Half Yearly Report

RNS Number : 2204L

Aberdeen Asset Management PLC

04 May 2010

 

ABERDEEN ASSET MANAGEMENT PLC

Interim Results for six months to 31 March 2010

 

 

Operational Highlights

 

·; Underlying profit before tax £92.6 million (2009: £33.0 million)

·; Underlying earnings per share 6.05p (+149%)

·; Operating margin 33.5% (2009: 19.8%)

·; Strong operating cashflow and proceeds of convertible bond issue used to reduce bank borrowings to £20 million (30 September 2009: £178.3 million)

·; Net gearing reduced to 8.3% (30 September 2009: 17.2%)

·; New business wins of £25.1 billion funded in the period, with £2.0 billion awarded but yet to fund

 

Financial highlights

	March 2010	March 2009
Revenue	£294.9m	£192.2m
Pre-tax profit
Before exceptional items and amortisation and impairment of intangibles	£92.6m	£33.0m
After exceptional items and amortisation and impairment of intangibles	£59.5m	£17.9m
Diluted earnings per share
Before exceptional items and amortisation and impairment of intangibles	6.05p	2.43p
After exceptional items and amortisation and impairment of intangibles	3.76p	0.52p
Dividend per share	3.2p	2.8p
Operating cashflow	£93.8m	£1.4m
Gross new business - funded	£25.1bn	£5.4bn
- awarded but not yet funded	£2.0bn	£2.6bn
Net new business	£0.1bn	(8.5bn)
Assets under management at period end	£170.9bn	£96.3bn

 

Martin Gilbert, Chief Executive of Aberdeen Asset Management commented:

 

"These record results demonstrate the success of our strategy in recent years: to make selective acquisitions at attractive prices at the same time as building the business organically and controlling costs. The acquisition of the funds of funds business from RBS in January expands our investment capabilities to include equities, fixed income, property and alternatives and also further diversifies our distribution channels.

 

"Aberdeen is now a truly global asset manager with clients and assets around the world. Our focus remains on meeting the objectives of our existing clients, organic growth and cash generation."

 

To view an interview with Martin Gilbert regarding the interim results, recent acquisition, strategy and the outlook. Please click on the following link.

 

www.aberdeen-asset.com/IR

 

 

For further information, please contact:

 

Aberdeen Asset Management

Martin Gilbert + 44 (0) 207 463 6000

Bill Rattray

 

Maitland

Neil Bennett + 44 (0) 207 379 5151 Charlotte Walsh

 

A presentation for analysts and institutions will be held at 10am on 4 May 2010 at Aberdeen's offices at Bow Bells House, 1 Bread Street, London EC4M 9HH. If you would like to register for the live webconference of the presentation, please click on to the following link. Instructions of how to access the event will then be sent to you.

 

http://mediazone.brighttalk.com/event/Aberdeen/5505712229-3710-intro

 

Those unable to attend the presentation or participate in the live webconference, a replay of the event will be available on the Group's website at www.aberdeen-asset.com as will a copy of the presentation.

 

 

Chairman's statement

Over the six month period to 31 March 2010 we have been able to provide further evidence that Aberdeen Asset Management is well positioned and in good shape following the financial crisis. The Group has achieved record interim profits, reduced short term debt, continued to control costs and significantly improved its operating margin. These achievements have been assisted by a recovery in global stock markets but, nevertheless, provide initial validation of our strategy of growth through selective acquisition accompanied by strong cost control, despite the volatile and difficult circumstances of the last two years.

 

Continued demand for risk assets, particularly equities, has seen new business flows for the first half comfortably exceed those reported for the whole of the year to 30 September 2009; these flows have been well diversified across our client base worldwide, with the UK, the Nordics and the Middle East leading the way. Resilient investment performance across a broad range of asset classes, coupled with our enhanced distribution capabilities, has enabled the Group to grow assets and revenues strongly. We have enjoyed strong growth in recurring management fees, supplemented by an increase in performance fee income. Operating costs have been carefully controlled and the cost base now reflects the full benefit of the cost reduction programme implemented in 2008/09; as a result, the operating margin has improved significantly to 33.5% (2009: 19.8%). This strong profit performance has been fully converted into operating cashflow and further reductions in short-term debt.

 

Our recent acquisitions have been integrated into the wider Group and our focus is on generating further organic growth from our enhanced distribution platforms. For example, the business acquired from Royal Bank of Scotland ("RBS") in January, which added an established long-only multi-manager business and a funds of hedge funds capability, has already begun to bear fruit, with £110 million of commitments achieved for a new UCITS compliant fund of absolute return funds.

 

Despite further redemptions by some fixed income clients, we have enjoyed healthy flows into higher margin products across several asset classes, in both pooled funds and segregated mandates, and the overall effect is to increase recurring fee income by around £26 million per annum.

 

 

Financials

The Group achieved profit before taxation of £59.5 million (2009: £17.9 million). Underlying profit before taxation, stated before exceptional items and amortisation and impairment of intangible assets, was £92.6 million compared to £33.0 million in 2009. This represents fully diluted underlying earnings per share of 6.05p (2009: 2.43p). The Board has decided to pay an interim dividend of 3.2 pence per share, an increase of 14% on the equivalent payment last year. This interim dividend will be paid on 17 June 2010 to qualifying shareholders on the register at 14 May 2010.

 

The Group's balance sheet has been strengthened further, with a £90 million convertible bond issue completed in December and a placing of ordinary shares in January raising £116 million after expenses, some £30 million more than was required for the RBS transaction. Combined with strong operating cashflow, this has enabled us to reduce bank borrowings to £20 million at 31 March 2010 and net gearing was reduced to 8.3% (30 September 2009: 17.2%).

