www.rathbones.comrathbone brothers plc announcement of preliminary results to 31 december 2005 8...
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www.rathbones.comRathbone Brothers Plc
Rathbone Brothers Plc
Announcement of Preliminary Results
to 31 December 2005
8 March 2006
www.rathbones.com8 March 2006Page 2
Rathbone Brothers PlcPreliminary Results to December 31, 2005
Mark Powell
Chairman
Andy Pomfret
Chief Executive
Sue Desborough
Finance Director
Andrew Morris
Director
The executive team
www.rathbones.com8 March 2006Page 3
Rathbone Brothers PlcPreliminary Results to December 31, 2005
Rathbone Brothers Plc
“2005 has proved to be a year of considerable growth in UK and overseas stock markets. This has provided the backdrop for an increase in the rates of organic growth within Rathbones and has helped us to make real progress.”Mark Powell, Chairman
www.rathbones.com8 March 2006Page 4
Rathbone Brothers PlcPreliminary Results to December 31, 2005
Highlights• Funds under management as at 2 March 2006 are £10 billion
• Profits before tax, aborted acquisition costs and LSE-related profits increased 28.4% to £34.4 million (2004: £26.8million)
• Profits before tax increased 23.9% to £35.3 million (2004: £28.5 million)
• Unit trust profits increased 182.4% to £3.8 million (2004: £1.3 million)
• Basic earnings per share rose by 22.7% to 60.13p (2004: 48.99p)
• Recommended final dividend is 18.5p, making a total of 30.0p (2004: 27.5p) for the year – an overall increase of 9.1%
• New non-executive appointments and Paul Egerton-Vernon steps down from the Plc Board
• Court hearing in relation to the approval of the acquisition of Dexia UK private banking business
www.rathbones.com8 March 2006Page 5
Rathbone Brothers PlcPreliminary Results to December 31, 2005
Results highlights
2005 income statement
(£m)
LSE-related profits
(£m)
Rensburg-related
costs (£m)
2005 Adjusted
(£m)
2004* Adjusted
(£m) % increase
Operating income 113.2 (2.3) 110.9 93.8 18.2
Operating expenses 77.9 (1.4) 76.5 67.0 14.2
Profit before tax 35.3 34.4 26.8 28.4
Earnings per share (p) 60.13 3.36 (3.99) 59.50 45.44 30.9
Dividend (p) 30.0 27.5 9.1
1*Restated for IFRS
www.rathbones.com8 March 2006Page 6
Rathbone Brothers PlcPreliminary Results to December 31, 2005
Operating income (adjusted)
2005 (£m) 2004* (£m) % increase
Investment management income 75.0 63.3 18.5
Unit trust income 10.5 6.8 54.4
Trust income 21.5 20.5 4.9
Other income 3.9 3.2 21.9
Operating income 110.9 93.8 18.2
*Restated for IFRS
www.rathbones.com8 March 2006Page 7
Rathbone Brothers PlcPreliminary Results to December 31, 2005
Operating expenses (adjusted)
2005 (£m) 2004* (£m) % increase
Fixed staff costs 36.9 35.4 4.2
Variable (include profit-related) staff costs 13.3 9.3 43.0
Total staff costs 50.2 44.7 12.3
Other operating expenses 26.3 22.3 17.9
Operating expenses 76.5 67.0 14.2
Adjusted cost/income ratio 69% 71%
*Restated for IFRS
www.rathbones.com8 March 2006Page 8
Rathbone Brothers PlcPreliminary Results to December 31, 2005
Profits by segment
2005 (£m) 2004* (£m) % change
Investment management 27.4 22.2 +23.4
Unit trusts 3.8 1.3 +182.4
Trust 3.2 3.3 -2.7
34.4 26.8 28.1
*Restated for IFRS
www.rathbones.com8 March 2006Page 9
Rathbone Brothers PlcPreliminary Results to December 31, 2005
Trust
• Jersey business profits increased by 5.2%
• Three Jersey sites will combine into a single, purpose-built site on the Esplanade in St. Helier
• Geneva returned to operating profitability during 2005
• Our operations in the UK continue to perform in line with expectations
• Trust division helps to secure and retain investment management mandates and works closely with some key investment management clients
Operating profit (£m) H1 H2 Total
2005 1.5 1.7 3.2
2004 1.9 1.4 3.3
www.rathbones.com8 March 2006Page 10
Rathbone Brothers PlcPreliminary Results to December 31, 2005
Unit trusts• Continued growth in funds under management since the year end to
over £1.3 billion as at 2 March 2006
• Rathbone Income Fund top quartile over one, two, three and five year periods
• Recent awards from Citywire, What Investment and Standard & Poor’s
• Growing level of support from over 2,000 IFAs
