Final Results

Rathbone Brothers PLC 30 March 2001 30th March 2001 RATHBONE BROTHERS PLC PRELIMINARY RESULTS FOR THE YEAR TO 31st DECEMBER 2000 Rathbone Brothers Plc, the group which specialises in discretionary investment management for private clients, announces Preliminary Results for the year ended 31st December 2000. Preliminary Results for the year ended 31st December 2000 Highlights: * Pre-tax profits before goodwill amortisation increased by 14% to £26.5m * Earnings per share before goodwill amortisation increased by 8% * Total dividends per share raised by 14% to 25p * Discretionary funds under management increased by 10% to £5.5 billion (against the backdrop of a falling market) * Continuing recruitment: 16 new investment/trust managers in 2000 and a further 12 to date in 2001 * Strong investment performance from our highly rated Unit Trusts * Acquisition of Nigel Harris Trust Company Limited in April * Winner of 3 awards Micky Ingall, Chairman, commented: 'It is a great pleasure to report another successful year. 2000 was the first year since 1994 in which the main UK equity indices have failed to record an increase. It is therefore particularly creditable to record that during 2000 funds under discretionary management have risen from £5bn to over £5.5bn. The recruitment of new investment managers and new client gains have continued and this fundamental growth underscores our optimism for the medium term.' For further information, please contact: Micky Ingall, Chairman Mark Powell, Group Managing Director Andy Pomfret, Finance Director Rathbone Brothers Plc 020 7399 0000 Lucy Copeman Polhill Communications 020 7369 9333 RATHBONE BROTHERS PLC PRELIMINARY RESULTS ANNOUNCEMENT FOR THE YEAR ENDED 31ST DECEMBER 2000 Chairman's Statement It is a great pleasure to report another successful year for 2000. Profits before tax have risen by 14% to £26.5m and earnings per share by 8%, both figures before amortisation of goodwill, in spite of a fall in the main London market. The final dividend is increased to 15p making a total of 25p for the year, an increase of 14%. Investment Management Rathbones' principal activity is discretionary investment management services for private individuals and their related trusts, pensions and charities. It is forecast that the total number and wealth of 'high net worth individuals' is likely to grow significantly in the next five years and this prediction has attracted a number of major financial institutions to the wealth management market. Rathbones can now claim to be the largest independent, British owned discretionary investment manager, exclusively geared to the needs of the private individual. We believe that our clients are best served by direct contact between client and investment manager. Our commitment to this philosophy has attracted a significant number of investment managers and clients over the last twelve months and this is a continuing process. 2000 was the first year since 1994 in which the main UK equity indices have failed to record an increase. It is therefore particularly creditable to record that during 2000 funds under discretionary management have risen from £ 5bn to over £5.5bn. Notwithstanding the fall in the indices, 2000 has been a testing time for investment management. The first quarter of the year witnessed an unprecedented polarisation of investment performance between the telecom, media and technology (TMT) stocks and the 'old economy' stocks. This trend was exacerbated by the industry's increasing obsession with benchmarks, based on market capitalisation weighted indices. The almost opposite swing in fashion out of technology stocks in the final quarter completed a year of very volatile markets. We are therefore particularly pleased that our investment management services continue to be recognised. The readers of the Investors Chronicle voted Rathbones 'Best Discretionary Portfolio Manager' for the second year running. We have also recently received an award from the PAM Guide to Private Asset Managers, again for the second year running. Unit Trusts In 1999 we embarked on an initiative to promote Rathbone Unit Trusts to a wider audience and this project continued throughout 2000 with significant success. The objective is to promote the Rathbone name and to make our investment services available to a wider spectrum of the community than our traditional investment clients. At the same time, our specialist unit trusts are a suitable vehicle for a proportion of the