Preliminary Statement

RNS Number : 1515J

Evolution Group PLC

25 March 2010

 



Embargoed until 7.00am 25 March 2010

The Evolution Group Plc

(the "Evolution Group", the "Group", the "Company")

Preliminary statement for the year ended 31 December 2009

Evolution Group, the listed investment bank and private client investment management group, today announces its preliminary statement for the year ended 31 December 2009.

Financial and Operational Highlights

·      Record total group income of £129.4m, up 103% on 2008.

·      Adjusted profit before tax from continuing operations¹ of £21.1m, up £19.2m from £1.9m in 2008.

·      Statutory profit before tax from continuing operations of £11.1m (2008: Statutory loss before tax £12.7m).

·      Strong cash generation from operations of £33.8m.

·      Balance sheet remains strong with £109.5m of cash.

·      Year end final dividend increased 34% year on year to 1.70p.

·      Full year dividend increased 24% year on year to 2.50p.

Private Clients²

·      Assets under management ("AUM") up 37% to a record level of £5.2bn (2008: £3.8bn).

·      Record income up 23% to £42.4m (2008: £34.5m).

·      Management fee income of £24.4m up 40% on 2008.

·      Transactional income of £17.0m, up 21% on 2008.

·      Adjusted operating profit¹ of £4.1m increased by 14% from £3.6m in 2008.

·      Philip Howell appointed Chief Executive Officer in March 2010.

Investment Banking³

·      Record income up 193% to £87.0m (2008: £29.7m).

·      Strong profitability - Adjusted operating profit¹ of £18.5m compared with a loss of £5.4m.

·      Record Equities income of £36.2m, up 170% on 2008.

·      Record Fixed income revenue of £35.3m, up 397% on 2008.

·      Number of institutional clients increased to 942 (2008: 586).

·      Voted Top European Fixed Income Agency Broker of 2009 by Credit Magazine.

·      Voted Number 1 AIM advisor of 2009 by Growth Company Investor Magazine.

Commenting on the results and outlook, Martin Gray, the Chairman of Evolution Group said:

"These excellent results, which have been achieved despite highly challenging market conditions in each of our businesses, are the result of our continuing strategic focus on building a Group which can create shareholder value throughout the business cycle. While activity levels last year remained depressed and investor sentiment proved highly sensitive to risk and volatility, the Group nevertheless delivered an extremely impressive financial performance, with significant growth in both income and profit.

Throughout the recession of the past two years we have maintained our focus on achieving sustainable earnings growth, high cash generation and low fixed costs, and the strength of our balance sheet again enabled us last year to take advantage of opportunities to broaden our business in line with our strategy to develop both quality and breadth of income streams.

Our business is built upon long term client relationships and is underpinned by financial strength and a partnership culture. We are confident that our business is better placed than ever to face ongoing challenges in the economic environment and we look forward to delivering sector-leading shareholder returns in the future."

Key Performance Indicators

	2009		2008
Private Clients2
Fund inflows (£m)	322		550
No. of clients	14,343		11,803
Income per average head (£000)	163		160
Income per average front office head4 (£000)	337		345
Core operating costs per average front office head (£000)	240		250
Adjusted operating profit1 (£m)	4.1		3.6
Adjusted operating margin	10%		10%
AUM (£bn)	5.2		3.8
Net increase in year end headcount	8		80
Investment Banking3
Market share by value traded
LSE Market - FTSE 100 (%)	1.5%		0.6%
LSE Market - Total FTSE (%)	1.8%		0.7%
LSE Market - AIM (%)	5.4%		5.1%
Corporate clients	76		70
Institutional clients	942		586
Transactional volumes (millions)	3.0		1.6
Funds raised (£m)	451		157
Income per average head (£000)	486		217
Income per average front office head5 (£000)	640		300
Core operating costs per average front office head (£000)	280		271
Adjusted operating profit / (loss)1 (£m)	18.5		(5.4)
Adjusted operating margin	21%		-
Net increase / (decrease) in year end headcount	95		(33)
Notes
1Adjusted operating profit, adjusted profit before tax from continuing operations, adjusted earnings from continuing operations and adjusted earnings per share are defined in the Financial Review section. 2The results of Private Clients are defined as those arising from Williams de Broë ("WDB") Limited, WDB Assetmaster Management Company Limited, WDB Asset Management Limited and WDB Capital Limited. 3The results of Investment Banking are defined as those arising from Evolution Securities Limited ("ESL") and its subsidiary Evolution Securities (US) Inc. ("ESUS"). 4 Front office head count for Private Clients is defined as including investment managers, dealers, financial planners and investment assistants. 5 Front office head count for Investment Banking is defined as including all client facing staff, including corporate finance executives, market makers, sales and sales traders, and research analysts.

For further information, please contact:

The Evolution Group Plc Alex Snow, Chief Executive Officer Andrew Westenberger, Finance Director	020 7071 4300
Pelham Bell Pottinger Charles Cook Victoria Geoghegan	020 7337 1546

FORWARD-LOOKING STATEMENTS

This Annual Financial Report contains forward-looking statements with respect to the financial condition, results, operations and businesses of the Evolution Group Plc. Although the Group believes that the expectations reflected in these forward-looking statements are reasonable, we can give no assurance that these expectations will prove to have been correct. Such statements and forecasts involve risk and uncertainty because they relate to future events and depend upon circumstances that will occur in the future. There are a number of factors that could cause actual results or developments to differ materially from those expressed or implied by forward-looking statements and forecasts. Forward-looking statements and forecasts are based on the Directors' current view and information known to them at the date of this statement. The Directors do not make any undertaking to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.

CHAIRMAN'S STATEMENT

I am delighted to report such excellent results for the Group. In my report last year I said we believed the challenging market and economic conditions experienced in 2008 would continue throughout 2009. To a large extent, 2009 unfolded in line with this premise. Financial markets stabilised after worldwide Government backed rescues of troubled banks combined with unprecedented injections of liquidity into financial markets by several Central Banks through the policy of quantitative easing.

Risk appetite, almost non-existent at the end of 2008 and early in 2009, has somewhat returned as a result, although it has remained volatile throughout 2009 and indeed into the early months of this year, as investor sentiment remains highly sensitive to further shocks, such as Sovereign default risk.

Against this backdrop the Group has begun to deliver impressive growth in income and profitability. I said last year that our strategy would enable us to take advantage of opportunities as they arose, to continue to recruit quality people and to invest in new income streams. The Group has been able to progress this strategy in 2009 and completed two significant investments in the development of the fixed income agency business and the large-cap equity business. Both these investments add significant potential for the Group to grow further in the future.

