TIDMRAT
Funds under management reach GBP30.6 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 2016.
Philip Howell, Chief Executive of Rathbone Brothers Plc, said:
"Whilst turbulent market conditions and planned expenditure have
impacted profitability, we continue to pursue our growth plans. In an
eventful first half, our investment teams have worked hard to ensure
that client communications are timely and insightful.
"Although our outlook is cautious, Rathbones will remain alert to
acquisition opportunities that fit with our culture and philosophy."
Highlights:
-- Total funds under management at 30 June 2016 were GBP30.6 billion, up
4.8% from GBP29.2 billion at 31 December 2015. This compared to an
increase of 4.2% in the FTSE 100 Index and an increase of 5.4% in the
FTSE WMA Balanced Index over the same period.
-- Total net organic and acquired growth in the funds managed by Investment
Management was GBP0.5 billion in the first six months of 2016,
representing a net annual growth rate of 4.2% (2015: 5.1%). Net organic
growth of GBP0.3 billion for the first half represents an underlying
annualised rate of net organic growth of 2.5% (2015: 2.8%).
-- Underlying profit before tax* decreased 5.1% from GBP37.2 million to
GBP35.3 million in the first six months of 2016. Underlying profit margin
remained strong at 29.4% compared to 31.9% in 2015.
-- Profit before tax was GBP22.8 million for the six months ended 30 June
2015, down 28.3% compared to GBP31.8 million in 2015, reflecting the
impact of previously announced non-underlying costs in relation to the
acquisition of the Vision businesses, and costs incurred to date in
respect of our planned London office move to 8 Finsbury Circus. Basic
earnings per share decreased 32.9% to 35.7p (2015: 53.2p).
-- The board recommends a 21.0p interim dividend for 2016 (2015: 21.0p).
-- Underlying operating income in Investment Management of GBP108.8 million
in the first six months of 2016 (2015: GBP106.8 million) was up 1.9%,
mostly due to growth in funds under management. The average FTSE 100
Index was 6298 on quarterly billing dates in 2016, compared to 6677 in
2015, a decrease of 5.7%.
-- Net interest income of GBP5.7 million in the first six months of 2016 has
increased 3.6% from GBP5.5 million in 2015, largely due to an increase in
average liquidity to GBP1.7 billion for the six months to 30 June 2016
(2015: GBP1.6 billion).
-- Underlying operating expenses of GBP84.9 million for the six months ended
30 June 2016 were up 6.7% from GBP79.6 million in the first half of 2015,
largely reflecting higher fixed staff costs and higher direct costs.
-- Funds under management in Unit Trusts were GBP3.3 billion at 30 June 2016
(31 December 2015: GBP3.1 billion). Net inflows were GBP259 million in
the first half of 2016 (2015: GBP107 million). Underlying operating
income in Unit Trusts was GBP11.4 million in the six months ended 30 June
2016, an increase of 14.0% from GBP10.0 million in the first half of
2015.
-- Shareholders' equity of GBP279.7 million at 30 June 2016 fell 6.8% from
31 December 2015 (GBP300.2 million), largely as a result of the value of
retirement benefit obligations which increased by GBP27.5 million from
GBP4.5 million to GBP32.0 million during the period.
* Excluding charges in relation to client relationships and goodwill,
acquisition-related costs and London head office relocation costs.
Issued on 27 July 2016
For further information contact:
Rathbone Brothers Plc Tel: 020 7399 0000 Camarco Tel: 020 3757 4984
Email: shelly.chadda@rathbones.com Email: ed.gascoigne-pees@camarco.co.uk
Philip Howell, Chief Executive Ed Gascoigne-Pees
Paul Stockton, Finance Director
Shelly Chadda, Investor Relations Manager
Rathbone Brothers Plc
Rathbone Brothers Plc ("Rathbones"), 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, financial
planning, trust and company management and banking services.
Rathbones has over 1,000 staff in 15 UK locations and Jersey, and
currently has its headquarters in Curzon Street, London.
rathbones.com http://www.rathbones.com/
Interim management report
First half defined by political and macroeconomic factors
The first six months of 2016 were dominated by the political and
macroeconomic climate. Our investment teams faced some particularly
turbulent market conditions, compounded by the uncertainties surrounding
Brexit and mixed signals in many economies.
Although the FTSE 100 Index was 6504 at 30 June 2016, up 4.2% from 6242
at the beginning of 2016, it lacked direction for most of the period,
notwithstanding a late rally at the end of June. The FTSE 100 Index has
undoubtedly benefited from sterling weakness, but the FTSE 250 fell 6.6%
in the first half of 2016.
In these conditions, our investment teams have been working hard to
manage portfolios, and have endeavoured to ensure that all
communications with our clients remain timely and insightful.
Annualised growth totalled 4.2% in the first six months
Total group funds under management were GBP30.6 billion at 30 June 2016
up 4.8% from GBP29.2 billion at 31 December 2015. Of this, GBP27.3
billion was managed by our Investment Management segment and GBP3.3
billion by our Unit Trusts segment.
Investment Management net inflows were GBP0.5 billion in the first half
(2015: GBP0.6 billion) representing an annualised growth rate of 4.2%
(2015: 5.1%). Organic growth of GBP0.3 billion was similar to last year
(2015: GBP0.3 billion), equating to an annualised net organic growth
rate of 2.5% (2015: 2.8%). Our Charities business continued to perform
well with funds under management growing 5.7% from GBP3.5 billion to
GBP3.7 billion in the first six months of 2016.
Rathbones was named "Private Client Asset Manager of the Year -
Institutional" and "Charity Investment Manager of the Year" at the
Citywealth awards in May. These recognise an excellence in client
service, leadership and vision, together with an overall contribution to
the profession. This is the fourth year in a row that the Charities team
has won this award.
Against a backdrop of mass redemptions across the industry, our Unit
Trusts business continued to buck the trend. Funds under management were
up 6.5% from GBP3.1 billion at 31 December 2015 to GBP3.3 billion, with
net inflows of GBP259 million (2015: GBP107 million). Market share in
our Income fund remained steady, while our Global Opportunities and
Ethical Bond funds performed positively against sectors that otherwise
suffered large redemptions.
The trend toward fee-based income continues
Fee income of GBP87.1 million in the first half of 2016 increased 12.1%
compared to last year (2015: GBP77.7 million) in spite of an average
FTSE 100 Index (calculated on our fee billing dates) of 6298, down 5.7%
compared to 6677 a year ago. The WMA Balanced Index ended the period at
3721, up 5.4% from 31 December 2015, largely reflecting the strong
performance of gilts, in which we were relatively underweight. Fee
income represented 72.5% of total net operating income in the six months
ended 30 June 2016 (2015: 66.5%), supporting our objective to move to
more fee-based income in the medium term.
Net commission income of GBP19.5 million was down 25.9% from GBP26.3
million in the first half of 2015, reflecting weak investing conditions.
