Final Results

Charles Stanley Group PLC 

Results for the year ended 31 March 2015

Charles Stanley, one of the UK's leading independently owned, full service investment management groups, today it announces its preliminary results for the year ended 31 March 2015 in accordance with FCA Listing Rule 9.7A.

Highlights:

· Total funds increased 6% to £21.3 billion (2014: £20.1 billion)

· Discretionary funds increased 13% to £9.3 billion (2014: £8.2 billion)

· Revenue increased 1% to £149.7 million (2014: £149.0 million)

· Charles Stanley Direct account holders grew to over 20,000 with revenues up 37.1%

· Adjusted profit before tax £4.2 million (2014: £13.5 million)

· Loss before tax £6.1 million (2014: profit £6.1 million)

· Earnings per share

o Underlying EPS from continuing operations 13.14p (2014: 24.98p)

o Reported loss per share (13.46p) (2014: reported earnings per share 10.51p)

· Dividend per share of 5.00p (2014: 12.25p)

· Appointment of Paul Abberley as Chief Executive and Ben Money-Coutts as Chief Financial Officer

· Strategic Review undertaken by management

Post Period

· Contracts exchanged for sale of Charles Stanley Securities and non-binding Heads of Agreement entered into for Charles Stanley Financial Solutions

· £15.8 million raised through private placing

Commenting on the results, Paul Abberley, Chief Executive Officer of Charles Stanley Group, said:

"The past year has been one of substantial change for Charles Stanley. Whilst several of the underlying elements of the results give cause for encouragement, the overall result leaves significant room for improvement.

 As such, our immediate priorities have been firstly to ensure our staff continue to aim for the highest possible level of client delivery and secondly to address the near term deterioration in profitability. Alongside these initiatives, we have refined our strategy to ensure that greater emphasis is placed on developing the core Investment Management business, while retaining and building only those other activities which directly complement and enhance this core activity. With our strengthened management team, we are implementing the new strategy in earnest. 

We are confident that the core activities of Charles Stanley are sound and are committed to delivering significant progress over the coming financial year."

For further information, please contact: 

CHAIRMAN'S STATEMENT

The year to 31 March 2015 has seen some of the most significant changes in Charles Stanley in the two centuries since the business was first established. While we marginally increased our revenue, our profits have been adversely impacted by the changes and we ended the year with a loss before tax of £6.1 million (2014: profit £6.1 million). After amending for adjusting items we recorded an underlying profit before tax of £4.2 million compared with £13.5 million the previous year.

Throughout the year our management and client-facing investment teams have been heavily engaged in the major programme to which I referred last year, of upgrading our systems and our record-keeping to meet the rising regulatory expectations across our area of the financial services sector. This has led to a substantial re-modelling of the interface with our extensive client base, which is moving forward on schedule to completion very shortly. The outcome is intended to reinforce our high-quality offer of service to our clients by ensuring we build and maintain a deep understanding of each client's circumstances and thus the suitability of the service provided. We are hugely appreciative of our clients' forbearance in what has been a very demanding process.

The decline in our profitability is essentially due to a combination of the rising costs associated with these changes, and, to an extent, the inevitable diversion of focus from business generation. But the upside is that we firmly believe that we have built a stronger base to take our business forward.

MANAGEMENT

These developments have coincided with some significant management changes and the initiatives described below have further enhanced the effectiveness of the Board. European legislation now dictates that the role of Chairman and Chief Executive Officer of financial services businesses should be separate. Accordingly, our Nomination Committee was tasked with seeking a new Chief Executive Officer. After a rigorous process the Board was delighted to appoint Paul Abberley to this role. Paul, who has held senior executive roles in the Aviva group, joined us in May last year as Chief Investment Officer, and was confirmed as our new Chief Executive Officer in December on receipt of approval from the FCA. I continue to serve as Non-executive Chairman.

In January 2015 we were further delighted to accept the recommendation of our Nomination Committee to appoint Ben Money-Coutts as our Chief Financial Officer (CFO), in place of James Rawlingson, who stepped down at that time, and to whom I should like to express the Board's thanks. Ben joined us in May 2013 and subsequently held senior positions in the Company prior to his appointment as Chief Financial Officer.

At our 31 March 2015 year-end Michael Clark stepped down as a Director, having served throughout the entire 27 years since Charles Stanley was transformed from a partnership to an incorporated company. Michael continues to be employed by the Group, and I should like to pay the warmest tribute to him on behalf of us all for his long service to Charles Stanley.

This has been a very busy and demanding year for my fellow Non-executive Directors, who, between them, chair our Remuneration, Audit, Nomination and Risk Committees and I should like to thank them warmly for their support of the Group. Their reports are set out on later pages.

Overall the Company's Board has been reduced in size and its committee structure streamlined, further enhancing its effectiveness during an important phase in the Company's development. Separately, a Chief Risk Officer (CRO) has been appointed and now leads an independent risk function.

STRATEGY

Historically our strategy has been to develop the business of the Group as evenly as possible across a broad waterfront of different business lines, though all essentially built around our core proposition of a high quality of investment management, advisory and administration services to a range of different (but complementary) client segments. Over the past couple of years this strategy has been finessed so that greater emphasis is now placed on developing the core business, while retaining and building only those ancillary businesses which directly support and feed into the core activity. Examples of the latter are our successful and growing EBS SIPP operation, and our expanding Financial Planning offering.

Charles Stanley Direct, our award-winning direct-to-client digital platform, has continued to build its client base and Assets under Administration, and this, too, is a key element in our strategy going forward. Clients of our Discretionary and Advisory services increasingly seek digital access to every aspect of their accounts. We believe that clients will welcome our planned strategic development of greater cross-functionality between these different elements of our service.

As a consequence of our increased focus and as announced previously, we have been progressing with the sale of our corporate broking division, Charles Stanley Securities, and our employee benefits business Charles Stanley Financial Solutions Ltd, both of which are not regarded as core. On the 17 June the Group announced contracts had been exchanged with Panmure Gordon (UK) Limited regarding the sale of Charles Stanley Securities. Further announcements regarding the sale of Charles Stanley Financial Solutions Ltd will be issued in due course.

CAPITAL

A further area on which the Board has focused during the year has been the Group's capital position. The maintenance of high cash balances has always been a significant strategic objective, and although these remain high, the effect of reduced profitability and maintained dividends, has been to reduce these below target levels. At the year-end the cash balance stood at £28.5 million compared with £38.6 million a year earlier. So just after the year-end, in April 2015, the Group arranged a fund-raising which was fully taken up, predominantly by existing institutional shareholders, raising £15.8 million net of expenses. We are extremely grateful to our shareholders for their proactive support.

