TIDMRAT
RNS Number : 3921U
Rathbone Brothers PLC
29 July 2020
A strong first half
Paul Stockton, chief executive, said:
"An acceleration of net inflows in the second quarter helped our
funds under management and administration reach GBP49.4 billion at
30 June 2020, down 2.0% over the half year against a backdrop where
the FTSE 100 index decreased by 18.2%. Total net inflows were
GBP1.3 billion in the first half, representing an annualised growth
rate of 5.3%, while Investment Management generated annualised net
organic growth of 1.4%. Our Unit Trusts business delivered another
outstanding performance with net inflows of GBP0.6 billion, 68.7%
ahead of the first half of 2019, with funds under management
growing by 20.0% to GBP8.0 billion at 30 June 2020.
Underlying profit margins remained resilient as our business
model responded strongly to the challenges of the COVID-19 pandemic
whilst also creating opportunities to leverage the advantages of
remote working and streamlining procedures. We continue to
prioritise the safety and well-being of our employees and remain
dedicated to delivering a high-quality client service.
Our strong first half performance is testament to the strength
of our brand, our market position and our people. Our business
model has proven to be resilient, agile and adaptable throughout
the duration of the COVID-19 pandemic, with little to no impact on
business continuity. Whilst we expect investment markets to remain
volatile and interest rates to remain lower for some time to come,
our balance sheet is robust with a strong capital position. We are
well placed to continue delivering on our organic growth strategy,
balancing investment in the business with prevailing market
conditions, maintaining strict cost discipline and identifying
inorganic growth opportunities that fit our culture."
Financial highlights:
- Total funds under management and administration reached
GBP49.4 billion at 30 June 2020, down 2.0% from GBP50.4 billion at
31 December 2019 (30 June 2019: GBP49.2 billion). The FTSE 100
Index and MSCI PIMFA Private Investor Balanced Index decreased
18.2% and 6.3% respectively over the six-month period to 30 June
2020.
- GBP41.4 billion in the Investment Management business (30 June 2019: GBP42.5 billion)
- GBP8.0 billion in the Unit Trusts business (30 June 2019: GBP6.7 billion)
- Total net inflows were GBP1.3 billion in the first six months
of 2020 (30 June 2019: GBP0.5 billion), representing an annualised
growth rate of 5.3% (30 June 2019: 2.1%).
- Total net inflows in Investment Management were GBP0.8 billion
in the first six months of 2020 (30 June 2019: GBP0.1 billion). Net
organic inflows in the first half of the year totalled GBP0.3
billion (30 June 2019: net outflows of GBP0.1 billion).
- Net inflows in Unit Trusts were GBP0.6 billion in the first
half of 2020 (30 June 2019: GBP0.3 billion).
- Profit before tax for the six months to 30 June 2020 of
GBP27.3 million (30 June 2019: GBP20.0 million). Basic earnings per
share totalled 36.1p (30 June 2019: 25.8p).
- Operating income totalled GBP179.0 million in the first half
of 2020, 3.6% ahead of the prior year (30 June 2019: GBP172.7
million).
- Income in Investment Management totalled GBP158.7 million in
the first six months of 2020, an increase of 2.3% on the prior
period (30 June 2019: GBP155.2 million). The average FTSE 100 Index
level on quarterly billing dates in 2020 was 5793, a decrease of
22.1% against the 7436 recorded in 2019.
- Income in Unit Trusts totalled GBP20.3 million in the six
months ended 30 June 2020, an increase of 16.0% on the GBP17.5
million reported in the first half of 2019.
- Underlying profit before tax totalled GBP46.0 million in the
first six months of 2020 (30 June 2019: GBP46.6 million).
Underlying earnings per share totalled 67.5p (30 June 2019:
71.4p).
- Underlying operating margin of 25.7% in the six months ended
30 June 2020 (30 June 2019: 27.0%; 31 December 2019: 25.5%)
Declaration of interim dividend
- We are maintaining our interim dividend at 25p (30 June 2020:
25p). This reflects our confidence in our medium-term prospects and
the strength of our balance sheet. The record date will be 4
September 2020 and the dividend will be paid on 6 October 2020.
Funds under management and administration
(i) Investment Management 6 months ended 30 June1
----------------------------
2020 2019 Change
GBPm GBPm %
--------------------------------------------------- --------- -------- -------
Opening FUMA (1 January) 42,965 38,456 11.7
Inflows 2,360 1,901 24.1
--------------------------------------------------- --------- -------- -------
Organic new business(1) 1,884 1,727 9.1
Purchased new business(2) 476 174 173.6
--------------------------------------------------- --------- -------- -------
Outflows (1,579) (1,761) (10.3)
Market effect and investment performance (2,426) 3,886 (162.4)
--------------------------------------------------- --------- -------- -------
Closing FUMA (30 June) 41,320 42,482 (2.7)
--------------------------------------------------- --------- -------- -------
Underlying annualised rate of net organic growth 1.4% -0.2%
Total annualised net organic and acquired growth 3.6% 0.7%
FTSE 100 Index closing level (30 June) 6170 7426 (16.9)
MSCI PIMFA Private Investor Balanced Index closing
level (30 June) 1574 1632 (3.6)
--------------------------------------------------- --------- -------- -------
(ii) Unit Trusts
6 months ended 30 June
----------------------------------------- ---------------------------
2020 2019 Change
GBPm GBPm %
----------------------------------------- --------- ------- -------
Opening FUM (1 January) 7,438 5,643 31.8
Inflows 1,689 994 69.9
Outflows (1,134) (665) 70.5
Market effect and investment performance 51 730 (93.0)
----------------------------------------- --------- ------- -------
Closing FUM (30 June) 8,044 6,702 20.0
----------------------------------------- --------- ------- -------
Total FUMA(3) 49,364 49,184 0.4
----------------------------------------- --------- ------- -------
(iii) Investment Management: Service level breakdown
30 June 31 December 30 June Change Change
2020 2019 2019 6 months 12 months
GBPm GBPm GBPm % %
---------------------------------------- ------- ----------- ------- --------- ----------
Direct 30,355 31,013 29,906 (2.1) 1.5
Financial Adviser linked(4) 8,524 8,735 8,440 (2.4) 1.0
----------------------------------------- ------- ----------- ------- --------- ----------
Total Discretionary 38,879 39,748 38,346 (2.2) 1.4
Non-Discretionary Investment Management 1,957 2,550 3,374 (23.3) (42.0)
Execution Only 2,330 2,412 2,299 (3.4) 1.3
----------------------------------------- ------- ----------- ------- --------- ----------
Gross Investment Management FUMA 43,166 44,710 44,019 (3.5) (1.9)
----------------------------------------- ------- ----------- ------- --------- ----------
Discretionary wrapped funds(5) (1,846) (1,745) (1,537) 5.8 20.1
----------------------------------------- ------- ----------- ------- --------- ----------
Total Investment Management FUMA 41,320 42,965 42,482 (3.8) (2.7)
----------------------------------------- ------- ----------- ------- --------- ----------
1. Organic growth excludes income items and represents new
business from current clients or from new clients (including those
via intermediaries).
2. Purchased growth is defined as corporate or team
acquisitions, and new business from investment managers who are on
an earn-out arrangement.
3. Includes Greenbank funds of GBP1.7 billion (31 December 2019:
GBP1.6 billion) and funds managed with a charitable mandate of
GBP6.0 billion (31 December 2019: GBP6.1 billion).
4. The balance of financial adviser linked business is spread
across non-discretionary investment management and execution only
business.
5. Discretionary wrapped funds represent funds operated by Unit
Trusts, managed by both Investment Management teams and Unit Trusts
fund managers.
29 July 2020
For further information contact:
Rathbone Brothers Plc
Tel: 020 7399 0000
email: dominic.lagan@rathbones.com
Paul Stockton, Chief Executive
Jennifer Mathias, Group Finance Director
Dominic Lagan, Head of Investor Relations
Camarco
Tel: 020 3757 4984
email: ed.gascoigne-pees@camarco.co.uk
Ed Gascoigne-Pees
Julia Tilley
Rathbone Brothers Plc
Rathbones provides individual investment and wealth management
services for private clients, charities, trustees and professional
partners. We have been trusted for generations to manage and
preserve our clients' wealth. Our tradition of investing and acting
responsibly has been with us from the beginning and continues to
lead us forward. Our ambition is to be recognised as the UK's most
responsible wealth manager.
Rathbones has over 1,500 staff in 15 UK locations and Jersey;
its headquarters is 8 Finsbury Circus, London.
rathbones.com
Interim management report
Managing through the pandemic and investment market
volatility
The first half of 2020 will always be remembered for the
significant impact that the COVID-19 pandemic had on many
businesses. We successfully prioritised employee well-being and
serving our clients in a period that was challenging in many ways.
Throughout the period Rathbones operated effectively, which was of
critical importance to clients at a time of heightened market
volatility.
The first quarter of 2020 reflected the weak investor sentiment
that was driven by the negative impact of lockdown measures on
global economies to contain the spread of COVID-19. As governments
responded, investor sentiment improved during the second quarter as
countries emerged cautiously from lockdown and we saw the beginning
of a return to improved economic activity. The FTSE 100 index ended
the first half at 6170, decreasing by 18.2% from the 7542 index
level at 31 December 2019.
The longer-term consequences from the pandemic remain far from
certain, and we expect market volatility to persist into the second
half. Despite this ongoing uncertainty we will continue to invest
and make productivity improvements to deliver on our strategic
priorities and emerge from the crisis a stronger and more agile
company.
Resilient operating margin and a strong balance sheet
Total funds under management and administration were GBP49.4
billion at 30 June 2020, down 2.0% from GBP50.4 billion at 31
December 2019 and up 0.4% from GBP49.2 billion at 30 June 2019.
Operating income totalled GBP179.0 million in the first half of
2020, 3.6% ahead of the prior year (30 June 2019: GBP172.7
million).
Operating income in Investment Management totalled GBP158.7
million in the first six months of 2020, an increase of 2.3% on the
prior year. Investment Management fee income of GBP106.4 million in
the first half of 2020 was 3.8% lower than the GBP110.6 million
recorded in the prior year, reflecting lower market levels at
quarterly billing dates. The average of the FTSE 100 on quarterly
billing dates in the first half of 2020 was 22.1% lower than in the
first half of 2019. Commission income of GBP37.3 million was 34.7%
ahead of the first six months of 2019, driven by continuing high
trading volumes in a particularly volatile second quarter of 2020.
We expect commission income to remain seasonally weighted to the
first half of the year, being correlated to periods of increased
market volatility. Net interest income of GBP4.8 million in the
first half was 36.8% lower than the corresponding six-month period
in 2019, reflecting UK base rate reductions in March 2020. Fees
from advisory and other services grew encouragingly to GBP10.2
million during the first half of 2020, up 9.7% on the prior year
(30 June 2019: GBP9.3 million).
Total income in our Unit Trusts business increased significantly
by 16.0% to GBP20.3 million (30 June 2019: GBP17.5 million) as
growth in funds, driven by strong net inflows and market
outperformance more than offset the smoothed impact of market
movements on fees which are calculated daily.
Profit before tax for the six months to 30 June 2020 of GBP27.3
million (30 June 2019: GBP20.0 million) reflects a number of
expected items, primarily in relation to the acquisition of Speirs
& Jeffrey. Acquisition costs in relation to this totalled
GBP11.5 million in the period (30 June 2019: GBP17.8 million) of
which GBP10.0 million was in relation to deferred consideration
payments, consistent with the GBP18 million disclosed in our 2019
preliminary results as our expectation for full year 2020. Further
detail on acquisition-related costs can be found in note 6. Basic
earnings per share were 36.1p (30 June 2019: 25.8p).
