TIDMRAT
Rathbones' funds under management grow 8.6% to GBP23.9 billion
This statement is a half-yearly financial report in accordance with the
UK Listing Authority's Disclosure and Transparency Rules. It covers the
six month period ended 30 June 2014.
Philip Howell, Chief Executive of Rathbone Brothers Plc, said:
"The first six months of this year have been a busy and exciting period
for Rathbones in which we have announced two acquisitions and a
successful placing. We are pleased to have removed the uncertainty
associated with the long-running legal proceedings, and believe that
joining a settlement to do so is in the best commercial interests of the
company.
"Notwithstanding relatively flat markets total net growth in funds under
management was GBP1.5 billion in the first half of 2014, representing an
annualised growth rate of 14.3% compared to 9.4% in the first half of
2013 and representing continued momentum both from organic and acquired
growth. Including the impact of market movements, Rathbones' total funds
under management at 30 June 2014 were GBP23.9 billion.
"The impact of recent acquisitions is expected to have a positive effect
on earnings in 2015. We are continuing to invest carefully in the skills
and systems required to achieve our growth objectives. Rathbones'
outlook therefore remains positive."
Highlights:
-- Total funds under management at 30 June 2014 were GBP23.9 billion, up
8.6% from GBP22.0 billion at 31 December 2013. This compared to a
decrease of 0.1% in the FTSE 100 Index and an increase of 1.0% in the
FTSE WMA (formerly APCIMS) Balanced Index over the same period.
-- Total net organic and acquired growth in the funds managed by Rathbone
Investment Management was GBP1.2 billion in the first six months of 2014,
representing a net annual growth rate of 12.2% (2013: 9.3%). Net organic
growth of GBP417 million for the first half represents an underlying
annualised rate of net organic growth of 4.1% (2013: 3.9%). We have now
completed the acquisition of part of Deutsche Asset & Wealth Management's
London-based private client investment management business, which added
GBP617 million of funds under management by 30 June 2014. The acquisition
of the private client and charity investment management business of
Jupiter Asset Management is expected to complete at the end of the third
quarter, when funds under management will transfer to Rathbone Investment
Management.
-- Profit before tax was GBP30.9 million for the six months ended 30 June
2014, up 33.2% compared to GBP23.2 million in 2013. Underlying profit
before tax (excluding charges in relation to client relationships and
goodwill, gain on disposal of financial securities and transaction costs)
increased 13.4% from GBP26.1 million to GBP29.6 million, representing a
margin of 30.2% (2013: 29.6%).
-- Earnings per share increased 33.7% to 51.6p (2013: 38.6p). The weighted
average number of ordinary shares, used to calculate earnings per share,
increased 2.0% from 45.6 million at 30 June 2013 to 46.5 million at 30
June 2014, largely as a result of the placing of 2.9% of the then issued
share capital in April 2014.
-- The board recommends a 19p interim dividend for 2014 (2013: 18p), an
increase of 5.6% on 2013.
-- Underlying operating income in Investment Management of GBP90.8 million
in the first six months of 2014 (2013: GBP83.0 million) was up 9.4%. The
average FTSE 100 Index was 6720 on our quarterly billing dates in 2014,
compared to 6233 in 2013, an increase of 7.8%.
-- Net interest income of GBP4.4 million in the first six months of 2014 has
increased 4.8% from GBP4.2 million in 2013 largely due to an increase in
average liquidity from GBP1.0 billion at 31 December 2013 to GBP1.1
billion at 30 June 2014 and more client lending.
-- Underlying operating expenses of GBP68.5 million for the six months ended
30 June 2014 were up 10.5% on GBP62.0 million in the first half of 2013
largely as a result of business growth.
-- Funds under management in Rathbone Unit Trust Management were GBP2.2
billion at 30 June 2014 (31 December 2013: GBP1.8 billion). Net inflows
of GBP338 million in the first half of 2014 have increased from GBP67
million in 2013. Underlying operating income in Rathbone Unit Trust
Management was GBP7.3 million in the six months ended 30 June 2014, an
increase of 43.1% from GBP5.1 million in the first half of 2013.
-- Late on 23 July 2014 the company joined into a conditional agreement to
contribute GBP15 million to a settlement of legal proceedings in Jersey
involving a former director and employee of a former subsidiary, Rathbone
Trust Company Jersey Limited and in respect of legal proceedings against
certain of Rathbones' civil liability (professional indemnity) insurers.
Issued on 24 July 2014
For further information contact:
Rathbone Brothers Plc Quill PR
Tel: 020 7399 0000 Tel: 020 7466 5054
email: marketing@rathbones.com email: hugo@quillpr.com
Mark Nicholls, Chairman Hugo Mortimer-Harvey
Philip Howell, Chief Executive
Paul Stockton, Finance Director
Rathbone Brothers Plc
Rathbone Brothers Plc is a leading provider of high-quality,
personalised investment and wealth management services for private
clients, charities and trustees. This includes discretionary investment
management, unit trusts, tax planning, trust and company management,
pension advice and banking services.
Rathbones has over 850 staff in 13 UK locations and Jersey, and has its
headquarters in Curzon Street, London.
www.rathbones.com
Interim management report
Financial highlights
Underlying profit before tax of GBP29.6 million was 13.4% up on the same
half year period last year (2013: GBP26.1 million), reflecting more
positive markets and continued growth in funds under management to
GBP23.9 billion at 30 June 2014 (GBP22.0 billion at 31 December 2013).
Underlying earnings per share were up 13.6% to 49.4p for the six months
ended 30 June 2014 (2013: 43.5p), reflecting both the growth in earnings
and the impact of issuing 1.3 million shares in April 2014 via a
placing.
Profit before tax for the half year of GBP30.9 million (2013: GBP23.2
million) includes a one-off gain of GBP5.9 million from the sale of
London Stock Exchange Group Plc ordinary shares, transaction costs of
GBP1.0 million and charges in relation to client relationships and
goodwill of GBP3.6 million. Basic earnings per share of 51.6p increased
33.7% on 38.6p last year.
Our interim dividend has been increased by 1p per share to 19p (2013
interim: 18p). The interim dividend will be paid on 8 October 2014.
First half review
The first six months of this year have been a busy and exciting period
for Rathbones. On 1 April 2014 we announced our intention to acquire the
private client and charity investment management business of Jupiter
Asset Management, and also part of Deutsche Asset & Wealth Management's
London-based private client investment management business ("Deutsche
Bank"). On 1 May 2014, Rathbone Trust Company Limited purchased 100% of
law firm Rooper & Whately to add depth to the range of its advisory
services.
The Deutsche Bank transaction completed on 5 June 2014 when we welcomed
clients and their investment management team who brought GBP617 million
of funds under management to Rathbones. This represents 95% of the total
available funds under management which is a positive result. The Jupiter
transaction is proceeding well and is expected to complete at the end of
September 2014. Total Jupiter discretionary and other managed funds
under management available for transfer equate to GBP1.6 billion, with a
further GBP0.5 billion in execution only accounts.
We also announced a share placing of 1.3 million shares in April 2014,
raising a net GBP23.6 million to fund future growth opportunities. The
placing attracted strong support from investors such that it was
achieved with no discount to the prevailing closing price.
Investment markets have remained relatively stable since the start of
the year with the FTSE 100 trading within a narrow range and ending the
half year at 6744; largely consistent with the end of 2013. The Wealth
Management Association (WMA) Balanced Index ended the first half at
3429, up 1.0% compared to 3395 at 31 December 2013. Interest rates
remained at historically low levels throughout the first half, but
market commentaries are more consistently pointing to future rises which
would positively impact our interest income.
We have continued to attract individual investment managers and new
clients, drawn by our approach to portfolio management, quality systems
and strong client service ethos. This was echoed by the results of the
independent client survey we conducted in April, in which overall
feedback was very positive. We are not complacent however and will
continue to pursue opportunities to improve our service and engage more
proactively with our clients. In May our charity team was named Charity
Investment Manager of the Year for the second year running at the
Citywealth Magic Circle Awards, which are voted for by clients.
Part of our commitment to our clients is to provide them with a clear
and accurate account of how their portfolios have performed. In June
2014, after several years of hard work, we announced that Rathbone
Investment Management had successfully attained full Global Investment
Performance Standards (GIPS) accreditation. GIPS are a universally
recognised indicator of investment performance reporting, and we believe
this is a unique achievement for a major UK private client firm. We
believe this demonstrates not only the robustness of our data
disciplines and operational infrastructure, but also our commitment to
provide our clients with the highest quality discretionary investment
management service.
In our 2013 annual report we highlighted a number of initiatives which
we would be focussing on in 2014 to position ourselves for further
growth and ensure that we maintain a high standard of service to our
existing clients. An example of this is our Asset Allocation Modelling
system which has now been rolled out across all of our investment teams.