• New sources of business from life companies, further fund supermarket links and fund of fund managers
• Internal sales now account for only 5% of total gross sales
www.rathbones.com8 March 2006Page 11
Rathbone Brothers PlcPreliminary Results to December 31, 2005
Unit trustsOperating Income
2005 (£m) 2004* (£m)
Initial charges net of discounts 1.1 0.9
Annual management charges 13.7 8.8
Net dealing profits 1.4 0.9
Interest & other income 0.5 0.1
16.7 10.7
Commission payable (0.6) (0.5)
Rebates and trail commission (5.6) (3.4)
Unit trust operating income 10.5 6.8
*Restated for IFRS
www.rathbones.com8 March 2006Page 12
Rathbone Brothers PlcPreliminary Results to December 31, 2005
Unit trustsGrowth in funds under management
2005 £bn 2004 £bn
Opening funds under management 0.8 0.5
Market movement (FTSE 100) 0.1 -
Inflow of new money 0.4 0.3
Outflow of money (0.1) (0.1)
Effect of performance relative to market - 0.1
Closing funds under management 1.2 0.8
Net new money 0.3 0.2
www.rathbones.com8 March 2006Page 13
Rathbone Brothers PlcPreliminary Results to December 31, 2005
Investment managementOperating income
2005 (£m) 2004* (£m) % increase
Fees 39.6 31.0 27.7
Commission 26.4 24.8 6.5
Interest 9.0 7.5 20.0
75.0 63.3 18.5
Average FTSE/APCIMS Balanced Index on charging dates
2597 2313 12.3
Basis point return 99 97
*Restated for IFRS
www.rathbones.com8 March 2006Page 14
Rathbone Brothers PlcPreliminary Results to December 31, 2005
Investment managementGrowth in segregated funds under management
2005 £bn 2004 £bn
Opening funds under management 6.9 6.3
Market movement (FTSE/APCIMS Balanced) 1.0 0.4
Inflow of new money – organic 0.9 0.5
Outflow of money (0.5) (0.2)
Effect of performance relative to market - (0.1)
Closing funds under management 8.3 6.9
Net new money 0.4 0.3
Average funds under management 7.6 6.5
www.rathbones.com8 March 2006Page 15
Rathbone Brothers PlcPreliminary Results to December 31, 2005
Investment management • New investment managers joining
• The value of segregated portfolios under management rose by 20.6% to £8.3 billion (31 December 2005)
• £700 million of charity funds
• £300 million of SIPP funds
• The Rathbone SIPP
• SEC registration
• Fees and commission unbundling
• Further development of the Rathbones Investment Process
www.rathbones.com8 March 2006Page 16
Rathbone Brothers PlcPreliminary Results to December 31, 2005
Investment management: Dexia• Dexia’s UK private banking operations
• What we are buying:
• Investment management
• Banking book
• Timetable
• Court approval
• Date of transfer
• Accommodation
• Financial impact
www.rathbones.com8 March 2006Page 17
Rathbone Brothers PlcPreliminary Results to December 31, 2005
55.9%
21.3%
8.7%
5.4%8.8%
Private client funds (exc SIPPs)
Trusts and settlements
Charities
Pensions, including SIPPs
Other funds under management
Investment management: client base (1)Funds under management by type of account
Source: Internal data.
www.rathbones.com8 March 2006Page 18
Rathbone Brothers PlcPreliminary Results to December 31, 2005
Funds under management by type of account
88.0%
12.0%Discretionary
Non-discretionary
Investment management: client base (2)
Source: Internal data.
www.rathbones.com8 March 2006Page 19
Rathbone Brothers PlcPreliminary Results to December 31, 2005
Investment management: client base (3)Profile of client numbers by location Profile of client FUM by location
39.9%
20.6%
11.4%
12.0%
3.1%5.0%
2.8%
5.2%
Internal data. Private clients only.
19.0%
12.6%
8.7%
3.0%5.0%
2.6%
44.3%
4.8%South EastSouth WestCentralNorth WestNorth EastScotlandWales/NIRest of World
www.rathbones.com8 March 2006Page 20
Rathbone Brothers PlcPreliminary Results to December 31, 2005
Investment management: client base (4)Profile of client numbers by age Profile of client FUM by
age
43.2%
22.2%
13.3%
10.8%
6.3%4.2%
Internal data. Private clients only.
51.9%
23.0%
12.6%
7.8%3.6%
1.1%65+55 to 6445 to 5435 to 4425 to 34Under 25
www.rathbones.com8 March 2006Page 21
Rathbone Brothers PlcPreliminary Results to December 31, 2005
Investment management: client base (5)Profile of client numbers by gender
36.4%
52.1%
11.5% Male
Female
Joint
Internal data. Private clients only.
