Final Results

RNS Number : 4084W

Rensburg Sheppards plc

11 June 2008

 



11 June 2008

Rensburg Sheppards plc

 ('Rensburg Sheppards' or 'the Company') 

Preliminary Results 

Rensburg Sheppards, the investment led wealth management group, today announces its preliminary results for the year ended 31 March 2008 

Key Points:

• Profit before tax increased by 21.4% to £31.2 million (2007: £25.7 million)

• Adjusted* profit before tax increased by 15.6% to £41.5 million (2007: £35.9 million)

• Basic earnings per share increased by 27.7% to 47.9p (2007: 37.5p) 

• Adjusted* basic earnings per share increased by 14.5% to 65.4p (2007: 57.1p)

• Recommended final dividend is 17p, making a total dividend of 25.5p (2007: 22.5p) for the year - an overall increase of 13.3% 

• Group funds under management at 31 March 2008 of £12.95 billion (2007: £14.40 billion) 

• On 6 May 2008, the group's £5 million floating rate debt was repaid ahead of schedule

* Before amortisation of the client relationships intangible asset and share-based charges relating to the Employee Benefit Trust ('EBT'). These items amount to a net charge before tax of £10.3 million (2007: £10.2 million) and a net charge after tax of £7.7 million (2007: £8.6 million).

Steve Elliott, Chief Executive of Rensburg Sheppards, commented:

"I am pleased by these excellent results, which were achieved despite the difficult trading conditions. We remain cautiously positive in our outlook. With an established business model, experienced management and a strong control environment, this group is able to weather difficult conditions and is well positioned for any upturn."

An analysts' meeting will be held today at 10.00 am at the offices of Hudson Sandler, 29 Cloth Fair, London, EC1A 7NN.

For further information, please contact:
Steve Elliott, Chief Executive Jonathan Wragg, Finance Director Rensburg Sheppards plc	Tel: [phone] Tel: [phone]
Nick Lyon / James White  Hudson Sandler	Tel: [phone]

Chairman's statement

I am pleased to be able to report another set of strong results for the group for the year to 31 March 2008. This is a robust performance considering the environment in which we have been operating since our last annual report to shareholders in the early summer of 2007, with every company operating in the financial services industry affected to some extent by what was originally known as the 'sub-prime' problem. 

The year started well, with the financial markets continuing to rise during the first quarter. It then gradually dawned on the investment community that not just Northern Rock but many other companies involved in property financing and related products, whether here or overseas, had been less than prudent in their pursuit of growth. With the banking sector representing approximately 20% of the FTSE 100 index (and smaller but still considerable percentages of the leading indices in North America and Europe) it was inevitable that all leading markets weakened overall, yet despite the consequent modest reduction in overall funds under management between 1 April 2007 and 31 March 2008, we have achieved an increased level of profitability. 

Although markets remain volatile and we are cautious because there may be further shocks that affect the financial markets, strong measures taken by those in charge of major economies, and indeed by individual companies, have enabled markets to begin to re-focus on the fundamental issues and drivers, i.e. profit and dividend growth. Last year was more challenging than many, but looking at the results achieved I believe I can say that we have met and responded to this challenge and for this I would like to record my considerable thanks to all the executives and the group's employees.

Results and dividend

For the year ended 31 March 2008, reported profit before tax increased by 21.4% to £31.2 million (2007: £25.7 million) and basic earnings per share increased by 27.7% to 47.9p (2007: 37.5p).  

Adjusting for amortisation of the client relationships intangible asset and share-based charges relating to the Employee Benefit Trust ('EBT'), together with their associated tax consequences, gives underlying profit before tax of £41.5 million (2007: £35.9 million) and underlying basic earnings per share of 65.4p (2007: 57.1p) representing increases of 15.6% and 14.5% respectively. This strong growth in underlying earnings for the group derives from solid growth of income and profits in each of the group's operating segments of investment management and fund management.

Given the strength both of the group's results for the year and our overall financial situation, the board took the decision soon after the year end to repay ahead of schedule the outstanding balance of £5 million on the group's floating rate subordinated debt. This repayment was made on 6 May 2008.

The directors are now recommending a final dividend of 17p (2007: 15p) per ordinary share payable on 8 August 2008 to all shareholders on the register at the close of business on 18 July 2008. When added to the interim dividend of 8.5p per ordinary share (2007: 7.5p), this brings the total dividends in respect of the year to 25.5p per ordinary share (2007: 22.5p), representing an overall increase of 13.3%.  

Board 

As we announced in our half-yearly report, during October 2007 a number of changes in the executive membership of the board took place. David Bulteel and Jon Seal, who in their respective roles are the investment directors in day-to-day charge of the London and Liverpool offices, joined the board and have brought with them a wealth of experience.  Ian Maxwell Scott, who was originally due to retire from the board on reaching 62 years of age in December 2007, agreed to continue as an executive director and I am delighted both with this and the two new appointments. Finally, Nick Lane Fox resigned from the board after five years service and I should like also to thank him.

After six years service as a non-executive director, including the last five years as the senior independent non-executive director, Andrew Tyrie is to step down from the board with effect from the conclusion of the forthcoming Annual General Meeting on 29 July 2008. On behalf of the board, I would like to take this opportunity to thank Andrew for his significant contribution during a period of major change for the group. After reviewing carefully the overall size and composition of the board, we have agreed to appoint two new independent non-executive directors. This search is progressing well and announcements will follow in due course. 