Net interest income increased 3.6% to GBP5.7 million in the first half
(2015: GBP5.5 million), largely reflecting an increase in deposit
balances. Average deposits were GBP1.7 billion in 2016 compared to
GBP1.6 billion a year ago. Client loans decreased 6.8% to GBP104.2
million from GBP111.8 million at 31 December 2015 due to repayments.
Fees from advisory services and other income increased 8.2% to GBP7.9
million (2015: GBP7.3 million) largely reflecting the consolidation of
Vision and Castle ('the Vision businesses') income, following their
acquisition at the end of 2015.
Underlying operating expenses of GBP84.9 million (2015: GBP79.6 million)
increased 6.7% year-on-year. Planned additions in headcount increased
fixed staff costs by 8.9% to GBP40.2 million (2015: GBP36.9 million).
Average headcount in the first half of 2016 was 1,045, up 9.3% compared
to 956 a year ago. Variable staff costs decreased 5.8% to GBP19.5
million (2015: GBP20.7 million) reflecting lower profitability in the
period and the lower value of growth awards. Variable staff costs as a
percentage of underlying profit before variable staff costs remained
stable at 35.6% (2015: 35.7%). Other direct costs of GBP25.2 million
(2015: GBP22.0 million) were up 14.5% and include GBP0.6 million of
operating costs relating to the Vision businesses (2015: GBPnil). Total
incremental expenditure on strategic initiatives was GBP2.0 million in
the first half of 2016.
Underlying profit before tax fell 5.1% to GBP35.3 million (2015: GBP37.2
million) in the first six months of 2016; however, our underlying profit
margin remained strong at 29.4% in the first half of 2016 compared to
31.9% in 2015. Underlying earnings per share of 56.5p (2015: 62.4p) fell
9.5%.
Profit before tax for the half year of GBP22.8 million is 28.3% lower
than the GBP31.8 million in 2015, reflecting the impact of previously
announced non-underlying costs in relation to the acquisition of the
Vision businesses, and costs incurred to date in respect of our planned
London office move to 8 Finsbury Circus. Our effective tax rate for the
first half of 2016 was 25.3% (2015: 20.4%) with the increase a result of
deferred payments to acquire the Vision businesses (see note 3). All of
the above are reflected in our basic earnings per share, which at 35.7p
has fallen 32.9% from 53.2p last year.
The board has decided to maintain the interim dividend at 21p per share
(2015: 21.0p). The interim dividend will be paid on 5 October 2016 (see
note 7).
Strategic priorities continue despite market volatility
Despite volatile markets, we spent the first half of the year building
on many of our strategic initiatives.
Acquired growth continued during the first half of the year. Our Glasgow
office, which opened in May 2015, has performed strongly, securing over
GBP250 million funds under management in just over a year of operation.
We hired some key individuals to our financial planning team, and expect
to add to the number of financial advisers throughout the rest of 2016.
We have continued to strengthen our research capability, with three new
hires in the first half of 2016. We also launched the Rathbones Research
Hub in February. The Hub supports our collaborative investment culture,
allowing investment managers easier access to recommendations and
research from the investment committees, as well as the ability to make
their own contributions to our collaboration process. Investment
managers also welcomed some further upgrades to our asset allocation
modelling tool.
We continue to progress our distribution strategy as we build further
partnerships with IFA networks across the country. Despite market
volatility, financial advisers continue to seek to outsource investment
services. We have added resources covering Scotland and the North, and
dedicated full-time support to pursue opportunities in London.
Progress on our Private Office initiative continued during the first
half of the year. In addition to securing an External Asset Manager
relationship with Credit Suisse, we have also hired a nucleus team of
three client directors to deliver our wider range of services. We are
expecting the team to be able to welcome clients to Rathbones towards
the end of this year.
We continue to make capital investments in the business to ensure that
our systems and infrastructure remain robust. In the first half we have
enhanced our management information systems, and developed additional
space in our Liverpool office to support our future growth aspirations.
We are also making improvements to our client account opening processes
and continue to improve the capability of our website.
Finally, plans to move to our new London office space at 8 Finsbury
Circus remain on schedule and we expect to relocate during Q1 2017.
Financial position and regulatory capital
Shareholders' equity of GBP279.7 million at 30 June 2016 has fallen 6.8%
since 31 December 2015 (GBP300.2 million) and 1.0% since 30 June 2015
(GBP282.4 million). This is largely as a result of the value of
retirement benefit obligations during the first half increasing GBP27.5
million from 31 December 2015 (GBP4.5 million), and GBP21.2 million from
30 June 2015 (GBP10.8 million). This reflects the substantial fall in
the long term corporate bond yields that are used to discount the value
of long term liabilities. The board is considering the future of its
defined benefit pension schemes.
Total assets at 30 June 2016 were GBP2,344.8 million (31 December 2015
(restated): GBP1,833.9 million; 30 June 2015: GBP1,940.9 million), of
which GBP1,860.0 million (31 December 2015: GBP1,402.9 million; 30 June
2015: GBP1,505.9 million) represents the cash element of client
portfolios that is held as a banking deposit. Cash in client portfolios
increased to 6.6% of total investment management funds at 30 June 2016
(31 December 2015: 5.1%; 30 June 2015: 5.6%). As a result, balances with
central banks increased from GBP583.2 million at 31 December 2015 to
GBP960.1 million at 30 June 2016 (30 June 2015: GBP703.3 million).
Our Consolidated Common Equity Tier 1 ratio was 16.0% at 30 June 2016
(31 December 2015 (restated): 16.3%; 30 June 2015: 14.1%). Our
consolidated leverage ratio was 6.2% at 30 June 2016 (31 December 2015:
7.7%; 30 June 2015: 6.3%). As the CRD IV capital buffer regime applies
to banks for the first time in 2016, we have enhanced disclosures in
respect of the Pillar 2 buffer capital we are required to hold. More
detail can be found in the regulatory capital section.
Board and senior management changes
Ali Johnson succeeded Richard Loader as Company Secretary in April. The
board would like to thank Richard for his much valued contribution to
the success of the group over the years.
Business risks reflect current market conditions
The principal risks facing Rathbones in 2016 continue to be associated
with our ambition to grow and develop our business, and also from
regulatory developments impacting our sector. Our risk framework is
described in detail in the strategic report and group risk committee
report in our 2015 annual report and accounts (pages 20-25 and page 69).
Following the result of the referendum on the United Kingdom's
membership of the European Union, we remain alert to the risks
associated with volatile investment markets, the valuation of retirement
benefit obligations, and our ability to sublet surplus office space in
London.
Market uncertainty expected but growth aspirations remain
Whilst markets are expected to remain volatile, Rathbones will continue
to pursue the strategic initiatives that will grow the business. We
remain alert to acquisition opportunities that fit with our culture and
philosophy.
