6th Jan 2005 07:00
Aberdeen Asset Management PLC06 January 2005 ABERDEEN ASSET MANAGEMENT PLC FINAL RESULTS FOR YEAR TO 30 SEPTEMBER 2004 Aberdeen Asset Management has today announced its final results for the yearto 30 September 2004. OPERATIONAL HIGHLIGHTS • Split capital investment trust voluntary settlement agreed • Net new business of £2 billion added during the year • Further net new business wins totalling £770 million since the year-end • Income from Investment Management division increased 11.6% on a like-for-like basis • Strong investment performance now being delivered in areas where it was previously weak FINANCIAL HIGHLIGHTS 2004 2003 ------------ -----------Turnover £140.0m £142.3m ------------ -----------Pre-tax profit (before goodwill charges and exceptionalitems) £15.1m £5.0m ------------ -----------Pre-tax loss (after goodwill charges and exceptionalitems) (£87.6m) (£6.4m) ------------ -----------Earnings per share (before goodwill charges and exceptional items) 4.7p 3.1p ------------ -----------Loss per share (after goodwill charges and exceptionalitems) (34.9p) (8.8p) ------------ -----------Total dividend per share 4.0p 4.0p ------------ -----------Assets under management at the year-end £22.1bn £20.6bn ------------ ----------- Martin Gilbert, Chief Executive of Aberdeen Asset Management commented; "The settlement with the FSA finally allows us to focus exclusively on thebusiness once again. We have had an excellent year for new business wins and thestrong investment performance, which we have consistently delivered in the FarEast, has now spread to other asset classes. We are well positioned to continuethe progress we have made and return to a pattern of sustained, profitablegrowth and I am confident we are well on the way to improving shareholder returns." For further information: Fiona Piper Maitland 0207 379 5151 2004 CHAIRMAN'S STATEMENT The past year has been one of continued transition. Our asset gatheringactivities benefited from sustained performance across a number of assetclasses, principally Asia and emerging market equities, which resulted in £2.0billion of net new business. With stock markets also firmer after prolonged weakconditions, total assets under our management at the year end were£22.1 billion, compared with £20.6 billion 12 months ago. These improvements were achieved against a clear requirement to reduce furtherour borrowings. To this end we disposed of a number of non-core assets. Lesstangibly, we have pursued our re-positioning as a global institutional manager,making refinements to our teams and investment processes, albeit within aframework of tight cost controls. Throughout the review period we have continued to cooperate with the FSAinvestigation into the split capital investment trust sector. However, I ampleased to report that, together with the majority of the firms involved in thesector, we have now reached a settlement, which should enable us to draw a line under these issues. Results and DividendThe financial results for the year reflect the benefits of ongoingrestructuring. Profit before taxation, goodwill charges and exceptional itemswas £15.1 million compared to £5.0 million in 2003, representing earnings pershare of 4.7p against 3.1p last year. After accounting for the estimated cost ofthe split capital settlement of £77.7 million, other exceptional costs of £7.6million, exceptional gains of £2.4 million and goodwill charges of £19.7million, we report a pre-tax loss of £87.6 million, compared to a loss of £6.4million in 2003. The Board has decided to pay a second interim dividend, in lieu of a finaldividend, of 2p per share making a total payment for the year of 4p per share,unchanged from the total paid in 2003. This payment is fully covered byunderlying profit earned in 2004 and our belief now is that the Group is in aposition to build from a stable financial base. FinancialsThe Group's revenues were barely changed on 2003, but these figures are notdirectly comparable due to the effects of corporate acquisitions and disposalsduring the year. However, this disguises the progress made within the investmentmanagement division where the benefits of new business flows have contributed toa healthy increase in turnover. On a like-for-like basis income in thisdivision, at £92.8 million, is 11.6% higher than in 2003. We have seen an overall reduction in the Group's costs following the disposal ofthe UK and Amsterdam offices operated by our property division. While we addedselectively to headcount across the Group, this was generally in support ofsecondary functions. Although we added further cost to the investment managementdivision with the acquisition of Edinburgh Fund Managers in October 2003, thishas been countered by wider cost reductions and the total costs of this divisionare approximately 8% lower than for 2003. We continue to challenge our operatingcosts and we have entered the new financial year with these costs running at anannual rate of £70 million. This represents a