19th May 2005 07:00
Investec PLC19 May 2005 19 May 2005 Investec delivers strong growth in earnings, dividends and return on equity "This is a good set of results driven by very strong performances from all our businesses" - Stephen Koseff Investec plc announces today its full year results for the year ended 31 March2005 Financial highlights • Operating profit* up 57.5% to £208.3 million (2004: £132.3 million) • Profit before tax* up 55.0% to £222.4 million (2004: £143.5 million) • Profit after tax, exceptional items and amortisation of goodwill up 43.5% to £101.5 million (2004: £70.7 million) • Earnings per share* up 35.6% to 140.8 pence (2004: 103.8 pence) • Proposed increased final dividend of 37.0 pence equating to a full year dividend of 67.0 pence (2004: 58.0 pence) and a dividend cover at 2.10 times (2004:1.79 times) • Return on equity increased to 21.3% from 15.4% (target: 20%) • Client assets under management increased 12.8% to £33.9 billion (2004: £30.0 billion) • Core loans and advances up 20.7% to £5.8 billion (2004 : £4.8 billion) whilst maintaining asset quality at a high level Business highlights • Substantial growth from all businesses: - Private Client Activities: profit* up 57.5% to £84.8 million (2004:£53.9 million) - Treasury and Specialised Finance: profit* up 33.9% to £47.9 million (2004:£35.8 million) - Investment Banking: profit* up 25.0% to £47.2 million (2004: £37.7 million) - Asset Management: profit* up 55.1% to £38.2 million (2004: £24.6 million) - Property Activities: profit* up 21.5% to £12.3 million (2004: £10.1 million) *before exceptional items and amortisation of goodwill, totaling -£63.6 million(2004: -£44.8 million) Stephen Koseff, Chief Executive of Investec, said: "Our results reflect the benefit of strategic actions taken by group managementover the past few years to streamline the business and achieve greateroperational focus on core activities. During 2004 we identified and implementedsix key financial and growth targets by which to measure the group's performanceand as these results demonstrate we have moved rapidly towards meeting, orimproving on those financial targets. We continue to operate in a competitive environment where ongoing innovation andrapid, yet careful, response to competition is crucial. Within this challengingcontext we are very well positioned with the quality and balance of our earningssources." Bernard Kantor, Managing Director of Investec, said: "We firmly believe that our niche focus, our ability to be distinctive and thequality of our people will position us to take advantage of market conditionsand we are confident that opportunities ahead of us will allow us to continue togrow profitably in the forthcoming year." For further information please contact: Investec +44 (0) 207 597 4000 Citigate Dewe Rogerson +44(0)20 7638 9571Stephen Koseff, Chief Executive Jonathan ClareBernard Kantor, Managing Director Simon Rigby Sara BatchelorInvestec+ 44 (0) 207 597 5546+27 82 552 8808Ursula Munitich, Investor Relations Investec will be presenting the full year results at 9am today at their officesat 2 Gresham Street, London EC2V 7QP. Details of the conference callfacilities and a delayed webcast of the presentation are available atwww.investec.com. About Investec Investec is an international specialist banking group that provides a diverserange of financial products and services to a niche client base in threeprincipal markets, the United Kingdom, South Africa and Australia as wellas certain other countries. The group was established in 1974 and currently hasapproximately 4 100 employees. Investec focuses on delivering distinctive profitable solutions for its clientsin five core areas of activity namely, Private Client Activities, Treasury andSpecialised Finance, Investment Banking, Asset Management and Property Activities. In July 2002 the Investec group implemented a dual listed company structure withprimary listings on the London and Johannesburg Stock Exchanges. The combinedgroup has a market capitalisation of approximately £1.8 billion. Further information Investec plc (incorporating the results of Investec Limited)Consolidated financial results in UK GAAP Pounds Sterling for the year ended 31March 2005. Overall performance We are pleased to announce that for the year ended 31 March 2005, earnings pershare (EPS) before exceptional items and amortisation of goodwill increased35.6% to 140.8 pence from 103.8 pence (as restated). We have benefited fromcontinued focus on driving profitable growth in our key business areas andgeographies, supported by favourable economic conditions. We have achieved themajority of our stated growth and financial return objectives and we have madesignificant progress towards achieving the others. Salient features of the financial year: • Operating profit before exceptional items and amortisation of goodwill increased 57.5% from £132.3 million to £208.3 million. • Earnings attributable to ordinary shareholders before exceptional items and amortisation of goodwill increased 42.3% from £106.2 million to £151.1 million. • Return on adjusted equity shareholders' funds (inclusive of compulsorily convertible instruments) increased from 15.4% to 21.3%. • Recurring/annuity income as a percentage of total operating income increased from 64.8% to 65.2%. • The ratio of total operating expenses to total operating income improved from 72.7% to 66.8%. • Investec Limited issued R2.3 billion (£207.3 million) of non-redeemable, non-cumulative, non-participating preference shares in February 2005. • The board proposes an increased final dividend of 37.0 pence per ordinary share equating to a full year dividend of 67.0 pence (2004: 58.0 pence) and a dividend cover based on the group's EPS before exceptional items and goodwill amortisation of 2.10 times (2004: 1.79 times). This is consistent with our policy of increasing our cover to the upper end of our target range of 1.7 to 2.3 times in years of strong performance. Commentary The financial information contained in this commentary is prepared in accordancewith UK GAAP. Rand values included in this section are translated into PoundsSterling - in the case of the profit and loss account at the weighted averagerate for the relevant period, and in the case of the balance sheets at therelevant closing rate. The average Rand/Pounds Sterling exchange rates were11.47 and 12.02 for the years ended 31 March 2005 and 31 March 2004,respectively, representing an appreciation of the Rand of approximately 5%during the period under review. Unless the context indicates otherwise, all comparatives relate to the yearended 31 March 2004. Business unit review Private Client Activities Our Private Client Activities, comprising the Private Banking and Private ClientPortfolio Management and Stockbroking divisions, reported substantial growth inoperating profit before exceptional items and amortisation of goodwill of 57.5%to £84.8 million from £53.9 million. • Private Banking Operating profit before exceptional items and amortisation of goodwill of thePrivate Banking division increased by 56.7% to £71.1 million driven by solidgrowth in total advances and non-interest income. Strong performances were recorded across the majority of Private Bankingactivities with notable performances from Specialised Lending, Property Finance,Growth Finance and Investment Management Activities. Since 31 March 2004, theglobal private client lending book has grown by 26.5% to £4.3 billion and thedivision increased its retail deposit book by 16.8% to £3.0 billion. • Private Client Portfolio Management and Stockbroking Private Client Portfolio Management and Stockbroking recorded strong growth,earning operating profit before exceptional items and amortisation of goodwillof £13.7 million, an increase of 61.7%. Improved equity market conditions and strict cost control benefited both CarrSheppards Crosthwaite in the UK and Private Client Securities in SA. Since 31March 2004, total private client funds under management have increased by 14.0%to £9.7 billion (excluding recently announced transactions). We have bolstered our Private Client Portfolio Management and Stockbrokingactivities through the acquisition of the SA private client business of HSBC andthe merger of Carr Sheppards Crosthwaite and Rensburg plc in the UK. Treasury and Specialised Finance The group's Treasury and Specialised Finance division posted operating profitbefore exceptional items and amortisation of goodwill of £47.9 million, anincrease of 33.9%. The SA business benefited from a relatively stable interest rate environment andan improvement in dealing profits following a disappointing performance in theprior period. The advisory and structuring businesses in the UK and SA performedwell with notable performances from the Project Finance, Resource Finance,Structured Finance and Financial Products divisions. These results were somewhatoffset by an unsatisfactory result recorded by the Commodities and EquityDerivative trading operations in the UK. Investment Banking The group's Investment Banking division recorded an increase in operating profitbefore exceptional items and amortisation of goodwill of 25.0% from £37.7million to £47.2 million. The Institutional Stockbroking operations performed well against a backdrop offavourable equity markets and the Corporate Finance divisions posted soundresults, with a solid performance reported by the UK division. The DirectInvestments and Private Equity divisions continued to benefit from the goodperformance of their underlying portfolios. Asset Management The Asset Management division delivered substantial growth in operating profitbefore exceptional items and amortisation of goodwill of 55.1% to £38.2 millionfrom £24.6 million. The division benefited from favourable market conditionswith assets under management increasing by 11.4% in Pounds Sterling to £22.9billion and by 12.0% in Rands to R268.9 billion. The UK and other international operations recorded a significant improvement inprofit due to strong net inflows across their product ranges, with