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Half Yearly Report

27th Nov 2014 07:00

RNS Number : 1181Y

Charles Stanley Group PLC

27 November 2014

CHARLES STANLEY GROUP PLC

RESULTS FOR THE SIX MONTHS ENDED 30 SEPTEMBER 2014

Charles Stanley is one of the UK's leading independently owned, full service investment management groups. Today it announces its preliminary results for the six months ended 30 September 2014.

Highlights:

· Total funds £20.2 billion (31 March 2014: £20.1 billion, 30 September 2013: £18.5 billion)

· Discretionary funds £8.7 billion (31 March 2014: £8.2 billion, 30 September 2013: £6.9 billion)

· Charles Stanley Direct account holders grew to over 17,500 and revenues up 66.7%

· Underlying profit before tax £1.5 million (first half 2013/14: £8.0 million)

· Underlying earnings per share 1.54p (first half 2013/14: 13.74p)

· Loss before tax £3.9 million (first half profit 2013/14: £4.9 million)

· Basic earnings per share (7.90p) (first half 2013/14: 8.52p)

· Maintained interim dividend per share 3.00p (first half 2013/14: 3.00p)

· Paul Abberley's appointment as Chief Executive (subject to regulatory approval) announced in November 2014

Commenting on the results Sir David Howard, Chairman said:

"It is disappointing to have to report a loss before tax of £3.9 million and a reduced underlying profit before tax of £1.5 million, not least because this does not reflect the good progress achieved in many areas of the Group. We are investing heavily in a major upgrade of our systems and processes to enhance the proposition to our clients, and in several developments for the future including our award-winning service Charles Stanley Direct. This has impacted on our costs in a period of static markets and revenue.

I am delighted that Paul Abberley has accepted the Board's invitation to succeed me as Chief Executive of Charles Stanley, having previously been Chief Executive of Aviva Investors London. Paul brings a fresh perspective to our business and we are committed to restoring our profitability."

For further information please contact:

Charles Stanley Group PLC	Canaccord Genuity	Peel Hunt LLP
Magnus Wheatley	Martin Green	Guy Wiehahn
Head of Press & Public Relations
Phone: 020 7149 6273	Phone: 020 7523 4619	Phone: 020 7418 8893

CHAIRMAN'S STATEMENT

The past six months have been a period of steady development by Charles Stanley against a difficult background. Clients' funds under management and administration increased by 0.5% since 31 March 2014, from £20.1 billion to £20.2 billion, compared to a rise of 0.4% in the FTSE 100 Index. However within these figures the funds under discretionary management increased by 6.1% over the same period, from £8.2 billion to £8.7 billion, while other fund categories - Advisory Managed, Advisory Dealing and Execution-only - declined. This continuing shift in the balance in favour of discretionary managed funds means that at 30 September 2014 they represented 43.1% of the total funds under management and administration compared to 40.8% at our March 2014 year-end.

Group revenues have increased 4.1% to £72.9m (first half-year 2013/14: £70.0m), with notable growth achieved by our Financial Services Division and Charles Stanley Direct, respectively up 20.6% and 66.7%. In our Investment Management Division, which represents 80.4% of Group revenues, there has been a mixed performance, with strong growth of fee income from Managed services offset by lower commission income and a decline in income from Administered clients. This results from a combination of factors. The re-pricing programme to which I drew attention in our interim statement last year reflects enhancements in our service to our clients following the Retail Distribution Review, and a re-balancing of our charging structure with a greater emphasis on investment management fees and less on commission charged on transactions. This in turn has brought about a re-balancing between our different services. The improvement in fee income has been achieved despite the fact that we have suffered, as expected, a small percentage of attrition amongst clients with lower levels of investment assets. This is reflected particularly in the 8.3% reduction in client funds in our advisory dealing service since the March year-end. So the increase in fee income has been driven by a combination of re-pricing, increasing substitution of fees for commission income, and of re-balancing our mix of services.

Against this welcome but marginal improvement in our income, we have experienced a significant increase in our costs to £77.0m (first half-year 2013/14: £65.4m). I referred to this in our last Annual Report, for the year ended 31 March 2014. We have been carrying out a major upgrade of our systems and processes to meet the rising expectations of our clients and our regulators and there has been an increase in headcount to support this. We are very pleased with how this is taking shape and believe that it will add considerable strength - and still greater quality - to our basic proposition to our clients. At the same time we continue to invest in several developments for the future, principally our award-winning web-based direct-to-client service, Charles Stanley Direct.

Consequently we report a loss before tax for the half-year of £3.9 million, compared to a profit of £4.9 million for the first half of the previous year. If the one-off costs are excluded, to give a more meaningful trading result, we show an adjusted profit for the period of £1.5 million, compared with a profit of £8.0 million for the six months to 30 September 2013.

DIVIDEND

The Company operates a progressive dividend policy, in light of which and the reported loss for the period, the Directors have decided to maintain an interim dividend at the same level as last year, at 3.00p net per share. The dividend will be paid on 21 January 2015 to shareholders registered on 5 December 2014.

THE BOARD

I am delighted at the appointment of Paul Abberley as Chief Executive Officer of the company, subject to regulatory approval. As a result of recent EU legislation, I will be stepping down after a happy but busy 42 years as CEO, managing director and managing partner. I will continue as non-executive chairman of the company.

Paul joined us in June as Chief Investment Officer and has already made a marked impression on the company. Prior to this appointment Paul was the Acting CEO of Aviva Investors and member of the Aviva Group Executive Committee, leading a series of strategic re-alignments with Aviva Investors where he had worked since 2008.

I am particularly grateful to our two Non-Executive Directors, David Pusinelli and Bridget Guerin, who undertook the search and recruitment process, and who interviewed a number of strong candidates from both within and outside the company.

Paul has commenced a strategic review of the business to identify the measures required to enhance the profitability of the Group and drive its long-term growth, and will present to shareholders in due course.

As reported to you previously, just after the year-end, on 9 April 2014, we were delighted to announce the appointment of Anthony Scott, our Head of Investment Management, as a Director.

This has been a very challenging period for all our Directors, both executive and non-executive, particularly with the intense pace of regulatory change in our industry, and I am very grateful for all their guidance and support.

THE CHARLES STANLEY TEAM

I should also like to give my thanks, and those of the Board, to everyone in the Charles Stanley team. Our ambitious programme of development and enhancement of our services poses significant challenges, and we are very grateful for the enthusiasm of everyone in the company in tackling these and, despite the dull trading background, in helping to build Charles Stanley into a stronger and even more client-focussed business.

OUTLOOK

The markets, through the period, have remained trapped in a narrow trading band reflecting the uncertainty that abounds in both the Eurozone and domestically. In the absence of an upturn in trading levels and market volatility our margins are likely to remain under pressure in the second half of the year. For the longer term, I am confident that the investment we are making, both in our traditional investment management business and in Charles Stanley Direct, together with the output from the strategic review which Paul Abberley has commenced, will lead to a further enhancement in the high quality of service to our clients, as well as restoring the company's profitability.

Sir David Howard

Chairman

26 November 2014

BUSINESS REVIEW

OVERVIEW

Good progress has been made during the period in increasing Discretionary funds under management, increasing fees and investing in the Group's infrastructure to support future growth; however, overall trading has been disappointing. In part this has been due to subdued market conditions with the FTSE 100 index and FTSE WMA Stock Market Balanced Index respectively up 0.4% and 2.0%, in part due to costs having risen ahead of revenues as the group has been investing for the future, and in part due to the fact that the regulatory costs of providing wealth management services continue to rise.

Client funds

Client funds for the Group increased 0.5% over the half year to 30 September 2014. Discretionary managed funds grew strongly by 6.1% as the migration from Advisory and Execution-only services continues. This is summarised below:

				Change	Change
	Sept	Sept	March	Sept	March
	2014	2013	2014	2013	2014
	£bn	£bn	£bn	%	%
Discretionary	8.7	6.9	8.2	26.1%	6.1%
Advisory managed	2.9	2.8	3.0	3.6%	(3.3%)
Total managed	11.6	9.7	11.2	19.6%	3.6%

Advisory dealing	2.2	2.5	2.4	(12.0%)	(8.3%)
Execution-only	6.4	6.3	6.5	1.6%	(1.5%)
Total administered	8.6	8.8	8.9	(2.3%)	(3.4%)
Total funds	20.2	18.5	20.1	9.2%	0.5%
FTSE 100 Index	6,623	6,462	6,598	2.5%	0.4%
WMA Stock Market Balanced Index	3,454	3,294	3,385	4.9%	2.0%

Trading performance

The increase in Discretionary funds combined with the impact of the revision of our charging structure, implemented toward the end of the last financial year, has been the principal contributor to group fee income increasing 17.8% compared with the half-year ended 30 September 2013. However, commission income declined 15.8%, leading to overall group revenues for the six months ended30 September 2014, increasing £2.9m to £72.9m (first half year 2013/14: £70.0m).