Mark Nicholls Philip Howell
Chairman Chief Executive
Consolidated interim statement of comprehensive income
for the six months ended 30 June 2016
Unaudited Unaudited Audited
Six months to Six months to Year to
30 June 2016 30 June 2015 31 December 2015
Note GBP'000 GBP'000 GBP'000
Interest and similar income 7,141 6,125 12,663
Interest expense and similar charges (1,394) (629) (1,822)
Net interest income 5,747 5,496 10,841
Fee and commission income 120,948 113,478 222,638
Fee and commission expense (8,596) (4,200) (8,049)
Net fee and commission income 112,352 109,278 214,589
Net trading income 1,445 1,298 2,230
Other operating income 657 678 1,361
Share of profit of associates - 83 157
Gain on remeasurement of non-controlling interest 3 - - 885
Operating income 120,201 116,833 230,063
Charges in relation to client relationships and goodwill 11 (5,778) (5,479) (11,014)
Acquisition-related costs 3 (4,431) - (162)
Head office relocation costs 4 (2,257) - (412)
Loss on derivative financial instruments 16 - - (1,030)
Other operating expenses (84,910) (79,589) (158,813)
Operating expenses (97,376) (85,068) (171,431)
Profit before tax 22,825 31,765 58,632
Taxation 6 (5,778) (6,473) (12,261)
Profit for the period attributable to equity holders
of the company 17,047 25,292 46,371
Other comprehensive income:
Items that will not be reclassified to profit or loss
Net remeasurement of defined benefit liability (29,080) 664 6,524
Deferred tax relating to the net remeasurement of
defined benefit liability 4,535 (133) (1,509)
Items that may be reclassified to profit or loss
Net gain on revaluation of available for sale investment
securities 12 15 53
Deferred tax relating to revaluation of available
for sale investment securities - (3) (10)
Other comprehensive income net of tax (24,533) 543 5,058
Total comprehensive income for the period net of tax
attributable to equity holders of the company (7,486) 25,835 51,429
Dividends paid and proposed for the period per ordinary
share 7 21.0p 21.0p 55.0p
Dividends paid and proposed for the period 10,160 10,093 26,305
Earnings per share for the period attributable to
equity holders of the company: 8
- basic 35.7p 53.2p 97.4p
- diluted 35.4p 52.8p 96.6p
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 2016
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 2015 (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
Net gain on 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 15 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
Profit for the period 21,079 21,079
Net remeasurement of defined benefit liability 5,860 5,860
Net gain on revaluation of available for sale investment
securities 38 38
Deferred tax relating to components of other comprehensive
income (7) (1,376) (1,383)
Other comprehensive income net of tax - - - 31 - 4,484 4,515
Dividends paid (10,070) (10,070)
Issue of share capital 15 4 1,468 1,472
Share-based payments:
- value of employee services 1,410 1,410
- cost of own shares acquired (519) (519)
- cost of own shares vesting 357 (357) -
- tax on share-based payments (83) (83)
At 31 December 2015 (audited) 2,407 97,643 31,835 71 (6,177) 174,413 300,192
Profit for the period 17,047 17,047
Net remeasurement of defined benefit liability (29,080) (29,080)
Net gain on revaluation of available for sale investment
securities 12 12
Deferred tax relating to components of other comprehensive
income - 4,535 4,535
Other comprehensive income net of tax - - - 12 - (24,545) (24,533)
Dividends paid (16,336) (16,336)
Issue of share capital 15 12 3,818 3,830
Share-based payments:
- value of employee services 734 734
- cost of own shares acquired (1,043) (1,043)
- cost of own shares vesting 659 (659) -
- tax on share-based payments (149) (149)
At 30 June 2016 (unaudited) 2,419 101,461 31,835 83 (6,561) 150,505 279,742
The accompanying notes form an integral part of the condensed
consolidated interim financial statements.
Consolidated interim balance sheet
as at 30 June 2016
Audited
Unaudited Unaudited 31 December 2015
30 June 2016 30 June 2015 GBP'000
Note GBP'000 GBP'000 (restated - note 1)
Assets
Cash and balances
with central banks 960,115 703,338 583,156
Settlement balances 99,199 59,012 17,948
Loans and advances
to banks 105,869 112,996 108,877
Loans and advances
to customers 9 111,382 100,996 117,269
Investment
securities:
- available for sale 84,705 50,851 53,386
- held to maturity 725,000 674,177 707,745
Prepayments, accrued
income and other
assets 70,516 60,302 59,513
Property, plant and
equipment 10 9,492 9,871 10,006
Deferred tax asset 8,083 6,238 4,577
Investment in
associates - 1,472 -
Intangible assets 11 170,409 161,664 171,453
Total assets 2,344,770 1,940,917 1,833,930
Liabilities
Deposits by banks 3,434 10,522 299
Settlement balances 74,856 55,593 21,481
Due to customers 1,860,023 1,505,856 1,402,890
Accruals, deferred
income and other
liabilities 55,309 51,913 58,900
Current tax
liabilities 4,820 5,645 6,359
Provisions for
liabilities and
charges 12 15,080 18,169 19,816
Subordinated loan
notes 13 19,541 - 19,492
Retirement benefit
obligations 14 31,965 10,831 4,501
Total liabilities 2,065,028 1,658,529 1,533,738
Equity
Share capital 15 2,419 2,403 2,407
Share premium 15 101,461 96,175 97,643
Merger reserve 31,835 31,835 31,835
Available for sale
reserve 83 40 71
Own shares (6,561) (6,015) (6,177)
Retained earnings 150,505 157,950 174,413
Total equity 279,742 282,388 300,192
Total liabilities
and equity 2,344,770 1,940,917 1,833,930
The condensed consolidated interim financial statements were approved by
the board of directors and authorised for issue on 27 July 2016 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 2016
Unaudited Unaudited Audited
Six months to Six months to Year to
30 June 2016 30 June 2015 31 December 2015
Note GBP'000 GBP'000 GBP'000
Cash flows from operating activities
Profit before tax 22,825 31,765 58,632
Share of profit of associates - (83) (157)
Net interest income (5,747) (5,496) (10,841)
Net impairment charges/(recoveries) on impaired loans
and advances 1 (8) 19
Net charge for provisions 12 1,014 155 1,045
Loss on fair value of derivative - 330 1,030
Gain on remeasurement of non-controlling interest - - (885)
Profit on disposal of property, plant and equipment (13) - (4)
Depreciation, amortisation and impairment 9,925 7,992 16,115
Defined benefit pension scheme charges 1,652 2,185 4,217
Defined benefit pension contributions paid (3,268) (4,400) (6,902)
Share-based payment charges 1,860 2,381 4,629
Interest paid (1,428) (658) (1,282)
Interest received 10,466 8,125 11,349
37,287 42,288 76,965
Changes in operating assets and liabilities:
- net decrease/(increase) in loans and advances to
banks and customers 46,368 10,699 (5,606)
- net increase in settlement balance debtors (81,251) (43,122) (2,058)
- net increase in prepayments, accrued income and
other assets (14,328) (7,372) (2,396)
- net increase in amounts due to customers and deposits
by banks 460,268 233,952 120,763
- net increase/(decrease) in settlement balance
creditors 53,375 33,009 (1,103)
- net (decrease)/increase in accruals, deferred income,
provisions and other liabilities (5,057) (4,062) 329
Cash generated from operations 496,662 265,392 186,894
Tax paid (6,435) (4,226) (10,414)
Net cash inflow from operating activities 490,227 261,166 176,480
Cash flows from investing activities
Dividends received from associates - 45 107
Acquisition of subsidiaries, net of cash acquired (2,258) - (3,528)
Purchase of property, equipment and intangible assets (11,439) (12,443) (22,879)
Proceeds from sale of property, plant and equipment 13 21 33
Purchase of investment securities (540,000) (590,620) (988,127)
Proceeds from sale and redemption of investment
securities 522,745 346,068 709,853
Net cash used in investing activities (30,939) (256,929) (304,541)
Cash flows from financing activities
Issue of ordinary shares 18 2,787 1,302 2,255
Net proceeds from the issue of subordinated loan notes - - 19,454
Dividends paid (16,336) (15,766) (25,836)
Net cash used in financing activities (13,549) (14,464) (4,127)
Net increase/(decrease) in cash and cash equivalents 445,739 (10,227) (132,188)
Cash and cash equivalents at the beginning of the
period 703,628 835,816 835,816
Cash and cash equivalents at the end of the period 18 1,149,367 825,589 703,628
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 15 of the annual report and accounts for the
year ended 31 December 2015 and have not materially changed since that
date.