reduction of 35% from the peaklevel reached in 2001. Our balance sheet was strengthened during the year due to sales of non-core assets and has also benefited after the year-end from the receipt of £19 million of the proceeds due from the sale of the investment in Lombard International Assurance. While the FSA settlement will require an immediate outlay of £17.5 million the further payments due under the settlement are spread over the period to October 2006. In respect of Aberdeen Progressive Growth Unit Trust, we have announced the final details of an Uplift Plan, first suggested in 2002, which is designed to ensure that investors will be able to recover any financial loss sustained around the fifth anniversary of their investment. The eventual cost of the Uplift Plan is dependent upon market conditions over the next 2 years and we have made an accounting provision of £39.2 million representing the discounted value of our estimated cost. We expect to finance these payments from a combination of existing facilities and additional facilities to be made available. Depending on market conditions, we may consider refinancing an element of bank debt from a small convertible bond issue. Since the year end we have restructured our bank debt, partly swapping ourworking capital facility for an additional term loan. This allowed us to repaythe $27.5 million 8% convertible subordinated loan notes in November. Theprofile of the Group's debt is now more closely aligned to the anticipatedrealisation of outstanding non-core assets. As well as the disposal of ourinvestment in Lombard, which we announced recently, we have also reachedconditional agreement for the sale of our Isle of Man life company. Corporate activityThe year began with the completion of our purchase of Edinburgh Fund Managersplc ("EFM"), for a £50.4 million all share consideration, and the parallel saleof EFM's retail business to New Star Asset Management Group Limited. Wesubsequently made a minor disposal with the sale of EFM's private equitysubsidiary, Northern Ventures Managers Limited, to its management in December2003. The integration of EFM into the Group has been relatively swift, helped by thefact that its core investment trust business complements our existing strengthsin this area. Our ability to integrate senior staff greatly assisted ourretention of the underlying management contracts at a sensitive time for theGroup generally. The £2.1 billion of additional assets under management broughtthe opportunity for further cost efficiencies across the enlarged Group, whilstthe sale of EFM's retail business led to a reduction in gearing. In May, we completed the sale of the UK and Amsterdam offices of our propertymanagement division to Arlington Securities, for a cash consideration of up to£50 million, the proceeds of which were used to reduce further bank debt. Ourremaining property arm headquartered in Stockholm, has continued to trade wellthrough the period, expanding its business across into Continental Europe.Institutional demand caused funds here to increase by £560 million over theperiod. Splits settlementThe near three-year-long investigation into the marketing and management ofsplit capital funds has now concluded with an omnibus settlement between themajority of the firms involved in the sector, the FSA, the Jersey FinancialServices Commission and the Guernsey Financial Services Commission. Aberdeen'scontribution to this settlement is approximately £74 million. The terms of thesettlement entail no admission of liability and effectively conclude the Group'sexposure to the regulators in respect of these matters. We will contribute £35million to a central fund which will be used to provide a cash distribution forretail investors in the zero dividend preference shares ("ZDPs") issued by splitcapital investment companies, and we have also finalised the details of anUplift Plan for investors in Aberdeen Progressive Growth Unit Trust at anestimated cost of £39 million. We recognise the huge impact this episode has already had on our business. Wehave incurred legal and other external costs of over £7 million to date as wellas considerable management time and cost. We therefore regard this voluntarysettlement as the best outcome for shareholders, investors and the industry. Thealternative of prolonged legal action would have been attritional in theextreme. BoardThere have been a number of changes to the Board this year and I was verypleased to welcome a number of new directors: Roger Cornick, formerly deputychairman of Perpetual plc, and Anita Frew, formerly an executive director ofAbbott Mead Vickers Group Limited, have joined as independent non executivedirectors; Robert Wilson was appointed as a non executive director in May andAndrew Laing, our chief operating officer, joined as an executive director. David Woods retired following the AGM in January 2004, having served as nonexecutive deputy chairman since 1997. Jack Solan also stepped down from theBoard during the year and