REG-Rathbone Brothers Plc : Half-yearly report 2017 <Origin Href="QuoteRef">RAT.L</Origin>
25/07/2017 07:06
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Underlying profit before tax up 22.7% to £43.3 million
Philip Howell, Chief Executive of Rathbone Brothers Plc, said:
"The first six months of 2017 has seen another busy period for Rathbones as we
continue to deliver our strategic plans without detracting from our high
standards of service to our clients. We remain confident in the medium term
potential of our growth initiatives. Short term market conditions are
dominated by a backdrop of ongoing geopolitical uncertainty and we will
continue to invest with discipline."
Highlights:
* Underlying profit before tax* increased 22.7% from £35.3 million to £43.3
million in the first six months of 2017. Underlying profit margin remained
strong at 30.4% compared to 29.4% in 2016. Underlying earnings per share
increased 21.1% to 68.4p (2016: 56.5p).
* Profit before tax for the half year increased 16.7% from £22.8 million to
£26.6 million, reflecting £15.8 million of costs associated with the London
office move, offset by a plan amendment gain of £5.5 million arising from the
closure of our defined benefit pension schemes. Basic earnings per share
increased 16.5% to 41.6p (2016: 35.7p).
* The board recommends a 22.0p interim dividend for 2017 (2016: 21.0p).
* Total funds under management at 30 June 2017 were £36.6 billion, up 7.0%
from £34.2 billion at 31 December 2016. This compared to an increase of 2.4%
in the FTSE 100 Index and an increase of 2.7% in the MSCI WMA Private Investor
Balanced Index over the same period.
* Total net organic and acquired growth in the funds managed by Investment
Management was £0.6 billion in the first six months of 2017, representing a
net annual growth rate of 4.0% (2016: 4.2%). Net organic growth of £0.4
billion for the first half represents an underlying annualised rate of net
organic growth of 2.9% (2016: 2.5%). In the period, we experienced higher
outflows from low margin accounts and adjusting for this, the annualised net
organic growth rate was 3.4%.
* Underlying operating income in Investment Management of £127.4 million in
the first six months of 2017 (2016: £108.8 million) was up 17.1%, largely due
to growth in funds under management. The average FTSE 100 Index was 7322 on
quarterly billing dates in 2017, compared to 6298 in 2016, an increase of
16.3%.
* Underlying operating expenses of £99.1 million (2016: £84.9 million)
increased 16.7% year-on-year largely as a result of variable staff costs,
reflecting both the higher profitability in the period and an improved
investment performance element for growth awards.
* Funds under management in Unit Trusts were £4.6 billion at 30 June 2017 (31
December 2016: £4.0 billion). Net inflows were £269 million in the first
half of 2017 (2016: £259 million). Underlying operating income in Unit Trusts
was £14.9 million in the six months ended 30 June 2017, an increase of 30.7%
from £11.4 million in the first half of 2016.
* Shareholders equity of £342.4 million at 30 June 2017 increased 5.4% since
31 December 2016 (£324.8 million) and 22.4% since 30 June 2016 (£279.7
million), largely as a result of the fall in value of retirement benefit
obligations, which totalled £20.0 million at 30 June 2017, 49.4% lower than
the £39.5 million recorded at 31 December 2016.
* Excluding a plan amendment gain on the closure of the defined benefit
pension schemes and charges in relation to client relationships and goodwill,
acquisition-related costs and London head office relocation costs.
25 July 2017
For further information contact:
Rathbone Brothers Plc Tel: 020 7399 0000 email: shelly.patel@rathbones.com Philip Howell, Chief Executive Paul Stockton, Finance Director Shelly Patel, Investor Relations Manager Camarco Tel: 020 3757 4984 email: ed.gascoigne-pees@camarco.co.uk Ed Gascoigne-Pees
Rathbone Brothers Plc
Rathbone Brothers Plc ("Rathbones"), through its subsidiaries, is a leading
provider of high-quality, personalised investment and wealth management
services for private clients, charities and trustees. Our services include
discretionary investment management, unit trusts, banking and loan services,
financial planning, unitised portfolio services, and UK trust, legal, estate
and tax advice.
