26th Nov 2015 07:00
26 November 2015
Charles Stanley Group PLC
Results for the six months ended 30 September 2015
Charles Stanley, one of the UK's leading independently owned, full service investment management groups, today announces its interim results for the six months ended 30 September 2015.
Highlights
• Revenues from the Core business (this excludes businesses classed as Held for Sale during the period (Charles Stanley Securities and Charles Stanley Financial Solutions) up 4% to £70.8 million (H1 2014/15: £68.4 million)
• Profit before tax from the Core business up 200% to £3.0 million (H1 2014/15: £1.0 million)
• Reported profit before tax up 151% to £2.0 million (H1 2014/15: loss before tax £3.9 million)
• Costs reduced 5% to £73.1million (H1 2014/15: £77.0 million)
• Total Funds under Management and Administration £20.0 billion (H1 2014/15: £20.2 billion)
• Discretionary Funds £8.9 billion (H1 2014/15: £8.7 billion)
• Charles Stanley Direct added over 5,000 account holders, with revenues up 2% to £2.6 million (H1 2014/15: £2.5 million) and costs reduced by 29%
• Underlying earnings per share from the Core business
o Basic EPS 5.26p (H1 2014/15: 2.85p)
• Reported EPS
o Basic EPS 3.04p (H1 2014/15: loss per share 7.90p)
o Diluted EPS 3.04p (H1 2014/15: loss per share 7.86p)
• Interim dividend per share of 1.50p (H1 2014/15: 3.00p) in line with previously announced dividend policy
• £16.3 million raised through a private placing which has helped significantly strengthen the Group's capital resources to £55.7 million (31 March 2015: £37.7 million)
• Completion of the sale of Charles Stanley Securities
• Contracts exchanged for the sale of Charles Stanley Financial Solutions
Paul Abberley, Chief Executive Officer of Charles Stanley Group, commented:
"Significant progress has been made during the period, in line with the stated three-to-five year strategy announced at the last set of results. Our first priority was to arrest the decline in profitability, which we are pleased to have achieved, whilst maintaining our high levels of client delivery.
Initial milestones include the successful completion of our client suitability upgrade programme, the sale of non-core businesses and the determination of a revised rate card. We have articulated our intention to build a holistic offering, built around full service and bespoke investment management, complemented by Asset Management and Financial Planning divisions, and have successfully reorganised the business divisions to reflect this.
Our digital offering, Charles Stanley Direct, has now been woven more closely into the core business and its encouraging performance during the period - significant account growth, increased profitability and reduced overhead costs - is a pattern we hope to continue moving forward.
Whilst the building blocks are in place for growth, much remains to be done. However I am confident that we are on course to deliver our vision of building Charles Stanley into the leading UK wealth management business."
For further information, please contact:
Charles Stanley Joanne Vowles, Public Relations Manager Via Redleaf | Canaccord Genuity Roger Lambert 020 7523 4619 | Peel Hunt Guy Wiehahn 020 7418 8893 | Redleaf Communications Rebecca Sanders-Hewett Richard Gotla 020 7382 4730 |
FINANCIAL HIGHLIGHTS
The profit before tax of the Core business (excluding business Held for Sale during the period) for the first half increased 200.0% to £3.0 million (H1 2014/15: £1.0 million) as a result of a 3.5% increase in revenues and improved cost margins. The underlying earnings per share from the Core business grew 84.6% to 5.26p (H1 2014/15: 2.85p).
The reported profit before tax for the period was £2.0 million compared with a loss of £3.9 million in the prior half-year. The main contributor to this improvement of performance was the 5.1% reduction of costs from £77.0 million in the previous half-year to £73.1 million for the current half-year.
Following the rebasing of the dividend at the end of our last financial year, the interim dividend has been reduced to 1.50p (H1 2014/15: 3.00p). It will be paid on 20 January 2016 to shareholders registered on 4 December 2015.
FIRST HALF REVIEW
The Stock Market declined significantly during the first half, with a 10.5% fall in the FTSE 100 from 31 March 2015 to 30 September 2015. A combination of sluggish growth in the US and the Eurozone and worse than expected growth figures from China, together with collapsing commodities prices, caused concern that valuations of equities were stretched.
During the period, management has commenced the implementation of the Board's revised strategy. The first step was to strengthen the Group's balance sheet and capital resources, and this was achieved with shareholders' support via a £16.3 million placing completed in April 2015. Steps which have been taken since then have included:
· Improving the financial position by arresting the decline in profitability
· Finalisation of our client suitability review programme;
· The disposal of Charles Stanley Securities and exchange of contracts for the disposal of Charles Stanley Financial Solutions;
· Bringing all our Financial Planning staff into a single Financial Planning division;
· Reorganising various of our specialist asset management teams and research support into a single Asset Management Division;
· Restructuring Charles Stanley Direct, accelerating its progress toward profitability whilst maintaining its growth;
· Reviewing our client charging structure for investment management clients. We recently announced that we will be introducing a revised rate card for new clients with effect from 1 December 2015.
We have also spent much time reviewing the remuneration structures of our investment managers and had much constructive consultation on this area. It is the Company's intention to rebase the remuneration arrangements onto a consistent, profit based model designed to incentivise and reward investment managers while taking account of financial performance, customer outcomes and conduct. It should be noted that the transition from the Company's current variable remuneration schemes for investment managers to the proposed new ones is expected to lead to a higher one-off charge for the current financial year. In order to encourage investment managers to agree to the proposed new contracts, as well as to align their interests more closely with shareholders, as a one-off exercise, the Board intends to seek shareholder approval for the establishment of an Employee Share Plan for its employed members of staff, and an Associate Share Plan for its self-employed associates. The Board will seek approval to issue shares under the terms of the Share Plans for up to 10% of the current issued share capital of the Company. A separate circular will be posted to shareholders setting out details of the proposals in due course.
FUNDS UNDER MANAGEMENT AND ADMINISTRATION
Change |
Change | |||||||
Sept | Sept | March | Sept | March | ||||
2015 | 2014 | 2015 | 2014 | 2015 | ||||
£bn | £bn | £bn | % | % | ||||
Discretionary Managed | 8.9 | 8.7 | 9.3 | 2.3% | (4.3%) | |||
Advisory Managed | 2.3 | 2.9 | 3.0 | (20.7%) | (23.3%) | |||
Total Managed | 11.2 | 11.6 | 12.3 | (3.4%) | (8.9%) | |||
Advisory Dealing | 2.0 | 2.2 | 2.1 | (9.1%) | (4.8%) | |||
Execution-only | 6.8 | 6.4 | 6.9 | 6.3% | (1.4%) | |||
Total Administered | 8.8 | 8.6 | 9.0 | 2.3% | (2.2%) | |||
Total Funds | 20.0 | 20.2 | 21.3 | (1.0%) | (6.1%) | |||
FTSE 100 Index | 6,062 | 6,623 | 6,773 | (8.5%) | (10.5%) | |||
WMA Stock Market Balanced Index | 3,421 | 3,454 | 3,684 | (1.0%) | (7.1%) | |||
Inflows / (Outflows) | ||||||||
Managed | Administered | Total | Change | |||||
£bn | £bn | £bn | % | |||||
Funds at 1 April 2015 | 12.3 | 9.0 | 21.3 | |||||
Net inflow from existing and new clients | 0.1 | 0.7 | 0.8 | |||||
Lost clients | (0.3) | (0.3) | (0.6) | |||||
Net (outflow)/inflow of funds | (0.2) | 0.4 | 0.2 | 0.9% | ||||
Market movement | (0.9) | (0.6) | (1.5) | (7.0%) | ||||
Funds at 30 September 2015 | 11.2 | 8.8 | 20.0 | (6.1%) | ||||
Managed Funds | ||||||||
Discretionary Managed | Advisory Managed | Total Managed | Change | |||||
£bn | £bn | £bn | % | |||||
Funds at 1 April 2015 | 9.3 | 3.0 | 12.3 | |||||
Net inflow from existing and new clients | 0.4 | (0.3) | 0.1 | |||||
Lost clients | (0.2) | (0.1) | (0.3) | |||||
Net inflow/(outflow) of funds | 0.2 | (0.4) | (0.2) | (1.6%) | ||||
Market Movement | (0.6) | (0.3) | (0.9) | (7.3%) | ||||
Funds 30 September 2015 | 8.9 | 2.3 | 11.2 | (8.9%) | ||||
Charles Stanley remains an investment-led firm committed to providing genuinely bespoke investment management services for our clients. We continue to offer a full service extending to Advisory Dealing and Execution-only services in addition to the core Discretionary portfolio management.
