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www.rathbones.comRathbone Brothers Plc
Rathbone Brothers Plc
Announcement of Interim Results
to 30 June 2005
1 September 2005
www.rathbones.com1 September 2005Page 2
Rathbone Brothers PlcInterim Results to June 30, 2005
Mark Powell
Chairman
Andy Pomfret
Chief Executive
Sue Desborough
Finance Director
Paul Chavasse
Chief Operating Officer
The Executive Team
www.rathbones.com1 September 2005Page 3
Rathbone Brothers PlcInterim Results to June 30, 2005
Rathbone Brothers Plc
“A more favourable environment in world stock markets has provided the backdrop for solid progress by Rathbones during the first half of 2005.”Mark Powell, Chairman
www.rathbones.com1 September 2005Page 4
Rathbone Brothers PlcInterim Results to June 30, 2005
Results HighlightsH1 2005 % increase
Operating income £53.9m 14.0
Operating profit (before Rensburg-related costs) £16.1m 21.1
Operating profit (after Rensburg-related costs) £14.7m 10.5
Earnings per share (after Rensburg-related costs) 25.46p 9.4
Dividend 11.5p 9.5
Funds under management# £8.4bn *9.1
FTSE APCIMS Balanced Index # 2524 5.0
FTSE 100 Index # 5113 6.2
Average FTSE APCIMS Balanced Index on charging dates
2481 9.0
Average FTSE 100 Index on charging dates 5028 12.4
1#as at 30 June 2005*increase since 31 Dec 2004
www.rathbones.com1 September 2005Page 5
Rathbone Brothers PlcInterim Results to June 30, 2005
Operating Income
H1 2005 (£m) % increase
Investment management fees 18.8 25.3
Investment management commissions 13.4 -
Bank interest and other income from investment management activity
4.4 15.8
Total investment management income 36.6 13.7
Unit trust income 4.7 51.6
Trust income 10.7 2.9
Bank interest from non-investment management activity 1.9 18.8
Operating income 53.9 14.0
www.rathbones.com1 September 2005Page 6
Rathbone Brothers PlcInterim Results to June 30, 2005
Operating Expenses (excluding Rensburg-related costs)
H1 2005 (£m) % increase
Fixed staff costs 19.2 4.9
Variable (including profit-related) staff costs 5.9 18.0
Total staff costs 25.1 7.7
Other costs 12.7 18.7
Operating expenses 37.8 11.2
www.rathbones.com1 September 2005Page 7
Rathbone Brothers PlcInterim Results to June 30, 2005
Other Financial Issues
• International accounting standards
• 2004 restatement issued 4 August 2005
• Conversion costs around £0.5m
• Interpretations still developing
• Transitional effects
• Pension fund
• Capital Requirements Directive
www.rathbones.com1 September 2005Page 8
Rathbone Brothers PlcInterim Results to June 30, 2005
Investment Management Highlights
• Segregated funds up 7.2% to £7.4bn (APCIMS Balanced up 5.1%)
• Charity funds over £600 million
• Pension funds (predominantly SIPP funds) over £400 million
• New head of pensions
• Continued increase in average size of account
• Collectives – increased use demonstrates investment process
www.rathbones.com1 September 2005Page 9
Rathbone Brothers PlcInterim Results to June 30, 2005
Investment ManagementGrowth in segregated funds under management
Six months to 30/6/05
£bn
Year to
31/12/04
£bn
Opening funds under management 6.9 6.3
Market movement (FTSE APCIMS Balanced) 0.3 0.4
Inflow of new money – organic 0.4 0.5
Outflow of money (0.2) (0.2)
Effect of performance relative to market - (0.1)
Closing funds under management 7.4 6.9
Net new money 0.2 0.3
www.rathbones.com1 September 2005Page 10
Rathbone Brothers PlcInterim Results to June 30, 2005
Operations: Scaleability
“Rathbones’ existing operations and systems have proved
efficient and robust and, the Rathbones Directors believe,
have the capacity to cope with a significant increase in client
numbers and funds under management.”
Press release: 31 March 2005
www.rathbones.com1 September 2005Page 11
Rathbone Brothers PlcInterim Results to June 30, 2005
Operations: Scaleability
Common/scaleable platform
• Investment in core fund management systems - Quasar 6 & Rathbone
Investment Desk (RID)
• Automation of basic processes - order flow, cash payments, corporate
events
• Investment in service enhancements - performance measurement (GIPS),
compliance with client mandate module
• Investment in regulatory compliance and tax reporting – SEC, EUSD
www.rathbones.com1 September 2005Page 12
Rathbone Brothers PlcInterim Results to June 30, 2005
Operations: Flexibility and Client Service• Common operational platform allows flexibility in client service:
− Offshore investment
− US clients, EU requirements
− Differing client requirements - SIPPs, ethical investment, charities,
loans
− Flexible range of asset classes - fixed interest, equities,
alternatives, property vehicles
− Deliver individual service to families, trusts, entrepreneurs and
intermediaries
www.rathbones.com1 September 2005Page 13
Rathbone Brothers PlcInterim Results to June 30, 2005
Operational ScaleabilityChange in value of client cases1: December 2001 – June 2005
% change
FTSE All Share +0.1%
FTSE APCIMS Balanced +0.5%
Value of total funds under management (ex-RUTM) +19.6%
Number of Rathbones cases banded by value
Total number of Rathbones cases +4.7%
<£100,000 -11.3%
£100,000 - £249,999 +15.8%
£250,000 - £499,999 +26.8%
£500,000 - £999,999 +27.5%
£1million + +37.5%
Cases: a case may be several accounts that are
effectively managed as one mandate. Commonly this is husband and wife,
one or two main accounts and two PEP & ISA
accounts.