Rathbones has over 1,100 staff in 16 locations in the UK and Jersey; its
headquarters is 8 Finsbury Circus, London.
rathbones.com (http://www.rathbones.com)
Investment management report
Continuing growth in funds under management
In the first half of 2017, investment markets largely shrugged off political
events, and continued to build momentum with the FTSE 100 reaching all time
highs during the period. Our own funds under management grew 7.0% to reach
£36.6 billion at 30 June 2017, benefitting from a combination of continued
acquired and organic growth and these resilient conditions. This compares to a
2.4% increase in the FTSE 100 Index and a 2.7% increase in the MSCI WMA
Private Investor Balanced Index.
Funds under management in our Investment Management business were £32.0
billion at 30 June 2017 (2016: £30.2 billion). Investment Management net
inflows were £0.6 billion in the first half (2016: £0.5 billion)
representing a total annualised growth rate of 4.0% (2016: 4.2%). Net
organic growth totalled £0.4 billion up from £0.3 billion at 30 June 2016,
equating to an annualised net organic growth rate of 2.9%. In the period, we
experienced higher outflows from low margin accounts and adjusting for this,
the annualised net organic growth rate was 3.4%. Purchased growth totalled
£0.2 billion (2016: £0.2 billion), with nearly all investment managers set
to meet or exceed their earn-out targets. Our charities business continued to
perform well and retained the position of the second biggest investment
management provider to the top 5,000 charities in the UK. Its funds under
management grew 4.9% to £4.3 billion in the first six months of 2017. The
market profile of our ethical business, Rathbone Greenbank Investments,
continues to rise with funds under management increasing by 9.6% to reach
£946 million in the first half.
Funds under management in our Unit Trusts business increased 15.0% from £4.0
billion at 31 December 2016 to £4.6 billion at 30 June 2017. Positive
markets and competitive investment performance helped to attract gross sales
of £733 million compared to £576 million for the same period in 2016. In
common with many in the industry, redemptions of £464 million were higher at
the start of 2017 as investor concerns heightened, and many sought to realise
gains. Whilst the lead up to and subsequent results of the UK election did
have some adverse impacts in June, net inflows for the first half totalled
£269 million compared to £259 million at 30 June 2016.
We continue to strive to provide high quality service to our clients and in
May 2017, for the second year in a row, Rathbones was named both "Private
Client Asset Manager of the Year (Institutional)" at the Citywealth awards and
"Asset Manager of the Year" at the Better Society Awards. These awards
recognise a continued excellence in client service, leadership and an overall
contribution to the profession.
Underlying profit before tax up 22.7% to £43.3 million
Underlying profit before tax increased 22.7% to £43.3 million (2016: £35.3
million) in the first six months of 2017, representing an underlying profit
margin of 30.4% (2016: 29.4%). Underlying earnings per share of 68.4p
increased 21.1% from 56.5p in 2016.
Profit before tax for the half year of £26.6 million is 16.7% higher than the
£22.8 million in 2016 and reflects £15.8 million of costs associated with
the London office move (see note 3), offset by a plan amendment gain of £5.5
million arising from the closure of our defined benefit pension schemes with
effect from 30 June 2017 (see note 13). Prior year profit before tax included
charges of £4.4 million in respect of the acquisition of the Vision
businesses. We are working hard to let our Curzon Street premises, though
the rental market remains soft particularly in light of Brexit uncertainty.
Fee income of £105.5 million in the first half of 2017 increased 21.1%
compared to the same period last year (2016: £87.1 million) reflecting
positive markets and growth in organic and acquired new business over the
period. The average FTSE 100 Index (calculated on our fee billing dates) was
7322, up 16.3% compared to 6298 a year ago. Fee income represented 74.1% of
total underlying operating income in the six months ended 30 June 2017 (2016:
72.5%), as our fee only tariff becomes more widely adopted, helping to support
our move to higher quality fee-based income.
