8th Nov 2007 07:01
Charles Stanley Group PLC08 November 2007 8 November 2007 CHARLES STANLEY GROUP PLC INTERIM RESULTS FOR THE SIX MONTHS ENDED 30 SEPTEMBER 2007 Charles Stanley Group PLC, one of the UK's leading independent full servicestockbroking, corporate finance and investment management groups, announces itsinterim results for the six months ended 30 September 2007. Highlights: • Revenue up 10% at £52.5 million • Private client fee income up 22% at £19.2 million • Underlying profit before one-off costs up 21% at £9.2 million • Interim dividend up 14% at 2.10p • Total funds under management and administration £11.5 billion (March 2007: £10.6 billion) • Acquisition of Garrison Investment Analysis Ltd Summary Sep 07 Sep 06 Change £m £m %Revenue 52.5 47.6 10%Underlying profit 9.2 7.6 21%One-off costs (2.2) (0.4)Profit on disposal of investments 0.2 0.5Reported profit 7.2 7.7 (6%)Underlying EPS 14.83p 12.77p 16%Reported EPS 11.59p 13.00p (11%)Interim dividend 2.10p 1.85p 14% Sir David Howard, Chairman, commented: "I am pleased to report another strong set of results for Charles Stanley GroupPLC for the six months ended 30 September 2007. Despite a turbulent marketbackground this has been a busy half-year for us, characterised by significantacquisition activity. Subject to the market coping with further shocks as robustly as it has done sofar, I look forward with confidence to the second half-year." For further information please contact: Charles Stanley Group PLC Landsbanki Securities Ltd Hudson SandlerSir David Howard, Chairman Simon Bridges Fran ReadPeter A Hurst, Finance Director Managing Director Account ManagerPhone: 020 7739 8200 Phone: 020 7426 9000 Phone: 020 7796 4133Fax: 020 7953 2948 Chairman's Statement I am pleased to report another strong set of results for Charles Stanley GroupPLC for the six months ended 30 September 2007. Despite a turbulent marketbackground this has been a busy half-year for us, characterised by significantacquisition activity. Our income for the period was 10% higher than for thefirst six months of the previous year, at £52.5 million (2006-7: £47.6 million).While our reported pre-tax profit of £7.2 million was some 6% lower than for theequivalent period of the previous year (£7.7 million), this figure includesexpenses of £2.2 million relating to recent acquisitions and profit on disposalof investments of £0.2 million. If these are excluded from the comparison, thepre-tax profit has risen by 21% to £9.2 million. Over the six month period our clients' funds for which we provide investmentmanagement or fee-based administration services rose from £10.6 billion to £11.5billion. Within this figure the funds under discretionary management have risenfrom £2.3 billion a year ago to £2.6 billion at 31 March 2007 and to £2.9billion at the end of the latest six months. Within the overall income figure, our commission income rose by 6% from £28.3million to £30.0 million, and our fee income rose by 18% from £18.9 million to£22.4 million. Approximately 43% of our income comes from fees. The directors propose an increase of 14% in the interim dividend from 1.85p to2.10p per share. This will be paid on 12 December 2007 to shareholdersregistered on 16 November 2007. Review of operations In recent full-year, half-year and quarterly statements I have described the wayin which the group has continued to move ahead against a background of dullmarket conditions. Charles Stanley is one of the largest independently-owned UKstockbroking and wealth management companies, providing a personal investmentservice, so our fortunes are intimately linked to the financial markets. The latest six months have been anything but dull, with some major shocks to thesystem. While private client trading volumes have remained flat, our income fromprivate client transactions has moved ahead by 8% compared with the first sixmonths of the previous year. Investment management and administration feesgenerated from private clients have increased by 22% over the same period.Consequently our private client division registered an overall increase inincome of 14% from £38.8 million to £44.1 million. Within our private client division, our financial planning department increasedits income by 44% from £2.5 million to £3.6 million. This increase includes£0.7 million contributed by Garrison Investment Analysis Ltd during the period.We have also seen the addition of 218 new SIPPs, and £30m of transfers and newcontributions. Charles Stanley