17th May 2006 07:01
Rensburg Sheppards plc17 May 2006 17 May 2006 Rensburg Sheppards plc ('Rensburg Sheppards' or 'the Company') Preliminary Results for the 16 Months Ended 31 March 2006 Rensburg Sheppards, (formerly Rensburg plc), the Investment Management Group - Key Points: • Profit before tax, amortisation of both goodwill and the Employee Benefit Trust ('EBT') prepayment and exceptional items* for the 16 months ended 31 March 2006 of £29.3 million (12 months ended 30 November 2004: £8.8 million). • Basic earnings per share before amortisation of both goodwill and the EBT prepayment and exceptional items* for the 16 months ended 31 March 2006 of 55.6p (12 months ended 30 November 2004: 27.9p). • Final dividend of 13.2p per ordinary share. • In respect of the acquisition of Carr Sheppards Crosthwaite, we continue to expect to achieve annualised pre-tax cost synergies of approximately £5.5 million per annum by the year ending 31 March 2008. • Group funds under management at 31 March 2006 of £13.1 billion (30 November 2004: £4.2 billion). * Amortisation of both goodwill and the EBT prepayment and exceptional itemsbefore taxation amount to a net charge of £19.6 million (12 months ended 30November 2004: £0.4 million) Mike Burns, Chief Executive of Rensburg Sheppards, commented: "It is pleasing to report such good progress even during the major integrationof CSC. I look forward to the year ahead with considerable optimism." For further information, please contact: Michael Burns, Chief Executive Tel: 0151 227 2030Rensburg Sheppards plc Nick Lyon Tel: 020 7796 4133Hudson Sandler CHAIRMAN'S STATEMENT I am delighted to be presenting what we consider to be very creditable resultsfor the 16 month period to 31 March 2006, helped of course by favourable stockmarket conditions and continued development of the enlarged group. The Companyhas been transformed by the acquisition, around twelve months ago, of CarrSheppards Crosthwaite Limited ('CSC') and the deal has proved rewarding so far,with more benefits expected to come. Acquisition and integration of CSC Before moving on to the financial results, I should like to comment on theacquisition and integration of CSC. Following shareholder and regulatoryapprovals, this acquisition was completed on 6 May 2005 and the name of theCompany was then changed to Rensburg Sheppards plc. For practical reasons, theaccounting reference date of the Company and the group was subsequently changedto 31 March; this has resulted in the elongation of the accounting period nowbeing reported upon to 16 months. With regard to the integration of CSC, muchhas been done but much work also lies ahead. Importantly, we remain confidentthat we will reap the expected ongoing benefits of the acquisition, being £5.5million of annualised pre-tax cost synergies by the year ending 31 March 2008. Financial results This entire section is necessarily quite complex, but in essence we are pleasedwith the results from all the different business units, with activity levelswell ahead of the previous year. Due to the amount of detailed information to bedisclosed, this follows for the first time in a separate report from the FinanceDirector. I would however like to point out one specific figure that gives usparticular encouragement for the future. This is that total group funds undermanagement at 31 March 2006 exceeded £13 billion, and your Company is now placedfirmly amongst the leading quoted companies in the investment managementindustry. Share capital consolidation and dividends On 1 June 2005 a special dividend of 45p per ordinary share was paid on theissued ordinary shares other than those issued to finance the acquisition of CSC('Consideration Shares'). Immediately following the ordinary shares going exthis special dividend on 20 May 2005, all existing ordinary shareholdings(including the Consideration Shares) were consolidated on the basis of 91 newordinary shares for every 100 old ordinary shares. The directors are now recommending a final dividend of 13.2p per ordinary sharepayable on 11 August 2006 to all shareholders on the register as at the close ofbusiness on 21 July 2006. When combined with the special dividend of 45p andthe two interim dividends each of 6.6p per ordinary share (the second interimdividend being paid as a consequence of the four month extension to theaccounting period), this brings the total dividends declared in respect of thisreporting period to 71.4p per ordinary share. Board and employees The acquisition of CSC from Investec was accompanied by a reorganisation of theboard. Effective from 6 May 2005, Robert Allen, Barry Anysz, Katrina Michel andNicko Williams stood down as directors and I should like to thank them all fortheir considerable and varied contributions over many years. We welcomed intheir place Nick Bagshawe, Steve Elliott and Ian Maxwell Scott of CSC asexecutive directors and, representing Investec's major stake in the businessgoing forward, Stephen Koseff and Bernard Kantor joined as non-executives. On 14November 2005 we announced the appointment of Michael Haan to the board