Underlying profit before tax of GBP46.0 million at 30 June 2020
was marginally below the GBP46.6 million reported for the period a
year ago. Growth in operating income of 3.6% was offset by fixed
and variable staff cost increases of 3.9% while other operating
expenses increased by 9.2%, largely reflecting a GBP2.1 million
increase in Financial Services Compensation Scheme ('FSCS') levies
during the first six months of 2020. The full year FSCS cost is
currently expected to be approximately GBP6.1 million (31 December
2019: GBP4.5 million), however this is subject to any supplementary
levies from the FSCS during the second half of the year. This
unwelcome increase offset GBP2.1 million of cost synergies relating
to Speirs & Jeffrey achieved during the first half of the year
(full year 2020 synergies of GBP4.5 million expected). We expect to
realise the remainder of the synergies in the second half. We
continue to maintain a strict discipline on discretionary costs,
recognising ongoing market uncertainty for the second half of the
year.
The underlying operating margin at 30 June 2020 was 25.7% (30
June 2019: 27.0%). Underlying profit after tax was GBP36.2 million
in the first six months of the year (30 June 2019: GBP38.1
million). Accordingly, underlying earnings per share of 67.5p
decreased from the 71.4p recorded in the first six months of 2019.
A full reconciliation between profit before tax and underlying
profit before tax can be found in note 10.
Our balance sheet remains robust with a consolidated Common
Equity Tier 1 ratio of 21.3% at 30 June 2020 (31 December 2019:
22.0%; 30 June 2019: 20.5%) and a consolidated leverage ratio of
6.8% at 30 June 2020 (31 December 2019: 8.3%; 30 June 2019: 8.6%).
The decrease in the consolidated leverage ratio from 31 December
2019 to 30 June 2020 was due to total assets increasing by GBP530
million, largely reflecting an increase in client deposits, while
tier 1 capital remained broadly unchanged. Our capital surplus of
own funds (excluding year-to-date post-tax profits) over our
regulatory capital requirement was GBP98.2 million at 30 June 2020
(GBP104.2 million at 31 December 2019). Net retirement benefit
obligations increased to GBP16.4 million at 30 June 2020 from the
GBP8.0 million recorded at 31 December 2019, largely reflecting the
reduction in bond yields which reduced the discount rate applied in
calculating the present value of future pension payments.
The carrying value of the 10-year subordinated loan notes at 30
June 2020 was GBP20.0 million (31 December 2019: GBP19.9 million).
The loan notes are repayable in August 2025 with a call option to
redeem the loan notes in August 2020 and annually thereafter. In
light of current and anticipated market conditions, we do not
expect to exercise the associated call option this year.
The Investment Management loan book was GBP125.9 million at 30
June 2020, a small decrease on the GBP132.0 million at 31 December
2019. Loans are fully secured against underlying client investment
portfolios. The IFRS 9 impairment loss allowance held against the
group's treasury and loan books at the end of the first half was
GBP1.0 million, compared to GBP0.3 million at the end of 2019. The
company continues not to experience any defaults on client
loans.
Maintaining our interim dividend level
We have maintained our interim dividend at 25p (30 June 2019:
25p), reflecting our confidence in our medium-term prospects and
the strength of our balance sheet. The record date will be 4
September 2020 and the dividend will be paid on 6 October 2020. The
interim dividend is covered 2.7 times by underlying earnings per
share and 1.4 times by basic earnings per share.
Supporting our clients and employees
Our operational resilience has always been seen as critical to
our reputation and our ability to attract and retain high-quality
employees who remain productive and engaged. In recent years, our
continued investment in the technology that has now enabled our
employees to work remotely has proved invaluable. As lockdown
restrictions were imposed, the business was able to manage a staged
transfer to a remote working operating model very rapidly, ensuring
that our employees could be kept as safe as possible and
maintaining a full service for our clients.
Following the full implementation of lockdown measures in the UK
during March, we closed all offices, aside from Liverpool, and were
able to mobilise all staff to work successfully from home. Our
thanks go to the individuals who made that happen, and to the key
employees that remained office-based to continue essential
functions. We have not made use of any government support schemes
and none of our staff have been furloughed or been made redundant
as a result of the crisis.
Client engagement and communication through digital channels
increased significantly, providing reassurance to clients
throughout the period of market volatility that followed.
Increasing the frequency of market updates to clients and
distribution channels, often accompanied by relevant video material
and individual calls or video meetings, has proved successful. We
have also made several operational process efficiencies and
enhancements that have improved client experience and support
greater productivity. Our revised operating model allowed us to
streamline account opening and amendments, anti-money laundering
verifications, asset and cash transfers and payments whilst
carefully managing operational risk. This work accelerated previous
plans and will provide a strong foundation for further
digitalisation and process improvement.
We have continued most of our planned training activity for
employees, supplementing this with dedicated well-being initiatives
and additional communications to help ensure that they all remain
well connected and productive. Regular surveys have helped the
executive management team remain informed and able to react to any
issues or well-being matters that develop. We will retain our
flexible approach to returning to work, keeping our key priorities
of employee well-being and delivering high client service standards
at the forefront of any approach we take. We continue to pursue a
number of targeted initiatives to promote greater diversity and
inclusion in our workforce.
We recognise the challenging time the communities in which we
operate are facing and therefore Rathbones employees have chosen to
support two charities during the pandemic by raising funds for
Mental Health UK and the Trussell Trust with Rathbones committed to
matching employee fundraising up to a total of GBP100,000.
Employees are also given three paid volunteering days per year,
which can be taken flexibly, to support their local communities.
The Rathbones Foundation also continues to support local charities
by donating up to GBP200,000 per year through regionally focused
activities.
Pursuing our strategic growth goals
In October 2019 we presented our medium-term organic growth
strategy, defining our purpose to think, act and invest responsibly
with the ambition of being recognised as the UK's most responsible
wealth manager. Underpinning this is a clear plan that focuses on
enriching the client and adviser proposition and experience,
supporting and delivering growth, inspiring our people and
operating more efficiently. The pandemic has inevitably had some
impact on the speed of some operational initiatives but has also
helped accelerate others.
Plans to increase the number of investment professionals to
support our growth plans are progressing well with many high
calibre candidates content to be 'virtually' recruited and very
committed to pursuing a career with us. We added 11 investment
professionals in the first half and expect this rate to continue
during the second half. We also expect to recruit up to 10
graduates into our academy this year.
We continue to foster closer collaboration across Rathbones to
deliver services to clients, rolling out a 'Blueprint for growth
initiative' which trains selected investment managers to set
achievable growth targets and provides professional training to
build trusted relationships by offering the benefits of the
totality of our services for clients.
In our intermediated distribution team, each of our six regions
now has a Discretionary Fund Management ('DFM') distribution
specialist that oversees the provision of a new, integrated
proposition to IFA firms that distinguishes between an 'adviser as
adviser' and 'adviser as introducer' relationship. We have also
developed a more efficient onboarding process for new 'adviser as
adviser' relationships, including an improved level of initial and
ongoing support to advisers such as due diligence, risk mapping,
workshops, collateral and investment governance. We have onboarded
19 new adviser firms during the first six months of the year using
our new integrated approach (41 since launch in 2019). At 30 June
2020 the amount of funds under management and administration linked
to an adviser (including discretionary and non-discretionary
investment management as well as execution-only funds) was GBP9.0
billion (30 June 2019: GBP8.8 billion).
In specialist markets, our newly formed charity team based in
Scotland were successful in securing mandates in the first half
which was an important test of our proposition and investment
process. Thanks to close collaboration between colleagues across
front office, middle office and external parties, assets were
seamlessly transferred by the end of April.
In early April, we successfully migrated all client assets
following the acquisition of the Barclays Wealth Court of
Protection and Personal Injury business. The business added GBP440
million of assets in the first half, increasing the size of our
Court of Protection and Personal Injury business to GBP803 million
at 30 June 2020. Ten new colleagues were welcomed to the firm using
remote on-boarding and training processes.
We have continued to invest to build capability and develop
targeted Environmental, Social and Governance ('ESG') propositions
across the firm, working to embed a common approach to ESG
investing across the wider group that complements the specialist
offering delivered by Rathbone Greenbank. During the first six
months of 2020 we have engaged with 110 companies on ESG matters
compared to 70 during full year 2019. We are also a signatory to
the Institutional Investors Group on Climate Change letter
supporting the UK "build back better" campaign and a letter to the
EU heads of state and government calling for a sustainable recovery
in the EU. In addition, we were one of over 200 signatories to the
letter to the UK Prime Minister in support of a green coronavirus
recovery plan. Funds under management and administration in
Rathbone Greenbank grew 6.3% to GBP1.7 billion at 30 June 2020
(GBP1.6 billion at 31 December 2019), while our Ethical Bond Fund
increased from GBP1.5 billion at 31 December 2019 to GBP1.7 billion
at 30 June 2020.
Both the ESG and Court of Protection and Personal Injury sectors
have significant potential to grow.
We will continue to innovate in how we bring our services to
market. Over this period, virtual marketing and networking events
with external partners have raised our profile amongst potential
new clients and will be an approach we will continue to adopt in
combination with individual meetings. Video-based investment market
and other educational material have been particularly well received
by our clients, and we will continue to promote these across
websites and social media platforms.
Building our financial advice capability
The benefit of financial advice to clients is even more
important during times of market turbulence and dislocation, with
both the demand and the need for advice increasing. Our strategy
continues to place considerable importance on the financial advice
market which we access in several ways. In addition to the
important distribution relationships we have, working directly with
c. 12,000 IFAs to provide DFM investment services for them and
their clients, we operate both an independent IFA network, Vision
Independent Financial Planning ('Vision'), and an in-house
capability, Rathbones Financial Planning ('RFP'). The combination
of Vision and RFP represents a strong proposition for clients,
providing them with access to 152 financial planners advising over
GBP3.1 billion of client funds. Advisers have access to our single
strategy funds, multi-asset funds and DFM service range providing a
considerable depth to our investment offering which, combined with
service quality, was recognised in Defaqto's Annual Survey
published in April 2020.
Vision focuses on the mass affluent and HNW segment of the
market and at 30 June 2020 had assets totalling GBP1.9 billion on
its discretionary fund management panel (30 June 2019: GBP1.8
billion) and 131 independent financial advisers (30 June 2019:
124). Vision continues to attract quality advisers and seeks to
recruit an average of 10 additional IFAs per year.
RFP continues to focus on supporting existing relationships
between investment managers and their clients and forging new
client relationships via external professional partners. RFP
advisers complement and support our discretionary investment
services to meet client needs where appropriate. Advice is
delivered on a one-off or ongoing basis and is typically available
to clients with more complex financial situations or decisions to
make. There are currently 21 advisers (30 June 2019: 19) and we
continue to invest in this area.
Delivering on other projects that underpin the strategy
We have made good strategic progress during the first half of
the year, despite the challenging circumstances. In 2020 we have
focused on projects that improve the client experience and client
reporting, enhance and automate our investment risk monitoring and
improve our digital capability, including the quality and
integration of data across different systems. Work on these
projects will continue in the second half.
In order to provide clients with more holistic communication and
online access options we are building a new platform which will be
known as 'MyRathbones'. This is the first stage of a programme of
digital enhancements to Rathbones' client proposition and is
designed to augment our existing services. Clients will benefit
from improved digital access to Rathbones from a range of devices
and will be protected by industry standard online security. We will
continue to develop the 'MyRathbones' platform by adding additional
features and enhancing its capabilities and expect that feedback
from our clients and advisers will play a significant role in how
we define and prioritise future developments.
After experiencing some justifiable delays because of the
COVID-19 pandemic, we resumed the pilot of our new investment
solution for clients known as Rathbone Select Portfolio ('RSP').
RSP is a cost-effective and compelling investment solution aimed at
clients with a minimum investment of GBP15,000 for a term of at
least three years, where a bespoke discretionary investment
management service may not be appropriate. It is a self-select /
execution only solution for clients who feel comfortable choosing
an investment strategy to meet their investment objectives and risk
/ return profile. Clients can choose from six risk-rated investment
strategies. Each strategy is delivered through a single Rathbone
Multi-Asset Portfolio fund, actively managed by a Rathbone Unit
Trust Management fund management team who follow our firm-wide
investment philosophy. Clients will have the flexibility to make
additions to or withdrawals from their portfolios, switch between
investment strategies as circumstances change, have direct online
access to information about their performance and the underlying
investments in their portfolios as well as access to a dedicated
RSP team based in the UK. Subject to a successful pilot, we expect
to start rolling out RSP during the third quarter of 2020.
