Interim Results

19th Nov 2008 07:00



19 November 2008

Rensburg Sheppards plc

 ('Rensburg Sheppards' or 'the Company') 

Half-Yearly Financial Report

Rensburg Sheppards, the investment led wealth management group, today announces its half-yearly results for the six months ended 30 September 2008

Key Points:

Profit before tax of £16.4 million (2007: £15.0 million)

Adjusted* profit before tax of £19.7 million (2007: £20.1 million)

Basic earnings per share of 26.3p (2007: 23.9p)

Adjusted* basic earnings per share of 31.9p (2007: 31.7p)

Interim dividend maintained at 8.5p per ordinary share (2007: 8.5p)

Group funds under management at 30 September 2008 of £11.45 billion (31 March 2008: £12.95 billion)

* Before amortisation of the client relationships intangible asset and share-based charges relating to the Employee Benefit Trust ('EBT'). These items amount to a net charge before tax of £3.3 million (2007: £5.1 million) and a net charge after tax of £2.5 million (2007: £3.4 million).

Steve Elliott, Chief Executive of Rensburg Sheppards, commented:

"Against a backdrop of challenging markets, I am pleased that the hard work of all my colleagues has resulted in these very creditable results. We will continue to maintain our strong client relationships as well as focusing on maximising net organic growth of funds under management. Overall, I believe we have the right business model to successfully trade through the current difficult market conditions".

An analysts meeting will be held today at 9.30 am at the offices of Hudson Sandler, 29 Cloth Fair, London, EC1A 7NN. 

For further information, please contact:
Steve Elliott, Chief Executive Jonathan Wragg, Finance Director Rensburg Sheppards plc	Tel: 020 7597 1234
Nick Lyon / James White Hudson Sandler	Tel: 020 7796 4133

Interim Management Report 

The six months to 30 September 2008 witnessed a further deterioration in the already weakened UK and world financial markets, with the FTSE All-Share index falling 15.1% over this period. This was primarily driven by increasing concerns over the health of key financial institutions, culminating in the events of September 2008 when confidence was rocked by the demise of Lehman Brothers and several major US domestic banks, the swiftly orchestrated takeover of Merrill Lynch by Bank of America and the US government bail-out of AIG. In the UK, we saw the quickly arranged planned takeover of HBOS by Lloyds TSB and the nationalisation of Bradford & Bingley, which took place during intense downward pressure on the share prices of most UK based banks, reflecting market concerns relating to their financial viability. A welcome reversal in the prices of oil and other commodities came too late to offset the negative economic impact of the 'credit crunch', leading to downward pressure on other economically sensitive sectors of the equity market. 

We consider that the results now being reported demonstrate the resilience of the group's business. Whilst acknowledging that market conditions are more than likely to remain difficult for some time to come, the board believes that the group is well placed to trade through these challenging times. 

Financial results and dividend

From revenue (net of fees and commissions payable to introducers) of £57.5 million (2007: £61.4 million), the group's profit before tax was £16.4 million (2007: £15.0 million). After removing charges totalling £3.3 million (2007: £5.1 million) in respect of the amortisation of the client relationships intangible asset and share-based charges relating to the Employee Benefit Trust associated with the acquisition of Carr Sheppards Crosthwaite, the resulting adjusted profit before tax was £19.7 million (2007: £20.1 million). 

Basic earnings per share increased to 26.3p (2007: 23.9p). This increase reflects the cessation during May 2008 of the share-based charge relating to the EBT, which contributed 4.3p to basic earnings per share for the period.  After adjusting for the items detailed in the above paragraph, together with the associated tax consequences of these adjustments, the adjusted basic earnings per share increased to 31.9p (2007: 31.7p).  It continues to be the directors' opinion that the adjusted measures of profit before tax and of earnings represent better measures of the group's underlying financial performance.

The group's ability to generate cash from its operating activities remains strong. After allowing for the effect of short term cash requirements, as set out in note 10, there continues to be a high correlation between the group's profitability and cash generation.

Taking the profitability achieved in the first half of this year, combined with the solid financial base of the group, the directors have declared a maintained interim dividend of 8.5p per ordinary share payable on 6 February 2009 to all shareholders on the register at the close of business on 9 January 2009.

Rensburg Sheppards Investment Management ('RSIM')

Fee and other recurring income in RSIM declined by 2.5% to £38.8 million (2007: £39.8 million). Non-recurring income, which principally comprises commissions, decreased by 8.4% to £13.1 million (2007: £14.3 million).

