REG - Rathbones Group PLC - Interim Results 2022
28/07/2022 07:00
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RNS Number : 9697T Rathbones Group PLC 28 July 2022
Rathbones Group Plc
Interim results
Rathbones Group Plc ("Rathbones") announces interim results for the six months
ended 30 June 2022.
Paul Stockton, Group Chief Executive of Rathbones, said:
"The first half of 2022 has been a turbulent one for investors but despite
this volatility, net inflows remained positive in the period. Our net
operating income totalled £231.9 million to 30 June 2022, an increase of 8.6%
from the £213.5 million last year, reflecting continued net organic and
acquired growth in funds under management and stronger advisory revenues.
Rathbones remains focused on delivering the strategic plans we set out at our
full-year results. Investment in our digital and data capabilities remains
critical to our future success which, supported by high client retention and a
robust balance sheet, places Rathbones in a strong position to navigate
short-term market fluctuations and take advantage of future growth
opportunities in the sector."
Financial highlights:
- Total funds under management and administration were £58.9 billion at 30
June 2022 (30 June 2021: £59.2 billion, 31 December 2021: £68.2 billion).
The MSCI PIMFA Private Investor Balanced index fell 10.0% in the six-month
period to 30 June 2022.
- £43.8 billion in the Investment Management business (30 June 2021:
£47.8 billion).
- £10.9 billion in the Rathbone Funds business (30 June 2021: £11.4
billion).
- £4.2 billion in Saunderson House (30 June 2021: n/a).
- Despite a difficult market backdrop, net inflows in the first half were
positive. Total discretionary and managed net inflows were £0.6 billion (H1
2021: £1.0 billion) in the period to 30 June 2022, representing an annualised
growth rate of 2.3% (H1 2021: 4.5%).
- Discretionary service net inflows totalled £0.4 billion (H1 2021: £0.7
billion).
- Net inflows into our multi-asset fund range (a central part of our
managed offering to the adviser market) were resilient, totalling £0.2
billion and equating to annualised net growth for the period of 22.3% (H1
2021: £0.3 billion).
- Data published by the Investment Association highlights that recent market
volatility and macroeconomic headwinds have driven significant outflows across
the asset management industry. Against that backdrop, single-strategy funds
outflows of £0.2bn in our funds business were relatively resilient, faring
well against peers.
- Underlying net operating income totalled £231.9 million to 30 June 2022,
an increase of 8.6% from the £213.5 million in the corresponding period last
year.
- Income in Investment Management totalled £200.1 million in the first
six months of 2022, an increase of 8.3% on the prior period (30 June 2021:
£184.8 million).
- Income in our funds business totalled £31.8 million in the six months
ended 30 June 2022, an increase of 10.8% on the £28.7 million reported in the
first half of 2021.
- Underlying profit before tax totalled £50.0 million in the first six
months of 2022 (30 June 2021: £62.9 million) and reported profit before tax
for the six months to 30 June 2022 totalled £32.6 million (30 June 2021:
£48.8 million). Both reported and underlying profit are net of planned
expenditure of c.£8m to further our digital and data capabilities in the
first half.
Declaration of interim dividend:
- In line with our progressive dividend policy, we have increased our
interim dividend 3.7% to 28p (30 June 2021: 27p). The record date will be 2
September 2022 and the dividend will be paid on 4 October 2022.
Board changes
- Colin Clark, Senior Independent Director and Non-executive Director has
decided to step down from the board, effective immediately, in order to take
on other responsibilities. Colin joined the board in 2018 and has helped
oversee the appointment of both a new CEO and Chair over that period. His
extensive industry knowledge and experience has been much valued. Sarah
Gentleman, the current Chair of the Remuneration Committee, will assume the
role of Senior Independent Director subject to regulatory approval.
Funds under management and administration
(i) Breakdown of FUMA and flows by service level
6 months ended 30 June 2022 Opening FUM Inflows Outflows Net Flows Service Level Transfers Market Movement (£m) Closing FUM Ann Net Growth
(£m)
(£m)
(£m)
(£m)
(£m)
(£m)
(%)
Discretionary service
Bespoke portfolios 47,986 1,563 (1,262) 301 (161) (6,381) 41,745 1.3%
Managed via in-house funds 1,264 120 (45) 75 49 (144) 1,244 11.9%
Multi-asset funds 1,991 428 (206) 222 (282) 1,931 22.3%
Total discretionary & managed 51,240 2,111 (1,513) 598 (111) (6,807) 44,920 2.3%
Non-discretionary service 1,026 10 (37) (27) (50) (117) 832 -5.3%
Total wealth management 52,267 2,121 (1,551) 571 (161) (6,925) 45,752 2.2%
Single-strategy funds 8,316 988 (1,188) (201) (1,596) 6,519 -4.8%
Execution only & banking 2,659 118 (231) (113) 161 (275) 2,432 -8.5%
Total group (pre acquisitions) 63,242 3,227 (2,971) 257 - (8,796) 54,703 0.8%
Saunderson House 4,917 296 (346) (50) (623) 4,243 -2.0%
Total group 68,159 3,523 (3,317) 207 (9,420) 58,946 0.6%
Q2 ended 30 June 2022 Opening FUM Inflows Outflows Net Flows Service Level Transfers Market Movement (£m) Closing FUM Ann Net Growth
(£m)
(£m)
(£m)
(£m)
(£m)
(£m)
(%)
Discretionary service
Bespoke portfolios 45,619 655 (525) 130 (82) (3,922) 41,745 1.1%
Managed via in-house funds 1,292 47 (23) 23 30 (101) 1,244 7.2%
Multi-asset funds 1,992 200 (79) 121 - (182) 1,931 24.2%
Total discretionary & managed 48,903 902 (628) 274 (52) (4,205) 44,920 2.2%
Non-discretionary service 948 4 (17) (13) (19) (83) 832 -5.6%
Total wealth management 49,851 906 (645) 261 (71) (4,288) 45,752 2.1%
Single-strategy funds 7,571 416 (553) (136) - (916) 6,519 -7.2%
Execution only & banking 2,631 75 (121) (45) 71 (225) 2,432 -6.9%
Total group (pre acquisitions) 60,053 1,397 (1,318) 79 - (5,430) 54,703 0.5%
Saunderson House 4,675 154 (178) (25) (407) 4,243 -2.1%
Total group 64,728 1,551 (1,496) 54 (5,837) 58,946 0.3%
(ii) Breakdown of Rathbone Investment Management FUMA and flows by channel
6 months ended 30 June 2022 Opening FUM Inflows Outflows Net Flows Service Level Transfers Market Movement (£m) Closing FUM Ann Net Growth
(£m)
(£m)
(£m)
(£m)
(£m)
(£m)
(%)
Total direct 37,800 1,097 (1,005) 92 (104) (4,975) 32,814 0.5%
Total financial adviser linked 11,449 586 (302) 284 (8) (1,550) 10,175 5.0%
Total discretionary service 49,249 1,683 (1,307) 376 (111) (6,525) 42,989 1.5%
Non-discretionary service 2,659 118 (231) (113) 161 (275) 2,432 -8.5%
Execution only & banking 1,026 10 (37) (27) (50) (117) 832 -5.3%
Total Investment Management 52,935 1,811 (1,576) 236 0 (6,917) 46,253 0.9%
Q2 ended 30 June 2022 Opening FUM Inflows Outflows Net Flows Service Level Transfers Market Movement (£m) Closing FUM Ann Net Growth
(£m)
(£m)
(£m)
(£m)
(£m)
(£m)
(%)
Total direct 35,944 456 (428) 28 (82) (3,077) 32,814 0.3%
Total financial adviser linked 10,967 246 (121) 125 29 (946) 10,175 4.6%
Total discretionary service 46,911 702 (548) 153 (52) (4,023) 42,989 1.3%
Non-discretionary service 2,631 75 (121) (45) 71 (225) 2,432 -6.9%
Execution only & banking 948 4 (17) (13) (19) (83) 832 -5.6%
Total Investment Management 50,490 781 (686) 94 0 (4,332) 46,253 0.7%
(iii) Total Group FUMA
At 30 June At 5 April
2022 2021 Change 2022 Change
£m £m % £m %
Rathbone Investment Management Gross FUMA 46,253 50,264 (8.0) 50,490 (8.4)
Of which: discretionary wrapped funds(1) (2,439) (2,466) (1.1) (2,593) (5.9)
43,814 47,798 (8.3) 47,897 (8.5)
Rathbone Funds 10,888 11,386 (4.3) 12,156 (10.4)
Saunderson House 4,243 - 100.0 4,675 (9.2)
Total Group FUMA 58,946 59,184 (0.4) 64,728 (8.9)
1. Discretionary wrapped funds represent funds operated by Rathbone Funds,
managed by both Rathbone Investment Management teams and Rathbone Funds
managers
Interim results presentation
A presentation detailing the 2022 interim results is available on the investor
relations website under the tab 'Results Presentations'
(https://www.rathbones.com/investor-relations/results-and-presentations).
A presentation to analysts and investors will take place this morning at
10:30am at our offices at 8 Finsbury Circus, London, EC2M 7AZ. Participants
who wish to join the presentation virtually can do so by either joining the
video
webcast (https://www.investis-live.com/rathbone-brothers/62cc2411d943801400779aa7/rathw)
or by dialling in using the conference call details below:
United Kingdom: 0800 640 6441
United Kingdom (Local) : 020 3936 2999
All other locations : +44 203 936 2999
Participant access code: 581500
A Q&A session will follow the presentation. Participants will be able to
ask their questions either via the webcast by typing them in or via the
conference call line.
A recording of the presentation will be available later today on our website
at: www.rathbones.com/investor-relations/results-and-presentations.
28 July 2022
For further information contact:
Rathbones Group Plc
Tel: 020 7399 0000
Email: shelly.patel@rathbones.com
Paul Stockton, Group Chief Executive
Jennifer Mathias, Group Chief Financial Officer
Shelly Patel, Head of Investor Relations
Camarco
Tel: 020 3757 4984
Email: ed.gascoigne-pees@camarco.co.uk
Ed Gascoigne-Pees
Julia Tilley
Rathbones Group Plc
Rathbones provides individual investment and wealth management services for
private clients, charities, trustees and professional partners. We have been
trusted for generations to manage and preserve our clients' wealth. Our
tradition of investing and acting responsibly has been with us from the
beginning and continues to lead us forward. Our ambition is to be recognised
as the UK's most responsible wealth manager.
Rathbones has over 1,900 staff in 15 UK locations and Jersey; its headquarters
is 8 Finsbury Circus, London, EC2M 7AZ.
www.rathbones.com
Chair and CEO statement
Market overview and client interaction
The first half of 2022 was not the easiest in terms of making investment
decisions. Investors have been confronted by high inflation, rising interest
rates and the conflict in Ukraine, all of which contributed to a weaker
outlook for global economic growth and corporate earnings. General market
sentiment remains nervous about the potential for recession in many economies.