	Sept	Sept
	2014	2013	Change
	£m	£m	£m	%
Revenue
Fees	48.9	41.5	7.4	17.8%
Commission	24.0	28.5	(4.5)	(15.8%)
Total Revenue	72.9	70.0	2.9	4.1%
Administrative expenses	(77.0)	(65.4)	(11.6)	(17.7%)
Other income	0.1	0.1	-	-
Operating contribution	(4.0)	4.7	(8.7)	(185.1%)
Net interest and finance income	0.1	0.2	(0.1)	(50.0%)
Reported (loss)/profit before tax	(3.9)	4.9	(8.8)	(179.6%)
Add back:
Charles Stanley Direct one-off costs	-	0.3	(0.3)	-
FSCS levy	1.6	1.2	0.4	33.3%
Amortisation of intangible assets	1.3	1.1	0.2	18.2%
Leicester branch one-off costs	0.3	0.5	(0.2)	(40.0%)
Restructuring costs	2.6	-	2.6	-
Reduction in deferred consideration	(0.4)	-	(0.4)	-
Underlying profit before tax	1.5	8.0	(6.5)	(81.3%)

While revenues for the period have grown 4.1%, administrative costs excluding adjusting items that total £5.4m (first half year 2013/14: £3.1m) increased 14.9% to £71.6m (first half year 2013/14: £62.3m), resulting in the underlying operating profit for the period falling to £1.5m (first half year 2013/14: £8.0m). As previously reported in the annual accounts, costs have increased due to a combination of business growth, investment in the future of the business and upgrading the quality of the service of our principal business of Discretionary and Advisory investment management. Most notably, staff costs have increased by £6.3m as a result of increased variable staff costs related to revenue growth and increased headcount in both front and back office.

DIVISIONAL REVIEW

The Group is organised into four operating divisions: Investment Management Services, Financial Services, Charles Stanley Direct and Charles Stanley Securities. The split of funds, revenues and expenses between the divisions is shown in the following tables and their performance reviewed in more detail below.

In order to show more accurately the underlying contribution of each division, a greater proportion of indirect central overheads have been allocated to each division. Prior year comparatives have been restated to reflect the same cost allocation methodology.

Funds under management

	Sept				Sept
	2014				2013
	Total	IM Services	Financial Services	Charles Stanley Direct	Total	IM Services	Financial Services	Charles Stanley Direct
	£bn	£bn	£bn	£bn	£bn	£bn	£bn	£bn
Discretionary	8.7	8.1	0.6	-	6.9	6.8	0.1	-
Advisory Managed	2.9	2.6	0.3	-	2.8	2.5	0.3	-
Total managed	11.6	10.7	0.9	-	9.7	9.3	0.4	-
Advisory Dealing	2.2	2.2	-	-	2.5	2.5	-	-
Execution-only	6.4	4.9	-	1.5	6.3	5.0	-	1.3
Total administered	8.6	7.1	-	1.5	8.8	7.5	-	1.3
Total funds	20.2	17.8	0.9	1.5	18.5	16.8	0.4	1.3

Revenue for six months ended

	Sept			Sept
	2014			2013
	Total	Fees	Commi-ssions	Total	Fees	Commi-ssions
	£m	£m	£m	£m	£m	£m
Investment Management Services	58.6	36.8	21.8	57.3	31.4	25.9
Financial Services	7.6	7.4	0.2	6.3	6.1	0.2
Charles Stanley Direct	2.5	2.1	0.4	1.5	1.1	0.4
Charles Stanley Securities	4.2	2.6	1.6	4.9	2.9	2.0
	72.9	48.9	24.0	70.0	41.5	28.5

Administrative expenses for six months ended

	Sept	Sept
	2014	2013	Change
	£m	£m	£m	%
Investment Management Services	47.8	43.9	3.9	8.9%
Financial Services	8.1	6.3	1.8	28.6%
Charles Stanley Direct	4.4	2.6	1.8	69.2%
Charles Stanley Securities	5.0	4.7	0.3	6.4%

	65.3	57.5	7.8	13.6%
Central costs	11.7	7.9	3.8	48.1%
	77.0	65.4	11.6	17.7%

INVESTMENT MANAGEMENT SERVICES

Funds managed and administered for our Investment Management Services clients and the movements during the half year have been relatively static, increasing 0.6% since 31 March 2014 to £17.8bn at 30 September 2014. As shown in the table below, market movement of 2.3% has compensated for a small net outflow of administered funds which has occurred as a result of the revision to our charging structures implemented at the end of last year which included increased minimums.

		Managed	Administered	Total	Change
		£bn	£bn	£bn	%

Funds at 1 April 2014		10.3	7.4	17.7

Clients of new investment managers		0.2	0. 2	0.4
Net inflow/(outflow) from existing clients	0.1		(0.6)	(0.5)
Lost clients	(0.1)		(0.1)	(0.2)

Net inflow/(outflow) of funds	0.2		(0.5)	(0.3)	(1.7%)
Market movement	0.2		0.2	0.4	2.3%
Funds at 30 September 2014	10.7		7.1	17.8	0.6%

Consistent with the marginal increase in fund levels, revenues for the division have increased modestly by 2.3%, though this overall change masks strong growth in the revenues of our Managed business, up 10.2%, offset by a decline of Administered business by 16.4%.

	Sept	Sept
	2014	2013	Change
	£m	£m	£m	%
Managed	44.3	40.2	4.1	10.2%
Administered	14.3	17.1	(2.8)	(16.4%)
Total income	58.6	57.3	1.3	2.3%
Administrative expenses	(47.8)	(43.9)	(3.9)	(8.9%)
Operating contribution	10.8	13.4	(2.6)	(19.4%)
Managed as % of total	75.6%	70.2%

There were a number of contributory factors to the good progress made by our Managed business, primarily being strong growth of discretionary funds under management and fees arising therefrom, offset by a lower rate of growth of advisory managed funds and a decline in commissions. These trends have been driven by our continuing focus on encouraging more clients toward a fee paying discretionary service at the expense of charging less commission. Lower commission levels have also resulted from a lower level of dealing activity during the period. Thus on our discretionary book of business, average funds under management increased 20% and fees increased 26.5%, but commission income declined 15.0%. For the advisory managed book, average funds under management increased 3.8%, fee income 21.4% but commission income fell 16.7%.

Overall, our Managed business enjoyed a 10.2% increase in revenues deriving from a 15.4% increase in average funds offset by a 4 basis point decline in margin.

Income from managed clients

	Sept			Sept
	2014			2013			Change
	Total	Disc	Adv	Total	Disc	Adv
	£m	£m	£m	£m	£m	£m	£m	%
Fees	31.6	24.8	6.8	25.2	19.6	5.6	6.4	25.4%
Commission	12.7	10.2	2.5	15.0	12.0	3.0	(2.3)	(15.3%)
	44.3	35.0	9.3	40.2	31.6	8.6	4.1	10.2%
	£bn	£bn	£bn	£bn	£bn	£bn	£bn	%
Average funds	10.5	7.8	2.7	9.1	6.5	2.6	1.4	15.4%
	bp	bp	bp	bp	bp	bp	bp	%
Revenue margin (%)	0.84	0.90	0.69	0.88	0.97	0.67	0.04	(4.6%)

For the Investment Management division as a whole, the encouraging revenue performance from our Managed business was materially offset by a sharp drop in our Administered business whose income declined to £14.3m (first half year 2013/14: £17.1m). As shown in the table below, this decline comprised a £1.0m drop in fee income because of a further reduction in net interest earned on deposits and decline in trail income, and a £1.8m drop in commission income as transaction volumes declined by 22%.

Income from administered clients

	Sept			Sept
	2014			2013			Change
	Total	Adv	Exe	Total	Adv	Exe
	£m	£m	£m	£m	£m	£m	£m	%
Fees	5.2	1.7	3.5	6.2	2.1	4.1	(1.0)	(16.1%)
Commission	9.1	2.8	6.3	10.9	4.1	6.8	(1.8)	(16.5%)
	14.3	4.5	9.8	17.1	6.2	10.9	(2.8)	(16.4%)

FINANCIAL SERVICES

Total income for the Financial Services division grew by 20.6% from £6.3m to £7.6m including first time revenues of £0.8m from Charles Stanley Pan Asset which was acquired in December 2013.

