Final Results Cont.
Royal Bank of Scotland Group PLC
1 March 2001
THE ROYAL BANK OF SCOTLAND GROUP plc
CONTENTS PAGE
STATUTORY RESULTS
Basis of Preparation 2
Consolidated Profit and Loss Account for the 15 months to 31 December 2000 3
Consolidated Balance Sheet at 31 December 2000 5
Statement of total recognised gains and losses 6
Reconciliation of movements in shareholders' funds 6
Acquisition of NatWest 7
Notes 8
CONTACTS 10
Page 1 of 10
BASIS OF PREPARATION
On 6 March 2000 the Group completed the acquisition of National Westminster
Bank Plc ('NatWest') and on 19 April 2000 announced a change of financial year
end to 31 December.
The Group's statutory accounts are therefore for the 15 month period ending on
31 December 2000 and include the results of NatWest from 6 March 2000. These
statutory accounts also include the fair value and other adjustments required
to account for the acquisition of NatWest.
The consolidated profit and loss account for the 15 months ended 31 December
2000 set out on pages 3 and 4 incorporates the results of NatWest from the
date of acquisition, 6 March 2000.
Pro forma results
The acquisition has had a significant effect on the Group's financial
position. As a consequence, comparisons with the prior year on a statutory
basis (which only includes NatWest from 6 March 2000) are of limited benefit.
In order to provide shareholders with additional relevant and meaningful
information the Group has also published results on a pro forma basis. The pro
forma results assume that the acquisition of NatWest took place on 1 January
1999. This approach facilitates meaningful comparisons with the prior year and
provides a benchmark against which the Group's future performance can be
judged. The pro forma results are also being announced at this time and are
set out in a separate report.
Page 2 of 10
CONSOLIDATED PROFIT AND LOSS ACCOUNT
15 months 12 months
ended ended
31 December 30 September
2000 1999
£m £m
Interest receivable 14,494 4,853
Interest payable 8,707 3,105
-------- --------
Net interest income 5,787 1,748
-------- --------
Dividend income 54 34
Fees and commissions receivable 3,885 1,081
Fees and commissions payable (746) (129)
Dealing profits 1,003 199
Other operating income 959 459
-------- --------
5,155 1,644
General insurance
- earned premiums 1,608 869
- reinsurance (442) (159)
-------- --------
Non-interest income 6,321 2,354
--------- --------
Total income* 12,108 4,102
--------- --------
Administrative expenses
- staff costs 3,547 1,012
- premises and equipment 817 271
- other 1,615 460
Depreciation and amortisation
- tangible fixed assets 786 278
- goodwill 541 1
-------- --------
Operating expenses 7,306 2,022
-------- --------
Profit before other operating charges 4,802 2,080
General insurance
- gross claims 1,205 720
- reinsurance (347) (130)
-------- --------
Profit before provisions for bad and doubtful debts 3,944 1,490
Provisions for bad and doubtful debts 629 266
Amounts written off investments 42 13
-------- --------
Operating profit** 3,273 1,211
Profit on disposal of businesses 100 -
-------- --------
Profit on ordinary activities before tax 3,373 1,211
-------- --------
* Analysis of total income:
- continuing operations 5,629 4,102
- acquisitions 6,479 -
--------- ---------
12,108 4,102
** Analysis of operating profit: --------- ---------
- continuing operations 1,355 1,211
- acquisitions 1,918 -
--------- ---------
3,273 1,211
--------- ---------
Page 3 of 10
CONSOLIDATED PROFIT AND LOSS ACCOUNT
15 months 12 months
ended ended
31 December 30 September
2000 1999
£m £m
Profit on ordinary activities before tax 3,373 1,211
Tax on profit on ordinary activities 1,157 361
--------- ---------
Profit on ordinary activities after tax 2,216 850
Minority interests (47) 6
--------- ---------
Profit after minority interests 2,169 856
Preference dividends 322 80
--------- ---------
Profit attributable to ordinary shareholders 1,847 776
Ordinary dividends 882 254
--------- ---------
Retained profit 965 522
--------- ---------
Basic earnings per ordinary share 90.0p 87.8p
--------- ---------
Adjusted earnings per ordinary share (Note 4) 126.4p 87.8p
--------- ---------
Diluted earnings per ordinary share 88.9p 86.6p
--------- ---------
This information does not constitute statutory accounts for the periods ended
31 December 2000 or 30 September 1999. Statutory accounts for the year ended
30 September 1999 have been delivered to the Registrar of Companies and those
for the 15 months ended 31 December 2000 will be delivered following the
company's annual general meeting. The auditors have reported on these
accounts; their reports were unqualified and did not contain a statement under
Section 237(2) or (3) of the Companies Act.