as anadditional independent non-executive director. The Company has been transformed during the past 18 months. Deals such as ourscreate tremendous opportunities, but also significant challenges as changes toworking practices evolve. To varying degrees this has inevitably had an effecton all our employees, whom I thank and congratulate for their unstinting effortsthroughout this lengthy period. Outlook Significant progress has been made since the first statement about the possibleacquisition by Rensburg of CSC which was made in December 2004, and we areconfident about the full delivery of the ongoing benefits of this deal comingthrough in line with the timetable outlined when the deal was put toshareholders in April 2005. The combination of the historic Rensburg and CSCbusinesses into the single, higher profile brand of Rensburg Sheppards, togetherwith the positive environment for equity based investment and wider recognitionby individuals of the need to provide for their own long term futures, leavesthe group well placed for the challenges that lie ahead. C.G. ClarkeChairman16 May 2006 CHIEF EXECUTIVE'S REVIEW OF OPERATIONS The acquisition of Carr Sheppards Crosthwaite Limited ('CSC') was completed on 6May 2005. This major acquisition took almost five months to complete since themaking of an initial announcement on 10 December 2004, during which time theCompany carefully evaluated and ultimately rejected the approaches to acquirethe Company that were made by Rathbone Brothers Plc. The integration of CSC is the largest of its kind and I am pleased to reportthat the project is well advanced. In the circular proposing the acquisition ofCSC, which was sent to shareholders on 23 March 2005 ('the Circular'), weanticipated annual pre-tax cost synergies of approximately £5.5 million by theyear ending 31 March 2008, with a significant proportion of these synergies weexpected being achieved in the year ending 31 March 2007. We have delayed untilthe third quarter of this year the consolidation of the two existing settlementfunctions and this means that the pre-tax cost synergies we now expect toachieve in the financial year ending 31 March 2007 will be approximately £3million. However, more importantly, thereafter we continue to expect to benefitfrom annualised pre-tax cost synergies of approximately £5.5 million. Given the acquisition of CSC described above, this has been a period ofsignificant change for the group and I would like to thank the patience of ourclients, particularly the Rensburg clients who have over recent months endured aconsiderable increase in paper output as we migrated IT systems. We arecurrently producing our 5 April packs, which effectively completes this dualrunning process for our clients. We have now embarked upon a programme ofenhancements to client output. It has been customary for me to acknowledge the dedication and hard work shownby our staff towards the end of my statement. I believe however that it is mostappropriate, following an unparalleled period in the history of our group, tobring this forward. We operate in a 'people's business' and the commitment ofall staff, particularly those under threat of redundancy who have continued toact with complete professionalism throughout, merits special recognition. Thedesire to provide a stable service to our clients has been uppermost in theirminds and I thank them all most sincerely for their considerable efforts. Rensburg Sheppards Investment Management On 1 February 2006 the historic businesses of Rensburg Investment ManagementLimited ('RIM') and Carr Sheppards Crosthwaite Limited were formally combined.From this date the group's core private client investment management businesshas been operated under the new, single brand, of Rensburg Sheppards InvestmentManagement Limited ('RSIM'). During the period under review, the consistently rising financial markets, whichhave brought with them a gradual return of investor confidence, assisted RSIM ingrowing its funds under management to a total of £11.9 billion by 31 March 2006including £334 million contributed by the Charity Property Fund. The review of RIM's charging structure that was implemented during the quarterended 30 November 2004 has benefited this business over the period under review,primarily in terms of an increase in the absolute level of income. CSC alsoundertook a fundamental review of its charging structure during the latter halfof 2005 to enable RSIM to operate with a common rate card and this wasimplemented with effect from 1 December 2005. The early indications are thatthis review has led to a marked increase in the quality of CSC's income, with asignificant migration of clients away from CSC's previous heavily commissionorientated income structure over to a pure fee or fee/commission mixed basis,accompanied by a positive effect on the absolute level of income. The principalquarterly period ends for the ad valorem fee billings across RSIM have now beenconsolidated and for the majority of services are based upon the value of clientportfolios as at the last working day of