	Sept	Sept
	2014	2013	Change
	£m	£m	£m	%
Financial planning and wealth management	2.8	2.6	0.2	7.7%
EBS Management PLC	1.2	1.1	0.1	9.1%
Charles Stanley Financial Solutions Limited	1.5	1.6	(0.1)	(6.3%)
Charles Stanley Pan Asset Capital Management Limited	0.8	-	0.8	-
Matterley	1.3	1.0	0.3	30.0%
Total revenue	7.6	6.3	1.3	20.6%
Administrative expenses	(8.1)	(6.3)	(1.8)	28.6%
Operating contribution	(0.5)	-	(0.5)

Financial planning and wealth management

The Financial Planning and Wealth Management department has increased its gross revenue by 7.7% over the year. This is a satisfactory result in light of changes in the wealth management industry as trail income is being replaced by adviser charging and customer agreed remuneration. We have addressed many of the issues created by the Retail Distribution Review and believe the business is well placed to benefit from the opportunities that we can foresee including those presented by the changing pension regime.

EBS Management PLC

EBS continues to enjoy strong growth of SIPP schemes, up 8% in the year to date, which continues to drive revenues forward. The majority of this growth has been of lower margin white labelled SIPPs. The Government's proposed changes to pension legislation are likely to give rise to further opportunities and challenges in adapting systems to cope, albeit that there remains much in the detail of the Government's proposals to be resolved.

Charles Stanley Financial Solutions Limited

Although revenue decreased marginally from £1.6m to £1.5m, the core employee benefits business increased 11% from £1.4m to £1.5m. This increase was achieved partly due to increased Auto Enrolment activity resulting in additional revenue from both existing and new corporate clients, and partly due to a growing number of opportunities from professional introducers; in particular, the exclusive Assurex Global partnership signed in July this year. These developments are helping to counter the likely impact on future revenues of capping of pension charges that will take effect in spring 2015, and the removal of pensions commissions from April 2016.

Charles Stanley Pan Asset Capital Management Limited

Charles Stanley Pan Asset made a first-time contribution of revenues for the six months ended 30 September 2014 of £0.8m, having been acquired in December 2013. The team has now been integrated with the rest of the Group's investment management operations which has enabled planned cost savings to be realised.

A proportion of the consideration payable for Pan Asset is payable in December 2014 and June 2015, contingent on certain assets under management ("AUM") targets being achieved. In view of the fact that it is unlikely that the target level will be achieved, £0.4m of deferred consideration has been reversed. This has been shown as an adjusting item to underlying profit.

Matterley

Matterley, Charles Stanley's fund division, has seen assets increase 2.7% since the beginning of the year with notable performances from the Regular High Income Fund and the International Growth Fund. It was announced on 8 September 2014 that agreement had been reached to sell the Matterley Undervalued Asset Fund to Miton Group. Initial consideration of £0.8m will be paid on completion of the transaction in December.

	Sept	March
	2014	2014	Growth
	£m	£m	%
FP Matterley Regular High Income Fund	66.0	59.5	10.9%
FP Matterley Equity Fund	10.3	10.7	(3.7%)
FP Matterley International Growth Fund	18.8	16.7	12.6%
FP Matterley UK & International Growth Fund	86.6	80.7	7.3%
FP Matterley Undervalued Assets Fund	85.7	92.7	(7.6%)
Total	267.4	260.3	2.7%

CHARLES STANLEY DIRECT

Charles Stanley Direct is our full service direct-to-client digital investment platform that combines with existing Group back office settlement and custody for funds, stocks and shares. The new platform has been well received by the market and most recently won the Consumer Platform award for leading innovation at the Aberdeen UK Platform Awards 2014.

The quality of client service provision, both digitally and via telephone, has been reflected in the ongoing rapid increase in the number of accounts opened since public launch on 1st March 2013. 3,300 net new accounts have been opened (an increase of 22.9%) in this reporting period, to give total accounts in excess of 17,500 at 30 September 2014. Since 31 March 2014 assets under administration ("AUA") on the platform have increased by 16.8%, standing at £866m. The driver of this growth has been fund/ISA transfer business which generates monthly platform fees.

The Charles Stanley Direct division also includes the broadly static books of discount fund broker Garrison, and a white label stockbroking service.

The total AUA of the division is £1.5 billion.

As a result of the rapid increase in account numbers on the new platform, Charles Stanley Direct's revenues for the period increased 66.7% to £2.5m (first half-year 2013/14: £1.5m). Significant investment is continuing to be made into the platform as the Board believes there are considerable opportunities for rapid growth in the provision of digital direct platform and wealth management services.

Revenue

	Sept	Sept
	2014	2013	Change
	£m	£m	£m	%
Fees	2.1	1.1	1.0	90.9%
Commission	0.4	0.4	-	-
Total revenue	2.5	1.5	1.0	66.7%
Administrative expenses	(4.4)	(2.6)	(1.8)	(69.2%)
Operating contribution	(1.9)	(1.1)	(0.8)	(72.7%)

CHARLES STANLEY SECURITIES

Charles Stanley Securities, the Group's equity capital markets business focused on the small and mid-cap sector, has experienced lower revenues as a result of reduced secondary commissions in both equity and bond trading and lower corporate finance fees.

The division has been involved in raising a total of £77m on behalf of clients during the first half and currently acts for 46 retained clients. The division has a healthy pipeline of both M&A and equity capital market mandates for the second half of the financial year.

Revenue

	Sept	Sept
	2014	2013	Change
	£m	£m	£m	%
Fees	2.6	2.9	(0.3)	(10.3%)
Commission	1.6	2.0	(0.4)	(20.0%)
Total revenue	4.2	4.9	(0.7)	(14.3%)
Administrative expenses	(5.0)	(4.7)	(0.3)	(6.4%)
Operating contribution*	(0.8)	0.2	(1.0)	(500.0%)

\* The relationship with WG Partners, which made an operating contribution of £0.2m in September 2013, ceased at the beginning of the current financial year.

Charles Stanley Group PLC

CONDENSED CONSOLIDATED INTERIM INCOME STATEMENT

SIX MONTHS ENDED 30 SEPTEMBER 2014

		Unaudited half-year 30 Sept	Unaudited half-year 30 Sept	Audited year 31 March
		2014	2013	2014
	Notes	£'000	£'000	£'000

Continuing operations
Revenue	1	72,898	69,981	149,028
Administrative expenses		(77,062)	(65,435)	(143,440)
Other income		113	120	140


Operating (loss)/profit	3	(4,051)	4,666	5,728


Finance income	4	144	227	483
Finance costs	4	(38)	(28)	(85)

Net finance income	4	106	199	398


(Loss)/profit before tax		(3,945)	4,865	6,126
Tax expense	5	347	(1,012)	(1,369)

(Loss)/profit for the period attributable to equity shareholders		(3,598)	3,853	4,757

Earnings per share Basic	7	(7.90p)	8.52p	10.51p
Diluted	7	(7.86p)	8.44p	10.42p

The notes on pages 15 to 30 are an integral part of these condensed interim financial statements.

Charles Stanley Group PLC

CONDENSED CONSOLIDATED INTERIM STATEMENT OF COMPREHENSIVE INCOME

SIX MONTHS ENDED 30 SEPTEMBER 2014

	Unaudited	Unaudited	Audited
	half-year	half-year	year
	30 Sept	30 Sept	31 March
	2014	2013	2014
	£'000	£'000	£'000

(Loss)/profit for the period	(3,598)	3,853	4,757
Other comprehensive income
Items that will never be reclassified to profit or loss
Revaluation of property, plant and equipment	-	-	(67)
Related tax	-	-	16
Re-measurement of the defined benefit obligation	(3,282)	779	2,290
Related tax	675	(329)	(677)
Related tax	675	(329)	(677)
	(2,607)	450	1,562

Items that are or may be reclassified to profit or loss
Available-for-sale financial assets - net change in fair value	(548)	(70)	136
Available-for-sale financial assets - reclassified to profit or loss	540	-	140
Related tax	102	73	33
	94	3	309
Other comprehensive income for the period, net of tax	(2,513)	453	1,871
Total comprehensive income for the period attributable to equity shareholders	(6,111)	4,306	6,628

The notes on pages 15 to 30 are an integral part of these condensed interim financial statements.