It is at times like these that our business responds by repositioning
portfolios to explore buying opportunities and through providing reassurance
and advice to our clients. Many clients are thinking hard about their asset
allocation, fund choices and portfolios. Our teams have spent much time in the
first half of 2022 talking through market movements and continuing to help
them plan their futures.
Market corrections are painful, but we believe that the wealth and asset
management industry continues to be attractive for the long term.
Performance, FUMA and financial review
Total funds under management and administration for the group were £58.9
billion at 30 June 2022 (H1 2021: £59.2 billion, FY 2021: £68.2 billion).
This comprised £43.8 billion in the Investment Management business (H1 2021:
£47.8 billion, FY 2021: £50.3 billion), £10.9 billion in the Rathbone Funds
business (H1 2021: £11.4 billion, FY 2021: £13.0 billion) and £4.2 billion
in Saunderson House (H1 2021: £nil, FY 2021: £4.9 billion). The MSCI PIMFA
Private Investor Balanced index fell 10.0% in the six-month period to 30 June
2022.
Investment performance has been impacted in the first half as markets moved
very quickly to adjust to a riskier environment. While the moves have been
dramatic, they have not been even across geographies, sectors or themes.
Markets driven by macro themes and styles are never an easy environment to
navigate for long-term investors. The winners of the last few years have
generally suffered this year, performing poorly compared to sectors such as
energy. The latter was up over 60% at one stage, before falling back
significantly. More generally, 'growth' as an investment style has
underperformed 'value' this year, and 'quality' as an investment style has
also significantly underperformed. Like many in the industry, this has reduced
our levels of funds under management.
Despite the current market, net inflows in the period have been positive.
Discretionary service net inflows totalled £0.4 billion in the first six
months (H1 2021: £0.7 billion). External inflows of £0.2 billion into our
multi-asset fund range (a central part of our managed offering to the adviser
market) were resilient in the period (H1 2021: £0.3 billion). Total
discretionary and managed net inflows were £0.6 billion (H1 2021: £1.0
billion) in the period to 30 June 2022, representing an annualised growth rate
of 2.3% (H1 2021: 4.5%).
Our intermediary sales team continues to perform well, with indirect
net flows from advisers into our discretionary services at £0.3 billion in
H1 2022 (H1 2021: £0.4 billion).
The whole market for asset management businesses has been volatile, suffering
net outflows as a sector to the end of June, according to data published by
the Investment Association. Our funds have shown resilience and despite
single-strategy funds suffering net outflows of £0.2 billion (H1 2021: net
inflows of £0.5 billion), they did attract nearly £1.0 billion of gross
inflows and have fared well against peers. Rathbones was ranked in 10th
position for total net retail sales in the UK in the first quarter of 2022
(source: Pridham Report).
Investment Management fee income of £139.4 million in the first half of 2022
was consistent with the £140.7 million recorded in H1 2021. Income in the
Funds business increased to £32.1 million year-on-year (H1 2021: £27.8
million).
Commission income of £26.9 million was lower than the first six months of
2021 (£31.2 million), with the prior period benefitting from higher trading
volumes. We expect normal seasonality to reduce commission income in the
second half, albeit first half rises in Bank of England base rates will
positively impact net interest income. Net interest income totalled £6.1
million (H1 2021: £2.4 million), reflecting the steady increases to the UK
base rate since the start of the year.
Fees from advisory and other services increased considerably to £26.9 million
during the first half of 2022 (30 June 2021: £9.7 million) and includes six
full months of Saunderson House (acquired in October 2021) income totalling
£17.0 million (H1 2021: £nil) and ongoing growth in Rathbone Financial
Planning.
Total operating income for the group was £231.9 million, up 8.6%
year-on-year.
Underlying operating expenses totalled £182.0 million for the first half (H1
2021: £150.7 million). Fixed staff costs of £79.6 million (H1 2021: £62.9
million) reflect the impact of the Saunderson House acquisition which added
£7.6 million (H1 2021: £nil), salary inflation and planned headcount growth
to support our digital and change agenda. Variable staff costs of £44.2
million (H1 2021: £41.9 million) include Saunderson House but also reflect
lower performance-based awards. Other direct expenses of £58.1 million (H1
2021: £45.9 million) include the planned investment into our digital and data
strategy as well as costs in relation to the addition of Saunderson House.
Underlying profit before tax totalled £50.0 million in H1 2022 (H1 2021:
£62.9 million) and profit before tax totalled £32.6 million (H1 2021: £48.8
million). The underlying operating margin at 30 June 2022 was 21.5% (30 June
2021: 29.4%). Figures include the planned spend of c.£8 million in respect of
our digital and data strategy as well as asset management system capability.
After this period of planned expenditure, margins are expected to return to
over 27%, mindful of market conditions. A full reconciliation between profit
before tax and underlying profit before tax can be found in note 4 of the
financial statements.
Our balance sheet remains robust with a consolidated Common Equity Tier 1
ratio of 16.7% at 30 June 2022 (31 December 2021: 18.7%). Our capital surplus
of own funds (excluding year-to-date post-tax profits) over our regulatory
capital requirement was £96.7 million at 30 June 2022 (£115.1 million at 31
December 2021). Following the Financial Policy Committee's announcement of the
increases to the countercyclical capital buffer for UK exposures, based on our
current risk-weighted assets, we expect our capital requirement to increase by
c. £16 million in December 2022 and then by a further c.£16 million in July
2023.
Interim dividend
In line with our progressive dividend policy, we have increased our interim
dividend 3.7% to 28p (30 June 2021: 27p), reflecting our business and balance
sheet strengths. The record date will be 2 September 2022 and the dividend
will be paid on 4 October 2022.
Business review
Wealth management
The group now offers a comprehensive range of investment and financial advice
solutions that are designed to cater to a range of client needs. Client
retention has remained strong at 96.6% (H1 2021: 95.8%, FY 2021: 93.3%).
Investing responsibly remains at the heart of our core values. We are
committed to our own views on the Environmental, Social and Governance (ESG)
profile of the investments we make and have strengthened our core investment
process over this period. These add to our stewardship capability. All
investment teams have completed a CISI qualification on responsible investing.
The Rathbone Greenbank team continues to grow, and we have added both
investment and business development resources. Flows into the Rathbone
Greenbank Multi-Asset Portfolios have been positive in the period.
Rathbones has a strong market position in the ESG space, receiving an ESG
rating of AA from MSCI. Our Stewardship Director also recently received the
Editor's Choice Award at the ESG Clarity Awards this year.
Work with intermediaries continues to be an important area for growth and in
the first half we launched a new 'Reliance on Adviser' proposition for select
advisers which removes duplication of documentation. This approach will create
capacity, streamline client onboarding and make us an easier business to work
with.
Our digital and data strategy objective is to support future growth and
efficiency through improved client and investment manager experiences. We have
made significant improvements to the quality of client reports through
redesigned, content-rich valuations and tax packs. Around 60% of clients are
now receiving updates digitally in place of hard copies. Now 45% of clients
interact with MyRathbones, our digital gateway accessed either online or via
an app, with regular updates taking place in response to client and adviser
feedback.
Work with InvestCloud to improve the digital experience for client
prospecting, onboarding, and servicing for our clients continues to progress.
Alongside our in-house financial planning team, in June 2022, we launched our
new propositions for Saunderson House clients following the completion of the
acquisition of that business in October 2021. These leverage the strength and
depth of Rathbones' investment management solutions and combine them with
financial advice.
Vision Independent Financial Planning continues to operate independently as an
important part of the group. The network has now grown to 128 advisers that
manage FUMA of £2.4 billion (31 December 2021: £2.7 billion).
Asset management (Funds)
The asset management business remains an important part of our organic growth
strategy. It builds scale and expertise in core product areas, engages in
disciplined investment processes and works closely with the larger wealth
management business.
Our product range remains relevant to the needs of financial advisers,
investment managers and clients. This approach means that the product range we
offer is diversified through a mix of equity, fixed income and risk-adjusted
mandates; the latter designed to provide more 'all-weather' solutions.
Rathbones was awarded 'Multi-Asset Group of the Year' at the Professional
Adviser Awards this year.
Our focus for the business remains on delivering growth and implementing
Charles River's portfolio management system by the end of 2022.
Finally, we understand that not all funds can outperform all of the time and
the recent market falls have highlighted this, particularly for our
growth-orientated funds. That said, a diversified product range helps in these
times and interest in our fixed income products is growing amongst investors.
We are confident in our award winning and highly talented team of fund
managers, each of whom has a clear philosophy and process, supported by
governance processes that maintain discipline. Short-term underperformance is
well understood by our investors and we remain committed to ongoing
communication.
Our people
Our employee engagement remains high, scoring 8/10 (0.3 above the financial
services benchmark) during our most recent people survey in July. In addition,
the response to the question asking how likely employees would be to recommend
Rathbones as a place to work scored 8.3/10 (0.4 above the financial services
benchmark). We recognise the importance of employee feedback and now our
surveys are being run on a quarterly basis.
The ways that we live and work have changed. That which functioned well in the
past will not necessarily do so in the future. To this end, we have started to
re-organise our offices for hybrid working. Our new Edinburgh office, which we
moved to in June, has been designed around this philosophy. The office
features specially configured meeting rooms and pods, collaboration booths,
sit/stand desks, lockers, community space and a client lounge.
During the first half, we also launched our Diversity, Equality and Inclusion
(DE&I) strategy. This is a business built on highly personal
relationships, and it is our hope that this new DE&I strategy will guide
us towards a better future for our colleagues, clients and communities.
Principal risks and uncertainties
The most important changes to the group's principal risks and uncertainties
relate to recent market falls and the changing economic and political
landscape. This will impact investment performance and client
sentiment. Otherwise, the principal risks and uncertainties set out in our
2021 annual report and accounts have not materially changed. These are in the
strategic report and group risk committee report in pages 46 to 53 and pages
86 to 89 of the 2021 Annual Report.
We continue to be conscious of the impact of the changing risk landscape to
our clients, our people and our industry. Risks associated with ESG factors,
including climate change, financial crime and anti-money laundering, along
with the potential for supply chain risks, are considered and assessed
regularly. We remain alert in respect of potential cyber threats.
Regulation
We respond to regulatory changes and acknowledge recent FCA and PRA
consultation activity and statements. We expect further regulatory guidance
and policy statements on a range of topics in the near term and will respond
appropriately.
Board changes
James Dean stepped down at the Annual General Meeting (AGM) in May as planned,
having served nine years on the board. James has made a huge contribution to
the board, both as a non-executive director and chair of the audit committee.
As part of the board's succession plans, Iain Cummings succeeded James as
chair of the
audit committee.