At 30 September 2008, discretionary funds under management were £7.25 billion (31 March 2008: £8.04 billion), a decrease of 9.8%, whilst non-discretionary funds under management were £2.95 billion (31 March 2008: £3.44 billion), a decrease of 14.2%. This gave total funds under management at 30 September 2008 of £10.20 billion (31 March 2008: £11.48 billion) a decrease over the six month period of 11.1%, compared with the decrease of 9.5% over the corresponding period in the FTSE APCIMS Private Investors Balanced Index. Of these total funds, 71.1% are managed on a discretionary basis, a further increase towards our stated target of 75%.

All of RSIM's staff understand that during such challenging times as those currently being faced it is more important than ever to keep in regular contact with their clients and have acted accordingly. From a combination of these efforts, whilst also successfully developing relationships with new clients, RSIM has achieved an implied rate of net organic growth in funds under management in the six months to 30 September 2008 of 0.8% (2007: nil %). Although this improvement is modest, it is particularly welcome against the difficult backdrop and net organic growth of funds will remain a key goal. 

Rensburg Fund Management ('RFM') 

Recurring income in RFM, which principally comprises the manager's service charge, was £5.0 million (2007: £6.2 million), a 19.4% reduction over the comparable prior year period; on the same basis, non-recurring income, which comprises profits from sales of units was £0.6 million (2007: £1.1 million), a 45.5% reduction.

Over the six months to 30 September 2008, the value of RFM's retail unit trust based funds under management fell by 19.4% to £0.87 billion (31 March 2008: £1.08 billion). This compared with the corresponding decline of 15.1% in the FTSE All-Share index. The net movement out of the trusts over the period totalled £73.9 million, representing 6.8% of opening funds under management. Asset allocation switches by professional investors out of UK equities in anticipation of weaker sterling were undoubtedly a significant factor influencing the net outflows.

In contrast, despite the decline in the FTSE All-Share index referred to above, the value of the segregated mandate managed by RFM decreased by only 1.7% to £386.1 million (31 March 2008: £392.6 million), reflecting capital inflows that totalled £55.0 million during the six months to 30 September 2008. Combining the unit trust and segregated mandate funds gives RFM's total funds under management at 30 September 2008 of £1.25 billion (31 March 2008: £1.47 billion).

Group funds under management

The group's total funds under management at 30 September 2008 were £11.45 billion, a decrease of £1.50 billion, or 11.6%, since 31 March 2008. This compared with the decreases of 9.5% in the FTSE APCIMS Private Investors Balanced and 15.1% in the FTSE All-Share indices over this time.

People

As announced in the Company's preliminary results in June 2008, after six years' service Andrew Tyrie stepped down from the board and the position of senior independent non-executive director following the conclusion of the Annual General Meeting on 29 July 2008. Michael Haan, who joined the board in November 2005 as a non-executive director, succeeded Andrew in the role of senior independent non-executive director.

On 4 November 2008, following a detailed search process, the board was pleased to announce the appointments of Isla Smith and Robert Lister as independent non-executive directors. Isla and Robert bring with them significant and varied experience which we are confident will assist us in taking the group forward.

During such challenging times it is essential that we formally record the board's sincere appreciation to all of the group's staff for their considerable efforts over the first half of this financial year. It is evident that all of our people remain fully committed to working on behalf of their clients to steer them through the current difficult conditions.

Outlook

Since 30 September 2008, the UK, in common with other leading equity markets, has experienced continued volatility accompanied by underlying further sharp falls. Given the direct linkage between equity market levels and a significant proportion of the group's income, this backdrop inevitably forms the principal risk and uncertainty faced as we move into the latter half of this financial year.

However, with its recurring revenue-centred model, its strong client relationships that have been proven to withstand previous downturns and its sound financial position, the group remains well placed to withstand the remainder of this downturn and to benefit once markets recover.

C.G. Clarke	S.M. Elliott
Chairman	Chief Executive
18 November 2008

Consolidated income statement

for the six months ended 30 September 2008

			2008		2007		2008
			Six months		Six months		Year
			ended		ended		ended
			30 September		30 September		31 March
	Note		£'000		£'000		£'000
Revenue			62,480		67,415		132,928
Fees and commissions payable			(4,940)		(5,970)		(11,646)
Net revenue	2		57,540		61,445		121,282
Share-based payments - EBT	3		(440)		(2,328)		(4,653)
Amortisation of intangible assets - client relationships			(2,802)		(2,802)		(5,603)
Other operating expenses			(38,108)		(40,873)		(79,326)
Operating expenses			(41,350)		(46,003)		(89,582)
Operating profit			16,190		15,442		31,700
Finance income			1,733		1,466		3,284
Finance expenses	4		(1,498)		(1,903)		(3,771)
Profit before tax			16,425		15,005		31,213
Taxation	5		(4,941)		(4,556)		(10,324)
Profit for the period attributable to the equity holders of the company			11,484		10,449		20,889
Earnings per share	7
Basic			26.3p		23.9p		47.9p
Diluted			26.3p		23.8p		47.8p