These condensed consolidated interim financial statements 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 2015 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 2015, 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 2015 are not the group's statutory accounts for that financial
year. The group's financial statements for the year ended 31 December
2015 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.
Measurement period adjustment
In the current period, the group recognised a measurement period
adjustment to provisional amounts in respect of a business combination
completed on 31 December 2015. This has arisen due to payments made to
the previous owners of the acquired companies during the current period,
in respect of the net assets of the companies at the acquisition date.
Comparatives have been restated for the impact of the adjustment. As at
31 December 2015, total assets have been increased by GBP301,000, and
total liabilities have been increased by the same amount. There has been
no impact on operating income, profit or shareholders' equity in the
current or prior periods. Further details on the restated comparatives
can be found in notes 3, 11 and 12.
Developments in reporting standards and interpretations
Future new standards and interpretations
A number of new standards and amendments to standards and
interpretations will be effective for future annual periods beginning
after 1 January 2016 and, therefore, have not been applied in preparing
these consolidated financial statements. IFRS 9 'Financial Instruments',
IFRS 15 'Revenue from Contracts with Customers' and IFRS 16 'Leases' are
expected to have the most significant effect on 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. IFRS 16 ' Leases' is not expected to become
mandatory for periods commencing before 1 January 2019. These standards
have not yet been adopted by the EU and the group does not plan to adopt
these standards early.
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.
IFRS 16 'Leases' eliminates the classification of leases as either
operating leases or finance leases. The group will be required to
recognise all leases with a term of more than 12 months as a lease asset
on its balance sheet; the group will also recognise a financial
liability representing its obligation to make future lease payments. The
extent of their impact has not yet been fully determined.
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 2016 (unaudited) GBP'000 GBP'000 GBP'000 GBP'000
Net investment management fee income 77,315 9,799 - 87,114
Net commission income 19,443 - - 19,443
Net interest income 5,747 - - 5,747
Fees from advisory services and other income 6,288 1,609 - 7,897
Underlying operating income 108,793 11,408 - 120,201
Staff costs - fixed (29,075) (1,541) (9,576) (40,192)
Staff costs - variable (14,430) (2,290) (2,780) (19,500)
Total staff costs (43,505) (3,831) (12,356) (59,692)
Other direct expenses (11,254) (2,600) (11,364) (25,218)
Allocation of indirect expenses (22,487) (1,233) 23,720 -
Underlying operating expenses (77,246) (7,664) - (84,910)
Underlying profit before tax 31,547 3,744 - 35,291
Charges in relation to client relationships and goodwill
(note 11) (5,778) - - (5,778)
Acquisition-related costs (note 3) (4,431) - - (4,431)
Segment profit before tax 21,338 3,744 - 25,082
Head office relocation costs (note 4) (2,257)
Profit before tax 22,825
Taxation (note 6) (5,778)
Profit for the period attributable to equity holders
of the company 17,047
Segment total assets 2,290,797 47,735 2,338,532
Unallocated assets 6,238
Total assets 2,344,770
Investment Indirect
Management Unit Trusts 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 11) (5,479) - - (5,479)
Segment profit before tax 28,051 3,714 - 31,765
Taxation (note 6) (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
Investment Indirect
Unit
Management Trusts expenses Total
Year ended 31 December 2015 (audited) GBP'000 GBP'000 GBP'000 GBP'000
Net investment management fee income 143,777 17,632 - 161,409
Net commission income 43,136 - - 43,136
Net interest income 10,841 - - 10,841
Fees from advisory services and other income 11,241 2,551 - 13,792
Underlying operating income 208,995 20,183 - 229,178
Staff costs - fixed (51,277) (2,966) (19,296) (73,539)
Staff costs - variable (29,460) (3,794) (6,493) (39,747)
Total staff costs (80,737) (6,760) (25,789) (113,286)
Other direct expenses (19,186) (4,370) (21,971) (45,527)
Allocation of indirect expenses (45,306) (2,454) 47,760 -
Underlying operating expenses (145,229) (13,584) - (158,813)
Underlying profit before tax 63,766 6,599 - 70,365
Charges in relation to client relationships and goodwill
(note 11) (11,014) - - (11,014)
Acquisition-related costs (note 3) (162) - - (162)
Loss on derivative financial instruments (note 16) (1,030) - - (1,030)
Gain on remeasurement of non-controlling interest
(note 3) 885 - - 885
Segment profit before tax 52,445 6,599 - 59,044
Head office relocation costs (note 4) (412)
Profit before tax 58,632
Taxation (note 6) (12,261)
Profit for the year attributable to equity holders
of the company 46,371
Segment total assets (restated - note 1) 1,793,558 37,806 1,831,364
Unallocated assets 2,566
Total assets 1,833,930
The following table reconciles underlying operating income to operating
income:
Unaudited Unaudited Audited
Six months to Six months to Year to
30 June 2016 30 June 2015 31 December 2015
GBP'000 GBP'000 GBP'000
Underlying operating income 120,201 116,833 229,178
Gain on remeasurement of non-controlling interest
(note 3) - - 885
Operating income 120,201 116,833 230,063
The following table reconciles underlying operating expenses to
operating expenses:
Unaudited Unaudited Audited
Six months to Six months to Year to
30 June 2016 30 June 2015 31 December 2015
GBP'000 GBP'000 GBP'000
Underlying operating expenses 84,910 79,589 158,813
Charges in relation to client relationships and goodwill
(note 11) 5,778 5,479 11,014
Acquisition-related costs (note 3) 4,431 - 162
Loss on derivative financial instruments (note 16) - - 1,030
Head office relocation costs (note 4) 2,257 - 412
Operating expenses 97,376 85,068 171,431
Included within Investment Management underlying operating income is
GBP634,000 (30 June 2015: GBP604,000; 31 December 2015: GBP1,243,000) 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 2016 30 June 2015 31 December 2015
GBP'000 GBP'000 GBP'000
United Kingdom 115,798 112,909 221,957
Jersey 4,403 3,924 8,106
Operating income 120,201 116,833 230,063
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 2016, the group provided
investment management services to 48,000 clients (30 June 2015: 47,000;
31 December 2015: 47,000).
3 Business combinations
On 31 December 2015, the group acquired the remaining 80.1% of the
ordinary share capital of Vision Independent Financial Planning Limited
('Vision') and Castle Investment Solutions Limited ('Castle').
