TIDMRAT
Half year underlying profit before tax increases 27% to GBP37.2 million
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 2015.
Philip Howell, Chief Executive of Rathbone Brothers Plc, said:
"In the first half of 2015, we have been working steadily towards our
strategic goals. In a period when markets made little progress, we
continued to grow both organically and through acquisition, adding a
combined total net funds under management of GBP0.7 billion in the first
half. The full benefit of 2014 acquisitions is reflected in our 2015
half year results.
"We will continue to invest in the skills and systems necessary to
deliver our strategic plans and achieve our growth objectives. We face
the future with cautious optimism."
Highlights:
-- Total funds under management at 30 June 2015 were GBP28.3 billion, up
4.0% from GBP27.2 billion at 31 December 2014. This compared to a
decrease of 0.7% in the FTSE 100 Index and an increase of 0.6% in the
FTSE WMA Balanced Index over the same period.
-- Total net organic and acquired growth in the funds managed by Rathbone
Investment Management was GBP0.6 billion in the first six months of 2015,
representing a net annual growth rate of 5.1% (2014: 12.2%). Net organic
growth of GBP0.3 billion for the first half represents an underlying
annualised rate of net organic growth of 2.8% (2014: 4.1%).
-- Underlying profit before tax1 increased 27.0% from GBP29.3 million2 to
GBP37.2 million, representing a margin of 31.9% (2014: 29.9%2).
-- Profit before tax was GBP31.8 million for the six months ended 30 June
2015, up 3.9% compared to GBP30.6 million2 in 2014.
-- Basic earnings per share increased 3.9% to 53.2p (2014: 51.2p2).
-- The board recommends a 21p interim dividend for 2015 (2014: 19p), an
increase of 10.5% on 2014.
-- Underlying operating income in Rathbone Investment Management of GBP106.8
million in the first six months of 2015 (2014: GBP90.8 million) was up
17.6%, mostly due to growth in funds under management. The average FTSE
100 Index was 6677 on our quarterly billing dates in 2015, compared to
6720 in 2014, a decrease of 0.6%.
-- Net interest income of GBP5.5 million in the first six months of 2015 has
increased 25.0% from GBP4.4 million in 2014 largely due to an increase in
average liquidity to GBP1.6 billion for the six months to 30 June 2015
(2014: GBP1.1 billion).
-- Underlying operating expenses of GBP79.6 million for the six months ended
30 June 2015 were up 15.7% from GBP68.8 million2 in the first half of
2014 largely reflecting higher fixed and variable staff costs associated
with employees joining us through 2014 acquisitions and increased
profitability.
-- Funds under management in Rathbone Unit Trust Management were GBP2.7
billion at 30 June 2015 (31 December 2014: GBP2.5 billion). Net inflows
of GBP107 million in the first half of 2015 have decreased from GBP338
million in 2014. Underlying operating income in Rathbone Unit Trust
Management was GBP10.0 million in the six months ended 30 June 2015, an
increase of 37.0% from GBP7.3 million in the first half of 2014.
-- On 27 July 2015, Rathbone Investment Management Limited agreed to issue
GBP20 million of 10-year subordinated notes (callable in year five) to
M&G, which will count as Tier 2 capital. This has been made possible by
the changes to regulatory capital rules as a result of CRD IV that allow
us as a bank to add Tier 2 capital as a way of financing future growth in
a cost effective and capital-efficient manner.
(1) Excluding charges in relation to client relationships and goodwill
and, in 2014, gain on disposal of financial securities and transaction
costs
(2) Restated following the adoption of IFRIC 21, as described in note 1
to the condensed consolidated interim financial statements
Issued on 28 July 2015
For further information contact:
Rathbone Brothers Plc Quill PR
020 7399 0000 020 7466 5054
marketing@rathbones.com hugo@quillpr.com
Mark Nicholls, Chairman Hugo Mortimer-Harvey
Philip Howell, Chief Executive
Paul Stockton, Finance Director
Rathbone Brothers Plc
Rathbone Brothers Plc, through its subsidiaries, 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 950 staff in 14 UK locations and Jersey, and has its
headquarters in Curzon Street, London.
rathbones.com http://www.rathbones.com/
Interim management report
First half review
In spite of the reasonable level of confidence in financial markets in
April and May 2015, they made little progress in the half year overall
as the UK election weighed heavily on sentiment and Eurozone worries
added to investor concerns in China towards the end of June. The FTSE
100 Index was 6521 at 30 June 2015, down marginally on the 6566 at the
beginning of the year.
During this time, Rathbones has been working steadily towards achieving
its strategic goals. The full benefit of 2014 acquisitions is reflected
in our 2015 half year results and retention of clients that joined us
continues to be high, with teams working hard to ensure that their
experiences at Rathbones are positive. We continued to grow both
organically and through acquisition, adding combined total net funds
under management of GBP0.7 billion in the first half (2014: GBP1.5
billion). We welcomed 13 new investment professionals to Rathbones in
the period and in May extended our presence in Scotland with the opening
of an office in Glasgow. We have also continued to strengthen our
research capabilities and overall investment process.
This is the first period where our distribution teams for investment
management and unit trust intermediaries have worked together as one
unit. This widens our distribution capability and improves service to
larger intermediary and IFA networks. Activity to support this
initiative has been high and, whilst early days, we are seeing
encouraging signs. The development of our private office service is
progressing as planned and we expect to make some key additions to this
team in the second half of the year. A decision on whether to exercise
our option to acquire the remaining part of Vision Independent Financial
Planning Limited is due to be made before the end of September 2015. The
launch of our new branding is currently being implemented throughout the
organisation, with the new look 2014 report and accounts, corporate
stationery and client magazine 'Rathbones Review' already available.
At the start of 2015, we introduced a 'clean', fee-only rate for all new
private clients. Our new tariff remains competitive and clients have
welcomed the clarity and transparency. With effect from 1 July 2015, we
are amending some fee schedules for some existing private clients in
order to bring these more in line with the tariff for new clients. We
expect that our revenue margin will increase by approximately 3bps on
circa GBP12 billion of existing funds under management for a full year.
Business performance
Total group funds under management at 30 June 2015 were GBP28.3 billion,
up from GBP27.2 billion at 31 December 2014 and GBP23.9 billion at 30
June 2014. Of this, GBP25.6 billion was managed by our Investment
Management segment and GBP2.7 billion by our Unit Trusts segment.