Net commission income of £21.9 million was up 12.3% from £19.5 million in
the first half of 2016, reflecting more positive investing conditions and a
strong first quarter in particular. Net interest income was relatively stable
at £5.6 million in the first half (2016: £5.7 million), as higher liquidity
largely offset the impact of lower base interest rates. As active investment
managers, we remain focused on balancing risks and returns, and as a result
saw overall cash weightings in portfolios rise to 7.1% compared to 6.6% a year
ago reflecting a greater degree of uncertainty over future equity markets.
Average deposits were £2.3 billion in the first half of the year compared to
£1.7 billion a year ago. Client loans increased 8.7% to £115.5 million from
£106.3 million at 31 December 2016. Fees from advisory services and other
income increased 19.0% to £9.4 million (2016: £7.9 million) reflecting more
positive flows from Vision following a slower period last year as the business
completed a comprehensive file review exercise.
Underlying operating expenses of £99.1 million (2016: £84.9 million)
increased 16.7% year-on-year. This was largely as a result of variable staff
costs, which increased 32.3% to £25.8 million (2016: £19.5 million)
reflecting both the higher profitability in the period and an improved
investment performance element for growth awards. Variable staff costs as a
percentage of underlying profit before variable staff costs also therefore
increased to 37.3% (2016: 35.6%). In line with our strategy, planned
additions in headcount increased fixed staff costs by 11.2% to £44.7 million
(2016: £40.2 million) and average headcount in the first half of 2017 was
1,123, up 7.5% compared to 1,045 a year ago. Other direct costs of £28.6
million (2016: £25.2 million) were up 13.5% as a result of higher property
costs and planned project expenditure.
Our effective tax rate for the first half of 2017 was 21.1% (2016: 25.3%). The
prior year rate was higher as a result of deferred payments to acquire the
Vision businesses. Our interim dividend has been increased by 1p per share to
22p (2016: 21p) and will be paid on 3 October 2017.
Progress on growth strategy
Vision continues to gain momentum and now has £1.2 billion of funds under
advice on its discretionary investment management panel, up 20.0% from the
£1.0 billion at 31 December 2016, and 108 advisers, up from 99 at 31 December
2016. The business remains on track to grow to our target of 150 advisers and
we remain confident in its growth prospects.
Our distribution strategy continues to focus on promoting our discretionary
investment management services to professional intermediaries, principally
national and regional IFA networks. It continues to make good progress with
net flows of £108 million in the first six months of the year, up 96.4% from
£55 million at the same time last year. We continue to build our presence in
the intermediary market as evidenced by a May 2017 Defaqto report which
confirmed that the usage of Rathbones as a discretionary fund management
provider to advisers had more than doubled in the last year, and placed
Rathbones very highly in the critical areas of 'Quality of investment staff'
and 'Service'. We successfully launched an execution only Managed Portfolio
Service in March 2017 which attracted £7.2 million of net flows in its first
3 months of launch.
With the Credit Suisse partnership fully operational, the Rathbone Private
Office was formally launched in January. The nucleus team of three senior
client advisers and four support staff is making good progress in promoting
this new advisory capability. This service is offered directly to super high
net worth clients and family offices as well as seeking introductions from the
professional intermediary market and from our own investment manager
community. The team has already engaged its first clients and is developing an
encouraging pipeline of prospective clients for the full year.
We continue to focus on improving our client experience and striving for
greater operational efficiency in our support functions with the aim of
creating additional capacity for growth. At the full year, we outlined our
plans to spend an additional £1 million in 2017 to implement a new client
relationship management system and improve our client take on processes. These
plans are developing more quickly than originally planned and in light of more
favourable investment conditions, we have chosen to bring forward capital
expenditure originally planned for 2018 to the second half of this year in
order to accelerate delivery and improve functionality through greater
automation. This brings the total expected capital expenditure in relation to
our client relationship management system and client take on process
improvement to approximately £2 million in 2017.
Expenditure on the other growth strategies remains in line with expectations.
The relocation of our London head office to 8 Finsbury Circus has proved very
successful.