February, May, August and November. Given the fundamental changes during the period, we have concluded that it is oflittle benefit at this point to make either year on year comparisons of fundsunder management or analyse out income into its key streams. However with thesemajor changes behind us, in future reporting we will provide more detailedanalysis of these and potentially other areas of interest. Since the integration of CSC began, employees across RSIM have continued toadapt admirably to the opportunities and challenges faced as we move towardsachievement of our goal of a single operating platform run by a settlementfunction located primarily in one geographical location. December 2005 saw themove onto a common operating platform achieved and the initial months of 2006has seen great effort invested in 'bedding down' this new system. Theconsolidation in Liverpool of the majority of the settlement functions isscheduled to take place over the next half year and we remain fully aware of theoperational risk surrounding the successful achievement of this and to thebenefits that will be forthcoming as this is completed. Rensburg Fund Management Rensburg Fund Management Limited ('RFM') has continued to perform extremely wellin terms of attracting significant net new money inflows. Net sales over thesixteen months of £225 million have, combined with the rising financial marketsand solid investment performance, led to an increase in the value of RFM'sretail unit trust based funds under management to £942 million as at 31 March2006 (30 November 2004: £505 million). In addition, the company now acts asinvestment manager to two segregated mandates; the total funds managed underthese mandates have increased from £27 million on 30 November 2004 to £223million at 31 March 2006. This brings the total assets managed by RFM to £1.17billion (30 November 2004: £0.53 billion). Combining RSIM and RFM brings the group's total funds under management as at 31March 2006 to £13.1 billion (30 November 2004: £4.2 billion). Regulation The group devotes considerable human and financial resources to regulatorymatters; currently, FSA's initiative of Treating Customers Fairly is beingfirmly embedded into the enlarged group. We, together with our peer group, prideourselves on our personal service to our clients - it is our raison d'etre. Webelieve that our clients value a relationship that understands their needs andis not reduced to a 'box ticking' exercise. We welcome the FSA's shift to 'principle based' regulation and hope and expect that all supervisory teams willalso adopt this approach. We are, in accordance with EU directives, currently preparing for the CapitalRequirements Directive ('CRD'), which comes into effect in January 2007, and inNovember 2007 we will see the implementation of MiFID (Markets in FinancialInstruments Directive) which is intending to co-ordinate financial servicesacross Europe. We are grateful for the assistance of APCIMS (Association forPrivate Client Investment Managers), our trade association, who not only editthe vast reading material that arrives, but also represent actively our interestwith the regulator. Outlook We have another extremely busy and exciting year in front of us as we completethe integration and seek to attract additional funds to manage. With thecontinued commitment of all of our staff, I look forward to the year ahead withconsiderable optimism. M.H. BurnsChief Executive 16 May 2006 FINANCE DIRECTOR'S REPORT Financial results The group's profit before tax, amortisation of both goodwill and the EBTprepayment and exceptional items for the 16 months ended 31 March 2006 was £29.3million (12 months ended 30 November 2004: £8.8 million) from a turnover of£109.4 million (30 November 2004: £36.9 million). The basic earnings per shareon this basis were 55.6p (30 November 2004: 27.9p). These adjusted measurementsof profit before tax and basic earnings per share have been provided in additionto the unadjusted measurements detailed below, as it is the directors' opinionthat they represent better measures of underlying business performance. The results as now presented include those of Carr Sheppards Crosthwaite Limited('CSC') from 6 May 2005, being the date CSC was acquired, up until 31 March2006. The results of CSC for this period are separately analysed within theprofit and loss account. The profit before tax for the 16 months ended 31 March2006 as stated above includes the benefit of approximately £0.5 million ofsynergy benefits. This reflects the commencement during the latter months ofthis period of certain of the ongoing synergy benefits expected to be derivedfrom the acquisition of CSC. At 31 March 2006 we had committed to £9.9 million of exceptional pre-taxreorganisation costs relating to the integration of CSC; these costs have beenfully expensed in the profit and loss account. The board now estimates that thetotal of exceptional pre-tax reorganisation costs ultimately to be incurred willfall within the range £10 million to £10.5 million, compared with the originalestimate in the circular to shareholders