Breakdown by funds under management almost the same
www.rathbones.com8 March 2006Page 22
Rathbone Brothers PlcPreliminary Results to December 31, 2005
Investment management: client baseChange in value of clients: December 2001 – December 2005
% change
FTSE All Share +12.8%
FTSE APCIMS Balanced +11.0%
Value of total funds under management (ex-RUTM) +34.3%
Number of clients banded by value
Total number of clients +4.3%
<£100,000 -18.9%
£100,000 - £249,999 +16.2%
£250,000 - £499,999 +35.9%
£500,000 - £999,999 +45.2%
£1million + +66.5%
www.rathbones.com8 March 2006Page 23
Rathbone Brothers PlcPreliminary Results to December 31, 2005
Investment management: client base• Private client focus
• Bias towards discretionary
• Well-diversified client base
• Growth potential
www.rathbones.com8 March 2006Page 24
Rathbone Brothers PlcPreliminary Results to December 31, 2005
Issues for 2006• Market levels and momentum
• Organic growth
• Dexia acquisition
• Pension deficit
• Pensions – A-day
• Further consolidation in sector
• LSE shares
www.rathbones.com8 March 2006Page 25
Rathbone Brothers PlcPreliminary Results to December 31, 2005
Conclusion and current trading
“These are record results for Rathbones. We are busy and facing the future in all three of our activities with enthusiasm and confidence.”Mark Powell, Chairman
www.rathbones.com8 March 2006Page 26
Rathbone Brothers PlcPreliminary Results to December 31, 2005
Rathbone Brothers Plc: strategy• To be the leading, independent provider of discretionary investment
management services to the private client in the UK and to provide trust services internationally
• Primary focus will remain on private clients
• Encourage and reward organic growth
• Further acquisitions of businesses and people if demonstrably earnings enhancing in the medium-term, or add to service offered to clients
• Investment management and unit trusts to account for over 80% of activity
• To grow our unit trust business
• Continuing development of the investment process
www.rathbones.com8 March 2006Page 27
Rathbone Brothers PlcPreliminary Results to December 31, 2005
Appendices
www.rathbones.com8 March 2006Page 28
Rathbone Brothers PlcPreliminary Results to December 31, 2005
Analysis of investment management operating income 12 months to 31 December 2005
52.8%35.2%
12.0%Fees
Commission
Net interest and otherincome
www.rathbones.com8 March 2006Page 29
Rathbone Brothers PlcPreliminary Results to December 31, 2005
48.3%
17.4%
3.7%
11.8%
3.0%
7.8%4.6%
3.4%Staff - payroll (excl variable)
Staff - variable (incl profit-related)
Staff other (non-payroll costs)
Premises
Depreciation
Professional
Settlements
IT
Analysis of operating expenses (excl Rensburg-related)
12 months to 31 December 2005
www.rathbones.com8 March 2006Page 30
Rathbone Brothers PlcPreliminary Results to December 31, 2005
Operating profit (£m)
14
.2
11
.2
11
.4
9.4
13
.3 16
.1
12
.3
9.4
7.0
10
.4
15
.2
19
.2
26
.5
20
.6
18
.4 19
.7
28
.5
35
.3
0
5
10
15
20
25
30
35
40
2000 2001 2002 2003 2004 2005
£ m
illio
n 1st Half
2nd Half
Full Year
2000 - 2005 After IFRS restatement
www.rathbones.com8 March 2006Page 31
Rathbone Brothers PlcPreliminary Results to December 31, 2005
Market movements and growth Group funds under management
0
1,000
2,000
3,000
4,000
5,000
6,000
7,000
8,000
9,000
10,000
2000 2001 2002 2003 2004 2005
£ m
illio
ns
Funds under management
FTSE 100
FTSE APCIMS BalancedFTSE 100 and FTSE
APCIMS Balanced
rebased at 5574 as at
31 December 2000
www.rathbones.com8 March 2006Page 32
Rathbone Brothers PlcPreliminary Results to December 31, 2005
Consolidated balance sheetas at 31 December 2005
Assets31/12/05
£’000
31/12/04*
£’000Liabilities
31/12/05
£’000
31/12/04*
£’000
Cash and balances at central banks 511 15,840 Deposits by banks 1,853 3,243
Settlement balances 14,017 11,199 Settlements balances 16,133 15,238
Loans and advances to banks 144,975 57,881 Derivative financial instruments 7 19
Loans and advances to customers 37,520 41,226 Due to customers 493,612 425,078
Investment securities – available-for-sale 5,157 7,219 Debt securities in issue 141 286
Investment securities – held-to-maturity 396,000 381,119 Accruals, deferred income, provisions 27,526 23,003
Intangible assets 60,101 59,860 Current tax liabilities 7,869 6,067
Property, plant and equipment 4,295 4,480 Retirement benefit obligations 18,710 14,983
Deferred tax asset 8,599 4,379 Called up share capital 2,063 2,043
Prepayments, accrued income, other assets 25,093 22,154 Share premium/other reserves 70,500 69,223
Retained earnings 57,854 46,174
Equity shareholders funds 130,417 117,440
Total assets 696,268 605,357 Total liabilities 696,268 605,357
*Restated for IFRS
www.rathbones.com8 March 2006Page 33
Rathbone Brothers PlcPreliminary Results to December 31, 2005
Rathbone Brothers Plc
159 New Bond Street
London
W1S 2UD
Telephone +44 (0)20 7399 0000
Facsimile +44 (0)20 7399 0011
www.rathbones.com