1st Dec 2008 07:00
ABERDEEN ASSET MANAGEMENT PLC
FINAL RESULTS FOR YEAR TO 30 SEPTEMBER 2008
Aberdeen Asset Management has today announced its final results for the year to 30 September 2008 (unaudited).
Highlights
Assets under management increased to £111.1 billion (2007: £95.3 billion)
Clean profit before tax £95.1 million (2007: £94.3 million)
Final dividend of 3.0p per share, 5.8p for the full year
New business wins of £21.8 billion funded in the year, plus £1.9 billion awarded but not funded at year end
Promising demand across diverse asset classes
FINANCIAL HIGHLIGHTS
|
2008 |
2007 |
|
|
Revenue |
£430.1m |
£347.8m |
|
Pre-tax profit |
||
|
Before exceptional items and amortisation of intangibles |
£95.1m |
£94.3m |
|
After exceptional items and amortisation of intangibles |
£60.5m |
£23.7m |
|
Diluted earnings per share |
||
|
Before exceptional items and amortisation of intangibles |
9.01p |
11.09p |
|
After exceptional items and amortisation of intangibles |
4.52p |
3.50p |
|
Total dividend per share |
5.8p |
5.5p |
|
Gross new business - funded |
£21.8bn |
£22.8bn |
|
Net new business - funded |
£1.0bn |
£8.7bn |
|
- awarded but not funded at year end |
£1.9bn |
£3.1bn |
|
Assets under management at the year-end |
£111.1bn |
£95.3bn |
Martin Gilbert, Chief Executive of Aberdeen Asset Management commented:
"We are very pleased to report that Aberdeen continued to grow during the past year despite the unprecedented market difficulty. Conditions in the asset management industry are tough and will remain so for some time.
We believe that our Group is better placed than ever to confront these challenges. Our diverse asset and client base, our performance and our transparent investment processes all give me great confidence in the future. We will continue to manage the business tightly, but we also remain keen to take advantage of relevant growth opportunities that may emerge during this turbulent period."
For more information:
Aberdeen Asset Management
Martin Gilbert Chief Executive + 44 (0) 207 463 6000
Bill Rattray Finance Director + 44 (0) 207 463 6000
Maitland
Neil Bennett/ Charlotte Walsh + 44 (0) 207 379 5151
Chairman's statement 2008 marked Aberdeen's twenty-fifth year as an independent asset management group; it has also been a year of unprecedented uncertainty in financial markets and volatility in the asset classes that we manage. Nonetheless, I am pleased to report that the Group has shown considerable resilience. It has continued to achieve success both organically, through new business flows, and strategically, through several acquisitions, thus diversifying and strengthening the Group's distribution as well as its investment capabilities.
The Group continued to attract healthy levels of new business, particularly from Continental Europe, with gross inflows running at similar levels to last year. However, to a large extent these wins have been offset by higher redemptions because of increased risk aversion. Nevertheless, gross new business for 2008 of £21.8 billion, with a further £1.9 billion of mandates awarded but not funded at the year end, are testament to our product strength. After deducting redemptions of £20.8 billion, net new business for the year totalled £1.0 billion, a respectable balance in the circumstances. Margins overall however remain under pressure in volatile conditions and our previously reported cost reduction programme continues in light of the difficult market environment.
Financials
Revenue has increased by 24% to £430.1 million. This increase has been spread over the investment management and property divisions, with the benefit of new revenues from acquisitions outweighing the adverse effects of the generally lower market levels.
Operating costs have increased by 32%, largely as a result of businesses acquired during the year. However, as reported in the Interim Management Statement in July 2008, we have implemented a programme to reduce annual operating costs by approximately £57 million which, after factoring in the consequent income reduction, will deliver a net annualised benefit of approximately £40 million. Some £3 million of this net benefit is reflected in the second half of the reported year, with the balance of the savings to come through in 2008/09. Restructuring costs of £10.3 million associated with these savings have been incurred in the year to 30 September 2008. Additionally, we are now implementing further annualised cost savings of approximately £20 million, which we expect to be fully implemented by September 2009.
Overall, the Group's operating profit is slightly ahead of last year at £100.0 million, although the operating margin is somewhat lower this year at 23.3%. We will continue to manage the cost base to ensure that the Group is positioned to benefit from an eventual improvement in market conditions.
The balance sheet remains healthy, with approximately £137 million of net debt supported by £743 million of equity. Whilst we chose to finance two of the three acquisitions completed during the year from borrowings, new equity was issued to fund the acquisition of Goodman Property Investors, thus maintaining the Group's gearing at a comfortable level of 18%.
Results and dividendThe Group's underlying profit, which we define as profit before taxation, exceptional items and amortisation of intangible assets, was £95.1 million compared to £94.3 million in 2007. This represents underlying earnings per share, on a diluted basis, of 9.0p, a decrease of 19 % on last year. After accounting for exceptional items and amortisation, we report a pre-tax profit of £60.5 million, compared to £23.7 million in 2007.
The Board is recommending a final dividend of 3.0p per share, making a total payment for the year of 5.8p per share, an increase of 5.5% on the total payment for 2007.
Corporate activity
After the year end, the Group announced a business and capital alliance with Mitsubishi UFJ Trust and Banking Corporation ("MUTB"), under which MUTB will promote selected Aberdeen products to the Japanese institutional market. MUTB has also purchased approximately 10% of Aberdeen's issued share capital, with the right to purchase further shares in the market up to a maximum holding of 19.9%.
In October 2007, we purchased a US fund management business from Nationwide Financial Services adding approximately US$7 billion (£3.5 billion) of assets under management ("AuM"), principally in sub-advisory mandates. This acquisition not only broadened and strengthened our US equity capability but will increase Aberdeen's distribution resources and presence in the US mutual fund market. We intend to build our US mutual fund activities from this platform.