dated 23 March 2005 ('the Circular') ofapproximately £10 million; these figures include £0.7 million of actual non-cashreorganisation costs relating to certain asset write-downs, which is lower thanthat predicted in the Circular of approximately £1 million, a consequence ofcertain assets being determined as suitable to be retained for ongoing use inthe enlarged group. This overall potential increase in the exceptional pre-taxreorganisation costs reflects additional costs anticipated to arise from thedelay described in the Chief Executive's Review in consolidating the twoexisting settlement functions. In the Circular, we estimated £0.7 million ofadditional capital expenditure would be necessary as a consequence of theintegration plan; to date, approximately £0.44 million has been incurred and wenow ultimately expect the total to be incurred will be no more than the originalestimate. During December 2004, the group disposed of 662,857 shares in London StockExchange plc ('LSE'); these disposals, which are accounted for as an exceptionalitem, gave rise to a taxable gain of £3,129,000 on which tax of £939,000 hasbeen provided. The group retains a holding of 100,000 shares in LSE at theirhistoric cost of nil. After including a net charge of £19.6 million (30 November 2004: £0.4 million)for amortisation of both goodwill and the EBT prepayment and exceptional items(including the above reorganisation costs and LSE disposal), profit before taxfor the 16 months ended 31 March 2006 was £9.7 million (12 months ended 30November 2004: £8.4 million) and basic earnings per share were 7.6p (30 November2004: 26.1p). The corporation tax charge for the 16 months ended 31 March 2006 of £7.0 million(12 months ended 30 November 2004: £2.7 million) represents 72% of the group'sprofit before tax of £9.7 million (12 months ended 30 November 2004: £8.4m).This apparently high rate of tax reflects the fact that no tax relief isavailable in respect of goodwill amortisation, nor is any tax relief anticipatedin respect of the amortisation of the EBT prepayment. CSC had audited profit before exceptional items and taxation of £8.8 million forthe year ended 31 March 2005. This compared favourably with the profit forecastof £8.3 million included within the circular sent to Rensburg shareholders on 23March 2005, proposing the acquisition of CSC. Adoption of International Financial Reporting Standards ('IFRS') For the current 16 month accounting period to 31 March 2006, the group isrequired to report its results under UK Generally Accepted Accounting Principles('UK GAAP'). Thereafter, we are required to report all results under IFRS.Hence, the group's interim results for the six months ending 30 September 2006,which we expect to announce during mid-November 2006, will be the initialresults reported under IFRS. The effect of adopting IFRS on the group hascontinued to be evaluated and it is expected that the areas of significantimpact on reported financial performance of the business will be as follows: • Goodwill will no longer be amortised, but will be subject to an annual impairment review (IFRS 3); • The acquisition of Carr Sheppards Crosthwaite Limited, which arose after the date of transition to IFRS, will be restated and accounted for under IFRS 3 . This restatement will principally relate to the write back of goodwill previously amortised and the recognition of deferred tax liabilities in respect of assets adjusted to fair value (IFRS 1 & IFRS 3); • The fair value of options granted under the group's Save As You Earn share option scheme after 7 November 2002 and outstanding at 1 April 2005 will be charged to the profit and loss account (IFRS 2); • The charge relating to the Employee Benefit Trust ('EBT') will be based on the fair value of the benefits that are expected to be provided by the trust. Currently, the amortisation of the EBT prepayment is based on the value of the shares at the date they were transferred by Investec 1 Limited ('Investec') into the EBT (IFRS 2). • Equity investments, being assets that are available-for-sale, will be measured at fair value (IAS 39); • Where retained initial charge income received on the sale of units represents the provision of ongoing investment management services, this income will be recognised on a straight line basis over the estimated life of the unit holding (IAS 18); • Where applicable, the tax effect and the provision of deferred tax in respect of the above items will be recognised (IAS 12); • Dividends payable will only be recognised in the period in which they are declared (IAS 10). In order to enable readers of our accounts to better understand the impact ofIFRS, it is our intention to publish ahead of our next interim results, atransitional statement explaining how the changes in accounting treatment underIFRS impact on the group's reported financial information for the 16 monthperiod ended 31 March 2006, as previously prepared under UK GAAP. J.P. WraggFinance Director 16 May 2006 Consolidated profit and loss accountfor the 16 months ended 31 March 2006 2006 2004 16 months ended 31 March 12 