REG - Rathbones Group PLC - Interim Results 2023
26/07/2023 07:00
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RNS Number : 1679H Rathbones Group PLC 26 July 2023
Rathbones Group Plc
Interim results
Rathbones Group Plc ("Rathbones") announces interim results for the six months
ended 30 June 2023.
Paul Stockton, Group Chief Executive of Rathbones, said:
"After a more positive last half of 2022, the first half of 2023 was a
challenging period for investors as markets digested material changes in
inflation expectations and interest rates. Rathbones FUMA and net operating
income have remained resilient, growing by 2.7% and 2.6%, respectively
compared with the same period a year ago.
Gross inflows into our discretionary and managed business were strong in the
first half of the year at an annualised 10.7% of FUMA, although net inflows in
the period were £161 million, representing an annualised growth rate of 0.7%.
Outflows were elevated in our Charities business, including one large client
outflow. Client retention rates remain high at 92.8% albeit economic
conditions have resulted in a marginally higher incidence of low value
outflows from accounts that remain with us.
We are grateful for the strong support from shareholders who in June 2023
voted convincingly in favour of the Investec Wealth & Investment
("Investec W&I") combination. Integration plans are progressing well, and
we expect to complete towards the end of the third quarter of 2023. The
transaction presents many exciting opportunities for all stakeholders and
places the enlarged Rathbones in a strong position to navigate the current
markets and take advantage of future growth opportunities in the sector."
Financial and business highlights:
- Total funds under management and administration grew 2.7% to £60.5 billion
at 30 June 2023 from the £58.9 billion at 30 June 2022 (31 December 2022:
£60.2 billion). The MSCI PIMFA Private Investor Balanced index was 1.6%
higher at 1,692 on 30 June 2023 compared to a year ago.
- Underlying net operating income totalled £238.0 million in the six months
to 30 June 2023, an increase of 2.6% from the £231.9 million in the
corresponding period last year, The average MSCI PIMFA Private Investor
Balanced index was 2% lower than last year falling to an average of 1,697 in
the six-month period to 30 June 2023.
- Fee income and commission in Investment Management totalled £162.5
million in the first six months of 2023, a decrease of 2.3% on the prior
period (30 June 2022: £166.3 million).
- Fee income in our funds business totalled £31.1 million in the six
months ended 30 June 2023, a decrease of 3.1% on the £31.8 million reported
in the first half of 2022.
- Net interest income was £23.0 million, up from £6.1 million in the
first half of 2022.
- Although gross organic inflows were strong in the period (representing an
annualised growth rate of 11.4% of opening FUMA), outflows were elevated
reflecting net losses in our Charities business and increases in lower value
outflows from accounts that remain with us. Total discretionary and managed
net inflows were £0.2 billion (H1 2022: £0.6 billion) in the period to 30
June 2023 as a result, representing an annualised growth rate of 0.7% (H1
2022: 2.3%).
- Discretionary service net inflows totalled £0.1 billion (H1 2022: £0.4
billion).
- Net inflows into our multi-asset fund range (a central part of our
managed offering to the adviser market) were £0.1 billion, equating to
annualised net growth for the period of 9.1% (H1 2022: £0.2 billion).
- Single strategy net outflows in our funds business were £0.3 billion
(H1 2022: £0.2 billion).
- £1 billion of FUMA has been transferred from Saunderson House to
Rathbones solutions at 30 June 2023. Our propositions offer improved solutions
to clients at lower cost and the migration is expected to be completed by the
end of the first quarter of 2024.
- Underlying profit before tax totalled £50.7 million in the first six months
of 2023 (30 June 2022: £50.0 million) and statutory profit before tax for the
six months to 30 June 2023 totalled £26.0 million (30 June 2022: £32.6
million). Statutory profit before tax included £11.2 million of costs
relating to our combination with Investec W&I, largely professional and
legal fees. We now expect the transaction to complete towards the end of the
third quarter of 2023.
- Our ongoing financial resilience allows us to continue to build the digital
and data capabilities that remain critical to future success. In the first
half we completed planned enhancements to MyRathbones and added functionality
to investment and dealing systems in our Funds business.
- Delivery of our Client Lifecycle Management (CLM) programme has been slower
than anticipated such that the launch is now expected to be in the first
quarter of 2024. This timing is reflected in the total expenditure on our
digital programme in the first half which at £6 million is lower than the £8
million incurred a year ago. We continue to expect total expenditure across
our digital programme to be no more than £40 million.
Declaration of interim dividend:
- In line with our progressive dividend policy, we have increased our interim
dividend by 3.6% to 29p (30 June 2022: 28p). The record date will be 4 August
2023 and the dividend will be paid on 25 August 2023.
- In light of the upcoming combination with Investec W&I, and to ensure
dividends paid remain appropriately aligned to earnings, we also expect to
bring forward payment of a portion of the final dividend for FY23 to
shareholders on the register shortly prior to the completion of the
combination, by way of a second interim dividend. The final dividend in
respect of FY23 will then be reduced accordingly.
Board role changes
- After six years Sarah Gentleman is stepping down as Chair of the
Remuneration Committee to focus on her role as Senior Independent Director. We
would like to thank her for her leadership on remuneration policy over this
time and are delighted to appoint Dharmash Mistry as our new Remuneration
Committee Chair, effective as of 1 September, subject to regulatory approval.
Dharmash joined the board as a non-executive director on 5 October 2021.
Funds under management and administration
(i) Breakdown of FUMA and flows by service level
6 months ended 30 June 2023 Opening FUMA Net Flows Service Level Transfers(1) Market & investment Performance (£m) Closing FUMA Ann Net Growth(2)
(£m)
(£m)
(£m)
(£m)
(%)
SHL Migrated Assets
(£m)
Discretionary service 44,322 63 (199) 923 193 45,302
Bespoke portfolios 42,894 (39) (714) 419 151 42,711 (0.2)
Managed via in-house funds 1,428 102 515 504 42 2,591 14.3
Multi-asset funds 2,159 98 - - 21 2,278 9.1
Total discretionary & managed 46,481 161 (199) 923 214 47,580 0.7
Non-discretionary service 757 (8) (12) - 6 743 (2.1)
Total wealth management 47,238 153 (211) 923 220 48,323 0.6
Single-strategy funds 6,474 (279) - - 325 6,520 (8.6)
Execution only & banking 2,404 (87) 211 - 27 2,555 (7.2)
Total group (pre acquisitions) 56,116 (213) - 923 572 57,398 (0.8)
Saunderson House(3) 4,117 (156) - (923) 97 3,135 (7.6)
Total group 60,233 (369) - - 669 60,533 (1.2)
Q2 ended 30 June 2023 Opening FUMA Net Flows Service Level Transfers(1) SHL Migrated Assets Market & investment Performance (£m) Closing FUMA Ann Net Growth(2)
(£m)
(£m)
(£m)
(£m)
(%)
(£m)
Discretionary service 45,207 (177) (106) 571 (193) 45,302
Bespoke portfolios 43,407 (226) (506) 254 (218) 42,711 (2.1)
Managed via in-house funds 1,800 49 400 317 25 2,591 10.9
Multi-asset funds 2,231 36 - - 11 2,278 6.5
Total discretionary & managed 47,438 (141) (106) 571 (182) 47,580 (1.2)
Non-discretionary service 743 (8) 8 - - 743 (4.3)
Total wealth management 48,181 (149) (98) 571 (182) 48,323 (1.2)
Single-strategy funds 6,529 (128) - - 119 6,520 (7.8)
Execution only & banking 2,452 (11) 98 - 16 2,555 (1.8)
Total group (pre acquisitions) 57,162 (288) - 571 (47) 57,398 (2.0)
Saunderson House(3) 3,716 (66) - (571) 56 3,135 (7.1)
Total group 60,878 (354) - - 9 60,533 (2.3)
(ii) Breakdown of Rathbones Investment Management FUMA and flows by channel
6 months ended 30 June 2023 Opening FUMA Net Flows Service Level Transfers(1) SHL Migrated Assets Market & investment Performance (£m) Closing FUMA Ann Net Growth(2)
(£m)
(£m)
(£m)
(£m)
(%)
(£m)
Total direct 33,639 (200) (195) - 89 33,333 (1.2)
Total financial adviser linked 10,683 263 (4) 923 104 11,969 4.9
Total discretionary service 44,322 63 (199) 923 193 45,302 0.3
Execution only & banking 2,404 (87) 211 - 27 2,555 (7.2)
Non-discretionary service 757 (8) (12) - 6 743 (2.1)
Total Investment Management 47,483 (32) - 923 226 48,600 (0.1)
Q2 ended 30 June 2023 Opening FUMA Net Flows Service Level Transfers(1) SHL Migrated Assets Market & investment Performance (£m) Closing FUMA Ann Net Growth(2)
(£m)
(£m)
(£m)
(£m)
(%)
(£m)
Total direct 33,882 (287) (96) - (166) 33,333 (3.4)
Total financial adviser linked 11,325 110 (10) 571 (27) 11,969 3.9
Total discretionary service 45,207 (177) (106) 571 (193) 45,302 (1.6)
Execution only & banking 2,452 (11) 98 - 16 2,555 (1.8)
Non-discretionary service 743 (8) 8 - 0 743 (4.3)
Total Investment Management 48,402 (196) - 571 (177) 48,600 (1.6)
1. Service Level Transfers represent client FUMA which has transferred from
one service to another within the group during the period.