Two further acquisitions have added to our property division: DEGI, the German-based property asset manager, and Goodman Property Investors ("GPI"), which brings a UK capability to complement our European operations. As well as broadening Aberdeen's client base, bringing £5.8 billion of additional AuM, the DEGI transaction also further strengthened our distribution base and profile in Germany. In May 2008, the GPI deal added further AuM of £7.0 billion. Our property division is now the second largest property fund manager in the UK and a top ten global property manager, with AuM of £25.4 billion at the year end.
Overall, these transactions added £16.3 billion to AuM and total AuM at the year end increased by 17% to £111.1 billion (2007: £95.3 billion).
The operating environment
Without doubt, we are now operating in an environment that is challenging all asset management firms in a number of ways. At the most fundamental level, fee income is under pressure, as assets fall and margin pressures increase. The management team has addressed this through a cost reduction programme I have described above.
We have seen extraordinary declines in asset prices over the past twelve months. Unfortunately, whatever action is undertaken by governments and central banks, markets are likely to remain difficult in the shorter term even if a measure of confidence does return. Traditional managers with transparent processes and business models at least can offer products that can be understood; as independent asset managers we can provide these services without conflicts of interest or balance sheet risk.
Our investment philosophy is to identify fundamentals that will drive asset prices over the long term. Our global equities team have continued to deliver performance well ahead of benchmark over both the short and long term. Our fixed income teams have experienced unprecedented market conditions because of the global credit crunch. Whilst the credit teams managed to avoid the perils of the CDO market, the magnitude of deleveraging and illiquidity in many areas of the market have led to even high quality securities moving to extreme valuations. The impact of this has hurt our US credit performance, and to a lesser extent our other credit teams globally. Property as an asset class has also suffered during this turbulent period. We are fortunate that most clients by value are institutional investors that have long-term time horizons and have invested in funds with lengthy lock-in periods.
New business
The Group continued to attract new business from a broad range of investment disciplines and the office network afforded by our property division is now also helping to contribute across a number of key European countries outside the UK. Whilst our operations in the Netherlands, Germany and the Nordic regions have again been successful in gaining new local clients, we are further encouraged by the breadth of our newer client base in other domiciles worldwide, with new asset flows of note from the Middle East, Canada and Korea. Gross inflows were sourced from Continental Europe (33%), the UK (18%), the United States and Canada (20%), Asia Pacific (14%) and the Middle East and Africa (15%). The composition of new business flows is summarised in the following table.
|
|
Funded
£m
|
Yet to fund
£m
|
Total
£m
|
|
Fixed income:
|
|
|
|
|
Gross inflows
|
8,515
|
629
|
9,144
|
|
Outflows
|
(9,955)
|
-
|
(9,955)
|
|
Net flow
|
(1,440)
|
629
|
(811)
|
|
Equities:
|
|
|
|
|
Gross inflows
|
9,459
|
507
|
9,966
|
|
Outflows
|
(8,399)
|
-
|
(8,399)
|
|
Net flow
|
1,060
|
507
|
1,567
|
|
Property:
|
|
|
|
|
Gross inflows
|
3,293
|
724
|
4,017
|
|
Outflows
|
(1,648)
|
-
|
(1,648)
|
|
Net flow
|
1,645
|
724
|
2,369
|
|
Multi asset:
|
|
|
|
|
Gross inflows
|
487
|
50
|
537
|
|
Outflows
|
(765)
|
-
|
(765)
|
|
Net flow
|
(278)
|
50
|
(228)
|
|
Group total:
|
|
|
|
|
Gross inflows
|
21,754
|
1,910
|
23,664
|
|
Outflows
|
(20,767)
|
-
|
(20,767)
|
|
Net flow
|
987
|
1,910
|
2,897
|
Outlook The first two months of our new financial year have seen the turmoil in global markets deepen. However, we enter it with a stable balance sheet, a strong range of core products and a well diversified global client base. Our priorities are to make sustainable cost reductions, achieve synergies from new business and identify avenues to further profitable growth, such as our recent partnership with Mitsubishi. The turmoil in our industry and world financial markets will create numerous opportunities for growth as well as obstacles and we remain alert to both. Finally, we are aware of the importance of our people, and the Board recognises the commitment and professionalism of our staff in what have been, and remain, extremely challenging times.
I will be retiring from the Board at the forthcoming AGM after nine years as chairman and I am delighted that Roger Cornick, who joined the board in 2004, has agreed to succeed me as chairman. These last nine years have been an exhilarating period of growth for Aberdeen and, although we are currently experiencing unprecedented economic conditions, I firmly believe that we have the platform in place to grow the business in the years ahead and become an even more significant player in the global asset management industry. None of this would have been possible without the continual hard work and commitment of all of our staff, for which I am deeply grateful and I would also like to thank my colleagues on the board for their contribution and support during my term as Chairman.