For the six months to September 2015 the Group experienced net Managed fund inflows of £0.2 billion. Discretionary Managed Funds and Charles Stanley Direct contributed inflows of £0.4 billion, offsetting net outflows from our other service categories. Total Group funds of £20.0 billion (31 March 2015: £21.3 billion) were negatively impacted by market movements, with the FTSE WMA Balanced Index down 7.1% since 31 March 2015.
RESULTS AND PERFORMANCE
The Group's financial performance shown below is split between its core activities and those of its businesses which are classed as Held for Sale (Charles Stanley Securities and Charles Stanley Financial Solutions) at 30 September 2015. The table below shows the underlying results along with the results on a statutory basis, the difference being accounted for by adjustments for certain non-cash items (being amortisation of customer relationships, goodwill impairments and profits from the sale of business and fund assets).
Core | Held | Underlying | Adjusting | Reported | |
business | for Sale | performance | items | performance | |
£m | £m | £m | £m | £m | |
30 September 2015 | |||||
Revenue | 70.8 | 4.1 | 74.9 | - | 74.9 |
Costs | (67.9) | (3.9) | (71.8) | (1.3) | (73.1) |
Other income | 0.1 | - | 0.1 | - | 0.1 |
Operating contribution | 3.0 | 0.2 | 3.2 | (1.3) | 1.9 |
Finance and other income | - | - | - | 0.1 | 0.1 |
Profit/(loss) before tax | 3.0 | 0.2 | 3.2 | (1.2) | 2.0 |
Tax expense | (0.4) | (0.1) | (0.5) | - | (0.5) |
Profit/(loss) after tax | 2.6 | 0.1 | 2.7 | (1.2) | 1.5 |
Pre-tax profit margin | 4.2% | 4.9% | 4.3% | - | 2.7% |
Earnings per share | 5.26p | 0.20p | 5.46p | (2.42p) | 3.04p |
Core | Held | Underlying | Adjusting | Reported | |
business | for Sale | performance | items | performance | |
£m | £m | £m | £m | £m | |
30 September 2014 | |||||
Revenue | 68.4 | 4.5 | 72.9 | - | 72.9 |
Costs | (67.6) | (5.6) | (73.2) | (3.8) | (77.0) |
Other income | 0.1 | - | 0.1 | - | 0.1 |
Operating contribution | 0.9 | (1.1) | (0.2) | (3.8) | (4.0) |
Finance and other income | 0.1 | - | 0.1 | - | 0.1 |
Profit/(loss) before tax | 1.0 | (1.1) | (0.1) | (3.8) | (3.9) |
Tax credit | 0.3 | - | 0.3 | - | 0.3 |
Profit/(loss) after tax | 1.3 | (1.1) | 0.2 | (3.8) | (3.6) |
Pre-tax profit margin | 1.5% | (24.4%) | (0.1%) | - | (5.3%) |
Earnings per share | 2.85p | (2.41p) | 0. 44p | (8.34p) | (7.90p) |
Core | Held | Underlying | Adjusting | Reported | |
business | for Sale | performance | items | performance | |
£m | £m | £m | £m | £m | |
31 March 2015 | |||||
Revenue | 141.0 | 8.7 | 149.7 | - | 149.7 |
Costs | (136.8) | (10.5) | (147.3) | (9.9) | (157.2) |
Other income | 0.1 | - | 0.1 | - | 0.1 |
Operating contribution | 4.3 | (1.8) | 2.5 | (9.9) | (7.4) |
Finance and other income | 0.1 | - | 0.1 | 1.2 | 1.3 |
Profit/(loss) before tax | 4.4 | (1.8) | 2.6 | (8.7) | (6.1) |
Tax (expense)/credit | (0.4) | 0.4 | - | - | - |
Profit/(loss) after tax | 4.0 | (1.4) | 2.6 | (8.7) | (6.1) |
Pre-tax profit margin | 3.1% | (20.7%) | 1.7% | - | (4.1%) |
Earnings per share | 9.64p | (3.94p) | 5.70p | (19.16p) | (13.46p) |
Group revenue from Core business increased by 3.5% to £70.8 million (H1 2014/15: £68.4 million). The revenues of the Held for Sale activities declined 8.9% over the same period, resulting in overall Group revenues increasing 2.7% from £72.9 million in the last half-year to £74.9 million in the current half-year.
Adjusting items totalling a net cost of £1.2 million, comprising amortisation of customer lists (£0.8 million), goodwill impairments (£0.5 million) and a profit from the sale of business and fund assets (£0.1 million) declined from an overall cost of £3.8 million in the previous half-year. Consequently, the overall reported profit before tax of the Group increased from a prior period loss of £3.9 million to a profit of £2.0 million for the six months ended 30 September 2015.
As a result of the reorganisation of the business, the Group has been organised into four operating divisions: Investment Management Services, Asset Management, Financial Planning and Charles Stanley Direct. A brief description of the operations of each division and their recent trading performance is provided below.
INVESTMENT MANAGEMENT SERVICES
30 Sept 2015 £'000 | 30 Sept 2014 £'000 | Change % | |
Revenue | 62,615 | 60,504 | 3.5% |
Costs | (58,650) | (59,468) | 1.4% |
Operating Profit | 3,965 | 1,036 | 282.7% |
The Investment Management Services division provides personal investment services to individuals, companies, trusts and charities and includes platform dealing, custody and SIPP and ISA administration services.
Revenue for the division rose 3.5% to £62.6 million (H1 2014/15: £60.5 million) for the six month period to 30 September 2015. Costs decreased by 1.4%, resulting in the operating contribution increasing from £1.0 million at 30 September 2014 to £4.0 million at 30 September 2015.
ASSET MANAGEMENT
30 Sept 2015 £'000 | 30 Sept 2014 £'000 | Change % | |
Revenue |
2,813 | 2,686 | 4.7% |
Costs | (3, 248) | (3,186) | (1.9%) |
Operating Loss | (435) | (500) | 13.0% |
The Asset Management division provides specialist asset management services through its Matterley range of funds, active and passive model portfolios, IHT services and investment research to the Investment Management Services division and clients.
Revenue for the Asset Management division has increased 4.7% from September 2014 as a result of strong growth from the Collectives Portfolio and IHT services. These more than offset a decline in Matterley's income resultant from the sale of the Undervalued Fund to Miton in the second half of last year. Costs increased due to the launch of the Matterley Bond fund in May 2015 which is not expected to recur at the same level in the second half. Overall the division's operating loss has fallen from £0.5 million last half-year 2014 to £0.4 million this half-year.
FINANCIAL PLANNING
30 Sept 2015 £'000 | 30 Sept 2014 £'000 | Change % | |
Revenue | 2,789 | 2,664 | 4.7% |
Costs | (3,578) | (3,781) | 5.4% |
Operating Loss | (789) | (1,117) | 29.4% |
The Financial Planning division provides financial planning and advice.
The table above reflects the contribution from the continuing operations of the division and thus excludes Charles Stanley Financial Solutions, which is classed as Held for Sale. The division increased its gross revenue by 4.7% on the same period last year whilst operating costs have been reduced by 5.4%. As a result the division has reduced its operating loss to £0.8 million (H1 2014/15: operating loss £1.1 million).
CHARLES STANLEY DIRECT
30 Sept 2015 £'000 | 30 Sept 2014 £'000 | Change % | |
Revenue | 2,581 | 2,535 | 1.8% |
Costs | (3,295) | (4,627) | 28.8% |
Operating Loss | (714) | (2,092) | 65.9% |
Charles Stanley Direct provides direct-to-client online dealing and fund broking services.
Fund inflows for Charles Stanley Direct have continued at a steady rate, with the total inflows of £0.17 billion for the six months ending 30 September 2015 (H1 2014/15: £0.14 billion). Despite the 10.5% slide in the FTSE 100 over the same period the division's total Assets under Administration rose to £1.68 billion up from March's figure of £1.64 billion. There have been over 5,000 accounts opened in the period taking the total to 25,042.
A detailed analysis of the business, now in its third year, was conducted by the new management at the start of the period. This led to cost saving measures being implemented, which have reduced costs 28.8% in comparison with the same period last year, rapidly accelerating the division's move to break even as revenues grow with assets. Increasing flows both upstream to the Group's managed services and financial planning as well as investment manager referral of clients to Charles Stanley Direct have improved throughout the year and is an ongoing cycle that the Group will continue to promote going forward.
SALE OF NON-CORE ACTIVITIES
In line with the Board's strategy of focussing on the Group's core private client wealth management activities, it announced on 17 June 2015 the sale of Charles Stanley Securities, its corporate finance division, to Panmure Gordon (UK) Limited for an initial consideration of up to £1.5 million and a deferred payment of up to £5.0 million. The deferred element, if any, will be payable 12 months following completion of the sale, dependent on the performance of the business. The disposal was completed on 15 July 2015.
