14th Nov 2006 07:00
Charles Stanley Group PLC14 November 2006 14 November 2006 CHARLES STANLEY GROUP PLC RESULTS FOR THE SIX MONTHS ENDED 30 SEPTEMBER 2006 Charles Stanley, a major independently owned stockbroker, announces its interimresults for the six months ended 30 September 2006. Highlights: • Revenue up by 14% to £47.6 million (2006: £41.7 million) • Profit before tax up by 34% to £7.2 million (2006: £5.4 million) • Earnings per share up 34% to 11.75p (2006: 8.78p) • Interim dividend up by 32% to 1.85p (2006: 1.40p) • Funds under discretionary/advisory management £5.1 billion (March 2006: £4.9 billion) • Total funds under management and administration £9.7 billion (March 2006: £9.7 billion) Sir David Howard, Chairman, commented: "I am pleased to report another excellentset of results for the Group. Economic and market conditions have remainedbenign in recent months, although concerns over inflation have led to the recentand potential further hardening of interest rates. However, even if theeconomic background continues to be stable there are other fundamental issueswhich should concern private investors. The London market has been steadily "de-securitising", with more equity being withdrawn than issued. Should theLondon Stock Exchange fall into the hands of an American company, we cannot besure that decisions taken in New York would always put the UK and its investorsfirst. We face other challenges, too, not least the comprehensive re-structuring offinancial services regulation which is heading this way from Brussels. Howeverwe welcome the recent announcement from the Treasury in relation to thesimplification and extension of the PEP and ISA regime. Charles Stanley has agood track record of managing change, and provided that economic conditionsremain stable I am optimistic about continued good trading in the secondhalf-year." For further information please contact: Charles Stanley Group PLC Bridgewell 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 report another excellent set of results for the Group. Ourincome for the six months ended 30 September 2006 has increased by 14% from£41.7 million to £47.6 million, and profit before tax for the period has risenby 34% from £5.4 million to £7.2 million. Earnings per share have increased by34% from 8.78p to 11.75p. Overall we achieved a 10% increase in our stock exchange commission incomecompared with the equivalent period of the previous year. Our fee income was 19%higher, and fees now represent 40% of our total income. With continuing focuson our costs we have now achieved our target of a gross margin (pre-tax profitas a ratio of revenue) of 15%. During the latest six months the two principal APCIMS indices fell by 1%, butthe value of clients' funds which we manage or administer held steady at £9.7billion. Within this figure the funds under discretionary management increasedfrom £2.2 billion to £2.3 billion, and the funds under advisory managementincreased from £2.7 billion to £2.8 billion. In the light of these results we propose an increase of 32% in the interimdividend from 1.40p to 1.85p net per share, which will be paid on 13 December2006 to shareholders registered on 24 November 2006. Review of Operations We have achieved these results during the latest six month period against abackground of dull trading conditions. Share prices, in general, barely moved.Retail trading volumes logged by the London Stock Exchange were about 2% lowerthan in the equivalent period last year. Yet all areas of the business performed strongly. As in previous periods ourown trading levels tracked the general trend, with Charles Stanley continuing totransact about one retail stock exchange transaction in every 16 nationally. Inrecent years we have gradually been adjusting the mix of our business to achievea higher proportion of fees. During the latest period, for example, theoverall fee revenue from our private client business rose by 18% to £15.8million (2006: £13.4 million), out of the total income from our private clientbusiness of £38.8 million (up by 12% from £34.6 million). We are