Consolidated balance sheet

at 30 September 2008

						2008		2007		2008
						30 September		30 September		31 March
				Note		£'000		£'000		£'000
Assets
Non-current assets
Intangible assets				8		178,861		184,767		181,772
Property, plant and equipment				9		5,562		5,365		5,197
Available-for-sale investments						2,180		2,896		2,827
Deferred tax assets						1,435		1,339		1,372
						188,038		194,367		191,168
Current assets
Trade and other receivables						156,458		124,349		123,953
Cash and cash equivalents				10		53,927		51,684		71,464
						210,385		176,033		195,417
Total assets						398,423		370,400		386,585
Liabilities
Current liabilities
Trade and other payables						(147,340)		(120,619)		(127,981)
Subordinated loan				11		(5,625)		(5,625)		(5,625)
Provisions				12		(82)		(115)		(56)
Current tax liabilities						(5,910)		(6,434)		(6,820)
						(158,957)		(132,793)		(140,482)
Non-current liabilities
Accruals and deferred income						(1,593)		(1,477)		(1,373)
Subordinated loan				11		(33,750)		(44,375)		(44,375)
Provisions				12		(568)		(508)		(551)
Deferred tax liabilities						(12,419)		(14,566)		(13,689)
						(48,330)		(60,926)		(59,988)
Total liabilities						(207,287)		(193,719)		(200,470)
Net assets						191,136		176,681		186,115
Equity attributable to the equity holders of the company
Share capital				13,14		4,822		4,822		4,822
Share premium				14		10,617		10,610		10,617
Capital redemption reserve				14		100		100		100
Available-for-sale reserve				14		994		1,509		1,460
Revaluation reserve				14		1,512		980		973
Other reserves				14		130,601		130,601		130,601
Retained earnings				14		42,490		28,059		37,542
Total equity						191,136		176,681		186,115

Consolidated cash flow statement

for the six months ended 30 September 2008

			2008		2007		2008
			Six months		Six months		Year
			ended		ended		ended
			30 September		30 September		31 March
			£'000		£'000		£'000
Cash flows from operating activities
Profit before taxation			16,425		15,005		31,213
Adjustments for:
- Amortisation of intangible assets			3,046		3,107		6,198
- Finance expenses			1,498		1,903		3,771
- Finance income			(1,733)		(1,466)		(3,284)
- Depreciation			500		433		900
Share-based payments			884		2,788		5,557
(Increase)/decrease in trade and other receivables			(32,355)		6,167		6,440
Increase/(decrease) in trade payables and provisions			21,031		(3,327)		2,674
Cash generated from operations			9,296		24,610		53,469
Interest received			1,515		1,346		3,261
Dividends received			68		56		82
Interest paid			(7)		(12)		(44)
Taxation paid			(6,741)		(4,669)		(10,964)
Net cash inflow from operating activities			4,131		21,331		45,804
Cash flows from investing activities
Purchase of property, plant and equipment			(587)		(376)		(675)
Purchase of intangible assets - software			(135)		(273)		(369)
Net cash outflow from investing activities			(722)		(649)		(1,044)
Cash flows from financing activities
Dividends paid to shareholders			(7,421)		(6,548)		(10,258)
Proceeds from issue of ordinary share capital			-		7		14
Redemption of loan notes			-		(72)		(72)
Repayment of subordinated loan			(10,625)		(10,000)		(10,000)
Interest paid on subordinated loan			(1,796)		(2,160)		(3,987)
Net cash outflow from financing activities			(19,842)		(18,773)		(24,303)
Net (decrease)/increase in cash and cash equivalents			(16,433)		1,909		20,457
Cash and cash equivalents at start of period			70,232		49,775		49,775
Cash and cash equivalents at end of period	10		53,799		51,684		70,232

Consolidated statement of recognised income and expense

for the six months ended 30 September 2008

			2008		2007		2008
			Six months		Six months		Year
			ended		ended		ended
			30 September		30 September		31 March
			£'000		£'000		£'000
Revaluation of available-for-sale investments
- (loss)/gain arising from changes in fair value			(647)		334		265
Deferred tax on revaluation of available-for-sale investments
- on loss/(gain) arising from changes in fair value			181		(100)		(80)
- movement in deferred tax arising from change of tax rate			-		41		46
Revaluation of property
- gain arising from change in fair value			278		-		-
Deferred tax on revalued property
- on gain arising from change in fair value			(78)		-		-
- on change in tax base cost			346		-		-
- movement in deferred tax arising from change of tax rate			-		27		27
Net income recognised directly in equity			80		302		258
Profit for the period			11,484		10,449		20,889
Total recognised income and expense for the period attributable to the equity holders of the company			11,564		10,751		21,147

