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Half Yearly Report

8th Nov 2012 07:00

RNS Number : 5969Q

Charles Stanley Group PLC

08 November 2012

CHARLES STANLEY GROUP PLC

RESULTS FOR THE HALF-YEAR ENDED 30 SEPTEMBER 2012

Charles Stanley is one of the UK's leading independently owned, full service stockbroking and investment management groups, advising on substantial funds. Today it announces its interim results for the half-year ended 30 September 2012.

Highlights:

§ Funds under management and administration £15.6 billion (at 31 March 2012 £15.4 billion) 1.3% increase; (at 30 September 2011: £13.7 billion) 13.9% increase

§ Discretionary funds under management £5.4 billion (at 30 September 2011: £4.4 billion) 22.7% increase

§ Revenue for the half-year £59.7 million (first half 2011/12: £60.2 million) 0.8% decrease

§ Fees for the half-year £36.8 million (first half 2011/12: £33.1 million) 11.2% increase

§ Reported profit before tax £3.4 million (first half 2011/12: £5.2 million) 34.6% decrease

§ Adjusted profit before tax £5.6 million (first half 2011/12: £6.8 million) 17.6% decrease

§ Reported earnings per share 6.00p (first half 2011/12: 8.49p) 29.3% decrease

§ Adjusted earnings per share 9.78p (first half 2011/12: 11.27p) 13.2% decrease

§ Interim dividend per share 2.75p (first half 2011/12: 2.75p) no change

Commenting on the results Sir David Howard, Chairman said:

"Charles Stanley Group is pleased to report that client funds under management and administration have reached £15.6 billion, an increase of 1.3% when compared to the £15.4 billion reported on 31 March 2012 and an increase of 13.9% when compared to the £13.7 billion reported on 30 September 2011. Most pleasing within this increase is the 22.7% rise in funds held under discretionary management between September 2011 and 2012 which now stand at £5.4 billion. Over the same period since 30 September 2011 the FTSE 100 Index increased by 12.0% and the APCIMS Balanced Index by 10.2%.

Despite a continuing decline in transaction volumes and a 15.8% decrease in overall commission income, Group revenues remained steady at £59.7 million during the half year to 30 September 2012. This represents a flat performance on the same period last year. We have continued to grow our fee based income in both absolute terms and as a proportion of overall Group revenues. This strategy of reducing reliance on market volumes has produced an 11.2% increase in our fee income to £36.8 million over the half year."

For further information please contact:

Charles Stanley Group PLC	Canaccord Genuity	Peel Hunt LLP
Sir David Howard, Chairman	Martin Green	Guy Wiehahn
James Rawlingson, Finance Director
Phone: 020 7739 8200	Phone: 020 7523 4619	Phone: 020 7418 8893
Magnus Wheatley
Head of Press & Public Relations
Phone 020 7149 6273

CHAIRMAN'S STATEMENT

Charles Stanley Group is pleased to report that overall revenues remained steady at £59.7 million during the half-year to 30 September 2012 compared to £60.2 million for the equivalent period last year - a drop of just 0.8%. This was achieved against a backdrop of a continuing decline in transaction volumes resulting in a decrease of 15.8% in commission earned from £27.1 million to £22.8 million.

However, the Group has continued to grow clients' funds under management and administration which now stand at £15.6 billion compared with £15.4 billion at 31 March 2012 and with £13.7 billion at 30 September 2011 - increases of 1.3% and 13.9% respectively. Within that figure we are particularly pleased to report an increase of 22.7% in funds held under discretionary management to £5.4 billion (30 September 2011: £4.4 billion). Over the same period the FTSE 100 Index increased by 12.0% and the APCIMS Balanced Index by 10.2%. This performance is reflected in the 11.2% increase in fees earned during the period - from £33.1 million to £36.8 million - offsetting the decline in commission noted above.

Reported profit before tax is down to £3.4 million as against £5.2 million for the equivalent period last year. Adjusted profit before tax was £5.6 million, down from £6.8 million. Adjusted profits are arrived at by excluding certain costs such as amortisation of intangible assets and the Financial Services Compensation Scheme levy and one-off costs relating to the development of our new direct to client service - CS Direct.

The Group's own cash balances stood at £35.0 million at 30 September 2012, down from £39.6 million at 30 September 2011. As ever, and even more so in these unsettled times, we continue to pay particular emphasis to the strength of the Group's balance sheet and our levels of cash.

In the light of these results and the continued uncertainty in the markets the Directors have decided to maintain the interim dividend at 2.75p per share (first half 2011/12: 2.75p). The dividend will be paid on 14 December 2012 to shareholders registered on 16 November 2012.

Governance

In early September, following a rigorous and professional search process, I was delighted to be able to announce the appointment of Bridget Guerin and David Pusinelli to our board as non-executive Directors. We have also made a number of internal promotions to the board of our principal trading subsidiary, Charles Stanley & Co Limited, and on behalf of shareholders I warmly welcome all of our new Group and trading company Directors.

Review of operations

The Group is organised into three operating Divisions: Private Clients, Financial Services and Charles Stanley Securities. The split of revenue for the half year over these three Divisions is shown in the following table.

