RNS Number:8972R
Charles Stanley Group PLC
11 November 2003
11 November 2003
RESULTS FOR THE SIX MONTHS ENDED 30 SEPTEMBER 2003
* Turnover increased by 11.8% to # 30.1 million
* Profit before tax and goodwill #3.0 million
(September 2002: #1.5 million)
* Profit before tax #2.4 million (September 2002: #1.0 million)
* Earnings per share 3.10p (September 2002: 1.51p)
* Dividend 1.00p (September 2002: 1.00p)
* Acquisition of EBS (Employee Benefit Services)
* Acquisition of part of Durlacher's private client stockbroking operation
* Acquisition of "Nothing Ventured" online Sharedealing service
Charles Stanley, one of the largest independent private client stockbrokers in
the UK, is pleased to announce that for the six months ended 30th September 2003
profit before tax and amortisation has doubled from #1.54 million (2002) to
#3.03 million. Turnover for the period has risen by 11.8% to #30.15 million
(2002: #26.98 million). Profit before tax, but after amortisation and the sale
of investments, was #2.44 million (2002: #1.04 million).
The improvement in turnover corresponds to an increase of 11.35% in the volume
of stock exchange transactions undertaken by the company in the period. At the
same time, fixed costs have remained under tight control, resulting in a
doubling of the profit. We propose maintaining the dividend at 1.00p net per
share.
Markets continue to be difficult, and although the latest results represent a
significant improvement the directors consider that trading volumes remain below
the long-term trend-line. Our strategy, as described in previous statements, has
been to take advantage of these weak conditions to continue to build the
business. The latest results illustrate the success of this strategy. Our
acquisitions during this prolonged downturn in the market have integrated very
well into Charles Stanley, and are now bearing fruit.
Acquisitions
During the latest six months we have made a number of further acquisitions.
Often these consist of small teams or individual stockbrokers who fit neatly
into our existing operations. Two acquisitions are of particular note. First is
the acquisition of the well-known leading-edge firm of pension administrators
and pension advisers, EBS Management PLC. For some years we have been steadily
building a specialist financial planning capability to complement the wealth
management available to our stockbroking clients, and to offer skilled services
in areas of specialisation such as employee benefit schemes. This process began
in February 2001 with the purchase of Forester MacLean Benefit Consultants
Limited, followed now by the acquisition of EBS Management and its subsidiary
companies.
EBS provides services to some 500 Small Self-Administered Schemes ("SSASs"), 850
Self Invested Personal Pension Schemes ("SIPPs") and 35 Exempt Property Unit
Trusts ("EPUTs"), with total assets exceeding #700 million, generating revenues
of about #1.2 million p.a. We are particularly delighted to have been joined by
the founder of EBS, Mr Dryden Gilling-Smith, the well-known expert and
commentator who has done so much to popularise personal pension provision.
Secondly, in September we acquired a significant part of the private client
stockbroking division of Durlacher PLC. More recently, in October, just after
the end of the half-year, we acquired the internet share-trading business of
Durlacher PLC, which operated under the name of "Nothing Ventured".
I have referred in previous statements to our policy of advancing the growth of
the group on all fronts, in an evenly balanced way. For example, at this time
last year, and again at the year-end, I mentioned our success in attracting a
significant corporate finance and corporate broking team to our London office,
where they have subsequently enjoyed an excellent 12 months. In the same way we
have been looking to expand our internet share-trading services. In February
last year these grew to roughly double their previous size when, as a result of
acquiring the prestigious business of Torrie & Co in Edinburgh, we were able to
merge its well-known FasTrade internet service with our own pioneering Xest
operation. This now operates as a popular site under the FasTrade label.
The acquisition of the Nothing Ventured business offers significant further
improvements to our FasTrade clients, in particular in the range and quality of
information and research available on the website. We are already seeing a
significant increase in the volume of our internet trading as a result of this
latest development.
Operations
All parts of the business performed well during the half-year.
For example, we now hold very nearly #900 million for clients in Charles Stanley
PEPs and ISAs. This is a new record for us, and has been achieved in the face of
FTSE share indices which stand substantially below their peak - a benchmark to
which PEP and ISA values are closely linked.
The revenue of our Financial Planning division more than doubled in the six
months, to #533,000, and should more than double again with the acquisition of
EBS Management.