committed tofurther increase this proportion of fee income in relation to our commissionincome in the future. Our recently established Charles Stanley Securities division, comprising ofCorporate Finance and Institutional Research and Sales, has also performedstrongly, increasing its institutional commission income compared with theequivalent period last year by 15% from £3.9 million to £4.5 million, whilecorporate finance fee income in the six months was some 25% higher, rising from£2.4 million to £3.0 million. The division advised on 14 transactions whichincluded 3 Initial Public Offers. We now act for 57 corporate clients, up from54 at the same stage last year. Total fee income for the Group rose by 19% from £15.8 million to £18.9 million.Within this figure our Financial Planning Division increased its turnover by 39%from £1.8 million to £2.5 million. The effect of the higher overall growth infees has been to increase the proportion of fee income, as a percentage of ourtotal income, from approximately 38% (for each of the full years 2004-05 and2005-06) to 40%. This is in line with our stated strategy. Another strategic target of the Group is to achieve a consistent rise in ourgross margin. This will fluctuate in turbulent market conditions, but where thebackground to our business is stable over a period of time we seek to achieve asteady long-term improvement. In my annual statement to shareholders in Junethis year, and indeed in June 2005, I described our target as 15%, and we havenow achieved this in the latest period. By way of comparison, in our past threefull financial years this margin has been, successively, 12%, 13% and last year(to 31 March 2006) 14%. During the period we have continued to invest in developing our infrastructureand our range of services. This investment has been fairly even across theGroup, for example adding depth and breadth to our financial planningactivities, our research coverage and our institutional offering under CharlesStanley Securities. We won accolades during the period for the quality andaccuracy of our research and for our execution-only services. Outlook Economic and market conditions have remained benign in recent months, althoughconcerns over inflation have led to the recent and potential further hardeningof interest rates. However, even if the economic background continues to bestable there are other fundamental issues which should concern privateinvestors. The London market has been steadily "de-securitising", with moreequity being withdrawn than issued. Should the London Stock Exchange fall intothe hands of an American company we cannot be sure that decisions taken in NewYork would always put the UK and its investors first. We face other challenges, too, not least the comprehensive re-structuring offinancial services regulation which is heading this way from Brussels. However,we welcome the recent announcement from the Treasury in relation to thesimplification and extension of the PEP and ISA regime. Charles Stanley has agood track record of managing change, and provided that economic conditionsremain stable I am optimistic about continued good trading in the secondhalf-year. Sir David Howard Bt. Chairman 14 November 2006 30 Sep 2006 30 Sep 2005 31 Mar 2006 £ billion £ billion £ billionDiscretionary funds under managementIn Group's nominee or sponsored member 2.3 1.8 2.2 Advisory portfolio funds under managementIn Group's nominee or sponsored member 2.2 1.8 2.1Not held in Group's nominee 0.6 0.5 0.6 2.8 2.3 2.7 Total managed funds 5.1 4.1 4.9 Advisory dealing fundsIn Group's nominee or sponsored member 2.3 2.0 2.4Execution only fundsIn Group's nominee or sponsored member 2.3 2.6 2.4 Total administered funds 4.6 4.6 4.8 Total funds under management and administration 9.7 8.7 9.7 Financial Calendar 14 November 2006 Results announced 22 November 2006 Ex-dividend date for interim dividend 24 November 2006 Record date for interim dividend 13 December 2006 Interim dividend paid June 2007 Final results announced Charles Stanley Group PLCConsolidated Income StatementSix months ended 