Robert Fleming Holdings - Final Results
Jardine Matheson Hldgs Ld
24 May 2000
Robert Fleming Holdings Limited
Annual Results for the Year Ended 31st March 2000
The following press release was issued today by the Group's 17%-
owned associate, Robert Fleming Holdings Limited.
For further information, please contact:
Forrest International Limited Tel :(852) 2522 6475 (office)
David Dodwell Tel :(852) 2501 7902 (direct)
FLEMINGS REPORTS RECORD ANNUAL PRE-TAX PROFITS OF £328.3 MILLION
Flemings, the international asset management and investment
banking group, reports profits before tax for the year ended 31st
March 2000 of £328.3 million, up from £64.1 million last year
(restated from £70.0 million to reflect changes in the current
tax treatment of overseas dividends).
Other financial highlights include:
Strong performance in both core business activities:
Asset Management - £178.0 million. Investment Banking - £150.3
million.
Pre-tax return on equity increased to 29.2%.
Cost income ratio improved to 74.6%.
Earnings per share of 136.1p (1999 - 21.1p).
Second interim dividend of 17.18p per share.
Funds under management up by 34% to £89.3 billion (US$142.2
billion).
Roddie Fleming, Chairman of Flemings, said:
'I am pleased to report that the Flemings Group performed
extremely strongly last year, earning record profits of £328.3
million. The acquisition of the remaining 50% of Fleming Martin
and Jardine Fleming, enabling the Group to deliver a more
integrated and competitive service to our clients, has been fully
justified. This, together with a strong recovery in Asian
markets, has contributed to the Group's significantly improved
results.'
William Garrett, Group Chief Executive of Flemings, said:
'With world class businesses now established in Asia, Japan,
Africa and Europe, the Group has a firm base on which to build in
the future. As we announced on 11th April 2000, we believe that
this potential will be best fulfilled by joining forces with the
global capabilities of Chase. I am confident that the Flemings'
businesses will go from strength to strength in this new global
combination.'
Financial Review
The profit and loss account now includes the fully consolidated
results of Jardine Fleming Group Limited which was acquired on
24th March 1999. The acquisition of Jardine Fleming has
substantially increased levels of gross operating income and
expense for the Group compared with prior periods. The balance
sheet fully consolidated Jardine Fleming at 31st March 1999.
Income Analysis
Operating income for the year was £1,136.7 million (1999 - £515.7
million). Adjusting for the consolidation of Jardine Fleming,
underlying operating income is some 58.7% higher than the
previous year. Growth was achieved in both Asset Management and
Investment Banking, mainly due to the recovery in Asian equity
markets and strong investment performance within Asset
Management.
Expense Analysis
Operating expenses totalled £854.6 million (1999 - £470.6
million). After adjusting for Jardine Fleming as above,
underlying costs rose by some 25.4%, largely reflecting increases
in performance related compensation driven by improved corporate
earnings. The Cost/Income ratio for the period improved to 74.6%
compared to 89.6% for the previous year.
Business Highlights
ASSET MANAGEMENT
Asset Management had a record year with pre-tax profits of £178.0
million, an increase of 135% over the 1999 level. Funds under
management grew to £89.3 billion (US$142.2 billion) from £66.7
billion (US$107.4 billion), an increase of 34%. This impressive
overall growth was derived both from market movements and from
substantial cash flows into our pooled fund product ranges.
Open Ended Pooled Funds
Throughout the year and increasingly during the latter half,
our open ended pooled fund ranges experienced rapid growth.
Total funds under management increased to £43.1 billion
(US$68.7 billion) from £23.9 billion (US$38.5 billion) at the
beginning of the financial year, an overall increase of £19.2
billion (US$30.2 billion), of which £6.0 billion (US$9.5
billion) was due to net cash flows into the product ranges and
£13.2 billion (US$20.7 billion) was due to increased market
levels and out performance of market indices.