For the period from 1 April 2015 to completion of its sale in July 2015, Charles Stanley Securities generated revenues of £2.7 million and contributed a profit of £0.4 million.
On 10 November 2015 contracts were exchanged for the disposal of Charles Stanley Financial Solutions, the Group's employee benefits business, to the management team for a consideration of £2.0 million. Completion of the disposal is conditional on approval from the Financial Conduct Authority. For the six months ended 30 September 2015 Charles Stanley Financial Solutions made a loss before tax of £0.06 million (H1 2014/15: loss before tax of £0.15 million). In addition an impairment charge to the goodwill held in respect of Charles Stanley Financial Solutions of £0.4 million has been made.
FINANCIAL POSITION AND REGULATORY CAPITALThe Group's capital position was strengthened following the £16.3 million capital-raising in April 2015. At 30 September 2015, the Group had regulatory capital resources of £55.7 million, representing 148% of its current regulatory capital requirement.
The balance sheet and liquidity has also strengthened since March 2015, with cash and cash equivalents at £42.3 million up from £28.5 million and the retirement benefit obligation decreasing from £13.1 million at 31 March to £11.8 million at 30 September 2015.
BOARD CHANGES
Andrew Didham joined Charles Stanley as a non-executive Director in September 2015. Andrew was previously Group Finance Director of the Rothschild group. We welcome Andrew to the Board.
BUSINESS RISKS
The principal risks and uncertainties facing the Group in the period to 30 September 2015 are shown in note 23.3 of the 2016 Interim Report & Accounts.
A full assessment of the risks and uncertainties of the Group can be found on pages 41-46 of the 2015 Annual Report together with the controls and processes used to monitor and mitigate those risks as appropriate.
Customer Outcome risk has diminished during the first half as a result of completing our Suitability upgrade programme in June, but People risk has increased owing to the consultation that is currently taking place in respect of investment managers' contract terms. The Group has mitigation plans in place in the event of unplanned departures.
DIVIDEND
The Board's policy is to grow dividends steadily over time with dividend cover of at least two times (as adjusted for the amortisation of intangibles). Having paid dividends at less than this level of cover for a number of years, the Board rebased the dividend in respect of the final dividend paid for the year ended 31 March 2015. Accordingly, an interim dividend of 1.50p per share (H1 2014/15: 3.00p) will be payable on 20 January 2016 to shareholders on the register at the close of business on 4 December 2015 with an ex-dividend date of 3 December 2015.
OUTLOOK
Trading during the first quarter was strong but weakened in the second quarter due to a decline in the stock market at the end of June and lower trading activity in recent months. Our results for the remainder of the year will be driven by a combination of internal performance and wider capital market developments, particularly UK equity valuations, which remain lower than they were at the start of the financial year. While markets feel fully priced and the tail winds of monetary policy ease and profit margin expansion are probably behind us, the more likely scenarios do not suggest a bear market in risk assets. Economic growth appears underpinned and any monetary policy tightening should be slow and gradual.
The change programme instigated earlier this year is to continue to provide an unparalleled service which is relevant to our clients' needs; it is also designed to improve the level of the Group's profitability so that we have the resources to reinvest in the business, as well as provide appropriate returns to our shareholders and staff. As we commented at the year end, there is a substantial schedule of work ahead of us that will take three to five years to complete. We are making good progress getting the foundations in place; the benefits of which we expect to begin to feed through in the next financial year.
Unaudited half-year | Unaudited half-year | Audited year | |||
30 Sept | 30 Sept | 31 March | |||
2015 | 2014 | 2015 | |||
Notes | £'000 | £'000 | £'000 | ||
Continuing operations | |||||
Revenue | 1 | 72,133 | 69,910 | 144,264 | |
Administrative expenses | 1 | (70,330) | (70,937) | (141,875) | |
Impairment of intangible assets and investments | 1 | (465) | (1,800) | (8,277) | |
Other income | 112 | 113 | 132 | ||
Operating profit/(loss) | 3 | 1,450 | (2,714) | (5,756) | |
Gain on sale of business | 100 | - | 1,200 | ||
Finance income | 4 | 64 | 144 | 185 | |
Finance costs | 4 | (51) | (38) | (75) | |
Net finance income | 13 | 106 | 110 | ||
Profit/(loss) before tax | 1,563 | (2,608) | (4,446) | ||
Tax expense | 5 | (358) | 347 | (413) | |
Profit/(loss) from continuing operations | 1,205 | (2,261) | (4,859) | ||
Discontinued operations | |||||
Profit/(loss) from discontinued operations | 8 | 316 | (1,337) | (1,287) | |
Profit/(loss) for the year attributable to equity shareholders | 1,521 | (3,598) | (6,146) | ||
Earnings per share | |||||
Basic | 7 | 3.04p | (7.90p) | (13.46p) | |
Diluted | 7 | 3.04p | (7.86p) | (13.46p) | |
Earnings per share continuing operations | |||||
Basic | 2.41p | (5.77p) | (10.64p) | ||
Diluted | 2.40p | (5.75p) | (10.64p) | ||
The notes on pages 17 to 36 are an integral part of these condensed interim financial statements
Unaudited half-year | Unaudited half-year | Audited year | |||
30 Sept | 30 Sept | 31 March | |||
2015 | 2014 | 2015 | |||
Notes | £'000 | £'000 | £'000 | ||
Profit/(loss) for the period | 1,521 | (3,598) | (6,146) | ||
Other comprehensive income | |||||
Items that will never be reclassified to profit or loss | |||||
Remeasurement of the defined benefit obligation | 16 | 1,342 | (3,282) | (5,950) | |
Related tax | 16 | (269) | 675 | 1,189 | |
1,073 | (2,607) | (4,761) | |||
Items that are or may be reclassified to profit or loss | |||||
Available for sale financial assets - net change in fair value | 12 | (163) | (548) | (407) | |
Available for sale financial assets - reclassified to profit or loss | 12 | 7 | 540 | 560 | |
Related tax | 31 | 102 | 70 | ||
(125) | 94 | 223 | |||
Other comprehensive income for the period, net of tax | 948 | (2,513) | (4,538) | ||
Total comprehensive income for the period attributable to owners of the Company | 2,469 | (6,111) | (10,684) | ||
The notes on pages 17 to 36 are an integral part of these condensed interim financial statements
Unaudited | Unaudited | Audited | |||
30 Sept | 30 Sept | 31 March | |||
2015 | 2014 | 2015 | |||
Notes | £'000 | £'000 | £'000 | ||
Assets | |||||
Intangible assets and goodwill | 10 | 25,920 | 34,409 | 26,097 | |
Property, plant and equipment | 11 | 12,200 | 14,567 | 13,287 | |
Net deferred tax assets | 2,253 | 2,104 | 2,558 | ||
Available for sale financial assets | 12 | 6,886 | 6,860 | 7,054 | |
Trade and other receivables | 792 | 1,486 | 419 | ||
Non-current assets | 48,051 | 59,426 | 49,415 | ||
Trade and other receivables | 282, 836 | 236,582 | 267,494 | ||
Financial assets at fair value through profit or loss | 50 | 70 | 100 | ||
Assets Held for Sale | 9 | 3,073 | - | 4,190 | |
Current tax assets | - | 201 | - | ||
Cash and cash equivalents | 42,326 | 18,943 | 28,453 | ||
Current assets | 328,285 | 255,796 | 300,237 | ||
Total assets | 376,336 | 315,222 | 349,652 | ||
The notes on pages 17 to 36 are an integral part of these condensed interim financial statements | |||||
Unaudited | Unaudited | Audited | |||
30 Sept | 30 Sept | 31 March | |||
2015 | 2014 | 2015 | |||
Notes | £'000 | £'000 | £'000 | ||
Equity | |||||
Share capital | 13 | 12,641 | 11,416 | 11,490 | |
Share premium | 4,151 | 3,514 | 4,139 | ||
Revaluation reserve | 2,581 | 2,577 | 2,706 | ||
Merger relief reserve | 14 | 15,167 | - | - | |
Retained earnings | 52,260 | 56,657 | 50,559 | ||
Equity attributable to owners of the Company | 86,800 | 74,164 | 68,894 | ||
Non-controlling interests | 24 | 24 | 24 | ||
Total equity | 86,824 | 74,188 | 68,918 | ||
Liabilities | |||||
Borrowings | 15 | 1,751 | 1,897 | 1,824 | |
Employee benefits | 16 | 11,828 | 10,307 | 13,087 | |
Non-current liabilities | 13,579 | 12,204 | 14,911 | ||
Trade and other payables | 275,321 | 228,680 | 265,123 | ||
Borrowings | 15 | 150 | 150 | 150 | |
Current tax liabilities | 458 | - | 152 | ||
Liabilities Held for sale | 9 | 4 | - | 398 | |
Current liabilities | 275,933 | 228,830 | 265,823 | ||