www.rathbones.com1 September 2005Page 14
Rathbone Brothers PlcInterim Results to June 30, 2005
Trust Division
• Continuing progress on managing legacy issues
• Geneva improving with recent profitable underlying trading
• Continuing solid performance in Jersey
• Profit of £1.5m, being 7.7% above H2 2004 but 24.8% below H1 2004
• Business development opportunities in Jersey and London
www.rathbones.com1 September 2005Page 15
Rathbone Brothers PlcInterim Results to June 30, 2005
Unit Trusts• Continued growth in funds under management to over £1 billion
• Good medium to long-term performance across the range of funds
• Maturing team - appointment of two investment managers to sole managership
• Developing distribution
• Fund supermarkets/life companies - proportion of gross sales increasing: Zurich Intermediary Group, AMEX, Skandia, other institutional contacts
• Ratings and awards continue
• Increased sales in smaller funds
www.rathbones.com1 September 2005Page 16
Rathbone Brothers PlcInterim Results to June 30, 2005
Conclusion and Current Trading
“World stock markets have maintained their comparative strength since 30 June, despite the political and economic uncertainties which exist. Levels of new business enquiries are encouraging and we look forward with confidence.”Mark Powell, Chairman
www.rathbones.com1 September 2005Page 17
Rathbone Brothers PlcInterim Results to June 30, 2005
Appendices
www.rathbones.com1 September 2005Page 18
Rathbone Brothers PlcInterim Results to June 30, 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.com1 September 2005Page 19
Rathbone Brothers PlcInterim Results to June 30, 2005
71%
17%
12%
Investment management
Trust
Unit trusts
Analysis of Gross Operating Income6 months to 30 June 2005
www.rathbones.com1 September 2005Page 20
Rathbone Brothers PlcInterim Results to June 30, 2005
Analysis of Investment Management Operating Income 6 months to 30 June 2005
51%
37%
12%
Fees
Commission
Net interest and other income
www.rathbones.com1 September 2005Page 21
Rathbone Brothers PlcInterim Results to June 30, 2005
49%
16%
4%
6%
3%
8%
4%4%
6% Staff - payroll (excl. profit related)
Staff - profit related
Staff other (non payroll costs)
Premises
Depreciation
Professional
Settlements
IT
Other
Analysis of Expenditure (excluding Rensburg-related costs) 6 months to 30 June 2005
www.rathbones.com1 September 2005Page 22
Rathbone Brothers PlcInterim Results to June 30, 2005
Operating Profit (£m) (before Rensburg-related costs)
14
.2
11
.2
11
.4
9.4
13
.3
16
.1
12
.3
9.4
7.0
10
.4
15
.2
26
.5
20
.6
18
.4 19
.7
28
.50
5
10
15
20
25
30
2000 2001 2002 2003 2004 H1 2005
£ m
illio
n 1st Half
2nd Half
Full Year
2000 - H1 2005 After IFRS restatement
www.rathbones.com1 September 2005Page 23
Rathbone Brothers PlcInterim Results to June 30, 2005
Investment ManagementMarket movements and growth in Group funds under management
1 Year 3 Years 5 Years
FTSE 100 Index +14.5% +9.8% -19.1%
FTSE APCIMS Balanced Index +11.3% +10.8% -12.8%
Funds Under Management +20.0% +42.4% +68.0%
www.rathbones.com1 September 2005Page 24
Rathbone Brothers PlcInterim Results to June 30, 2005
Investment Management (incl. unit trusts)
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
2000 2001 2002 2003 2004 H1 2005
£ m
illio
ns
Funds under management
FTSE 100
FTSE APCIMS Balanced
FTSE 100 and FTSE
APCIMS Balanced
rebased at 5574 as at
31 December 2000
www.rathbones.com1 September 2005Page 25
Rathbone Brothers PlcInterim Results to June 30, 2005
Trust DivisionOperating profit (£m)
H1 H2 Total
2005 1.5
2004 1.9 1.4 3.3
www.rathbones.com1 September 2005Page 26
Rathbone Brothers PlcInterim Results to June 30, 2005
0
200
400
600
800
1000
1200
01/04
/199
9
01/07
/199
9
01/10
/199
9
01/01
/200
0
01/04
/200
0
01/07
/200
0
01/10
/200
0
01/01
/200
1
01/04
/200
1
01/07
/200
1
01/10
/200
1
01/01
/200
2
01/04
/200
2
01/07
/200
2
01/10
/200
2
01/01
/200
3
01/04
/200
3
01/07
/200
3
01/10
/200
3
01/01
/200
4
01/04
/200
4
01/07
/200
4
01/10
/200
4
01/01
/200
5
01/04
/200
5
01/07
/200
5
£ m
illi
on
0
500
1000
1500
2000
2500
3000
3500
FT
SE
All
Sh
are
Funds Under Management
FTSE All Share Index
Unit TrustsGrowth of business
Source: Rathbones. Mid price basis. All other data offer price or mid price as applicable to fund pricing structure.