Investment performance was consistently strong across all
investment categories and excelled in a number, most notably our
Japanese and Pacific funds, but also our European and US smaller
company and technology funds. Over the year, in excess of 80% of
the Fleming Flagship and 50% of the Save & Prosper Asian and
Japanese funds achieved first quartile rankings relative to their
respective peer groups. In the UK, the Save & Prosper Premier
Equity Growth Fund continued its impressive long-term performance
during which it has beaten the FTSE All-share index for each of
the last seven calendar years. This consistent long-term
performance has continued to attract UK investors with the fund
raising £223 million (US$355 million) during the year.
During the year, we launched a number of new funds, and most
notably a series of technology funds including the launch of the
Flagship European Technology Fund which raised in excess of £750
million (US$1,194 million) from launch in November last year. At
the same time we have established a series of funds with emphasis
on value style investments to round out our product ranges.
Closed Ended Pooled Funds
Funds under management at the year end stood at £7.8 billion
(US$12.5 billion), an increase of 44% from a year earlier when
total funds under management stood at £5.4 billion
(US$8.8 billion).
Fleming Claverhouse remained one of the top performing UK General
Funds over three and five years while a broad range of the
Fleming Investment Trusts achieved first quartile performances.
The performance of the Japanese Funds was exceptional with
Fleming Japanese, JF Fledgeling Japan and JF Japan OTC all
achieving outstanding investment returns.
Fleming Geared Growth was re-mandated into a technology trust and
in November we launched Fleming Managed Growth to provide a
simple solution to asset allocation for the retail investor.
Towards the end of the year we provided an innovative scheme to
enable corporate loan note holders in Asda Walmart to convert
their loan notes into holdings in Fleming Managed Growth and the
Save & Prosper Premier Equity Growth funds.
Segregated Funds
Segregated funds under management increased over the year from
£32.8 billion (US$52.8 billion) to £33.7 billion (US$53.7 billion).
This increase comprised market and performance gains of £6.3
billion (US$9.5 billion) offset by net cash outflows of £5.4
billion (US$8.6 billion). The majority of the outflows was from
our UK sourced balanced pension fund clients as the trend to
indexed portfolios and specialist mandate appointments accelerated.
As we reported at the interim stage, steps have been taken to
improve the management of this area and investment performance
continues to show indications of improvement, but we do not
expect any significant reversal of cash flows in the short term.
Elsewhere, investment performance was strong and clients both in
Europe and Asia continued to provide us with new specialist
mandates.
Private Clients
Our private client businesses, run from the UK and Singapore,
enjoyed a solid year reporting increased profits and funds under
management.
Rowe Price-Fleming International
We recently announced the sale, subject to regulatory approvals,
of Rowe Price-Fleming International to our partner T. Rowe Price
for US$780 million. Rowe Price-Fleming International has, over
20 years, developed a very successful business and this year
increased its funds under management from £20.1 billion (US$32.4
billion) at the beginning of the year to £26.9 billion (US$42.8
billion) at the end of the year. This transaction will allow our
direct entry into the US markets.
INVESTMENT BANKING
Investment Banking pre-tax profits reached a record level of
£150.3 million. This encouraging result has been driven by the
continued strength of trading conditions for our securities
businesses in Asia and Africa, combined with further growth in
our banking profits and strong deal flow for our corporate
finance and capital markets teams.
Highlights of the year have included: our lead-management of the
£2.7 billion (US$4.3 billion) launch of the Hong Kong Tracker
Fund on behalf of the Hong Kong Government; our pivotal role in
advising Lagardere and Aerospatiale Matra on the £13 billion
(US$20 billion) merger of Aerospatiale Matra with DASA and CASA,
creating the leading European aerospace and defence company; and
our lead-management of the £433 million (US$689 million)
flotation of Kingston Communications, a client of our banking
division for over ten years.
Securities
The Securities business had a record year on the back of a very
strong performance in Asia. After two years of severe
economic downturn, the Asian markets once again became an area of
focus for international and domestic investors and we were
strategically positioned to take advantage of the upturn in
activity and to capitalise on the opportunities provided.