Charles Irby Chairman
|
Group Income Statement |
|||
|
For the year ended 30 September 2008 |
|
|
|
|
2008 |
2007 |
||
|
|
Notes |
£'000 |
£'000 |
|
Revenue |
2 |
430,086 |
347,843
|
|
Operating costs |
(330,794) |
(251,299) |
|
|
Exceptional costs |
4 |
(25,002) |
(20,301) |
|
Amortisation of intangible assets |
(13,785) |
(9,404) |
|
|
Exceptional settlement costs |
5 |
- |
(46,776) |
|
Operating expenses |
(369,581) |
(327,780) |
|
|
Exceptional gains |
6 |
4,129 |
8,667 |
|
Net gains on investments and other income |
6 |
724 |
3,440 |
|
Other operating income |
6 |
4,853 |
12,107 |
|
Operating profit before: |
100,016 |
99,984 |
|
|
Exceptional gains and charges |
(20,873) |
(58,410) |
|
|
Amortisation of intangible assets |
(13,785) |
(9,404) |
|
|
Operating profit |
65,358 |
32,170 |
|
|
Finance revenue |
5,697 |
5,580 |
|
|
Finance costs |
(10,598) |
(11,299) |
|
|
Exceptional finance costs |
- |
(2,778) |
|
|
Net finance costs |
8 |
(4,901) |
(8,497) |
|
Profit before exceptional items, amortisation and taxation |
95,115 |
94,265 |
|
|
Exceptional items and amortisation before taxation |
(34,658) |
(70,592) |
|
|
Profit before taxation |
60,457 |
23,673 |
|
|
Tax expense before exceptional items and amortisation |
(16,491) |
(11,387) |
|
|
Tax on exceptional items and amortisation |
2,881 |
18,357 |
|
|
Tax (expense) credit |
9 |
(13,610) |
6,970 |
|
Profit after taxation before exceptional items and amortisation |
78,624 |
82,878 |
|
|
Exceptional items and amortisation after taxation |
(31,777) |
(52,235) |
|
|
Profit for the year |
|
46,847 |
30,643 |
|
Attributable to equity holders of the parent: |
|||
|
Ordinary shareholders |
35,216 |
26,957 |
|
|
Other equity holders |
11,631 |
3,686 |
|
|
Earnings per share |
|||
|
Basic |
11 |
4.57p |
3.61p |
|
Diluted |
11 |
4.52p |
3.50p |
|
All items dealt with in arriving at the profits stated above relate to continuing operations |
|||
|
Group Statement of Recognised Income and Expense |
|||
|
For the year ended 30 September 2008 |
|||
|
|
|
|
|
|
|
2008 |
2007 |
|
|
|
|
£'000 |
£'000 |
|
Net actuarial gain on defined benefit pension schemes |
7,223 |
10,527 |
|
|
Translation of foreign currency net investments |
(1,425) |
1,823 |
|
|
Movement in fair value of available for sale investments |
(4,992) |
(4,054) |
|
|
Tax on items taken directly to equity |
|
(1,269) |
(5,772) |
|
Net (expense) income recognised directly in equity |
(463) |
2,524 |
|
|
Profit for the financial period |
|
46,847 |
30,643 |
|
Total recognised income and expense for the year |
|
46,384 |
33,167 |
|
Attributable to equity holders of the parent: |
|||
|
Ordinary shareholders |
34,753 |
29,481 |
|
|
Other equity holders |
11,631 |
3,686 |
|
|
Group Balance Sheet |
|||
|
As at 30 September 2008 |
|||
|
2008 |
2007 |
||
|
|
Notes |
£'000 |
£'000 |
|
Assets |
|||
|
Non-current assets |
|||
|
Intangible assets |
12 |
828,461 |
619,687 |
|
Property, plant and equipment |
|
15,661 |
13,833 |
|
Other investments |
13 |
50,335 |
34,898 |
|
Pension surplus |
21 |
5,481 |
- |
|
Deferred tax assets |
|
24,109 |
21,155 |
|
Trade and other receivables |
|
8,898 |
4,485 |
|
Total non-current assets |
|
932,945 |
694,058 |
|
Current assets |
|||
|
Stock of units and shares |
14 |
268 |
537 |
|
Financial investments |
16 |
1,131,060 |
1,298,402 |
|
Trade and other receivables |
|
191,558 |
178,173 |
|
Other investments |
13 |
15,441 |
23,508 |
|
Cash and cash equivalents |
|
82,161 |
80,680 |
|
Assets classified as held for sale |
13 |
17,596 |
- |
|
Total current assets |
|
1,438,084 |
1,581,300 |
|
Total assets |
|
2,371,029 |
2,275,358 |
|
Equity |
|||
|
Called up share capital |
|
79,691 |
70,888 |
|
Share premium account |
|
396,010 |
287,565 |
|
Other reserves |
|
216,876 |
222,283 |
|
Retained loss |
|
(147,216) |
(158,636) |
|
Total equity attributable to ordinary equity holders of the parent |
17 |
545,361 |
422,100 |
|
Attributable to other equity holders - perpetual capital securities |
197,942 |
197,814 |
|
|
Total equity |
743,303 |
619,914 |
|
|
Liabilities |
|||
|
Non-current liabilities |
|||
|
Interest bearing loans and borrowings |
18 |
172,340 |
85,334 |
|
Other creditors |
11,970 |
1,548 |
|
|
Provisions |
|
- |
500 |
|
Pension deficit |
21 |
17,376 |
18,269 |
|
Deferred tax liabilities |
|
60,930 |
30,108 |
|
Total non-current liabilities |
|
262,616 |
135,759 |
|
Current liabilities |
|||
|
Investment contract liabilities |
16 |
1,131,060 |
1,298,402 |
|
Interest bearing loans and borrowings |
18 |
46,529 |
48,320 |
|
Trade and other payables |
|
169,269 |
156,123 |
|
Provisions |
20 |
2,000 |
- |
|
Deferred income |
1,588 |
2,276 |
|
|
Current tax payable |
14,664 |
14,564 |
|
|
Total current liabilities |
1,365,110 |
1,519,685 |
|
|
Total liabilities |
1,627,726 |
1,655,444 |
|
|
|
|||
|
Total equity and liabilities |
|
2,371,029 |
2,275,358 |
|
Cash Flow Statement |
|||
|
For the year ended 30 September 2008 |
|||
|
2008 |
2007 |
||
|
|
Notes |
£'000 |
£'000 |
|
Core cashflow from operating activities |
82,174 |
33,423 |
|
|
Effects of short-term timing differences on unit trust settlements |
|
(3,314) |
3,728 |
|
78,860 |
37,151 |
||
|
Exceptional settlement costs paid |
- |
(46,776) |
|
|
Other exceptional costs paid |
(14,358) |
(20,301) |
|
|
Net cash generated from (used in) operating activities |
7 |
64,502 |
(29,926) |
|
Cash flows from investing activities |
|||
|
Proceeds from sale of investments |
19,877 |
33,539 |
|
|
Proceeds from sale of property, plant and equipment |
17,161 |
22 |
|
|
Disposal of subsidiaries, net of cash disposed of |
- |
1,500 |
|
|
Acquisition of subsidiaries, net of cash acquired |
(195,741) |
(50,009) |
|
|