30 September 2006 Unaudited Unaudited Audited Half-year to Half-year to Year to 30.9.06 30.9.05 31.3.06 Notes £'000 £'000 £'000 Continuing operationsRevenue 1 47,612 41,671 92,555 Administrative expenses (41,393) (37,205) (81,194) Operating profit 6,219 4,466 11,361 Interest payable and similar charges 2 (62) (50) (153) Interest receivable 2 1,020 941 1,825 Profit before tax 3 7,177 5,357 13,033Tax on profit on ordinary activities 5 (2,210) (1,658) (4,377) Profit for the period from continuingoperations 4,967 3,699 8,656 Profit attributable to minority interest - - 34Profit attributable to equity shareholders 4,967 3,699 8,622 4,967 3,699 8,656 Earnings per Share Based on profit for the periodBasic 6 11.75p 8.78p 20.45p Diluted 6 11.30p 8.39p 19.62p Charles Stanley Group PLCStatement of Recognised Income and ExpenseSix months ended 30 September 2006 Unaudited Unaudited Audited Half-year to Half-year to Year to 30.9.06 30.9.05 31.3.06 Profit for the period 4,967 3,699 8,656 Revaluation (loss)/gain on financial assets (818) 523 2,483Deferred tax on revaluation of financial assets 407 (157) (443)Retirement benefit scheme actuarial loss - - (2,284)Deferred tax on retirement benefit scheme actuarial loss - - 729 Net (losses)/gains not recognised in the income statement (411) 366 485 Total recognised income for the period 4,556 4,065 9,141 Attributable to minority interest - - 34Attributable to equity shareholders 4,556 4,065 9,107 4,556 4,065 9,141 Charles Stanley Group PLCConsolidated Balance Sheet30 September 2006 Unaudited Unaudited Audited 30.9.06 30.9.05 31.3.06 Notes £'000 £'000 £'000 AssetsNon-current assetsGoodwill 8 15,603 15,590 15,603Property, plant and equipment 9 5,537 5,650 5,480Financial assets 10 6,000 5,257 7,170 27,140 26,497 28,253 Current assetsTrade and other receivables 11 253,076 359,987 239,890Financial assets 12 98 1,150 -Cash and cash equivalents 13 46,479 47,111 48,108 299,653 408,248 287,998 LiabilitiesCurrent liabilitiesFinancial liabilities 14 (963) (1,013) (1,001)Trade and other payables 15 (262,631) (378,335) (253,190)Current tax liabilities (2,449) (1,775) (3,099) (266,043) (381,123) (257,290) Net current assets 33,610 27,125 30,708 Non-current liabilitiesFinancial liabilities 14 (74) (576) (556)Retirement benefit liability (2,429) (111) (2,429)Deferred tax liabilities (97) (983) (504)Other non-current liabilities 15 (100) (1,079) (100) (2,700) (2,749) (3,589) Net assets 58,050 50,873 55,372 Shareholders' equityOrdinary shares 16 10,580 10,540 10,541 Share premium 17 336 8 21Other reserves 17 2,962 3,063 3,955Retained earnings 17 43,992 37,059 40,675 Total shareholders' equity 17 57,870 50,670 55,192Minority interest in equity 180 203 180 Total equity 58,050 50,873 55,372 Charles Stanley Group PLCConsolidated Cash Flow StatementSix months ended 30 September 2006 Unaudited Unaudited Audited Half-year to Half-year to Year to 30.9.06 30.09.05 31.3.06 Notes £'000 £'000 £'000 Cash flows from operating activitiesCash generated from operations 18 3,263 6,586 10,062Interest received 1,020 941 1,825Interest paid (62) (50) (153)Tax paid (2,860) (2,133) (3,527) Net cash from operating activities 1,361 5,344 8,207 Cash flows from investing activitiesAcquisition of subsidiaries and other businesses - (15) (2,461)Proceeds from sale of property, plant and equipment - 49 28Purchase of property, plant and equipment (1,250) (743) (1,846)Proceeds from sale of financial assets 916 328 2,956Purchase of financial assets (737) (259) (445)Dividends received 302 48 83 Net cash used in investing activities (769) (592) (1,685) Cash flows from financing activitiesNet proceeds from issue of ordinary share capital 354 7 21Cash outflow from change in debt and lease financing (320) (132) (329)Dividends paid to shareholders (2,255) (1,750) (2,340) Net cash used in financing activities (2,221) (1,875) (2,648) Net (decrease)/increase in cash and cash equivalents (1,629) 2,877 3,874 Cash and cash equivalents at start of period 48,108 44,234 44,234 Cash and cash equivalents at end of period 46,479 47,111 48,108 Charles Stanley Group PLCNotes to the Financial Statements General information The interim financial information for the six months ended 30 September 2006 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 2006. These unaudited interim financial statementsshould therefore be read in conjunction with the 2006 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 onpage 15. The comparative figures for the year ended 31 March 2006 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. 