8th Nov 2005 07:00
Charles Stanley Group PLC08 November 2005 8 November 2005 CHARLES STANLEY GROUP PLC RESULTS FOR THE SIX MONTHS ENDED 30 SEPTEMBER 2005 Charles Stanley, a major independent stockbroker, announces its interim resultsfor the six months ended 30 September 2005. Highlights: • Revenue up by 20% to £41.7 million (2004: £34.7 million) • Profit before tax up by 32% to £5.4 million (2004: £4.1 million) • Funds under management up by £1 billion (13%) to £8.7 billion (31 March 2005: £7.7 billion) • Earnings per share up 31% to 8.78p (2004: 6.68p) • Dividend up by 27% to 1.40p (2004: 1.10p) • Recruitment of new 15 strong investment team in London • New offices opened in Birmingham and Glasgow Sir David Howard, Chairman, commented: "I reported to shareholders in June onthe growing uncertainties for economic growth, interest rates, inflation andconsumer spending. Five months later the situation looks equally uncertain, yetmarket indices have continued to perform strongly with company profits stillrising, and a spate of take-over activity. Commentators seem to agree that theeconomy will drift over the next twelve months, but the market is perhapssending out more positive signals. Throughout the past two years I have expressed cautious optimism in each of myreports. This has proved justified: we have performed well. On the same basis,looking ahead to the second half of the year, I am once again cautiouslyoptimistic". For further information please contact: Charles Stanley Group PLC Bridgewell Securities Ltd Tavistock CommunicationsSir David Howard, Chairman Ben Money-Coutts Jeremy Carey, ChairmanPeter A Hurst, Finance Director Director David Foxman, DirectorPhone: 020 7739 8200 Phone 020 7003 3124 Phone: 020 7920 3150Fax: 020 7953 2948 Chairman's Statement I am pleased to announce that the income of the Group for the six months ended30 September 2005 has increased by 20% from £34.7 million to £41.7 million, andprofit before tax for the period has risen by 32% from £4.1 million to £5.4million. Earnings per share have increased by 31% from 6.68p to 8.78p. Clients' funds under management stood at £8.7 billion at 30 September 2005, anincrease of more than £1 billion (or 13%) in the latest six months (31 March2005: £7.7 billion), analysed as follows: 30 Sep 2005 31 Mar 2005 £ billion £ billionDiscretionary funds under managementIn Group's nominee or sponsored membership 1.8 1.4 Advisory portfolio funds under managementIn Group's nominee or sponsored membership 1.8 1.6Not held in Group's nominee 0.5 0.5 2.3 2.1Total managed funds 4.1 3.5 Advisory dealing fundsIn Group's nominee or sponsored membership 2.0 1.9Execution only fundsIn Group's nominee or sponsored membership 2.6 2.3 Total administered funds 4.6 4.2 Total funds under management and administration 8.7 7.7 During the period we were delighted that a significant team of investmentmanagers joined our London office from Dryden Wealth Management Ltd. We openeda new office in Glasgow on 1 June 2005 with a highly regarded institutional teamformerly with Aitken Campbell; and on 1 August 2005 we opened a new office inBirmingham comprising a group of private client stockbrokers previously withGerrards. All three teams have got off to an excellent start with CharlesStanley. In the light of these results we propose an increase of 27% in the interimdividend from 1.1p to 1.4p net per share, which will be paid on 14 December 2005to shareholders registered on 18 November 2005. This increase in the dividendseeks to narrow the gap which has been growing in recent years between ourinterim and final dividends. Review of Operations As in the full year ended 31 March 2005 approximately 62% of our turnover in thelatest half-year was derived from Stock Exchange transaction charges and 38%from fees for investment management, corporate finance, investmentadministration, personal and corporate financial planning, and related services. In the year to 31 March 2005 the volume of Stock Exchange transactions byprivate clients, nationally, fell by about 12%, and the latest six months hasseen only a modest improvement. Despite a significant rise in all the majormarket indices during these six months, private client transactions on theLondon Stock Exchange were just 2.9% higher than in the equivalent half-yearended 30 September 2004. Charles Stanley has performed in line with the national figure, with a 2.6%increase in private client transactions. But by steadily increasing the averagevalue of transactions, we have been able to translate this into an increase of21% in transaction income, from £21.28 million (first half of 2004-05) to £25.76million. At the same time our fee income advanced across all areas of the Group by 21%,from £13.1 million in the first six months of 2004-05 to £15.8 million. Within this figure our Financial Planning services increased their turnover by31% from £1.35 million to £1.77 million. Our Corporate Advisory and BrokingDivision have enjoyed a good half-year, too, having completed 4 Initial PublicOffers and a number of other significant transactions. We now act for 54corporate clients, up from 44 at the same stage last year, with fees earned bythe division rising by 12% from £2.15 million to £2.40 million. With our new offices in Birmingham and Glasgow Charles Stanley now provides itsservices to clients from 26 offices around the United Kingdom. Our long-standingacquisition policy continues to focus on businesses which fit neatly into ourstrategic model, and which can be quickly and efficiently integrated - to ensurethe smoothest