2. Annualised net growth in flows calculated as net flows/opening FUMA.
3. Total funds under advice by Saunderson House, including those clients
transferred to fellow group companies totalled £4.17 billion at 30 June 2023
(30 June 2022: £4.24 billion, 31 December 2022: £4.18 billion).
(iii) Total Group FUMA
At 30 June At 5 April
2023 2022 Change 2023 Change
£m £m % £m %
Rathbones Investment Management Gross FUMA 48,600 46,253 5.1 48,402 0.4
Of which: invested in Rathbones Funds discretionary wrapped funds(4) (3,169) (2,439) 29.9 (2,671) 18.6
Rathbone Funds 12,165 10,888 11.7 11,431 6.4
Saunderson House 3,135 4,243 (26.1) 3,716 (15.6)
Of which: invested in Rathbones Funds discretionary wrapped funds(5) (198) - - - -
Total Group FUMA 60,533 58,946 2.7 60,878 (0.6)
4. Discretionary wrapped funds represent funds operated by Rathbone Funds,
managed by both Rathbone Investment Management teams and Rathbone Funds
managers.
5. Discretionary wrapped funds represent funds operated by Rathbone Funds,
managed by both Saunderson House teams and Rathbone Funds managers.
Interim results presentation
A presentation detailing the 2023 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/6491abc967ddff0c004fd028/odind)
or by dialling in
using the conference call details below:
United Kingdom (Local): +44 20 3936 2999
United Kingdom (Toll-Free): +44 800 358 1035
Participant access code: 887498
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.
26 July 2023
For further information contact:
Rathbones Group Plc
Paul Stockton, Group Chief Executive Officer
Jennifer Mathias, Group Chief Financial Officer
Sarah Lewandowski, Head of Investor Relations
Tel: 07702605524
Email: sarah.lewandowski@rathbones.com
Camarco
Ed Gascoigne-Pees
Julia Tilley
Tel: 020 3757 4984
Email: ed.gascoigne-pees@camarco.co.uk
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 for everyone's tomorrow has been with us
from the beginning and continues to lead us forward.
Rathbones has over 2,200 employees in 15 UK locations and Jersey; its
headquarters is 8 Finsbury Circus, London, EC2M 7AZ.
www.rathbones.com
Chair and ceo statement
market overview
Although UK equity markets were less volatile in the six months to 30 June
2023, investor sentiment has been negatively impacted by the persistent
inflationary backdrop and general outlook, particularly in the UK, where
interest rates are at their highest since the financial crisis with potential
to rise further.
This weaker outlook for economic growth has not only exacerbated the
cost-of-living crisis for individuals, but it has also driven investors to
change their short-term asset allocation towards short-dated fixed income
securities and money market instruments.
Whilst this backdrop may not present a strong current case for investing in
equities, our advice-led model continues to be focussed on achieving our
clients' desired outcomes over the longer term, and we continue to pursue
suitable investment opportunities, prioritise engagement with them and improve
service standards.
The UK wealth management industry remains attractive with long-term structural
drivers still in place, but competition remains strong, and we continue to
pursue the benefits of scale to generate efficiencies and develop our
technology footprint. We have welcomed the strong support shareholders gave in
June for our transaction with Investec Wealth & Investment ("Investec
W&I"), which remains an opportunity to accelerate our plans and improve
margins.
Performance, FUMA and financial review
Total funds under management and administration (FUMA) for the group were
£60.5 billion at 30 June 2023 (H1 2022: £58.9 billion, FY 2022: £60.2
billion).
Gross organic inflows were strong in the period, representing an annualised
growth rate of 11.4% of opening FUMA. Outflows were elevated however,
representing a disappointing 12.6% on an annualised basis of opening FUMA.
Outflows were largely driven by our Charities business, including one large
client outflow. Our Charity team continues to focus on investment performance
and improving our ESG proposition, after recently winning a Gold award for
Charity Investment Management Company of the year at the Magic Circle Awards.
Current economic conditions have also resulted in a marginally higher
incidence of low value outflows from accounts that remain with us, as our
clients actively make decisions on funding lifestyles.
Total discretionary and managed net inflows were £0.2 billion (H1 2022: £0.6
billion) in the period to 30 June 2023, representing an annualised growth rate
of 0.7% (H1 2022: 2.3%). Excluding charity accounts, the equivalent growth
rate would have been 2.3% in the half year to 30 June 2023.
The asset management industry reported net inflows of c.£7.1 billion in the
first five months of the year, according to data published by the Investment
Association. This was driven primarily by inflows into global bonds, gilts and
money market funds, with outflows across equities. Reflecting this more
cautious investor sentiment, we also saw outflows in our UK equity funds
versus relatively strong inflows into our multi-asset funds. In our single
strategy funds, net outflows were £0.3 billion (H1 2022: net outflows of
£0.2 billion). The Pridham report, released in May 2023, ranked Rathbones in
9(th) position for total net retail sales in the UK in the first quarter of
2023.
Investment Management fee income of £138.8 million in the first half of 2023
was in line with FUMA, comparing directly with the £139.4 million recorded in
H1 2022. Fee income
in the Funds business slightly decreased to £31.1 million year-on-year (H1
2022: £32.1 million).
Commission income of £23.7 million was lower than the first six months of
2022 (H1 2022: £26.9 million), reflecting trading volumes in the respective
periods. Investment management revenue margin remained robust at 74.2bps in
the period, compared with 73.0bps in the first half of 2022.
Net interest income increased significantly to £23.0 million (H1 2022: £6.1
million), reflecting the further increases to the UK base rate. Average client
cash balances in the period were £2.5 billion (H1 2022: £2.4 billion). We
expect net interest income to continue to increase in 2023, consistent with
both recent and future base rate increases.
Fees from advisory and other services decreased to £20.8 million during the
first half of 2023 (30 June 2022: £26.8 million) with the contribution from
Saunderson House falling to £10.5 million (H1 2022: £17.0 million) as we go
through the transition process.
Total operating income for the group was £238.0 million, up 2.6%
year-on-year as increased net interest income more than offset the reduction
in commissions and fees from advisory services.
Underlying operating expenses totalled £187.3 million for the first half (H1
2022: £182.0 million). Fixed staff costs of £88.3 million (H1 2022: £79.6
million) broadly reflect the impact of increased headcount last year and
salary increases. Annual average salary increases were c.6%, reflecting the
current inflationary climate and competition for key resources. Increases were
deliberately higher at lower salary levels to reflect the current cost of
living challenges for some colleagues. Variable staff costs of £43.9 million
(H1 2022: £44.2 million) includes the impact of lower performance-based
awards. Other direct expenses of £55.1 million (H1 2022: £58.2 million)
include c.£6m planned investment in our digital programme (H1 2022:
c.£8 million).