 

These figures include provision for all exceptional costs related to the integration of recent acquisitions and for the expected costs of our former London office to the end of the lease period. As a result, we do not expect any further charge for exceptional costs in the second half of this financial year.

 

 

Review of operations

Assets under management at 31 March 2010 increased by 16.9% to £170.9 billion, which includes the acquisition of businesses from Royal Bank of Scotland adding approximately £13.5 billion and are summarised as follows:

 

	£bn
AuM at 30 September 2009	146.2
Corporate transactions	12.1
Net new business flows - 3 months to 31 December 2009	(2.6)
Net new business flows - 3 months to 31 March 2010	2.7
Markets, performance & FX	12.5
AuM at 31 March 2010	170.9

 

 

Gross new business inflows for the six months to 31 March totalled £25.1 billion (2009: £5.4 billion) and these flows are included in assets under management at 31 March 2010; a further £2.0 billion of mandates had been awarded but not funded at that date. Outflows for the same period were £25.0 billion (2009: £13.8 billion), resulting in net inflows for the six months of £0.1 billion (2009: net outflows of £8.5 billion). The mix of the new business flows, with net inflows being reflected in higher margin assets, has a beneficial effect on revenue, adding approximately £26 million per annum to fee income.

 

The composition of the new business flows is summarised in the following table.

 

	Funded £m	Yet to fund £m	Total £m
Equities:
Gross inflows	11,132	845	11,977
Outflows	(4,287)	-	(4,287)
Net flow	6,845	845	7,690
Fixed income:
Gross inflows	4,497	691	5,188
Outflows	(11,886)	-	(11,886)
Net flow	(7,389)	691	(6,698)
Alternative investment strategies:
Gross inflows	4,367	-	4,367
Outflows	(1,561)	-	(1,561)
Net flow	2,806	-	2,806
Property:
Gross inflows	2,086	450	2,536
Outflows	(1,166)	-	(1,166)
Net flow	920	450	1,370
Money market:
Gross inflows	3,004	-	3,004
Outflows	(6,122)	-	(6,122)
Net flow	(3,118)	-	(3,118)
Group total:
Gross inflows	25,086	1,986	27,072
Outflows	(25,022)	-	(25,022)
Net flow	64	1,986	2,050

 

 

Investment performance remains resilient across our equity asset classes. In addition to the consistent long-term outperformance from our Asia Pacific, global emerging market and global equity products, our US equity capability now has strong 5 year performance against benchmark which is beginning to attract some interest from investors. Finally, our Pan-European equity product is also showing some improvement.

 

In fixed income, performance has continued to rebound strongly; all strategies are well ahead of benchmark over a 12 month period, although the 3 year numbers are still behind benchmark in certain areas. Redemptions in some strategies have continued as investors continue to realign their risk appetites, but we have seen increasing inflows in recent months and growing interest across our range of fixed income products. In particular, we have been encouraged by the level of interest in Asian fixed income, emerging market debt and high yield bonds, all of which are higher margin products.

 

Our low-margin money market products experienced net outflows reflecting the industry trend of investors switching out of cash into risk assets. Despite changing investor sentiment, demand remains strong for good quality money market funds and these remain an important part of our overall product offering.

 

We have made good progress in integrating the property division into the broader Group and this will lead to a more efficient use of resources. Property performance has benefited from the strong rebound in UK property values since the 3rd quarter of 2009, accounting for around a quarter of our property assets under management. The majority of our UK mandates also delivered above benchmark returns for the last calendar year. Our UK property team has invested around £270 million on behalf of clients over the period. A further £350 million has been allocated by clients which has yet to be invested.

 

Other European property markets are behind the UK in the recovery cycle, but we are benefiting from a pick-up in values in Norway and Denmark. Values in other western European markets have also passed the turning point and returns are recovering, helped by better income yields. A small element of property mandates have exposure to eastern European markets, which remain weak, as the effects of risk aversion have continued to erode values in recent months, but at a slowing rate. We are seeing increased interest in some of our single-country and regional products and are currently planning to launch a third Asia fund of funds pooled vehicle.

 

 

Business development

Following the acquisition of Credit Suisse in 2009 and the expansion of our European activities, our business development teams have focused their activity on the promotion, to both existing and new investors, of our diverse range of capabilities, with particular emphasis on global and US equities, emerging market debt and property.

 

The US remains a key target market for the Group and we have recently commenced a marketing initiative to raise the Group's profile amongst investors. We have also opened an office in Toronto to service our growing Canadian client base.

 

The distribution relationships with Credit Suisse and Mitsubishi are developing well and the new relationship with RBS Wealth Management, including Coutts, has got off to an encouraging start. We look forward to working with these partners to achieve further new business growth in the years ahead.

 

 

Outlook

2010 has started strongly and we look forward to building further profitable growth from our diverse investment capabilities and distribution relationships. Our primary focus is on driving strong organic growth and, whilst markets may experience some volatility as global economies recover from recession at different rates, we believe we are well placed to continue the substantial progress we have made during the period under review.

