Replacement: Final Results

The following amendment has been made to the 'Results for the year ended 31 March 2016' announcement released on 16 June 2016 at 7:00 under RNS No 3371B.

Note 5 of the Notes to the financial statements for the year ended 31 March 2016 has been amended to read:

Note 5: Earnings per share

The calculation of earnings per share has been based on the loss for the year attributable to equity shareholders.

All other details remain unchanged.

The full amended text is shown below.

16 June 2016

Charles Stanley Group PLC

Results for the year ended 31 March 2016

Charles Stanley Group PLC (the "Group" or "Charles Stanley") today announces its preliminary results for the year ended 31 March 2016 in accordance with FCA Listing Rule 9.7A. Charles Stanley has a distinctive client focused approach offering a full and personal service across a range of investment management services. The Group's vision is to become the UK's leading wealth manager by 2020.

Highlights of financial year 2016:

· Strategic review completed and Core Business reorganised into four main operating divisions:

o Investment Management Services

o Asset Management

o Financial Planning

o Charles Stanley Direct

· Detailed strategic implementation plans developed for each division

· Non-core activities; Charles Stanley Securities and Charles Stanley Financial Solutions Limited disposed of

· Reported loss after tax of £0.3 million (2015: £6.1 million)

· Reported revenue of £141.6 million (2015: £149.7 million)

· Group cash balance increased to £48.1 million (2015: £28.5 million)

· Capital adequacy ratio significantly strengthened to 151% (2015: 107%)

· Total dividend maintained at 5 pence per share

Paul Abberley, Chief Executive Officer commented:

"Our three-fold priorities for the year were to arrest the decline in profitability, determine and begin to implement the strategic direction for Charles Stanley and build the foundations upon which we can drive sustainable growth. Solid progress was achieved in each. We have reduced our losses by £5.8m, refocused on core activities that will allow us to deliver high levels of customer satisfaction, and made significant progress in terms of making the Group more efficient over the long-term. We look forward to another year of progress as we pursue our aim of becoming the UK's leading wealth manager."

For further information, please contact: 

Notes to editors:

Charles Stanley was established in 1792 and is one of the oldest firms on the London Stock Exchange. Charles Stanley today provides holistic wealth management services to private clients, charities and smaller institutions. These are delivered by over 450 professionals located in 25 offices throughout the UK, both direct to clients and to intermediaries. Our services include investment portfolio management and financial planning, supported by in-house administration and custody for investment portfolios, SIPPs and ISAs to enhance the quality of service provided. In addition, Charles Stanley Direct provides an award winning direct to customer Execution-only dealing platform for equities and funds. 

Financial highlights:

Business highlights:

Core Business revenue:

Financial calendar:

Ex-dividend date for final dividend 23 June 2016

Final dividend record date 24 June 2016

Annual General Meeting 29 July 2016

1Funds under Management and Administration

Chairman's statement

Overview

During the year ended 31 March 2016, we have driven forward our transformation programme in the face of market headwinds. There is much to do still, and our sights remain resolutely fixed on our ambition to be the leading wealth manager in the UK in terms of the quality of what we do and how we serve our valued clients. Our strategy remains strongly focused on broadening our core investment management offering into a holistic wealth management business incorporating financial planning, asset management and digital platform enterprises.

Our results for the year reflect the lower levels of activity which have been experienced across the market in general over recent months. This, together with the disposal of non-core businesses, which I flagged in my statement last year, has led to a decline in our reported revenue from £149.7 million for the year ended 31 March 2015 to £141.6 million for the 2016 financial year. Our tight control of costs helped mitigate the impact of this, with the adjusted profit before tax from our Core Business holding up well at £4.2 million compared with £4.4 million in financial year 2015 and the reported loss before tax improving from £6.1 million incurred in the previous financial year to £0.3 million this year.

Clients' Funds under Management and Administration were impacted by the market downturn, ending the year at £20.5 billion compared with £21.3 billion the year before. This represents a decline of 3.8% compared with the decline in our principal comparator, the WMA Balanced Index, of 3.5%, and of 8.8% in the FTSE 100 Index. Within these figures the level of managed funds fell by rather less, 2.4%, from £12.3 billion as at 31 March 2015 to £12.0 billion at the end of March 2016.

As I reported in my statement last year, we carried out a fund-raising exercise in April 2015 to strengthen the Group's balance sheet. This was well supported by shareholders. We raised £15.8 million net of transaction expenses. As at 31 March 2016, our cash balances were nearly £20 million higher at £48.1 million compared to the previous year (31 March 2015: £28.5 million).

This has been a year of significant strategic development and implementation, and our Chief Executive Officer, Paul Abberley, addresses this in detail in the Our Strategy section of this announcement.

Activities of the Board

Over the past year, whilst continuing with its general oversight and challenge responsibilities, the Board has been particularly focused on a number of key areas:

· Review of the structure of the Group's key management committees and reporting hierarchy to improve their quality and effectiveness;

· Development of the detailed strategic implementation plans for each of our core operating divisions;

· Changes to the Board membership itself and of other senior appointments;

· The completion of the implementation of the Group's revised client suitability processes; and

· Oversight of the design of revised variable remuneration arrangements which have been consulted on with the firm's investment managers.

The common themes of these activities have been to ensure that the Group is both equipped to deliver on its transformation programme and that not only are clients' interests embedded front and centre throughout our culture, which I firmly believe they are, but also that there is tangible demonstration of this.

Reporting structures

Over a number of years we have developed from having a very flat reporting structure to one where we have quite a large number of sub-committees, both of the Board itself and of the Executive Committee.

The main challenge posed by the range of committees required is how to ensure they operate effectively to enable good and timely decision making. During the year the Board has challenged a number of aspects of the structure, including the terms of reference, membership, reporting hierarchy and management information produced. Much progress has been made. However there is further to go and we anticipate this will continue to be a main area of focus during the 2017 financial year.

Development of strategy

Strategy is naturally an evolving canvas and having laid out the broad tenets of how Charles Stanley was intended to develop a year ago, a key task for the Executive Committee has been to complete the strategy review and then develop the detailed implementation plans to put this into effect. The role of the Board and of the Non-executive Directors in particular during the year has been to challenge these plans to ensure they are robust both from shareholders' and clients' perspectives. We have had many healthy debates and refinement along the way so I am confident that what is emerging and being put into effect will help us achieve our goals.

Team

It is now more than a year since Paul Abberley agreed to succeed me as Chief Executive Officer, and the 2016 year-end results mark his first full year in this role. It has been an extremely busy year for Paul and I should like to pay tribute to him for his energy and his vision. In the midst of a major transformation of our business and in difficult market conditions, he has taken the Group forward strongly.

Paul has been more than ably assisted by our new Chief Financial Officer, Ben Money-Coutts, who was appointed to this role in June 2015. Ben has re-structured our Finance department and plays a leading role in our Executive Committee, chaired by Paul Abberley.

Regrettably, Anthony Scott, the Director co-heading our Investment Management Services division alongside Gary Teper, decided to step down in April 2016 for personal reasons. Anthony was central to developing our new and enhanced proposition to our private clients, and I thank him warmly for his contribution. The Investment Management Services division remains under Gary's capable leadership.

We decided in 2015 that the Company would benefit from having a fourth Non-executive Director, in addition to David Pusinelli, Bridget Guerin and myself. With the help of external consultants we identified Andrew Didham as a particularly well-qualified candidate to take on the chairmanship of the Risk Committee.

Amongst other key changes in personnel during the year I should mention that we have reorganised our Risk and Compliance teams under the oversight of Peter Kelk, our Chief Risk Officer. Peter has already made good progress and I should like to thank him for his considerable input to this area.

The 2016 financial year was a busy and demanding year for all of my fellow Non-executive Directors, who, between them, chair our Audit, Remuneration and Risk Committees and I should like to thank them for their support to the Group.

It has also been another challenging year of change for everyone in the Company - Directors, managers, investment managers and so many others - and this is my opportunity to say thank you to them all on behalf of the shareholders, for coping with all the demands in making Charles Stanley the fine Company that it is.