Charles Stanley Group PLC

CONDENSED CONSOLIDATED INTERIM STATEMENT OF FINANCIAL POSITION

AT 30 SEPTEMBER 2014

		Unaudited	Unaudited	Audited
		30 Sept	30 Sept	31 March
		2014	2013	2014
	Notes	£'000	£'000	£'000
Assets
Intangible assets and goodwill	8	34,409	33,288	35,286
Property, plant and equipment	9	14,567	13,755	13,749
Deferred tax assets		2,104	1,579	1,282
Available-for-sale financial assets	10	6,860	7,068	7,300
Trade and other receivables		1,486	1,446	1,467
Non-current assets		59,426	57,136	59,084
Trade and other receivables		236,582	380,426	212,737
Financial assets at fair value through profit or loss		70	215	117
Cash and cash equivalents		18,943	27,775	38,567
Current tax assets		201	-	-
Current assets		255,796	408,416	251,421
Total assets		315,222	465,552	310,505

The notes on pages 15 to 30 are an integral part of these condensed interim financial statements.

Charles Stanley Group PLC

CONDENSED CONSOLIDATED INTERIM STATEMENT OF FINANCIAL POSITION (continued)

AT 30 SEPTEMBER 2014


		Unaudited	Unaudited	Audited
		30 Sept	30 Sept	31 March
		2014	2013	2014
	Notes	£'000	£'000	£'000
Equity
Ordinary shares	11	11,416	11,310	11,314
Share premium		3,514	2,560	2,597
Revaluation reserve		2,577	2,228	2,483
Retained earnings		56,657	66,223	67,009
Total equity attributable to equity holders of the Company		74,164	82,321	83,403
Non-controlling interests		24	53	24
Total equity		74,188	82,374	83,427
Liabilities
Trade and other payables		-	-	116
Borrowings	12	1,897	2,029	1,970
Employee benefits	13	10,307	8,263	6,933
Non-current liabilities		12,204	10,292	9,019
Trade and other payables		228,680	371,032	217,135
Borrowings	12	150	307	150
Current tax liabilities		-	1,547	774
Current liabilities		228,830	372,886	218,059
Total liabilities		241,034	383,178	227,078
Total equity and liabilities		315,222	465,552	310,505

The notes on pages 15 to 30 are an integral part of these condensed interim financial statements.

Charles Stanley Group PLC

CONDENSED CONSOLIDATED INTERIM STATEMENT OF CHANGES IN EQUITY

SIX MONTHS ENDED 30 SEPTEMBER 2014

	Share capital	Share premium	Re-valuation reserve	Retained earnings	Total	Non-controlling interests	Total equity
	Share capital	Share premium	Re-valuation reserve	Retained earnings	Total	Non-controlling interests	Total equity
	£'000	£'000	£'000	£'000	£'000	£'000	£'000

1 April 2013 (audited)	11,309	2,549	2,225	65,882	81,965	53	82,018

Profit for the period	-	-	-	3,853	3,853	-	3,853
Other comprehensive income:
Revaluation of available-for-sale financial assets	-	-	-	-	-	-	-
- net gain from change in fair values	-	-	(70)	-	(70)	-	(70)
Deferred tax on available-for-sale financial assets	-	-	73	-	73	-	73
Defined benefit plan actuarial gains	-	-	-	779	779	-	779
Deferred tax on defined benefit plan actuarial gains	-	-	-	(329)	(329)	-	(329)
Total other comprehensive income for the period	-	-	3	450	453	-	453

Total comprehensive income for the period	-	-	3	4,303	4,306	-	4,306
Dividends paid	-	-	-	(4,071)	(4,071)	-	(4,071)
Share options:
value of employee services	-	-	-	109	109	-	109
issue of shares	1	11	-	-	12	-	12
30 September 2013 (unaudited)	11,310	2,560	2,228	66,223	82,321	53	82,374
Profit for the period	-	-	-	904	904	-	904
Other comprehensive income:
Revaluation of property, plant and equipment	-	-	(67)	-	(67)	-	(67)
Deferred tax on property, plant and equipment	-	-	16	-	16	-	16
Revaluation of available-for-sale financial assets	-	-	-	-	-	-	-
- net gain from change in fair values	-	-	206	-	206	-	206
- net profit on disposal transferred to profit or loss	-	-	140	-	140	-	140
Deferred tax on available- for-sale financial assets	-	-	(40)	-	(40)	-	(40)
Defined benefit plan actuarial gains	-	-	-	1,511	1,511	-	1,511
Deferred tax on defined benefit plan actuarial gains	-	-	-	(348)	(348)	-	(348)
Total other comprehensive income for the period	-	-	255	1,163	1,418	-	1,418

Total comprehensive income for the period	-	-	255	2,067	2,322	-	2,322
Dividends paid to equity shareholders	-	-	-	(1,358)	(1,358)	(29)	(1,387)
Share options:
value of employee services	-	-	-	77	77	-	77
issue of shares	4	37	-	-	41	-	41
31 March 2014 (audited)	11,314	2,597	2,483	67,009	83,403	24	83,427
Loss for the period	-	-	-	(3,598)	(3,598)	-	(3,598)
Other comprehensive income:
Revaluation of available-for-sale financial assets	-	-	-	-	-	-	-
- net loss from change in fair values	-	-	(548)	-	(548)	-	(548)
- net profit on disposal transferred to profit or loss	-	-	540	-	540	-	540
Deferred tax on available-for-sale financial assets	-	-	102	-	102	-	102
Defined benefit plan actuarial loss	-	-	-	(3,282)	(3,282)	-	(3,282)
Deferred tax on defined benefit plan actuarial gains	-	-	-	675	675	-	675
Total other comprehensive income for the period	-	-	94	(2,607)	(2,513)	-	(2,513)
Total comprehensive income for the year	-	-	94	(6,205)	(6,111)	-	(6,111)
Dividends paid	-	-	-	(4,223)	(4,223)	-	(4,223)
Share options:
value of employee services	-	-	-	76	76	-	76
issue of shares	102	917	-	-	1,019	-	1,019

30 September 2014 (unaudited)	11,416	3,514	2,577	56,657	74,164	24	74,188

The notes on pages 15 to 30 are an integral part of these condensed interim financial statements.

Charles Stanley Group PLC

CONDENSED CONSOLIDATED INTERIM STATEMENT OF CASH FLOWS

SIX MONTHS ENDED 30 SEPTEMBER 2014

		Unaudited	Unaudited	Audited
		Half-year	Half-year	Year
		30 Sept	30 Sept	31 March
		2014	2013	2014
	Notes	£'000	£'000	£'000
Cash flows from operating activities
Cash (absorbed by)/generated from operations	15	(11,224)	(593)	17,184
Interest received		96	189	483
Interest paid		(38)	(28)	(85)
Tax paid		(672)	(1,124)	(2,384)
Net cash (outflows)/inflows from operating activities		(11,838)	(1,556)	15,198

Cash flows from investing activities
Acquisition of subsidiaries and other businesses		-	-	(1,208)
Acquisition of intangible assets	8	(2,191)	(1,593)	(2,272)
Purchase of property, plant and equipment	9	(2,411)	(7,634)	(10,552)
Purchase of available-for-sale financial assets	10	(211)	(229)	(2,479)
Proceeds from sale of available-for-sale financial assets		191	166	2,644
Dividends received		113	120	140
Net cash used in investing activities		(4,509)	(9,170)	(13,727)

Cash flows from financing activities
Proceeds from issue of ordinary share capital		1,019	12	53
Cash (outflow)/inflow from debt and lease financing		(73)	2,179	2,120
Dividends paid	6	(4,223)	(4,071)	(5,458)
Net cash used in financing activities		(3,277)	(1,880)	(3,285)
Net decrease in cash and cash equivalents		(19,624)	(12,606)	(1,814)
Cash and cash equivalents at start of period		38,567	40,381	40,381
Cash and cash equivalents at end of period		18,943	27,775	38,567

The notes on pages 15 to 30 are an integral part of these condensed consolidated financial statements.