Outlook

As alluded to earlier in this report, the financial markets appear to have stabilised somewhat since 31 March 2008. Whilst the outlook for the short term remains uncertain, we remain optimistic regarding the medium to longer term prospects for the wealth management industry and for this group's ability to share in its success.  

C.G. Clarke
Chairman
10 June 2008

Chief executive's report

The first quarter of the financial year was influenced by strong markets and positive sentiment. The next three quarters have reflected the opposite, with weak and volatile markets and negative sentiment originating from the sub-prime problem, which led to the banking and liquidity crises experienced over recent months.

Despite the difficult trading conditions, we have produced excellent results which have been underpinned by high quality assets and earnings, coupled with the considerable efforts of all of our staff and the continued support of our clients.

Rensburg Sheppards Investment Management ('RSIM')

Discretionary funds under management at 31 March 2008 were £8.04 billion (2007: £8.53 billion); a decrease of 5.7% over the year. Non-discretionary funds decreased by 16.3% over the year to £3.44 billion (2007: £4.11 billion). This gave rise to total funds under management at 31 March 2008 of £11.48 billion compared with £12.64 billion at 31 March 2007; the proportion managed on a discretionary basis having increased to 70.0% (2007: 67.5%), a further step towards our target figure of 75%. 

The decrease in RSIM's total funds under management over the year of 9.2% compares with the decrease in the FTSE/APCIMS Private Investors Balanced index ('the APCIMS Index') of 5.9% over the corresponding period. This shortfall of 3.3 percentage points resulted from two elements:

• net organic growth in funds under management of minus 0.3%; together with  

• our client assets in aggregate lagged the APCIMS Index by 3.0%

With regard to growth in funds under management, over the past year we have conducted a strategic review of the business. From this review we have identified a number of key areas which are now to be focussed upon in order to assist the business in achieving sustainable organic growth in terms of both funds under management and income. 

The APCIMS index is a widely used yardstick for performance measurement in the private client sector, although it is certainly not an exact match for the full range of RSIM client portfolios which, in aggregate, would not be expected to mirror a single benchmark. The past year was also affected by factors that held back performance of our aggregated clients' portfolios, many of which have a bias towards income, compared with the APCIMS measure.  Most notably, in the UK, there was a marked divergence between high yielding equities and the wider market. The FTSE 350 High Yield index fell by 5% more than the FT All-Share index. As the credit crisis unfolded, even high grade corporate bonds (widely held for their higher yields) substantially underperformed gilts (which are the basis for APCIMS performance measurement). Finally, the index of global equities (which tend to be underweighted in income-seeking portfolios) performed 6% better than the UK market, partly owing to the decline in sterling.

Looking at the quality of RSIM's net income for the year, it is pleasing that this increased further, with 73.8% (2007: 70.8%) being recurring in nature.  

The strategic review of the business has reaffirmed our position as an investment led wealth management business offering predominantly discretionary investment advice with integrated financial planning. We continue to expand our SIPP (self invested personal pension) and inheritance tax planning propositions; this is crucial to the maintenance of clients' assets and attracting new assets to manage. Our expansion will be driven by organic growth and the recruitment of quality teams or individuals, coupled with acquisition growth where the fit is right for the organisation. In April 2008, we opened an office in Edinburgh and thus far the feedback has been very positive. 

We will continue to invest in delivering an increasingly efficient service to our clients by enhancing client reporting and our on-line services.

RSIM has expanded its marketing efforts to raise brand awareness in our markets and to ensure that the Rensburg Sheppards name is at the forefront of our niche market. Our sponsorships include The National Garden Scheme, Liverpool Philharmonic Orchestra, The Independent Schools Football Association Under 13 & Under 15 Cups and The Yorkshire Air Ambulance Service. 

We are committed to supporting the communities where our employees work and will contribute to a greener world through our processes and behaviour. 

Rensburg Fund Management ('RFM') 

Against the challenging operating environment already described, RFM has delivered a strong financial performance for the year. However, in common with many of its peers, as the year progressed the business started to experience rising withdrawals of funds under management, which peaked in the final quarter of the year as investor sentiment turned further against UK equities and particularly against equity investment into the smaller and mid-cap areas where RFM has exposure. 

Unit trust sales for the year totalled £440 million (2007: £434 million) and there was a net inflow into the trusts of £12 million (2007: £205 million) for the year, representing 0.9% of the value of the opening funds under management. Despite this creditable net inflow of unit trust funds, the value of RFM's retail unit trust funds under management declined by 16.3% over the year to £1.08 billion (2007: £1.29 billion). This reflected investment under-performance when compared against the corresponding fall of 10.8% in the FTSE All-Share index ('the All-Share'). 

There were three major contributors to this under-performance against the All-Share. First, after five years of consistently strong performance, the UK Select Growth trust performed poorly in the first quarter of the year; it is pleasing to note however that performance started to recover in the final quarter of the year when this trust outperformed the All-Share by 1.5%. In addition, RFM's blue-chip based funds had overweight exposure to higher yielding equities which, as already referred to under RSIM, have under-performed. Finally, RFM suffered from its higher level of exposure (when compared to the composition of the All-Share) in overall terms to smaller and mid-cap stocks which significantly under-performed against the All-Share. 