 

Roger C Cornick

Chairman

Condensed Consolidated Income Statement

For the six months to 31 March 2010

	Notes	6 mths to 31 Mar 2010 £'000	6 mths to 31 Mar 2009 £'000	Year to 30 Sept 2009 £'000
Revenue		294,939	192,176	421,897
Operating costs		(196,136)	(154,860)	(325,900)
Exceptional costs	3	(19,506)	(6,700)	(44,498)
Amortisation and impairment of intangible assets		(13,625)	(8,424)	(30,136)
Operating expenses		(229,267)	(169,984)	(400,534)
Other operating income (expense)	4	53	983	(282)
Operating profit before:		98,856	38,299	95,715
Exceptional costs		(19,506)	(6,700)	(44,498)
Amortisation and impairment of intangible assets		(13,625)	(8,424)	(30,136)
Operating profit		65,725	23,175	21,081
Finance income		489	939	1,125
Finance costs		(6,712)	(6,203)	(11,736)
Net finance costs		(6,223)	(5,264)	(10,611)
Profit before exceptional items, amortisation, impairment and taxation		92,633	33,035	85,104
Exceptional items, amortisation and impairment before taxation		(33,131)	(15,124)	(74,634)
Profit before taxation		59,502	17,911	10,470
Tax expense on profit before exceptional items, amortisation and impairment		(17,622)	(5,248)	(14,605)
Tax on exceptional items, amortisation and impairment		7,089	2,563	10,831
Tax expense	6	(10,533)	(2,685)	(3,774)
Profit after taxation, before exceptional items, amortisation and impairment		75,011	27,787	70,499
Exceptional items, amortisation and impairment after taxation		(26,042)	(12,561)	(63,803)
Profit for the period		48,969	15,226	6,696
Attributable to:
Equity shareholders of the Company		41,850	7,236	(8,073)
Other equity holders		7,119	7,990	14,769
		48,969	15,226	6,696
Earnings (loss) per share
Basic	8	3.88p	0.52p	(1.71p)
Diluted	8	3.76p	0.52p	(1.71p)

 

Condensed Consolidated Statement of Comprehensive Income

For the six months to 31 March 2010

		6 mths to 31 Mar 2010 £'000	6 mths to 31 Mar 2009 £'000	Year to 30 Sept 2009 £'000
Net actuarial loss on defined benefit pension schemes		-	-	(25,386)
Translation of foreign currency net investments		(592)	4,795	21,725
Movement in fair value of available for sale investments		1,251	(869)	(6,400)
Tax on items of other comprehensive income		(350)	243	8,943
Other comprehensive income (expense), net of tax		309	4,169	(1,118)
Profit for the period		48,969	15,226	6,696
Total comprehensive income for the period		49,278	19,395	5,578
Attributable to equity holders of the Company
Equity shareholders of the Company		42,159	11,405	(9,191)
Other equity holders		7,119	7,990	14,769

 

Condensed Consolidated Balance Sheet

31 March 2010

	Notes	31 Mar 2010 £'000	31 Mar 2009 £'000	30 Sept 2009 £'000
Assets
Non-current assets
Intangible assets	9	1,224,893	856,042	1,147,614
Property, plant & equipment		21,388	16,602	18,888
Other investments	10	60,425	58,700	59,903
Pension surplus	18	-	6,587	-
Deferred tax assets		36,280	27,324	36,087
Other receivables		12,685	5,943	6,853
Total non-current assets		1,355,671	971,198	1,269,345
Current assets
Stock of units and shares	11	328	345	468
Financial investments	12	1,480,148	984,027	1,465,470
Trade and other receivables		237,445	178,564	197,021
Other investments	10	30,141	9,214	34,013
Cash and cash equivalents		84,257	34,712	81,362
Assets classified as held for sale	13	-	16,573	27,817
Total current assets		1,832,319	1,223,435	1,806,151
Total assets		3,187,990	2,194,633	3,075,496
Equity
Called up share capital	16	114,514	80,298	104,306
Share premium account		805,329	406,817	683,214
Other reserves		232,671	213,059	226,009
Retained loss		(190,389)	(153,653)	(196,583)
Total equity attributable to shareholders of the parent		962,125	546,521	816,946
Minority interest		-	-	6,932
Attributable to other equity holders - perpetual capital securities		198,202	198,302	198,111
Total equity		1,160,327	744,823	1,021,989
Liabilities
Non-current liabilities
Interest bearing loans and borrowings	15	180,466	216,217	227,561
Other creditors		1,341	3,325	603
Provisions		3,000	-	-
Pension deficit	18	31,668	16,827	33,415
Deferred tax liabilities		111,607	61,963	111,812
Total non-current liabilities		328,082	298,332	373,391
Current liabilities
Investment contract liabilities	12	1,480,148	984,027	1,465,470
Interest bearing loans and borrowings	15	-	39,424	28,331
Trade and other payables		203,370	116,004	178,384
Provisions		3,300	1,303	1,300
Deferred income		1,216	1,291	841
Current tax payable		11,547	9,429	5,790
Total current liabilities		1,699,581	1,151,478	1,680,116
Total liabilities		2,027,663	1,449,810	2,053,507
Total equity and liabilities		3,187,990	2,194,633	3,075,496

 

Condensed Consolidated Statement of Changes in Equity

For the six months to 31 March 2010	Share capital £'000	Share premium account £'000	Other reserves £'000	Retained earnings £'000	Minority interests £'000	Total equity £'000
Balance at 1 October 2009	104,306	683,214	226,009	(196,583)	6,932	823,878
Profit for the period	-	-	-	48,969	-	48,969
Other comprehensive income	-	-	309	-	-	309
Total comprehensive income	-	-	309	48,969	-	49,278
Arising on the issue of shares	10,208	122,115	(69)	-	-	132,254
Share based payment charge	-	-	-	15,152	-	15,152
Shares issued in respect of employee compensation schemes	-	-	-	(17,891)	-	(17,891)
Exchange movement on coupon outstanding on perpetual capital securities	-	-	-	(91)	-	(91)
Equity element of convertible bond net of amortisation	-	-	6,422	-	-	6,422
Purchase of own shares	-	-	-	(602)	-	(602)
Disposal of minority interests	-	-	-	-	(6,932)	(6,932)
Dividends paid to shareholders	-	-	-	(39,343)	-	(39,343)
At 31 March 2010	114,514	805,329	232,671	(190,389)	-	962,125