Despite an almost complete dearth of corporate finance activity in the market in
the latest period, our Corporate Finance division has continued to attract
important new clients. We now act for 40 companies. In the first seven months of
the current year (that is, up to the end of October 2003) the fee income of the
Corporate Finance division has exceeded #2.38 million, which was the figure for
the whole of last year, 2002-03.
Our run of awards has continued, recognising the quality of the service that we
provide to our clients. The latest is the award from Shares Magazine for the
Best Discretionary Stockbroker of 2003.
Fee income now represents 31% of total income. In the light of our programme of
steady improvement in the range of services offered to our investment management
clients we are moving more strongly to fee-based remuneration. This is a major
exercise which is progressing well. The ratio between fee and commission income
will fluctuate over time, as commission income is more volatile, but we are
actively planning for a steady increase in the medium-term trend of the
percentage that fees contribute to our total revenue.
In my last report to shareholders (in June 2003) I explained our view that no
provision needed to be made in respect of advice given on split capital
investment trust shares. There has been no significant change in the information
which I gave at that time, and our view remains the same.
Dividend
It is proposed to pay a dividend of 1.00p per share, net of tax, on 17th
December 2003 to shareholders registered on 21st November 2003.
Outlook
Market conditions remain well below their best, but the underlying tone has been
rather more "bullish" than at any time in the three-year recessionary period of
2000, 2001 and 2002. Recent months have seen a reasonably persistent upward
trend in business levels, and this has been maintained into the opening weeks of
our second half-year.
But there are many uncertainties. While the UK economy is growing again at
somewhere near its long-term trend, the weakness of the continental economies is
bound to affect export growth. The proportion of empty commercial property in
the City is close to record levels, and this is very tangible evidence of an
economy working well below capacity. The diversion of resources by the
government from the private to the public sector (whose productivity rate has
actually been falling) is worrying for the future. And we think that the
combined effect of a probable increase in personal taxation to pay for this, and
of the steady expansion in regulations, could place further strains on the
financial services sector.
Views are divided as to whether the world is now moving decisively out of the
long recession. Certainly the pace of change will vary from region to region.
China, and now Japan, are becoming significant drivers of world growth. Europe,
by contrast, seems destined to languish under the weight of self-imposed
structural and institutional barriers, and attempts to dismantle these look
unlikely to succeed. Nevertheless the UK economy seems to be gathering speed.
Against this background one has to say that the broader outlook, while more
encouraging than in the recent past, remains unclear. Within your company,
though, we are seeing the benefit of recent acquisitions, and we think that the
improvement in market conditions is fairly soundly based. Given the good start
to the second six months we take a reasonably positive view of the outlook for
the remainder of the current year.
Sir David Howard Bt.
Chairman
11 November 2003
Consolidated Profit and Loss Account
Six months ended 30 September 2003
Half-year to Half-year to Year to
30.9.03 30.9.02 31.3.03
#'000 #'000 #'000
Notes
TURNOVER 2
Continuing operations 29,963 25,216 47,553
Acquisitions 186 1,760 3,511
30,149 26,976 51,064
Operating expenses (28,224) (26,413) (51,058)
OPERATING PROFIT/(LOSS)
Continuing operations 1,951 545 350
Acquisitions (26) 18 (344)
1,925 563 6
Profit/(loss) on sale of investments - continuing
operations 32 (19) (50)
1,957 544 (44)
Interest receivable 512 559 1,142
Interest payable 3 (31) (67) (120)
Profit on ordinary activities before goodwill
amortisation and profit on sale of investments 3,033 1,542 1,997