months Continuing operations ended Existing Acquisitions Total 30 Nov Note £'000 £'000 £'000 £'000 Turnover 62,779 46,606 109,385 36,936 Operating expenses (46,745) (32,453) (79,198) (29,866)Reorganisation costs - exceptional 1 - (9,907) (9,907) -Amortisation of EBT prepayment 2 - (4,226) (4,226) -Goodwill amortisation 8 (1,104) (7,501) (8,605) (868) Total administrative expenses (47,849) (54,087) (101,936) (30,734) Operating profit/(loss) 14,930 (7,481) 7,449 6,202 Profit on disposal of fixed asset 3 3,129 - 3,129 -investments Profit/(loss) on ordinary activities before 18,059 (7,481) 10,578 6,202interest and investment income Income from fixed asset investments - - 490exceptional Interest receivable and similar income 3,365 1,819 Interest payable and similar charges 4 (4,205) (67) Profit on ordinary activities before 9,738 8,444Taxation Tax on profit on ordinary activities 5 (6,975) (2,725) Profit for the financial period 2,763 5,719 Dividends 6 (19,827) (3,943) Retained (loss)/profit for the period (17,064) 1,776 Earnings per share before amortisation of goodwill 7and EBT prepayment and exceptional items -Basic 55.6p 27.9p -Diluted 54.8p 27.3p Earnings per share 7 -Basic 7.6p 26.1p -Diluted 7.5p 25.6p Dividend per share 6 - First interim dividend 6.6p 6.0p - Second interim dividend 6.6p - - Final dividend 13.2p 12.0p - Special dividend 45.0p - 71.4p 18.0p The group has no recognised gains and losses other than those included in theprofits above and therefore no separate statement of total recognised gains andlosses is presented. Consolidated balance sheetat 31 March 2006 2006 2004 31 March 30 Nov Note £'000 £'000Fixed assets Intangible assets 8 170,326 13,000 Tangible assets 4,540 4,132 Investments 800 500 175,666 17,632 Current assets Debtors - due within one year 173,829 26,226 Debtors - due after one year 9 5,089 - 178,918 26,226 Cash at bank and in hand 16 49,958 40,618 228,876 66,844 Creditors Amounts falling due within one year (183,693) (40,389) Net current assets 45,183 26,455 Total assets less current liabilities 220,849 44,087 Creditors Amounts falling due after more than one year (60,000) (232) Provisions for liabilities and charges 11 (7,174) (206) Net assets 153,675 43,649 Capital and reserves Called up share capital 12 4,760 2,209 Profit and loss account 8,938 26,002 Other reserves 139,977 15,438 Equity shareholders' funds 14 153,675 43,649 Consolidated cash flow statementfor the 16 months ended 31 March 2006 2006 2004 16 months 12 months ended ended 31 March 30 Nov Note £'000 £'000 Net cash inflow from operating activities 15 24,384 11,850 Returns on investments and servicing of finance Interest received 3,823 1,565 Interest paid (2,496) (69) Income from fixed asset investments - exceptional - 490 Taxation paid (5,595) (2,513) Capital expenditure and financial investment Purchase of tangible fixed assets (1,834) (1,354) Proceeds from sale of fixed asset investments 3,129 - Acquisitions and disposals Costs associated with purchase of subsidiary undertakings 13 (5,781) - Cash acquired with subsidiary undertakings 13 17,611 - Payment of deferred consideration (52) - Equity dividends paid (26,939) (3,936) Cash inflow before financing 6,250 6,033 Financing Issue of ordinary share capital 25 9 Costs associated with issue of shares (180) - Redemption of loan notes (1,755) (844) Increase in cash in the period 16 4,340 5,198 Notes to the interim report 1. Reorganisation costs Reorganisation costs relate to the integration of Carr Sheppards CrosthwaiteLimited, which was acquired on 6 May 2005. Details of this acquisition are setout in note 13. The charge of £9,907,000 represents the element of these coststhat have been committed to during the period from the date of acquisition to 31March 2006. 2. Amortisation of EBT prepayment As set out in note 13 below, Investec 1 Limited ('Investec') established anEmployee Benefit Trust ('EBT') under the terms of the acquisition of CarrSheppards Crosthwaite Limited by Rensburg Sheppards plc on 6 May 2005. Of thetotal of 25,500,000 ordinary shares that were issued by the company to Investecon 6 May 2005 under the terms of the acquisition, 2,800,000 shares wereimmediately transferred by Investec to the EBT. The fair value of these sharesat the time of transfer to the EBT was £13,972,000. The EBT does not fallwithin the control of the Rensburg Sheppards group and, as a result, the fairvalue of £13,972,000 has been accounted for as a prepayment by RensburgSheppards plc of certain of the group's future employment costs; this amountwill be amortised evenly through the consolidated profit and loss account overthe three years from 6 May 2005, being the period to which the prepaymentrelates. The charge of £4,226,000 represents the amortisation for the periodfrom the date of acquisition of 6 May 2005 to 31 March 2006. This amortisationwill not result in any cash flows and there will be no effect on the company'sdistributable reserves. It is not anticipated that any tax relief will beavailable in respect of this charge. 