Securities, our specialist small and mid-cap advisory andinstitutional broking division, has again performed well against a backdrop ofmore difficult market conditions. Revenues for the half year were broadlysimilar with last year at £7.2 million (2006-7: £7.5 million). The corporate finance and broking team enjoyed a number of new client wins andthe retained client list has now increased to 55 companies. The generalreduction in IPO activity has been well documented. However Charles StanleySecurities completed three IPOs during the period, as planned, and in additionthe team advised on a number of transactions valued at £280 million.Notwithstanding market conditions, the division has made an encouraging start aswe enter the second half, in terms of existing mandates and of the pipeline. Throughout the group, we have continued to invest significantly in our ITinfrastructure and systems to improve our overall efficiency and client service. Acquisitions This has been a very busy few months for the group, with a series of importantacquisitions. We opened new branches in Exeter and in Guildford and we have beenjoined by a major broking team in London that specialises in Court of Protectionand personal injury awards investment management. In Exeter we acquired anentire branch of a well-established stockbroking business with effect from 1April 2007, and this has made a useful contribution to our half-year results.The Guildford and London teams have joined us in stages during and following thelatest half-year. On 14 June 2007 we announced the acquisition of Garrison Investment AnalysisLtd, a leading financial intermediary based in Beverley, East Yorkshire.Garrison markets unit trusts, open-ended investment company units and packagedfinancial products to private clients, both directly and in wrappers such asISAs and pensions. The business fits neatly into the range of services providedby the group, and we see considerable scope for adding value both to Garrisonand to the rest of the group by working together. We acquired 75.1% of Garrisonfor approximately £6 million, satisfied by a mixture of cash and loan notes, andwe have agreed to purchase the balance of 24.9% for a further £2 million in June2009. We also plan to open an office in Bristol in the current quarter. Our shareholders will be aware of our conservative attitude to building andmaintaining substantial cash reserves. One of the reasons has been to haveresources available for carefully focussed acquisitions to help build thebusiness of the group. The recent level of acquisition activity has been fundedalmost entirely from our own resources, but the cash balances maintained by thegroup, after paying for the acquisitions, remain at a substantial figure inrelation to the needs of the business. Regulation Much of the focus of management, over the past year or so, has been directed tothe raft of major changes emanating primarily from the European Commission andits promotion of the Financial Services Action Plan. Some of the changes to ourbusiness are quite fundamental, and have involved extensive preparation,lobbying, trade association involvement at a senior level, and comprehensivere-programming of our systems. This has been an outstanding team effortthroughout the group, echoed by the excellent response from our very largeclient base to the explanatory material that we have issued. No one can be quite sure of the effects of the more fundamental EuropeanDirectives - the Capital Requirements Directive (which came into force on 1January 2007) and the Markets in Financial Instruments Directive (which cameinto force on 1 November 2007) - but we believe that we are as well placed asany financial company to weather these significant changes. This gives me anopportunity to express my warmest thanks both to all the staff involved, and toour clients for responding so promptly and with no loss of their support andgood humour. Outlook The recent significant shocks to the market have, until now, been confined toparticular financial sector companies and particular types of (primarilywholesale) financial instruments. But the effects are beginning to ripple outinto the broader economy. So far this has followed a sadly familiar cycle -cheap credit, over-priced asset classes, and risks being poorly understood andunder-priced. It is too early to assess how broad, deep or long-lasting theconsequent retrenchment will be. Many of the most reliable indicators point tothe continuing underlying strength of