Goodwill amortisation (627) (487) (969)
2,406 1,055 1,028
Profit/(loss) on sale of investments 32 (19) (50)
PROFIT ON ORDINARY ACTIVITIES BEFORE TAXATION 2,438 1,036 978
Tax on profit on ordinary activities 4 (1,130) (400) (534)
PROFIT FOR THE PERIOD 1,308 636 444
Dividends 5 (421) (421) (1,897)
TRANSFER TO/(FROM) RESERVES 887 215 (1,453)
Earnings per Share
Half-year to Half-year to Year to
Notes 30.9.03 30.9.02 31.3.03
Basic 6 3.10p 1.51p 1.05p
Diluted 6 2.97p 1.51p 1.02p
Excluding goodwill
Basic 6 4.59p 2.66p 3.35p
Diluted 6 4.39p 2.66p 3.25p
Statement of Total Recognised Gains and Losses
#'000 #'000 #'000
Profit for the period 1,308 636 444
Unrealised gains/(losses) on investments 472 (847) (1, 241)
Total recognised gains and losses relating to the
period 1,780 (211) (797)
Note of Historical Cost Profits and Losses
#'000 #'000 #'000
Reported profit on ordinary activities before
taxation 2,438 1,036 978
Realisation of investment revaluation gains of
previous years 4 - (27)
Historical cost profit on ordinary activities
before taxation 2,442 1,036 951
Historical cost profit/(loss) for the year after
taxation and dividends 891 215 (1,480)
Consolidated Balance Sheet
30 September 2003
30.9.03 30.9.02 31.3.03
#'000 #'000 #'000
Notes
FIXED ASSETS
Intangible - Goodwill 10,979 8,439 8,191
Tangible 5,328 5,766 5,227
Investments 3,255 3,118 2,732
19,562 17,323 16,150
CURRENT ASSETS
Debtors 208,814 134,450 178,896
Listed investments 419 105 322
Cash at bank and in hand 28,666 27,977 26,948
237,899 162,532 206,166
CREDITORS amounts falling due within one year (216,826) (139,432) (182,931)
NET CURRENT ASSETS 21,073 23,100 23,235
TOTAL ASSETS LESS CURRENT LIABILITIES 40,635 40,423 39,385
CREDITORS: amounts falling due after more than one year (1,046) (131) (1,155)
Minority Interests (44) (44) (44)
NET ASSETS 39,545 40,248 38,186
CAPITAL AND RESERVES
Called up share capital 7 10,537 10,537 10,537
Revaluation reserve 2,568 2,490 2,096
Profit and loss account 26,440 27,221 25,553
EQUITY SHAREHOLDERS' FUNDS 39,545 40,248 38,186
Consolidated Cash Flow Statement
Six months ended 30 September 2003
Half-year to Half-year to Year to
30.9.03 30.09.02 31.3.03
#'000 #'000 #'000
Notes
Cash flow from operating activities 8 4,941 5,595 6,972
Returns on investments and servicing
of finance 482 487 1,027
Taxation (317) (863) (1,486)
Capital expenditure and financial investment (586) (799) (1,278)
Acquisitions (1054) (160) 106
Equity dividends paid (1476) (1,475) (1,897)
Cash inflow before financing 1,990 2,785 3,444
Financing
Decrease in debt (272) (956) (2,644)
Increase in cash in the period 1,718 1,829 800
RECONCILIATION OF NET CASH FLOW TO MOVEMENT IN NET
FUNDS
Increase in cash in the period 1,718 1,829 800
Cash outflow from change in debt and lease financing 272 956 2,644
1,990 2,785 3,444
New finance leases (571) (43) (43)
Movement in net funds in the period 1,419 2,742 3,401
Net funds at start of period 26,623 23,222 23,222
Net funds at close of period 28,042 25,964 26,623
Notes to the Financial Statements
1 BASIS OF PREPARATION
The interim results have been prepared on a basis consistent with the accounting
policies set out on pages 29 and 30 of Charles Stanley Group PLC's Annual Report
and Financial Statements for the year ended 31 March 2003. The unaudited
interim financial statements should therefore be read in conjunction with the
2003 Annual Report and Financial Statements.
The financial information as set out in this report is unaudited and does not
comprise statutory accounts for the purposes of Section 240 of the Companies Act
1985. The Auditors have carried out a review and their report is set out below.
The comparative figures for the year ended 31 March 2003 have been taken from,
but do not constitute, the Company's statutory financial statements for that
financial year. Those financial statements have been reported on by the
Company's Auditors and delivered to the Registrar of Companies. Their report
was unqualified and did not contain a statement under Section 237(2) or (3) of
the Companies Act 1985.
A copy of this statement is being forwarded to all shareholders and will be
available for members of the public at the Company's registered office, 25 Luke
Street, London EC2A 4AR.