Total liabilities | 289,512 | 241,034 | 280,734 | ||
Total equity and liabilities | 376,336 | 315,222 | 349,652 | ||
The notes on pages 17 to 36 are an integral part of these condensed interim financial statements. | |||||
Share capital | Share premium | Re- valuation reserve | Merger relief reserve | Retained earnings | Total | Non-controlling interests | Total equity |
| |||||||||
£'000 | £'000 | £'000 | £'000 | £'000 | £'000 | £'000 | £'000 |
| |||||||||
1 April 2014 (audited) | 11,314 | 2,597 | 2,483 | - | 67,009 | 83,403 | 24 | 83,427 |
| ||||||||
| |||||||||||||||||
Loss for the period | - | - | - | - | (3,598) | (3,598) | - | (3,598) |
| ||||||||
Other comprehensive income: |
| ||||||||||||||||
Revaluation of Available for sale financial assets |
| ||||||||||||||||
-net gain from change in fair values | - | - | (548) | - | - | (548) | - | (548) |
| ||||||||
-net profit on disposal transferred to profit or loss | - | - | 540 | - | - | 540 | - | 540 |
| ||||||||
Deferred tax on Available for sale financial assets | - | - | 102 | - | - | 102 | - | 102 |
| ||||||||
Defined benefit plan actuarial gains | - | - | - | - | (3,282) | (3,282) | - | (3,282) |
| ||||||||
Deferred tax on defined benefit plan actuarial gains | - | - | - | - | 675 | 675 | - | 675 |
| ||||||||
Total other comprehensive income for the period | - | - | 94 | - | (2,607) | (2,513) | - | (2,513) |
| ||||||||
| |||||||||||||||||
Total comprehensive income for the period | - | - | 94 | - | (6,205) | (6,111) | - | (6,111) |
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Dividends paid to equity |
| ||||||||||||||||
shareholders | - | - | - | - | (4,223) | (4,223) | - | (4,223) |
| ||||||||
Share options: - value of employee services | - | - | - | - | 76 | 76 | - | 76 |
| ||||||||
- issue of shares | 102 | 917 | - | - | - | 1,019 | - | 1,019 |
| ||||||||
30 September 2014 (unaudited) | 11,416 | 3,514 | 2,577 | - | 56,657 | 74,164 | 24 | 74,188 |
| ||||||||
The notes on pages 17 to 36 are an integral part of these condensed interim financial statements. |
| ||||||||||||||||
Share capital | Share premium | Re- valuation reserve | Merger relief reserve | Retained earnings | Total | Non-controlling interests | Total equity | ||||||||||
£'000 | £'000 | £'000 | £'000 | £'000 | £'000 | £'000 | £'000 | ||||||||||
30 September 2014 (unaudited) | 11,416 | 3,514 | 2,577 | - | 56,657 | 74,164 | 24 | 74,188 | |||||||||
Loss for the period | - | - | - | - | (2,548) | (2,548) | - | (2,548) | |||||||||
Other comprehensive income: | |||||||||||||||||
Revaluation of available for sale financial assets | |||||||||||||||||
-net gain from change in fair values | - | - | 141 | - | - | 141 | - | 141 | |||||||||
-net profit on disposal transferred to profit or loss | - | - | 20 | - | - | 20 | - | 20 | |||||||||
Deferred tax on available for sale financial assets | - | - | (32) | - | - | (32) | - | (32) | |||||||||
Defined benefit plan actuarial gains | - | - | - | - | (2,668) | (2,668) | - | (2,668) | |||||||||
Deferred tax on defined benefit plan actuarial gains | - | - | - | - | 514 | 514 | - | 514 | |||||||||
Total other comprehensive income for the period | - | - | 129 | - | (2,154) | (2,025) | - | (2,025) | |||||||||
Total comprehensive income for the period | - | - | 129 | - | (4,702) | (4,573) | - | (4,573) | |||||||||
Dividends paid | - | - | - | - | (1,370) | (1,370) | - | (1,370) | |||||||||
Share options: - value of employee services | - | - | - | - | (26) | (26) | - | (26) | |||||||||
- issue of shares | 74 | 625 | - | - | - | 699 | - | 699 | |||||||||
31 March 2015 (audited) | 11,490 | 4,139 | 2,706 | - | 50,559 | 68,894 | 24 | 68,918 | |||||||||
The notes on pages 17 to 36 are an integral part of these condensed interim financial statements.
Share capital | Share premium | Re- valuation reserve | Merger relief reserve | Retained earnings | Total | Non-controlling interests | Total equity | |
£'000 | £'000 | £'000 | £'000 | £'000 | £'000 | £'000 | £'000 | |
31 March 2015 (audited) | 11,490 | 4,139 | 2,706 | - | 50,559 | 68,894 | 24 | 68,918 |
Profit for the period | - | - | - | - | 1,521 | 1,521 | - | 1,521 |
Other comprehensive income: | ||||||||
Revaluation of available for sale financial assets | ||||||||
- net gain from change in fair values | - | - | (163) | - | - | (163) | - | (163) |
- net profit on disposal transferred to profit or loss | - | - | 7 | - | - | 7 | - | 7 |
Deferred tax on available for sale financial assets | - | - | 31 | - | - | 31 | - | 31 |
Defined benefit plan actuarial gain | - | - | - | - | 1,342 | 1,342 | - | 1,342 |
Deferred tax on defined benefit plan actuarial gains | - | - | - | - | (269) | (269) | - | (269) |
Total other comprehensive income for the period | - | - | (125) | - | 1,073 | 948 | - | 948 |
Total comprehensive income for the period | - | - | (125) | - | 2,594 | 2,469 | - | 2,469 |
Dividends paid | - | - | - | - | (995) | (995) | - | (995) |
Share options: - value of employee services | - | - | - | - | 102 | 102 | - | 102 |
- issue of shares | 2 | 12 | - | - | - | 14 | - | 14 |
Issue of ordinary shares | 1,149 | - | - | 15,167 | - | 16,316 | - | 16,316 |
30 September 2015 (unaudited) | 12,641 | 4,151 | 2,581 | 15,167 | 52,260 | 86,800 | 24 | 86,824 |
The notes on pages 17 to 36 are an integral part of these condensed interim financial statements.
Unaudited | Unaudited | Audited | ||||
half-year | Half-year | year | ||||
30 Sept | 30 Sept | 31 March | ||||
2015 | 2014 | 2015 | ||||
Notes | £'000 | £'000 | £'000 | |||
Cash flows from operating activities | ||||||
Cash generated from /(absorbed by) operating activities | 18 | 1,415 | (11,224) | 948 | ||
Interest received | 64 | 96 | 110 | |||
Interest paid | (51) | (38) | (75) | |||
Tax paid | (65) | (672) | (711) | |||
Net cash from/(used in) operating activities | 1,363 | (11,838) | 272 | |||
Cash flows from investing activities | ||||||
Acquisition of intangible assets | 10 | (1,462) | (2,191) | (4,243) | ||
Proceeds from disposal of Fund asset | - | - | 750 | |||
Purchase of property, plant and equipment | 11 | (392) | (2,411) | (2,865) | ||
Proceeds from sale of business | 577 | - | - | |||
Purchase of Available for sale financial assets | 12 | (150) | (211) | (471) | ||
Proceeds from sale of Available for sale financial assets | 12 | 102 | 191 | 445 | ||
Dividends received | 112 | 113 | 132 | |||
Net cash used in investing activities | (1,213) | (4,509) | (6,252) | |||
Cash flows from financing activities | ||||||
Proceeds from issue of ordinary share capital | 16,330 | 1,019 | 1,718 | |||
Repayment of borrowings | (71) | (73) | (146) | |||
Dividends paid | 6 | (995) | (4,223) | (5,593) | ||
Net cash from/(used in) financing activities | 15,264 | (3,277) | (4,021) | |||
Net decrease in cash and cash equivalents | 15,414 | (19,624) | (10,001) | |||
Cash and cash equivalents at start of period | 28,566 | 38,567 | 38,567 | |||
Cash and cash equivalents end of period | 43,980 | 18,943 | 28,566 | |||
Cash and cash equivalents shown in current assets | 42,326 | 18,943 | 28,453 | |||
Cash classified as assets Held for Sale | 1,654 | - | 113 | |||
Cash and cash equivalents at end of period | 43,980 | 18,943 | 28,566 | |||
The Group has elected to present a condensed Interim Statement of Cash Flows that analyses all cash flows in total, i.e. including both continuing and discontinued operations; amounts relating to discontinued operations are disclosed in note 8. | ||||||
The notes on pages 17 to 36 are an integral part of these condensed interim financial statements. | ||||||
1. OPERATING SEGMENTS
The Group currently has four strategic divisions which are reportable segments. These segments are the basis on which the Group reports its performance to the Board, which is the Group's chief operating decision maker. The operations of each division are described below:
Division | Operations |
Investment Management Services
Asset Management | Provision of investment services to individuals, companies, trusts and charities; Specialist asset management and investment research; |
Financial Planning | Financial planning and advice; |
Charles Stanley Direct | Direct-to-client investment service including online dealing. |
The Group sold the Charles Stanley Securities division (excluding the Equity Sales Trading operation, which is shown below within the Investment Management Services division) to Panmure Gordon (UK) Limited on 15 July 2015. Charles Stanley Securities, apart from the equity trading business, has been classified as discontinued operations.
