30th Nov 2010 07:00
ABERDEEN ASSET MANAGEMENT PLC
FINAL RESULTS FOR YEAR TO 30 SEPTEMBER 2010
Aberdeen Asset Management has today, 30 November 2010, announced its audited final results for the year to 30 September 2010.
HIGHLIGHTS
·; Assets under management increased to £178.7 billion (2009: £146.2 billion)
·; Clean profit before tax £210.0 million (2009: £85.1 million)
·; Final dividend of 3.8p per share, 7.0p for the full year (2009: 6.0p)
·; Conversion rate from operating profit to operating cashflow of 115% (2009: 83%)
·; Strong balance sheet, gearing reduced to 0.6% (2009: 17.1%)
·; Gross new business wins £46.6 billion (2009: £19.1 billion)
·; Net new business inflows £2.6 billion (2009: net outflows £10.7 billion)
FINANCIAL HIGHLIGHTS
2010 | 2009 | |
Revenue | £638.2m | £421.9m |
Pre-tax profit | ||
Before exceptional items, amortisation and impairment of intangibles |
£210.0m |
£85.1m |
After exceptional items, amortisation and impairment of intangibles |
£125.6m |
£10.5m |
Diluted earnings (loss) per share | ||
Before exceptional items, amortisation and impairment of intangibles |
13.28p |
6.31p |
After exceptional items, amortisation and impairment of intangibles |
8.04p |
(1.71p) |
Total dividend per share | 7.0p | 6.0p |
Gross new business - funded | £46.6bn | £19.1bn |
- awarded but not funded at year end | £1.9bn | £3.6bn |
Net new business - funded | £2.6bn | £(10.7bn) |
Assets under management at the year end | £178.7bn | £146.2bn |
Martin Gilbert, Chief Executive of Aberdeen Asset Management commented:
"This has been an excellent year for Aberdeen in which we have taken full advantage of the improvement in financial markets and the new business opportunities presented to us. I am particularly pleased we have achieved this whilst strengthening our balance sheet still further, with the result that the business will move into a net cash position shortly as we continue to prioritise organic growth. Looking ahead, financial markets still pose many challenges and uncertainties but we are confident that, given our diverse ranges of products, asset classes and geographies, and our heritage of strong investment performance, we are well placed to continue our growth."
For more information:
Aberdeen Asset Management
Martin Gilbert Chief Executive + 44 (0) 20 7463 6000
Bill Rattray Finance Director + 44 (0) 20 7463 6000
Maitland
Neil Bennett/ Tom Roberts + 44 (0) 20 7379 5151
Chairman's statement
We have, over the year, enjoyed a record level of new business wins, primarily driven by strong investor demand for our global emerging market and global equities capabilities, but with encouraging levels of inflows in other areas - inflows of £46.6 billion were 144% higher than 2009. Whilst outflows of lower margin funds of £44.0 billion, primarily from our core fixed income and money market strategies, continued during 2010, the rate slowed as the year progressed. As a result, net inflows of £2.6 billion were achieved in 2010 (2009: net outflows of £10.7 billion). A further £1.9 billion of mandates were awarded but not funded at the year end.
The acquisition of a high quality alternatives business from the Royal Bank of Scotland (RBS) in January has provided a significant entry point into this market, with the quality of the team, process and scale of this business creating a credible opportunity to diversify our new business flows yet further. We believe there is considerable scope to grow this business over the coming years and the transaction enhances our distribution capability through global private banking networks.
Financials
Revenue for the year of £638.2 million was 51% higher than in 2009 due to the combined effects of new business flows, improved market levels and the inclusion of the ex-Credit Suisse business for a full year. Performance fees showed a healthy increase to £30.3 million but, while such income is always welcome, this represents only 4.7% of our total revenue and we remain focused on growing recurring income.
Operating expenses increased by 28%, an element of which is due to the inclusion of a full year's costs from the ex-Credit Suisse business and completion of the RBS transaction at the end of January. We have also implemented a controlled increase in marketing expenditure as we support our business development effort; we undertook our first ever campaign to increase our brand recognition in the US, a market which we believe offers significant potential, and opened a small office in Toronto to facilitate the servicing of our growing Canadian client base. A key initiative in our brand building in the US was our commitment to sponsor the Dad Vail Regatta in Philadelphia (the largest collegiate rowing event in the United States) until 2013. Operating profit increased significantly to £221.9 million (2009: £95.7 million), and we achieved an operating margin of 34.8% (2009: 22.7%). We believe that this margin compares favourably with our international peer group and we are well placed to improve this margin further from ongoing new business flows.
We have also added further strength to the balance sheet; we repaid all short term bank debt during August and reduced the net gearing ratio to 0.6% (2009: 17%). We expect our operating cashflow to bring us to a net cash position during 2011.