Total growth in investment management funds under management of GBP0.6
billion in the first half (2014: GBP1.2 billion) represents an
annualised growth rate of 5.1% (2014: 12.2%). Of this, organic growth in
the first half of 2015 was subdued at GBP0.3 billion (2014: GBP0.4
billion), equating to an annualised net organic growth rate of 2.8%
(2014: 4.1%), reflecting both the considerable uncertainty that
surrounded the UK general election and a tendency for UK private clients
in general to allocate more of their wealth to property in the current
climate. As expected, our overall organic growth rate has been softened
this year by recently-arrived teams whose priority is their existing
clients rather than pursuing new business. In light of the size of
acquisitions made in 2014, this has been a significant factor this half
year. Adjusting for this, we estimate that the annualised net organic
growth rate would be 3.2%.
Net inflows into Rathbone Unit Trust Management in the first half were
GBP107 million (2014: GBP338 million), which represents a relatively
strong performance when compared to an industry that saw an increase in
outflows in all sectors in which we have funds. Redemptions of GBP335
million (2014: GBP205 million) in the first half reflect this, but have
been more than offset by inflows.
Financial results
The average FTSE 100 Index calculated on our fee billing days was 6677
in the first half of 2015 compared to 6720 a year ago, so the 19.1%
increase in underlying operating income of GBP116.8 million (2014:
GBP98.1 million) is mostly due to growth in funds under management
rather than any movement in investment markets. Net commission income of
GBP26.3 million increased 11.9% from GBP23.5 million in the first half
of 2014, following a particularly strong first quarter. Net interest
income increased 25.0% to GBP5.5 million in the first half (2014: GBP4.4
million), which largely reflected higher deposit levels as average
liquidity increased from GBP1.1 billion in 2014 to GBP1.6 billion in
2015. Fees from advisory services and other income of GBP7.3 million
were in line with 2014 (GBP7.2 million), which included a non-recurring
gain of GBP0.6 million on the repayment of loan notes.
Underlying operating expenses of GBP79.6 million (2014: GBP68.8 million)
increased 15.7% year-on-year, largely reflecting the higher fixed staff
costs of GBP36.9 million (2014: GBP30.7 million) associated with
employees joining us through 2014 acquisitions, but also higher variable
staff costs of GBP20.7 million (2014: GBP17.2 million) as a result of
increased profitability. Average headcount in the first half of 2015 was
956 compared to 853 a year ago and is expected to continue to grow in
the second half of the year. Other direct costs of GBP22.0 million
(2014: GBP20.9 million) were up 5.3%. This included the impact of
reporting the entire annual Financial Services Compensation Scheme
(FSCS) levy charge in the first half, following the adoption of IFRIC 21
(comparative balances have been restated accordingly - see note 1) and
higher project costs.
Underlying profit before tax for the first six months of 2015 increased
by 27.0% to GBP37.2 million (2014: GBP29.3 million). Underlying earnings
per share of 62.4p (2014: 48.9p) were up 27.6% on last year. The
underlying profit margin increased to 31.9% in the first half of 2015
compared to 29.9% in 2014, largely reflecting relatively strong income
levels in the first half of 2015.
Profit before tax for the half year of GBP31.8 million was 3.9% higher
than the GBP30.6 million in 2014; however last half year's result
included an exceptional gain of GBP5.9 million on the disposal of our
holding of shares in London Stock Exchange Group Plc, which was partly
offset by transaction costs of GBP1.0 million relating to acquisitions.
Our effective tax rate for the first half of 2015 was 20.4% (2014:
22.3%), reflecting the impact of the increase in share price on share
based awards and the 1% reduction in the UK tax rate effective from 6
April 2015, partially offset by disallowable expenses. Basic earnings
per share of 53.2p represents an increase of 3.9% on 51.2p last year.
Our interim dividend has been increased by 2.0p per share to 21.0p (2014
interim: 19p). The interim dividend will be paid on 7 October 2015 (see
note 6).
Financial position and regulatory capital
Our balance sheet remains stable with total equity increasing 4.1% to
GBP282 million at 30 June 2015 from GBP271 million at 31 December 2014
(30 June 2014: GBP275 million). Cash and balances with central banks
were GBP703 million at 30 June 2015, a decrease of 3.3% from GBP727
million at 31 December 2014. Loans and advances to customers reduced
marginally to GBP101.0 million from GBP101.6 million at 31 December 2014
as some large loans were repaid in the first half. Retirement benefit
obligations reduced from GBP13.7 million at 31 December 2014 to GBP10.8
million at 30 June 2015, largely reflecting the movement in long term
gilts yields in the period.
The group's consolidated common equity Tier 1 ("CET1") ratio at 30 June
2015 stood at 14.1%, compared to 17.8% at 31 December 2014 and 23.0% at
30 June 2014. The reduction is largely a consequence of the GBP40.0
million of goodwill and intangibles arising from acquisitions made in
the second half of 2014. The consolidated leverage ratio represents the
group's common equity Tier 1 capital as a percentage of its total
balance sheet assets, adjusted to exclude intangible assets and
investment in associates but including a proportion of off-balance sheet
exposures. The ratio as at 30 June 2015 stood at 6.3%, compared to 7.4%
at 31 December 2014 and 10.8% at 30 June 2014, impacted by higher
treasury assets over the period as client liquidity rose.
Total regulatory capital resources (excluding profits for the first half,
which have not yet been independently verified) were GBP112 million at
30 June 2015, in line with GBP113 million at 31 December 2014 (30 June
2014: GBP154 million). Regulatory capital resources are entirely
comprised of CET1 capital; being total equity less intangible assets and
own shares, together with some other small regulatory adjustments.
The group's Pillar 1 own funds requirement at 30 June 2015 was GBP63.6
million, compared to GBP50.6 million at 31 December 2014 and GBP53.6
million at 30 June 2014. Risk weighted assets (RWAs) were GBP796 million
at 30 June 2015 (31 December 2014: GBP633 million; 30 June 2014: GBP670
million). At 30 June 2015, our Pillar 2A guidance amounted to 2.1% of
RWAs (31 December 2014: 2.4%; 30 June 2014: 2.3%), of which 1.2% must be
covered by CET1 capital (31 December 2014: 1.3%; 30 June 2014: 1.3%). In
addition, the group is required to hold capital to cover Pillar 2B
buffers (which provide for potential risks arising from external market
factors over the cycle), that are agreed confidentially with the
Prudential Regulation Authority from time-to-time.
In addition to our CET1 resources, we have taken the opportunity to add
Tier 2 capital as a way of financing future growth in a cost effective
and capital efficient manner and today announce the issue by Rathbone
Investment Management Limited of GBP20 million of 10-year Tier 2 notes
to funds managed by M&G Investment Management Limited. These notes are
repayable in August 2025, with a call option for the issuer in August
2020 and annually thereafter. Interest is payable at a fixed rate of
5.856% until the first call option date and at a fixed margin of 4.375%
over 6-month LIBOR thereafter.