Continuing operations | ||||||||
Investment Management Services | Asset Management | Financial Planning | Charles Stanley Direct | Central | Sub-total | Discontinued operations | Total | |
£'000 | £'000 | £'000 | £'000 | £'000 | £'000 | £'000 | £'000 | |
Six months ended 30 September 2015 | ||||||||
Fees | ||||||||
Investment management | 29,207 | 1,169 | 690 | - | - | 31,066 | - | 31,066 |
Administration | 9,549 | 1,388 | 3,256 | 2,130 | - | 16,323 | 53 | 16,376 |
Corporate finance | - | - | - | - | - | - | 2,496 | 2,496 |
38,756 | 2,557 | 3,946 | 2,130 | - | 47,389 | 2,549 | 49,938 | |
Commission | 23,859 | 256 | 178 | 451 | - | 24,744 | 177 | 24,921 |
Total revenue | 62,615 | 2,813 | 4,124 | 2,581 | - | 72,133 | 2,726 | 74,859 |
Administrative expenses | (34,875) | (3,410) | (4,062) | (1,610) | (27,020) | (70,977) | (2,144) | (73,121) |
Other income | 112 | - | - | - | - | 112 | - | 112 |
Operating contribution | 27,852 | (597) | 62 | 971 | (27,020) | 1,268 | 582 | 1,850 |
Allocated costs | (23,775) | 162 | (1,540) | (1,685) | 27,020 | 182 | (182) | - |
Operating profit/(loss) | 4,077 | (435) | (1,478) | (714) | - | 1,450 | 400 | 1,850 |
Segment assets | 272,962 | 1,056 | 5,097 | 8,070 | 89,151 | 376,336 | - | 376,336 |
Segment liabilities | 257,209 | 2 | 4 | 79 | 32,218 | 289,512 | - | 289,512 |
Continuing operations | ||||||||
Investment Management Services | Asset Management | Financial Planning | Charles Stanley Direct | Central | Sub-total | Discontinued operations | Total | |
£'000 | £'000 | £'000 | £'000 | £'000 | £'000 | £'000 | £'000 | |
Six months ended 30 September 2014 | ||||||||
Fees | ||||||||
Investment management | 27,900 | 737 | 551 | - | - | 29,188 | 3 | 29,191 |
Administration | 9,602 | 1,930 | 3,444 | 2,135 | - | 17,111 | 65 | 17,176 |
Corporate finance | - | - | - | - | - | - | 2,565 | 2,565 |
37,502 | 2,667 | 3,995 | 2,135 | - | 46,299 | 2,633 | 48,932 | |
Commission | 23,002 | 19 | 190 | 400 | - | 23,611 | 355 | 23,966 |
Total revenue | 60,504 | 2,686 | 4,185 | 2,535 | - | 69,910 | 2,988 | 72,898 |
Administrative expenses | (36,457) | (2,789) | (3,990) | (3,268) | (27,058) | (73,562) | (3,500) | (77,062) |
Other income | 113 | - | - | - | - | 113 | - | 113 |
Operating contribution | 24,160 | (103) | 195 | (733) | (27,058) | (3,539) | (512) | (4,051) |
Allocated costs | (23,011) | (397) | (1,466) | (1,359) | 27,058 | 825 | (825) | - |
Operating profit/(loss) | 1,149 | (500) | (1,271) | (2,092) | - | (2,714) | (1,337) | (4,051) |
Segment assets | 236,848 | 1,677 | 5,794 | 10,773 | 58,606 | 313,698 | 1,524 | 315,222 |
Segment liabilities | 209,776 | 83 | 410 | 12 | 30,753 | 241,034 | - | 241,034 |
The costs that have been allocated to the divisions have been changed to reflect the new cost allocation methodology put in place in the current year.
Continuing operations | ||||||||
Investment Management Services | Asset Management | Financial Planning | Charles Stanley Direct | Central | Sub-total | Discontinued operations | Total | |
£'000 | £'000 | £'000 | £'000 | £'000 | £'000 | £'000 | £'000 | |
Year ended 31 March 2015 | ||||||||
Fees | ||||||||
Investment management | 55,790 | 1,252 | 1,205 | - | - | 58,247 | - | 58,247 |
Administration | 21,662 | 3,352 | 7,276 | 3,982 | - | 36,272 | 120 | 36,392 |
Corporate finance | - | - | - | - | - | - | 4,536 | 4,536 |
77,452 | 4,604 | 8,481 | 3,982 | - | 94,519 | 4,656 | 99,175 | |
Commission | 47,995 | 502 | 390 | 858 | - | 49,745 | 770 | 50,515 |
Total revenue | 125,447 | 5,106 | 8,871 | 4,840 | - | 144,264 | 5,426 | 149,690 |
Administrative expenses | (73,968) | (6,697) | (7,969) | (4,841) | (57,768) | (151,243) |
(5,964) | (157,207) |
Other income | 132 | - | - | - | - | 132 | - | 132 |
Operating contribution | 51,611 | (1,591) | 902 | (1) | (57,768) | (6,847) | (538) | (7,385) |
Allocated costs | (47,323) | 336 | (3,930) | (5,760) | 57,768 | 1,091 | (1,091) | - |
Operating profit/(loss) | 4,288 | (1,255) | (3,028) | (5,761) | - | (5,756) | (1,629) | (7,385) |
Segment assets | 266,074 | 1,108 | 4,098 | 7,192 | 69,149 | 347,621 | 2,031 | 349,652 |
Segment liabilities | 246,298 | 15 | 395 | 80 | 33,946 | 280,734 | - | 280,734 |
2 EMPLOYEE BENEFIT EXPENSES
Continuing operations | Discontinued operations | |||||
Unaudited | Unaudited | Audited | Unaudited | Unaudited | Audited | |
half-year | half-year | year | half-year | half-year | year | |
30 Sept | 30 Sept | 31 March | 30 Sept | 30 Sept | 31 March | |
2015 | 2014 | 2015 | 2015 | 2014 | 2015 | |
£'000 | £'000 | £'000 | £'000 | £'000 | £'000 | |
Staff costs for the Group during the year: | ||||||
Wages and salaries | 26,113 | 26,804 | 51,754 | 1,168 | 1,372 | 4,744 |
Social security contributions | 3,049 | 2,804 | 5,365 | 96 | 169 | 529 |
Share-based payments | 102 | 63 | 48 | - | 13 | 2 |
Pension costs | ||||||
Defined contribution plans | 1,809 | 1,895 | 3,677 | 73 | 149 | 465 |
Defined benefit plan | 457 | 460 | 920 | - | - | - |
31,530 | 32,026 | 61,764 | 1,337 | 1,703 | 5,740 | |
3 OPERATING PROFIT
Unaudited | Unaudited | Audited | |
half-year | half-year | year | |
30 Sept | 30 Sept | 31 March | |
2015 | 2014 | 2015 | |
£'000 | £'000 | £'000 | |
The following items have been included in arriving at the results: | |||
Depreciation of property, plant and equipment: | |||
Owned assets | 1,479 | 1,593 | 3,150 |
Amortisation and impairment | 2,024 | 3,568 | 10,358 |
Impairment of equity investment | - | - | 500 |
Impairment of loan | - | - | 250 |
Audit of the Company's annual accounts | 70 | 107 | 80 |
Audit of the Company's subsidiaries | 104 | 18 | 210 |
Services relating to taxation | - | 18 | 41 |
Other assurance services | - | - | 60 |
All other services | - | 11 | 46 |
Gains on financial assets at fair value through profit or loss | 26 | 48 | (29) |
Gains on foreign currency exchange | (36) | (31) | 76 |
Profit/(loss) on sale of fixed assets | 6 | - | (178) |
Operating lease rentals payable | 1,436 | 1,351 | 2,829 |
Financial Services Compensation Scheme Levy | 1,588 | 1,646 | 1,317 |
4 NET FINANCE INCOME
Unaudited | Unaudited | Audited | |
half-year | half-year | year | |
30 Sept | 30 Sept | 31 March | |
2015 | 2014 | 2015 | |
£'000 | £'000 | £'000 | |
Interest income | 64 | 96 | 110 |
Gains and losses on available for sale financial assets | - | 48 | 75 |
Finance income | 64 | 144 | 185 |
Interest payable on bank borrowings | (19) | (2) | (4) |
Interest payable on other loans | (32) | (36) | (71) |
Finance costs | (51) | (38) | (75) |
Net finance income | 13 | 106 | 110 |
5 TAX EXPENSE
| Unaudited | Unaudited | Audited |
half-year | half-year | year | |
30 Sept | 30 Sept | 31 March | |
2015 | 2014 | 2015 | |
£'000 | £'000 | £'000 | |
Analysis of charge in year | |||
Current taxation | |||
Current year | 360 | (301) | 419 |
Adjustment in respect of prior years | - | - | 14 |
Current year | (2) | (46) | (20) |
Tax expense on continuing operations | 358 | (347) | 413 |
| |||
6 DIVIDENDS PAID
Unaudited | Unaudited | Audited | |
half-year | half-year | year | |
30 Sept | 30 Sept | 31 March | |
2015 | 2014 | 2015 | |
£'000 | £'000 | £'000 | |
Final paid for 2015: 2.00p per share (2014: 9.25p) | 995 | 4,223 | 4,223 |
Interim paid for 2016: 1.50p per share (2015: 3.00p) | - | - | 1,370 |
995 | 4,223 | 5,593 | |
The Directors are proposing an interim dividend in respect of the six months ended 30 September 2015 of 1.50p per share which will absorb an estimated £0.76 million of shareholders' funds. It will be paid on 20 January 2016 to shareholders who are on the register of members on 4 December 2015. | |||
7 EARNINGS PER SHARE
The Directors believe that a true reflection of the performance of the Group's ongoing business is given by the measure of underlying earnings per share. "Underlying earnings" represent earnings before one-off costs, amortisation of customer relationships and the sale of business and Fund assets. This measure is also followed by the analyst community as a benchmark of the Group's ongoing performance.