Feedback has been positive, and investment managers are seeing the
benefits of being able to manage portfolios more efficiently. We have
also adopted a new team-based approach in our London office to help
improve client service and manage capacity.
In addition to recruiting junior investment professionals and additional
research team members, we believe that it is now appropriate to
strengthen senior management in some other support areas in order to
position ourselves for future growth. We recently welcomed a new head of
our London charities team and we have now recruited a head of strategy
and organisation development. We expect to also add a chief risk officer
and a head of investment process and risk in the second half of this
year.
We continue to invest in our operations and IT platform to ensure that
it remains up to date and robust. In the first half of the year we
successfully completed the move of our Liverpool servers to a third
party data centre. This strategy has not only enhanced our disaster
recovery capability, but it has also freed up valuable IT resources to
better support the business and to focus on further enhancements to our
front office platform. These include the current upgrade programme in
respect of our online portfolio service for clients and intermediaries,
with the first phase completed at the end of June.
We continue to manage a busy regulatory agenda, with the impact of the
Capital Requirements Directive (CRD) IV, new client asset rules and the
US Foreign Account Tax Compliance Act (FATCA), among other regulatory
developments.
Since 2012, we have reported on the progress of a claim relating to the
management of a Jersey trust that was filed in Jersey against a former
employee (and director) of a former subsidiary, Rathbone Trust Company
Jersey Limited and others. We have also reported on the associated legal
proceedings by Rathbones and the former employee against insurers on the
excess layer of our civil liability insurance policy to seek
confirmation of insurance cover.
Whilst we believe that the underlying Jersey claim would eventually
prove unsuccessful and that effective insurance cover would be confirmed
following the recent Court of Appeal hearing in the insurance
proceedings, we have been mindful that litigation is never without risk
and that we could face several more years of substantial legal costs as
well as the potential unwarranted negative impact on our reputation. We
have therefore concluded that joining a settlement of both the Jersey
and insurance legal actions would be in the best commercial interests of
the company and allow our senior management team to apply its full focus
to executing our strategic plans. On 23 July 2014, the company
therefore agreed to contribute GBP15 million to a conditional settlement
agreement. This payment will be treated as an exceptional pre-tax charge
in the second half of 2014.
Results and business performance
Total group funds under management at 30 June 2014 were GBP23.9 billion
up from GBP19.9 billion at the 2013 half year, and GBP22.0 billion at
the end of 2013. Total net growth (excluding market movements) in the
funds managed by our core investment management business was GBP1.2
billion in the first six months of 2014 (2013: GBP0.8 billion), which
represents an annualised growth rate of 12.2% (2013: 9.3%).
First half growth benefitted from the Deutsche Bank transaction, which
helped total acquired growth to rise to GBP819 million in the period
(2013: GBP453 million). We expect the clients and investment teams of
Jupiter's private client business to join Rathbones when the acquisition
completes at the end of the third quarter. Net organic growth in the
first half was satisfactory at GBP417 million and represents an
annualised rate of 4.1% (2013: 3.9%).
Rathbone Unit Trust Management had a strong first half, attracting net
inflows of GBP338 million (2013: GBP67 million). Funds under management,
at 30 June 2014 stood at a new high of GBP2.2 billion up 22.2% from the
2013 year end with strong growth particularly coming from the income,
global opportunities and ethical bond funds.
Underlying operating income of GBP98.1 million increased 11.4% from
GBP88.1 million a year ago, reflecting continued growth in funds under
management, solid investment performance and higher average markets on
our quarterly billing dates. Net commission income of GBP23.5 million in
the first half of 2014 was marginally higher than the GBP23.2 million in
2013, led by a particularly strong first quarter. Net interest income of
GBP4.4 million was consistent with last year (2013: GBP4.2 million) as
lower returns on treasury assets were compensated for by an increase in
average liquidity to GBP1.1 billion (2013: GBP1.0 billion) and higher
levels of interest earned on client loans of GBP1.3 million (2013:
GBP1.0 million). Fees from advisory services and other income increased
16.1% to GBP7.2 million from GBP6.2 million one year ago, largely
reflecting the gain of GBP0.6 million recognised on a GBP3.4 million
repayment of Loan Notes (see note 10 to the condensed consolidated
interim financial statements).
Cash and balances with central banks increased by 180% from GBP211
million at 31 December 2013 to GBP591 million at 30 June 2014. Loans and
advances to customers decreased 3.9% in the first half of 2014 from
GBP95.5 million at 31 December 2013 to GBP91.8 million at 30 June 2014
largely reflecting the Loan Notes repayment referred to above.
Underlying operating expenses over the last year increased 10.5% to
GBP68.5 million from GBP62.0 million. Staff costs rose 13.0% to GBP47.9
million in the six months ending 30 June 2014 (2013: GBP42.3 million),
reflecting salary inflation of 4%, higher introductory payments to
investment managers (see note 13 to the condensed consolidated interim
financial statements) and an increase in average full time equivalent
headcount from 821 to 853 that reflects both the historic growth in the
business and our expectations for the future. Variable staff awards for
the first half year have increased 25.5% to GBP17.2 million (2013:
GBP13.7 million) reflecting the growth in underlying profit, continuing
net new business growth and higher values of deferred share based awards
which, for cash settled schemes, are marked to market.
Other direct expenses of GBP20.6 million to the end of June 2014
remained stable compared to those incurred last year (2013: GBP19.7
million). These include GBP1.1 million of legal expenses associated with
the claim and legal proceedings referred to above. Total expenses
incurred to date in relation to the claim and proceedings have been
GBP5.3 million.
Our underlying operating profit margin remains an important measure of
our success and was 30.2% for the first half of 2014 compared to 29.6% a
year ago. The second half of the year is expected to reflect the
positive earnings impact of the Deutsche Bank transaction and, for the
last quarter, the Jupiter transaction; together with the full effect of
first half headcount growth and the additional costs of planned senior
recruitment mentioned above.
In the first half of 2014 we recognised a one-off gain of GBP5.9 million
in respect of the sale of London Stock Exchange Group Plc shares which
had previously been marked to market through equity. This was partially
offset by one-off costs of GBP1.0 million relating to acquisitions. Our
effective tax rate in the first half was 22.3% (2013: 24.2%) reflecting
the 2% reduction in the UK tax rate effective from 6 April 2014.
Total equity has increased 9.6% to GBP275 million at 30 June 2014 from
GBP251 million at 31 December 2013. Our defined benefit pension schemes
returned to a deficit of GBP3.7 million at 30 June 2014, reflecting a
fall in gilt yields and lower member mortality than assumed at the
previous triennial valuation. The triennial review of the schemes at 31
December 2013 is currently being undertaken and is expected to be
completed in the second half of the year.
Our consolidated common equity tier 1 ratio as at 30 June 2014
(excluding unverified Rathbone Investment Management's profits for the
first half) stood at 22.9%, as compared to 19.1% as at 31 December 2013.
This reflects the impact of the share placing in April 2014, partially
offset by the cost of the Deutsche Bank transaction which completed in
June.
Our consolidated Basel III leverage ratio represents the group's common
equity tier 1 capital as a percentage of its total balance sheet assets,
adjusted largely to exclude intangible assets and investment in
associates. The ratio as at 30 June 2014 (excluding unverified Rathbone
Investment Management's profits for the first half) stood at 10.8%, as
compared to 11.5% as at 31 December 2013.
Risks and key judgements
We have made further progress in the first six months of 2014 in
developing an independent risk management and oversight structure across
the business, whilst continuing to promote risk awareness and
responsibility at all levels throughout the firm. The group risk
committee has considered the risks associated with recent acquisition
activity and continues to develop best practices in our risk management
and risk reporting.
The principal risks facing Rathbones in 2014 continue to be associated
with our ambition to grow and develop our business, and also from
regulatory developments impacting our sector; these are described in
detail in the strategic report and group risk committee report of our
2013 annual report and accounts (pages 14-16 and page 53).
Board changes
James Dean succeeded Oliver Corbett as Chairman of the audit committee
on 3 June 2014. Oliver Corbett, who was approaching the end of his nine
year tenure as an independent director, stepped down from the Board on 3
June 2014 to join the board of Close Brothers Group plc, as a
non-executive director.
Outlook
We have been considering a number of further strategic initiatives to
develop the Rathbones group, whilst remaining true to our long-term
vision to be the UK's leading independently-owned provider of investment
management services to private clients, charities and trustees.
The impact of recent acquisitions is expected to have a positive effect
on earnings in 2015. We are continuing to invest carefully in the skills
and systems required to achieve our growth objectives. Rathbones'
outlook therefore remains positive.
Mark Nicholls Philip Howell
Chairman Chief Executive
23 July 2014 23 July 2014
This interim statement contains certain forward looking statements which
are made by the directors in good faith based on the information
available to them at the time of their approval of this interim
statement. Forward looking statements contained within the interim
statement should be treated with some caution due to the inherent
uncertainties, including economic, regulatory and business risk factors,
underlying any such forward looking statements.