Suitability processes

I commented in my statement last year on the suitability review programme that required most of the Group's staff involvement. The initial process was completed to timetable at the end of June 2015 after considerable effort by all of our investment management teams, Compliance, IT and Operations departments, as well as with the great forbearance of our clients. Of course it is an ongoing programme to ensure we keep an up-to-date profile of our clients' investment objectives, financial position, attitude to risk and capacity for loss. Accordingly, the Board has continued to pay close attention to the embedding of this approach in our business as usual processes.

Remuneration structures

We have for some time been in consultation with our investment management teams about their variable remuneration arrangements, both because it is a key component in helping to improve the Group's profitability and because it is seen as a key driver of delivering good client outcomes. Ordinarily such a review might be overseen by the Remuneration Committee, but such is the import of these discussions that the full Board has played an active oversight role. We have agreed interim arrangements which subsist for the financial year ending 31 March 2017 and we believe we are close to reaching a long-term agreement. I would like to thank all concerned for the constructive way in which they have entered into the dialogue and know that everyone is looking forward to finalising terms.

Dividend

This time last year we re-based our recommendation for the final dividend for financial year 2015 at 2 pence per share. Together with the interim dividend of 3 pence per share paid in November 2014 this resulted in a total dividend of 5 pence per share for the year. In January 2016 an interim dividend 1.5 pence per share was paid in respect of the 2016 financial year. The Board is now recommending a final dividend of 3.5 pence per share thus maintaining the total dividend for the financial year at 5 pence per share. As indicated last year, it is the Company's intention that, as profitability starts to improve significantly, we will return over a period of time to our previous pattern of steadily increasing dividends.

Outlook

The new management team has now been in place for over a year and we are moving steadily along a transformational path from being a traditional stockbroking business to a full-scale holistic wealth manager. Much has been achieved already and there is much still to be done.

The market backdrop to all this remains problematic. Since this time last year growth in most of the developed economies has ticked up a little, but the commodity-based economies are in a state of turmoil which threatens wider global markets. Now the issues are less the state of the Euro and the Greek economy - though these are not far away - but the ramifications of the referendum on Britain's membership of the EU, and the choice facing the American electorate in November this year. Either has potentially huge implications for the market, and could swing share price levels and trading volume either way.

I believe that Charles Stanley is on track with its programme of change and development. The background conditions were equally worrying last year when I suggested a slightly higher degree of optimism for the year ahead. This has proved to be justified, and I think it is fair to suggest a similar degree of gentle optimism for the financial year ending 31 March 2017.

Sir David Howard

Chairman

16 June 2016

Chief Executive's report

Financial performance

The Group's losses were significantly reduced during the year, with stabilisation in both the reported and the Core Business results. Nevertheless, difficult financial markets in the second half of the financial year did prove challenging. While overall costs were reduced by £15.1 million, these savings were partially offset by an £8.1 million decline in revenues as weaker markets both reduced fee income and led to lower commissions. Across the four operating divisions combined after tax performance marginally improved.

Good progress was made in addressing the financial performance of our smaller divisions, namely Asset Management, Financial Planning and most notably, Charles Stanley Direct.

We are grateful to our shareholders for a successful capital raising which re-established a strong balance sheet in excess of the Board's preferred buffer above the regulatory capital requirement. These funds were earmarked for reserves and have remained untouched.

Total Funds under Management and Administration fell by £0.8 billion during the financial year to £20.5 billion. During the same period the FTSE 100 Index and WMA Balanced Index fell by 8.8% and 3.5% respectively. The business mix continues to move in favour of managed accounts at the expense of advisory business.

Strategy implementation

Our strategic review reaffirmed that we remain an investment-led firm and retain our commitment to providing genuinely personalised wealth management delivered by investment professionals. Our private client offering will remain full service, extending to advisory and execution-only services in addition to the core Discretionary portfolio management. The review also affirmed a strategic commitment to provide holistic wealth management, offering financial planning, asset management and digital services. Finally, as flagged in our Interim Report and Accounts for the period ended 30 September 2015, we have disposed of non-core assets, underlining our 100% focus on the UK wealth management market. Mobilisation represents the first stage in our strategy implementation and this is largely complete. An overhaul of management information, governance and controls is creating a platform from which strategic change can be delivered with greater pace and precision. Two new divisions, Financial Planning and Asset Management, have been created from legacy businesses and capabilities. Together with the Investment Management Services division and Charles Stanley Direct, these four profit centres enable the flexible delivery of the range of services increasingly sought by our clients.

The year ahead

While retaining a primary focus on client service, the year ending 31 March 2017 will be another year of significant and sometimes challenging change as we accelerate the detailed implementation of our strategy in each of our four key operating divisions while re-engineering our operational and support functions.

The impact on near-term revenues from the current challenging market environment, presents trade-offs between recording short term improvements in profitability and investing in the full implementation of the long-term strategy. This might lead to an extension of the timeframes originally envisaged. Achievement of a 15% operating margin is still regarded as attainable but is likely to take 12 to 18 months longer than originally anticipated in the absence of a significant market rally. We will proceed prudently.

In summary, while I believe that much has been achieved, considerable work lies ahead. With skilled execution and sensible stewardship our vision of becoming the UK's leading wealth manager by 2020 is still firmly within our sights.

Paul Abberley

Chief Executive Officer

16 June 2016

Key Performance Indicators

1 Based on total shareholders' return over the three years ending 31 March 2014, 2015 and 2016 compared to peer group listed companies

2Investment managers who provide advisory services regarded as a controlled function by the FCA.

Our Strategy

Achieving our vision to become the UK's leading wealth manager by 2020 will require a transformation of various aspects of the Group without compromising the long-standing focus on client service.

The process will be three pronged:

1. The first step, which has been completed, is the delivery of a strategic review and, from that, the development of strategic implementation plans for all areas of the Group;

2. The second step, now underway, is the implementation of that strategy; and

3. As the strategy becomes embedded, we will then improve the delivery of sustainable long-term growth for our stakeholders.

Strategic review

Our review set three principal strategic objectives:

1. Charles Stanley will focus exclusively on wealth management;

2. We will provide holistic wealth management services delivered through four divisions: Investment Management Services, Asset Management, Financial Planning and Charles Stanley Direct; and

3. Our core Investment Management Services division will continue to provide a full service offering, delivered by empowered investment professionals.

Milestones achieved during the year ended 31 March 2016 have been to lay the foundations for the strategic transformation to come. We have:

· Disposed of non-core activities, namely Charles Stanley Securities and Charles Stanley Financial Solutions Limited;

· Restructured the divisional organisation, the divisional management teams and the reporting lines to streamline process and accelerate the change programme;

· Developed detailed strategic implementation plans for each division of the Group so that we have a clear roadmap and can prioritise resource allocation; and

· Substantially stemmed the trading losses of the Asset Management division and Charles Stanley Direct and put them on a clear path to profitability.

Strategic implementation

Having completed the strategic review, we are now moving into the critical implementation phase. Our focus during financial year 2017 for each division and our central functions is summarised as follows:

Investment Management Services

The highest priority is to agree a revised basis for the remuneration packages of our private client investment managers to ensure they are fully aligned with the best interests alike of clients, shareholders and the investment managers themselves. Detailed conversations throughout the year have brought a long term solution closer and have resulted in an interim arrangement being agreed for the 2017 financial year. We are confident that this will be finalised in summer 2016 with the new arrangements effective from April 2017 as the interim arrangement expires. Simultaneously, we intend to renew our three core drivers:

1. The first is the continuing focus to increase our discretionary book of business;

2. The second is to continue the phased implementation of our revised rate card to improve our return on assets in line with the market pricing; and

3. The third is to invigorate our distribution and marketing channels, including via intermediary networks, to improve our organic rate of growth.

Asset Management

We are in the advanced stages of restructuring the division to drive operating efficiencies and support growth. The division has two key responsibilities. The first is to provide our private client investment managers with first class investment advice. The second is to provide model and pooled portfolio solutions for clients together with segregated portfolio management for selected client groups. The department is also responsible for a crucial change initiative in the form of recrafting Charles Stanley's fund range into a risk-rated multi-asset class solution fit for smaller investment management clients.

Financial Planning

The Financial Planning division's first task is a review of the operating and pricing models. Once complete, a strategic programme will be launched to increase integration with the Investment Management Services division in order to offer these services to current clients. We will also launch a marketing programme in order to attract new clients.