Whilst much of our strategic focus is on organic growth, part of
our strategy has been, and will continue to be, acquiring
businesses that fit our culture. We will continue to monitor
opportunities to build the business inorganically, recognising the
importance of cultural fit and the importance of building
scale.
Business performance
Investment Management
Total funds under management and administration in our
Investment Management business were GBP41.4 billion, down 2.6% from
the GBP42.5 billion we reported a year ago and largely reflecting
lower market levels. The average of the FTSE 100 on quarterly
billing dates in the first half of 2020 was 22.1% lower than in the
first half of 2019, while the MSCI PIMFA Private Investor Balanced
Index was 8.6% lower than the prior year.
Total net inflows were GBP0.8 billion in the first six months of
2020 compared to GBP0.1 billion in the first six months of 2019.
Net organic inflows in the first half totalled GBP0.3 billion (30
June 2019: net outflows of GBP0.1 billion). Gross organic inflows
were 9.1% ahead of the prior year against a challenging market
backdrop while outflows were 10.3% lower. Inorganic inflows during
the first half of 2020 were GBP0.5 billion, driven by the
acquisition of the Barclays Wealth Court of Protection and Personal
Injury business (30 June 2019: GBP0.2 billion).
Net organic annualised growth in the first half was 1.4% (30
June 2019: -0.2%) benefiting from charity mandate wins in the
second quarter, while outflows were driven by the part withdrawal
of previously reported short-term mandates, the re-balancing of
certain pension scheme portfolios in the first quarter and the loss
of an execution-only non-fee paying mandate in the second
quarter.
The Investment Management business has been shortlisted for the
following Citywealth awards: Private Client Investment Team of the
Year, Charity Investment Team of the Year, Impact/ESG Manager of
the Year and Industry sustainability. Our charities team has also
been shortlisted for the Charity Times Better Society 'Green
Finance' award, while our FTSE350 modern slavery engagement has
been shortlisted for the 'Stewardship Project of the Year' for the
PRI 2020 awards.
Unit Trusts
Our funds business has continued its strong momentum with funds
under management of GBP8.0 billion at 30 June 2020, up 19.4% from
GBP6.7 billion a year ago. Despite a challenging first half and a
volatile market backdrop, the business has attracted substantial
net inflows of GBP555 million for the first six months of the year,
68.7% ahead of the same period in 2019 (30 June 2019: GBP329
million). This represents an annualised net organic growth rate of
14.9% (30 June 2019: 11.7%).
There were strong net inflows into the Ethical Bond Fund, Global
Opportunities Fund and the High-Quality Bond Fund. Net flows into
our Multi Asset Portfolios were also strong, particularly into the
Strategic Growth Fund.
During June 2020, we added two new funds to our Rathbone
Multi-Asset Portfolio (RMAP) range, the Rathbone Multi-Asset
Defensive Growth Portfolio and the Rathbone Multi-Asset Dynamic
Growth Portfolio, providing advisers with cost-effective access to
target return profiles for their clients, which complement the
existing range of multi-asset portfolio funds. We now have six
different actively managed investment strategies within our RMAP
suite, alongside the RMAP Total Return, Strategic Income, Strategic
Growth and Enhanced Growth portfolio funds. These strategies now
offer a comprehensive, risk-rated market solution for the majority
of clients and will support our RSP solution. Our multi-asset range
now manages GBP1.3 billion (30 June 2019: GBP1.2 billion) and
continues to grow.
According to the Pridham Report, which monitors fund sales and
asset trends in the UK, Rathbones was ranked in 10th position for
overall net retail sales during the first quarter of 2020,
maintaining its top 10 position. Our Ethical Bond Fund won a
Morningstar UK award for the best bond fund while the Strategic
Growth Fund was awarded the City of London Wealth Management award
for Best Fund 2020. We won the Professional Paraplanner award for
Best Outsourced Investment Firm 2020 and also won Best Group for
the Citywire UK awards 2020 in the Sterling Strategic Bond
category. James Thomson, manager of the Rathbone Global
Opportunities Fund, has been shortlisted for Best Alpha Manager
(Global Developed Equities) in the FE fundinfo's annual FE Alpha
Manager Awards, 2020. These awards recognise consistent, strong
outperformance.
Going concern
As set out in the statement of directors' responsibilities on
page 30 of the condensed consolidated interim financial statements,
the directors believe that the group is well positioned to manage
its business risks successfully, despite an uncertain backdrop. The
group's financial projections, and the capital adequacy assessment,
which is required to apply extreme stress scenarios to these
projections, provide comfort that the group has adequate financial
and regulatory resources to continue in operational existence for
the foreseeable future. These forecasts have been prepared taking
account of the potential impacts of the COVID-19 pandemic on market
volatility, net organic growth and additional costs of maintaining
operational resilience. Accordingly, the directors continue to
adopt a going concern basis for the preparation of the condensed
consolidated interim financial statements. In forming their view,
the directors have considered the group's prospects for a period
exceeding 12 months from the date the condensed consolidated
interim financial statements are approved.
Principal risks and uncertainties
While our people, operations and infrastructure have adapted and
responded well to the COVID-19 pandemic crisis, the board
recognises that the impact and priority of the principal risks and
uncertainties which may have a material effect on the group's
performance have, in the short term, changed from those identified
in the strategic report and group risk committee report in our 2019
annual report and accounts (pages 3 to 11 and pages 80 to 82
respectively). The firm has therefore focused on ensuring our
operations are resilient, our staff are protected and the potential
disruption to our business model and services to clients remains
low during the rest of this year. However, future phases of the
pandemic are uncertain and could result in a range of scenarios
with a variety of outcomes. We remain alert to the evolving cyber
threat landscape during this crisis, ensuring that our processes
continue to protect our clients' assets and we continue to remain
attentive to the investment performance we are delivering to our
clients.
The board recognises and continues to monitor the UK
government's trade negotiations with the EU and assess the risk of
a hard Brexit. Our exposure to any potential disruption from this
scenario remains low as we have no operations in other EU countries
and no material dependencies on goods, services, or people from
other EU countries. We have proactively changed the basis by which
our Unit Trusts business distributes its funds in Europe. We will,
however, continue to monitor developments closely and we will act
as necessary.
Regulation
Our regulators are responding to the COVID-19 pandemic,
addressing Brexit and issuing guidance on a wide range of topics.
The FCA and PRA are also promoting climate change risk as a key
area of focus. We are tracking regulatory developments carefully
during this period of transition on a range of subjects and have
launched our own initiatives in response where needed.
Executive team
Our plans to bring new talent into the executive team are
progressing well. Following Jennifer Mathias's appointment last
year, Andy Brodie joined as Chief Operating Officer in April.
Kathleen Jones joined the executive team as interim Chief People
Officer in June to lead on an important Human Resources agenda.
This team brings a wealth of experience in the financial services
sector and is working well together to deliver our strategic
plan.
Outlook for the remainder of the year
Our business model has proven to be resilient, agile and
adaptable throughout the duration of the COVID-19 pandemic, with
little to no impact on business continuity. Whilst we expect
investment markets to remain volatile and interest rates to remain
lower for some time to come, our balance sheet is robust with a
strong capital position. We are well placed to continue delivering
on our organic growth strategy, balancing investment in the
business with prevailing market conditions, maintaining strict cost
discipline and identifying inorganic growth opportunities that fit
our culture.
Mark Nicholls Paul Stockton
Chairman Chief Executive
28 July 2020
Consolidated interim statement of comprehensive income
for the six months ended 30 June 2020
Unaudited Unaudited Audited
Six months Six months Year
to to to
30 June 30 June 31 December
2020 2019 2019
Note GBP'000 GBP'000 GBP'000
----------------------------------------------- ---- ----------- ----------- ------------
Interest and similar income 9,449 13,631 28,553
Interest expense and similar charges (4,649) (5,985) (12,141)
----------------------------------------------- ---- ----------- ----------- ------------
Net interest income 4,800 7,646 16,412
----------------------------------------------- ---- ----------- ----------- ------------
Fee and commission income 184,126 174,950 352,519
Fee and commission expense (11,816) (11,348) (23,547)
----------------------------------------------- ---- ----------- ----------- ------------
Net fee and commission income 172,310 163,602 328,972
----------------------------------------------- ---- ----------- ----------- ------------
Net trading income (10) 165 170
Other operating income 1,949 1,318 2,517
----------------------------------------------- ---- ----------- ----------- ------------
Operating income 179,049 172,731 348,071
----------------------------------------------- ---- ----------- ----------- ------------
Charges in relation to client relationships
and goodwill 14 (7,038) (7,795) (15,964)
Acquisition-related costs 6 (11,651) (18,857) (33,057)
Other operating expenses (133,079) (126,103) (259,398)
----------------------------------------------- ---- ----------- ----------- ------------
Operating expenses (151,768) (152,755) (308,419)
----------------------------------------------- ---- ----------- ----------- ------------
Profit before tax 27,281 19,976 39,652
Taxation 8 (7,864) (6,214) (12,729)
----------------------------------------------- ---- ----------- ----------- ------------
Profit for the period attributable to equity
holders of the company 19,417 13,762 26,923
----------------------------------------------- ---- ----------- ----------- ------------
Other comprehensive income:
Items that will not be reclassified to profit
or loss
Net remeasurement of defined benefit liability (10,292) (285) 310
Deferred tax relating to the net remeasurement
of defined benefit liability 2,734 48 (53)
----------------------------------------------- ---- ----------- ----------- ------------
Other comprehensive income net of tax (7,558) (237) 257
----------------------------------------------- ---- ----------- ----------- ------------
Total comprehensive income for the period net
of tax attributable to equity holders of the
company 11,859 13,525 27,180
----------------------------------------------- ---- ----------- ----------- ------------
Dividends paid and proposed for the period
per ordinary share 9 25.0p 25.0p 70.0p
Dividends paid and proposed for the period 14,338 14,019 37,714
Earnings per share for the period attributable
to equity holders of the company: 10
* basic 36.1p 25.8p 50.3p
* diluted 34.7p 25.0p 48.7p
----------------------------------------------- ---- ----------- ----------- ------------
Consolidated interim statement
of changes in equity
for the six months ended 30 June 2020
Share Share Merger Retained Total
capital premium reserve Own shares earnings equity
Note GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
------------------------------------ ---- -------- -------- -------- ---------- --------- --------
At 1 January 2019 (restated) 2,760 205,273 56,785 (32,737) 232,059 464,140
Profit for the period 13,762 13,762
------------------------------------ ---- -------- -------- -------- ---------- --------- --------
Net remeasurement of defined
benefit liability (285) (285)
Deferred tax relating to components
of other comprehensive income 48 48
------------------------------------ ---- -------- -------- -------- ---------- --------- --------
Other comprehensive income
