Interim Results

Rathbone Brothers PLC 7 September 2000 RATHBONE BROTHERS PLC INTERIM RESULTS Rathbone Brothers Plc ('Rathbones'), the investment management and private client services Group with £5 billion of investors funds under discretionary management, announces interim results for the six months ended 30 June 2000. Interim Results for the Six Months Ended 30 June 2000 Highlights: Turnover up by 24% to £44.9m (£36.3m) Pre-tax profits (before goodwill amortisation) up 22% to £14.2m (£11.6m) Earnings per share (before goodwill amortisation) up 20% to 27.76p per share (23.20p) Interim dividend up 25% to 10p per share (8p) Discretionary funds under management up 11% to £5 billion (£4.5 billion) Significant recruitment: 19 new investment and trust managers have joined the Group Commenting on these interim results, Micky Ingall, Chairman, said: 'Rathbones continues to grow both organically and by acquisition, and we see significant further opportunities in our chosen field of providing investment management and trust services to the private individual. 'The second half has started well and I look forward to another year of good progress.' For further information, please contact: Micky Ingall, Chairman Mark Powell, Group Managing Director Andy Pomfret, Finance Director Rathbone Brothers Plc 020 7399 0000 Julian Polhill Lucy Copeman Polhill Communications 020 7369 9333 Chairman's statement I am pleased to report another successful trading period for the first half of 2000. Pre-tax profits of £14.2m and earnings per share of 27.76p (both figures before goodwill amortisation) have risen by 22% and 20% respectively. The interim dividend is raised to 10p per share, an increase of 25%. The first half of 2000 has been a period of high volatility for UK stockmarkets with the FTSE 100 share index down nearly 10% from its peak at the end of 1999. This fall, though in itself significant, disguises a far greater volatility in the performance of individual sectors of the market. The first quarter was characterised by a boom in Telecom, Media and Technology (TMT) stocks at the expense of the old economy followed by an equally violent reversal of these sectors' performances in the second quarter. As I pointed out in my annual statement in March the high level of dealing activity seen in some areas of retail stockbroking in the first quarter of the year has little significant effect on our investment management activities. Therefore I view the profit performance and the maintenance of discretionary funds under management above £5bn with satisfaction. The first half of 2000 has been a period of significant recruitment in both the investment management and trust operations and this has continued into the second half. Some nineteen new investment and trust managers have joined the Group this year in the UK. At the beginning of April we announced the acquisition of Nigel Harris Trust Company Limited, a trust company in Jersey for a maximum consideration of £15m payable in shares. Included in these interim figures is a contribution to group pre-tax profits (before goodwill amortisation) of £474,000 from Nigel Harris which is above budget and is earnings enhancing in the context of the Group. Rathbones continues to grow both organically and by acquisition, and we see significant further opportunities in our chosen field of providing investment management and trust services to the private individual. The second half has started well and I look forward to another year of good progress. Micky Ingall Chairman 6th September 2000 Unaudited consolidated profit and loss account For the six months ended 30th June 2000 Six months Six months Year ended ended ended 30th June 30th June 31st 2000 1999 December Unaudited Unaudited 1999 £'000 £'000 Audited £'000 Turnover - continuing operations 43,854 36,307 71,895 - acquisitions 1,075 - - 44,929 36,307 71,895 Operating costs (31,310) (25,059) (49,442) Operating profit before goodwill amortisation 14,182 11,617 23,224 Goodwill amortisation (563) (369) (771) Operating profit being profit on ordinary activities before taxation - continuing operations 13,324 11,248 22,453 - acquisitions 295 - - 13,619 11,248 22,453 Tax on profit on ordinary (4,396) (3,543) (6,922) activities Profit for the period attributable to 9,223 7,705 15,531 shareholders Dividends (3,580) (2,786) (7,648) Retained profit for the 5,643 4,919 7,883 period Basic earnings per ordinary share - before goodwill 27.76p 23.20p 47.28p amortisation - after goodwill 26.16p 22.47p 45.04p amortisation Diluted earnings per share - before goodwill 27.24p 22.94p 46.11p amortisation - after goodwill 25.67p 22.21p 43.93p amortisation Unaudited consolidated balance