Underlying profit before tax totalled £50.7 million in H1 2023 (H1 2022:
£50.0 million) and profit before tax totalled £26.0 million (H1 2022: £32.6
million).
During the six months to 30 June 2023, we incurred £14.9 million
acquisition-related costs relating to the combination with Investec W&I.
These costs were primarily due to legal and professional fees. £11.2 million
of these costs have been recognised in profit or loss, and the remainder have
been recognised as an asset at 30 June, as these are incremental costs related
directly to the share issue expected in the second half of the year.
The underlying operating margin at 30 June 2023 was 21.3% (30 June 2022:
21.5%). Excluding the impact of our digital programme spend, the underlying
operating margin was 23.8%. We retain our guidance, that after this period of
planned expenditure, margins are expected to return to higher 20s%, 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 17.6% at 30 June 2023 (31 December 2022: 17.9%). Our capital surplus
of own funds (excluding year-to-date post-tax profits) over our regulatory
capital requirement was £98.1 million at 30 June 2023 (£110.3 million at 31
December 2022).
Interim dividend
In line with our progressive dividend policy, we have increased our interim
dividend by 3.6% to 29p (30 June 2022: 28p), reflecting the strength of our
business and balance sheet. The record date will be 4 August 2023 and the
dividend will be paid on 25 August 2023.
In light of the upcoming combination with Investec W&I, and to ensure
dividends paid remain appropriately aligned to earnings, we also expect to
bring forward payment of a portion of the final dividend for FY23 to
shareholders on the register shortly prior to the completion of the
combination, by way of a second interim dividend. The final dividend in
respect of FY23 will then be reduced accordingly.
business update
Growing and enabling teams
Our clients value the services we provide, and this is highlighted in our
strong retention level of 92.8% that we continue to enjoy.
A key part of our effort to support future growth is to keep our propositions
relevant to today's market. We completed a refresh of our brand in the first
half of 2023 which positions us with an assured look and feel and a marque
that translates simply and clearly in the digital space.
Our new brand has underpinned the launch of a new and upgraded website that
now depicts our services and market positioning much more clearly. The site is
easier to navigate and now operates on a platform that is much simpler to
develop future content. Combining with our MyRathbones portal, our digital
shop window has improved significantly over the last 12 months and compares
favourably against key competitors. This lays a solid foundation that will
complement the Investcloud capability we are building to drive an improved
client experience.
Consumer duty regulation has supported us in clarifying the design and
positioning of the propositions we offer, supporting marketing and business
development activity that is more clearly targeted to key client affinity
groups. This work has streamlined what we offer and will form the basis of how
Rathbones positions its services in the future to private clients, third party
advisers and intermediaries and charities.
Having recently streamlined the way in which we work with external financial
advisers in advance of delivering easier digital capability, we continue to
extend our reach into the third-party advisor market. We currently offer a
broad range of investment solutions to over 280 IFAs utilising our Reliance on
Advisor model. FUMA linked to IFA relationships was £4.3 billion at 30 June
2023 (30 June 2022: £1.3 billion).
Rathbones Select was designed as a high-quality, 'self-select' investment
service for smaller value portfolios, generally below £150k and now serves
almost 3,500 clients up from under 2,500 a year ago. Select is not only a more
suitable investment solution that uses our multi asset fund capability, but it
is much more efficient for teams to deliver service and creates capacity.
leveraging financial planning
The integration of Saunderson House is progressing well, now operating under a
common management team to deliver a leading range of advice services to
clients.
Our acquisition case for Saunderson House rested upon the opportunity to offer
improved investment solutions to clients at lower cost to them. Saunderson
House now operates as a restricted advisor from an investment product
perspective and c.£1 billion FUMA has been migrated to Rathbones propositions
to date. The migration is expected to be completed by the end of the first
quarter of 2024.
Whilst the asset migration is underway, we have chosen not to charge activity
and investment advisory fees to clients during this transition which has
contributed to total reductions in revenue from advisory services in the
period to £20.8 million from £26.8 million in the previous year. Following
completion of the migration, advice revenues will return to more normal
levels, as investment fees will be closely linked to the value of FUMA we
manage, and financial planning teams will operate with a significantly
improved capacity to deliver additional financial planning services for new
and existing clients.
Vision Independent Financial Planning continues to operate independently as an
important part of the group. The network has now grown to 137 advisers that
manage FUMA of £2.9 billion (30 June 2022: 128 advisers, £2.4 billion).
Across the group at 30 June 2023, Rathbones operated through 209 financial
advisers, that work closely with 363 investment managers to deliver our
services.
improving our digital capability
We continue to pursue our digital strategy vigorously, implementing some
important enhancements to MyRathbones that have added data and allowed clients
a greater ability to customise information. Around c.55% of our clients now
receive updates digitally rather than in hard copy form in accordance with
their preferences.
We have also made further enhancements to Charles River in our Funds business
where we plan to roll out performance measurement, attribution and risk
processes this year, which will significantly reduce the administrative burden
on our team.
Delivery of our Client Lifecycle Management (CLM) programme has been slower
than expected over the first half. This is reflected in the incidence of
expenditure which was c.£6 million in the period (H1 2022: c.£8 million),
making the total spend to date c.£22 million.
We expect delivery to accelerate in the second half as additional resources
are applied, but the full launch of the system looks likely now to move into
the early part of 2024 rather than by the end of 2023. We reiterate our
guidance that the total cost of digital projects (including the Charles River
implementation) will continue to be no more than £40 million.
Inspiring our people
Employee engagement and feedback remains a critical part of how we measure our
success, and we run regular surveys to ensure that employee engagement remains
high. Our Peakon survey in July 2023 produced an engagement score of 8/10
which was 0.2 above the financial services benchmark, alongside a net promoter
score of 37, which compares favourably at 15 points above the financial
services benchmark.
We will continue to place the well-being of our employees at the heart of what
we do and are committed to offering them future challenge and opportunity. Our
2022 Annual Report outlined a practical and action orientated approach to
fostering Diversity, Equality and Inclusion (DE&I) and we are already
seeing positive results from the awareness, network building and training we
have offered. We remain sensitive to the current environment and the
cost-of-living challenges it presents to some colleagues.
Combination with investec W&I
The combination that we announced on 4 April 2023 with Investec W&I
presents us with many opportunities including the chance to capture the
benefits that scale provides. We were grateful for the overwhelming
shareholder support for the transaction in June which was a positive
affirmation of our strategy.
Rathbones and Investec continue to work collaboratively with regulators, and
we expect the transaction to complete towards the end of the third quarter.
Integration planning remains on track, and we very much look forward to
welcoming clients and new colleagues from Investec W&I to form a
significant part of the enlarged Rathbones group. Our future focus will then
move to integration and delivering benefits to clients, employees and
shareholders.
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 2022 annual
report and accounts have not materially changed. These are in the strategic
report and group risk committee report in pages 59 to 65 and pages 110 to 113
of the 2022 Annual Report.
The risks associated with our combination with Investec W&I were outlined
to shareholders in the prospectus we issued on 1 June. We remain 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
Rathbones has welcomed the new Consumer Duty rules that will come into force
this summer, using them as an opportunity to review all of our services
against the four customer duty outcomes. This work has helped clarify how
these services are sold and described to clients, and further re-enforced key
concepts in training given to employees.
We remain committed to ensuring that the interests of our clients are at the
forefront of everything we do. Our ongoing efforts to meet and exceed
regulatory requirements are central to our commitment to client trust and
long-term sustainable growth.
board and executive changes
After six years Sarah Gentleman is stepping down as Chair of the Remuneration
Committee to focus on her role as Senior Independent Director. We would like
to thank her for her leadership on remuneration policy over this time and are
delighted to appoint Dharmash Mistry as our new Remuneration Committee Chair,
effective as of 1 September, subject to regulatory approval. Dharmash joined
the board as a non-executive director on 5 October 2021.
After 37 years in the industry, and 14 years at Rathbones Mike Webb, chief
executive of RUTM and group distribution, will retire at the end of this year.