Colin Clark, Senior Independent Director and Non-executive Director, has
decided to step down from the board, effective immediately, in order to take
on other responsibilities. Colin joined the board in 2018 and has helped
oversee the appointment of both a new CEO and Chair over that period. His
extensive industry knowledge and experience has been much valued. Sarah
Gentleman, the current Chair of the Remuneration Committee, will assume the
role of Senior Independent Director subject to regulatory approval.
On behalf of the entire board, we would like to express our thanks to Colin
for his valuable insights and contributions to the board and the committees on
which he served. We wish him well in his future endeavours.
Responsible business agenda
We published our first responsible business report in the first half of the
year to highlight progress across the four pillars of our programme. These
include welcoming interns from the #10,000 BlackInterns initiative and joining
the Business Disability Forum. Having supported the Ukraine appeals run by the
Disasters Emergency Committee and the British Red Cross, we are also entering
the second year of our partnership with Social Shifters, supporting their
Global Innovation Challenge.
In the second half of 2022, we will continue working with the Science Based
Targets initiative to verify our near-term net zero emissions targets. To
further strengthen our approach to financial education and awareness we will
join with an external partner to expand the scope of our current programme. We
will share our new people strategy and continue supporting our colleagues as
we return to the office.
Going concern
As set out in the statement of directors' responsibilities of the condensed
consolidated interim financial statements, the directors believe that the
group is well positioned to manage its business risks successfully.
The group's financial projections, and the capital adequacy and liquidity
assessment, which is required to apply extreme stress scenarios to these
projections, provide comfort that the group has adequate financial and
regulatory resources to continue in operational existence for the foreseeable
future. In forming their view, the directors have considered the group's
prospects for a period exceeding 12 months from the date the condensed
consolidated interim financial statements are approved.
Outlook for the remainder of the year
Although market levels in the first half were lower than expected, we continue
to see strong client engagement and positive net flows. We expect normal
commission seasonality in the second half, although first half rises in Bank
of England base rates will positively impact net interest income.
Our digital and data strategy programmes remain critical to client engagement
and efficiency, irrespective of short-term adverse fluctuations in investment
markets. Costs remain in line with our full-year 2022 guidance of £20
million and outcomes we set to achieve by the end of 2023 are expected to be
realised.
Planned acquisition-related costs in full year 2022 will reflect the
previously noted £10 million in relation to Saunderson House and £4 million
for Speirs & Jeffrey deferred consideration.
Rathbones is resilient, with a strong balance sheet and recognised market
position. Market conditions are clearly different to 31 December 2021, and
while we will ensure ongoing expense discipline, strategic expenditure remains
an important part of future growth. We therefore expect a short-term operating
margin of low 20s for 2022 but continue to aim to operating margins of 27-30%
from 2024 onwards.
Our clients remain the priority. Our investment teams will continue to work
with them to navigate through difficult markets to help them plan for their
futures.
Clive Bannister Paul Stockton
Chair Group Chief Executive Officer
27 July 2022
Condensed consolidated interim financial statements
Consolidated interim statement of comprehensive income
for the six months ended 30 June 2022
Note Unaudited Unaudited Audited
Six months to
Six months to
Year to
30 June 2022
30 June 2021
31 December 2021
£'000
£'000
£'000
Interest and similar income 16,368 4,145 7,710
Interest expense and similar charges (10,271) (1,751) (3,834)
Net interest income 6,097 2,394 3,876
Fee and commission income 239,177 223,430 457,696
Fee and commission expense (13,869) (14,001) (29,062)
Net fee and commission income 225,308 209,429 428,634
Other operating income 535 1,718 3,417
Operating income 231,940 213,541 435,927
Charges in relation to client relationships and goodwill 14 (9,924) (7,198) (15,595)
Acquisition-related costs 6 (7,426) (6,870) (10,089)
Other operating expenses (181,976) (150,678) (315,208)
Operating expenses (199,326) (164,746) (340,892)
Profit before tax 32,614 48,795 95,035
Taxation 8 (7,625) (10,838) (19,806)
Profit for the period attributable to equity holders of the company 24,989 37,957 75,229
Other comprehensive income:
Items that will not be reclassified to profit or loss
Net remeasurement of defined benefit asset/liability 3,315 7,990 17,091
Deferred tax relating to the net remeasurement of defined benefit 961 (1,518) (3,247)
asset/liability
Other comprehensive income net of tax 4,276 6,472 13,844
Total comprehensive income for the period net of tax attributable to equity 29,265 44,429 89,073
holders of the company
Dividends paid and proposed for the period per ordinary share 9 28.0p 27.0p 81.0p
Dividends paid and proposed for the period 16,388 15,543 49,501
Earnings per share for the period attributable to equity holders of the 10
company:
- basic 42.7p 69.9p 133.5p
- diluted 41.6p 67.0p 129.3p
Consolidated interim statement of changes in equity
for the six months ended 30 June 2022
Note Share capital Share premium Merger reserve Own shares Retained earnings Total equity
£'000
£'000
£'000
£'000
£'000
£'000
At 1 January 2021 2,874 215,092 71,756 (46,744) 270,849 513,827
Profit for the period 37,957 37,957
Net remeasurement of defined benefit liability 7,990 7,990
Deferred tax relating to components of other comprehensive income (1,518) (1,518)
Other comprehensive income net of tax - - - - 6,472 6,472
Dividends paid (25,938) (25,938)
Issue of share capital 18 196 73,918 - - - 74,114
Share-based payments: -
- value of employee services (10,572) (10,572)
- cost of own shares acquired (1,829) (1,829)
- cost of own shares vesting 166 (166) -
- tax on share-based payments 739 739
At 30 June 2021 (unaudited) 3,070 289,010 71,756 (48,407) 279,341 594,770
Profit for the period 37,272 37,272
Net remeasurement of defined benefit asset 9,101 9,101
Deferred tax relating to components of other comprehensive income (1,729) (1,729)
Other comprehensive income net of tax - - - - 7,372 7,372
Dividends paid (18,022) (18,022)
Issue of share capital 18 30 2,016 5,209 - - 7,255
Share-based payments:
- value of employee services 7,325 7,325
- cost of own shares acquired (13,301) (13,301)
- cost of own shares vesting 25,082 (25,082) -
- tax on share-based payments 611 611
At 31 December 2021 (audited) 3,100 291,026 76,965 (36,626) 288,817 623,282
Profit for the period 24,989 24,989
Net remeasurement of defined benefit asset 3,315 3,315
Deferred tax relating to components of other comprehensive income 961 961
Other comprehensive income net of tax - - - - 4,276 4,276
Dividends paid (32,054) (32,054)
Issue of share capital 18 52 12,787 - - - 12,839
Share-based payments:
- value of employee services 2,482 2,482
- cost of own shares acquired (10,843) (10,843)
- cost of own shares vesting 2,217 (2,217) -
- tax on share-based payments 1,172 1,172
At 30 June 2022 (unaudited) 3,152 303,813 76,965 (45,252) 287,465 626,143
Comprehensive interim balance statement
as at 30 June 2022
Note Unaudited Unaudited Audited
30 June 2022
30 June 2021
31 December 2021
£'000
£'000
£'000
Assets
Cash and balances with central banks 1,683,670 1,414,086 1,463,294
Settlement balances 137,672 127,818 69,750
Loans and advances to banks 186,206 158,986 203,589
Loans and advances to customers 11 189,960 186,166 179,840
Investment securities:
- fair value through profit or loss 11,906 112,579 29,934
- amortised cost 829,970 714,765 761,654
Prepayments, accrued income and other assets 124,260 116,285 115,992
Property, plant and equipment 12 14,012 13,814 13,059
Right-of-use assets 13 41,606 42,460 43,895
Current tax asset 6,167 247 2,272
Net deferred tax asset - 3,406 -
Intangible assets 14 365,245 228,417 376,187
Retirement benefit asset 17 15,887 - 12,287
Total assets 3,606,561 3,119,029 3,271,753
Liabilities
Deposits by banks 19,587 1,604 2,212
Settlement balances 139,916 152,745 60,075
Due to customers 2,582,703 2,193,869 2,333,011
Accruals, deferred income and other liabilities 122,799 91,474 129,174
Lease liabilities 52,739 53,627 54,971
Current tax liabilities 275 - -
Net deferred tax liability 11,523 - 13,811
Provisions for liabilities and charges 15 10,984 9,286 15,324
Subordinated loan notes 16 39,892 19,964 39,893
Retirement benefit obligation 17 - 1,690 -
Total liabilities 2,980,418 2,524,259 2,648,471
Equity
Share capital 18 3,152 3,070 3,100
Share premium 18 303,813 289,010 291,026
Merger reserve 18 76,965 71,756 76,965
Own shares (45,252) (48,407) (36,626)
Retained earnings 287,465 279,341 288,817
Total equity 626,143 594,770 623,282
Total liabilities and equity 3,606,561 3,119,029 3,271,753
The condensed consolidated interim financial statements were approved by the
board of directors and authorised for issue on 27 July 2022 and were signed on
its behalf by:
Jennifer Mathias
Paul Stockton Group Chief Financial Officer
Group Chief Executive Officer
Company registered number: 01000403
27 July 2022
Consolidated interim statement of cash flows
for the six months ended 30 June 2022
Note Unaudited Unaudited Audited
30 June 2022
30 June 2021
31 December 2021
£'000
£'000
£'000
Cash flows from operating activities
Profit before tax 32,614 48,795 95,035
Change in fair value through profit or loss 525 (218) (670)
Net interest income (6,097) (2,394) (3,876)
Net impairment charges/(recoveries) on loans and advances 13 (576) (712)
Net charge for provisions 15 330 892 3,118
Loss on disposal of right-of-use assets - 81 -
Depreciation, amortisation and impairment 17,564 14,645 31,279
Foreign exchange movements (6,406) 178 (519)
Defined benefit pension scheme charges (117) 63 105
Defined benefit pension contributions paid (168) (168) (5,086)
Share-based payment charges 14,337 10,290 20,132
Interest paid (9,034) (2,469) (4,994)
Interest received 13,510 3,480 11,225
57,071 72,599 145,037
Changes in operating assets and liabilities:
- net increase in loans and advances to banks and customers (10,355) (14,519) (41,409)
- net (increase)/decrease in settlement balance debtors (67,922) (37,445) 20,624
- net increase in prepayments, accrued income and other assets (5,242) (16,906) (9,113)
- net increase/(decrease) in amounts due to customers and deposits by 267,210 (367,186) (227,435)
banks
- net increase/(decrease) in settlement balance creditors 79,841 57,333 (35,336)
- net decrease in accruals, deferred income, provisions and other (12,952) (10,417) (39,381)
liabilities
Cash generated from/(used in) operations 307,651 (316,541) (187,013)
Tax paid (11,398) (12,898) (27,207)
Net cash inflow/(outflow) from operating activities 296,253 (329,439) (214,220)
Cash flows from investing activities
Acquisition of subsidiaries, net of cash acquired - - (79,736)
Purchase of property, equipment and intangible assets (9,108) (7,926) (12,632)
Purchase/(disposal) of right-of-use assets 2,748 (119) (70)
Purchase of investment securities (555,202) (579,905) (932,386)
Proceeds from sale and redemption of investment securities 490,802 515,481 821,790
Net cash used in investing activities (70,760) (72,469) (203,034)
Cash flows from financing activities
Net (repurchase)/issue of ordinary shares 22 (3,703) 50,476 44,335
Repayment of subordinated loan notes - - (20,114)
Net proceeds from the issue of subordinated loan notes - - 39,893
Dividends paid (32,054) (25,938) (43,960)
Payment of lease liabilities (5,662) (2,497) (5,109)
Interest paid (1,128) (453) (895)
Net cash (used in)/generated from financing activities (42,547) 21,588 14,150
Net increase/(decrease) in cash and cash equivalents 182,946 (380,320) (403,104)
Cash and cash equivalents at the beginning of the period 1,653,590 2,056,694 2,056,694
Cash and cash equivalents at the end of the period 22 1,836,536 1,676,374 1,653,590
Notes to the condensed consolidated interim financial statements
Notes to the condensed consolidated interim financial statements
1 Basis of preparation
Rathbones Group Plc ('the company') is the parent company of a group of
companies ('the group') that is a leading provider of
high-quality, personalised investment and wealth management services for
private clients, charities and trustees. This includes discretionary
investment management, unit trusts, tax planning, trust and company
management, pension advice and banking services. The products and services
from which the group derives its revenues are described in 'Rathbones at a
glance' on
pages 6 to 7 of the annual report and accounts for the year ended 31 December
2021 and have not materially changed since that date.