net of tax - - - - (237) (237)
Dividends paid (22,433) (22,433)
Issue of share capital 18 44 3,648 14,971 18,663
Share-based payments:
* value of employee services 5,301 5,301
* cost of own shares acquired (4,361) (4,361)
* cost of own shares vesting 260 (260) -
* tax on share-based payments (89) (89)
------------------------------------ ---- -------- -------- -------- ---------- --------- --------
At 30 June 2019 (unaudited) 2,804 208,921 71,756 (36,838) 228,103 474,746
Profit for the period 13,161 13,161
------------------------------------ ---- -------- -------- -------- ---------- --------- --------
Net remeasurement of defined
benefit liability 595 595
Deferred tax relating to components
of other comprehensive income (101) (101)
------------------------------------ ---- -------- -------- -------- ---------- --------- --------
Other comprehensive income
net of tax - - - - 494 494
Dividends paid (13,526) (13,526)
Issue of share capital 18 14 2,018 2,032
Share-based payments:
* value of employee services 14,086 14,086
* cost of own shares acquired (5,672) (5,672)
* cost of own shares vesting 539 (539) -
* tax on share-based payments 72 72
------------------------------------ ---- -------- -------- -------- ---------- --------- --------
At 31 December 2019 (audited) 2,818 210,939 71,756 (41,971) 241,851 485,393
Profit for the period 19,417 19,417
------------------------------------ ---- -------- -------- -------- ---------- --------- --------
Net remeasurement of defined
benefit liability (10,292) (10,292)
Deferred tax relating to components
of other comprehensive income 2,734 2,734
------------------------------------ ---- -------- -------- -------- ---------- --------- --------
Other comprehensive income
net of tax - - - - (7,558) (7,558)
Dividends paid (24,316) (24,316)
Issue of share capital 18 50 2,171 - 2,221
Share-based payments:
* value of employee services 13,994 13,994
* cost of own shares acquired (4,282) (4,282)
* cost of own shares vesting 165 (165) -
* tax on share-based payments (208) (208)
------------------------------------ ---- -------- -------- -------- ---------- --------- --------
At 30 June 2020 (unaudited) 2,868 213,110 71,756 (46,088) 243,015 484,661
------------------------------------ ---- -------- -------- -------- ---------- --------- --------
Consolidated interim balance sheet
as at 30 June 2020
Unaudited Unaudited Audited
30 June 30 June 31 December
2020 2019 2019
Note GBP'000 GBP'000 GBP'000
------------------------------------------------ ---- --------- --------- ------------
Assets
Cash and balances with central banks 2,303,875 1,271,512 1,932,997
Settlement balances 178,416 126,509 52,520
Loans and advances to banks 162,143 176,172 177,832
Loans and advances to customers 11 134,575 139,121 138,412
Investment securities:
* fair value through profit or loss 109,874 126,308 105,967
* amortised cost 647,068 917,098 600,261
Prepayments, accrued income and other assets 94,394 93,462 95,390
Property, plant and equipment 12 14,841 15,713 15,432
Right of use assets 13 47,052 51,396 49,480
Current tax asset 888 - -
Deferred tax asset 1,382 590 2,636
Intangible assets 14 236,553 235,653 227,807
------------------------------------------------ ---- --------- --------- ------------
Total assets 3,931,061 3,153,534 3,398,734
------------------------------------------------ ---- --------- --------- ------------
Liabilities
Deposits by banks 3 - 28
Settlement balances 189,795 109,773 57,694
Due to customers 3,071,196 2,382,588 2,668,645
Accruals, deferred income and other liabilities 83,306 75,951 84,531
Lease liabilities 58,492 62,840 61,004
Current tax liabilities - 5,205 4,766
Provisions for liabilities and charges 15 7,172 12,869 8,732
Subordinated loan notes 16 19,989 19,866 19,927
Retirement benefit obligations 17 16,447 9,696 8,014
------------------------------------------------ ---- --------- --------- ------------
Total liabilities 3,446,400 2,678,788 2,913,341
------------------------------------------------ ---- --------- --------- ------------
Equity
Share capital 18 2,868 2,804 2,818
Share premium 18 213,110 208,921 210,939
Merger reserve 18 71,756 71,756 71,756
Own shares (46,088) (36,838) (41,971)
Retained earnings 243,015 228,103 241,851
------------------------------------------------ ---- --------- --------- ------------
Total equity 484,661 474,746 485,393
------------------------------------------------ ---- --------- --------- ------------
Total liabilities and equity 3,931,061 3,153,534 3,398,734
------------------------------------------------ ---- --------- --------- ------------
The condensed consolidated interim financial statements were
approved by the board of directors and authorised for issue on 28
July 2020 and were signed on its behalf by:
Paul Stockton Jennifer Mathias
Chief Executive Finance Director
Company registered number: 01000403
Consolidated interim statement
of cash flows
for the six months ended 30 June 2020
Unaudited Unaudited Audited
30 June 30 June 31 December
2020 2019 2019
Note GBP'000 GBP'000 GBP'000
------------------------------------------------------------- ---- --------- --------- ------------
Cash flows from operating activities
Profit before tax 27,281 19,976 39,652
Change in fair value through profit or loss (1,081) (323) (410)
Net interest income (4,800) (7,646) (16,412)
Net impairment charges on loans and advances 749 37 103
Net (release)/charge for provisions 15 (507) 590 3,572
Loss on disposal of property, plant and equipment - - 428
Depreciation, amortisation and impairment 14,860 14,779 33,799
Foreign exchange movements (3,268) 299 2,152
Defined benefit pension scheme charges 60 132 255
Defined benefit pension contributions paid (1,918) (1,918) (3,128)
Share-based payment charges 12,640 18,339 31,012
Interest paid (3,592) (5,907) (11,421)
Interest received 9,433 13,597 28,264
------------------------------------------------------------- ---- --------- --------- ------------
49,857 51,955 107,866
Changes in operating assets and liabilities:
* net decrease/(increase) in loans and advances to
banks and customers 62,236 29,838 (31,076)
* net increase in settlement balance debtors (125,896) (86,755) (12,765)
* net decrease/(increase) in prepayments, accrued
income and other assets 1,015 (12,047) (13,725)
* net increase in amounts due to customers and deposits
by banks 402,526 156,561 442,646
* net increase in settlement balance creditors 132,101 73,081 21,002
* net (decrease)/increase in accruals, deferred income,
provisions and other liabilities (2,329) (4,532) 2,802
------------------------------------------------------------- ---- --------- --------- ------------
Cash generated from operations 519,510 208,101 516,750
Tax paid (11,047) (8,105) (17,133)
------------------------------------------------------------- ---- --------- --------- ------------
Net cash inflow from operating activities 508,463 199,996 499,617
------------------------------------------------------------- ---- --------- --------- ------------
Cash flows from investing activities
Purchase of property, equipment and intangible
assets (18,287) (5,142) (17,705)
Proceeds from sale of property, plant and
equipment - - (239)
Purchase of investment securities (575,669) (538,442) (754,958)
Proceeds from sale and redemption of investment
securities 531,463 528,167 1,058,874
------------------------------------------------------------- ---- --------- --------- ------------
Net cash (used in)/generated from investing
activities (62,493) (15,417) 285,972
------------------------------------------------------------- ---- --------- --------- ------------
Cash flows from financing activities
Net (repurchase)/issue of ordinary shares 22 (2,061) (700) (4,340)
Dividends paid (24,316) (22,433) (35,959)
Payment of lease liabilities (2,513) (2,318) (4,623)
Interest paid (586) (586) (1,171)
------------------------------------------------------------- ---- --------- --------- ------------
Net cash used in financing activities (29,476) (26,037) (46,093)
------------------------------------------------------------- ---- --------- --------- ------------
Net increase in cash and cash equivalents 416,494 158,542 739,496
------------------------------------------------------------- ---- --------- --------- ------------
Cash and cash equivalents at the beginning
of the period 2,148,033 1,408,537 1,408,537
------------------------------------------------------------- ---- --------- --------- ------------
Cash and cash equivalents at the end of the
period 22 2,564,527 1,567,079 2,148,033
------------------------------------------------------------- ---- --------- --------- ------------
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 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.
The products and services from which the group derives its revenues
are described in 'Rathbones at a glance' on pages 8 to 9 of the
annual report and accounts for the year ended 31 December 2019 and
have not materially changed since that date.
These condensed consolidated interim financial statements, on
pages 1 to 26, 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 2019, except as disclosed
in note 2. The condensed consolidated interim financial statements
should be read in conjunction with the group's audited financial
statements for the year ended 31 December 2019, 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 2019 are not the group's statutory accounts for
that financial year. The group's financial statements for the year
ended 31 December 2019 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 adopted during the current
reporting period
The following amendments to standards have been adopted in the
current period, but have not had a significant impact on the
amounts reported in these financial statements:
- Amendments to References to Conceptual Framework in IFRS
Standards
- Definition of Material (Amendments to IAS 1 and IAS 8)
- Interest Rate Benchmark Reform (Amendments to IFRS 9, IAS 39
and IFRS 7)
Future new standards and interpretations
A number of new standards are effective for annual periods
beginning after 1 January 2020 and earlier application is
permitted; however, the group has not early adopted the new or
amended standards in preparing these condensed consolidated interim
financial statements.
None of the standards not yet effective are expected to have a
material impact on the group's financial statements.
2 Changes in significant accounting policies
The accounting policies applied in these condensed consolidated
interim financial statements are the same as those applied in the
group's consolidated financial statements as at and for the year
ended 31 December 2019.
3 Critical accounting judgments and key sources of estimation and uncertainty
In light of the COVID-19 pandemic, the group has reviewed the
judgements and estimates that affect its accounting policies and
amounts reported in its financial statements.
Although these are unchanged from those reported in the group's
financial statements for the year ended 31 December 2019, the group
continue to closely monitor the valuation of the earn out
consideration payable to vendors of Speirs & Jeffrey Limited,
as well as related incentivisation awards to other staff (note
5).
During the period, the group revised its valuation of the earn
out consideration and incentivisation awards, which is dependent on
performance by the acquired business against certain operational
and financial targets by 31 December 2020 and 31 December 2021. The
group estimate the total amount payable on these dates to be
GBP24.8 million, based on forecast qualifying funds under
management of GBP4.8 billion at the end of 2020, with an associated
charge to profit or loss during the first half of 2020 of GBP4.0
million (note 5).
If qualifying funds under management do not exceed GBP4.5
billion then no earn-out consideration or incentivisation awards
are payable. If qualifying funds under management at 31 December
2020 are GBP100 million higher or lower than management's estimate
then the accumulated charges as at 30 June 2020 for earn-out
consideration and incentivisation awards would be GBP2.3 million
higher or lower and the charge to profit or loss in the six months
to 30 June 2020 would be GBP2.3 million higher or lower.
Under the terms of the agreements, the maximum possible payment
under the earn-out and incentivisation awards is capped at
GBP128,750,000; which represents qualifying funds under management
of approximately GBP10 billion at the end of 2021.
4 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. These are, 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, which
is the group's chief operating decision maker.