Deferred and contingent consideration
A net asset value payment of GBP1,563,000 was made in March 2016,
following the provisional agreement of the net asset value (as at the
acquisition date) of the acquired businesses. The payment was lower than
was provided for at 31 December 2015, and as such, the comparative
figures have been restated accordingly (notes 1 and 12). The carrying
value of the net assets acquired remain provisional and subject to
finalisation of the acquired businesses' completion accounts.
A further payment of GBP3,232,000 was made in June 2016, following the
achievement of certain operational targets. Of this, GBP695,000 related
to contingent consideration. The remaining GBP2,537,000 related to
deferred payments to previous owners who are remaining in employment
with the acquired companies and was charged to profit and loss in the
six months to 30 June 2016. These payments were made 80% in cash and 20%
in shares.
Contingent consideration of up to GBP1,640,000 is payable between the
balance sheet date and the end of 2019 (note 12). Further deferred
payments to previous owners remaining in employment of up to
GBP7,456,000 is payable over the same period and is being charged to
profit or loss over the deferral period. Of this, GBP1,532,000 has been
charged to profit and loss in the six months to 30 June 2016. Both sets
of payments are subject to performance against certain growth and
operational targets, and will be made 80% in cash and 20% in shares.
Identifiable assets acquired and liabilities assumed
As a result of the settlement of the net asset value payment (see above),
the identifiable net assets of the acquired businesses at the
acquisition date have been restated. This has resulted in a reduction in
net asset value of the companies as at 31 December 2015.
Acquisition-related costs
The group has incurred the following costs in relation to this
acquisition, summarised by their classification within the income
statement:
Unaudited Unaudited Audited
Six months to Six months to Year to
30 June 2016 30 June 2015 31 December 2015
GBP'000 GBP'000 GBP'000
Staff costs 4,069 - -
Legal and advisory fees 362 - 162
Acquisition-related costs 4,431 - 162
Amounts reported in staff costs relate to deferred payments to previous
owners who are remaining in employment (described above).
Remeasurement of non-controlling interest
Prior to the acquisition of the remaining 80.1% of the two companies,
the group remeasured its pre-existing 19.9% holdings to fair value,
recognising a gain of GBP885,000 during the year ended 31 December 2015.
4 Head office relocation
Contract negotiations for 8 Finsbury Circus, London were at an advanced
stage as at 31 December 2015. The group reviewed its estimate of the
timing of dilapidation costs arising from the current head office lease.
As a result, the provision for dilapidations of the premises at 1 Curzon
Street, London was increased by GBP412,000 as at 31 December 2015.
On 6 January 2016, the group exchanged contracts for five 17-year leases
for a total of 75,000 sq ft of office space at 8 Finsbury Circus. The
group began recognising costs relating to rent and dilapidations on the
new premises from the date the leases began, 13 May 2016.
During the six months ended 30 June 2016, incremental costs of
GBP2,257,000 (30 June 2015: GBPnil; 31 December 2015: GBP412,000) were
incurred as a result of the decision to move the head office to 8
Finsbury Circus. Included in these costs are rental costs of GBP599,000
for 8 Finsbury Circus prior to occupation. A provision of GBP181,000 for
dilapidations at the new property has also been recognised. Total
depreciation charges of GBP1,717,000 in relation to 1 Curzon Street
includes GBP1,409,000 which has been accelerated by the decision to
move. Legal and professional costs of GBP68,000 have also been incurred.
Construction work will begin towards the end of July 2016 and it is
expected that the move from the current head office in Curzon Street
will be completed in early 2017, which will be the trigger point for
recognition of a provision for surplus property.
5 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 2016 30 June 2015 31 December 2015
Investment Management:
- investment management
services 679 598 628
- advisory services 81 74 77
Unit Trusts 26 45 27
Shared services 259 239 249
1,045 956 981
6 Taxation
The tax expense for the six months ended 30 June 2016 was calculated
based on the estimated average annual effective tax rate. The overall
effective tax rate for this period was 25.3% (six months ended 30 June
2015: 20.4%; year ended 31 December 2015: 20.9%).
Unaudited Unaudited Audited
Six months to Six months to Year to
30 June 2016 30 June 2015 31 December 2015
GBP'000 GBP'000 GBP'000
United Kingdom taxation 4,805 5,568 12,140
Overseas taxation 92 103 143
Deferred taxation 881 802 (22)
5,778 6,473 12,261
The underlying UK corporation tax rate for the year ending 31 December
2016 is 20.0% (2015: 20.2%).
The Finance Bill 2016 contained legislation to reduce the UK corporation
tax rate to 17.0% in April 2020 (with the reduction to 19.0% in April
2017 remaining unchanged). Royal Assent of the Bill has been delayed
until Autumn 2016; therefore, deferred income taxes are calculated on
all temporary differences under the liability method using an effective
tax rate of 18.0% (30 June 2015: 20.0%; 31 December 2015: 19.0%).
7 Dividends
An interim dividend of 21.0p per share was declared on 26 July 2016 and
is payable on 5 October 2016 to shareholders on the register at the
close of business on 9 September 2016 (30 June 2015: 21.0p). In
accordance with IFRS, the interim dividend has not been included as a
liability in this interim statement. A final dividend for 2015 of 34.0p
per share was paid on 23 May 2016.
8 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 2016 Six months to 30 June 2016 Six months to 30 June 2015 Six months to 30 June 2015 Year to 31 December 2015 Year to 31 December 2015
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 35,291 27,020 37,244 29,662 70,365 55,728
Gain on remeasurement of non-controlling interest
(note 3) - - - - 885 706
Charges in relation to client relationships and goodwill
(note 11) (5,778) (4,622) (5,479) (4,370) (11,014) (8,784)
Acquisition-related costs (note 3) (4,431) (3,545) - - (162) (129)
Loss on derivative financial instruments (note 16) - - - - (1,030) (821)
Head office relocation costs (note 4) (2,257) (1,806) - - (412) (329)
Profit attributable to equity holders 22,825 17,047 31,765 25,292 58,632 46,371
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 47,805,338 (30
June 2015: 47,525,980; 31 December 2015: 47,612,026).