Mike Haylon resigned in November following repaymentof the convertible loan notes to Phoenix. Finally, John Wybrew has intimated hisdecision to retire at the conclusion of the AGM having joined the board in 2001.I would like to thank each of them for their valuable contributions. OutlookThe Group has faced exceptionally challenging conditions over the last fewyears, both in markets and as a consequence of the FSA investigation. Duringthis period, we have continued to confront our competitive positioning head on,review our systems of control and risk management, and implement changes wherenecessary. Whilst our staff have not had an easy time, I believe the recognition now beingpaid to our investment team attests to its stability and focus, and is a creditto the Group as a whole. We value the loyalty and professionalism of all membersof staff and I would also like to thank our clients and shareholders for theircontinued support and encouragement. Even though much remains to be done, considerable progress has been made. Werecognise that the ability to deliver consistent investment performance isessential for any asset management business, and we have entered the newfinancial year in a much stronger competitive position thanks to improvedinvestment performance and buoyant levels of new business generation. The balance sheet is benefiting from the delivery of promised cost reductions,including the phased pay-down of debt via non-core asset sales. The Board isconfident that the settlement of the split capital issues can be managed andfinanced in an efficient and cost effective manner and we are thus wellpositioned to return to a pattern of sustained, profitable growth. As wecontinue to remain focused I am confident we can deliver improving returns toshareholders. CLA IrbyChairman Consolidated Profit and Loss AccountFor the year ended 30 September 2004 Notes 2004 2003 £'000 £'000 ---------- --------- Turnover 1 140,011 142,268 ---------- ---------Operating expenses 1 (113,783) (123,250)Costs relating to settlement of regulatory issues 2 (38,519) (3,058)Provision for Progressive Growth Uplift Plan 2 (39,200) -Other exceptional costs 2 (7,589) (20,793)Amortisation of goodwill (19,122) (18,430)Provision for impairment of goodwill & intangibleassets (584) (17,311) ---------- ---------Total administrative expenses (218,797) (182,842)Other operating income 1,116 -Exceptional amounts written off investments - (5,376) ---------- ---------Operating profit before goodwill amortisation,impairment provisions & exceptional operating items 27,344 19,018Amortisation of goodwill, impairment provisions &exceptional operating items (105,014) (64,968) ---------- --------- Operating loss 1 (77,670) (45,950)Gain on disposal of subsidiaries 2 1,940 -Gain on disposal of management contracts 2 421 53,536Net interest payable and similar charges (12,273) (13,985) ---------- ---------Loss on ordinary activities before taxation (87,582) (6,399)Tax on loss on ordinary activities 6,981 (8,232) ---------- ---------Loss on ordinary activities after taxation (80,601) (14,631)Minority interests - equity (170) (231) ---------- ---------Loss for the financial year (80,771) (14,862) ---------- ---------DividendsEquity dividends on ordinary shares 3 (9,437) (7,074)Non-equity dividends on preference shares 3 (46) (589) ---------- --------- (9,483) (7,663) ---------- ---------Retained loss for the financial year (90,254) (22,525) ---------- ---------Earnings (loss) per share - basic and diluted 5Before goodwill amortisation, impairment provisions& exceptional items 4.68p 3.10p After goodwill amortisation, impairment provisions& exceptional items (34.90p) (8.76p) ---------- --------- Turnover, operating loss and the gain on disposal of management contracts ariseswholly from continuing activities. There is no material difference between theloss on ordinary activities before taxation above and the historic costequivalent. Consolidated Statement of Total Recognised Gains and LossesFor the year ended 30 September 2004 2004 2003 £'000 £'000 ---------- ----------Loss for the financial year (80,771) (14,862)Revaluation of fixed asset investments 4,428 3,171Translation of foreign currency net investments (475) 1,102 ---------- ----------Total recognised gains and losses for the financial year (76,818) (10,589) ---------- ---------- Consolidated Balance SheetAs at 30 September 2004 Notes 2004 2003 £'000 £'000 ---------- ----------ASSETSFixed assetsIntangible assets 40,788 42,408Goodwill 297,083 302,459Tangible assets 10,567 14,981Investments 46,654 33,861 ---------- ---------- 395,092 393,709 ---------- ----------Current assetsStock 519 192Debtors 45,730 39,981Investments 424 2,812Cash at bank and in hand 17,763 23,003 ---------- ---------- 64,436 65,988 ---------- ----------Assets attributable to equity shareholders 459,528 459,697Assets of long-term life assurance business 231,045 247,328 ---------- ----------Total assets 690,573 707,025 ---------- ---------- LIABILITIESCapital and reservesCalled