sheet 30th June 2000 30th June 30th June 31st 2000 1999 December Unaudited Unaudited 1999 Restated Audited (Note 3) £'000 £'000 £'000 Fixed assets Intangible assets 28,566 14,120 14,860 Tangible assets 8,368 6,753 7,069 Investments 65 65 65 36,999 20,938 21,994 Current assets Work in progress 1,589 469 436 Debtors 67,829 56,679 56,265 Investments 244,301 104,791 128,248 Cash and short term 40,773 33,222 46,200 deposits 354,492 195,161 231,149 Creditors: amounts falling due (319,284) (163,833) (197,672) within one year Net current assets 35,208 31,328 33,477 Total assets less current 72,207 52,266 55,471 liabilities Creditors: amounts falling due after more than one (313) (206) (310) year Provision for liabilities (4,172) (3,630) (3,722) and charges Net assets 67,722 48,430 51,439 Capital and reserves Called up share capital 1,790 1,732 1,735 Share premium account 5,457 4,940 5,160 Other reserves 23,811 13,803 13,803 Profit and loss account 36,664 27,955 30,741 Equity shareholders' funds 67,722 48,430 51,439 Approved by the Board on 6th September 2000 Statement of total group recognised gains and losses Reconciliation of movements in equity shareholders' funds For the six months ended 30th June 2000 Statement of total group recognised gains and losses Six months Six months Year ended ended ended 30th June 30th June 31st 2000 1999 December Unaudited Unaudited 1999 £'000 £'000 Audited £'000 Profit for the period attributable 9,223 7,705 15,531 to equity shareholders Currency adjustments 280 11 (167) Total group recognised gains and losses for the 9,503 7,716 15,364 period Reconciliation of movements in equity shareholders' funds Six months Six months Year ended ended ended 30th June 30th June 31st 2000 1999 December Unaudited Unaudited 1999 £'000 £'000 Audited £'000 Profit for the period attributable 9,223 7,705 15,531 to equity shareholders Dividends (3,580) (2,786) (7,648) Retained profit for the 5,643 4,919 7,883 period Currency adjustments 280 11 (167) Shares issued 55 84 87 Premium on shares issued 10,305 3,085 3,305 Goodwill adjustment in respect - (82) (82) of earlier acquisitions Net addition to equity shareholders' funds 16,283 8,017 11,026 Opening equity 51,439 40,413 40,413 shareholders' funds Closing equity 67,722 48,430 51,439 shareholders' funds Consolidated cash flow statement For the six months ended 30th June 2000 Six months Six months Year ended ended ended 30th June 30th June 31st 2000 1999 December Unaudited Unaudited 1999 £'000 £'000 Audited £'000 Net cash inflow from operating activities 123,111 1,373 49,296 Taxation -UK Corporation tax (2,261) (95) (6,556) -Overseas tax (241) (250) (618) (2,502) (345) (7,174) Capital expenditure - Purchase of tangible (2,633) (1,526) (2,798) fixed assets - Sale of tangible fixed 149 72 144 assets Net cash outflow for capital expenditure (2,484) (1,454) (2,654) Acquisitions and disposals - Acquisition of (5,226) (89) (864) subsidiaries - Net cash acquired with subsidiary undertakings 628 - - Net cash outflow for (4,598) (89) (864) acquisitions Equity dividends paid (4,860) (4,115) (6,886) Cash inflow/(outflow) before use of liquid 108,667 (4,630) 31,718 resources and financing Management of liquid resources - (Increase)/Decrease in current asset investments (116,053) 4,827 (18,630) - Decrease/(Increase) in short term deposits 7,423 (1,871) (6,757) (108,630) 2,956 (25,387) Financing - Issue of shares 302 460 683 - Capital element of financial lease rental (32) (15) (41) payments Net cash inflow from 270 445 642 financing Increase/(Decrease) in cash in the period 307 (1,229) 6,973 Notes to the Interim Accounts For the six months ended 30th June 2000 1. Basis of preparation The unaudited interim financial information, which has been approved by the Board of Directors, has been prepared on the basis of accounting policies set out in the Group's accounts for the year ended 31st December 1999. The comparative balance sheet figures as at 30th June 1999 have been restated as described in note 3 below. The Group's accounts for the year ended 31st December 1999 have been reported on by the auditors and delivered to the Registrar of Companies. The report of the auditors was unqualified and did not contain a statement under section 237(2) or (3) of the Companies Act 1985. 2. Basis of consolidation The consolidated accounts are based on the accounts of Rathbone Brothers Plc, its subsidiary undertakings and its quasi subsidiary made up to 30th June. The consolidated profit and loss account includes the results of subsidiary undertakings acquired during the period from the effective date of acquisition. 