3. Profit on disposal of fixed asset investments During the period, the group disposed of 662,857 shares in London Stock Exchangeplc, giving rise to a taxable gain of £3,129,000. The amount of tax payable onthe gain is expected to be £939,000. Following this disposal, the group retainsa holding of 100,000 shares in London Stock Exchange plc, which are included infixed asset investments at their historic cost of nil. 4. Interest payable Interest payable includes amounts due relating to subordinated debt of£3,858,000 (November 2004: nil). Details of subordinated debt are set out innote 10. 5. Tax on profit on ordinary activities United Kingdom corporation tax at 30% (November 2004: 30%). No tax relief isavailable in respect of the amortisation of goodwill nor is tax reliefanticipated to be available in respect of the amortisation of the EBTprepayment. 6. Dividends 2006 2004 16 months 12 months ended ended 31 March 30 Nov £'000 £'000 First interim dividend: 6.6p per share (November 2004: 6.0p) 1,319 1,314 Second interim dividend: 6.6p per share (November 2004: nil) 2,854 - Final dividend: 13.2p per share (November 2004: 12.0p) 5,783 2,629 Special dividend: 45.0p per share (November 2004: nil) 9,871 - 19,827 3,943 The proposed final dividend of £5,783,000 is payable in respect of 43,808,579ordinary shares; this excludes 76,660 ordinary shares held by the EmployeeOwnership Trust, in respect of which all dividends have been waived. The firstinterim dividend of 6.6p per share was paid in respect of 19,983,531 ordinaryshares, which excluded 126,250 shares held by the Employee Share OwnershipTrust. The ordinary shares issued on 6 May 2005 as part of the considerationfor the acquisition of Carr Sheppards Crosthwaite Limited did not rank for thefirst interim dividend paid in respect of the six month period ended 31 May2005, nor did they rank for the special dividend of 45p per share paid on 1 June2005, in accordance with the terms of the acquisition. However, these sharesdid rank for the second interim dividend and rank pari passu for all futuredividends. The second interim dividend of 6.6p per share was paid in respect of43,221,408 ordinary shares, excluding 107,750 shares held by the Employee ShareOwnership Trust. The special dividend was paid on 1 June 2005 in respect of21,935,609 ordinary shares. 7. Earnings per share Basic earnings per share before amortisation of goodwill and EBT prepayment andexceptional items is calculated with reference to earnings for shareholders of£20,339,000 (November 2004: £6,097,000) and the weighted average number ofshares in issue during the period of 36,595,582 (November 2004: 21,876,641).The weighted average number of shares includes the 2,800,000 shares relating tothe EBT from their date of issue on 6 May 2005. The effect of the shareconsolidation on the weighted average number of shares is recognised from 1 June2005, being the date of payment of the related special dividend. Basic earningsper share is calculated with reference to earnings for shareholders of£2,763,000 (November 2004: £5,719,000). Diluted earnings per share is the basic earnings per share, adjusted for theeffect of the conversion into fully paid shares of the weighted average numberof all employee share options outstanding during the period. The number ofadditional shares used for the diluted calculation is 491,190 shares (November2004: 495,756). The directors believe that the provision of additional earnings per sharefigures, in particular before amortisation of both goodwill and the EBTprepayment and exceptional items, better represent underlying businessperformance. The effect of these adjustments on earnings and basic earnings pershare is as follows: 16 months ended 12 months ended 31 March 2006 30 November 2004 Earnings Earnings Earnings Earnings per per share share £'000 Pence £'000 Pence Unadjusted earnings and EPS 2,763 7.6 5,719 26.1 Goodwill amortisation 8,605 23.5 868 4.0 Income from fixed asset - - (490) (2.2)investments - exceptional Profit on disposal of fixed (3,129) (8.6) - -asset investments Reorganisation costs 9,907 27.1 - - Amortisation of EBT prepayment 4,226 11.5 - - Tax arising on exceptional items (2,033) (5.5) - - Earnings and EPS excludingamortisation of goodwill andEBT prepayment andexceptional items 20,339 55.6 6,097 27.9 8. Intangible fixed assets Note Goodwill £'000Cost:At 1 December 2004 16,689Additions 13 165,931 At 31 March 2006 182,620 Amortisation:At 1 December 2004 3,689Provided during the period 8,605 At 31 March 2006 12,294 Net book value:At 31 March 2006 170,326 At 30 November 2004 13,000 Goodwill is being amortised over the directors' estimate of its useful economiclife of 20 years. 9. Debtors - due after one year Amounts falling due after more than one year of £5,089,000 (November 2004: nil)relate entirely to the prepayment of employment costs arising from the EmployeeBenefit Trust, as set out in note 2 above. 