up share capital 23,620 28,034Share premium account 19,710 19,205Revaluation reserve 19,901 15,529Other reserves 203,805 154,766Profit & loss account (134,114) (38,938) ---------- ----------Shareholders' fundsEquity 132,922 168,253Non-equity - 10,343 ---------- ---------- 132,922 178,596 Minority interests - equity 282 749Provisions for liabilities and charges 7 45,625 4,179 Creditors: due within one year, including convertible debt Creditors 162,962 123,810Convertible debt 15,197 19,562 ---------- ---------- 178,159 143,372 ---------- ----------Creditors: due after more than one year, includingconvertible debt Creditors 4,267 35,272Convertible debt 98,273 97,529 ---------- ---------- 102,540 132,801 ---------- ---------- Liabilities of long - term life assurance business 231,045 247,328 ---------- ----------Total liabilities 690,573 707,025 ---------- ---------- Summary Consolidated Cash Flow StatementFor the year ended 30 September 2004 Notes 2004 2003 £'000 £'000 ---------- ----------Net cash inflows from operating activitiesCore cashflow from operating activities 4,193 17,082Effects of short-term timing differences on unittrust settlements (2,550) (9,669) ---------- ---------- 4 1,643 7,413Returns on investments and servicing of finance (10,241) (14,749)Taxation paid (6,194) (3,243)Capital expenditure and financial investment 32,290 79,198Acquisitions and disposals 29,305 (2,208)Equity dividends paid (8,251) (7,311) ---------- ----------Cash inflow before financing 38,552 59,100 FinancingIssue of share capital 586 -Redemption of preference share capital (10,343) (10,342)New bank term loans - 754Repayments of loan notes (2,176) -Repayment of convertible loan notes (2,793) (3,163)Repayment of loan stock (10,000) -Instalments repaid on long-term loans (29,272) (71,762) ---------- ----------Decrease in cash in the year 4 (15,446) (25,413) ---------- ---------- Reconciliation of net cash flow to movement in netdebt Notes 2004 2003 £'000 £'000 ---------- ----------Decrease in cash in the year (15,446) (25,413)New bank term loans - (754)Loans assumed on acquisition of subsidiary (11,844) -Repayments of loan notes 2,176 -Instalments repaid on term loans 29,272 71,762Repayment of convertible loan notes 2,793 3,163Repayment of loan stock 10,000 - ---------- ----------Change in net debt resulting from cash flows 16,951 48,758Amortisation of issue costs of convertible bonds (744) (744)Conversion of bonds to ordinary shares - 3Translation difference (140) 1,102 ---------- ----------Movement in net debt in the year 16,067 49,119Net debt at 1 October 6 (185,332) (234,451) ---------- ----------Net debt at 30 September 6 (169,265) (185,332) ---------- ---------- Notes 1. Segmental information The Group is involved in providing investment management and property assetmanagement services. These services are provided to clients in the followinggeographic areas: United Rest of Rest of Kingdom Europe World Total £'000 £'000 £'000 £'000 -------- -------- -------- --------Year to 30 September 2004 Turnover 75,451 45,641 18,919 140,011 -------- -------- -------- --------Operating (loss) profit (95,795) 7,781 10,344 (77,670) -------- -------- -------- --------(Loss) profit beforeinterest and tax (92,775) 7,223 10,243 (75,309) -------- -------- -------- --------Net assets (liabilities)outwith the UK 14,876 (487) 14,389 -------- -------- --------Year to 30 September 2003 Turnover 89,445 41,682 11,141 142,268 -------- -------- -------- -------- Operating (loss) profit (54,873) 5,181 3,742 (45,950) -------- -------- -------- --------(Loss) profit beforeinterest and tax (1,337) 5,181 3,742 7,586 -------- -------- -------- -------- Net assets outwith the UK 10,910 5,455 16,365 -------- -------- -------- Turnover and (loss) profit before interest and tax by origin is not materiallydifferent to the information given above. The results of the Group can be further analysed between investment managementand property asset management activities as shown below. Property Investment asset GroupYear to 30 September 2004 management management total £'000 £'000 £'000 Turnover 91,659 48,352 140,011 Operating expenses (73,565) (40,218) (113,783)Costs relating to settlement of regulatoryissues (38,519) - (38,519)Provision for Progressive Growth UpliftPlan (39,200) - (39,200)Other exceptional costs (7,589) - (7,589)Amortisation of goodwill (17,282) (1,840) (19,122)Provisions for impairment of goodwill & intangible assets (584) - (584) --------- --------- ------- Total administrative expenses (176,739) (42,058) (218,797) --------- --------- ------- Operating profit (before goodwill amortisation, impairment provisions & exceptional costs) 19,210 8,134 27,344 --------- --------- -------Operating (loss) profit (after goodwillamortisation, impairment provisions & exceptional costs) (83,964) 6,294 (77,670) --------- --------- -------(Loss) profit before interest and tax (81,603) 6,294 (75,309) --------- --------- -------Net assets 122,406 10,516 132,922 --------- --------- ------- Property