We undertake no obligation to update any forward looking statements
whether as a result of new information, future events or otherwise. The
interim statement has been prepared by Rathbone Brothers Plc to provide
information to its shareholders and should not be relied upon by any
other party or for any other purpose.
Statement of directors' responsibilities in respect of the interim
statement
We confirm to the best of our knowledge that:
-- the condensed set of financial statements have been prepared in
accordance with IAS 34 Interim Financial Reporting as adopted by the EU;
-- the interim management report includes a fair view of the information
required by:
1. DTR 4.2.7R of the Disclosure and Transparency Rules, being an
indication of important events that have occurred during the first
six months of the financial year and their impact on the condensed
set of financial statements; and a description of the principal
risks and uncertainties for the remaining six months of the year;
and
2. DTR 4.2.8R of the Disclosure and Transparency Rules, being related
party transactions that have taken place in the first six months
of the current financial year and that have materially affected
the financial position or performance of the entity during that
period; and any changes in the related party transactions
described in the last annual report that could do so.
Philip Howell
Chief Executive
23 July 2014
Consolidated interim statement of comprehensive income
for the six months ended 30 June 2014
Unaudited
Unaudited Six months to Audited
Six months to 30 June 2013 Year to
30 June 2014 GBP'000 31 December 2013
Note GBP'000 (re-presented - note 1) GBP'000
Interest and similar income 4,712 4,540 9,212
Interest expense and similar charges (346) (302) (604)
Net interest income 4,366 4,238 8,608
Fee and commission income 96,663 86,900 174,325
Fee and commission expense (5,328) (4,910) (9,938)
Net fee and commission income 91,335 81,990 164,387
Dividend income 73 29 127
Net trading income 973 569 1,226
Other operating income 1,283 1,209 1,972
Share of profit of associates 85 66 89
Gain on disposal of financial securities 4 5,932 - -
Operating income 104,047 88,101 176,409
Charges in relation to client relationships and goodwill 13 (3,617) (2,876) (6,306)
Transaction costs 5 (1,001) - -
Other operating expenses (68,508) (62,001) (125,899)
Operating expenses (73,126) (64,877) (132,205)
Profit before tax 30,921 23,224 44,204
Taxation 7 (6,902) (5,615) (9,453)
Profit for the period attributable to equity holders
of the company 24,019 17,609 34,751
Other comprehensive income:
Items that will not be reclassified to profit or loss
Net remeasurement of defined benefit liability/asset (6,747) 9,671 2,188
Deferred tax relating to the net remeasurement of
defined benefit liability/asset 1,349 (2,224) (788)
Items that may be reclassified to profit or loss
Revaluation of available for sale investment securities:
- net gain from changes in fair value 696 824 2,072
- net profit on disposal transferred to profit or
loss during the period (5,932) - (5)
(5,236) 824 2,067
Deferred tax relating to revaluation of available
for sale investment securities 1,047 (190) (298)
Other comprehensive income net of tax (9,587) 8,081 3,169
Total comprehensive income for the period net of tax
attributable to equity holders of the company 14,432 25,690 37,920
Dividends paid and proposed for the period per ordinary
share 8 19.0p 18.0p 49.0p
Dividends paid and proposed for the period 9,084 8,322 22,645
Earnings per share for the period attributable to
equity holders of the company: 9
- basic 51.6p 38.6p 76.1p
- diluted 51.2p 38.4p 75.6p
The accompanying notes form an integral part of the condensed
consolidated interim financial statements.
Consolidated interim statement of changes in equity
for the six months ended 30 June 2014
Available
Share Share Merger for sale Own Retained Total
capital premium reserve reserve shares earnings equity
Note GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
At 1 January 2013 2,298 62,160 31,835 2,948 (5,844) 136,096 229,493
Profit for the period 17,609 17,609
Net remeasurement of defined benefit asset 9,671 9,671
Revaluation of available for sale investment securities 824 824
Deferred tax relating to components of other comprehensive
income (190) (2,224) (2,414)
Other comprehensive income net of tax - - - 634 - 7,447 8,081
Dividends paid (13,800) (13,800)
Issue of share capital 16 14 2,546 2,560
Share-based payments:
- value of employee services 1,300 1,300
- cost of own shares acquired (289) (289)
- cost of own shares vesting 446 (446) -
- tax on share-based payments 19 19
At 30 June 2013 (unaudited) 2,312 64,706 31,835 3,582 (5,687) 148,225 244,973
Profit for the period 17,142 17,142
Net remeasurement of defined benefit asset (7,483) (7,483)
Revaluation of available for sale investment securities
- net gain from changes in fair value 1,248 1,248
- net profit on disposal transferred to profit or
loss during the period (5) (5)
Deferred tax relating to components of other comprehensive
income (108) 1,436 1,328
Other comprehensive income net of tax - - - 1,135 - (6,047) (4,912)
Dividends paid (8,296) (8,296)
Issue of share capital 16 3 778 781
Share-based payments:
- value of employee services 1,618 1,618
- cost of own shares acquired (320) (320)
- cost of own shares vesting 285 (285) -
- tax on share-based payments 14 14
At 31 December 2013 (audited) 2,315 65,484 31,835 4,717 (5,722) 152,371 251,000
Profit for the period 24,019 24,019
Net remeasurement of defined benefit liability (6,747) (6,747)
Revaluation of available for sale investment securities
- net gain from changes in fair value 696 696
- net profit on disposal transferred to profit or
loss during the period (5,932) (5,932)
Deferred tax relating to components of other comprehensive
income 1,047 1,349 2,396
Other comprehensive income net of tax - - - (4,189) - (5,398) (9,587)
Dividends paid (14,734) (14,734)
Issue of share capital 16 75 26,151 26,226
Share-based payments:
- value of employee services (873) (873)
- cost of own shares acquired (1,250) (1,250)
- cost of own shares vesting 1,524 (1,524) -
- tax on share-based payments 162 162
At 30 June 2014 (unaudited) 2,390 91,635 31,835 528 (5,448) 154,023 274,963
The accompanying notes form an integral part of the condensed
consolidated interim financial statements.
Consolidated interim balance sheet
as at 30 June 2014
Unaudited Unaudited Audited
30 June 2014 30 June 2013 31 December 2013
Note GBP'000 GBP'000 GBP'000
Assets
Cash and balances with
central banks 591,005 213,004 211,005
Settlement balances 39,893 44,157 19,611
Loans and advances to
banks 110,760 135,908 106,327
Loans and advances to
customers 10 91,801 81,085 95,543
Investment securities:
- available for sale 38,841 37,799 53,985
- held to maturity 453,714 606,008 575,838
Prepayments, accrued
income and other
assets 11 80,102 43,561 46,368
Property, plant and
equipment 12 10,970 12,067 11,522
Deferred tax asset 3,834 - 1,699
Investment in
associates 1,366 1,288 1,296
Intangible assets 13 117,797 105,808 104,969
Surplus on retirement
benefit schemes 15 - 9,297 1,614
Total assets 1,540,083 1,289,982 1,229,777
Liabilities
Deposits by banks 4,202 - -
Settlement balances 65,298 60,012 27,626
Due to customers 1,084,295 928,952 891,897
Accruals, deferred
income and other
liabilities 47,669 38,938 45,376
Current tax liabilities 6,310 4,618 3,972
Provisions for
liabilities and
charges 14 53,671 11,419 9,906
Deferred tax liability - 1,070 -
Retirement benefit
obligations 15 3,675 - -
Total liabilities 1,265,120 1,045,009 978,777
Equity
Share capital 16 2,390 2,312 2,315
Share premium 16 91,635 64,706 65,484
Merger reserve 31,835 31,835 31,835
Available for sale
reserve 528 3,582 4,717
Own shares (5,448) (5,687) (5,722)
Retained earnings 154,023 148,225 152,371
Total equity 274,963 244,973 251,000
Total liabilities and
equity 1,540,083 1,289,982 1,229,777
The condensed consolidated interim financial statements were approved by
the Board of directors and authorised for issue on 23 July 2014 and were
signed on their behalf by:
Philip Howell Paul Stockton
Chief Executive Finance Director
Company registered number: 01000403
The accompanying notes form an integral part of the condensed
consolidated interim financial statements.