Division	Sep 2012 £m	Sep 2011 £m	Sep 2010 £m	Sep 2009 £m	Sep 2008 £m

Private clients	49.4	50.7	49.9	45.7	41.2
Financial services	6.4	5.8	4.5	4.3	2.7
CS Securities	3.9	3.7	5.3	5.9	5.1

Total revenue	59.7	60.2	59.7	55.9	49.0


Private clients as % of total	82.7%	84.2%	83.6%	81.8%	84.1%

And funds held are split as follows:

Funds under management and administration	Sep 2012 £bn	Private clients £bn	Financial services £bn	Sep 2011 £bn	Private clients £bn	Financial services £bn

Discretionary	5.35	5.25	0.10	4.42	4.42	-
Advisory managed	2.70	2.42	0.28	2.60	2.25	0.35
Advisory dealing	2.83	2.83	-	2.79	2.79	-
Execution only	4.76	4.28	0.48	3.90	3.47	0.43

	15.64	14.78	0.86	13.71	12.93	0.78

Private Client Division

In very difficult conditions total income has declined by 2.6% to £49.4 million from £50.7 million. This is due to the continued decline in transaction volumes resulting in a decrease of 16.3% in commission income - £20.6 million compared with £24.6 million in the first half of 2011/12. It is pleasing to note that in a continuation of the process started some years ago fee income for the period exceeded commission income, with investment management and administration fees in this Division rising 10.3% to £28.8 million (first half 2011/12: £26.1 million).

	Sep 2012 £m	Sep 2011 £m	Sep 2010 £m	Sep 2009 £m	Sep 2008 £m

Commission	20.6	24.6	26.0	26.1	22.6
Fees	28.8	26.1	23.9	19.6	18.6

Total revenue	49.4	50.7	49.9	45.7	41.2


Fees as % of total	58.3%	51.5%	47.9%	42.9%	45.1%

This switch from commission to fee income had a greater impact on our non-managed business as commission accounts for a higher proportion of revenue generated by these clients.

	Sep 2012 £m	Sep 2011 £m	Sep 2010 £m	Sep 2009 £m	Sep 2008 £m

Managed revenue	32.5	31.7	29.4	24.4	21.8
Non-managed revenue	16.9	19.0	20.5	21.3	19.4

Total revenue	49.4	50.7	49.9	45.7	41.2


Managed as % of total	65.8%	62.5%	58.9%	53.4%	52.9%

Fees are generally charged based as a percentage of funds held. During the half year to 30 September 2012 total funds under management and administration increased by 14.3% compared with an increase in the FTSE 100 Index of 12.0% and an increase in the APCIMS Balance Portfolio Index of 10.2%. The Group continues to attract discretionary funds and these now account for 35.5% of the total (first half 2011/12: 34.2%).

Total funds under management and administration are shown below:

	Sep 2012	Sep 2011	Mar 2012	Change Mar 2012	Change Sep 2011
	£ bn	£ bn	£bn	%	%

Discretionary funds under management	5.25	4.42	4.94	6.3%	18.8%
Advisory managed funds	2.42	2.25	2.47	(0.2%)	7.6%

Total managed funds	7.67	6.67	7.41	3.5%	15.0%

Advisory dealing funds	2.83	2.79	3.03	(6.6%)	1.4%
Execution only funds	4.28	3.47	4.12	3.9%	23.3%

Total administered funds	7.11	6.26	7.15	(0.6%)	13.6%

Total funds under management and administration	14.78	12.93	14.56	1.5%	14.3%


FTSE 100 index	5,742	5,128	5,768	(0.4%)	12.0%


APCIMS benchmark	3,014	2,735	3,002	(0.4%)	10.2%

Managed clients

Funds held under management increased by 15.0% since September 2011 and by 3.5% since March 2012. The flow of funds during the six months under review is analysed in the table below.

	Discretionary managed	Advisory managed	Total	Change
	£bn	£bn	£bn	%

Managed funds at 1 April 2012	4.94	2.47	7.41

Inflows
New clients of existing investment managers	0.17	0.05	0.22
Clients of new investment managers	0.01	-	0.01
Organic - new funds from existing clients (Including re-invested income)	0.41	0.14	0.55

Total inflows	0.59	0.19	0.78	10.5%

Outflows
Lost clients and transfers	(0.18)	(0.20)	(0.38)
Organic - withdrawal of funds by existing clients	(0.12)	(0.05)	(0.17)

Total outflows	(0.30)	(0.25)	(0.55)	(7.4%)

Net inflow/(outflow) of funds	0.29	(0.06)	0.23	3.1%

Market movement	0.02	0.01	0.03	0.4%

Managed funds at 30 September 2012	5.25	2.42	7.67


% change since 1 April 2012	6.3%	(2.0%)	3.5%

Fee income increased as average funds under management increased.