Acquisition of intangible assets |
(2,433) |
(15,356) |
|
|
Acquisition of property, plant & equipment |
(2,959) |
(6,367) |
|
|
Acquisition of investments |
(37,031) |
(28,106) |
|
|
Net cash used in investing activities |
|
(201,126) |
(64,777) |
|
Cash flows from financing activities |
|||
|
Issue of ordinary share capital |
95,206 |
1,571 |
|
|
Issue of perpetual securities |
- |
196,465 |
|
|
Purchase of own shares |
- |
(29,473) |
|
|
New borrowings |
98,582 |
22,947 |
|
|
Repayment of borrowings |
(373) |
(25,683) |
|
|
Dividends paid |
(54,959) |
(39,409) |
|
|
Net cash from financing activities |
|
138,456 |
126,418 |
|
Net increase in cash and cash equivalents |
1,832 |
31,715 |
|
|
Cash and cash equivalents at 1 October |
80,680 |
48,120 |
|
|
Effect of exchange rate fluctuations on cash and cash equivalents |
(351) |
845 |
|
|
Cash and cash equivalents at 30 September |
|
82,161 |
80,680 |
|
Notes to the Accounts |
||||||
|
1. |
Preparation in accordance with IFRS This preliminary announcement of results sets out information which will be more fully covered in the Annual Report for the year to 30 September 2008. The Board has chosen to make certain voluntary disclosures in addition to the requirements of IFRS to enable investors to achieve a proper understanding of the financial statements. These additional disclosures involve identifying items that arise outwith the Group's normal business activities and which are sufficiently material to warrant separate disclosure. The Board has elected to use the term "exceptional" in referring to such items. |
|||||
|
2. |
Revenue |
2008 |
2007 |
|||
|
£'000 |
£'000 |
|||||
|
Turnover |
432,591 |
346,974 |
||||
|
Net fair value (losses) gains on assets at fair value through income |
(2,505) |
869 |
||||
|
Total revenue |
430,086 |
347,843 |
||||
|
3. |
Segment reporting |
|||||
|
The Group's primary business segments, based on the Group's management and reporting structure, are the investment management division and the property management division. |
||||||
|
The results, analysed by these two business segments, are shown below. |
||||||
|
Investment management |
Property asset management |
Group total |
||||
|
Year to 30 September 2008 |
£'000 |
£'000 |
£'000 |
|||
|
Turnover |
315,291 |
117,300 |
432,591 |
|||
|
Net fair value losses on assets at fair value through income |
(2,505) |
- |
(2,505) |
|||
|
Revenue |
312,786 |
117,300 |
430,086 |
|||
|
Operating costs |
(229,704) |
(101,090) |
(330,794) |
|||
|
Integration costs |
(11,094) |
(13,908) |
(25,002) |
|||
|
Amortisation of intangible assets |
(11,940) |
(1,845) |
(13,785) |
|||
|
Operating expenses |
(252,738) |
(116,843) |
(369,581) |
|||
|
Exceptional gains on property |
- |
4,129 |
4,129 |
|||
|
Gains on disposal of other investments |
724 |
- |
724 |
|||
|
Other operating income |
724 |
4,129 |
4,853 |
|||
|
Operating profit (before exceptional items and amortisation of intangibles) |
83,806 |
16,210 |
100,016 |
|||
|
Operating profit (after exceptional items and amortisation of intangibles) |
60,772 |
4,586 |
65,358 |
|||
|
Profit before tax |
56,587 |
3,870 |
60,457 |
|||
|
Total assets |
2,151,222 |
219,807 |
2,371,029 |
|||
|
Total liabilities |
1,541,440 |
86,286 |
1,627,726 |
|||
|
Depreciation |
2,901 |
914 |
3,815 |
|||
|
Total significant non-cash expenses |
14,716 |
- |
14,716 |
|||
|
Capital expenditure |
2,518 |
441 |
2,959 |
|||
|
Acquisition of intangible assets and goodwill |
22,116 |
192,684 |
214,800 |
|||
|
Investment management |
Property asset management |
Group total |
||||
|
Year to 30 September 2007 |
£'000 |
£'000 |
£'000 |
|||
|
Turnover |
277,958 |
69,016 |
346,974 |
|||
|
Net fair value gains on assets at fair value through income |
869 |
- |
869 |
|||
|
Revenue |
278,827 |
69,016 |
347,843 |
|||
|
Operating costs |
(196,679) |
(54,620) |
(251,299) |
|||
|
Integration costs |
(20,301) |
- |
(20,301) |
|||
|
Amortisation of intangible assets |
(9,285) |
(119) |
(9,404) |
|||
|
Exceptional charge |
(46,776) |
- |
(46,776) |
|||
|
Operating expenses |
(273,041) |
(54,739) |
(327,780) |
|||
|
Exceptional gains on investments |
8,667 |
- |
8,667 |
|||
|
Gains on investments and other income |
3,440 |
- |
3,440 |
|||
|
Other operating income |
12,107 |
- |
12,107 |
|||
|
Operating profit (before exceptional items and amortisation of intangibles) |
85,588 |
14,396 |
99,984 |
|||
|
Operating profit (after exceptional items and amortisation of intangibles) |
17,893 |
14,277 |
32,170 |
|||
|
Profit before tax |
9,267 |
14,406 |
23,673 |
|||
|
Total assets |
2,227,514 |
47,844 |
2,275,358 |
|||
|
Total liabilities |
1,624,654 |
30,790 |
1,655,444 |
|||
|
Depreciation |
1,995 |
530 |
2,525 |
|||
|
Total significant non-cash expenses |
7,498 |
- |
7,498 |
|||
|
Capital expenditure |
5,802 |
565 |
6,367 |
|||
|
Acquisition of intangible assets and goodwill |
79,573 |
107 |
79,680 |
|||
|
4. |
Exceptional costs |
|||||
|
Exceptional costs include rationalisation and redundancy costs related to acquisitions completed during the year, an impairment charge in respect of a seed capital investment and non-recurring costs incurred in implementing a cost reduction programme. The exceptional provision for VAT on investment trusts represents VAT which may be repayable to the Group's UK investment trust clients following conclusion of an action brought against HMRC by a UK investment trust. The amount of this provision is an estimate of the costs which may arise in respect of historic periods in excess of the amount to be recovered from HMRC. The exceptional impairment provision arose from the decision to discontinue marketing a proposed property fund in order to focus attention on completion and integration of the DEGI transaction. Exceptional costs incurred in 2007 relate to the acquisition of certain fund management businesses of Deutsche Asset Management in late 2005 and integrating them with the existing businesses of the Group. These integration costs comprised charges in respect of a transitional services agreement with the vendor to ensure that both people and systems were transferred in a controlled manner; set up costs in respect of the migration of the back office data and systems to the Group's third party administrator; and costs of retaining duplicate staffing for a transitional period to ensure a smooth migration of data. |