Consolidated interim statement of cash flows
for the six months ended 30 June 2014
Unaudited Unaudited Audited
Six months to Six months to Year to
30 June 2014 30 June 2013 31 December 2013
Note GBP'000 GBP'000 GBP'000
Cash flows from operating activities
Profit before tax 30,921 23,224 44,204
Share of profit of associates (85) (66) (89)
Net profit on disposal of available for sale investment
securities 4 (5,932) - (5)
Net interest income (4,366) (4,238) (8,608)
Net (recoveries)/impairment charges on impaired loans
and advances (551) 6 290
Net (release)/charge for provisions 14 (29) 89 500
Profit on disposal of property, plant and equipment - - (1)
Depreciation, amortisation and impairment 6,105 4,967 10,580
Defined benefit pension scheme charges 1,727 1,570 3,188
Defined benefit pension contributions paid (3,185) (3,326) (4,744)
Share-based payment charges 2,881 2,410 4,833
Interest paid (350) (318) (615)
Interest received 5,140 5,611 9,802
32,276 29,929 59,335
Changes in operating assets and liabilities:
- net decrease in loans and advances to banks and
customers 13,796 10,242 37,904
- net increase in settlement balance debtors (20,282) (31,551) (7,005)
- net increase in prepayments, accrued income and
other assets (1,993) (4,352) (6,678)
- net increase in amounts due to customers and deposits
by banks 196,598 99,993 62,936
- net increase in settlement balance creditors 37,672 41,420 9,034
- net decrease in accruals, deferred income, provisions
and other liabilities (1,735) (6,154) (409)
Cash generated from operations 256,332 139,527 155,117
Tax paid (4,139) (3,921) (9,830)
Net cash inflow from operating activities 252,193 135,606 145,287
Cash flows from investing activities
Dividends received from associates 15 15 30
Acquisition of business combinations, net of cash
acquired (569) - -
Purchase of property, equipment and intangible assets (6,003) (13,269) (19,415)
Proceeds from sale of property, plant and equipment - - 1
Purchase of investment securities (281,916) (511,008) (839,938)
Proceeds from sale and redemption of investment
securities 409,934 464,025 823,062
Net cash generated from/(used in) investing activities 121,461 (60,237) (36,260)
Cash flows from financing activities
Issue of ordinary shares 19 24,976 2,271 2,732
Dividends paid (14,734) (13,800) (22,096)
Net cash generated from/(used in) financing activities 10,242 (11,529) (19,364)
Net increase in cash and cash equivalents 383,896 63,840 89,663
Cash and cash equivalents at the beginning of the
period 319,828 230,165 230,165
Cash and cash equivalents at the end of the period 19 703,724 294,005 319,828
The accompanying notes form an integral part of the condensed
consolidated interim financial statements.
Notes to the condensed consolidated interim financial statements
1. Basis of preparation
Rathbone Brothers Plc ('the company') is the parent company of a group
of companies ('the group') that provides personalised investment and
wealth management services for private clients, charities and trustees.
The group also provides financial planning, private banking, offshore
fund management and trust administration services. The group's primary
activities are set out in the 'Our Business' section on pages 6 to 11 of
the annual report and accounts for the year ended 31 December 2013 and
have not materially changed since that date.
These condensed consolidated interim financial statements, on pages 6 to
23, are presented in accordance with IAS 34 'Interim Financial
Reporting' as adopted by the EU. The condensed consolidated interim
financial statements have been prepared on a going concern basis, using
the accounting policies, methods of computation and presentation set out
in the group's financial statements for the year ended 31 December 2013
except as disclosed below. The condensed consolidated interim financial
statements should be read in conjunction with the group's audited
financial statements for the year ended 31 December 2013, which are
prepared in accordance with International Financial Reporting Standards
(IFRS) as adopted by the EU.
The information in this announcement does not comprise statutory
financial statements within the meaning of section 434 of the Companies
Act 2006. The group's financial statements for the year ended 31
December 2013 have been reported on by its auditors and delivered to the
Registrar of Companies. The report of the auditors on those financial
statements was unqualified and did not draw attention to any matters by
way of emphasis. It also did not contain a statement under section 498
of the Companies Act 2006.
Developments in reporting standards and interpretations
Standards affecting the financial statements
In the current period, the group has not adopted any new or revised
standards that have affected the financial statements.
Changes in accounting disclosure
Following a review of broker contracts during the second half of 2013,
the group concluded it would be more transparent to show broker
commissions receivable and payable on a gross basis in the income
statement and re-presented these costs as fee and commission expense in
the 2013 consolidated financial statements. In these condensed
consolidated interim financial statements, fee and commission income for
the six months ended 30 June 2013 have been re-presented accordingly.
This re-presentation has increased fee and commission income by
GBP909,000 and fee and commission expense by the same amount. The
re-presentation has had no impact on net operating income, profit or
equity in any period.
Segmental information has been re-presented to show how centrally
incurred indirect expenses are allocated to each line item in the
segmental table (note 2).
Standards not affecting the reported results or the financial position
The following new and revised standards and interpretations have been
adopted in the current year. Their adoption has not had any significant
impact on the amounts reported in these financial statements but may
impact the accounting for future transactions and arrangements.
-- Offsetting Financial Assets and Financial Liabilities (Amendments to IAS
32)
-- Recoverable Amount Disclosures for Non-Financial Assets (Amendments to
IAS 36)
IFRS 10 'Consolidated Financial Statements', IFRS 11 'Joint
Arrangements', and IFRS 12 'Disclosure of Interests in Other Entities',
which are effective in 2014, were adopted early in 2013.
New standards and interpretations
A number of new standards and amendments to standards and
interpretations are effective for annual and interim periods beginning
after 1 January 2014 and, therefore, have not been applied in preparing
these condensed consolidated interim financial statements. None of
these is expected to have a significant effect on the condensed
consolidated interim financial statements and the consolidated financial
statements of the group, except for IFRS 9 'Financial Instruments', IFRS
15 'Revenue from Contracts with Customers' and IFRIC 21 'Levies'.
IFRS 9 'Financial Instruments' and IFRS 15 ' Revenue from Contracts with
Customers' are not expected to become mandatory for periods commencing
before 1 January 2018 and 1 January 2017 respectively. The group does
not plan to adopt these standards early and the extent of their impact
has not been determined. These standards have not yet been adopted by
the EU. IFRS 9 'Financial Instruments' could change the classification
and measurement of financial assets and the timing and extent of credit
provisioning. IFRS 15 'Revenue from Contracts with Customers' could
change how and when revenue is recognised from contracts with customers
and is expected to extend the period during which awards accruing to new
investment managers are capitalised.
IFRIC 21 'Levies' has been endorsed by the EU and is applicable for
periods commencing 17 June 2014; the group will adopt it from 1 January
2015. IFRIC 21 'Levies' will change the point at which the group
recognises a liability in respect of Financial Services Compensation
Scheme (FSCS) levies. From 1 January 2015, the group will recognise a
liability in respect of FSCS levies from the date at which the
triggering event specified in the legislation occurs. The triggering
event for recognition of FSCS levies will change from 31 December of the
preceding financial year to 1 April of the current financial year,
resulting in levies recognised in the current financial year being
derecognised and recognised in the following financial year. If the
company had adopted IFRIC 21 in 2014, it would have resulted in a
decrease in profit after tax of GBP220,000 (30 June 2013: GBP151,000
decrease; 31 December 2013: GBP92,000 increase) and a decrease (30 June
2013: decrease; 31 December 2013: increase) in equity of the same
amount.
2. Segmental information
For management purposes, the group is organised into two operating
divisions: Investment Management and Unit Trusts. Centrally incurred
indirect expenses are allocated to these operating segments on the basis
of the cost drivers that generate the expenditure; principally the
headcount of staff directly involved in providing those services from
which the segment earns revenues, the value of funds under management
and the segment's total revenue. The allocation of these costs is shown
in a separate column in the table below, alongside the information
presented for internal reporting to the executive committee.