	Sep 2012 Total	Disc	Adv	Sep 2011 Total	Disc	Adv	Change
	£m	£m	£m	£m	£m	£m	£m	%

Commission	11.4	8.5	2.9	12.7	8.9	3.8	(1.3)	(10.2%)
Fees	21.1	15.7	5.4	19.0	13.7	5.3	2.1	11.1%


	32.5	24.2	8.3	31.7	22.6	9.1	0.8	2.5%


	£bn	£bn	£bn	£bn	£bn	£bn	£bn
Average funds under management	7.54	5.10	2.44	7.11	4.52	2.59	0.43	6.0%


	bps	bps	bps	bps	bps	bps	Bps

Revenue margin	0.86	0.95	0.68	0.89	1.00	0.70	(0.03)	(3.4%)

Non-managed clients

Funds under administration have decreased by 0.6% over the half year.

	Advisory dealing	Execution only	Total
	£bn	£bn	£bn
At 1 April 2012	3.03	4.12	7.15
Net inflow/(outflow) of funds	0.15	(0.15)	-
Net organic change	(0.36)	0.29	(0.07)
Market movement	0.01	0.02	0.03

At 30 September 2012	2.83	4.28	7.11


% change	(6.6%)	3.9%	(0.6%)

Administration fees have increased but not enough to offset the drop in commission income.

	Sep 2012Total	Adv	Exe	Sep 2011 Total	Adv	Exe	Change
	£m	£m	£m	£m	£m	£m	£m	%

Commission	9.2	4.3	4.9	11.9	5.8	6.1	(2.7)	(22.7%)
Fees	7.7	3.3	4.4	7.1	3.3	3.8	0.6	8.5%

	16.9	7.6	9.3	19.0	9.1	9.9	(2.1)	(11.1%)

Financial Services

Total revenue for the Division rose by 10.3% to a record level of £6.4 million in the half year. Matterley Funds continue to produce good inflows due to continued strong performance in difficult markets with funds under management rising to £165 million against £151 million at the financial year end. This growth of 9.2% in AUM compares to a fall in the FTSE of 0.5% over the same period. We have seen growth in our Financial Planning and Wealth Management offerings and expect further progress as we proceed with the full integration of the Jobson James business. We believe that this Division is well prepared to take on the requirements of holistic investment advice in the new regulatory environment. EBS has continued to grow from an increased level of new business and CSFS is making good progress in the SME employee benefits market.

	Half year Sep 2012	Half year Sep 2011	Year Mar 2012
	£ m	£m	£m
Financial planning*	1.3	1.3	2.5
EBS - pension administration	1.1	1.0	2.0
Garrison - financial intermediary	0.8	0.8	1.6
CS Financial Solutions - employee benefits provider*	1.7	1.6	3.2
Matterley - funds management	0.6	0.4	0.7
Jobson James - financial planning and wealth management	0.9	0.7	1.6

Total revenue	6.4	5.8	11.6

*the comparative figures have been adjusted for the benefit consultancy business in Plymouth which was transferred from Financial Planning to CS Financial Solutions in 2012.

Charles Stanley Securities

The market place in which the securities Division operates has continued to prove extremely challenging. The Division lost £0.5 million in the first half of the year which includes re-organisation costs of £0.2 million. Despite the headwinds, we are pleased to report a creditable 6% growth in revenue over the same period last year. We have seen a good growth in fee income which has been offset by a disappointing reduction in commission income despite bond commissions growing compared to last year. We detect some signs of a modest improvement in the operating environment with ten additional clients being taken on since 1 April and more clients being willing to commit to transactions than for some time. With a continuation or improvement in this sentiment together with a continuing decline of other participants in the market, we would expect a stronger performance in the second half of the year.

The Charles Stanley team

Once again I should like to thank everyone in the Group for their unstinting efforts in these unusually challenging conditions. We are all having to grapple with many changes, not least the increasing burden of regulatory requirements. The Directors are very grateful for the spirited way in which the team is rising to meet the heightened demands which are being placed on them.

Outlook

Poor economic and market conditions continue to overshadow many financial companies, and we are no exception. It is likely that the decline in our commission income is a persistent long-term decline, as managed clients move over to fee based charging structures in the new environment. Our strategy of switching emphasis increasingly to investment management and administration services, earning steadier fee income, has gone a long way to protecting our revenue streams. We have demonstrated that we have a very solid base, given the strength of our underlying private client business in testing conditions, and our ability to continue to build the funds which we manage and administer.

During the half year, a considerable amount of progress has been made in relation to the launch of CS Direct, our new direct to client service, in Q1 of 2013. This will bring together our current services in Fastrade and Garrison and will deliver an up to date and modern clean priced offering.

Once again our results have been seriously impacted by large demands from the Financial Services Compensation Scheme, which have paid for the failings of businesses in quite different areas of activity. This is really no more than a sort of tax which is levied on us in a way, and in amounts, that we can't plan for. The demand in the latest half-year of £1.4 million (first half 2011/12: £0.6 million) has absorbed about 40% of our pre-tax profit.

In the meantime we continue to address our cost levels, and as always we have some innovative plans in development. Thus, if economic and market conditions improve, we are well placed to benefit. But even if they don't, my cautious optimism about the future remains only slightly dimmed.