Board and senior management changes
As we reported in the annual report, Sarah Gentleman was appointed to
the board as an independent non-executive director on 21 January 2015
and has joined the audit, remuneration, nomination and group risk
committees. We welcome Sarah to the board.
We continue to strengthen our senior management structure in
anticipation of our continuing growth so have added to our executive
committee. As announced on 17 July 2015, Sarah Owen-Jones, who joined
us as chief risk officer in March 2015, has now formally joined the
committee. Andrew Morris, Richard Smeeton, Ivo Clifton and Rupert Baron,
who will each hold leadership responsibility for a specific part of the
Rathbone Investment Management business, have also been promoted to the
committee. These additions allow Paul Chavasse, as head of investment,
to focus on the development of our investment process, research and
client services.
Business risks
The principal risks facing Rathbones are described in detail in the risk
management section of the strategic report on pages 18 to 22 of our 2014
annual report and accounts. Operational risks that arise from growth in
our business have reduced in the first half as we have not completed any
new corporate acquisitions. We continue to expect that principal future
risks in the second half will arise from our ambition to grow the
business and from regulatory risks that may arise from continual changes
to rules and standards in our sector.
Outlook
Whilst market concerns ahead of the UK general election proved largely
unfounded with the election of a government with a clear majority, we
continue to expect more volatility in financial markets as many other
geo-political risks remain.
The chancellor's summer budget contained a number of changes to the UK
tax rules, which could impact our post-tax earnings, including welcome
reductions in the underlying rate of corporation tax, but also an
unexpected banking surcharge on profits above GBP25 million and
restrictions on the deductibility of amortisation of intangible assets.
We will review the legislation enacting these changes, when it is
available, in order to quantify their possible impact on our business.
Rathbones will continue to invest carefully in the skills and systems
necessary to deliver its strategic plans and achieve its growth
objectives. We face the future with cautious optimism.
Mark Nicholls Philip Howell
Chairman Chief Executive
27 July 2015
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.
Consolidated interim statement of comprehensive income
for the six months ended 30 June 2015
Unaudited
Six months to Audited
Unaudited 30 June 2014 Year to 31 December 2014
Six months to 30 June 2015 GBP'000 GBP'000
Note GBP'000 (restated - note 1) (restated - note 1)
Interest and similar income 6,125 4,712 10,024
Interest expense and similar charges (629) (346) (865)
Net interest income 5,496 4,366 9,159
Fee and commission income 113,478 96,663 196,637
Fee and commission expense (4,200) (5,328) (9,126)
Net fee and commission income 109,278 91,335 187,511
Dividend income - 73 74
Net trading income 1,298 973 1,878
Other operating income 678 1,283 2,012
Share of profit of associates 83 85 169
Refund of levies for the Financial Services Compensation
Scheme 3 - - 982
Gain on disposal of financial securities 3 - 5,932 6,833
Gain on disposal of pension administration business 3 - - 683
Operating income 116,833 104,047 209,301
Charges in relation to client relationships and goodwill 10 (5,479) (3,617) (8,287)
Contribution to legal settlement 3 - - (15,000)
Transaction costs 3 - (1,001) (1,057)
Other operating expenses (79,589) (68,788) (139,247)
Operating expenses (85,068) (73,406) (163,591)
Profit before tax 31,765 30,641 45,710
Taxation 5 (6,473) (6,842) (10,032)
Profit for the period attributable to
equity holders of the company 25,292 23,799 35,678
Other comprehensive income:
Items that will not be reclassified to profit or loss
Net remeasurement of defined benefit liability 664 (6,747) (17,466)
Deferred tax relating to the net remeasurement of
defined benefit liability (133) 1,349 3,493
Items that may be reclassified to profit or loss
Revaluation of available for sale investment securities:
- net gain from changes in fair value 15 696 959
- net profit on disposal transferred to profit or
loss during the period - (5,932) (6,820)
15 (5,236) (5,861)
Deferred tax relating to revaluation of available
for sale investment securities (3) 1,047 1,172
Other comprehensive income net of tax 543 (9,587) (18,662)
Total comprehensive income for the period net of tax
attributable to equity holders of the company 25,835 14,212 17,016
Dividends paid and proposed for the period per ordinary
share 6 21.0p 19.0p 52.0p
Dividends paid and proposed for the period 10,093 9,084 24,863
Earnings per share for the period attributable to
equity holders of the company: 7
- basic 53.2p 51.2p 76.0p
- diluted 52.8p 50.8p 75.4p
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 2015
(restated - note 1)
Available
Share Merger for sale Own Retained
Share capital premium reserve reserve shares earnings
Note GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 Total equity GBP'000
At 1 January 2014 (audited) 2,315 65,484 31,835 4,717 (5,722) 152,371 251,000
Restatement (see note 1) 498 498
At 1 January 2014 (restated) 2,315 65,484 31,835 4,717 (5,722) 152,869 251,498
Profit for the period 23,799 23,799
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 13 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) 154,301 275,241
Profit for the period 11,879 11,879
Net remeasurement of defined benefit liability (10,719) (10,719)
Revaluation of available for sale investment securities
- net gain from changes in fair value 263 263
- net profit on disposal transferred to profit or
loss during the period (888) (888)
Deferred tax relating to components of other comprehensive
income 125 2,144 2,269
Other comprehensive income net of tax - - - (500) - (8,575) (9,075)
Dividends paid (9,059) (9,059)
Issue of share capital 13 5 1,352 1,357
Share-based payments:
- value of employee services 1,247 1,247
- cost of own shares acquired (405) (405)
- cost of own shares vesting 322 (322) -
- tax on share-based payments 86 86
At 31 December 2014 (audited) 2,395 92,987 31,835 28 (5,531) 149,557 271,271
Profit for the period 25,292 25,292
Net remeasurement of defined benefit liability 664 664
Revaluation of available for sale investment securities 15 15
Deferred tax relating to components of other comprehensive
income (3) (133) (136)
Other comprehensive income net of tax - - - 12 - 531 543
Dividends paid (15,766) (15,766)
Issue of share capital 13 8 3,188 3,196
Share-based payments:
- value of employee services (388) (388)
- cost of own shares acquired (1,894) (1,894)
- cost of own shares vesting 1,410 (1,410) -
- tax on share-based payments 134 134
At 30 June 2015 (unaudited) 2,403 96,175 31,835 40 (6,015) 157,950 282,388
The accompanying notes form an integral part of the condensed
consolidated interim financial statements.