Investment Indirect
Management Unit Trusts expenses Total
Six months ended 30 June 2014 (unaudited) GBP'000 GBP'000 GBP'000 GBP'000
Net investment management fee income 56,800 6,151 - 62,951
Net commission income 23,547 - - 23,547
Net interest income 4,366 - - 4,366
Fees from advisory services and other income 6,129 1,122 - 7,251
Underlying operating income 90,842 7,273 - 98,115
Staff costs - fixed (21,734) (1,606) (7,358) (30,698)
Staff costs - variable (12,533) (1,315) (3,374) (17,222)
Total staff costs (34,267) (2,921) (10,732) (47,920)
Other direct expenses (7,065) (1,323) (12,200) (20,588)
Allocation of indirect expenses (21,645) (1,287) 22,932 -
Underlying operating expenses (62,977) (5,531) - (68,508)
Underlying profit before tax 27,865 1,742 - 29,607
Charges in relation to client relationships and goodwill
(note 13) (3,617) - - (3,617)
Segment profit before tax 24,248 1,742 - 25,990
Gain on disposal of financial securities (note 4) 5,932
Transaction costs (note 5) (1,001)
Profit before tax 30,921
Taxation (note 7) (6,902)
Profit for the period attributable to equity holders
of the company 24,019
Segment total assets 1,499,922 35,628 - 1,535,550
Unallocated assets 4,533
Total assets 1,540,083
Investment Indirect
Six months ended 30 June 2013 (unaudited) (re-presented Management Unit Trusts expenses Total
- note 1) GBP'000 GBP'000 GBP'000 GBP'000
Net investment management fee income 50,062 4,425 - 54,487
Net commission income 23,188 - - 23,188
Net interest income 4,238 - - 4,238
Fees from advisory services and other income 5,529 659 - 6,188
Underlying operating income 83,017 5,084 - 88,101
Staff costs - fixed (20,166) (1,577) (6,867) (28,610)
Staff costs - variable (10,240) (610) (2,917) (13,767)
Total staff costs (30,406) (2,187) (9,784) (42,377)
Other direct expenses (8,882) (1,186) (9,556) (19,624)
Allocation of indirect expenses (18,157) (1,183) 19,340 -
Underlying operating expenses (57,445) (4,556) - (62,001)
Underlying profit before tax 25,572 528 - 26,100
Charges in relation to client relationships and goodwill (2,876) - - (2,876)
Segment profit before tax 22,696 528 - 23,224
Taxation (note 7) (5,615)
Profit for the period attributable to equity holders
of the company 17,609
Segment total assets 1,247,549 25,619 - 1,273,168
Unallocated assets 16,814
Total assets 1,289,982
Investment Indirect
Year ended 31 December 2013 (audited) (re-presented Management Unit Trusts expenses Total
- note 1) GBP'000 GBP'000 GBP'000 GBP'000
Net investment management fee income 104,222 9,651 - 113,873
Net commission income 42,051 - - 42,051
Net interest income 8,608 - - 8,608
Fees from advisory services and other income 10,456 1,421 - 11,877
Underlying operating income 165,337 11,072 - 176,409
Staff costs - fixed (39,848) (3,059) (13,939) (56,846)
Staff costs - variable (20,588) (1,799) (5,546) (27,933)
Total staff costs (60,436) (4,858) (19,485) (84,779)
Other direct expenses (19,456) (2,400) (19,264) (41,120)
Allocation of indirect expenses (36,348) (2,401) 38,749 -
Underlying operating expenses (116,240) (9,659) - (125,899)
Underlying profit before tax 49,097 1,413 - 50,510
Charges in relation to client relationships and
goodwill (6,306) - - (6,306)
Segment profit before tax 42,791 1,413 - 44,204
Taxation (note 7) (9,453)
Profit for the year attributable to equity holders
of the company 34,751
Segment total assets 1,195,571 23,556 - 1,219,127
Unallocated assets 10,650
Total assets 1,229,777
The following table reconciles underlying operating income to operating
income:
Unaudited Unaudited Audited
Six months to Six months to Year to
30 June 2014 30 June 2013 31 December 2013
GBP'000 GBP'000 GBP'000
Underlying operating income 98,115 88,101 176,409
Gain on disposal of
financial securities (note
4) 5,932 - -
Operating income 104,047 88,101 176,409
Included within Investment Management operating income is GBP179,000 (30
June 2013: GBP415,000; 31 December 2013: GBP829,000) of fees and
commissions receivable from Unit Trusts. Intersegment sales are charged
at prevailing market prices.
Geographic analysis
The following table presents operating income analysed by the
geographical location of the group entity providing the service:
Unaudited Unaudited Audited
Six months to Six months to Year to
30 June 2014 30 June 2013 31 December 2013
GBP'000 GBP'000 GBP'000
United Kingdom 100,915 85,371 170,786
Jersey 3,132 2,730 5,623
Operating income 104,047 88,101 176,409
The group's non-current assets are substantially all located in the
United Kingdom.
Major clients
The group is not reliant on any one client or group of connected clients
for generation of revenues. At 30 June 2014, the group provided
investment management services to over 43,000 clients (30 June 2013:
40,000; 31 December 2013: 41,000).
3. Business combinations
Rooper & Whately
On 1 May 2014, the group acquired the trade and assets of Rooper &
Whately, a partnership that provides legal services, to add depth to the
range of its advisory services. Initial cash consideration of GBP569,000
was paid in 2 tranches in May 2014. Deferred, contingent consideration
is also payable in November 2014, the value of which is dependent on the
cash realised from collection of the work in progress and debtor
balances acquired with the business. If the full book value is realised,
then the deferred payment will total GBP42,000. A provision for this
amount has been recognised at 30 June 2014 (note 14).
The acquired business' net assets at the acquisition date were as
follows:
Carrying Fair value Recognised
amounts adjustments values
30 June 2014 (unaudited) GBP'000 GBP'000 GBP'000
Loans and advances to customers 41 - 41
Prepayments, accrued income and other
assets 223 - 223
Intangible assets - 303 303
Goodwill - 239 239
Accruals, deferred income and other
liabilities (195) - (195)
Total net assets acquired 69 542 611
Cash 569
Deferred contingent consideration 42
Total consideration 611
Included within the condensed consolidated statement of comprehensive
income for the six months ended 30 June 2014 is a loss before tax of
GBP42,000 relating to the acquired business.
The fair value of acquired loans and advances to customers and
prepayments, accrued income and other assets is equal to the contractual
amounts receivable, all of which are expected to be collected.
Goodwill of GBP239,000 arises as a result of expected synergies once the
business is fully integrated into the group and future growth of the
group's business as a result of this acquisition. It is expected to be
deductible for tax purposes.
Acquisition related costs totalling GBP20,000 for legal and professional
advice have been recognised in transaction costs (note 5) in the period
in relation to this transaction (six months ended 30 June 2013 and year
ended 31 December 2013: GBPnil).
If the group had made the acquisition on 1 January 2014, the loss before
tax included in the consolidated results would have been GBP126,000.
Jupiter Asset Management Limited's private client and charity investment
management business
On 1 April 2014, the group announced that it had agreed to purchase
Jupiter Asset Management Limited's private client and charity investment
management business. It is expected that the acquisition will complete
on 26 September 2014. As a result of the agreement, at 30 June 2014, the
group has recognised a liability of GBP32,000,000 (note 14), being the
minimum amount payable under the acquisition agreement, and a
corresponding recoverable amount of GBP32,000,000 (note 11).
4. Gain on disposal of financial securities
During the year, the group disposed of its remaining holding of 300,000
shares in London Stock Exchange Group Plc for cash consideration of
GBP5,932,000. The group recognised a gain on disposal of GBP5,932,000,
which was recycled from the available for sale reserve.
5. Transaction costs
Transaction costs incurred in the period include GBP975,000 of legal and
advisory fees in relation to the acquisitions of Rooper & Whately and
Jupiter Asset Management Limited's private client and charity investment
management business respectively (note 3) and the transaction to take
over part of Deutsche Asset & Wealth Management's London-based private
client investment management business (note 13).
Listing authority fees of GBP26,000 in relation to the placing of
ordinary shares (note 16) have also been included in transaction costs.
6. Staff numbers
The average number of employees, on a full time equivalent basis, during
the period was as follows:
Unaudited Unaudited Audited
Six months to Six months to Year to
30 June 2014 30 June 2013 31 December 2013
Investment Management:
- investment management
services 523 501 506
- advisory services 72 69 70
Unit Trusts 30 30 30
Shared services 228 221 227
853 821 833
7. Taxation
The tax expense for the six months ended 30 June 2014 was calculated
based on the estimated average annual effective tax rate. The overall
effective tax rate for this period was 22.3% (six months ended 30 June
2013: 24.2%; year ended 31 December 2013: 21.3%).
Unaudited Unaudited Audited
Six months to Six months to Year to
30 June 2014 30 June 2013 31 December 2013
GBP'000 GBP'000 GBP'000
United Kingdom taxation 6,398 4,986 10,211
Overseas taxation 79 24 64
Deferred taxation 425 605 (822)
6,902 5,615 9,453
The underlying UK corporation tax rate for the year ending 31 December
2014 is 21.5% (2013: 23.2%).
At 30 June 2014, the UK Government's proposal that the UK corporation
tax rate be reduced to 20.0% over the three years from 2012 had been
substantively enacted. Deferred tax assets and liabilities are
calculated at the rate that is expected to be in force when the
temporary differences unwind, but limited to the extent that such rates
have been substantively enacted.
8. Dividends
An interim dividend of 19.0p per share is payable on 8 October 2014 to
shareholders on the register at the close of business on 12 September
2014 (30 June 2013: 18.0p). In accordance with IFRS, the interim
dividend has not been included as a liability in this interim statement.
A final dividend for 2013 of 31.0p per share was paid on 19 May 2014.
9. Earnings per share
Earnings used to calculate earnings per share on the bases reported in
these condensed consolidated interim financial statements were:
Unaudited Unaudited Unaudited Unaudited Audited Audited
Six months to 30 June 2014 Six months to 30 June 2014 Six months to 30 June 2013 Six months to 30 June 2013 Year to 31 December 2013 Year to 31 December 2013
Pre-tax Post-tax Pre-tax Post-tax Pre-tax Post-tax
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Underlying profit attributable to equity holders 29,607 22,988 26,100 19,816 50,510 39,591
Gain on disposal of financial securities (note 4) 5,932 4,657 - - - -
Charges in relation to client relationships and goodwill
(note 13) (3,617) (2,840) (2,876) (2,207) (6,306) (4,840)
Transaction costs (note 5) (1,001) (786) - - - -
Profit attributable to equity holders 30,921 24,019 23,224 17,609 44,204 34,751
Basic earnings per share has been calculated by dividing profit
attributable to equity holders by the weighted average number of shares
in issue throughout the period, excluding own shares, of 46,523,342 (30
June 2013: 45,589,267; 31 December 2013: 45,667,571).
