Final Results

CHARLES STANLEY GROUP PLC

RESULTS FOR THE YEAR ENDED 31 MARCH 2011

Charles Stanley is one of the UK's leading independently owned, full service stockbroking and investment management groups, advising on substantial funds. Today it announces its preliminary results for the year ended 31 March 2011.

Highlights:

§ Revenue for the year £125.6 million (2010: £115.0 million) 9.2% increase

§ Reported profit before tax £13.4 million (2010: £10.3 million) 30.1% increase

§ Adjusted profit before tax £17.7 million (2010: £13.7 million) 29.2% increase

§ Funds under management and administration £14.5 billion (2010: £12.8 billion) 13.3% increase

§ Private Client income £106.0 million (2010: £96.1 million) 10.3% increase

§ Reported earnings per share 21.42p (2010: 15.44p) 38.7% increase

§ Adjusted earnings per share 28.39p (2010: 21.18p) 34.0% increase

§ Total dividend 10.75p (2010: 9.45p) 13.8% increase

§ Acquisition of Jobson James Financial Services Limited in May 2011

Commenting on the results for the latest year, Sir David Howard, chairman, said:

"Despite the continuing unsettled economic background we are pleased to have achieved a new record level of turnover and a significant increase in profits and funds under management. Charles Stanley has performed strongly in the past twelve months, and our confidence a year ago has been amply justified. The future remains as uncertain as ever. But we are well placed to move forward. So my guarded feeling of confidence about the outlook remains undaunted."

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CHAIRMAN'S STATEMENT

Charles Stanley Group is pleased to announce that revenue for the year ended 31 March 2011 has risen by 9% to £125.6 million (2010: £115.0 million). Profit before tax has risen by 30% to £13.4 million (2010: £10.3 million). The adjusted profit before tax, which excludes the effect of amortisation and a levy of £2.6 million imposed by the Financial Services Compensation Scheme in respect of unrelated businesses, was 29% higher at £17.7 million (2010: £13.7 million). Despite the continuing unsettled economic background we are pleased to have achieved a new record level of turnover and a significant increase in profits and funds under management.

Client funds managed and administered by Charles Stanley Group have risen to £14.50 billion at 31 March 2011, an increase of 13.3% compared with the total of £12.80 billion at 31 March 2010. Within this figure the funds under discretionary or advisory management have risen from £6.35 billion to £7.20 billion, an increase of 13.4%. This compares with an increase over the same period of 3.5% in the FTSE 100 Share Index and of 4.3% in our principal benchmark, the APCIMS Balanced Portfolio Index. This increase in managed funds derives from market performance across clients' portfolios averaging 3.4% while net incoming funds from new and existing clients added 10.0% to the total.

In line with our emphasis on steadily increasing the level of discretionary fund management, our clients' discretionary funds now represent 64.0% of managed funds compared with 61.2% at 31 March 2010.

Following the year end, on 16 May 2011 we acquired Jobson James Financial Services Limited, a Birmingham-based provider of wealth-management solutions to companies and individuals, for a consideration of up to £2.25 million. Charles Stanley has a growing presence in the Midlands, and Jobson James is an excellent strategic fit both in terms of its business and geographically. During the year we were delighted to welcome a number of additions to our teams of stockbrokers in London and around the country, and we opened a new office in Cirencester, which has made an excellent start.

The results once again reflect the Group's traditional emphasis on maintaining strong cash balances, particularly while conditions remain so uncertain. This allows us to fund acquisitions from our own resources. The figure for our cash balances at 31 March 2011 was £45.5 million compared to £36.6 million at 31 March 2010.

In the light of these results the Directors recommend an increase in the final dividend to 8.25p per share, making a total dividend for the year of 10.75p. This represents an increase of 13.8% compared to the total dividend of 9.45p last year. The dividend will be paid on 3 August 2011 to shareholders registered on 17 June 2011. Once again we are also offering shareholders a scrip alternative.