 

For the six months to 31 March 2009	Share capital £'000	Share premium account £'000	Other reserves £'000	Retained earnings £'000	Minority interests £'000	Total equity £'000
Balance at 1 October 2008	79,691	396,010	216,876	(147,216)	-	545,361
Profit for the period	-	-	-	15,226	-	15,226
Other comprehensive income	-	-	4,169	-	-	4,169
Total comprehensive income	-	-	4,169	15,226	-	19,395
Arising on the issue of shares	607	10,807	(7,986)	(1,082)	-	2,346
Purchase of own shares	-	-	-	(327)	-	(327)
Share based payment charge	-	-	-	10,805	-	10,805
Exchange movement on coupon outstanding on perpetual capital securities	-	-	-	(360)	-	(360)
Dividends paid to shareholders	-	-	-	(30,699)	-	(30,699)
At 31 March 2009	80,298	406,817	213,059	(153,653)	-	546,521

 

 

For the year to 30 September 2009	Share capital £'000	Share premium account £'000	Other reserves £'000	Retained earnings £'000	Minority interests £'000	Total equity £'000
Balance at 1 October 2008	79,691	396,010	216,876	(147,216)	-	545,361
Profit for the period	-	-	-	6,696	6,932	13,628
Other comprehensive income (expense)	-	-	17,119	(18,237)	-	(1,118)
Total comprehensive income (expense)	-	-	17,119	(11,541)	6,932	12,510
Arising on the issue of shares	24,615	287,204	(7,986)	(1,337)	-	302,496
Purchase of own shares	-	-	-	(328)	-	(328)
Share based payment charge	-	-	-	25,555	-	25,555
Exchange movement on coupon outstanding on perpetual capital securities	-	-	-	(169)	-	(169)
Dividends paid to shareholders	-	-	-	(61,547)	-	(61,547)
At 30 September 2009	104,306	683,214	226,009	(196,583)	6,932	823,878

 

Condensed Consolidated Cash Flow Statement

For the six months to 31 March 2010

	Notes	6 mths to 31 Mar 2010 £'000	6 mths to 31 Mar 2009 £'000	Year to 30 Sept 2009 £'000
Core cashflow from operating activities		92,056	27	84,368
Effects of short-term timing differences on open end fund settlements		1,718	1,399	(4,732)
Cash generated from operations		93,774	1,426	79,636
Net interest paid		(5,808)	(5,704)	(9,717)
Tax paid		(7,442)	(9,859)	(27,611)
Net cash generated from (used in) operations		80,524	(14,137)	42,308
Other non-recurring costs paid		(10,300)	(6,700)	(25,244)
Net cash generated from (used in) operating activities	5	70,224	(20,837)	17,064
Cash flows (used in) from investing activities
Proceeds from sale of investments		27,926	15,528	29,466
Proceeds from sale of property, plant & equipment		-	713	3,430
Acquisition of businesses, net of cash acquired		(93,224)	-	36,285
Acquisition of intangible assets		(1,084)	(1,704)	(2,445)
Acquisition of property, plant & equipment		(7,746)	(2,389)	(10,243)
Acquisition of investments		(4,394)	(14,242)	(43,392)
Net cash (used in) from investing activities		(78,522)	(2,094)	13,101
Cash flows from (used in) financing activities
Issue of ordinary share capital net of expenses		115,829	516	(841)
Issue of convertible bonds net of expenses		87,312	-	-
Premium paid on conversion of preference shares		-	(1,082)	-
Purchase of own shares		(602)	(327)	(328)
New borrowings		-	29,641	178,331
Repayment of borrowings		(158,331)	(26,878)	(146,529)
Dividends paid and coupon payments		(39,343)	(30,699)	(61,547)
Net cash generated from (used in) financing activities		4,865	(28,829)	(30,914)
Net decrease in cash and cash equivalents		(3,433)	(51,760)	(749)
Cash and cash equivalents at 1 October		81,362	82,161	82,161
Effect of exchange rate fluctuations on cash and cash equivalents		6,328	4,311	(50)
Cash and cash equivalents at end of period		84,257	34,712	81,362

Notes to the Interim Condensed Consolidated Financial Statements

For the six months to 31 March 2010

1 General information

The interim results have not been audited but have been reviewed by the auditors. The comparative figures for the financial year to 30 September 2009 are not the company's statutory accounts for that 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.

 

2 Basis of preparation

These condensed financial statements have been prepared in accordance with IAS 34 Interim Financial Reporting as adopted by the EU. The annual financial statements are prepared in accordance with IFRSs as adopted by the EU.

As required by the Disclosure and Transparency Rules of the Financial Services Authority, the condensed financial statements have been prepared applying the accounting policies and presentation that were applied in the preparation of the Company's published consolidated financial statements for the year ended 30 September 2009 except for the adoption of IFRS 8 Operating Segments, IFRS 3 (Revised) Business Combinations, IAS 27 Consolidated and Separate Financial Statements (Revised) and IAS 1 (Revised) Presentation of Financial Statements.

The preparation of interim financial statements requires management to make estimates and assumptions that affect the reported income and expense, assets and liabilities and disclosure of contingencies at the date of the interim financial statements. Although these estimates and assumptions are based on management's best judgement at the date of the interim financial statements, actual results may differ from these estimates. The interim financial statements, which are in a condensed format, do not include all the information and disclosures required in the Group's annual report, and should be read in conjunction the Group's annual report for the year to 30 September 2009.