Investment asset GroupYear to 30 September 2003 management management total £'000 £'000 £'000 Turnover 90,073 52,195 142,268 Operating expenses (79,859) (43,391) (123,250)Costs relating to settlement ofregulatory issues (3,058) - (3,058)Other exceptional costs (20,086) (707) (20,793)Amortisation of goodwill (16,081) (2,349) (18,430)Provisions for impairment of goodwill & intangible assets (17,311) - (17,311) --------- --------- -------Total administrative expenses (136,395) (46,447) (182,842) --------- --------- ------- Operating profit (before goodwill amortisation, impairment provisions & exceptional costs) 10,214 8,804 19,018 --------- --------- -------Operating (loss) profit (after goodwill amortisation,impairment provisions& exceptional costs) (51,698) 5,748 (45,950) ------- --------- -------Profit before interest and tax 1,838 5,748 7,586 --------- --------- -------Net assets 163,896 14,700 178,596 --------- --------- ------- Following its acquisition on 24 October 2003, the operations of Edinburgh FundManagers Group have been integrated with those of existing Group companies andtherefore the results and cashflows can no longer be separately identified. 2. Exceptional Items Exceptional costs: recognised within operating loss 2004 2003 £'000 £'000 Costs relating to settlement of regulatory issues 38,519 3,058Provision for Uplift Plan to eligible investors inAberdeen Progressive Growth Unit Trust 39,200 -Expenses in relation to cost reduction and rationalisationprogramme 6,829 8,662Costs incurred in relation to the curtailment of activitiesin the UK retail market - 8,597Costs of aborted sale, subsequent rationalisation and other costs 760 3,534 -------- -------- 85,308 23,851Amounts written off investments - 5,376 -------- -------- 85,308 29,227 -------- -------- Exceptional costs arose for the following reasons: Certain subsidiaries have been involved in investigations instigated by theFinancial Services Authority ('FSA') and the Jersey Financial ServicesCommission ('JFSC') which have been in progress since 2002. The Group has incurred considerable costs in the provision of information to theinvestigators and in taking legal advice on its defence against any allegationsmade. As announced on 24 December 2004, the Group, in common with other firmsinvolved in these investigations, has agreed to make a voluntary contribution toa central fund to achieve resolution of this issue, which otherwise could havecontinued for some time. The voluntary contribution of £35,000,000 and £3,519,000 of costs relating tothe Group's involvement in these investigations, have been treated asexceptional costs. The costs for 2003 of £3,058,000 represent the expensesincurred relating to the investigations for that period. The provision for the cost of the Uplift Plan to eligible investors inAberdeen Progressive Growth Unit Trust of £39,200,000 represents the estimateddiscounted cost to the Group of the Uplift Plan as described in note 7. These payments, which will be made over the period December 2004 - October 2006, are expected to be financed from a combination of existing facilities and additional facilities to be made available. Depending on market conditions, the Group may consider refinancing an element of bank debt from a small convertible bond issue. Expenses in relation to the cost reduction and rationalisation programme coverexpenses incurred as part of the Group's cost reduction exercise and includecosts in respect of redundancy, office closure and outsourcing. The costsfor 2004 include expenses of this nature incurred following the acquisition ofEdinburgh Fund Managers Group plc in October 2003. Costs of aborted sale, subsequent rationalisation and other costs in 2003 relateprincipally to the proposed disposal by sale or flotation of the Group'sproperty division. The amounts written off investments in 2003 represent provisions made againstthe value of both fixed asset and current asset investments exposed to the splitcapital sector. Gain on disposal of subsidiaries The gain on disposal of subsidiaries of £1,940,000 represents the gain realisedon disposal of the UK and Continental European property businesses completed on24 May 2004. Gain on disposal of management contracts 2004 2003 £'000 £'000 Proceeds of disposal 507 86,762Less : intangible assets written off - (28,526)Less : related costs of disposal (86) (4,700) -------- --------Profit on disposal of management contracts 421 53,536 -------- -------- The gain on disposal of management contracts in 2004 relates to the sale of themanagement rights of a unit trust contract. The gain on disposal of management contracts in 2003 relates to the sale of themanagement rights of six UK retail fund assets to New Star Asset ManagementGroup Limited. The transaction was completed on 21 February 2003 and resulted in£1.73 billion of assets being transferred to New Star. The tax attributable tothis transaction was estimated at £13 million, which the directors believed to be a prudent estimate because it did not take into account certain reliefs untilsuch time as their availability was confirmed. 