DIVIDEND

In light of the reported loss for the latest year, and in order not to dilute the newly increased capital, the Board has reluctantly decided to re-base its dividend payments. While the interim dividend, paid in November 2014, was maintained at 3.00p per share, it has been decided to recommend a final dividend of 2.00p per share, which compares with last year's final dividend of 9.25p. This was flagged to shareholders at the time of the fund-raising in early April, and is now confirmed as the Board's recommendation. We fully expect, once profitability picks up, to return to our previous pattern of steadily increasing dividends over time, with dividend cover at least two times (as adjusted for the amortisation of intangibles).

EMPLOYEES

This has been a challenging year for everyone in the Group and this is my opportunity to say thank you to them all, on behalf of the Directors and shareholders, for coping with all the demands in such good spirit, in taking their Company - your Company - further ahead.

OUTLOOK

The changes in key management in the Group are bedding in well. We are going through a significant process of change so as to refocus Charles Stanley, ensuring the continued excellence of our client service and to place ourselves at the front of the regulatory curve. There is a substantial programme of work ahead of us but I believe that shareholders should have every confidence in the team that we have built to take this forward.

As always both the domestic and global economic conditions have a very significant effect on our business. Despite some obvious geopolitical risks, the broader outlook seems more benign than it has for several years. Growth has returned to our economy and to that of the USA, and there are better signs of an uptick in Europe too. True, the signals from China could herald a slow-down in world growth. The forthcoming UK referendum on Britain's EU membership creates some - but perhaps limited - uncertainty. On the other hand this could well turn out to be positive, with the chance of meaningful reforms giving a boost to growth across Europe.

While remaining, as always, very cautious, I think there are signs for a little more optimism in the year ahead.

Sir David Howard

Chairman

18 June 2015

CHIEF EXECUTIVE'S REPORT

Having been appointed Chief Executive Officer in late 2014 my immediate priorities have been threefold:

· Ensuring our staff continue to aim for the highest possible level of client delivery. Client service and outcomes form the bedrock upon which we will continue to grow Charles Stanley;

· Diagnose and address the near term deterioration in profitability; and

· Review, and as necessary, reshape our corporate strategy.

FINANCIAL PERFORMANCE

Several of the underlying elements of the Group's financial performance for the year ending 31 March 2015 were encouraging but the overall result was unsatisfactory.

Total Funds under Management and Administration (FuMA) grew 6.0% to £21.3 billion, revenues rose 0.5% to £149.7 million, but our underlying profit before tax fell from £13.5 million to £4.2 million and our actual reported profit turned from a profit before tax of £6.1 million in 2014 to a loss before tax of £6.1 million in 2015. This loss resulted in a decline in net assets attributable to equity shareholders to £68.9 million (2014: £83.4 million) and of our year-end cash balance from £38.6 million the preceding year to £28.5 million.

· Underlying these disappointing numbers there are nevertheless some encouraging trends, most notably:13.4% growth of Discretionary Funds under Management;

· 23.0% increase in fees generated from our Managed investment activities; and

· 35.1% growth of Charles Stanley Direct's Assets under Administration (AuA) on its core direct-to-client platform and 37.1% increase in revenues.

These figures give substance to the view that the core activities of the Group and quality of client service are fundamentally sound, but that much needs to be done to drive greater overall revenue growth and the productivity of our staff whilst ensuring tight control of our cost base.

KEY INITIATIVES FOR THE YEAR AHEAD

Implementation of the revised strategy will begin in earnest. We will focus exclusively on wealth management in the UK, and accordingly have already announced our intention to dispose of non-core operations.

We remain an investment-led firm and retain our commitment to providing genuinely bespoke investment management for our clients. We know our clients value a personal service, delivered by an empowered investment professional. Our investment offering will continue to extend to Advisory and Execution-only services in addition to the core Discretionary portfolio management.

Increasingly, our clients require advice and we are renewing our commitment to make such support available. Our Financial Planning staff will be combined into a single Financial Planning division, enlarged over time, and offering a high quality and consistent suite of services, focussing upon but not limited to, retirement and inheritance.

A number of our teams provide both specialist Asset Management products to clients and research support to our core Investment Management division. These units include PAN Asset Management, the Collectives Portfolios Service, the IHT portfolio service, Matterley funds, Discretionary Fund Management and the central Research function. They will now be restructured and combined into a single Asset Management division. This will allow for the cost-effective leveraging over a broad range of investment specialisms. Research support for our private client investment teams will be further enhanced. Asset management solutions will be offered to financial intermediaries and wholesale and institutional clients.

We will continue to provide a broad range of platforms and wrappers, reflecting the varying needs of our clients. These will include SIPP administration, delivered by our EBS unit.

Finally, while known for our personal service, we are also acutely aware that our clients require high quality digital access to our products and services. Indeed, whether by choice or because more practical, some will continue to use this route exclusively. Accordingly, we remain committed to our highly regarded Charles Stanley Direct offering. The innovative delivery developed within the platform will be leveraged across the Charles Stanley offering, benefitting all clients.

We expect the benefits from the implementation of the strategy to take a number of years to have full effect. We have set ourselves the primary financial objective of building our operating margin to at least 15% in 2018 and expect it to grow further beyond that.

In summary, we will be active at four points on the value chain and thus vertically integrated. Each point will be managed as a profit centre and thus Financial Planning, provision of Platforms and Wrappers, Investment Management and Asset Management will each contribute to the long term growth of both our profits and our margin. Implementation of the revised strategy will be a multi-year exercise, but meaningful progress will be delivered in the current financial year.

Paul Abberley

Chief Executive Officer

18 June 2015

STRATEGIC REPORT

OUR BUSINESS

Charles Stanley remains one of the UK's leading independently owned private client investment management firms. We have a long heritage, dating back to 1792, which includes membership of the Stock Exchange under the Charles Stanley name since the 1850s. We manage and administer over £21.3 billion of assets on behalf of 80,577 clients, many of whom have been with us over decades or generations due to the excellence of our services and commitment to client care.

These principles of service will remain at the heart of everything we do. However, in recent times we have begun to take significant steps to refocus our business and realign our model with the changing requirements of our clients, our regulator and our market place. The desire to modernise the business has been evident in the changes we have made to our senior management team and by the commitment we have made to enact the recommendations of the Strategic Review of our business.

This Strategic Review, led by our new Chief Executive Officer, has involved a thorough analysis of our businesses with a view to identifying those which have the capacity to develop further and contribute to our overall vision of building Charles Stanley into the UK's leading Wealth Management Business by 2020. The benchmarks we employ to evaluate the extent to which we have achieved this vision shall be to seek top quartile, independently assessed performance in the following three key areas.

1. Client satisfaction;

2. Equity market rating (on a like-for-like basis with our peers); and

3. Staff engagement.

The timescale for the delivery of this vision demonstrates that we consider the process of redefining and then benefitting from our revised strategy as a major and long term project which will require considerable endeavour from our employees and perhaps some degree of patience from our shareholders.