Financial position and regulatory capital
Shareholders' equity of £342.4 million at 30 June 2017 increased 5.4% since
31 December 2016 (£324.8 million) and 22.4% since 30 June 2016 (£279.7
million). This is largely as a result of the fall in value of retirement
benefit obligations which totalled £20.0 million at 30 June 2017, 49.4% lower
than the £39.5 million recorded at 31 December 2016. This reflected a high
number of members transferring their benefits out of the scheme, a reduction
in the assumed rates of improvement in longevity and breakage of the link
between pension entitlements and final salaries. Triennial valuation
discussions with trustees are ongoing and are expected to complete in the
second half of the year.
Total assets at 30 June 2017 were £2,829.9 million (31 December 2016:
£2,404.0 million; 30 June 2016: £2,344.8 million), of which £2,215.1
million (31 December 2016: £1,888.9 million; 30 June 2016: £1,860.0 million)
represents the cash element of client portfolios that is held as a banking
deposit. As a result of these higher levels of cash, balances with central
banks increased from £1,075.7 million at 31 December 2016 to £1,480.9
million at 30 June 2017 (30 June 2016: £960.1 million).
Our consolidated Common Equity Tier 1 ratio was 18.2 % at 30 June 2017 (31
December 2016: 17.7%; 30 June 2016: 16.0%). Our consolidated leverage ratio
was 6.2% at 30 June 2017 (31 December 2016: 6.6%; 30 June 2016: 6.2%). The
capital surplus of own funds over the Pillar 1 and 2A requirements and CRD IV
buffers was £69.9m at 30 June 2017 (excluding year to date post tax profits
and improvements in the value of retirement benefit obligations) compared to
£49.2m at 30 June 2016, largely reflecting the impact of additional equity
raised in October 2016 offset by higher capital requirements.
Business risks
The board believes that the nature of the principal risks and uncertainties
which may have a material effect on the group's performance during the
remainder of its financial year remain unchanged from those identified in the
strategic report and group risk committee report in our 2016 annual report and
accounts (pages 18-25 and pages 80-81 respectively).
Regulatory changes
We continue to prepare for the changes brought on by MiFID II and the General
Data Protection Regime and are working hard to ensure our people and systems
are compliant. We anticipate that the cost of these projects will be
approximately £1.5 million which will be absorbed by our normal expenditure
budget for the year.
We note the recommendations of the recent FCA Asset Management Market Report
and the sequence of consultations prior to final implementation. While we
broadly welcome the proposals, they will have an impact on margins of our Unit
Trust business from 2018. In addition, as part of our implementation of MiFID
II, research payments that have long been charged to our funds will, from 1
January 2018 be borne by the business. The impact of these changes will be
significantly offset by a reduction in variable remuneration, some cost
actions and by the continued funds growth momentum through this year and
beyond. Fund box profits in our Unit Trust business for the six months ended
30 June 2017 were £1.8 million and research costs currently borne by the
funds totalled approximately £0.5 million for the same period.
Board and senior management changes
Following the announcement of David Harrel stepping down after nine years on
the board, we are pleased to announce that Sarah Gentleman has now completed
the regulatory approval process and has formally succeeded David as the
chairman of the remuneration committee.
Outlook
The first six months of 2017 has seen another busy period for Rathbones as we
continue to deliver our strategic plans without detracting from our high
standards of service to our clients. We remain confident in the medium term
potential of our growth strategy. Short term market conditions are dominated
by a backdrop of ongoing geopolitical uncertainty and we will continue to
invest with discipline.