the economy. Maybe the "credit crunch"will turn out to be a blip, with much of the damage limited to the wholesalefinancial markets. Or maybe the after-shocks will spread further into the retailsector. It is too early to tell. As personal wealth expands, demand will continue to grow for the veryspecialised and personal investment service that we offer. So I believe that wecan look beyond the uncertainties of current market conditions, and theunpredictable consequences of the sweeping legislative changes in financialservices, to the strong fundamentals and the record of growth of our business.Subject to the market coping with further shocks as robustly as it has done sofar, I look forward with confidence to the second half-year. Sir David Howard Bt. Chairman 8 November 2007 Funds under management and administration 30 Sep 2007 30 Sep 2006 31 Mar 2007 £ billion £ billion £ billionDiscretionary managed servicesIn Group's nominee or crest membership 2.9 2.3 2.6 Advisory managed servicesIn Group's nominee or crest membership 2.6 2.2 2.5Not held in Group's nominee 0.5 0.6 0.5 3.1 2.8 3.0 Total managed services 6.0 5.1 5.6 Advisory dealing servicesIn Group's nominee or crest membership 2.5 2.3 2.4 Execution only servicesIn Group's nominee or crest membership 2.6 2.3 2.6Not held in Group's nominee 0.4 - - 3.0 2.3 2.6 Total administered services 5.5 4.6 5.0 Total funds under management and administration 11.5 9.7 10.6 Financial Calendar 8 November 2007 Results announced 14 November 2007 Ex-dividend date for interim dividend 16 November 2007 Record date for interim dividend 12 December 2007 Interim dividend paid June 2008 Final results announced Charles Stanley Group PLCConsolidated Income StatementSix months ended 30 September 2007 Restated Unaudited Unaudited Audited Half-year to Half-year to Year to 30.9.07 30.9.06 31.3.07 Notes £'000 £'000 £'000 Continuing operationsRevenue 1 52,483 47,612 98,179 Administrative expenses (46,390) (41,393) (84,672) Operating profit 6,093 6,219 13,507 Interest payable and similar charges 2 (46) (62) (46)Interest receivable 2 1,001 1,020 2,151 Profit on disposal of available for sale (AFS)investments 2 163 527 1,974 Profit before tax 3 7,211 7,704 17,586 Tax on profit on ordinary activities 5 (2,283) (2,210) (5,235) Profit for the period from continuing operations 4,928 5,494 12,351 Profit attributable to minority interest - - (22)Profit attributable to equity shareholders 4,928 5,494 12,373 4,928 5,494 12,351Earnings per Share Based on profit for the periodBasic 6 11.59p 13.00p 29.25p Diluted 6 11.17p 12.50p 28.16p Charles Stanley Group PLCStatement of Recognised Income and ExpenseSix months ended 30 September 2007 Restated Unaudited Unaudited Audited Half-year to Half-year to Year to 30.9.07 30.9.06 31.3.07 £'000 £'000 £'000 Profit for the period 4,928 5,494 12,351 Revaluation of AFS investments taken to income statement ondisposal (163) (527) (1,974)Revaluation of AFS investments 196 (818) (463)Deferred tax on revaluation of financial assets (12) 407 771Retirement benefit scheme actuarial gain - - 825Deferred tax on retirement benefit scheme actuarial gain - - (303) Net gains/(losses) not recognised in the income statement 21 (938) (1,144) Total recognised income for the period 4,949 4,556 11,207 Attributable to minority interest - - (22)Attributable to equity shareholders 4,949 4,556 11,229 4,949 4,556 11,207 Charles Stanley Group PLCConsolidated Balance Sheet30 September 2007 Unaudited Unaudited Audited 30.9.07 30.9.06 31.3.07 Notes £'000 £'000 £'000 AssetsNon-current assetsGoodwill 8 23,318 15,603 15,434Intangible assets 9 3,138 - 3,169Property, plant and equipment 10 7,065 5,537 6,128Available for sale investments 11 4,792 6,000 4,942 38,313 27,140 29,673 Current assetsTrade and other receivables 12 219,660 253,076 267,474Held for trading investments 13 2,001 98 1,234Cash and cash equivalents 14 28,263 46,479 42,305 249,924 299,653 311,013 LiabilitiesCurrent liabilitiesFinancial liabilities 15 (536) (963) (881)Trade and other payables 16 (213,670) (262,631) (271,214)Current tax liabilities (2,288) (2,449) (3,011) (216,494) (266,043) (275,106) Net current assets 33,430 33,610 35,907 Non-current liabilitiesFinancial liabilities 15 (1,411) (74) (97)Retirement benefit liability (1,521) (2,429) (1,521)Deferred tax liabilities (170) (97) (36)Other non-current liabilities 16 (1,992) (100) - (5,094) (2,700) (1,654) Net assets 66,649 58,050 63,926 Shareholders' equityOrdinary shares 17 10,638 10,580 