Restated | Restated | ||
Unaudited | Unaudited | Audited | |
half-year | half-year | year | |
30 Sept | 30 Sept | 31 March | |
2015 | 2014 | 2015 | |
No. | No. | No. | |
Weighted average number of shares in issue in the period | 50,054 | 45,567 | 45,655 |
Effect of share options | 72 | 183 | 66 |
Diluted weighted average number of shares in issue during the period | 50,126 | 45,750 | 45,721 |
£'000 | £'000 | £'000 | |
Reported earnings attributable to ordinary shareholders | 1,521 | (3,598) | (6,146) |
Amortisation of customer relationships | 850 | 1,264 | 1,800 |
Additional Financial Services Compensation Levy and rebates | - | - | (303) |
Branch acquisition costs | - | 280 | 259 |
Restructuring costs | - | 2,639 | - |
Non-recurring professional fees | - | - | 99 |
Profit on sale of Fund asset | (100) | - | (1,200) |
Loss on sale of business unit | 5 | - | - |
Impairment of assets and investments | 505 | - | 8,277 |
Reduction in deferred consideration | (40) | (388) | (348) |
Tax on adjusting items | (244) | (797) | (1,803) |
Underlying earnings attributable to ordinary shareholders | 2,497 | (600) | 635 |
Based on reported earnings | |||
Basic earnings per share | 3.04p | (7.90p) | (13.46p) |
Diluted earnings per share | 3.04p | (7.86p) | (13.46p) |
Based on underlying earnings | |||
Basic earnings per share | 4.99p | (1.32p) | 1.39p |
Diluted earnings per share | 4.99p | (1.31p) | 1.39p |
The previous year comparatives have been restated as the annual FSCS Levy is no longer classified as an adjusting item; however, any interim levy raised, or rebate received, is treated as an adjusting item.
8 DISCONTINUED OPERATIONS
Results from discontinued operations
In July 2015 the Group completed the sale of the Charles Stanley Securities division (excluding the Equity Sales Trading operation) to Panmure Gordon (UK) Limited.
Unaudited | Unaudited | Audited | |
half-year | half-year | year | |
30 Sept | 30 Sept | 31 March | |
2015 | 2014 | 2015 | |
£'000 | £'000 | £'000 | |
Revenue | 2,726 | 2,988 | 5,426 |
Expenses | (2,326) | (4,325) | (7,055) |
Results from operating activities | 400 | (1,337) | (1,629) |
Loss on sale of business | (5) | - | - |
Income tax (expense)/credit | (79) | - | 342 |
Profit/(loss) for the period | 316 | (1,337) | (1,287) |
Earnings per share from discontinued operations | |||
Basic | 0.63p | (2.93p) | (2.82p) |
Diluted | 0.63p | (2.92p) | (2.82p) |
Cash flows (used in)/from discontinued operations | |||
£'000 | £'000 | £'000 | |
Net cash from/(used in) operating activities | 977 | (1,422) | (1,502) |
Net cash flow for the period | 977 | (1,422) | (1,502) |
Effect of disposal on the financial position of the Group | |||
£'000 | £'000 | £'000 | |
Intangible assets | - | 1,524 | 1,524 |
Trade and other receivables | - | - | 507 |
Net assets and liabilities | - | 1,524 | 2,031 |
9 DISPOSAL GROUP HELD FOR SALE
In November 2015 the Group exchanged contracts with the management team of Charles Stanley Financial Solutions regarding the sale of Charles Stanley Financial Solutions Limited. Charles Stanley Financial Solutions has been presented as a disposal Group Held for Sale.
Impairment losses of £0.4 million for write-downs of the disposal group to the lower of its carrying amount and its fair value less costs to sell have been included in impairment of intangible assets in the consolidated income statement. The impairment losses have been applied to reduce the carrying amount of goodwill within the disposal group.
At 30 September 2015 the disposal group was stated at the lower of the carrying amount and fair value less costs to sell and comprised the following assets and liabilities:
Unaudited | Audited | ||
half-year | year | ||
30 Sept | 31 March | ||
2015 | 2015 | ||
£'000 | £'000 | ||
Intangible assets | 1,145 | 1,550 | |
Deferred tax assets | 3 | 3 | |
Trade and other receivables | 271 | 493 | |
Cash and cash equivalents | 1,654 | 113 | |
Assets Held for Sale | 3,073 | 2,159 | |
Trade and other payables | 4 | 396 | |
Current tax liabilities | - | 2 | |
Liabilities Held for Sale | 4 | 398 |
In July 2015 the Group completed the sale of the Charles Stanley Securities division (excluding the Equity Sales Trading operation) to Panmure Gordon (UK) Limited.
Unaudited | Audited | |
half-year | year | |
30 Sept | 31 March | |
2015 | 2015 | |
£'000 | £'000 | |
Intangible assets | - | 1,524 |
Trade and other receivables | - | 507 |
Net assets and liabilities | - | 2,031 |
Unaudited | Audited | ||
half-year | year | ||
30 Sept | 31 March | ||
2015 | 2015 | ||
£'000 | £'000 | ||
Total assets Held for Sale | |||
Charles Stanley Financial Solutions | 3,073 | 2,159 | |
Charles Stanley Securities | - | 2,031 | |
3,073 | 4,190 |
10 INTANGIBLE ASSETS
Goodwill | Customer relationships | Internally generated software | Total | ||||
£'000 | £'000 | £'000 | £'000 | ||||
Cost | |||||||
1 April 2015 | 21,507 | 22,769 | 4,167 | 48,443 | |||
Purchased in the period | - | 564 | 898 | 1,462 | |||
30 September 2015 | 21,507 | 23,333 | 5,065 | 49,905 | |||
Amortisation | |||||||
01 April 2015 | 5,511 | 15,498 | 1,337 | 22,346 | |||
Amortisation during the period | - | 849 | 750 | 1,599 | |||
Impairment during the period | - | 40 | - | 40 | |||
30 September 2015 | 5,511 | 16,387 | 2,087 | 23,985 | |||
Net book value | |||||||
30 September 2015 | 15,996 | 6,946 | 2,978 | 25,920 | |||
31 March 2015 | 15,996 | 7,271 | 2,830 | 26,097 | |||
None of the intangible assets have been pledged as security.
| |||||||
| |||||||
a) Goodwill | |||||||
Goodwill is allocated to the Group's operating division as follows: | |||||||
Unaudited | Unaudited | Audited | |||||
half-year | half-year | year | |||||
30 Sept | 30 Sept | 31 March | |||||
2015 | 2014 | 2015 | |||||
£'000 | £'000 | £'000 | |||||
Investment Management Services | 9,105 | 9,756 | 9,105 | ||||
Financial Planning | 1,644 | 4,623 | 1,644 | ||||
Charles Stanley Direct | 5,247 | 8,247 | 5,247 | ||||
Charles Stanley Securities (discontinued operations) | - | 1,524 | - | ||||
15,996 | 24,150 | 15,996 | |||||
The recoverable amounts of goodwill allocated to each Cash Generating Unit (CGU) are determined by calculating the fair value less cost to sell. If the fair value less cost to sell is found to be lower than the carrying amount, the recoverable amount is determined by performing value in use calculations. The fair value less cost to sell calculations are largely based on a percentage of Funds under Management. Where this approach is not appropriate a turnover multiple is used instead.
