REG - Rathbones Group PLC - Interim Results 2024
31/07/2024 07:00
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RNS Number : 4763Y Rathbones Group PLC 31 July 2024
Rathbones Group Plc
A STRONG FIRST HALF FOCUSED ON DELIVERY
Rathbones Group Plc ("Rathbones" or the "Group")
announces results for the six months ended 30 June 2024
Performance headlines:
- Funds under management and administration (FUMA): £108.9 billion,
+3.4%
- Significant improvement in net flows in Q2
- Underlying profit before tax: £112.1 million, +120.7%
- Underlying operating margin: 25.1%
- Statutory profit before tax: £65.3 million, +151.2%
- Interim dividend of 30p, +3.4%
- Accelerated delivery of IW&I integration synergies
- Successful first stage implementation of InvestCloud Client Lifecycle
Management (CLM) technology platform
- Migration of Saunderson House assets substantially complete
Paul Stockton, Group Chief Executive Officer of Rathbones, said:
"Rathbones has continued to focus on consolidating its position as the leading
UK discretionary wealth manager, with total FUMA growing to £108.9 billion at
30 June 2024 (Q1 2024: £107.6 billion, FY 2023: £105.3 billion).
In the first six months of 2024, Rathbones has surpassed both the strategic
and financial objectives we set out upon the announcement of the Investec
Wealth & Investment (IW&I) combination. We have achieved synergy
realisation ahead of target, with run-rate synergies of £20 million delivered
to the end of June 2024, well ahead of our year one post-combination objective
of £15 million. These synergies have delivered a benefit to underlying
operating profit for the six-month period of £8 million and we remain
confident in the guidance set out at the time of the combination.
Our office consolidation programme is progressing at pace with six office
integrations completed so far, including our London head office move to
Gresham Street earlier this month. The remaining two co-located offices will
complete during the remainder of 2024. Work to develop our combined service
proposition is also advancing well, with several propositions now aligned
across the group.
In June, we launched successfully the InvestCloud CLM system into the business
in line with the budgeted investment we guided previously. This represents a
key milestone for our digital programme and gives us a strong platform from
which to build enhanced functionality and improve the client experience.
The migration of Saunderson House assets has been substantially completed,
with the advice process to migrate assets to Rathbones investment propositions
completed or in progress, with only a small residue of £0.2 billion yet to
engage in the migration process.
Our underlying operating margin was 25.1% for the six months to 30 June 2024
(30 June 2023: 21.3%), in line with our target and showing significant
progress towards our target of a 30%+ margin. We end the period in a strong
position, with confidence in the prospects for our enlarged business and a
clear focus on maintaining the momentum of delivery during the second half of
the year."
Financial highlights:
- Total FUMA grew to £108.9 billion at 30 June 2024 (Q1 2024: £107.6
billion, FY 2023: £105.3 billion).
- £93.6 billion in the Wealth Management segment (£99.1 billion prior
to the elimination of Wealth Management FUMA invested in the Asset Management
segment of £5.5 billion).
- £15.3 billion in the Asset Management segment.
- Statutory profit before tax increased by 151.2% to £65.3 million (30
June 2023: £26.0 million), after expensing amortisation of client
relationship intangible assets of £22.0 million (30 June 2023: £9.5 million)
and integration related costs of £24.8 million (30 June 2023: £15.3 million)
in the period. Underlying profit before tax totalled £112.1 million at 30
June 2024 (30 June 2023: £50.8 million), reflecting the inclusion of IW&I
for the current six-month period, with an underlying operating margin of 25.1%
(30 June 2023: 21.3%).
- Total operating income for the group increased by 88.0% to £447.4
million (30 June 2023: £238.0 million). Legacy Rathbones operating income
grew by 11.6% to £265.7 million on a like-for-like basis, driven by recurring
investment management and asset management fees on higher average FUMA, in
addition to increased net interest income of £32.7 million (30 June 2023:
£23.0 million).
- Total underlying operating expenses for the period were £335.3 million
(30 June 2023: £187.2 million) and include the impact of the integration, and
£7.1 million planned investment in our digital programme (30 June 2023: £6.0
million) with the remainder of the £15 million guided for the year to be
incurred in the second half of the year, completing the £45 million spend of
the programme implementation.
- Net FUMA flows improved significantly in the second quarter. While
factors which have resulted in elevated outflows remain relevant, a
significant reduction in gross outflows combined with continued strength in
gross inflows saw net outflows reduce from £0.6 billion in the first quarter
to flat in the second quarter.
- Total gross inflows increased by 3.3% in the second quarter to £3.1
billion (Q1 2024: £3.0 billion) while total gross outflows reduced by 8.6% to
£3.2 billion (Q1 2024: £3.5 billion) in the same period. Although remaining
elevated, reflecting the impact that the prolonged higher interest rate
environment has on debt servicing costs and the relative attraction of cash as
an asset class, this result offers a greater degree of optimism of returning
to more normalised outflow levels.
- Net flows in RIM discretionary & managed propositions remained
positive in the second quarter at £0.1 billion, resulting in £0.5 billion of
net inflows for the first half of the year (30 June 2023: £0.2 billion),
representing an annualised growth rate of 1.9% (30 June 2023: 0.7%).
- Net flows in IW&I also improved significantly, returning to
positive territory in the second quarter, with net inflows of £0.2 billion
(Q1 2024: net outflows of £0.6 billion), reflecting both a significant
reduction in gross outflows related to investment managers who left the
business prior to the announcement of the combination and improved gross
inflows as client confidence in investment markets improves.
- Our single strategy funds remained resilient, with limited outflows of
£0.1 billion in the second quarter (Q1 2024: £0.2 billion), against a
challenging industry backdrop (30 June 2023: £0.3 billion).
Declaration of interim dividend:
- In line with our progressive dividend policy, we have increased our
interim dividend by 3.4% to 30p (30 June 2023: 29p), reflecting the strength
of our business and balance sheet. The record date will be 6 September 2024
and the dividend will be paid on 1 October 2024.
Funds under management and administration
(I) Segment fuma
6 months ended 30 June 2024 Wealth Management Asset Management Intra-group holdings Group FUMA
(£m)
(£m)
(£m) (£m)
Opening FUMA 96,118 13,770 (4,548) 105,340
Gross Inflows 4,727 2,533 (1,168) 6,092
Gross Outflows (5,209) (2,002) 531 (6,680)
Net Flows (482) 531 (637) (588)
Transfers (84) 84 - -
Market & Investment Performance 3,518 922 (285) 4,155
Closing FUMA 99,070 15,307 (5,470) 108,907
(Ii) Breakdown of FUMA and flows by service level
6 months ended 30 June 2024 Opening FUMA Gross Inflows Gross Outflows Net Flows Transfers(1) SHL Migrated Assets Market & Investment Performance (£m) Closing FUMA Ann Net Growth(2)
(£m)
(£m)
(£m)
(£m)
(%)
(£m) (£m) (£m)
Rathbones Investment Management 48,759 2,371 (2,060) 311 (2) 625 1,670 51,363 1.3
Bespoke portfolios 45,004 2,096 (1,894) 202 (304) 272 1,553 46,727 0.9
Managed via in-house funds 3,755 275 (166) 109 302 353 117 4,636 5.8
Multi-asset funds(3) 2,545 601 (423) 178 84 - 185 2,992 14.0
Rathbones discretionary & managed 51,304 2,972 (2,483) 489 82 625 1,855 54,355 1.9
Non-discretionary service 752 12 (24) (12) (39) - 6 707 (3.2)
Investec W&I 42,267 2,128 (2,528) (400) (204) - 1,614 43,277 (1.9)
Saunderson House(4) 1,590 58 (238) (180) - (626) 36 820 (22.6)
Total wealth management 95,913 5,170 (5,273) (103) (161) (1) 3,511 99,159 (0.2)
Single-strategy funds 6,677 764 (1,048) (284) - - 452 6,845 (8.5)
Execution only 2,750 158 (359) (201) 161 1 192 2,903 (14.6)
Total group 105,340 6,092 (6,680) (588) - - 4,155 108,907 (1.1)
Q2 ended 30 June 2024 Opening FUMA Gross Inflows Gross Outflows Net Flows Transfers(1) SHL Migrated Assets Market & Investment Performance (£m) Closing FUMA Ann Net Growth(2)
(£m)
(£m)
(£m)
(£m)
(%)
(£m) (£m) (£m)
Rathbones Investment Management 50,423 1,095 (1,026) 69 (23) 187 707 51,363 0.5
Bespoke portfolios 46,099 969 (934) 35 (170) 99 664 46,727 0.3
Managed via in-house funds 4,324 126 (92) 34 147 88 43 4,636 3.1
Multi-asset funds(3) 2,926 278 (212) 66 - - - 2,992 9.0
Rathbones discretionary & managed 53,349 1,373 (1,238) 135 (23) 187 707 54,355 1.0
Non-discretionary service 729 6 (10) (4) (31) - 13 707 (2.2)
Investec W&I 42,671 1,272 (1,094) 178 (21) - 449 43,277 1.7
Saunderson House(4) 1,119 41 (181) (140) - (187) 28 820 (50.0)
Total wealth management 97,868 2,692 (2,523) 169 (75) - 1,197 99,159 0.7
Single-strategy funds 6,904 371 (476) (105) - - 46 6,845 (6.1)
Execution only 2,822 72 (166) (94) 75 - 100 2,903 (13.3)
Total group 107,594 3,135 (3,165) (30) - - 1,343 108,907 (0.1)