His role will be divided between Jayne Rogers, who will join Rathbones in
September as executive chair of RUTM and chief distribution officer, and Tom
Caroll who will run RUTM day to day as CEO. Jayne joins us after four years at
Morgan Stanley Investment Management where she was EMEA head of strategic
initiatives. Prior to this Jayne held senior roles at Robeco Asset Management
Northern Trust, and KPMG Investment Advisory. Tom joined RUTM in 2022 as chief
investment officer from Sanlam. Both appointments are subject to regulatory
approval.
We were deeply saddened by the recent loss of Anne-Marie McConnon who suddenly
passed away shortly after her arrival as our first Chief Client Officer of
Rathbones. We were very excited to work with Anne-Marie and continue to see
this role as an important part of the executive team going forward.
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
Whilst market conditions are expected to remain subdued in the short term,
stable revenue margins in our core discretionary fund management business, and
positive performance in our asset management business, provide a solid
platform for the group.
Larger than expected base rate rises to date support net interest income this
year of closer to £45 million, up from the £35 million we guided to in our
full year results, and we will maintain expense and recruitment discipline
during this inflationary period.
We look forward to achieving the objectives we set out following completion of
the transaction with Investec W&I, which are expected to improve medium
term underlying operating profit margins to at least 30%.
Clive C R Bannister Paul Stockton
Chair Group Chief Executive Officer
25 July 2023
CONSOLIDATED INTERIM Statement OF COMPREHENSIVE INCOME
FOR THE SIX MONTHS ENDED 30 JUNE 2023
Note Unaudited Unaudited Audited
Six months to
Six months to
Year to
30 June 2023
30 June 2022
31 December 2022
£'000
£'000
£'000
Interest and similar income 65,898 16,368 46,335
Interest expense and similar charges (42,928) (10,271) (28,032)
Net interest income 22,970 6,097 18,303
Fee and commission income 228,502 239,177 462,689
Fee and commission expense (14,119) (13,869) (27,477)
Net fee and commission income 214,383 225,308 435,212
Other operating income 673 535 2,360
Operating income 238,026 231,940 455,875
Charges in relation to client relationships and goodwill 14 (9,510) (9,924) (19,544)
Acquisition-related costs 6 (15,271) (7,426) (13,462)
Other operating expenses (187,284) (181,976) (358,815)
Operating expenses (212,065) (199,326) (391,821)
Profit before tax 25,961 32,614 64,054
Taxation 8 (6,279) (7,625) (15,070)
Profit after tax 19,682 24,989 48,984
Profit for the period attributable to equity holders of the company 19,682 24,989 48,984
Other comprehensive income:
Items that will not be reclassified to profit or loss
Net remeasurement of defined benefit asset (2,790) 3,315 (7,083)
Deferred tax relating to the net remeasurement of defined benefit asset 698 961 3,361
Other comprehensive income net of tax (2,092) 4,276 (3,722)
Total comprehensive income for the period net of tax attributable to equity 17,590 29,265 45,262
holders of the company
Dividends paid and proposed for the period per ordinary share 9 29.0p 28.0p 84.0p
Dividends paid and proposed for the period 16,976 16,388 49,317
Earnings per share for the period attributable to equity holders of the 10
company:
- basic 33.6p 42.7p 83.6p
- diluted 32.8p 41.6p 81.6p
Consolidated interim statement of changes in equity
as at 30 June 2023
Note Share capital Share premium Merger reserve Own shares Retained earnings Total equity
£'000
£'000
£'000
£'000
£'000
£'000
At 1 January 2022 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: -
- cost of share-based payment arrangements 13,786 13,786
- cost of vested employee remuneration and share plans (11,304) (11,304)
- cost of own shares vesting 2,217 (2,217) -
- cost of own shares acquired (10,843) (10,843)
- 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
Profit for the period 23,995 23,995
Net remeasurement of defined benefit asset (10,398) (10,398)
Deferred tax relating to components of other comprehensive income 2,400 2,400
Other comprehensive income net of tax - - - - (7,998) (7,998)
Dividends paid (16,553) (16,553)
Issue of share capital 18 18 6,157 6,175
Share-based payments:
- cost of share-based payment arrangements 12,100 12,100
- cost of vested employee remuneration and share plans (1,472) (1,472)
- cost of own shares vesting 461 (461) -
- cost of own shares acquired (7,724) (7,724)
- tax on share-based payments 168 168
At 31 December 2022 (audited) 3,170 309,970 76,965 (52,515) 297,244 634,834
Profit for the period 19,682 19,682
Net remeasurement of defined benefit asset (2,790) (2,790)
Deferred tax relating to components of other comprehensive income 698 698
Other comprehensive income net of tax - - - - (2,092) (2,092)
Dividends paid (33,414) (33,414)
Issue of share capital 18 2 808 810
Share-based payments:
- cost of share-based payment arrangements 10,714 10,714
- cost of vested employee remuneration and share plans (5,613) (5,613)
- cost of own shares vesting 11,371 (11,371) -
- cost of own shares acquired (6,660) (6,660)
- tax on share-based payments 77 77
At 30 June 2023 (unaudited) 3,172 310,778 76,965 (47,804) 275,227 618,338
Consolidated interim balance statement
as at 30 June 2023
Note Unaudited Unaudited Audited
30 June 2023
30 June 2022
31 December 2022
£'000
£'000
£'000
Assets
Cash and balances with central banks 1,141,926 1,683,670 1,412,915
Settlement balances 215,119 137,672 65,818
Loans and advances to banks 139,481 186,206 194,723
Loans and advances to customers 11 143,374 189,960 169,766
Investment securities:
- fair value through profit or loss 3,081 11,906 11,214
- amortised cost 1,233,827 829,970 1,045,234
Prepayments, accrued income and other assets 152,323 124,260 126,687
Property, plant and equipment 12 10,865 14,012 12,687
Right-of-use assets 13 37,268 41,606 39,087
Current tax assets 9,163 6,167 3,475
Intangible assets 14 347,163 365,245 356,193
Retirement benefit asset 17 7,002 15,887 9,401
Total assets 3,440,592 3,606,561 3,447,200
Liabilities
Deposits by banks 17,173 19,587 1,035
Settlement balances 211,188 139,916 69,872
Due to customers 2,377,131 2,582,703 2,516,116
Accruals and other liabilities 98,561 122,799 114,288
Lease liabilities 48,858 52,739 50,484
Current tax liabilities 363 275 247
Net deferred tax liabilities 9,880 11,523 7,525
Provisions for liabilities and charges 15 19,210 10,984 12,907
Subordinated loan notes 16 39,890 39,892 39,891
Total liabilities 2,822,254 2,980,418 2,812,365
Equity
Share capital 18 3,172 3,152 3,170
Share premium 18 310,778 303,813 309,970
Merger reserve 18 76,965 76,965 76,965
Own shares (47,804) (45,252) (52,515)
Retained earnings 275,227 287,465 297,244
Total equity 618,338 626,143 634,834
Total liabilities and equity 3,440,592 3,606,561 3,447,199
The condensed consolidated interim financial statements were approved by the
board of directors and authorised for issue on 25 July 2023 and were signed on
its behalf by:
Jennifer Mathias
Paul Stockton Group Chief Financial Officer
Group Chief Executive Officer
Company registered number: 01000403
25 July 2023
Consolidated interim statement of cash flows
for the six months ended 30 June 2023
Note Unaudited Unaudited Audited
30 June 2023
30 June 2022
31 December 2022
£'000
£'000
£'000
Cash flows from operating activities
Profit before tax 25,961 32,614 64,054
Change in fair value through profit or loss (2) 525 304
Net interest income (22,970) (6,097) (18,303)
Net (recoveries)/impairment charges on loans and advances (64) 13 (96)
Net charge to income statement for provisions 15 7,251 330 1,971
Depreciation, amortisation and impairment 17,047 17,564 34,942
Foreign exchange movements 3,886 (6,406) (7,077)
Defined benefit pension scheme charges (223) (117) (258)
Defined benefit pension contributions paid (168) (168) (3,939)
Share-based payment charges 19 10,714 13,786 25,886
Interest paid (34,542) (2,396) (20,861)
Interest received 49,587 8,437 33,940
56,477 58,085 110,563
Changes in operating assets and liabilities:
- net decrease/(increase) in loans and advances to banks and customers 17,283 (10,355) 8,382
- net (increase)/decrease in settlement balance debtors (149,301) (67,922) 3,931
- net (increase)/decrease in prepayments, accrued income and other assets (14,912) (5,242) 1,871
- net (decrease)/increase in amounts due to customers and deposits by banks (122,847) 267,210 181,928
- net increase in settlement balance creditors 141,316 79,841 9,797
- net decrease in accruals, provisions and other liabilities (20,941) (14,592) (5,925)
Cash (used in)/generated from operations (92,925) 307,026 310,547
Tax paid (8,720) (11,398) (17,613)
Net cash (outflow)/inflow from operating activities (101,645) 295,628 292,934
Cash flows from investing activities
Purchase of property, plant, equipment and intangible assets (3,694) (9,108) (13,133)
Payment of deferred consideration - - (10,873)
Purchase of investment securities (1,083,928) (555,202) (1,262,476)
Proceeds from sale and redemption of investment securities 899,582 490,802 984,394
Net cash used in investing activities (188,040) (73,508) (302,088)
Cash flows from financing activities
Issue of ordinary shares 22 810 7,140 9,262
Repurchase of ordinary shares 22 (6,660) (10,843) (18,567)
Dividends paid (33,414) (32,054) (48,607)
Payment of lease liabilities (3,872) (4,347) (8,481)
Interest paid (2,577) (2,693) (5,320)
Net cash used in financing activities (45,713) (42,797) (71,713)
Net (decrease)/increase in cash and cash equivalents (335,398) 179,323 (80,867)
Cash and cash equivalents at the beginning of the period 1,572,723 1,653,590 1,653,590
Cash and cash equivalents at the end of the period 22 1,237,325 1,832,913 1,572,723
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 on pages 2-4 of the annual report and accounts for the
year ended 31 December 2022 and have not materially changed since that date.