The Group has applied IFRS 8 Operating Segments, which replaced IAS 14 Segment Reporting, for this reporting period. The new standard requires disclosures to reflect the information which the Group Management Board, being the body that is the chief operating decision maker for the Group, uses for evaluating performance and the allocation of resources. During the first part of 2010, significant progress has been made on integrating the property business with the Group's other asset classes. As a result, the Group is now managed as a single investment management business, with multiple asset classes including equities, fixed income, property and alternatives that are managed across a range of products, distribution channels and geographic regions. Reporting provided to the Group Management Board is on an aggregated basis.

The most significant changes to the Group's previous accounting policies for business combinations are as follows:

• acquisition related costs which previously would have been included in the costs of a business combination are included in administrative expenses as they are incurred;

• any pre-existing equity interest in the entity acquired is remeasured to fair value at the date of obtaining control, with any resulting gain or loss recognised in profit or loss;

• any changes in the Group's ownership interest subsequent to the date of obtaining control are recognised directly in equity, with no adjustment to goodwill; and

• any changes to the cost of an acquisition, including contingent consideration, resulting from events after the date of acquisition are recognised in profit or loss. Previously, such changes resulted in an adjustment to goodwill.

The revised standards have been applied to the acquisition of the asset management business from RBS as described in note 14.

Any adjustments to contingent consideration for acquisitions made prior to 1 October 2009 which result in an adjustment to goodwill continue to be accounted for under IFRS 3 (2004) and IAS 27 (2005), for which the accounting policies can be found in the Group's latest annual audited financial statements.

As a result of adoption of IAS 1 (Revised), a Condensed Consolidated Statement of Changes in Equity has been included as a primary statement.

 

3 Exceptional costs

Exceptional costs for 2010 cover four categories. First, the final element of costs arising from the acquisition of certain businesses and assets from Credit Suisse and the integration and migration of these businesses, which included charges in respect of a transitional services provided by the vendor, set up costs in respect of the migration of the back office data and systems to the Group's third party administrator and costs of retaining duplicate staffing for a transitional period to ensure a smooth migration of data.

Secondly, £1.6 million of advisory and legal fees were incurred on the acquisition of the asset management business acquired from The Royal Bank of Scotland described in note 14.

We have also provided for all expected costs related to the remaining lease period for our former London office. In economic terms, this cost is largely offset by the benefit of a rent-free period negotiated on the new office lease but IFRS does not permit these items to be netted off. The benefit of the rent-free period is being amortised over the lease term of 15 years within operating expenses.

Finally, the Company received deferred consideration of £0.7 million from the sale of the Group's Belgian property business.

Exceptional costs in 2009 fell into three categories. First, the costs in respect of Credit Suisse acquisition as described above. Secondly, non-recurring rationalisation and redundancy costs were incurred in implementing a cost reduction programme. Thirdly, one-off costs were incurred in completing the integration of businesses acquired in the previous financial year. These costs included the acceleration of certain property lease costs following the elimination of duplicate of office premises as well as redundancy and other rationalisation costs.

		6 mths to 31 Mar 2010 £'000	6 mths to 31 Mar 2009 £'000	Year to 30 Sept 2009 £'000
Arising on Credit Suisse acquisition:
Transitional costs from vendor		4,118	-	7,849
Costs of separation, migration and integration of back office data and systems		8,373	-	10,405
		12,491	-	18,254
Costs relating to businesses acquired from RBS		1,614	-	-
Duplicate staff costs, redundancy costs and third party integration costs arising from earlier acquisitions		-	1,877	-
		14,105	1,877	18,254
Redundancy and other non-recurring costs from implementation of the cost reduction programme		-	4,823	17,800
Acceleration of lease costs on office rationalisation		6,122	-	7,052
Exceptional gain on disposal of Belgian property business		(721)	-	-
Costs arising on disposal of private equity business		-	-	1,392
Total exceptional costs		19,506	6,700	44,498

 

 

4 Other operating income

	6 mths to 31 Mar 2010 £'000	6 mths to 31 Mar 2009 £'000	Year to 30 Sept 2009 £'000
Other operating income comprises the following items:
Gains (losses) on disposal of other investments	53	983	(282)

 

 

 

 

5 Reconciliation of profit after tax to operating cash flow

	6 mths to 31 Mar 2010 £'000	6 mths to 31 Mar 2009 £'000	Year to 30 Sept 2009 £'000
Profit after tax	48,969	15,226	6,696
Depreciation charges	2,728	2,117	4,360
Amortisation and impairment of intangible assets	13,625	8,424	30,136
Fair value gains on investments	(192)	(273)	(2,881)
Losses (gains) on disposal of investments and other assets	139	(983)	2,186
Share based element of remuneration	15,152	10,805	25,555
Net finance costs	6,223	5,264	10,611
Income tax expense	10,533	2,685	3,774
	97,177	43,265	80,437
Increase (decrease) in provisions	5,000	(697)	(700)
Decrease (increase) in stock	140	(77)	(200)
(Increase) decrease in trade and other receivables	(33,108)	15,949	14,567
Increase (decrease) in trade and other payables	14,265	(63,714)	(39,712)
Net cash inflow (outflow) from operating activities	83,474	(5,274)	54,392
Net interest paid	(5,808)	(5,704)	(9,717)
Corporation tax paid	(7,442)	(9,859)	(27,611)
Net cash generated from (used in) operating activities	70,224	(20,837)	17,064

 

 

6 Tax expense

	6 mths to 31 Mar 2010 £'000	6 mths to 31 Mar 2009 £'000	Year to 30 Sept 2009 £'000
Current tax expense	12,674	5,731	14,189
Adjustments in respect of previous periods	302	2	(485)
Deferred tax credit	(2,949)	(3,121)	(10,819)
Adjustments in respect of previous periods	506	73	889
Total tax expense in income statement	10,533	2,685	3,774

 

The expected tax charge for the six month period to 31 March 2010 is calculated using the expected effective annual tax rate in each country of operation and applying these rates to the results of each country for the first six months of the year.