10,592 Share premium 18 742 336 379Other reserves 18 2,311 2,962 2,289Retained earnings 18 52,861 43,992 50,569 Total shareholders' equity 18 66,552 57,870 63,829Minority interest in equity 97 180 97 Total equity 66,649 58,050 63,926 Charles Stanley Group PLCConsolidated Cash Flow StatementSix months ended 30 September 2007 Unaudited Unaudited Audited Half-year to Half-year to Year to 30.9.07 30.9.06 31.3.07 Notes £'000 £'000 £'000 Cash flows from operating activitiesCash (outflows)/inflows from operations 19 (513) 3,263 4,386Interest received 1,001 1,020 2,151Interest paid (46) (62) (95)Tax paid (2,898) (2,860) (5,323) Net cash (outflows)/inflows from operating activities (2,456) 1,361 1,119 Cash flows from investing activitiesAcquisition of subsidiaries and other businesses 20 (4,776) - (313)Acquisition of intangible assets (2,119) - (1,169)Proceeds from sale of property, plant and equipment - - 27Purchase of property, plant and equipment (1,670) (1,250) (3,066)Proceeds from sale of investments 434 916 2,229Purchase of investments (767) (737) (1,869)Dividends received 75 302 371 Net cash used in investing activities (8,823) (769) (3,790) Cash flows from financing activitiesNet proceeds from issue of ordinary share capital 80 354 152Cash outflow from change in debt and lease financing (187) (320) (245)Dividends paid to shareholders (2,656) (2,255) (3,039) Net cash used in financing activities (2,763) (2,221) (3,132) Net decrease in cash and cash equivalents (14,042) (1,629) (5,803) Cash and cash equivalents at start of period 42,305 48,108 48,108 Cash and cash equivalents at end of period 28,263 46,479 42,305 Charles Stanley Group PLCNotes to the Financial Statements General information The interim financial information for the six months ended 30 September 2007 hasbeen prepared under International Financial Reporting Standards ("IFRS") asadopted by the EU. These interim accounts are presented in accordance with IAS34 Interim Financial Reporting. The interim accounts have been prepared on thebasis of the accounting policies set out in the Group's consolidated accountsfor the year ended 31 March 2007. These unaudited interim financial statementsshould therefore be read in conjunction with the 2007 Annual Report andFinancial Statements. The financial information as set out in this report is unaudited and does notcomprise statutory accounts for the purposes of Section 240 of the Companies Act1985. The Auditors have carried out a review and their report is set out below. The comparative figures for the year ended 31 March 2007 have been taken frombut do not constitute the Company's statutory financial statements for thatfinancial year. Those financial statements have been reported on by theCompany's Auditors and delivered to the Registrar of Companies. Their report isunqualified and did not contain a statement under Section 237(2) or (3) of theCompanies Act 1985. The comparative figures for the six months ended 30 September 2006 have beenrestated to show profit on disposal of investments in the income statement,instead of being recognised directly in equity, as it had previously been. Thisis consistent with the preparation of the financial statements for the yearended 31 March 2007, and the note that is included on page 41 of the 2007statements. In the current financial year, the group will adopt IFRS 7 "FinancialInstruments: Disclosures". As this is a disclosure standard, there is no impacton the half-year financial report. Principal risks and uncertainties The principal risks and uncertainties facing the group are described in detailon pages 13 and 14 of the 2007 Annual Report and Financial Statements. Theirimpact on the six months to 30 September 2007 and for the remainder of thefinancial year is discussed in the chairman's statement above. Related party transactions Related party transactions are described in detail on page 67 of the 2007 AnnualReport and Financial Statements. No transactions took place during the sixmonths to 30 September 2007 that would materially affect the financial positionor performance of the group during the period. 