Results and dividend
The Group's underlying profit, which we define as profit before taxation, exceptional items, amortisation and impairment of intangible assets, was £210.0 million compared to £85.1 million in 2009. This represents underlying earnings per share, on a diluted basis, of 13.3p, an increase of 110% on last year. After accounting for exceptional items, amortisation and impairment, we report a pre-tax profit of £125.6 million (2009: £10.5 million).
The Board is recommending a final dividend of 3.8p per share, making a total payment for the year of 7.0p per share, an increase of 17% on the total payment for 2009. The Board remains committed to a progressive dividend policy.
New business
Gross new business for the year totalled £46.6 billion, 144% higher than 2009 and more than twice the previous high reported in 2007. As stated above, these figures were driven principally by demand for our global emerging markets, global equity and Asia Pacific products, although we have also seen encouraging interest in some of our other capabilities, such as emerging market debt, Asian fixed income and US equities. Our distribution teams have continued to develop the significant new relationships we have added over the last two years, and we have made good progress, especially from Europe, the Middle East and the Americas.
Our fixed income teams had a much better year as credit spreads recovered and the strong rebound in performance has continued throughout 2010; our one year and two year numbers are strongly ahead of benchmark and the improvement is now feeding into our three year figures. We still experienced redemptions as investors have considered their appetite for risk. Fixed income performance has recovered strongly but further outflows are still likely. A common theme across the industry has been withdrawals from money market funds as investor risk appetite has returned and we experienced some outflows earlier in the year, although this has stabilised somewhat in recent months.
We were awarded our first segregated mandate in Asian fixed income during the year, contributing to record flows of over £500 million into this product and the quality of our capability in this area was endorsed at the Global Investor Awards for excellence in institutional asset management where Aberdeen won the award for best Asia Pacific fixed income manager. We continue to see considerable investor appetite for this asset class and for emerging market debt which has enjoyed net inflows of £300 million this year and high yield bonds; all strategies in which we can demonstrate robust long term performance. It has been another record year for our equity teams who have continued to outperform their respective benchmarks over a number of time periods both long and short term. Global and global emerging market ("GEM") equities were the main drivers of new business flows supplemented by flows into Asia Pacific and we were pleased to be awarded our first mandate by a European pension fund into US equities during the year. Such has been the demand for GEM equities that we took the decision at the beginning of the year to close to new segregated business in this asset class to assist in managing the flow of new business, principally into our pooled funds. Our UK and Pan European equities continue to deliver good performance over one and three year time frames and we are hopeful that we may see appetite for these products in due course.
Following the acquisition from RBS, our Alternative Investment Strategies asset class now encompasses a broad range of capabilities including a large multi-manager and hedge fund of funds business and has critical mass within the industry. Performance has been encouraging across the core products. In the first half of the year we raised £110 million for a new UCITS fund of absolute return funds, which has since grown to over £200 million.
Following a period of considerable turbulence, property markets have stabilised somewhat and investor appetite has begun to return, which has led to a number of new mandates being awarded particularly in the UK. However, in Germany, the property sector remains difficult and we recently announced the controlled liquidation of the DEGI Europa Fund. The major project to integrate the property business fully within the wider Group has proceeded according to plan and will be fully completed by the end of the calendar year. The new business flows achieved during the year are set out in the table below; gross inflows were sourced principally from investors in Europe 45%, the UK (25%), the Americas (10%), Asia Pacific (14%) and the Middle East (6%).
Corporate activity
On 29 January 2010, the Group announced the acquisition of certain fund management assets and contracts from Royal Bank of Scotland which also included a long-term distribution agreement with RBS Wealth Management, including Coutts, for a consideration of £84.7 million. The transaction was funded via a placement of new Aberdeen shares and brought an enhanced alternatives capability and approximately 60 staff into the Group. The transaction completed on 29 January 2010 and added approximately £13.5 billion to assets under management (AuM) during the year.
Business development
Our distribution efforts continued to make progress on a number of products globally. In July we took over the management of four US mutual funds, previously managed by Bank of Hawaii, with assets of $450 million which have now been merged into our existing mutual fund range.
We successfully raised over £50 million for the Aberdeen Latin American Income Trust, a UK-listed closed end fund which invests in Latin American equities and debt with the objective of providing an above average yield. We also launched a local currency emerging market debt fund which has grown steadily and our efforts within alternatives are currently focused on active promotion of our multi-manager product. The opening of two new offices during the year, in Sao Paulo and Toronto, will enable us to deepen our research capability and build on distribution opportunities.