Our core activity is to provide investment management services to an affluent private client base, although we very frequently act on behalf of charities, corporates and trusts. Over the past decade we have increasingly focused on a fully Discretionary fee paying service. Our Discretionary Managed client base now accounts for 43.7% of our clients' Funds under Management and Administration, up from 8.9% at the turn of the millennium. This trend can also be seen in the balance of our revenues which is now provided in the majority by fee-based income. To complement our investment management business we are refining the offering provided by various of our central investment management teams (Matterley funds, Pan Asset Management, the Collectives Portfolio service, IHT Portfolio service, Discretionary Fund management and the central Research Function) into an Asset Management division, which is a range of investment solutions emerging directly from our Investment Process. We are taking steps to improve and extend the scope of our Investment Process as a part of this exercise.

Alongside this, we also retain a strong commitment to providing a spectrum of services and regard our Advisory business and Execution-only services as an integral part of our Investment Management offering. Furthermore, we remain excited by the prospects for growth in the online self-directed market which Charles Stanley Direct services. We also believe the market place for Financial Planning services will develop considerably in the future and is one which fits naturally with our core competencies. Accordingly we are looking to develop further our Financial Planning offering as we can see this being both an increasingly integrated product but also as a source of new clients being introduced to the firm.

We believe we have a natural competitive advantage in these businesses which, when correctly leveraged, will offer a differentiated and superior service for our clients. By comparison, in the instance of Charles Stanley Securities and Charles Stanley Financial Solutions, although we have every confidence that both businesses are well positioned to serve their client bases, we have decided that they do not have the desired degree of commonality with our target market to justify continued ownership by the Group. Accordingly, we have announced our intention to dispose of these activities. The exchange of contracts with Panmure Gordon (UK) Limited for the sale of Charles Stanley Securities was announced to the market on the 17 June 2015. The sale process of Charles Stanley Financial Solutions is still ongoing.

We rely upon our team of over 300 investment managers and financial planners located in offices through the country to deliver our services and products to our clients. We believe that a close personal relationship between adviser and clients is essential to the development of our business and is consistent with the reputation for client satisfaction that we enjoy. Geographical decentralisation supports this. We also remain committed to a truly bespoke service in which investment professionals achieve superior risk assessed performance by really listening to, and understanding the needs and desires, of their clients.

We will continue to be investment-led and to regard a personal service as the heart of our offering. With this as our foundation we have taken considerable steps to respond to the changing needs of our customers and our regulators in delivering our investment solutions. This will inevitably lead to us developing a more targeted and differentiated investment management service. Over the last 18 months we have carried out a programme to understand the financial circumstances and investment objectives of our clients with a greater depth and rigour than ever before. Although this has involved an enormous commitment of our time and resources we believe that the quality of the portfolios that we will deliver as a result will strengthen the longevity of our client relationships over the medium to longer term. We are currently in the midst of a review and reorganisation of our investment process and the consequent tools that we are able to put at the disposal of our investment managers. This review will enhance the quality and extent of the general asset allocation guidance which is produced by the Group, and will be made available as a supporting framework from which our investment manager can design bespoke portfolios.

We are confident that the ingredients of the Charles Stanley business remain as attractive today as at any other point in our history, and that following the implementation of our Strategic Review we will be in an excellent position to drive greater value for all of our stakeholders.

OUR SERVICES

Investment Management

The core of our business is contained within our Investment Management Services division. This accounts for approximately 87.7% of the total assets. We manage and administer 81.2% of Group revenue. The services of our Investment Management division are provided by our investment managers via our network of regional branches and London Head Office.

Within our Investment Management division our flagship offering is Discretionary Investment Management. This is predominantly a fee-based service directed at Private Clients who wish to delegate the management of their investment portfolio to a recognised professional. Our investment managers create bespoke portfolios tailored to the individual objectives and personal risk tolerances of their clients. Our investment managers use their own investment expertise and experience, and a wealth of in-house research and tax efficient wrappers provided by the Group to manage client assets. We are currently upgrading our investment process with a view to providing our investment managers with an even stronger asset allocation framework to serve as the foundation for the bespoke portfolios they create.

Within our Discretionary Investment Management service we also offer our Collectives Portfolio Service and Pan Asset Management. Both are model-based services which provide clients a low cost method of gaining access to our investment process and expertise via exposure to collective investment vehicles as opposed to direct exposure to individual securities. These products are primarily aimed at clients with modest investible assets and for whom a fully bespoke portfolio is not cost effective. The model solutions are available to all of our investment managers and are also made selectively available to financial intermediaries via external investment platforms. We shall be making changes to the operation of our model-based services as part of the upgrading of our central investment proposition into an Asset Management division. We would expect this to be a considerable area of growth for the Group over time.

Within the Investment Management Services division we offer a full suite of Advisory, Dealing and Execution services. We provide Advisory Managed services to those clients who wish to have their investment portfolios managed by an investment professional but wish to retain the ultimate decision making power over individual investment decisions. We report the assets we manage within our Advisory Managed business together with the assets of our Discretionary Managed business and describe this as our Managed business.

We selectively offer an Advisory Dealing service to a number of individuals with a keen interest in and considerable experience of investment and markets. This remains an important part of our offering as it still accounts for £2.1 billion of our Funds under Management and Administration. Accordingly it is one which we will continue to offer to appropriate clients. Our Execution-only service provides a dealing, custody and administration service to clients who wish to make their investment decisions over all or part of their portfolio, and who accordingly require no advice. This service may be accessed via an Investment Manager, through a dedicated telephone-based dealing service or online via Charles Stanley Direct.

Across the Investment Management Service division we offer clients access to a variety of services and products which are designed to ensure the efficient administration of their portfolios both from a custodial and a tax perspective. We offer clients the opportunity to hold their investments with us via a Charles Stanley Nominee account or via CREST personal membership and offer clients a full cash management service. From a tax efficiency viewpoint, we also offer clients access to our in-house Individual Savings Accounts, Self-Invested Personal Pensions and Inheritance Tax Portfolio Service.

Charles Stanley Direct

Charles Stanley Direct has been developed in recent years to service the requirements of a growing customer base that wish to use an online platform to conduct aspects of their investment activities and are comfortable in making their decisions without access to advice. We believe that this group of clients will continue to grow. Since its launch in 2013, Charles Stanley Direct has attracted more than 20,000 accounts and now has well in excess of £1 billion of Assets under Administration.

Financial Planning

Our financial planners advise clients across the full spectrum of their needs with a particular expertise in the pensions, retirement and inheritance fields. The Financial Planning service is offered through our branch network and is delivered alongside an investment management service. We believe the financial planning market will continue to grow and is complementary to our core investment management activities. We will seek to roll out this service further and extend our team of Chartered Financial Planners accordingly.

OUR MARKETS

Charles Stanley operates solely within the UK's wealth management industry. This is a sizeable market place with over £737 billion¹ of assets being administered by UK based Wealth Management institutions. The table below sets out the total assets managed by Charles Stanley and those we consider to be its immediate peers.