3. Dividends 2004 2003 £'000 £'000Equity dividends on ordinary shares:Interim paid 2.0p (2003 - 2.0p) 4,713 3,536Second interim proposed 2.0p (2003 - nil ) 4,724 -Final proposed nil (2003 - 2.0p) - 3,538 -------- -------- 9,437 7,074 -------- -------- Non-equity dividends on redeemable preference shares:Accrued at 1 October (91) (182)31 October paid 137 27331 January paid - 13630 April paid - 13631 July paid - 135Accrued to 30 September - 91 -------- -------- 46 589 -------- -------- The Board has decided to pay a second interim dividend, in lieu of a finaldividend, of 2p per share on 23 February 2005 to qualifying shareholders on theregister at 14 January 2005. 4. Reconciliation of operating loss to operating cash flow 2004 2003 £'000 £'000 Operating loss (77,670) (45,950)Depreciation charges 4,415 4,911Amortisation of goodwill 19,122 18,430Provision for impairment of goodwill 584 13,511Amortisation of intangible assets 1,620 2,086Provision for impairment of intangible assets - 3,800Profit on disposal of tangible fixed assets (199) (38)(Gain) loss on disposal of fixed and current assetinvestments (590) 77Exceptional amounts written off fixed and current assetinvestments - 5,376Amounts written off current asset investments 286 282Share of results of associated undertakings (116) (129)Increase (decrease) in provisions for liabilities andcharges 31,753 (1,320)(Increase) decrease in stock (327) 528(Increase) decrease in debtors (6,407) 16,728Increase (decrease) in creditors 29,172 (10,879) -------- --------Net cash inflow from operating activities 1,643 7,413 -------- -------- The operating cash flow in the year includes £10,300,000 (2003 - £15,500,000)relating to exceptional items. Analysis of the balances of cash asshown in the balance sheet Change in Change in 2004 year 2003 year 2002 £'000 £'000 £'000 £'000 £'000 Cash at bank and inhand 17,763 (5,240) 23,003 (9,487) 32,490Bank overdrafts (41,435) (11,918) (29,517) (15,987) (13,530) -------- -------- -------- -------- -------- (23,672) (17,158) (6,514) (25,474) 18,960 -------- -------- -------- -------- -------- Analysis of the changes in cash 2004 2003 £'000 £'000 Net cash outflow before adjustment for the effects offoreign exchange rates (15,446) (25,413)Effects of foreign exchange rate changes (1,712) (61) -------- -------- (17,158) (25,474) -------- -------- 5. Earnings (loss) per shareThe calculations of earnings (loss) per share is based on the following (losses)profits and numbers of shares: 2004 2003 £'000 £'000Basic and Diluted Loss for the financial year (80,771) (14,862)Non- equity dividends (46) (589) -------- --------Loss for the financial year - FRS 14 basis (80,817) (15,451)Goodwill amortisation and impairment provisions 19,706 35,741Exceptional operating costs, net of attributabletaxation 74,308 25,724Gain on disposal of subsidiaries, net of attributabletaxation (1,940) -Gain on disposal of management contracts, net ofattributable taxation (421) (40,536) -------- --------Profit for the financial year before goodwillamortisation, impairment provisions & exceptional items 10,836 5,478 -------- -------- 2004 2003 Number of Number of Shares shares 000's 000's -------- --------Weighted average number of shares for basic 231,597 176,458and diluted earnings per share -------- -------- The Directors believe that the Group's results are more fairly represented by ameasure of earnings per share which excludes exceptional items, impairmentprovisions and amortisation of goodwill and therefore also present earnings pershare figures stated before these items are charged to the profit and lossaccount. The two measures of earnings per share can be reconciled as follows: Basic and Diluted 2004 2003 After goodwill amortisation, impairment provisions &exceptional items - FRS 14 basis (34.90p) (8.76p)Add: goodwill amortisation and impairment provisions 8.51p 20.25pAdd: exceptional operating costs, net of attributabletaxation 32.09p 14.58pLess: gain on disposal of subsidiaries, net ofattributable taxation (0.84p) -Less: gain on disposal of management contracts, net ofattributable taxation (0.18p) (22.97p) -------- --------Before goodwill amortisation, impairment provisions &exceptional items 4.68p 3.10p -------- -------- 6. Analysis of changes in net debt At Acquisitions Other At 30 Sept (excl cash & non-cash Exchange 1 October 2004 Cash Flow overdrafts) changes Movement 2003 £'000 £'000 £'000 £'000 £'000 £'000 ------- ------- -------- ------- ------- ------- Cash at bank and in hand 17,763 (3,528) - - (1,712) 23,003 Bank overdraft (41,435) (11,918) - - - (29,517) ------- ------- -------- ------- ------- -------- (23,672) (15,446) - - (1,712) (6,514) ------- ------- -------- ------- ------- -------- Debt due within one year (28,316) 41,448 (5,196) (38,113) - (26,455)Convertible debt duewithin one year (15,197) 2,793 - - 1,572 (19,562)Debt due aftermore than one year (3,807) - (6,648) 38,113 - (35,272)Convertible debt due aftermore than one year (98,273) - - (744) - (97,529) ------- ------- -------- ------- ------- ------- (145,593) 44,241 (11,844) (744) 1,572 (178,818) -------- ------- -------- ------- ------- -------- (169,265) 28,795 (11,844) (744) (140) (185,332) ------- ------- -------- ------- ------- -------- 7. Provisions for liabilities and charges Provision for liabilities on Deferred Provision for pension scheme taxation Uplift Plan Total £'000 £'000 £'000 £'000 At 1 October 2003 4,179 - - 4,179Transferred from debtors - (344) - (344)Arising on acquisition 9,000 9,811 - 18,811On disposal of subsidiaries - 136 - 136Exchange movement - 69 - 69Utilised (7,447) - - (7,447)(Released) provided inthe year - (8,979) 39,200 30,221 ---------- --------- ---------- --------- 5,732 693 39,200 45,625 ---------- --------- ---------- --------- The Board has resolved to offer an Uplift Plan to eligible investors inAberdeen Progressive Growth Unit Trust ("Progressive"), a retail unit trustwhich, since its launch in August 2000, has invested principally in the zerodividend preference shares of a range of split capital closed end funds. The Uplift Plan is available to investors who bought units in Progressivebetween launch and 28 June 2002 and offers those investors the opportunity toreceive the initial cost of their investment on the redemption of their holdingson or around the 5th anniversary of their investment. Payments to eligibleinvestors who have previously sold their holdings will also be offered, at adiscounted rate. Investors who accept the offer to participate in the UpliftPlan will do so in full and final settlement of any remedies that they mayconsider they would otherwise have. An interim payment will be made to investors shortly after their acceptance ofthe Uplift Plan, with any further payments to be made on or around the 5thanniversary of each individual's original date of investment. These further payments will be made over the period from August 2005 to October 2006. The cost to the Group of providing this Uplift Plan will depend upon a numberof factors, including: • the proportion of eligible investors who choose to accept the offer of participation; • future stock market performance; • the discount to net asset value at which the stocks in the Progressive portfolio trade in future; and • any changes to the structure or financing of any stocks in the Progressive portfolio. Progressive will continue to be managed in accordance with its objective and allrelevant regulations and the portfolio will remain diversified across a range ofsuitable investments. Depending upon the impact of the factors described above, there is a wide rangeof potential outcomes. However, the Group is taking steps to limit the maximumcost, in the event of a sustained, material fall in both equity and bondmarkets, to approximately £54 million. This level of cost would arise in theevent that the FTSE 100 index traded consistently below 3,000 during the periodAugust 2005 - October 2006 and that other equity and bond markets were similarlyaffected. In accordance with the provisions of FRS 12 Provisions and Contingencies,provision for the potential cost of the Uplift Plan has been made on thebasis of the present value of the best estimate of the likely outcome. Theprincipal assumptions used are: • 100% acceptance by eligible investors; • equity and bond markets decline at 5% per annum during 2005 and 2006; • the stocks in the Progressive portfolio trade at an average discount of 15% to their respective net asset values; and • no material changes in the structure or financing of any stocks in the portfolio. The value of the provision for these costs, before any tax benefit, is asfollows: 2004 2003 £'000 £'000Undiscounted 43,300 -Discounted 39,200 - The sensitivity of the above figures to general movements in the equity and bondmarkets and to changes in the average discount of the stocks in the portfolioare approximately as follows: Undiscounted Discounted £'000 £'000Increase (decrease) in provision:Equity and bond markets grow by 5% pa (3,404) (3,008)Average discount narrows to 10% (3,161) (2,817)Combination of both of the above (6,760) (6,000) Equity and bond markets decline by 15% pa 4,416 3,897Average discount widens to 20% 3,168 2,823Combination of both of the above 7,332 6,496 8. Contingent Liabilities On 3 April 2003, the board of Real Estate Opportunities Limited ("REO")announced it had terminated Aberdeen's management contract with immediate effectand indicated that it held Aberdeen liable for damages in respect of lossesincurred on its income portfolio. No proceedings have been issued by REO.Aberdeen does not accept the validity of REO's termination without notice.Aberdeen has rejected the claim and, if proceedings are brought, they will bevigorously defended. Aberdeen has a claim for its accrued fees and for feesrelating to the 12 months notice period provided for in the management contract.Having taken legal advice the Board considers that there is no need for anyprovision in respect of any action threatened by REO. As disclosed in note 7, the Board has made appropriate provision for the estimated costs of providing an Uplift Plan to investors in Aberdeen Progressive Growth Unit Trust ("Progressive"). The cost has been estimated onthe basis that all eligible investors elect to participate in the Plan, whichis being offered on a voluntary basis. The Board recognises that other avenuesremain open to eligible investors unless they accept participation in the Uplift Plan and that there is therefore a wide range of potential outcomes. However, on the basis of legal advice, the Board does not believe that any material liability will crysallise in excess of the amount provided. 