Diluted earnings per share is the basic earnings per share, adjusted for
the effect of contingently issuable shares under Long Term Incentive
Plans, employee share options remaining capable of exercise and any
dilutive shares to be issued under the Share Incentive Plan, all
weighted for the relevant period (see table below):
Unaudited Unaudited Audited
30 June 2014 30 June 2013 31 December 2013
Weighted average number of ordinary shares in issue
during the period - basic 46,523,342 45,589,267 45,667,571
Effect of ordinary share options/Save As You Earn 26,901 50,045 45,814
Effect of dilutive shares issuable under the Share
Incentive Plan 131,247 48,007 60,078
Effect of contingently issuable ordinary shares under
Long Term Incentive Plans 193,905 212,570 222,122
Diluted ordinary shares 46,875,395 45,899,889 45,995,585
Unaudited Unaudited Audited
Six months to Six months to Year to
30 June 2014 30 June 2013 31 December 2013
Underlying earnings per share for the period attributable
to equity holders of the company:
- basic 49.4p 43.5p 86.7p
- diluted 49.0p 43.2p 86.1p
10. Loans and advances to customers
Unaudited Unaudited Audited
30 June 2014 30 June 2013 31 December 2013
GBP'000 GBP'000 GBP'000
Overdrafts 3,703 3,453 2,424
Investment management loan
book 86,960 73,615 89,211
Trust and pension debtors 1,124 1,203 1,071
Other debtors 14 2,814 2,837
91,801 81,085 95,543
Other debtors included loan notes ('Notes') with a nominal value of
GBP5,000,000 that were issued by the acquirer of the group's Jersey
trust operations in 2008 and which were carried at amortised cost, less
provision for impairment. The Notes were settled on 28 February 2014 for
GBP3,400,000 in cash. As a result, impairment losses of GBP565,000 have
been reversed in the period and the corresponding gain has been included
in other operating income within profit or loss for the period.
11. Prepayments, accrued income and other assets
Included in other assets is a receivable of GBP32,000,000 relating to
the acquisition of Jupiter Asset Management Limited's private client and
charity investment management business (notes 3 and 14).
12. Property, plant and equipment
During the six months ended 30 June 2014, the group purchased assets
with a cost of GBP899,000 (six months ended 30 June 2013: GBP1,495,000;
year ended 31 December 2013: GBP2,385,000). No assets were acquired
through business combinations (six months ended 30 June 2013 and year
ended 31 December 2013: GBPnil).
No assets were disposed of in the six months ended 30 June 2014 (six
months ended 30 June 2013: no disposals). Assets with a net book value
of GBP2,000 were disposed of during the year ended 31 December 2013
resulting in a gain on disposal of GBP1,000.
13. Intangible assets
Software
Client development Purchased Total
Goodwill relationships costs software Intangibles
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Cost
At 1 January
2014 47,241 74,974 3,535 16,668 142,418
Internally
developed in
the period - - 207 - 207
Purchased in
the period - 15,403 - 1,327 16,730
Acquired
through
business
combinations
(note 3) 239 303 - - 542
Disposals - (479) - - (479)
At 30 June
2014 47,480 90,201 3,742 17,995 159,418
Amortisation
and
impairment
At 1 January
2014 - 22,487 2,869 12,093 37,449
Charge in the
period 350 3,267 170 864 4,651
Disposals - (479) - - (479)
At 30 June
2014 350 25,275 3,039 12,957 41,621
Carrying
value at 30
June 2014
(unaudited) 47,130 64,926 703 5,038 117,797
Carrying
value at 30
June 2013
(unaudited) 47,241 53,753 664 4,150 105,808
Carrying
value at 31
December
2013
(audited) 47,241 52,487 666 4,575 104,969
The total amount charged to profit or loss in the period, in relation to
goodwill and client relationships, was GBP3,617,000 (six months ended 30
June 2013: GBP2,876,000; year ended 31 December 2013: GBP6,306,000). A
further GBP904,000 (six months ended 30 June 2013: GBP184,000; year
ended 31 December 2013: GBP480,000) was expensed as staff costs during
the period, representing amounts due for client relationships introduced
more than 12 months after the cessation of any non-compete period.
Purchases of client relationships relate to payments made to investment
managers and third parties for the introduction of client relationships.
Client relationships purchased in the period includes GBP13,738,000 (six
months ended 30 June 2013 and year ended 31 December 2013: GBPnil)
relating to the purchase of part of Deutsche Asset & Wealth Management's
London-based private client investment management business. The group
made an initial payment of GBP1,000,000 on 5 June 2014 and deferred
consideration of GBP12,738,000 is payable in four tranches between
September 2014 and January 2016 (note 14).
Goodwill and client relationships acquired through business combinations
include GBP239,000 and GBP303,000 respectively, in relation to the
acquisition of Rooper & Whately during the period (note 3).
During the period, the group updated its assessment of goodwill
allocated to the investment management and trust and tax cash generating
units (CGUs) for impairment. An initial assessment of goodwill acquired
with Rooper & Whately was also performed. The recoverable amounts of
goodwill allocated to the CGUs are determined from value-in-use
calculations. There was no indication of impairment of goodwill
allocated to the investment management or Rooper & Whately CGUs during
the period.
The calculated recoverable amount of goodwill allocated to the trust and
tax CGU at 30 June 2014 was GBP1,604,000, which was lower than the
carrying value of GBP1,954,000 at 31 December 2013. The recoverable
amount was calculated based on forecast earnings for the current year,
extrapolated using a growth rate of 1.5% for revenues and 3.0% for
expenditure for a ten year period (31 December 2013: 2.7% and 3.0%
respectively). The pre-tax rate used to discount the forecast cash flows
was 14% as the group judges this discount rate appropriately reflects
the market in which the CGU operates and, in particular, its small size.
The group has therefore recognised an impairment charge of GBP350,000
during the period. This impairment has been included in the Investment
Management segment in the segmental analysis (note 2).
14. Provisions for liabilities and charges
Deferred, variable
costs to acquire client Legal and
relationship intangibles compensation Property-related Total
GBP'000 GBP'000 GBP'000 GBP'000
At 1 January
2013 10,167 216 826 11,209
Charged to
profit or
loss - 36 82 118
Unused amount
credited to
profit or
loss - - (29) (29)
Net charge to
profit or
loss - 36 53 89
Other
movements 6,243 - - 6,243
Utilised/paid
during the
period (6,043) (79) - (6,122)
At 30 June
2013
(unaudited) 10,367 173 879 11,419
Charged to
profit or
loss - 331 95 426
Unused amount
credited to
profit or
loss - (14) (1) (15)
Net charge to
profit or
loss - 317 94 411
Other
movements 1,538 - - 1,538
Utilised/paid
during the
period (3,455) (7) - (3,462)
At 1 January
2014
(audited) 8,450 483 973 9,906
Charged to
profit or
loss - 170 54 224
Unused amount
credited to
profit or
loss - (253) - (253)
Net credit to
profit or
loss - (83) 54 (29)
Business
combinations
(note 3) 32,042 - - 32,042
Other
movements 14,404 - - 14,404
Utilised/paid
during the
period (2,571) (81) - (2,652)
At 30 June
2014
(unaudited) 52,325 319 1,027 53,671
Payable within
1 year 38,754 319 10 39,083
Payable after
1 year 13,571 - 1,017 14,588
At 30 June
2014
(unaudited) 52,325 319 1,027 53,671
Other movements in provisions relate to deferred payments to investment
managers and third parties for the introduction of client relationships,
which have been capitalised in the period. At 30 June 2014, this
includes GBP12,738,000 (30 June 2013 and 31 December 2013: GBPnil) in
relation to the purchase of part of Deutsche Asset & Wealth Management's
London-based private client investment management business on 5 June
2014. The final amount payable will be based on the value of transferred
funds under management retained by the group at 31 December 2015.
At 30 June 2014, business combinations includes a provision of
GBP32,000,000, being the minimum consideration payable for the
acquisition of Jupiter Asset Management Limited's private client and
charity investment management business (30 June 2013 and 31 December
2013: GBPnil). The final amount payable will be calculated based on the
value of funds under management that have transferred from Jupiter Asset
Management Limited to the group, measured on 26 September 2014 (note 3).
This balance also includes GBP42,000 (30 June 2013 and 31 December 2013:
GBPnil) in relation to deferred contingent consideration payable
following the acquisition of Rooper and Whately (note 3).