 

7 Dividends and coupon payments

	6 mths to 31 Mar 2010 £'000	6 mths to 31 Mar 2009 £'000	Year to 30 Sept 2009 £'000
Dividends on perpetual preference shares:
Dividend paid	-	1,745	4,445
Coupon payments in respect of perpetual capital securities (net of tax)
Coupon payments made during the period	7,119	7,731	14,769
Ordinary dividends
Declared and paid during the period
Dividends paid on ordinary shares:
Final dividend for 2009 - 3.2p (2008 - final dividend 3.0p)	32,224	21,222	21,222
Interim dividend for 2009 - 2.8p	-	-	21,111
	32,224	21,222	42,333
Total dividends and coupon payments paid during the period	39,343	30,698	61,547

 

The dividend paid on perpetual preference shares in the period to 31 March 2009 was in respect of the dividend accrued on preference shares which converted on 24 March 2009.

The interim ordinary dividend of 3.2p per share will be paid on 17 June 2010 to qualifying shareholders on the register at 14 May 2010.

 

8 Earnings per share

The calculations of earnings per share are based on the following profits and numbers of shares.

Basic earnings per share amounts are calculated by dividing profit for the period attributable to ordinary shareholders by the weighted average number of ordinary shares outstanding during the period.

Diluted earnings per share amounts are calculated by dividing the profit for the period attributable to ordinary shareholders by the weighted average number of ordinary shares outstanding during the period plus the weighted average number of ordinary shares that would be issued on the conversion of all the potentially dilutive shares into ordinary shares.

Underlying earnings per share figures are calculated by adjusting the profit to exclude exceptional items and amortisation of intangible assets. The purpose of providing the underlying earnings per share is to allow readers of the accounts to clearly consider trends without the impact of exceptional and non-cash items.

	IAS 33			Underlying
	6 mths to 31 Mar 2010 £'000	6 mths to 31 Mar 2009 £'000	Year to 30 Sept 2009 £'000	6 mths to 31 Mar 2010 £'000	6 mths to 31 Mar 2009 £'000	Year to 30 Sept 2009 £'000
Basic earnings per share
Profit attributable to shareholders	48,969	15,226	6,696	48,969	15,226	6,696
Dividends on perpetual preference shares	(1,339)	(3,503)	(5,527)	(1,339)	(3,503)	(3,771)
Coupon payments on perpetual capital securities (net of tax)	(7,119)	(7,990)	(14,769)	(7,119)	(7,990)	(14,769)
Profit (loss) for the financial period, attributable to ordinary shareholders	40,511	3,733	(13,600)	40,511	3,733	(11,844)
Amortisation and impairment of intangible assets, net of attributable taxation				11,998	7,033	27,237
Exceptional costs, net of attributable taxation				14,044	5,528	36,566
Premium paid on conversion of preference shares				-	1,082	-
Profit for the financial period - underlying basis				66,553	17,376	51,959
Weighted average number of shares (000's)	1,043,461	712,514	796,745	1,043,461	712,514	796,745
Basic earnings (loss) per share	3.88p	0.52p	(1.71p)	6.38p	2.44p	6.52p
Diluted earnings per share
Profit (loss) for calculation of basic earnings per share, as above	40,511	3,733	(13,600)	66,553	17,376	51,959
Add: interest on convertible bonds, net of attributable taxation	1,013	-	-	1,013	-	-
Add: dividend on convertible preference share units	1,339	-	-	1,339	-	3,771
Profit (loss) for calculation of diluted earnings per share	42,863	3,733	(13,600)	68,905	17,376	55,730
Weighted average number of shares
For basic earnings per share	1,043,461	712,514	796,745	1,043,461	712,514	796,745
Dilutive effect of convertible bonds	28,067	-	-	28,067	-	-
Dilutive effect of convertible preference share units	43,093	-	-	43,093	-	61,621
Dilutive effect of LTIP awards	1,188	2,042	-	1,188	2,042	1,008
Dilutive effect of exercisable share options and deferred shares	23,890	1,413	-	23,890	1,413	23,801
For diluted earnings per share	1,139,699	715,969	796,745	1,139,699	715,969	883,175
Diluted earnings (loss) per share	3.76p	0.52p	(1.71p)	6.05p	2.43p	6.31p

 

All potentially dilutive items in the year to 30 September 2009 were anti-dilutive on an IAS 33 basis.

 

9 Intangible assets

	31 Mar 2010 £'000	31 Mar 2009 £'000	30 Sept 2009 £'000
Intangible assets	537,041	310,300	470,142
Goodwill	687,852	545,742	677,472
	1,224,893	856,042	1,147,614

 

 

10 Other investments

	31 Mar 2010 £'000	31 Mar 2009 £'000	30 Sept 2009 £'000
Non-current assets
Non-current investments	60,425	58,700	59,903
Current assets
Listed equities - held for trading	12,825	850	12,295
Liquid investments of life subsidiaries	17,316	8,364	21,718
	30,141	9,214	34,013

 

 

11 Stock of units and shares

	31 Mar 2010 £'000	31 Mar 2009 £'000	30 Sept 2009 £'000
Units and shares in managed funds	328	345	468

 

 

12 Other financial investments/investment contract liabilities

These balances represent unit linked business carried out by the Group's life and pensions subsidiaries. The assets represent investments held to meet contracted liabilities.