The rates used are those implied by recent transactions in the market or, where appropriate, similar quoted businesses. When calculating the fair value less cost to sell, key assumptions were stress tested to determine whether the calculations were sensitive to a reasonable possible change in these assumptions.
The value in use calculations use pre-tax cash flow projections based on revenue and expense forecasts.
Financial Planning
The Group has exchanged contracts with the management team of Charles Stanley Financial Solutions regarding the sale of the business. The recoverable amount has been calculated based on the key elements of the agreement. As a result an impairment charge of £0.4 million has been recognised. The impairment charge has been fully allocated to goodwill, reducing the Charles Stanley Financial Solutions goodwill to £1.1 million, and is included in impairment of intangible assets in the consolidated income statement. The goodwill of Charles Stanley Financial Solutions has been reclassified as assets Held for Sale.
Charles Stanley Securities
Completion of the sale of Charles Stanley Securities to Panmure Gordon (UK) (excluding its Equity Sales Trading operation) took place on 15 July 2015. It is shown as a discontinued operation for the period it remained within the Group on the basis that it represented a major line of business (one of five divisions), which was previously separately reported both externally and internally.
b) Customer relationships
Purchases of customer relationships relate to payments made to investment managers and third parties for the introduction of customer relationships.
c) Internally generated software
The cost and accumulated amortisation for the previous year were reclassified to include internally generated software, which had been reclassified from office equipment, included in property, plant and equipment. This reclassification has represented the substance of internally generated software, which is software designed, developed and implemented by the Group.
11 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 2015 | 4,988 | 1,021 | 7,899 | 16,862 | 30,770 |
Additions | 25 | - | 8 | 359 | 392 |
Disposals | - | - | - | (34) | (34) |
30 September 2015 | 5,013 | 1,021 | 7,907 | 17,187 | 31,128 |
Depreciation | |||||
1 April 2015 | 250 | 308 | 4,021 | 12,904 | 17,483 |
Charge for the period | 65 | 37 | 400 | 977 | 1,479 |
Disposals | - | - | - | (34) | (34) |
30 September 2015 | 315 | 345 | 4,421 | 13,847 | 18,928 |
Net book value | |||||
30 September 2015 | 4,698 | 676 | 3,486 | 3,340 | 12,200 |
31 March 2015 | 4,738 | 713 | 3,878 | 3,958 | 13,287 |
12 AVAILABLE FOR SALE FINANCIAL ASSETS
Listed investments | Unlisted investments | Total | |
£'000 | £'000 | £'000 | |
Fair value | |||
1 April 2015 | 3,785 | 3,269 | 7,054 |
Additions | 150 | - | 150 |
Disposals | (102) | - | (102) |
Revaluation and impairment in period | (156) | (60) | (216) |
30 September 2015 | 3,677 | 3,209 | 6,886 |
The fair value of listed investments is determined by reference to quoted prices on active markets.
Listed investments include a £2.0 million holding in Gilts which is pledged to our clearing house.
Unlisted investments include the Group's holding of 6,030 shares in Euroclear plc for which no observable market data is available as to its value. The Directors believe it is appropriate to value this holding on a dividend yield basis.
At 30 September 2015, the Group assessed its equity investment in Masterlist. The valuation was based on the Net Asset Value of the operating entity of Masterlist. In light of management information provided, the Group believes that the equity investment should remain at nil.
13 SHARE CAPITAL
Unaudited | Unaudited | Audited | |
half-year | half-year | year | |
30 Sept | 30 Sept | 31 March | |
2015 | 2014 | 2015 | |
£'000 | £'000 | £'000 | |
Authorised | |||
80,000,000 ordinary shares of 25p each | 20,000 | 20,000 | 20,000 |
Allotted and fully paid: | |||
50,573,212 ordinary shares of 25p each | 12,641 | 11,416 | 11,490 |
As at 30 September 2015 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 | 23 Dec 2014 | 18 Dec 2013 | 19 Dec 12 |
Exercisable during the six months commencing | 1 Feb 2018 | 1 Feb 2017 | 31 Jan 2016 |
Number of Shares | 93,302 | 58,146 | 143,631 |
Expected price per share | £2.70 | £4.11 | £2.48 |
Expected fair value of option | £0.65 | £1.26 | £0.69 |
The rights and obligations attaching to the Company's ordinary shares are set out in the Report and Accounts 2015 of the Directors (page 48).
During the period 704,414 ordinary shares were issued fully paid for cash at an average price of £2.44 each following the exercise of options by employees. These shares had a nominal value of £176,104 and a total consideration of £1,717,637.
14 MERGER RELIEF RESERVE
Unaudited | Unaudited | Audited | |
half-year | half-year | year | |
30 Sept | 30 Sept | 31 March | |
2015 | 2014 | 2015 | |
£'000 | £'000 | £'000 | |
Balance at 30 September 2015 | 15,167 | - | - |
In April 2015 the Group undertook a capital raising. 4,596,000 shares were issued at £3.55 per share. These shares had a nominal value of £1,149,000 and a total consideration of £16,315,800.
The merger relief reserve is used where more than 90% of the share capital in a subsidiary is acquired and the consideration includes the issue of new shares by the Company, thereby attracting merger relief under Section 612 of the Companies Act 2006. The merger relief reserve arose on a placing of the Company's shares and forms part of the distributable reserves.
15 BORROWINGS
Unaudited | Unaudited | Audited | |
half-year | half-year | year | |
30 Sept | 30 Sept | 31 March | |
2015 | 2014 | 2015 | |
£'000 | £'000 | £'000 | |
Current | |||
Bank loan | 150 | 150 | 150 |
Non-current | |||
Bank loan | 1,751 | 1,897 | 1,824 |
The bank loan is secured by property disclosed in note 15 of the Annual Report and Accounts 2015. The loan is repayable in 20 quarterly instalments with the final balance due on 18 August 2018. It bears interest at 2.75% per annum above the Bank of England base rate (currently 0.50%).
16 EMPLOYEE BENEFITS
The Group operates a defined contribution pension scheme. The assets of the scheme are held separately from those of the Group in independently administered funds.
The Group also sponsors the Charles Stanley & Co. Limited Retirement Benefits Scheme, which is a funded defined benefit arrangement. This is a separate trustee-administered fund holding the pension plan assets to meet long term pension liabilities for some 74 past and 28 present employees. The level of retirement benefit is principally based on salary earned in the last three years of employment prior to leaving active service and is linked to changes in inflation following retirement.
The plan is subject to the funding legislation, which came into force on 30 December 2005, outlined in the Pensions Act 2004. This, together with documents issued by the Pensions Regulator, and Guidance Notes adopted by the Financial Reporting Council, set out the framework for funding defined benefit occupational pension plans in the UK.
The trustees of the plan are required to act in the best interests of the plan's beneficiaries. The appointment of the trustees is determined by the plan's trust documentation. It is policy that at least one third of all trustees should be nominated by the members.
A full actuarial valuation has been carried out in May 2014 in accordance with the scheme funding requirements of the Pensions Act 2004, and the funding of the plan is agreed between the Group and the trustees in line with those requirements. These in particular require the surplus/deficit to be calculated using conservative, as opposed to best estimate, actuarial assumptions.
The actuarial valuation at 13 May 2014 showed a deficit of £4,200,000. The Group has agreed with the trustees that it will aim to eliminate the deficit over a period of eight and half years from 13 May 2015 by the payment of annual contributions of £350,000 in respect of the deficit. In addition and in accordance with the actuarial valuation, the Group agreed with the trustees that it would pay 25.5% of pensionable earnings in respect of the cost of accruing benefits and will meet expenses of the plan and levies to the Pension Protection Fund. Member contributions are payable at a rate of 3% (except for Directors) and this is included within the rate of 25.5%.