These condensed consolidated interim financial statements, on pages 7 to 27,
are presented in accordance with United Kingdom adopted International
Accounting Standard 34. 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 2022. The condensed
consolidated interim financial statements should be read in conjunction with
the group's audited financial statements for the year ended 31 December 2022.
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 2022 are not the
group's statutory accounts for that financial year. The group's financial
statements for the year ended 31 December 2022 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:
- IFRS 17 Insurance Contracts.
- Amendments to IFRS 17.
- Disclosure of Accounting Policies (Amendments to IAS 1 and IFRS Practice
Statement 2).
- Definition of Accounting Estimate (Amendments to IAS 8).
- Deferred Tax Related to Assets and Liabilities Arising from a Single
Transaction - Amendments to IAS 12 Income Taxes.
- Initial Application of IFRS 7 and IFRS 9 - Comparative Information
(Amendments to IFRS 17).
Future new standards and interpretations
The following standards are effective for annual periods beginning after 1
January 2024 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
Sale or Contribution of Assets between an Investor and its Associate or Join Optional
Venture
(Amendments to IFRS 10 and IAS 28)
Classification of liabilities as current or non-current (Amendments to IAS 1) 01 January 2024
Lease Liability in a Sale and Leaseback - Amendments to IFRS 16 01 January 2024
Non-current Liabilities with Covenants (Amendments to IAS 1) 01 January 2024
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 2022.
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 2022.
In 2021, 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 purchase price payable in respect of the acquisition was split into a
number of different components. The equity-settled 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 Saunderson House management incentive scheme is subject to the achievement
of certain operational and performance targets at 31 December 2024. A profit
or loss charge has been recognised in equity for the expected consideration
payable in shares.
Under the terms of the agreements, the award ranges from a payment of £nil to
a maximum possible payment in shares of £7.2 million, and is dependent on the
value of qualifying funds under management at the test date, as well as other
qualitative factors. Management's best estimate of this award at the period
end was £4.7 million.
The maximum award of £7.2 million would result in an additional charge to
profit or loss in the period of £0.3 million. A payment of £nil would result
in a reversal of the accumulated profit or loss charge since commencement of
the award of £2.4 million in 2023.
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 2023 (unaudited) Investment Management Funds Indirect expenses Total
£'000
£'000
£'000
£'000
Net investment management fee income 138,822 31,071 - 169,893
Net commission income 23,713 - - 23,713
Net interest income 22,221 749 - 22,970
Fees from advisory services and other income 21,005 445 - 21,450
Operating income 205,761 32,265 - 238,026
Staff costs - fixed (59,468) (3,665) (25,112) (88,245)
Staff costs - variable (31,664) (5,280) (6,981) (43,925)
Total staff costs (91,132) (8,945) (32,093) (132,170)
Other direct expenses (20,532) (6,334) (28,248) (55,114)
Allocation of indirect expenses¹ (52,990) (7,351) 60,341 -
Underlying operating expenses (164,654) (22,630) - (187,284)
Underlying profit before tax 41,107 9,635 - 50,742
Charges in relation to client relationships and goodwill (note 14) (9,510) - - (9,510)
Acquisition-related costs (note 6) (2,199) - (13,072) (15,271)
Segment profit before tax 29,398 9,635 (13,072) 25,961
Taxation (note 8) (6,279)
Profit for the period attributable to equity holders of the company 19,682
4 / Segmental information continued
Investment Management Funds Total
£'000
£'000
£'000
Segment total assets 3,276,012 157,578 3,433,590
Unallocated assets 7,002
Total assets 3,276,012 157,578 3,440,592
1. Included within the allocation of indirect expenses are costs related to
the group's digital strategy for activities that are now live.
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
Year ended 31 December 2022 (audited) Investment Management Funds Indirect expenses Total
£'000
£'000
£'000
£'000
Net investment management fee income 274,881 62,158 - 337,039
Net commission income 48,871 - - 48,871
Net interest income 17,779 524 - 18,303
Fees from advisory services and other income 51,393 269 - 51,662
Operating income 392,924 62,951 - 455,875
Staff costs − fixed (109,507) (6,938) (42,035) (158,480)
Staff costs − variable (66,915) (11,240) (8,917) (87,072)
Total staff costs (176,422) (18,178) (50,952) (245,552)
Other direct expenses (41,494) (9,570) (62,199) (113,263)
Allocation of indirect expenses (104,363) (8,788) 113,151 -
Underlying operating expenses (322,279) (36,536) - (358,815)
Underlying profit before tax 70,645 26,415 - 97,060
Charges in relation to client relationships and goodwill (note 22) (19,544) - - (19,544)
Acquisition-related costs (note 9) (10,027) - (3,436) (13,462)
Segment profit before tax 41,074 26,415 (3,436) 64,054
Taxation (note 11) (15,070)
Profit for the year attributable to equity holders of the company 48,984
Investment Management Funds Total
£'000
£'000
£'000
Segment total assets 3,323,428 114,371 3,437,799
Unallocated assets 9,401
Total assets 3,323,428 114,371 3,447,200
Included within Investment Management operating income is £774,000 (30 June
2022: £1,018,000; 31 December 2022: £1,916,000) 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 2023
30 June 2022
31 December 2022
£'000
£'000
£'000
Underlying operating expenses 187,284 181,976 358,815
Charges in relation to client relationships and goodwill (note 14) 9,510 9,924 19,544
Acquisition-related costs (note 6) 15,271 7,426 13,462
Operating expenses 212,065 199,326 391,821
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 2023
30 June 2022
31 December 2022
£'000
£'000
£'000
United Kingdom 229,734 224,958 441,977
Jersey 8,292 6,927 13,842
Rest of World - 55 56
Operating income 238,026 231,940 455,875
The group's non-current assets are substantially all located in the United
Kingdom.