Notes to the condensed financial statements

1. Basis of preparation and statement of compliance

Rensburg Sheppards plc ('the company') is a public company incorporated in the United Kingdom. The shares of the company are listed on the London Stock Exchange. The consolidated income statement, consolidated balance sheet, consolidated statement of recognised income and expense, consolidated cash flow statement and the related notes represent condensed consolidated interim financial statements of the company and comprise those of the company and its subsidiaries (together referred to as 'the group'). The condensed consolidated interim financial statements have been prepared in accordance with International Financial Reporting Standard IAS 34 Interim Financial Reporting as adopted by the EU. They do not include all of the information required for full annual financial statements and should be read in conjunction with the consolidated financial statements of the group for the year ended 31 March 2008. The accounting policies applied by the group in these condensed consolidated interim financial statements are the same as those applied by the group in its consolidated financial statements for the year ended 31 March 2008.

The financial information contained in these condensed consolidated interim financial statements is unaudited and does not constitute statutory accounts within the meaning of section 240 of the Companies Act 1985.  The comparative figures for the year ended 31 March 2008 are not the company's statutory accounts for that year.  Those accounts have been reported on by the auditor of the company and delivered to the Registrar of Companies. The report of the auditor was (i) unqualified, (ii) did not include a reference to any matters to which the auditor drew attention by way of emphasis without qualifying its report and (iii) did not contain a statement under section 237 (2) or (3) of the Companies Act 1985.

2. Revenue and segmental information

For management purposes, the group is organised into two business segments, being Investment Management and Fund Management.  These segments represent the primary reporting segments of the group.

Six months ended 30 September 2008

		Investment		Fund
		Management		Management		Eliminations		Group
		£'000		£'000		£'000		£'000
Revenue
External		53,610		8,870		-		62,480
Inter-segment		318		-		(318)		-
		53,928		8,870		(318)		62,480
Fees and commissions payable		(2,009)		(3,249)		318		(4,940)
Segmental net revenue		51,919		5,621		-		57,540
Share-based payments - EBT		(440)		-		-		(440)
Amortisation of intangible assets - client relationships		(2,802)		-		-		(2,802)
Other operating expenses		(34,896)		(3,212)		-		(38,108)
Segmental expenses		(38,138)		(3,212)		-		(41,350)
Segmental operating profit		13,781		2,409		-		16,190
Finance income		1,467		266		-		1,733
Finance expenses		(1,498)		-		-		(1,498)
Profit before tax		13,750		2,675		-		16,425
Segmental net revenue comprises:
Fees		26,596		4,981		-		31,577
Commission		11,048		-		-		11,048
Interest from client deposits		7,589		-		-		7,589
Trail commission		2,844		-		-		2,844
Profit on sale of units of unit trusts		-		624		-		624
Other income		3,842		16		-		3,858
Total segmental net revenue		51,919		5,621		-		57,540

Six months ended 30 September 2007

		Investment		Fund
		Management		Management		Eliminations		Group
		£'000		£'000		£'000		£'000
Revenue
External		55,870		11,545		-		67,415
Inter-segment		336		-		(336)		-
		56,206		11,545		(336)		67,415
Fees and commissions payable		(2,132)		(4,174)		336		(5,970)
Segmental net revenue		54,074		7,371		-		61,445
Share-based payments - EBT		(2,328)		-		-		(2,328)
Amortisation of intangible assets - client relationships		(2,802)		-		-		(2,802)
Other operating expenses		(36,394)		(4,479)		-		(40,873)
Segmental expenses		(41,524)		(4,479)		-		(46,003)
Segmental operating profit		12,550		2,892		-		15,442
Finance income		1,177		289		-		1,466
Finance expenses		(1,903)		-		-		(1,903)
Profit before tax		11,824		3,181		-		15,005
Segmental net revenue comprises:
Fees		29,161		6,229		-		35,390
Commission		12,336		-		-		12,336
Interest from client deposits		5,862		-		-		5,862
Trail commission		2,811		-		-		2,811
Profit on sale of units of unit trusts		-		1,094		-		1,094
Other income		3,904		48		-		3,952
Total segmental net revenue		54,074		7,371		-		61,445