1 Revenue Charles Private Stanley Clients Securities Other Total6 months ended 30 September 2007 £'000 £'000 £'000 £'000 Commission 24,811 4,035 1,199 30,045 Fees Investment management 9,130 - - 9,130 Administration 10,119 - - 10,119 Corporate finance - 3,114 - 3,114 19,249 3,114 - 22,363 Other income - - 75 75 Total for 6 months ended 30 September 2007 44,060 7,149 1,274 52,483Allocated administrative expenses (28,573) (5,551) (681) (34,805) 15,487 1,598 593 17,678Unallocated administrative expenses (11,585) Operating profit 6,093 6 months ended 30 September 2006Commission 22,960 4,488 886 28,334 Fees Investment management 7,612 - - 7,612 Administration 8,217 - - 8,217 Corporate finance - 3,026 - 3,026 15,829 3,026 - 18,855 Other income - - 423 423 Total for 6 months ended 30 September 2006 38,789 7,514 1,309 47,612Allocated administrative expenses (24,188) (5,558) (812) (30,558) 14,601 1,956 497 17,054Unallocated administrative expenses (10,835) Operating profit 6,219 12 months ended 31 March 2007Commission 48,796 8,737 1,873 59,406 Fees Investment management 16,268 - - 16,268 Administration 16,993 - - 16,993 Corporate finance - 5,114 - 5,114 33,261 5,114 - 38,375 Other income - - 398 398 Total for 12 months ended 31 March 2007 82,057 13,851 2,271 98,179Allocated administrative expenses (50,233) (10,796) (1,732) (62,761) 31,824 3,055 539 35,418Unallocated administrative expenses (21,911) Operating profit 13,507 2 Finance income - net 30 Sep 2007 30 Sep 2006 31 Mar 2007 £'000 £'000 £'000Interest expense:Interest payable on bank borrowings (6) (23) (32)Interest payable on other loans (34) (33) (3)Interest payable on finance leases (6) (6) (11) Interest and similar charges payable (46) (62) (46) Interest income 1,001 1,020 2,151 Profit on disposal of AFS investments 163 527 1,974 Finance income - net 1,118 1,485 4,079 3 Profit before tax The following items have been included in arriving at profit before tax: Depreciation of property, plant and equipment:- owned assets 1,084 1,173 2,283- assets held under finance leases 21 20 108Amortisation of intangibles 150 - -Other operating lease rentals payable 837 523 1,368One-off revenue costs relating to new investment teams 2,129 390 1,613LSE special dividend received - (300) (300) 4 Staff costs Staff costs for the Group during the period:Wages and salaries 16,169 13,650 30,777Social security costs 1,626 1,349 3,539Other pension costs 1,423 1,244 2,563 19,218 16,243 36,879 5 Taxation Analysis of charge in the periodCurrent tax- Continuing operations 2,161 2,210 5,404- Adjustment in respect of prior periods - - (169)Deferred tax- Continuing operations 122 - - 2,283 2,210 5,235 6 Earnings per share Restated 30 Sep 2007 30 Sep 2006 31 Mar 2007 £'000 £'000 £'000 Earnings attributable to ordinary shareholders 4,928 5,494 12,373Profit on disposal of available for sale investments (163) (527) (1,974)Tax on profit on disposal of available for sale investments 49 158 592One-off revenue costs relating to new investment teams 2,129 390 1,613Tax on one-off revenue costs (639) (117) (484) Underlying earnings attributable to ordinary shareholders 6,304 5,398 12,120 No. No. No. '000 '000 '000 Weighted average number of shares in issue in the period 42,512 42,261 42,299Dilution 1,600 1,696 1,647 44,112 43,957 43,946 Based on reported earnings Basic earnings per share 11.59p 13.00p 29.25p Diluted earnings per share 11.17p 12.50p 28.16p Based on underlying earnings Basic earnings per share 14.83p 12.77p 28.65p Diluted earnings per share 14.29p 12.28p 27.58p 7 Dividends paid Final: 2007: 6.25p (2006: 5.35p) per 25p share 2,657 2,255 2,256Interim: (2007: 1.85p) per 25p share - - 783 2,657 2,255 3,039 In addition, the Directors are proposing an interim dividend in respect of thesix months ended 30 September 2007 of 2.10p per share which will absorb anestimated £894,000 of shareholders' funds. It will be paid on 12 December 2007to shareholders who are on the register of members on 16 November 2007. 8 Goodwill CostAt beginning of period 15,434 15,603 15,603Additions 7,884 - 80Disposals and adjustments to deferred consideration - - (249) At end of period 23,318 15,603 15,434 9 Intangible assets Customer Brand costs Total lists £'000 £'000 £'000 1 April 2007 3,083 86 3,169 Acquisitions 22 97 119 Amortisation during period (150) - (150) 30 September 2007 2,955 183 3,138 10 Property, plant and equipment Freehold Long Short Office Total premises leasehold leasehold equipment and premises premises motor vehicles £'000 £'000 £'000 £'000 £'000Cost1 April 2007 185 1,975 4,190 10,431 16,781Additions 227 - 248 1,585 2,060Disposals or scrapping - - - (2,831) (2,831) 30 September 2007 412 1,975 4,438 9,185 16,010 Depreciation1 April 2007 28 1,574 2,025 7,026 10,653Charge for the period 2 13 61 1,029 1,105Disposals or scrapping - - - (2,813) (2,813) 30 September 2007 30 1,587 2,086 5,242 8,945 Net book