10. Subordinated loan The company entered into a £60 million subordinated loan agreement with Investec1 Limited on 6 May 2005. The loan formed part of the consideration for theacquisition of Carr Sheppards Crosthwaite Limited, as set out in note 13 below.A fixed rate of interest of 7.155% per annum is payable on £45 million of theloan and a floating rate, being 2.25% above LIBOR, is payable on £15 million ofthe loan. The loan is repayable in equal instalments over eight years, with thefirst instalment becoming payable in 2008. 11. Provisions for liabilities and charges Reorganisation Deferred Lease Restructuring Property Total costs tax rentals costs dilapidations £'000 £'000 £'000 £'000 £'000 £'000 At 1 December 2004 - 24 182 - - 206Acquisition - - - 252 - 252Charged/(released) to the profit and loss account 9,907 (9) - - 75 9,973Transferred from accruals - - - - 75 75Utilised in the period (3,111) - (34) (187) - (3,332) At 31 March 2006 6,796 15 148 65 150 7,174 Reorganisation costs relate to the integration of Carr Sheppards Crosthwaite ('CSC') into the group. CSC was acquired on 6 May 2005 and details of thisacquisition are set out in note 13. Lease rentals represent future rentals on unoccupied leasehold premises to theend of the lease term, up to 2013. The restructuring provision represents the residue of amounts previouslyprovided within Carr Sheppards Crosthwaite Limited, prior to its acquisition bythe company, in respect of the cost of restructuring certain businessactivities. Property dilapidations represent potential costs of reinstatement of the group'sleasehold premises upon expiry of property leases, up to 2017. 12. Called up share capital The company's authorised share capital was increased to £6,000,000, comprising60,000,000 ordinary shares of 10 pence each, at an extraordinary general meetingheld on 20 April 2005. On 20 May 2005, the company's share capital wasconsolidated by the issue of 91 new ordinary shares of 10 90/91 pence each forevery 100 existing ordinary shares of 10 pence each. As a result of the shareconsolidation, the company's authorised share capital was reduced to 54,600,000ordinary shares of 10 90/91 pence each. 2006 2004 31 March 30 NovAuthorised: 54,600,000 ordinary shares of 10 90/91p each £6,000,000 £3,000,000(Nov 2004: 30,000,000 ordinary shares of 10p each) Allotted and fully paid:43,314,068 ordinary shares of 10 90/91p each £4,759,788 £2,208,708(Nov 2004: 22,087,078 ordinary shares of 10p each) As a result of the share consolidation on 20 May 2005, the shares held by theEmployee Share Ownership Trust ('the trust') reduced such that the trust nolonger held sufficient shares to satisfy all options outstanding under thegroup's Employee Share Ownership Plan. The trust therefore purchased 13,703ordinary shares of 10 90/91 pence each on 25 May 2005, representing 0.03% of theissued share capital on that date. The amount paid for these shares of £72,626has been charged to the profit and loss account during the period. 13. Acquisition On 6 May 2005, the company acquired the entire share capital of Carr SheppardsCrosthwaite Limited from Investec 1 Limited ('Investec'). Carr SheppardsCrosthwaite Limited is a private client investment management business withoffices in London, Reigate, Farnham and Cheltenham. The consideration paid andthe fair value of the net assets acquired was as follows: Book Fair value Fair value adjustments value £'000 £'000 £'000 Tangible fixed assets 517 - 517 Fixed asset investments 30 270 300 Debtors 90,508 565 91,073 Cash at bank - amounts repayable on demand 17,611 - 17,611 Cash at bank - short term deposits 5,000 - 5,000 Proposed dividend (10,266) - (10,266) Other creditors (90,860) - (90,860) Provisions for liabilities and (252) - (252)charges Net assets acquired 12,288 835 13,123 Goodwill 165,931 Consideration 179,054 The purchase consideration comprised: £'000 22,700,000 ordinary shares 113,273 Subordinated loan 60,000 Direct costs of acquisition 5,781 179,054 Cash at bank - short term deposits of £5 million represent bank deposits with amaturity of up to one month. The proposed dividend represents the dividend payable to Investec in accordancewith the terms of the acquisition of Carr Sheppards Crosthwaite Limited. The adjustment to fixed asset investments represents a revaluation of certainequity investments to their market value at the date of acquisition. Theadjustment to debtors represents the fair value of future amounts receivable inrespect of the sale of certain business assets. A total of 25,500,000 ordinary shares were issued to Investec on 6 May 2005under the terms of the acquisition of Carr Sheppards Crosthwaite Limited. Asset out in note 2 above, 2,800,000 of these shares were immediately transferredby Investec to an Employee Benefit Trust ('EBT'). The fair value of theseshares at the time they were transferred by Investec to the EBT was £13,972,000. This amount has been accounted for as a prepayment by Rensburg Sheppards plcof certain of the group's future employment costs and, as such, does not formpart of the fair value of the purchase consideration in accordance with FRS 7. The fair values set out above are provisional. In accordance with FRS 6, shouldany adjustments to fair values subsequently be required, these will be accountedfor in the period up to the end of