Year ended 31 March 2008

	Investment		Fund
	Management		Management		Eliminations		Group
	£'000		£'000		£'000		£'000
Revenue
External	110,546		22,382		-		132,928
Inter-segment	716		-		(716)		-
	111,262		22,382		(716)		132,928
Fees and commissions payable	(4,082)		(8,280)		716		(11,646)
Segmental net revenue	107,180		14,102		-		121,282
Share-based payments - EBT	(4,653)		-		-		(4,653)
Amortisation of intangible assets - client relationships	(5,603)		-		-		(5,603)
Other operating expenses	(71,412)		(7,914)		-		(79,326)
Segmental expenses	(81,668)		(7,914)		-		(89,582)
Segmental operating profit	25,512		6,188		-		31,700
Finance income	2,578		706		-		3,284
Finance expenses	(3,771)		-		-		(3,771)
Profit before tax	24,319		6,894		-		31,213
Segmental net revenue comprises:
Fees	57,307		11,934		-		69,241
Commission	23,993		-		-		23,993
Interest from client deposits	12,483		-		-		12,483
Trail commission	5,436		-		-		5,436
Profit on sale of units of unit trusts	-		2,089		-		2,089
Other income	7,961		79		-		8,040
Total segmental net revenue	107,180		14,102		-		121,282

Of the segmental net revenue shown above, fees, interest from client deposits, trail commission and certain amounts within other income are deemed to be recurring in nature. Recurring income amounted to £38,802,000 in respect of the Investment Management segment (September 2007: £39,788,000; March 2008: £79,142,000) and £4,981,000 in respect of the Fund Management segment (September 2007: £6,229,000; March 2008: £11,934,000).

3. Share-based payments

The total charge for the period in respect of employee share-based payment schemes was £884,000 (September 2007: £2,788,000; March 2008: £5,557,000), all of which related to equity-settled share-based payment transactions. This charge comprised £440,000 relating to the EBT (September 2007: £2,328,000; March 2008: £4,653,000) and £444,000 in respect of the group's other share and share option schemes (September 2007: £460,000; March 2008: £904,000). The charge relating to the EBT ceased on 6 May 2008, following the vesting of the EBT awards on that date.

The movements during the period in the number of shares in respect of which awards are outstanding are set out below:

				Employee
	SAYE	2007 Employee	Employee	Share
	2006	Share Plan	Benefit Trust	Ownership Plan
	No.	No.	No.	No.
Outstanding at 1 April 2008	423,778	202,350	2,548,000	27,250
Forfeited	(116,935)	-	-	-
Exercised	-	-	-	(7,250)
Vested	-	-	(2,548,000)	-
Outstanding at 30 September 2008	306,843	202,350	-	20,000

The awards outstanding at 1 April 2008 in respect of the Employee Benefit Trust ('EBT') represented potential future entitlements to shares conferred on participating employees under the terms of the group's acquisition of Carr Sheppards Crosthwaite Limited on 6 May 2005. These awards vested on 6 May 2008 in accordance with the terms of the EBT.

4. Finance expenses

Finance expenses include interest payable of £1,491,000 relating to the subordinated loan (September 2007: £1,892,000; March 2008: £3,728,000). 

5. Taxation

The tax expense for the six months ended 30 September 2008 has been calculated using the estimated annual effective rate of tax for the year ending 31 March 2009. The tax charge recognised in the income statement comprises:

	2008		2007		2008
	Six months		Six months		Year
	ended		ended		ended
	30 September		30 September		31 March
	£'000		£'000		£'000
United Kingdom corporation tax	5,831		6,431		13,112
Deferred tax	(890)		(1,875)		(2,788)
	4,941		4,556		10,324

The movement on deferred tax for the six months ended 30 September 2007 and the year ended 31 March 2008 included credits of £852,000 and £806,000 respectively which arose as a result of the change in the rate of corporation tax from 30% to 28%, effective from 1 April 2008.

6. Dividend

The interim dividend declared for the six months ended 30 September 2008 of 8.5 pence per share is payable on 6 February 2009 to shareholders on the register as at the close of business on 9 January 2009. In accordance with the group's accounting policies and the requirements of IAS 10 Events after the balance sheet date this dividend has not been recognised as a liability at 30 September 2008.

7. Earnings per share

Basic earnings per share is calculated with reference to earnings for shareholders of £11,484,000 (September 2007: £10,449,000; March 2008: £20,889,000) and the weighted average number of shares in issue during the period of 43,654,177 (September 2007: 43,650,486; March 2008: 43,651,919). Adjusted earnings per share before amortisation of the client relationships intangible asset and share-based payments relating to the EBT is calculated with reference to earnings for shareholders of £13,941,000 (September 2007: £13,841,000; March 2008: £28,567,000).

Diluted earnings per share is the basic earnings per share, adjusted for the effect of the conversion into fully paid shares of the weighted average number of all employee share options outstanding during the period. The number of additional shares used for the diluted calculation is 35,811 shares (September 2007: 267,686; March 2008: 50,972).