At 31 March 2008, RFM managed £392 million in a single segregated mandate. This compared with the £472 million managed at 31 March 2007, which comprised the current mandate and one other small segregated mandate which RFM ceased to manage shortly before the end of this financial year. 

Taking both the unit trusts and the segregated mandate arrives at total assets managed by RFM of £1.47 billion (2007: £1.76 billion), a decrease of 16.5%. Of RFM's total net income for the year almost 85% was recurring in nature, equal to that achieved in the prior year. 

In the last month of the year, RFM migrated to a new outsourced administrator. This was a major operational project, which, thanks to careful planning and considerable hard work, progressed smoothly. The benefits of this, both financial and otherwise, are already being felt.  

Group funds under management

Combining RSIM and RFM brings the group's total funds under management as at 31 March 2008 to £12.95 billion (2007: £14.40 billion), a decrease of 10.1%.

Regulation

Major new regulation became effective during the year, the most significant being the Markets in Financial Instruments Directive ('MiFID'). The requirements of MiFID, which applied from November 2007, required careful planning and preparation involving many of our employees and additionally our clients, who were asked en masse to review new documentation. In addition, the second and final phase of the Capital Requirements Directive ('CRD') took effect and considerable resources were invested in preparing for both this and also the merging of PEPs and ISAs, which became effective during April 2008. I am pleased to record that all of these significant new regulatory requirements were successfully met and implemented, testament to the hard work and dedication of everyone involved. 

Outlook

The year going forward will in our view remain unpredictable due to the slowing down of the broader economy influenced in part by rising costs of commodities, energy and food prices, which will have an adverse effect on inflation; this in turn will have an impact on the savings ratio in the country. Whilst taking into account this uncertainty, we remain cautiously positive in our outlook. With an established business model, experienced management and a strong control environment, this group is able to weather difficult conditions and is well positioned for any upturn.

S.M. Elliott

Chief Executive

10 June 2008

Financial review

Financial results

From revenue (net of fees and commissions payable to introducers) of £121.3 million (2007: £112.9 million), the group's reported profit before tax for the year ended 31 March 2008 was £31.2 million (2007: £25.7 million). After removing a net charge totalling £10.3 million (2007: £10.2 million) in respect of the amortisation of the client relationships intangible asset and share-based charges relating to the Employee Benefit Trust ('EBT'), the resulting adjusted profit before tax increased by 15.6% to £41.5 million (2007: £35.9 million). It is the directors' opinion that this adjusted measure of profit before tax and that of earnings given below represent better measures of the group's underlying financial performance. 

Reported basic earnings per share were 47.9p (2007: 37.5p) and on the basis of adjusting for the items detailed in the above paragraph, together with the associated tax consequences of these adjustments, the adjusted basic earnings per share increased by 14.5% to 65.4p (2007: 57.1p).

Key performance indicators ('KPIs')

The principal KPIs used by management for the group as a whole, and also for each of the two individual business segments that make up the group, are stated below. Where figures are described as 'underlying', this is after adjusting, where appropriate, for the items referred to in the opening paragraph of this financial review.

The group:

	Year ended 31 March 2008	Year ended 31 March 2007	% change
Total funds under management*	£12.95 billion	£14.40 billion	-10.1%
FTSE/APCIMS Balanced index*	2,801.8	2,977.6	-5.9%
Underlying rate of net organic growth in total funds under management**	-0.5%	+4.9%	-110.2%
Underlying operating profit	£42.0 million	£37.7 million	+11.4%
Underlying operating profit as a % of net revenue	34.6%	33.4%	+3.6%
Underlying basic earnings per share	65.4 pence	57.1 pence	+14.5%

* As at the year end

** Net organic (outflow)/inflow (valued at the date of transfer out/in) as a % of opening funds under management  

Investment management:

	Year ended 31 March 2008	Year ended 31 March 2007	% change
Total funds under management*	£11.48 billion	£12.64 billion	-9.2%
FTSE/APCIMS Balanced index*	2,801.8	2,977.6	-5.9%
Underlying rate of net organic growth in investment management funds under management**	-0.3%	+1.9%	-115.8%
% of total funds managed on a discretionary basis*	70.0%	67.5%	+3.7%
Underlying operating profit	£35.8 million	£33.2 million	+7.8%
Underlying operating profit as a % of net revenue	33.4%	32.7%	+2.1%

* As at the year end

** Net organic (outflow)/inflow (valued at the date of transfer out/in) as a % of opening funds under management  

Fund management:

	Year ended 31 March 2008	Year ended 31 March 2007	% change
Total funds under management*	£1.47 billion	£1.76 billion	-16.5%
FTSE All-Share index*	2,927.1	3,283.2	-10.8%
Underlying rate of net organic growth in funds under management**	-1.7%	+35.9%	-104.7%
Underlying operating profit	£6.2 million	£4.5 million	+37.8%
Underlying operating profit as a % of net revenue	44.0%	39.1%	+12.5%

* As at the year end

** Net organic (outflow)/inflow (valued at the date of transfer out/in) as a % of opening funds under management  

Tax

The effective tax rate for the year is 33.0% (2007: 36.2%) calculated as the total tax charge of £10.3 million (2007: £9.3 million) divided by the profit before tax of £31.2 million (2007: £25.7 million). With effect from 1 April 2008, the UK standard rate of corporation tax has been reduced by 2% to 28%. This reduction in the rate of tax for the forthcoming and future financial years has reduced the group's net deferred tax liability at 31 March 2008, which has resulted in a non-recurring credit to the tax charge for the year of £0.8 million. A full reconciliation of the tax charge, which explains why the effective rate of tax is higher than the UK standard rate of 30%, is set out in note 4.