1 Revenue Charles Private Stanley Clients Securities Other Total 6 months ended 30 September 2006 £'000 £'000 £'000 £'000 Commission 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 47,612 6 months ended 30 September 2005Commission 21,121 3,863 777 25,761 Fees Investment management 6,239 - - 6,239 Administration 7,197 - - 7,197 Corporate finance - 2,399 - 2,399 13,436 2,399 - 15,835 Other income - - 75 75 Total for 6 months ended 30 September 2005 34,557 6,262 852 41,671 12 months ended 31 March 2006Commission 47,208 8,461 1,579 57,248 Fees Investment management 13,021 - - 13,021 Administration 14,923 - - 14,923 Corporate finance - 6,911 - 6,911 27,944 6,911 - 34,855 Other income - - 452 452 Total for 12 months ended 31 March 2006 75,152 15,372 2,031 92,555 2 Finance income - net 30 Sep 2006 30 Sep 2005 31 Mar 2006 £'000 £'000 £'000Interest expense:Interest payable on bank borrowings (23) (8) (32)Interest payable on other loans (33) (32) (102)Interest payable on finance leases (6) (10) (19) Interest and similar charges payable (62) (50) (153) Interest income 1,020 941 1,825 Finance income - net 958 891 1,672 3 Profit before tax The following items have been included in arriving at profit before tax: Depreciation of property, plant and equipment:- owned assets 1,173 1,105 2,193- assets held under finance leases 20 17 212Profit on disposal of property, plant and equipment - - (61)Profit on disposal of financial assets (125) (56) (408)Other operating lease rentals payable 523 609 1,174One-off revenue costs relating to new investment teams 390 - 2,201LSE special dividend received (300) - - 4 Staff costs Staff costs for the Group during the period:Wages and salaries 13,650 12,403 26,781Social security costs 1,349 1,327 3,315Other pension costs 1,244 1,139 2,364 16,243 14,869 32,460 5 Taxation Analysis of charge in the periodCurrent tax- Continuing operations 2,210 1,663 4,540- Adjustment in respect of prior periods - (122)Deferred tax- Continuing operations - (5) (41) 2,210 1,658 4,377 6 Earnings per share 30 Sep 2006 30 Sep 2005 31 Mar 2006 £'000 £'000 £'000 Earnings attributable to ordinary shareholders 4,967 3,699 8,622 No. No. No. '000 '000 '000 Weighted average number of shares in issue in the period 42,261 42,154 42,158Dilution 1,696 1,914 1,780 43,957 44,068 43,938 Basic earnings per share 11.75p 8.78p 20.45p Diluted earnings per share 11.30p 8.39p 19.62p 7 Dividends paid Final: 2006: 5.35p (2005: 4.15p) per 25p share 2,255 1,750 1,750Interim: (2006: 1.40p) per 25p share - - 590 2,255 1,750 2,340 In addition, the Directors are proposing an interim dividend in respect of thesix months ended 30 September 2006 of 1.85p per share which will absorb anestimated £780,000 of shareholders' funds. It will be paid on 13 December 2006to shareholders who are on the register of members on 24 November 2006. 8 Goodwill Cost1 April 2006 19,606 19,664 19,664Additions - 15 660Disposals and adjustments to deferred consideration - - (718) 30 September 2006 19,606 19,679 19,606 Aggregate amortisation1 April 2006 4,003 4,089 4,089Disposals - - (86) 30 September 2006 4,003 4,089 4,003 Net book amount at 30 September 2006 15,603 15,590 15,603 9 Property, plant and equipment Office Long Short equipment Freehold leasehold leasehold and motor premises premises premises vehicles Total £'000 £'000 £'000 £'000 £'000Cost1 April 2006 185 1,901 3,792 7,902 13,780Additions - 35 249 966 1,250 30 September 2006 185 1,936 4,041 8,868 15,030 Depreciation1 April 2006 24 1,484 1,650 5,142 8,300Charge for the period 2 45 165 981 1,193 30 September 2006 26 1,529 1,815 6,123 9,493 Net book value at 30 