The directors believe that the provision of additional earnings per share figures, in particular before amortisation of the client relationships intangible asset and share-based payments relating to the EBT, better represent underlying business performance. The effect of these adjustments on earnings and earnings per share is as follows:

			Basic		Diluted
	Earnings		EPS		EPS
Six months ended 30 September 2008	£'000		Pence		Pence
Unadjusted earnings and EPS	11,484		26.3		26.3
Share-based payments - EBT	440		1.0		1.0
Amortisation of intangible assets - client relationships	2,802		6.4		6.4
Tax arising on adjusted items at 28%	(785)		(1.8)		(1.8)
Adjusted earnings and EPS	13,941		31.9		31.9

			Basic		Diluted
	Earnings		EPS		EPS
Six months ended 30 September 2007	£'000		Pence		Pence
Unadjusted earnings and EPS	10,449		23.9		23.8
Share-based payments - EBT	2,328		5.3		5.3
Amortisation of intangible assets - client relationships	2,802		6.4		6.4
Tax arising on adjusted items at 30%	(841)		(1.9)		(1.9)
Effect on tax arising on adjusted items following change of rate of taxation	(897)		(2.0)		(2.1)
Adjusted earnings and EPS	13,841		31.7		31.5

			Basic		Diluted
	Earnings		EPS		EPS
Year ended 31 March 2008	£'000		Pence		Pence
Unadjusted earnings and EPS	20,889		47.9		47.8
Share-based payments - EBT	4,653		10.7		10.6
Amortisation of intangible assets - client relationships	5,603		12.8		12.8
Tax arising on adjusted items at 30%	(1,681)		(3.9)		(3.8)
Effect on tax arising on adjusted items following change of rate of taxation	(897)		(2.1)		(2.0)
Adjusted earnings and EPS	28,567		65.4		65.4

8. Intangible assets

The carrying values of intangible assets are as follows:

	2008		2007		2008
	30 September		30 September		31 March
	£'000		£'000		£'000
Goodwill	136,385		136,385		136,385
Client relationships	42,064		47,667		44,866
Software	412		715		521
	178,861		184,767		181,772

The carrying values of intangible assets are subject to an annual impairment review. The directors have considered whether there are any indications that the intangible assets may have become impaired in the period following the latest impairment review, and have concluded that there are no indications of impairment either at 30 September 2008 or the date of this report.

9. Property, plant and equipment

During the six months ended 30 September 2008, the group acquired assets with a cost of £587,000 (September 2007: £376,000; March 2008: £675,000). No assets were disposed of during the six months ended 30 September 2008 (September 2007: nil; March 2008: assets with a cost of £265,000 and a carrying value of nil were disposed of, with no profit or loss arising on disposal).

On 14 August 2008, the group's freehold property was revalued by an independent valuer. The valuation represented the open market value that could be realised upon an arm's length sale of the property with vacant possession. The valuation was determined by reference to sales and lettings of comparable properties within the same area. The surplus arising on revaluation and the associated tax consequences are set out in note 14.

10. Cash, cash equivalents and bank overdrafts

For the purposes of the cash flow statement, cash and cash equivalents comprise cash in hand, deposits with banks and financial institutions with a maturity of up to three months, and bank overdrafts repayable on demand.

	2008		2007		2008
	30 September		30 September		31 March
	£'000		£'000		£'000
Cash and cash equivalents	53,927		51,684		71,464
Bank overdrafts	(128)		-		(1,232)
	53,799		51,684		70,232

The group's cash balance is subject to day-to-day fluctuations resulting from the settlement of market transactions and the occasional funding of margin calls in respect of option positions. Whilst the date of settlement of market transactions is set at the time that sale and purchase orders are placed with the market, it is expected that, in the normal course of business, a proportion of transactions will not have been completed with both the client and the market on the recorded settlement date. Under these circumstances, the group may experience a temporary short term inflow or outflow of cash, until the settlement process has been completed. Taking into account the effect of these short term funding requirements, the group's ability to generate cash from its operating activities remains strong and there continues to be a high correlation between the group's profitability and cash generation. The net cash outflow during the six months ended 30 September 2008 includes an outflow of £10.4m which arose from these short term funding requirements.

11. Subordinated loan

The carrying value of the loan of £39.375 million at 30 September 2008 is subject to a fixed rate of interest of 7.155% per annum.

On 6 May 2008, £5 million of the subordinated loan was repaid ahead of schedule. This repayment was in respect of the floating rate element of the loan and was originally scheduled for repayment in equal annual instalments commencing on 6 May 2008. The floating rate element of the loan originally amounted to £15 million and, following the repayment of the balance of £5 million on 6 May 2008, has now been repaid in full. No penalty arose from the making of this early repayment. In addition to the early repayment, a repayment of £5.625 million was made on 6 May 2008 in accordance with the normal repayment schedule.