Dividend

An interim dividend of 8.5p per share (2007: 7.5p) was paid to shareholders on 1 February 2008 and the board is recommending a final dividend of 17p per share (2007: 15p) payable on 8 August 2008. This results in a total payment in respect of the year of 25.5p (2007: 22.5p), an increase of 13.3%. In determining the dividend, the directors consider, in particular, the requirement for the group to ensure that it retains adequate levels of working capital and regulatory capital for the foreseeable future, the group's commitment to repay its subordinated loan and the need to retain adequate reserves for re-investment towards the future growth of the business. In accordance with current accounting standards, the final dividend of 17p has not been recognised in these financial results, but has been disclosed as a post balance sheet event in note 15.

Cash flow

During the year the business enjoyed a strong net cash inflow from its operating activities, after corporation tax payments, of £45.8 million (2007: £16.0 million). This increase reflects certain non-recurring cash outflows that occurred during 2007, including the payment of expenses relating to the integration of Carr Sheppards Crosthwaite ('CSC') into the group, in addition to the increase in the profitability of the group during 2008. However, the increase also includes the short-term benefit of movements in market settlement balances and other timing differences. 

The group's investing and financing cash flows for the year, which principally included dividend payments of £10.3 million (2007: £9.1 million), subordinated loan interest and capital repayments of £14.0 million (2007: £4.3 million) and capital expenditure of £1.0 million (2007: £1.6 million), amounted to a net cash payment of £25.3 million (2007: £16.2 million), resulting in an overall increase in the group's cash balances during the year of £20.5 million (2007: £0.2 million decrease).

Capital structure and treasury management

At 31 March 2008 the group had net assets of £186.1 million (2007: £169.7 million), which included £181.8 million (2007: £187.6 million) of intangible assets, principally comprising goodwill of £136.4 million (2007: £136.4 million) and client relationships of £44.9 million (2007: £50.5 million). 

Throughout the year, the group was financed by equity shareholders' funds which at 31 March 2008 were £186.1 million (2007: £169.7 million), together with debt which comprised a subordinated loan of £50 million (2007: £60 million). The loan was originally scheduled to be repayable in equal annual instalments of £7.5 million commencing May 2008 and ending May 2015. The group maintained the bulk of its cash balances which, net of an overdraft of £1.2 million at 31 March 2008, totalled £70.2 million (2007: £49.8 million) within its regulated trading subsidiaries. Cash was placed on deposit with highly rated banks and was available on instant access, thus minimising credit and liquidity risk. The nature of the group's business has been such that currency risk was insignificant. 

Repayments of capital in relation to the subordinated loan that was entered into as a part of the consideration for the acquisition of CSC, were due to commence on 6 May 2008. However, given the subsequent stronger financial performance of the group than was anticipated at the point of acquiring CSC in May 2005, the board announced that on 8 May 2007 an early repayment of £10 million of this debt had been made. In addition, given a continuation of the stronger than expected performance, on 6 May 2008 an additional £5 million was repaid ahead of schedule together with £5.625 million scheduled to be repaid on that date. Full details of this are provided in note 15.

Regulatory capital

The group's principal trading subsidiaries are all FSA regulated and hence are required at all times to hold certain minimum levels of regulatory capital. The Capital Requirements Directive ('CRD'), which is a European Directive, came into effect on 1 January 2007, although, due to a staged implementation, the full impact of this was not felt until 1 January 2008. The introduction of CRD led to a modest increase in the minimum amount of regulatory capital required from 1 January 2007 and, as expected, this was further modestly increased from 1 January 2008.

J.P.Wragg

Finance Director

10 June 2008

Consolidated income statement

for the year ended 31 March 2008

					2008		2007
					Year		Year
					ended		ended
					31 March		31 March
	Note				£'000		£'000
Revenue					132,928		122,297
Fees and commissions payable					(11,646)		(9,360)
Net revenue	2				121,282		112,937
Share-based payments - EBT					(4,653)		(4,653)
Amortisation of intangible assets - client relationships					(5,603)		(5,603)
Other operating expenses					(79,326)		(75,225)
Operating expenses					(89,582)		(85,481)
Operating profit					31,700		27,456
Finance income	3				3,284		2,694
Finance expenses	3				(3,771)		(4,483)
Profit before tax					31,213		25,667
Taxation	4				(10,324)		(9,289)
Profit for the year attributable to the equity holders of the company					20,889		16,378
Earnings per share	6
Basic					47.9p		37.5p
Diluted					47.8p		37.4p