(iiI) Breakdown of Investment Management FUMA and flows by channel
6 months ended 30 June 2024 Opening FUMA Net Flows Transfers(1) SHL Migrated Assets Market & Investment Performance (£m) Closing FUMA Ann Net Growth(2)
(£m)
(£m)
(£m)
(£m)
(%)
(£m)
Gross Inflows Gross Outflows
(£m) (£m)
Total direct 34,411 1,479 (1,512) (33) (152) - 1,224 35,450 (0.2)
Total financial adviser linked 14,348 892 (548) 344 150 625 446 15,913 4.8
Total discretionary service 48,759 2,371 (2,060) 311 (2) 625 1,670 51,363 1.3
Execution only 2,750 158 (359) (201) 161 1 192 2,903 (14.6)
Non-discretionary service 752 12 (24) (12) (39) - 6 707 (3.2)
Total Investment Management 52,261 2,541 (2,443) 98 120 626 1,868 54,973 0.4
Investec W&I 42,267 2,128 (2,528) (400) (204) - 1,614 43,277 (1.9)
Total Investment Management for enlarged group 94,528 4,669 (4,971) (302) (84) 626 3,482 98,250 (0.6)
Q2 ended 30 June 2024 Opening FUMA Net Flows Transfers(1) SHL Migrated Assets Market & Investment Performance (£m) Closing FUMA Ann Net Growth(2)
(£m)
(£m)
(£m)
(£m)
(%)
(£m)
Gross Inflows Gross Outflows
(£m) (£m)
Total direct 35,127 671 (750) (79) (104) - 506 35,450 (0.9)
Total financial adviser linked 15,296 424 (276) 148 81 187 201 15,913 3.9
Total discretionary service 50,423 1,095 (1,026) 69 (23) 187 707 51,363 0.5
Execution only 2,822 72 (166) (94) 75 - 100 2,903 (13.3)
Non-discretionary service 729 6 (10) (4) (31) - 13 707 (2.2)
Total Investment Management 53,974 1,173 (1,202) (29) 21 187 820 54,973 (0.2)
Investec W&I 42,671 1,272 (1,094) 178 (21) - 449 43,277 1.7
Total Investment Management for enlarged group 96,645 2,445 (2,296) 149 - 187 1,269 98,250 0.6
(iV) Total Group FUMA
6 months ended 30 June 2024 Opening FUMA Gross Inflows Gross Outflows Net Flows Transfers(3) SHL Migrated Assets Market & Investment Performance (£m) Closing FUMA Ann Net Growth(4)
(£m)
(£m)
(£m)
(£m)
(%)
(£m) (£m) (£m)
Rathbones Investment Management 52,261 2,541 (2,443) 98 120 626 1,868 54,973 0.4
Rathbones Asset Management 13,770 2,533 (2,002) 531 84 - 922 15,307 7.7
Investec W&I 42,267 2,128 (2,528) (400) (204) - 1,614 43,277 (1.9)
Saunderson House(4) 1,590 58 (238) (180) - (626) 36 820 (22.6)
Total 109,888 7,260 (7,211) 49 - - 4,440 114,377 0.1
Group eliminations(5) (4,548) (1,168) 531 (637) - - (285) (5,470) 28.0
Total 105,340 6,092 (6,680) (588) - - 4,155 108,907 (1.1)
1. Transfers represent client FUMA which has transferred from one service to
another and other intra-group movements. These are excluded from net inflows.
2. Annualised net growth in flows calculated as net flows/opening FUMA.
3. Net inflows into multi-asset funds include direct flows and flows into
managed solutions via in-house funds.
4. Total funds under advice by Saunderson House, including those clients
transferred to fellow group companies totalled £4.3 billion at 30 June 2024.
5. Group eliminations represent RAM funds which are held within portfolios
managed by RIM (£5.2 billion) and IW&I (£0.2 billion) teams and
Saunderson House (£0.1 billion) teams. Consequently, after excluding the
RAM funds, the FUMA of each entity is £49.8 billion in RIM, £43.1 billion
within IW&I and £0.7 billion within Saunderson House.
Interim results presentation:
A presentation detailing Rathbones' 2024 interim results is available on the
investor relations website under the tab 'Results Presentations'
(https://www.rathbones.com/investor-relations/results-and-presentations
(https://www.rathbones.com/investor-relations/results-and-presentations) ).
A presentation to analysts and investors will take place this morning at
10:00am at Peel Hunt's offices at 100 Liverpool Street, EC2M 2AT. Participants
who wish to join the presentation virtually can do so by either joining the
video webcast
(https://www.investis-live.com/rathbone-brothers/666186c9806e6315001ab2b5/ioiy
(https://www.investis-live.com/rathbone-brothers/666186c9806e6315001ab2b5/ioiy)
) 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: 822572
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
(http://www.rathbones.com/investor-relations/results-and-presentations) .
31 July 2024
For further information contact:
Rathbones Group Plc
Paul Stockton, Group Chief Executive Officer
Iain Hooley, Group Chief Financial Officer
Shelly Patel, Head of Investor Relations
Tel: 020 7399 0071
Email: shelly.patel@rathbones.com (mailto:shelly.patel@rathbones.com)
Camarco
Ed Gascoigne-Pees
Julia Tilley
Tel: 020 3757 4984
Email: ed.gascoigne-pees@camarco.co.uk
(mailto:ed.gascoigne-pees@camarco.co.uk)
Rathbones Group Plc
Rathbones provides 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 3,500 employees in 23 locations across the UK and Channel
Islands; its headquarters is 30 Gresham Street, London, EC2V 7PG.
www.rathbones.com
Group Chief Executive Officer's Review
A STRONG FIRST HALF FOCUSED ON DELIVERY
Rathbones has continued to focus on consolidating its position as the leading
UK discretionary wealth manager, with total funds under management and
administration ('FUMA') growing to £108.9 billion at 30 June 2024 (Q1 2024:
£107.6 billion, FY 2023: £105.3 billion).
In the first six months of 2024, Rathbones has surpassed both the strategic
and financial objectives we set out upon the announcement of the Investec
Wealth & Investment ('IW&I') combination. We have achieved synergy
realisation ahead of target, with run-rate synergies(1) of £20 million
delivered to the end of June 2024, well ahead of our year one post-combination
objective of £15 million. These synergies have delivered a benefit to
underlying operating profit for the six-month period of £8 million and we
remain confident in the guidance set out at the time of the combination.
Our office consolidation programme is progressing at pace with six office
integrations completed so far, including our London head office move to
Gresham Street earlier this month. The remaining two co-located offices will
complete during the remainder of 2024.
Work to develop our combined service proposition is also advancing well, with
several propositions now aligned across the group.
In June, we launched successfully the InvestCloud Client Lifecycle Management
system into the business in line with the budgeted investment we guided
previously. This represents a key milestone for our digital programme and
gives us a strong platform from which to build enhanced functionality and
improve the client experience.
The migration of Saunderson House assets has been substantially completed,
with the advice process to migrate assets to Rathbones investment propositions
completed or in progress, with only a small residue of £0.2 billion yet to
engage in the migration process.
Our underlying operating margin was 25.1% for the six months to 30 June 2024
(30 June 2023: 21.3%), in line with our target and showing significant
progress towards our target of a 30%+ margin. We end the period in a strong
position, with confidence in the prospects for our enlarged business and a
clear focus on maintaining the momentum of delivery during the second half of
the year.
MARKET BACKDROP
After a sustained period where equity market growth was dominated by a select
number of companies, it was encouraging to see more of a recovery across a
wider number of sectors and geographies in the first half of 2024, with
investor sentiment towards the UK in particular emerging more positively
towards the end of the period from a challenging few years. Portfolios in
Rathbones Investment Management (RIM) and IW&I continue to target balanced
and diversified positioning to enable clients to meet their long-term goals
and aspirations.
The UK wealth management industry remains attractive, with its long-term
structural drivers well documented. Our services and propositions are well
placed to respond to external market conditions, along with varied and
changing client preferences in a period of ongoing and significant regulatory
change.
As a combined business with significant scale, Rathbones offers a compelling
and diverse range of investment and advice solutions, while remaining
commercially competitive. Whether through bespoke investment management,
advice services, or unitised product offerings, we continue to develop our
proposition suite to deliver a service that remains highly valued by clients
and their families, building long-lasting relationships across generations
over multiple planning and investment horizons.
PERFORMANCE, FUMA AND FINANCIAL REVIEW
Total gross inflows of FUMA were strong in the second quarter, up 3.3% to
£3.1 billion relative to the first quarter (Q1 2024: £3.0 billion),
exhibiting that the demand for investment management services continues to
grow as the cost-of-living crisis begins to abate. Total gross outflows
reduced 8.6% to £3.2 billion (Q1 2024: £3.5 billion) in the second quarter.
Although gross outflows remain elevated, reflecting the impact that the
prolonged higher interest rate environment has on debt servicing costs and the
relative attraction of cash as an asset class, the reduction we have seen in
the second quarter offers a greater degree of optimism that we are returning
to more normalised outflow levels.
Net flows in RIM discretionary and managed propositions remained positive in
the second quarter at £0.1 billion, resulting in £0.5 billion of net inflows
for the first half of the year (30 June 2023: £0.2 billion).