September 2006 159 407 2,226 2,745 5,537 10 Financial assets Listed Unlisted investments investments TotalFixed asset investments £'000 £'000 £'0001 April 2006Cost 1,218 305 1,523Revaluation surplus 3,494 2,153 5,647 Book value 4,712 2,458 7,170 Additions 168 271 439Disposals (750) (41) (791)Revaluation in period (820) 2 (818) 30 September 2006 3,310 2,690 6,000 Cost 1,206 545 1,751Revaluation surplus 2,104 2,145 4,249 11 Trade and other receivables 30 Sep 2006 30 Sep 2005 31 Mar 2006 £'000 £'000 £'000CurrentTrade debtors 251,146 358,190 237,530Other debtors 455 495 556Prepayments and accrued income 1,475 1,302 1,804 253,076 359,987 239,890 12 Financial assets 30 Sep 2006 30 Sep 2005 31 Mar 2006 £'000 £'000 £'000 CurrentListed investments 98 1,150 - 13 Cash and cash equivalents Cash at bank and in hand 46,479 47,111 48,108 14 Financial liabilities Current3% redeemable loan 157 157 1574.5% convertible redeemable loan note 680 469 4694.5% redeemable unsecured loan note 81 171 81Obligations under finance leases 45 180 94Short position holdings - - 200Bank overdraft - 36 - 963 1,013 1,001 Non-current4.5% convertible redeemable loan note - 468 468Obligations under finance leases 74 108 88 74 576 556 15 Trade and other payables CurrentTrade payables 968,347 944,021 902,061Less funds held on behalf of clients in segregated bank accounts (712,298) (572,739) (658,166) 256,049 371,282 243,895Other taxes and social security 816 594 2,570Other creditors 1,700 2,503 1,293Accruals and deferred income 4,066 3,956 5,432 262,631 378,335 253,190 Non currentOther creditors 100 1,079 100 16 Ordinary shares 30 Sep 2006 30 Sep 2005 31 Mar 2006 £'000 £'000 £'000Authorised80,000,000 ordinary shares of 25p each 20,000 20,000 20,000 Allotted and fully paid42,320,155 ordinary shares of 25p each 10,580 10,540 10,541 On 30 September 2006 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 11 July 2001 11,051 £2.87Exercisable during the six months commencing 1 September 2006 Grant dated 2 January 2003 1,685,298 £0.96Exercisable during the six months commencing 1 February 2008 During the period 26,738 ordinary shares were issued fully paid for cash at 96peach and 24,689 ordinary shares were issued fully paid for cash at £2.87 each,following the exercise of options by former employees. In April 2006 part of the 4.5% convertible redeemable loan note was redeemed and103,393 ordinary shares were issued fully paid at £2.48 each. 17 Statement of changes in shareholders' equity Share Share Other Retained capital premium reserves earnings Total £'000 £'000 £'000 £'000 £'000 1 April 2006 10,541 21 3,955 40,675 55,192 Net profit - - - 4,967 4,967 Dividends paid - - - (2,255) (2,255) Revaluation - - (818) - (818) Deferred tax - - 407 - 407 Transfer realised revaluation surplus - - (582) 582 - Share options - value of employee services - - - 23 23 Share options - proceeds of shares issued 13 84 - - 97 Conversion of loan note 26 231 - - 257 30 September 2006 10,580 336 2,962 43,992 57,870 18 Reconciliation of net profit to cash generated from operations 30 Sep 2006 30 Sep 2005 31 Mar 2006 £'000 £'000 £'000 Net profit 7,177 5,357 13,033Adjustments for:Depreciation 1,193 1,122 2,405Share option cost 23 12 72Dividend income (302) (48) (83)Interest income (1,020) (941) (1,825)Interest expense 62 50 153Profit on disposal of property, plant and equipment - (56) (61)Profit on disposal of financial assets (125) - (408)Financial assets acquired in lieu of fees - - (620) Changes in working capital:Increase in debtors (13,186) (127,932) (7,710)Increase in creditors 9,441 129,022 5,106 Cash generated from operations 3,263 6,586 10,062 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 2006 which comprises the consolidated incomestatement, 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. 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 2006. Saffery ChampnessChartered AccountantsLondon14 November 2006 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. This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
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