Charles Stanley Group PLC

NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS

SIX MONTHS ENDED 30 SEPTEMBER 2014

1 OPERATING SEGMENTS

The Group has four strategic divisions which are its reportable segments. These segments are the basis on which the Group reports its performance to the Board, which is the Group's chief operating decision maker. The operations of each division are described below:

Division	Operations
Investment Management Services	Provision of investment services to individuals, companies, trusts and charities;
Financial Services	SIPP and SSAS administration, employee benefits, financial planning and wealth management;
Charles Stanley Direct	Direct-to-client investment service including online dealing; and
Charles Stanley Securities	Advisory, broking and corporate finance services for smaller and mid-cap UK listed companies

	Investment Management Services	Financial Services	Charles Stanley Direct	Charles Stanley Securities	Sub-total	Central	Total
	£'000	£'000	£'000	£'000	£'000	£'000	£'000
Six months ended 30 September 2014
Fees
Investment management	27,928	647	-	-	28,575	-	28,575
Administration	8,851	6,723	2,135	83	17,792	-	17,792
Corporate finance	-	-	-	2,565	2,565	-	2,565
	36,779	7,370	2,135	2,648	48,932	-	48,932
Commission	21,814	210	400	1,542	23,966	-	23,966
Total Revenue	58,593	7,580	2,535	4,190	72,898	-	72,898
Administrative expenses	(47,827)	(8,127)	(4,376)	(5,027)	(65,357)	(11,705)	(77,062)
Other income	-	-	-	-	-	113	113
Operating contribution	10,766	(547)	(1,841)	(837)	7,541	(11,592)	(4,051)
Segment assets	234,695	10,781	12,106	5,264	262,846	52,376	315,222
Segment liabilities	207,541	1,167	200	2,569	211,477	29,557	241,034

	Investment Management Services	Financial Services	Charles Stanley Direct	Charles Stanley Securities	Sub-total	Central	Total
	£'000	£'000	£'000	£'000	£'000	£'000	£'000
Six months ended 30 September 2013
Fees
Investment management	20,961	420	-	-	21,381	-	21,381
Administration	10,469	5,669	1,125	60	17,323	-	17,323
Corporate finance	-	-	-	2,808	2,808	-	2,808
	31,430	6,089	1,125	2,868	41,512	-	41,512
Commission	25,898	200	338	2,033	28,469	-	28,469
Total Revenue	57,328	6,289	1,463	4,901	69,981	-	69,981
Administrative expenses*	(43,931)	(6,327)	(2,625)	(4,667)	(57,550)	(7,885)	(65,435)
Other income	-	-	-	-	-	120	120
Operating contribution	13,397	(38)	(1,162)	234	12,431	(7,765)	4,666
Segment assets	328,858	8,637	10,768	63,523	411,786	53,766	465,552
Segment liabilities	267,904	472	174	93,019	361,569	21,609	383,178

Year ended 31 March 2014
Fees
Investment management	44,592	885	-	-	45,477	-	45,477
Administration	20,086	11,983	2,446	109	34,624	-	34,624
Corporate finance	-	-	-	10,525	10,525	-	10,525
	64,678	12,868	2,446	10,634	90,626	-	90,626
Commission	53,203	424	753	4,022	58,402	-	58,402
Total Revenue	117,881	13,292	3,199	14,656	149,028	-	149,028
Administrative expenses*	(93,416)	(14,021)	(5,683)	(12,009)	(125,129)	(18,311)	(143,440)
Other income	-	-	-	-	-	140	140
Operating contribution	24,465	(729)	(2,484)	2,647	23,899	(18,171)	5,728
Segment assets	212,211	12,530	12,115	6,505	243,361	67,144	310,505
Segment liabilities	189,364	1,289	204	2,471	193,328	33,750	227,078

*Administrative expenses for prior years have been re-allocated to each division in accordance with the current year.

2 EMPLOYEE BENEFIT EXPENSES

	30 Sept	30 Sept	31 March
	2014	2013	2014
	£'000	£'000	£'000
Staff costs for the Group during the period:
Wages and salaries	28,176	24,651	54,240
Social security contributions	2,973	2,874	5,714
Share options - value of employee services	76	109	186
Pension costs
Defined contribution plans	2,044	1,635	3,418
Defined benefit plan	460	508	1,104

	33,729	29,777	64,662

3 OPERATING PROFIT

	30 Sept	30 Sept	31 March
	2014	2013	2014
	£'000	£'000	£'000
The following items have been included in arriving at the results:
Depreciation of property, plant and equipment:
Owned assets	1,593	1,390	2,707
Amortisation and impairment	3,568	1,126	2,747
Auditors' remuneration:
Audit/Review of the Company's annual accounts	107	78	73
Audit of the Company's subsidiaries	18	29	240
Services relating to taxation	18	19	49
Other assurance services	-	-	81
All other services	11	-	628
Gains on financial assets at fair value through profit or loss	48	-	75
Gains on foreign currency exchange	(31)	190	20
Operating lease rentals payable	1,351	897	2,301
Financial Services Compensation Scheme levy	1,646	1,200	1,200

4 NET FINANCE INCOME

	30 Sept	30 Sept	31 March
	2014	2013	2014
	£'000	£'000	£'000

Interest Income	96	189	324
Gains and losses on available-for-sale financial assets	48	38	159
Finance income	144	227	483

Interest payable on bank borrowings	(2)	(8)	(11)
Interest payable on other loans	(36)	(20)	(74)
Finance costs	(38)	(28)	(85)
Net finance income	106	199	398

5 TAX EXPENSE

	30 Sept	30 Sept	31 March
	2014	2013	2014
	£'000	£'000	£'000
Analysis of charge in period
Current taxation
Current period	(301)	1,351	1,835
Adjustment in respect of prior periods	-	-	3
Deferred taxation
Origination and reversal of temporary differences
Current period	(46)	(120)	(191)
Adjustments in respect of prior periods	-	(219)	(278)

	(347)	1,012	1,369

The tax credit is lower than the statutory rate as goodwill impairment is disallowable for tax purposes.

6 DIVIDENDS PAID

	30 Sept	30 Sept	31 March
	2014	2013	2014
	£'000	£'000	£'000
Final paid of 9.25p per share (2013: 9.00p)	4,223	4,071	4,071
Interim paid of 3.00p per share	-	-	1,358

	4,223	4,071	5,429
Amount paid by subsidiary to non-controlling interests in the year	-	-	29

The Directors are proposing an interim dividend in respect of the six months ended 30 September 2014 of 3.00p per share which will absorb an estimated £1.4 million of shareholders' funds. It will be paid on 21 January 2015 to shareholders who are on the register of members on 5 December 2014.

7 EARNINGS PER SHARE

The directors believe that a more accurate reflection of the performance of the Group's ongoing business is given by the measure of underlying earnings per share. "Underlying earnings" represent earnings before one-off costs, FSCS levy and amortisation of customer relationships. This measure is also followed by the analyst community as a benchmark of the Group's ongoing performance.

	30 Sept	30 Sept	31 March
	2014	2013	2014
	No.	No.	No.
	000	000	000

Weighted average number of shares in issue in the period	45,567	45,236	45,243
Effect of share options	183	388	420
Diluted weighted average number of shares in issue during the period	45,750	45,624	45,663
	£'000	£'000	£'000
Reported earnings attributable to ordinary shareholders	(3,598)	3,853	4,757
Charles Stanley Direct one-off costs	-	270	1,278
Amortisation of intangible assets	1,264	1,126	2,440
Financial Services Compensation Scheme levy	1,646	1,200	1,200
Leicester branch and other acquisition one-off costs	280	477	2,417
Restructuring costs	2,639	-	-
Reduction in deferred consideration	(388)	-	-
Tax on adjusting items	(1,143)	(712)	(1,687)

Underlying earnings attributable to ordinary shareholders (not reviewed)	700	6,214	10,405
Based on reported earnings
Basic earnings per share	(7.90p)	8.52p	10.51p
Diluted earnings per share	(7.86p)	8.44p	10.42p
Based on underlying earnings (not reviewed)
Basic earnings per share	1.54p	13.74p	23.00p
Diluted earnings per share	1.53p	13.62p	22.79p

8 INTANGIBLE ASSETS

	Goodwill	Customer relationships	Internally generated software	Total
	£'000	£'000	£'000	£'000
Cost
1 April 2014	25,450	21,153	1,540	48,143
Additions	-	685	1,506	2,191
30 September 2014	25,450	21,838	3,046	50,334
Amortisation
1 April 2014	-	12,550	307	12,857
Amortisation during the period	-	1,007	373	1,380
Impairment during the period	1,300	388	-	1,688
30 September 2014	1,300	13,945	680	15,925
Net book value
30 September 2014	24,150	7,893	2,366	34,409
31 March 2014	25,450	8,603	1,233	35,286

For the purposes of impairment testing, goodwill has been allocated to the Group's operating divisions as follows:

	30 Sept	31 March
	2014	2014
	£'000	£'000
Investment Management Services	9,756	10,556
Financial Services	4,623	5,123
Charles Stanley Direct	8,247	8,247
Charles Stanley Securities	1,524	1,524
	24,150	25,450

a) Goodwill

The recoverable amounts of goodwill allocated to the Cash Generating Units ("CGU") are determined by first calculating the fair value less costs to sell. If the fair value less cost to sell is found to be lower than the carrying amount the recoverable amount is then determined based on value in use calculations.