As I write, financial and economic conditions remain challenging with the additional uncertainty presented by the political agendas surrounding the elections in both the UK and the US in 2010. We do, however, see some signs that risk appetite is continuing to improve gradually. We are hopeful that politicians and policy makers in general can maintain and encourage a stable and consistent macro environment, specifically with regard to inflation, interest rates, taxation and regulation, conducive to continued growth in activity across all areas of the economy.

I am pleased to announce that we have made further progress in strengthening the Group's Board. Andrew Westenberger was appointed as Group Finance Director on 8 April 2009; Chris Chambers joined as a Non-Executive on 3 November 2009 and Roger Perkin joined as a Non-Executive on 27 January 2010. All three have made valuable contributions to the management of the Group. Roger Perkin replaced Nick Irens who resigned on 31 December 2009 as Chairman of the Audit committee. Andrew Umbers also resigned from the Board on 3 February 2010. We wish them both well and thank them for their significant contributions to the success of the Group over the past few years. As well as these Group Board changes, a new Chief Executive Officer for Williams de Broë Limited, Philip Howell, joined the Group in March 2010. 

As ever, a key decision for us is how to reward (both to retain and motivate) the key people for the future success of the Group. Accordingly, the Group has put in place new long term partnership equity plans, both for the Group Executives and senior employees within our operating divisions. These plans were designed after extensive consultation with our major shareholders and were approved at an EGM on 22 January 2010. During the year we have continued to recruit very high calibre people and will continue to do so. Our staff have managed our business in a very impressive way and once again I thank them all for their professionalism and their commitment.

In summary, I believe the Group remains better placed than ever to face the challenges ahead and deliver continued growth to our shareholders.

Martin Gray

Chairman

25 March 2010

CHIEF EXECUTIVE'S REPORT

Results

After the extraordinarily difficult business environment of 2008, 2009 presented no less a challenging period. Equity market volumes continued to decline, whilst corporate fund raising activity continued for much of the year at the depressed levels seen in 2008, albeit beginning to tentatively recover in the second half of 2009. It is therefore very satisfying to report a return to profitability for the year.

Group statutory profit before tax for the year increased substantially to £11.1m (2008: £12.7m loss). Group adjusted operating profit improved similarly to £20.8m for the period (2008: £2.7m loss). Adjusted diluted earnings per share was 7.83p (2008: 1.17p) with statutory diluted earnings per share from continuing operations of 3.87p (2008: 5.18p loss).

These results were achieved through a diversified mix of income which totalled £129.4m (2008: £63.9m) and a continued discipline on costs.

Group full year dividend is up 24% year on year to 2.50p, more than covered by adjusted and statutory earnings.

The Group has retained its Balance Sheet strength and strong liquidity position with year end cash and cash equivalents up £5.9m to £109.5m.

Both principal operating businesses, Investment Banking (Evolution Securities Limited) and Private Clients (Williams de Broë Limited) traded profitably during 2009 with Investment Banking reporting a significant improvement in adjusted operating profit to £18.5m for 2009 (2008: £5.4m loss).

The results for 2009 reflect the transformation of the Group, achieved over the last three years. The business mix is radically different today in terms of both the quality and breadth of income streams within the Group as shown below:

	2003 - 2007 Total Income				2008 - 2009 Total Income
	£m	%			£m	%
Corporate Finance	142.3	42%		Corporate Finance	24.7	13%
Private Clients	77.8	23%		Private Clients	76.9	40%
Fixed Income	4.6	1%		Fixed Income	42.4	22%
Equity Sales	49.9	15%		Equity Sales	36.5	19%
Equity Trading	59.7	17%		Equity Trading	13.1	7%
Other	7.3	2%		Other	(0.3)	(1%)
	341.6				193.3

Operational Review

Private Clients

Private Clients activities comprises Williams de Broë Limited, one of the UK's leading and fastest growing retail investment managers, WDB Capital Limited, the investment manager to WDB Capital UK Equity Fund Limited, and WDB Assetmaster, the investment manger of our multi manager collectives.

Williams de Broë Limited continues to increase in significance to the Group, both in terms of current performance, and in terms of business development momentum it is now displaying. Organic growth over the last five years, together with the successful integration in 2009 of the new teams in Edinburgh and from Singer & Friedlander Investment Management Limited ("SFIM") in London, has created a market leading business of scale in its sector.

Income and AUM Trend		2004	2005	2006	2007	2008	2009
Total Net Income (£m)		9.1	11.1	20.1	31.8	34.5	42.4
Assets Under Management (£bn)		0.6	0.8	2.2	2.8	3.8	5.2

The Private Client business performed robustly in 2009 despite the uncertain market conditions. Total net income for the year of £42.4m was up 23% on the prior period (2008: £34.5m). Recurring management fee income of £24.4m (2008: £17.4m) accounted for 58% of total net income, compared with 50% in the comparative period. Transactional volumes increased 47% to 167,000 (2008: 114,000) driving transactional income to £17.0m in the year (2008: £14.1m). Adjusted operating profit increased by 14% to £4.1m (2008: £3.6m), with a strong performance in the second half of 2009 as new teams started to register and margin improvement initiative began to deliver.

Growth in assets under management remained a core focus within Williams de Broë during 2009. At 31 December 2009, total assets under management reached a record level of £5.2bn, an increase of 37% from £3.8bn at the end of 2008. This represents an excellent performance for a period that saw the recruitment of no new investment managers or acquisitions of businesses, whilst management focused on completing the integration of the prior year. Headcount remained largely unchanged during the year at 268 (2008: 260). Net fund sales were achieved solely from organic growth. Net fund inflows of £322m (2008: £550m) were achieved by our discretionary sales team together with our investment managers.

Movement in assets under management and administration		£bn		%
Assets under management and administration - 31 December 2008		3.8
Assets under administration - 31 December 2008		(0.4)
Managed assets under management - 31 December 2008		3.4
AUM performance		0.6		17.6%
Fund sales		0.3		8.8%
Redemptions		(0.1)		(2.9)%
Managed assets under management - 31 December 2009		4.2
Assets under administration - 31 December 2009		1.0
Assets under management and administration - 31 December 2009		5.2

With a heritage dating back to 1869, Williams de Broë has always prided itself on the quality of its people and the service it gives to clients. Its reputation has been founded on the following core values:

·      Personal service - we have a personal service driven culture and our ethos is to maintain investment managers dedicated to our individual client's needs;

·      Bespoke by nature - we tailor our services to fulfil our individual client's specific investment objectives and risk criteria;

·      Sound investment process - we maintain a significant resource in our investment process and have a strong focus to achieve investment excellence;

·      True independence - we select "best of breed" investments, which are appropriate for our clients, without conflicts of interest. We also develop close relationships with our professional intermediary partners; and

·      Quality business infrastructure, back office and compliance departments.