possible transition for clients and for all those that we welcometo Charles Stanley. IFRS Our results are prepared for the first time on the basis of the newInternational Financial Reporting Standards (IFRS), and comparatives forprevious periods have been re-stated on the same basis. The three principaladjustments are that we no longer treat the amortisation of goodwill as anexpense, we have to provide for the potential tax liability on the unrealisedappreciation in value of our investment assets, and we have to provide for thesmall shortfall in our defined-benefit pension scheme liability. A detailedanalysis of the changes is attached to this statement. Outlook When I last reported to you, in June, I talked of the growing uncertainties foreconomic growth, interest rates, inflation and consumer spending. Five monthslater the situation looks equally uncertain, yet market indices have continuedto perform strongly with company profits still rising, and a spate of take-overactivity. Commentators seem to agree that the economy will drift over the nexttwelve months, but the market is perhaps sending out more positive signals. Throughout the past two years I have expressed cautious optimism in each of myreports. This has proved justified: we have performed well. On the same basis,looking ahead to the second half of the year, I am once again cautiouslyoptimistic. Sir David Howard Bt. Chairman 8 November 2005 Financial Calendar 8 November 2005 Results announced 16 November 2005 Ex-dividend date for interim dividend 18 November 2005 Record date for interim dividend 14 December 2005 Interim dividend paid June 2006 Final results announced Charles Stanley Group PLC Consolidated Profit and Loss Account Six months ended 30 September 2005 Unaudited Unaudited Unaudited Half-year to Half-year to Year to 30.9.05 30.9.04 31.3.05 Notes £'000 £'000 £'000 Continuing operationsRevenue 2 41,671 34,727 78,687 Administrative expenses (37,205) (31,298) (69,657) Operating profit 4,466 3,429 9,030 Interest payable and similar charges 3 (50) (21) (118) Interest receivable 3 941 709 1,605 Profit before tax 4 5,357 4,117 10,517Tax on profit on ordinary activities 6 (1,658) (1,300) (3,688) Profit for the period from continuingoperations 3,699 2,817 6,829 Profit attributable to minority interest - - 9Profit attributable to equity shareholders 3,699 2,817 6,820 3,699 2,817 6,829 Earnings per Share Unaudited Unaudited Unaudited Half-year to Half-year to Year to Notes 30.9.05 30.9.04 31.3.05Based on profit for the periodBasic 7 8.78p 6.68p 16.18pDiluted 7 8.39p 6.40p 15.47p Proposed dividendsDividend per share 1.40p 1.10p 4.15p £'000 £'000 £'000Dividend 8 590 463 1,750 Statement of recognised income and expense £'000 £'000 £'000Profit for the period 3,699 2,817 6,829Revaluation of available for sale securities 523 (535) 2,406Deferred tax on revaluation of available for salesecurities (157) 157 (427)Retirement benefit scheme actuarial loss - - (311)Net gains/(losses) not recognised in profit and lossaccount 366 (378) 1,668Total recognised income for the period 4,065 2,439 8,497 Charles Stanley Group PLC Consolidated Balance Sheet 30 September 2005 Unaudited Unaudited Unaudited 30.9.05 30.9.04 31.3.05 Notes £'000 £'000 £'000 AssetsNon-current assetsGoodwill 9 15,590 13,835 15,575Property, plant and equipment 10 5,650 6,068 5,995Financial assets 11 5,257 3,110 4,787Retirement benefit asset - 73 - 26,497 23,086 26,357 Current assetsTrade and other receivables 12 359,987 160,424 232,055Financial assets 1,150 1,409 1,108Cash and cash equivalents 13 47,111 32,495 44,234 408,248 194,328 277,397 LiabilitiesCurrent liabilitiesFinancial liabilities 14 (1,013) (2,682) (991)Retirement benefit liability (111) - (111)Trade and other payables 15 (378,335) (167,779) (249,357)Current tax liabilities (1,775) (1,134) (2,250) (381,234) (171,595) (252,709) Net current assets 27,014 22,733 24,688 Non-current liabilitiesFinancial liabilities 14 (576) (199) (600)Deferred tax liabilities (983) (278) (831)Other non-current liabilities (1,079) (2,384) (1,079) (2,638) (2,861) (2,510) Net assets 50,873 42,958 48,535 Shareholders' equityOrdinary shares 16 10,540 10,537 10,538Share premium 17 8 - 3Other reserves 17 3,063 1,498 2,863Retained earnings 17 37,059 30,679 34,928 Total shareholders' equity 18 50,670 42,714 48,332Minority interest in equity 203 244 203 Total equity 50,873 42,958 48,535 Charles Stanley Group PLC Consolidated Cash Flow Statement Six months ended 30 September 2005 Unaudited Unaudited Unaudited Half-year to Half-year to Year to 30.9.05 30.09.04 31.3.05 Notes £'000 £'000 £'000Cash flows from operating activitiesCash generated from operations 19 6,586 3,901 18,258Interest received 941 709 1,605Interest paid (50) (21) (118)Tax paid (2,133) (2,133) (3,489) Net cash from operating activities 5,344 2,456 16,256 Cash flows from investing activitiesAcquisition of subsidiaries (15) (627) (2,802)Proceeds from sale of property, plant andequipment 49 13 408Purchase of property, plant and equipment (743) (1,606) (2,922)Proceeds from available for sale investments 328 80 1,415Purchase of available for sale investments (259) (559) (298)Dividends received 48 438 438 Net cash used in investing activities (592) (2,261) (3,761) Cash flows from financing activitiesNet proceeds from issue of ordinary share capital 7 - 4Cash outflow from change in debt and lease (132) (112) (214)financingDividends paid to shareholders (1,750) (1,581) (2,044) Net cash used in financing activities (1,875) (1,693) (2,254) Net increase/(decrease) in cash and cashequivalents 