¹The ComPeer Limited- The UK Wealth Management Industry Q12015.

²Figures based on latest audited accounts and other publicly available information. All are as at 31 March 2015, with the exception of Close Brothers AM which is as at 30 April 2015.

Despite its size the market remains highly fragmented with at least 180 firms in operation. The top 10 firms control only 31% of the market place.

We believe the industry will continue to undergo rapid change. For example we estimate that the number of individuals with between £50,000 and £5 million of investible assets will increase 18% by 2018. This is partly evidence of the pace of retirement of the baby boomer generation gathering speed. The UK has an increasing number of elderly, with a disproportionate amount of wealth concentrated in individuals over 65 years old. This group is faced with making provision for long years of retirement as life expectancies continue to increase. This will inevitably increase the demand for investment management and financial planning services.

There is no doubt that the recent changes that have been made to pensions legislation both in regard to auto-enrolment and in the removal of the requirement for annuity purchases will increase the pool of capital available to the wealth management industry. We anticipate that we will need to extend the provision of our services to a changing client base and that the industry will respond to these trends with an evolving product suite.

Our industry is also confronting the challenges posed by the increasing technological requirements of our natural client base. Our clients are increasingly comfortable in handling their financial affairs on mobile devices and are managing sizeable transactions via this medium. There is an increasing demand for up to the minute online access to investment portfolios and the ability to trade remotely. Although we have developed a number of innovative solutions to these changing requirements it remains an ongoing challenge to ensure that the technological capabilities can service these needs, and ensure that access and transactions are carried out with the requisite levels of security.

Furthermore, the regulatory environment in which we operate has been rapidly developing and we anticipate that this trend will continue. We, like many others in the industry, have been investing heavily to ensure that our processes and systems place us in a position to comply with the increased regulatory scrutiny in which we manage our clients' money. We believe that the investment we have made will lead us to be in a better position to service our clients' needs.

KEY PERFORMANCE INDICATORS

*A placing to raise £15.8 million was concluded in April 2015, which would increase the Group's capital adequacy ratio from 107% to 154%

REVIEW OF THE YEAR

Charles Stanley's performance

Whilst elements of Charles Stanley's financial performance for the year ended 31 March 2015 were encouraging, most notably the continued growth of our Funds under Management and Administration (FuMA), the growing proportion of Discretionary Managed funds, and the continued rapid growth of Charles Stanley Direct, other critical aspects of the Group's performance were disappointing, most obviously the deterioration of the operating margin owing to increased costs. These factors, together with a number of other charges, ultimately led to a reported pre-tax loss for the year of £6.1 million.

Funds under Management and Administration

Total Funds under Management and Administration at 31 March 2015 reached a new high of £21.3 billion, up 6.0% from £20.1 billion at 31 March 2014. Within this, Managed Funds increased 9.8% with Discretionary Funds up 13.4% to £9.3 billion and Advisory Managed Funds constant at £3.0 billion.

Administered Funds increased 1.1% and Advisory Dealing Funds declined to £2.1 billion. Nevertheless, we retain a strong commitment to providing an Advisory Dealing service as part of our full spectrum offering, although we see it becoming a more specialist service for individuals with a keen interest in and considerable experience of investments and markets, and thus priced accordingly. Execution-only funds grew 6.2% to £6.9 billion with particularly strong growth of 35.1% through our direct-to-client platform, Charles Stanley Direct.

Overview of financial performance

The Group's financial performance is shown below as split between its continuing activities and those of its businesses which are Held for sale (Charles Stanley Securities and Charles Stanley Financial Solutions). The table shows the underlying results along with the results on a statutory basis. The underlying performance includes adjustments widely used by our listed peer group and equity research analysts.

Group revenue

Group revenue from continuing activities increased by 4.9% to £141.0 million for 2015 from £134.4 million in 2014. Revenues of the Held for sale activities of Charles Stanley Securities and Charles Stanley Financial Solutions declined 40.4% largely as a result in a fall in corporate finance fees. As a consequence overall Group revenues were up 0.5% to £149.7 million from £149.0 million in the prior year.

Group underlying operating expenses

Group operating expenses from continuing activities increased 9.4% from £123.6 million in 2014 to £135.2 million in 2015. Approximately 74.0% of this increase was accounted for by headcount and associated remuneration increases, and 7.8% by establishment due to the Group taking an additional floor at its main London office. The expenses of the Held for sale activities declined 15.3% to £10.5 million largely due to a £3.7 million reduction in the variable remuneration paid to Charles Stanley Securities staff. Combined underlying operating expenses were £145.7 million (2014: £136.0 million).

Group underlying pre-tax profit margin

The Group's pre-tax profit margin for its core continuing operations fell from 8.4% for 2014 to 4.3% for 2015 and that of its Held for sale activities from 15.1% in 2014 to a negative margin of (20.7%) in 2015. In overall terms, the pre-tax profit margin fell from 9.1% to 2.8%. The main driver of this decline was the sharp increase in the cost base against relatively flat revenues. This level of profitability is unsustainable and the Board's highest single priority regarding financial performance is to restore the margin to at least 15% by no later than calendar year 2018.

Adjusting items

The Board considers the underlying profit before tax and earnings per share as a better reflection of business performance rather than looking at results on a statutory basis only. To calculate the underlying results we have excluded the items detailed below.

FSCS Levy (£1.3 million)

The Group incurred FSCS Levy charges of £1.6 million for the period. During the year the FSCS was successful in recovering some of its costs in relation to claims made in previous years. As a result the Group received a rebate of £0.3 million of its 2011 Levy.

Amortisation of client relationships (£1.8 million)

Payments made to new investment managers and third parties for introduction of customer relationships that are judged to be intangible assets are capitalised. We amortise these intangibles over the useful life of the client relationship, which has been assessed to be 10 years. We have excluded amortisation charges for the client relationships from the underlying profit as it is a significant non-cash item.

Branch acquisition costs (£0.3 million)

The Group was joined by a team of investment managers in Leicester in October 2013. This led to various one-off costs due to their being in a start-up phase. No further acquisition costs are expected in relation to this branch.

Impairment of assets (£8.3 million)

The Board has conducted a thorough review of the carrying value of the goodwill relating to a number of assets and has decided it would be appropriate to write down the goodwill associated with a number of activities as summarised below:

Full details on the basis of these impairment charges can be found in note 14.

Non-recurring professional costs (£0.1 million)

At the request of the Financial Conduct Authority (FCA), the Group engaged Ernst & Young to help review its processes for conducting client suitability assessments, make recommendations for their improvement, and subsequent validation testing to ensure changes made in line with these recommendations had been implemented and were working as intended. This process has now been concluded.