Charles Stanley Group provides a comprehensive range of investment, wealth management and financial planning services to retail, institutional and corporate clients. A detailed report of our performance and operations during the past year is set out in the following Business Review and Operating and Financial Review.

In my statement last year I wrote at some length about the unfairness of the Financial Services Compensation Scheme, which imposes levies on companies like ours to compensate victims of loss caused by the collapse or misbehaviour of other, completely unrelated firms. More often than not these appear to be rogue businesses, operating in areas of the industry unrelated to us, marketing products or services that should have been stopped at inception. In this context we welcome the plans of the FSA to vet complicated financial products before they reach the market.

Last year I was critical of the extraordinary levy of £686,000 which was taken straight off our pre-tax profit to compensate clients for other people's failures. This year the share of the levy imposed on us is no less than the truly astonishing figure of £2.6 million. The total levy being taken from investment firms is more than £300 million. We join with the many companies, professional bodies and trade associations that are calling for a high-level enquiry into how such a thing, on such a scale, could possibly have been allowed to happen.

The quality of our service

These results reflect a great deal of dedication and commitment of everyone in the Group. Once again on behalf of shareholders I express the appreciation of the Directors for another year of strenuous effort in producing this successful outcome.

I should like to take this opportunity to pay tribute to my fellow Directors, both at Group level and trading subsidiary level, who drive the business with such skill and care. And particularly to Peter Hurst, our Finance Director, who is retiring at the AGM in July, after 24 years of dedicated service to Charles Stanley. During that time the Group has grown beyond all recognition, and Peter has been absolutely central to this. I know that all shareholders will join me in thanking Peter and wishing him a long and happy retirement. Arrangements are well advanced to appoint Peter's successor and a further announcement will follow.

Outlook

The recovery remains weak, but after the wild swings in the FTSE 100 index which I spoke of last year it has stabilised at ten or fifteen percent below its historic high. This has been driven as much perhaps by the corporate sector performing well, with a steady rise in profitability and by strong dividend performance, as by expectations of further economic recovery. With the economy looking anaemic still, it seems likely, but ironic, that the infusion of liquidity by the government is driving debt reduction and asset build-up rather than an expansion of consumer spending; and this effect is mirrored at Charles Stanley in the inflows of cash from our existing client base.

It is difficult to conclude from this shift in spending and saving patterns that the upturn from the recession has gained much traction yet. The projections for growth in the UK are faltering, and we remain perplexed at whether a default in the Eurozone will bring down the whole structure of the euro, with all the collateral damage that this would cause. However the banks continue to re-build their balance sheets, surely underpinning a recovery, and corporate Britain looks in reasonable health.

Regulation continues to dominate much of our attention, to the detriment of management focus on running a commercial business. But we see this as sadly inevitable after the public policy disasters, predominantly in wholesale finance, which have once again led to calls for further ratcheting up the protection of the retail consumer. Charles Stanley is a traditional investment business acting for a very large number of successful clients who place their trust in our values and traditions and the quality of our service. Like so much of the UK's highly developed and sophisticated financial system - insurance, investment services, foreign exchange and maritime services - we have continued to function efficiently, and deliver value, throughout the crisis. Intensified regulation, however inevitable, comes with a cost.

Charles Stanley has performed strongly in the past twelve months, and our confidence a year ago has been amply justified. But the future remains as uncertain as ever - with worries over the strength and timing of the UK recovery, the near and medium-term problems of the eurozone, and the continuing depressive effect of ever more intrusive regulation. But the stock market has performed well, our clients continue to garner more investment funds, and we are well placed to move forward. So my guarded feeling of confidence about the outlook remains undaunted.

Sir David Howard

Chairman

7 June 2011

BUSINESS REVIEW

The Group is organised into three operating divisions: Private Clients, Financial Services and Charles Stanley Securities.

Private Clients

The division has demonstrated the strength of the core retail business. Total income has risen by 10.3% to £106.0 million from £96.1 million and on a like for like basis income has risen by 11.0%. Income comprises commission on trades on behalf of clients, investment management fees for the division's discretionary and advisory managed clients, and administration fees.