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:
Unaudited Unaudited Audited
30 June 2016 30 June 2015 31 December 2015
Weighted average number of ordinary shares in issue
during the period - basic 47,805,338 47,525,980 47,612,026
Effect of ordinary share options/Save As You Earn 134,226 160,451 174,219
Effect of dilutive shares issuable under the Share
Incentive Plan 12,207 18,464 26,636
Effect of contingently issuable ordinary shares
under Long Term and Executive Incentive Plans 217,754 217,470 204,110
Diluted ordinary shares 48,169,525 47,922,365 48,016,991
Unaudited Unaudited Audited
Six months to Six months to Year to
30 June 2016 30 June 2015 31 December 2015
Underlying earnings per share for the period attributable
to equity holders of the company:
- basic 56.5p 62.4p 117.0p
- diluted 56.1p 61.9p 116.1p
9 Loans and advances to customers
Unaudited Unaudited Audited
30 June 2016 30 June 2015 31 December 2015
GBP'000 GBP'000 GBP'000
Overdrafts 6,232 5,997 4,468
Investment management loan
book 104,180 93,971 111,810
Trust and pension debtors 953 1,012 978
Other debtors 17 16 13
111,382 100,996 117,269
10 Property, plant and equipment
During the six months ended 30 June 2016, the group purchased assets
with a cost of GBP2,276,000 (six months ended 30 June 2015:
GBP1,056,000; year ended 31 December 2015: GBP2,547,000).
Assets with a net book value of GBPnil were disposed of in the six
months ended 30 June 2016 (six months ended 30 June 2015: GBP21,000;
year ended 31 December 2015: GBP29,000) resulting in a gain on disposal
of GBP13,000 (six months ended 30 June 2015: GBPnil; year ended 31
December 2015: GBP4,000).
11 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 2016 (restated - note 1) 64,272 138,659 4,514 21,838 229,283
Internally developed in the period - - 203 - 203
Purchased in the period - 4,785 - 1,104 5,889
Disposals - (802) - - (802)
At 30 June 2016 64,272 142,642 4,717 22,942 234,573
Amortisation and impairment
At 1 January 2016 666 37,790 3,616 15,758 57,830
Charge in the period 141 5,637 211 1,147 7,136
Disposals - (802) - - (802)
At 30 June 2016 807 42,625 3,827 16,905 64,164
Carrying value at 30 June 2016 (unaudited) 63,465 100,017 890 6,037 170,409
Carrying value at 30 June 2015 (unaudited) 57,565 97,833 863 5,403 161,664
Carrying value at 31 December 2015 (audited) (restated
- note 1) 63,606 100,869 898 6,080 171,453
The total amount charged to profit or loss in the period, in relation to
goodwill and client relationships, was GBP5,778,000 (six months ended 30
June 2015: GBP5,479,000; year ended 31 December 2015: GBP11,014,000). A
further GBP1,553,000 (six months ended 30 June 2015: GBP1,623,000; year
ended 31 December 2015: GBP3,254,000) 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.
Impairment
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 2016 was GBP1,147,000, which was lower than the
carrying value of GBP1,288,000 at 31 December 2015. The recoverable
amount was calculated based on forecast earnings for the current year,
extrapolated for a ten year period, assuming an annual decrease in
revenues of 1.0% per annum (31 December 2015: no increase per annum).
The pre-tax rate used to discount the forecast cash flows was 9% (31
December 2015: 11%) 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
GBP141,000 during the period. This impairment has been included in the
Investment Management segment in the segmental analysis (note 2).
12 Provisions for liabilities and charges
Deferred, Deferred
variable costs and contingent
to acquire client consideration
relationship in business Legal and Property-
intangibles combinations compensation related Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
At 1 January 2015 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
Charged to profit
or loss - - 307 631 938
Unused amount
credited to
profit or loss - - (48) - (48)
Net charge to
profit or loss - - 259 631 890
Business
combinations - 3,908 - - 3,908
Other movements 4,035 - - - 4,035
Utilised/paid
during the
period (7,055) - (131) - (7,186)
At 1 January 2016
(audited)
(restated - note
1) 13,392 3,908 721 1,795 19,816
Charged to profit
or loss - - 855 306 1,161
Unused amount
credited to
profit or loss - (58) (89) - (147)
Net charge to
profit or loss - (58) 766 306 1,014
Other movements 4,783 48 - - 4,831
Utilised/paid
during the
period (7,902) (2,258) (421) - (10,581)
At 30 June 2016
(unaudited) 10,273 1,640 1,066 2,101 15,080
Payable within 1
year 1,398 538 1,066 1,251 4,253
Payable after 1
year 8,875 1,102 - 850 10,827
At 30 June 2016
(unaudited) 10,273 1,640 1,066 2,101 15,080
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
31 December 2015 included GBP4,389,000 (30 June 2015: GBP7,221,000) in
relation to the purchase of part of Deutsche Asset & Wealth Management's
London-based private client investment management business. The final
payment of GBP4,495,000 was made during the period, based on the value
of transferred funds under management retained by the group at 31
December 2015.
Deferred and contingent consideration in business combinations
Deferred and contingent consideration of GBP1,640,000 (30 June 2015:
GBPnil; 31 December 2015 (restated - note 1): GBP3,908,000) is payable
in instalments up to the end of 2019 following the acquisition of Vision
and Castle. The payments are contingent on certain operational and
financial targets being met.
The group has estimated the size and timing of the amounts payable by
taking into account the expected outcome of the conditions attached to
the payments. The group has discounted the amounts payable after one
year.
Following the agreement of the net asset value of the acquired
businesses, a net asset value payment of GBP1,563,000 was made in March
2016. As a result of this, deferred and contingent consideration in
business combinations as at 1 January 2016 has been restated to reflect
this measurement period adjustment.
A further payment of GBP695,000 was made in June 2016, following the
achievement of operational targets.
Legal & compensation
During the ordinary course of business the group may be subject to
complaints, as well as threatened and actual legal proceedings both in
the UK and overseas. Any such matters are periodically reassessed, with
the assistance of external professional advisers where appropriate, to
determine the likelihood of the group incurring a liability. Where it is
concluded that it is more likely than not that a payment will be made, a
provision is established to the group's best estimate of the amount
required to settle the obligation at the relevant balance sheet date.
Property-related
Property-related provisions consist of GBP2,101,000 in relation to
dilapidation provisions expected to arise on leasehold premises held by
the group (30 June 2015: GBP1,164,000; 31 December 2015: GBP1,795,000).
Dilapidation provisions are calculated using a discounted cash flow
model; during the six months ended 30 June 2016, provisions have
increased by GBP306,000 (30 June 2015: GBP82,000; 31 December 2015:
GBP713,000) due to the impact of discounting and taking on new leases.