| Funded £bn | Yet to fund £bn | Total £bn |
Equities: |
|
|
|
Gross inflows | 23.0 | 1.1 | 24.1 |
Outflows | (9.2) | - | (9.2) |
Net flow | 13.8 | 1.1 | 14.9 |
Fixed income: |
|
|
|
Gross inflows | 8.6 | 0.5 | 9.1 |
Outflows | (19.5) | - | (19.5) |
Net flow | (10.9) | 0.5 | (10.4) |
Alternative investment strategies: | |||
Gross inflows | 6.5 | - | 6.5 |
Outflows | (4.3) | - | (4.3) |
Net flow | 2.2 | - | 2.2 |
Property: | |||
Gross inflows | 2.3 | 0.3 | 2.6 |
Outflows | (1.7) | - | (1.7) |
Net flow | 0.6 | 0.3 | 0.9 |
Money market: | |||
Gross inflows | 6.2 | - | 6.2 |
Outflows | (9.3) | - | (9.3) |
Net flow | (3.1) | - | (3.1) |
Group total: | |||
Gross inflows | 46.6 | 1.9 | 48.5 |
Outflows | (44.0) | - | (44.0) |
Net flow | 2.6 | 1.9 | 4.5 |
Outlook
During the course of 2010 we have experienced a period of corporate stability enabling the prior acquisitional activity of Aberdeen to stabilise and provide a platform for steady organic growth. This has delivered rewarding levels of new business, helped by improved markets, leading to increased revenues and improved operating margins. I would like to thank all our staff for their continued hard work and support and welcome our new employees to the Group. I would especially like to thank my fellow Board members for their strong contributions over this reporting period and to welcome Jim Pettigrew as a new director. Jim brings considerable experience and knowledge of the global asset management industry that will be a great benefit to the Board over the coming years. Finally, I would like to pass on the Board's thanks to Donald Waters who, following ten years valuable service, will retire following the AGM.
Looking ahead, while we are conscious of the risk of further market volatility, we plan to grow further the Group's revenues and profits by remaining focussed on the management and distribution of the wide range of investment activity that we have developed over the course of the last five years. Providing that we are able to sustain current progress we aim to use improving cashflow to strengthen the balance sheet still further, and believe the Group's improved financial strength and diversified product and client base, coupled with robust investment performance should lead to growing benefits to shareholders over the years ahead.
Roger C Cornick
Chairman
Group Income Statement | |||||||
For the year to 30 September 2010 | |||||||
2010 | 2009 | ||||||
Before exceptional items and amortisation |
Exceptional items and amortisation | Total | Before exceptional items and amortisation |
Exceptional items and amortisation | Total | ||
Notes | £m | £m | £m | £m | £m | £m | |
Revenue | 2 | 638.2 | - | 638.2 | 421.9 | - | 421.9 |
Operating costs | (416.3) | - | (416.3) | (326.2) | - | (326.2) | |
Exceptional items | 4 | - | (18.2) | (18.2) | - | (44.5) | (44.5) |
Amortisation and impairment of intangible assets | - | (66.2) | (66.2) | - | (30.1) | (30.1) | |
Operating expenses | (416.3) | (84.4) | (500.7) | (326.2) | (74.6) | (400.8) | |
Operating profit | 221.9 | (84.4) | 137.5 | 95.7 | (74.6) | 21.1 | |
Finance revenue | 0.2 | - | 0.2 | 1.1 | - | 1.1 | |
Finance costs | (12.1) | - | (12.1) | (11.7) | - | (11.7) | |
Net finance costs | 7 | (11.9) | - | (11.9) | (10.6) | - | (10.6) |
Profit before taxation | 210.0 | (84.4) | 125.6 | 85.1 | (74.6) | 10.5 | |
Tax expense | 8 | (40.4) | 22.1 | (18.3) | (14.6) | 10.8 | (3.8) |
Profit for the year | 169.6 | (62.3) | 107.3 | 70.5 | (63.8) | 6.7 | |
Attributable to: | |||||||
Equity shareholders of the Company | 92.6 | (8.1) | |||||
Other equity holders | 14.7 | 14.8 | |||||
107.3 | 6.7 | ||||||
Earnings (loss) per share | |||||||
Basic | 10 | 8.32p | (1.71p) | ||||
Diluted | 10 | 8.04p | (1.71p) | ||||
Group Statement of Comprehensive Income | |||
For the year ended 30 September 2010
| |||
2010 | 2009 | ||
£m | £m | ||
Profit for the year | 107.3 | 6.7 | |
Net actuarial loss on defined benefit pension schemes | (5.0) | (25.4) | |
Translation of foreign currency net investments | (8.0) | 21.7 | |
Net change in fair value of available for sale investments | (0.3) | (6.4) | |
Tax on items of other comprehensive expense | 0.4 | 8.9 | |
Other comprehensive (expense) income, net of tax | (12.9) | (1.2) | |
Total comprehensive income for the year | 94.4 | 5.5 | |
Attributable to: | |||
Equity shareholders of the Company | 79.7 | (9.3) | |
Other equity holders | 14.7 | 14.8 | |