2,877 (1,498) 10,241 Cash and cash equivalents at start of period 44,234 33,993 33,993 Cash and cash equivalents at end of period 47,111 32,495 44,234 Charles Stanley Group PLC Notes to the Financial Statements General information The interim financial information for the six months ended 30 September 2005 hasbeen prepared under International Financial Reporting Standards ("IFRS") subjectto exemptions referred to below and in accordance with IAS 34. Explanation of transition to IFRS This is the first period for which the Group has presented its financialstatements under IFRS. The last financial statements under UK GAAP were for theyear ended 31 March 2005. The Group has applied the transitional provisions of IFRS 1 "First time adoptionof International Financial Reporting Standards". The date of transition toInternational Financial Reporting and Accounting Standards was 1 April 2004 andall comparative information in these financial statements has been restated toreflect the Group's adoption of International Financial Reporting and AccountingStandards. IFRS 1 contains a number of exemptions which companies are permitted to apply.The Group has elected: - not to restate its financial information for acquisitions occurring before 1 April 2004; - to deem cumulative translation differences to be zero at 1 April 2004; - to recognise all actuarial gains and losses on pensions and other post-retirement benefits directly in equity attributable to equity holders of the parent at 1 April 2004; - To apply IFRS 2 to all grants of equity instruments after 7 November 2002 that had not vested as of 1 January 2005. The financial information for the year ended 31 March 2005 has been derived fromaudited UK GAAP information adjusted for the impact of IFRS and is thereforeunaudited. The financial information for the period ended 30 September 2004 hasbeen derived from audited UK GAAP information adjusted for the impact of IFRS,and is therefore unaudited also. The impact of the transition from UK GAAP toIFRS at 1 April 2004, 30 September 2004 and 31 March 2005 is contained in thereconciliations of equity that are shown as note 20 of these interim statements. The interim information, together with the comparative information contained inthis report for the year ended 31 March 2005, does not constitute statutoryaccounts within the meaning of section 240 of the Companies Act 1985. However,the information has been reviewed by the Company's auditors, and their reportappears at the end of the interim financial report. The UK GAAP statutoryaccounts for the year ended 31 March 2005 have been reported on by the Company'sauditors, and delivered to the Registrar of Companies. The report of theauditors on those accounts was unqualified and did not contain a statement undersection 237(2) or (3) of the Companies Act 1985. A copy of this statement is being forwarded to all shareholders and will beavailable for members of the public at the Company's registered office, 25 LukeStreet, London EC2A 4AR. 1 Accounting Policies European Union ('EU') law requires that the next annual consolidated financialstatements of the Company, for the year ending 31 March 2006, be prepared inaccordance with IFRS adopted for use in the EU. As the next annual financialstatements will be prepared under IFRS, this interim financial report has beenprepared in accordance with IFRS for the first time. The disclosures requiredby IFRS 1 concerning the transition from UK GAAP to IFRS are given in note 20.As this is the first time the Group has reported under IFRS, a summary of theaccounting policies is set out below, and should be read in conjunction with thefinancial statements. Basis of consolidation The consolidated financial statements combine the financial statements ofCharles Stanley Group PLC and all its subsidiaries, drawn up to 30 September2005. For the purposes of these accounts, uniform accounting policies have beenfollowed by the Group. All significant intercompany transactions and balancesbetween Group entities are eliminated on consolidation. Revenue Revenue comprises stockbroking commission, investment management fees, corporatefinance fees, the profit on buying and selling securities, and the profit orloss arising on positions held in securities. Dividends are credited to the profit and loss account in the year in which theyare receivable and are shown exclusive of tax credits. Stockbroking commissionand fees are stated gross but exclude value added tax. Foreign currencies Foreign currencies have been translated into sterling at the rate of exchangeruling at the balance sheet date. Transactions in foreign currencies arerecorded at the rate ruling at the date of the transaction. All differences aretaken to the profit and loss account. Intangible assets Goodwill arising on consolidation represents the excess of the cost ofacquisition over the Group's interest in the fair value of the identifiableassets, liabilities and contingent liabilities of a subsidiary at the date ofacquisition. Goodwill is recognised as an asset and is reviewed for impairment at leastannually, or on such other occasions where changes in circumstances indicatethat it might be impaired. Any impairment is recognised immediately in theprofit and loss account and is not subsequently reversed. Goodwill arising onacquisition is allocated to cash-generating units for purposes of impairmenttesting. Goodwill arising on acquisitions before the date of transition to IFRS has beenretained at the previous UK GAAP amount and is subject to an impairment reviewat the date of