Net flows in IW&I improved significantly, returning to positive territory
in the second quarter with net inflows of £0.2 billion (Q1 2024: net outflows
of £0.6 billion). This reflects both a significant reduction in gross
outflows relating to investment managers who left the business prior to the
announcement of the combination and improved gross inflows as client
confidence in investment markets improves.( )
Despite renewed investor confidence and stability in the market, the asset
management industry continued to face challenges. Performance in our single
strategy funds, and in particular across our largest funds, remained
resilient, however, limiting outflows to £0.1 billion in the second quarter
(Q1 2024: £0.2 billion). There has been both stronger client interest in the
Rathbone Global Opportunities Fund and a pickup in interest in the Rathbone UK
Opportunities Fund, following strong recent performance and renewed interest
in UK equities as an asset class. The small but consistent outflows from the
single strategy funds have been offset by flows into our in-house and
multi-asset fund range, supported by good performance, particularly over the
medium and longer-term.
Underlying financial business performance
Total operating income for the group increased by 88.0% to £447.4 million (30
June 2023: £238.0 million). Legacy Rathbones operating income grew by 11.6%
to £265.7 million on a like-for-like basis, driven by recurring investment
management and asset management fees on higher average FUMA.
Net interest income also contributed £32.7 million to operating income in the
first half, up from £23.0 million during the same period last year,
reflecting the continuing higher interest rate environment and higher returns
on treasury investments.
Total underlying operating expenses for the period were £335.3 million (30
June 2023: £187.2 million). The increase year-on-year reflects the impact of
the integration, as well as annual salary increases, in addition to variable
costs increasing in line with underlying profitability. Total underlying
expenses also include £7.1 million of planned investment in our digital
programme (30 June 2023: £6.0 million) with the remainder of the £15 million
guided for the year to be spent in the second half of the year, as we
undertake the planned post-implementation phase of system enhancement and
complete the £45 million spend. An FSCS levy of £4.5 million was expensed in
full in the first half, returning to what we currently expect to be more
normal levels.
Underlying profit before tax totalled £112.1 million at 30 June 2024 (30 June
2023: £50.8 million), reflecting the inclusion of IW&I for the current
six-month period, with an underlying operating margin of 25.1% (30 June 2023:
21.3%). This strong development from a lower 20s% margin last year to mid-20s%
this year exhibits our progression towards a 30%+ margin target which we
remain confident can be achieved within previously guided timescales.
Integration costs and statutory profit
Statutory profit before tax increased by 151.2% to £65.3 million (30 June
2023: £26.0 million), after expensing amortisation of client relationship
intangible assets of £22.0 million (30 June 2023: £9.5 million) and
integration related costs of £24.8 million (30 June 2023: £15.3 million) in
the period. We continue to expect that total acquisition-related and
integration costs of £177 million will be expensed over the next 2 - 3 years,
partially funded by £45 million of capital left in IW&I by Investec at
completion.
The successful assignment of our London head office lease at 8 Finsbury
Circus, without incurring penalties or void rental periods, removes what was
previously an area of risk to the overall cost of the integration. Employee
incentive run-rates also remain in line with expectations. A full
reconciliation between profit before tax and underlying profit before tax can
be found in note 4 of the interim financial statements.
Our balance sheet remains strong and robust with a consistent Common Equity
Tier 1 ratio of 18.1% at 30 June 2024 (FY 2023: 17.8%), evidencing our
resilient capital position. Our capital surplus of own funds (excluding
year-to-date post-tax profits) over our regulatory capital requirement was
£145.6 million at 30 June 2024 (FY 2023: £134.5 million). This significant
surplus puts us in a strong position to fund integration costs over 2024/2025
and maintain our progressive dividend policy. As mentioned in our Q1 2024
update, the Trustees of Rathbones' two defined benefit pension schemes entered
into an agreement with Canada Life to fully insure the benefits of members of
both schemes in a "Buy-In" arrangement. This arrangement removes the future
obligation on the group to fund these benefits and substantially de-risks the
group's balance sheet. Subject to regulatory approval, we expect to be able to
confirm the associated capital benefit by the end of this financial year.
INTERIM DIVIDEND
As with previous integrations, our progressive dividend policy looks through
short-term events and we have therefore increased our interim dividend by 3.4%
to 30p (30 June 2023: 29p), reflecting the strength of our balance sheet and
our confidence in the future. The record date will be 6 September 2024 and the
dividend will be paid on 1 October 2024.
INVESTEC WEALTH & INVESTMENT
The integration of IW&I is progressing well, and we continue to balance
the execution of the integration with business-as-usual activity to deliver
both our operational and strategic objectives.
The process of seeking clients' consent to move their accounts to RIM from
IW&I is well underway. This process started with small pilots and has now
moved to the full-scale process of communication which is currently ongoing.
We have now written to circa 45% of clients, with the remainder to be
contacted in the coming weeks. Response rates have been positive and in line
with our expectations. Work will continue in earnest for the remainder of this
year, and we remain confident in our ability to migrate clients in the first
quarter of 2025. In preparation for client migration, our data teams have also
carried out successful test migrations to ensure the smooth migration of
client records following the completion of the consent process.
During the first half of the year, we successfully combined six of our dual
sites across the UK, where both Rathbones and IW&I have offices, thereby
significantly reducing property cost exposure and delivering the expected
synergies. Our colleagues in Birmingham, Cheltenham, Exeter, Glasgow, and
Edinburgh have been working in combined premises following their moves during
the first half of the year, and our London colleagues have now also combined
premises, moving out of Finsbury Circus and into Gresham Street earlier this
month. Further regional office moves, including Bristol and Liverpool, will
follow during the second half of the year. Associated costs to achieve this
change are broadly as expected and the opportunity for teams to work
collaboratively under one roof has been widely welcomed.
The combination presents the opportunity to provide a compelling range of
services. In the first half we adopted IW&I's structured product and SIPP
administration capabilities, and we are working to streamline MPS offerings
across the combined group by leveraging the capability in Rathbones Asset
Management. Greenbank is now being offered across the group, and our
partnership with Investec Bank is working well, as we continue to see leads
referred into the business.
There is a great deal of similarity in the core services of RIM and IW&I,
and we are making tangible progress in the alignment of our marketing and
distribution teams to ensure that we deliver propositions to market
consistently across the wider group.
Investment manager turnover remains low across the combined business. In
addition, work to bring client facing and support teams together is also
progressing well with several key leadership changes below group executive
level successfully enacted during the period. Each organisational change is
subject to a strong governance and decision-making process that considers
structure, capability, and diversity as well as adherence to synergy targets.
This is a unique opportunity to leverage the considerable talent that exists
across our combined business.
In our first quarter update in May 2024, we noted that we had achieved £10.6
million of the £15.0 million of run-rate synergies targeted for 2024. As at
30 June 2024, the run-rate synergies achieved had increased to £20 million,
which represents a significant acceleration of delivery. These synergies have
delivered a benefit to underlying operating profit for the six-month period of
£8 million.
While it is reassuring to have delivered synergies ahead of expectations so
far, our focus remains on the delivery of the remaining synergies, the total
value of which we expect to remain consistent with our original objective of
£60 million once the integration process is complete.
SAUNDERSON HOUSE
The migration of Saunderson House Limited ('SHL') is now substantially
complete, with £4.3 billion of SHL connected FUMA as at 30 June 2024. Of
assets of £0.8 billion not yet fully migrated, only £0.2 billion relates to
clients that are yet to engage with the consent process.
This has been an important strategic deal for Rathbones, as our Saunderson
House colleagues have significantly increased our capacity to offer financial
planning services to more of our client base. Revenue generated on migrated
assets totalled £17.2 million across the group in the first half as assets
moved into both investment management and asset management solutions, with
annualised revenue of £37.3 million. Run rate revenue margins were 114bps at
30 June 2024. In the second half of the year we expect to largely complete all
systems integrations and closures that will enable us to deliver anticipated
cost synergies.
The Saunderson House brand has now been decommissioned and the combined
Rathbone Financial Planning business is now operating under the Rathbones
brand.
IMPROVING OUR DIGITAL CAPABILITY
In June 2024, we launched successfully the InvestCloud Client Lifecycle
Management ('CLM') system into the business with first stage functionality. We
can now add improved capability throughout the rest of 2024 in advance of the
IW&I migration in the first quarter of 2025. This has enabled us to
leverage a modern solution that we can now build on to improve efficiency and
client service. Improvements throughout 2024 will be to both digital
onboarding and servicing.
As part of the overall integration with IW&I and our intention to adopt
the best of both business' capabilities, we have also incorporated Salesforce
and IRESS XPlan to provide common groupwide sales enablement and financial
planning solutions. By blending MyRathbones provided by Objectway,
InvestCloud, Salesforce and Charles River, we will have a modern and
comprehensive suite of applications that will enable us to manage our client
and adviser base more efficiently and effectively. Project costs for the full
year ended 31 December 2024 are expected to be circa £15 million, bringing
the total cost to £45 million over the project period, in-line with guidance.
Following project completion in 2024, further developments in the capabilities
will be met from normal change budgets, under the same approach that applies
to our other applications.
MyRathbones continues to be used by an increasing portion of our client base,
with 60% of clients now registered users, with an expectation these numbers
will increase further as we move through the integration process.
INSPIRING OUR PEOPLE
I am sure that shareholders will recognise the amount of work involved in an
integration of this size. We are proud of the substantial effort, commitment
and skill that has been demonstrated by our colleagues in the business
throughout the period, and, in particular, their success in maintaining the
high standards of service that we continually strive to deliver for our
clients. Aside from the inevitable uncertainties that are created over a
period of change, we continue to prioritise timely communication, continual
feedback, and engagement with colleagues as we work through the operational
detail that supports progress toward our objectives.
Rathbones and IW&I teams are working closely and collaboratively, building
relationships that will lay the foundations of the firm for many years to
come. We remain committed to our DE&I objectives and to creating teams
across the group that reflect both the best talent the business has to offer
and the right balance for the combined organisation, supported by
executive-sponsored working groups focussing on key areas where we think we
will make a difference.