Mark Nicholls Philip Howell
Chairman Chief Executive
Consolidated interim statement of comprehensive income
for the six months ended 30 June 2017
Note Unaudited Six months to 30 June 2017 £'000 Unaudited Six months to 30 June 2016 £'000 Audited Year to 31 December 2016 £'000
Interest and similar income 6,323 7,141 13,890
Interest expense and similar charges (723) (1,394) (2,319)
Net interest income 5,600 5,747 11,571
Fee and commission income 144,600 120,948 253,192
Fee and commission expense (10,636) (8,596) (17,936)
Net fee and commission income 133,964 112,352 235,256
Net trading income 1,769 1,445 3,103
Gain on plan amendment of defined benefit pension schemes 13 5,523 - -
Other operating income 1,041 657 1,353
Operating income 147,897 120,201 251,283
Charges in relation to client relationships and goodwill 10 (5,960) (5,778) (11,735)
Acquisition-related costs (487) (4,431) (5,985)
Head office relocation costs 3 (15,769) (2,257) (7,031)
Other operating expenses (99,095) (84,910) (176,403)
Operating expenses (121,311) (97,376) (201,154)
Profit before tax 26,586 22,825 50,129
Taxation 5 (5,612) (5,778) (11,972)
Profit for the period attributable to
equity holders of the company 20,974 17,047 38,157
Other comprehensive income:
Items that will not be reclassified to profit or loss
Net remeasurement of defined benefit liability 13,495 (29,080) (37,318)
Deferred tax relating to the net remeasurement of defined benefit liability (2,294) 4,535 5,936
Items that may be reclassified to profit or loss
Revaluation of available for sale investment securities:
- net gain from changes in fair value 110 12 93
- net profit on disposal transferred to profit or loss during the year (43) - -
67 12 93
Deferred tax relating to revaluation of available for sale investment securities (11) - (14)
Other comprehensive income net of tax 11,257 (24,533) (31,303)
Total comprehensive income for the period net of tax attributable to equity holders of the company 32,231 (7,486) 6,854
Dividends paid and proposed for the period per ordinary share 6 22.0p 21.0p 57.0p
Dividends paid and proposed for the period 11,274 10,160 28,267
Earnings per share for the period attributable to equity holders of the company: 7
- basic 41.6p 35.7p 78.9p
- diluted 41.3p 35.4p 78.2p
The accompanying notes form an integral part of the condensed consolidated
interim financial statements.
Consolidated interim statement of changes in equity
for the six months ended 30 June 2017
Note Share capital £'000 Share premium £'000 Merger reserve £'000 Available for sale reserve £'000 Own shares £'000 Retained earnings £'000 Total equity £'000
At 1 January 2016 (audited) 2,407 97,643 31,835 71 (6,177) 174,413 300,192
Profit for the period 17,047 17,047
Net remeasurement of defined benefit liability (29,080) (29,080)
Net gain on revaluation of available for sale investment securities 12 12
Deferred tax relating to components of other comprehensive income - 4,535 4,535
Other comprehensive income net of tax - - - 12 - (24,545) (24,533)
Dividends paid (16,336) (16,336)
Issue of share capital 14 12 3,817 3,829
Share-based payments:
- value of employee services 734 734
- cost of own shares acquired (1,043) (1,043)
- cost of own shares vesting 659 (659) -
- tax on share-based payments (149) (149)
At 30 June 2016 (unaudited) 2,419 101,460 31,835 83 (6,561) 150,505 279,741
Profit for the period 21,110 21,110
Net remeasurement of defined benefit liability (8,238) (8,238)
Net gain on revaluation of available for sale investment securities 81 81
Deferred tax relating to components of other comprehensive income (14) 1,401 1,387
Other comprehensive income net of tax - - - 67 - (6,837) (6,770)
Dividends paid (10,143) (10,143)
Issue of share capital 14 116 38,186 38,302
Share-based payments:
- value of employee services 2,301 2,301
- cost of own shares acquired (542) (542)
- cost of own shares vesting 425 (425) -
- own shares sold 345 435 780
- tax on share-based payments 34 34
At 31 December 2016 (audited) 2,535 139,991 31,835 150 (6,243) 156,545 324,813
Profit for the period 20,974 20,974
Net remeasurement of defined benefit liability 13,495 13,495
Revaluation of available for sale investment securities:
- net gain from changes in fair value 110 110
- net profit on disposal transferred to profit or loss during the year (43) (43)
Deferred tax relating to components of other comprehensive income (11) (2,294) (2,305)
Other comprehensive income net of tax - - - 56 - 11,201 11,257
Dividends paid (18,236) (18,236)
Issue of share capital 14 27 2,718 2,745
Share-based payments:
- value of employee services 1,095 1,095
- cost of own shares acquired (437) (437)
- cost of own shares vesting 1,336 (1,336) -