Transaction levels have remained steady during 2011 leading to a small increase of 2% in commission income - £56.0 million compared with £54.8 million in 2010.

The division's fee income has continued to grow. Total fee income rose 20.8% to £50.0 million from £41.4 million, and within that, investment management fees increased by 18.9% to £27.0 million from £22.7 million in 2010. Administration fees also increased during the year. An increase in investment by clients in collectives resulted in increased trail fees during the year. Interest turn income continues to be depressed due to low interest rates but this has been partly offset by increased income from foreign currency transactions due to improved systems. The Private Client ratio of commission to fee income is 52.9% to 47.1% compared with 57.0% and 43.0% respectively for 2010.

Total funds under management and administration are shown below:

The Group has seen a 13.3% increase in the value of its funds under management and administration from March 2010, compared with an increase in the FTSE 100 of 3.5% and the APCIMS Balanced Portfolio Index of 4.3%. The Group continues to attract discretionary funds, and we are pleased to see such funds now account for 31.8% of funds under management and administration (2010: 30.4%).

Included in this increase in funds were additional ISA subscriptions during the year of £142 million (2010: £116 million) of which £84 million (2010: £68 million) were under management and £58 million (2010: £48 million) under administration.

Charity team

Over the years our Charity team and investment managers have earned a reputation for meeting the investment needs of a diverse range of Charities and Foundations. In the last five years, with an increased emphasis on the personal support that we offer to our Charity clients and to the Charitable sector it is very encouraging to report that Charitable funds held have increased from £320 million to £750 million at 31 March 2011.

Managed clients

Funds under management have increased by 13.4% during the year of which 7.2% related to net organic growth as shown in the table below.

This increase in funds under management has followed through into an increase of 15.3% in income levels.

There was less volatility in the markets during the year resulting in lower levels of commission and a reduced revenue margin compared with 2010.

Non-managed clients

Funds under administration have increased by 13.2% of which 7.0% related to net organic growth.

Net organic growth represents an inflow of funds from existing clients. This increase in funds under administration has led to an increase in administration fees as shown below which has offset the slight decrease in commission earned during the year.

Michael Clark

Director of Private Client Stockbroking

Peter Hurst

Finance Director

Financial Services

The division includes EBS Management PLC ("EBS"), a SIPP administration services provider, Garrison Investment Analysis Limited ("Garrison"), a discount financial intermediary, CS Financial Solutions Limited (formerly Griffiths & Armour (Financial Services) Limited ("CS Financial Solutions"), an employee benefits provider together with the existing Charles Stanley financial planning, wealth management and funds management.

Total income has risen by 10.6% during 2011 as analysed below:

EBS

Revenue increased during the year to £1.9 million from £1.8 million. The new registered scheme reported in last year's accounts has been established, although the product has not yet gone live hence the income which was expected to begin being reflected in the 31 March 2011 accounts is not yet available. We hope to report substantial business from this SIPP in next year's accounts.

In total, 495 SIPPs were added to the portfolio for the year, although with losses taken into account the net increase in SIPP numbers is 369. EBS now administers 1,500 full SIPPs, 1,200 Alpha SIPPS, 300 white label SIPPs and 360 SSASs.

The Coalition Government's 2010 Budget has simplified contributions and tax relief for high earners, therefore we are expecting more new money to be introduced into the clients' portfolios. This increases activities such as new SIPPs and money moving to Charles Stanley for investing. It is evident from the scheme numbers that the Alpha SIPP, which is used by Charles Stanley and a number of other companies, is growing in numbers rapidly, whereas the full hybrid SIPP remains fairly static.

Garrison

Garrison Investment Analysis maintained the revenues at £1.6 million, the same as last year even though we introduced a loyalty bonus for clients on the Cofunds platform rebating 30% of the trail commission. Increased levels of new business and our cost cutting throughout the year helped increase the pre tax profits by 11% to £559,000. Assets continue to grow standing at £461 million at 31 March 2011, which reflects the increases in the markets and our success in retaining business as a result of the loyalty bonus.