PRINCIPAL RISKS AND UNCERTAINTIES
The most important external changes to the group's principal risks and
uncertainties relate to the changing economic and political landscape under a
new government. Otherwise, the principal risks and uncertainties set out in
our 2023 annual report and accounts remain current and continue to receive
management attention.
These are set out in the strategic report and group risk committee report in
pages 82 to 86 and pages 107 to 109 of the 2023 annual report and accounts.
Although we have not added any new material risks to our taxonomy this half
year, there have been changes in how these risks are perceived. Change risk
and integration risk remain elevated as we move through integration, and
people risk is expected to increase as our teams set out their integration
plans. These risks continue to receive a high degree of focus and management
through our integration planning and governance processes. Pension risk
exposure has reduced as a result of action taken by the pension scheme
trustees to complete the buy-in process to insure the future liabilities of
the schemes.
REGULATION
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 maintaining client
trust and long-term sustainable growth. We continue to have an ongoing
constructive dialogue with all regulators and fully support the principles
underlying Consumer Duty as we continue to proactively respond to regulatory
requirements and changes.
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 severe but plausible 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
The UK wealth market has continued to consolidate over the first half of the
year. We continue to believe in the benefits of scale for enduring success in
this industry, and the scale that our combined business now has, affords us
independence, stability, more capacity to invest and a higher level of
efficiency and optionality in how we operate and deliver for our clients, as
well as being the employer of choice for the skills and talent we require for
our future success.
Although our focus as a business, and for clients, is over the long term, the
broader outlook for flows in the shorter-term is improving as client
confidence to invest increases, helped by a more certain UK political
backdrop, lower inflation and the increased likelihood of a reduction in
interest rates. Our breadth of proposition, growing marketing and distribution
capability and robust balance sheet will be the foundation on which we will
take advantage of a structurally growing sector and achieve the financial
objectives we aspire to.
Paul Stockton
Group Chief Executive Officer
30 July 2024
(1) This measure is considered an alternative performance measure (APM).
Please refer to page 32 for more details on APMs.
CONSOLIDATED INTERIM STATEMENT OF
COMPREHENSIVE INCOME
FOR THE SIX MONTHS ENDED 30 JUNE 2024
Note Unaudited Unaudited Audited
Six months to Six months to Year to
30 June 2024 30 June 2023 31 December 2023
£m £m £m
Interest and similar income 74.3 65.9 128.8
Interest expense and similar charges (41.6) (42.9) (77.1)
Net interest income 32.7 23.0 51.7
Fee and commission income 415.7 228.5 538.6
Fee and commission expense (16.7) (14.1) (29.7)
Net fee and commission income 399.0 214.4 508.9
Other operating income 15.7 0.6 10.5
Operating income 447.4 238.0 571.1
Charges in relation to client relationship intangible assets and goodwill 14 (22.0) (9.5) (25.2)
Acquisition-related and integration costs 6 (24.8) (15.3) (44.3)
Other operating expenses (335.3) (187.2) (444.0)
Operating expenses (382.1) (212.0) (513.5)
Profit before tax 65.3 26.0 57.6
Taxation 8 (19.8) (6.3) (20.1)
Profit after tax 45.5 19.7 37.5
Profit for the period attributable to equity holders of the company 45.5 19.7 37.5
Other comprehensive income:
Items that will not be reclassified to profit or loss
Net remeasurement of defined benefit asset (10.4) (2.8) (5.8)
Deferred tax relating to the net remeasurement of defined benefit pension 2.6 0.7 1.5
scheme asset
Other comprehensive income net of tax (7.8) (2.1) (4.3)
Total comprehensive income for the period net of tax attributable to equity 37.7 17.6 33.2
holders of the company
Dividends paid in and proposed for the period per ordinary share 9 30.0p 29.0p 87.0p
Dividends paid in and proposed for the period 31.0 17.0 62.9
Earnings per share for the period attributable to equity holders of the 10
company:
- basic 43.9p 33.6p 52.6p
- diluted 42.8p 32.8p 50.8p
The accompanying notes form an integral part of the condensed consolidated
interim financial statements.
CONSOLIDATED INTERIM STATEMENT OF CHANGES IN EQUITY
As at 30 June 2024
Note Share Share Merger Own Retained Total
capital premium reserve shares earnings equity
£m £m £m £m £m £m
At 1 January 2023 3.2 310.0 77.0 (52.6) 297.2 634.8
Profit for the period - - - - 19.7 19.7
Net remeasurement of defined benefit pension scheme asset - - - - (2.8) (2.8)
Deferred tax relating to components of other comprehensive income - - - - 0.7 0.7
Other comprehensive income net of tax - - - - (2.1) (2.1)
Dividends paid - - - - (33.4) (33.4)
Issue of share capital 18 - 0.8 - - - 0.8
Share-based payments:
- cost of share-based payment arrangements - - - - 10.7 10.7
- cost of vested employee remuneration and share plans - - - - (5.6) (5.6)
- cost of own shares vesting - - - 11.4 (11.4) -
- cost of own shares acquired - - - (6.7) - (6.7)
- tax on share-based payments - - - - 0.1 0.1
At 30 June 2023 (unaudited) 3.2 310.8 77.0 (47.9) 275.2 618.3
Profit for the period - - - - 17.8 17.8
Net remeasurement of defined benefit pension scheme asset - - - - (3.0) (3.0)
Deferred tax relating to components of other comprehensive income - - - - 0.8 0.8
Other comprehensive income net of tax - - - - (2.2) (2.2)
Dividends paid - - - - (38.0) (38.0)
Issue of share capital 18 2.2 1.5 747.4 - - 751.1
Share-based payments:
- cost of share-based payment arrangements - - - - 13.3 13.3
- cost of vested employee remuneration and share plans - - - - (0.4) (0.4)
- cost of own shares vesting - - - 1.6 (1.6) -
- cost of own shares acquired - - - (9.3) - (9.3)
- tax on share-based payments - - - - (0.4) (0.4)
At 31 December 2023 (audited) 5.4 312.3 824.4 (55.6) 263.7 1,350.2
Profit for the period - - - - 45.5 45.5
Net remeasurement of defined benefit pension scheme asset - - - - (10.4) (10.4)
Deferred tax relating to components of other comprehensive income - - - - 2.6 2.6
Other comprehensive income net of tax - - - - (7.8) (7.8)
Dividends paid - - - - (25.2) (25.2)
Issue of share capital 18 - 2.4 - - - 2.4
Share-based payments:
- cost of share-based payment arrangements - - - - 14.8 14.5
- cost of vested employee remuneration and share plans - - - - (4.4) (4.1)
- cost of own shares vesting - - - 3.4 (3.4) -
- cost of own shares acquired - - - (8.9) - (8.9)
- tax on share-based payments - - - - 0.7 0.7
At 30 June 2024 (unaudited) 5.4 314.7 824.4 (61.1) 283.9 1,367.3
Consolidated statement of financial position
AS AT 30 JUNE 2024
Note Unaudited Unaudited Audited
30 June 2024 30 June 2023 31 December 2023
£m £m £m
Assets
Cash and balances with central banks 1,033.0 1,141.9 1,038.3
Settlement balances 371.7 215.1 165.7
Loans and advances to banks 230.3 139.5 266.9
Loans and advances to customers 11 120.3 143.4 115.6
Investment securities:
- fair value through profit or loss - 3.1 1.2
- amortised cost 1,392.9 1,233.8 1,294.6
Prepayments, accrued income and other assets 244.2 152.2 225.3
Property, plant and equipment 12 39.4 10.9 16.1
Right-of-use assets 13 51.6 37.3 64.5
Current tax assets 6.4 9.2 3.9
Intangible assets 14 997.8 347.2 1,025.3
Defined benefit pension scheme asset 17 0.4 7.0 7.0
Total assets 4,488.0 3,440.6 4,224.4
Liabilities
Deposits by banks 19.4 17.2 12.4
Settlement balances 406.4 211.2 172.1
Due to customers 2,298.8 2,377.1 2,253.3
Accruals and other liabilities 194.0 98.5 209.6
Lease liabilities 48.3 48.9 74.9
Current tax liabilities 0.9 0.4 0.5
Net deferred tax liabilities 79.8 9.9 86.0
Provisions for liabilities and charges 15 33.2 19.2 25.5
Subordinated loan notes 16 39.9 39.9 39.9
Total liabilities 3,120.7 2,822.3 2,874.2
Equity
Share capital 18 5.4 3.2 5.4
Share premium 18 314.7 310.8 312.3
Merger reserve 18 824.4 77.0 824.4
Own shares (61.1) (47.9) (55.6)
Retained earnings 283.9 275.2 263.7
Total equity 1,367.3 618.3 1,350.2
Total liabilities and equity 4,488.0 3,440.6 4,224.4
The condensed consolidated interim financial statements were approved by the
board of directors and authorised for issue on 30 July 2024 and were signed on
its behalf by:
Paul
Stockton
Iain Hooley
Group Chief Executive
Officer Group
Chief Financial Officer
Company registered number: 01000403
30 July 2024
CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED 31 DECEMBER 2023
Note Unaudited Unaudited Audited
30 June 2024 30 June 2023 31 December 2023
£m £m £m
Cash flows from operating activities
Profit before tax 65.3 26.0 57.6
Change in fair value through profit or loss - - (1.0)
Net interest income (32.7) (23.0) (51.7)
Net (recoveries)/impairment charges on loans and advances (0.1) (0.1) 0.1
Net charge to income statement for provisions 15 10.1 7.3 9.4
Gain on modification of leases (12.9) - -
Depreciation, amortisation and impairment 36.8 17.0 47.1
Foreign exchange movements (0.2) 3.9 3.4
Defined benefit pension scheme charges (0.2) (0.2) (0.5)
Defined benefit pension contributions paid (3.7) (0.2) (2.9)
Share-based payment charges 19 14.8 10.7 24.0
Interest paid (39.6) (34.5) (67.7)
Interest received 104.5 49.6 111.9
142.1 56.5 129.7
Changes in operating assets and liabilities:
- net (increase)/decrease in loans and advances to banks and customers (2.3) 17.3 87.4
- net (increase)/decrease in settlement balance debtors (206.0) (149.3) 133.3
- net increase in prepayments, accrued income and other assets (40.2) (14.9) (36.2)
- net increase/(decrease) in amounts due to customers and deposits by 52.5 (122.9) (251.5)
banks
- net increase/(decrease) in settlement balance creditors 234.3 141.3 (123.6)
- net increase/(decrease) in accruals, provisions and other liabilities (23.6) (20.9) 1.0
Cash generated from/(used in) operations 156.8 (92.9) (59.9)
Tax paid (24.7) (8.7) (29.5)
Net cash inflow/(outflow) from operating activities 132.1 (101.6) (89.4)
Cash flows from investing activities
Cash acquired on acquisition of subsidiaries - - 172.6
Purchase of property, plant, equipment and intangible assets (35.6) (3.7) (10.7)
Purchase of investment securities (1,040.6) (1,083.9) (2,059.9)
Proceeds from sale and redemption of investment securities 943.6 899.6 1,818.1
Net cash used in investing activities (132.6) (188.0) (79.9)
Cash flows from financing activities
Issue of ordinary shares 22 2.4 0.8 -
Repurchase of ordinary shares 22 (8.9) (6.7) (16.0)
Dividends paid (25.2) (33.4) (71.4)
Payment of lease liabilities (5.3) (3.9) (7.5)
Interest paid (2.1) (2.6) (5.6)
Net cash used in financing activities (39.1) (45.8) (100.5)
Net decrease in cash and cash equivalents (39.6) (335.4) (269.8)
Cash and cash equivalents at the beginning of the period 1,302.9 1,572.7 1,572.7
Cash and cash equivalents at the end of the period 22 1,263.3 1,237.3 1,302.9
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 trust management, tax planning, trust services, pension advice and
banking services. The products and services from which the group derives its
revenues are described on page 2 of the annual report and accounts for the
year ended 31 December 2023 and have not materially changed since that date.