||||||
|
2008 |
2007 |
|||||
|
£'000 |
£'000 |
|||||
|
Transitional service costs from vendor |
- |
10,295 |
||||
|
Set-up costs in respect of back office data and systems |
- |
3,396 |
||||
|
Duplicate staff costs, redundancy and third party integration costs arising from acquisitions completed during the year |
4,074 |
6,610 |
||||
|
Integration costs |
4,074 |
20,301 |
||||
|
Redundancy and other non-recurring costs arising from implementation of the cost reduction programme |
10,284 |
- |
||||
|
VAT expense on investment trusts (note 20) |
2,000 |
- |
||||
|
Exceptional impairment provision on property seed capital |
8,644 |
- |
||||
|
Total exceptional costs |
25,002 |
20,301 |
||||
|
5. |
Exceptional settlement costs |
2008 |
2007 |
|||||||
|
£'000 |
£'000 |
|||||||||
|
Recognised within operating profit Settlement of legal action initiated by Real Estate Opportunities |
- |
54,276 |
||||||||
|
Less payment made in 2006 to defend proceedings by Real Estate Opportunities |
- |
(7,500) |
||||||||
|
- |
46,776 |
|||||||||
|
On 16 March 2007 the Company announced that it had reached agreement with Real Estate Opportunities Limited ('REO') to settle the Company's part in the legal action initiated in 2005 by REO against the Company and another party. The Company made no admission whatsoever of any liability or acceptance of the validity of REO's claim, but the Board recognised that it was in the interests of the Group and its shareholders to conclude this matter and to end the distraction it was causing to the Company. The net cost to the Group, including the Group's legal costs and after return of the defence payment of £7,500,000 made in 2006, was £46,776,000. |
||||||||||
|
6. |
Other operating income |
2008 |
2007 |
|||||||
|
£'000 |
£'000 |
|||||||||
|
Other operating income comprises the following items: |
||||||||||
|
Gain on disposal of property |
4,129 |
- |
||||||||
|
Gain on disposal of significant investments |
- |
7,892 |
||||||||
|
Gain on disposal of subsidiaries and contracts |
- |
775 |
||||||||
|
Exceptional gains |
4,129 |
8,667 |
||||||||
|
Gains on disposal of other investments |
724 |
3,440 |
||||||||
|
Other operating income |
4,853 |
12,107 |
||||||||
|
2008 The gain on disposal of property relates to the sale of a building acquired as part of the DEGI transaction. The premium over the fair value on acquisition was achieved as a result of subsequent changes in the tenancy arrangements of the property and in the identification of a strategic purchaser. The Board considers this gain to be outwith the course of the Group's normal business and sufficiently material that it should be disclosed separately to enable a proper understanding of the financial statements, and therefore choose to disclose this item as an exceptional gain. The gain on disposal of other investments in 2008 comprises principally net gains realised on the disposal of private equity investments. 2007 The gain on significant investments in 2007 represented the final contingent deferred consideration received in respect of the sale, in January 2005, of the Group's investment in Lombard International Assurance SA. The gain included the transfer of £7.0 million from the available for sale reserve. The gain on disposal of subsidiaries and contracts comprised deferred proceeds received in that year in respect of disposals completed in previous years. The Board considered that these two categories of gains are outwith the course of the Group's normal business and sufficiently material that they should be disclosed separately to enable a proper understanding of the financial statements, and therefore chose to disclose these items as exceptional gains. Gains on disposal of other investments comprised principally of net gains on the realisation of private equity investments. |
||||||||||
|
7. |
Analysis of consolidated cash flows |
2008 |
2007 |
|||||||
|
£'000 |
£'000 |
|||||||||
|
Reconciliation of profit after tax to operating cash flow |
||||||||||
|
Profit after tax |
46,847 |
30,643 |
||||||||
|
Depreciation charge |
3,815 |
2,525 |
||||||||
|
Amortisation of intangible assets |
13,785 |
9,404 |
||||||||
|
Fair value gains (losses) on investments |
2,505 |
(869) |
||||||||
|
Gain on disposal of investments and other assets |
(4,723) |
(12,170) |
||||||||
|
Share based element of remuneration |
14,716 |
7,498 |
||||||||
|
Net finance costs |
4,901 |
8,497 |
||||||||
|
Income tax expense (credit) |
13,610 |
(6,970) |
||||||||
|
95,456 |
38,558 |
|||||||||
|
Increase (decrease) in provisions |
1,500 |
(4,981) |
||||||||
|
Decrease (increase) in stock |
269 |
(273) |
||||||||
|
Increase in trade and other receivables |
(16,764) |
(24,711) |
||||||||
|
Decrease (increase) in short-term loans to property funds |
24,027 |
(24,027) |
||||||||
|
(Decrease) increase in trade and other payables |
(12,570) |
20 |
||||||||
|
Net cash inflow (outflow) from operating activities |
91,918 |
(15,414) |
||||||||
|
Net finance costs paid |
(5,146) |