 

13 Assets classified as held for sale

	31 Mar 2010 £'000	31 Mar 2009 £'000	30 Sept 2009 £'000
Seed capital investments	-	16,573	4,817
Management contracts held for sale	-	-	23,000
	-	16,573	27,817

 

Management contracts held for sale were acquired by the Group as part of the acquisition of certain businesses from Credit Suisse in June 2009. Agreement was reached on 13 July 2009 to sell these contracts and the sale was completed on 5 December 2009.

 

14 Acquisitions

On 28 January 2010 the Group completed the acquisition of certain fund of hedge fund and long only multi-manager businesses from The Royal Bank of Scotland plc ('RBS') for a cash consideration of £84.7 million. The acquisition included the assignment of a number of asset administration, consultancy, advisory and other service agreements, certain trademarks, shares in certain companies and the associated staff of the business. In addition, the Group has entered into a long-term distribution agreement with RBS, largely incorporating their private banking customer base at Coutts & Co.

The Group engaged external valuation specialists to advise on the correct allocation of the purchase price between goodwill, intangible assets and tangible assets. Provisional values for the net assets of the acquired business, at the date of acquisition, are set out in the table below. Goodwill includes the value of the acquired workforce and expected synergies and other benefits from combining the activities of the acquisition with those of the Group.

	Business acquired from Royal Bank of Scotland plc
	At date of acquisition £'000	Fair value adjustments £'000	Provisional fair value £'000
Intangible assets	-	73,490	73,490
Cash	77	-	77
Trade receivables	13,915	-	13,915
Trade payables	(14,952)	-	(14,952)
Net assets of acquired business	(960)	73,490	72,530
Goodwill			12,170
			84,700
Discharged by:
Cash consideration			84,700

 

On 22 October 2009 the Group completed the acquisition of two investment management contracts from Bramdean Group Limited for a consideration of £6.0 million. No further disclosures are provided on the grounds of materiality.

The businesses acquired during the period are being integrated with the Group's existing investment management business therefore the results and cashflows can no longer be separately identified.

 

15 Interest bearing loans and borrowings

	31 Mar 2010 £'000	31 Mar 2009 £'000	30 Sept 2009 £'000
Non-current liabilities
Amount drawn under bank revolving credit facility	20,000	129,641	150,000
3.5% Convertible bonds 2014	78,601	-	-
7.2% Subordinated notes 2016	81,865	86,576	77,561
	180,466	216,217	227,561
Current liabilities
Amount drawn under bank revolving credit facility	-	39,424	28,331

 

On 17 December 2009 the Group issued £90 million 3.5% Convertible bonds 2014. The bonds have a term of five years and unless previously redeemed, converted, or purchased and cancelled the bonds will be redeemed at their principal amount on 17 December 2014. Interest is payable semi-annually in arrear on 17 June and 17 December. The bonds are convertible into ordinary shares of the Company at any time after 28 January 2010 at an initial conversion price of 185p.

 

16 Share capital

On 13 January 2010 the Group issued 90,000,000 new ordinary shares of 10p each following a successful placing of these shares. The proceeds from the placing were £118.8 million.

During the period a total of 12,048,000 ordinary shares of 10p each were issued in respect of employee compensation schemes. The remainder relates to ordinary shares of 10p each were issued in respect of the conversion of 345 convertible preference share units.

 

17 Analysis of changes in net debt

	At 1 Oct 2009 £'000	Cash flow £'000	Other non cash changes £'000	Exchange movement £'000	At 31 Mar 2010 £'000
Cash at bank and in hand	81,362	(3,433)	-	6,328	84,257
Debt due within one year	(28,331)	28,331	-	-	-
Debt due after more than one year	(227,561)	130,000	(54)	(4,250)	(101,865)
Convertible debt due after more than one year	-	(87,312)	8,711	-	(78,601)
	(255,892)	71,019	8,657	(4,250)	(180,466)
Total	(174,530)	67,586	8,657	2,078	(96,209)
Net gearing	17.2%				8.3%

 

 

18 Net pension deficit

The Group's principal form of pension provision is by way of three defined contribution schemes operated world-wide. The Group also operates a number of legacy defined benefit schemes. There are three schemes in the UK which are closed to new membership and to future service accrual, two schemes in Japan and schemes in Germany, Norway and Finland.

The actuarial valuations of the defined benefit pension schemes referred to above were updated to 30 September 2009 by the respective independent actuaries. Contributions to the schemes since 30 September 2009 have been set off against the scheme deficits.

	31 Mar 2010 £'000	31 Mar 2009 £'000	30 Sept 2009 £'000
Surplus in scheme at end of period	-	6,587	-
Deficits in schemes at end of period	(31,668)	(16,827)	(33,415)
Net deficit in schemes at end of period	(31,668)	(10,240)	(33,415)

 

 

19 Contingent liabilities

The Group may, from time to time, be subject to claims, actions or proceedings in the normal course of its business. While there can be no assurances, the directors believe , based on information currently available to them, that the likelihood of a material outflow of economic benefits is remote.

Principal risks

 

In common with many businesses, the Group is exposed to a range of risks. Some of these risks are an inherent part of the business conducted by the Group such as taking investment decisions on behalf of clients and our energies are focussed on managing this risk as opposed to eliminating it. On the other hand there is regulatory risk which we actively seek to avoid.

The management of risk is embedded in the culture of the business and in the way in which the Group carries out its business. The Risk Management Committee together with the Risk, Compliance, and Internal Audit department are responsible for overseeing the implementation of the Group's risk strategies and this involves the provision of regular reports to the Group Board.