Sir David Howard

Chairman

8 November 2012

CHARLES STANLEY GROUP PLC

CONDENSED CONSOLIDATED INTERIM INCOME STATEMENT

SIX MONTHS ENDED 30 SEPTEMBER 2012


		Unaudited Half-year	Unaudited Half-year	Audited Year
		30 Sept 2012	30 Sept 2011	31 Mar 2012
	Notes	£'000	£'000	£'000
Continuing operations
Revenue	2	59,657	60,209	119,636
Administrative expenses		(56,467)	(55,345)	(111,663)
Other income		15	66	89


Operating profit	4	3,205	4,930	8,062

Finance income	5	182	244	449
Finance costs	5	(24)	(36)	(67)
Gains and losses on available for sale financial assets	5	32	12	34
Gains and losses on disposal of property, plant and equipment	5	-	-	4

Profit before tax		3,395	5,150	8,482

Tax expense	6	(679)	(1,321)	(2,553)


Profit for the period attributable to equity shareholders		2,716	3,829	5,929

Earnings per share

Based on reported profit for the period
Basic	7	6.00p	8.49p	13.12p


Diluted	7	5.99p	8.46p	13.08p

CHARLES STANLEY GROUP PLCCONDENSED CONSOLIDATED INTERIM STATEMENT OF COMPREHENSIVE INCOMESIX MONTHS ENDED 30 SEPTEMBER 2012


	Unaudited Half-year	Unaudited Half-year	Audited Year
	30 Sept 2012	30 Sept 2011	31 Mar 2012
	£'000	£'000	£'000

Profit for the period	2,716	3,829	5,929


Other comprehensive income
Gains and losses on available for sale financial assets	(50)	(63)	2
Deferred tax on available for sale financial assets	38	35	28
Retirement benefit scheme actuarial deficit	(1,805)	(3,391)	(2,705)
Deferred tax on retirement benefit scheme actuarial deficit	433	882	582


Other comprehensive income for the period, net of tax	(1,384)	(2,537)	(2,093)


Total comprehensive income for the period attributable to equity shareholders	1,332	1,292	3,836

CHARLES STANLEY GROUP PLC

CONDENSED CONSOLIDATED INTERIM STATEMENT OF FINANCIAL POSITION

AT 30 SEPTEMBER 2012

		Unaudited 30 Sept 2012	Unaudited 30 Sept 2011	Audited 31 Mar 2012
	Notes	£'000	£'000	£'000
Assets
Non-current assets
Intangible assets	9	33,893	35,948	34,604
Property, plant and equipment	10	6,913	6,622	6,832
Deferred tax assets		1,663	1,294	922
Available for sale financial assets	11	6,004	5,191	5,493
Trade and other receivables	12	1,112	1,522	1,219

Total non-current assets		49,585	50,577	49,070

Current assets
Trade and other receivables	12	257,211	150,343	267,315
Financial assets at fair value through profit or loss		229	296	211
Cash and cash equivalents		34,986	39,656	41,910

Total current assets		292,426	190,295	309,436

Total assets		342,011	240,872	358,506


Equity
Ordinary shares	13	11,308	11,308	11,308
Share premium		2,545	2,545	2,545
Revaluation reserve		1,481	1,435	1,493
Retained earnings		63,867	65,007	66,283

Total equity attributable to equity holders of the Company		79,201	80,295	81,629
Non-controlling interests		53	53	53

Total equity		79,254	80,348	81,682

Liabilities
Non-current liabilities
Trade and other payables	14	-	500	500
Retirement benefit obligations	16	7,866	6,672	5,936

Total non-current liabilities		7,866	7,172	6,436

Current liabilities
Trade and other payables	14	253,599	151,887	269,517
Borrowings	15	157	10	157
Current tax liabilities		1,135	1,455	714

Total current liabilities		254,891	153,352	270,388

Total liabilities		262,757	160,524	276,824

Total equity and liabilities		342,011	240,872	358,506

CHARLES STANLEY GROUP PLC

CONDENSED CONSOLIDATED INTERIM STATEMENT OF CHANGES IN EQUITY

SIX MONTHS ENDED 30 SEPTEMBER 2012

	Share capital	Share premium	Revaln reserve	Retained earnings	Sub- total	Minority interests	Total
	£'000	£'000	£'000	£'000	£'000	£'000	£'000

1 April 2011 (audited)	11,265	2,491	1,463	66,852	82,071	53	82,124

Profit for the period	-	-	-	3,829	3,829	-	3,829

Other comprehensive income:
Gains and losses on available for sale financial assets	-	-	(63)	-	(63)	-	(63)
Deferred tax on available for sale financial assets	-	-	35	-	35	-	35
Retirement benefit scheme actuarial deficit	-	-	-	(3,391)	(3,391)	-	(3,391)
Deferred tax on retirement benefit scheme actuarial deficit	-	-	-	882	882	-	882
Total other comprehensive income for the period	-	-	(28)	(2,509)	(2,537)	-	(2.537)

Total comprehensive income for the period	-	-	(28)	1,320	1,292	-	1,292
Dividends paid to equity shareholders	-	-	-	(3,270)	(3,270)	-	(3,270)
Shares issued in lieu of dividends	33	(33)	-	-	-	-	-
Share options - value of employee services	-	-	-	105	105	-	105
Share options - issue of shares	3	29	-	-	32	-	32
Conversion of loan notes	7	58	-	-	65	-	65