investmentperformance remaining strong. The Southern African operations delivered solidfinancial results boosted by a combination of performance fees and additionalrevenue from rising portfolio prices over the period. Assurance Activities The group's SA assurance activities, conducted by Investec Employee Benefits(IEB) reported an increase in operating profit of 69.5% to £7.8 million. Thebusiness has benefited from an increase in embedded value as a consequence ofimproved efficiencies. The group risk business has been sold to Capital AllianceHoldings Limited (CAL) through a reinsurance contract executed on 31 December2004, and the earnings reflect income to the date of sale. Property Activities Operating profit before exceptional items and amortisation of goodwill of theProperty Activities division increased by 21.5% to £12.3 million. The divisionbenefited from an increase in funds under management in SA and realised gainsearned in the UK. Group Services and Other Activities Group Services and Other Activities incurred an operating loss of £29.8 millioncompared to the prior period loss of £34.4 million. The SA Central Fundingdivision benefited from an improved capital structure and a lower interest rateenvironment. These results were partially offset by a net increase in interestcosts in the UK Central Funding division following the issue of Tier IIsubordinated debt of £200 million in March 2004. Financial statements analysis Operating income Operating income increased by 23.5% to £692.6 million. The movements in totaloperating income are analysed further below. Net interest income increased by 26.1% to £132.7 million. We recorded stronggrowth in Private Banking and UK Treasury and Specialised Finance lendingportfolios, with total core loans and advances increasing by 20.7% to £5.8billion. A more stable interest rate environment in SA has led to an improvementin the performance of the Treasury and Specialised Finance and Central Fundingdivisions. Net fees and commissions increased by 28.3% to £411.4 million. This was largelyattributable to increased lending turnover and transactional activity in thePrivate Banking division and a sound performance by the UK Project Finance, UKInvestment Banking, Financial Products and Property divisions. The AssetManagement and Private Client Portfolio and Stockbroking divisions benefitedfrom improved equity market conditions and net inflows across a number of theproduct ranges. Dealing profits decreased by 23.7% to £68.7 million mainly as a result of themoderate performance of the trading investments held within the Property andPrivate Banking divisions in SA and certain other investments held directly bythe group in its corporate portfolio. The performance of the group's long-term assurance activities is discussed under"Business unit review". The growth in the return on shareholder's funds in the long-term assurancebusiness conducted through IEB results from the substantial increase in theaverage long-term assurance assets attributable to the shareholder from £186.9million to £248.1 million, supported by favourable capital market conditions. Other operating income increased by 58.1% to £19.3 million as a result of gainsachieved on the sale of investments in the underlying funds of the UK privateequity portfolio. Recurring/annuity income as a percentage of total operating income increasedfrom 64.8% to 65.2% (our target range is 70%-75%). Administrative expenses Administrative expenses increased by 14.6%. Variable remuneration increased by41.0% to £106.9 million due to increased profitability. Other operating expensesincreased by 8.3% to £346.0 million largely as a result of an increase incompliance, risk management and regulatory costs, an increase in rental costsgiven that the group no longer owns certain of the buildings from which itoperates, and an increase in consulting fees relating to certain projectsundertaken by us to improve efficiency which should result in long-term costsavings. We have made material progress towards reaching our operating expenses to totaloperating income target of 65% as the ratio improved from 72.7% to 66.8%,principally as a result of the strong growth in operating income of 23.5%. Goodwill amortisation and impairments The charge for goodwill amortisation and impairment increased from £50.6 millionto £51.8 million. Included in the current period is an amount of £5 millionrelating to negative goodwill arising from a structured finance transaction andan impairment of £8.8 million in respect of the Institutional Asset Managementbusiness in SA relating to the portfolio of businesses acquired from Fedsure. Provision for bad and doubtful debts The bad and doubtful debts charge in the profit and loss account increasedmarginally by 1.8% to £21.3 million. We have experienced an increase inprovisions as a result of book growth mitigated by bad debt recoveries andprovisions made in prior years against certain loans, which are no longerrequired. The percentage of gross non-performing loans (NPLs) to core loans and