In summary, 2009 represents a year of significant achievement for Williams de Broë with the successful integration of new teams in London and Edinburgh combining with organic sales momentum across the business to deliver sound investment performance and record results.

Whilst management initiatives to improve operating margins are now beginning to deliver, we have also ensured that there has been a commensurate investment in new systems and governance processes to anticipate the increased demands of our current growth ambitions.

The potent combination of a high quality team of investment professionals, a differentiated product, a respected brand and a highly scalable infrastructure together with sound financial strength of the Group has firmly positioned Williams de Broë as an engine for significant further growth in the short and medium term.

Investment Banking

2009 saw a significant expansion to our investment banking division. Overall headcount grew significantly from 125 to 220 (up 76%) as a result of our two key business initiatives: the significant expansion of the agency fixed income team and the significant large-cap equities team. The business was able to instigate these transforming initiatives for modest upfront investment in the midst of the continued market upheavals experienced in the early part of 2009.

As a result of these initiatives the investment banking division produced a record level of income in the period of £87.0m (2008: £29.7m), nearly three times (up 193%) the level of income achieved in 2008. As a result adjusted operating profit increased £23.9m to £18.5m from a loss of £5.4m in 2008.

All areas of the business contributed to this significant growth in the period, however, the main drivers were our agency equities and fixed income businesses. Equity sales commission income of £23.2m recorded a £9.9m (up 74%) increase on the prior year (2008: £13.3m) and fixed income commission of £35.3m recorded a £28.2m (up 397%) increase on the prior year (2008 £7.1m). Our equity market making team achieved income of £13.0m compared with £0.1m in the prior period an increase of £12.9m. Corporate finance achieved income of £15.5m (2008: £9.2m), up £6.3m (up 68%) through the successful raising of £451m for our corporate clients (2008: £157m).

Equities

2009 was a transformational year for our equities business, our existing UK mid market equities platform was repositioned to include increased coverage of UK and European large-cap equities. We made significant hires across the equities platform, increasing the client facing staff by 108% over the year.

Research

The strength and quality of our research lies at the heart of our equities offering and we now cover 312 companies compared with 176 in the prior year (up 77%). In 2009, we expanded our research coverage to include: Banks, Beverages, Consumers and Food Producers, Economics and Strategy, Food Retail, General Financials, Income Service, Luxury Goods, Pharmaceuticals and Biotech, Property, Support Services, Telecoms and Tobacco. We have also added more resource to our existing sector strengths in Aerospace, Industrials and Engineering, Mining, Oils, Travel and Leisure, Utilities and Growth companies.

Our research team now has significant coverage of UK and Pan-European large cap and UK mid and growth companies. The build-out of our research team is now largely complete, although we anticipate some selective hires in the current year, particularly where we can emphasise our key strengths of industry knowledge, sector expertise and research experience. As a result of the investment made in research through 2009, we have experienced a significant re-rating of our research product from our institutional clients through the second half of 2009 and into the current year. We are confident that this momentum will continue. 

Sales & Trading

Our clients have an increasing requirement for high quality sales, sales trading and trading services. 2009 saw the transformation of our offering, our new colleagues have increased the strength and capability of our distribution strengths and execution services. During the second half of 2009, we began to experience the income opportunity that is available to our new platform, notwithstanding, the well documented concerns over market volumes and market values in 2009. We have added to our mid and small cap UK trading expertise by now providing market making and distribution in the Euro Stox 300, and through our algorithmic trading functionality we have access to a large number of different pools of liquidity both light and dark, on behalf of our clients, in addition to all primary exchanges enabling us to offer our clients a first class execution capability. We have established offices in New York, Boston and Madrid in the second half of 2009 and continue to grow our distribution expertise at the local level, and although only 10 months into our expansion plans, we continue to see growing evidence and validation from our clients that the product offering is of the highest quality.

During 2009 income within our equities business grew by £22.8m to £36.2m, an increase of 170%, and the number of institutional clients' accounts grew by 89 to 597 an increase of 18%.

		2009	2008
Headcount		108	52
LSE Market - FTSE 100 (%)		1.5%	0.6%
LSE Market - Total FTSE (%)		1.8%	0.7%
LSE Market - AIM (%)		5.4%	5.1%
Research stocks covered		312	176
Institutional clients		597	508
Equity sales commission (£m)		23.2	13.3
Equity market making (£m)		13.0	0.1

Fixed Income 

During 2009, our fixed income business saw significant upgrades in headcount and quality of product. The business was able to recruit a range of high quality specialists, with wide ranging experience and track records of providing their clients with well priced liquidity. Strategically, we have set out to develop our fixed income service to be "best in league" to offer genuinely un-conflicted research with no principal client conflicts. This provides a real focus on the buyer and seller, solving their liquidity requirements and providing transparent pricing. The fixed income business now principally covers six product areas across UK and Europe; Investment Grade Bonds, Asset Backed Securities, Emerging Markets, Government Bonds, High Yield and Distressed Bonds, and Illiquids (prefs and Pibs). Importantly Evolution Securities Fixed Income team has been rated for 2009 as the No.1 UK and European fixed Income agency house by Credit Magazine, polling over 52% of the vote.

During the year fixed income revenues grew by £28.2m to £35.3m, an increase of 397%, whilst the number of institutional client accounts grew by 267 to 345, an increase of 342%.

		2009	2008
Headcount		35	13
Institutional / client accounts		345	78
Fixed income revenue (£m)		35.3	7.1
Bonds priced		3,500+	200+

Corporate Finance

Equity Corporate Finance and Corporate Broking

In 2009 we successfully completed 20 (2008: 9) placings on behalf of our clients, raising £451m (2008: £157m), which together with other advisory fees and retainers generated income of £15.5m up 68% in the year (2008: £9.2m). Overall retained corporate clients grew from 70 to 76 during the course of 2009, and our efforts on the AIM market were recognised by Growth Company Investor Magazine (as voted by Directors of public companies) who voted Evolution Securities Ltd, No. 1 AIM advisor for 2009.

Debt Capital Markets

Strategically, the core offering of strength in distribution was complemented during 2009 by the recruitment of key professionals in both Debt Advisory and Debt Capital Markets teams. It is already clear that there is a real requirement for corporates to look at a range of financing alternatives including Investment Grade and Non-Investment Grade bonds as well as private placement strategies, as traditional lending channels have become less obvious. The team are currently working on a range of mandates for potential transactions in 2010, enhancing upon the global distribution strengths that have been built during the year, and providing depth and clarity on pricing to our corporate clients.