These condensed consolidated interim financial statements, on pages 7 to 28,
are presented in accordance with United Kingdom adopted international
accounting standards. 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 2021. The condensed consolidated
interim financial statements should be read in conjunction with the group's
audited financial statements for the year ended 31 December 2021, which are
prepared in accordance with UK-adopted International Accounting Standards.
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 2021 are not the
group's statutory accounts for that financial year. The group's financial
statements for the year ended 31 December 2021 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
Standards and interpretations adopted during the current reporting period
The following amendments to standards have been adopted in the current period,
but have not had a significant impact on the amounts reported in these
financial statements:
- Onerous Contracts - Cost of Fulfilling a Contract (Amendments to IAS 37)
- Annual Improvements to IFRS Standards 2018-2020
- Property, Plant and Equipment: Proceeds before Intended Use (Amendments to
IAS 16)
- Reference to the Conceptual Framework (Amendments to IFRS 3)
Future new standards and interpretations
The following standards are effective for annual periods beginning after 1
January 2023 and earlier application is permitted; however, the group has not
early-adopted the amended standards in preparing these consolidated financial
statements.
Standards available for early adoption Effective date
IFRS 17 Insurance Contracts 01 January 2023
Classification of liabilities as current or non-current (Amendments to IAS 1) 01 January 2023
Amendments to IFRS 17 01 January 2023
Disclosure of Accounting Policies (Amendments to IAS 1 and IFRS Practice 01 January 2023
Statement 2)
Definition of Accounting Estimate (Amendments to IAS 8) 01 January 2023
Deferred Tax Related to Assets and Liabilities Arising from a Single 01 January 2023
Transaction -
Amendments to IAS 12 Income Taxes
Sale or Contribution of Assets between an Investor and its Associate or Joint Optional
Venture
(Amendments to IFRS 10 and IAS 28)
None of the standards not yet effective are expected to have a material impact
on the group's financial statements.
2 Changes in significant accounting policies
The accounting policies applied in these condensed consolidated interim
financial statements are the same as those applied in the group's consolidated
financial statements as at and for the year ended 31 December 2021.
3 Critical accounting judgements and key sources of estimation and
uncertainty
The group has reviewed the judgements and estimates that affect its accounting
policies and amounts reported in its financial statements. These are unchanged
from those reported in the group's financial statements for the year ended 31
December 2021.
During the prior year, the group acquired the entire share capital of
Saunderson House Limited. The group accounted for the transaction as a
business combination, as set out in note 5.
The payment of certain elements of consideration was deferred. The proportion
of the deferred payments that are contingent on the recipients remaining
employees of the group for a specific period are accounted for as remuneration
for ongoing services in employment. The group's estimate of the amounts
ultimately payable will be expensed over the deferral period.
The group continues to monitor the valuation of the consideration payable to
the senior management team of Saunderson House Limited (note 5). The deferred
payments are subject to the achievement of certain operational and performance
targets at 31 December 2024. A provision for the expected consideration has
been made.
Under the terms of the agreements, the award ranges from a payment of £nil to
a maximum possible payment of £7.2 million. Management's best estimate of
this award at 30 June 2022 was £5.0 million, based on expected qualifying
funds under management at 31 December 2024 of £5.0 billion. The maximum award
of £7.2 million, which represents qualifying funds under management of
approximately £8.6 billion at the end of 2024, would result in an additional
charge to profit or loss for the period to 30 June 2022 of £0.4 million.
4 Segmental information
For management purposes, the group is organised into two operating divisions:
Investment Management and Funds. Centrally incurred indirect expenses are
allocated to these operating segments on the basis of the cost drivers that
generate the expenditure. These are, principally, the headcount of staff
directly involved in providing those services from which the segment earns
revenues, the value of funds under management and the segment's total
revenue. The allocation of these costs is shown in a separate column in the
table below, alongside the information presented for internal reporting to
the executive committee, which is the group's chief operating decision-maker.
Six months ended 30 June 2022 (unaudited) Investment Management Funds Indirect expenses Total
£'000
£'000
£'000
£'000
Net investment management fee income 139,353 32,101 - 171,454
Net commission income 26,856 - - 26,856
Net interest income 6,052 45 - 6,097
Fees from advisory services and other income 27,812 (279) - 27,533
Operating income 200,073 31,867 - 231,940
Staff costs - fixed (54,522) (3,796) (21,315) (79,633)
Staff costs - variable (34,765) (7,013) (2,417) (44,195)
Total staff costs (89,287) (10,809) (23,732) (123,828)
Other direct expenses (22,419) (5,275) (30,454) (58,148)
Allocation of indirect expenses (50,065) (4,121) 54,186 -
Underlying operating expenses (161,771) (20,205) - (181,976)
Underlying profit before tax 38,302 11,662 - 49,964
Charges in relation to client relationships and goodwill (note 14) (9,924) - - (9,924)
Acquisition-related costs (note 6) (6,334) - (1,092) (7,426)
Segment profit before tax 22,044 11,662 (1,092) 32,614
Taxation (note 8) (7,625)
Profit for the period attributable to equity holders of the company 24,989
Investment Management Funds Total
£'000
£'000
£'000
Segment total assets 3,436,315 154,359 3,590,674
Unallocated assets 15,887
Total assets 3,436,315 154,359 3,606,561
4 Segmental information continued
Six months ended 30 June 2021 (unaudited) Investment Management Funds Indirect expenses Total
£'000
£'000
£'000
£'000
Net investment management fee income 140,660 27,807 - 168,467
Net commission income 31,197 - - 31,197
Net interest income 2,393 1 - 2,394
Fees from advisory services and other income 10,621 862 - 11,483
Operating income 184,871 28,670 - 213,541
Staff costs - fixed (43,737) (2,299) (16,821) (62,857)
Staff costs - variable (29,919) (6,795) (5,198) (41,912)
Total staff costs (73,656) (9,094) (22,019) (104,769)
Other direct expenses (20,257) (5,864) (19,788) (45,909)
Allocation of indirect expenses (37,738) (4,069) 41,807 -
Underlying operating expenses (131,651) (19,027) - (150,678)
Underlying profit before tax 53,220 9,643 - 62,863
Charges in relation to client relationships and goodwill (note 14) (7,198) - - (7,198)
Acquisition-related costs (note 6) (6,468) - (402) (6,870)
Segment profit before tax 39,554 9,643 (402) 48,795
Profit before tax attributable to equity holders of the company 48,795
Taxation (note 8) (10,838)
Profit for the period attributable to equity holders of the company 37,957
Investment Management Funds Total
£'000
£'000
£'000
Segment total assets 2,907,675 204,550 3,112,225
Unallocated assets 6,804
Total assets 2,907,675 204,550 3,119,029
Year ended 31 December 2021 (audited) Investment Management Funds Indirect expenses Total
£'000
£'000
£'000
£'000
Net investment management fee income 288,089 61,289 - 349,378
Net commission income 53,596 - - 53,596
Net interest income 3,874 2 - 3,876
Fees from advisory services and other income 27,265 1,812 - 29,077
Operating income 372,824 63,103 - 435,927
Staff costs - fixed (89,343) (5,210) (35,260) (129,813)
Staff costs - variable (61,872) (16,833) (11,426) (90,131)
Total staff costs (151,215) (22,043) (46,686) (219,944)
Other direct expenses (37,488) (10,084) (47,692) (95,264)
Allocation of indirect expenses (85,767) (8,611) 94,378 -
Underlying operating expenses (274,470) (40,738) - (315,208)
Underlying profit before tax 98,354 22,365 - 120,719
Charges in relation to client relationships and goodwill (note 14) (15,595) - - (15,595)
Acquisition-related costs (note 6) (9,635) - (454) (10,089)
Segment profit before tax 73,124 22,365 (454) 95,035
Profit before tax attributable to equity holders of the company 95,035
Taxation (note 8) (19,806)
Profit for the year attributable to equity holders of the company 75,229
Investment Management Funds Total
£'000
£'000
£'000
Segment total assets 3,132,898 126,568 3,259,466
Unallocated assets 12,287
Total assets 3,132,898 126,568 3,271,753
Included within Investment Management operating income is £1,018,000 (30 June
2021: £1,072,000; 31 December 2021: £2,264,000) of fees and commissions
receivable from the Funds business. Intersegment sales are charged at
prevailing market prices.
The following table reconciles underlying operating expenses to operating
expenses:
Unaudited Unaudited Audited
Six months to
Six months to
Year to
30 June 2022
30 June 2021
31 December 2021
£'000
£'000
£'000
Underlying operating expenses 181,976 150,678 315,208
Charges in relation to client relationships and goodwill (note 14) 9,924 7,198 15,595
Acquisition-related costs (note 6) 7,426 6,870 10,089
Underlying operating expenses 199,326 164,746 340,892
Geographic analysis
The following table presents operating income analysed by the geographical
location of the group entity providing the service:
Unaudited Unaudited Audited
Six months to
Six months to
Year to
30 June 2022
30 June 2021
31 December 2021
£'000
£'000
£'000
United Kingdom 224,958 206,327 421,386
Jersey 6,927 7,214 14,541
Rest of World 55 - -
Operating income 231,940 213,541 435,927
The group's non-current assets are substantially all located in the United
Kingdom.