advancesdecreased from 1.8% to 0.9%. Total provision coverage remains highlysatisfactory both as a percentage of gross NPLs and net NPLs (gross NPLs net ofsecurity), at 157.9% and 409.1% respectively. The group's general provision as apercentage of net loans and advances has remained at approximately 1.2%. Share of income of associated companies The group's main associate was CAL. An amount of £14.0 million before goodwillamortisation was accrued, representing Investec's share of the estimate of CAL'soperating earnings for the year ended 31 March 2005. Taxation The effective tax rate of the group (excluding the tax effect of exceptionalitems) increased from 21.0% to 27.5% due to the reversal of deferred tax assetsas a result of reduced availability of assessed losses. Exceptional items Exceptional items comprise: £'millionProfits arising on the sale of the group's investment in CAL 8.1to Liberty Group LimitedReinsurance of the group risk business in IEB with CAL (1.8) • Profits arising on reinsurance 5.9 • Impairment of goodwill (7.7) Losses arising on the sale of the banking subsidiary in Israel (6.3)largely relating to a write down in the value of the buildingsit occupiedClosure of the Traded Endowments operation in the UK (6.4) • Losses arising on closure (3.7) • Impairment of goodwill (2.7) Losses relating to restructuring costs incurred in certain (2.2)businessesTotal exceptional items (8.6) Capital resources Total capital resources increased by 13.6% to £1.5 billion and totalshareholders' funds increased by 26.2% to £967 million largely as a result ofthe issue of R2.3 billion (£207.3 million) of non-redeemable, non-cumulative,non-participating preference shares by Investec Limited in February 2005. The annualised return on average total equity shareholders' funds, inclusive ofgoodwill, increased from 16.6% to 23.6%. The annualised return on adjustedshareholders' funds (inclusive of compulsorily convertible instruments)increased from 15.4% to 21.3%, exceeding our target of 20%. Investec plc and Investec Limited are well capitalised and capital adequacyratios comfortably exceed the minimum regulatory requirements. The capitaladequacy of Investec plc (applying UK Financial Services Authority rules to itscapital base) is 15.4% (March 2004: 17.3%). The capital adequacy of InvestecLimited (applying South African Reserve Bank rules to its capital base) is 20.1%(March 2004: 15.1%). Assets under administration Client assets under administration increased by 12.8% from £30.0 billion to£33.9 billion, with sound growth across all ranges of funds. On balance sheetassets grew by 16.9% from £15.3 billion to £17.9 billion largely as a result ofstrong growth in core advances. Outlook------- Our results reflect the benefit of strategic actions taken by group managementover the past few years to streamline the business and achieve greateroperational focus on core activities. During 2004 we identified and implementedsix key financial and growth targets by which to measure the group's performanceand as these results demonstrate we have moved rapidly towards meeting, orimproving on those financial targets. We continue to operate in a competitive environment where ongoing innovation andrapid, yet careful, response to competition is crucial. Within this challengingcontext we are very well positioned with the quality and balance of our earningssources. We firmly believe that our niche focus, our ability to be distinctive and thequality of our people will position us to take advantage of market conditionsand we are confident that opportunities ahead of us will allow us to continue togrow profitably in the forthcoming year. On behalf of the boards of Investec plc and Investec Limited Hugh Herman Stephen Koseff Bernard Kantor Chairman Chief Executive Officer Managing Director Presentation of financial information------------------------------------- Investec operates under a Dual Listed Companies (DLC) structure with primarylistings of Investec plc on the London Stock Exchange and Investec Limited onthe JSE Securities Exchange South Africa. In terms of the contracts constituting the DLC structure, Investec plc andInvestec Limited effectively form a single economic enterprise in which theeconomic and voting rights of shareholders of the companies are maintained inequilibrium relative to each other. The directors of the two companies considerthat for financial reporting purposes, the fairest presentation is achieved byconsolidating the results and financial position of both companies using mergeraccounting principles. Accordingly, the year-end results for Investec plc present the results andfinancial position of the combined DLC group under UK GAAP, denominated inPounds Sterling. However, because SA GAAP differs in certain respects from UKGAAP, the group publishes a high-level reconciliation and summary of theprincipal differences. In the commentary above, all references to Investec orthe group relate to the combined DLC group comprising Investec plc and InvestecLimited. As announced on 30 