In 2010 we will further recruit into our corporate finance division to continue the momentum of growth in new corporate client capture, but also to make sure that the coverage of our significantly expanded equities and fixed income business is suitably aligned with the strengths required in our corporate finance department.

		2009	2008
Headcount		27	25
Corporate clients		76	70
Corporate finance revenue (£m)		15.5	9.2
Funds raised (£m)		451	157

Investment banking - Outlook

Evolution Securities has made significant progress in 2009, both quantitatively and qualitatively, and we intend to continue to build on that growth in 2010. The distribution strengths that have been established in both equities and fixed income securities have been remarkable. A key opportunity is to marry these strengths with our capital markets services in both equity and debt, allowing us to find new and innovative financing solutions for our clients in a changing financing environment.

Group - Outlook

The core of the Group strategy since early 2007 has been principally based around risk avoidance, combined with tight control of costs and a highly liquid and unencumbered Balance Sheet. This allowed the Group to capture significant optionality at the end of 2008 and into the beginning of 2009, in both the Investment Banking and Private Clients businesses. Already in 2009 we are beginning to see the returns and momentum that these actions have produced. A key part of our strategy is to continue to increase our strategic risk appetite within the parameters that we have laid out in this report, in order to continue to develop our recurring revenue and profit potential, and to drive further shareholder returns.

We note the regulatory dislocation beginning within the Investment Banking sector and the inevitable exit of capital deployed, and continue to see opportunities for increasing our risk appetite and potential returns. Our emphasis on agency skills, wherever possible, and a partnership structure achieved through shared future equity returns, allows flexibility of remuneration to play a key role in the retention of our talent and the attraction of new partners. In the future this should be at the core of further real and sustained growth.

The Group is very well positioned, and aims to continue to develop the strong momentum in revenue and profit growth in 2009 from all our activities. Although there is much uncertainty in global markets which provides challenges to short term trading, this only goes to underpin the long term stability that the markets require to operate more effectively, and in fact reflects an underestimation of the global economic recovery and the beneficial impact of the robust nature of the capitalist model.

We look forward to further opportunities for growth in 2010, and I would like to thank all our employees for the extraordinary efforts to deliver the transformations to the Group over the course of 2009.

 

   

Alex Snow

Chief Executive Officer

25 March 2010

FINANCIAL REVIEW - Group results

Group Results

The Group returned to profitability in 2009 with statutory operating profit of £11.1m, increasing by £28.4m from the £17.3m loss reported in 2008. Adjusted operating profit¹ (the Group's principal performance measure) also increased significantly to £20.8m.

The increase in profitability was principally due to the Investment Banking division generating a much improved performance, resulting in its adjusted operating profit growing to £18.5m (2008: £5.4m loss).

		Adjusted Basis1			Statutory
		2009	2008		2009	2008
		£m	£m		£m	£m
Total income		129.4	63.9		129.4	63.9
Net loss from available-for-sale financial assets		-	-		(1.7)	-
Operating expenses		(108.6)	(66.6)		(116.6)	(81.2)
Operating profit / (loss) from continuing operations		20.8	(2.7)		11.1	(17.3)
Net finance income		0.3	4.6		0.3	4.6
Associates		-	-		(0.3)	-
Profit / (loss) before tax		21.1	1.9		11.1	(12.7)
Tax (expense) / credit		(2.7)	1.0		(1.9)	1.7
Profit / (loss) after tax		18.4	2.9		9.2	(11.0)
Discontinued operations		-	-		(2.3)	(2.5)
Profit / (loss) for the year		18.4	2.9		6.9	(13.5)
Diluted earnings per share
Continuing operations		7.8p	1.2p		3.9p	(5.2)p
Discontinued operations		-	-		(0.8)p	(0.9)p

¹An explanation of the adjusted basis performance measurement, details of the adjusted items and reconciliation between adjusted earnings and statutory earnings is given below. Analysis and commentary below within the financial review is based upon the adjusted basis unless otherwise indicated.

Total Income

Total Group income for the year more than doubled to £129.4m reflecting record levels in both divisions. Investment Banking income grew by 193% to £87.0m, as a result of strong growth across all areas of its business, in particular the institutional markets businesses (equities and fixed income). Private Client income grew by 23% to £42.4m, as a result of continued strong growth in assets under management ("AUM"), up 37% to £5.2 billion.

Operating Expenses

Adjusted operating expenses in 2009 were £108.6m (2008: £66.6m) made up as follows:

		2009	2008	Change
		£m	£m
Core operating costs
Staff costs		30.7	22.1
Transaction related costs		8.2	5.9
IT costs (market data, systems, communications)		8.9	6.1
Property related costs		6.1	4.8
Other costs		13.7	11.9
Core operating costs		67.6	50.8	33%
Performance costs		41.0	15.8	159%
Total costs		108.6	66.6	63%

 Core operating costs increased by 33% to £67.6m (2008: £50.8m). This was driven by the expansion of headcount in the year. Average front office headcount increased by 32% in the year with total average headcount increasing by 25% to 457.

Headcount - Average		2009	2008	Change
Front office		262	199	32%
Back office		195	167	17%
		457	366	25%
Core operating cost per front office head £000		258	255

Core operating costs per front office head have marginally increased to £258,000 per annum from 2008. The Group continues to manage its core operating cost base very carefully.

Performance costs include all short term incentive remuneration, inclusive of employers national insurance and the cost of those share options arising from the deferral of elements of annual bonus into Evolution Group shares (2009: £1.0m, 2008: £nil). Performance costs increased by 159% in the period to £41.0m (2008: £15.8m), in line with increased revenue and profitability levels.

Financing

Net finance income declined to £0.3m in 2009 from £4.6m in 2008 as a result of lower interest rates impacting the income the Group received from its excess cash balances.

Taxation

The Group's statutory tax charge was £1.9m, equivalent to 17% of statutory profit before tax of £11.1m. The tax charge in 2009 is lower than the UK tax rate of 28% primarily due to deferred tax on options arising from the movement in the Group's share price more than offsetting the impact of disallowable expenses. The Group's continuing utilisation of its historic tax losses means that no material corporation tax is payable.

Balance Sheet

The Group's Balance Sheet remains strong. The Group continues to carry capital significantly in excess of the minimum regulatory requirements.

Non Current Assets

Non current assets increased in the period due to the inclusion of investments in associates following disposals of majority stakes in ESCL and WDB Capital UK Equity Fund.