value at 30 September 2007 382 388 2,352 3,943 7,065 11 Available for sale investments Listed investments Unlisted investments TotalFixed asset investments £'000 £'000 £'0001 April 2007Cost 1,428 303 1,731Revaluation surplus 910 2,301 3,211 Book value 2,338 2,604 4,942 Additions 115 - 115Disposals (461) - (461)Revaluation in period 196 - 196 30 September 2007 2,188 2,604 4,792 Cost 1,243 303 1,546Revaluation surplus 945 2,301 3,246 12 Trade and other receivables 30 Sep 2007 30 Sep 2006 31 Mar 2007 £'000 £'000 £'000CurrentTrade debtors 216,601 251,146 264,967Other debtors 341 455 393Prepayments and accrued income 2,718 1,475 2,114 219,660 253,076 267,474 13 Held for trading investments CurrentListed investments 2,001 98 1,234 14 Cash and cash equivalents Cash at bank and in hand 28,263 46,479 42,305 At the balance sheet date there were also deposits for clients, not included inthe consolidated balance sheet, which were held in trust in segregated bankaccounts amounting to £856 million (September 2006: £712 million; March 2007:£741 million). 15 Financial liabilities Current3% redeemable loan 157 157 1574.5% convertible redeemable loan note 311 680 6804.5% redeemable unsecured loan note - 81 -Obligations under finance leases 68 45 44 536 963 881 Non-currentBank of England rate unsecured loan note 1,336 - -Obligations under finance leases 75 74 97 1,411 74 97 16 Trade and other payables 30 Sep 2007 30 Sep 2006 31 Mar 2007 £'000 £'000 £'000CurrentTrade payables 206,659 256,049 258,483Other taxes and social security 1,672 816 1,746Other creditors 1,618 1,700 4,742Accruals and deferred income 3,721 4,066 6,243 213,670 262,631 271,214 Non currentOther creditors 1,992 100 - 17 Ordinary shares Authorised80,000,000 ordinary shares of 25p each 20,000 20,000 20,000 Allotted and fully paid42,550,407 ordinary shares of 25p each 10,638 10,580 10,592 During the period 27,135 ordinary shares were issued fully paid for cash at 96peach and 4,703 ordinary shares were issued fully paid for cash at £2.87 each,following the exercise of options by former employees. Also during the period, part of the 4.5% convertible redeemable loan note wasredeemed and 148,374 ordinary shares were issued fully paid at £2.48 each. On 30 September 2007 the following options have been granted and remainoutstanding in respect of ordinary shares of 25p in the Company under theCompany's Save As You Earn Scheme. No of shares Option price Grant dated 2 January 2003 1,600,477 £0.96Exercisable during the six months commencing 1 February 2008 18 Statement of changes in shareholders' equity Share Share Other Retained Total capital premium reserves earnings £'000 £'000 £'000 £'000 £'000 1 April 2007 10,592 379 2,289 50,569 63,829 Net profit - - - 4,928 4,928 Dividends paid - - - (2,657) (2,657) Revaluation of investments - - 196 - 196 Transfer realised revaluation surplus - - (162) - (162) Deferred tax on revaluations - - (12) - (12) Share options - value of employee services - - - 21 21 Share options - proceeds of shares issued 8 32 - - 40 Conversion of loan note 38 331 - - 369 30 September 2007 10,638 742 2,311 52,861 66,552 19 Reconciliation of net profit to cash generated from operations Restated 30 Sep 2006 30 Sep 2007 £'000 31 Mar 2007 £'000 £'000 Net profit 7,211 7,704 17,586Adjustments forDepreciation 1,102 1,193 2,391Amortisation of customer lists 150 - -Share option cost 21 23 38Dividend income (75) (302) (371)Interest income (1,001) (1,020) (2,151)Interest expense 46 62 46Profit on disposal of investments (163) (652) (1,974)Investments acquired in lieu of fees (50) - - Changes in working capitalDecrease/(increase) in debtors 47,814 (13,186) (27,544)(Decrease)/increase in creditors (55,568) 9,441 16,365 Cash (outflows)/inflows from operations (513) 3,263 4,386 20 Acquisitions On 14 June 2007, the Group announced the acquisition of Garrison InvestmentAnalysis Ltd. The initial consideration of 75.1% of the business of just over£6 million was satisfied by a mixture of cash and the issue of loan notes. Theremaining balance will be acquired on the second anniversary of completion. The assets and liabilities of Garrison Investment Analysis Ltd at acquisitiondate were as follows: £'000 Freehold property 227Net current assets 142 Net assets acquired 369 Goodwill acquired 7,884 Total cost of acquisition 8,253 Satisfied by:Cash 4,776Loan notes 1,336Deferred consideration 2,141 Total consideration 8,253 Directors' Responsibility Statement We confirm that to the best of our