July 2004 Investec plc sold its 80.28% stake in Investec Bank(Israel) Limited to The First International Bank of Israel. The transaction wascompleted on 22 December 2004 and hence the results of Investec Bank (Israel)Limited to that date, have been consolidated into the group results for the yearended 31 March 2005. Accounting policies and disclosures----------------------------------- The comparative information provided in the financial information is for theyear ended 31 March 2004. Other than changes noted below, accounting policiesadopted by the group are consistent with the prior period. Change in accounting policies since the release of the 31 March 2004 annualresults UITF 38: Accounting for ESOP trusts The group has adopted UITF 38 in respect of accounting for employee shareincentive trusts (ESOP trusts). In summary the impact on the adoption of the newstandard is as follows: • Own shares held by the ESOP trusts (which have not vested to employees) are deducted from shareholders' funds (previously included on balance sheet as an asset under "own shares"). • No gain or loss is recognised in the profit and loss account or statement of total recognised gains and losses on the purchase, sale or cancellation of the group's own shares held by the ESOP trusts. • The net finance costs of the ESOP trusts are charged to the profit and loss account as they accrue. Other than UITF 38, the changes in policies noted below were already included inthe 31 March 2004 annual results. The impact of the change in accounting policies arising from the adoption ofUITF 38 is detailed below: Year to 31 March 2004 £'000Interest receivable 1 184Interest payable - -------Net interest income 1 184Other operating income (1 063) -------Profit on ordinary activities before taxation 121Taxation - -------Profit on ordinary activities after taxation 121 ------- The impact of the change in accounting policies arising from the adoption ofUITF 38 on reserves is detailed below: £'000Reserves at 31 March 2004 as previously reported 808 969UITF 38 (42 596) ----------Relating to 2004 opening reserves (51 502)Relating to 2004 movement in reserves 8 906Retained profit for the year 121Net reduction in treasury shares 5 764Net movement in share premium on reduction of treasuryshares 3 021 ---------- Restated total reserves at 31 March 2004 766 373 ----------- Conversion to International Financial Reporting Standards Under regulations adopted by the European Union as well as changes introduced tothe JSE Securities Exchange South Africa listing requirements, we are requiredto prepare our financial statements in accordance with International FinancialReporting Standards (IFRS) for the year ending 31 March 2006. The results relating to the six months ending 30 September 2005 will bepresented under IFRS, alongside restated comparative information in accordancewith IAS 34 - Interim Financial Reporting. The date of transition to IFRS willbe 1 April 2004, being the start of the earliest period for which comparativeinformation will be presented in the first set of IFRS compliant financialstatements. We have made significant progress in the conversion to IFRS. The majordifferences between IFRS and UK GAAP have been identified, and we are currentlyquantifying the impact. More detailed information will be made available priorto the release of the September 2005 interim results. The most significant areas of impact for us due to IFRS are as follows: Transition to IFRS IFRS 1 governs the conversion to and first time adoption of IFRS. We areanalysing the impact of the utilisation of certain exemptions allowed by thestandard, and will choose them in such a fashion as to strike a balance betweenfair presentation and practicability. We will disclose the impact of thetransition in accordance with this standard. Share based payments The introduction of IFRS 2 will result in the expensing of all share basedpayments made by us. The major area of impact will be as a result of the expensearising from share options granted to employees under share option schemes aswell as other long-term Incentive plans. Goodwill Existing goodwill will no longer be amortised, but tested for impairment on anannual basis in accordance with IFRS 3 - Business Combinations. Negativegoodwill will be released to the income statement as and when it arises. Insurance contracts IFRS 4 may lead to a gross-up on the balance sheet as a result of a restrictionon netting off reinsurance contracts and the related liabilities. Dividends IAS 10 - Events after Balance Sheet Date will prohibit the recognition of aliability for any dividends declared after balance sheet date. Financial instruments The adoption of IAS 32 - Financial Instruments: Disclosure and Presentation, andIAS 39 - Financial Instruments: Recognition and Measurement will result in thefollowing key changes: - All derivative financial instruments will be carried at fair value, regardless of whether they form part of the banking or trading books. Where possible, the effect of this will be negated by hedge accounting or treatment of related financial instruments at fair value.