Consolidated interim balance sheet
as at 30 June 2015
Unaudited Audited
Unaudited 30 June 2014 31 December 2014
30 June 2015 GBP'000 GBP'000
Note GBP'000 (restated - note 1) (restated - note 1)
Assets
Cash and
balances
with central
banks 703,338 591,005 727,178
Settlement
balances 59,012 39,893 15,890
Loans and
advances to
banks 112,996 110,760 144,399
Loans and
advances to
customers 8 100,996 91,801 101,640
Investment
securities:
- available
for sale 50,851 38,841 15,514
- held to
maturity 674,177 453,714 429,974
Prepayments,
accrued
income and
other
assets 60,302 80,102 55,272
Property,
plant and
equipment 9 9,871 10,970 10,242
Deferred tax
asset 6,238 3,834 7,042
Investment in
associates 1,472 1,366 1,434
Intangible
assets 10 161,664 117,797 159,654
Total assets 1,940,917 1,540,083 1,668,239
Liabilities
Deposits by
banks 10,522 4,202 -
Settlement
balances 55,593 65,298 22,584
Due to
customers 1,505,856 1,084,295 1,282,426
Accruals,
deferred
income and
other
liabilities 51,913 47,315 52,944
Current tax
liabilities 5,645 6,386 4,360
Provisions
for
liabilities
and charges 11 18,169 53,671 20,944
Retirement
benefit
obligations 12 10,831 3,675 13,710
Total
liabilities 1,658,529 1,264,842 1,396,968
Equity
Share capital 13 2,403 2,390 2,395
Share premium 13 96,175 91,635 92,987
Merger
reserve 31,835 31,835 31,835
Available for
sale
reserve 40 528 28
Own shares (6,015) (5,448) (5,531)
Retained
earnings 157,950 154,301 149,557
Total equity 282,388 275,241 271,271
Total
liabilities
and equity 1,940,917 1,540,083 1,668,239
The condensed consolidated interim financial statements were approved by
the board of directors and authorised for issue on 27 July 2015 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 2015
Unaudited Audited
Unaudited Six months to Year to
Six months to 30 June 2014 31 December 2014
30 June 2015 GBP'000 GBP'000
Note GBP'000 (restated - note 1) (restated - note 1)
Cash flows from operating activities
Profit before tax 31,765 30,641 45,710
Share of profit of associates (83) (85) (169)
Net profit on disposal of available for sale investment
securities 3 - (5,932) (6,820)
Net interest income (5,496) (4,366) (9,159)
Net recoveries on impaired loans and advances (8) (551) (589)
Net charge/(release) for provisions 11 155 (29) 380
Loss on fair value of derivative 330 - -
Loss on disposal of property, plant and equipment - - 517
Depreciation, amortisation and impairment 7,992 6,105 13,367
Defined benefit pension scheme charges 2,185 1,727 3,332
Defined benefit pension contributions paid (4,400) (3,185) (5,474)
Share-based payment charges 2,381 2,881 5,477
Interest paid (658) (350) (852)
Interest received 8,125 5,140 10,284
42,288 31,996 56,004
Changes in operating assets and liabilities:
- net decrease/(increase) in loans and advances to
banks and customers 10,699 13,796 (11,074)
- net (increase)/decrease in settlement balance debtors (43,122) (20,282) 3,721
- net increase in prepayments, accrued income and
other assets (7,372) (1,993) (8,982)
- net increase in amounts due to customers and deposits
by banks 233,952 196,598 390,529
- net increase/(decrease) in settlement balance
creditors 33,009 37,672 (5,042)
- net (decrease)/increase in accruals, deferred income,
provisions and other liabilities (4,062) (1,455) 2,790
Cash generated from operations 265,392 256,332 427,946
Tax paid (4,226) (4,139) (10,215)
Net cash inflow from operating activities 261,166 252,193 417,731
Cash flows from investing activities
Dividends received from associates 45 15 31
Acquisition of business combinations, net of cash
acquired - (569) (40,129)
Purchase of property, equipment and intangible assets (12,443) (6,003) (15,953)
Proceeds from sale of property, plant and equipment 21 - (517)
Purchase of investment securities (590,620) (281,916) (641,858)
Proceeds from sale and redemption of investment
securities 346,068 409,934 794,548
Net cash (used in)/generated from investing activities (256,929) 121,461 96,122
Cash flows from financing activities
Issue of ordinary shares 16 1,302 24,976 25,928
Dividends paid (15,766) (14,734) (23,793)
Net cash (used in)/generated from financing activities (14,464) 10,242 2,135
Net (decrease)/increase in cash and cash equivalents (10,227) 383,896 515,988
Cash and cash equivalents at the beginning of the
period 835,816 319,828 319,828
Cash and cash equivalents at the end of the period 16 825,589 703,724 835,816
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 products and
services from which the group derives its revenues are described in 'our
approach' on pages 11 to 12 of the annual report and accounts for the
year ended 31 December 2014 and have not materially changed since that
date.
These condensed consolidated interim financial statements, on pages 7 to
24, 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 2014
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 2014, 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 comparative figures for the financial year ended 31
December 2014 are not the group's statutory accounts for that financial
year. The group's financial statements for the year ended 31 December
2014 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 and interpretations affecting the financial statements
In the current period, the group has adopted IFRIC 21 'Levies'. IFRIC 21
'Levies' changes the point at which the group recognises a liability in
respect of Financial Services Compensation Scheme (FSCS) levies. From 1
January 2015, the group has recognised 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
has changed from 31 December of the preceding financial year to 1 April
of the current financial year, resulting in levies recognised in the
previous financial year being derecognised and recognised in the current
financial year.
Comparatives have been restated for the impact of the change. As at 1
January 2014, retained earnings bought forward have been increased by
GBP498,000. For the six months ended 30 June 2014, profit after tax has
been reduced by GBP220,000, and total liabilities have been reduced by
GBP278,000. For the year ended 31 December 2014, profit after tax has
been increased by GBP41,000, and total liabilities have been reduced by
GBP539,000.
Future new standards and interpretations
A number of new standards and amendments to standards and
interpretations will be effective for future annual and interim periods
and, therefore, have not been applied in preparing these condensed
consolidated interim financial statements. IFRS 9 'Financial
Instruments' and IFRS 15 'Revenue from Contracts with Customers' are
expected to have the most significant effect on the condensed
consolidated interim financial statements and the consolidated financial
statements of the group.
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. The group does not plan to adopt these standards
early and the extent of their impact has not yet been fully 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.