3. Merger Relief The unaudited consolidated balance sheet comparatives as at 30th June 1999 have been restated to take account of Section 131 merger relief which should have been taken in 1998 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 £8,471,000 from the share premium account to other reserves. This restatement has no effect on the net assets of the Group as at 30th June 1999. 4. Investments The Group has acquired a holding of 200,000 shares in the London Stock Exchange which is included in the balance sheet at a cost of £nil. 5. Goodwill Purchased goodwill arising on consolidation in respect of acquisitions before 1st January 1999, when FRS 10 Goodwill and intangible assets was adopted, was written off to reserves in the year of acquisition. Purchased goodwill (representing the excess of the fair value of the consideration given over the fair value of the separable net assets acquired) arising on consolidation in respect of acquisitions since 1st January 1999 is capitalised. Positive goodwill is amortised to nil by equal annual instalments over its estimated useful life, normally 20 years. Such goodwill is subject to periodic review for impairment in accordance with FRS 11: Impairment of tangible fixed assets and goodwill. 6.Acquisitions The acquisitions in the six month period to 30th June 2000 have contributed to the Group's financial results as follows: £'000 Turnover 1,075 Profit before taxation (before goodwill 474 amortisation) The total consideration payable in respect of the acquisition of Nigel Harris Trust Company Limited comprises initial and deferred contingent consideration and is capped at £15m. The initial part of the consideration, £9,945,000, together with the vendor placing costs was satisfied by the issue of 996,930 ordinary shares at an average allotment price of 1008.95p on 1st April 2000 pursuant to an agreement on that date. The deferred contingent consideration estimated by the directors to be £3,449,000 will be determined by the profit after tax for the year ending 31st December 2000. The net assets acquired with the acquisition of Nigel Harris Trust Company Limited were as follows: £'000 Fixed assets Tangible assets 177 Current assets Work in progress 743 Debtors 542 Cash at bank 628 Total assets 2,090 Liabilities (682) Net assets 1,408 Goodwill arising on 12,324 acquisition Fair value of consideration 13,732 Comprising: Acquisition costs 225 New ordinary shares of 5p 10,058 Deferred contingent 3,449 consideration 13,732 The Group paid £1,544,000 in cash on the 13th June 2000 in consideration for the goodwill of the business of Nigel Packer & Company. 7. Turnover All amounts derive from continuing activities. 8. Taxation The interim taxation charge is calculated by applying the Directors' best estimate of the effective annual corporation tax rate (31% (1999: 31.5%)) to the profit for the period. 9.Earnings per ordinary share The calculation of basic earnings per share is based on profit after taxation, before dividends, for each period and 35,249,967 ordinary shares at 30th June 2000, 34,480,634 ordinary shares at 31st December 1999, and 34,296,278 ordinary shares at 30th June 1999, where this is the weighted average number of ordinary shares in issue during the relevant period. The directors believe that the provision of additional EPS figures, in particular before goodwill amortisation, is beneficial to the users of these interim accounts 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 in relation to deferred consideration for the acquisition of subsidiary undertakings and employee share options remaining capable of exercise weighted for the relevant periods. The directors believe that the contingently isssuable shares as part of the total consideration for the acquisition of Nigel Harris Trust Company Limited will be earnings enhancing. Six months Six months Year ended ended ended 30th June 30th June 31st 2000 1999 December 1999 Weighted average number of ordinary shares in 35,249,967 34,296,278 34,480,634 issue during the period Effect of ordinary share 503,367 396,310 420,345 options Weighted average number of contingently issuable ordinary shares during 174,491 - 453,924 the period Diluted ordinary shares 35,927,825 34,692,588 35,354,903 10.Dividend per share The directors have declared an interim dividend of 10p (1999: 8p) per share amounting to £3,580,000 (1999: £2,786,000) payable on 10th October 2000 to shareholders on the register at the close of business on 22nd September 2000. 