Group Balance Sheet |
| ||
As at 30 September 2010 |
| ||
2010 | 2009 | ||
Notes | £m | £m | |
Assets | |||
Non-current assets | |||
Intangible assets | 11 | 1,134.3 | 1,147.6 |
Property, plant and equipment | 19.8 | 18.9 | |
Other investments | 12 | 58.6 | 59.9 |
Deferred tax assets | 29.7 | 36.1 | |
Trade and other receivables | 16.8 | 6.8 | |
Total non-current assets | 1,259.2 | 1,269.3 | |
Current assets | |||
Stock of units and shares | 13 | 0.3 | 0.5 |
Financial investments | 15 | 1,412.6 | 1,465.5 |
Trade and other receivables | 283.1 | 197.0 | |
Other investments | 12 | 40.6 | 34.0 |
Cash and cash equivalents | 150.8 | 81.4 | |
Assets classified as held for sale | 12 | - | 27.8 |
Total current assets | 1,887.4 | 1,806.2 | |
Total assets | 3,146.6 | 3,075.5 | |
Equity | |||
Called up share capital | 114.8 | 104.3 | |
Share premium account | 812.1 | 683.2 | |
Other reserves | 216.8 | 226.0 | |
Retained loss | (170.5) | (196.6) | |
Total equity attributable to shareholders of the parent | 973.2 | 816.9 | |
Minority interest | 13.6 | 7.0 | |
Perpetual capital securities | 198.1 | 198.1 | |
Total equity | 1,184.9 | 1,022.0 | |
Liabilities | |||
Non-current liabilities | |||
Interest bearing loans and borrowings | 16 | 158.5 | 227.6 |
Other creditors | 0.7 | 0.6 | |
Pension deficit | 17 | 35.0 | 33.4 |
Provisions | 3.6 | - | |
Deferred tax liabilities | 62.1 | 111.8 | |
Total non-current liabilities | 259.9 | 373.4 | |
Current liabilities | |||
Investment contract liabilities | 15 | 1,412.6 | 1,465.5 |
Interest bearing loans and borrowings | 16 | - | 28.3 |
Trade and other payables | 274.0 | 178.4 | |
Provisions | - | 1.3 | |
Deferred income | 1.4 | 0.8 | |
Current tax payable | 13.8 | 5.8 | |
Total current liabilities |
|
1,701.8 |
1,680.1 |
Total liabilities |
|
1,961.7 |
2,053.5 |
Total equity and liabilities | 3,146.6 | 3,075.5 | |
Group Statement of Changes in Equity
For the year to 30 September 2010
Sharecapital £m | Sharepremiumaccount £m | Otherreserves £m | Retainedearnings £m | Minority interests £m | Perpetual Capital securities £m | Total equity £m | |
Balance at 1 October 2008 | 79.7 | 396.0 | 216.8 | (147.2) | - | 197.9 | 743.2 |
Profit for the period | - | - | - | 6.7 | - | - | 6.7 |
Other comprehensive income (expense) | - | - | 17.1 | (18.3) | - |
- | (1.2) |
Total comprehensive income (expense) | - | - | 17.1 | (11.6) | - | - | 5.5 |
Arising on the issue of shares | 24.6 | 287.2 | (7.9) | (1.3) | - | - | 302.6 |
Purchase of own shares | - | - | - | (0.3) | - | - | (0.3) |
Share based payment charge | - | - | - | 25.5 | - | - | 25.5 |
Exchange movement on coupon outstanding on perpetual capital securities | - | - | - | (0.2) | - | 0.2 | - |
Dividends paid to shareholders | - | - | - | (61.5) | - | - | (61.5) |
Minority interest in consolidated funds | - | - | - | - | 7.0 | - | 7.0 |
Balance at 30 September 2009 | 104.3 | 683.2 | 226.0 | (196.6) | 7.0 | 198.1 | 1,022.0 |
Profit for the period | - | - | - | 107.3 | - | - | 107.3 |
Other comprehensive expense | - | - | (8.4) | (4.5) | - | - | (12.9) |
Total comprehensive (expense) income | - | - | (8.4) | 102.8 | - | - | 94.4 |
Arising on the issue of shares | 9.0 | 106.8 | - | - | - | - | 115.8 |
Share based payment charge | - | - | - | 26.8 | - | - | 26.8 |
Shares issued in respect of employee compensation schemes | 1.2 | 15.2 | - | (16.4) | - | - | - |
Equity element of convertible bond. net of deferred tax | - | - | 6.4 | - | - | - | 6.4 |
Purchase of own shares | - | - | - | (2.2) | - | - | (2.2) |
Conversion of preference shares | 0.3 | 6.9 | (7.2) | - | - | - | - |
Dividends paid to shareholders | - | - | - | (84.9) | - | - | (84.9) |
Minority interest in consolidated funds | - | - | - | - | 6.6 | - | 6.6 |
Balance at 30 September 2010 | 114.8 | 812.1 | 216.8 | (170.5) | 13.6 | 198.1 | 1,184.9 |
Group Statement of Cash Flow |
| ||
For the year to 30 September 2010 |
| ||
2010 | 2009 | ||
Notes | £m | £m | |
Core cashflow from operating activities | 254.6 | 84.3 | |
Effects of short-term timing differences on open end fund settlements | 0.4 | (4.7) | |
Cash generated from operations | 255.0 | 79.6 | |
Net interest paid | (10.1) | (9.7) | |
Tax paid | (16.8) | (27.6) | |
Net cash generated from operations | 228.1 | 42.3 | |
Other non-recurring costs paid | (15.5) | (25.2) | |
Net cash generated from operating activities | 6 | 212.6 | 17.1 |