Consolidated balance sheet

at 31 March 2008

								2008		2007
				Note				£'000		£'000
Assets
Non-current assets
Intangible assets				7				181,772		187,601
Property, plant and equipment								5,197		5,422
Available-for-sale investments								2,827		2,562
Deferred tax assets				8				1,372		1,280
								191,168		196,865
Current assets
Trade and other receivables								123,953		130,452
Cash and cash equivalents				9				71,464		49,775
								195,417		180,227
Total assets								386,585		377,092
Liabilities
Current liabilities
Trade and other payables								(127,981)		(124,359)
Loan notes								-		(72)
Provisions				10				(56)		(641)
Current tax liabilities								(6,820)		(4,672)
								(134,857)		(129,744)
Non-current liabilities
Accruals and deferred income								(1,373)		(798)
Subordinated loan				11				(50,000)		(60,000)
Provisions				10				(551)		(517)
Deferred tax liabilities				8				(13,689)		(16,341)
								(65,613)		(77,656)
Total liabilities								(200,470)		(207,400)
Net assets								186,115		169,692
Equity attributable to the equity holders of the company
Share capital				12,14				4,822		4,822
Share premium				14				10,617		10,603
Capital redemption reserve				14				100		100
Available-for-sale reserve				14				1,460		1,234
Revaluation reserve				14				973		959
Other reserves				14				130,601		130,601
Retained earnings				14				37,542		21,373
Total equity								186,115		169,692

Consolidated cash flow statement

for the year ended 31 March 2008

					2008		2007
					Year		Year
					ended		ended
					31 March		31 March
	Note				£'000		£'000
Cash flows from operating activities
Profit before taxation					31,213		25,667
Adjustments for:
- Amortisation of intangible assets					6,198		6,219
- Finance expenses					3,771		4,483
- Finance income					(3,284)		(2,694)
- Depreciation					900		672
Share-based payments					5,557		4,815
Loss on disposal of property, plant & equipment and intangible assets					-		102
Decrease in trade and other receivables					6,440		36,901
Increase/(decrease) in trade payables and provisions					2,674		(55,116)
Cash generated from operations					53,469		21,049
Interest received					3,261		2,318
Dividends received					82		280
Interest paid					(44)		(221)
Taxation paid					(10,964)		(7,446)
Net cash inflow from operating activities					45,804		15,980
Cash flows from investing activities
Purchase of property, plant and equipment					(675)		(1,407)
Purchase of intangible software					(369)		(223)
Net cash outflow from investing activities					(1,044)		(1,630)
Cash flows from financing activities
Dividends paid to shareholders					(10,258)		(9,073)
Proceeds from issue of ordinary share capital					14		1,390
Costs associated with issue of shares					-		(1)
Purchase of own shares					-		(1,815)
Repayment of subordinated loan					(10,000)		-
Redemption of loan notes					(72)		(768)
Interest paid on subordinated loan					(3,987)		(4,266)
Net cash outflow from financing activities					(24,303)		(14,533)
Net increase/(decrease) in cash and cash equivalents					20,457		(183)
Cash and cash equivalents at start of year					49,775		49,958
Cash and cash equivalents at end of year	9				70,232		49,775

Consolidated statement of recognised income and expense

for the year ended 31 March 2008

					2008		2007
					Year		Year
					ended		ended
					31 March		31 March
					£'000		£'000
Revaluation of available-for-sale investments
-gain arising from changes in fair value					265		374
Deferred tax on revaluation of available-for-sale investments
-on gain arising from changes in fair value					(80)		(112)
-movement in deferred tax arising from change of tax rate					46		-
Deferred tax on revalued property
-movement in deferred tax arising from change of tax rate					27		-
Net income recognised directly in equity					258		262
Profit for the year					20,889		16,378
Total recognised income and expense for the year attributable to the equity holders of the company					21,147		16,640

Notes to the financial statements

1. Basis of preparation

The group financial statements consolidate those of the company and its subsidiaries (together referred to as 'the group'). The financial statements have been prepared and approved by the directors in accordance with International Financial Reporting Standards as adopted by the European Union ('adopted IFRS'). A summary of the group's significant accounting policies will be included in the 2008 Report & Financial Statements.

The financial information contained in this announcement does not constitute the company's statutory accounts for the years ended 31 March 2008 or 31 March 2007 but is derived from those accounts. Statutory accounts for 2007 have been delivered to the Registrar of Companies, and those for 2008 will be delivered following the company's annual general meeting. The independent auditor has reported on those accounts; its reports were unqualified and did not contain statements under section 237(2) or (3) of the Companies Act 1985.

2. Revenue and segmental information

For management purposes, the group is organised into two business segments, being Investment Management and Fund Management.  This organisation reflects the differing nature of each segment's services, client base and risk profile. The principal activity of the investment management segment is the provision of investment management services to private clients, pension funds and charities. The fund management segment manages unit trusts and segregated mandates. Transactions between the two business segments are undertaken on an arm's length basis on normal commercial terms. All of the group's activities are undertaken in the United Kingdom and hence relate to a single geographical segment.