11.Provisions for liabilities and charges Six months Six months Year ended ended ended 30th June 30th June 31st 2000 1999 December £'000 £'000 1999 £'000 Contingent consideration on acquisition of - Rathbone Jersey - 2,690 3,057 Limited - Nigel Harris Trust 3,449 - - Company Limited 723 940 665 Deferred taxation 4,172 3,630 3,722 12. Consolidated Cash Flow Statement (i)Reconciliation of operating profit to net cash inflow from operating activities Six months Six months Year ended ended ended 30th June 30th June 31st 2000 1999 December £'000 £'000 1999 £'000 Operating profit 13,619 11,248 22,453 Profit on disposal of (88) (54) (100) fixed assets Depreciation charges 1,460 1,538 2,464 Amortisation of goodwill 563 369 771 Increase in debtors (10,632) (11,694) (11,280) Increase in work in (421) (67) (34) progress Increase in creditors 118,610 33 35,022 Net cash inflow from 123,111 1,373 49,296 operating activities (ii) Reconciliation of net cash flow to movement in net funds Six months Six months Year ended ended ended 30th June 30th June 31st 2000 1999 December £'000 £'000 1999 £'000 Increase/(Decrease) in cash 307 (1,229) 6,973 for the period Exchange movements 92 179 69 Finance charges on leases (1) (3) (4) Changes in net debt resulting 33 15 45 from cash flows Movement in net funds in the 431 (1,038) 7,083 period Net funds at beginning of 31,928 24,845 24,845 period Net funds at end of period 32,359 23,807 31,928 (iii) Analysis of net funds At 1st Cash Flow Non-cash Exchange At 30th January changes movements June 2000 2000 £'000 £'000 £'000 £'000 £'000 Cash 31,972 1,904 - 92 33,968 Overdrafts - (1,597) - - (1,597) Net Cash 31,972 307 - 92 32,371 Finance (44) 33 (1) - (12) leases Total 31,928 340 (1) 92 32,359 Cash and short term deposits in the balance sheet of £40,773,000 comprise cash of £33,968,000 and short term deposits of £6,805,000. (iv) Analysis of changes in financing Share Share Other Finance Capital Premium Reserves leases Restated Restated (Note 3) (Note 3) £'000 £'000 £'000 £'000 Balance at 1st 1,735 5,160 13,803 44 January 2000 Cash 5 297 - (33) inflow/(outflow) Other movements 50 - 10,008 1 Balance at 30th June 1,790 5,457 23,811 12 2000 13. Segmental information Turnover Profit before taxation Six Six Year Six Six Year months months ended months months ended ended ended 31st ended ended 31st 30th 30th December 30th 30th December June June 1999 June June 1999 2000 1999 2000 1999 £'000 £'000 £'000 £'000 £'000 £'000 By class of business: Investment management 30,336 27,209 53,455 11,134 8,883 18,735 Banking 7,536 3,949 8,159 1,191 816 1,480 Trust 7,057 5,149 10,281 1,294 1,549 2,238 services 44,929 36,307 71,895 13,619 11,248 22,453 By geographical segment: United 38,945 32,635 63,641 12,143 10,014 20,248 Kingdom Europe 4,584 2,663 5,863 1,317 956 1,736 The Americas 1,400 1,009 2,391 159 278 469 44,929 36,307 71,895 13,619 11,248 22,453 Total Assets Net Assets Six Six Year Six Six Year months months ended months months ended ended ended 31st ended ended 31st 30th 30th December 30th 30th December June June 1999 June June 1999 2000 1999 2000 1999 £'000 £'000 £'000 £'000 £'000 £'000 By class of business: Investment management 67,557 62,782 63,465 20,981 25,029 22,918 Banking 276,994 127,280 163,085 16,699 9,147 12,879 Trust 46,940 26,037 26,593 30,042 14,254 15,642 services 391,491 216,099 253,143 67,722 48,430 51,439 By geographical segment: United 345,150 187,363 227,189 40,540 33,989 39,062 Kingdom Europe 42,163 23,206 22,669 24,526 10,997 9,978 The Americas 4,178 5,530 3,285 2,656 3,444 2,399 391,491 216,099 253,143 67,722 48,430 51,439 Interest Receivable Fees & Commissions Receivable Six Six Year Six Six Year months months ended months months ended ended ended 31st ended ended 31st 30th 30th December 30th 30th December June June 1999 June June 1999 2000 1999 2000 1999 £'000 £'000 £'000 £'000 £'000 £'000 United 8,233 7,860 12,629 30,173 24,169 49,530 Kingdom Europe 332 41 416 4,250 2,622 5,444 The Americas 265 315 525 1,131 694 1,865 8,830 8,216 13,570 35,554 27,485 56,839 Other Operating Income Six Six Year months months ended ended ended 31st 30th 30th December June June 1999 2000 1999 £'000 £'000 £'000 United 539 606 1,481 Kingdom Europe 2 - 4 The Americas 4 - 1 545 606 1,486 The Group interest income receivable included in group turnover comprises: Six Six Year months months ended ended ended 31st 30th 30th December June June 1999 2000 1999 £'000 £'000 £'000 Gross interest earned on own funds 7,919 5,854 9,488 and banking activities Net interest earned on client money 911 2,362 4,082 accounts 8,830 8,216 13,570 The banking book has risen by over £100 million since 31st December 1999 as a result of clients becoming banking clients by transferring their client agreements to Rathbone Investment Management Limited from other subsidiary undertakings. Gross interest earned on own funds and banking activities has risen accordingly. 