transition. Impairment The Group reviews the carrying amounts of its tangible and intangible assetswith finite lives to determine whether there is any indication that those assetshave suffered an impairment loss on an annual basis. If any such indicationexists, the recoverable amount of the asset is estimated in order to determinethe extent of the impairment loss (if any). Where the asset does not generatecash flows that are independent from other assets, the Group estimates therecoverable amount of the cash-generating unit to which the asset belongs. Anintangible asset with an indefinite useful life is tested for impairmentannually and whenever there is an indication that the asset may be impaired. The recoverable amount is the higher of fair value less any cost to sell andvalue in use. In assessing value in use, the estimated future cash flows arediscounted to their present values using a pre-tax discount rate. This ratereflects current market assessments of the time value of money as well as therisks specific to the asset for which the estimates of future cash flows havenot been adjusted. If the recoverable amount of an asset (or cash-generating unit) is estimated tobe less than its carrying amount, the carrying amount of the asset(cash-generating unit) is reduced to its recoverable amount. Impairment lossesare recognised as an expense immediately, unless the relevant asset is carriedat a revalued amount, in which case the impairment loss is treated as arevaluation decrease. Where an impairment loss subsequently reverses, thecarrying amount of the asset (cash-generating unit) is increased to the revisedestimate of its recoverable amount, but so that the increased carrying amountdoes not exceed the carrying amount that would have been determined had noimpairment loss been recognised for the asset (cash-generating unit) in prioryears. A reversal of the impairment loss is recognised as income immediately,unless the relevant asset is carried at a revalued amount, in which case thereversal of the impairment loss is treated as a revaluation increase. However,impairment losses relating to goodwill may not be reversed. Tangible fixed assets Tangible fixed assets are included in the balance sheet at cost less accumulateddepreciation and any provisions for impairment. Freehold land is not depreciated. Other tangible fixed assets are depreciatedon a straight-line basis at rates sufficient to write off the cost lessestimated residual values of individual assets over their estimated usefullives. The depreciation periods of the principal categories of assets are asfollows: Freehold buildings and leasehold properties up to 50 yearsOffice equipment and motor vehicles 3 to 10 years Leased assets and obligations Where assets are financed by leasing agreements that give rights approximatingto ownership ("finance leases"), the assets are treated as if they had beenpurchased outright. The amount capitalised is the present value of the minimumlease payments payable during the lease term. The corresponding leasingcommitments are shown as obligations to the lessor. Lease payments are treatedas consisting of capital and interest elements, and the interest is charged tothe profit and loss account using the annuity method. Depreciation on therelevant assets is charged to the profit and loss account. All other leases are"operating leases", and the annual rentals are charged to the profit and lossaccount on a straight line basis over the lease term. Investments Investments in securities are recognised and derecognised on trade date. Suchinvestments are initially measured at cost, excluding transaction costs whichare expensed immediately. After initial recognition, investments which are classified as held for tradingor available-for-sale are measured at fair value. Gains or losses oninvestments held for trading are recognised in the profit and loss for theperiod. Gains or losses on available-for-sale investments are recogniseddirectly as a separate component of equity until the investment is sold, orotherwise disposed of, or until the investment is determined to be impaired, atwhich time the cumulative gain or loss previously reported in equity is includedin the profit or loss for the period. Investments are classified as held to maturity when they are non-derivativeswith fixed or determinable payments and a fixed maturity that the Group has apositive intention and ability to hold to maturity. Investments intended to beheld for an undefined period are not included in this classification. For investments that are actively traded in organised financial markets, fairvalue is determined by reference to quoted bid prices at the close of businesson the balance sheet date. For investments where there is no quoted marketprice, fair value is determined by reference to the current market value ofanother instrument which is substantially the same. Alternatively, it iscalculated based on the expected cash flows of the underlying net asset base ofthe investment. Retirement benefit costs The cost of providing benefits under defined benefit plans are determined usingthe projected unit credit method, with actuarial valuations being carried out onan annual basis. Actuarial gains and losses are recognised in full in the period in which theyoccur. They are recognised outside the income statement and are presented inthe statement of recognised income and expense. Past service cost is recognisedimmediately to the extent that the benefits are already vested. The amountrecognised in the balance sheet represents the present value of