Year ended 31 March 2008

	Investment		Fund
	Management		Management		Eliminations		Group
	£'000		£'000		£'000		£'000
Revenue
External	110,546		22,382		-		132,928
Inter-segment	716		-		(716)		-
	111,262		22,382		(716)		132,928
Fees and commissions payable	(4,082)		(8,280)		716		(11,646)
Segmental net revenue	107,180		14,102		-		121,282
Share-based payments - EBT	(4,653)		-		-		(4,653)
Amortisation of intangible assets - client relationships	(5,603)		-		-		(5,603)
Other operating expenses	(71,412)		(7,914)		-		(79,326)
Segmental expenses	(81,668)		(7,914)		-		(89,582)
Segmental operating profit	25,512		6,188		-		31,700
Finance income	2,578		706		-		3,284
Finance expenses	(3,771)		-		-		(3,771)
Profit before tax	24,319		6,894		-		31,213
Segmental net revenue is derived from:
Investment management services	107,180		-		-		107,180
Fund management services	-		12,013		-		12,013
Profit on sale of units of unit trusts	-		2,089		-		2,089
	107,180		14,102		-		121,282
Other segmental items:
Segmental assets (excluding taxation)	362,900		22,313		-		385,213
Segmental liabilities (excluding taxation)	(164,752)		(15,209)		-		(179,961)
Capital expenditure	675		-		-		675
Acquisition of intangible assets	369		-		-		369
Depreciation and amortisation	7,095		3		-		7,098

Year ended 31 March 2007

	Investment		Fund
	Management		Management		Eliminations		Group
	£'000		£'000		£'000		£'000
Revenue
External	104,602		17,695		-		122,297
Inter-segment	598		-		(598)		-
	105,200		17,695		(598)		122,297
Fees and commissions payable	(3,783)		(6,175)		598		(9,360)
Segmental net revenue	101,417		11,520		-		112,937
Share-based payments - EBT	(4,653)		-		-		(4,653)
Amortisation of intangible assets - client relationships	(5,603)		-		-		(5,603)
Other operating expenses	(68,206)		(7,019)		-		(75,225)
Segmental expenses	(78,462)		(7,019)		-		(85,481)
Segmental operating profit	22,955		4,501		-		27,456
Finance income	2,284		410		-		2,694
Finance expenses	(4,483)		-		-		(4,483)
Profit before tax	20,756		4,911		-		25,667
Segmental net revenue is derived from:
Investment management services	101,417		-		-		101,417
Fund management services	-		9,822		-		9,822
Profit on sale of units of unit trusts	-		1,698		-		1,698
	101,417		11,520		-		112,937
Other segmental items:
Segmental assets (excluding taxation)	333,432		42,380		-		375,812
Segmental liabilities (excluding taxation)	(170,946)		(15,441)		-		(186,387)
Capital expenditure	1,404		3		-		1,407
Acquisition of intangible assets	223		-		-		223
Depreciation and amortisation	6,888		3		-		6,891

3. Finance income and expenses

								2008		2007
								Year		Year
								ended		ended
								31 March		31 March
								£'000		£'000
Interest receivable on bank deposits								3,202		2,414
Dividends receivable								82		280
Finance income								3,284		2,694
Interest payable on bank overdrafts and loan notes								43		178
Interest payable on subordinated loan								3,728		4,305
Finance expenses								3,771		4,483

None of the finance income and expenses shown above relate to impaired assets.

4. Taxation

								2008		2007
								Year		Year
								ended		ended
								31 March		31 March
								£'000		£'000
Current tax expense:
United Kingdom corporation tax at 30% (2007: 30%)								13,098		9,950
Adjustments in respect of prior periods								14		88
								13,112		10,038
Deferred tax expense:
Origination and reversal of timing differences								(2,646)		(560)
Adjustments in respect of prior periods								(142)		(189)
Total tax expense in the income statement								10,324		9,289

The tax charge for the year and the amount calculated by applying the standard United Kingdom corporation tax rate of 30% (2007: 30%) to the profit before tax per the income statement can be reconciled as follows:

			2008		2007
			Year		Year
			ended		ended
			31 March		31 March
			£'000		£'000
Profit before tax			31,213		25,667
Tax expense using the United Kingdom corporation tax rate of 30%			9,364		7,700
Effects of:
Share-based payments			1,600		1,396
Other expenses not tax deductible			321		378
Income not chargeable to tax			(27)		(84)
Adjustments to current tax in respect of prior periods			14		88
Adjustments to deferred tax in respect of prior periods			(142)		(189)
Effect of change of tax rate			(806)		-
Total tax expense in the income statement			10,324		9,289

The following amounts of deferred tax have been recognised directly in equity:

			2008		2007
			Year		Year
			ended		ended
			31 March		31 March
			£'000		£'000
Property, plant & equipment			27		-
Available-for-sale investments			(34)		(112)
Share-based payments			(37)		(762)
			(44)		(874)

5. Dividends

The final dividend proposed for the year ended 31 March 2008 of 17.0 pence per share is payable on 8 August 2008 to shareholders on the register as at the close of business on 18 July 2008. In accordance with the group's accounting policies and the requirements of IAS 10 Events after the balance sheet date, this dividend has not been recognised as a liability at 31 March 2008. Dividends have been recognised in the periods set out below:

								2008		2007
								Year		Year
								ended		ended
								31 March		31 March
								£'000		£'000
Final dividend for the sixteen months ended 31 March 2006 of 13.2p per share								-		5,783
Interim dividend for the six months ended 30 September 2006 of 7.5p per share								-		3,290
Final dividend for the year ended 31 March 2007 of 15.0p per share								6,548		-
Interim dividend for the six months ended 30 September 2007 of 8.5p per share								3,710		-
								10,258		9,073

6. Earnings per share    

Basic earnings per share is calculated with reference to earnings for shareholders of £20,889,000 (2007: £16,378,000) and the weighted average number of shares in issue during the year of 43,651,919 (2007: 43,723,007). Adjusted earnings per share before amortisation of the client relationships intangible asset and share-based payments relating to the EBT is calculated with reference to earnings for shareholders of £28,567,000 (2007: £24,953,000).