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
Management Unit Trusts Indirect expenses Total
Six months ended 30 June 2015 (unaudited) GBP'000 GBP'000 GBP'000 GBP'000
Net investment management fee income 69,129 8,613 - 77,742
Net commission income 26,337 - - 26,337
Net interest income 5,496 - - 5,496
Fees from advisory services and other income 5,828 1,430 - 7,258
Underlying operating income 106,790 10,043 - 116,833
Staff costs - fixed (25,899) (1,525) (9,455) (36,879)
Staff costs - variable (15,480) (1,872) (3,356) (20,708)
Total staff costs (41,379) (3,397) (12,811) (57,587)
Other direct expenses (9,562) (1,703) (10,737) (22,002)
Allocation of indirect expenses (22,319) (1,229) 23,548 -
Underlying operating expenses (73,260) (6,329) - (79,589)
Underlying profit before tax 33,530 3,714 - 37,244
Charges in relation to client relationships and goodwill
(note 10) (5,479) - - (5,479)
Segment profit before tax 28,051 3,714 - 31,765
Taxation (note 5) (6,473)
Profit for the period attributable to equity holders
of the company 25,292
Segment total assets 1,894,746 42,070 1,936,816
Unallocated assets 4,101
Total assets 1,940,917
Six months ended 30 June 2014 (unaudited) (restated Investment Management Unit Trusts Indirect expenses Total
- note 1) 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 (7,345) (1,323) (12,200) (20,868)
Allocation of indirect expenses (21,645) (1,287) 22,932 -
Underlying operating expenses (63,257) (5,531) - (68,788)
Underlying profit before tax 27,585 1,742 - 29,327
Charges in relation to client relationships and goodwill
(note 10) (3,617) - - (3,617)
Transaction costs (note 3) (1,001) - - (1,001)
Segment profit before tax 22,967 1,742 - 24,709
Gain on disposal of financial securities (note 3) 5,932
Profit before tax 30,641
Taxation (note 5) (6,842)
Profit for the period attributable to equity holders
of the company 23,799
Segment total assets 1,499,922 35,628 1,535,550
Unallocated assets 4,533
Total assets 1,540,083
Year ended 31 December 2014 (audited) (restated - Investment Management Unit Trusts Indirect expenses Total
note 1) GBP'000 GBP'000 GBP'000 GBP'000
Net investment management fee income 120,561 13,281 - 133,842
Net commission income 43,723 - - 43,723
Net interest income 9,159 - - 9,159
Fees from advisory services and other income 11,908 2,171 - 14,079
Underlying operating income 185,351 15,452 - 200,803
Staff costs - fixed (43,885) (3,304) (14,760) (61,949)
Staff costs - variable (25,790) (2,751) (6,664) (35,205)
Total staff costs (69,675) (6,055) (21,424) (97,154)
Other direct expenses (17,013) (2,788) (22,292) (42,093)
Allocation of indirect expenses (41,085) (2,631) 43,716 -
Underlying operating expenses (127,773) (11,474) - (139,247)
Underlying profit before tax 57,578 3,978 - 61,556
Refund of levies for the Financial Services Compensation
Scheme (note 3) 907 75 - 982
Gain on disposal of pension administration business
(note 3) 683 - - 683
Charges in relation to client relationships and goodwill
(note 10) (8,287) - - (8,287)
Transaction costs (note 3) (1,057) - - (1,057)
Segment profit before tax 49,824 4,053 - 53,877
Gain on disposal of financial securities (note 3) 6,833
Contribution to legal settlement (note 3) (15,000)
Profit before tax 45,710
Taxation (note 5) (10,032)
Profit for the year attributable to equity holders
of the company 35,678
Segment total assets 1,630,464 32,878 1,663,342
Unallocated assets 4,897
Total assets 1,668,239
The following table reconciles underlying operating income to operating
income:
Unaudited Unaudited Audited
Six months to Six months to Year to
30 June 2015 30 June 2014 31 December 2014
GBP'000 GBP'000 GBP'000
Underlying operating income 116,833 98,115 200,803
Refund of levies for the Financial Services
Compensation
Scheme (note 3) - - 982
Gain on disposal of financial securities (note 3) - 5,932 6,833
Gain on disposal of pension administration business
(note 3) - - 683
Operating income 116,833 104,047 209,301
The following table reconciles underlying operating expenses to
operating expenses:
Unaudited Unaudited Audited
Six months to Six months to Year to
30 June 2015 30 June 2014 31 December 2014
(restated - note 1) GBP'000 GBP'000 GBP'000
Underlying operating expenses 79,589 68,788 139,247
Charges in relation to client relationships and goodwill
(note 10) 5,479 3,617 8,287
Transaction costs (note 3) - 1,001 1,057
Contribution to legal settlement (note 3) - - 15,000
Operating expenses 85,068 73,406 163,591
Included within Investment Management operating income is GBP604,000 (30
June 2014: GBP179,000; 31 December 2014: GBP1,782,000) 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 2015 30 June 2014 31 December 2014
GBP'000 GBP'000 GBP'000
United Kingdom 112,909 100,915 202,634
Jersey 3,924 3,132 6,667
Operating income 116,833 104,047 209,301
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 2015, the group provided
investment management services to 47,000 clients (30 June 2014: 43,000;
31 December 2014: 46,000).
3. Operating income and expenses
In 2014, the following items were included in operating income and
expenses. No corresponding income or expenses arose in 2015.
Refund of levies for the Financial Services Compensation Scheme
In December 2014, the group received partial refunds of its 2010/2011
year Financial Services Compensation Scheme (FSCS) levies, totalling
GBP982,000 (six months ended 30 June 2014: GBPnil).
Gain on disposal of financial securities
During the six months ended 30 June 2014, the group disposed of its
remaining holding of 300,000 shares in London Stock Exchange Group Plc
for cash consideration of GBP5,932,000, recognising a gain on disposal
of GBP5,932,000. In the second half of 2014, the group also disposed of
its holding of 1,809 shares in Euroclear Plc for cash consideration of
GBP931,000, recognising a gain on disposal of GBP901,000 and a total
gain for the year ended 31 December 2014 of GBP6,833,000.
Gain on disposal of pension administration business
On 31 December 2014, the group disposed of its self invested personal
pension (SIPP) administration business for cash consideration of
GBP800,000, recognising a gain on disposal for the year then ended of
GBP683,000, after deducting related costs (six months ended 30 June
2014: GBPnil).
Contribution to legal settlement
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.
The settlement became unconditional on 18 August 2014 and the company
contributed GBP15,000,000 as its share of the settlement.
Transaction costs
During the year ended 31 December 2014, the group incurred GBP1,031,000
of legal and advisory fees in relation to corporate transactions entered
into during the year and GBP26,000 of listing authority fees in relation
to the placing of ordinary shares in April 2014, resulting in
transaction costs of GBP1,057,000 (six months ended 30 June 2014:
GBP1,001,000).