the definedbenefit obligation as adjusted for unrecognised actuarial gains and losses andunrecognised past service cost, and reduced by the fair value of plan assets.Any asset resulting from this calculation is limited to the unrecognisedactuarial losses and past service cost, plus the present value of availablerefunds and reductions in future contributions to the plan. Taxation Current tax is provided at amounts expected to be paid (or recovered) using thetax rates and laws that have been enacted or substantively enacted by thebalance sheet date. The tax currently payable is based on taxable profit for the period. Taxableprofit differs from net profit as reported in the income statement because itexcludes items of income or expense that are taxable or deductible in otherperiods and it further excludes items that are never taxable or deductible. Deferred tax is recognised in respect of all timing differences that haveoriginated but not reversed at the balance sheet date where transactions orevents that result in an obligation to pay more tax in the future or a right topay less tax in the future have occurred at the balance sheet date. Deferred tax is accounted for using the balance sheet liability method inrespect of temporary differences between the carrying amount of assets andliabilities in the financial statements and the corresponding tax basis used inthe computation of taxable profit. Deferred tax liabilities are recognised forall temporary differences and deferred tax assets are recognised to the extentthat it is probable that taxable profits will be available against whichdeductible temporary differences may be utilised. Such assets and liabilitiesare not recognised if the temporary difference arises from goodwill or from theinitial recognition (other than in a business combination) of other assets andliabilities in a transaction that affect neither the tax profit nor theaccounting profit. The carrying amounts of deferred tax assets are reviewed at each balance sheetdate and reduced to the extent that it is no longer probable that sufficienttaxable profits will be available to allow all or part of the asset to berecovered. Deferred tax is calculated at the rates that are expected to apply when theasset or liability is settled or when the asset is realised. Deferred tax ischarged or credited in the income statement, except when it relates to itemscredited or charged directly to equity, in which case the deferred tax is alsodealt with in equity. Share-based payments The Group has applied the requirements of IFRS 2 "Share-based Payments". Inaccordance with the transitional provisions, IFRS 2 has been applied to allgrants of equity instruments after 7 November 2002 that had not vested as of 1January 2005. The Group grants share options to certain employees. These are measured at fairvalue at the date of grant. The fair value so determined is expensed on astraight-line basis over the vesting period, based on the Group's estimate ofthe number of shares that will eventually vest. The fair value of share optionsgranted at market price is determined using a Black Scholes valuation model. 2 Revenue 30 Sep 2005 30 Sep 2004 31 Mar 2005 £'000 £'000 £'000 Commission 25,761 21,278 48,150Investment management fees 6,239 5,114 10,556Administration fees 7,197 5,794 14,024Corporate finance fees 2,399 2,146 5,158Other income 75 395 799 41,671 34,727 78,687 3 Finance income - net Interest expense:Interest payable on bank borrowings (8) (5) (13)Interest payable on other loans (32) (4) (83)Interest payable on finance leases (10) (12) (22)Interest and similar charges payable (50) (21) (118)Interest income 941 709 1,605Finance income - net 891 688 1,487 4 Profit before tax The following items have been included in arriving at operating profit: 30 Sep 2005 30 Sep 2004 31 Mar 2005 £'000 £'000 £'000Depreciation of property, plant and equipment:- owned assets 1,105 950 2,108- assets held under finance leases 17 105 171Loss/(profit) on disposal of fixed assets (56) 2 (257)Other operating lease rentals payable 609 583 1,210Sublet of lease - George Street, Edinburgh - 444 444 5 Staff costs Staff costs for the Group during the period:Wages and salaries 12,403 9,452 21,401Social security costs 1,327 1,005 2,394Other pension costs 1,139 1,066 2,116 14,869 11,523 25,911 6 Taxation Analysis of charge in the periodCurrent tax- Continuing operations 1,663 1,251 3,723Deferred tax- Continuing operations (5) 49 (35) 1,658 1,300 3,688 7 Earnings per share £'000 £'000 £'000Earnings attributable to ordinary shareholders 3,699 2,817 6,820 No. No. No. '000 '000 '000Weighted average number of shares in issue in the period 42,154 42,149 42,151Dilution 1,914 1,877 1,932 44,068 44,026 44,083Basic earnings per share 8.78p 6.68p 16.18pDiluted earnings per share 8.39p 6.40p 15.47p 8 Dividends paid 30 Sep 2005 30 Sep 2004 31 Mar 2005 £'000 £'000 £'000Final paid: 4.15p (2004: 3.75p) per 25p share 1,750 1,581 1,581Interim paid: 1.10p (2004: 1.00p) per 25p share - - 463 1,750 1,581 2,044 In addition, the Directors are proposing an interim dividend in respect of thesix months ended 30 September 2005 of 1.40p per share which will absorb anestimated £590,000 of shareholders' funds. It will be paid on 14 December 2005to shareholders who are on the register of members on 18 November 2005. 