Amounts payable after 1 year
Property-related provisions of GBP850,000 are expected to be settled
within 20 years of the balance sheet date, which corresponds to the
longest lease for which a dilapidations provision is being held.
Provisions for deferred and contingent consideration in business
combinations of GBP1,102,000 are expected to be settled in four years of
the balance sheet date. Remaining provisions payable after one year are
expected to be settled within two years of the balance sheet date.
13 Subordinated loan notes
Unaudited Unaudited Audited
30 June 2016 30 June 2015 31 December 2015
GBP'000 GBP'000 GBP'000
Subordinated loan notes
- Face value 20,000 - 20,000
- Carrying value 19,541 - 19,492
On 3 August 2015, Rathbone Investment Management Limited issued
GBP20,000,000 of 10-year Tier 2 notes ('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.
14 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 2016 30 June 2015 31 December 2015
% p.a. % p.a. % p.a.
Rate of increase in salaries 4.10 4.30 4.20
Rate of increase of pensions
in payment:
- Laurence Keen Scheme 3.40 3.50 3.50
- Rathbones 1987 Scheme 3.10 3.20 3.10
Rate of increase of deferred
pensions 3.10 3.30 3.20
Discount rate 3.05 3.90 4.00
Inflation* 3.10 3.30 3.20
* Inflation assumptions are based on the Retail Prices Index
The assumed life expectations of members retiring, aged 65 were:
Unaudited Unaudited Unaudited Unaudited Audited Audited
30 June 2016 30 June 2016 30 June 2015 30 June 2015 31 December 2015 31 December 2015
Males Females Males Females Males Females
Retiring
today 24.3 26.5 24.2 26.4 24.2 26.4
Retiring
in 20
years 26.6 28.8 26.5 28.6 26.5 28.6
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
30 June 2016 30 June 2016 30 June 2015 30 June 2015 31 December 2015 31 December 2015
Rathbone Laurence Keen Rathbone Laurence Keen Rathbone Laurence Keen
1987 Scheme Scheme 1987 Scheme Scheme 1987 Scheme Scheme
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Present
value of
defined
benefit
obligations (199,897) (16,801) (166,066) (15,309) (161,965) (14,002)
Fair value
of scheme
assets 169,915 14,818 155,486 15,058 157,475 13,991
Total
deficit (29,982) (1,983) (10,580) (251) (4,490) (11)
The group made special contributions into its pension schemes of
GBP1,936,000 during the period (30 June 2015: GBP2,792,000; 31 December
2015: GBP3,792,000).
15 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 2015 47,890,269 2,395 92,987 95,382
Shares issued:
- to Share
Incentive Plan 139,573 1,934.0 - 2,264.0 7 2,873 2,880
- to Save As You
Earn scheme 31,813 984.0 - 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
Shares issued:
- to Share
Incentive Plan 66,310 1,934.0 - 2,264.0 3 1,402 1,405
- to Save As You
Earn scheme 3,261 934.0 - 1,641.0 1 39 40
- on exercise of
options 2,953 852.0 - 1,172.0 - 27 27
At 31 December
2015 (audited) 48,134,286 2,407 97,643 100,050
Shares issued:
- in relation to
business
combinations
(note 3) 37,912 1,705.0 2 645 647
- to Share
Incentive Plan 104,667 1,968.0 - 2,039.0 5 2,069 2,074
- to Save As You
Earn scheme 102,319 934.0 - 1,641.0 5 1,104 1,109
- on exercise of
options - - - - -
At 30 June 2016
(unaudited) 48,379,184 2,419 101,461 103,880
At 30 June 2016, the group held 376,273 own shares (30 June 2015:
388,831; 31 December 2015: 384,295).
16 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 2016 (unaudited) GBP'000 GBP'000 GBP'000 GBP'000
Assets
Available for sale securities:
- equity securities 1,082 - - 1,082
- money market funds - 83,623 - 83,623
Total financial assets 1,082 83,623 - 84,705
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 31 December 2015 (audited) GBP'000 GBP'000 GBP'000 GBP'000
Assets
Available for sale securities:
- equity securities 1,070 - - 1,070
- money market funds - 52,316 - 52,316
Total financial assets 1,070 52,316 - 53,386
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
Prior to the acquisition of Vision and Castle (note 3), the group was
party to certain option contracts over the equity instruments of the two
companies. The agreement to acquire the remaining 80.1% of the companies
superseded the option contracts; the carrying value of which was written
down to GBPnil, realising a loss of GBP1,030,000 for the year ended 31
December 2015.
Losses relating to the derivative financial instruments are included
within 'loss on derivative financial instruments'. 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.
Derivative
financial
instruments Total
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
Total unrealised gains and losses recognised in:
- profit or loss (700) (700)
At 31 December 2015 (audited) and 30 June 2016 - -
(unaudited)
The fair values of the group's other financial assets and liabilities
are not materially different from their carrying values with the
exception of the following:
-- Held to maturity 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 2016 was GBP727,395,000 (30
June 2015: GBP676,125,000; 31 December 2015: GBP710,718,000) and the
carrying value was GBP725,000,000 (30 June 2015: GBP674,177,000; 31
December 2015: GBP707,745,000). Fair value for held to maturity assets is
based on market bid prices and hence would be categorised as level 1
within the fair value hierarchies.
-- Subordinated loan notes (note 13) comprise Tier 2 loan notes issued
during the year. The fair value of the loan notes at 30 June 2016 was
GBP20,301,000 (30 June 2015: GBPnil; 31 December 2015: GBP20,099,000) and
the carrying value was GBP19,541,000 (30 June 2015: GBPnil; 31 December
2015: GBP19,492,000). Fair value of the loan notes is based on discounted
future cash flows using current market rates for debts with similar
remaining maturity, and hence would be categorised as level 2 in the fair
value hierarchy.
17 Contingent liabilities and commitments
-- 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.
-- Capital expenditure authorised and contracted for at 30 June 2016 but not
provided for in the condensed consolidated interim financial statements
amounted to GBP434,000 (30 June 2015: GBP653,000; 31 December 2015:
GBP534,000).
-- The contractual amounts of the group's commitments to extend credit to
its clients are as follows:
Unaudited Unaudited Audited
30 June 2016 30 June 2015 31 December 2015
GBP'000 GBP'000 GBP'000
Guarantees - 578 -
Undrawn commitments to lend of 1
year or less 22,146 17,208 20,417
22,146 17,786 20,417
The fair value of the guarantees is GBPnil (30 June 2015 and 31 December
2015: GBPnil).
-- 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.
18 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 2016 30 June 2015 31 December 2015
GBP'000 GBP'000 GBP'000
Cash and balances at
central banks 960,115 703,338 583,156
Loans and advances to banks 105,629 72,280 68,156
Available for sale
investment securities 83,623 49,971 52,316
1,149,367 825,589 703,628
Available for sale investment securities are amounts invested in money
market funds which are realisable on demand.