30 September 2011 (unaudited)	11,308	2,545	1,435	65,007	80,295	53	80,348

Profit for the period	-	-	-	2,100	2,100	-	2,100

Other comprehensive income:
Gains and losses on available for sale financial assets	-	-	65	-	65	-	65
Deferred tax on available for sale financial assets	-	-	(7)	-	(7)	-	(7)
Retirement benefit scheme actuarial deficit	-	-	-	686	686	-	686
Deferred tax on retirement benefit scheme actuarial deficit	-	-	-	(300)	(300)	-	(300)
Total other comprehensive income for the period	-	-	58	386	444	-	444

Total comprehensive income for the period	-	-	58	2,486	2,544	-	2,544
Dividends paid to equity shareholders	-	-	-	(1,244)	(1,244)	-	(1,244)
Share options - value of employee services	-	-	-	34	34	-	34

31 March 2012 (audited)	11,308	2,545	1,493	66,283	81,629	53	81,682


	Share capital	Share premium	Revaln reserve	Retained earnings	Sub- total	Minority interests	Total
	£'000	£'000	£'000	£'000	£'000	£'000	£'000

31 March 2012 (audited)	11,308	2,545	1,493	66,283	81,629	53	81,682

Profit for the period	-	-	-	2,716	2,716	-	2,716

Other comprehensive income:
Gains and losses on available for sale financial assets	-	-	(50)	-	(50)	-	(50)
Deferred tax on available for sale financial assets	-	-	38	-	38	-	38
Retirement benefit scheme actuarial deficit	-	-	-	(1,805)	(1,805)	-	(1,805)
Deferred tax on retirement benefit scheme actuarial deficit	-	-	-	433	433	-	433

Total other comprehensive income for the period	-	-	(12)	(1,372)	(1,384)	-	(1,384)

Total comprehensive income for the period	-	-	(12)	1,344	1,332	-	1,332
Dividends paid to equity shareholders	-	-	-	(3,845)	(3,845)	-	(3,845)
Share options - value of employee services	-	-	-	85	85	-	85

30 September 2012 (unaudited)	11,308	2,545	1,481	63,867	79,201	53	79,254

CHARLES STANLEY GROUP PLC

CONDENSED CONSOLIDATED INTERIM STATEMENT OF CASH FLOWS

SIX MONTHS ENDED 30 SEPTEMBER 2012

		Unaudited Half-year	Unaudited Half-year	Audited Year
		30 Sept 2012	30 Sept 2011	31 Mar 2012
	Notes	£'000	£'000	£'000
Cash flows from operating activities
Cash (absorbed by)/generated from operations	17	(999)	2,037	9,612
Interest received		182	244	449
Interest paid		(24)	(36)	(67)
Tax paid		(526)	(1,563)	(3,470)

Net cash (outflows)/inflows from operating activities		(1,367)	682	6,524

Cash flows from investing activities
Acquisition of subsidiaries and other businesses		-	(1,352)	(1,352)
Acquisition of intangible assets		(8)	(552)	(1,632)
Purchase of property, plant and equipment		(1,190)	(1,453)	(2,678)
Proceeds from sale of property, plant and equipment		-	-	6
Purchase of available for sale financial assets		(683)	(104)	(498)
Proceeds from sale of available for sale financial assets		154	85	264
Dividends received		15	66	89

Net cash used in investing activities		(1,712)	(3,310)	(5,801)

Cash flows from financing activities
Net proceeds from issue of ordinary share capital		-	32	32
Cash outflow from change in debt and lease financing		-	(18)	129
Dividends paid to equity shareholders	8	(3,845)	(3,270)	(4,514)

Net cash used in financing activities		(3,845)	(3,256)	(4,353)

Net decrease in cash and cash equivalents		(6,924)	(5,884)	(3,630)

Cash and cash equivalents at start of period		41,910	45,540	45,540

Cash and cash equivalents at end of period		34,986	39,656	41,910

CHARLES STANLEY GROUP PLC

NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS

1 GENERAL INFORMATION

Charles Stanley Group PLC 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 2012 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

1.1 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. The condensed consolidated interim financial statements have been prepared on the basis of the accounting policies, methods of computation and presentation set out in the Group's consolidated financial statements for the year ended 31 March 2012. The condensed consolidated interim financial statements should be read in conjunction with the Group's audited financial statements for the year ended 31 March 2012.

The comparative figures for the financial year ended 31 March 2012 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 8 November 2012.

1.2 Principal risks and uncertainties

The Directors believe that the nature of the principal risks and uncertainties facing the Group during the six months to 30 September 2012 and during the remainder of its financial year remain unchanged from 31 March 2012. A full assessment of the risks and uncertainties, together with the controls and processes which are in place to monitor and mitigate the risks where possible, are set out on pages 19, 20 and 21 of the 2012 Annual Report and Financial Statements. The risks are summarised below.