Timing of revenue recognition
The following table presents operating income analysed by the timing of
revenue recognition of the operating segment providing the service:
Unaudited Unaudited Audited
Six months to
Six months to
Year to
30 June 2022
30 June 2021
31 December 2021
Investment Management Funds Investment Management Funds Investment Management Funds
£'000
£'000
£'000
£'000
£'000
£'000
Products and services transferred at a point in time 30,516 - 33,786 - 44,190 -
Products and services transferred over time 169,557 31,867 151,085 28,670 327,486 64,251
Operating income 200,073 31,867 184,871 28,670 371,676 64,251
Major clients
The group is not reliant on any one client or group of connected clients for
generation of revenues. At 30 June 2022, the group provided investment
management services to 67,171 clients (30 June 2022: 61,200; 31 December 2021:
66,480).
5 Business combinations
Speirs & Jeffrey
On 31 August 2018, the group acquired 100% of the ordinary share capital of
Speirs & Jeffrey Limited ('Speirs & Jeffrey').
Deferred and contingent payments
The group has now provided for the total cost of deferred and contingent
payments to be made to the vendors for the sale of the shares of Speirs &
Jeffrey. These payments required the vendors to remain in employment with the
group for the duration of the respective deferral periods. Hence, they were
treated as remuneration for post-combination services and the grant date fair
value was charged to profit and loss over the respective vesting periods. The
group continues to provide for related incentivisation awards for other staff.
The payments are to be made in shares and are being accounted for as
equity-settled share-based payments under IFRS 2:
- initial share consideration was payable on completion. However, although
the shares were issued on the date of acquisition, they vested during the
prior year at the third anniversary of the acquisition date.
- earn-out consideration and related incentivisation awards were subject to
the delivery of certain operational and financial performance targets. The
awards were payable in two parts in the third and fourth years following the
acquisition date. The second earn-out vested during the prior year.
Further details of each of these elements are as follows:
Unaudited Unaudited Audited
Six months to
Six months to
Year to
30 June 2022
30 June 2021
31 December 2021
£'000
£'000
£'000
Initial share consideration - 3,461 4,533
Earn-out consideration and incentivisation awards 2,667 3,005 1,430
2,667 6,466 5,963
These costs are being reported as staff costs within acquisition-related costs
(see note 6).
Saunderson House Limited
On 20 October 2021, the group acquired 100% of the ordinary share capital of
the Saunderson House group. Full details of the acquisition are set out in
note 8 of the 2021 report and accounts.
Total consideration comprised an initial cash payment of £87,981,000, and was
paid on 20 October 2021. A further £45,208,000 was paid to the vendors on
completion to settle debt of the acquired group. This debt, now payable to
Rathbones Group Plc, was included in the value of net assets acquired.
Deferred cash consideration of £10,873,000 is payable on the first
anniversary of the acquisition date to vendors who are not required to remain
in employment with the group.
Other deferred payments
The group continues to provide for the cost of other deferred and contingent
payments to be made to individuals required to remain in employment with the
group for the duration of the respective deferral periods, as set out in note
8 of the 2021 report and accounts.
All of these payments are to be made 100% in shares and are being accounted
for as equity-settled share-based payments under IFRS 2.
The charge recognised in profit or loss for the above elements is as follows:
Unaudited Unaudited Audited
Six months to
Six months to
Year to
30 June 2022
30 June 2021
31 December 2021
£'000
£'000
£'000
Initial cash consideration 901 - 358
Deferred share consideration 2,002 - 802
Incentivisation awards 764 - 245
Total consideration 3,667 - 1,405
6 Acquisition-related costs
Unaudited Unaudited Audited
Six months to
Six months to
Year to
30 June 2022
30 June 2021
31 December 2021
£'000
£'000
£'000
Acquisition of Speirs & Jeffrey 2,866 6,466 6,418
Acquisition of Barclays Wealth's Personal Injury and Court of Protection - 2 2
business
Acquisition of Saunderson House 4,560 402 3,669
Acquisition-related costs 7,426 6,870 10,089
Costs relating to the acquisition of Speirs & Jeffrey
The group has incurred the following costs in relation to the acquisition of
Speirs & Jeffrey:
Unaudited Unaudited Audited
Six months to
Six months to
Year to
30 June 2022
30 June 2021
31 December 2021
£'000
£'000
£'000
Acquisition costs:
Staff costs 2,667 6,466 5,964
Legal and advisory fees - - 5
Integration costs 199 - 449
2,866 6,466 6,418
Non-staff acquisition costs of £nil (30 June 2021: £nil; 31 December 2021:
£5,000) and integration costs of £199,000 (30 June 2021: £nil; 31 December
2021: £449,000) have not been allocated to a specific operating segment (note
4).
Costs relating to the acquisition of Barclays Wealth's Personal Injury and
Court of Protection business
On 3 April 2020, the group acquired the trade and assets of Barclays Wealth's
Personal Injury and Court of Protection business. The group incurred
professional services costs of £nil (30 June 2021: £2,000; 31 December 2021:
£2,000) in relation to the acquisition during the year.
Costs relating to the acquisition of Saunderson House
The group has incurred the following costs in relation to the acquisition of
Saunderson House:
Unaudited Unaudited Audited
Six months to
Six months to
Year to
30 June 2022
30 June 2021
31 December 2021
£'000
£'000
£'000
Acquisition costs:
Staff costs 3,667 - 1,406
Legal and advisory fees - 402 2,263
Integration costs 893 - -
4,560 402 3,669
Non-staff acquisition costs of £nil (30 June 2021: £402,000; 31 December
2021: £2,263,000) and integration costs of £893,000 (30 June 2021: £nil; 31
December 2021: £nil) have not been allocated to a specific operating segment
(note 4).
7 Staff numbers
The average number of employees, on a full time equivalent basis, during the
period was as follows:
Unaudited Unaudited Audited
Six months to
Six months to
Year to
30 June 2022
30 June 2021
31 December 2021
Investment Management:
- investment management services 1,267 1,037 1,096
- advisory services 151 131 137
Funds 50 40 43
Shared services 543 437 463
2,011 1,645 1,739
8 Taxation
The tax expense for the six months ended 30 June 2022 was calculated based on
the estimated average annual effective tax rate. The overall effective tax
rate for this period was 23.4% (six months ended 30 June 2021: 22.2%; year
ended 31 December 2021: 20.8%).
The effective tax rate reflects the disallowable costs of the deferred
consideration payments in relation to the acquisitions of Speirs
& Jeffrey and Saunderson House.
Unaudited Unaudited Audited
Six months to
Six months to
Year to
30 June 2022
30 June 2021
31 December 2021
£'000
£'000
£'000
United Kingdom taxation 7,797 11,364 23,463
Overseas taxation 104 218 418
Deferred taxation (276) (744) (4,075)
7,625 10,838 19,806
The underlying UK corporation tax rate for the year ending 31 December 2022 is
19.0% (2021: 19.0%).
The UK Government legislated in the Finance Act 2020 to maintain the UK
corporation tax rate at 19.0% from 1 April 2020, rather than reducing the
rate to 17.0% as previously enacted. The Finance Act 2020 was enacted on 22
July 2020. Deferred income taxes are calculated on all temporary differences
under the liability method using the rate expected to apply when the relevant
timing differences are forecast to unwind.
The UK Government legislated in the Finance Act 2021 to increase the UK
corporation tax rate to 25.0% in 2023. This has been reflected in the deferred
tax calculations.
9 Dividends
An interim dividend of 28.0p per share was declared on 27 July 2022 and is
payable on 4 October 2022 to shareholders on the register at the close of
business on 2 September 2022 (30 June 2021: 27.0p). The interim dividend has
not been included as a liability in this interim statement. A final dividend
for 2021 of 54.0p per share was paid on 10 May 2022.
10 Earnings per share
Earnings used to calculate earnings per share on the bases reported in these
condensed consolidated interim financial statements were:
Unaudited Unaudited Audited
Six months to
Six months to
Year to
30 June 2022
30 June 2021
31 December 2021
Pre-tax Post-tax Pre-tax Post-tax Pre-tax Post-tax
£'000
£'000
£'000
£'000
£'000
£'000
Underlying profit attributable to equity holders 49,964 39,573 62,863 50,270 120,719 96,987
Charges in relation to client relationships and goodwill (note 14) (9,924) (8,038) (7,198) (5,830) (15,595) (12,632)
Acquisition-related costs (note 6) (7,426) (6,546) (6,870) (6,483) (10,089) (9,126)
Profit attributable to equity holders 32,614 24,989 48,795 37,957 95,035 75,229
Basic earnings per share has been calculated by dividing profit attributable
to equity holders by the weighted average number of shares in issue throughout
the period, excluding own shares, of 58,528,000 (30 June 2021: 54,332,383; 31
December 2021: 56,334,784).
Diluted earnings per share is the basic earnings per share, adjusted for the
effect of contingently issuable shares under the Saunderson House initial
share consideration and Executive Incentive Plan, employee share options
remaining capable of exercise, and any dilutive shares to be issued under the
Share Incentive Plan, all weighted for the relevant period. The Speirs and
Jeffrey initial share consideration vested during 2021.
Unaudited Unaudited Audited
30 June 2022
30 June 2021
31 December 2021
Weighted average number of ordinary shares in issue during the period - basic 58,528,000 54,332,383 56,334,784
Effect of ordinary share options/Save As You Earn 571,430 246,546 521,955
Effect of dilutive shares issuable under the Share Incentive Plan 1,359 182,342 237,776
Effect of contingently issuable ordinary shares under the Executive Incentive 633,295 912,730 811,508
Plan/Executive Share Performance Plan
Effect of contingently issuable shares under the Speirs & Jeffrey initial - 1,006,522 -
share consideration
Effect of contingently issuable shares under Saunderson House initial share 272,952 - 272,952
consideration
Diluted ordinary shares 60,007,036 56,680,523 58,178,975
Unaudited Unaudited Audited
Six months to
Six months to
Year to
30 June 2022
30 June 2021
31 December 2021
Earnings per share for the period attributable to equity holders of the
company:
- basic 42.7p 69.9p 133.5p
- diluted 41.6p 67.0p 129.3p
Underlying earnings per share for the period attributable to equity holders of
the company:
- basic 67.6p 92.5p 172.2p
- diluted 65.9p 88.7p 166.7p
Underlying earnings per share is calculated in the same way as earnings per
share, but by reference to underlying profit attributable to shareholders.
11 Loans and advances to customers
Unaudited Unaudited Audited
30 June 2022
30 June 2021
31 December 2021
£'000
£'000
£'000
Overdrafts 10,425 11,798 7,022
Investment Management loan book 175,500 172,505 167,981
Trust and financial planning debtors 2,047 1,642 3,973
Other debtors 1,988 221 864
189,960 186,166 179,840
12 Property, plant and equipment
During the six months ended 30 June 2022, the group purchased assets with a
cost of £3,182,000 (six months ended 30 June 2021: £1,023,000; year ended 31
December 2021: £1,999,000).