Other non-current assets declined by £2.1m in the year from £30.8m to £28.7m, primarily as a result of the release of deferred tax assets upon the exercise of employee share options during the period.

Working Capital

		2009	2008	Change
		£m	£m
Trading portfolio balances		10.4	0.8	9.6
Trading counterparty balances		(0.2)	3.9	(4.1)
Net trade and other balances		(21.7)	(4.4)	(17.3)
		(11.5)	0.3	(11.8)

The Group had negative working capital at 31 December 2009 compared to a small positive amount at the end of 2008. The increase in working capital of £5.5m over the year from investment banking institutional market activities (trading portfolio and trading counterparty balances) was more than offset by the negative working capital impact of higher staff performance incentive accruals as at 31 December 2009 compared to 31 December 2008.

Trading Positions

Net trading portfolio assets increased by £9.6m in the year.

		2009	2008
		£m	£m
Trading portfolio assets		13.3	5.0
Trading portfolio liabilities		(2.9)	(4.2)
		10.4	0.8

This reflects more normalised levels of risk appetite on equity small and mid cap market making books, with inventory levels severely cut at the end of 2008 during the dislocation in financial markets.

The average net trading positions during 2009 were £6.7m (2008: £11.2m).

Net Counterparty Receivables		2009	2008
		£m	£m
Counterparty receivables		57.8	39.0
Counterparty payables		(58.0)	(35.1)
		(0.2)	3.9

Working capital resulting from the Group's public markets activities continues to be carefully managed and average working capital balances during 2009 were £30.4m (2008: £33.8m).

Cash balances remain strong with cash and cash equivalents of £109.5m at the end of 2009, an increase of £5.9m (2008: £103.6m). The Group maintains its policy of maintaining a highly liquid Balance Sheet at all times. Cash balances at 31 December 2009 represent 80% of shareholder funds (2008: 70%) and are held in call or overnight cash deposits.

Cash flow

The Group generated net positive cash flow of £6.1m in 2009 (2008: £1.8m). This resulted from very strong growth in cash from operating activities of £33.8m (2008: £15.6m) due to the increased level of operating profitability and positive in flows from working capital reductions.

Capital expenditure on fixed assets and intangibles of £2.7m remained at similarly low levels to 2008 (2008: £2.3m).

Net cash out flows from financing activities increased significantly during 2009 to £25.2m (2008: £5.7m). This resulted from a significant increase in the purchase of Group shares (on behalf of the Employee Share Trust) to satisfy outstanding employee share option awards.

This was based on the Group's decision to fully hedge all outstanding employee share options during the year. This was achieved via the purchase of 16 million shares during the period at a cost of £23.7m.

Adjusted basis explanation

The Group has historically measured performance on an Adjusted Basis, as it has considered this to be a better reflection of the underlying performance of the Group's businesses. In addition to being the basis of performance criteria against which incentive awards were measured, adjusted measures such as Adjusted Operating Profit and Adjusted EPS have been followed by research analysts covering the Group.

Items of income and expense falling in the categories explained in more detail below are excluded from the Group's results on an adjusted basis.

Whilst such items have continued to represent a material impact on the Group's results, the Board has considered it appropriate to disclose their impact and focus its financial review of the year on 'Adjusted Basis' figures where appropriate. In particular, the Group's principal performance measure, 'Adjusted Operating Profit' (which excludes the net loss on AFS financial instruments, various expense items not considered part of the ongoing business profitability and the cost of share options), is used as the basis for discussion of the Group and divisional performance for 2009.

The total impact of adjusted items on the Group's results is steadily declining and accordingly the Board anticipates altering its principal performance measure to Statutory Operating Profit from 2010 onwards.

Adjusted items

		2009	2008
		£m	£m
(i)      Net (loss) on available-for-sale financial assets
Net (loss) on available-for-sale financial assets		(1.7)	-
(ii)     Operating expenses
Charge for share options granted		(3.8)	(11.7)
Private Client integration costs		(2.0)	(1.3)
Amortisation of certain intangibles		(1.5)	(0.6)
Non-recurring items		(0.7)	(1.0)
		(8.0)	(14.6)
(iii)   Associate results
Evolution Securities China Ltd  ("ESCL")		(0.7)	-
WDB Capital UK Equity Fund		0.4	-
		(0.3)	-
(iv)    Discontinued operations
Loss after tax (ESCL)		(1.3)	(2.5)
Loss arising on disposal		(1.0)	-
		(2.3)	(2.5)
Tax effect on the above adjustments		0.8	0.7
Total  adjustments		(11.5)	(16.4)
Reconciliation of earnings
Statutory profit / (loss)		6.9	(13.5)
Total adjustments net of tax		11.5	16.4
Adjusted profit after tax		18.4	2.9

Notes:

Net loss on available-for-sale financial assets

The net loss on AFS financial assets relates primarily to the write off to the income statement of accumulated losses on impaired investments originally acquired as consideration for corporate finance fees dating from 2005. Such losses were previously recorded in equity reserves.

Operating Expenses

Expense items excluded from adjusted results have fallen principally into three categories:

·      Charge for share options granted.

This relates to the income statement costs of share options granted to employees. This charge peaked in the years 2006, 2007 and 2008 and primarily resulted from the options granted to key employees in the period 2003 to 2008. The incidence of such option grants has declined significantly and going forward the Group's key long term equity incentive component of performance pay will be achieved through the new partnership equity plans. A £1.0m charge relating to deferred bonuses is included in the adjusted basis results as an operating expense in 2009.

·      Private Client integration and take on costs associated with material acquisitions such as Williams de Broë, Singer & Friedlander and the Edinburgh team within Private Clients.

·      Non recurring costs, which for 2009 comprise the settlement of a dispute with HMRC concerning potential tax obligations of certain legacy employees. The prior year comparative figure relates to redundancy costs. 