These condensed consolidated interim financial statements, on pages 7 to 29,
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 2023. The condensed
consolidated interim financial statements should be read in conjunction with
the group's audited financial statements for the year ended 31 December 2023.
The information in these interim financial statements 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 2023 are not the group's statutory accounts for that financial year.
The group's financial statements for the year ended 31 December 2023 have been
reported on by its auditors and delivered to the Registrar of Companies. The
report of the auditor 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:
- Lease Liability in a Sale and Leaseback - Amendments to IFRS 16
- Classification of liabilities as current or non-current (Amendments to
IAS 1)
- Amendments to IAS 7 Statement of Cash Flows and IFRS 7 Financial
Instruments: Disclosures Supplier Finance Arrangements
- International Tax Reform - Pillar Two Model Rules (Amendments to IAS 12)
Future new standards and interpretations
The following standards are effective for annual periods beginning after 1
January 2025 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 Optional
Join Venture (Amendments to IFRS 10 and IAS 28)
Lack of Exchangeability (Amendments to IAS 21) 01 January 2025
Amendments to the Classification and Measurement of Financial Instruments 01 January 2026
(Amendments to IFRS 9 and IFRS7)
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 2023.
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. Other than those
noted below, these are unchanged from those reported in the group's financial
statements for the year ended 31 December 2023.
3.1 BUSINESS COMBINATIONS (NOTE 5)
3.1.1 Investec Wealth & Investment
Intangible assets
In 2023, the group acquired the entire share capital of Investec Wealth &
Investment Limited ('IW&I'). The group has accounted for the transaction
as a business combination as set out in note 5.
The fair value of net assets acquired was determined to be £411.8 million.
Goodwill of £340.1 million was recognised at acquisition, and represents the
future economic benefit expected from an acquired workforce, expected future
growth and future client relationships, as well as operational and revenue
synergies. Goodwill was revalued in the period to £332.6 million. A reduction
in goodwill of £8.2 million was attributable to the recognition of contingent
consideration receivable owed to the group by the seller (see below for
further detail). This was partially offset by a £0.7 million increase in
goodwill attributable to a re-measurement of the acquired client relationship
intangible assets and the related deferred tax liability (see below for
further detail).
The allocation of goodwill between the group's cash-generating units has been
based on their respective relative values. The allocation of goodwill is
provisional and shall be reviewed and completed before the end of the first
annual period after the acquisition. See note 14.
Client relationship intangible assets of £350.3 million were recognised at
acquisition. A multi-period earnings model was used to value the intangible
assets by using estimates of client longevity and investment performance to
derive a series of discounted cash flows. This was determined with reference
to management's best estimates of future performance and estimates of the
return required to determine an appropriate discount rate. These assets are
being amortised over an average useful economic life of 14 years. During the
period, the intangible assets were remeasured in line with IFRS 3 and adjusted
downwards by £1.2 million to reflect new information about facts and
circumstances in existence at the acquisition date. The related deferred tax
liability was also reduced accordingly by £0.5 million.
Contingent consideration receivable
At acquisition, the seller, Investec Bank plc, agreed to indemnify the cost of
the fit-out works (in excess of any landlord incentives) to be carried out at
30 Gresham Street, which operates as the new London head-office for the
enlarged group. Sufficient capital was to be left in IW&I at the time of
completion to fund this. The costs of the fit-out are now expected to be
higher than the original estimate at completion. The exact amount of the
indemnified excess costs is not quantifiable until the fit-out works are
completed and new lease terms are entered into. The current estimate leaves a
shortfall of £8.2 million to be paid by Investec Bank plc.
In accordance with IFRS 3, as this amount is payable by the seller to the
buyer under the acquisition agreements and is dependent on a future event, we
consider the indemnification of the additional fit-out costs to be contingent
consideration receivable. The standard notes that contingent consideration may
include an acquirer's right to the return of previously transferred
consideration. At the date of acquisition, the fair value of this receivable
was assessed as nil, as the amount of excess capital left in IW&I was
assumed to exactly cover the future fit-out costs. As the reassessment of the
fair value at the reporting date is within the IFRS 3 measurement period,
being 12 months from the date of acquisition, this is an adjustment to the
acquisition accounting; recognition of a £8.2 million contingent
consideration receivable has led to a corresponding reduction in goodwill.
Subsequent changes in the expected fit-out costs or lease incentives will
require further re-measurement of the contingent consideration receivable;
should these arise outside of the 12-month measurement period, these will be
reflected through profit or loss.
Best expectations for the fit-out costs and landlord incentives have been used
to arrive at the current estimate of £8.2 million. A range of outcomes for
the value of the contingent consideration receivable is currently expected to
be between £6.0 million and £12.0 million.
3.1.2 Saunderson House
Estimation uncertainty
In 2021, the group acquired the entire share capital of Saunderson House
Limited as part of a business combination. The equity-settled deferred
payments that are contingent on the recipients remaining employees of the
group for a specific period under the Saunderson House Transaction Incentive
Plan are accounted for as remuneration for ongoing services from employment.
The group's estimate of the amounts ultimately payable will be expensed over
the deferral period.
The amount payable under the Saunderson House Transaction Incentive Plan 2021
is subject to the achievement of certain operational and performance targets
which are to be measured at 31 December 2024 ('the measurement date'). A
profit or loss charge has been recognised in equity for the expected
consideration payable.
Under the terms of the agreements, the award is calculated as 0.1% of funds
under management ('FUM') at the measurement date of 31 December 2024. The key
estimation uncertainty for this award is the value of the FUM at the
measurement date. The key inputs to the estimated value of FUM at the
measurement date are forecast market movements and estimated net inflows and
outflows of FUM. In addition to the FUM-based award are integration and
discretionary awards. The total of all awards payable under the scheme ranges
from nil to a maximum possible award, payable in shares, of £7.5 million.
Should the maximum total award of £7.5 million become payable, it would
result in an additional charge to profit or loss in the period of £0.9
million. A payment of nil would result in a reversal of the accumulated profit
or loss charge recognised since commencement of the scheme of £4.3 million in
the period.
3.2 RETIREMENT BENEFIT OBLIGATIONS (NOTE 17)
An insurance buy-in of the group's retirement benefits was completed during
the period. An asset for the insurance contract was subsequently recognised at
a fair value equivalent to the liabilities in the scheme. The liabilities
continue to be revalued on a monthly basis in line with IAS 19, and the
insurance asset is revalued accordingly by an equal and offsetting amount. The
net impact on equity and total comprehensive income from future revaluations
is expected to be nil. We therefore no longer consider this to be an area of
estimation uncertainty.
4 SEGMENTAL INFORMATION
IFRS 8 requires operating segments to be identified on the basis of internal
reports about components of the group that are regularly reviewed by the chief
operating decision-maker, which takes the form of the Group Executive
Committee, in order to allocate resources to the segment and to assess its
performance.
The group is organised into two reporting segments: Wealth Management and
Asset Management. IW&I has been identified as a separate operating segment
of the group. The results of this segment have been reported in aggregate with
the group's previously existing Wealth Management segment, on the basis that
their long-term characteristics are expected to align following the initial
integration period of the business.