4. 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 2015 30 June 2014 31 December 2014
Investment Management:
- investment management
services 598 523 543
- advisory services 74 72 73
Unit Trusts 45 30 32
Shared services 239 228 232
956 853 880
5. Taxation
The tax expense for the six months ended 30 June 2015 was calculated
based on the estimated average annual effective tax rate. The overall
effective tax rate for this period was 20.4% (six months ended 30 June
2014: 22.3%; year ended 31 December 2014: 21.9% (restated - note 1)).
Audited
Unaudited Year to
Unaudited Six months to 31 December 2014
Six months to 30 June 2014 GBP'000
30 June 2015 GBP'000 (restated -
GBP'000 (restated - note 1) note 1)
United Kingdom
taxation 5,568 6,338 10,216
Overseas taxation 103 79 246
Deferred taxation 802 425 (430)
6,473 6,842 10,032
The underlying UK corporation tax rate for the year ending 31 December
2015 is 20.2% (2014: 21.5%).
Deferred tax assets and liabilities are calculated at 20%, which is the
rate that is currently in force. The changes announced in the summer
budget on 8 July 2015 have yet to be substantively enacted and therefore
have not been reflected in the above.
6. Dividends
An interim dividend of 21.0p per share was declared on 27 July 2015 and
is payable on 7 October 2015 to shareholders on the register at the
close of business on 11 September 2015 (30 June 2014: 19.0p). In
accordance with IFRS, the interim dividend has not been included as a
liability in this interim statement. A final dividend for 2014 of 33.0p
per share was paid on 19 May 2015.
7. 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 Six months to Six months to 30 June 2014 Six months to 30 June 2014 Year to 31 December 2014 Year to 31 December 2014
30 June 2015 30 June 2015 (restated - note 1) (restated - note 1) (restated - note 1) (restated - note 1)
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 37,244 29,662 29,327 22,768 61,556 48,119
Refund of levies for the Financial Services Compensation
Scheme (note 3) - - - - 982 771
Gain on disposal of financial securities (note 3) - - 5,932 4,657 6,833 5,364
Gain on disposal of pension administration business
(note 3) - - - - 683 536
Charges in relation to client relationships and goodwill
(note 10) (5,479) (4,370) (3,617) (2,840) (8,287) (6,506)
Contribution to legal settlement (note 3) - - - - (15,000) (11,776)
Transaction costs (note 3) - - (1,001) (786) (1,057) (830)
Profit attributable to equity holders 31,765 25,292 30,641 23,799 45,710 35,678
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 47,525,980 (30
June 2014: 46,523,342; 31 December 2014: 46,971,196).
Diluted earnings per share is the basic earnings per share, adjusted for
the effect of contingently issuable shares under Long Term and
Executive 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 2015 30 June 2014 31 December 2014
Weighted average number of ordinary shares in issue
during the period - basic 47,525,980 46,523,342 46,971,196
Effect of ordinary share options/Save As You Earn 160,451 26,901 21,684
Effect of dilutive shares issuable under the Share
Incentive Plan 18,464 131,247 63,866
Effect of contingently issuable ordinary shares under
Long Term and Executive Incentive Plans 217,470 193,905 247,202
Diluted ordinary shares 47,922,365 46,875,395 47,303,948
Unaudited Unaudited Audited
Six Six months to 30 June 2014 (restated - note 1) Year to 31 December 2014
months to (restated - note 1)
30 June
2015
Underlying earnings per share for the period attributable
to equity holders of the company:
- basic 62.4p 48.9p 102.4p
- diluted 61.9p 48.6p 101.7p
8. Loans and advances to customers
Unaudited Unaudited Audited
30 June 2015 30 June 2014 31 December 2014
GBP'000 GBP'000 GBP'000
Overdrafts 5,997 3,703 3,331
Investment management loan
book 93,971 86,960 97,392
Trust and pension debtors 1,012 1,124 909
Other debtors 16 14 8
100,996 91,801 101,640
9. Property, plant and equipment
During the six months ended 30 June 2015, the group purchased assets
with a cost of GBP1,056,000 (six months ended 30 June 2014:GBP899,000;
year ended 31 December 2014: GBP1,666,000).
Assets with a net book value of GBP21,000 were disposed of in the six
months ended 30 June 2015 (six months ended 30 June 2014: no disposals;
year ended 31 December 2014: GBPnil) resulting in a gain on disposal of
GBPnil (six months ended 30 June 2014: no disposals; year ended 31
December 2014: GBP8,000).
10. Intangible assets
Goodwill Client relationships Software development costs Purchased software Total Intangibles
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Cost
At 1 January
2015 58,234 124,679 4,034 19,104 206,051
Internally
developed in
the period - - 248 - 248
Purchased in
the period - 7,273 - 1,076 8,349
Disposals - (762) - - (762)
At 30 June
2015 58,234 131,190 4,282 20,180 213,886
Amortisation
and
impairment
At 1 January
2015 350 28,959 3,220 13,868 46,397
Charge in the
period 319 5,160 199 909 6,587
Disposals - (762) - - (762)
At 30 June
2015 669 33,357 3,419 14,777 52,222
Carrying
value at 30
June 2015
(unaudited) 57,565 97,833 863 5,403 161,664
Carrying
value at 30
June 2014
(unaudited) 47,130 64,926 703 5,038 117,797
Carrying
value at 31
December
2014
(audited) 57,884 95,720 814 5,236 159,654
The total amount charged to profit or loss in the period, in relation to
goodwill and client relationships, was GBP5,479,000 (six months ended 30
June 2014: GBP3,617,000; year ended 31 December 2014: GBP8,287,000). A
further GBP1,623,000 (six months ended 30 June 2014: GBP904,000; year
ended 31 December 2014: GBP2,824,000) 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.
During the period, the group updated its assessment of goodwill
allocated to the investment management, trust and tax and Rooper &
Whately cash generating units (CGUs) for impairment.
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 2015 was GBP1,285,000, which was lower than the
carrying value of GBP1,604,000 at 31 December 2014. The recoverable
amount was calculated based on forecast earnings for the current year,
extrapolated using a growth rate of 1.0% for revenues for a ten year
period (31 December 2014: 1.5%). The pre-tax rate used to discount the
forecast cash flows was 13% (31 December 2014: 13%) 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 GBP319,000 during the period. This
impairment has been included in the Investment Management segment in the
segmental analysis (note 2).