Charles Stanley Direct

In the autumn a new website will be released carrying streamlined onboarding procedures and better search visibility on Google. Thereafter, we can tailor our digital marketing and drive client acquisition. We are also reviewing our pricing policy. Moreover, we are investigating ways of making our revised Open-ended Investment Company range available to retail clients, and we are considering revisions to our rate card in order to target under-served areas of the retail market.

Support functions

We have four priorities for our support functions during the 2017 financial year:

1. The first, working in conjunction with all front office areas, is to begin streamlining and standardising processes to generate operating efficiencies and improved scalability into our cost structure. If successfully implemented it is anticipated this will enable our investment managers to spend more time directly on client matters and less on administration. This will be a multi-year project.

2. The second priority is to strengthen further our governance and management information framework to improve the speed and quality of decision making and execution.

3. Our third priority, facilitated by our Human Resource department, is to mobilise the entire workforce to contribute to the detailed strategy implementation programme. This process has already begun with the formation of seven internal working parties drawn from across the Group focusing on subjects such as improving the client experience, growing assets and streamlining processes and systems.

4. The fourth priority will be the rationalisation of our London office space. London staff are currently split across four sites and we will rationalise this to at most two by the end of the 2017 financial year. We have entered into a new office lease at 55 Bishopsgate, London which will allow us to move all our front office and front office support functions into one building, whilst at the same time enabling us to vacate two of our other properties. One of these offices is on a long leasehold and we are expecting that the proceeds from the sale of this lease will substantially cover the costs of the move.

Summary

Combined, the change programme for financial year 2017, aims to provide an unparalleled service for clients. It is also designed to improve the level of the Group's profitability so that we have the resources to reinvest in the business as well as provide appropriate returns to our shareholders. As we commented in the 2015 Annual Report and Accounts, there is a substantial programme of work ahead of us that will take three to five years to complete. We are making good progress and the benefits will begin to feed through in the 2017 financial year.

Review of the year

After reporting a significant loss for the financial year ended 31 March 2015, the task for the 2016 financial year was to stabilise performance, dispose of non-core activities and begin to lay the foundations for long-term growth. Whilst progress was made in each of these areas, the financial performance of the Group during the year ended 31 March 2016 suffered from the headwind of declining markets.

Funds under Management and Administration

Charles Stanley's revenue is substantively driven by the level of its FuMA. These decreased 3.8% during the year from £21.3 billion at 31 March 2015 to £20.5 billion at 31 March 2016. This decrease was broadly in line with the decrease in the WMA Balanced Index over the same period, down 3.5%, and compared favourably to the decline of the FTSE 100 Index, down 8.8%.

Discretionary Managed funds increased 1.1% during the year. Other investment categories suffered a reduction, in part owing to transfers between services, notably £0.4 billion out of the Advisory services and into Discretionary (£0.1 billion) and Execution-only (£0.3 billion). The Execution-only funds on the Charles Stanley Direct platform increased by 9.7%.

Net fund inflows of £1.1 billion were fully accounted for by Discretionary (£0.6 billion) and Execution-only (£0.5 billion) services. However, these were offset by negative market performance of £0.7 billion and accounts closed during the year of £1.2 billion, resulting in overall FuMA at the year-end of £20.5 billion.

Overview of financial performance

The Group made pre-tax profits from its Core Business (comprising the Investment Management Services, Asset Management, Financial Planning and Charles Stanley Direct divisions) of £4.2 million (2015: £4.4 million). The decline primarily reflects the fall in FuMA over the period and the consequential 3.3% reduction in revenues of the Core Business.

Losses before tax from the held for sale activities (Charles Stanley Securities and Charles Stanley Financial Solutions Limited) were reduced to £0.5 million (2015: £1.9 million), and one-off adjusting items were significantly lower at £4.0 million (2015: £8.6 million).

The Group's overall reported loss after tax improved from £6.1 million in 2015 to £0.3 million in 2016.

The total of the Core Business, held for sale activities and adjusting items represents the overall results for the Group as reported in the consolidated income statement. The table below shows the results for the year split into these categories.

The financial performance of the Core Business divisions is summarised as follows:

Core Business revenues

Overall, revenues from the Core Business declined 3.3% from £141.0 million in 2015 to £136.3 million in 2016. This was attributable to a 4.3% decline in the revenues of the Investment Management Services division. The Asset Management and Financial Planning divisional revenues showed better progress, increasing by 7.8% and 5.3% respectively. Charles Stanley Direct's revenues have remained stable over the prior year at £4.8 million.

Core Business expenses

Expenses within the Core Business reduced 3.4% to £132.3 million (2015: £136.9 million). Savings were achieved by the Investment Management Services, Asset Management and Charles Stanley Direct divisions, down £3.4 million, £0.7 million and £1.1 million respectively. These savings were partially offset by £0.6 million higher spending within the Financial Planning division.

The bulk of the cost savings within the Core Business were achieved by reduced remuneration costs, down £3.9 million, driven by a 7.2% reduction in headcount to 976 employees (2015: 1,052 employees). Administration costs were reduced by £2.2 million as revenue sharing payments to third parties fell by £1.3 million and an increase in the VAT recovery rate resulted in a £0.7 million improvement year on year.

Core Business pre-tax profit margin

The Core Business pre-tax profit margin was flat at 3.1% (2015: 3.1%). This was because improvements in the operating performance of the Asset Management and the Charles Stanley Direct divisions were more than offset by a deterioration of the much larger Investment Management Services division and, to a lesser extent, the Financial Planning division. The decline in the Investment Management Services division reflects the operational gearing these activities have to market levels since the overhead cost, with the exception of variable remuneration, is semi-fixed. Considerable efforts are being made to address this just as more focused sales and marketing initiatives to grow assets under management and revenues are now underway.

Held for sale

The revenues of the held for sale activities declined 39.1% from £8.7 million in 2015 to £5.3 million in 2016. This was due to the sale of Charles Stanley Securities in July 2015, reducing revenue by £2.4 million year on year, and a reduction in the revenue generated by Charles Stanley Financial Solutions Limited of £0.9 million. Expenses within the held for sale activities fell 43.8% to £5.9 million (2015: £10.5 million) almost entirely due to the sale of Charles Stanley Securities. Overall there was a £1.4 million reduction in losses incurred by the held for sale activities.

Adjusting items

The Board considers the Core Business profit before tax and earnings per share to be a better reflection of business performance than the statutory figures reported in the financial statements. To calculate the Core Business results the Board has excluded the items detailed below.

Amortisation of client relationships: (£1.6 million)

Payments made for the introduction of customer relationships that are deemed to be intangible assets are capitalised and amortised over their useful life, which has been assessed to be 10 years. This amortisation charge has been excluded from the Core Business profit since it is a significant non-cash item.

Transition bonus accrual: (£1.4 million)

In March 2016, the Board agreed revised interim remuneration arrangements with the Group's investment managers in relation to their variable compensation. Part of this agreement involved moving the basis of the bonus calculation from being based on billed revenue to earned revenue. This has resulted in the Group bringing forward the recognition of bonuses on revenues that were accrued but not yet billed as at 31 March 2016.

Dilapidations: (£0.8 million)

On 25 April 2016, the Group entered into a lease agreement for 47,000 sq ft of office space at 55 Bishopsgate, London. The new offices will allow the Group to consolidate a number of its London office locations, including staff currently based at 131 Finsbury Pavement, London, into a central site, and decommission peripheral London offices nearing the end of their existing leases. As a consequence, a review was carried out of the dilapidation payments due under the existing leases in London which might otherwise have been extended, resulting in an accelerated charge of £0.8 million recognised in the year.

Exceptional professional fees: (£0.8 million)

The Group incurred professional fees of £0.5 million on the £16.3 million private placing undertaken in April 2015 and of £0.3 million in relation to the disposal of Charles Stanley Financial Solutions Limited. Since both of these transactions were one-off in nature their costs have been excluded from the Core Business profit.

Impairment of intangibles: (£0.4 million)

Further to the exchange of contracts for the disposal of Charles Stanley Financial Solutions Limited, which completed on 1 April 2016, the Board reviewed and impaired the goodwill associated with this company by £0.4 million.