Reduction in deferred consideration (profit £0.3 million)

Last year as part of the acquisition of Pan Asset Capital Management Limited (PAN) an estimate based on the Funds under Management was made of the deferred consideration payable. The Funds under Management of PAN have since fallen and as a result the deferred consideration payable has decreased

Sale of Fund asset (profit £1.2 million)

In September 2014 the Group sold the Matterley Undervalued Asset Fund to Miton Group for an initial consideration of £0.75 million. Based on the current level of assets in the fund, further deferred consideration of £0.45 million will be payable in December 2015 and has therefore been recognised through the income statement in the current financial year.

Taxation

Even though the Group is reporting a loss before tax, its continuing operations have a small taxable profit, hence a small tax expense of £0.04 million in relation to the current financial year (2014: expense £1.4 million). A full reconciliation of the tax charge on continuing activities is provided in note 12 of the financial statements. A tax credit of £0.3 million arises on the losses attributable to the discontinued activities and this is shown separately in note 12.

Earnings/(loss) per share

The basic loss per share for the year ended 31 March 2015 was (13.46p) compared with earnings of 10.51p in 2014. On an underlying basis for continuing operations, earnings per share fell 47.4% to 13.14p (2014: 24.98p).

Dividends

In view of the Group's trading performance for the year and the need to strengthen the Group's capital reserves, the Board has proposed a final dividend of 2.00p. Taken together with the interim dividend of 3.00p, this will represent a total dividend for the year of 5.00p (2014: 12.25p).

Divisional review

The Group is currently comprised of four operating divisions as summarised below:

Charles Stanley Securities, and the employee benefits business, Charles Stanley Financial Solutions are both recognised as assets Held for sale.

The split of funds, revenue, underlying expenses and underlying operating profit/(loss) between the divisions, and also between continuing operations and Held for sale operations, is summarised in the following tables.

Fund analysis

Revenue analysis

Underlying cost analysis

The underlying costs of each division including direct and allocated costs, but excluding one-off adjusting items.

Where possible, administrative expenses are charged directly to the division to which they are attributable. However, a significant proportion of the Group's administrative expenditure is incurred by middle and back office functions. Examples of these include our Operations, Finance, Information Technology, Compliance, Risk, Internal Audit, Marketing, Professional and Facilities departments as well as the costs associated with being a publicly listed company. Historically the Group has allocated some but not all of these expenses to the four operating divisions. In order to understand better the profitability of each division, the Board has conducted a full cost allocation exercise. Accordingly, the total administrative expenses of £157.2 million attributed to the operating divisions include £57.9 million of centrally allocated costs.

In 2014 £26.5 million of central costs were allocated to divisions and £23.4 million remained unallocated. These costs totalling £49.9 million have now been fully allocated to provide prior year comparatives. It should be noted that elements of the allocation are judgemental and that in the event a business or division is sold, any fixed or semi-variable costs that have been allocated to them would need to be reallocated to other areas (as they would, for example, in relation to the costs associated with being a publicly listed company).

Underlying profit/(loss) analysis

The underlying profit/(loss) for each division after taking account of central cost allocations, is shown in the following table:

*Includes other income

Investment Management Services (IMS)

Our Investment Management Services division lies at the centre of our business, accounting for 87.7% of total funds and 81.2% of Group revenue.

The services this division provides are summarised below:

Investment Management income is generated from: 

· Investment Management fees, which are based on a percentage of the value of clients' funds;

· Administration fees based on a combination of percentage of funds and fixed fees;

· Commissions charged on transactions undertaken on behalf of clients; and

· Interest turn on cash balances.

Year-on-year changes in the key performance indicators for our Investment Management Services division are shown in the table below:

Funds under Management and Administration

FuMA is the main driver for the financial performance of the Investment Management Services division. Investment Management FuMA has increased by 5.1% from £17.7 billion at the beginning of the year to £18.6 billion at 31 March 2015. Managed Funds, comprising Discretionary Managed and Advisory Managed Funds, respectively changed by +14.1% and (1.1%), in part owing to a shift of Advisory Managed funds to the Discretionary service. This is expected to be a continuing pattern.

Fund flows during the past financial year were substantially driven by market movement rather than net inflow of new funds. This was disappointing but we believe it was substantially accounted for by our investment managers being heavily engaged in the client suitability repapering exercise which has been a very major undertaking. Whilst ensuring the suitability of our services for our clients and alignment of their investment portfolios to their requirements is an ongoing undertaking, the upgrade programme we have been undertaking draws to its conclusion at the end of June 2015. We are hopeful that with the conclusion of this exercise, our investment managers will be able to focus more time on marketing activity. We can expect that this, along with the Group bringing greater focus to its overall marketing strategy (one of its key initiatives), will lead to increasing levels of new business.

Financial performance

The financial performance of the IMS division is detailed in the table below:

IMS Revenues

The revenues of the IMS division comprise Investment Management fees, trading commission and interest turn. Revenue within IMS increased 3.7% to £121.6 million in 2015 from £117.3 million in the previous year. This can largely be attributed to the growth in Funds under Management over the period driven by market gains.

Income generated from Managed services is shown in the following table:

The very healthy growth of 23.0% in fees from £50.5 million to £62.1 million in our Managed business was partially offset by a decline in commission of 9.6% from £31.3 million at the end of last year to £28.3 million in the current year. This trend has been driven by our focus on encouraging more clients toward a fee-paying Discretionary service at the expense of charging lower commission or none at all. Commission revenues further declined as a result of lower dealing activity. In overall terms, the volume of commission-earning bargains declined 18.8% year on year. Finally, interest turn on aggregated client cash balances, where we share with clients the benefits of wholesale rates that we can achieve on large balances (typically in excess of £1 billion at any one time) versus what can be achieved on individual small retail deposits, declined 25.0% on the prior year to £2.4 million. In the near term it is likely that this aspect of our revenues will decline further as we remain in a low interest rate environment, and few banks wish to take these deposits because of the high level of regulatory capital they are required to set aside against client cash.

Whilst our overall revenues from Managed business increased in 2015, our revenue margin on Funds under Management declined from 89bps to 86bps. This is a key performance indicator and one we will be seeking to improve upon in coming years. Although superficially we believe it does not appear to be out of step with our competitors, we believe it is low relative to the average size of client portfolio we manage.

The revenue performance of the administered element of our Investment Management division's business is summarised in the table below. This comprises Advisory Dealing and Execution-only services. Total revenue fell 10.8% from £32.3 million in 2014 to £28.8 million in 2015. The drivers of this performance were similar to that of the Managed business, in this instance comprising higher fees and higher interest turn (because of higher average cash balances held by clients) offset by a marginal decrease in FuMA and commission income.

IMS costs

IMS's underlying costs increased 9.5% during the year from £101.6 million to £111.3 million and including adjusting items they increased 8.6%. The major contributory elements to this increase of £9.7 million were employment costs (£6.4 million), IT costs (£1.4 million) and establishment costs (£0.6 million).