knowledge: - The condensed set of financial statements hasbeen prepared in accordance with IAS 34 'Interim Financial Reporting' as adoptedby the EU; - The interim management report includes a fairreview of the information required by: a) DTR 4.2.7R of the Disclosure and Transparency Rules, being anindication of important events during the first six months of the financial yearand their impact on the condensed set of financial statements; and a descriptionof 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 relatedparty transactions that have taken place in the first six months of the currentfinancial year and that have materially affected the financial position orperformance of the entity during that period; and any changes in the relatedparty transactions described in the last annual report that could do so. On behalf of the board: PETER HURSTFINANCE DIRECTOR8 November 2007 Independent review report to Charles Stanley Group PLC Introduction We have been engaged by the Company to review the condensed set of financialstatements in the half-year financial report for the six months ended 30September 2007 which comprises the consolidated income statement, consolidatedbalance sheet, consolidated cash flow statement and the related explanatorynotes. We have read the other information contained in the half-year financialreport and considered whether it contains any apparent misstatements or materialinconsistencies with the information in the condensed set of financialstatements. This report is made solely to the Company in accordance with the terms of ourengagement to assist the Company in meeting the requirements of the Disclosureand 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 theCompany those matters we are required to state to it in this report and for noother purpose. To the fullest extent permitted by law, we do not accept orassume responsibility to anyone other than the Company for our review work, forthis report, or for the conclusions we have reached. Directors' responsibilities The half-year financial report is the responsibility of, and has been approvedby, the Directors. The Directors are responsible for preparing the half-yearfinancial report in accordance with the DTR of the UK FSA. As disclosed in the notes to the financial statements, the annual financialstatements of the Group are prepared in accordance with IFRSs as adopted by theEU. The condensed set of financial statements included in this half-yearfinancial report has been prepared in accordance with IAS 34 'Interim FinancialReporting' as adopted by the EU. Our responsibility Our responsibility is to express to the Company a conclusion on the condensedset of financial statements in the half-year financial report based on ourreview. Scope of Review We conducted our review in accordance with International Standard on ReviewEngagements (UK and Ireland) 2410 'Review of Interim Financial InformationPerformed by the Independent Auditor of the Entity' issued by the AuditingPractices Board for use in the UK. A review of interim financial informationconsists of making enquiries, primarily of persons responsible for financial andaccounting matters, and applying analytical and other review procedures. Areview is substantially less in scope than an audit conducted in accordance withInternational Standards on Auditing (UK and Ireland) and consequently does notenable us to obtain assurance that we would become aware of all significantmatters that might be identified in an audit. Accordingly, we do not express anaudit opinion. Conclusion Based on our review, nothing has come to our attention that causes us to believethat the condensed set of financial statements in the half-year financial reportfor the six months ended 30 September 2007 is not prepared, in all materialrespects, in accordance with IAS 34 as adopted by the EU and the DTR of the UKFSA. Saffery ChampnessChartered AccountantsLondon8 November 2007 Notes: A review does not provide assurance on the maintenance and integrity ofthe website, including controls used to achieve this, and in particular onwhether any changes may have occurred to the financial information since firstpublished. These matters are the responsibility of the directors but no controlprocedures can provide absolute assurance in this area. Legislation in theUnited Kingdom governing the preparation and dissemination of financialinformation differs from legislation in other jurisdictions. 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