(4,807) |
||||||||
|
Corporation tax paid |
(22,270) |
(9,705) |
||||||||
|
Net cash generated from (used in) operating activities |
64,502 |
(29,926) |
||||||||
|
8. |
Net finance costs |
2008 |
2007 |
|||||||
|
£'000 |
£'000 |
|||||||||
|
Interest on 7.2% Subordinated loan notes |
4,582 |
4,518 |
||||||||
|
Interest on 4.5% Convertible bonds 2010 |
240 |
1,671 |
||||||||
|
Interest on 5.875% Convertible bonds 2007 |
- |
421 |
||||||||
|
Interest on unsecured guaranteed loan notes |
14 |
40 |
||||||||
|
Interest on overdrafts, revolving credit facilities and other interest bearing accounts |
5,649 |
4,313 |
||||||||
|
10,485 |
10,963 |
|||||||||
|
Amortisation of issue costs on Convertible bonds |
113 |
336 |
||||||||
|
10,598 |
11,299 |
|||||||||
|
Adjustment to bond value on redemption |
- |
2,778 |
||||||||
|
Total finance costs |
10,598 |
14,077 |
||||||||
|
Finance revenue - interest income |
(5,697) |
(5,580) |
||||||||
|
Net finance costs |
4,901 |
8,497 |
||||||||
|
9. |
Tax expense (credit) |
2008 |
2007 |
|||||||
|
£'000 |
£'000 |
|||||||||
|
Current year tax charge on profit before exceptional items and amortisation of intangible assets |
19,903 |
15,149 |
||||||||
|
Adjustments in respect of prior periods |
(3,412) |
(3,762) |
||||||||
|
16,491 |
11,387 |
|||||||||
|
Tax credit on exceptional items and amortisation of intangible assets arising in the year |
(2,881) |
(18,357) |
||||||||
|
13,610 |
(6,970) |
|||||||||
|
10. |
Dividends |
2008 |
2007 |
|||||||
|
£'000 |
£'000 |
|||||||||
|
Dividends on perpetual preference shares: |
||||||||||
|
Dividend paid 30 June |
5,395 |
5,395 |
||||||||
|
Coupon payments in respect of perpetual capital securities (net of tax) |
||||||||||
|
Coupon payments made during the year |
11,461 |
2,742 |
||||||||
|
Ordinary dividends |
||||||||||
|
Declared and paid during the year |
||||||||||
|
Dividends paid on ordinary shares: |
||||||||||
|
Final dividend for 2007 - 2.9p (2006 - 2.4p) |
18,451 |
14,978 |
||||||||
|
Interim dividend for 2008 - 2.8p (2007 - 2.6p) |
19,652 |
16,294 |
||||||||
|
38,103 |
31,272 |
|||||||||
|
Total dividends and coupon payments paid during the year |
54,959 |
39,409 |
||||||||
|
Proposed for approval at the Annual General Meeting (not recognised as a liability at 30 September 2008) |
||||||||||
|
Dividends on ordinary shares: |
||||||||||
|
Final dividend for 2008 - 3.0p (2007 -2.9p) |
21,086 |
18,366 |
||||||||
|
The proposed final dividend of 3.0p per ordinary share will be paid on 29 January 2009 to qualifying shareholders on the register at close on 12 December 2008. The total ordinary dividend for the year is 5.8p per share including the proposed final dividend for 2008 of 3.0p per share. This payment will trigger an adjustment to the subscription price applying to the warrants which form part of the 6.75% Convertible Preference Share Units issued in June 2005. Assuming approval of the final dividend payment at the forthcoming Annual General Meeting, the subscription price will reduce from 97p per ordinary share to 94p per ordinary share. |
||||||||||
|
11. |
Earnings per share |
|||||||||
|
The calculations of earnings per share are based on the following profits and numbers of shares. Basic earnings per share amounts are calculated by dividing net profit for the period attributable to ordinary shareholders by the weighted average number of ordinary shares outstanding during the year. Diluted earnings per share amounts are calculated by dividing the net profit for the period attributable to ordinary shareholders by the weighted average number of ordinary shares outstanding during the year plus the weighted average number of ordinary shares that would be issued on the conversion of all the potentially dilutive shares into ordinary shares. |
||||||||||
|
IAS33 |
Underlying |
|||||||||
|
Basic earnings per share |
2008 £'000 |
2007 £'000 |
2008 £'000 |
2007 £'000 |
||||||
|
Profit attributable to shareholders |
46,847 |
30,643 |
46,847 |
30,643 |
||||||
|
Dividends on redeemable preference shares |
(5,395) |
(5,395) |
(5,395) |
(5,395) |
||||||
|
Coupon payments in respect of perpetual capital securities (net of tax) |
(11,631) |
(3,686) |
(11,631) |
(3,686) |
||||||
|
Profit for the financial year - IAS 33 basis |
29,821 |
21,562 |
29,821 |
21,562 |
||||||
|
Amortisation of intangible assets, net of attributable taxation |
12,285 |
9,054 |
||||||||
|
Exceptional gains on disposal of investments, and property, net of attributable taxation |
(2,932) |
(6,067) |
||||||||
|
Exceptional integration costs and expenses associated with cost reduction programme, net of attributable taxation |
22,424 |
14,211 |
||||||||
|
Exceptional finance costs, net of attributable taxation |
- |
1,945 |
||||||||
|
Exceptional settlement costs, net of attributable taxation |
- |
32,743 |
||||||||
|
Profit for the financial year - underlying basis |
61,598 |
73,448 |
||||||||
|
Weighted average number of shares (000's) |
652,149 |
597,388 |
652,149 |
597,388 |
||||||
|
Basic earnings per share |
4.57p |
3.61p |
9.45p |
12.29p |
||||||
|
Diluted earnings per share |
||||||||||
|
Profit for calculation of basic earnings per share, as above |
29,821 |
21,562 |
61,598 |
73,448 |
||||||
|
Add: interest on 2010 convertible bonds, net of attributable taxation |
N/A |
N/A |
170 |
1,170 |
||||||
|
Add: dividend on convertible preference share units |
N/A |
N/A |
5,395 |
5,395 |
||||||
|
Profit for calculation of diluted earnings per share |
29,821 |
21,562 |
67,163 |
80,013 |
||||||
|
Weighted average number of shares (000's) |
||||||||||
|
For basic earnings per share |
652,149 |
597,388 |
652,149 |
597,388 |
||||||
|