By far the most significant cost the division incurs is employment costs (as is the case for the entire Group) which rose to 50.1% of revenues from 46.8% in the prior year. Improving productivity of our investment management teams is a key area of focus for the Board. This can be achieved by increasing the FuMA managed by each investment manager; increasing the revenues charged on those assets, optimising the ratio of front office to middle and back office staff by improving and standardising workflow processes, and by revising compensation structures.

IMS operating profit

IMS achieved an underlying operating profit of £10.4 million, a decline of 34.2% since the prior year. This decline was caused by its increased cost base. Its operating margin was 8.6% compared to 13.5% in 2014.

Financial Services

The Financial Services division currently comprises a number of different activities including:

The trading performance of the Financial Services division is set out in the table below, where continuing operations have been identified separately.

Total revenue for the Financial Services division grew by 11.9% from £13.5 million to £15.1 million. This includes a full year of revenue for Charles Stanley Pan Asset which was acquired in December 2013. Excluding assets Held for sale (Charles Stanley Financial Solutions), revenues grew 19.0% to £11.9 million (2014: £10.0 million). An analysis of revenue by business is given below.

Financial Services Division revenue

Financial Planning and Wealth Management

The Financial Planning and Wealth Management department has increased its gross revenue by 16.7% over the year from £4.8 million to £5.6 million. This is a satisfactory result despite trail commission being replaced by adviser charging and customer agreed remuneration. We have addressed the issues raised by the RDR and believe the business is well placed to face the challenges presented, such as the changes to pension scheme regulations.

Direct costs in the business increased by £1.1 million to £4.6 million (2014: £3.5 million), as a result of increased employment costs arising from the recruitment of a number of senior financial planners into the division to grow the business. Consequently, the operating contribution has decreased by 23.1%.

EBS Management PLC

During 2015 EBS continued to achieve strong growth of schemes under administration, up 31.0% since 2014. Whilst this is the leading indicator of the health of the business, its revenues and profits lagged for two key reasons. First, the majority of the scheme growth came from lower margin white-labelled SIPPs which have had a negative impact on our average revenue per scheme under administration. We improved the pricing on a number of our schemes toward the end of the financial year which will drive revenues more strongly in the future. Secondly, we have had to recruit a number of additional staff to deal with both the sheer volume of additional schemes and all the changes brought about by the Government's overhaul of pension scheme legislation and flexibility of drawdown. In the upcoming year, the Group intends to invest in new systems for EBS at an estimated cost of approximately £0.4 million. With over 10,000 SIPPs and SSASs already under administration and with continued strong growth in scheme numbers despite almost no direct sales or marketing effort, EBS has the scale to merit this systems spend. The Board believes this investment will significantly improve EBS's operating efficiency, scalability and control environment, thereby supporting its continued development with significantly improved operating margins.

Charles Stanley Pan Asset Capital Management

Charles Stanley Pan Asset (PAN) made a full year's contribution of revenue for the first time in 2015 of £1.3 million, having been acquired in December 2013. Planned cost savings have begun to be realised now that the team has been integrated with the rest of the Group's Investment Management operations.

A proportion of the consideration for PAN was paid in December 2014 and a further amount is payable in June 2015. The amount payable is contingent upon PAN's FuMA being above £500 million. As at 31 December 2014, the FuMA was £488 million which was below the required amount, therefore no deferred consideration was paid on that date. As at 31 March 2015, PAN's FuMA was £512 million, upon which we anticipate £40,000 will be payable in June 2015. We will continue to monitor the FuMA up to the due date in June 2015.

Matterley

Matterley manages a range of open ended investment funds, predominantly targeted internally either toward smaller clients to provide them with proper asset diversification in a cost efficient fashion or to meet specific needs (for example the UK & International Growth Fund which is managed by our successful Court of Protection team).

During the year the Matterley Undervalued Assets Fund was sold to Miton Group for an initial consideration of £0.75 million and a deferred payment based on the Assets under Management (AuM) of the Fund. As at 31 March 2015, we have recognised a deferred payment of £0.45 million based on its AuM at that date.

Excluding the Undervalued Assets Fund, the Matterley funds have seen growth of 19.6% since the previous year, with notable growth in the UK & International Growth fund.

Since the year-end, we have launched the Matterley Bond Opportunities Fund. This Fund, co-run by Peter Geikie-Cobb and Jeremy Palliser, aims to achieve a total return of 5-6%, combining both income and capital growth along with downside protection strategies. The Fund will invest predominantly in highly liquid investments and is an Absolute Return Bond Fund.

Charles Stanley Financial Solutions Limited

Charles Stanley Financial Solutions' revenues declined marginally during the year from £3.5 million in 2014 to £3.2 million in 2015.

Although we have every confidence that the business is well positioned to serve its client base, it faces potential headwinds in relation to the capping of pension charges and removal of pensions commissions from April 2016. We have decided that the company does not have the desired degree of commonality with our core Investment Management and Financial Planning services, so consequently it is now Held for sale.

Charles Stanley Direct

Charles Stanley Direct currently generates revenue from the following:

· Direct to client (D2C) platform;

· Manage Fidelity's share-trading contract; and

· Garrison business.

Charles Stanley Direct is our full service Direct-to-client digital investment platform. It has been well received by the market since its launch in March 2013, and most recently won the Leading Innovator in Consumer Platforms award at the Aberdeen UK Platform Awards 2014. Since January 2015, the management structure has been overhauled and costs in the business have been closely reviewed. The period of high start-up costs has now passed and the operational gearing has been improved significantly.

Charles Stanley Direct's financial performance for the year ended 31 March 2015 is shown below:

Revenues in the business have increased by 37.1% with some 7,141 new accounts opened in the year, taking the total to 20,595. Average client size is steadily improving at £63,000 per client. Underlying direct operating costs have increased year on year from £2.8 million in 2014 to £4.7 million; however, allocated costs have decreased by 28.6%. After allocated costs, the division reported an underlying operating loss of £1.9 million (2014: £2.1 million). The total Assets under Administration stood at £1.6 billion as at 31 March 2015 (2014: £1.4 billion).

Costs in the business have been significantly addressed in 2015 and stabilised and the website has been reworked in closer alignment with the Charles Stanley Group with new brochureware offering a cleaner message to new clients. The service is already seeing greater interaction and improved client journeys to registration as a result. New client acquisition is served by a digital marketing strategy encompassing paid search, display advertising, re-targeting and social media advertising as well as by internal broker and Garrison transfers.

The service desk in Edinburgh and the investment helpdesk in Beverley continue to handle significant numbers of client calls on a monthly basis, as well as handling a large amount of the administration functions for the service. Digital efficiencies continue to be sought in the service centre processes and this efficiency drive will continue in the upcoming financial year. The progress that has been made to date has been pleasing.

The Board has conducted a thorough review of the carrying value of the goodwill relating to Charles Stanley Direct and in particular its Garrison Investment Analysis business. It has been decided that an appropriate write down of goodwill associated with Charles Stanley Direct is £3.0 million leaving a residual value of £5.2 million.