Investment Indirect
Management Unit Trusts expenses Total
Six months ended 30 June 2020 (unaudited) GBP'000 GBP'000 GBP'000 GBP'000
--------------------------------------------- ----------- ----------- --------- ---------
Net investment management fee income 106,431 19,907 - 126,338
Net commission income 37,329 - - 37,329
Net interest income 4,800 - - 4,800
Fees from advisory services and other income 10,155 427 - 10,582
--------------------------------------------- ----------- ----------- --------- ---------
Underlying operating income 158,715 20,334 - 179,049
--------------------------------------------- ----------- ----------- --------- ---------
Staff costs - fixed (42,897) (2,161) (14,278) (59,336)
Staff costs - variable (23,858) (4,760) (3,460) (32,078)
--------------------------------------------- ----------- ----------- --------- ---------
Total staff costs (66,755) (6,921) (17,738) (91,414)
Other direct expenses (19,968) (4,571) (17,126) (41,665)
Allocation of indirect expenses (31,213) (3,651) 34,864 -
--------------------------------------------- ----------- ----------- --------- ---------
Underlying operating expenses (117,936) (15,143) - (133,079)
--------------------------------------------- ----------- ----------- --------- ---------
Underlying profit before tax 40,779 5,191 - 45,970
Charges in relation to client relationships
and goodwill (note 14) (7,038) - - (7,038)
Acquisition-related costs (note 6) (10,135) - (1,516) (11,651)
--------------------------------------------- ----------- ----------- --------- ---------
Segment profit before tax 23,606 5,191 (1,516) 27,281
Taxation (note 8) (7,864)
--------------------------------------------- ----------- ----------- --------- ---------
Profit for the period attributable to equity
holders of the company 19,417
--------------------------------------------- ----------- ----------- --------- ---------
Investment
Management Unit Trusts Total
GBP'000 GBP'000 GBP'000
--------------------------------------------- ----------- ----------- --------- ---------
Segment total assets 3,752,215 128,500 3,880,715
Unallocated assets 50,346
--------------------------------------------- ----------- ----------- --------- ---------
Total assets 3,752,215 128,500 3,931,061
--------------------------------------------- ----------- ----------- --------- ---------
Investment Indirect
Management Unit Trusts expenses Total
Six months ended 30 June 2019 (unaudited) GBP'000 GBP'000 GBP'000 GBP'000
------------------------------------------------- ----------- ----------- --------- ---------
Net investment management fee income 110,572 16,929 - 127,501
Net commission income 27,675 - - 27,675
Net interest income 7,646 - - 7,646
Fees from advisory services and other income 9,354 555 - 9,909
------------------------------------------------- ----------- ----------- --------- ---------
Underlying operating income 155,247 17,484 - 172,731
------------------------------------------------- ----------- ----------- --------- ---------
Staff costs - fixed (39,694) (1,887) (14,797) (56,378)
Staff costs - variable (21,128) (3,916) (6,617) (31,661)
------------------------------------------------- ----------- ----------- --------- ---------
Total staff costs (60,822) (5,803) (21,414) (88,039)
Other direct expenses (17,374) (3,837) (16,853) (38,064)
Allocation of indirect expenses (34,872) (3,395) 38,267 -
------------------------------------------------- ----------- ----------- --------- ---------
Underlying operating expenses (113,068) (13,035) - (126,103)
------------------------------------------------- ----------- ----------- --------- ---------
Underlying profit before tax 42,179 4,449 - 46,628
Charges in relation to client relationships
and goodwill (note 14) (7,795) - - (7,795)
Acquisition-related costs (note 6) (17,085) - (1,772) (18,857)
------------------------------------------------- ----------- ----------- --------- ---------
Segment profit before tax 17,299 4,449 (1,772) 19,976
------------------------------------------------- ----------- ----------- --------- ---------
Profit before tax attributable to equity holders
of the company 19,976
Taxation (note 8) (6,214)
------------------------------------------------- ----------- ----------- --------- ---------
Profit for the period attributable to equity
holders of the company 13,762
------------------------------------------------- ----------- ----------- --------- ---------
Investment
Management Unit Trusts Total
GBP'000 GBP'000 GBP'000
--------------------- ----------- ----------- ---------
Segment total assets 3,045,038 103,967 3,149,004
Unallocated assets 4,529
--------------------- ----------- ----------- ---------
Total assets 3,045,038 103,967 3,153,534
--------------------- ----------- ----------- ---------
Investment Indirect
Management Unit Trusts expenses Total
Year ended 31 December 2019 (audited) GBP'000 GBP'000 GBP'000 GBP'000
------------------------------------------------- ----------- ----------- --------- ---------
Net investment management fee income 224,135 36,073 - 260,208
Net commission income 51,132 - - 51,132
Net interest income 16,412 - - 16,412
Fees from advisory services and other income 19,247 1,072 - 20,319
------------------------------------------------- ----------- ----------- --------- ---------
Underlying operating income 310,926 37,145 - 348,071
------------------------------------------------- ----------- ----------- --------- ---------
Staff costs - fixed (78,562) (3,783) (28,477) (110,822)
Staff costs - variable (49,711) (8,710) (8,353) (66,774)
------------------------------------------------- ----------- ----------- --------- ---------
Total staff costs (128,273) (12,493) (36,830) (177,596)
Other direct expenses (40,392) (7,299) (34,111) (81,802)
Allocation of indirect expenses (63,842) (7,099) 70,941 -
------------------------------------------------- ----------- ----------- --------- ---------
Underlying operating expenses (232,507) (26,891) - (259,398)
------------------------------------------------- ----------- ----------- --------- ---------
Underlying profit before tax 78,419 10,254 - 88,673
Charges in relation to client relationships
and goodwill (note 14) (15,964) - - (15,964)
Acquisition-related costs (note 6) (28,246) - (4,811) (33,057)
------------------------------------------------- ----------- ----------- --------- ---------
Segment profit before tax 34,209 10,254 (4,811) 39,652
------------------------------------------------- ----------- ----------- --------- ---------
Profit before tax attributable to equity holders
of the company 39,652
Taxation (note 8) (12,729)
------------------------------------------------- ----------- ----------- --------- ---------
Profit for the year attributable to equity
holders of the company 26,923
------------------------------------------------- ----------- ----------- --------- ---------
Investment
Management Unit Trusts Total
GBP'000 GBP'000 GBP'000
--------------------- ----------- ----------- ---------
Segment total assets 3,303,691 89,937 3,393,628
Unallocated assets 5,106
--------------------- ----------- ----------- ---------
Total assets 3,398,734
--------------------- ----------- ----------- ---------
Included within Investment Management underlying operating
income is GBP904,000 (30 June 2019: GBP1,451,000; 31 December 2019:
GBP3,038,000) of fees and commissions receivable from Unit Trusts.
Intersegment sales are charged at prevailing market prices.
The following table reconciles underlying operating expenses to
operating expenses:
Unaudited Unaudited
Six months Six months Audited
to to Year to
30 June 30 June 31 December
2020 2019 2019
GBP'000 GBP'000 GBP'000
------------------------------------------------ ----------- ----------- ------------
Underlying operating expenses 133,079 126,103 259,398
Charges in relation to client relationships and
goodwill (note 14) 7,038 7,795 15,964
Acquisition-related costs (note 6) 11,651 18,857 33,057
-----------
Operating expenses 151,768 152,755 308,419
------------------------------------------------ ----------- ----------- ------------
Geographic analysis
The following table presents operating income analysed by the
geographical location of the group entity providing the
service:
Unaudited Unaudited
Six months Six months Audited
to to Year to
30 June 30 June 31 December
2020 2019 2019
GBP'000 GBP'000 GBP'000
---------------------------- ----------- ----------- ------------
United Kingdom 172,866 166,943 335,732
Jersey 6,183 5,788 12,339
---------------------------- ----------- ----------- ------------
Underlying operating income 179,049 172,731 348,071
---------------------------- ----------- ----------- ------------
The group's non-current assets are substantially all located in
the United Kingdom.
Timing of revenue recognition
The following table presents operating income analysed by the
timing of revenue recognition of the operating segment providing
the service:
Unaudited Unaudited Audited
Six months Six months Year to
to to 31 December
30 June 2020 30 June 2019 2019
------------------------ ------------------------ ------------------------
Investment Investment Investment
Management Unit Trusts Management Unit Trusts Management Unit Trusts
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
---------------------------------- ----------- ----------- ----------- ----------- ----------- -----------
Products and services transferred
at a point in time 39,110 (34) 36,632 167 53,599 172
Products and services transferred
over time 119,605 20,368 118,615 17,317 257,327 36,973
---------------------------------- ----------- ----------- ----------- ----------- ----------- -----------
Underlying operating income 158,715 20,334 155,247 17,484 310,926 37,145
---------------------------------- ----------- ----------- ----------- ----------- ----------- -----------
Major clients
The group is not reliant on any one client or group of connected
clients for generation of revenues. At 30 June 2020, the group
provided investment management services to 64,000 clients (30 June
2019: 60,000; 31 December 2019: 60,000).
5 Business combinations
Speirs & Jeffrey
On 31 August 2018, the group acquired 100% of the ordinary share
capital of Speirs & Jeffrey Limited ('Speirs &
Jeffrey').
Deferred and contingent payments
The group continues to provide for the cost of deferred and
contingent payments to be made to vendors for the sale of the
shares of Speirs & Jeffrey, as well as related incentivisation
awards for other staff. These payments require the vendors to
remain in employment with the group for the duration of the
respective deferral periods. Hence they are being treated as
remuneration for post-combination services and the grant date fair
value charged to profit and loss over the respective vesting
periods.
These payments are to be made 100% in shares and are being
accounted for as equity-settled share-based payments under IFRS
2.
- Initial share consideration: although the shares were issued
on the date of acquisition, they do not vest until the third
anniversary of the acquisition date, subject to the vendors
remaining employed until this date.
- Earn out consideration and related incentivisation awards:
these are payable in two parts in the third and fourth years
following acquisition date and are subject to the delivery of
certain operational and financial performance targets.
The charge recognised in profit or loss for the period ended 30
June 2020 for the above elements is as follows:
Unaudited Unaudited Audited
30 June 30 June 31 December
2020 2019 2019
GBP'000 GBP'000 GBP'000
-------------------------------------------------- --------- --------- ------------
Initial share consideration 5,926 3,910 8,402
Contingent consideration - 6,015 6,015
Earn out consideration and incentivisation awards 4,034 4,707 9,724
Other deferred awards - 1,413 1,885
-------------------------------------------------- --------- --------- ------------
9,960 16,045 26,026
-------------------------------------------------- --------- --------- ------------
These costs are being reported as staff costs within
acquisition-related costs (see note 6).
Barclays Wealth's Personal Injury and Court of Protection
business
On 3 April 2020, the group acquired the trade and assets of
Barclays Wealth's Personal Injury and Court of Protection business.
The charge recognised in profit or loss for the period ended 30
June 2020 is set out in note 6.
6 Acquisition-related costs
Unaudited Unaudited
Six months Six months Audited
to to Year to
30 June 30 June 31 December
2020 2019 2019
GBP'000 GBP'000 GBP'000
------------------------------------------------- ----------- ----------- ------------
Acquisition of Speirs & Jeffrey 11,476 17,817 30,837
Acquisition of Vision and Castle - 1,040 2,041
Acquisition of Barclays Wealth's Personal Injury
and Court of Protection business 175 - 179
------------------------------------------------- ----------- ----------- ------------
Acquisition-related costs 11,651 18,857 33,057
------------------------------------------------- ----------- ----------- ------------
Costs relating to the acquisition of Speirs & Jeffrey
The group incurred GBP11,476,000 (30 June 2019: GBP17,817,000;
31 December 2019: GBP30,837,000) in relation to the acquisition of
Speirs & Jeffrey, which is made up as follows.
Unaudited Unaudited
Six months Six months Audited
to to Year to
30 June 30 June 31 December
2020 2019 2019
GBP'000 GBP'000 GBP'000
------------------------ ----------- ----------- ------------
Acquisition costs:
Staff costs 9,960 16,045 26,026
Legal and advisory fees - - 103
Integration costs 1,516 1,772 4,708
------------------------ ----------- ----------- ------------
11,476 17,817 30,837
------------------------ ----------- ----------- ------------
Non-staff acquisition costs of GBPnil (30 June 2019: GBPnil; 31
December 2019: GBP103,000) and integration costs of GBP1,516,000
(30 June 2019: GBP1,772,000; 31 December 2019: GBP4,708,000) have
not been allocated to a specific operating segment (note 4).
Costs relating to the acquisition of Vision Independent
Financial Planning and Castle Investment Solutions
The group made the final payment in relation to the 2015
acquisition of Vision Independent Financial Planning and Castle
Investment Solutions at the end of 2019. The group incurred the
following costs during 2019, summarised by the classification
within the income statement:
Unaudited Unaudited
Six months Six months Audited
to to Year to
30 June 30 June 31 December
2020 2019 2019
GBP'000 GBP'000 GBP'000
----------------- ----------- ----------- ------------
Staff costs - 690 1,375
Interest expense - 350 666
-----------
- 1,040 2,041
----------------- ----------- ----------- ------------
Amounts reported in staff costs relate to deferred payments to
previous owners who remain in employment with the acquired
companies.
Costs relating to the acquisition of Barclays Wealth's Personal
Injury and Court of Protection business
The group has incurred the following costs in relation to the
acquisition of the Personal Injury and Court of Protection business
of Barclays Wealth:
Unaudited Unaudited
Six months Six months Audited
to to Year to
30 June 30 June 31 December
2020 2019 2019
GBP'000 GBP'000 GBP'000
---------------------------- ----------- ----------- ------------
Professional services costs 175 - 179
---------------------------- ----------- ----------- ------------
175 - 179
---------------------------- ----------- ----------- ------------
These costs have been allocated to the Investment Management
operating segment (note 4).