The deficit on defined benefit pension obligations is summarised as follows: |
| ||
Unaudited | Unaudited | Audited | |
half-year | half-year | year | |
30 Sept | 30 Sept | 31 March | |
2015 | 2014 | 2015 | |
£'000 | £'000 | £'000 | |
Fair value of plan assets | 29,519 | 29,505 | 30,778 |
Present value of defined benefit obligation | (41,347) | (39,812) | (43,865) |
Deficit in scheme | (11,828) | (10,307) | (13,087) |
As all actuarial gains and assets are recognised, the deficits shown above are those recognised in the balance sheet. | |||
Defined benefit costs recognised in the income statement | |||
Unaudited | Unaudited | Audited | |
half-year | half-year | year | |
30 Sept | 30 Sept | 31 March | |
2015 | 2014 | 2015 | |
£'000 | £'000 | £'000 | |
Current service cost | 249 | 308 | 610 |
Net interest costs | 208 | 152 | 310 |
Total | 457 | 460 | 920 |
The valuation of the benefit obligations is: based on the following key assumptions: | |||||
30 Sept | 31 March | 31 March | 31 March | 31 March | |
2015 | 2015 | 2014 | 2013 | 2012 | |
% per annum | % per annum | % per annum | % per annum | % per annum | |
Inflation - RPI | 3.20 | 3.10 | 3.40 | 3.50 | 3.25 |
Salary increases | 2.30 | 2.20 | 3.00 | 3.00 | 3.00 |
Rate of discount | 3.70 | 3.20 | 4.50 | 4.45 | 5.05 |
Allowance for pension in payment increases of RPI or 5% p.a. if less | 3.40 | 3.30 | 3.60 | 3.50 | 3.25 |
Allowance for revaluation of deferred pensions of RPI or 5% p.a. if less | 3.20 | 3.10 | 3.40 | 3.50 | 3.25 |
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 the retirement benefits. Charles Stanley has used RPI in calculating the liability as at 30 September 2015. | |||||
17 FAIR VALUES AND RISK MANAGEMENT
(a) Carrying amount versus fair value | ||
The fair value of financial assets and financial liabilities, together with the carrying values in the condensed Statement of Financial Position are as follows: | ||
Carrying value | ||
Unaudited | Audited | |
30 Sept | 31 March | |
half-year | year | |
2015 | 2015 | |
£'000 | £'000 | |
Non-current financial assets | ||
Available for sale financial assets | 6,886 | 7,054 |
Trade and other receivables | 792 | 419 |
7,678 | 7,473 | |
Current financial assets | ||
Trade and other receivables | 282,836 | 267,494 |
Financial assets at fair value through profit and loss | 50 | 100 |
Cash and cash equivalents | 42,326 | 28,453 |
325,212 | 296,047 | |
Non-current financial liabilities | ||
Borrowings | 1,751 | 1,824 |
Current financial liabilities | ||
Trade and other payables | 275,321 | 265,123 |
Borrowings | 150 | 150 |
275,471 | 265,273 | |
The carrying value approximates to the fair value of the financial assets and liabilities held.
(b) Financial instruments carried at fair value
Fair value hierarchy
The table below analyses recurring fair value measurements for financial assets. These fair value measurements are categorised into different levels in the fair value hierarchy based on the inputs to valuation techniques used.
The different levels are defined as follows:
Level 1 - quoted prices (unadjusted) in active markets for identical assets or liabilities that the group can access at the measurement date;
Level 2 - inputs other than quoted prices included within level 1 that are observable for the asset either directly (that is, prices) or indirectly (that is, derived from prices);
Level 3 - inputs for assets that are not based on observable market data (that is, unobservable).
Level 1 | Level 2 | Level 3 | Total | |
£'000 | £'000 | £'000 | £'000 | |
30 September 2015 | ||||
Financial assets measured at fair value | ||||
Available for sale financial assets | 3,677 | - | 3,209 | 6,886 |
Financial assets at fair value through profit and loss | 50 | - | - | 50 |
3,727 | - | 3,209 | 6,936 | |
There were no transfers between any of the levels of the fair value hierarchy during the six months ended 30 September 2015. | ||||
(c) Level 3 fair values | |
Details of the determination of level 3 fair value measurements are set out below: | |
Equity securities: Available for sale | |
£'000 | |
At 1 April 2015 and 30 September 2015 | 3,209 |
The Group has an established control framework with respect to the measurement of fair values. If one or more significant inputs are not based on observable market data, the instrument is included in level 3. Specific valuation techniques used to value the financial instrument grouped under level 3 include discounting future cash flows and calculating the dividend yield. All valuations performed are presented to the Group Executive Directors for final approval. Significant valuation issues are reported to the Group Audit Committee.
Equity securities - Available for sale
The level 3 balance comprises amounts relating to holdings in unlisted investments. At 30 September 2015 these unlisted investments had a fair value of £3.2 million (31 March 2015: £3.3 million). Included within this balance is the Group's holding of 6,030 Euroclear plc shares with a fair value of £3.1 million (31 March 2015: £3.1 million). This fair value has been determined using a valuation technique that used significant unobservable inputs. This was because the shares were not listed on an exchange, and there were no recent observable arm's length transactions in the shares.
Valuation Technique | Significant unobservable inputs | Inter-relationship between significant unobservable inputs and fair value | ||
The fair value is determined by considering the dividend yield where the expected dividend is determined | Expected dividend growth rate, which includes an adjustment for currency volatility (45%) | The estimated fair value would increase if the expected dividend growth rate were higher |
For the Euroclear investment a 1% increase/decrease in the expected dividend yield would increase/decrease other comprehensive income in the statement of changes in equity by £20,000 (31 March 2015: £20,000).
During the period the unlisted investment in Sutherlands Edinburgh was reviewed based on the net asset value of the operating entity. As a result the investment was revalued to a book value of nil.
No new information has become available that would require a change in the valuation of any further unlisted investments.
The Group assessed the recoverability of the loan it has with Masterlist, which is repayable in 2017. The Group believes that Masterlist still has sufficient access to liquid funds, and will therefore continue to operate as a Going Concern. As a result, the Directors believe there is no need for impairment at this time.
18 RECONCILIATION OF NET PROFIT TO CASH GENERATED FROM OPERATIONS
Unaudited | Unaudited | Audited | |
half-year | half-year | year | |
30 Sept | 30 Sept | 31 March | |
2015 | 2014 | 2015 | |
£'000 | £'000 | £'000 | |
Profit/(loss) before tax | 1,958 | (3,945) | (6,075) |
Adjustments for: | |||
Depreciation | 1,479 | 1,593 | 3,150 |
Amortisation and impairment of assets | 2,104 | 3,568 | 11,108 |
Share-based payments - value of employee services | 102 | 76 | 50 |
Retirement benefit scheme | 83 | 91 | 204 |
Dividend income | (112) | (113) | (132) |
Interest income | (64) | (96) | (110) |
Interest expense | 51 | 38 | 75 |
Profit on disposal of Available for sale financial assets | - | (48) | (75) |
Profit/(loss) on disposal of property, plant and equipment | (6) | - | 178 |
Loss on disposal of business unit | 5 | - | - |
Profit on disposal of Fund asset | (100) | - | (750) |
Changes in working capital: | |||
Decrease in financial assets at fair value through profit or loss | 51 | 47 | 17 |
(Increase)/decrease in receivables | (13,061) | (23,864) | (54,960) |
Increase/(decrease) in payables | 8,925 | 11,429 | 48,268 |
Net cash inflow/(outflow) from operations | 1,415 | (11,224) | 948 |
19 CONTINGENT LIABILITIES
A recent ruling by the European Court of Justice indicated that under the European Working Time Directive, 'normal pay' for the purposes of calculating statutory holiday pay includes contractual commission as well as basic salary. The UK Employment Tribunal considered the implications for UK employers under the Working Time Directive 1998 and, as expected, has ruled in a similar manner to the European Courts of Justice, although it has also ruled that non-guaranteed overtime payments should be included for the purposes of calculating holiday pay entitlements. The decision by the UK Employment Tribunal is currently subject to appeal and, as yet, no hearing date has been set to consider it. Based on this information and advice to date, the Group does not expect the impact to be material. However, in the event that analysis, judgements and/or appeals are determined to be ultimately different, the Group may be exposed to a material additional liability.
20 COMMITMENTS
At 30 September 2015 capital expenditure authorised and contracted for but not provided in the financial statements amounted to nil (2014: nil).
21 POST BALANCE SHEET EVENTS
In November 2015 the Group exchanged contracts with the management team of Charles Stanley Financial Solutions regarding the sale of the business for £2.0 million. Completion of the sale is conditional on approval by the Financial Conduct Authority.
Related Shares:
CAY.L