- Certain fees earned as part of lending transactions will be spread over the life of the lending arrangement as an integral component of the effective interest yield.- General provisions will no longer be raised.- Specific and portfolio impairments will be introduced, which take into account the discounting of future cash flows.- Certain financial assets and related liabilities may no longer be offset, which will result in gross values on the balance sheet. Dividend announcement Investec plc In terms of the DLC structure, Investec plc shareholders who are non-SouthAfrican resident shareholders may receive all or part of their dividendentitlements through dividends declared and paid by Investec plc on theirordinary shares and/or through dividends declared and paid on the SA DAN shareissued by Investec Limited. Investec plc shareholders who are South African residents, may receive all orpart of their dividend entitlements through dividends declared and paid byInvestec plc on their ordinary shares and / or through dividends declared andpaid on the SA DAS share issued by Investec Limited. Notice is hereby given that a final dividend (No. 6) has been proposed by theboard in respect of the year ended 31 March 2005. The Annual General Meeting ofmembers at which the proposed dividend will be considered for approval isscheduled to take place on Thursday, 11 August 2005. Shareholders in Investec plc will receive a total distribution of 37 pence(2004: 30 pence) per ordinary share, which will be paid as follows:- - for non-South African resident Investec plc shareholders, through a dividend paid by Investec plc of 37 pence per ordinary share.- for South African resident shareholders of Investec plc, through a dividend paid on the SA DAS share equivalent to 37 pence per ordinary share. The relevant dates for the payment of the dividends are:- Last day to trade cum-dividend: - On the London Stock Exchange Tuesday, 26 July 2005- On the JSE Securities Exchange South Africa Friday, 22 July 2005 Shares commence trading ex-dividend: - On the London Stock Exchange Wednesday, 27 July 2005- On the JSE Securities Exchange South Africa Monday, 25 July 2005 Record date:- On the London Stock Exchange Friday, 29 July 2005- On the JSE Securities Exchange South Africa Friday, 29 July 2005 Payment date:- United Kingdom register Monday, 15 August 2005- South African register Monday, 15 August 2005 Share certificates on the South African branch register may not bedematerialised or rematerialised between Monday, 25 July 2005 and Friday, 29July 2005, both dates inclusive, nor may transfers between the UK and SAregisters take place between Monday, 25 July 2005 and Friday, 29 July 2005, bothdates inclusive. Shareholders registered on the South African register are advised that the totaldistribution of 37 pence, equivalent to 437 cents per share, has been arrived atusing the Rand/Pounds Sterling average spot rate, as determined at 11h00 (SAtime) on 18 May 2005. By order of the board R VardyCompany Secretary 19 May 2005 Dividend announcement Investec Limited Notice is hereby given that a final dividend (No. 99) of 437 cents (2004:360 cents) per ordinary share has been proposed by the board in respect of theyear ended 31 March 2005. The Annual General Meeting of members at which theproposed dividend will be considered for approval is scheduled to take place onThursday, 11 August 2005. The dividend is payable to shareholders recorded in the members' register of thecompany at the close of business on Friday, 22 July 2005. The relevant dates for the payment of the dividend are: Last day to trade cum-dividend Friday, 22 July 2005Shares commence trading ex-dividend Monday, 25 July 2005Record date Friday, 29 July 2005Payment date Monday, 15 August 2005 The final dividend of 437 cents per ordinary share has been determined byconverting the Investec plc distribution of 37 pence per ordinary share intoRands using the Rand/Pounds Sterling average spot rate at 11h00 (SA time) on 18May 2005. Share certificates may not be dematerialised or rematerialised betweenMonday, 25 July 2005 and Friday, 29 July 2005, both dates inclusive. By order of the board S NoikCompany Secretary 19 May 2005 Further information Information provided on the Company's website at www.investec.com includes: • Copies of this statement. • The results presentation. • Additional report produced for the investment community including more detail on the results. • Excel worksheets containing the salient financial information in UK GAAP Pounds Sterling. Alternatively for further information please contact the Investor Relationsdivision on e-mail [email protected] or telephone +27 11 286 7070 /+44 207 597 5546. Investec plc (incorporating the results of Investec Limited) Consolidated UK GAAP financial results in Pounds Sterling for the year ended 31March 2005 Salient features 31 March % 31 MarchUK GAAP 2005 Change 2004* Operating profit before goodwill andtaxation (£'000) 