Charles Stanley Securities

Charles Stanley Securities provides advisory, broking and corporate finance services for the smaller and mid-cap sector. It has experienced a decrease in revenue of 44.2% from £14.7 million in 2014 to £8.2 million in the current financial year primarily as a result of reduced corporate finance fees as well as lower secondary commissions in equity and bond trading. Although its costs have fallen as variable remuneration paid to staff has been reduced significantly, the decline in revenues has led to the division declaring a loss for the year of £1.7 million (2014: profit £1.1 million).

As part of its strategic review of the Group, the Board concluded that Charles Stanley Securities was not a part of the core activities of the Group. In June the Group announced contracts had been exchanged with Panmure Gordon (UK) Limited for the sale of the division excluding the Equities Trading business. For this reason the division is treated as a discontinued activity and included as an asset Held for sale in our accounts for the year ended 31 March 2015.

FINANCIAL POSITION

Charles Stanley & Co. Limited (CSC) is an IFPRU 125K Limited Licence firm regulated by the Financial Conduct Authority (FCA), and the consolidated regulatory capital position is shown as though the Group was subject to the same regime. At 31 March 2015, the Group had regulatory capital resources of £37.7 million as shown in the table below:

*Prudential deductions include all intangible assets and certain deferred tax assets.

The Group monitors a range of capital and liquidity statistics on a daily, weekly or monthly basis. The Group's internal risk appetite is to maintain capital levels of at least 125% of the regulatory capital requirement. Capital levels fell below this internal target level during the year to 31 March 2015, arising from adverse trading results and movements in the defined benefit pension scheme. The Group's capital position was strengthened following the capital-raising in April 2015, and the Group continues to monitor capital levels carefully. The Group maintained a surplus of regulatory capital at all times during the year.

As required under FCA rules, the Group maintains an Internal Capital Adequacy Assessment Process (ICAAP), which includes performing a range of stress tests to determine the appropriate level of regulatory capital and liquidity that the Group needs to hold. The last review conducted and signed off by the Board was in April 2015. The ICAAP process includes the performance of a number of stress tests to determine the appropriate levels of regulatory capital and liquidity that the Group needs to hold. Capital forecasts are performed monthly and take into account expected dividends and intangible asset acquisitions and disposals as well as expected trading results.

The Group's Pillar III disclosures are published annually on our website (www.charles-stanley.co.uk/ investor-relations/pillar-3-disclosure) and provide further details about regulatory capital resources and requirements.

Intangible assets

Intangible assets arise principally from acquired Funds under Management and are categorised as client relationships. Goodwill arises on consolidation. At 31 March 2015, the total carrying value of intangible assets was £29.1 million (2014: £35.3 million). This figure includes £3.0 million disclosed as Held for sale assets. During the year £1.6 million in customer relationships and £2.6 million of internally generated software were capitalised. No goodwill was acquired during the year or in 2014.

Client relationship intangibles are amortised over the estimated useful life of the client relationship - 10 years.

Goodwill arising from business combinations is not amortised, but is subject to an annual impairment test. Following this review impairment charges have been allocated against goodwill, including £1.5 million in respect of the Durlacher business, £0.3 million in respect of Pan Asset, £2.0 million in respect of Charles Stanley Financial Solutions and the Plymouth employee benefits business, and £3.0 million in respect of Charles Stanley Direct.

Further details on the Group's intangibles are provided in note 14.

Capital expenditure

During the year the Group has continued to invest in its infrastructure, principally through the enhancement of ICT infrastructure through purchase of enhanced mainframe systems (£1.6 million) and the refurbishment of our offices (£0.9 million). Improving the systems continues to be a focus of the Group, whether through improving existing systems or investing in new ones.

Further details on the Group's capital expenditure are provided in note 17 of the Annual Report and Accounts 2015.

Defined benefit pension scheme

The Group operates one defined benefit pension scheme, which has been closed to new members for several years. Each year actuarial valuations are carried out based on the position at 31 March 2015.

The fall in discount rates used to value the scheme's liabilities has outweighed growth in asset prices during the year. As a result the scheme deficit increased to £13.1 million at 31 March 2015 (2014: £6.9 million).

The Group has established a working party to examine the extent that pension risk can be mitigated, and expects to take positive steps in this regard during the current financial year.

Further details on the Group's defined benefit pension scheme and the assumptions underpinning the valuation are provided in note 9.

Cash at bank

Risk targets have been set to help the Group monitor the bank balances (see risks and uncertainties below).

The Group experienced downward pressure on its cash balances during the year, arising from the adverse trading results noted above. Bank balances are monitored daily and forecast to ensure they do not fall below £25 million. Cash balances were £28.5 million at 31 March 2015 and strengthened post year-end following the capital raising referred to above.

The Group regularly reviews the counterparties with whom it holds both client and its own monies and determines that all operations are in accordance with the policy set by the Treasury Committee.

RISKS AND UNCERTAINTIES

A Board Risk Committee comprising two independent Non-executive Directors was formed. In addition a Chief Risk Officer was appointed reporting to the Risk Committee and the Chief Executive Officer.

The Board has developed and approved a Risk Appetite Statement (RAS). The RAS is a core component to the Group's risk management framework and was developed taking into consideration the Group's strategic objectives, strategy and business plans. This new level of RAS articulation is driving the implementation of more robust risk monitoring and risk reporting process, which continue to evolve. As the Group implements these processes, the Board will periodically review the RAS to ensure that it continues to reflect the risk appetite of the Group.

The RAS sets out the Group's tolerance to various types of risk and includes both quantitative and qualitative measures against which management and Board monitor risk on a periodic basis.

Set out on the next four pages are the key risks relevant to the Group's long term performance.

FUTURE DEVELOPMENTS

Charles Stanley has an enviable track record in relation to the quality and breadth of its private client wealth management services, its commitment to innovation and the scale of its operations. However, as the financial results for the past financial year show, its strategy and business model has failed to keep pace profitably with the challenges the external environment has posed in the form of increased competition, greater complexity in achieving clients' financial requirements and increased regulation.

Although the basic steps to return the Group to a sustainable level of profitability are not complex (focus on core strengths, eliminate loss making activities, increase revenues and control costs) - the timescale for enacting them is likely to be a number of years because both client and staff relationships have to be managed sensitively. Moving too quickly on certain aspects will raise just as many risks as moving too slowly.

Having made changes to the management team, strengthened our balance sheet and defined our strategy, our focus over the next twelve months will be on execution. In particular we will:

§ Review our pricing architecture in conjunction with our service levels;

§ Review our compensation and incentivisation arrangements to ensure alignment of interests between client outcomes, shareholder returns and staff engagement;

§ Work to improve the co-ordination of the range of our activities, both front and back office, to improve client service and drive operating efficiencies; and

§ Dispose of our non-core activities, Charles Stanley Securities and Charles Stanley Financial Solutions.

