Final Results - Year Ended 31 December 1999

Rathbone Brothers PLC 30 March 2000 RATHBONES EARNINGS PER SHARE INCREASED BY 20% Rathbone Brothers Plc ('Rathbones'), which has £5 billion of investors funds under discretionary management, announces preliminary results for the year ended 31 December 1999 (year ended 31 December 1998). The highlights are: - Pre-tax profit (before goodwill amortisation) increased by 29% to £23.2m (£18.1m) - Earnings per share (before goodwill amortisation) increased by 20% to 47.28p (39.55p) - Total dividends per share raised by 16% to 22p net (19p net) - Acquisition in Jersey successfully integrated - Discretionary funds under management increased by 22% to £5 billion Micky Ingall, Chairman commented: 'No significant acquisitions have taken place during the course of 1999 and the figures therefore represent a year of solid achievement.' 'These fast changing markets give further weight to our belief that discretionary investment management is by far the most effective way to manage the investment affairs of private clients.' 'The Curzon Acquisition made in December 1998 has fully lived up to expectations and has significantly strengthened services available from the Trust Division in the Channel Islands.' For further information please contact: Micky Ingall, Chairman Hamish McFall Andy Pomfret, Finance Director Tavistock Communications Limited Rathbone Brothers Plc Tel: 020 7600 2288 Tel: 020 7399 0000 CHAIRMAN'S STATEMENT It is a great pleasure to report another successful year for 1999. Pre-tax profits have risen by 29% to £23.2m and earnings per share by 20% to 47.3p both figures before amortisation of goodwill. The final dividend is increased to 14p, making a total of 22p for the year, an increase of 16%. No significant acquisitions have taken place during the course of 1999 and the figures therefore represent a year of solid achievement. Investment Management The Group's principal business activity is the provision of private client investment management services and funds under discretionary management have now increased to £5bn. The Group's policy of moving progressively towards fee based services rather than commission income continues to improve the quality and reliability of Group revenues. The high level of dealing activity seen in some areas of retail stockbroking does not therefore have a significant impact on the Group. The first nine months of 1999 saw relatively buoyant stock markets in the UK with, in particular, a welcome out-performance by small companies relative to larger ones. Small companies have suffered many years of under-performance and this trend appears to have been reversed. However, markets are always changing and the final quarter of the year was characterised by an unprecedented boom in technology and other related stocks accompanied by a severe mark down of old economy stocks. Whilst this has been an extremely exciting market in which to participate, it has at the same time presented significant difficulties in the management of portfolios requiring even a modest level of yield. These fast changing markets give further weight to our belief that discretionary investment management is by far the most effective way to manage the investment affairs of private clients. April 1999 marked the launch of the new Individual Savings Account (ISA) replacing the Personal Equity Plan (PEP). It is difficult to see how the ISA as finally constituted is in any way superior to its predecessors and enormous effort has been required by everybody in the industry to implement what appears to be an unnecessary change. Nevertheless, ISAs are an important tax saving vehicle for our clients and as at 31 December 1999 we had £40m invested in this medium whilst retaining £715m in the old PEP accounts. Unit Trusts Building on the excellent performance of our stable of unit trusts, we have decided to market them to a wider audience. They have been rebadged 'Rathbone Unit Trusts' and a significant marketing initiative has been undertaken to promote them in particular to the IFA market. Funds under management in this division have more than doubled, much assisted by the Rathbone Technology Fund launched in May 1999, which has had a spectacular performance in a very favourable market. Trust 1999 marked the first full year that Rathbone Jersey Limited (formerly Curzon Secretaries & Trustees Limited) has been included in the Rathbone Group. This acquisition made in December 1998 has fully lived up to expectations and has significantly strengthened the services available from the Trust