208 343 57.5 132 260Earnings before goodwill andexceptional items (£'000) 151 146 42.3 106 203Profit attributable to shareholders 100 524 45.9 68 906(£'000)Earnings per share before goodwill andexceptional items (pence) 140.8 35.6 103.8Earnings per share (pence) 81.5 35.8 60.0Headline earnings per share (pence) 141.7 36.9 103.5Dividends per share (pence) 67.0 15.5 58.0 * Restated for changes to accounting policies and disclosures. Consolidated profit and loss account Year ended 31 March 2005 Year ended 31 March 2004* Before Goodwill Before Goodwill goodwill and goodwill and£'000 and exceptional and exceptional exceptional items Total exceptional items Total items itemsInterest receivable 81 061 - 81 061 91 845 - 91 845- interest incomearisingfrom debt securitiesInterest receivable 639 526 - 639 526 588 188 - 588 188- other interestincomeInterest payable (587 901) - (587 901) (574 822) - (574 822) Net interest income 132 686 - 132 686 105 211 - 105 211 Dividend income 9 887 - 9 887 3 450 - 3 450Fees and commissions 434 978 - 434 978 340 712 - 340 712receivable- Annuity 325 527 - 325 527 266 373 - 266 373- Deal 109 451 - 109 451 74 339 - 74 339Fees and commission (23 611) - (23 611) (20 046) - (20 046)payable Dealing profits 68 747 - 68 747 90 127 - 90 127Income from long-term 7 763 - 7 763 5 082 - 5 082assurance businessReturn on 42 837 - 42 837 24 122 - 24 122shareholder'sfunds in thelong-termassurance businessOther operating 19 278 - 19 278 12 196 - 12 196incomeOther income 559 879 - 559 879 455 643 - 455 643 Total operating 692 565 - 692 565 560 854 - 560 854income Administrative (452 848) - (452 848) (395 188) - (395 188)expenses Depreciation and (10 040) (51 807) (61 847) (12 448) (50 644) (63 092)amortisation -tangible fixed (10 040) - (10 040) (12 448) - (12 448)assets -amortisation and - (51 807) (51 807) - (50 644) (50 644)impairment of goodwillProvision for bad and (21 334) - (21 334) (20 958) - (20 958)doubtful debts Operating profit 208 343 (51 807) 156 536 132 260 (50 644) 81 616 Share of income of 14 045 (3 197) 10 848 11 205 (2 132) 9 073associated companiesExceptional items - (8 635) (8 635) - 8 529 8 529 Provision for losses - - - - (5 103) (5 103)on termination anddisposal of groupoperations -discontinuedLosses on termination - (3 492) (3 492) - (24 328) (24 328)and disposal of group operations -discontinuedLess provision made - 3 492 3 492 - 19 225 19 225last year(Loss)/profit on - (8 635) (8 635) - 13 632 13 632terminationand disposal of groupoperations -continuing Profit on ordinary 222 388 (63 639) 158 749 143 465 (44 247) 99 218activitiesbefore taxation Tax on profit on (57 265) - (57 265) (27 821) (678) (28 499)ordinary activities Tax on profit on (57 265) - (57 265) (27 821) - (27 821)ordinary continuing activitiesTax on termination - - - - (678) (678)anddisposal of groupoperations -continuing Profit on ordinary 165 123 (63 639) 101 484 115 644 (44 925) 70 719activitiesafter taxation Minority (960) - (960) (1 888) 75 (1 813)interests-equity Profit attributable 164 163 (63 639) 100 524 113 756 (44 850) 68 906to shareholders Dividends-including (83 606) - (83 606) (63 709) - (63 709)non-equity Retained profit for 80 557 (63 639) 16 918 50 047 (44 850) 5 197the year * Restated for changes to accounting policies and disclosure Earnings and dividends per share Year ended Year ended 31 March 31 March 2005 2004*£'000 Profit attributable to shareholders 100 524 68 906Amortisation and impairment of goodwill 51 807 50 644Loss/(profit) on termination and disposal of groupoperations (net of taxation and minority interest) 8 635 (13 029)Provision for losses on termination and disposal ofgroup - 5 103operations (net of deferred tax)Amortisation of goodwill of associates 3 197 2 132Preference dividends (13 017) (7 553)---------------------------------------------------------------------------Earnings before goodwill and exceptional items 151 146 106 203--------------------------------------------------------------------------- Earnings per share (pence)- Basic 81.5 60.0- Diluted 79.0 59.6 Excluding goodwill and exceptional items- Basic 140.8 103.8- Diluted 133.0 100.8 Dividends per share (pence) 67.0 58.0Weighted number of ordinary shares in issue (million) 107.4 102.3 • Restated for changes to accounting policies and disclosures. Consolidated statement of recognised gains and losses Year ended Year ended£'000 2005 2004*Profit for the year attributable to 100 524 68 906shareholdersTranslation differences on foreign currency (2 724) (5 203)net investments - equityTranslation differences on foreign currency net (10 472) 1 099investments - perpetual preference sharesUnrealised surplus on revaluation of investment 4 478 13 982propertiesActuarial gains/(losses) net of deferred tax 2 370 (1 294)recognised on pension fund schemesTotal recognised gains and losses for the year 94 176 77 490Prior year adjustments in respect of changes in (43)accounting policies relating to the adoption ofUITF 38Total gains and losses since last annual report 94 133 * Restated for