Approval

This report in its entirety has been approved by the Board of Directors and signed on its behalf by:

Paul Abberley Ben Money-Coutts

Chief Executive Officer Chief Financial Officer

18 June 2015

CONDENSED CONSOLIDATED INCOME STATEMENT

YEAR ENDED 31 MARCH 2015

CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

YEAR ENDED 31 MARCH 2015

CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL POSITION

YEAR ENDED 31 MARCH 2015

Approved by the Board on 18 June 2015 Company registration number 48796 (England and Wales)

Paul Abberley Ben Money-Coutts Directors

CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

YEAR ENDED 31 MARCH 2015

CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

YEAR ENDED 31 MARCH 2015

CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS

YEAR ENDED 31 MARCH 2015

The Group has elected to present a Consolidated Statement of Cash Flows that analyses all cash flows in total, i.e. including both continuing and discontinued operation; amounts relating to discontinued operations are disclosed in Note 13.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

YEAR ENDED 31 MARCH 2015

1 REPORTING ENTITY

Charles Stanley Group PLC (the Company) is the parent Company of a group of companies (the Group) which provides a range of investment and financial services within the United Kingdom.

The Company is a public limited company which is listed on the London Stock Exchange and is incorporated and domiciled in the United Kingdom. The address of its registered office is 25 Luke Street, London EC2A 4AR.

The consolidated financial statements were authorised for issue by the Board on 18 June 2015.

2 BASIS OF ACCOUNTING

The financial information set out in these financial statements does not constitute the Company's statutory accounts for the years ended 31 March 2015 or 2014. Statutory accounts for 2014 have been delivered to the Registrar of Companies, and those for 2015 will be delivered in due course. The auditor has reported on those accounts; their reports were (i) unqualified, (ii) did not include a reference to any matters to which the auditor 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.

The results have been prepared on a basis consistent with the accounting policies set out in the statutory financial statements for the year ended 31 March 2015 except as explained below. The condensed financial information as set out in this report is unaudited and does not comprise statutory accounts for the purposes of the Companies Act 2006.

The comparative figures for the year ended 31 March 2014 have been taken from, but do not constitute, the Group's statutory financial statements for that financial year. Those financial statements have been reported on by the Group's auditors and delivered to the Registrar of Companies. The report was unqualified. Certain comparative figures have been amended to conform to current period presentation.

The Directors are satisfied that the Group has sufficient resources to continue in operation for the foreseeable future, a period of not less than 12 months from the date of this report. Accordingly they continue to adopt the going concern basis in presenting and preparing the financial statements.

3 CHANGES IN ACCOUNTING POLICIES

Except for the changes below, the Group has consistently followed the same accounting policies, presentation and methods of computation in these consolidated financial statements as applied in the Group's consolidated financial statements for the year ended 31 March 2014.

The Group has adopted the following new standards and amendments to standards, including any consequential amendments to other standards, with a date of initial application of 1 April 2014.

a) IFRS 10 Consolidated Financial Statements

As a result of IFRS 10, the Group has changed its accounting policy for determining whether it has control over and consequently whether it consolidates its investees. IFRS 10 introduces a new control model that focuses on whether the Group has power over an investee, exposure or rights to variable returns from its involvement with the investee and ability to use its power to affect those returns. Adoption of IFRS 10 did not change the Group's determination of control over any of its subsidiaries.

b) IFRS 11 Joint Arrangements

As a result of IFRS 11, the Group has changed its accounting policy for its interests in joint arrangements. Adoption of IFRS 11 has not impacted the Group financial statements as the Group does not have interests in joint arrangements.

c) IFRS 12 Disclosures of Interests in Other Entities

The Group has adopted the amendments of IFRS 12 relating to the disclosure of interests in subsidiaries, joint arrangements, associates and unconsolidated structured entities. As a result, the Group has included disclosures of its holdings in unconsolidated structured entities (see note 26 in the Annual Report and Accounts 2015).

d) Recoverable Amount Disclosures for Non-Financial Assets (Amendments to IAS 36) (2013)

The Group has adopted the amendments to IAS 36 (2013). As a result, the Group has expanded its disclosures of recoverable amounts when they are based on fair values less costs of disposals and an impairment is recognised. Refer to note 14 for further details.

e) Discontinued operations

A discontinued operation is a component of the Group's business, the operations and cash flows of which can be clearly distinguished from the rest of the Group and which:

· represents a separate major line of business or geographic area of operations;

· is part of a single co-ordinated plan to dispose of a separate major line of business or geographic area of operations; or

· is a subsidiary acquired exclusively with a view to re-sale.

Classification as a discontinued operation occurs at the earlier of disposal or when the operation meets the criteria to be classified as Held for sale.

When an operation is classified as a discontinued operation, the comparative statement of profit or loss and OCI is re-presented as if the opinion had been discontinued from the start of the comparative year.

4 USE OF JUDGEMENTS AND ESTIMATES

In preparing these consolidated financial statements, and the Parent Company financial statements, management has made judgements, estimates and assumptions that affect the application of the Group's accounting policies and the reported amounts of assets, liabilities, income and expenses. Actual results may differ from these estimates.

Estimates and judgements are reviewed on an ongoing basis taking account of historical experience and future expectations.

4.1 Intangible assets and goodwill (note 14)

For the purposes of impairment testing, the Company and the Group value goodwill and client relationships based on the valuation of individual units making up the relevant intangible asset in accordance with the accounting policy set out in note 36 in the Annual Report and Accounts 2015. These fair value calculations require the use of assumptions which are set out in more detail in note 14.

During the period the Group assessed the recoverable amount of the Durlacher business and the Charles Stanley Financial Solutions business. As a result impairment charges of £1.5 million and £0.9 million respectively were recognised.

The Plymouth employee benefits (EB) business has not been included as part of the sale of Charles Stanley Financial Solutions. The Group assessed the recoverable amount of the Plymouth EB business. As a result an impairment charge of £1.1 million has been recognised.

The recoverable amount of the Charles Stanley Direct goodwill was assessed based on the projected revenue and profitability. Two of the three different revenue streams are forecast to decline over the next 2-3 years, while the third stream (Direct-to-client) is forecast to continue to grow Assets under Administration and client accounts. The carrying amount of the Charles Stanley Direct goodwill was determined to be higher than the recoverable amount and an impairment charge of £3.0 million has been recognised.

The impairment charges were allocated fully to goodwill and are included in administrative expenses in the consolidated income statement. For further details on these impairments refer to note 14.

The Group also performed a review of the deferred consideration payable on the acquisition of Pan Asset Capital Management. As a result the deferred consideration payable has been reduced by £0.3 million and an impairment charge has been recognised to reduce the Pan Asset Capital Management intangible asset.

It was concluded that no other impairments to the carrying value of goodwill or intangible assets are required.