The table below summarises the calculation of adjusted basis EPS:

	Year ended 31 December 2009			Year ended 31 December 2008
		Weighted Average			Weighted Average
		(Millions)			(Millions)
Basic shares		221.6			213.2
Diluted shares		234.7			247.9
	Earnings £m	EPS (Pence)		Earnings £m	EPS (Pence)
Basic EPS from continuing operations	9.2	4.10p		(11.0)	(5.18p)
Basic EPS from discontinued operations	(1.9)	(0.86p)		(1.8)	(0.85p)
Diluted EPS from continuing operations	9.2	3.87p		(11.0)	(5.18p)
Diluted EPS from discontinued operations	(1.9)	(0.81p)		(1.8)	(0.85p)
Diluted EPS from continuing operations	9.2	3.87p		(11.0)	(5.18p)
Total adjustments to operating expenses	8.0	3.43p		14.6	5.89p
Tax effect of adjustments above	(0.8)	(0.34p)		(0.7)	(0.26p)
Adjustment for share of associates losses	0.3	0.14p		-	-
Net loss on available-for-sale	1.7	0.73p		-	-
Adjusted earnings / Adjusted diluted EPS	18.4	7.83p		2.9	1.17p

FINANCIAL REVIEW - Private clientS

	Half Year  30.06.09	Half Year  31.12.09	2009	2008
	£m	£m	£m	£m
Management fees	10.8	13.6	24.4	17.4
Transactional income	7.3	9.7	17.0	14.1
Segregated interest income	0.7	0.3	1.0	3.0
Total income	18.8	23.6	42.4	34.5
Expenses	(17.6)	(20.7)	(38.3)	(30.9)
Operating profit	1.2	2.9	4.1	3.6
Headcount - Year end	261	268	268	260
Assets Under Management (£bn)	4.2	5.2	5.2	3.8
Fund sales (£m)	123	199	322	550

Results

Private Clients adjusted operating profit increased by 14% to £4.1m (2008: £3.6m). The operating profit margin improved to 12% in the second half of 2009 from 6% in the first half, resulting in a 10% full year margin, in line with 2008.

Total income grew by 23% to £42.4m for the year, primarily due to a 40% increase in management fees to £24.4m (2008: £17.4m). This was driven by continued strong growth in assets under management (up 37% to £5.2bn from £3.8bn) which resulted from net new fund sales of £322m (2008: £550m) and increases in equity market valuations (25% increase in FTSE All-share and 13% in FTSE APCIMS - Balanced).

Transactional income increased by 21% to £17.0m in 2009 (2008 £14.1m), continuing the recovery from the second half of 2008.

Segregated interest income was significantly lower in 2009 at £1.0m (2008: £3.0m) as a result of the sharp and prolonged decline in interest rates during the year.

Operating expenses in 2009 were £38.3m (2008: £30.9m), made up as follows:

	2009	2008
	£m	£m
Staff costs	13.0	10.6
Transactional related costs	5.2	4.2
IT costs (market data, systems and communications)	2.0	1.5
Property related costs	2.5	1.7
Other costs	7.6	7.0
Core operating costs	30.3	25.0
Performance costs	8.0	5.9
Total costs	38.3	30.9

Core operating costs increased by 21% to £30.3m (2008: £25.0m). This was driven by the increase in average headcount throughout the year and transactional related costs.

Headcount - Average		2009	2008	Change
Front office		126	100	26%
Back office		134	116	16%
		260	216	20%
Core operating cost per front office head (£000)		240	250

The reduction in core operating costs per average front office headcount reflects continued cost control within the business and 2008 costs incurred on the integration of the Singer & Friedlander and Edinburgh teams.

Performance costs increased to £8.0m from £5.9m in 2008, a 36% increase. This was as a result of increased formulaic payments driven by higher revenues and profitability, together with integration linked costs associated with the Singer & Friedlander acquisition.

FINANCIAL REVIEW - investment banking

Investment Banking activities are organised into two principal areas:

1.     Corporate Finance, which encompasses providing corporate finance and broking services, including equity and debt capital raisings, to our corporate clients.

2.     Markets, which encompasses our secondary market activities, including research, equity sales, market making and agency fixed income broking, to our institutional clients.

	Half Year 30.06.09	Half Year 31.12.09	2009	2008
	£m	£m	£m	£m
Corporate finance	3.5	12.0	15.5	9.2
Markets
- Equity sales commission	6.6	16.6	23.2	13.3
- Equity market making	7.8	5.2	13.0	0.1
- Total equities	14.4	21.8	36.2	13.4
- Fixed income	16.0	19.3	35.3	7.1
Total income	33.9	53.1	87.0	29.7
Expenses	(25.6)	(42.9)	(68.5)	(35.1)
Operating profit / (loss)	8.3	10.2	18.5	(5.4)
Key metrics
Headcount - Year end	189	220	220	125
Corporate clients	76	76	76	70
Transactional volumes (millions)	1.3	1.7	3.0	1.6

Results

In a year of substantial transformation and investment, the business generated a profit of £18.5m (2008: £5.4m loss). Total income increased by 193% to £87.0m (2008: £29.7m) with all businesses, corporate finance, equities and fixed income contributing to the significant increase.

Corporate finance income increased by 68% to £15.5m (2008: £9.2m), largely due to some recovery of corporate activity levels in the second half of 2009.

Equity sales commissions increased by 74% in 2009 to a record level of £23.2m (2008: £13.3m), primarily as a result of the expansion into Large-cap and Pan-European equity coverage during the year. Commissions earned steadily increased throughout the second half of 2009 as we integrated the new hires across research, trading and sales. Commissions continue to increase as we gain market share, with first quarter 2010 rates approximately 15% above second half 2009 levels, despite continued declines in market wide volumes.  

Market making income increased to £13.0m for 2009 (2008: £0.1m) as equity markets recovered some equilibrium after the dislocation experienced in 2008. The partial return of liquidity on small and mid cap stocks, almost totally absent towards the end of 2008 and beginning of 2009, has enabled more normalised levels of income to be earned.

Fixed Income revenues increased substantially in 2009 to £35.3m (2008: £7.1m), reflecting two key factors:

1.     Most significantly, the increase in the breadth of product offering and the range of clients we service increased dramatically during the year. This was achieved through the recruitment initiative beginning at the end of 2008 and continuing to date; and

2.     The withdrawal of capital by major investment banks in the early part of 2009 resulted in significant widening of spreads across fixed income and credit products. As stability has gradually returned to financial markets spreads have narrowed, in particular within investment grade instruments, although not to levels witnessed prior to the credit downturn.

Operating expenses in 2009 were £68.5m (2008: £35.1m), made up as follows:

	2009	2008
	£m	£m
Staff costs	15.4	10.8
Transactional related costs	3.0	1.7
IT costs (market data, systems and communications)	6.8	4.6
Property related costs	3.3	2.8
Other costs	9.6	6.7
Core operating costs	38.1	26.6
Performance costs	30.4	8.5
Total costs	68.5	35.1

Core operating costs increased by 43% to £38.1m (2008: £26.6m). This was driven by the increase in average headcount throughout the year and transactional related costs.