Risk type	Risk
Credit risk	Default by counterparty
Market risk	Loss from fluctuations in asset values, interest rates or exchange rates
Operational risk	Loss resulting from inadequate or failed internal processes, people and systems
Liquidity risk	Risk that Group does not have sufficient resources to meet its obligations
Business risk	Exposure to macroeconomic, geopolitical, industrial, regulatory and other external risks
Regulatory risk	Loss from regulatory action
Reputational risk	Poor service provision and investment performance

1.3 Related party transactions

Related party transactions are described on page 87 of the 2012 Annual Report and Financial Statements. No transactions took place during the six months to 30 September 2012 that would materially affect the financial position or performance of the Group during the period.

1.4 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 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 2012. The following areas were reviewed by management and changes made as noted below:

Retirement benefit obligations

The Directors requested the Company's actuaries to up-date their valuation from 31 March 2012 to 30 September 2012. This resulted in an increase in the actuarial deficit of £ 1.8 million which has been reflected in these financial statements.

Intangible assets

During the period market valuations and volumes have decreased. Management have carried out an impairment review of intangible assets and have concluded that there is no impairment to the carrying value of intangible assets.

Available for sale financial assets

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

1.5 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.

2 SEGMENT INFORMATION

For management purposes the Group is organised into three Divisions - Private Clients, Financial Services and Charles Stanley Securities. The principal activity of the Private Client Division is the provision of investment management services to individuals, trusts and charities. The Financial Services Division includes a SIPP administrator, a discount financial intermediary, employee benefits providers together with financial planning and fund management areas. Charles Stanley Securities is the Group's advisory, broking and corporate finance arm for smaller and mid-cap UK listed companies. Sales between segments are carried out at arm's length. All of the Group's activities are undertaken in the United Kingdom.

	Private Clients	Financial Services	Charles Stanley Securities	Sub- total	Central costs	Total
Six months ended 30 September 2012	£'000	£'000	£'000	£'000	£'000	£'000

Commission	20,630	117	2,110	22,857	-	22,857
Fees
Investment management	16,578	316	-	16,894	-	16,894
Administration	12,169	5,922	72	18,163	-	18,163
Corporate finance	-	-	1,743	1,743	-	1,743
	28,747	6,238	1,815	36,800	-	36,800


Total revenue	49,377	6,355	3,925	59,657	-	59,657
Administrative expenses	(29,703)	(5,800)	(4,466)	(39,969)	(16,498)	(56,467)
Other income	-	-	-	-	15	15

Operating profit/(loss)	19,674	555	(541)	19,688	(16,483)	3,205


Segment assets	261,325	14,631	10,268	286,224	55,359	341,583


Segment liabilities	225,282	941	19,591	245,814	16,443	262,257


Six months ended 30 September 2011
Commission	24,604	167	2,373	27,144	-	27,144
Fees
Investment management	14,648	260	-	14,908	-	14,908
Administration	11,458	5,370	128	16,956	-	16,956
Corporate finance	-	-	1,201	1,201	-	1,201

	26,106	5,630	1,329	33,065	-	33,065

Total revenue	50,710	5,797	3,702	60,209	-	60,209
Administrative expenses	(31,095)	(5,021)	(4,131)	(40,247)	(15,098)	(55,345)
Other income	-	-	-	-	66	66

Operating profit	19,615	776	(429)	19,962	(15,032)	4,930


Segment assets	174,443	16,734	4,834	196,011	44,861	240,872


Segment liabilities	153,287	43	132	153,462	7,062	160,524


	Private Clients	Financial Services	Charles Stanley Securities	Sub- total	Central costs	Total
Year ended 31 March 2012	£'000	£'000	£'000	£'000	£'000	£'000

Commission	47,400	332	4,425	52,157	-	52,157
Fees
Investment management	30,187	549	-	30,736	-	30,736
Administration	22,884	10,781	278	33,943	-	33,943
Corporate finance	-	-	2,800	2,800	-	2,800

	53,071	11,330	3,078	67,479	-	67,479

Total revenue	100,471	11,662	7,503	119,636	-	119,636
Administrative expenses	(61,992)	(10,447)	(8,121)	(80,560)	(31,103)	(111,663)
Other income	-	-	-	-	89	89

Operating profit	38,479	1,215	(618)	39,076	(31,014)	8,062


Segment assets	268,631	14,655	14,271	297,557	60,949	358,506


Segment liabilities	241,891	999	15,865	258,755	18,069	276,824

3 EMPLOYEE BENEFIT EXPENSES

	30 Sept 2012£'000	30 Sept 2011£'000	31 Mar 2012£'000
Staff costs for the Group during the period:
Wages and salaries	22,374	22,319	45,593
Social security costs	2,624	2,558	4,824
Share options - value of employee services	85	104	139
Pension costs:
Defined contribution plans	1,443	1,401	3,004
Defined benefit plan	648	401	816

	27,174	26,783	54,376

4 OPERATING PROFIT

The following items have been included in arriving at operating profit:


Depreciation of property, plant and equipment:
- owned assets	1,057	1,057	2,067
- assets held under finance leases	-	-	3
Amortisation of intangible assets	719	1,022	2,300
Impairment of intangible assets	-	-	150
Other operating lease rentals	1,188	1,110	2,308
Financial Services Compensation Scheme levy	1,445	600	1,688