At 30 June 2014, deferred, variable costs to acquire client relationship
intangibles includes a final amount payable of GBP4,010,000 in relation
to the deferred consideration for the purchase of Taylor Young
Investment Management Limited's private client base (30 June 2013:
GBP4,108,000; 31 December 2013: GBP3,943,000). The final amount was
calculated based on the value of transferred funds under management at
30 April 2014 and is payable in October 2014.
Property-related provisions include GBP1,027,000 in relation to
dilapidation provisions expected to arise on leasehold premises held by
the group (30 June 2013: GBP879,000; 31 December 2013: GBP973,000).
Dilapidation provisions are calculated using a discounted cash flow
model; during the six months ended 30 June 2014, the impact of
discounting has increased the provisions by GBP54,000 (30 June 2013:
GBP82,000; 31 December 2013: GBP125,000).
Provisions payable after 1 year are expected to be settled within 2
years of the balance sheet date, except for property-related provisions
of GBP1,017,000, which are expected to be settled within 22 years of the
balance sheet date, which corresponds to the longest lease for which a
dilapidations provision is being held.
15. Long term employee benefits
The group operates two defined benefit pension schemes providing
benefits based on pensionable salary for some executive directors and
staff employed by the company. For the purposes of calculating the
pension benefit obligations, the following assumptions have been used:
Unaudited Unaudited Audited
30 June 2014 30 June 2013 31 December 2013
% p.a. % p.a. % p.a.
Rate of increase in salaries 4.40 4.40 4.50
Rate of increase of pensions
in payment:
- Laurence Keen Scheme 3.60 3.60 3.60
- Rathbones 1987 Scheme 3.30 3.30 3.40
Rate of increase of deferred
pensions 3.40 3.40 3.50
Discount rate 4.40 4.80 4.60
Inflation (Retail Prices
Index) 3.40 3.40 3.50
The assumed life expectations of members retiring, aged 65 were:
Unaudited Unaudited Unaudited Unaudited Audited Audited
30 June 30 June 30 June 30 June 31 December 31 December
2014 2014 2013 2013 2013 2013
Males Females Males Females Males Females
Retiring
today 24.2 26.2 24.1 26.1 24.1 26.1
Retiring
in 20
years 26.5 28.1 26.4 28.1 26.4 28.1
The amount included in the balance sheet arising from the group's
obligations in respect of the schemes is as follows:
Unaudited Unaudited Unaudited Unaudited Audited Audited
Rathbone Laurence Keen Rathbone Laurence Keen Rathbone Laurence Keen
1987 Scheme Scheme 1987 Scheme Scheme 1987 Scheme Scheme
30 June 30 June 30 June 30 June 31 December 31 December
2014 2014 2013 2013 2013 2013
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Present value of
defined benefit
obligations (142,093) (15,915) (116,812) (13,862) (129,765) (14,603)
Fair value of
scheme assets 137,742 16,591 124,647 15,324 129,949 16,033
Total
(deficit)/surplus (4,351) 676 7,835 1,462 184 1,430
The group made special contributions into its pension schemes of
GBP1,963,000 during the period (30 June 2013: GBP2,068,000; 31 December
2013: GBP2,236,000).
Triennial funding valuations of the two schemes as at 31 December 2013
are currently being carried out and are expected to be completed later
in the year.
16. Share capital
The following movements in share capital occurred during the period:
Exercise Share Share
Number of price capital premium Total
shares pence GBP'000 GBP'000 GBP'000
At 1 January 2013 45,954,071 2,298 62,160 64,458
Shares issued:
- to Share
Incentive Plan 79,686 1,296.0 - 1,510.0 4 1,081 1,085
- to Save As You
Earn scheme 175,233 696.0 - 984.0 9 1,213 1,222
- on exercise of
options 24,786 743.5 - 1,172.0 1 252 253
At 30 June 2013
(unaudited) 46,233,776 2,312 64,706 67,018
Shares issued:
- to Share
Incentive Plan 51,962 1,460.0 3 756 759
- to Save As You
Earn scheme 158 934.0 - 1,106.0 - 2 2
- on exercise of
options 1,768 1,172.0 - 20 20
At 31 December
2013 (audited) 46,287,664 2,315 65,484 67,799
Shares issued:
- on Placing 1,343,000 1,814.0 66 23,511 23,577
- to Share
Incentive Plan 117,859 1,634.0 - 1,946.0 6 2,101 2,107
- to Save As You
Earn scheme 26,788 934.0 1 249 250
- on exercise of
options 33,976 743.5 - 1,172.0 2 290 292
At 30 June 2014
(unaudited) 47,809,287 2,390 91,635 94,025
At 30 June 2014, the group held 420,589 own shares (30 June 2013:
504,610; 31 December 2013: 493,848).
On 1 April 2014, the company issued 1,343,000 shares by way of a placing
for cash consideration at GBP18.14 per share (representing no discount
to the prevailing market price) which raised GBP23,577,000, net of
GBP784,000 placing costs, which have been offset against share premium
arising on the issue.
17. Financial instruments
Debt securities comprise bank and building society certificates of
deposit, which have fixed coupons, and at 30 June 2014, the group also
held UK treasury bills. The fair value of debt securities at 30 June
2014 was GBP454,833,000 (30 June 2013: GBP607,152,000; 31 December 2013:
GBP577,602,000) and the carrying value was GBP453,714,000 (30 June 2013:
GBP606,008,000; 31 December 2013: GBP575,838,000). Fair value for held
to maturity assets is based on market bid prices. The fair values of the
group's other financial assets and liabilities are not materially
different from their carrying values.
The table below analyses financial instruments measured at fair value
into a fair value hierarchy based on the valuation technique used to
determine the fair value.
-- Level 1: quoted prices (unadjusted) in active markets for identical
assets or liabilities.
-- Level 2: inputs other than quoted prices included within level 1 that are
observable for the asset or liability, either directly or indirectly.
-- Level 3: inputs for the asset or liability that are not based on
observable market data.
Level 1 Level 2 Level 3 Total
At 30 June 2014 (unaudited) GBP'000 GBP'000 GBP'000 GBP'000
Assets
Available for sale securities:
- equity securities 491 - 699 1,190
- money market funds - 37,651 - 37,651
Derivative financial instruments - - 1,030 1,030
Total financial assets 491 37,651 1,729 39,871
Level 1 Level 2 Level 3 Total
At 30 June 2013 (unaudited) GBP'000 GBP'000 GBP'000 GBP'000
Assets
Available for sale securities:
- equity securities 4,455 - 692 5,147
- money market funds - 32,652 - 32,652
Derivative financial instruments - - 1,030 1,030
Total financial assets 4,455 32,652 1,722 38,829
Level 1 Level 2 Level 3 Total
At 31 December 2013 (audited) GBP'000 GBP'000 GBP'000 GBP'000
Assets
Available for sale securities:
- equity securities 5,642 - 691 6,333
- money market funds - 47,652 - 47,652
Derivative financial instruments - - 1,030 1,030
Total financial assets 5,642 47,652 1,721 55,015
There have been no transfers between levels during the period. The fair
value of listed equity securities is their quoted price. Money market
funds are demand securities and changes to estimates of interest rates
will not affect their fair value. The fair value of money market funds
is their daily redemption value.
Level 3 financial instruments
Available for sale equity securities
The fair value of unlisted equity securities is calculated by reference
to tangible net asset values from the published information of the
underlying company with a 25% liquidity discount applied.
A 5 percentage point increase in the liquidity discount applied to the
calculation of the fair value of the unlisted equity securities would,
in isolation, result in a decrease in fair value of GBP46,000 (30 June
2013: GBP46,000; 31 December 2013: GBP46,000). A 5 percentage point
decrease would have an equal and opposite effect.
Derivative financial instruments
In 2012, the group entered into certain options over the equity
instruments of its associates. Further details regarding these option
contracts can be found in note 20 of the annual report and accounts for
the year ended 31 December 2013.
The fair value of the option contracts is calculated using a probability
weighted expected return model, based on potential valuation outcomes
under a range of business growth forecast scenarios. The key assumptions
underlying the forecast growth in profitability of the associates in the
model are the growth of funds under management, revenue margins and the
discount rate used to calculate the present value of the cash flows. The
key assumptions are flexed in each scenario to generate a potential
valuation for the options. The probability of each scenario occurring is
estimated, based on the group's judgement in light of the economic
conditions prevailing at the time. The fair value of the options is
calculated as the weighted average of the valuations derived under each
scenario, taking account of the associated probabilities of occurrence.
Changing one or more of the key assumptions to reasonably possible
alternatives would have the following effects on the fair value of the
contracts. These effects have been calculated by running the valuation
model using the alternative estimates of the key assumptions. Any
interrelationship between the assumptions is not considered to have a
significant impact within the range of reasonably possible alternative
assumptions.