- tax on share-based payments 232 232
At 30 June 2017 (unaudited) 2,562 142,709 31,835 206 (5,344 ) 170,475 342,443
Consolidated interim balance sheet
as at 30 June 2017
Note Unaudited 30 June 2017 £'000 Unaudited 30 June 2016 £'000 Audited 31 December 2016 £'000
Assets
Cash and balances with central banks 1,480,932 960,115 1,075,673
Settlement balances 99,197 99,198 37,787
Loans and advances to banks 148,257 105,869 114,088
Loans and advances to customers 8 123,303 111,382 110,951
Investment securities:
- available for sale 126,800 84,705 105,421
- held to maturity 590,005 725,000 700,000
Prepayments, accrued income and other assets 72,323 70,516 65,710
Property, plant and equipment 9 17,133 9,492 16,590
Deferred tax asset 8,623 8,083 10,601
Intangible assets 10 163,323 170,409 167,192
Total assets 2,829,896 2,344,769 2,404,013
Liabilities
Deposits by banks 9,065 3,434 294
Settlement balances 122,026 74,856 39,289
Due to customers 2,215,117 1,860,023 1,888,895
Accruals, deferred income and other liabilities 71,497 55,309 70,410
Current tax liabilities 5,395 4,820 6,523
Provisions for liabilities and charges 11 24,692 15,080 14,744
Subordinated loan notes 12 19,643 19,541 19,590
Retirement benefit obligations 13 20,018 31,965 39,455
Total liabilities 2,487,453 2,065,028 2,079,200
Equity
Share capital 14 2,562 2,419 2,535
Share premium 14 142,709 101,460 139,991
Merger reserve 31,835 31,835 31,835
Available for sale reserve 206 83 150
Own shares (5,344) (6,561) (6,243)
Retained earnings 170,475 150,505 156,545
Total equity 342,443 279,741 324,813
Total liabilities and equity 2,829,896 2,344,769 2,404,013
The condensed consolidated interim financial statements were approved by the
board of directors and authorised for issue on 24 July 2017 and were signed on
their behalf by:
Philip Howell Chief Executive Paul Stockton Finance Director
Company registered number: 01000403
The accompanying notes form an integral part of the condensed consolidated
interim financial statements.
Consolidated interim statement of cash flows
for the six months ended 30 June 2017
Note Unaudited 30 June 2017 £'000 Unaudited 30 June 2016 £'000 Audited 31 December 2016 £'000
Cash flows from operating activities
Profit before tax 26,586 22,825 50,129
Net profit on disposal of available for sale investment securities (43) - -
Net interest income (5,600) (5,747) (11,571)
Net (recoveries)/impairment charges on impaired loans and advances (15) 1 9
Net charge for provisions 11 16,198 1,014 1,355
Profit on disposal of property, plant and equipment - (13) (16)
Depreciation, amortisation and impairment 10,014 9,925 20,716
Gain on plan amendment of defined benefit pension schemes 13 (5,523) - -
Defined benefit pension scheme charges 2,134 1,652 3,058
Defined benefit pension contributions paid (2,553) (3,268) (5,422)
Share-based payment charges 1,765 1,860 5,201
Interest paid (676) (1,428) (2,308)
Interest received 9,455 10,466 14,085
51,742 37,287 75,236
Changes in operating assets and liabilities:
- net decrease in loans and advances to banks and customers 17,364 46,368 16,785
- net increase in settlement balance debtors (61,410) (81,250) (19,839)
- net increase in prepayments, accrued income and other assets (9,746) (14,328) (6,392)
- net increase in amounts due to customers and deposits by banks 334,991 460,268 486,000
- net increase in settlement balance creditors 82,737 53,375 17,808
- net (decrease)/increase in accruals, deferred income, provisions and other liabilities (2,592) (5,057) 9,762
Cash generated from operations 413,086 496,663 579,360
Tax paid (6,833) (6,435) (12,025)
Net cash inflow from operating activities 406,253 490,228 567,335
Cash flows from investing activities
Acquisition of subsidiaries, net of cash acquired - (2,258) (2,532)
Purchase of property, equipment and intangible assets (9,923) (11,439) (26,137)
Proceeds from sale of property, plant and equipment - 13 16
Purchase of investment securities (295,703) (540,000) (905,701)
Proceeds from sale and redemption of investment securities 405,160 522,745 912,745
Net cash generated from/(used in) investing activities 99,534 (30,939) (21,609)
Cash flows from financing activities
Issue of ordinary shares 17 2,308 2,786 40,199
Dividends paid (18,236) (16,336) (26,479)
Net cash (used in)/generated from financing activities (15,928) (13,550) 13,720
Net increase in cash and cash equivalents 489,859 445,739 559,446
Cash and cash equivalents at the beginning of the period 1,263,074 703,628 703,628
Cash and cash equivalents at the end of the period 17 1,752,933 1,149,367 1,263,074
The accompanying notes form an integral part of the condensed consolidated
interim financial statements.