Cash flows from investing activities | |||
Proceeds from sale of investments | 51.8 | 29.5 | |
Proceeds from sale of property, plant & equipment | - | 3.4 | |
Acquisition of businesses, net of cash acquired | (90.2) | 36.3 | |
Acquisition of intangible assets | (12.2) | (2.5) | |
Acquisition of property, plant & equipment | (6.5) | (10.2) | |
Acquisition of investments | (22.7) | (43.4) | |
Net cash (used in) from investing activities | (79.8) | 13.1 | |
Cash flows from financing activities | |||
Issue of ordinary share capital, net of expenses | 115.8 | (0.9) | |
Issue of convertible bond, net of expenses | 87.4 | - | |
Purchase of own shares | (2.2) | (0.3) | |
New borrowings drawn | - | 178.3 | |
Repayment of borrowings | (178.3) | (146.5) | |
Dividends paid and coupon payments | (90.6) | (61.5) | |
Net cash used in financing activities | (67.9) | (30.9) | |
Net increase (decrease) in cash and cash equivalents | 64.9 | (0.7) | |
Cash and cash equivalents at 1 October | 81.4 | 82.1 | |
Effect of exchange rate fluctuations on cash and cash equivalents | 4.5 | - | |
Cash and cash equivalents at 30 September | 150.8 | 81.4 | |
Notes to the Accounts | ||||||||
1. |
Preparation in accordance with IFRS This preliminary announcement of results sets out information which will be more fully covered in the Annual Report for the year to 30 September 2010.
The Board has chosen to make certain voluntary disclosures in addition to the requirements of IFRS to enable investors to achieve a proper understanding of the financial statements. These additional disclosures involve identifying items that arise outwith the Group's normal business activities and which are sufficiently material to warrant separate disclosure. The Board has elected to use the term "exceptional" in referring to such items. | |||||||
2. | Revenue | 2010 | 2009 | |||||
£m | £m | |||||||
Revenue comprises: | ||||||||
Management fees | 596.5 | 402.4 | ||||||
Performance fees | 30.3 | 9.7 | ||||||
Transaction fees | 11.0 | 6.9 | ||||||
637.8 | 419.0 | |||||||
Net fair value gains on investments | 0.4 | 2.9 | ||||||
638.2 | 421.9 | |||||||
3 | Segmental reporting | |||||||
The Group operates a single business segment for reporting and control purposes.
IFRS 8 Operating Segments requires disclosures to reflect the information which the Group Management Board, being the body that is the Group's chief operating decision maker, uses for evaluating performance and the allocation of resources. During 2010, the Board decided that the Group's property asset management activities should no longer operate as a separately managed business and those operations have been fully integrated with other elements of the Group's operations. As a result, the Group is now managed as a single asset management business, with multiple asset classes including equities, fixed income, property and alternative investment strategies that are managed across a range of products, distribution channels and geographic regions. Reporting provided to the Group Management Board is on an aggregated basis. | ||||||||
4. | Exceptional items | |||||||
The main elements of exceptional items for 2010 related to the final element of costs from the migration and integration of the businesses bought from Credit Suisse in 2009. This included charges in respect of transitional services provided by the vendor, costs of migration of the back office data and systems to the Group's third party administrator and costs of retaining duplicate staffing for a transitional period to ensure a smooth migration of data.
Advisory and legal fees incurred on the acquisition of the asset management business from The Royal Bank of Scotland as described in note 14 have been recognised as a cost, as required by amended financial reporting standards.
We have provided for all expected costs related to the remaining lease period for our former London office. In economic terms, this cost is largely offset by the benefit of a rent-free period negotiated on the new office lease but IFRS does not permit these items to be netted. The benefit of the rent-free period is being amortised over the lease term of 15 years within operating expenses.
Exceptional credits have been recognised in respect of the release of a surplus provision for possible VAT costs and receipt of contingent consideration of £0.7 million from the sale in 2009 of the Group's Belgian property business.