In September we signed a joint venture agreement with Cable and
Wireless HKT to provide on-line broking services to retail
clients in Hong Kong and we expect to launch this service in the
second quarter of this year. We are also actively pursuing other
internet business opportunities.
Corporate Finance
In the number, size and quality of transactions, the Corporate
Finance team has demonstrated good progress towards our goal of
establishing Flemings as a front rank adviser to major
international companies and quality growth companies. Both
revenues and profits were well ahead of budget and showed a good
balance of activity between Asia and Western Europe.
Highlights of the year included: advising Centrica on the £1.1
billion (US$1.8 billion) acquisition of the AA; acting for Prada
on its joint venture with Jil Sander in Germany and its
acquisition of Church Shoes in the UK; advising Pacific Century
CyberWorks (PCCW) on acquiring a £691 million (US$1.1 billion)
stake in Pacific Convergence Corp.; the Celltech offers for
Chiroscience and Medeva, together worth £879 million (US$1.4
billion), to create the UK's leading biopharmaceutical company;
and, in South Africa, Harmony's contested and ultimately
successful bid for Randfontein.
The year finished with a large number of transactions in
progress. These include working for Aerospatiale Matra in the
creation of the new European aerospace group EADS, and advising
Cable & Wireless HKT regarding the offer from PCCW .
Capital Markets
Capital Markets had a record year, raising more than £40 billion
(US$63 billion) for companies in 26 countries, including 43 lead-
managed equity and equity-related issues.
In Asia, our strength in the region was highlighted by the £250
million (US$400 million) IPO of SUNeVision Holdings on the GEM
market in Hong Kong, as well as by a series of transactions which
included ABS-CBN (Philippines), Funai Electric (Japan), Gas
Authority of India Limited (India), Mosel Vitelic (Taiwan),
National Finance (Thailand), Pacific Century Insurance (Hong
Kong), PT Indofood (Indonesia) and Synnex Technology (Taiwan).
In Europe, our emphasis on the technology, media and telecom
sectors led to strong deal flow in the region. In Scandinavia,
Fleming Aros managed equity issues for technology companies such
as HiQ and Q-Med (Sweden) and Contex (Denmark). In Germany, we
were active on the Neuer Markt with IPOs such as TRIA Software.
We were also active in the Italian market with IPOs for
AISoftw@re and Tecnodiffusione. Other new markets included Egypt
(Chipsy Food IPO) and Turkey (Turk Ekonomi Bankasi IPO).
Our structured finance and fixed income teams also made a very
strong contribution, one of the larger transactions being a major
share buy-back programme for South African Breweries.
Banking
Banking had a very successful year, establishing new record
performance levels across almost all areas.
Our Commercial Banking business continued to prosper, arranging
new facilities totalling £700 million (US$1.1 billion). Our
retail businesses, Fleming Premier Banking and Fleming Offshore
Banking, increased their retail deposit base by 15% to
approximately £2 billion (US$3.2 billion). Fleming Premier
Banking saw a significant uplift in deposits from small
businesses and partnerships and achieved market leading customer
satisfaction survey results. Our money market and foreign
exchange businesses in London and Hong Kong traded well
throughout the year, particularly over the Millennium period.
Custody operations processed record levels of transactions and
along with Stock Lending achieved good profits.
Outlook
Commenting on the outlook for the year, William Garrett said:'The
outlook for the new year remains positive, both for our asset
management operations and in the investment banking arena.
Working closely with Chase will be good for our clients and staff
and we are excited about the prospects this new partnership
brings us for the future.'