The fair value less costs to sell calculations are largely based on a percentage of funds under management. Where this approach is not appropriate a turnover multiple is used. The rates used are those implied by recent transactions in the market or where appropriate, similar quoted businesses. When calculating the fair value less cost to sell key assumptions were stress tested to determine whether the calculations were sensitive to a reasonably possible change in these assumptions. No material differences were noted as a result of these stress tests. The value in use calculations use pre-tax cash flow projections based on revenue and expense forecasts covering a five to seven year period.

Following the strategic decision to cease providing Execution-only access to traded options, the Group assessed the recoverable amount of the Durlacher business for the six months ended 30 September 2014. As a result, an impairment charge of £0.8 million has been recognised. The impairment charge was allocated fully to goodwill, reducing the Durlacher carrying value to £0.7 million, and is included in administrative expenses in the condensed consolidated interim income statement.

The recoverable amount of the Durlacher business was based on its value in use. The key assumptions used in the estimation of value in use were as follows:

Discount rate	12%
Growth rate	0%

Following a loss in the Charles Stanley Financial Solutions business for the six months ended 30 September 2014, the Group assessed the recoverable amount of the CGU. As a result, an impairment charge of £0.5 million has been recognised. The impairment charge was allocated fully to goodwill, reducing the Charles Stanley Financial Solutions goodwill to £1.9 million, and is included in administrative expenses in the condensed consolidated interim income statement.

The recoverable amount of the Charles Stanley Financial Solutions business was based on its fair value less cost to sell using a turnover multiple approach. The key assumptions used in the estimation of fair value less cost to sell were as follows:

Costs to sell	10% of turnover
Turnover multiple	1.25

Each valuation referred to above would be classified as a level 3 fair value under the IFRS fair value hierarchy as inputs are not based on observable market data.

b) Customer relationships

Purchases of customer relationships relate to payments made to investment managers and third parties for the introduction of customer relationships.

A proportion of the consideration payable for Pan Asset is contingent on certain AUM targets being achieved. The Group performed a review on the likelihood that the target levels will be achieved. The Group determined that it was unlikely that the targets will be achieved and as a result the deferred consideration payable has been reduced to nil and an impairment charge has been recognised to reduce the Pan Asset Capital Management intangible asset to £1.0 million (from £1.4 million).

9 PROPERTY, PLANT & EQUIPMENT

	Freehold premises	Long leasehold premises	Short leasehold premises	Office equipment and motor vehicles	Total
	£'000	£'000	£'000	£'000	£'000
Cost
1 April 2014	4,929	2,669	9,173	14,867	31,638
Additions	52	-	736	1,623	2,411
30 September 2014	4,981	2,669	9,909	16,490	34,049

Depreciation
1 April 2014	123	1,849	4,952	10,965	17,889
Charge for the period	64	42	544	943	1,593
30 September 2014	187	1,891	5,496	11,908	19,482

Net book value
30 September 2014	4,794	778	4,413	4,582	14,567
31 March 2014	4,806	820	4,221	3,902	13,749

10 AVAILABLE-FOR-SALE FINANCIAL ASSETS

	Listed	Unlisted
	investments	investments	Total
	£'000	£'000	£'000
Fair value
1 April 2014	3,531	3,769	7,300
Additions	211	-	211
Disposals	(143)	-	(143)
Revaluation and impairment in period	(8)	(500)	(508)

30 September 2014	3,591	3,269	6,860

At 30 September 2014, the Group revalued and impaired its equity investment in Masterlist. The valuation was based on the Net Asset Value of the operating entity of Masterlist. As a result, the shares owned by the Group have been impaired to nil. The £0.5m impairment charge is included within administrative expenses in the condensed consolidated interim income statement.

The Group also assessed the recoverability of the loan it has with Masterlist, which is repayable in 2017. The Group believes that Masterlist still has sufficient access to liquid funds, and will therefore continue to operate as a Going Concern. As a result there is no need for impairment at this time.

11 SHARE CAPITAL

	30 Sept	30 Sept	31 March
	2014	2013	2014
	£'000	£'000	£'000

Authorised
80,000,000 ordinary shares of 25p each	20,000	20,000	20,000

Allotted and fully paid
45,665,697 ordinary shares of 25p each	11,416	11,310	11,314

As at 30 September 2014 the following options have been granted and remain outstanding in respect of ordinary shares of 25p in the Company under the Company's Save As You Earn Scheme.

Date of grant	18 Dec 2013	19 Dec 2012	20 Dec 2011	11 March 2011
Exercisable during the six months commencing	1 Feb 2017	31 Jan 2016	1 Feb 2015	1 May 2014
Number of shares	144,248	166,425	302,434	4,946
Expected price per share	£4.11	£2.48	£2.34	£2.51
Expected fair value of option	£1.26	£0.69	£0.53	£0.79

12 BORROWINGS

	30 Sept	30 Sept	31 March
	2014	2013	2014
	£'000	£'000	£'000

Current
Bank of England base rate redeemable loan	-	157	-
Bank loan	150	150	150

	150	307	150

Non-current
Bank loan	1,897	2,029	1,970

The bank loan is secured by freehold property disclosed in Note 9. The loan is repayable in 20 quarterly instalments with the final balance due on 18 August 2018. It bears interest at 2.75% per annum above the Bank of England base rate (currently 0.5%).

13 EMPLOYEE BENEFITS

The Group operates a defined contribution pension scheme. The assets of the scheme are held separately from those of the Group in independently administered funds.

The Group also sponsors the Charles Stanley & Co. Limited Retirement Benefits Scheme ("the Scheme") which is a funded defined benefit arrangement. A full actuarial valuation of the Scheme was carried out at 13 May 2011 and updated to 30 September 2014 by a qualified actuary, independent of the Scheme's sponsoring employer. The major assumptions used by the actuary are shown below.

The Company currently pays into the defined benefit scheme, contributions at the rate of 25.5% of pensionable pay plus £315,000 per annum. This rate is net of member contributions of 3% of pensionable pay (nil for Directors).

It is the policy of the Group to recognise all actuarial gains and losses in the year in which they occur outside the income statement and in the statement of comprehensive income.

The deficit on defined benefit pension obligations is summarised as follows:

	30 Sept	30 Sept	31 March
	2014	2013	2014
	£'000	£'000	£'000
Fair value of plan assets	29,505	28,031	29,893
Present value of defined benefit obligation	(39,812)	(36,294)	(36,826)
Deficit in scheme	(10,307)	(8,263)	(6,933)

As all actuarial gains and assets are recognised, the deficits shown above are those recognised in the balance sheet.

Defined benefit costs recognised in the income statement

	30 Sept	30 Sept	31 March
	2014	2013	2014
	£'000	£'000	£'000
Current service cost	308	365	707
Net interest cost	152	143	397
Total	460	508	1,104

The best estimate of contributions (employer and employee) to be paid to the plan for the year ending 31 March 2015 is £745,000 (2014: £827,000).

The valuation of the benefit obligations is based on the following key assumptions:

	30 Sept	31 March	31 March	31 March	31 March
	2014	2014	2013	2012	2011
	% per annum	% per annum	% per annum	% per annum	% per annum
Assumptions
Inflation - RPI	3.30	3.40	3.50	3.25	3.40
Salary increases	2.40	3.00	3.00	3.00	3.00
Rate of discount	4.00	4.50	4.45	5.05	5.55
Allowance per pension
in payment increases:
lower of RPI and 5% p.a. if less	3.50	3.60	3.50	3.25	3.35
Allowance for revaluation of
deferred pensions of:
lower of RPI and 5% p.a. if less	3.30	3.40	3.50	3.25	3.40

The Occupational Pensions (Revaluation) Order 2010 issued in July 2010 confirmed the government's intention to move to using the Consumer Price Index ("CPI") rather than the Retail Price Index ("RPI") as the inflation measure for determining the minimum pension increases to be applied to the statutory index-linked features of retirement benefits. Charles Stanley has used RPI in calculating the liability as at 30 September 2014.

14 FAIR VALUES AND RISK MANAGEMENT

(a) Carrying amount versus fair value

The fair value of financial assets and financial liabilities, together with the carrying amounts in the condensed statement of financial position are as follows:

	Carrying	Fair
	amount	value
	£'000	£'000
30 September 2014
Non-current financial assets
Available-for-sale financial assets	6,860	6,860
Trade and other receivables	1,486	1,486

	8,346	8,346



Current financial assets
Trade and other receivables	236,582	236,582
Financial assets at fair value through profit and loss	70	70
Cash and cash equivalents	18,943	18,943

	255,595	255,595


Non-current financial assets
Borrowings	1,897	1,897




Current financial liabilities
Trade and other payables	228,680	228,680
Borrowings	150	150

	228,830	228,830

(b) Financial instruments carried at fair value

Fair value hierarchy

The table below analyses recurring fair value measurements for financial assets. These fair value measurements are categorised into different levels in the fair value hierarchy based on the inputs to valuation techniques used. The different levels are defined as follows:

Level 1 - quoted prices (unadjusted) in active markets for identical assets or liabilities that the Group can access at the measurement date;

Level 2 - inputs other than quoted prices included within level 1 that are observable for the asset either directly (that is, prices) or indirectly (that is, derived from prices);

Level 3 - inputs for assets that are not based on observable market data (that is, unobservable).