Exceptional costs in 2009 related to: (i) the costs in respect of the Credit Suisse acquisition as described above; (ii) non-recurring rationalisation and redundancy costs were incurred in implementing a cost reduction programme; and (iii) one-off costs incurred in completing the integration of businesses acquired in the previous financial year, which included office rationalisations.
| ||||||||
2010 | 2009 | |||||||
£m | £m | |||||||
Arising on Credit Suisse acquisition: | ||||||||
Transitional service costs from vendor | 4.1 | 7.9 | ||||||
Costs of migration and integration of back office data and systems | 8.4 | 10.4 | ||||||
12.5 | 18.3 | |||||||
Costs relating to businesses acquired from RBS | 1.6 | - | ||||||
Acquisition and integration costs | 14.1 | 18.3 | ||||||
Acceleration of property lease costs on office rationalisation | 6.1 | 7.0 | ||||||
Redundancy and other non-recurring costs arising from cost reduction programme | - | 17.8 | ||||||
Exceptional gain on disposal of Belgian property business | (0.7) | - | ||||||
Surplus provision for VAT cost on investment trusts | (1.3) | - | ||||||
Costs arising on disposal of private equity business | - | 1.4 | ||||||
Total exceptional items | 18.2 | 44.5 | ||||||
5. | Other operating expense | 2010 | 2009 | |||||
£m | £m | |||||||
Operating expenses include the following: | ||||||||
Provisions recorded against other investments | 1.4 | - | ||||||
Net (gain) loss on disposal of other investments | (1.2) | 0.3 | ||||||
Other operating expense | 0.2 | 0.3 | ||||||
6. | Analysis of cash flows | 2010 | 2009 | |||||
£m | £m | |||||||
Reconciliation of profit after tax to operating cash flow | ||||||||
Profit after tax | 107.3 | 6.7 | ||||||
Depreciation charges | 4.8 | 4.3 | ||||||
Amortisation and impairment of intangible assets | 66.2 | 30.1 | ||||||
Fair value gains on investments | (0.4) | (2.9) | ||||||
Loss on disposals of investments and other assets | 0.2 | 2.2 | ||||||
Share based element of remuneration | 30.9 | 25.5 | ||||||
Net finance costs | 11.9 | 10.6 | ||||||
Income tax expense | 18.3 | 3.8 | ||||||
239.2 | 80.3 | |||||||
Increase (decrease) in provisions | 2.3 | (0.7) | ||||||
Decrease (increase) in stock | 0.2 | (0.2) | ||||||
(Increase) decrease in trade and other receivables | (84.5) | 14.6 | ||||||
Decrease (increase) in trade and other payables | 82.3 | (39.6) | ||||||
Net cash inflow from operating activities | 239.5 | 54.4 | ||||||
Net interest paid | (10.1) | (9.7) | ||||||
Corporation tax paid | (16.8) | (27.6) | ||||||
Net cash generated from operating activities | 212.6 | 17.1 | ||||||
7. | Net finance costs | 2010 | 2009 | |||||
£m | £m | |||||||
Interest on 7.2% subordinated notes 2016 | 5.8 | 5.9 | ||||||
Interest on 3.5% convertible bonds 2014 | 3.8 | - | ||||||
Interest on 4.5% convertible bonds 2010 | - | 0.1 | ||||||
Interest on overdrafts, revolving credit facilities and other interest bearing accounts | 2.0 | 5.6 | ||||||
11.6 | 11.6 | |||||||
Amortisation of issue costs on convertible bonds | 0.5 | 0.1 | ||||||
Total finance costs | 12.1 | 11.7 | ||||||
Finance revenue - interest income | (0.2) | (1.1) | ||||||
Net finance costs | 11.9 | 10.6 | ||||||
8. | Tax expense | 2010 | 2009 | |||||
£m | £m | |||||||
Current year tax charge on profit before exceptional items, amortisation and impairment of intangible assets | 41.3 | 14.2 | ||||||
Adjustments in respect of prior periods | (0.9) | 0.4 | ||||||
40.4 | 14.6 | |||||||
Tax credit on exceptional items, amortisation and impairment of intangible assets arising in the year | (22.1) | (10.8) | ||||||
18.3 | 3.8 | |||||||
9. | Dividends | 2010 | 2009 | |
£m | £m | |||
Dividends on convertible preference shares: | ||||
Dividend paid | 2.7 | 4.4 | ||
Coupon payments in respect of perpetual capital securities (net of tax) | ||||
Coupon payments made during the year | 14.7 | 14.8 | ||
Dividends on ordinary shares | ||||
Declared and paid during the year: | ||||
Final dividend for 2009 - 3.2p (2008 - 3.0p) | 32.2 | 21.2 | ||
Interim dividend for 2010 - 3.2p (2009 - 2.8p) | 35.3 | 21.1 | ||
67.5 | 42.3 | |||
Total dividends and coupon payments paid during the year | 84.9 | 61.5 | ||
Proposed for approval at the Annual General Meeting (not recognised as a liability at 30 September) | ||||
Dividends on ordinary shares: | ||||
Final dividend for 2010 - 3.8p (2009 - 3.2p) | 43.5 | 32.2 | ||
The total ordinary dividend for the year is 7.0p per share including the proposed final dividend of 3.8p per share. This payment will trigger an adjustment to the subscription price applying to the warrants which form part of the 6.75% convertible preference share units issued in June 2005. Assuming approval of the final dividend payment at the forthcoming Annual General Meeting, the subscription price will reduce from 92p per ordinary share to 90p per ordinary share.