9 Goodwill Cost1 April 2005 19,664 15,935 15,935Additions 15 1,989 3,729 30 September 2005 19,679 17,924 19,664 Aggregate amortisation1 April and 30 September 2005 4,089 4,089 4,089 Net book amount at 30 September 2005 15,590 13,835 15,575 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 2005 184 1,893 3,394 11,212 16,683Additions - - 240 598 838Disposals - - - (121) (121) 30 September 2005 184 1,893 3,634 11,689 17,400 Depreciation1 April 2005 21 1,324 1,446 7,897 10,688Charge for the period 2 10 225 885 1,122Disposals - - - (60) (60) 30 September 2005 23 1,334 1,671 8,722 11,750 Net book value at 30 September 2005 161 559 1,963 2,967 5,650 11 Financial assets Listed investments Unlisted investments TotalFixed asset investments £'000 £'000 £'0001 April 2005Cost 394 305 699Revaluation surplus 2,027 2,061 4,088 Book value 2,421 2,366 4,787 Additions 217 - 217Disposals (270) - (270)Revaluation in period 523 - 523 30 September 2005 2,891 2,366 5,257 Cost 579 305 884Revaluation surplus 2,312 2,061 4,373 12 Trade and other receivables 30 Sep 2005 30 Sep 2004 31 Mar 2005 £'000 £'000 £'000Amounts falling due within one year:Trade debtors 358,190 158,728 229,897Other debtors 495 483 630Prepayments and accrued income 1,302 1,213 1,528 359,987 160,424 232,055 13 Cash and cash equivalents Cash at bank and in hand 47,111 32,495 44,234 14 Financial liabilities Current:3% redeemable loan 157 - 1574.5% convertible redeemable loan note 469 - 4694.5% redeemable unsecured loan note 171 - 171Fixed rate loan notes - 300 -Obligations under finance leases 180 228 194Short position holdings - 2,154 -Bank overdraft 36 - - 1,013 2,682 991 Non-current:4.5% convertible redeemable loan note 468 - 468Obligations under finance leases 108 199 132 576 199 600 15 Trade and other payables 30 Sep 2005 30 Sep 2004 31 Mar 2005 £'000 £'000 £'000 Trade payables 944,021 673,831 788,643Less funds held on behalf of clients in protected bank accounts (572,739) (511,860) (548,817) 371,282 161,971 239,826Other taxes and social security 594 950 2,100Other creditors 2,503 2,882 3,121Accruals 3,956 1,976 4,310 378,335 167,779 249,357 16 Called up share capital Authorised:80,000,000 ordinary shares of 25p each 20,000 20,000 20,000 Allotted and fully paid:42,160,419 ordinary shares of 25p each 10,540 10,537 10,538 On 30 September 2005 the following options have been granted and remainoutstanding in respect of ordinary shares of 25p in the company under thecompany's Save AsYou Earn Scheme. No of shares Option price Grant dated 11 July 2001 43,499 £2.87Exercisable during the six months commencing 1 September 2006 Grant dated 2 January 2003 1,741,110 £0.96Exercisable during the six months commencing 1 February 2008 During the period 6,666 ordinary shares were issued fully paid for cash at 96peach following the exercise of options by a former employee. 17 Reserves Share premium Revaluation Retained £'000 reserve earnings £'000 £'000 1 April 2005 3 2,863 34,928Net profit - - 3,699Dividend paid - - (1,750)Revaluation - 523 -Deferred tax - (157) -Transfer of realised revaluation surplus - (237) 237Deferred tax - 71 (71)Share options - value of employee service - - 16Share options - issue of shares 5 - - 8 3,063 37,059 18 Statement of changes in shareholders' equity Share Share Other Retained Total capital premium reserves earnings £'000 £'000 £'000 £'000 £'000 1 April 2004 10,537 - 1,876 29,428 41,841Net profit - - - 2,817 2,817Dividends - - - (1,581) (1,581)Revaluation - - (535) - (535)Deferred tax charge - - 157 - 157Share options - value of employee services - - - 15 15 30 September 2004 10,537 - 1,498 30,679 42,714 Net profit - - - 4,012 4,012Dividends - - - (463) (463)Revaluation - - 2,941 - 2,941Deferred tax - - (584) - (584)Transfer realised revaluation surplus - - (992) 992 -Retirement benefits scheme actuarial loss - - - (311) (311)Share options - value of employee services - - - 19 19Share options - proceeds of shares issued 1 3 - - 4 31 March 2005 10,538 3 2,863 34,928 48,332 Net profit - - - 3,699 3,699Dividends - - - (1,750) (1,750)Revaluation - - 523 - 523Deferred tax - - (157) - (157)Transfer realised revaluation surplus - - (237) 237 -Deferred tax charge - - 71 (71) -Share options - value of employee services - - - 16 16Share options - proceeds of shares issued 2 5 - - 7 30 September 2005 10,540 8 3,063 37,059 50,670 19 Reconciliation of net profit to net cash inflow from 30 Sep 2005 30 Sep 2004 31 Mar 2005operating activities £'000 £'000 £'000 Net profit 5,357 4,117 10,517Adjustments for:Depreciation 1,122 1,055 2,279Retirement benefit credit - - (49)Share option cost 12 16 17Dividend income (48) (436) (436)Interest income (941) (709) (1,605)Interest expense 50 21 118Profit on disposal of property, plant and equipment (56) - (257) Changes in working capital:(Increase)/decrease in debtors (127,932) 11,065 (60,566)Increase(decrease) in creditors 129,022 (11,228) 68,240 Net cash inflow from operating activities 6,586 3,901 18,258 20 Reconciliation of net assets and profit under UK GAAP to IFRS Charles Stanley Group PLC reported under UK GAAP in its previous publishedfinancial statements for the year ended 31 March 2005. The analysis below showsa reconciliation of net assets and profit as reported under UK GAAP as at 31March 2005 to the revised net assets and profit under IFRS as reported in thesefinancial statements. In addition there is a reconciliation of net assets underUK GAAP to IFRS at the transition date for this company, being 1 April 2004. Reconciliation of profit for the period ended 30 September 2004 Previous GAAP Effect of IFRS transition to IFRS Notes £'000 £'000 £'000 Continuing operationsRevenue 34,332 395 34,727Administrative expenses (a) (c) (d) (32,212) 914 (31,298) Operating profit 2,120 1,309 3,429Profit on sale of fixed assets (3) 3 -Income