7 Staff numbers
The average number of employees, on a full time equivalent
basis, during the period was as follows:
Unaudited Unaudited
Six months Six months Audited
to to year to
30 June 30 June 31 December
2020 2019 2019
-------------------------------------- ----------- ----------- ------------
Investment Management:
* investment management services 982 975 979
* advisory services 121 115 118
Unit Trusts 37 34 35
Shared services 368 381 377
1,508 1,506 1,509
-------------------------------------- ----------- ----------- ------------
8 Taxation
The tax expense for the six months ended 30 June 2020 was
calculated based on the estimated average annual effective tax
rate. The overall effective tax rate for this period was 28.8% (six
months ended 30 June 2019: 31.1%; year ended 31 December 2019:
32.2%).
The effective tax rate reflects the disallowable costs of the
deferred consideration payments in relation to the acquisition of
Speirs & Jeffrey.
Unaudited Unaudited
Six months Six months Audited
to to Year to
30 June 30 June 31 December
2020 2019 2019
GBP'000 GBP'000 GBP'000
------------------------ ----------- ----------- ------------
United Kingdom taxation 5,138 7,165 15,570
Overseas taxation 151 143 346
Deferred taxation 2,575 (1,094) (3,187)
------------------------ ----------- ----------- ------------
7,864 6,214 12,729
------------------------ ----------- ----------- ------------
The underlying UK corporation tax rate for the year ending 31
December 2020 is 19.0% (2019: 19.0%).
The Finance Bill 2020 contained legislation to maintain the UK
corporation tax rate at 19.0% from 1 April 2020, rather than
reducing the rate to 17.0%, as previously announced. This was
substantively enacted in March 2020. Deferred income taxes are
calculated on all temporary differences under the liability method
using the rate expected to apply when the relevant timing
differences are forecast to unwind.
9 Dividends
An interim dividend of 25.0p per share was declared on 28 July
2020 and is payable on 6 October 2020 to shareholders on the
register at the close of business on 4 September 2020 (30 June
2019: 25.0p). In accordance with IFRS, the interim dividend has not
been included as a liability in this interim statement. A final
dividend for 2019 of 45.0p per share was paid on 12 May 2020.
10 Earnings per share
Earnings used to calculate earnings per share on the bases
reported in these condensed consolidated interim financial
statements were:
Unaudited Unaudited Audited
Six months Six months Year to
to to 31 December
30 June 2020 30 June 2019 2019
------------------ ------------------ ------------------
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 45,970 36,240 46,628 38,096 88,673 71,138
Charges in relation to client relationships
and goodwill (note 14) (7,038) (5,701) (7,795) (6,314) (15,964) (12,931)
Acquisition-related costs (note 6) (11,651) (11,122) (18,857) (18,020) (33,057) (31,284)
-------------------------------------------- -------- -------- -------- -------- -------- --------
Profit attributable to equity holders 27,281 19,417 19,976 13,762 39,652 26,923
-------------------------------------------- -------- -------- -------- -------- -------- --------
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
53,714,423 (30 June 2019: 53,326,270; 31 December 2019:
53,566,271).
Diluted earnings per share is the basic earnings per share,
adjusted for the effect of contingently issuable shares under the
Executive Incentive Plan and the Speirs & Jeffrey (S&J)
initial share consideration, 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 30 June 31 December
2020 2019 2019
---------------------------------------------------- ---------- ---------- ------------
Weighted average number of ordinary shares in issue
during the period - basic 53,714,423 53,326,270 53,566,271
Effect of ordinary share options/Save As You Earn 317,141 111,502 97,495
Effect of dilutive shares issuable under the Share
Incentive Plan 1,747 1,003 570
Effect of contingently issuable ordinary shares
under the Executive Incentive Plan 885,559 508,274 574,393
Effect of contingently issuable shares under the
S&J initial share consideration 1,006,522 1,006,522 1,006,522
---------------------------------------------------- ---------- ---------- ------------
Diluted ordinary shares 55,925,392 54,953,571 55,245,251
---------------------------------------------------- ---------- ---------- ------------
Unaudited Unaudited
Six months Six months Audited
to to Year to
30 June 30 June 31 December
2020 2019 2019
---------------------------------------------------------- ----------- ----------- ------------
Earnings per share for the period attributable to
equity holders of the company:
* basic 36.1p 25.8p 50.3p
* diluted 34.7p 25.0p 48.7p
Underlying earnings per share for the period attributable
to equity holders of the company:
* basic 67.5p 71.4p 132.8p
* diluted 64.8p 69.3p 128.8p
---------------------------------------------------------- ----------- ----------- ------------
11 Loans and advances to customers
Unaudited Unaudited Audited
30 June 30 June 31 December
2020 2019 2019
GBP'000 GBP'000 GBP'000
------------------------------------- --------- --------- ------------
Overdrafts 6,636 6,777 5,148
Investment management loan book 125,880 131,235 132,034
Trust and financial planning debtors 1,964 1,080 1,170
Other debtors 95 29 60
------------------------------------- --------- --------- ------------
134,575 139,121 138,412
------------------------------------- --------- --------- ------------
12 Property, plant and equipment
During the six months ended 30 June 2020, the group purchased
assets with a cost of GBP1,463,000 (six months ended 30 June 2019:
GBP893,000; year ended 31 December 2019: GBP3,055,000).
13 Right of use assets
Motor vehicles
Property and equipment Total
GBP'000 GBP'000 GBP'000
---------------------------------------------- -------- -------------- --------
Cost
1 January 2020 54,275 41 54,316
Additions - - -
At 30 June 2020 (unaudited) 54,275 41 54,316
---------------------------------------------- -------- -------------- --------
Depreciation and impairment
1 January 2020 (unaudited) 4,822 14 4,836
Charge in the period 2,421 7 2,428
---------------------------------------------- -------- -------------- --------
At 30 June 2020 (unaudited) 7,243 21 7,264
---------------------------------------------- -------- -------------- --------
Carrying amount at 31 December 2019 (audited) 49,453 27 49,480
---------------------------------------------- -------- -------------- --------
Carrying amount at 30 June 2020 (unaudited) 47,032 20 47,052
---------------------------------------------- -------- -------------- --------
14 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 2020 92,359 207,136 8,182 41,148 348,825
Internally developed in the period - - 891 - 891
Acquired through business combinations 6,467 6,890 - - 13,357
Purchased in the period - 2,641 - 2,236 4,877
Disposals - (910) - (1,228) (2,138)
-------- -------------- ------------ --------- ------------
At 30 June 2020 98,826 215,757 9,073 42,156 365,812
--------------------------------------- -------- -------------- ------------ --------- ------------
Amortisation and impairment
At 1 January 2020 1,954 82,680 6,037 30,347 121,018
Charge in the period - 7,038 490 2,851 10,379
Disposals - (910) - (1,228) (2,138)
At 30 June 2020 1,954 88,808 6,527 31,970 129,259
--------------------------------------- -------- -------------- ------------ --------- ------------
Carrying value at 30 June 2020
(unaudited) 96,872 126,949 2,546 10,186 236,553
--------------------------------------- -------- -------------- ------------ --------- ------------
Carrying value at 30 June 2019
(unaudited) 90,734 131,324 2,193 11,402 235,653
--------------------------------------- -------- -------------- ------------ --------- ------------
Carrying value at 31 December
2019 (audited) 90,405 124,456 2,145 10,801 227,807
--------------------------------------- -------- -------------- ------------ --------- ------------
The total amount charged to profit or loss in the period, in
relation to goodwill and client relationships, was GBP7,038,000
(six months ended 30 June 2019: GBP7,795,000; year ended 31
December 2019: GBP15,964,000).
Goodwill and client relationships acquired through business
combinations in the period relate to the acquisition of the
Barclays Wealth's Personal Injury and Court of Protection business
(note 5).
Client relationships of GBP6,890,000 relate to the fair value of
the client relationship intangible assets, measured using a
multi-period earnings method. The model uses estimates of client
longevity and investment performance to derive a series of cash
flows, which are discounted to a present value to determine the
fair value of the client relationships acquired.
Goodwill of GBP6,467,000 has been allocated to the investment
management group of CGUs. Goodwill arises as a result of the
acquired workforce, expected future growth, and operational
synergies arising post integration. The group does not believe
there are any key assumptions where reasonable changes could occur
which could give rise to a material adjustment in the carrying
value.
Impairment
The recoverable amounts of the groups of CGUs to which goodwill
is allocated are determined from value-in-use calculations. The
group prepares cash flow forecasts derived from the most recent
financial budgets approved by the board, covering the forthcoming
and future years. The key assumptions underlying the budgets are
that organic growth rates, revenue margins and profit margins are
in line with recent historical rates and equity markets will not
change significantly in the forthcoming year. Budgets are
extrapolated for 5 years based on annual revenue and cost growth
for each group of CGUs, as well as the group's expectation of
future industry growth rates. A 5 year extrapolation period is
chosen as this aligns with the period covered by the group's ICAAP
modelling. A terminal growth rate is applied to year 5 cash flows,
which takes into account the net growth forecasts over the
extrapolation period and the long-term average growth rate for the
industry. The group estimates discount rates using pre-tax rates
that reflect current market assessments of the time value of money
and the risks specific to the group of CGUs.
The pre-tax rate used to discount the forecast cash flows was
13.8% (30 June 2019: 12.0%; 31 December 2019: 8.7%). These are
based on a risk-adjusted weighted average cost of capital. The
group judges that these discount rates appropriately reflect the
markets in which the group of CGUs operate.
During the prior year, the group recognised an impairment charge
of GBP595,000 in relation to goodwill allocated to the Trust group
of CGUs. The recoverable amount of the group of CGUs was lower than
the carrying value, which reflected the fact that the business
associated with this goodwill is contracting. This reduced the
carrying value of the goodwill allocated to the Trust group of CGUs
to GBPnil. The impairment was recognised in the Investment
Management segment in the segmental analysis.
There was no impairment on the goodwill allocated to the
investment management group of CGUs during the period.
15 Provisions for liabilities and charges
Deferred,
variable
costs Deferred
to acquire and contingent
client consideration
relationship in business Legal
intangibles combinations and compensation Property-related Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
------------------------------------ ------------- --------------- ----------------- ---------------- --------
At 1 January 2019 1,061 2,378 809 7,536 11,784
------------------------------------ ------------- --------------- ----------------- ---------------- --------
Charged to profit or loss - 32 264 462 758
Unused amount credited to profit or
loss - - (161) (7) (168)
------------------------------------ ------------- --------------- ----------------- ---------------- --------
Net charge to profit or loss - 32 103 455 590
Other movements 4,297 72 - - 4,369
Utilised/paid during the period (520) (1,050) (616) (1,688) (3,874)
------------------------------------ ------------- --------------- ----------------- ---------------- --------
At 30 June 2019 (unaudited) 4,838 1,432 296 6,303 12,869
------------------------------------ ------------- --------------- ----------------- ---------------- --------
Charged to profit or loss - (32) 2,588 888 3,444
Unused amount credited to profit or
loss - - (159) (303) (462)
------------------------------------ ------------- --------------- ----------------- ---------------- --------
Net charge to profit or loss - (32) 2,429 585 2,982
Other movements 972 107 - - 1,079
Utilised/paid during the period (4,491) (1,507) (550) (1,650) (8,198)
------------------------------------ ------------- --------------- ----------------- ---------------- --------
At 31 December 2019 (audited) 1,319 - 2,175 5,238 8,732
------------------------------------ ------------- --------------- ----------------- ---------------- --------
Charged to profit or loss - - 120 (520) (400)
Unused amount credited to profit or
loss - - (84) (23) (107)
------------------------------------ ------------- --------------- ----------------- ---------------- --------
Net credit to profit or loss - - 36 (543) (507)
Other movements 1,302 - - - 1,302
Utilised/paid during the period (307) - (1,223) (825) (2,355)
------------------------------------ ------------- --------------- ----------------- ---------------- --------
At 30 June 2020 (unaudited) 2,314 - 988 3,870 7,172
------------------------------------ ------------- --------------- ----------------- ---------------- --------
Payable within 1 year 2,030 - 988 - 3,018
Payable after 1 year 284 - - 3,870 4,154
------------------------------------ ------------- --------------- ----------------- ---------------- --------
At 30 June 2020 (unaudited) 2,314 - 988 3,870 7,172
------------------------------------ ------------- --------------- ----------------- ---------------- --------
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 and contingent consideration in business
combinations
Following the satisfaction of certain operational targets,
contingent consideration of GBP1,050,000 was paid to vendors of
Speirs & Jeffrey in May 2019. In addition, contingent
consideration of GBP1,507,000 was paid in October 2019 in respect
of the acquisition of Vision and Castle.