Profit on disposal of Matterley Undervalued Asset Fund: £0.2 million

In December 2015 the Group received final deferred consideration of £0.2 million in relation to the sale of the Matterley Undervalued Asset Fund to Miton Group which completed in September 2014.

Defined benefit pension scheme credit: £0.8 million

During the year, the Group changed the basis of calculating the future benefits augmentation allowance on its defined benefit pension scheme from that aligned to the Retail Price Index ("RPI") to the Consumer Price Index ("CPI"). This change was done so as to bring the Group's defined benefit pension scheme in accordance with recently introduced government legislation and in line with best industry practice. The switch to using CPI when indexing future pension payments at the balance sheet date resulted in a one-off credit of £1.7 million recognised in the profit and loss account. This credit was partially off-set by a loss on curtailment of £0.9 million arising from closing the Group's defined benefit pension scheme to future service accruals during the year. Accordingly, the net credit to the profit and loss account of £0.8 million arising from these two one-off events is being added back to arrive at a normalised pension service cost run rate.

Taxation

The Group reported a loss before tax of £0.3 million during the year which resulted in a negligible tax credit recognised. A full reconciliation of the tax charge on continuing activities is provided in the taxation note to the financial statements.

Earnings/(loss) per share

The reported loss per share for the year ended 31 March 2016 was 0.61 pence compared with a loss of 13.46 pence for 2015. The Core Business earnings per share increased by 22.6% to 6.90 pence (2015: 5.63 pence).

Dividends

The Board has proposed a final dividend of 3.5 pence per share. Taken together with the interim dividend paid of 1.5 pence per share, this results in a total dividend for the year ended 31 March 2016 of 5.0 pence per share (2015: 5.0 pence per share) or £2.5 million (2015: £2.3 million). The recommended final dividend of 3.5 pence per share is subject to shareholders' approval, which will be sought at the Company's Annual General Meeting on 29 July 2016.

Divisional review

As noted above, the Group's wealth management services are provided through four Core Business operating divisions: Investment Management Services, Asset Management, Financial Planning and Charles Stanley Direct.

Charles Stanley Securities, the Group's corporate broking business, and Charles StanleyFinancial Solutions Limited, which provided employee benefits services, were both held for sale during the year. The sale of Charles Stanley Securities was completed in July 2015 to Panmure Gordon and Charles Stanley Financial Solutions Limited was sold to its management team in April 2016.

The financial performance of the Investment Management Services division is largely driven by the value and mix of FuMA, the revenue margin earned on these assets (expressed as a basis point return) and the operating costs associated with managing them which comprise both variable and fixed costs. Changes in these key performance indicators for the division are shown below.

Funds under Management and Administration

The table above shows the change in the division's FuMA for the financial year. The main reason for the overall decline was negative investment performance, which was broadly in line with the fall in the market of 3.5% as measured by the WMA Balanced Index. Another reason for the decline has been a low level of net organic inflows and the lack of acquisitions (of companies or of new investment managers) during the year, historically an important engine of growth. During the past 24 months we have also closed and consolidated a number of regional offices, leading to some reductions in FuMA.

Measures are being taken to bring greater focus onto attracting new inflows. In particular, the Group has restructured the sales and marketing team with the aim of encouraging new clients. The Intermediary Sales Team has been reformed in order to market the Group's full range of services to independent financial advisers. In addition, the Group's branding and marketing materials have been modernised.

It has been deemed inappropriate to make any acquisitions whilst Management have been focused on stabilising the existing business. Furthermore, because the Group has been in extensive discussions with its investment management teams about the basis of their variable remuneration, it has not been possible to provide certainty to teams who might otherwise be attracted to join Charles Stanley. It is expected that this will be resolved shortly and that the Group's autonomous investment manager model will, over the longer term, continue to attract high quality investment management teams to the Group.

The long-term trend for the Investment Management Services division's FuMA has been the growth of Managed services, especially Discretionary, whilst Advisory Dealing and to a lesser extent Execution-only services, have reduced. In the latter instance some of these accounts have moved to the Group's online service, Charles Stanley Direct.

During financial year ended 31 March 2016, the number of Discretionary Managed accounts continued to increase and funds were able to show some modest growth when compared to the market, however all other areas suffered declines. The principal reduction was for the Advisory Dealing service where, following completion of a suitability review of all client accounts, a number of Advisory Dealing accounts were either closed or had their service reclassified as Execution-only.

Financial performance

The financial performance of the Investment Management Services division is detailed in table below:

Investment Management Services revenues

The revenues of the Investment Management Services division comprise investment management fees, trading commissions and interest earned on client cash balances. Overall revenues decreased 4.3% to £120.0 million in 2016 (2015: £125.4 million). This can mainly be attributed to declines in commission income and interest earned. Although fees also decreased, this was due to the loss of trail, which fell by £1.2m compared to 2015, after we completed the conversion of all clients' fund holdings into clean classes during the year.

The loss of commission income also resulted in a decline in the division's revenue margin, in overall terms from 70bps to 67bps. This is shown in table below.

Investment Management Services revenues - revenue margins

In December 2015 a new rate card was introduced both to rationalise pre-existing tariffs and to ensure that the division charges appropriately for its services. This rate card is being applied to all new clients and is being phased in gradually with existing clients. It is expected that this will lead to a steady but gradual improvement of the revenue margin over the next 36 months.

Investment Management Services costs

Investment Management Services's costs declined by 2.9% during the year from £115.8 million to £112.4 million. The composition of these costs is shown in the table below:

The reduction in costs was mainly due to lower staff costs. An 8.1% reduction in headcount helped to drive a 4.7% reduction in fixed staff costs. Variable staff costs were also lower reflecting the lower levels of income generated and the profitability of the division. Other direct expenses, which mainly comprise establishment, IT and communications, and professional fees (including the FSCS levy) fell by 11.5%. Allocated costs, which comprise central operational services such as dealing and custody operations, IT support and research, as well as central Management costs, grew 5.7%.

EBS Management PLC ("EBS")

EBS, the Group's pension administration business is incorporated within the Investment Management Services division alongside the Group's other administration, custody and ISA services. EBS had another successful year, growing the number of schemes it administers from 10,220 to 12,737 and revenues by 20.8% to £2.9 million (2015: £2.4 million).

Outlook for Investment Management Services division

As has been previously mentioned, the Group has been in extensive discussions with its investment management teams about the method of computation and scale of their variable remuneration arrangements. Resolving this is viewed by the Board as a key component to improving the Group's profitability, along with growing assets under management and streamlining other costs. Although a long term agreement has not yet been finalised, interim arrangements were agreed with the majority of investment managers during March 2016 and took effect from 1 April 2016. These are expected to lead to a reduction in variable compensation as a proportion of revenue in the 2017 financial year. As part of this interim agreement, variable remuneration is now being paid on the basis of revenues and profits when they arise rather than when they are billed. This led to a one-off exceptional charge of £1.4 million being taken in the financial year ended 31 March 2016, representing the acceleration of the timing of recognition of variable remuneration payable.

In addition to resolving the reward arrangements for the long term, a key challenge the Group faces is how to create efficiencies and streamline its front office support, mid and back office processes, both to be able to reduce the cost base and to introduce a greater degree of variability to it. The Group has a number of work streams focused on trying to achieve this and we have a target of reducing non-payroll costs as a proportion of revenues by 7.5% over the next three years.

Asset Management

The Asset Management division was formed during the year to bring together a number of complementary specialist investment management services that had previously operated independently of one another within the Group. These activities include investment research covering asset allocation, active and passive fund selection, equities and bonds; the management of active and passive Open-ended Investment Companies, model portfolios and centralised investment portfolios; and Inheritance Tax services.

The Asset Management division's performance is driven by Funds under Management and the revenue margin earned on these assets.

Year-on-year changes in key performance indicators for the division are shown below:

Funds under Management

FUM of the Asset Management division grew strongly during the year, up 14.3%. There has been significant growth in pension and institutional business, which is lower margin and reduced the overall bps charged.

Financial performance

The financial performance of the Asset Management division is detailed in the table below. The division made strong progress during the year both growing Funds under Management and revenues, whilst controlling costs in the process, reducing its operating loss significantly to £1.0 million (2015: £2.1 million). In addition the division generated an exceptional profit on sale of £0.2 million, being the final deferred consideration received from the disposal of the FP Matterley Undervalued Asset Fund.