from fixed asset investments 438 (438) -Interest payable and similar charges (21) - (21)Interest receivable 709 - 709 Profit before tax 3,243 874 4,117Taxation (e) (1,250) (50) (1,300) Profit for the period 1,993 824 2,817 Reconciliation of profit for the year ended 31 March 2005 Previous GAAP Effect of IFRS transition to IFRS Notes £'000 £'000 £'000 Continuing operationsRevenue 78,021 666 78,687Administrative expenses (a) (c) (d) (71,773) 2,116 (69,657) Operating profit 6,248 2,782 9,030Profit on sale of fixed assets 257 (257) -Income from fixed asset investments 438 (438) -Interest payable and similar charges (118) - (118)Interest receivable 1,605 - 1,605 Profit before tax 8,430 2,087 10,517Taxation (e) (3,723) 35 (3,688) Profit for the period 4,707 2,122 6,829 Reconciliation of equity at 1 April 2004 (date of transition to IFRS) Previous GAAP Effect of IFRS transition to IFRS Notes £'000 £'000 £'000 AssetsNon-current assetsGoodwill 11,846 - 11,846Property, plant and equipment 5,493 - 5,493Financial assets 3,670 - 3,670Retirement benefit asset (d) - 73 73 21,009 73 21,082 Current assetsTrade and other receivables 171,489 - 171,489Financial assets 908 - 908Cash and cash equivalents 33,993 - 33,993 206,390 - 206,390 LiabilitiesCurrent liabilitiesFinancial liabilities (509) - (509)Trade and other payables (b) (182,640) 1,581 (181,059)Current tax liabilities (2,016) - (2,016) (185,165) 1,581 (183,584) Net current assets 21,225 1,581 22,806 Non-current liabilitiesFinancial liabilities (293) - (293)Deferred tax liabilities (e) - (385) (385)Other non-current liabilities (1,125) - (1,125) (1,418) (385) (1,803) Net assets 40,816 1,269 42,085 Shareholders' equityOrdinary shares 10,537 - 10,537 Other reserves (e) 2,675 (799) 1,876Retained earnings (a to e) 27,360 2,068 29,428 Total shareholders' equity 40,572 1,269 41,841Minority interest in equity 244 - 244 Total equity 40,816 1,269 42,085 Reconciliation of equity at 30 September 2004 Previous GAAP Effect of IFRS transition to IFRS Notes £'000 £'000 £'000 AssetsNon-current assetsGoodwill (a) 12,946 889 13,835Property, plant and equipment 6,068 - 6,068Financial assets 3,110 - 3,110Retirement benefit asset (d) - 73 73 22,124 962 23,086 Current assetsTrade and other receivables 160,424 - 160,424Financial assets 1,409 - 1,409Cash and cash equivalents 32,495 - 32,495 194,328 - 194,328 LiabilitiesCurrent liabilitiesFinancial liabilities (2,682) - (2,682)Trade and other payables (b) (168,242) 463 (167,779)Current tax liabilities (1,134) - (1,134) (172,058) 463 (171,595) Net current assets 22,270 463 22,733 Non-current liabilitiesFinancial liabilities (199) - (199)Deferred tax liabilities (e) - (278) (278)Other non-current liabilities (2,384) - (2,384) (2,583) (278) (2,861) Net assets 41,811 1,147 42,958 Shareholders' equityOrdinary shares 10,537 - 10,537 Other reserves (e) 2,140 (642) 1,498Retained earnings (a to e) 28,890 1,789 30,679 Total shareholders' equity 41,567 1,147 42,714Minority interest in equity 244 244 Total equity 41,811 1,147 42,958 Reconciliation of equity at 31 March 2005 Previous GAAP Effect of IFRS transition to IFRS Notes £'000 £'000 £'000 AssetsNon-current assetsGoodwill (a) 13,518 2,057 15,575Property, plant and equipment 5,995 - 5,995Financial assets 4,787 - 4,787 24,300 2,057 26,357 Current assetsTrade and other receivables 232,055 - 232,055Financial assets 1,108 - 1,108Cash and cash equivalents 44,234 - 44,234 277,397 - 277,397 LiabilitiesCurrent liabilitiesFinancial liabilities (991) - (991)Retirement benefit liabilities (d) - (111) (111)Trade and other payables (b) (251,107) 1,750 (249,357)Current tax liabilities (2,250) - (2,250) (254,348) 1,639 (252,709) Net current assets 23,049 1,639 24,688 Non-current liabilitiesFinancial liabilities (600) - (600)Deferred tax liabilities (e) - (831) (831)Other non-current liabilities (1,079) - (1,079) (1,679) (831) (2,510) Net assets 45,670 2,865 48,535 Shareholders' equityOrdinary shares 10,538 - 10,538 Share premium 3 - 3Other reserves (e) 4,089 (1,226) 2,863Retained earnings (a to e) 30,837 4,091 34,928 Total shareholders' equity 45,467 2,865 48,332Minority interest in equity 203 - 203 Total equity 45,670 2,865 48,535 Notes to the reconciliation of equity due to IFRS The accounting policies that the Directors assume will apply to the preparationof the first annual IFRS financial statements for the year ending 31 March 2006are shown below. The effects that each of these statements have on the restatedcomparative information are also shown below. However, the adopted IFRS thatwill be effective (or available for early adoption) in the annual financialstatements for the year ending 31 March 2006 are still subject to change and toadditional interpretations and therefore cannot be determined with certainty.Accordingly, the accounting policies for that annual period will be determinedonly when the annual financial statements are prepared for the year ending 31March 2006. (a) IFRS 3 - Business Combinations In accordance with the transitional provisions of IFRS 1, the Group has chosento apply IFRS 3 retrospectively from the date of transition. The result of thisapplication is that the value of goodwill arising from previous acquisitions isfrozen at the value held on the Group balance sheet as at 1 April 2004, and thereversal of any amortisation charged in the year to 31 March 2005. This change results in the reversal of £2.1 million previously charged to theincome statement under UK GAAP for the year ended 31 March 2005. The value ofintangible assets is therefore also increased by £2.1 