funds of established clients. The upper quartile investment performance of the majority of our unit trusts represents a valuable shop window of group performance which is difficult to demonstrate with individual private portfolios. Trust At the beginning of April 2000, we announced the acquisition of Nigel Harris Trust Company Limited, a trust company in Jersey. Profits of Nigel Harris for nine months are included in the figures and are earnings enhancing. We now have a staff of over 90 people in Jersey and 35 in Geneva and are seeing a significant growth in the number of new clients. Our Trust business in London has also expanded and, as for Investment Management, the attraction of an independent UK based trust company has been demonstrated by our recruitment in this area. Outlook The year 2000 has been a challenging one for all areas of our business and, for the first time in a number of years, stockmarkets have had a negative effect on our overall results. This weakness has continued through the first quarter of the current year and inevitably affects our revenues in the short term. However, the recruitment of new investment managers and new client gains have continued and this fundamental growth underscores our optimism for the medium term. Directors As noted in my last report, Mark Pearson who was Chairman and Chief Executive of Neilson Cobbold Plc at the time of the acquisition in 1996 and has been on our Board since then, retired on 31st October 2000. We shall greatly miss his participation and input on the Board and Executive Committee. Andrew Morris and Richard Smeeton, investment managers in Liverpool and London respectively, joined the Board and I welcome them. Finally I would like to thank all our staff for their great efforts in 2000 and our clients for their continued support. Micky Ingall Chairman 30th March 2001 Consolidated profit and loss account for the year ended 31st December 2000 1999 Restated 2000 (Note 7) £'000 £'000 Interest receivable - interest receivable and similar income arising from 12,804 6,230 debt securities - other interest receivable and similar income 5,414 7,340 Interest payable (9,131) (4,838) Net interest income 9,087 8,732 Dividend income 57 47 Fees and commissions receivable 68,787 56,839 Fees and commissions payable (4,566) (1,917) Other operating income 1,395 1,439 Operating income 74,760 65,140 - continuing operations 71,253 65,140 - acquisitions 3,507 - Administrative expenses (44,069)(38,392) Depreciation and amortisation (4,528) (3,235) Other operating charges (590) (548) Provisions for bad and doubtful debts (403) (512) Group operating profit before amortisation of goodwill 26,542 23,224 Amortisation of goodwill (1,372) (771) Group operating profit on ordinary activities 25,170 22,453 - continuing operations 23,902 22,453 - acquisitions 1,268 - Tax on Group profit on ordinary activities (8,297) (6,922) Group profit on ordinary activities after tax 16,873 15,531 Dividends (8,993) (7,648) Retained profit for the year 7,880 7,883 Dividends per ordinary share 25p 22p Earnings per ordinary share Basic after goodwill amortisation 47.45p 45.04p Basic before goodwill amortisation 51.31p 47.28p Diluted after goodwill amortisation 46.39p 43.93p Diluted before goodwill amortisation 50.16p 46.11p Consolidated balance sheet as at 31st December 2000 1999 Restated 2000 (Note 7) £'000 £'000 Assets Cash and balances at central banks 18,349 13,915 Settlement balances 26,111 21,998 Loans and advances to banks 40,405 32,285 Loans and advances to customers 32,550 21,416 Debt securities 234,591 128,248 Equity shares 65 65 Intangible fixed assets 29,378 14,860 Tangible fixed assets 7,764 7,069 Other assets 3,582 1,699 Prepayments and accrued income 12,838 11,588 Total assets 405,633 253,143 Liabilities Deposits by banks 3,127 - Customer accounts 289,643 166,689 Settlement balances 13,632 13,886 Other liabilities 11,065 8,498 Accruals and deferred income 4,981 3,589 Provision for liabilities and charges 12,506 9,042 Called up share capital 1,800 1,735 Share premium account 6,156 5,160 Other reserves 23,811 13,803 Profit and loss account 38,912 30,741 Equity shareholders' funds 70,679 51,439 Total liabilities 405,633 253,143 Memorandum items Contingent liabilities 50 1,540 Consolidated cash flow statement for the year ended 31st December 2000 2000 1999 Restated (Note 7) Notes £'000 £'000 £'000 £'000 Net cash inflow from operating 6(i) 144,462 42,539 activities Taxation - UK corporation tax (7,520) (6,556) - overseas