The comparative figures for the subordinated loan at 30 September 2007 and 31 March 2008 have been re-presented, such that the amount payable within one year is classified within current liabilities.

12. Provisions

				Onerous		Property
				leases		dilapidations		Total
				£'000		£'000		£'000
At 1 April 2008
Current liabilities				56		-		56
Non-current liabilities				254		297		551
				310		297		607
Charged to the income statement				64		-		64
Utilised during the period				(21)		-		(21)
At 30 September 2008				353		297		650

The balances at 30 September 2008 are categorised as follows:

			Onerous		Property
			Leases		dilapidations		Total
			£'000		£'000		£'000
Current liabilities			82		-		82
Non-current liabilities			271		297		568
			353		297		650

13. Share capital

No shares have been issued by the company during the period and there have been no changes to the company's authorised or issued share capital during the period.

14. Reconciliation of changes in shareholders' equity

			Capital	Available	Reval-
	Share	Share	redemption	-for-sale	uation	Other	Retained	Total
	capital	premium	reserve	reserve	reserve	reserves	earnings	Equity
	£'000	£'000	£'000	£'000	£'000	£'000	£'000	£'000
At 1 April 2007	4,822	10,603	100	1,234	959	130,601	21,373	169,692
Profit after taxation	-	-	-	-	-	-	10,449	10,449
Dividends	-	-	-	-	-	-	(6,548)	(6,548)
Issue of shares	-	7	-	-	-	-	-	7
Share-based payments	-	-	-	-	-	-	2,788	2,788
Deferred tax on share-based payments	-	-	-	-	-	-	(13)	(13)
Gain arising on available-for-sale investments	-	-	-	334	-	-	-	334
Deferred tax on available-for-sale investments	-	-	-	(100)	-	-	-	(100)
Movement in deferred tax arising from change of tax rate	-	-	-	41	27	-	4	72
Depreciation on revalued property	-	-	-	-	(6)	-	6	-
At 30 September 2007	4,822	10,610	100	1,509	980	130,601	28,059	176,681
Profit after taxation	-	-	-	-	-	-	10,440	10,440
Dividends	-	-	-	-	-	-	(3,710)	(3,710)
Issue of shares	-	7	-	-	-	-	-	7
Share-based payments	-	-	-	-	-	-	2,769	2,769
Deferred tax on share-based payments	-	-	-	-	-	-	(24)	(24)
Loss arising on available-for-sale investments	-	-	-	(69)	-	-	-	(69)
Deferred tax on available-for-sale investments	-	-	-	20	-	-	-	20
Movement in deferred tax arising from change of tax rate	-	-	-	-	-	-	1	1
Depreciation on revalued property	-	-	-	-	(7)	-	7	-
At 31 March 2008	4,822	10,617	100	1,460	973	130,601	37,542	186,115
Profit after taxation	-	-	-	-	-	-	11,484	11,484
Dividends	-	-	-	-	-	-	(7,421)	(7,421)
Share-based payments	-	-	-	-	-	-	884	884
Deferred tax on share-based payments	-	-	-	-	-	-	(6)	(6)
Loss arising on available-for-sale investments	-	-	-	(647)	-	-	-	(647)
Deferred tax on available-for-sale investments	-	-	-	181	-	-	-	181
Gain arising on revaluation of property	-	-	-	-	278	-	-	278
Deferred tax on revaluation of property	-	-	-	-	(78)	-	-	(78)
Deferred tax on change in tax base cost of revalued property	-	-	-	-	346	-	-	346
Depreciation on revalued property	-	-	-	-	(7)	-	7	-
At 30 September 2008	4,822	10,617	100	994	1,512	130,601	42,490	191,136

15. Contingent liabilities

The group's principal trading subsidiary, Rensburg Sheppards Investment Management Limited ('RSIM'), is engaged in negotiations with HM Revenue & Customs ('HMRC') to determine a basis (known as a partial exemption special method) upon which it will calculate the amount of input VAT it can recover on the goods and services it purchases. Once a method has been agreed, it will be applied retrospectively from May 2005, being the point at which the group acquired Carr Sheppards Crosthwaite Limited ('CSC'). The partial exemption special methods that existed and were applied by the group and CSC prior to May 2005 had been agreed with HMRC but these methods ceased as a result of the acquisition, and it became necessary to agree a method with HMRC for the enlarged business.

Pending the agreement of a method, RSIM has continued to recover VAT incurred on the goods and services it has purchased since May 2005 at a rate consistent with that which applied prior to the acquisition of CSC. The method that has been proposed by RSIM to HMRC would produce a similar rate of recovery.