Notes to the condensed consolidated interim financial statements
1 Basis of preparation
Rathbone Brothers Plc ('the company') is the parent company of a group of
companies ('the group') that provides personalised investment and wealth
management services for private clients, charities and trustees. The group
also provides financial planning, private banking, offshore fund management
and trust administration services. The products and services from which the
group derives its revenues are described in 'our services' on page 3 of the
annual report and accounts for the year ended 31 December 2016 and have not
materially changed since that date.
These condensed consolidated interim financial statements are presented in
accordance with IAS 34 'Interim Financial Reporting' as adopted by the EU. The
condensed consolidated interim financial statements have been prepared on a
going concern basis, using the accounting policies, methods of computation and
presentation set out in the group's financial statements for the year ended 31
December 2016 except as disclosed below. The condensed consolidated interim
financial statements should be read in conjunction with the group's audited
financial statements for the year ended 31 December 2016, which are prepared
in accordance with International Financial Reporting Standards (IFRS) as
adopted by the EU.
The information in this announcement does not comprise statutory financial
statements within the meaning of section 434 of the Companies Act 2006. The
comparative figures for the financial year ended 31 December 2016 are not the
group's statutory accounts for that financial year. The group's financial
statements for the year ended 31 December 2016 have been reported on by its
auditors and delivered to the Registrar of Companies. The report of the
auditors on those financial statements was unqualified and did not draw
attention to any matters by way of emphasis. It also did not contain a
statement under section 498 of the Companies Act 2006.
Developments in reporting standards and interpretations Future new standards
and interpretations
A number of new standards and amendments to standards and interpretations will
be effective for future annual periods beginning after
1 January 2017 and, therefore, have not been applied in preparing these
consolidated financial statements. IFRS 9 'Financial Instruments', IFRS 15
'Revenue from Contracts with Customers' and IFRS 16 'Leases' are expected to
have the most significant effect on the consolidated financial statements of
the group.
IFRS 9 'Financial Instruments'
IFRS 9 is effective for periods commencing on or after 1 January 2018. The
standard was endorsed by the EU during 2016. The group has not adopted this
standard early.
IFRS 9 changes the classification and measurement of financial instruments and
the timing and extent of credit provisioning. The group has conducted a
preliminary assessment of the potential impact, based on the profile of its
financial instruments as at the balance sheet date, and is well advanced in
its approach to classification and valuation.
Classification of financial assets
The basis of classification for financial assets under IFRS 9 is different
from that under IAS 39. Financial assets will be classified into one of three
categories: amortised cost, fair value through profit or loss (FVTPL) or fair
value through other comprehensive income (FVOCI). The held to maturity, loans
and receivables and available for sale categories available under IAS 39 have
been removed. In addition, the classification criteria for allocating
financial assets between categories are different under IFRS 9. The group is
well advanced in its classification of financial assets under the new
standard.
IFRS 9 uses the same measurement bases as IAS 39 and the group has not yet
identified any material differences arising from applying the new standard.
Debt securities currently classified as held to maturity will be classified as
amortised cost. Other assets currently cRecent news on Rathbones
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