tax (193) (618) Net cash outflow for taxation (7,713) (7,174) Capital expenditure and financial investments - purchase of investment securities (1,087,513) (417,390) - proceeds from sale and maturities of 981,170 398,760 investment securities - purchase of tangible fixed assets (3,776) (2,798) - sale of tangible fixed assets 209 144 Net cash outflow for capital expenditure and (109,910) (21,284) financial investments Acquisitions and disposals - acquisitions of subsidiaries (5,328) (864) - net cash acquired with subsidiary 628 - undertakings Net cash outflow for acquisitions and (4,700) (864) disposals Equity dividends paid (8,452) (6,886) Net cash inflow before financing 13,687 6,331 Financing - issue of shares 1,011 683 - capital element of finance lease (44) (41) rental payments Net cash inflow from financing 6(iii) 967 642 Increase in cash in the year 6(ii) 14,654 6,973 Consolidated statement of total recognised gains and losses for the year ended 31st December 2000 2000 1999 £'000 £'000 Profit for the financial year attributable to shareholders 16,873 15,531 Currency adjustments 291 (167) Total recognised gains and losses for the year 17,164 15,364 Reconciliation of movements in shareholders' funds 2000 1999 £'000 £'000 Profit for the financial year attributable to shareholders 16,873 15,531 Dividends (8,993) (7,648) Retained profit for the financial year 7,880 7,883 Currency adjustments 291 (167) Shares issued 65 87 Premium on shares issued 11,004 3,305 Goodwill adjustment - (82) Net addition to shareholders' funds 19,240 11,026 Opening shareholders' funds 51,439 40,413 Closing shareholders' funds 70,679 51,439 Notes to the accounts 1 Segmental information Gross operating Profit before income taxation 1999 1999 Restated Restated 2000 (see below) 2000 (see below) £'000 £'000 £'000 £'000 By class of business: Investment management and banking (see 73,065 61,614 21,549 20,215 note below) Trust services 15,392 10,281 3,621 2,238 88,457 71,895 25,170 22,453 Total assets Net assets 1999 1999 Restated Restated 2000 (see below) 2000 (see below) £'000 £'000 £'000 £'000 By class of business: Investment management and banking (see 358,325 226,550 48,706 35,797 note below) Trust services 47,308 26,593 21,973 15,642 405,633 253,143 70,679 51,439 The Group's banking activity relates entirely to clients in the investment management business and both are treated as one segment for management and internal reporting purposes. Accordingly, in the opinion of the directors, it is more meaningful to present segmental information for these activities on a combined basis. The comparatives have been restated accordingly. Gross operating Profit before income taxation 1999 1999 £'000 £'000 £'000 £'000 By geographical segment: United Kingdom 75,448 63,641 20,546 19,701 Jersey, Switzerland and other 10,862 5,863 3,881 2,283 European countries The Americas 2,147 2,391 743 469 88,457 71,895 25,170 22,453 Total assets Net assets 1999 1999 £'000 £'000 £'000 £'000 By class of business: United Kingdom 355,915 227,189 49,278 39,062 Jersey, Switzerland and other 44,348 22,669 19,304 9,978 European countries The Americas 5,370 3,285 2,097 2,399 405,633 253,143 70,679 51,439 Gross operating income comprises interest receivable, dividend income, fees and commissions receivable and other operating income which arise by geographical segment as follows: Interest Dividend income Fees and Other operating receivable commissions receivable income 2000 1999 2000 1999 2000 1999 2000 1999 £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000 United 17,205 12,629 57 47 56,834 49,530 1,352 1,434 Kingdom Jersey, Switzerland and other European 833 416 - - 9,986 5,444 43 4 countries The 180 525 - - 1,967 1,865 - 1 Americas 18,218 13,570 57 47 68,787 56,839 1,395 1,439 In the opinion of the Directors, there is no material difference between the sales origin and destination of gross operating income and accordingly, the geographic segmental analysis has been prepared on a sales origin basis only. None of the activities were discontinued in the current and previous years. The tables include companies that have joined the Group with effect from the date of their acquisition. Common costs and earnings on shareholders' funds have been allocated on the same basis that is used for internal management reporting. Total assets have been allocated on a legal entity basis, which, in the main, reflects both the 'by class of business' and 'by geographical segment' analyses. 