During the six months ended 30 September 2008, HMRC formally rejected the proposed method, and RSIM has requested a formal reconsideration of this decision, which is currently ongoing. An appeal process may follow if the formal reconsideration does not result in an outcome that is acceptable to the group.

If RSIM is not ultimately able to obtain HMRC's agreement to a method that results in a rate of input VAT recovery that the group considers to be fair and reasonable, the worst case scenario is that RSIM would be required to apply the standard method of recovery. Using the standard method would result in RSIM repaying the difference between the amount of input VAT actually recovered by the company since May 2005 and the amount that would be recoverable under the standard method, being a maximum loss to RSIM (including interest payable) of approximately £2.7 million in respect of this retrospective period. The standard method, which is the default method and would result in RSIM recovering input VAT based simply on the value of its income that is subject to VAT relative to its income that is exempt from VAT, is not considered by the group to represent a fair and reasonable basis of input VAT recovery, as it does not accurately reflect the way in which the group's activities consume costs. In addition, the standard method is not consistent with the historic rate of VAT recovery applicable to either CSC or the group, nor is it believed to be representative of the rates of recovery common amongst businesses that are comparable in nature to RSIM. For these reasons, RSIM will continue to pursue the agreement of its proposed method.

16. Events after the balance sheet date

On 18 November 2008, the group entered into an agreement to acquire certain investment management contracts, subject to the consent of the relevant clients, from Investec Asset Management Limited, a subsidiary of Investec plc. Investec plc and its subsidiary companies are related parties of the group.

The transaction falls within the scope of Listing Rule 11.1.10 'Modified requirements for smaller related party transactions'. In accordance with Listing Rule 11.1.10, full disclosure of the transaction will be provided in the next published annual accounts of Rensburg Sheppards plc for the year ending 31 March 2009. The financial effect of this transaction is not considered to be material to the Rensburg Sheppards group.

17. Related party transactions

The directors of the company represent the key management of both the group and the company and the amounts paid in respect of their services for the latest full financial year were set out in the Report & Financial Statements for the year ended 31 March 2008.  The directors of the company include B. Kantor and S. Koseff, both of whom are also directors of Investec plc. The transactions set out below have taken place with Investec plc or its subsidiary companies ('the Investec group') during the period.

The group has a subordinated loan facility with the Investec group which was entered into on 6 May 2005. The loan, which had an original value of £60 million, formed part of the consideration for the acquisition of Carr Sheppards Crosthwaite Limited on that date. Following capital repayments, the outstanding value of the loan amounted to £50 million at 31 March 2008 and a further £10.6 million was repaid during the period, details of which are set out in note 11 above. The interest charged on the loan during the period amounted to £1,491,000 (September 2007: £1,892,000; March 2008: £3,728,000) and interest of £1,154,000 was payable at 30 September 2008 (September 2007: £1,450,000; March 2008: £1,459,000).

The group leases premises at 2 Gresham Street London from the Investec group.  The amount payable during the period under the terms of the lease in respect of rent and service charges amounted to £558,000 (September 2007: £558,000; March 2008: £1,115,000) and no amounts were outstanding at 30 September 2008 (September 2007: nil; March 2008: nil).

The Investec group provides the group with certain infrastructure services.  The amount payable during the period under the terms of the related agreement amounted to £303,000 (September 2007: £394,000; March 2008: £781,000) and £329,000 was outstanding at 30 September 2008 (September 2007: nil; March 2008: £199,000).

The Investec group has provided internal audit services to the group during the period.  The amount payable by the group during the period in respect of these services amounted to £93,000 (September 2007: £148,000; March 2008: £248,000) and no amounts were outstanding at 30 September 2008 (September 2007: nil; March 2008: nil).

The group contributes to defined contribution pension schemes on behalf of its employees and operates a number of share-based payment arrangements for the purposes of employee remuneration; details of these schemes were set out in the latest full financial statements for the year ended 31 March 2008.

Directors, and all employees of the group, are eligible to receive investment management services from the group at discounted staff rates.

Responsibility statement of the directors in respect of the half-yearly financial report

We confirm that to the best of our knowledge:

(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 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

(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.

 

By order of the board

P.M. Watts

Company Secretary

18 November 2008

Independent review report by KPMG Audit Plc to Rensburg Sheppards 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 2008 which comprises the consolidated income statement, consolidated balance sheet, consolidated statement of recognised income and expense, consolidated cash flow statement 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, 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 2008 is not prepared, in all material respects, in accordance with IAS 34 as adopted by the EU and the DTR of the UK FSA.

KPMG Audit PlcChartered Accountants 

Leeds 18 November 2008

ENDIR FFWFMASASEDF

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