changes to accounting policies and disclosures. Consolidated balance sheet 31 March 31 March 2005 2004*£'000 AssetsCash and balances at central banks 105 130 363 862Treasury bills and other eligible bills 323 622 332 208Loans and advances to banks 2 961 809 1 704 715Loans and advances to customers 7 391 038 6 347 032Debt securities 1 986 864 1 466 437Equity shares 439 963 418 254Interests in associated undertakings 3 559 70 006Other participating interests 9 124 9 135Intangible fixed assets 193 317 251 508Tangible fixed assets 125 022 146 326Other assets 1 202 305 1 081 131Prepayments and accrued income 122 899 81 511Long-term assurance business attributable to the 230 885 265 315shareholder 15 095 537 12 537 440Long-term assurance assets attributable to 2 815 137 2 781 335policyholders 17 910 674 15 318 775LiabilitiesDeposits by banks 912 320 1 233 609Customer accounts 6 805 429 7 211 292Debt securities in issue 1 925 124 621 857Other liabilities 3 737 901 1 969 855Accruals and deferred income 226 763 185 600Pension fund liability 7 554 11 967 13 615 091 11 234 180Long-term assurance liabilities attributable to 2 815 137 2 781 335policyholders 16 430 228 14 015 515Capital ResourcesSubordinated liabilities (including convertible 499 995 497 858debt)Minority interests - equity 13 195 39 029 Called up share capital 165 165Share premium account 1 029 242 1 027 539Treasury shares (118 694) (101 304)Shares to be issued 2 191 2 666Perpetual preference shares 323 800 127 797Revaluation reserves 47 620 43 142Other reserves (189 663) (169 501)Profit and loss account (127 405) (164 131)Shareholders' funds 967 256 766 373- equity 643 456 638 576- non-equity 323 800 127 797 1 480 446 1 303 260 17 910 674 15 318 775 * Restated for changes to accounting policies and disclosures. Consolidated cash flow statement Year ended Year ended£'000 31 March 31 March 2005 2004* Net cash inflow from trading activities 281 114 166 911Increase/(decrease) in other operating assets/liabilities 1 085 756 (656 282) 1 366 870 (489 371)Dividends received from associated undertakings 4 893 3 769Net cash outflow from return on investments andservicing of finance (71 966) (54 318)Taxation (21 764) (31 917)Net cash (outflow)/inflow from capitalexpenditure (460 102) 334 187and financial investmentNet cash (outflow)/inflow from acquisitions anddisposals (70 224) 40 227Ordinary share dividends paid (60 749) (52 810)Net cash inflow from financing 194 465 389 225 Increase in cash 881 423 138 992 Cash and demand bank balances at beginning ofyear 1 172 894 1 033 902Cash and demand bank balances at end of year 2 054 317 1 172 894 * Restated for changes to accounting policies and disclosures. Segmental analysis - geographical and business analysis of operating profitbefore taxation, exceptional items and amortisation of goodwill For the year ended 31 March 2005 United£'000 Kingdom Southern and Other Total Africa Europe Australia geographiesPrivate Client Activities 33 586 45 081 4 119 2 051 84 837Treasury and Specialised 31 121 15 527 1 496 (210) 47 934FinanceInvestment Banking 26 186 15 290 3 515 2 165 47 156Asset Management andAssurance Activities 40 382 5 373 - 185 45 940Property Activities 7 233 5 071 - - 12 304Group Services and OtherActivities (5 571) (25 394) 2 328 (1 191) (29 828) 132 937 60 948 11 458 3 000 208 343 For the year ended 31 March 2004* United £'000 Kingdom Southern and Other Africa Europe Australia geographies Total Private Client Activities 19 610 30 627 3 025 600 53 862 Treasury and Specialised 18 887 14 015 436 2 467 35 805 Finance Investment Banking 27 147 2 939 4 312 3 321 37 719 Asset Management and Assurance Activities 27 322 1 614 - 257 29 193 Property Activities 8 605 1 521 - - 10 126 Group Services and Other Activities (24 022) (11 982) 1 853 (294) (34 445) 77 549 38 734 9 626 6 351 132 260 *Restated for changes to accounting policies and disclosures. Consolidated statement of reconciliations of shareholders' funds and movementson reserves Year ended Year ended 31 March 31 March£'000 2005 2004* Balance at the beginning of the year 766 373 588 466As previously reported 808 969 639 968Changes in accounting policiesAdoption of UITF 38: Accounting for ESOPtrusts (42 596) (51 502)Retained profit for the year 16 918 5 197Foreign currency adjustments - equity (2 724) (5 203)Issue of ordinary shares/shares to be - 46 325issuedNet movement of perpetual preference 196 003 126 552shares Issue of perpetual preference shares 207 313 127 484 Share issue expenses (838) (2 031) Foreign currency adjustments - perpetual preference shares (10 472) 1 099Share premium movement on re-issue oftreasury shares 1 703 18 975Net purchase of treasury shares (17 865) (25 571)Actuarial gains/(losses) net of deferredtax recognised on pension fund schemes 2 370 (1 294)Revaluation of investment properties 4 478 13 982Reduction of shareholding in associates - (1 056)Balance at end of year 967 256 766 373 * Restated for changes to accounting policies and disclosures. 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