9. Post balance sheet events Banking Arrangements On 12 November 2004 the Company entered into new term loan and working capital facilityagreements with the Bank of Scotland under which the Group's bank debt has beenrestructured. Bank debt outstanding at the year end has been replaced by a£85,125,000 term loan, the repayments of which are linked to the receipt ofproceeds from the sale of non-core assets. This loan bears interest of 1.5% overLIBOR on balances up to £65,125,000 and 1.75% over LIBOR on the excess. Theproceeds of the new term loan have been used to repay existing term loans, theoutstanding amount under the working capital facility and the USD27.5 millionConvertible Subordinated Loan Notes. A new working capital facility of £15million has been agreed bearing interest at 1% over base rate. The Bankcontinues to provide guarantees totalling £5.47 million in support of certain ofthe Group's obligations. £19 million of the new term loan was subsequentlyrepaid on 14 December 2004 from the receipt of an element of the proceeds fromthe sale of the investment in Lombard International Assurance SA (Lombard). Disposal of Lombard On 26 October 2004 the Company announced that it had agreed to dispose of itsentire shareholding in Lombard, a pan-European life assurance company based in Luxembourg, to Friends Provident plc (Friends Provident). Lombard's shareholders have entered into an agreement to sell 100 per cent of the share capital of Lombard to Friends Provident for an initial consideration of Euro 265 million (£184 million) payable on completion in Friends Provident shares, not to be sold or transferred before 1 April 2005 without Friends Provident's consent. With the knowledge and consent of Friends Provident, a transaction to monetise an element of these shares was undertaken by the shareholders on 6 December 2004. On completion the Company will receive, in respect of its 15.18 per centinterest in Lombard, ordinary shares of Friends Provident with a value ofapproximately £26.7 million net of expenses. The Company subsequently received£19 million from the monetisation referred to above and intends to sell theremaining consideration shares after expiry of the restricted period. Furtherconsideration will be received in each of April 2005, 2006 and 2007, dependenton Lombard achieving or exceeding certain performance targets for both newbusiness profits and growth in embedded value for the 3 financial years to 31December 2006. The further consideration will be paid in cash or FriendsProvident's ordinary shares, at Friends Provident's option. In aggregate theconsideration receivable by the Company is capped at approximately £50.7million. No tax arises on the disposal of the Groups' interest in Lombard as it was held in a jurisdiction in which no tax will be charged on the eventual capital gain. 10. The financial information set out above does not constitute the company'sstatutory accounts for the years ended 30 September 2004 or 2003. The financialinformation for 2003 is derived from the statutory accounts for 2003 which havebeen delivered to the Registrar of Companies. The auditors have reported on the2003 accounts; their report was unqualified and did not contain a statementunder section 237(2) or (3) of the Companies Act 1985. The statutory accountsfor 2004 will be finalised on the basis of the financial information presentedby the directors in this preliminary announcement and will be delivered to theRegistrar of Companies following the company's annual general meeting. Assets Under Management 2004 2003 £m £m ---------- -----------By Product Institutional funds 11,821 12,212Unit trusts & OEICs 2,594 2,327Investment trusts andclosed end funds 4,966 3,990Offshore funds 1,961 1,227Discretionary accounts 393 389Private equity 363 455 ---------- ----------- 22,098 20,600 ---------- -----------By asset class Equities: UK 6,740 4,814 Asia Pacific 4,006 1,950 European 994 1,235 North America 1,215 870 Japan 560 400 Emerging markets (ex Asia) 266 194 ---------- ----------- 13,781 9,463Fixed interest & cash 4,405 5,468Property 3,912 5,669 ---------- ----------- 22,098 20,600 ---------- ----------- This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
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