Legal and compensation
During the ordinary course of business the group may, from time
to time, be subject to complaints, as well as threatened and actual
legal proceedings (which may include lawsuits brought on behalf of
clients or other third parties) both in the UK and overseas. Any
such material matters are periodically reassessed, with the
assistance of external professional advisors where appropriate, to
determine the likelihood of the group incurring a liability. In
those instances 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. The timing of
settlement of provisions for client compensation or litigation is
dependent, in part, on the duration of negotiations with third
parties.
Property-related
Property-related provisions of GBP3,870,000 relate to
dilapidation provisions expected to arise on leasehold premises
held by the group (30 June 2019: GBP6,303,000; 31 December 2019:
GBP5,238,000). Prior year balances also included monies due under
the contract with the assignee of leases on the group's former
property at 1 Curzon Street, which was fully utilised in the
period.
Dilapidation provisions are calculated using a discounted cash
flow model. During the six months ended 30 June 2020, dilapidation
provisions decreased by GBP523,000 (30 June 2019: increased
GBP404,000; 31 December 2019: increased GBP677,000). The group
utilised GBP825,000 (30 June 2019: GBP1,688,000; 31 December 2019:
GBP3,338,000) of the dilapidations provision held for its
properties during the period. The impact of discounting led to a
credit of GBP523,000 (30 June 2019: additional charge of
GBP441,000; 31 December 2019: additional charge of GBP1,364,000)
being recognised over the period.
Amounts payable after one year
Property-related provisions of GBP3,870,000 are expected to be
settled within 13 years of the balance sheet date, which
corresponds to the longest lease for which a dilapidations
provision is being held. Remaining provisions payable after one
year are expected to be settled within two years of the balance
sheet date.
16 Subordinated loan notes
Unaudited Unaudited Audited
30 June 30 June 31 December
2020 2019 2019
GBP'000 GBP'000 GBP'000
------------------------ --------- --------- ------------
Subordinated loan notes
* face value 20,000 20,000 20,000
* carrying value 19,989 19,866 19,927
------------------------ --------- --------- ------------
Subordinated loan notes consist of 10-year Tier 2 notes, which
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 six month LIBOR thereafter. The group does not expect to
exercise the call option this year.
An interest expense of GBP648,000 (30 June 2019: GBP644,000; 31
December 2019: GBP1,290,000) was recognised in the period.
17 Long-term employee benefits
The group operates two defined benefit pension schemes providing
benefits based on pensionable salary for 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 30 June 31 December
2020 2019 2019
% p.a. % p.a. % p.a.
-------------------------------------------------------- --------- --------- -------------
Rate of increase of pensions in payment:
* Laurence Keen Scheme 3.40 3.60 3.40
* Rathbone 1987 Scheme 3.00 3.30 3.10
Rate of increase of deferred pensions 3.00 3.40 3.10
Discount rate 1.50 2.35 2.05
Inflation* 3.00 3.40 3.10
Percentage of members transferring out of the schemes
per annum 3.00 3.00 3.00
Average age of members at date of transferring out
(years) 52.50 52.50 52.50
Average duration of defined benefit obligation (years):
* Laurence Keen Scheme 17.00 18.00 19.00
* Rathbone 1987 Scheme 21.00 22.00 22.00
-------------------------------------------------------- --------- --------- -------------
* Inflation assumptions are based on the Retail Prices Index
The assumed life expectations of members retiring aged 65
were:
Unaudited 30 Unaudited 30 Audited 31 December
June 2020 June 2019 2019
-------------- -------------- ---------------------
Males Females Males Females Males Females
--------------------- ----- ------- ----- ------- -------- -----------
Retiring today 23.2 25.2 23.6 25.6 23.1 25.1
Retiring in 20 years 24.8 27.0 25.4 27.4 24.7 26.9
--------------------- ----- ------- ----- ------- -------- -----------
The amount included in the balance sheet arising from the
group's obligations in respect of the schemes is as follows:
Unaudited 30 Unaudited 30 Audited 31 December
June 2020 June 2019 2019
-------------------------- -------------------------- --------------------------
Rathbone Laurence Rathbone Laurence Rathbone Laurence
1987 Scheme Keen Scheme 1987 Scheme Keen Scheme 1987 Scheme Keen Scheme
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
--------------------------------- ------------ ------------ ------------ ------------ ------------ ------------
Present value of defined benefit
obligations (153,941) (12,585) (148,177) (12,860) (146,398) (12,726)
Fair value of scheme assets 137,991 12,088 139,181 12,160 138,932 12,178
--------------------------------- ------------ ------------ ------------ ------------ ------------ ------------
Total deficit (15,950) (497) (8,996) (700) (7,466) (548)
--------------------------------- ------------ ------------ ------------ ------------ ------------ ------------
The group made lump sum contributions into its pension schemes
totalling GBP1,918,000 during the period (30 June 2019:
GBP1,918,000; 31 December 2019: GBP3,128,000).
18 Share capital and share premium
The following movements in share capital occurred during the
period:
Exercise Share Share Merger
Number of price capital premium reserve Total
shares pence GBP'000 GBP'000 GBP'000 GBP'000
------------------------------------------- ---------- ----------- ----------- ------------ ----------- --------
At 1 January 2019 55,206,957 2,760 205,273 56,785 264,818
Shares issued:
* in relation to business combinations 603,913 2,484.0 30 - 14,971 15,001
2,085.0 -
* to Share Incentive Plan 70,722 2,540.0 4 1,633 - 1,637
1,556.0 -
* to Save As You Earn scheme 125,526 1,648.0 6 2,015 - 2,021
* to Employee Benefit Trust 70,000 5.0 4 - - 4
------------------------------------------- ---------- ----------- ----------- ------------ ----------- --------
At 30 June 2019 (unaudited) 56,077,118 2,804 208,921 71,756 283,481
------------------------------------------- ---------- ----------- ----------- ------------ ----------- --------
Shares issued:
2,085.0 -
* to Share Incentive Plan 80,044 2,540.0 4 1,731 - 1,735
1,556.0 -
* to Save As You Earn scheme 17,976 1,648.0 1 287 - 288
* to Employee Benefit Trust 186,848 5.0 9 - - 9
------------------------------------------- ---------- ----------- ----------- ------------ ----------- --------
At 31 December 2019
(audited) 56,361,986 2,818 210,939 71,756 285,513
------------------------------------------- ---------- ----------- ----------- ------------ ----------- --------
Shares issued:
1,296.0 -
* to Share Incentive Plan 133,945 2,110.0 7 2,119 - 2,126
1,641.0 -
* to Save As You Earn scheme 3,180 1,648.0 - 52 - 52
* to Employee Benefit Trust 859,800 5.0 43 - - 43
------------------------------------------- ---------- ----------- ----------- ------------ ----------- --------
At 30 June 2020 (unaudited) 57,358,911 2,868 213,110 71,756 287,734
------------------------------------------- ---------- ----------- ----------- ------------ ----------- --------
On 28 May 2019, the company issued 603,913 shares in respect of
the contingent consideration from the acquisition of Speirs &
Jeffrey, following the satisfaction of certain operational
targets.
At 30 June 2020, the group held 3,708,454 own shares (30 June
2019: 2,189,960; 31 December 2019: 2,611,442).
19 Share-based payments
The group recognised total expenses of GBP3,779,000 (30 June
2019: GBP4,925,000; 31 December 2019: GBP9,328,000) in relation to
share-based transactions in the period. This excludes the staff
costs in relation to the acquisition of Speirs & Jeffrey
reported within acquisition-related costs (note 6).
20 Financial instruments
Fair value measurement
The table below analyses the 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 Level Level
1 2 3 Total
At 30 June 2020 (unaudited) GBP'000 GBP'000 GBP'000 GBP'000
----------------------------------- -------- -------- -------- --------
Financial assets
Fair value through profit or loss:
* equity securities 5,209 - 2,292 7,501
* money market funds - 102,373 - 102,373
----------------------------------- -------- -------- -------- --------
5,209 102,373 2,292 109,874
----------------------------------- -------- -------- -------- --------
Level Level Level
1 2 3 Total
At 30 June 2019 (unaudited) GBP'000 GBP'000 GBP'000 GBP'000
----------------------------------- -------- -------- -------- --------
Financial assets
Fair value through profit or loss:
* equity securities 3,624 - 1,254 4,878
* money market funds - 121,430 - 121,430
----------------------------------- -------- -------- -------- --------
3,624 121,430 1,254 126,308
----------------------------------- -------- -------- -------- --------
Level Level Level
1 2 3 Total
At 31 December 2019 (audited) GBP'000 GBP'000 GBP'000 GBP'000
----------------------------------- -------- -------- -------- --------
Financial assets
Fair value through profit or loss:
* equity securities 4,587 - 1,186 5,773
* money market funds - 100,194 - 100,194
----------------------------------- -------- -------- -------- --------
4,587 100,194 1,186 105,967
----------------------------------- -------- -------- -------- --------
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.
The fair values of the group's other financial assets and
liabilities not measured at fair value are not materially different
from their carrying values with the exception of the following:
- Debt securities that are classified and measured at amortised
cost comprise bank and building society certificates of deposit,
which have fixed coupons. The fair value of debt securities at 30
June 2020 was GBP634,780,975 (30 June 2019: GBP922,725,963; 31
December 2019: GBP604,462,000) and the carrying value was
GBP647,068,000 (30 June 2019: GBP917,098,000; 31 December 2019:
GBP600,291,000). Fair value is based on market bid prices and hence
would be categorised as level 1 within the fair value
hierarchy.
- Subordinated loan notes (note 16) comprise Tier 2 loan notes.
The fair value of the loan notes at 30 June 2020 was GBP20,146,000
(30 June 2019: GBP20,197,000; 31 December 2019: GBP21,302,000) and
the carrying value was GBP19,989,000 (30 June 2019: GBP19,866,000;
31 December 2019: GBP19,927,000). 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 within the fair value hierarchy.
Level 3 financial instruments
Fair value through profit or loss
The group holds 1,809 shares in Euroclear Holdings SA, which are
classed as level 3 in the fair value hierarchy since no observable
market data is available. The fair value of these shares was
previously calculated with reference to the last buyback event in
May 2017 when shares were sold at EUR774. In the current period,
the valuation has been calculated by reference to the most readily
available data, which is the entity's estimated net asset value per
share at 30 June 2020 of GBP1,267. This value is based on the most
recent published net asset value at 31 December 2019, adjusted in
line with forecast earnings for the six months to 30 June 2020.
The valuation at the balance sheet date also reflects movements
in exchange rates in the period. A 10% weakening of the euro
against sterling, occurring on 30 June 2020, would have reduced
equity and profit after tax by GBP186,000 (30 June 2019:
GBP102,000; 31 December 2019: GBP96,000). A 10% strengthening of
the euro against sterling would have had an equal and opposite
effect.