Page 4 of 10
CONSOLIDATED BALANCE SHEET
31 December 30 September
2000 1999
£m £m
Assets
Cash and balances at central banks 3,049 1,394
Items in course of collection from other banks 2,961 1,655
Treasury bills and other eligible bills 3,316 701
Loans and advances to banks 32,061 10,375
Loans and advances to customers 168,076 49,340
Debt securities 57,789 15,389
Equity shares 1,553 913
Interests in associated undertakings 83 43
Intangible fixed assets 12,080 11
Tangible fixed assets 6,121 2,526
Other assets 18,034 3,326
Prepayments and accrued income 4,182 1,166
----------- ----------
309,305 86,839
Long-term assurance assets attributable to 10,699 2,013
policyholders
----------- ----------
Total assets 320,004 88,852
----------- ----------
Liabilities
Deposits by banks 35,130 6,418
Items in the course of transmission to other banks 1,707 975
Customer accounts 177,302 55,180
Debt securities in issue 19,407 9,199
Other liabilities 32,959 4,634
Accruals and deferred income 7,172 2,582
Provisions for liabilities and charges
- deferred taxation 1,224 465
- other provisions 306 6
Subordinated liabilities
- dated loan capital 6,316 1,917
- undated loan capital including convertible debt 4,120 1,115
Minority interests - equity (34) 108
- non-equity 580 38
Shareholders' funds including non-equity interests 23,116 4,202
----------- ----------
309,305 86,839
Long-term assurance liabilities to policyholders 10,699 2,013
----------- ----------
Total Liabilities 320,004 88,852
----------- ----------
Memorandum items:
Contingent liabilities and commitments 105,102 23,650
----------- ----------
Page 5 of 10
STATEMENT OF TOTAL RECOGNISED GAINS AND LOSSES
15 months 12 months
ended ended
31 December 30 September
2000 1999
£m £m
Profit attributable to ordinary shareholders 1,847 776
Currency translation adjustments and other movements 26 5
Revaluation of premises 24 28
------- ------
Total recognised gains and losses 1,897 809
------- ------
RECONCILIATION OF MOVEMENTS IN SHAREHOLDERS' FUNDS
15 months 12 months
ended ended
31 December 30 September
2000 1999
£m £m
Profit attributable to ordinary shareholders 1,847 776
Ordinary dividends (882) (254)
------- ------
Retained profit for the period 965 522
Issue of ordinary and preference shares 18,032 613
Redemption of preference shares (300) -
Other recognised gains and losses 50 33
Currency translation adjustment on share premium 184 23
account
Write-back of goodwill - 28
Other movements (17) 30
--------- --------
Net increase in shareholders' funds 18,914 1,249
Opening shareholders' funds 4,202 2,953
--------- --------
Closing shareholders' funds 23,116 4,202
--------- --------
Page 6 of 10
ACQUISITION OF NATWEST
£m £m
Consideration paid:
Issue of 1,563.5 million new 25 pence ordinary shares to
NatWest ordinary shareholders (Note a) 13,462
Payment of cash to NatWest ordinary shareholders (Note b) 7,110
Issue of loan notes to NatWest ordinary shareholders (Note 239
b)
Fees and expenses related to the acquisition 176
---------
20,987
---------
Net assets acquired:
Shareholders' funds 9,699
Less: preference shares (488)
---------
NatWest net assets as at 6 March 2000 (Note c) 9,211
---------
Fair value adjustments: (533)
Goodwill in NatWest
Disposal of businesses: (Note d)
- Gartmore 866
- Other 271
---------
1,137
Pension fund surplus 1,070
Contingent asset 70
Fixed assets excluding property (40)
Property (262)
Financial instruments (516)
Other (504)
Tax on fair value adjustments (36)
---------
Total fair value adjustments 386
---------
Adjusted net assets acquired 9,597
---------
Goodwill arising on acquisition (Note e) 11,390
---------
Notes
(a) The 'Consideration paid' information above is based on the closing price on
the London Stock Exchange on 3 March 2000, the trading day immediately
prior to the offer for NatWest being declared unconditional in all
respects, of 861 pence per RBSG ordinary share of 25 pence.
(b) NatWest ordinary shareholders had the right to receive, for each NatWest
share held, 0.968 new RBSG 25 pence ordinary shares plus 400 pence in cash
or loan notes. A 'Partial cash alternative' was also offered, which, for
each NatWest share held, consisted of 0.92 new RBSG 25 pence ordinary
shares plus 450 pence in cash or loan notes.