14.Interim report The interim report will today be sent to registered shareholders. Further copies will be available to the public from the Company's registered office: 159 New Bond Street, London W1S 2UD Independent Review Report by KPMG Audit Plc to Rathbone Brothers Plc Introduction We have been instructed by the Company to review the financial information set out on pages 4 to 13 and we have read the other information contained in the interim report and considered whether it contains any apparent misstatements or material inconsistencies with the financial information. Directors' responsibilities The interim report, including the financial information contained therein, is the responsibility of, and has been approved by, the directors. The Listing Rules of the Financial Service Authority require that the accounting policies and presentation applied to the interim figures should be consistent with those applied in preparing the preceding annual accounts except where they are to be changed in the next annual accounts in which case any changes, and the reasons for them, are to be disclosed. Review work performed We conducted our review in accordance with guidance contained in Bulletin 1999/4 Review of interim financial information issued by the Auditing Practices Board. A review consists principally of making enquiries of Group management and applying analytical procedures to the financial information and underlying financial data and, based thereon, assessing whether the accounting policies and presentation have been consistently applied unless otherwise disclosed. A review is substantially less in scope than an audit performed in accordance with Auditing Standards and therefore provides a lower level of assurance than an audit. Accordingly we do not express an audit opinion on the financial information. Review conclusion On the basis of our review we are not aware of any material modifications that should be made to the financial information as presented for the six months ended 30th June 2000. KPMG Audit Plc Chartered Accountants 8 Salisbury Square London EC4Y 8BB 6th September 2000 Group offices If you would like further information about any of the services offered by the Rathbone Group, please visit our website at www.rathbones.com or telephone Mary Leuchter in London on (020) 7399 0000 or Henry Robertson in Liverpool on (0151) 236 6666, or contact them by Email at marketing@rathbones.com. Alternatively, write to the Managing Director at any of the following offices: 159 New Bond Street, London W1S 2UD Telephone (020) 7399 0000 Facsimile (020) 7399 0011 Port of Liverpool Building, Pier Head, Liverpool L3 1NW Telephone (0151) 236 6666 Facsimile (0151) 243 7001 1 Place de Saint-Gervais, PO Box 2049, 1211 Geneva 1, Switzerland Telephone (0041) 22 909 8900 Facsimile (0041) 22 909 8939 PO Box 986, The Geneva Place, 333 Waterfront Drive, Road Town, Tortola, British Virgin Islands Telephone (001284) 494 6544 Facsimile (001284) 494 6532 17 Seaton Place, St Helier, Jersey, Channel Islands JE1 1BG Telephone (01534) 721 565 Facsimile (01534) 721 987 Nigel Harris & Company, Oak Walk, St Peter, Jersey, Channel Islands JE3 7EF Telephone (01534) 495555 Facsimile (01534) 495501 Barclays Bank Chambers, Queen's Square, Bowness, Cumbria LA23 3BY Telephone (015394) 42141 Facsimile (015394) 47255 Prince House, Prince Street, Bristol BS1 4PS Telephone (0117) 929 1919 Facsimile (0117) 929 1939 5 North Pallant, Chichester, W. Sussex PO19 1TJ Telephone (01243) 775 373 Facsimile (01243) 776 103 Charlotte House, 2 South Charlotte Street, Edinburgh EH2 4AW Telephone (0131) 247 8100 Facsimile (0131) 247 8200 1 Langley Court, Pyle Street, Newport, Isle of Wight PO30 1LA Telephone (01983) 520 922 Facsimile (01983) 510 897 Devonshire House, 61 Devonshire Road, Southampton, Hampshire SO15 2GR Telephone (023) 8033 0130 Facsimile (023) 8063 1463 Hanover Place, 8 Church Road, Tunbridge Wells, Kent TN1 1JL Telephone (01892) 709 400 Facsimile (01892) 543 121 Calpe House, St Thomas Street, Winchester, Hampshire SO23 8BJ Telephone (01962) 852 362 Facsimile (01962) 842 835 Rathbone Laurence Keen Limited and Rathbone Neilson Cobbold Limited are member firms of the London Stock Exchange and are regulated by the Securities and Futures Authority. Rathbone Unit Trust Management Limited and Albyn Investments Limited are regulated by the Investment Management Regulatory Organisation. Rathbone Investment Management Limited is an authorised institution under the Banking Act 1987 and regulated by the Securities and Futures Authority. Registered office: Port of Liverpool Building, Pier Head, Liverpool L3 1NW. Registered in England No. 1448919. VAT Registration No. GB 241 6893 49

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