Changes in the fair values of financial instruments categorised
as level 3 within the fair value hierarchy were as follows:
Unaudited Unaudited Audited
30 June 30 June 31 December
2020 2019 2019
GBP'000 GBP'000 GBP'000
----------------------------------------------------- --------- --------- ------------
At 1 January 1,186 1,259 1,259
Acquired in the year - - -
Total unrealised gains/(losses) recognised in profit
or loss 1,106 (5) (73)
At 30 June 2,292 1,254 1,186
----------------------------------------------------- --------- --------- ------------
Expected credit loss provision
The movement in the allowance for impairment in respect of
financial assets during the reporting period was as follows:
Cash and Trust
balances Loans Investment and financial
with central and advances Management planning
banks to banks loan book debtors Debt securities Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
-------------------------------- ------------- ------------- ----------- -------------- --------------- --------
Balance at 1 January 2020
(audited) 222 7 - 103 30 362
Amounts written off - - - - - -
Net remeasurement of loss
allowance 710 4 13 (9) 22 740
-------------------------------- ------------- ------------- ----------- -------------- --------------- --------
Balance at 30 June 2020
(unaudited) 932 11 13 94 52 1,102
-------------------------------- ------------- ------------- ----------- -------------- --------------- --------
As at 30 June 2020, the impairment allowance in respect of all
financial assets in the table above was measured at an amount equal
to 12 month ECLs, apart from trust and financial planning debtors,
where the impairment allowance was equal to lifetime ECLs.
21 Contingent liabilities and commitments
(a) 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.
(b) Capital expenditure authorised and contracted for at 30 June
2020 but not provided for in the condensed consolidated interim
financial statements amounted to GBP2,368,000 (30 June 2019:
GBP2,311,000; 31 December 2019: GBP787,000).
(c) The contractual amounts of the group's commitments to extend
credit to its clients are as follows:
Unaudited Unaudited Audited
30 June 30 June 31 December
2020 2019 2019
GBP'000 GBP'000 GBP'000
------------------------------------------------ --------- --------- ------------
Guarantees - 117 117
Undrawn commitments to lend of 1 year or less 29,141 24,747 23,344
Undrawn commitments to lend of more than 1 year 9,770 8,340 7,940
------------------------------------------------ --------- --------- ------------
38,911 33,204 31,401
------------------------------------------------ --------- --------- ------------
The fair value of the guarantees is GBPnil (30 June 2019 and 31
December 2019: 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.
22 Cash and cash equivalents
For the purpose 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 30 June 31 December
2020 2019 2019
GBP'000 GBP'000 GBP'000
------------------------------------------------- --------- --------- ------------
Cash and balances at central banks 2,300,000 1,270,056 1,930,000
Loans and advances to banks 162,154 176,178 117,839
Investment securities held at fair value through
profit or loss 102,373 121,430 100,194
------------------------------------------------- --------- --------- ------------
2,564,527 1,567,664 2,148,033
------------------------------------------------- --------- --------- ------------
Investment securities held at fair value through profit or loss
are amounts invested in money market funds which are realisable on
demand.
Cash flows arising from issue of ordinary shares comprise:
Unaudited Unaudited
Six months Six months
to to Audited
30 June 30 June 31 December
2020 2019 2019
GBP'000 GBP'000 GBP'000
------------------------------------------------- ----------- ----------- ------------
Share capital issued (note 18) 50 44 58
Share premium on shares issued (note 18) 2,171 3,648 5,666
Merger reserve on shares issued (note 18) - 14,971 14,971
Shares issued in relation to share-based schemes
for which no cash consideration was received - (15,001) (15,001)
Shares issued in relation to share buybacks (4,282) (4,362) (10,034)
------------------------------------------------- ----------- ----------- ------------
(2,061) (700) (4,340)
------------------------------------------------- ----------- ----------- ------------
23 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 GBP67,000 were paid in the period (six
months ended 30 June 2019: GBP69,000; year ended 31 December 2019:
GBP95,000) in respect of ordinary shares held by key management
personnel.
As at 30 June 2020, the group had provided interest-free season
ticket loans of GBPnil (30 June 2019: GBPnil; 31 December 2019:
GBPnil) to key management personnel.
At 30 June 2020, key management personnel and their close family
members had gross outstanding deposits of GBP801,000 (30 June 2019:
GBP3,804,000; 31 December 2019: GBP636,000) and gross outstanding
loans of GBP4,000 (30 June 2019: GBP724,000; 31 December 2019:
GBPnil) 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.
One group subsidiary, Rathbone Unit Trust Management, has
authority to manage the investments within a number of unit trusts.
During the first half of 2020, the group managed 29 unit trusts,
Sociétés d'investissement à Capital Variable (SICAVs) and
open-ended investment companies (OEICs) (together, 'collectives')
(six months ended 30 June 2019: 27 collectives; year ended 31
December 2019: 27 collectives).
The group charges each fund an annual management fee for these
services, but does not earn any performance fees on the unit
trusts. The management charges are calculated on the bases
published in the individual fund prospectuses, which also state the
terms and conditions of the management contract with the group.
The following transactions and balances relate to the group's
interest in the unit trusts:
Unaudited Unaudited
Six months Six months Audited
to to Year to
30 June 30 June 31 December
2020 2019 2019
GBP'000 GBP'000 GBP'000
---------------------- ----------- ----------- ------------
Total management fees 19,298 17,516 40,111
---------------------- ----------- ----------- ------------
Total management fees are included within 'fee and commission
income' in the consolidated interim statement of comprehensive
income.
Unaudited Unaudited
Six months Six months Audited
to to Year to
30 June 30 June 31 December
2020 2019 2019
GBP'000 GBP'000 GBP'000
---------------------------------- ----------- ----------- ------------
Management fees owed to the group 3,930 3,542 3,904
Holdings in unit trusts (note 20) 5,209 3,624 4,587
---------------------------------- ----------- ----------- ------------
9,139 7,166 8,491
---------------------------------- ----------- ----------- ------------
Management fees owed to the group are included within 'accrued
income' and holdings in unit trusts are classified as 'fair value
through profit or loss' in the consolidated interim balance sheet.
The maximum exposure to loss is limited to the carrying amount on
the balance sheet as disclosed above.
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.
24 Interest in unconsolidated structured entities
As described in note 23, at 30 June 2020, the group owned units
in collectives managed by Rathbone Unit Trust Management with a
value of GBP5,209,000 (30 June 2019: GBP3,624,000; 31 December
2019: GBP4,587,000), representing 0.06% (30 June 2019: 0.06%; 31
December 2019: 0.08%) of the total value of the collectives managed
by the group. These assets are held to hedge the group's exposure
to deferred remuneration schemes for employees of Unit Trusts.
The group's primary risk associated with its interest in the
unit trusts is from changes in fair value of its holdings in the
funds.
The group is not judged to control, and therefore does not
consolidate, the collectives. Although the fund trustees have
limited rights to remove Rathbone Unit Trust Management as manager,
the group is exposed to very low variability of returns from its
management and share of ownership of the funds and is therefore
judged to act as an agent rather than having control under IFRS
10.
25 Events after the balance sheet date
An interim dividend of 25.0p per share was declared on 28 July
2020 (note 9).
There have been no other material events occurring between the
balance sheet date and 28 July 2020.
Regulatory capital
The group is classified as a banking group under the Capital
Requirements Directive (CRD) 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).
The group has chosen not to adopt the IFRS 9 transitional
arrangements, as the impact of IFRS 9 on the group's regulatory
capital has been minimal.
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
30 June 30 June 31 December
2020 2019 2019
GBP'000 GBP'000 GBP'000
------------------------------------------------------ --------- --------- ------------
Share capital and share premium 215,978 211,725 213,757
Reserves 308,710 303,814 313,607
Less:
* prudent valuation of assets held at fair value
through profit or loss (110) (126) (106)
* own shares (46,088) (36,838) (41,971)
* intangible assets (net of deferred tax) (225,686) (226,367) (218,884)
------------------------------------------------------ --------- --------- ------------
Total Common Equity Tier 1 capital 252,804 252,208 266,403
Tier 2 capital 11,911 17,059 15,683
------------------------------------------------------ --------- --------- ------------
Total own funds 264,715 269,267 282,086
------------------------------------------------------ --------- --------- ------------
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 2020, the group's risk-weighted assets were
GBP1,187,800,000 (30 June 2019: GBP1,232,500,000; 31 December 2019:
GBP1,209,038,000).
Pillar 2 - supervisory review process
Pillar 2 supplements the Pillar 1 minimum requirement with
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. These include:
Pension obligation risk
The potential for additional unplanned capital strain or 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. 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 exposures.
The buffer rate is currently set to 0% for the UK. However,
different rates for other countries, where the group has small
relevant credit exposures, result in an overall rate of 0.18% of
risk-weighted assets for the group as at 30 June 2020. 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 group's own funds requirements were as follows:
Unaudited Unaudited Unaudited
30 June 30 June 31 December
2020 2019 2019
GBP'000 GBP'000 GBP'000
----------------------------------------------------- --------- --------- ------------
Own funds requirement for credit risk and settlement
risk 45,240 52,270 46,496
Own funds requirement for market risk - - 443
Own funds requirement for operational risk 49,784 46,330 49,784
----------------------------------------------------- --------- --------- ------------
Pillar 1 own funds requirement 95,024 98,600 96,723
Pillar 2A own funds requirement 39,665 49,113 39,830
----------------------------------------------------- --------- --------- ------------
Total Pillar 1 and 2A own funds requirement 134,689 147,713 136,553
----------------------------------------------------- --------- --------- ------------
CRD IV buffers:
* capital conservation buffer (CCB) 29,695 30,812 30,226
* countercyclical capital buffer (CCyB) 2,083 10,460 11,334
----------------------------------------------------- --------- --------- ------------
Total Pillar 1 and 2A own funds requirement and
CRD IV buffers 166,467 188,985 178,113
----------------------------------------------------- --------- --------- ------------
Statement of directors' responsibilities in respect of the
interim statement
Confirmations by the board
We confirm to the best of our knowledge:
- 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:
(a) DTR 4.2.7R of the Disclosure Guidance 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
(b) DTR 4.2.8R of the Disclosure Guidance 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. These forecasts have been
prepared taking account of the potential impacts of the COVID-19
pandemic on market volatility, net organic growth and additional
costs of maintaining operational resilience. 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 2020, and as at 30 June 2020, the group
was primarily equity-financed, with a small amount of gearing in
the form of the Tier 2 debt.
The group's financial projections and the capital adequacy
assessment provide comfort that the group has adequate financial
and regulatory resources to continue in operational existence for
the foreseeable future. Accordingly, 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
Paul Stockton
Chief Executive
28 July 2020
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 2020 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 notes
1 to 25. 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
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 Financial
Reporting Council. Our work has been undertaken so that we might
state to the company those matters we are required to state to it
in an independent review 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 formed.
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 Disclosure Guidance and Transparency Rules of the United
Kingdom's Financial Conduct Authority.
As disclosed in note 1, the annual financial statements of the
group are prepared in accordance with IFRSs as adopted by the
European Union. The condensed set of financial statements included
in this half-yearly financial report has been prepared in
accordance with International Accounting Standard 34 "Interim
Financial Reporting" as adopted by the European Union.
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 Financial Reporting Council for use in
the United Kingdom. A review of interim financial information
consists of making inquiries, 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 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 2020 is not prepared, in all material respects, in accordance
with International Accounting Standard 34 as adopted by the
European Union and the Disclosure Guidance and Transparency Rules
of the United Kingdom's Financial Conduct Authority.
Deloitte LLP
Statutory Auditor
Hill House, 1 Little New Street, London EC4A 3TR
28 July 2020
This information is provided by RNS, the news service of the
London Stock Exchange. RNS is approved by the Financial Conduct
Authority to act as a Primary Information Provider in the United
Kingdom. Terms and conditions relating to the use and distribution
of this information may apply. For further information, please
contact rns@lseg.com or visit www.rns.com.
END
IR BRGDRDXDDGGI
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July 29, 2020 02:00 ET (06:00 GMT)
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