Dilutive effect of 2010 convertible bonds |
N/A |
N/A |
2,793 |
24,737 |
||||||
|
Dilutive effect of convertible preference share units |
N/A |
N/A |
82,395 |
81,554 |
||||||
|
Dilutive effect of LTIP awards |
5,745 |
14,629 |
5,745 |
14,629 |
||||||
|
Dilutive effect of exercisable share options |
2,202 |
3,291 |
2,202 |
3,291 |
||||||
|
660,096 |
615,308 |
745,284 |
721,599 |
|||||||
|
Diluted earnings per share |
4.52p |
3.50p |
9.01p |
11.09p |
||||||
|
The effects of the 2010 convertible bonds and the convertible preference share units were anti-dilutive on an IAS 33 basis in both years. |
||||||||||
|
12. |
Intangible assets |
2008 |
2007 |
|||||||
|
£'000 |
£'000 |
|||||||||
|
Intangible assets |
291,856 |
185,718 |
||||||||
|
Goodwill |
536,605 |
433,969 |
||||||||
|
828,461 |
619,687 |
|||||||||
|
13. |
Other investments |
2008 |
2007 |
|
|
£'000 |
£'000 |
|||
|
Non-current assets |
||||
|
Non-current investments |
50,335 |
34,898 |
||
|
Current assets |
||||
|
Liquid investments of life and pensions subsidiary |
14,595 |
14,530 |
||
|
Listed equities held for trading |
846 |
8,978 |
||
|
15,441 |
23,508 |
|||
|
Assets classified as held for sale |
17,596 |
- |
||
|
14. |
Stock of units and shares |
2008 |
2007 |
|
|
£'000 |
£'000 |
|||
|
Units and shares in managed funds |
268 |
537 |
||
|
15. |
Acquisitions |
|||
|
On 1 October 2007 the Group completed the acquisition of the US equity asset management business of Nationwide Financial Services Inc. The acquisition includes a broad cross-section of US equity strategies in sub-advisory mandates for 30 mutual funds and variable insurance trusts amounting to £3.5 billion in assets under management. The acquisition was completed for a cash consideration of US$32 million (£16 million) of which US$6 million (£2.9 million) was paid on completion and US$26 million (£13.1 million) was paid in June 2008. On 27 March 2008 the Group's wholly owned subsidiary, Aberdeen Property Investors Holding AB, completed the acquisition of 100% of the ordinary share capital of DEGI Deutsche Gesellschaft für Immobilienfonds mbH ( 'DEGI' ) from Dresdner Bank AG. The economic benefit of the acquisition was effective from 1 January 2008. DEGI has approximately €6.4 billion (£5.1 billion) of assets under management in a number of property funds offering German, European or global commercial property exposure. The acquisition was completed for a cash consideration of €110 million (£87.7 million). On 30 May 2008 the Group completed the acquisition of Goodman Property Investors ('GPI') from the Goodman Group. The initial consideration for the acquisition was £89 million plus an amount of £8.4 million which was linked to the value of GPI's net assets at completion. The payment for net assets was subsequently amended to £8.9 million. In addition, further deferred consideration of up to £12.5 million is payable dependent on the value of GPI's assets under management flows over a 24 month period from completion and £3.1 million has been added to the costs of the acquisition as an estimate of the deferred consideration payable. Independent valuation specialists were engaged to carry out purchase price allocation exercises on the goodwill and intangible assets acquired. The value of goodwill in the acquisition takes account of the value of the assembled workforce in place and the value of the new business flows. Other adjustments were made to the assets and liabilities to reflect the directors' best estimate of the fair value. |
||||
|
The assets and liabilities at the date of the acquisitions and the fair value adjustments made were as follows: |
||||
|
Business acquired from Nationwide Financial Services |
||||
|
At date of acquisition |
Fair value adjustments |
Provisional fair value |
||
|
£'000 |
£'000 |
£'000 |
||
|
Intangible assets |
- |
12,000 |
12,000 |
|
|
Property, plant & equipment |
965 |
- |
965 |
|
|
Deferred tax on intangible assets |
- |
(3,224) |
(3,224) |
|
|
Net assets of acquired business |
965 |
8,776 |
9,741 |
|
|
Goodwill |
7,682 |
|||
|
17,423 |
||||
|
Discharged by: |
||||
|
Cash consideration |
15,976 |
|||
|
Expenses of acquisition |
1,447 |
|||
|
17,423 |
||||
|
Acquisition of DEGI |
||||
|
At date of acquisition |
Fair value adjustments |
Provisional fair value |
||
|
£'000 |
£'000 |
£'000 |
||
|
Intangible assets |
66 |
61,599 |
61,665 |
|
|
Property, plant & equipment |
8,969 |
5,678 |
14,647 |
|
|
Trade and other receivables |
15,704 |
- |
15,704 |
|
|
Investments |
12,448 |
- |
12,448 |
|
|
Cash and cash equivalents |
12,858 |
- |
12,858 |
|
|
Trade and other payables |
(31,890) |
(1,581) |
(33,471) |
|
|
Deferred tax on intangible assets |
- |
(20,706) |
(20,706) |
|
|
Net assets of acquired business |
18,155 |
44,990 |
63,145 |
|
|
Goodwill |
25,895 |
|||
|
89,040 |
||||
|
Discharged by: |
||||
|
Cash consideration |
87,398 |
|||
|
Expenses of acquisition |
1,642 |
|||
|
89,040 |
||||
|
Acquisition of Goodmans Property Investors |
||||
|
At date of acquisition |
Fair value adjustments |
Provisional fair value |
||
|
£'000 |
£'000 |
£'000 |
||
|
Intangible assets |
- |
37,500 |
37,500 |
|
|
Property, plant & equipment |
113 |
(113) |
- |
|
|
Trade and other receivables |
9,844 |
(1,161) |
8,683 |
|
|
Investments |
270 |
- |
270 |
|
|
Cash and cash equivalents |
2,467 |
- |
2,467 |
|
|
Trade and other payables |
(7,481) |
- |
(7,481) |
|
|
Deferred tax on intangible assets |
- |
(10,144) |
(10,144) |
|
|
Net assets of acquired business |
5,213 |
26,082 |
31,295 |
|
|
Goodwill |
67,624 |
|||
|
98,919 |
||||
|
Discharged by: |
||||
|
Cash consideration |
94,061 |
|||
|
Expenses of acquisition |
1,780 |
|||
|
Deferred consideration |
3,078 |
|||
|