million for the year ended31 March 2005. (b) IAS 10 - Events after Balance Sheet Date Under this standard, assets and liabilities should be adjusted for subsequentevents that existed at the balance sheet date, but not for events that areindicative of conditions that arose subsequent to the balance sheet date. UnderUK GAAP proposed dividends at the half year and year end were accrued eventhough there is no obligation to pay until the dividend is declared. Under IAS10, entities are not permitted to recognise a liability for dividends declaredafter the balance sheet date. The impact of this change is to increase equity at 1 April 2004 by £1.5 million,at 30 September 2004 by £0.5 million and at 31 March 2005 by £1.7 million. (c) IFRS 2 - Share-based Payment The Group recognises a charge to the income statement for the fair value ofoutstanding share options in relation to the Company's Save As You Earn schemegranted to employees after 7 November 2002 and not vested by 1 January 2005.These charges are calculated using a Black-Scholes technique, and are spreadover the relevant vesting periods, taking account of actual and expected levelsof vesting. Under UK GAAP, there was no charge in the income statement inrelation to share option awards. This change results in a charge of £0.02 million to profit for the year ended 31March 2005. (d) IAS 19 - Employee Benefits The Group recognises the net asset/liability on defined benefit schemes in thebalance sheet and takes all service costs to the profit and loss statement. These changes increase equity at 1 April 2004 by £0.1 million, and reduce equityat 31 March 2005 by £0.1 million. This standard also requires an increase inprofit of £0.05 million to be recorded for the year ended 31 March 2005. (e) IAS 12 - Income Taxes The Group recognises a deferred tax liability on timing differences, unusedcapital tax losses, revaluations of investments and on retirement benefit assets/liabilities. These changes result in the recording of a deferred tax liability of £0.4million at 1 April 2004, a deferred tax liability of £0.3 million at 30September 2004 and a deferred tax liability of £0.8 million at 31 March 2005. Independent review report to Charles Stanley Group PLC Introduction We have been instructed by the company to review the financial information forthe six months ended 30 September 2005 which comprises the consolidated profitand loss account, the consolidated balance sheet, the consolidated statement ofrecognised income and expense, the consolidated cash flow statement and therelated notes. We have read the other information contained in the interimreport and considered whether it contains any apparent misstatements or materialinconsistencies with the financial information. This report is made solely to the company in accordance with Bulletin 1999/4issued by the Auditing Practices Board. Our work has been undertaken so that wemight state to the company those matters we are required to state to them in anindependent review report and for no other purpose. To the fullest extentpermitted by law, we do not accept or assume responsibility to anyone other thanthe company, for our review work, for this report, or for the conclusions wehave formed. Directors' responsibilities The interim report, including the financial information contained therein, isthe responsibility of, and has been approved by, the directors. The directorsare responsible for preparing the interim report in accordance with the ListingRules of the Financial Services Authority which require that the accountingpolicies and presentation applied to the interim figures are consistent withthose applied in preparing the preceding annual accounts except where anychanges, and the reasons for them, are disclosed. International Financial Reporting Standards As disclosed in note 1, the next annual financial statements of the group willbe prepared in accordance with International Financial Reporting Standards asadopted for use in the EU. Accordingly, the interim report has been prepared inaccordance with the recognition and measurement criteria of IFRS and thedisclosure requirements of the Listing Rules. Review work performed We conducted our review in accordance with the guidance contained in Bulletin1999/4 issued by the Auditing Practices Board for use in the United Kingdom. Areview consists principally of making enquiries of group management and applyinganalytical procedures to the financial information and underlying financial dataand, based thereon, assessing whether the accounting policies and presentationhave been consistently applied unless otherwise disclosed. A review excludesaudit procedures such as tests of controls and verification of assets,liabilities and transactions. It is substantially less in scope than an auditperformed in accordance with International Standards on Auditing (UK andIreland) and therefore provides a lower level of assurance than an audit.Accordingly, we do not express an audit opinion on the financial information. Review conclusion On the basis of our review we are not aware of any material modifications thatshould be made to the financial information as presented for the six monthsended 30 September 2005. Saffery Champness Chartered Accountants London 8 November 2005 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 the United Kingdom governing the preparation and dissemination offinancial information differs from legislation in other jurisdictions. This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
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