The principal activity of the Wealth Management segment is the provision of
personalised discretionary investment management solutions to a range of
clients. Wealth Management services offered to clients include bespoke
portfolio management, managed service of ready-made diversified multi-asset
portfolios and direct access to range of ready-made multi-asset funds. The
Wealth Management segment also generates revenue through the provision of
financial planning and advisory services.
The Asset Management segment offers a range of single-strategy and multi-asset
funds to both retail and institutional investors. The range of funds available
are designed to meet investors' core investment needs, or provide 'building
blocks' for wealth solutions, with distribution primarily through UK advisors.
Centrally incurred shared service costs are allocated to these operating
segments on the basis of the cost drivers that generate the expenditure;
principally, these are the headcount of staff directly involved in providing
those services from which the segment earns revenues and the value of funds
under management and administration.
The allocation of these costs is shown in a separate column in the table
opposite, alongside the information presented for internal reporting. Wealth
Management Segmental Assets relate to assets held within the Investment
Management, Banking and Trust businesses. Asset Management Segmental Assets
are assets held solely within the Asset Management business. Unallocated
Segmental Assets relate to the Net Defined Benefit Asset held on the statement
of financial position.
Six months ended 30 June 2024 (unaudited) Wealth Asset Shared Total
Management Management Services £m
£m £m £m
Net investment management fee income 285.5 38.5 - 324.0
Net commission income 47.2 - - 47.2
Net interest income 31.8 0.9 - 32.7
Fees from advisory services and other income 43.1 0.4 - 43.5
Operating income 407.6 39.8 - 447.4
Staff costs - fixed (118.1) (3.9) (27.6) (149.6)
Staff costs - variable (64.4) (9.6) (9.8) (83.8)
Total staff costs (182.5) (13.5) (37.4) (233.4)
Other direct expenses (55.1) (7.4) (39.4) (101.9)
Allocation of shared services (70.6) (6.2) 76.8 -
Underlying operating expenses (308.2) (27.1) - (335.3)
Underlying profit before tax 99.4 12.7 - 112.1
Charges in relation to client relationship intangible assets and goodwill (22.0) - - (22.0)
(note 14)
Acquisition-related and integration costs (note 6) (24.8) - - (24.8)
Segment profit before tax 52.6 12.7 - 65.3
Taxation (note 8) - - - (19.8)
Profit for the period attributable to equity holders of the company - - - 45.5
Wealth Asset Unallocated Total
Management Management Assets £m
£m £m £m
Segment total assets 4,394.9 92.7 0.4 4,488.0
4 SEGMENTAL INFORMATION COntinued
Six months ended 30 June 2023 (unaudited) Wealth Asset Shared Total
Management Management Services £m
£m £m £m
Net investment management fee income 138.8 31.1 - 169.9
Net commission income 23.7 - - 23.7
Net interest income 22.2 0.8 - 23.0
Fees from advisory services and other income 21.0 0.4 - 21.4
Operating income 205.7 32.3 - 238.0
Staff costs - fixed (59.5) (3.7) (25.1) (88.3)
Staff costs - variable (31.6) (5.3) (7.0) (43.9)
Total staff costs (91.1) (9.0) (32.1) (132.2)
Other direct expenses (20.5) (6.2) (28.3) (55.0)
Allocation of shared services (53.0) (7.4) 60.4 -
Underlying operating expenses (164.6) (22.6) - (187.2)
Underlying profit before tax 41.1 9.7 - 50.8
Charges in relation to client relationship intangible assets and goodwill (9.5) - - (9.5)
(note 14)
Acquisition-related and integration costs (note 6) (2.2) - (13.1) (15.3)
Segment profit before tax 29.4 9.7 (13.1) 26.0
Taxation (note 8) - - - (6.3)
Profit for the period attributable to equity holders of the company - - - 19.7
Wealth Asset Unallocated Total
Management Management Assets £m
£m £m £m
Segment total assets 3,276.0 157.6 7.0 3,440.6
Year ended 31 December 2023 (audited) Wealth Asset Shared Total
Management Management Services £m
£m £m £m
Net investment management fee income 350.1 64.7 - 414.8
Net commission income 53.6 - - 53.6
Net interest income 49.9 1.8 - 51.7
Fees from advisory services and other income 50.3 0.7 - 51.0
Operating income 503.9 67.2 - 571.1
Staff costs − fixed (147.2) (7.1) (51.8) (206.1)
Staff costs − variable (78.2) (13.4) (15.9) (107.5)
Total staff costs (225.4) (20.5) (67.7) (313.6)
Other direct expenses (53.7) (12.2) (64.5) (130.4)
Allocation of shared services (119.4) (12.8) 132.2 -
Underlying operating expenses (398.5) (45.5) - (444.0)
Underlying profit before tax 105.4 21.7 - 127.1
Charges in relation to client relationship intangible assets (25.2) - - (25.2)
and goodwill (note 14)
Acquisition-related and integration costs (note 6) (11.0) - (33.3) (44.3)
Segment profit before tax 69.2 21.7 (33.3) 57.6
Taxation (note 8) - - - (20.1)
Profit for the year attributable to equity holders of the company - - - 37.5
Wealth Asset Unallocated Total
Management Management Assets £m
£m £m £m
Segment total assets 4,099.6 117.8 7.0 4,224.4
Included within Wealth Management operating income is £0.8 million (30 June
2023: £0.8 million; 31 December 2023: £1.5 million) of fees and commissions
receivable from the Asset Management business. Inter-segment sales are charged
on an arm's length basis.
The following table reconciles underlying operating expenses to operating
expenses:
Unaudited Unaudited Audited
Six months to Six months to Year to
30 June 2024 30 June 2023 31 December 2023
£m £m £m
Underlying operating expenses 335.3 187.2 444.0
Charges in relation to client relationships and goodwill (note 14) 22.0 9.5 25.2
Acquisition-related and integration costs (note 6) 24.8 15.3 44.3
Operating expenses 382.1 212.0 513.5
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 2024 30 June 2023 31 December 2023
£m £m £m
United Kingdom 436.7 229.7 553.4
Channel Islands 10.7 8.3 17.7
Operating income 447.4 238.0 571.1
The group's non-current assets are substantially all located in the United
Kingdom.
Timing of revenue recognition
The following table presents operating income analysed by the timing of
revenue recognition of the operating segment providing the service:
Unaudited Unaudited Audited
Six months to Six months to Year to
30 June 2024 30 June 2023 31 December 2023
Wealth Asset Wealth Asset Wealth Asset
Management Management Management Management Management Management
£m £m £m £m £m £m
Products and services transferred 48.8 - 16.9 - 44.4 -
at a point in time
Products and services transferred 358.8 39.8 188.8 32.3 459.5 67.2
over time
Operating income 407.6 39.8 205.7 32.3 503.9 67.2
MAJOR CLIENTS
The group is not reliant on any one client or group of connected clients for
generation of revenues. At 30 June 2024, the group provided wealth management
services to 114,294 clients (30 June 2023: 68,629; 31 December 2023: 114,200).
5 BUSINESS COMBINATIONS
INVESTEC WEALTH & INVESTMENT
On 21 September 2023, the group completed its acquisition of 100% of the
ordinary share capital of Investec Wealth & Investment Limited (IW&I)
from Investec Bank plc. Full details of the acquisition are set out in note 8
of the 2023 annual report and accounts.
Total consideration transferred to Investec Bank plc of £751.9 million
comprised a share issue of 27,056,463 ordinary shares and 17,481,868
convertible non-voting ordinary shares. Based on Rathbones' issued share
capital at completion, the total shares transferred to Investec Bank plc
amounted to an economic interest in Rathbones Group Plc of 41.25%, but in
accordance with the terms of the acquisition 29.9% of the total voting rights
in Rathbones.
As set out in note 3, at 30 June 2024, a £8.2 million contingent
consideration receivable is due from Investec Bank plc to fund the fit-out
costs at 30 Gresham Street, which were indemnified at the time of the
acquisition. Sufficient capital was to be left in IW&I at the time of
completion to fund this. The costs of the fit-out are now expected to be
higher than the original estimate.
As this change has occurred within the 12-month IFRS 3 measurement period
post-completion, this is an adjustment to the acquisition accounting;
recognition of a £8.2 million contingent consideration receivable has led to
a corresponding reduction in goodwill.
Deferred Incentive awards
Deferred awards and contingent payments were granted to a group of IW&I
employees under the Rathbones Integration Incentive Scheme. These payments
require the recipients of the awards to remain in employment with the group
for the duration of the respective deferral periods, and therefore these
amounts have not been included in the accounting for the acquisition under
IFRS 3 Business Combinations. The cost for these equity-settled awards is
being charged to profit or loss in line with IFRS 2 and spread over their
vesting periods.
In May and June 2024, two additional awards were granted to a group of
employees from Rathbones Group Plc, conditional upon the delivery of the
integration plan for Rathbones clients. The integration awards are payable in
cash in 2025 and 2027 and have been recognised in line with IAS 19.
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 2024 30 June 2023 31 December 2023
£m £m £m
Incentivisation awards 5.1 - 4.8
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 2023 annual report and accounts.
All of these payments are to be made entirely in shares and are being
accounted for as equity-settled share-based payments under IFRS 2.