4 / Segmental information continued
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 2023
30 June 2022
31 December 2022
Investment Management Funds Investment Management Funds Investment Management Funds
£'000
£'000
£'000
£'000
£'000
£'000
Products and services transferred at a point in time 16,908 - 30,516 - 41,192 -
Products and services transferred over time 188,853 32,265 169,557 31,867 351,732 62,951
Operating income 205,761 32,265 200,073 31,867 392,924 62,951
Major clients
The group is not reliant on any one client or group of connected clients for
generation of revenues. At 30 June 2023, the group provided investment
management services to 68,629 clients (30 June 2022: 67,171; 31 December 2022:
67,662).
5 / Business combinations
Speirs & Jeffrey
On 31 August 2018, the group acquired 100% of the ordinary share capital of
Speirs & Jeffrey Limited.
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 have
been treated as remuneration for post-combination services and the grant date
fair value has been 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:
- earn-out consideration and related incentivisation awards were subject to
the delivery of certain operational and financial performance targets. The
earn-out awards for the vendors were payable in two parts in the third and
fourth years following the acquisition date. The second earn-out vested in
2021. The incentivisation awards for staff will vest in tranches by 31 March
2025.
Further details are as follows:
Unaudited Unaudited Audited
Six months to
Six months to
Year to
30 June 2023
30 June 2022
31 December 2022
£'000
£'000
£'000
Earn-out consideration and incentivisation awards 570 2,667 3,497
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.
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 2022 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 deferred share consideration was paid in the prior year to vendors not
required to remain in employment with the group.
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 2023
30 June 2022
31 December 2022
£'000
£'000
£'000
Initial share consideration 901 901 1,816
Deferred share consideration - 2,002 3,290
Incentivisation awards 728 764 1,423
Total consideration 1,629 3,667 6,529
Investec Wealth & Investment UK
On 4 April 2023, the group announced an all-share acquisition of Investec
Wealth & Investment UK, which is subject to regulatory approval. See note
6 for detail of the costs incurred in the period in relation to the
acquisition.
6 / Acquisition-related costs
Unaudited Unaudited Audited
Six months to
Six months to
Year to
30 June 2023
30 June 2022
31 December 2022
£'000
£'000
£'000
Acquisition of Speirs & Jeffrey 570 2866 3497
Acquisition of Saunderson House 3,502 4,560 9,965
Acquisition of Investec Wealth and Investment UK 11,199 - -
Acquisition-related costs 15,271 7,426 13,462
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 2023
30 June 2022
31 December 2022
£'000
£'000
£'000
Acquisition costs:
Staff costs 570 2,667 3,497
Integration costs - 199 -
570 2,866 3,497
Integration costs of £nil (30 June 2022: £199,000; 31 December 2022: £nil)
have not been allocated to a specific operating segment (note 4).
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 2023
30 June 2022
31 December 2022
£'000
£'000
£'000
Acquisition costs:
Staff costs 1,629 3,667 6,529
Integration costs 1,873 893 3,436
3,502 4,560 9,965
Integration costs of £1,873,000 (30 June 2022: £893,000; 31 December 2022:
£3,436,000) have not been allocated to a specific operating segment (note 4).
Costs relating to the acquisition of Investec Wealth & Investment UK
The group incurred legal and advisory costs of £11,199,000 in relation to the
acquisition in the six months ended 30 June 2023, which were recognised in
profit or loss. These costs have not been allocated to a specific operating
segment (note 4). An additional £3,669,000 of incremental costs related
directly to the expected share issue in the second half of the year were
recognised as an asset at 30 June 2023.
Of the total costs incurred in the period, £6,700,000 of professional fees,
which become payable subject to completion of the transaction, have been
recognised as a provision at 30 June 2023 (note 15).
7 / EMPLOYEE numbers
The average number of employees during the period, on a full time equivalent
basis, was as follows:
Unaudited Unaudited Audited
Six months to
Six months to
Year to
30 June 2023
30 June 2022
31 December 2022
Investment Management:
- investment management services 1,148 1,084 1,112
- advisory services 345 334 348
Funds 52 50 50
Business support 594 543 543
2,139 2,011 2,053
8 / Taxation
The tax expense for the six months ended 30 June 2023 was calculated based on
the estimated average annual effective tax rate. The overall effective tax
rate for this period was 24.2% (six months ended 30 June 2022: 23.4%; year
ended 31 December 2022: 23.6%).
The effective tax rate reflects the disallowable costs of the deferred
consideration payments in relation to the acquisitions of Speirs & Jeffrey
and Saunderson House, as well as the legal and advisory fees incurred in
relation to the acquisition of Investec Wealth and Investment UK.
Unaudited Unaudited Audited
Six months to
Six months to
Year to
30 June 2023
30 June 2022
31 December 2022
£'000
£'000
£'000
United Kingdom taxation 3,522 7,797 16,467
Overseas taxation 241 104 289
Deferred taxation 2,516 (276) (1,686)
6,279 7,625 15,070
The UK corporation tax rate for the year ending 31 December 2023 is 23.5%.
This is a composite rate; the UK Government legislated in the Finance Act 2021
to increase the UK corporation tax rate to 25.0% from 1 April 2023 (2022:
19.0%). This has been reflected in the deferred tax calculations. 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.
9 / Dividends
An interim dividend of 29.0p per share is payable on 25 August 2023 to
shareholders on the register at the close of business on 4 August 2023. The
interim dividend has not been included as a liability in this interim
statement. A final dividend for 2022 of 56.0p per share was paid on 9 May
2023.
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 2023
30 June 2022
31 December 2022
Pre-tax Post-tax Pre-tax Post-tax Pre-tax Post-tax
£'000
£'000
£'000
£'000
£'000
£'000
Underlying profit attributable to equity holders 50,742 38,847 49,964 39,573 97,060 76,676
Charges in relation to client relationships and goodwill (note 14) (9,510) (7,274) (9,924) (8,038) (19,544) (15,831)
Acquisition-related costs (note 6) (15,271) (11,891) (7,426) (6,546) (13,462) (11,861)
Profit attributable to equity holders 25,961 19,682 32,614 24,989 64,054 48,984
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 58,538,625 (30 June 2022: 58,528,000; 31
December 2022: 58,618,521).
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, Executive Incentive Plan and Executive Share Performance
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.
Unaudited Unaudited Audited
30 June 2023
30 June 2022
31 December 2022
Weighted average number of ordinary shares in issue during the period - basic 58,538,625 58,528,000 58,618,521
Effect of ordinary share options/Save As You Earn 558,416 571,430 595,055
Effect of dilutive shares issuable under the Share Incentive Plan 1,477 1,359 671
Effect of contingently issuable ordinary shares under the Executive Incentive 597,431 633,295 563,816
Plan/Executive Share Performance Plan
Effect of contingently issuable shares under Saunderson House initial share 272,952 272,952 272,952
consideration
Diluted ordinary shares 59,968,901 60,007,036 60,051,015
Unaudited Unaudited Audited
Six months to
Six months to
Year to
30 June 2023
30 June 2022
31 December 2022
Earnings per share for the period attributable to equity holders of the
company:
- basic 33.6p 42.7p 83.6p
- diluted 32.8p 41.6p 81.6p
Underlying earnings per share for the period attributable to equity holders of
the company:
- basic 66.4p 67.6p 130.8p
- diluted 64.8p 65.9p 127.7p
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 2023
30 June 2022
31 December 2022
£'000
£'000
£'000
Overdrafts 15,080 10,425 6,540
Investment Management loan book 124,554 175,500 159,682
Trust and financial planning debtors 3,625 2,047 3,033
Other debtors 115 1,988 511
143,374 189,960 169,766
12 / Property, plant and equipment
During the six months ended 30 June 2023, the group purchased assets with a
cost of £616,000 (six months ended 30 June 2022: £3,182,000; year ended 31
December 2022: £4,371,000).