Increase in Decrease in
the assumption the assumption
Impact on fair value of: GBP'000 GBP'000
10% change in the fees and commission
charged to clients 888 (672)
5 percentage point change in commissions
payable (629) 829
10% change in the rate of growth in funds
under management 314 (314)
1 percentage point change in the discount
rate (261) 281
Changes in the fair values of financial instruments categorised as level
3 within the fair value hierarchy were as follows:
Available for Derivative
sale equity financial
securities instruments Total
GBP'000 GBP'000 GBP'000
At 1 January 2014 691 1,030 1,721
Total unrealised gains and losses
recognised in:
- other comprehensive income 8 - 8
At 30 June 2014 (unaudited) 699 1,030 1,729
The gain relating to the available for sale equity securities is
included within 'changes in fair value of available for sale investment
securities' in other comprehensive income. There were no other gains or
losses arising from changes in the fair value of financial instruments
categorised as level 3 within the fair value hierarchy.
18. Contingent liabilities and commitments
1. Indemnities are provided in the normal course of business to a number of
directors and employees who provide tax and trust advisory services in
connection with them acting as trustees/directors of client companies and
providing other services.
As reported in the 2013 report and accounts, a claim relating to the
management of a Jersey trust had been filed against a former employee
(and director) of Rathbone Trust Company Jersey Limited (RTCJ) and
others, and the company had issued proceedings to confirm insurance
cover against certain of Rathbones' civil liability (professional
indemnity) insurers. On 23 July 2014, the company entered into a
conditional agreement to contribute to a settlement of legal proceedings
in relation to both these cases (see note 21).
1. Capital expenditure authorised and contracted for at 30 June 2014 but not
provided for in the condensed consolidated interim financial statements
amounted to GBP490,000 (30 June 2013: GBP708,000; 31 December 2013:
GBP159,000).
2. The contractual amounts of the group's commitments to extend credit to
its clients are as follows:
Unaudited Unaudited Audited
30 June 2014 30 June 2013 31 December 2013
GBP'000 GBP'000 GBP'000
Guarantees 578 578 578
Undrawn commitments to lend
of 1 year or less 14,800 6,054 15,941
15,378 6,632 16,519
The fair value of the guarantees is GBPnil (30 June 2013 and 31 December
2013: GBPnil).
1. In addition to Financial Services Compensation Scheme levies accrued in
the period, further levy charges may be incurred in future years,
although the ultimate cost remains uncertain.
19. Consolidated interim statement of cash flows
For the purposes of the consolidated interim statement of cash flows,
cash and cash equivalents comprise the following balances with less than
three months until maturity from the date of acquisition:
Unaudited Unaudited Audited
Six months to Six months to Year to
30 June 2014 30 June 2013 31 December 2013
GBP'000 GBP'000 GBP'000
Cash and balances at
central banks 591,005 213,004 211,005
Loans and advances to banks 75,068 48,349 61,171
Available for sale
investment securities 37,651 32,652 47,652
703,724 294,005 319,828
Available for sale investment securities are amounts invested in money
market funds which are realisable on demand.
Cash flows arising from issue of ordinary shares comprise:
Unaudited Unaudited Audited
Six months to Six months to Year to
30 June 2014 30 June 2013 31 December 2013
GBP'000 GBP'000 GBP'000
Share capital issued (note 16) 75 14 17
Share premium on shares issued (note 16) 26,151 2,546 3,324
Shares issued in relation to share-based schemes for
which
no cash consideration was received (1,250) (289) (609)
24,976 2,271 2,732
20. Related party transactions
The key management personnel of the group are defined as the company's
directors and other members of senior management who are responsible for
planning, directing and controlling the activities of the group.
Dividends totalling GBP59,000 were paid in the period (six months ended
30 June 2013: GBP55,000; year ended 31 December 2013: GBP84,000) in
respect of ordinary shares held by key management personnel.
At 30 June 2014, key management personnel and their close family members
had gross outstanding deposits of GBP1,052,000 (30 June 2013:
GBP1,232,000; 31 December 2013: GBP436,000) and gross outstanding loans
of GBP6,586,000 (30 June 2013: GBP610,000; 31 December 2013:
GBP6,488,000) which were made on normal business terms. A number of the
company's directors and their close family members make use of the
services provided by companies within the group. Charges for such
services are made at various staff rates.
The group managed 21 unit trusts and OEICs during the first half of 2014
(six months ended 30 June 2013: 20 unit trusts and OEICs; year ended 31
December 2013: 22 unit trusts and OEICs). Total management charges of
GBP11,188,000 (six months ended 30 June 2013: GBP9,015,000; year ended
31 December 2013: GBP19,169,000) were earned during the period,
calculated on the bases published in the individual fund prospectuses,
which also state the terms and conditions of the management contract
with the group. Management fees owed to the group as at 30 June 2014
totalled GBP1,960,000 (30 June 2013: GBP1,544,000; 31 December 2013:
GBP1,785,000).
All amounts outstanding with related parties are unsecured and will be
settled in cash. No guarantees have been given or received. No
provisions have been made for doubtful debts in respect of the amounts
owed by related parties.
21. Events after the consolidated interim balance sheet date
On 23 July 2014 the company entered into a conditional agreement to
contribute to a settlement of legal proceedings in Jersey involving a
former director and employee of Rathbone Trust Company Jersey Limited
and in respect of legal proceedings against certain of Rathbones' civil
liability (professional indemnity) insurers (where the case has recently
been heard in the English Court of Appeal but judgment not yet handed
down). Both sets of proceedings were reported on in the 2013 report and
accounts.
The terms of settlement are confidential and conditional upon various
matters, including receiving Court approval in Jersey. Upon the
settlement becoming unconditional, the company will contribute GBP15
million as its share of the settlement. The settlement is expected to
become unconditional before the end of September 2014.
Independent review report to Rathbone Brothers Plc
We have been engaged by the Company to review the condensed set of
financial statements in the half yearly financial report for the six
months ended 30 June 2014 which comprises the consolidated interim
statement of comprehensive income, consolidated interim statement of
changes in equity, consolidated interim balance sheet, consolidated
interim statement of cash flows and the related explanatory notes. We
have read the other information contained in the half yearly financial
report and considered whether it contains any apparent misstatements or
material inconsistencies with the information in the condensed set of
financial statements.
This report is made solely to the Company in accordance with the terms
of our engagement to assist the Company in meeting the requirements of
the Disclosure and Transparency Rules ("the DTR") of the UK's Financial
Conduct Authority ("the UK FCA"). Our review has been undertaken so that
we might state to the Company those matters we are required to state to
it in this report and for no other purpose. To the fullest extent
permitted by law, we do not accept or assume responsibility to anyone
other than the Company for our review work, for this report, or for the
conclusions we have reached.
Directors' responsibilities
The half yearly financial report is the responsibility of, and has been
approved by, the directors. The directors are responsible for preparing
the half yearly financial report in accordance with the DTR of the UK
FCA.
As disclosed in note 1, the annual financial statements of the Group are
prepared in accordance with IFRSs as adopted by the EU. The condensed
set of financial statements included in this half yearly financial
report has been prepared in accordance with IAS 34 Interim Financial
Reporting as adopted by the EU.
Our responsibility
Our responsibility is to express to the Company a conclusion on the
condensed set of financial statements in the half yearly financial
report based on our review.
Scope of review
We conducted our review in accordance with International Standard on
Review Engagements (UK and Ireland) 2410 Review of Interim Financial
Information Performed by the Independent Auditor of the Entity issued by
the Auditing Practices Board for use in the UK. A review of interim
financial information consists of making enquiries, primarily of persons
responsible for financial and accounting matters, and applying
analytical and other review procedures. A review is substantially less
in scope than an audit conducted in accordance with International
Standards on Auditing (UK and Ireland) and consequently does not enable
us to obtain assurance that we would become aware of all significant
matters that might be identified in an audit. Accordingly, we do not
express an audit opinion.
Conclusion
Based on our review, nothing has come to our attention that causes us to
believe that the condensed set of financial statements in the half
yearly financial report for the six months ended 30 June 2014 is not
prepared, in all material respects, in accordance with IAS 34 as adopted
by the EU and the DTR of the UK FCA.
Richard Faulkner (Senior Statutory Auditor)
for and on behalf of KPMG LLP, Statutory Auditor
Chartered Accountants
15 Canada Square, London E14 5GL
23 July 2014
This announcement is distributed by NASDAQ OMX Corporate Solutions on
behalf of NASDAQ OMX Corporate Solutions clients.
The issuer of this announcement warrants that they are solely
responsible for the content, accuracy and originality of the information
contained therein.
Source: Rathbone Brothers PLC via Globenewswire
HUG#1836034
http://www.rathbones.com/
Rathbones (LSE:RAT)
Historical Stock Chart
From Jun 2024 to Jul 2024
Rathbones (LSE:RAT)
Historical Stock Chart
From Jul 2023 to Jul 2024