Asset Management revenues

Revenues for the division increased 7.8% with particularly strong performances from model portfolios (up 68.7%), the Inheritance Tax Service (up 26.3%) and centralised investment portfolios (up 16.8%). As a result of the sale of the Matterley Undervalued Asset Fund in December 2014, revenues generated from the Matterley range of OEICs declined 16.4%, though excluding this fund they were up 8.5% on a like-for-like basis.

Asset Management costs

Asset Management's overall costs were reduced by 9.7% during the year although its direct costs before allocations, increased marginally by 3.0%. The positive movement in allocated costs is due to a full recharge of investment research services to the rest of the Group as compared to a partial one the prior year.

During the year, the decision was taken to close the FP Matterley Bond Fund which was launched in May 2015 but never gained critical mass. The division's costs for the year include approximately £0.5 million relating to that fund which will not be incurred going forward.

Outlook for the Asset Management division

In order to rationalise and simplify our offering for all Charles Stanley clients, the Asset Management division will gradually phase out the various sub-brands currently used, such as Matterley, Pan Asset and the Collective Portfolio Service. This will take place over the next 24 months and be phased to coincide with a rationalisation of service providers and regulatory notice requirements.

Other initiatives being undertaken by the Asset Management division include reviewing the possibility of introducing a range of multi-asset OEIC funds to provide a cost and tax efficient service to smaller clients; escalating the marketing efforts behind the division's market-leading fiduciary management solution for smaller defined benefit pension schemes; and a continued focus on cost control as the consolidation of the various activities which now form the Asset Management division is still at a relatively early stage.

Financial Planning

The Financial Planning division was also reorganised during the 2016 financial year, established separately from what had been the Financial Services division. Additionally, the management team was reformed and the financial planners within the Group brought under its leadership and direction. The objective of these changes has been to give the division its own focus, introduce common reporting, standardise processes and improve control.

The division provides financial planning and advice and its financial performance is driven by the number of financial planners it has and their revenues per capita. Year-on-year changes in key performance indicators for the division are shown below.

Financial performance

The financial performance of the Financial Planning division is detailed in the table below. The division grew revenues by 5.3%, predominantly through the increase of financial planning and investment management fees respectively by 27.9% and 18.8% which more than offset the cessation of historical trail commission arrangements.

The increase in direct costs arose due to employment costs increasing 9.4% to £4.0 million (2015: £3.6 million) while the main contributors to the increase in allocated costs were Compliance, Marketing and Management charges.

Outlook for Financial Planning division

It is intended to establish Financial Planning as a core element of the Group's wealth management services and to increase materially the instances in which both Financial Planning and Investment Management services are provided to a client. The new management team is already implementing strategies to drive business development within the division, including the recruitment of additional financial planners, whilst improving productivity via enhancements made to operating processes utilised to transact and process business. It is anticipated that the benefit of these strategies will positively impact the results of the division.

Charles Stanley Direct

Charles Stanley Direct provides direct-to-client online share and fund dealing services and, up until February 2016, provided equity trading platform services to the Fidelity fund network. Following termination of these arrangements, many of these Fidelity clients were successfully migrated onto the Charles Stanley Direct platform in consideration for a two year revenue share agreement with Fidelity.

The division also encompasses the business of Garrison Investment Analysis, based in Beverley, Yorkshire, providing Execution-only services for an extensive range of products including ISAs, Unit Trusts, pensions and Venture Capital Trusts.

Charles Stanley Direct's financial performance is driven by the value of fund assets on which a platform fee is charged and by the number of commission-earning bargains undertaken by clients which in turn tend to be correlated to the value of non-fund holdings on the platform. Year-on-year changes in key performance indicators for the division are shown below.

Financial performance

The financial performance of Charles Stanley Direct is detailed in the table below. Although not yet profitable, the division's contribution and overall trading result improved markedly due to a significant reduction of its running costs.

Funds under Administration on the platform grew from £1.6 billion to £1.8 billion but revenues remained flat at £4.8 million. Fees increased 1.6% to £3.3 million (2015: £3.2million) despite the loss of £0.3 million of trail. Dealing commission was flat at £0.9 million (2015: £0.9 million) and interest turn declined, down 20.7% to £0.6 million (2015: £0.8 million).

Although it did not impact the 2016 numbers materially, the Fidelity contract ended in February. Whilst many of these assets have been transferred onto the Charles Stanley Direct platform, we do not expect to earn the same level of revenue from these going forward.

The main story during 2016 was the division's management team addressing the cost base. Direct costs were reduced from £4.8 million to £2.8 million, achieved by reducing employment costs by £0.7 million, marketing £0.4 million, professional fees £0.1 million, and IT, communications and market data by £0.3 million. Cost allocations increased from £2.5 million to £3.4 million leading to overall costs reducing by 15.0% to £6.2 million.

Outlook for Charles Stanley Direct division

Charles Stanley Direct's management's immediate focus is on delivering an enhanced mobile-optimised the website and Application (App) whilst streamlining back-end functionality with the goal of increased efficiencies around the division as well as driving top-line growth through more targeted and diverse digital marketing. Simultaneously, the management team is investigating ways of making the revised Open-ended Investment Company range available to retail clients, and is considering revisions to the current rate card in order to target under-served areas of the retail market.

Financial position

The Group's main operating subsidiary, Charles Stanley & Co. Limited (CSC) is an IFPRU 125K Limited Licence firm regulated by the Financial Conduct Authority (FCA). The consolidated regulatory capital position is shown as though the Group was subject to the same regime.

At 31 March 2016, the Group had regulatory capital resources of £57 million as shown in the table below:

The Group monitors a range of capital and liquidity statistics on a daily, weekly and monthly basis.

The Group's internal risk appetite is to maintain capital levels of at least 125% of the regulatory capital requirement. The Group's capital position was strengthened following the capital-raising in April 2015, and the Group continues to monitor capital levels carefully. The Group maintained a surplus of regulatory capital at all times during the financial year ended 31 March 2016.

As required under FCA rules, the Group maintains an Internal Capital Adequacy Assessment Process (ICAAP), which includes performing a range of stress tests to determine the appropriate level of regulatory capital and liquidity that the Group needs to hold. The last review of the ICAAP conducted and signed off by the Board was in October 2015. Capital forecasts are performed monthly and take into account expected dividends and intangible asset acquisitions and disposals as well as expected trading results.

The Group's Pillar III disclosures are published annually on the Group's website (charles-stanley.co.uk) and provide further details about regulatory capital resources and requirements.

Intangible assets

Intangible assets arise principally from acquired Funds under Management and are categorised as client relationships. Goodwill arises on consolidation. At 31 March 2016, the total carrying value of intangible assets was £26.5 million (2015: £29.2 million). This figure includes £1.1 million (2015: £3.0 million) disclosed as held for sale assets. During the year £0.6 million in customer relationships and £1.9 million of internally generated software were capitalised. No goodwill was acquired during the year nor in 2015.

Client relationship intangibles are amortised over the estimated useful life of the client relationship - 10 years.

Goodwill arising from business combinations is not amortised, but is subject to an annual impairment test.

Following this review impairment charges have been allocated against goodwill, including £0.4 million in respect of Charles Stanley Financial Solutions Limited.

Defined benefit pension scheme

The Group operates a defined benefit pension scheme, which has been closed to new members for several years and which was closed to future accruals on 31 March 2016. Each year actuarial valuations are carried out based on the position at 31 March.

During the year, the scheme deficit fell to £10.1 million at 31 March 2016 (2015: £13.1 million). The valuation takes into account more prudent longevity assumptions and, following formal communication to the members, the basis of benefit augmentation has been changed from being aligned to the Retail Price Index to the Consumer Price Index.

Cash at bank

In April 2015, the Group raised £16.3 million (£15.8 million net of expenses) through a private placing to strengthen the Group's regulatory capital resources. This primarily accounted for the increase in the Group's cash resources to £48.1 million at 31 March 2016 (2015: £28.5 million). During the year, the Group repaid in full the £1.9 million mortgage it had outstanding against its disaster recovery centre in Chelmsford.