The proposed final dividend of 3.8p per ordinary share will be paid on 27 January 2011 to qualifying shareholders on the register at the close of business on 10 December 2010.
10. | Earnings per share | |||||||||||||
The calculations of earnings per share are based on the following profits and numbers of shares.
Basic earnings per share amounts are calculated by dividing profit for the year attributable to ordinary shareholders by the weighted average number of ordinary shares outstanding during the year.
Diluted earnings per share amounts are calculated by dividing the net profit for the year attributable to ordinary shareholders by the weighted average number of ordinary shares outstanding during the year, plus the weighted average number of ordinary shares that would be issued on the conversion of all the potentially dilutive shares into ordinary shares.
Underlying earnings per share figures are calculated by adjusting the profit to exclude exceptional items, amortisation and impairment of intangible assets. The purpose of providing the underlying earnings per share is to allow readers of the accounts to clearly consider trends without the impact of exceptional and certain non-cash items.
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IAS33 | Underlying | |||||||||||||
Basic earnings (loss) per share | 2010 £m | 2009 £m | 2010 £m | 2009 £m | ||||||||||
Profit attributable to shareholders | 107.3 | 6.7 | 107.3 | 6.7 | ||||||||||
Dividend on convertible preference shares | (2.7) | (5.5) | (2.7) | (3.7) | ||||||||||
Coupon payments in respect of perpetual capital securities (net of tax) | (14.7) | (14.8) | (14.7) | (14.8) | ||||||||||
Profit (loss) for the financial year | 89.9 | (13.6) | 89.9 | (11.8) | ||||||||||
Amortisation and impairment of intangible assets, net of attributable taxation | 49.2 | 27.2 | ||||||||||||
Exceptional items, net of attributable taxation | 13.1 | 36.6 | ||||||||||||
Profit for the financial year - underlying basis | 152.2 | 52.0 | ||||||||||||
Weighted average number of shares (millions) | 1,080.1 | 796.7 | 1,080.1 | 796.7 | ||||||||||
Basic earnings (loss) per share | 8.32p | (1.71p) | 14.09p | 6.52p | ||||||||||
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Diluted earnings (loss) per share |
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Profit (loss) for calculation of basic earnings per share, as above | 89.9 | (13.6) | 152.2 | 52.0 | ||||||||||
Add: interest on 2014 convertible bonds, net of attributable taxation | 3.0 | N/A | 3.0 | - | ||||||||||
Add: dividend on convertible preference shares | 2.7 | N/A | 2.7 | 3.7 | ||||||||||
Profit (loss) for calculation of diluted earnings per share | 95.6 | (13.6) | 157.9 | 55.7 | ||||||||||
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Weighted average number of shares (millions) |
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For basic earnings per share | 1,080.1 | 796.7 | 1,080.1 | 796.7 |
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Dilutive effect of 2014 convertible bonds | 38.4 | - | 38.4 | - |
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Dilutive effect of convertible preference shares | 35.5 | N/A | 35.5 | 61.7 |
| |||||||||
Dilutive effect of LTIP awards | 1.2 | N/A | 1.2 | 1.0 |
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Dilutive effect of exercisable share options and deferred shares | 34.2 | N/A | 34.2 | 23.8 |
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1,189.4 | 796.7 | 1,189.4 | 883.2 |
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Diluted earnings (loss) per share | 8.04p | (1.71p) | 13.28p | 6.31p |
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The effects of the convertible preference share units, the LTIP awards and exercisable share options and deferred shares were anti-dilutive on an IAS 33 basis in 2009.