Division in the Channel Islands. Following this acquisition, our Trust business accounts for 12% of Group pre-tax profits. Trust services are an excellent complement to investment management providing significant opportunities for business referral and also a stable source of revenue largely unconnected with stock market movements. Technology Over the past two years we have been implementing a comprehensive upgrade of all our computer systems, with a view to all investment management clients being managed from a single integrated computer system. The first stage of this process is largely complete and will be followed by further enhancements including internet access. Our objective is to improve office efficiency and client communications in our principal service of discretionary investment management. Directors Andy Pomfret was appointed Finance Director in September 1999. He joined us from Kleinwort Benson Private Bank and we are already benefiting from his expertise. In June 1999, Giles Coode-Adams was appointed to the Board as a non-Executive Director. He had spent 40 years with Lehman Brothers and its predecessor companies as a stockbroker and investment banker. We are pleased to have the benefit of his broad experience. Ian Harvey retired as Finance Director in September 1999 and I would like to pay tribute to him for his enormous contributions to the Group during the 18 years of his service. 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, has decided to retire with effect from 30 November 2000. We shall greatly miss his participation and input on the Board and the Executive Committee. You will note that Oliver Stanley, my predecessor as Chairman, is not seeking re-election at the Annual General Meeting. It is difficult to adequately describe Oliver's contribution to our Company. He founded Comprehensive Financial Services Limited in 1971 and until his retirement from executive duties in 1996 he played a pre-eminent role in our development. Since then, we have been fortunate to retain his services in a non-executive capacity but all good things come to an end and as he approaches his 75th birthday, he has decided to fully retire. It has been a great privilege to work with him over the last 15 years and we on the Board will miss his advice and support. Finally, I would like to thank all our staff for their great efforts in 1999 and our clients for their continued support. Consolidated profit and loss account Year ended 31st December 1999 1999 1998 Restated (see note 4) £'000 £'000 Turnover - Continuing Operations 71,895 61,982 Operating Costs (49,442) (43,993) Operating profit being profit on ordinary 22,453 17,989 activities before taxation Tax on profit on ordinary activities (6,922) (5,766) Profit for the financial year attributable to shareholders 15,531 12,223 DIVIDENDS (7,648) (6,304) RETAINED PROFIT FOR THE YEAR 7,883 5,919 Dividends per ordinary share 22p 19p Earnings per ordinary share Basic after goodwill amortisation 45.04p 39.31p Basic before goodwill amortisation 47.28p 39.55p Diluted after goodwill amortisation 43.93p 36.97p Diluted before goodwill amortisation 46.11p 37.19p Consolidated balance sheet 31st December 1999 1999 1998 Restated (see note 4) £'000 £'000 Fixed assets Intangible assets 14,860 14,423 Tangible assets 7,069 6,791 Investments 65 65 21,994 21,279 CURRENT ASSETS WORK IN PROGRESS 436 402 DEBTORS 56,265 44,985 INVESTMENTS 128,248 109,618 CASH AND SHORT TERM DEPOSITS 46,200 33,434 231,149 188,439 CREDITORS: AMOUNTS FALLING DUE WITHIN ONE YEAR (197,672) (162,542) NET CURRENTS ASSETS 33,477 25,897 TOTAL ASSETS LESS CURRENT LIABILITIES 55,471 47,176 CREDITORS: AMOUNTS FALLING DUE AFTER MORE THAN ONE YEAR (310) (449) PROVISIONS FOR LIABILITIES AND CHARGES (3,722) (6,314) TOTAL NET ASSETS 51,439 40,413 CAPITAL AND RESERVES CALLED UP SHARE CAPITAL 1,735 1,648 SHARE PREMIUM ACCOUNT 5,160 4,488 OTHER RESERVES 13,803 11,252 PROFIT AND LOSS ACCOUNT 30,741 23,025 EQUITY SHAREHOLDERS' FUNDS 51,439 40,413 Consolidated cash flow statement Year ended 31st December 1999 1999 1999 1998 1998 Restated £'000 £'000 £'000 £'000 Net cash inflow from 49,296 54,692 operating activities Taxation - UK Corporation tax (6,556) (3,793) - Overseas tax (618) (107) (7,174) (3,900) Capital expenditure - Purchase of tangible fixed assets (2,798) (2,911) - Sale of tangible fixed assets 144 1,428 Net cash outflow for capital expenditure (2,654) (1,483) Acquisitions and disposals - Acquisitions of subsidiaries (864) (1,300) - Net cash acquired with subsidiary undertakings - 629 Net cash outflow for acquisitions