2 Dividends The Board is recommending a final dividend of 15p (1999: 14p) payable on 15th May 2001 to persons on the register on 17th April 2001 and this, together with the interim dividend of 10p (1999: 8p), results in total dividends of 25p (1999: 22p) per ordinary share for the year. 2000 1999 £000 £000 Interim dividend of 10.0p per share on 35,801,385 shares (1999: 8.0p per share on 34,639,555 shares) 3,580 2,771 Final dividend of 15.0p per share on 36,003,418 (1999: 14.0p per share on 34,709,505 shares) 5,400 4,860 Adjustment to previous year's final dividend 14.0p (1999: 12.0p) per share on 94,950 shares (1999: 142,100 13 17 shares) Total dividends - 25.0p per share (1999: 22.0p per share) 8,993 7,648 3 Earnings per share Basic earnings per share has been calculated by dividing the profit for the financial year of £18,245,000 (1999: £16,302,000) before goodwill amortisation and £16,873,000 (1999: £15,531,000) after goodwill amortisation by the weighted average number of shares in issue throughout the year of 35,560,272 (1999: 34,480,634). The directors believe that the provision of additional EPS figures, in particular before goodwill amortisation, is beneficial to the users of the financial statements to understand the performance of the Group. Diluted earnings per share is the basic earnings per share, adjusted for the effect of contingently issuable shares and conversion into fully paid shares of the weighted average number of all employee share options during the year. The average fair value of one ordinary share during 2000 was £9.93 (1999: £ 7.74) and the average exercise price for shares under option during 2000 was £ 6.34 (1999: £4.92). 2000 1999 Weighted average number of ordinary shares in issue during the year - basic 35,560,272 34,480,634 Effect of ordinary share options 484,043 420,345 Weighted average number of contingently issuable ordinary shares during the year 325,949 453,924 Diluted ordinary shares 36,370,264 35,354,903 4 Intangible fixed assets £'000 Cost at 1st January 2000 15,705 Additions/(disposals) (Note 5) 15,890 Cost at 31st December 2000 31,595 Amortisation at 1st January 2000 845 Charge for the year 1,372 Amortisation at 31st December 2000 2,217 Net book value at 31st December 2000 29,378 Net book value at 31st December 1999 14,860 Intangible fixed assets comprise purchased goodwill arising on acquisitions of subsidiary undertakings and purchases of businesses since 1st January 1998. Previously, goodwill arising on acquisitions of subsidiary undertakings and purchases of businesses was taken directly to reserves. The cumulative amount of goodwill taken to merger reserve in previous periods by the Group and not subsequently recognised in the profit and loss account except on disposals is £42,182,000. Goodwill included above in respect of all material acquisitions is currently being amortised over a period of 20 years being the estimated useful life. 5 Acquisitions On 1st April 2000, the Group acquired Nigel Harris Trust Company Limited, a Jersey based trust services company. The total consideration payable comprised initial and deferred contingent consideration and is capped at £15m. The initial part of the consideration of £9,945,000 and the vendor placing costs were satisfied by the issue of 996,930 ordinary shares at an average allotment price of 1,008.95p on 1st April 2000 pursuant to an agreement on that date. The deferred contingent consideration payable is two and a half times the profit after tax for Nigel Harris Trust Company Limited for the year ended 31 December 2000 subject to the cap referred to above. As at 31st December 2000, the deferred consideration payable is estimated by the directors to be £ 4,414,000. The deferred contingent consideration payable in respect of last year's acquisition of Rathbone Jersey Limited (formerly Curzon Secretaries & Trustees Limited), estimated at £3,057,000 as at 31st December 1999, was finalised at £ 3,379,000 which, including additional costs of £34,000, has resulted in an increase to goodwill on consolidation of £356,000. During the year, an amount of £1,596,000 was paid in cash in consideration for the goodwill of a UK based trust services company and a further amount of £ 45,000 was paid in cash in relation to an acquisition made in 1999. Nigel Harris Trust Company Limited Other Total £'000 £'000 £'000 Consideration paid Acquisition costs 275 34 309 Issue of 996,930 new ordinary shares of 10,058 - 10,058 5p Deferred contingent consideration 4,414 