98,919 |
||||
|
The businesses acquired during the year are being integrated with the Group's existing business therefore the results and cashflows can no longer be separately identified. |
||||
|
16. |
Other financial investments / investment contract liabilities |
|||
|
These balances represent unit linked business carried out by the Group's life and pension subsidiary. The assets represent investments held to meet contracted liabilities. |
||||
|
17. |
Statement of changes in equity |
2008 |
2007 |
|
|
£'000 |
£'000 |
|||
|
Profit for the year |
46,847 |
30,643 |
||
|
Other recognised income and expense |
(463) |
2,524 |
||
|
Dividends paid |
(54,959) |
(39,409) |
||
|
Issue of ordinary share capital |
117,248 |
1,571 |
||
|
Share based payments |
14,716 |
7,498 |
||
|
Movement on coupon outstanding on perpetual capital securities |
(128) |
(1,349) |
||
|
Purchase of own shares |
- |
(29,473) |
||
|
Net additions to (deductions from) shareholders' funds |
123,261 |
(27,995) |
||
|
Opening shareholders' funds |
422,100 |
450,095 |
||
|
Closing shareholders' funds |
545,361 |
422,100 |
||
|
18. |
Interest bearing loans and borrowings |
2008 |
2007 |
|
|
£'000 |
£'000 |
|||
|
Non-current liabilities |
||||
|
7.2% Subordinated notes 2016 |
69,470 |
60,643 |
||
|
4.5% Convertible bonds 2010 |
2,870 |
24,691 |
||
|
Amount drawn under bank revolving credit facility |
100,000 |
- |
||
|
172,340 |
85,334 |
|||
|
Current liabilities |
||||
|
Amount drawn under bank revolving credit facility |
46,529 |
47,947 |
||
|
Unsecured guaranteed loan notes 2003 - 2008 |
- |
373 |
||
|
46,529 |
48,320 |
|||
|
19. |
Analysis of changes in net debt |
At 1 October 2007 |
Cash flow |
Other non cash changes |
Exchange movement |
At 30 September 2008 |
|||
|
£'000 |
£'000 |
£'000 |
£'000 |
£'000 |
|||||
|
Cash at bank and in hand |
80,680 |
1,832 |
- |
(351) |
82,161 |
||||
|
Debt due within one year |
(48,320) |
373 |
1,418 |
- |
(46,529) |
||||
|
Debt due after more than one year |
(60,643) |
(98,582) |
(1,472) |
(8,773) |
(169,470) |
||||
|
Convertible debt due after more than one year |
(24,691) |
- |
21,821 |
- |
(2,870) |
||||
|
(133,654) |
(98,209) |
21,767 |
(8,773) |
(218,869) |
|||||
|
Total |
(52,974) |
(96,377) |
21,767 |
(9,124) |
(136,708) |
||||
|
20. |
Provisions An action against HM Revenue and Customs ('HMRC') brought jointly by the Association of Investment Companies ('AIC') and a UK investment trust in early 2004 sought to establish that charges for investment management services provided to UK investment trusts should be exempt from VAT, rather than being subject to the standard rate as required by UK VAT legislation. Following a decision of the European Court of Justice on certain questions referred by the UK VAT Tribunal, HMRC announced on 26 October 2007 that it would no longer seek to defend this case. A number of the Group's UK subsidiaries, in common with other UK asset managers, now face claims from investment trust clients for the repayment of VAT previously charged for periods back to 1990. The Group charged VAT in accordance with applicable legislation at the time, but a provision was recognised during the year to the extent that payments to investment trusts are expected to exceed the amounts recoverable from HMRC. The provision of £2 million represents the estimated net cost to the Group. Significant uncertainty remains as to the final quantification of amounts recoverable from HMRC and amounts payable to investment trusts. Some uncertainty remains over the methodology to be adopted by HMRC in certain circumstances and the timing of these payments therefore remains uncertain. |
||||||||
|
21. |
Pension scheme surplus and deficits The Group's principal form of pension provision is by way of three defined contribution schemes operated world-wide. The Group also operates three legacy defined benefit schemes in the UK: the CGA Staff Pension Fund, the Murray Johnstone Limited Retirement Benefits Plan and the Edinburgh Fund Managers Group plc Retirement & Death Benefits Plan. All three UK defined benefit schemes are closed to new membership and to future service accrual. In addition, some defined benefit scheme exposure was added with the acquisition of DEGI during the year. The actuarial valuations of these defined benefit arrangements were updated to 30 September 2008 by the respective independent actuaries using the projected unit method. |
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|
2008 |
2007 |
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|
£'000 |
£'000 |
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|
Pension scheme surplus |
5,481 |
- |
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|
Pension scheme deficits |
(17,376) |
(18,269) |
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|
22. |
The financial information set out above does not constitute the Company's statutory accounts for the years ended 30 September 2008 or 2007. The financial information for 2007 is derived from the statutory accounts for 2007 which have been delivered to the Registrar of Companies. The auditors have reported on the 2007 accounts; their report was (i) unqualified, (ii) did not include a reference to any matters to which the auditors drew attention by way of emphasis without qualifying their report and (iii) did not contain a statement under section 237(2) or (3) of the Companies Act 1985. The statutory accounts for 2008 will be finalised on the basis of the financial information presented by the directors in this preliminary announcement and will be delivered to the registrar of companies in due course. |
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