13 Right-of-use assets
Property Motor vehicles and equipment Total
£'000
£'000
£'000
Cost
1 January 2022 58,059 371 58,430
Additions 3,430 - 3,430
Other movements (3,405) (17) (3,422)
At 30 June 2022 58,084 353 58,437
Depreciation and impairment
1 January 2022 14,497 38 14,535
Charge in the period 2,780 60 2,840
Disposals (527) (17) (544)
At 30 June 2022 16,750 81 16,831
Carrying amount at 30 June 2022 (unaudited) 41,334 273 41,606
Carrying amount at 30 June 2021 (unaudited) 42,455 5 42,460
Carrying amount at 31 December 2021 (audited) 43,562 333 43,895
14 Intangible assets
Goodwill Client Software development costs Purchased Total
£'000
relationships
£'000
software
intangibles
£'000
£'000
£'000
Cost
At 1 January 2022 169,631 302,572 11,640 53,140 536,983
Internally developed in the period - - 834 911 1,745
Purchased in the period - - - - -
Disposals - (1,940) - (31) (1,971)
At 30 June 2022 169,631 300,632 12,474 54,020 536,757
Amortisation and impairment
At 1 January 2022 1,954 109,003 8,535 41,304 160,796
Charge in the period - 9,924 746 1,807 12,477
Disposals - (1,747) - (14) (1,761)
At 30 June 2022 1,954 117,180 9,281 43,097 171,512
Carrying value at 30 June 2022 (unaudited) 167,677 183,452 3,193 10,923 365,245
Carrying value at 30 June 2021 (unaudited) 96,872 117,408 3,056 11,081 228,417
Carrying value at 31 December 2021 (audited) 167,677 193,569 3,105 11,836 376,187
The total amount charged to profit or loss in the period, in relation to
goodwill and client relationships, was £8,177,000 (six months ended 30 June
2021: £6,289,000; year ended 31 December 2021: £13,879,000).
Impairment
The recoverable amounts of the groups of CGUs to which goodwill is allocated
are assessed using value-in-use calculations. The group prepares cash flow
forecasts derived from the most recent financial budgets approved by the
board, covering the forthcoming and future years. Budgets are extrapolated for
five years based on annual revenue and cost growth for each group of CGUs, as
well as the group's expectation of future industry growth rates. A five-year
extrapolation period is chosen as this aligns with the period covered by the
group's ICAAP modelling. A terminal growth rate is applied to year five cash
flows, which takes into account the net growth forecasts over the
extrapolation period and the long-term average growth rate for the industry.
The group estimates discount rates using pre-tax rates that reflect current
market assessments of the time value of money and the risks specific to the
group of CGUs.
The pre-tax rate used to discount the forecast cash flows was 11.3% (30 June
2021: 16.0%; 31 December 2021: 12.0%). These are based on a risk-adjusted
weighted average cost of capital. The group judges that these discount rates
appropriately reflect the markets in which the group of CGUs operate.
There was no impairment to the goodwill allocated to the Investment Management
group of CGUs during the period. The group has considered any reasonably
foreseeable changes to the assumptions used in the value-in-use calculation
for the Investment Management group of CGUs. Based on this assessment, no such
change would result in an impairment of the goodwill allocated to this CGU.
15 Provisions for liabilities and charges
Deferred, variable costs to acquire client relationship intangibles Deferred and contingent consideration in business combinations Legal and compensation Property-related Total
£'000
£'000
£'000
£'000
£'000
At 1 January 2021 3,785 588 594 3,748 8,715
Charged to profit or loss - - 1,191 (255) 936
Unused amount credited to profit or loss - - (44) - (44)
Net charge to profit or loss - - 1,147 (255) 892
Other movements 1,383 - - - 1,383
Utilised/paid during the period (855) (588) (261) - (1,704)
At 30 June 2021 (unaudited) 4,313 - 1,480 3,493 9,286
Charged to profit or loss - - 1,087 1,250 2,337
Unused amount credited to profit or loss - - (111) - (111)
Net charge to profit or loss - - 976 1,250 2,226
Other movements 6,609 - - - 6,609
Utilised/paid during the period (2,384) - (313) (100) (2,797)
At 31 December 2021 (audited) 8,538 - 2,143 4,643 15,324
Charged to profit or loss - - 234 310 544
Unused amount credited to profit or loss (193) - (21) - (214)
Net charge to profit or loss (193) - 213 310 330
Other movements - - - - -
Utilised/paid during the period (4,499) - (171) - (4,670)
At 30 June 2022 (unaudited) 3,846 - 2,185 4,953 10,984
Payable within one year 1,094 - 2,185 313 3,592
Payable after one year 2,752 - - 4,640 7,392
At 30 June 2022 (unaudited) 3,846 - 2,185 4,953 10,984
Deferred, variable costs to acquire client relationship intangibles
Other movements in provisions relate to deferred payments to investment
managers and third parties for the introduction of client relationships, which
have been capitalised in the period.
Deferred and contingent consideration in business combinations
During the prior year, the group settled an incentivisation award for Speirs
& Jeffrey support staff in the value of £588,000.
Legal and compensation
During the ordinary course of business the group may, from time to time, be
subject to complaints, as well as threatened and actual legal proceedings
(which may include lawsuits brought on behalf of clients or other third
parties) both in the UK and overseas. Any such material matters are
periodically reassessed, with the assistance of external professional advisers
where appropriate, to determine the likelihood of the group incurring a
liability. In those instances where it is concluded that it is more likely
than not that a payment will be made, a provision is established to the
group's best estimate of the amount required to settle the obligation at the
relevant balance sheet date. The timing of settlement of provisions for client
compensation or litigation is dependent, in part, on the duration of
negotiations with third parties.
In the ordinary course of business claims against the group for advice that is
deemed unsuitable may be made. As at 30 June, the group has identified claims
of £0.5m, which are expected to be paid within 12 months of the period end,
and which would be largely offset by an insurance recoverable. Both the
provision and insurance asset have not been recognised in the interim
statement at 30 June 2022.
Property-related
Property-related provisions of £4,953,000 relate to dilapidation provisions
expected to arise on leasehold premises held by the group (30 June 2021:
£3,493,000; 31 December 2021: £4,643,000).
Dilapidation provisions are calculated using a discounted cash flow model.
During the six months ended 30 June 2022, dilapidation provisions increased by
£310,000 (30 June 2021: decreased by £255,000; 31 December 2021: increased
by £895,000). The group utilised £nil (30 June 2021: £nil; 31 December
2021: £100,000) of the dilapidations provision held for its properties during
the period.
Amounts payable after one year
Property-related provisions of £4,953,000 are expected to be settled within
11 years of the balance sheet date, which corresponds to the longest lease for
which a dilapidations provision is being held. Remaining provisions payable
after one year are expected to be settled within three years of the balance
sheet date.
16 Subordinated loan notes
Unaudited Unaudited Audited
30 June 2022
30 June 2021
31 December 2021
£'000
£'000
£'000
Subordinated loan notes
- face value 40,000 20,000 40,000
- carrying value 39,892 19,964 39,893
During the prior year, Rathbone Investment Management Limited repaid its
£20.0 million 10-year callable subordinated loan notes, and Rathbones Group
Plc issued £40.0 million of 10-year tier 2 notes with a call option in
October 2026 and annually thereafter. Interest is payable at a fixed rate of
5.642% per annum until the first call option date and at a fixed rate of
4.893% over Compounded Daily SONIA thereafter. Legal fees of £107,000 were
incurred in issuing the notes, which were accounted for in the carrying value
of amortised cost.
17 Long-term employee benefits
The group operates two defined benefit pension schemes providing benefits
based on pensionable salary for staff employed by the company. For the
purposes of calculating the pension benefit obligations, the following
assumptions have been used:
Unaudited Unaudited Audited
30 June 2022
30 June 2021
31 December 2021
% p.a.
% p.a.
% p.a.
Rate of increase of pensions in payment:
- Laurence Keen Scheme 3.60 3.50 3.70
- Rathbone 1987 Scheme 3.20 3.20 3.30
Rate of increase of deferred pensions 3.20 3.30 3.40
Discount rate 3.70 1.90 1.90
Inflation* 3.20 3.30 3.40
Percentage of members transferring out of the schemes per annum 2.00 3.00 2.00
Average age of members at date of transferring out (years) 52.50 52.50 52.50
Average duration of defined benefit obligation (years):
- Laurence Keen Scheme 14.00 17.00 15.00
- Rathbone 1987 Scheme 18.00 21.00 20.00
* Inflation assumptions are based on the Retail Prices Index
The assumed life expectations of members retiring aged 65 were:
Unaudited 30 June 2022 Unaudited 30 June 2021 Audited 31 December 2021
Males Females Males Females Males Females
Retiring today 23.4 25.0 23.4 24.9 23.3 24.9
Retiring in 20 years 24.9 26.6 24.9 26.6 24.8 26.5
The amount included in the balance sheet arising from the group's obligations
in respect of the schemes is as follows:
Unaudited 30 June 2022 Unaudited 30 June 2021 Audited 31 December 2021
Rathbone 1987 Scheme Laurence Keen Scheme Rathbone 1987 Scheme Laurence Keen Scheme Rathbone 1987 Scheme Laurence Keen Scheme
£'000
£'000
£'000
£'000
£'000
£'000
Present value of defined benefit obligations (100,054) (8,138) (143,662) (11,263) (144,428) (11,149)
Fair value of scheme assets 114,611 9,468 140,831 12,404 154,883 12,981
Total surplus/(deficit) 14,557 1,330 (2,831) 1,141 10,455 1,832
The group made lump sum contributions into its pension schemes totalling
£168,000 during the period (30 June 2021: £168,000; 31 December 2021:
£5,086,000).
18 Share capital and share premium
The following movements in share capital occurred during the period:
Number of shares Exercise price Share capital Share premium Merger reserve Total
pence
£'000
£'000
£'000
£'000
At 1 January 2021 57,486,413 2,874 215,092 71,756 289,722
Shares issued:
- in relation to business combinations 881,737 24.8 44 21,858 - 21,902
- to Share Incentive Plan 193,842 1,540.0 - 1,858.0 10 3,287 - 3,297
- to Save As You Earn scheme 6,532 1,648.0 - 107 - 107
- to Employee Benefit Trust - - - - - -
- on placing 2,840,910 1,760.0 142 48,666 - 48,808
At 30 June 2021 (unaudited) 61,409,434 3,070 289,010 71,756 363,836
Shares issued:
- in relation to business combinations 272,952 1,913.4 14 - 5,209 5,223
- to Share Incentive Plan 101,116 1,540.0 - 2,055.0 5 1,966 - 1,971
- to Save As You Earn scheme 2,839 1,648.0 - 1,977.0 - 50 - 50
- to Employee Benefit Trust 217,000 5.0 11 - - 11
At 31 December 2021 (audited) 62,003,341 3,100 291,026 76,965 371,091
Shares issued:
- in relation to business combinations 229,489 24.8 11 5,689 - 5,700
- to Share Incentive Plan 349,298 1,600.0 - 2,090.0 17 7,089 - 7,106
- to Save As You Earn scheme 685 1,085.0 - 1,813.0 - 9 - 9
- to Employee Benefit Trust 481,500 5.0 24 - - 24
At 30 June 2022 (unaudited) 63,064,313 3,152 303,813 76,965 383,930
On 5 March 2021, the company issued 881,737 shares in respect of the Speirs
& Jeffrey first earn-out consideration relating to the sellers' 2020
incentivisation award.