Headcount - Average		2009	2008	Change
Front office		136	99	37%
Back office		43	38	13%
		179	137	31%
Core operating cost per average front office head (£000)		280	269

The overall increase in average core operating costs per front office employee is a result of: an increased proportion of more experienced staff earning higher salaries, partially offset by improved utilisation of the businesses infrastructure platform, including increased occupancy of existing office space, from the increased headcount.

Performance costs increased to £30.4m in the year (2008: £8.5m) as a result of higher performance incentive payments in line with the improvement in revenues and profitability, together with the integration linked costs associated with the build out of the Large-cap and Pan-European equities business.

FINANCIAL REVIEW - Central functions

Other activities

The Group's other activities consist of the central support costs not recovered from the operating businesses.

	2009	2008
	£m	£m
Total income	-	(0.3)
Expenses	(1.8)	(0.6)
Operating loss	(1.8)	(0.9)
Headcount - Year end	21	15

Other activities encompass Parent Company and central costs, including the cost of the Group Board, in addition to central support functions (principally finance) which are not directly recharged to the operating divisions.

Dividend

In light of these results the Board declares a final dividend of 1.70p per share, up 34% from the prior year final dividend of 1.27p. This reflects the Board's ongoing commitment to a progressive dividend policy. The dividend is payable on 18 May 2010 to shareholders on the register at 16 April 2010.

Andrew Westenberger

Finance Director

25 March 2010

CONSOLIDATED INCOME STATEMENT

		Year Ended 31.12.09	Year Ended 31.12.08
		£m	£m
Fee and commission income		115.6	61.2
Fee and commission expense		(0.8)	(0.4)
Net fee and commission income		114.8	60.8
Trading income		13.6	2.0
Other income		1.0	1.1
Total income		129.4	63.9
Net (loss) from available-for-sale financial assets		(1.7)	-
Operating expenses		(116.6)	(81.2)
Operating profit / (loss) from continuing operations		11.1	(17.3)
Finance income Finance expense		1.4 (1.1)	5.6 (1.0)
Net finance income		0.3	4.6
Share of post tax results of associates		(0.3)	-
Profit / (loss) before tax from continuing operations		11.1	(12.7)
Tax		(1.9)	1.7
Profit / (loss) after tax from continuing operations		9.2	(11.0)
Discontinued operations		(2.3)	(2.5)
Profit / (loss) for the year		6.9	(13.5)
Attributable to:
Minority interests		(0.4)	(0.7)
Equity holders of The Evolution Group Plc		7.3	(12.8)
		6.9	(13.5)
Earnings / (loss) per share attributable to the equity holders of The Evolution Group Plc during the year: Basic
From continuing operations		4.10p	(5.18p)
From discontinued operations		(0.86p)	(0.85p)
Diluted
From continuing operations		3.87p	(5.18p)
From discontinued operations		(0.86p)	(0.85p)
Dividend proposed / paid per share  - Interim (paid)		0.80p	0.75p
- Final (proposed)		1.70p	1.27p

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

		Year Ended 31.12.09		Year Ended 31.12.08
		£m		£m
Profit / (loss) for the year		6.9		(13.5)
Available-for-sale financial assets, net of tax		2.3		(0.6)
Deferred tax (debit) on share options taken to equity		(0.2)		(1.0)
Currency translation differences		-		0.4
Share of other comprehensive income of associates		(0.1)		-
Other comprehensive income / (expense) for the year, net of tax		2.0		(1.2)
Total comprehensive income / (expense) for the year		8.9		(14.7)
Attributable to:
Minority interests		(0.4)		(0.7)
Equity holders of The Evolution Group Plc		9.3		(14.0)
Total comprehensive income / (expense) for the year		8.9		(14.7)

CONSOLIDATED BALANCE SHEET

		31.12.09 £m		31.12.08 £m
ASSETS
Non-current assets
Goodwill		10.7		10.4
Intangible assets		6.2		7.6
Property, plant and equipment		3.3		3.4
Deferred tax assets		8.5		9.4
Investments in associates		13.4		-
		42.1		30.8
Current assets
Trade and other receivables		78.8		44.2
Available-for-sale financial assets		1.7		1.1
Trading portfolio assets		13.3		5.0
Cash and cash equivalents		109.5		103.6
Assets of disposal groups classified as held-for-sale		-		28.1
		203.3		182.0
Total assets		245.4		212.8
LIABILITIES
Current liabilities
Trade and other payables		102.4		45.8
Trading portfolio liabilities		2.9		4.2
Current tax liabilities		0.8		0.1
Liabilities of disposal groups classified as held-for-sale		-		12.9
		106.1		63.0
Non-current liabilities
Deferred tax liabilities		1.4		1.8
Provisions for other liabilities and charges		0.7		0.8
		2.1		2.6
Total liabilities		108.2		65.6
Net Assets		137.2		147.2
EQUITY
Capital and reserves attributable to equity shareholders
Share capital		2.3		2.2
Share premium		33.2		29.8
Other reserves		30.0		27.8
Retained earnings		71.7		86.5
Shareholders' equity excluding minority interest		137.2		146.3
Minority interests in equity		-		0.9
Total equity		137.2		147.2

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

		Share capital	Share premium	Other reserves	Retained earnings	Total	Minority interest	Total equity
		£m	£m	£m	£m	£m	£m	£m
Balance at 1 January 2009		2.2	29.8	27.8	86.5	146.3	0.9	147.2
Profit / (loss) for the year		-	-	-	7.3	7.3	(0.4)	6.9
Available-for-sale financial assets		-	-	2.3	-	2.3	-	2.3
Deferred tax (debit) on share options taken to equity		-	-	-	(0.2)	(0.2)	-	(0.2)
Share of other comprehensive income of associates		-	-	(0.1)	-	(0.1)	-	(0.1)
Total comprehensive income for the year		-	-	2.2	7.1	9.3	(0.4)	8.9
Issuance of ordinary shares		0.1	3.4	-	-	3.5	-	3.5
Purchase of trust shares1		-	-	-	(23.7)	(23.7)	-	(23.7)
Dividends paid		-	-	-	(4.7)	(4.7)	-	(4.7)
Share options: value of employee services		-	-	-	4.7	4.7	-	4.7
Disposal of subsidiaries' deferred tax and share options		-	-	-	0.2	0.2	-	0.2
Tax deductions on options exercised		-	-	-	1.6	1.6	-	1.6
Minority interest disposed with subsidiary		-	-	-	-	-	(0.5)	(0.5)
Transactions with shareholders		0.1	3.4	-	(21.9)	(18.4)	(0.5)	(18.9)
Balance at 31 December 2009		2.3	33.2	30.0	71.7	137.2	-	137.2