5 FINANCE INCOME - NET

	30 Sept 2012£'000	30 Sept 2011£'000	31 Mar 2012£'000

Interest income	182	244	449

Interest expense:
Interest payable on bank borrowings	(5)	(6)	(14)
Interest payable on other loans	(19)	(29)	(52)
Interest payable on finance leases	-	(1)	(1)

Interest and similar charges payable	(24)	(36)	(67)

Gains and losses on available for sale financial assets	32	12	34
Gains and losses on disposal of property, plant and equipment	-	-	4

Finance income - net	190	220	420

6 TAX EXPENSE

Analysis of charge in the period
Current tax
- Continuing operations	873	1,374	2,393
- Adjustment in respect of prior periods	75	(209)	(62)
Deferred tax
Origination and reversal of temporary timing differences
- Continuing operations	37	156	16
- Adjustment in respect of prior periods	(306)	-	206

	679	1,321	2,553

7 EARNINGS PER SHARE

The Directors believe that a better reflection of the underlying performance of the Group's ongoing business is given by a number of different measures of earnings per share. "Adjusted earnings" represent earnings before gains and losses on available for sale financial assets, one-off costs and amortisation of customer relationships. This measure is also followed by the analyst community as a benchmark of the Group's on-going performance.

	30 Sept 2012	30 Sept 2011	31 Mar 2012

	No. 000	No. 000	No. 000

Weighted average number of shares in issue in the period	45,234	45,111	45,173
Dilution	89	148	140

	45,323	45,259	45,313


	£'000	£'000	£'000

Reported earnings attributable to ordinary shareholders	2,716	3,829	5,929
Gains and losses on available for sale financial assets	(32)	(12)	(34)
Gains and losses on disposal of property, plant and equipment	-	-	(4)
Amortisation and impairment of customer relationships	719	1,022	2,450
One-off revenue costs	515	84	-
Financial Services Compensation Scheme Levy	1,445	600	1,688
Reduction of deferred consideration	(400)	-	-
Tax on these costs	(539)	(440)	(1,066)

Adjusted earnings attributable to ordinary shareholders	4,424	5,083	8,963


Based on reported earnings
Basic earnings per share	6.00p	8.49p	13.12p


Diluted earnings per share	5.99p	8.46p	13.08p


Based on adjusted earnings
Basic earnings per share	9.78p	11.27p	19.84p


Diluted earnings per share	9.76p	11.23p	19.78p

8 DIVIDENDS PAID

	30 Sept 2012£'000	30 Sept 2011£'000	31 Mar 2012£'000

Final paid of 8.50p per share (2011: 8.25p)	3,845	3,270	3,270
Interim paid of 2.75p per share	-	-	1,244

	3,845	3,270	4,514

The Directors are proposing an interim dividend in respect of the six months ended 30 September 2012 of 2.75p per share which will absorb an estimated £1.2 million of shareholders' funds. It will be paid on 14 December 2012 to shareholders who are on the register of members on 16 November 2012.

9 INTANGIBLE ASSETS

	Goodwill	Customer relationships	Total
	£'000	£'000	£'000
Cost
1 April 2012	25,450	17,185	42,635
Additions	-	8	8

30 September 2012	25,450	17,193	42,643

Amortisation
1 April 2012	-	8,031	8,031
Amortisation during the period	-	719	719

30 September 2012	-	8,750	8,750

Net book value
30 September 2012	25,450	8,443	33,893


31 March 2012	25,450	9,154	34,604

10 PROPERTY, PLANT AND EQUIPMENT

	Freehold premises	Long leasehold premises	Short leasehold premises	Office equipment and motor vehicles	Total
	£'000	£'000	£'000	£'000	£'000
Cost
1 April 2012	615	2,361	6,581	11,108	20,665
Additions	-	-	88	1,102	1,190
Disposal	-	-	-	(52)	(52)

30 September 2012	615	2,361	6,669	12,158	21,803

Depreciation
1 April 2012	73	1,721	4,221	7,818	13,833
Charge for the period	8	27	288	734	1,057

30 September 2012	81	1,748	4,509	8,552	14,890

Net book value 30 September 2012	534	613	2,160	3,606	6,913

31 March 2012	542	640	2,360	3,290	6,832

11 AVAILABLE FOR SALE FINANCIAL ASSETS

	Listed investments	Unlisted investments	Total
	£'000	£'000	£'000

Fair value
1 April 2012	3,399	2,094	5,493
Additions	183	500	683
Disposals	(122)	-	(122)
Revaluation in period	(50)	-	(50)

Fair value at 30 September 2012	3,410	2,594	6,004

12 TRADE AND OTHER RECEIVABLES

	30 Sep 2012£'000	30 Sep 2011£'000	31 Mar 2012£'000
Current
Trade receivables	251,059	145,592	261,616
Other receivables	3,274	2,239	2,977
Prepayments and accrued income	2,878	2,512	2,722

	257,211	150,343	267,315


Non-current
Other receivables	200	354	215
Prepayments and accrued income	912	1,168	1,004

	1,112	1,522	1,219

13 CALLED UP SHARE CAPITAL

	30 Sept 2012£'000	30 Sept 2011£'000	31 Mar 2012£'000
Authorised
80,000,000 ordinary shares of 25p each	20,000	20,000	20,000