On 22 June 2021, the company issued 2,840,910 shares by way of a placing for
cash consideration at £17.60 per share, which raised £48,808,000, net of
£1,192,000 placing costs, offset against share premium arising on the issue.
On 22 October 2021, the company issued 272,952 shares in respect of the
initial share consideration from the acquisition of Saunderson House. These
shares are being held in own shares until they vest on the third anniversary
of issue. As the share issuance was in pursuance of the arrangement to acquire
the shares in Saunderson House, the premium on the issuance of these shares
was recognised within the merger reserve.
On 30 March 2022, the company issued 229,489 shares in respect of the Speirs
& Jeffrey second earn-out consideration relating to the sellers' 2021
incentivisation award.
At 30 June 2022, the group held 4,497,727 own shares (30 June 2021: 3,757,229;
31 December 2021: 3,624,714).
19 Share-based payments
The group recognised total expenses of £7,452,000 (30 June 2021: £6,474,000,
31 December 2021: £13,390,000) in relation to share-based transactions in the
period. This excludes the staff costs in relation to the acquisitions of
Speirs & Jeffrey and Saunderson House reported within acquisition-related
costs (note 6).
20 Financial instruments
Fair value measurement
- The table below analyses the group's financial instruments measured at
fair value into a fair value hierarchy based on the valuation technique used
to determine the fair value.
- Level 1: quoted prices (unadjusted) in active markets for identical assets
or liabilities.
- Level 2: inputs other than quoted prices included within level 1 that are
observable for the asset or liability, either directly or indirectly.
- Level 3: inputs for the asset or liability that are not based on
observable market data.
At 30 June 2022 (unaudited) Level 1 Level 2 Level 3 Total
£'000
£'000
£'000
£'000
Financial assets
Fair value through profit or loss:
- equity securities 8,854 - 3,052 11,906
- money market funds - - - -
8,854 - 3,052 11,906
At 30 June 2021 (unaudited) Level 1 Level 2 Level 3 Total
£'000
£'000
£'000
£'000
Financial assets
Fair value through profit or loss:
- equity securities 7,018 - 2,464 9,482
- money market funds - 103,097 - 103,097
7,018 103,097 2,464 112,579
At 31 December 2021 (audited) Level 1 Level 2 Level 3 Total
£'000
£'000
£'000
£'000
Financial assets
Fair value through profit or loss:
- equity securities 7,376 - 2,558 9,934
- money market funds - 20,000 - 20,000
7,376 20,000 2,558 29,934
The group recognises transfers between levels of the fair value hierarchy at
the end of the reporting period during which the change has occurred. There
have been no transfers between levels during the period.
The fair value of listed equity securities is their quoted price. Money market
funds are demand securities and changes to estimates of interest rates will
not affect their fair value. The fair value of money market funds is their
daily redemption value.
The fair values of the group's other financial assets and liabilities not
measured at fair value are not materially different from their carrying values
with the exception of the following:
- Debt securities that are classified and measured at amortised cost
comprise bank and building society certificates of deposit, which have fixed
coupons. The fair value of debt securities at 30 June 2022 was £830,894,000
(30 June 2021: £715,434,789; 31 December 2021: £761,763,000) and the
carrying value was £829,970,000 (30 June 2021: £714,765,000; 31 December
2021: £761,654,000). Fair value is based on market bid prices and hence
would be categorised as level 1 within the fair value hierarchy.
- Subordinated loan notes (note 16) comprise Tier 2 loan notes. The fair
value of the loan notes at 30 June 2022 was £44,968,000 (30 June 2021:
£19,862,000; 31 December 2021: £42,824,000) and the carrying value was
£39,892,000 (30 June 2021: £19,964,000; 31 December 2021: £39,893,000).
Fair value of the loan notes is based on discounted future cash flows using
current market rates for debts with similar remaining maturity, and hence
would be categorised as level 2 within the fair value hierarchy.
Level 3 financial instruments
Fair value through profit or loss
The group holds 1,809 shares in Euroclear Holdings SA, which are classed as
level 3 in the fair value hierarchy since no observable market data is
available.
In the current period, the valuation of €1,985 per share has been calculated
by reference to the most readily available data, which is the indicative price
derived from recent transactions of the shares in the market. The valuation at
the balance sheet date has been adjusted for movements in exchange rates since
the acquisition date.
A 10% weakening of the euro against sterling, occurring on 30 June 2022, would
have reduced equity and profit after tax by £247,000 (30 June 2021:
£200,000; 31 December 2021: £207,000). A 10% strengthening of the euro
against sterling would have had an equal and opposite effect.
Changes in the fair values of financial instruments categorised as level 3
within the fair value hierarchy were as follows:
Unaudited Unaudited Audited
30 June 2022
30 June 2021
31 December 2021
£'000
£'000
£'000
At 1 January 2,558 2,569 2,569
Total unrealised gains/(losses) recognised in profit or loss 494 (105) (11)
At 30 June 3,052 2,464 2,558
Expected credit loss provision
The movement in the allowance for impairment in respect of financial assets
during the reporting period was as follows:
Cash and balances with central banks Loans and advances to banks Investment Management loan book Trust and financial planning debtors Debt securities Total
£'000
£'000
£'000
£'000
£'000
£'000
Balance at 1 January 2022 (audited) 83 - - 234 28 345
Amounts written off - - - - - -
Net remeasurement of loss allowance (48) - 1 (207) (8) (262)
Balance at 30 June 2022 (unaudited) 35 - 1 27 20 83
As at 30 June 2022, the impairment allowance in respect of all financial
assets in the table above was measured at an amount equal to 12 month ECLs,
apart from trust and financial planning debtors, where the impairment
allowance was equal to lifetime ECLs.
21 Contingent liabilities and commitments
(a) Indemnities are provided in the normal course of business to a number
of directors and employees who provide tax and trust advisory services in
connection with them acting as trustees/directors of client companies and
providing other services.
(b) Capital expenditure authorised and contracted for at 30 June 2022 but
not provided for in the condensed consolidated interim financial statements
amounted to £1,441,000 (30 June 2021: £1,300,000; 31 December 2021:
£988,000).
(c) The contractual amounts of the group's commitments to extend credit to
its clients are as follows:
Unaudited Unaudited Audited
30 June 2022
30 June 2021
31 December 2021
£'000
£'000
£'000
Undrawn commitments to lend of one year or less 30,660 33,027 31,005
Undrawn commitments to lend of more than one year 3,129 9,005 9,270
33,789 42,032 40,275
(d) The arrangements put in place by the Financial Services Compensation
Scheme (FSCS) to protect depositors and investors from loss in the event of
failure of financial institutions have resulted in significant levies on the
industry in recent years. The financial impact of unexpected FSCS levies is
largely out of the group's control as they result from other industry
failures.
There is uncertainty over the level of future FSCS levies as they depend on
the ultimate cost to the FSCS of industry failures. The group contributes to
the deposit class, investment fund management class and investment
intermediation levy classes and accrues levy costs for future levy years when
the obligation arises.
22 Cash and cash equivalents
For the purpose of the consolidated interim statement of cash flows, cash and
cash equivalents comprise the following balances with less than three months
until maturity from the date of acquisition:
Unaudited Unaudited Audited
30 June 2022
30 June 2021
31 December 2021
£'000
£'000
£'000
Cash and balances at central banks 1,680,329 1,414,291 1,460,001
Loans and advances to banks 156,207 158,986 173,589
Investment securities held at fair value through profit or loss - 103,097 20,000
1,836,536 1,676,374 1,653,590
Investment securities held at fair value through profit or loss are amounts
invested in money market funds which are realisable on demand.
Cash flows arising from issue of ordinary shares comprise:
Unaudited Unaudited Audited
Six months to
Six months to
31 December 2021
30 June 2022
30 June 2021
£'000
£'000
£'000
Share capital issued (note 18) 52 196 226
Share premium on shares issued (note 18) 12,787 74,011 75,934
Merger reserve on shares issued (note 18) - - 5,209
Shares issued in relation to share-based schemes for which no cash (5,699) (21,902) (21,902)
consideration was received
Shares issued in relation to share buybacks (10,843) (1,829) (15,132)
(3,703) 50,476 44,335
23 Related party transactions
The key management personnel of the group are defined as the company's
directors and other members of senior management who are responsible for
planning, directing and controlling the activities of the group.
Dividends totalling £171,000 were paid in the period (six months ended 30
June 2021: £192,000; year ended 31 December 2021: £229,000) in respect of
ordinary shares held by key management personnel.
As at 30 June 2022, the group had provided interest-free season ticket loans
of £nil (30 June 2021: £nil; 31 December 2021: £nil) to key management
personnel.
As at 30 June 2022, key management personnel and their close family members
had gross outstanding deposits of £2,366,000 (30 June 2021: £743,000; 31
December 2021: £634,000) and gross outstanding loans of £nil (30 June 2021:
£nil; 31 December 2021: £nil). A number of the company's directors and
their close family members make use of the services provided by companies
within the group. Charges for such services are made at various staff rates.
One group subsidiary, Rathbone Unit Trust Management, has authority to manage
the investments within a number of unit trusts. During the first half of 2022,
the group managed 32 unit trusts, Sociétés d'investissement à Capital
Variable (SICAVs) and open-ended investment companies (OEICs) (together,
'collectives') (six months ended 30 June 2021: 33 collectives; year ended 31
December 2021: 33 collectives).
The group charges each fund an annual management fee for these services, but
does not earn any performance fees on the unit trusts. The management charges
are calculated on the bases published in the individual fund prospectuses,
which also state the terms and conditions of the management contract with the
group.
The following transactions and balances relate to the group's interest in the
unit trusts:
Unaudited Unaudited Audited
Six months to
Six months to
Year to
30 June 2022
30 June 2020
31 December 2021
£'000
£'000
£'000
Total management fees 29,900 26,133 68,444
Total management fees are included within 'fee and commission income' in the
consolidated interim statement of comprehensive income.