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11. | Intangible assets | 2010 | 2009 |
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£m | £m |
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Management contracts | 436.7 | 464.0 |
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Distribution contracts | 39.2 | - |
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Goodwill | 653.7 | 677.5 |
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Software | 4.7 | 6.1 |
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1,134.3 | 1,147.6 |
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12. | Other investments | 2010 | 2009 |
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£m | £m |
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Non-current assets |
| |||||||||||||
Non-current investments | 58.6 | 59.9 |
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Current assets |
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Listed equities held for trading | 13.0 | 12.3 |
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Liquid investments of pensions subsidiaries | 27.6 | 21.7 |
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40.6 | 34.0 |
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Assets classified as held for sale |
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Seed capital investments | - | 4.8 |
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Management contracts held for sale | - | 23.0 |
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- | 27.8 |
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13. | Stock of units and shares | 2010 | 2009 |
| ||||||||||
£m | £m |
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Units and shares in managed funds | 0.3 | 0.5 |
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14. | Acquisition |
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On 29 January 2010 the Group completed the acquisition of certain long only multi-manager and fund of alternatives management agreements and contracts from The Royal Bank of Scotland plc (RBS) for a cash consideration of £84.7 million. The benefits of the acquisition were to add fund of alternatives capability and strengthen the Group's distribution relationship with RBS Wealth Management, including Coutts. The acquisition included the assignment of a number of asset administration, consultancy, advisory and other service agreements, certain trademarks, shares in certain Cayman Island companies and the associated staff of the business. In addition, the Group has entered into a long-term distribution agreement with RBS, largely incorporating their private banking customer base at Coutts & Co.
Goodwill represents the value of the acquired workforce and synergies. All goodwill is deductible for tax purposes.
The Group engaged external valuation specialists to advise on the correct allocation of the purchase price between goodwill, intangible assets and tangible assets. Provisional values for the net assets of the acquired business, at the date of acquisition, are set out in the table below.
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| |||||||||||||
At date of acquisition £m | Fair value adjustments £m | Provisional fair value £m |
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Intangible assets | - | 73.5 | 73.5 |
| ||||||||||
Cash | 0.1 | - | 0.1 |
| ||||||||||
Trade receivables | 13.8 | - | 13.8 |
| ||||||||||
Trade payables | (14.9) | - | (14.9) |
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Net assets of acquired business | (1.0) | 73.5 | 72.5 |
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Goodwill | - | - | 12.2 |
| ||||||||||
84.7 |
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Discharged by: |
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Cash consideration | 84.7 |
| ||||||||||||
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15. | Other financial investments / investment contract liabilities |
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These balances represent unit linked business carried out by the Group's life and pension subsidiary. The assets represent investments held to meet contracted liabilities.
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16. | Interest bearing loans and borrowings | 2010 | 2009 |
| ||||||||||
£m | £m |
| ||||||||||||
Non-current liabilities |
| |||||||||||||
7.2% subordinated notes 2016 | 78.8 | 77.6 |
| |||||||||||
3.5% convertible bonds 2014 | 79.7 | - |
| |||||||||||
Amount drawn under bank revolving credit facility | - | 150.0 |
| |||||||||||
158.5 | 227.6 |
| ||||||||||||
Current liabilities |
| |||||||||||||
Amount drawn under bank revolving credit facility | - | 28.3 |
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17. | Retirement benefits The Group's principal form of pension provision is by way of three defined contribution schemes operated world-wide. The Group also operates several legacy defined benefit schemes which include, in the UK, the CGA Staff Pension Fund, the Murray Johnstone Limited Retirement Benefits Plan and the Edinburgh Fund Managers Group plc Retirement & Death Benefits Plan. All defined benefit schemes are closed to new membership and to future service accrual. The actuarial valuations of these defined benefit arrangements were updated to 30 September 2010 by the respective independent actuaries using the projected unit method.
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2010 | 2009 |
| ||||||||||||
£m | £m |
| ||||||||||||
Pension scheme deficits | 35.0 | 33.4 |
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18. | The financial information set out above does not constitute the Company's statutory accounts for the years ended 30 September 2010 or 2009. The financial information for 2009 is derived from the statutory accounts for 2009 which have been delivered to the Registrar of Companies. The statutory accounts for 2010 will be delivered following the Company's Annual General Meeting. The auditors have reported on those accounts; their reports were (i) unqualified, (ii) did not include a reference to any matters to which the auditors drew attention by way of emphasis without qualifying their report and (iii) did not contain a statement under section 498(2) or (3) of the Companies Act 2006 or equivalent preceding legislation.
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Assets under management |
| |||||||||||||
2010 | 2009 |
| ||||||||||||
£bn | £bn |
| ||||||||||||
Equities | 72.1 | 50.7 |
| |||||||||||
Fixed income | 45.1 | 51.7 |
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Alternative investment strategies | 29.1 | 7.7 |
| |||||||||||
Property | 21.7 | 22.6 |
| |||||||||||
Money market | 10.7 | 13.5 |
| |||||||||||
178.7 | 146.2 |
| ||||||||||||
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Segregated mandates | 117.0 | 105.0 |
| |||||||||||
Pooled funds | 61.7 | 41.2 |
| |||||||||||
178.7 | 146.2 |
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Related Shares:
ADN.L