(c) Net assets acquired at 6 March 2000 include £51 million relating to
proceeds from the subsequent exercise of outstanding options.
(d) The fair value adjustment relating to the disposal of businesses reflects
the excess of sale proceeds over the net tangible asset value of these
businesses in NatWest's consolidated balance sheet at 6 March 2000.
(e) In the Group's interim results, the goodwill arising on the acquisition of
NatWest was estimated to be £11,200 million, based on preliminary fair
value adjustments. Subsequently, further fair value adjustments have been
identified resulting in a revision to the goodwill figure to £11,390
million. This is being amortised over its estimated economic life of 20
years, resulting in a charge of £570 million per annum.
Page 7 of 10
NOTES
1. Basis of preparation
The basis of preparation of the statutory results is set out on page 2.
2. Accounting policies and presentation
(i) Implementation by the Group of Financial Reporting Standard ('FRS')
15 'Tangible Fixed Assets' and FRS 16 'Current Tax' had no material
effect on reported profits. From 1 October 1999, the Group's
freehold and long leasehold buildings, following a reassessment of
their useful economic lives, are being depreciated over 50 years.
(ii) The following changes to the accounting presentation adopted by the
Group have been made to give a fairer presentation of the results
of the enlarged Group:
a) Interest receivable and interest payable on trading assets and
liabilities previously shown in net interest income are now
included in dealing profits. As a result of this change there
is a reduction of £217 million in interest receivable for the
15 months ended 31 December (30 September 1999 - £143 million),
a reduction in interest payable of £201 million (30 September
1999 - £135 million) and an increase of £16 million (30
September 1999 - £8 million) in dealing profits.
b) Fraud losses, formerly included in provisions for bad and
doubtful debts are now included in administrative expenses. The
charge for bad and doubtful debt provisions has decreased by £
16 million for the 15 months ended 31 December 2000 (30
September 1999 - £10 million), with a corresponding increase in
administrative expenses - other.
c) Credit card processing costs are now reported in fees and
commissions payable increasing this profit and loss caption by
£49 million for the 15 months ended 31 December 2000 (30
September 1999 - £36 million) and reducing administrative
expenses - other.
d) Following an analysis of staff costs, a net £17 million for the
15 months ended 31 December 2000 and £8 million for the year
ended 30 September 1999 has been transferred within
administrative expenses between staff costs and other costs.
Comparative figures have been restated to reflect these changes in
presentation which do not affect profit before tax.
3. Taxation
The charge for taxation is based on a UK corporation tax rate of 30% (1999
- 30.5%).
The tax charge of £1,157 million on profits of £3,373 million for the 15
months ended 31 December 2000 is equivalent to 34% of pre-tax profit. This
is higher than the standard UK tax rate of 30%, mainly due to goodwill
amortisation, which is not allowable for tax purposes.
Page 8 of 10
NOTES (continued)
4. Earnings per share
The earnings per share have been calculated as follows:
15 months 12 months
ended ended
31 30
December September
2000 1999
£m £m
Earnings:
Profit attributable to ordinary shareholders 1,847 776
-------- ------
Weighted average number of ordinary shares:
In issue during the period 2,053 884
Effect of dilutive share options and convertible 26 12
non-equity shares
-------- --------
In issue during the period - diluted 2,079 896
-------- --------
Earnings per share 90.0p 87.8p
Integration costs 14.0p -
Goodwill amortisation 25.8p -
Profit on sale of businesses (3.4p) -
-------- --------
Adjusted earnings per share 126.4p 87.8p
-------- --------
Adjusted earnings are calculated by adjusting the profit attributable to
ordinary shareholders for the after tax profits or losses on disposals of
businesses, integration costs and goodwill amortisation. Integration costs,
as defined by Financial Reporting Standard 6, amounted to £401 million in
the period 6 March 2000 to 31 December 2000.
5. Ordinary Dividends
The directors have declared a final dividend of 23.5p per share on the
ordinary shares, which, when added to the interim dividend of 9.5p per
share, makes a total of 33.0p per share. Subject to approval by
shareholders at the annual general meeting, the final dividend will be paid
on 18 May 2001 to shareholders registered on 16 March 2001. As an
alternative to cash, a scrip dividend election is to be offered and
shareholders will receive details of this by letter.
Page 9 of 10
CONTACTS
Fred Watt Group Finance Director 020 7427 8412
0131 523 2028
Grahame Whitehead Deputy Group Finance Director 020 7427 9450
0131 523 2970
1 March 2001
END
Page 10 of 10
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