Unaudited Unaudited Audited
Six months to
Six months to
Year to
30 June 2022
30 June 2021
31 December 2021
£'000
£'000
£'000
Management fees owed to the group 5,464 5,273 6,240
Holdings in unit trusts (note 20) 8,854 7,018 7,376
14,318 12,291 13,616
Management fees owed to the group are included within 'accrued income' and
holdings in unit trusts are classified as 'fair value through profit or loss'
in the consolidated interim balance sheet. The maximum exposure to loss is
limited to the carrying amount on the balance sheet as disclosed above.
All amounts outstanding with related parties are unsecured and will be settled
in cash. No guarantees have been given or received.
No provisions have been made for doubtful debts in respect of the amounts owed
by related parties.
24 Interest in unconsolidated structured entities
As described in note 23, at 30 June 2022, the group owned units in collectives
managed by Rathbone Unit Trust Management with a value of £8,854,000 (30
June 2021: £7,018,000; 31 December 2021: £7,376,000), representing 0.08% (30
June 2021: 0.06%; 31 December 2021: 0.06%) of the total value of the
collectives managed by the group. These assets are held to hedge the group's
exposure to deferred remuneration schemes for employees of Unit Trusts.
The group's primary risk associated with its interest in the unit trusts is
from changes in fair value of its holdings in the funds.
The group is not judged to control, and therefore does not consolidate, the
collectives. Although the fund trustees have limited rights to remove Rathbone
Unit Trust Management as manager, the group is exposed to very low variability
of returns from its management and share of ownership of the funds and is
therefore judged to act as an agent rather than having control under IFRS 10.
25 Events after the balance sheet date
An interim dividend of 28.0p per share was declared on 27 July 2022 (note 9).
There have been no other material events occurring between the balance sheet
date and 27 July 2022.
Regulatory capital
The group is classified as a banking group under the Capital Requirements
Directive (CRD) and is therefore required to operate within the restrictions
on capital resources and banking exposures prescribed by the Capital
Requirements Regulation, as applied by the Prudential Regulation Authority
(PRA).
Regulatory own funds
The group's regulatory own funds (excluding profits for the six months ended
30 June, which have not yet been independently verified, but including
independently verified profits to 31 December) are shown in the table below:
Unaudited Unaudited Unaudited
30 June 2022
30 June 2021
31 December 2021
£'000
£'000
£'000
Share capital and share premium 306,967 292,173 294,126
Reserves 351,376 320,704 365,782
Less:
- prudent valuation of assets held at fair value through profit or loss (12) (113) (30)
- own shares (45,252) (48,407) (36,626)
- intangible assets (net of deferred tax) (334,777) (215,753) (344,762)
- pension asset (15,887) - (12,287)
Total Common Equity Tier 1 capital 262,415 348,604 266,203
Tier 2 capital 40,000 9,690 38,508
Total own funds 302,415 358,294 304,711
Own funds requirements
The group is required to hold capital to cover a range of own funds
requirements, classified as Pillar 1 and Pillar 2.
Pillar 1 - minimum requirement for capital
Pillar 1 focuses on the determination of risk-weighted assets and expected
losses in respect of the group's exposure to credit, counterparty credit,
settlement, market and operational risks and sets a minimum requirement for
capital.
At 30 June 2022, the group's risk-weighted assets were £1,575,706,000 (30
June 2021: £1,314,225,000; 31 December 2021: £1,424,500,000).
Pillar 2 - supervisory review process
Pillar 2 supplements the Pillar 1 minimum requirement with firm-specific
Pillar 2A requirements and a framework of regulatory capital buffers.
The Pillar 2A own funds requirement is set by the PRA to reflect those risks,
specific to the firm, which are not fully captured under the Pillar 1 own
funds requirement. These include:
Pension obligation risk
The potential for additional unplanned capital strain or costs that the group
would incur in the event of a significant deterioration in the funding
position of the group's defined benefit pension schemes.
Interest rate risk in the banking book
The potential losses in the non-trading book resulting from interest rate
changes or widening of the spread between Bank of England base rates and
SONIA.
Concentration risk
Greater loss volatility arising from a higher level of loan default
correlation than is assumed by the Pillar 1 assessment.
The group is also required to maintain a number of regulatory capital buffers,
all of which must be met with CET1 capital.
Capital conservation buffer (CCB)
The CCB is a general buffer of 2.5% of risk-weighted assets designed to
provide for losses in the event of a stress.
Countercyclical capital buffer (CCyB)
The CCyB is time-varying and is designed to act as an incentive for banks to
constrain credit growth in times of heightened systemic risk. The amount of
the buffer is determined by reference to rates set by the Financial Policy
Committee (FPC) for individual countries where the group has credit exposures.
The buffer rate is currently set to 0% for the UK. However, different rates
for other countries, where the group has small relevant credit exposures,
result in an overall rate of 0.01% of risk-weighted assets for the group as at
30 June 2022. An increased UK rate of 1% will come into effect from December
2022, and a rate of 2% from July 2023, which has been built into our
forecasts.
The group's own funds requirements were as follows:
Unaudited Unaudited Unaudited
30 June 2022
30 June 2021
31 December 2021
£'000
£'000
£'000
Own funds requirement for credit risk, counterparty credit risk and settlement 63,798 52,753 50,862
risk
Own funds requirement for market risk - - 840
Own funds requirement for operational risk 62,258 52,385 62,258
Pillar 1 own funds requirement 126,056 105,138 113,960
Pillar 2A own funds requirement 40,145 40,118 40,073
Total Pillar 1 and 2A own funds requirement 166,201 145,256 154,033
CRD IV buffers:
- capital conservation buffer (CCB) 39,393 32,856 35,613
- countercyclical capital buffer (CCyB) 158 131 -
Total Pillar 1 and 2A own funds requirement and CRD IV buffers 205,752 178,243 189,646
Statement of directors' responsibilities in respect of the interim statement
Confirmations by the board
We confirm to the best of our knowledge:
- the condensed set of financial statements has been prepared in accordance
with United Kingdom adopted International Financial Reporting Standards;
- the interim management report includes a fair view of the information
required by:
(a) DTR 4.2.7R of the Disclosure Guidance and Transparency Rules, being an
indication of important events that have occurred during the first six months
of the financial year and their impact on the condensed set of financial
statements; and a description of the principal risks and uncertainties for the
remaining six months of the year; and
(b) DTR 4.2.8R of the Disclosure Guidance and Transparency Rules, being
related party transactions that have taken place in the first six months of
the current financial year and that have materially affected the financial
position or performance of the entity during that period; and any changes in
the related party transactions described in the last annual report that could
do so.
Going concern basis of preparation
Details of the group's results, cash flows and resources, together with an
update on the risks it faces and other factors likely to affect its future
development, performance and position, are set out in this interim management
report.
Group companies are regulated by the PRA and FCA and perform annual capital
adequacy and liquidity assessments, which include the modelling of certain
extreme stress scenarios. The group publishes Pillar 3 disclosures annually on
its website, which provide further detail about its regulatory capital
resources and requirements. During the first half of 2022, and as at 30 June
2022, the group was primarily equity-financed, with a small amount of gearing
in the form of the Tier 2 debt.
The group's financial projections and the capital adequacy and liquidity
assessments provide comfort that the group has adequate financial and
regulatory resources to continue in operational existence for the foreseeable
future. Accordingly, we continue to adopt the going concern basis of
accounting in preparing the condensed consolidated interim financial
statements. In forming our view, we have considered the company's prospects
for a period exceeding 12 months from the date the condensed consolidated
interim financial statements are approved.
By order of the board
Paul Stockton
Group Chief Executive Officer
27 July 2022
Independent review report to Rathbones Group Plc
Conclusion
We have been engaged by the company to review the condensed set of financial
statements in the half-yearly financial report for the six months ended 30
June 2022 which comprises the income statement, the balance sheet, the
statement of changes in equity, the cash flow statement, and related notes 1
to 25.
Based on our review, nothing has come to our attention that causes us to
believe that the condensed set of financial statements in the half-yearly
financial report for the six months ended 30 June 2022 is not prepared, in all
material respects, in accordance with United Kingdom adopted International
Accounting Standard 34 and the Disclosure Guidance and Transparency Rules of
the United Kingdom's Financial Conduct Authority.
Basis for Conclusion
We conducted our review in accordance with International Standard on Review
Engagements (UK) 2410 "Review of Interim Financial Information Performed by
the Independent Auditor of the Entity" issued by the Financial Reporting
Council for use in the United Kingdom. A review of interim financial
information consists of making inquiries, primarily of persons responsible for
financial and accounting matters, and applying analytical and other review
procedures. A review is substantially less in scope than an audit conducted in
accordance with International Standards on Auditing (UK) and consequently does
not enable us to obtain assurance that we would become aware of all
significant matters that might be identified in an audit. Accordingly, we do
not express an audit opinion.
As disclosed in note 1, the annual financial statements of the group will be
prepared in accordance with United Kingdom adopted International Financial
Reporting Standards. The condensed set of financial statements included in
this half-yearly financial report has been prepared in accordance with United
Kingdom adopted International Accounting Standard 34, "Interim Financial
Reporting".
Conclusion Relating to Going Concern
Based on our review procedures, which are less extensive than those performed
in an audit as described in the Basis for Conclusion section of this report,
nothing has come to our attention to suggest that the directors have
inappropriately adopted the going concern basis of accounting or that the
directors have identified material uncertainties relating to going concern
that are not appropriately disclosed.
This conclusion is based on the review procedures performed in accordance
with this ISRE (UK), however future events or conditions may cause the entity
to cease to continue as a going concern.
Responsibilities of the directors
The directors are responsible for preparing the half-yearly financial report
in accordance with the Disclosure Guidance and Transparency Rules of the
United Kingdom's Financial Conduct Authority.
In preparing the half-yearly financial report, the directors are responsible
for assessing the group's ability to continue as a going concern, disclosing
as applicable, matters related to going concern and using the going concern
basis of accounting unless the directors either intend to liquidate the
company or to cease operations, or have no realistic alternative but to do so.
Auditor's Responsibilities for the review of the financial information
In reviewing the half-yearly financial report, we are responsible for
expressing to the group a conclusion on the condensed set of financial
statement in the half-yearly financial report. Our conclusion, including our
Conclusions Relating to Going Concern, are based on procedures that are less
extensive than audit procedures, as described in the Basis for Conclusion
paragraph of this report.
Use of our report
This report is made solely to the company in accordance with International
Standard on Review Engagements (UK) 2410 "Review of Interim Financial
Information Performed by the Independent Auditor of the Entity" issued by the
Financial Reporting Council. Our work has been undertaken so that we might
state to the company those matters we are required to state to it in an
independent review report and for no other purpose. To the fullest extent
permitted by law, we do not accept or assume responsibility to anyone other
than the company, for our review work, for this report, or for the conclusions
we have formed.
Deloitte LLP
Statutory Auditor
London, United Kingdom
27 July 2022
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