the next financial year. The goodwill of £165,931,000 arising upon the acquisition of Carr SheppardsCrosthwaite Limited is being amortised over the directors' estimate of itsuseful economic life of 20 years. The profit and loss account of Carr Sheppards Crosthwaite Limited and itssubsidiary companies for the period from 1 April 2005 to the date of acquisitionof 6 May 2005 is summarised as follows: £'000 Turnover 4,566 Operating expenses (3,430) Operating profit 1,136 Net interest receivable and similar income 109 Profit on ordinary activities before taxation 1,245 Tax on profit on ordinary activities (395) Profit for the financial period 850 Carr Sheppards Crosthwaite Limited has no recognised gains and losses other thanthose included in the profits above and therefore no separate statement of totalrecognised gains and losses is presented for the period. 14. Reconciliation of movements in equity shareholders' funds 2006 2004 16 months 12 months ended ended 31 March 30 Nov £'000 £'000 Profit for the financial period 2,763 5,719 Dividends (19,827) (3,943) Retained (loss)/profit for the period (17,064) 1,776 Net proceeds of issue of ordinary share capital 127,090 9 Net addition to equity shareholders' funds 110,026 1,785 Equity shareholders' funds at beginning of period 43,649 41,864 Equity shareholders' funds at end of period 153,675 43,649 Equity shareholders' funds are stated net of an amount of £140,000, representingthe cost of 76,660 shares in Rensburg Sheppards plc held by the EmployeeOwnership Trust at 31 March 2006. 15. Reconciliation of operating profit to operating cash flows 2006 2004 16 months 12 months ended ended 31 March 30 Nov £'000 £'000 Operating profit 7,449 6,202 Amortisation of goodwill 8,605 868 Amortisation of EBT prepayment 4,226 - Depreciation 1,274 489 Loss on disposal of tangible fixed assets 58 - Non-cash reorganisation costs 669 - Increase in debtors (52,992) (2,356) Increase in creditors and provisions 55,095 6,647 Net cash inflow from operating activities 24,384 11,850 Net cash inflow from operating activities comprises: Continuing operations - acquisitions 15,560 - Continuing operations - existing 8,824 11,850 24,384 11,850 The net cash inflow from operating activities includes cash outflows relating toreorganisation costs of £2,442,000. 16. Analysis and reconciliation of net funds 1 Dec Cash Other 31 March 2004 flows changes 2006 £'000 £'000 £'000 £'000 Cash at bank repayable on demand and in hand 40,618 4,340 - 44,958 Short term bank deposits - - 5,000 5,000 Cash at bank and in hand 40,618 4,340 5,000 49,958 Debt due after one year (232) - (59,768) (60,000) Debt due within one year (750) 1,755 (1,845) (840) Net funds/(debt) 39,636 6,095 (56,613) (10,882) 2006 2004 16 months 12 months ended ended 31 March 30 Nov £'000 £'000 Increase in cash in the period 4,340 5,198 Increase in short term bank deposits 5,000 - Repayment of debt 1,755 844 Issue of loan notes (1,613) - Increase in debt - subordinated loan capital (60,000) - Movement in net (debt)/funds in the period (50,518) 6,042 Net funds at beginning of period 39,636 33,594 Net (debt)/funds at end of period (10,882) 39,636 Cash and deposits at 31 March 2006 includes segregated amounts in the course ofsettlement of £5,976,000 (November 2004: £2,541,000). 17. Material non-cash transaction The consideration for the acquisition of Carr Sheppards Crosthwaite Limited on 6May 2005 comprised shares and subordinated debt. Details of this transactionare set out in note 13 above. 18. Post balance sheet events The listing particulars dated 23 March 2005 set out the financial effects of theacquisition of Carr Sheppards Crosthwaite Limited, which include the cost ofintegrating the business of Carr Sheppards Crosthwaite Limited into the group.The implementation of the integration plan has continued since 31 March 2006 andfurther details are set out in the Chief Executive's and Finance Director'sreports above. 19. Basis of preparation In preparing this financial information there have been no material changes tothe accounting policies previously applied by the company in preparing itsannual accounts for the year ended 30 November 2004. The financial information in this document does not constitute statutoryaccounts within the meaning of section 240 of the Companies Act 1985, but isderived from the accounts. Statutory accounts for the 12 months ended 30November 2004 have been delivered to the Register of Companies, and those forthe 16 months ended 31 March 2006 will be delivered following the company'sannual general meeting. The independent auditor has reported on the accountsfor both 2004 and 2006; its reports were unqualified and did not containstatements under section 237 (2) or (3) of the Companies Act 1985. Full Accounts It is anticipated that the full accounts will be posted to shareholders on 14June 2006 and will be available at the company's registered office from thisdate, and on the group's website at www.rensburgsheppards.co.uk. This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
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