Risk targets have been set to help the Group monitor its bank balances as noted in the Risk management and principal risks section.

Risk management and principal risks

The Group's risk management framework is a fundamental component of the Group's operating model and embedded across all processes and controls. The Chief Risk Officer, under the supervision of the Risk Committee, has the principal responsibility for risk awareness, monitoring and management across all areas of the business.

Charles Stanley's approach to risk management is documented in the Risk Appetite Statement (RAS), which is reviewed, challenged and approved by the Board on an annual basis. The RAS is a core component of the Group's risk management framework and was developed taking into consideration the Group's strategic objectives, strategy and business plans. This new level of RAS articulation is driving the implementation of more robust risk monitoring and risk reporting processes, which continue to evolve.

As the Group implements these processes, the Board will periodically review the RAS to ensure that it continues to reflect the risk appetite of the Group.

The RAS sets out the Group's tolerance to various types of risks and includes both quantitative and qualitative measures against which Management and the Board monitor risk on a periodic basis.

Set out below is the Directors' viability statement covering the three years to 31 March 2019, which is then followed by an assessment of the key risks relevant to the Group's long-term performance.

Viability statement

In accordance with the revised UK Corporate Governance Code, the Directors have assessed the prospects of the Group over the three year period from 31 March 2016 to 31 March 2019. The assessment of the Group's viability over a three year time period is in alignment with the Group's strategy, budgeting process and the scenarios set out in the Internal Capital Adequacy Assessment Process (ICAAP).

Over the past 18 months the Group begun to undertake a significant business restructure as described in Our Strategy report above. The Directors consider a three year time horizon appropriate as it is most meaningful in planning the Group's new long term strategy, as a five year horizon stretches forecasting inputs and assumptions beyond a realistic threshold.

The Board is responsible for the oversight and management of the principal risks which the Group is exposed to. It manages these risks by:

· Overseeing the processes and procedures to monitor and mitigate the principal risks;

· Reviewing high level monthly management information from key departments which monitor whether the Group is operating within the parameters set out in the RAS linked to the principal risks; and

· Deciding the appropriate actions if any of the Group's risk appetites are breached.

On a detailed level, extensive management information is analysed by the Enterprise Risk Management Committee (ERM) which meets monthly and oversees operational risk across the Group by:

· Monitoring quantitative and qualitative management information across the Group to highlight areas of risk which require enhanced or additional controls;

· Delegating to the appropriate committees any issues raised as part of the management information which require further action;

· Carrying out annual 'deep dive' risk analysis of key departments which are discussed by the committee and the department heads; and

· Reviewing the reports of the internal and external auditors concerning systems and controls, reviewing the resolution of proposed control enhancements and monitoring any remaining open issues.

The Board's Risk Committee has oversight of the above processes, ensuring the monitoring and escalation procedures are operating effectively and completed in a timely manner.

The Board reviews and challenges the Group's three year strategic plan against the principal risks at least annually, stress testing the base case projections by applying multiple shock events. These stresses have been derived from workshops attended by senior management with the use of external events and challenged to ensure that modelled shock events are sufficiently severe and appropriate.

Based on the results of the latest stress test the Board believes that, by taking the projected management actions to reduce expenditure and dividends, the Group's business model is resilient and it holds sufficient capital to survive a range of severe but plausible stressed situations. As required by our Regulator, events significantly more severe than the stresses used in this assessment are modelled in the Group's wind down scenario and are included in the Group's assessment of its capital adequacy.

As the regulatory environment remains subject to ongoing change and enhancements the Firm holds a significant amount of capital above the FCA regulatory requirement calculated in the Group's ICAAP which is owned by the Board.

Given the extensive controls and procedures in place, the Directors are of the opinion that it is reasonable to conclude that the Group has sufficient resources to meet its obligations and continue business operations over the assessed three year period.

Condensed consolidated income statement

For the year ended 31 March 2016

Condensed consolidated statement of comprehensive income

For the year ended 31 March 2016

Condensed consolidated statement of financial position

For the year ended 31 March 2016

The financial statements were approved and authorised for issue by the board on 16 June 2016.

Condensed consolidated statement of changes in equity

For the year ended 31 March 2015

Condensed consolidated statement of changes in equity

For the year ended 31 March 2016

Condensed consolidated statement of cash flows

For the year ended 31 March 2016

Notes to the financial statements

For the year ended 31 March 2016

1.1 Basis of preparation of financial statements

The Group's consolidated financial statements are prepared on a going concern basis, in accordance with International Financial Reporting Standards as adopted by the European Union and IFRIC Interpretations (IFRS) and the Companies Act 2006 applicable to companies reporting under IFRS.

The financial information set out in these financial statements does not constitute the Group's statutory accounts for the years ended 31 March 2016 and 2015. Statutory accounts for the year ended 31 March 2015 have been delivered to the Registrar of Companies, and those for the year ended 31 March 2016 will be delivered in due course. The auditor has reported on those accounts; their reports were (i) unqualified, (ii) did not include a reference to any matters to which the auditor drew attention by way of emphasis without qualifying their report and (iii) did not contain a statement under section 498 (2) or (3) of the Companies Act 2006.

The Directors assessed the going concern of the Group in light of its current trading performance. The Directors looked at the forecasts covering the 18-month period from 31 March 2016 to 30 September 2017 and applied stress tests for adverse scenarios, which had been determined as part of the ICAAP process. As a result it was determined that the Company has enough liquidity to cover all anticipated payments. The Directors also considered the regulatory capital of the Group and determined that, based on the forecasts, the Group has sufficient regulatory capital for the foreseeable future.

The Directors have, at the time of approving the Financial Statements, a reasonable expectation that the Company and the Group have adequate resources to continue in operational existence for the foreseeable future.

Certain comparative figures have been amended to conform to the current period presentation.

1.2 Basis of measurement

The financial statements have been prepared on the historical cost basis as modified by the revaluation of land and buildings, available for sale financial investments, and financial assets and financial liabilities at fair value through profit and loss.

1.3 Consolidation

Subsidiaries are all entities over which the Group has the power to govern the financial and operating policies, generally accompanying a shareholding of more than one half of the voting rights. The existence and effect of potential voting rights that are currently exercisable or convertible are considered when assessing whether the Group controls another entity. Subsidiaries are fully consolidated from the date on which control is transferred to the Group. They are deconsolidated from the date that control ceases.

The purchase method of accounting is used to account for the acquisition of subsidiaries by the Group. The cost of an acquisition is measured as the fair value of the assets given, equity instruments issued and liabilities incurred or assumed at the date of exchange. Identifiable assets acquired and liabilities and contingent liabilities assumed in a business combination are measured initially at their fair values at the acquisition date, irrespective of the extent of any minority interest. The excess of the cost of acquisition over the fair value of the Group's share of the identifiable net assets acquired is recorded as goodwill. If the cost of acquisition is less than the fair value of the net assets of the subsidiary acquired, the difference is recognised directly in the income statement.

Intercompany transactions, balances and unrealised gains or losses on transactions between Group companies are eliminated. Accounting policies of subsidiaries have been changed where necessary to ensure consistency with the policies adopted by the Group.

1.4 Segment reporting

Operating segments are reported in a manner consistent with the internal reporting provided to the chief operating decision-maker. The chief operating decision-maker, who is responsible for allocating resources and assessing performance of the operating segments, has been identified as the board of the Parent Company that makes strategic decisions.

Segment results that are reported to the chief operating decision-maker include items directly attributable to a segment as well as those that can be allocated on a reasonable basis.

1.5 Foreign currency translation

Foreign currency transactions are translated into GBP using the exchange rates prevailing at the dates of the transactions. Foreign exchange gains and losses resulting from the settlement of such transactions, and from the translation at year-end exchange rates of monetary assets and liabilities denominated in foreign currencies, are recognised in the income statement.

1.6 Property, plant and equipment

Freehold property is shown at fair value, based on periodic valuations by external independent providers, less subsequent depreciation for buildings. Any accumulated depreciation at the date of revaluation is eliminated against the gross carrying amount of the asset, and the net amount is restated to the revalued amount of the asset. All other property, plant and equipment are stated at historical cost less depreciation. Historical cost includes expenditure that is directly attributable to the acquisition of the items. Subsequent costs are included in the asset's carrying amount or recognised as a separate asset, as appropriate, only when it is probable that future economic benefits associated with the item will flow to the Group and the cost of the item can be measured reliably. The carrying amount of the replaced part is derecognised. All other repairs and maintenance are charged to the income statement during the financial period in which they are incurred.