	Level 1	Level 2	Level 3	Total
	£'000	£'000	£'000	£'000
30 September 2014
Financial assets measured at fair value
Available-for-sale financial assets	3,591	-	3,269	6,860
Financial assets at fair value
through profit and loss	70	-	-	70

	3,661	-	3,269	6,930

There were no transfers between any of the levels of the fair value hierarchy during the six months ended 30 September 2014.

Details of the determination of level 3 fair value measurements are set out below:


	Equity Securities:
	available-for-sale

	£'000
At 1 April 2014 and 30 September 2014	3,269

The Group has an established control framework with respect to the measurement of fair values. If one or more significant inputs are not based on observable market data, the instrument is included in level 3. Specific valuation techniques used to value the financial instrument grouped under level 3 include discounting future cash flows and calculating the dividend yield. All valuations performed are presented to the Group Executive Directors for final approval. Significant valuation issues are reported to the Group Audit Committee.

Equity securities - available-for-sale

The level 3 balance comprises amounts relating to holdings in unlisted investments. At 30 September 2014 these unlisted investments had a fair value of £3.3 million (31 March 2014: £3.8 million). Included within this balance is the Group's holding of 6,030 Euroclear plc shares with a fair value of £3.1 million (31 March 2014: £3.1 million).

This fair value has been determined using a valuation technique that used significant unobservable inputs.

This was because the shares were not listed on an exchange, and there were no recent observable arm's length transactions in the shares.

30 September 2014

Valuation technique	Significant unobservable inputs	Inter-relationship between significant unobservable inputs and fair value
The Fair Value is determined by considering the Dividend Yield where the expected dividend is determined	Expected dividend growth rate, which includes an adjustment for currency volatility (45%)	The estimated fair value would increase if the expected dividend growth rate was higher

For the Euroclear investment a 1% increase/decrease in the expected dividend yield would increase/decrease other comprehensive income in the statement of changes in equity by £20,000 (31 March 2014: £20,000).

The Group also assessed the recoverability of the loan it has to Masterlist, which is repayable in 2017. The Group believes that Masterlist still has sufficient access to liquid funds, and will therefore continue to operate as a Going Concern. As a result there is no need for impairment at this time.

15 RECONCILIATION OF NET PROFIT TO NET CASH (ABSORBED BY)/GENERATED FROM OPERATIONS

	30 Sept	30 Sept	31 March
	2014	2013	2014
	£'000	£'000	£'000
(Loss)/profit before tax	(3,945)	4,865	6,126
Adjustments for:
Depreciation	1,593	1,390	2,707
Amortisation and impairment	3,568	1,126	2,747
Share options - value of employee services	76	109	186
Retirement benefit scheme	91	66	247
Dividend income	(113)	(120)	(140)
Interest income	(96)	(189)	(483)
Interest expense	38	28	85
Profit on disposal of available-for-sale financial assets	(48)	(38)	(159)
Changes in working capital:
(Increase)/decrease in financial assets at fair value through profit or loss	47	(44)	54
(Increase)/decrease in receivables	(23,864)	(118,812)	48,331
Increase/(decrease) in payables	11,429	111,026	(42,517)

Cash (absorbed by)/generated from operations	(11,224)	(593)	17,184

16 CONTINGENCIES

A competitor company has taken legal action against the Group in relation to staff who chose to leave them and join Charles Stanley. The Group has lodged a strong defence and the Directors believe that any judgement in relation to this action will result in no liability to the Group.

A recent ruling by the European Court of Justice indicated that under the European Working Time Directive, 'normal pay' for the purposes of calculating statutory holiday pay, includes contractual commission as well as basic salary. A UK Employment Tribunal is currently considering implications for UK employers under the Working Time Regulations 1998 and a decision is expected later in 2014/2015. The UK Employment Tribunal has ruled, though, that non-guaranteed overtime payments should be included for the purposes of calculating holiday pay entitlements. It is therefore expected that the UK Employment Tribunal will conclude on a similar basis for certain commissions. Based on information and advice to date, the Group does not expect the impact to be material. However, in the event that analysis, judgements and/or appeals are determined to ultimately be different, the Group may be exposed to a material additional liability.

17 POST BALANCE SHEET DATE EVENTS

It was announced on 8 September 2014 that agreement had been reached to sell the Matterley Undervalued Asset Fund to Miton Group. Initial consideration of £0.75m will be paid on completion of the transaction in December. Further consideration will be payable subject to the overall level of funds transferred to Miton.

18 INVOLVEMENT WITH UNCONSOLIDATED STRUCTURED ENTITIES

The Group holds fund management contracts over various investment funds (all open-ended investment companies). These investment funds invest capital received from investors in a portfolio of assets in order to provide returns to those investors from capital appreciation of those assets, income from those assets or both. The investment funds are financed through the issue of units to the investors. The Group's objective is to generate fees from managing assets on behalf of third parties.

The net assets of each fund are details below:

	Sept
	2014
	£m

FP Matterley Regular High Income Fund	66.0
FP Matterley Equity Fund	10.3
FP Matterley International Growth Fund	18.8
FP Matterley UK & International Growth Fund	86.6
FP Matterley II Undervalued Fund	85.7
Total	267.4

Included in the consolidated statement of financial position is accrued income of £0.30m (2013: £0.15m) relating to fees recognised which have not yet been received. These represent the Group's maximum exposure to loss in the funds.

The following table presents the Group's total income from unconsolidated structured entities in the income statement for the half year ended 30 September 2014.

	Sept
	2014
	£'000

FP Matterley Regular High Income Fund	267
FP Matterley Equity Fund	39
FP Matterley International Growth Fund	65
FP Matterley UK & International Growth Fund	403
FP Matterley II Undervalued Fund	354
Total	1,128

All the above income relates to the annual management charge.

19 GENERAL INFORMATION

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

The Company is a public limited company which is listed on the London Stock Exchange and is incorporated and domiciled in the United Kingdom.

The annual consolidated financial statements of the Group at 31 March 2014 are available upon request from the Company's registered office at 25 Luke Street, London, EC2A 4AR or at www.charles-stanley.co.uk/investor-relations.

19.1 Basis of preparation

The Group's consolidated financial statements are prepared and presented on a going concern basis and in accordance with International Financial Reporting Standards ("IFRS") as adopted by the EU. These condensed consolidated interim financial statements are prepared and presented in accordance with IAS 34 Interim Financial Reporting and the Disclosure and Transparency Rules issued by the Financial Conduct Authority.

The comparative figures for the financial year ended 31 March 2014 are not the Company's statutory accounts for the financial year. Those accounts have been reported on by the Company's auditors and delivered to the registrar of companies. The report of the auditors 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 498 (2) or (3) of the Companies Act 2006.

These condensed consolidated interim financial statements were approved by the Board of Directors on 26 November 2014. The Directors assessed the going concern of the Group in light of its current trading performance. The Directors looked at the forecasts covering the 15 month period to 31 December 2015 and applied stress tests for adverse scenarios, which had been determined as part of the ICAAP submission in February 2014. As a result it was determined that the Group has enough liquidity to cover all anticipated payments. The Directors also considered the regulatory capital of the Group and determined that based on the forecasts, the Group has sufficient regulatory capital for the foreseeable future.

19.2 Significant accounting policies

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

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

a) IFRS 10 Consolidated Financial Statements (2011)

As a result of IFRS 10 (2011), the Group has changed its accounting policy for determining whether it has control over, and consequently, consolidates its investees. IFRS 10 (2011) introduces a new control model that focuses on whether the Group has power over an investee, exposure or rights to variable returns from its involvement with the investee and ability to use its power to affect those returns. Adoption of IFRS 10 did not change the Group's determination of control over any of its subsidiaries.

b) IFRS 11 Joint Arrangements

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

c) IFRS 12 Disclosures of Interests in Other Entities

The Group has adopted the amendments of IFRS 12 relating to the disclosure of interests in subsidiaries, joint arrangements, associates and unconsolidated structured entities. As a result, the Group has included disclosures of its holdings in unconsolidated structured entities (see Note 18).