The charge recognised in profit or loss for the above elements is as follows:
Unaudited Unaudited Audited
Six months to Six months to Year to
30 June 2024 30 June 2023 31 December 2023
£m £m £m
Initial share consideration 0.9 0.9 1.8
Incentivisation awards 0.5 0.7 2.1
Total consideration 1.4 1.6 3.9
6 ACQUISITION-RELATED AND INTEGRATION COSTS
Unaudited Unaudited Audited
Six months to Six months to Year to
30 June 2024 30 June 2023 31 December 2023
£m £m £m
Acquisition of Investec Wealth & Investment UK 22.1 11.2 36.5
Acquisition of Saunderson House 2.7 3.5 6.8
Acquisition of Speirs & Jeffrey - 0.6 1.0
Acquisition and integration related costs 24.8 15.3 44.3
COSTS RELATING TO THE ACQUISITION OF INVESTEC WEALTH & INVESTMENT
The group has incurred the following costs in relation to the acquisition of
IW&I, summarised by the following classification within the income
statement:
Unaudited Unaudited Audited
Six months to Six months to Year to
30 June 2024 30 June 2023 31 December 2023
£m £m £m
Acquisition costs:
Acquisition-related legal and advisory costs - 11.2 21.3
Integration costs:
Integration related staff costs 15.5 - 6.2
Other integration costs 6.6 - 9.0
22.1 11.2 36.5
Non-staff acquisition costs (Legal and Advisory fees) of £nil (30 June 2023:
£11.2 million; 31 December 2023: £21.3 million) and integration costs of
£nil (30 June 2023: £nil million; 31 December 2023: £9.0 million) 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 2024 30 June 2023 31 December 2023
£m £m £m
Acquisition costs:
Staff costs 1.4 1.6 3.9
Integration costs 1.3 1.9 2.9
2.7 3.5 6.8
Non-staff acquisition and integration costs of £nil (30 June 2023: £1.9
million; 31 December 2023: £2.9 million) have not been allocated to a
specific operating segment (note 4).
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 2024 30 June 2023 31 December 2023
Wealth Management 2,240 1,493 1,686
Asset Management 56 52 52
Shared services 1,226 594 760
3,522 2,139 2,498
8 TAXATION
The tax expense for the six months ended 30 June 2024 was calculated based on
the estimated average annual effective tax rate. The overall effective tax
rate for this period was 30.3% (six months ended 30 June 2023: 24.2%; year
ended 31 December 2023: 34.9%).
The effective tax rate reflects the disallowable costs of the deferred
consideration payments in relation to the acquisitions of Speirs &
Jeffrey, Saunderson House and IW&I, as well as property related costs
arising on the lease assignment of 8 Finsbury Circus.
Unaudited Unaudited Audited
Six months to Six months to Year to
30 June 2024 30 June 2023 31 December 2023
£m £m £m
United Kingdom taxation 22.2 3.5 23.4
Overseas taxation excluding Pillar II income tax 0.3 0.3 0.5
Overseas taxation relating to Pillar II income tax 0.1 - -
Deferred taxation (2.8) 2.5 (3.8)
19.8 6.3 20.1
The statutory UK corporation tax rate for the year ending 31 December 2024 is
25.0% (2023: average rate of 23.5%).
The UK Government legislated in the Finance Act 2021 to increase the UK
corporation tax rate from 19.0% to 25.0% from 1 April 2023. 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.
On 11 July 2023, the government of the United Kingdom, being the jurisdiction
where the parent company is incorporated, enacted the Pillar II income taxes
legislation effective from 1 January 2024. Under the legislation, the parent
company will be required to pay, in the United Kingdom, top-up tax on profits
of its subsidiaries located in territories outside the United Kingdom that are
taxed at an effective tax rate of less than 15.0%. As required by IAS 12
Income Taxes, Rathbones Group Plc has applied the exception to recognising and
disclosing information about deferred tax assets and liabilities related to
Pillar II income taxes.
9 DIVIDENDS
An interim dividend of 30.0p per share is payable on 1 October 2024 to
shareholders on the register at the close of business on 6 September 2024. The
interim dividend has not been included as a liability in this interim
statement. A final dividend for 2023 of 24.0p per share was paid on 14 May
2024.
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 2024 30 June 2023 31 December 2023
Pre-tax Post-tax Pre-tax Post-tax Pre-tax Post-tax
£m £m £m £m £m £m
Underlying profit attributable to equity holders 112.1 83.4 50.8 38.9 127.1 96.8
Charges in relation to client relationships and goodwill (note 14) (22.0) (16.5) (9.5) (7.3) (25.2) (19.3)
Acquisition-related and integration costs (note 6) (24.8) (21.4) (15.3) (11.9) (44.3) (40.0)
Profit attributable to equity holders 65.3 45.5 26.0 19.7 57.6 37.5
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 103,695,582 (30 June 2023: 58,538,625; 31
December 2023: 71,269,129). This includes 17,481,868 convertible non-voting
shares issued as consideration for the IW&I transaction. In total,
44,538,331 shares were issued as a result of the IW&I transaction on 21
September 2023.
Diluted earnings per share is the basic earnings per share, adjusted for the
effect of contingently issuable shares under the Saunderson House initial
share consideration and Executive Incentive Plan, Executive Share Performance
Plan, employee share options remaining capable of exercise, expected shares to
be issued under the Key Employee Equity Plan Support Function award, expected
shares to be issued within the Rathbones Integration Incentive Award Scheme
and any dilutive shares to be issued under the Share Incentive Plan, all
weighted for the relevant period.
Unaudited Unaudited Audited
30 June 2024 30 June 2023 31 December 2023
Weighted average number of ordinary shares in issue during the period 103,695,582 58,538,625 71,269,129
Effect of ordinary share options/Save As You Earn 495,639 558,416 443,865
Effect of dilutive shares issuable under the Share Incentive Plan 2,233 1,477 2,517
Effect of contingently issuable ordinary shares under the Executive Incentive 195,773 597,431 294,770
Plan/Executive Share Performance Plan
Effect of contingently issuable shares under Saunderson House initial share 272,952 272,952 272,952
consideration
Effect of expected shares to be issued under the Key Employee Equity Plan 314,600 - 314,600
Support
Function Award
Effect of expected shares to be issued under the Rathbones Integration 1,276,744 - 1,276,744
Incentive
Scheme Award
Diluted ordinary shares 106,253,523 59,968,901 73,874,577
Unaudited Unaudited Audited
Six months to Six months to Year to
30 June 2024 30 June 2023 31 December 2023
Earnings per share for the period attributable to equity holders of the
company:
- basic 43.9p 33.6p 52.6p
- diluted 42.8p 32.8p 50.8p
Underlying earnings per share for the period attributable to equity holders of
the company:
- basic 80.4p 66.4p 135.8p
- diluted 78.5p 64.8p 131.0p
Underlying earnings per share is calculated in the same way as earnings per
share, but by reference to underlying profit after tax attributable to
shareholders. The tax rate applied has been adjusted for tax deductible
non-underlying costs, resulting in an adjusted tax rate of 25.6% (30 June
2023: 23.4%; 31 December 2023: 23.8%).
11 LOANS AND ADVANCES TO CUSTOMERS
Unaudited Unaudited Audited
Six months to Six months to Year to
30 June 2024 30 June 2023 31 December 2023
£m £m £m
Overdrafts 23.6 15.1 9.7
Wealth Management loan book 93.5 124.6 101.7
Trust and financial planning debtors 2.9 3.6 2.6
Other debtors 0.3 0.1 1.6
120.3 143.4 115.6
12 PROPERTY, PLANT AND EQUIPMENT
During the six months ended 30 June 2024, the group purchased assets with a
cost of £28.5 million (six months ended 30 June 2023: £0.6 million; year
ended 31 December 2023: £5.1 million), relating to office fit-out and
refurbishment costs.
Due to the shortened useful economic life of the fixtures and fittings at
8 Finsbury Circus following the assignment of the property lease, impairment
charges of £0.6 million have been recognised within non-underlying costs in
the period. In addition to this, additional depreciation charges of £1.1
million (31 December 2023: £1.7 million) have been recognised within
non-underlying costs, which represents the net uplift in costs against the
previous monthly charges prior to the lease assignment taking place.
13 RIGHT-OF-USE ASSETS
Property Motor vehicles Total
£m and equipment £m
£m
Cost
1 January 2024 90.1 0.3 90.4
Additions 16.2 - 16.2
Disposals (38.5) - (38.5)
At 30 June 2024 67.8 0.3 68.1
Depreciation and impairment
1 January 2024 25.7 0.2 25.9
Charge in the period 5.9 - 5.9
Disposals (15.3) - (15.3)
At 30 June 2024 16.3 0.2 16.5
Carrying amount at 30 June 2024 (unaudited) 51.5 0.1 51.6
Carrying amount at 30 June 2023 (unaudited) 37.1 0.2 37.3
Carrying amount at 31 December 2023 (audited) 64.4 0.1 64.5
Following the acquisition of IW&I, the group's enlarged property portfolio
was reviewed for leases that would require early termination. The most
material impact is in relation to the London properties, where the group will
vacate the property at 8 Finsbury Circus by 31 July 2024, prior to it's
termination date, and relocate to office space at 30 Gresham Street. At the
2023 year end, the right-of-use asset in respect of the property at 8 Finsbury
Circus was reviewed for impairment. An impairment charge of £2.1 million was
recognised in non-underlying costs in 2023, and a further £0.4 million was
recognised in the current period.
On 6 March 2024, the lease at 8 Finsbury Circus was assigned to a new tenant.
As the original terms and conditions of the lease did not include an option to
terminate the lease or reduce the lease term, this was treated as a lease
modification. At the effective date of the modification, the lease liability
was remeasured based on the remaining rental payments, the revised lease term
and a revised incremental borrowing rate. The right-of-use asset was also
revalued to reflect its reduced useful economic life. This resulted in a net
gain to profit or loss of £12.9 million, which has been recognised in
non-underlying costs.