4,414 Cash consideration - 1,963 1,963 Total consideration 14,747 1,997 16,744 Net assets acquired Loans and advances to banks 628 - 628 Tangible fixed assets 235 - 235 Other assets 1,259 - 1,259 Total assets 2,122 - 2,122 Liabilities (465) - (465) Net assets on acquisition date 1,657 - 1,657 Fair value adjustments Fixed assets (58) - (58) Work in progress (154) - (154) Deferred tax provision (554) - (554) Provision for liabilities and charges (37) - (37) Total fair value adjustments (803) - (803) Adjusted net assets acquired 854 - 854 Goodwill arising on acquisition 13,893 1,997 15,890 The acquisitions during the year have contributed to the financial results of the Group as follows: Nigel Harris Trust Company Limited Other Total £'000 £'000 £'000 Other interest receivable and similar 181 - 181 income Interest payable (133) - (133) 48 - 48 Fees and commissions payable (383) - (383) Fees and commissions receivable 3,547 288 3,835 Other operating income 7 - 7 Operating income 3,219 288 3,507 Administrative expenses (1,429) (165) (1,594) Depreciation and amortisation (608) (47) (655) Provisions for bad and doubtful debts 10 - 10 Profit on ordinary activities before tax 1,192 76 1,268 6 Group cash flow statement (i) Reconciliation of operating profit to net cash inflow from operating activities 1999 Restated 2000 (Note 7) £'000 £'000 Operating profit 25,170 22,453 Profit on disposal of tangible fixed assets (119) (100) Depreciation and amortisation 4,528 3,235 Provision for bad and doubtful debts 403 512 Increase in accrued income and prepayments (1,334) (3,132) Increase in provision for liabilities and charges 1,039 - Increase/(decrease) in accruals and deferred income 1,399 (204) Net cash inflow from trading activities 31,086 22,764 Net increase in loans and advances to banks and customers (9,774) (11,415) Net increase in settlement debtor balances (4,113) (5,585) Net (decrease)/increase in settlement creditor balances (238) 3,405 Net increase in deposits by banks and customer accounts 126,721 31,445 Net increase in other liabilities 1,391 376 Net (increase)/decrease in other assets (611) 1,549 Net cash inflow from operating activities 144,462 42,539 (ii) Analysis of the balances of cash as shown in the balance sheet At 1st At 31st January Cash Non-cash Exchange December 2000 flow changes movements 2000 £'000 £'000 £'000 £'000 £'000 Cash and balances at central banks 13,915 4,583 - (149) 18,349 Loans and advances to banks repayable on demand 18,365 10,071 - (50) 28,386 Total 32,280 14,654 - (199) 46,735 The Group is required to maintain a balance with the British Virgin Islands government which, at 31st December 2000, amounted to £335,000 (1999: £ 308,000). (iii) Analysis of changes in financing Share Share Finance capital premium leases £'000 £'000 £'000 Balance at 1st January 2000 1,735 5,160 44 Cash inflow/(outflow) 15 996 (44) Other movement 50 - - Balance at 31st December 2000 1,800 6,156 - (iv) Acquisition of subsidiary undertaking The effects of the acquisition of Nigel Harris Trust Company Limited on 1st April 2000 are set out in Note 5. Nigel Harris Trust Company Limited contributed £1,711,000 to the Group's net operating cashflows and utilised £24,000 for capital expenditure. (v) Major non-cash transactions The consideration for the purchase of Nigel Harris Trust Company Limited included shares - see Note 5. 7 Comparative figures The accounts for this year have been drawn up in accordance with the special provisions of Part VII Chapter II of the Companies Act 1985 relating to banking groups. The Group is defined as a banking group given most of its activities are now conducted through Rathbone Investment Management Limited, an authorised institution under the Banking Act 1987. The comparatives have been restated accordingly. 8 Financial information The financial information set out in this preliminary announcement has been extracted from the Group's accounts which have been approved by the Board of Directors. The financial information set out above does not constitute the Company's statutory accounts for the year ended 31st December 2000 or 1999. Statutory accounts for 1999 have been delivered to the Registrar of Companies and those for 2000 will be delivered following the Company's Annual General Meeting. The auditors have reported on those accounts. Their reports were unqualified and did not contain statements under section 237(2) or (3) of the Companies Act 1985.

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