We intend to expand our client base with a combination of further improvements to our website, improving our branding and expanding our marketing initiatives. We are confident that these measures will further increase our asset base and profit levels in the coming year.

CS Financial Solutions

CS Financial Solutions revenues were slightly reduced at £2.7 million for the year to March 2011 versus £2.8 million for the 12 months to March 2010. Revenues were behind those anticipated mainly due to the continued downward pressure on corporate spending across the employee benefits area; compounded by the exposure that the business has in particular market sectors. In addition, business revenue suffered as low (or zero) pay awards continued across the client base; total salary roll and funds under management both suffered as a consequence. This was exacerbated further by a real lack of staff recruitment, so, overall, the net effect was scheme membership numbers reduced with leavers not being replaced by new joiners. All of which links directly to the level of fee income received by the business. The process of amalgamating all of the Group's benefit consultancy business within this Company is almost complete and we now look forward to offering a uniform employee benefits service across our geographical reach. Following the Liverpool office move and the subsequent rebrand to CS Financial Solutions margins in the Company were further depressed by the relatively significant rebranding and establishment costs, but we look forward to an improvement in the margins in the future.

Financial Planning

The financial planning and wealth management teams have put in a solid performance during the year. The department provides an increasingly important contribution with regard to the collective portfolio service and collective research for the whole Group. During the next twelve months we look to provide this service to an increasing number of external IFAs and wealth managers.

Fund Management

The launch of the Matterley Fund department has gone well over the last twelve months with a good increase in assets under management. The Matterley Undervalued Asset Fund has made particular progress with assets increasing four-fold and the achievement of a Citywire AA rating for performance. The Regular High Income Fund has also achieved a Citywire A rating.

The Group currently has funds in-house which together with the IHT Portfolio fund totalled £147.2 million (March 2010: £104.4 million).

Acquisition

Since the year end the Group has acquired Jobson James Financial Services Limited ("JJFS"). Formed in 1991 and based in Edgbaston, Birmingham, JJFS provides wealth management advice and services for both private and corporate clients including pensions and retirement planning. The company also advises on life and health assurance products and provides tax advisory services. The business is a high-quality acquisition and complements our expanding activities in this area of financial services. The acquisition also contributes to our strategic aim of building a stronger presence in the Midlands. 

Charles Stanley Securities

CS Securities, the Group's advisory, broking and corporate finance arm for smaller and mid cap UK listed companies, together with the Sutherlands Agency Bond business produced slightly lower revenues for 2011 at £10.2 million versus £10.4 million for 2010. This was due in the main as we forecast to a significant decrease in activity in bond trading in the Sutherlands business. During the period a number of corporate clients were taken over and some clients were lost. Comparative retainer income fell from £1.45m in 2010 to £1.16m in 2011. A number of transactions were completed during the year and several notable new clients have been taken on, on a retained basis. The Sales Trading team having been rated number one in the Extel Survey in 2010 for smaller company execution had another good year.

Income within the division is shown below:

Whilst this area of the market remains challenging we believe we are in a strong position to take advantage of an up-turn in activity should it arise.

Michael Lilwall

Director

OPERATING AND FINANCIAL REVIEW

During 2011 total revenue for the Group grew by 9.2% to £125.6 million from £115.0 million. Reported profit for the year of £13.4 million is stated after amortisation of £1.7 million (2010: £1.7 million), FSCS levy of £2.6 million (2010: £0.7 million) and revenue costs relating to new investment teams last year of £1.2 million.

The financial impact of the FSCS levy, which arises from other industry failures, is wholly outside our control. The interim levy of £2.2 million, arising from the failure of Keydata Investment Services Limited and other intermediaries as announced in January 2011, is unwelcome and adds to the £0.4 million we had already anticipated resulting in a £2.6 million charge for the year (2010: £0.7 million).