Cash flows arising from the issue of ordinary shares comprise:
Unaudited Unaudited Audited
Six months to Six months to Year to
30 June 2016 30 June 2015 31 December 2015
GBP'000 GBP'000 GBP'000
Share capital issued (note 15) 12 8 12
Share premium on shares issued (note 15) 3,818 3,188 4,656
Purchase of newly issued shares for the purposes of
share-based schemes (1,043) (1,894) (2,413)
2,787 1,302 2,255
19 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 GBP122,000 were paid in the period (six months ended
30 June 2015: GBP38,000; year ended 31 December 2015: GBP108,000) in
respect of ordinary shares held by key management personnel.
As at 30 June 2016, the group had provided interest-free season ticket
loans of GBP3,000 (30 June 2015: GBP2,000;
31 December 2015: GBP6,000) to key management personnel.
At 30 June 2016, key management personnel and their close family members
had gross outstanding deposits of GBP4,104,000 (30 June 2015:
GBP306,000; 31 December 2015: GBP862,000) and gross outstanding loans of
GBP949,000 (30 June 2015: GBP4,139,000; 31 December 2015: GBP5,805,000)
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 25 unit trusts and OEICs during the first half of 2016
(six months ended 30 June 2015: 21 unit trusts and OEICs; year ended 31
December 2015: 22 unit trusts and OEICs). Total management charges of
GBP12,856,000 (six months ended 30 June 2015: GBP12,607,000; year ended
31 December 2015: GBP25,371,000) 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 2016
totalled GBP2,183,000 (30 June 2015: GBP2,094,000; 31 December 2015:
GBP2,181,000).
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.
20 Events after the balance sheet date
An interim dividend of 21.0p per share was declared on 26 July 2016 (see
note 7). There have been no other material events occurring between the
balance sheet date and 26 July 2016.
Regulatory capital
The group is classified as a banking group under the Capital
Requirements Directive and is therefore required to operate within the
restrictions on capital resources and banking exposures prescribed by
the Capital Requirements Regulation, as applied by the Prudential
Regulation Authority (PRA).
Regulatory own funds
The group's regulatory own funds (excluding profits for the six months
ended 30 June, which have not yet been independently verified, but
including independently verified profits to 31 December) are shown in
the table below.
Unaudited
Unaudited Unaudited 31 December 2015
30 June 2016 30 June 2015 GBP'000
GBP'000 GBP'000 (restated - note 1)
Share capital and share
premium 103,880 98,578 100,050
Reserves 206,331 181,432 206,319
Less:
- Own shares (6,561) (6,015) (6,177)
- Intangible assets (net
of deferred tax) (169,582) (161,547) (170,485)
Total Common Equity Tier 1
capital 134,068 112,448 129,707
Tier 2 capital 15,456 - 16,278
Total own funds 149,524 112,448 145,985
Own funds requirements
The group is required to hold capital to cover a range of own funds
requirements, classified as Pillar 1 and Pillar 2.
Pillar 1 - minimum requirement for capital
Pillar 1 focuses on the determination of risk-weighted assets and
expected losses in respect of the group's exposure to credit,
counterparty credit, market and operational risks and sets a minimum
requirement for capital.
At 30 June 2016 the group's risk weighted assets were GBP837,975,000 (30
June 2015: GBP795,463,000; 31 December 2015: GBP794,075,000).
Pillar 2 - Supervisory review process
Pillar 2 supplements the Pillar 1 minimum requirement with a firm
specific Individual Capital Guidance (Pillar 2A) and a framework of
regulatory capital buffers (Pillar 2B).
The Pillar 2A own funds requirement is set by the PRA to reflect those
risks, specific to the firm, which are not fully captured under the
Pillar 1 own funds requirement.
Pension obligation risk
The potential for additional unplanned costs that the group would incur
in the event of a significant deterioration in the funding position of
the group's defined benefit pension schemes.
Interest rate risk in the banking book
The potential losses in the non-trading book resulting from interest
rate changes or widening of the spread between Bank of England base
rates and LIBOR rates.
Concentration risk
Greater loss volatility arising from a higher level of loan default
correlation than is assumed by the Pillar 1 assessment.
The group is also required to maintain a number of Pillar 2B regulatory
capital buffers.
Capital conservation buffer (CCB)
The CCB is a general buffer of 2.5% of risk-weighted assets designed to
provide for losses in the event of a stress and is being phased in from
1 January 2016 to 1 January 2019. As at 30 June 2016, the buffer rate
was 0.625% of risk-weighted assets. The CCB must be met with Common
Equity Tier 1 capital.
Countercyclical capital buffer (CCyB)
The CCyB is time-varying and is designed to act as an incentive for
banks to constrain credit growth in times of heightened systemic risk.
The amount of the buffer is determined by reference to rates set by the
Financial Policy Committee (FPC) for individual countries where the
group has credit risk exposures. The buffer rate is currently set at
zero for the UK, however non-zero rates for Norway, Sweden and Hong Kong,
where the group has small relevant credit risk exposures, results in an
overall rate of 0.09% of risk weighted assets for the group as at 30
June 2016. The CCyB must be met with Common Equity Tier 1 capital.
PRA buffer
The PRA also determines whether any incremental firm-specific buffer is
required, in addition to the CCB and the CCyB. The PRA requires any PRA
buffer to remain confidential between the group and the PRA. The
proportion of any PRA buffer that must be met with Common Equity Tier 1
capital will rise from 25% in 2016 to 100% from 1 January 2019, rising
by 25% each year.
The group's own funds requirements were as follows.
Unaudited Unaudited Unaudited
30 June 2016 30 June 2015 31 December 2015
GBP'000 GBP'000 GBP'000
Own funds requirement for
credit risk 36,630 36,771 36,511
Own funds requirement for
market risk - 197 346
Own funds requirement for
operational risk 30,407 26,669 26,669
Pillar 1 own funds
requirement 67,037 63,637 63,526
Pillar 2A own funds
requirement 27,285 16,846 26,794
Total Pillar 1 + 2A own funds
requirement 94,322 80,483 90,320
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.
Going concern basis of preparation
Details of the group's results, cash flows and resources, together with
an update on 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
2016, and as at 30 June 2016, the group was primarily equity-financed,
with a small amount of gearing in the form of the Tier 2 debt issued in
2015.
In 2016, the group has continued to grow client funds under management
and remains profitable, despite turbulent market conditions. We have
considered the risks posed to the business by the results of the
referendum on the United Kingdom's membership of the European Union on
23 June and believe that the company remains well-placed to manage its
business risks successfully, despite the continuing uncertain economic
and political outlook.
As we believe that the group has, and is forecast to continue to have,
sufficient financial and regulatory resources 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
26 July 2016
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.
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 2016 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 2016 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
26 July 2016
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#2030825
http://www.rathbones.com/
(END) Dow Jones Newswires
July 27, 2016 02:00 ET (06:00 GMT)
Copyright (c) 2016 Dow Jones & Company, Inc.
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