2 TURNOVER
30 Sep 2003 30 Sep 2002 31 Mar 2003
#'000 #'000 #'000
Commission 20,808 17,919 33,862
Investment management fees 7,696 7,285 14,817
Corporate finance fees 1,645 1,772 2,385
30,149 26,976 51,064
3 INTEREST PAYABLE
On bank loans and overdrafts 15 21 35
On convertible debt - 28 47
Finance lease interest 16 18 38
31 67 120
4 TAX ON PROFIT ON ORDINARY ACTIVITIES
Current period:
UK corporation tax at 30% 987 446 585
Adjustments in respect of previous periods 143 (46) (51)
1,130 400 534
5 DIVIDENDS
Proposed interim of 1.00p per share (2002: 1.00p) 421 421 421
Final of 3.50p per share - - 1,476
421 421 1,897
Notes to the Financial Statements (continued)
6 EARNINGS PER SHARE
30 Sep 2003 30 Sep 2002 31 Mar 2003
No. No. No.
Weighted average number of shares in issue in the period 42,149,378 42,149,378 42,149,378
Weighted average number of options outstanding 1,943,500 - 1,371,565
44,092,878 42,147,378 43,520,943
#'000 #'000 #'000
Profit for the year before goodwill 1,935 1,123 1,413
Goodwill amortisation (627) (487) (969)
Profit for the period 1,308 636 444
7 CALLED UP SHARE CAPITAL
30 Sep 2003 30 Sep 2002 31 Mar 2003
#'000 #'000 #'000
Authorised:
80,000,000 ordinary shares of 25p each 20,000 20,000 20,000
Allotted and fully paid:
42,149,378 ordinary shares of 25p each 10,537 10,537 10,537
On 30 September 2003 the following options have been granted and remain
outstanding in respect of ordinary shares of 25p in the company under the
company's Save As You Earn Scheme.
No of shares Option price
Grant dated 11 July 2001 56,901 #2.87
Exercisable during the six months commencing 1 September 2006
Grant dated 2 January 2003 1,943,500 #0.96
Exercisable during the six months commencing 1 September 2008
8 RECONCILIATION OF OPERATING PROFIT TO NET CASH INFLOW FROM OPERATING ACTIVITIES
Operating profit 1,925 563 6
Provision made against fixed asset investments (28) 91 59
Depreciation charges 1,063 1,200 2,212
Goodwill amortised 627 487 969
(Increase)/decrease in debtors (30,014) 9,717 (34,946)
Increase/(decrease) in creditors 31,368 (6,463) 38,672
Net cash inflow from operating activities 4,941 5,595 6,972
Independent Review Report to Charles Stanley Group PLC
We have been instructed by the company to review the financial information set
out above which comprises the profit and loss account, balance sheet, cash flow
statement, statement of recognised gains and losses and the related notes. We
have read the other information contained in the interim report and considered
whether it contains any apparent misstatements or material inconsistencies with
the financial information.
Directors' Responsibilities
The interim report, including the financial information contained therein, is
the responsibility of, and has been approved by, the directors. The directors
are responsible for preparing the interim report in accordance with the Listing
Rules of the Financial Services Authority which require that the accounting
policies and presentation applied to the interim figures should be consistent
with those applied in preparing the preceding annual accounts except where any
changes, and the reasons for them, are disclosed.
Review work performed
We conducted our review in accordance with guidance contained in Bulletin 1999/4
issued by the Auditing Practices Board for use in the United Kingdom. A review
consists principally of making enquiries of management and applying analytical
procedures to the financial information and underlying financial data and, based
thereon, assessing whether the accounting policies and presentation have been
consistently applied unless otherwise disclosed. A review excludes audit
procedures such as tests of controls and verification of assets, liabilities and
transactions. It is substantially less in scope than an audit performed in
accordance with United Kingdom Auditing Standards and therefore provides a lower
level of assurance than an audit. Accordingly we do not express an audit
opinion on the financial information.
Review Conclusion
On the basis of our review we are not aware of any material modification that
should be made to the financial information as presented for the six months
ended 30 September 2003.
SAFFERY CHAMPNESS
Chartered Accountants
London
11 November 2003
Financial Calendar
11 November 2003 Results announced
19 November 2003 Ex-dividend date for interim dividend
21 November 2003 Record date for interim dividend
17 December 2003 Interim dividend paid
June 2004 Final results announced
FOR FURTHER INFORMATION PLEASE CONTACT
SIR DAVID HOWARD PETER A HURST
Chairman Finance Director
Phone 020 7739 8200 Fax 020 7953 2948
ANDREW MEIGH
HSBC
Phone 020 7991 8888
This information is provided by RNS
The company news service from the London Stock Exchange
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