Increases in the carrying amount arising on revaluation of freehold property are credited to other reserves in shareholders' equity. Decreases that offset previous increases of the same asset are charged against other reserves directly in equity; all other decreases are charged to the income statement.

Land is not depreciated. Depreciation on other assets is calculated using the straight line method to allocate their costs or revalued amounts to their residual values over their estimated useful lives, as follows:

Freehold and leasehold properties 3 to 50 years

Vehicles 3 years

Furniture, fittings and equipment 3 to 10 years

The assets' residual values and useful lives are reviewed, and adjusted if appropriate, at the end of each reporting period. An asset's carrying amount is written down immediately to its recoverable amount if the asset's carrying amount is greater than its estimated recoverable amount.

Gains and losses on disposals are determined by comparing the proceeds with the carrying amount and are recognised within 'gain on sale of business' in the income statement.

When revalued assets are sold, the amounts included in other reserves are transferred to retained earnings.

1.7 Intangible assets

1.7.1 Goodwill

Goodwill represents the excess of the cost of acquisition over the fair value of the Group's share of the net identifiable assets of the acquired subsidiary at the date of acquisition. Goodwill on acquisitions of subsidiaries is included in 'intangible assets'. Goodwill is tested annually for impairment and carried at cost less accumulated impairment losses. Impairment losses on goodwill are not reversed. Gains and losses on disposal of an entity include the carrying amount of goodwill relating to the entity sold.

Goodwill is allocated to cash-generating units (CGUs) for the purpose of impairment testing. The allocation is made to those CGUs or groups of CGUs that are expected to benefit from the business combination in which the goodwill arose, identified according to operating segment.

1.7.2 Customer relationships

Customer relationships acquired in a business combination are recognised at fair value at the acquisition date. Those customer relationships acquired outside of a business combination are initially recognised at cost. The customer relations have a finite useful life and are carried at cost less accumulated amortisation. Amortisation is calculated using the straight line method over their useful lives estimated at ten years.

1.7.3 Internally generated software

Computer software which is not an integral part of the related hardware or has been developed internally by the Group is recognised as an intangible asset when the Group is expected to benefit from future use of the software and the costs are reliably measurable. Computer software costs recognised as assets are amortised using the straight line method over their useful lives (three years).

1.8 Impairment of non-financial assets

Intangible assets, such as goodwill, are regarded as having an indefinite useful life when there is no foreseeable limit to the period over which the asset is expected to generate net cash inflows for the Group. These assets are not subject to amortisation and are tested annually for impairment. Assets that are subject to amortisation are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. An impairment loss is recognised for the amount by which the asset's carrying amount exceeds its recoverable amount. The recoverable amount is the higher of an asset's fair value less costs to sell and value in use. For the purposes of assessing impairment, assets are grouped at the lowest level for which there are separately identifiable cash flows.

Fair value less costs to sell is established based on recent public transactions for similar businesses. If the carrying amount relating to any CGU exceeds the fair value less cost to sell, a value in use is calculated using a discounted cash flow method. Non-financial assets other than goodwill that suffered an impairment are reviewed for possible reversal of the impairment at each reporting date.

1.9 Non-current assets held for sale

Non-current assets held for sale are classified as assets held for sale when their carrying amount is to be recovered principally through a sale transaction and a sale is considered highly probable. They are stated at the lower of carrying amount and fair value less costs to sell if their carrying amount is to be recovered principally through a sale transaction rather than through continuing use.

1.10 Financial assets

The Group classifies its financial assets in the following categories: at fair value through profit or loss, loans and receivables, and available for sale. The classification depends on the nature of the instruments and the purpose for which the financial assets were acquired. Management determines the classification of its financial assets at initial recognition.

1.10.1 Classification

1.10.1.1 At fair value through profit or loss

Financial assets at fair value through profit or loss are financial assets held for trading. A financial asset is classified in this category if acquired principally for the purpose of selling in the short-term. Assets in this category are classified as current assets.

1.10.1.2 Loans and receivables

Loans and receivables are non-derivative assets with fixed or determinable payments that are not quoted in an active market. They are included in current assets, except for maturities greater than 12 months after the end of the reporting period which as classified as non-current assets. The Group's loans and receivables comprise trade and other receivables and cash and cash equivalents in the statement of financial position.

1.10.1.3 Available for sale

Available for sale financial assets are non-derivatives that are either designated in this category or not classified in any of the other categories. They are included in non-current assets unless the investment matures or management intends to dispose of it within 12 months of the end of the reporting period.

1.10.2 Recognition and measurement

Regular purchases and sales of financial assets are recognised on the trade-date - the date on which the Company commits to purchase or sell the asset. Investments are initially recognised at fair value plus transaction costs for all financial assets not carried at fair value through profit or loss. Financial assets carried at fair value through profit or loss are initially recognised at fair value, and transaction costs are expensed in the income statement. Financial assets are derecognised when the rights to receive cash flows from the investments have expired or have been transferred and the Company has transferred substantially all risks and rewards of ownership. Available for sale financial assets and financial assets at fair value through profit or loss are subsequently carried at fair value. Loans and receivables are subsequently carried at amortised cost using the effective interest method.

Gains or losses arising from changes in the fair value of the 'financial assets at fair value through profit or loss' are presented in the income statement within 'other (losses)/gains - net' in the period in which they arise. Dividend income from financial assets at fair value through profit or loss is recognised in the income statement as part of other income when the Group's right to receive payments is established.

When securities classified as available for sale are sold or impaired, the accumulated fair value adjustments recognised in equity are included in the income statement as 'gains and losses on available for sale assets'.

Interest on available for sale securities calculated using the effective interest method is recognised in the income statement as part of finance income. Dividends on available for sale equity instruments are recognised in the income statement as part of other income when the Company's right to receive payment is established.

1.11 Impairment of financial assets

The Group assesses at the end of each reporting period whether there is objective evidence that a financial asset or a group of financial assets is impaired.

1.11.1 Assets classified as available for sale

These include listed and unlisted securities. The cumulative loss - measured as the difference between the acquisition cost and the current fair value, less any impairment loss on that asset previously recognised in profit or loss - is removed from equity and recognised in the income statement. Impairment losses recognised in the separate income statement on equity investments are reversed through equity. If, in a subsequent period, the fair value of debt instrument classified as available for sale increases and the increase can be objectively related to an event occurring after the impairment loss was recognised in profit or loss, the impairment loss is reversed through the separate income statement.

1.12 Trade receivables

Trade receivables are amounts due from clients and other counterparties for services performed in the ordinary course of business. If collection is expected in one year or less they are classified as current assets. If not, they are presented in non-current assets.

Trade receivables are recognised initially at fair value and subsequently measured at amortised cost using the effective interest method, less provision for impairment.

1.13 Cash and cash equivalents

Cash and cash equivalents include cash in hand and cash held at call with banks.

1.14 Segregated funds

Segregated funds are held in trust by the Group on behalf of clients in accordance with the Client Asset Rules of the FCA and the corresponding liability to clients is not shown in the statement of financial position.

1.15 Trade payables

Trade payables consist of amounts payable to clients and other counterparties and obligations to pay suppliers for goods or services in the ordinary course of business. Account payables are classified as current liabilities if payment is due within one year or less. If not, they are presented as non-current liabilities.

Trade payables are recognised initially at fair value and subsequently measured at amortised cost using the effective interest method.

1.16 Borrowings

Borrowings are recognised initially at fair value, net of transaction costs incurred. Borrowings are valued subsequently at amortised cost; any difference between the proceeds and the redemption value is recognised in the income statement over the period of the borrowings using the effective interest method.

1.17 Current and deferred income tax

The tax expense for the period comprises current and deferred tax. Tax is recognised in the income statement, except to the extent that it relates to items recognised in other comprehensive income or in equity. In this case the tax is also recognised in other comprehensive income or directly in equity, respectively.