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

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

The Group is assessing the potential impact on its consolidated financial statements resulting from the following new standards, which are currently not yet effective, and they have not yet been endorsed by the EU.

a) IFRS 9 Financial Instruments

IFRS 9 replaces the existing guidance in IAS 39 Financial Instruments: Recognition and measurement. It includes revised guidance on the classification and measurement of financial instruments. IFRS 9 is only effective for annual periods beginning on or after 1 January 2018, with early adoption permitted.

b) IFRS 15 Revenue from contracts with customers

IFRS 15 establishes a comprehensive framework for determining whether, how much and when revenue is recognised. It replaces existing revenue recognition guidance, including IAS 18 Revenue, IAS 11 Construction Contracts and IFRIC 13 Customer Loyalty Programmes. IFRS 15 is only effective for periods beginning on or after 1 January 2017, with early adoption permitted.

19.3 Principal risks and uncertainties

The principal risks and uncertainties facing the Group in the period to 30 September 2014 are shown in the table below.

A full assessment of the risks and uncertainties of the Group can be found on pages 22-26 of the 2014 Annual Report together with the controls and processes used to monitor and mitigate those risks as appropriate.

Risk type	Risk
Acquisition risk	Loss from unsuitable and poor acquisitions
Financial risk	Reduction/shortfall in regulatory capital, failure to meet targeted returns
Customer Outcome risk	Customer mistreatment and failing to achieve the right outcome for them
Operational risk	Loss resulting from inadequate or failed internal processes, people and systems
People risk	Loss of key personnel
Credit and counterparty risk	Default by clients and counterparties
Market risk	Loss from fluctuations in asset values, interest rates or exchange rates
Regulatory risk	Loss from regulatory action or public sanction
Reputational risk	Poor service provision and investment performance
Conduct risk	Poor product and service design and/or poor behaviour leading to unsatisfactory client outcomes

19.4 Related party transactions

Related party transactions are described on page 136 of the 2014 Annual Report and Financial Statements. No transactions took place during the half-year to 30 September 2014 that would materially affect the financial position or performance of the Group during the period.

19.5 Estimates

The preparation of interim financial statements requires management to make judgements, estimates and assumptions that affect the application of accounting policies and the reported amount of assets and liabilities, income and expense.

Actual results may differ from these estimates.

In preparing these condensed consolidated interim financial statements, the significant judgements made by management in applying the Group's accounting policies and key sources of estimation uncertainty were the same as those that applied to the consolidated financial statements as at and for the year ended 31 March 2014. The following areas were reviewed and there are no other changes to these estimates:

Revenue recognition

Fee income receivable is estimated based on current portfolio valuations, historical experience of debt collection and future expectations.

Retirement benefit obligations

The Directors requested the Company's actuaries to update their valuation from 31 March 2014 to 30 September 2014. This resulted in an increase in the actuarial deficit of £3.4 million which has been reflected in these financial statements.

Available-for-sale financial assets

During the period the investment in Masterlist shares was reviewed based on the net asset value of the operating entity. As a result the investment was revalued to a book value of nil.

No new information has become available that would require a change in the valuation of any further unlisted investments.

Legal action

A competitor company has taken legal action against the Group. Charles Stanley has lodged a defence and the Directors believe that no liability will arise to the Group.

Goodwill and intangible assets

During the period the Group assessed the recoverable amount of the Durlacher business and the Charles Stanley Financial Solutions business. As a result impairment charges of £0.8 million and £0.5 million respectively were recognised. The impairment charges were allocated fully to goodwill and are included in administrative expenses in the condensed consolidated interim income statement.

The Group also performed a review of the deferred consideration payable on the acquisition of Pan Asset Capital Management. As a result the deferred consideration payable has been reduced by £0.4m to nil and an impairment charge has been recognised to reduce the Pan Asset Capital Management intangible asset.

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

During the period the Group reassessed the useful life of client lists acquired. As a result the Group determined that the useful life of client lists acquired should be in line with client lists that are acquired under a business combination and so the useful life of client lists acquired was changed to 10 years. The impact of this for the current reporting period is that costs are proportionally lower by £0.2m, and this is included within administrative expenses in the condensed consolidated interim income statement.

19.6 Forward-looking statements

These condensed consolidated interim financial statements contain certain forward-looking statements which are made by the Directors in good faith based on the information available to them at the time of their approval of the accounts. Forward-looking statements should be treated with caution due to the inherent uncertainties, including economic, regulatory and business risk factors underlying any such forward looking statements. We undertake no obligation to update any forward-looking statements whether as a result of new information, future events or otherwise. The condensed consolidated interim financial statements have been prepared by Charles Stanley Group PLC to provide information to its shareholders and should not be relied upon by any other party or for any other purpose.

DIRECTORS' RESPONSIBILITY STATEMENT

The Directors confirm to the best of their knowledge:

a) the interim report has been prepared in accordance with International Accounting Standard 34 "Interim Financial Reporting" as adopted by the European Union.

b) the interim report includes a fair review of the information required by the Disclosure and Transparency Rules (DTR) 4.2.7R "indication of important events that have occurred during the first six months of the financial year and their impact on the condensed set of financial statements and a description of the principal risks and uncertainties for the remaining six months of the year".

c) the interim report includes a fair review of the information required by DTR 4.2.8R"disclosure of related party transactions and changes therein".

PRINCIPAL RISKS AND UNCERTAINTIES

The principal risks and uncertainties facing the Group for the first half of the financial year are substantially the same as those described in the Report and Accounts for the year ended 31 March 2014. The one addition is the Group now faces regulatory capital risk, i.e. a reduction or shortfall in regulatory capital.

On behalf of the Board

James Rawlingson

Finance Director

26 November 2014

INDEPENDENT REVIEW REPORT TO CHARLES STANLEY GROUP PLC

INTRODUCTION

We have been engaged by the Company to review the condensed set of financial statements in the half-yearly financial report for the six months ended 30 September 2014 which comprises the condensed consolidated interim income statement, condensed consolidated interim statement of comprehensive income, condensed consolidated interim statement of financial position, condensed consolidated interim statement of changes in equity, condensed consolidated interim statement of cash flows and the related explanatory notes. We have read the other information contained in the half-yearly financial report and considered whether it contains any apparent misstatements or material inconsistencies with the information in the condensed set of financial statements.

This report is made solely to the Company in accordance with the terms of our engagement to assist the Company in meeting the requirements of the Disclosure and Transparency Rules ("the DTR") of the UK's Financial Conduct Authority ("the UK FCA"). Our review has been undertaken so that we might state to the company those matters we are required to state to it in this report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the company for our review work, for this report, or for the conclusions we have reached.

DIRECTORS' RESPONSIBILITIES

The half-yearly financial report is the responsibility of, and has been approved by, the Directors. The Directors are responsible for preparing the half-yearly financial report in accordance with the DTR of the UK FCA.

As disclosed in note 1 to the financial statements, the annual financial statements of the Group are prepared in accordance with IFRSs as adopted by the EU. The condensed set of financial statements included in this half-yearly financial report has been prepared in accordance with IAS 34 'Interim Financial Reporting' as adopted by the EU.

OUR RESPONSIBILITY

Our responsibility is to express to the Company a conclusion on the condensed set of financial statements in the half-yearly financial report based on our review.

SCOPE OF REVIEW

We conducted our review in accordance with International Standard on Review Engagements (UK and Ireland) 2410 'Review of Interim Financial Information Performed by the Independent Auditor of the Entity' issued by the Auditing Practices Board for use in the UK. A review of interim financial information consists of making enquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with International Standards on Auditing (UK and Ireland) and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion.

CONCLUSION

Based on our review, nothing has come to our attention that causes us to believe that the condensed set of financial statements in the half-yearly financial report for the six months ended 30 September 2014 is not prepared, in all material respects, in accordance with IAS 34 as adopted by the EU and the DTR of the UK FCA.

Michael Peck (Senior Statutory Auditor)

for and on behalf of KPMG LLP,

Statutory Auditor

Chartered Accountants

15 Canada Square

London, E14 5GL

26 November 2014

DIRECTORS OF CHARLES STANLEY GROUP PLC

Executive

Sir David Howard, Bt (Chairman & CEO)

E Michael Clark

Michael R I Lilwall

James H Rawlingson

Gary Teper

Anthony C Scott (appointed 9 April 2014)

Pending regulatory approval

Paul Abberley (CEO Designate)

Non-executive

Bridget E Guerin

David C Pusinelli

FINANCIAL CALENDAR

27 November 2014 Results announced

4 December 2014 Ex-dividend date for interim dividend

5 December 2014 Record date for interim dividend

21 January 2015 Interim dividend paid

June 2015 Final results announced

This information is provided by RNS

The company news service from the London Stock Exchange

END

IR FMMZMNVMGDZM

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