The principal risks to which the Group will be exposed in the second half of the financial year are substantially the same as those discussed in the 2009 annual report.

Responsibility statement

 

We confirm that to the best of our knowledge:

• the condensed set of financial statements have been prepared in accordance with IAS 34 Interim Financial Reporting as adopted by the EU.

• the interim management report includes a fair review of the information required by:

(a) DTR 4.2.7R of the Disclosure and Transparency Rules, being an indication of important events that have occurred during the first six months of the current 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; and

and

(b) DTR 4.2.8R of the Disclosure and Transparency Rules, being related party transactions that have taken place in the first six months of the current financial year and that have materially affected the financial position or performance of the entity during that period; and any changes in the related party transactions described in the last annual report that could do so.

 

For and on behalf of the board

 

Scott E Massie

Secretary

3 May 2010

Independent Review Report to Aberdeen Asset Management 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 31 March 2010 which comprises the condensed consolidated statement of income, the condensed consolidated statement of comprehensive income, the condensed consolidated balance sheet, the condensed consolidated statement of changes in equity, condensed consolidated cash flow statement and the related 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 Services Authority ("the UK FSA"). 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 FSA.

As disclosed in note 2, 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 31 March 2010 is not prepared, in all material respects, in accordance with IAS 34 as adopted by the EU and the DTR of the UK FSA.

 

 

G Bainbridge

for and on behalf of KPMG Audit Plc

Chartered Accountants

37 Albyn Place

Aberdeen

AB10 1JB

3 May 2010

 

Assets Under Management
	March	September	March
	2010	2009	2009
	£bn	£bn	£bn
By type of mandate:
Institutional mandates	113.8	105.0	70.1
Open end funds (excluding property funds)	37.1	22.2	8.3
Closed end funds (excluding property funds)	7.5	6.1	4.8
Property funds	12.5	12.9	13.1
	170.9	146.2	96.3
By Mandate Type
Equities	60.2	46.1	28.7
Fixed Income	47.1	51.7	38.8
Alternative investment strategies	30.2	12.3	5.6
Property	22.6	22.6	23.2
Money market	10.8	13.5	-
	170.9	146.2	96.3

 

Overall New Business Flows - 6 Months To 31 March 2010
	Qtr to 31 Dec 09 £m	Qtr to 31 Mar 10 £m	6 mths to 31 Mar 10 £m
Gross inflows:
Equities	5,392	5,740	11,132
Fixed income	1,938	2,559	4,497
Alternative investment strategies	310	4,057	4,367
Property	481	1,605	2,086
Money market	1,611	1,393	3,004
	9,731	15,354	25,086
Outflows:
Equities	1,828	2,460	4,287
Fixed income	5,511	6,375	11,886
Alternative investment strategies	343	1,218	1,561
Property	302	865	1,166
Money market	4,344	1,779	6,122
	12,328	12,697	25,022
Net flows:
Equities	3,564	3,280	6,845
Fixed income	(3,573)	(3,816)	(7,389)
Alternative investment strategies	(33)	2,839	2,806
Property	179	740	920
Money market	(2,733)	(386)	(3,118)
	(2,595)	2,657	64

 

New Business Flows for 6 months to 31 March 2010 - Equities
	Qtr to 31 Dec 09 £m	Qtr to 31 Mar 10 £m	6 mths to 31 Mar 10 £m
Gross inflows:
Asia Pacific	907	1,347	2,254
Global emerging markets	1,843	2,337	4,180
Europe	16	215	231
Global & EAFE	2,267	1,746	4,013
UK	18	11	29
Specialist equities	135	3	138
US	205	81	286
	5,391	5,740	11,131
Outflows:
Asia Pacific	829	1,062	1,891
Global emerging markets	479	792	1,271
Europe	50	75	125
Global & EAFE	211	251	462
UK	52	86	138
Specialist equities	98	98	196
US	107	95	203
	1,827	2,459	4,287
Net flows:
Asia Pacific	78	285	363
Global emerging markets	1,364	1,545	2,909
Europe	(34)	140	106
Global & EAFE	2,056	1,495	3,551
UK	(34)	(75)	(109)
Specialist equities	37	(95)	(58)
US	98	(14)	83
	3,564	3,280	6,844

 

New Business Flows for 6 months to 31 March 2010 - Fixed Income
	Qtr to 31 Dec 09 £m	Qtr to 31 Mar 10 £m	6 mths to 31 Mar 10 £m
Gross inflows:
Asia Pacific	785	858	1,644
Convertibles	35	81	116
Currency overlay	-	12	12
Emerging markets	72	194	266
Europe	571	189	760
Global	78	348	426
High yield	99	57	156
UK	198	743	941
US	101	76	177
	1,938	2,559	4,497
Outflows:
Asia Pacific	1,015	976	1,991
Convertibles	126	235	361
Currency overlay	49	14	64
Emerging markets	111	243	354
Europe	719	434	1,153
Global	969	707	1,676
High yield	129	74	202
UK	1,559	1,114	2,673
US	836	2,578	3,414
	5,511	6,375	11,886
Net flows:
Asia Pacific	(230)	(118)	(347)
Convertibles	(91)	(154)	(245)
Currency overlay	(49)	(2)	(52)
Emerging markets	(39)	(49)	(88)
Europe	(148)	(245)	(393)
Global	(891)	(359)	(1,250)
High yield	(30)	(17)	(46)
UK	(1,361)	(371)	(1,732)
US	(735)	(2,502)	(3,237)
	(3,573)	(3,816)	(7,389)

 

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