Allotted and fully paid
45,234,163 ordinary shares of 25p each	11,308	11,308	11,308

As at 30 September 2012 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	20 Dec 2011	11 Mar 2011
Exercisable during the six months commencing	1 Feb 2015	1 May 2014
Number of shares	368,137	473,691
Exercise price	£2.34	£2.51

14 TRADE AND OTHER PAYABLES

	30 Sep 2012£'000	30 Sep 2011£'000	31 Mar 2012£'000
Current
Trade payables	243,924	143,374	257,756
Other taxes and social security	2,859	2,821	2,215
Other payables	2,010	1,533	4,381
Accruals and deferred income	4,806	4,159	5,165

	253,599	151,887	269,517


Non current
Other payables - deferred consideration	-	500	500

15 BORROWINGS


Current	30 Sept 2012£'000	30 Sept 2011£'000	31 Mar 2012£'000

Bank of England base rate redeemable loan	157	-	157
Obligations under finance leases	-	10	-

	157	10	157

16 RETIREMENT BENEFIT OBLIGATIONS

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 Ltd 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 2012 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 contributions at the rate of 25.5% of pensionable pay plus £315,000 per annum. This rate is net of member contributions of 3.0% 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.

	30 Sep 2012£'000	30 Sep 2011£'000	31 Mar 2012£'000

Fair value of plan assets	27,030	24,032	26,197
Present value of defined benefit obligation	(34,896)	(30,704)	(32,133)

Deficit in scheme	(7,866)	(6,672)	(5,936)

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

Expected long term rates of return

The expected return on bonds is determined by reference to UK long dated gilt and bond yields at the balance sheet date. The expected rate of return on equities has been determined by setting an appropriate risk premium above gilt/bond yields having regard to market conditions at the balance sheet date.

The expected long term rates of return are as follows:

	Sep 2012	Mar 2012	2011	2010	2009
	% per annum	% per annum	% per annum	% per annum	% per annum

Equities	6.25	7.50	7.50	7.50	6.75
Bonds	5.05	5.55	5.55	5.50	4.75
Cash	1.60	3.25	3.25	4.30	4..00
Overall for scheme	4.93	6.10	6.10	6.36	5.65

Assumptions

Inflation	2.50	3.25	3.40	3.50	3.10
Salary increases	3.00	3.00	3.00	3.00	3.00
Rate of discount	4.45	5.05	5.55	5.66	6.50
Allowance for pension in payment increases: lower of RPI and 5% p.ass	2.50	3.25	3.40	3.50	3.10
Allowance for revaluation of deferred pensions: lower of RPI and 5% p.a	2.45	3.25	3.35	3.45	3.05

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 continued to use RPI in calculating the liability as at 30 September 2012.

The mortality assumptions adopted at 30 September 2012 imply the following life expectations at age 65:

Male retiring at age 65 in 2012 22.5 years

Female retiring at age 65 in 2012 24.6 years

Male retiring at age 65 in 2032 24.8 years

Female retiring at age 65 in 2032 27.0 years

Best estimate of contributions to be paid to plan for the year ending 31 March 2013

The best estimate of contributions (employer and employee) to be paid to the plan for the year ending 31 March 2013 is £884,000 (2012: £1,020,000).

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

	30 Sept 2012£'000	30 Sept 2011£'000	31 Mar 2012£'000

Profit before tax	3,395	5,150	8,482
Adjustments for:
Depreciation	1,057	1,057	2,070
Write back of deferred consideration	(400)	-	-
Amortisation of client lists	719	1,022	2,300
Impairment of intangible assets	-	-	150
Share options - value of employee services	85	104	139
Retirement benefit scheme	125	(76)	(126)
Dividend income	(15)	(66)	(89)
Interest income	(182)	(244)	(449)
Interest expense	24	36	67
Profit on disposal of property, plant and equipment	-	-	(4)
Profit on disposal of available for sale financial assets	(32)	-	(34)
Net change in fair value of available for sale financial assets re-classified to profit/loss	-	(12)	-
Changes in working capital:
Increase in financial assets at fair value through profit or loss	(18)	(126)	(41)
Decrease/(increase) in receivables	10,262	74,448	(42,222)
(Decrease)/increase in payables	(16,019)	(79,256)	39,369

Cash (absorbed by)/generated from operations	(999)	2,037	9,612

DIRECTORS' RESPONSIBILITY STATEMENT

We confirm that to the best of our knowledge:

o The condensed set of financial statements has been prepared in accordance with IAS 34 'Interim Financial Reporting' as adopted by the EU;

o 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 during the first six months of the financial year and their impact on the condensed set of financial statements; and a description of principal risks and uncertainties for the remaining six months of the year; 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.

On behalf of the board:

JAMES RAWLINGSON

FINANCE DIRECTOR

8 November 2012

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 2012 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 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 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 2012 is not prepared, in all material respects, in accordance with IAS 34 as adopted by the EU and the DTR of the UK FSA.

Mike Peck

For and on behalf of KPMG Audit Plc

Chartered Accountants

15 Canada Square

London E14 5GL

8 November 2012

This information is provided by RNS

The company news service from the London Stock Exchange

END

IR KMMGMVNLGZZM

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