Diluted earnings per share is the basic earnings per share, adjusted for the effect of the conversion into fully paid shares of the weighted average number of all employee share options outstanding during the year. The number of additional shares used for the diluted calculation is 50,972 shares (2007: 112,337). Details of contingently issuable shares, that are not included in the calculation of basic or diluted earnings per share, are given in note 11.

The directors believe that the provision of additional earnings per share figures, in particular before amortisation of the client relationships intangible asset and share-based payments relating to the EBT, better represent underlying business performance. The effect of these adjustments on earnings and basic earnings per share is as follows:

	Year ended 31 March 2008			Year ended 31 March 2007
	Earnings	Basic	Diluted	Earnings	Basic	Diluted
		EPS	EPS		EPS	EPS
	£’000	pence	pence	£’000	pence	pence
Unadjusted earnings and EPS	20,889	47.9	47.8	16,378	37.5	37.4
Share-based payments – EBT	4,653	10.7	10.6	4,653	10.6	10.6
Amortisation of intangible assets – client relationships	5,603	12.8	12.8	5,603	12.8	12.7
Tax arising on adjusted items at 30%	(1,681)	(3.9)	(3.8)	(1,681)	(3.8)	(3.8)
Effect on tax arising on adjusted items following change in rate of taxation	(897)	(2.1)	(2.0)	-	-	-
Adjusted earnings and EPS	28,567	65.4	65.4	24,953	57.1	56.9

7. Intangible assets

The carrying values of intangible assets at 31 March are as follows:

		2008		2007
		£'000		£'000
Goodwill		136,385		136,385
Client relationships		44,866		50,469
Software		521		747
		181,772		187,601

8. Deferred tax assets and liabilities

Deferred tax is calculated in full on temporary differences under the liability method using a tax rate of 28% (2007: 30%). Deferred tax assets have been recognised in respect of all temporary timing differences giving rise to deferred tax assets, as it is considered to be probable that these assets are recoverable in full.

Deferred tax assets and liabilities are attributed to the following:

	Assets		Liabilities		Net
	2008	2007	2008	2007	2008	2007
	£’000	£’000	£’000	£’000	£’000	£’000
Intangible assets	-	-	(12,563)	(15,141)	(12,563)	(15,141)
Property, plant and equipment	454	566	(438)	(484)	16	82
Available-for-sale investments	-	-	(643)	(609)	(643)	(609)
Trade and other receivables	-	-	(45)	(107)	(45)	(107)
Share-based payments	114	91	-	-	114	91
Provisions, accruals and other payables	804	623	-	-	804	623
Net deferred tax assets/(liabilities)	1,372	1,280	(13,689)	(16,341)	(12,317)	(15,061)

9. Cash, cash equivalents and bank overdrafts

For the purposes of the cash flow statement, cash and cash equivalents comprise cash in hand, deposits with banks and financial institutions with a maturity of up to three months and bank overdrafts repayable on demand.

			2008		2007
			£'000		£'000
Cash and cash equivalents			71,464		49,775
Bank overdrafts			(1,232)		-
			70,232		49,775

Cash balances earn a floating rate of interest based on the daily bank deposit rate of the bank with which the deposit is held. All deposits are repayable on demand. The carrying value of cash, cash equivalents and bank overdrafts approximates to their fair value.

10. Provisions

			Reorganisation		Onerous		Property
			costs		leases		dilapidations		Total
			£'000		£'000		£'000		£'000
At 1 April 2007
Current liabilities			584		57		-		641
Non-current liabilities			-		292		225		517
			584		349		225		1,158
Charged to the income statement			-		-		75		75
Utilised during the year			(584)		(39)		(3)		(626)
At 31 March 2008			-		310		297		607

The balances at 31 March 2008 are categorised as follows:

			Reorganisation		Onerous		Property
			costs		leases		dilapidations		Total
			£'000		£'000		£'000		£'000
Current liabilities			-		56		-		56
Non-current liabilities			-		254		297		551
At 31 March 2008			-		310		297		607

Reorganisation costs relate to the integration of Carr Sheppards Crosthwaite Limited ('CSC') into the group. CSC was acquired on 6 May 2005.

The onerous leases provision represents future rentals and running costs of unoccupied leasehold premises to the end of the lease term. All such leases are due to expire during or before 2017.

The provision for property dilapidation costs reflects the obligations that the group has to reinstate leasehold properties to their original condition prior to the expiry of the relevant lease. The leases held on these properties expire in the period up to 2017.

11. Subordinated loan

The company entered into a £60 million subordinated loan agreement with Investec 1 Limited on 6 May 2005. The loan formed part of the consideration for the acquisition of Carr Sheppards Crosthwaite Limited. A fixed rate of interest of 7.155% per annum is payable on £45 million of the loan and a floating rate, being 2.25% above LIBOR, is payable on £15 million of the loan. Interest on the subordinated loan is payable every six months in May and November. The total amount of the loan is repayable in equal instalments over eight years, with the first instalment becoming payable in May 2008. On 8 May 2007, £10 million of the floating rate element of the loan was repaid ahead of schedule.