11. Provisions for liabilities and charges
Legal and
Deferred, variable costs to acquire client relationship Deferred, variable consideration in business combinations compensation Property-related Total
intangibles GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
At 1 January
2014 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 - 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) 20,283 32,042 319 1,027 53,671
Charged to
profit or
loss - - 354 55 409
Unused amount
credited to
profit or
loss - - - - -
Net charge to
profit or
loss - - 354 55 409
Business
combinations - (12) - - (12)
Other
movements 6,669 - - - 6,669
Utilised/paid
during the
period (7,773) (32,000) (20) - (39,793)
At 1 January
2015
(audited) 19,179 30 653 1,082 20,944
Charged to
profit or
loss - - 127 82 209
Unused amount
credited to
profit or
loss - (7) (47) - (54)
Net charge to
profit or
loss - (7) 80 82 155
Other
movements 7,273 - - - 7,273
Utilised/paid
during the
period (10,040) (23) (140) - (10,203)
At 30 June
2015
(unaudited) 16,412 - 593 1,164 18,169
Payable within
1 year 9,131 - 593 - 9,724
Payable after
1 year 7,281 - - 1,164 8,445
At 30 June
2015
(unaudited) 16,412 - 593 1,164 18,169
Deferred, variable costs to acquire client relationship intangibles
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.
Deferred, variable costs to acquire client relationship intangibles at
30 June 2015 includes GBP7,221,000 (30 June 2014: GBPnil; 31 December
2014: GBP11,132,000) 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.
Deferred, variable consideration in business combinations
Deferred, variable consideration in business combinations at 31 December
2014 consisted of GBP30,000 (30 June 2014: GBP42,000) payable following
the acquisition of Rooper and Whately. The final amount payable was
calculated as GBP23,000 and paid in March 2015.
Property-related
Property-related provisions consist of GBP1,164,000 in relation to
dilapidation provisions expected to arise on leasehold premises held by
the group (30 June 2014: GBP1,027,000; 31 December 2014: GBP1,082,000).
Dilapidation provisions are calculated using a discounted cash flow
model; during the six months ended 30 June 2015, provisions have
increased by GBP82,000 (30 June 2014: GBP54,000; 31 December 2014:
GBP109,000) due to the impact of discounting and taking on a new lease
during the period.
Ageing of provisions
Provisions payable after one year are expected to be settled within two
years of the balance sheet date, except for property-related provisions
of GBP1,164,000, which are expected to be settled within 21 years of the
balance sheet date, which corresponds to the longest lease for which a
dilapidations provision is being held.
12. 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 2015 30 June 2014 31 December 2014
% p.a. % p.a. % p.a.
Rate of increase in salaries 4.30 4.40 4.10
Rate of increase of pensions
in payment:
- Laurence Keen Scheme 3.50 3.60 3.40
- Rathbones 1987 Scheme 3.20 3.30 3.10
Rate of increase of deferred
pensions 3.30 3.40 3.10
Discount rate 3.90 4.40 3.80
Inflation* 3.30 3.40 3.10
* Inflation assumptions are based on the Retail Prices Index
The assumed life expectations of members retiring, aged 65 were:
Audited
Unaudited Unaudited Unaudited Unaudited 31 December Audited
30 June 2015 30 June 2015 30 June 2014 30 June 2014 2014 31 December 2014
Males Females Males Females Males Females
Retiring
today 24.2 26.4 24.2 26.2 24.2 26.3
Retiring
in 20
years 26.5 28.6 26.5 28.1 26.4 28.5
The amount included in the balance sheet arising from the group's
obligations in respect of the schemes is as follows:
Unaudited Rathbone Unaudited Unaudited Audited Rathbone Audited
1987 Scheme Laurence Keen Scheme Unaudited Rathbone 1987 Scheme Laurence Keen Scheme 1987 Scheme Laurence Keen Scheme
30 June 2015 30 June 2015 30 June 2014 30 June 2014 31 December 2014 31 December 2014
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Present value of
defined benefit
obligations (166,066) (15,309) (142,093) (15,915) (163,859) (16,770)
Fair value of
scheme assets 155,486 15,058 137,742 16,591 150,582 16,337
Total
(deficit)/surplus (10,580) (251) (4,351) 676 (13,277) (433)
The group made special contributions into its pension schemes of
GBP2,792,000 during the period (30 June 2014: GBP1,963,000;31 December
2014: GBP3,105,000).
13. Share capital
The following movements in share capital occurred during the period:
Share Share
Number of Exercise capital premium Total
shares price pence GBP'000 GBP'000 GBP'000
At 1 January
2014 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 1,634.0 -
Plan 117,859 1,946.0 6 2,101 2,107
- to Save As
You Earn
scheme 26,788 934.0 1 249 250
- on
exercise of 743.5 -
options 33,976 1,172.0 2 290 292
At 30 June
2014
(unaudited) 47,809,287 2,390 91,635 94,025
Shares
issued:
- to Share
Incentive 1,874.0 -
Plan 62,648 1,920.0 4 1,194 1,198
- to Save As
You Earn 934.0 -
scheme 1,834 1,106.0 - 18 18
- on
exercise of
options 16,500 852.0 1 140 141
At 31
December
2014
(audited) 47,890,269 2,395 92,987 95,382
Shares
issued:
- to Share
Incentive 1,934.0 -
Plan 139,573 2,264.0 7 2,873 2,880
- to Save As
You Earn 984.0 -
scheme 31,813 1,556.0 1 314 315
- on
exercise of
options 107 1,172.0 - 1 1
At 30 June
2015
(unaudited) 48,061,762 2,403 96,175 98,578
At 30 June 2015, the group held 388,831 own shares (30 June 2014:
420,589; 31 December 2014: 411,195).
14. Financial instruments
The table below analyses group's 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 2015 (unaudited) GBP'000 GBP'000 GBP'000 GBP'000
Assets
Available for sale securities:
- equity securities 880 - - 880
- money market funds - 49,971 - 49,971
Derivative financial instruments - - 700 700
Total financial assets 880 49,971 700 51,551
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 31 December 2014 (audited) GBP'000 GBP'000 GBP'000 GBP'000
Assets
Available for sale securities:
- equity securities 514 - - 514
- money market funds - 15,000 - 15,000
Derivative financial instruments - - 1,030 1,030
Total financial assets 514 15,000 1,030 16,544
The group recognises transfers between levels of the fair value
hierarchy at the end of the reporting period during which the change has
occurred. 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
Derivative financial instruments
As part of its ownership of 19.9% of the ordinary share capital of
Vision Independent Financial Planning Limited and Castle Investment
Solutions Limited, the group is party to certain option contracts over
the remaining 80.1% of the share capital of these companies.
The option contracts are valued together and are carried at fair value.
The fair value 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.