and disposals (864) (671) Equity dividends paid (6,886) (4,880) Net cash inflow before use of liquid resources and financing 31,718 43,758 Management of liquid resources - Increase in current asset (18,630) (42,145) investments - (Increase)/decrease (6,757) 4,189 in short term deposits (25,387) (37,956) Financing - Issue of shares 683 1,029 - Repayment of secured loan - (1,500) - Capital element of finance lease rental payments (41) (31) Net cash inflow/(outflow) 642 (502) from financing Increase in cash in 6,973 5,300 the year Consolidated statement of total recognised gains and losses Year ended 31st December 1999 1999 1998 £'000 £'000 Profit for the financial year attributable to shareholders 15,531 12,223 Currency adjustments (167) 22 Total recognised gains and losses for the financial year 15,364 12,245 RECONCILIATIONS OF MOVEMENTS IN SHAREHOLDERS' FUNDS Group Group Company Company 1999 1998 1999 1998 Restated £'000 £'000 £'000 £'000 Profit for the financial year attributable To shareholders 15,531 12,223 8,751 6,974 Dividends (7,648) (6,304) (7,648) (6,304) Retained profit for the financial year 7,883 5,919 1,103 670 Currency adjustments (167) 22 - - Shares issued 87 210 87 210 Premium on shares issued 3,305 9,191 672 1,012 Goodwill adjustment (82) (124) - - Net addition to shareholders' funds 11,026 15,218 1,862 1,892 Opening shareholders' funds 40,413 25,195 9,706 7,814 Closing shareholders' funds 51,439 40,413 11,568 9,706 Notes to Accounts 1. Segmental information TURNOVER PROFIT BEFORE TAXATION 1999 1998 1999 1998 Restated £'000 £'000 £'000 £'000 By class of business: Investment management 53,455 47,758 18,188 14,827 Banking 8,159 6,941 1,480 1,237 Trust services 10,281 7,283 2,785 1,925 71,895 61,982 22,453 17,989 TOTAL ASSETS NET ASSETS 1999 1998 1999 1998 Restated £'000 £'000 £'000 £'000 By class of business: Investment management 63,465 51,626 30,239 21,551 Banking 163,085 131,601 12,878 9,555 Trust services 26,593 26,491 8,322 9,307 253,143 209,718 51,439 40,413 TURNOVER PROFIT BEFORE TAXATION 1999 1998 1999 1998 Restated £'000 £'000 £'000 £'000 By geographical segment: United Kingdom 63,641 57,038 19,701 16,606 Switzerland and other European countries 5,863 3,154 2,283 736 The Americas 2,391 1,790 469 647 71,895 61,982 22,453 17,989 TOTAL ASSETS NET ASSETS 1999 1998 1999 1998 Restated £'000 £'000 £'000 £'000 ------ ------ ------ ------ By geographical segment: United Kingdom 227,189 180,388 39,062 29,579 Switzerland and other European countries 22,669 24,526 9,978 7,819 The Americas 3,285 4,804 2,399 3,015 253,143 209,718 51,439 40,413 The Group turnover comprises interest receivable, fees and commissions receivable and other operating income and arises by segment as follows: Fees and Other operating Interest commissions Income receivable receivable 1999 1998 1999 1998 1999 1998 Restated £'000 £'000 £'000 £'000 £'000 £'000 ------ ------ ------ ------ ------ ------ United Kingdom 12,629 13,096 49,530 42,868 1,481 1,074 Kingdom Switzerland and other European countries 416 496 5,444 2,655 4 3 The Americas 525 562 1,865 1,225 1 3 13,570 14,154 56,839 46,748 1,486 1,080 The Group interest income receivable included in Group turnover comprises: 1999 1998 Restated £'000 £'000 Gross interest earned on own funds and banking activities 9,488 9,897 Net interest earned on client money accounts 4,082 4,257 13,570 14,154 It is the opinion of the Directors that there is no material difference between the sales origin and destination of turnover with regard to geographical segment. None of the activities was discontinued in the above two financial years. The tables include companies joining the Group with effect from their dates of acquisition. 2. Dividends The Board is recommending a final dividend of 14p per ordinary share (1998: 12p) payable on 17 May 2000 to shareholders on the register as at 14 April 2000, which, with the interim dividend of 8p (1998: 7p) makes 22p for the year (1998: 19p). 