13 / Right-of-use assets
Property Motor vehicles and equipment Total
£'000
£'000
£'000
Cost
1 January 2023 58,096 354 58,450
Additions 796 - 796
Disposals (936) - (936)
At 30 June 2023 57,956 354 58,310
Depreciation and impairment
1 January 2023 19,224 139 19,363
Charge in the period 2,556 59 2,615
Disposals (936) - (936)
At 30 June 2023 20,844 198 21,042
Carrying amount at 30 June 2023 (unaudited) 37,112 156 37,268
Carrying amount at 30 June 2022 (unaudited) 41,334 273 41,606
Carrying amount at 31 December 2022 (audited) 38,872 215 39,087
14 / Intangible assets
Goodwill Client Software development costs Purchased Total
£'000
relationships
£'000
software
intangibles
£'000
£'000
£'000
Cost
At 1 January 2023 169,631 300,927 13,467 54,897 538,922
Internally developed in the period - - 487 - 487
Purchased in the period - 1,564 - 909 2,473
Disposals - (2,000) - - (2,000)
At 30 June 2023 169,631 300,491 13,954 55,806 539,882
Amortisation and impairment
At 1 January 2023 1,954 125,904 10,024 44,847 182,729
Charge in the period - 9,510 817 1,663 11,990
Disposals - (2,000) - - (2,000)
At 30 June 2023 1,954 133,414 10,841 46,510 192,719
Carrying value at 30 June 2023 (unaudited) 167,677 167,077 3,113 9,296 347,163
Carrying value at 30 June 2022 (unaudited) 167,677 183,452 3,193 10,923 365,245
Carrying value at 31 December 2022 (audited) 167,677 175,023 3,443 10,050 356,193
The total amount charged to profit or loss in the period, in relation to
goodwill and client relationships, was £9,510,000 (six months ended 30 June
2022: £9,924,000; year ended 31 December 2022: £19,544,000).
Impairment
The recoverable amounts of the groups of cash-generating units ('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 Internal Capital Adequacy
Assessment Process ('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 groups of CGUs.
The pre-tax rate used to discount the forecast cash flows was 13.3% (30 June
2022: 11.3%; 31 December 2022: 14.1%). 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 groups 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 Legal and professional, and compensation Property-related Total
£'000
£'000
£'000
£'000
At 1 January 2022 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
Charged to profit or loss - 609 872 1,481
Unused amount credited to profit or loss 193 - - 193
Net charge to profit or loss 193 609 872 1,674
Other movements 997 - - 997
Utilised/paid during the period (657) (58) (33) (748)
At 31 December 2022 (audited) 4,379 2,736 5,792 12,907
Charged to profit or loss - 7,352 205 7,557
Unused amount credited to profit or loss - (306) - (306)
Net charge to profit or loss - 7,046 205 7,251
Other movements 1,564 - - 1,564
Utilised/paid during the period (1,682) (830) - (2,512)
At 30 June 2023 (unaudited) 4,261 8,952 5,997 19,210
Payable within one year 4,030 8,952 331 13,313
Payable after one year 231 - 5,666 5,897
At 30 June 2023 (unaudited) 4,261 8,952 5,997 19,210
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 previously capitalised.
Legal and PROFESsIONAL, 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 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 group's best estimate is based on legal advice and
management's expectation of the most likely settlement outcome, which in some
cases is calculated by external professional advisers. The timing of
settlement of provisions for client compensation or litigation is dependent,
in part, on the duration of negotiations with third parties.
A provision of £6,700,000 for advisory fees was recognised in the period in
relation to the acquisition of Investec Wealth and Investment UK. This is
payable within one year of the balance sheet date, and payment is subject to
completion of the transaction.
Property-related
Property-related provisions of £5,997,000 relate to dilapidation provisions
expected to arise on leasehold premises held by the group (30 June 2022:
£4,953,000; 31 December 2022: £5,792,000).
During the six months ended 30 June 2023, the group utilised £nil in relation
to dilapidations (30 June 2022: £nil; 31 December 2022: £33,000). The impact
of discounting led to an additional charge of £205,000 (30 June 2022:
additional charge of £310,000; 31 December 2022: additional charge of
£1,182,000) being recognised during the period.
Amounts payable after one year
Property-related provisions of £5,997,000 are expected to be settled within
12 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 eight years of the balance
sheet date.
16 / Subordinated loan notes
Unaudited Unaudited Audited
30 June 2023
30 June 2022
31 December 2022
£'000
£'000
£'000
Subordinated loan notes
- face value 40,000 40,000 40,000
- carrying value 39,890 39,892 39,891
Rathbones Group Plc holds £39.9 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.
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 2023
30 June 2022
31 December 2022
% p.a.
% p.a.
% p.a.
Rate of increase of pensions in payment:
- Laurence Keen Scheme 3.60 3.60 3.60
- Rathbone 1987 Scheme 3.20 3.20 3.20
Rate of increase of deferred pensions 3.30 3.20 3.20
Discount rate 5.10 3.70 4.70
Inflation* 3.30 3.20 3.20
Percentage of members transferring out of the schemes per annum 2.00 2.00 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 12.00 14.00 13.00
- Rathbone 1987 Scheme 16.00 18.00 16.00
* Inflation assumptions are based on the Retail Price Index
The assumed life expectations of members retiring aged 65 were:
Unaudited 30 June 2023 Unaudited 30 June 2022 Audited 31 December 2022
Males Females Males Females Males Females
Retiring today 23.4 25.0 23.4 25.0 23.3 24.9
Retiring in 20 years 24.9 26.7 24.9 26.6 24.9 26.6
The amount included in the balance sheet arising from the group's obligations
in respect of the schemes is as follows:
Unaudited 30 June 2023 Unaudited 30 June 2022 Audited 31 December 2022
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 (85,863) (6,915) (100,054) (8,138) (87,564) (7,167)
Fair value of scheme assets 91,944 7,836 114,611 9,468 96,019 8,113
Total surplus 6,081 921 14,557 1,330 8,455 946
The group made lump sum contributions into its pension schemes totalling
£168,000 during the period (30 June 2022: £168,000; 31 December 2022:
£3,939,000).
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 2022 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
Shares issued:
- in relation to business combinations 211,767 1,600.0 - 2,090.0 11 4,041 - 4,052
- to Share Incentive Plan 118,261 1,085.0 - 1,813.0 7 2,107 - 2,114
- to Save As You Earn scheme 496 1,813.0 - 9 - 9
At 31 December 2022 (audited) 63,394,837 3,170 309,970 76,965 390,105
Shares issued:
- to Share Incentive Plan 38,544 2,070.0 - 2,160.0 2 808 - 810
At 30 June 2023 (unaudited) 63,433,381 3,172 310,778 76,965 390,915
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.
On 26 October 2022, the company issued 211,767 shares in respect of the
Saunderson House deferred consideration award.
At 30 June 2023, the group held 4,122,553 own shares (30 June 2022: 4,497,727;
31 December 2022: 4,887,294).
19 / Share-based payments
The group recognised total expenses of £10,714,000 (30 June 2022:
£13,786,000, 31 December 2022: £25,886,000) in relation to share-based
transactions in the period. This includes 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 2023 (unaudited) Level 1 Level 2 Level 3 Total
£'000
£'000
£'000
£'000
Financial assets
Fair value through profit or loss:
- equity securities - - 3,081 3,081
- - 3,081 3,081
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
8,854 - 3,052 11,906
20 / Financial instruments continued
At 31 December 2022 (audited) Level 1 Level 2 Level 3 Total
£'000
£'000
£'000
£'000
Financial assets
Fair value through profit or loss:
- equity securities 8,068 - 3,146 11,214
8,068 - 3,146 11,214
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 company previously owned units in collectives managed by Rathbone Unit
Trust Management. These were listed equity securities classified as fair value
through profit or loss. The fair value was their quoted price. During the
period, the group sold its holdings in the unit trusts.
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,
and treasury bills. The fair value of debt securities at 30 June 2023 was
£1,234,216,000 (30 June 2022: £830,894,000; 31 December 2022:
£1,053,460,000) and the carrying value was £1,233,827,000 (30 June 2022:
£829,970,000; 31 December 2022: £1,045,257,000). 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 2023 was £37,299,000 (30 June 2022:
£44,968,000; 31 December 2022: £41,211,000) and the carrying value was
£39,890,000 (30 June 2022: £39,892,000; 31 December 2022: £39,891,000).