Revenue by division for the year is summarised below:

The Group seeks, over time, to alter the balance between commission and fee income increasingly in favour of fees. In 2010-11 the proportion of fee income (excluding corporate finance fees) to total revenue was 47.2% compared to 44.6% in 2009-10 and 45.4% the previous year.

Administrative expenses

Administrative expenses are summarised below:

Total costs have increased by 6.9% from £105.4 million to £112.7 million. Staff costs are analysed in note 4. These have increased by 3.5% to £50.2 million from £48.5 million and represent 44.5% of our total costs (2010: 46.0%). Average employee numbers have risen by 2.5% to 747 from 729.

For management purposes costs are allocated to divisions by direct attribution and this is shown in note 2.

Due to acquisitions and joiners, salary costs of client facing staff have risen and the ratio of the number of times these salaries are covered by revenue has changed.

Given the increases in revenue, non-salary fixed costs have decreased slightly relative to revenue as follows:

The Group did not incur any costs in respect of new investment teams this year (2010: £1.2 million). The FSCS levy increased this year to £2.6 million. Excluding these costs total expenses have increased by 6.4% to £110.1 million from £103.5 million.

Costs also include depreciation of £2.2 million (2010: £2.7 million) and amortisation of intangible assets of £1.7 million (2010: £1.7 million). Further details are shown in notes 10 and 11. The proportion of our total costs which are fixed decreased to 63.8% from 65.9%. The proportion of fixed costs which is covered by fees has therefore increased to 88.7% from 77.7%.

Interest receivable of £0.4 million (2010: £0.4 million) includes interest on bank deposits and interest earned from interest bearing available for sale investments. The Group's cash balances stood at £45.5 million as at 31 March 2011 (2010: £36.6 million). Interest rates have been held by the Bank of England at 0.5% for the year.

The tax charge of £3.9 million is analysed in note 7. This represents 29.1% of the Group's profit before tax of £13.4 million (2010: 33.0% of £10.3 million). The effective rate is higher than the UK standard rate of 28.0% due to differences between accounting and taxation treatment of certain items, and the effects of prior year taxation adjustments.

Earnings per share after one-off costs were 21.42p (2010:15.44p). There was a slight dilution at 31 March 2011 of earnings giving diluted earnings per share of 21.40p. Further details on earnings per share are explained in note 8.

As indicated in the Chairman's Statement the final dividend for the year is recommended to be 8.25p in addition to the interim dividend of 2.50p giving a total dividend for the year of 10.75p. Shareholders will be offered a scrip alternative.

At 31 March 2011 the Group had net assets of £82.1 million (2010: £73.4 million) equivalent to £1.82 per share (2010: £1.67 per share).

We monitor our performance against our financial objectives by using the following key performance indicators:

Peter Hurst

Finance Director

7 June 2011

Charles Stanley Group PLC

CONDENSED CONSOLIDATED INCOME STATEMENT

YEAR ENDED 31 MARCH 2011

Earnings per share

Charles Stanley Group PLC

YEAR ENDED 31 MARCH 2011

Charles Stanley Group PLC

CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL POSITION

AT 31 MARCH 2011

Charles Stanley Group PLC

CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

YEAR ENDED 31 MARCH 2011

Charles Stanley Group PLC

CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS

YEAR ENDED 31 MARCH 2011

Charles Stanley Group PLC

NOTES TO THE CONDENSED FINANCIAL STATEMENTS

YEAR ENDED 31 MARCH 2011

1. GENERAL INFORMATION

Charles Stanley Group PLC and its subsidiaries provide investment services within the UK.

The Company is a public limited company which is listed on the London Stock Exchange and is incorporated and domiciled in the UK. The address of its registered office is 25 Luke Street, London EC2A 4AR. This condensed consolidated financial information was approved by the Board for issue on 7 June 2011.