		Share capital	Share premium	Other reserves	Retained earnings	Total	Minority interest	Total equity
		£m	£m	£m	£m	£m	£m	£m
Balance at 1 January 2008		2.2	28.8	49.9	72.4	153.3	1.9	155.2
Loss for the year		-	-	-	(12.8)	(12.8)	(0.7)	(13.5)
Available-for-sale financial assets		-	-	(0.6)	-	(0.6)	-	(0.6)
Currency translation differences		-	-	0.4	-	0.4	-	0.4
Deferred tax (debit) on share options taken to equity		-	-	-	(1.0)	(1.0)	-	(1.0)
Total comprehensive (expense) for the year		-	-	(0.2)	(13.8)	(14.0)	(0.7)	(14.7)
Issuance of ordinary shares		-	1.0	-	-	1.0	-	1.0
Transfer of merger reserve to retained earnings		-	-	(21.9)	21.9	-	-	-
Purchase of trust shares1		-	-	-	(1.6)	(1.6)	-	(1.6)
Dividends paid		-	-	-	(4.3)	(4.3)	-	(4.3)
Share options: value of employee services		-	-	-	11.7	11.7	0.1	11.8
Minority interest disposed with subsidiary		-	-	-	-	-	(0.5)	(0.5)
Tax deductions on options exercised		-	-	-	0.2	0.2	0.1	0.3
Transactions with shareholders		-	1.0	(21.9)	27.9	7.0	(0.3)	6.7
Balance at 31 December 2008		2.2	29.8	27.8	86.5	146.3	0.9	147.2

¹ The Evolution Group Plc Employees' Share Trust (the "Trust") administers The Evolution Group Plc share schemes. The debit shown in retained earnings of £23.7m (2008: £1.6m) relates to the value of purchases made by the trust to satisfy these outstanding option awards to employees of the Group.

CONSOLIDATED CASH FLOW STATEMENT

		Year Ended 31.12.09 £m	Year Ended 31.12.08 £m
Cash flows from operating activities from continuing operations:
Cash generated from operations		32.6	13.5
Finance income received		1.4	5.6
Finance expense paid		(1.1)	(1.0)
Tax received / (paid)		0.7	(0.8)
Cash flows generated from / (used in) discontinued operations		0.2	(1.7)
Net cash flows from operating activities		33.8	15.6
Cash flows from investing activities from continuing operations:
Acquisition of businesses and subsidiary, net of cash acquired		-	(4.4)
Fees in relation to disposal of subsidiaries		(0.1)	-
Net proceeds from sale of available-for-sale financial assets		0.3	-
Purchase of property, plant and equipment		(1.8)	(1.6)
Purchase of intangible assets		(0.9)	(0.7)
Purchase of available-for-sale financial assets		-	(1.0)
Cash flows from investing activities of discontinued operations		-	(0.4)
Net cash used in investing activities		(2.5)	(8.1)
Cash flows from financing activities from continuing operations:
Issue of ordinary share capital		3.2	0.2
Dividends paid		(4.7)	(4.3)
Purchase of trust shares		(23.7)	(1.6)
Net cash used in financing activities		(25.2)	(5.7)
Net increase in cash and cash equivalents		6.1	1.8
Cash and cash equivalents at beginning of year		103.6	122.7
Exchange gain on cash		-	0.8
Less: cash deconsolidated during the year from discontinued operations		(0.2)	(21.7)
Cash and cash equivalents at end of year from continuing operations		109.5	103.6

1. BASIS OF PREPARATION

In preparing the financial information in this statement the Group has applied policies in accordance with International Financial Reporting Standards (“IFRS”) as adopted by the European Union (“EU”) and IFRIC interpretations and with those parts of the Companies Act 2006 applicable to companies reporting under IFRS. The Financial Statements have been prepared under the historical cost convention, as modified by the revaluation of available-for-sale financial assets, and financial assets and financial liabilities (including derivative instruments) at fair value through the profit or loss.

 

The financial information in this statement does not constitute the Group’s statutory accounts for the year ended 31 December 2009 within the meaning of the Companies Act 2006. The statutory accounts for 2009 will be finalised on the basis of the financial information presented by the Directors in this preliminary announcement and will be delivered to the Registrar of Companies following the Company’s Annual General Meeting.

2. TAX

	2009 £m		2008 £m
Current tax:
UK Corporation income tax on profit	(0.1)		(0.2)
Adjustments in respect of prior years	0.1		0.7
Foreign tax	-		(0.2)
Total current tax credit	-		0.3
Deferred tax:
Current year movement	(1.9)		0.9
Adjustments in respect of prior years	-		0.5
Total tax (expense) / credit	(1.9)		1.7

Factors affecting the tax (expense) / credit for the year are explained below:

	2009 £m		2008 £m
Profit / (loss) before tax from continuing operations	11.1		(12.7)
Profit / (loss) multiplied by the standard rate of corporation tax in the UK of 28.0% (2008: 28.5%)	(3.1)		3.6
Tax effects of:
Expenses not deductible for tax purposes	(3.1)		(5.0)
Tax deduction on options exercised	5.4		1.9
Utilisation of losses	1.9		0.1
Trade losses carried back	-		(0.9)
Non taxable income	0.1		0.6
Adjustment in respect of prior years	0.1		0.7
Lower tax rates on overseas earnings	-		0.2
Share options taken to equity reserves	-		(0.2)
Overseas tax credit	-		0.1
Capital allowances	0.5		0.6
Current year tax losses not utilised	(1.8)		(1.3)
Current tax credit	-		0.4
Deferred tax expense	(1.9)		0.9
Deferred tax expense adjustment in respect of prior periods	-		0.4
Current year movement	(1.9)		1.3
Tax (expense) / credit	(1.9)		1.7

 

The standard rate of corporation tax in the UK for the year ended 2009 is 28% compared with 28.5% in the comparative period. The rate of 28.5% for the comparative period comprised of 3 months (1 January 2008 – 5 April 2009) at 30% and the remaining 9 months at 28%. In 2009 the standard rate of corporation tax has remained unchanged at 28%.

  

Deferred tax on items charged to Income Statement:

	2009 £m		2008 £m
Deferred tax (expense) on share options	(1.0)		(0.7)
Deferred tax credit on capital allowances	0.2		0.1
Deferred tax (expense) / credit on trade losses	(1.5)		1.3
Deferred tax credit on trade losses – prior year adjustment	-		0.5
Deferred tax credit on intangibles	0.4		0.1
Total deferred tax (credited) / charged to Income Statement	(1.9)		1.3

 

 

END

 

 

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