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 readily available observable market
data is available.
In the current period, the valuation of €1,985 per share has been calculated
by reference to the indicative price derived from the most 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.
Due to movements in the exchange rate used to value these shares, a 10%
weakening of the euro against sterling, occurring on 30 June 2023, would have
reduced equity and profit after tax by £236,000 (30 June 2022: £247,000; 31
December 2022: £255,000). 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 2023
30 June 2022
31 December 2022
£'000
£'000
£'000
At 1 January 3,146 2,558 2,558
Total unrealised gains/(losses) recognised in profit or loss (65) 494 588
At 30 June 3,081 3,052 3,146
20 / Financial instruments continued
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 2023 (audited) - 12 121 23 192
36
Amounts written off - - - - - -
Net remeasurement of loss allowance (13) - (12) (32) 1 (56)
Balance at 30 June 2023 (unaudited) 23 - - 89 24 136
As at 30 June 2023, 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 2023 but
not provided for in the condensed consolidated interim financial statements
amounted to £501,000 (30 June 2022: £1,441,000; 31 December 2022:
£536,000).
(c) The contractual amounts of the group's commitments to extend credit to
its clients are as follows:
Unaudited Unaudited Audited
30 June 2023
30 June 2022
31 December 2022
£'000
£'000
£'000
Undrawn commitments to lend of one year or less 15,917 30,660 17,838
Undrawn commitments to lend of more than one year 5,550 3,129 4,615
21,467 33,789 22,453
(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 2023
30 June 2022
31 December 2022
£'000
£'000
£'000
Cash and balances at central banks 1,139,000 1,680,329 1,408,000
Loans and advances to banks 98,325 156,207 164,723
1,237,325 1,836,536 1,572,723
Cash flows arising from issue of ordinary shares comprise:
Unaudited Unaudited Audited
Six months to
Six months to
31 December 2022
30 June 2023
30 June 2022
£'000
£'000
£'000
Share capital issued (note 18) 2 52 70
Share premium on shares issued (note 18) 808 12,787 18,944
Shares issued in relation to share-based schemes for which no cash - (5,699) (9,752)
consideration was received
Proceeds from issue of share capital 810 7,140 9,262
Shares repurchased and placed into the employee benefit trust (6,660) (10,843) (18,567)
Net issue/(repurchase) of ordinary shares (5,850) (3,703) (9,305)
In the period to 30 June 2022, £5,699,000 of shares were issued for the
vesting of the Speirs & Jeffrey second earn-out consideration. In the
second half of 2022, £4,053,000 of shares were issued for the Saunderson
House deferred share consideration. There was no cash consideration received
for these transactions.
During the current period, £6,660,000 of shares were repurchased and placed
into the group employee benefit trust (30 June 2022: £10,843,000; 31 December
2022: £18,567,000).
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 2022: £171,000; year ended 31 December 2022: £216,000) in respect of
ordinary shares held by key management personnel.
At 30 June 2023, key management personnel and their close family members had
gross outstanding deposits of £2,045,000 (30 June 2022: £2,366,000; 31
December 2022: £1,769,000). 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 2023,
the group managed 26 unit trusts, Sociétés d'Investissement à Capital
Variable (SICAVs) and open-ended investment companies (OEICs) (together,
'collectives') (six months ended 30 June 2022: 32 collectives; year ended 31
December 2022: 32 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.
23 / Related party transactions continued
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 2023
30 June 2022
31 December 2022
£'000
£'000
£'000
Total management fees 33,779 29,900 68,226
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 2023
30 June 2022
31 December 2022
£'000
£'000
£'000
Management fees owed to the group 5,879 5,464 5,587
Holdings in unit trusts (note 20) - 8,854 8,068
5,879 14,318 13,655
The group previously owned units in collectives managed by Rathbone Unit Trust
Management (valued at 30 June 2022: £8,854,000; 31 December 2022:
£8,068,000). These assets were held to hedge the group's exposure to deferred
remuneration schemes for employees of unit trusts. As per note 20, these
assets were sold in the period.
Management fees owed to the group are included within 'accrued income' and
holdings in unit trusts were 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 / Events after the balance sheet date
An interim dividend of 29.0p per share was declared on 25 July 2023 (note 9).
There have been no other material events occurring between the balance sheet
date and 25 July 2023.
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).
The decrease in own funds in the period of £21.0 million was largely
attributable to reserves, and is due to the impact of group share plans
vesting in the period and declared dividends in excess of year-to-date
profits. This was partly offset by a £6.1 million fall in the group's credit
risk requirement, which was driven by a sale of the group's collective
investment undertakings, and a subsequent fall in the group's CRD IV buffers.
This resulted in a capital surplus at 30 June 2023 of £98.1 million, down
from £110.3 million at 31 December 2022.
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 2023
30 June 2022
31 December 2022
£'000
£'000
£'000
Share capital and share premium 313,950 306,967 313,140
Reserves 337,295 351,376 374,209
Less:
- prudent valuation of assets held at fair value through profit or loss (4) (12) (11)
- own shares (47,804) (45,252) (52,515)
- intangible assets (net of deferred tax) (318,628) (334,777) (326,656)
- pension asset (7,002) (15,887) (9,401)
Total Common Equity Tier 1 capital 277,807 262,415 298,766
Tier 2 capital 40,000 40,000 40,000
Total own funds 317,807 302,415 338,766
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 a total risk exposure amount (also
known as 'risk-weighted assets') and expected losses in respect of the group's
exposure to credit, counterparty credit, market and operational risks, and
sets a minimum requirement for capital.
At 30 June 2023, the group's risk-weighted assets were £1,575,709,000 (30
June 2022: £1,575,706,000; 31 December 2022: £1,666,825,000).
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. See note 17 for
further detail on the movement in the year to the net defined benefit pension
asset.
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 potential exposure as a result of the concentration of borrowers
located in the UK than other overseas jurisdictions.
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, designed to provide for losses in the event of a
stress, and represents 2.5% (as set by the PRA) of the group's total risk
exposure amount.
Countercyclical capital buffer (CCyB)
The CCyB 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 UK exposures) and other jurisdictions for our exposures to their
locations, and for individual countries where the group has credit risk
exposures.
The buffer rate is currently set by the FPC at 1% for UK exposures (effective
from December 2022). The group has relevant credit exposures in other
jurisdictions, some of which have set buffer rates for exposures to those
countries, resulting in a weighted buffer rate of 0.9% as at 30 June 2023. An
increased UK rate of 2% came into effect in July 2023, which was built into
our forecasts.
The group's own funds requirements were as follows:
Unaudited Unaudited Unaudited
30 June 2023
30 June 2022
31 December 2022
£'000
£'000
£'000
Own funds requirement for credit risk, counterparty credit risk and settlement 60,142 63,798 66,289
risk
Own funds requirement for market risk - - 1,142
Own funds requirement for operational risk 65,915 62,258 65,915
Pillar 1 own funds requirement 126,057 126,056 133,346
Pillar 2A own funds requirement 39,627 40,145 39,981
Total Pillar 1 and 2A own funds requirement 165,684 166,201 173,327
CRD IV buffers:
- capital conservation buffer (CCB) 39,393 39,393 41,671
- countercyclical capital buffer (CCyB) 14,654 158 13,501
Total Pillar 1 and 2A own funds requirement and CRD IV buffers 219,731 205,752 228,499
Total capital surplus 98,076 96,663 110,267
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 Accounting Standard 34;
- 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 2023, and as at 30 June
2023, 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
25 July 2023
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 2023 which comprises the consolidated interim statement of comprehensive
income, consolidated interim statement of changes in equity, consolidated
interim balance sheet and consolidated interim statement of cash flows and
related notes 1 to 24.
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 2023 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 (ISRE (UK) 2410). 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 are
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
ISRE (UK) 2410; 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 company a conclusion on the condensed set of financial
statements in the half-yearly financial report. Our Conclusion, including our
Conclusion 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 ISRE (UK) 2410.
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
25 July 2023
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