Impact on fair value of:
Increase in Decrease in
the assumption the assumption
GBP'000 GBP'000
10% change in the fees and commission charged to Vision
clients 138 (206)
5 percentage point change in commissions payable (341) 387
10% change in the rate of growth in funds under
management 297 (179)
5 percentage point shift in probability of occurrence
between two highest growth scenarios 273 (273)
1 percentage point change in the discount rate (154) 164
Changes in the fair values of financial instruments categorised as level
3 within the fair value hierarchy were as follows:
Derivative
financial Total
instruments GBP'000 GBP'000
At 1 January 2015 1,030 1,030
Total unrealised gains and losses recognised
in:
- profit or loss (330) (330)
At 30 June 2015 (unaudited) 700 700
The loss relating to the derivative financial instruments is included
within 'other operating costs' in the consolidated interim statement of
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.
The fair values of the group's other financial assets and liabilities
are not materially different from their carrying values with the
exception of held to maturity investment debt securities. Debt
securities comprise bank and building society certificates of deposit,
which have fixed coupons and UK treasury bills. The fair value of debt
securities at 30 June 2015 was GBP676,125,000 (30 June
2014:GBP454,833,000; 31 December 2014: GBP431,496,000) and the carrying
value was GBP674,177,000 (30 June 2014: GBP453,714,000; 31 December
2014: GBP429,974,000). Fair value for held to maturity assets is based
on market bid prices.
15. 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.
2. Capital expenditure authorised and contracted for at 30 June 2015 but not
provided for in the condensed consolidated interim financial statements
amounted to GBP653,000 (30 June 2014: GBP490,000; 31 December 2014:
GBP122,000).
3. The contractual amounts of the group's commitments to extend credit to
its clients are as follows:
Unaudited Audited
Unaudited 30 June 2015 30 June 2014 31 December 2014
GBP'000 GBP'000 GBP'000
Guarantees 578 578 578
Undrawn commitments
to lend of 1 year
or less 17,208 14,800 14,634
17,786 15,378 15,212
The fair value of the guarantees is GBPnil (30 June 2014 and 31 December
2014: GBPnil).
d. The arrangements put in place by the Financial Services Compensation
Scheme (FSCS) to protect depositors and investors from loss in the event
of failure of financial institutions has resulted in significant levies
on the industry in recent years. The financial impact of unexpected FSCS
levies is largely out of the group's control as they result from other
industry failures.
There is uncertainty over the level of future FSCS levies as they depend
on the ultimate cost to the FSCS of industry failures. The group
contributes to the deposit class, investment fund management class and
investment intermediation levy classes and accrues levy costs for future
levy years when the obligation arises.
As detailed in note 1, the group has adopted IFRIC 21 'Levies' in the
current period. Comparative figures have been restated for the impact of
this. Levies of GBP686,000 have been included within administrative
expenses in 2015 (six months ended 30 June 2014 and year ended 31
December 2014: GBP634,000). It is only possible for the group to
estimate its share of these losses until invoices are received. In
addition to the FSCS levies accrued in the year further levy charges may
be incurred in future years, although the ultimate cost remains
uncertain.
16. 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
30 June 2015 30 June 2014 31 December 2014
GBP'000 GBP'000 GBP'000
Cash and balances at central
banks 703,338 591,005 727,178
Loans and advances to banks 72,280 75,068 93,638
Available for sale investment
securities 49,971 37,651 15,000
825,589 703,724 835,816
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 30 June 2015 Six months to 30 June 2014 Year to 31 December 2014
GBP'000 GBP'000 GBP'000
Share capital
issued (note
13) 8 75 80
Share premium
on shares
issued (note
13) 3,188 26,151 27,503
Purchase of
newly issued
shares for
the purposes
of
share-based
schemes (1,894) (1,250) (1,655)
1,302 24,976 25,928
17. 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 GBP38,000 were paid in the period (six months ended
30 June 2014: GBP59,000; year ended 31 December 2014: GBP93,000) in
respect of ordinary shares held by key management personnel.
As at 30 June 2015, the group had provided interest-free season ticket
loans of GBP2,000 (30 June 2014 and 31 December 2014: GBPnil) to key
management personnel.
At 30 June 2015, key management personnel and their close family members
had gross outstanding deposits of GBP306,000 (30 June 2014:
GBP1,052,000; 31 December 2014: GBP838,000) and gross outstanding loans
of GBP4,139,000 (30 June 2014: GBP6,586,000; 31 December 2014:
GBP3,859,000) 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 2015
(six months ended 30 June 2014: 21 unit trusts and OEICs; year ended 31
December 2014: 21 unit trusts and OEICs). Total management charges of
GBP12,607,000 (six months ended 30 June 2014: GBP11,188,000; year ended
31 December 2014: GBP23,061,000) 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 2015
totalled GBP2,094,000 (30 June 2014: GBP1,960,000; 31 December 2014:
GBP2,076,000).
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.
18. Events after the balance sheet date
On 27 July 2015, the group agreed the issue by Rathbone Investment
Management Limited of GBP20 million of 10-year Tier 2 notes (the Notes).
The Notes are repayable in August 2025, with a call option in August
2020 and annually thereafter. Interest is payable at a fixed rate of
5.856% until the first call option date and at a fixed margin of 4.375%
over 6 month LIBOR thereafter.
An interim dividend of 21p per share was declared on 27 July 2015 (see
note 6). There have been no other material events occurring between the
balance sheet date and 27 July 2015.
Statement of directors' responsibilities in respect of the interim
statement
Confirmation by the board
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.
Going concern basis of preparation
Details of the group's results, cash flows and resources, together with
the risks it faces and other factors likely to affect its future
development, performance and position are set out in this interim
management report.
Group companies are regulated by the PRA and FCA and perform annual
capital adequacy assessments, which include the modelling of certain
extreme stress scenarios. The group publishes Pillar 3 disclosures
annually on its website, which provide further detail about its
regulatory capital resources and requirements. During the first half of
2015, and as at 30 June 2015, the group has had no external borrowings
and is wholly funded by equity.
In 2015, the group has generated organic growth in client funds under
management and this is expected to continue. We believe that the company
is well-placed to manage its business risks successfully despite the
continuing uncertain economic and political outlook.
As we have a reasonable expectation that the company has adequate
resources to continue in operational existence for the foreseeable
future, we continue to adopt the going concern basis of accounting in
preparing the condensed consolidated interim financial statements. In
forming our view, we have considered the company's prospects for a
period exceeding 12 months from the date the condensed consolidated
interim financial statements are approved.
By Order of the Board
Philip Howell
Chief Executive
27 July 2015
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 2015 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 2015 is not
prepared, in all material respects, in accordance with IAS 34 as adopted
by the EU and the DTR of the UK FCA.
Nicholas Edmonds
for and on behalf of KPMG LLP
Chartered Accountants
15 Canada Square, London E14 5GL
27 July 2015
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#1941484
http://www.rathbones.com/
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