Cautionary statement

The Chairman's Statement, Business Review and Operating and Financial Review which form part of the preliminary announcement for the year ended 31 March 2011 have been prepared to provide additional information to shareholders to assess the Group's strategies and the potential for those strategies to succeed. They should not be relied on by any other party or for any other purpose. These reviews contain certain forward-looking statements. These statements are made by the Directors in good faith based on the information available to them up to the time of their approval of this report but such statements should be treated with caution due to the inherent uncertainties, including both economic and business risk factors, underlying any such forward-looking information.

Basis of preparationThe financial information set out in these financial statements does not constitute the Company's statutory accounts for the years ended 31 March 2011 or 2010.  Statutory accounts for 2010 have been delivered to the Registrar of Companies, and those for 2011 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 2010 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 2010 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.

Going concern

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

Adjusted profit before income tax and adjusted earnings

The Board believes that a truer reflection of the performance of the Group's on-going business is given by the measure "Adjusted profit before tax", which represents operating profit plus net interest but excludes gains and losses on available for sale financial assets, amortisation of customer relationships and one-off costs. The table below reconciles these measures to the consolidated income statement

Changes in accounting policy and disclosure

The same accounting policies, presentation and methods of computation are followed in these financial statements as applied in the Group's financial statements for the year ended 31 March 2010 except as described below.

The Group has adopted the following new and revised Standards and Interpretations in the current year. Their adoption has not had any significant impact on the amounts reported in these financial statements but may impact the accounting for future transactions and arrangements:

·; IFRS 3, 'Business Combinations (revised 2008)';

·; IAS 27, 'Consolidated and Separate Financial Statements (revised 2008)';

·; IFRIC 17, 'Distributions of Non-cash Assets to Owners';

·; Amendments to IFRS 2, 'Share-based Payments: Vesting Conditions and Cancellations & Group Cash-settled Share-based Payment Transactions'.

The following amendments were made as part of 'Improvements to IFRS (2009)':

·; Amendments to IAS 38 'Intangible Assets';

·; Amendments to IFRS 8 'Operating Segments';

·; Amendments to IAS 7 'Statement of Cash Flows';

·; Amendments to IAS 36 'Impairment of Assets'.

A number of new standards and interpretations have been issued with effective dates after the date of these financial statements. These changes are currently being assessed and the Directors do not anticipate that the adoption of these standards and interpretations will materially impact the Group's financial statements in the period of initial application although there could be revised and additional disclosures. The Group plans to apply these standards, once endorsed, in the first reporting period that commences after the effective date.

Related party transactions

Transactions between the Parent Company and its subsidiaries have been eliminated on consolidation and are not disclosed. The Parent Company received £2.0 million (2010: £3.0 million) in dividends and £2.4 million (2010: £2.0 million) in management charges from its subsidiaries during the year.

Principal risks and uncertainties

The Directors consider that the nature of the principal risks and uncertainties which may have a material effect on the Group's performance remain unchanged from those identified in the financial statements for the year ended 31 March 2010. In summary the major risks identified were:

Credit risk - risk of loss through default by counterparty;

Market risk - risk that arises from fluctuations in values of, or income from, assets or in interest or exchange rates;

Operational risk - risk of loss resulting from inadequate or failed internal processes, people and systems or from external events, including legal risk;

Liquidity risk - risk that the Group, although solvent, does not have available sufficient financial resources to enable it to meet its obligations;

Business risk - risk exposure to macroeconomic, geopolitical, regulatory and other external risks;

Regulatory risk - risk of loss resulting from breach of FSA rules; and

Reputational risk - risk of damage to client base leading to financial loss.

2 SEGMENT INFORMATION

For management purposes the Group is organised into three divisions - Private Clients, Financial Services and Charles Stanley Securities. The principal activity of the private client division is the provision of investment management services to individuals, trusts and charities. The financial services division includes a SIPP administrator, a discount financial intermediary, employee benefits provider and financial planning and wealth management areas. Charles Stanley Securities is the Group's advisory, broking and corporate finance arm for smaller and mid cap UK listed companies. All of the Group's activities are undertaken in the United Kingdom.