1999 1998 £'000 £'000 Adjustment to 1998 final dividend 12.0p per share on 142,100 shares 17 - Interim dividend of 8.0p per share on 34,639,555 shares (1998: 7.0p per share on 31,520,878 shares) 2,771 2,206 Final Dividend of 14.0p per share on 34,709,505 shares (1998: 12.0p per share on 34,145,994) shares 4,860 4,098 Total dividends - 22.0p per share (1998: 19.0p per share) 7,648 6,304 3. Earnings per share Basic earnings per share has been calculated by dividing the profit for the financial year of £16,302,000 (1998: £12,297,000) before goodwill amortisation and £15,531,000 (1998: £12,223,000) after goodwill amortisation by the weighted average number of shares in issue throughout the year of £34,480,634 (1998: 31,091,573). The directors believe that the provisions 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 1999 was £7.74 (1998: £5.34) and the average exercise price for shares under option during 1999 was £4.92 (1998: £3.32) 1999 1998 Weighted average number of ordinary shares in issue during the year-basic 34,480,634 31,091,573 Effect of ordinary share options 420,345 408,346 Weighted average number of contingently issueable ordinary shares during the year 453,924 1,563,103 Diluted ordinary shares 35,354,903 33,063,022 4. Restatement of 1998 figures The consolidated profit and loss account and balance sheet have been restated for the period ended 31st December 1998 to include Rathbone International Finance BV, a quasi subsidiary incorporated in the Netherlands, from 1st January 1998. The quasi subsidiary provides back to back loan facilities for Rathbones' clients. The inclusion of this quasi subsidiary has no impact on the results or net assets of the Group but increases current assets and current liabilities by £9,403,000 at 31st December 1998 and turnover and operating costs by £436,000 for the year to 31st December 1998. The balance sheet comparatives have also been restated to take account of Section 131 merger relief which should have been taken last year in respect of the acquisitions of Rathbone Jersey Limited (formerly Curzon Secretaries & Trustees Limited) and Albyn Investments Limited. The effect of the restatement is the reclassification of £5,838,000 from the share premium account to other reserves. This restatement has no effect on the net assets of the Group. 5. Intangible fixed assets Goodwill arising on acquisitions Group Company 1999 1999 £'000 £'000 Cost at 1 January 1999 14,497 - Additions 1,208 764 Cost at 31 December 1999 15,705 764 Amortisation at 1 January 1999 74 - Charge for the year 771 3 Amortisation at 31 December 1999 845 3 Net book value at 31 December 1999 14,860 761 Net book value at 1 January 1999 14,423 - Intangible fixed assets comprise purchased goodwill arising on acquisitions of subsidiary undertakings and purchases of businesses since 1 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 the 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. The Company paid £764,000 on 6 December 1999 in consideration for the businesses of Keith Clayton and Ann Cochrane. There is no profit or loss from these business acquisitions included in the consolidated profit for the year. 6. Group Cash Flow Statement 1999 1998 Restated £'000 £'000 Reconciliation of operating profit to net cash inflow from operating activities Operating profit 22,453 17,989 Profit on disposal of fixed assets (100) (157) Depreciation charges 2,464 1,884 Amortisation of goodwill 771 74 Increase in debtors (11,280) (10,789) Increase in work in progress (34) (155) Increase in creditors 35,022 45,846 Net cash inflow from operating activities 49,296 54,692 1999 1998 Restated £'000 £'000 Reconciliation of net cash flow to movement in net funds Increase in cash for the year 6,973 5,300 Exchange movements 69 (33) Finance charges on leases (4) (10) Changes in net debt resulting from cash flows 45 31 Movement in net funds in the year 7,083 5,288 Net funds at beginning of year 24,845 19,557 NET FUNDS AT END OF YEAR 31,928 24,845 ANALYSIS OF NET FUNDS At 1 January Cash Non- Exchange At 31 Flow Cash Movements December 1999 Changes 1999 £'000 £'000 £'000 £'000 £'000 Cash 25,963 5,940 - 69 31,972 Overdrafts (1,033) 1,033 - - - Net cash 24,930 6,973 - 69 31,972 Finance leases (85) 45 (4) - (44) Total 24,845 7,018 (4) 69 31,928 Cash and short term deposits in the balance sheet of £46,200,000 (1998: £33,434,000) comprise cash of £31,972,000 (1998: £25,963,000) and short term deposits of £14,228,000 (1998: £7,471,000) ANALYSIS OF CHANGES IN FINANCING SHARE SHARE FINANCE CAPITAL PREMIUM LEASES Restated £'000 £'000 £'000 Balance at 1 January 1999 1,648 4,488 85 Cash inflow/(outflow) 11 672 (45) Other movements 76 - 4 Balance at 31 December 1999 1,735 5,160 44 7. Financial Information The financial information set out in this preliminary announcement has been extracted from the Group's accounts which have today 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 31 December 1999 or 1998. Statutory accounts for 1998 have been delivered to the Registrar of Companies, and those for 1999 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) of (3) of the Companies Act 1985.

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