Media enquiries:
Malcolm Wallis,
Director of Group Corporate Communications Tel: 020 7382 8380
Consolidated Profit and Loss Account
for the year ended 31st March
2000 1999
£m £m
------- -------
Interest receivable:
Interest receivable and similar income
arising from debt securities 98.0 86.4
Other interest receivable and similar income 302.8 283.6*
------- -------
400.8 370.0
------- -------
Interest payable (335.1) (338.9)
------- -------
Net interest income 65.7 31.1
Dividend income 4.3 5.8
Fees and commissions receivable 948.8 479.8
Fees and commissions payable (67.7) (81.1)
Net dealing income 104.1 34.4
Other operating income 81.5 45.7
Non-interest income 1,071.0 484.6
------- -------
Total operating income 1,136.7 515.7
Administrative expenses (819.3) (443.2)
Depreciation and amortisation (28.8) (18.6)
Provisions for debt securities (8.0) (9.2)
Provisions for loans and advances 1.5 0.4
Total operating expenses (854.6) (470.6)
------- -------
Group operating profit 282.1 45.1
Share in operating results of:
Joint ventures 40.9 9.5
Associates 5.3 9.5
------- -------
Profit on ordinary activities before tax 328.3 64.1
Tax on profit on ordinary activities (95.2) (33.2)*
------- -------
Profit on ordinary activities after tax 233.1 30.9
Minority interests (4.6) 0.4
------- -------
Profit for the financial year 228.5 31.3
Dividends (44.6) (37.5)
------- -------
Profit/(Loss) retained
by the Group for the financial year 183.9 (6.2)
------- -------
Earnings per share
Basic 136.1p 21.1p
Diluted 133.7p 20.7p
£m £m
------- -------
Total operating income
Group 1,136.7 515.7
Share of joint ventures 132.1 118.1
------- -------
1,268.8 633.8
------- -------
* Restated to reflect changes in the current tax treatment of
overseas dividends.
Consolidated Balance Sheet
at 31st March
2000 1999
£m £m
-------- --------
Assets
Cash and balances at central banks 16.7 6.2
Treasury bills and other eligible bills 197.8 242.0
Loans and advances to banks 1,964.7 1,658.8
Loans and advances to customers 2,748.5 2,167.3
Net investment in finance leases 77.6 88.8
Settlement accounts 2,895.6 1,512.6
Debt securities 2,712.2 1,856.7
Equity shares 410.3 600.3
Financial instrument contracts 392.5 1,072.3
Interests in joint ventures 90.8 69.0
Interests in associated undertakings 14.1 8.6
Other participating interests 10.1 9.5
Value of long-term insurance business 96.3 91.4
Tangible fixed assets 88.0 120.6
Intangible fixed assets 80.3 83.3
Own shares 73.7 61.8
Insurance broking assets 149.5 131.6
Other assets 204.4 184.2
Prepayments and accrued income 190.6 136.3
-------- --------
12,413.7 10,101.3
-------- --------
Long-term insurance assets
attributable to policy holders 2,571.3 2,278.5
-------- --------
14,985.0 12,379.8
-------- --------
Group share of joint ventures:
Total assets 401.9 352.2
Total liabilities (311.1) (283.2)
-------- --------
90.8 69.0
-------- --------
Consolidated Balance Sheet
at 31st March
2000 1999
£m £m
-------- --------
Liabilities
Deposits by banks 834.8 801.3
Customer accounts 4,542.2 3,883.2
Settlement accounts 2,889.4 1,280.7
Debt securities in issue 484.4 535.2
Short securities positions 515.0 398.8
Financial instrument contracts 589.7 1,094.3
Insurance broking liabilities 161.2 141.5
Other liabilities 319.8 222.1
Accruals and deferred income 411.3 283.5
Provisions for liabilities and charges 84.3 80.5
-------- --------
10,832.1 8,721.1
-------- --------
Subordinated loan capital 358.1 355.7
Equity shareholders' funds
Called up share capital 44.1 43.7
Share premium account 195.8 183.8
Other reserves 962.8 777.1
1,202.7 1,004.6
Minority interests 20.8 19.9
Total capital resources 1,581.6 1,380.2
-------- --------
12,413.7 10,101.3
Long-term insurance liabilities 2,571.3 2,278.5
-------- --------
14,985.0 12,379.8
-------- --------
Memorandum items
Contingent liabilities
Acceptances and endorsements 157.4 202.8
Guarantees and irrevocable letters of credit 36.1 27.5
-------- --------
193.5 230.3
-------- --------
Commitments 395.5 259.8
-------- --------
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