The company has the option to redeem part or all of the floating rate debt at any point during the term of the loan. Early redemption of part or all of the fixed rate debt is not permitted for five years from the date of commencement of the loan, until May 2010. Early redemption after this period is at the option of the company. The company repaid £10.625 million of the loan on 6 May 2008, further details of which are set out in note 15.

The loan is subordinated to all other creditors of the company. For the purposes of the consolidated regulatory capital reporting requirements of the Financial Services Authority ('FSA'), the Rensburg Sheppards group is treated as being part of the Investec group, by virtue of the Investec group's holding of shares of Rensburg Sheppards plc. The Rensburg Sheppards group, as a separate consolidated entity, is not itself subject to the FSA's consolidated regulatory capital requirements. Should, for any reason, the Rensburg Sheppards group cease to be treated as being part of the Investec group for the purposes of consolidated regulatory capital reporting and instead be subject to the FSA's regulatory capital requirements as a separate consolidated entity, an amount of the loan may be converted into ordinary shares of the company. A conversion would only occur upon the request of the company if, and only to the extent that, there is a shortfall between the actual and required consolidated regulatory capital of the Rensburg Sheppards group.  The rate of conversion would be based on the company's average mid-market share price during the three months prior to a conversion. However, where a conversion is required as a consequence of a disposal of shares by Investec 1 Limited, or a conversion would otherwise require a member of the Investec group to make a general offer for the company, an alternative instrument, that would enable the company to satisfy the FSA's regulatory capital requirements, would be issued in place of ordinary shares.

12. Share capital

										Nominal
								Number		value
								of shares		£'000
Authorised ordinary shares of 10 90/91 pence each
At 1 April 2006, 31 March 2007 and 31 March 2008								54,600,000		6,000
Allotted, called up and fully paid ordinary shares of 10 90/91 pence each
At 1 April 2006								43,314,068		4,760
Exercise of share options								567,314		62
At 31 March 2007								43,881,382		4,822
Exercise of share options								2,118		-
At 31 March 2008								43,883,500		4,822

13. Share-based payments

The total charge for the year relating to employee share-based payment schemes was £5,557,000 (2007: £4,815,000), all of which related to equity-settled share-based payment transactions. This charge comprised £4,653,000 relating to the EBT (2007: £4,653,000) and £904,000 in respect of the group's other share and share option schemes (2007: £162,000).

14. Reconciliation of changes in shareholders' equity

			Capital	Available	Reval-
	Share	Share	redemption	-for-sale	uation	Other	Retained	Total
	capital	premium	reserve	reserve	reserve	reserves	earnings	equity
	£'000	£'000	£'000	£'000	£'000	£'000	£'000	£'000
At 1 April 2006	4,760	9,276	100	972	972	130,601	11,103	157,784
Profit after taxation	-	-	-	-	-	-	16,378	16,378
Dividends	-	-	-	-	-	-	(9,073)	(9,073)
Issue of shares	62	1,328	-	-	-	-	-	1,390
Share issue costs	-	(1)	-	-	-	-	-	(1)
Purchase of own shares by Employee Share Ownership Trust	-	-	-	-	-	-	(1,815)	(1,815)
Share-based payments	-	-	-	-	-	-	4,815	4,815
Tax relief on share-based payments	-	-	-	-	-	-	714	714
Deferred tax on share-based payments	-	-	-	-	-	-	(762)	(762)
Gain arising on available-for-sale investments	-	-	-	374	-	-	-	374
Deferred tax on available-for-sale investments	-	-	-	(112)	-	-	-	(112)
Depreciation on revalued property	-	-	-	-	(13)	-	13	-
At 31 March 2007	4,822	10,603	100	1,234	959	130,601	21,373	169,692
Profit after taxation	-	-	-	-	-	-	20,889	20,889
Dividends	-	-	-	-	-	-	(10,258)	(10,258)
Issue of shares	-	14	-	-	-	-	-	14
Share-based payments	-	-	-	-	-	-	5,557	5,557
Deferred tax on share-based payments	-	-	-	-	-	-	(37)	(37)
Gain arising on available-for-sale investments	-	-	-	265	-	-	-	265
Deferred tax on available-for-sale investments	-	-	-	(80)	-	-	-	(80)
Movement in deferred tax arising from change of tax rate	-	-	-	41	27	-	5	73
Depreciation on revalued property	-	-	-	-	(13)	-	13	-
At 31 March 2008	4,822	10,617	100	1,460	973	130,601	37,542	186,115

15. Events after the balance sheet date

On 6 May 2008, £5 million of the subordinated loan, the details of which are set out in note 11, was repaid ahead of schedule. This repayment is in respect of the floating rate element of the loan and was originally scheduled for repayment in equal annual instalments commencing on 6 May 2008. The floating rate element of the loan originally amounted to £15 million and, following the repayment of the balance of £5 million, has now been repaid in full. No penalty arose from the making of this early repayment. In addition to the early repayment, a repayment of £5.625 million was made on 6 May 2008 in accordance with the normal repayment schedule.

On 10 June 2008, the directors proposed a final dividend in respect of the year ended 31 March 2008 of 17.0 pence per share. Subject to the approval of shareholders at the forthcoming annual general meeting, which is to be held on 29 July 2008, the dividend will be payable on 8 August 2008 to shareholders on the register at the close of business on 18 July 2008.

 

END

 

 

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