www.rathbones.com1 September 2005Page 27
Rathbone Brothers PlcInterim Results to June 30, 2005
Unit TrustsInternal and external FUM
114 160 146255 211 218
83 26 75
226
606
765
0
100
200
300
400
500
600
700
800
900
1000
2000 2001 2002 2003 2004 H1 2005
£ m
illio
ns
External FUM
Internal FUM
Source: Rathbones. Mid price basis. All other data offer price or mid price as applicable to fund pricing structure.
www.rathbones.com1 September 2005Page 28
Rathbone Brothers PlcInterim Results to June 30, 2005
Awards2005 – Winner of:-• ‘Specialist Unit Trust Group of the Year 2005’ –Rathbone Unit Trust Management Ltd – What Investment?²
• ‘Most Consistent Unit Trust of the Year 2005’ – Rathbone Special Situations Fund – What Investment? ²
• ‘Best Provider for Ethical Investing’ – Rathbone Investment Management – Euromoney Private Banking Awards 2005¹
• ‘Rathbone Income Fund’ awarded 1st place in 5 year UK Marketed Funds, UK Equity Income sector – Standard & Poor’s Investment Funds Performance Awards 2005²
• ‘Rathbone Smaller Companies Fund’ awarded 1st place in 10 year UK Marketed Funds, Smaller Companies sector – Standard & Poor’s Investment Funds Performance Awards 2005²
2004 - Winner of:-• ‘Winner: UK Income’ awarded to the Rathbone Income Fund by Investment Week Fund Manager of the Year Awards
2004²
• ‘Small Fund Manager of the Year 2004’ awarded to Rathbone Unit Trust Management Ltd in the Financial Adviser Investment Awards 2004²
• ‘Gold Rating - Fund Manager of the Year UK (Group)’ awarded to Rathbone Unit Trust Management Ltd in the Financial Adviser Investment Awards 2004²
• ‘Best UK General Equity Fund 2004’ awarded to the Rathbone Special Situations Fund in the UK All Companies sector by Money Observer²
• ‘Equity UK’ - Standard & Poor’s awarded the Rathbone Special Situations Fund 1st place over 5 years in the UK Marketed Funds sector²
• ‘UK Smaller Companies’ - Standard & Poor’s awarded the Rathbone Smaller Companies Fund 1st place over 10 years in the UK Marketed Funds sector²
1 Awarded to Rathbone Investment Management Limited2 Awarded to Rathbone Unit Trust Management Limited
www.rathbones.com1 September 2005Page 29
Rathbone Brothers PlcInterim Results to June 30, 2005
Consolidated balance sheetas at 30 June 2005
Assets30/6/05
£’000
31/12/04
£’000Liabilities
30/06/05
£’000
31/12/04
£’000
Cash and balances at central banks 306 15,840 Deposits by banks 3,718 3,243
Settlement balances 32,939 11,199 Settlements balances 26,630 15,238
Loans and advances to banks 141,634 57,881 Derivative financial instruments - 19
Loans and advances to customers 38,465 41,226 Due to customers 525,302 425,078
Investment securities – available-for-sale 6,203 7,219 Debt securities in issue 170 286
Investment securities – held-to-maturity 403,297 381,119 Accruals, deferred income, provisions 23,360 23,003
Intangible assets 60,120 59,860 Current tax liabilities 4,867 6,067
Property, plant and equipment 4,185 4,480 Retirement benefit obligations 15,603 14,983
Deferred tax asset 5,042 4,379 Called up share capital 2,054 2,043
Prepayments, accrued income, other assets 28,044 22,154 Share premium/other reserves 69,966 69,223
Retained earnings 48,565 46,174
Equity shareholders funds 120,585 117,440
Total assets 720,235 605,357 Total liabilities 720,235 605,357
www.rathbones.com1 September 2005Page 30
Rathbone Brothers PlcInterim Results to June 30, 2005
Notes to Consolidated Balance Sheet
• Equity investments at market value with uplift in ‘Other reserves’
• Pre 1 Jan 2004 goodwill value frozen but must be reviewed for impairment
• Defined benefit pension scheme net liabilities included on balance sheet
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