The current income tax charge is calculated on the basis of the tax laws enacted or substantively enacted at the balance sheet date in the UK.

Deferred income tax is recognised, using the liability method, on temporary differences arising between the tax bases of assets and liabilities and their carrying amounts in the consolidated financial statements. However, the deferred income tax is not accounted for if it arises from initial recognition of an asset or liability in a transaction other than a business combination that at the time of the transaction affects neither accounting nor taxable profit or loss. Deferred income tax is determined using tax rates that have been enacted or substantively enacted by the balance sheet date and are expected to apply when the related deferred income tax asset is realised or the deferred income tax liability is settled.

Deferred income tax assets are recognised only to the extent that it is probable that future taxable profit will be available against which the temporary differences can be utilised.

Deferred income tax is provided on temporary differences arising on investments in subsidiaries, except where the timing of the reversal of the temporary difference is controlled by the Group and it is probable that the temporary difference will not reverse in the foreseeable future.

Deferred income tax is not provided on temporary timing differences arising on goodwill as the temporary timing difference will not reverse in the foreseeable future.

1.18 Employee benefits

1.18.1 Pension obligations

The Group operates two pension schemes - a defined benefit and a defined contribution scheme. A defined contribution plan is a pension plan under which the Group pays fixed contributions into a separate entity. The Group has no legal or constructive obligations to pay further contributions if the fund does not hold sufficient assets to pay employees the benefits relating to employee service in the current and prior periods. A defined benefit plan is a pension plan which is not a defined contribution plan. Typically defined benefit plans define an amount of pension benefit that an employee will receive on retirement, usually dependent on one or more factors such as age, years of service and compensation.

The net charge to the income statement mainly comprises the service cost and the net interest on the net defined benefit asset or liability and is presented in operating expenses.

The liability recognised in the statement of financial position in respect of the defined benefit plan is the present value of the defined benefit obligations at the end of the reporting period less the fair value of plan assets. The defined benefit obligation is calculated annually by independent actuaries using the projected unit credit method. The present value of the defined benefit obligation is determined by discounting the estimated future cash outflows using interest rates of AA credit rated corporate bonds that have terms of maturity approximating to the terms of the related pension liability.

Remeasurements of the defined benefit obligation arising from experience adjustments and changes in actuarial assumptions are charged or credited to equity in other comprehensive income in the period in which they arise. Past service costs are recognised immediately in income.

For defined contribution plans, the Group pays contributions to publicly or privately administered pension insurance plans on a mandatory contractual or voluntary basis. The Group has no further payment obligations once the contributions have been paid. The contributions are recognised as employee benefit expense when they are due. Prepaid contributions are recognised as an asset to the extent that a cash refund or a reduction in the future payments is available.

1.18.2 Short-term employee benefits

Short-term employee benefit obligations are measured on an undiscounted basis and are expensed as the related service is provided. Payments made in advance of services being provided are treated as prepayments.

1.19 Share-based payments

The Group operates various equity-settled share based payments schemes. There is a Save As You Earn scheme and a Long Term Incentive Plan under which the entity receives services from employees as consideration for equity instruments (share options or share awards) for the Group. The fair value of the employee services received in exchange for the grant of the share options or share awards is recognised as an expense. The total amount to be expensed is determined by reference to the fair value of the share options or share awards granted on the grant date:

· Including market performance conditions

· Excluding the impact of any service and non-market performance vesting conditions (for example, profitability, sales growth targets and remaining an employee of the entity over a specified time period)

· Including the impact of any non-vesting conditions (for example, the requirement for employees to save).

Non-market vesting conditions are included in assumptions about the number of share options or share awards that are expected to vest.

The total employee expense is recognised over the vesting period, which is the period over which all of the specified vesting conditions are to be satisfied. At the end of each reporting period, the entity revises its estimates of the number of share options or share awards that are expected to vest based on the non-market vesting conditions. It recognises the impact of the revision to original estimates, if any, in the income statement, with a corresponding adjustment to equity.

When the share options or share awards are exercised, the Group issues new shares. The proceeds received net of any directly attributable transaction costs are credited to share capital (nominal value) and share premium when the share options or share awards are exercised.

1.20 Revenue recognition

Revenue comprises the fair value of the consideration received or receivable for the provision of services in the ordinary course of the Group's activities. Revenue is shown net of VAT, rebates and discounts and after eliminating sales within the Group.

The Group recognises revenue when the amount of revenue can be reliably measured, it is probable that future economic benefits will flow to the entity and when specific criteria have been met for each of the Group's activities. The Group bases its estimates on historical results, taking into consideration the type of customer, the type of transaction and the specifics of each arrangement.

1.20.1 Commission

Commission income and expenses are recognised on a trade date basis.

1.20.2 Fees

Investment management, administration and corporate finance retainer fees are recognised evenly over the period the service is provided. Corporate finance success fees are recognised when earned.

1.20.3 Dividend income

Dividend income is recognised when the right to receive payment is established.

1.20.4 Interest income

Interest income is recognised using the effective interest method.

1.21 Leases

Leases in which a significant portion of the risks and rewards of ownership are retained by the lessor are classified as operating leases. Payments made under operating leases are charged to the income statement on a straight line basis over the period of the lease.

Leases where the Group has substantially all the risks and rewards of ownership are classified as finance leases. Finance leases are capitalised at the lease's commencement date at the lower of fair value of the leased property and the present value of the minimum lease payments.

Each lease payment is allocated between the liability and finance charges so as to achieve a constant rate on the finance balance outstanding. The corresponding rental obligations, net of finance charges, are included in other long-term payables. The property, plant and equipment acquired under finance leases are depreciated over the shorter of the useful life of the asset and the lease term.

1.22 Dividend distribution

Dividend distribution to the Group's shareholders is recognised as a liability in the Group's financial statements in the period in which the dividends are approved by the Group's shareholders.

1.23 Investments in subsidiaries

Investments in subsidiaries are stated at cost, less, where appropriate, provision for impairment.

1.24 Discontinued operations

A discontinued operation is a component of the Group's business, the operations and cash flows of which can be clearly distinguished from the rest of the Group and which:

· represents a separate major line of business or geographic area of operations

· is part of a single coordinated plan to dispose of a separate major line of business or geographic area of operations; or

· is a subsidiary acquired exclusively with a view to resale.

Classification as a discontinued operation occurs at the earlier of disposal or when the operation meets the criteria to be classified as held for sale.

When an operation is classified as a discontinued operation, the comparative statement of profit or loss and OCI is represented as if the opinion had been discontinued from the start of the comparative year.

1.25 Changes in accounting policies

Except for the changes below, the Group has consistently followed the same accounting policies, presentation and methods of computation in these consolidated financial statements as applied in the Group's consolidated financial statements for the year ended 31 March 2016.

A number of new standards and amendments to standards and interpretations are effective for periods beginning on or after 1 April 2016. The following new standards are not applicable to these financial statements but are expected to have an impact when they become effective. The Group plans to apply these standards in the reporting year in which they become effective.

1.25.1 IFRS 9 Financial Instruments

IFRS 9 replaces the existing guidance in IAS 39 Financial Instruments: Recognition and measurement. It includes revised guidance on the classification and measurement of financial instruments. IFRS 9 is only effective for annual periods beginning on or after 1 January 2018. The Group did not apply early adoption.

1.25.2 IFRS 15 Revenue from contracts with customers

IFRS 15 establishes a comprehensive framework for determining whether, how much and when revenue is recognised. It replaces existing revenue recognition guidance, including IAS 18 Revenue, IAS 11 Construction Contracts and IFRIC 13 Customer Loyalty Programmes. IFRS 15 is only effective for periods beginning on or after 1 January 2018. The Group did not apply early adoption.

1.25.3 IFRS 16 Leases

IFRS 16 replaces IAS 17 Leases. It eliminates the classification of leases as either operating leases or finance leases. Any leases with more than 12 months' term are to be recognised as a lease asset on the balance sheet and the related future lease obligations as a liability. IFRS 16 is only effective for annual periods beginning on or after 1 January 2019. The Group did not apply early adoption.

2. Operating segments

The Group currently has four strategic divisions which are its reportable segments. These segments are the basis on which the Group reports its performance to the Board, which is the Group's chief operating decision-maker.