In March 2024, the group entered into a lease agreement for additional floor
space in the property at 30 Gresham Street. The cost of this lease represents
a double-running of costs with 8 Finsbury Circus until that property is
vacated. The property costs for the vacant properties which are not occupied
by staff are recognised within non-underlying expenditure until the existing
properties cease to be used and are vacated. At 30 June 2024, the IFRS 16
related property costs net of synergies for the group's London-based
properties recognised as non-underlying comprised £0.2 million of
depreciation charged on the right-of-use assets, and a net £0.2 million
saving on interest charged on the lease liabilities. There were £0.8 million
of ancillary property costs recognised within non-underlying costs in the
period.
14 INTANGIBLE ASSETS
In 2023, goodwill of £340.1 million was recognised as part of the acquisition
of IW&I (see note 5). During the period, goodwill was revalued to £332.6
million. A reduction of £8.2 million was attributable to the recognition of a
contingent consideration receivable owed to the group by the seller (see note
2 for further detail). This was partially offset by a 0.7 million increase in
goodwill attributable to a reduction in the acquired client relationship
intangible assets and the related deferred tax liability (see below for
further detail).
Goodwill has been provisionally allocated between the IW&I cash-generating
unit ('CGU') and the Wealth Management group of CGUs in the year, before being
reviewed for impairment. This allocation will be reviewed at 31 December 2024.
Client relationship intangible assets of £350.3 million were recognised as
part of the acquisition of IW&I (see note 5). An average useful life of 14
years was assigned to these relationships, based on observed historic
attrition rates. During the period, the intangible assets recognised on
acquisition were re-measured in line with IFRS 3 and adjusted downwards by
£1.2 million to reflect new information about facts and circumstances in
existence at the acquisition date. The related deferred tax liability was
reduced accordingly by £0.5 million.
Goodwill Client Software Purchased Total
£m relationships development software Intangible
£m costs £m assets
£m £m
Cost
At 1 January 2024 509.7 651.0 16.2 59.1 1,236.0
Internally developed in the period - - 0.4 - 0.4
Purchased in the period - 5.0 - 1.5 6.5
Remeasurement of business combination (note 5) (7.5) (1.2) - - (8.7)
Disposals - (0.9) - - (0.9)
At 30 June 2024 502.2 653.9 16.6 60.6 1,233.3
Amortisation and impairment
At 1 January 2024 1.9 148.3 11.8 48.7 210.7
Charge in the period - 22.0 1.1 2.6 25.7
Disposals - (0.9) - - (0.9)
At 30 June 2024 1.9 169.4 12.9 51.3 235.5
Carrying value at 30 June 2024 (unaudited) 500.3 484.5 3.7 9.3 997.8
Carrying value at 30 June 2023 (unaudited) 167.7 167.1 3.1 9.3 347.2
Carrying value at 31 December 2023 (audited) 507.8 502.7 4.4 10.4 1,025.3
The total amount charged to profit or loss in the period, in relation to
goodwill and client relationship intangible assets, was £22.0 million (six
months ended 30 June 2023: £9.5 million; year ended 31 December 2023: £25.2
million)
IMPAIRMENT
The recoverable amounts of the operating segments to which goodwill is
allocated are assessed for impairment using value-in-use calculations. The
group prepares cash flow forecasts derived from the most recent financial
budgets approved by the board, which cover the three year period from the end
of the current financial year. This is extrapolated for five years based on
recent historic annual revenue and cost growth for each group of CGUs,
adjusted for significant historic fluctuations in industry growth rates where
relevant, as well as the group's expectation of future growth.
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 operating segments.
At 31 December 2023, the pre-tax rate used to discount the forecast cash flows
was 14.1% for the Wealth Management operating segment and 15.0% for the
IW&I operating segment. 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 each operating segment operates.
There was no indication of impairment to the goodwill allocated to the Wealth
Management operating segment or to the IW&I operating segment during the
period. The group has considered any reasonably foreseeable changes to the
assumptions used in the value-in-use calculations and the level of risk
associated with the cash flow projections. Based on this assessment, no such
change would result in an impairment of goodwill.
15 PROVISIONS FOR LIABILITIES AND CHARGES
Deferred, variable costs to Deferred and Legal and Property- Onerous Total
acquire client contingent professional, related Contract £m
relationship consideration and £m £m
intangibles in business compensation
£m combinations £m
£m
At 1 January 2023 4.4 - 2.7 5.8 - 12.9
Charged to profit or loss - - 7.3 0.2 - 7.5
Unused amount credited to profit or loss - - (0.3) - - (0.3)
Net charge to profit or loss - - 7.0 0.2 - 7.2
Other movements 1.6 - - - - 1.6
Utilised/paid during the period (1.7) - (0.8) - - (2.5)
At 30 June 2023 (unaudited) 4.3 - 8.9 6.0 - 19.2
Charged to profit or loss - - 1.8 - 1.2 3.0
Unused amount credited to profit or loss - (0.1) (0.8) - - (0.9)
Net charge to profit or loss - (0.1) 1.0 - 1.2 2.1
Acquisitions through business combinations (Note 5) - 3.4 1.9 5.4 - 10.7
Other movements 1.0 - - - - 1.0
Utilised/paid during the period (0.6) - (6.9) - - (7.5)
At 31 December 2023 (audited) 4.7 3.3 4.9 11.4 1.2 25.5
Charged to profit or loss - - (0.2) 12.9 - 12.7
Unused amount credited to profit or loss - - (0.3) (2.3) - (2.6)
Net charge to profit or loss - - (0.5) 10.6 - 10.1
Other movements 5.0 - 0.4 - - 5.4
Utilised/paid during the period (5.2) (0.7) (0.7) - (1.2) (7.8)
At 30 June 2024 (unaudited) 4.5 2.6 4.1 22.0 - 33.2
Payable within one year 0.2 2.6 3.5 15.0 - 21.3
Payable after one year 4.3 - 0.6 7.0 - 11.9
At 30 June 2024 (unaudited) 4.5 2.6 4.1 22.0 - 33.2
DEFERRED, VARIABLE COSTS TO ACQUIRE CLIENT RELATIONSHIP INTANGIBLE ASSETS
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.
DEFERRED CONSIDERATION IN BUSINESS COMBINATIONS
Deferred Consideration in Business Combinations relates to Investec Wealth
& Investment's deferred consideration provision on their acquisition of
Murray Asset Management. The Share Centre deferred consideration provision was
settled in March 2024, on transfer of the assets to Rathbones Asset Management
Limited.
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 those instances where it is concluded that it is more likely
than not that a payment will be made, a provision is established to the
group's best estimate of the amount required to settle the obligation at the
relevant statement of financial position 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.
PROPERTY-RELATED
Property-related provisions of £22.0 million relate to dilapidation
provisions expected to arise on leasehold premises held by the group and a
lease incentive payable in respect of 8 Finsbury Circus, which is discussed in
further detail below (30 June 2023: £6.0 million; 31 December 2023: £11.4
million).
During the six months ended 30 June 2024, the group utilised £nil in relation
to dilapidations (30 June 2023: £nil; 31 December 2024: £nil). The impact of
discounting led to an additional charge of £1.8 million (30 June 2023:
additional charge of £0.2 million; 31 December 2023: additional charge of
£0.2 million) being recognised during the period.
On 6 March 2024, the group assigned its lease at 8 Finsbury Circus to a new
tenant. As part of the sale contract, the group agreed to pay a reverse
premium of £11.2 million to the new tenant when the property is vacated on
completion. £7.5 million of this total is to be held in escrow and drawn down
by the tenant over 2 years on the anniversary of the completion date. As
payment is probable and the group has a present obligation to fulfil the
obligation, a provision for the full amount was recognised in the period. The
charge to profit or loss has been recognised within non-underlying costs.
At the date the lease was assigned, all existing liabilities transferred to
the new tenant, including the group's £2.3 million dilapidations obligation
relating to the property. As payment by the group is no longer probable, a
present obligation to recognise a provision no longer exists. Therefore, this
liability was released to profit or loss in the period; this gain has been
recognised in non-underlying costs.
As part of the lease assignment, the group agreed to enter into an Authorised
Guarantee Agreement, which holds the group liable to the landlord for any
rental payments that the new tenant may default on over the remaining
nine-year lease term. Due to the assumed low probability of default by the
tenant and the option for the group to reassign the lease in case of a
default, no liability has been recognised in relation to this agreement.
See note 13 for further detail of lease modifications in the period relating
to the group's London properties.
ONEROUS CONTRACT
In 2023, the group terminated a support agreement with a third-party service
provider. The onerous element of the contract represented a cost of £1.2
million to the group, which was recognised as a provision at the year end.
This provision has been settled in full during the period.
AMOUNTS PAYABLE AFTER ONE YEAR
Property-related provisions of £7.0 million are expected to be settled within
11 years of the statement of financial position 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 ten years
of the statement of financial position date.
16 SUBORDINATED LOAN NOTES
Unaudited Unaudited Audited
30 June 2024 30 June 2023 31 December 2023
£m £m £m
Subordinated loan notes
- face value 40.0 40.0 40.0
- carrying value 39.9 39.9 39.9
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 in 2026, and at a
fixed rate of 4.893% over Compounded Daily SONIA thereafter. Legal fees of
£0.1m were incurred in issuing the notes, which have been accounted for in
the carrying value of amortised cost.
17 LONG-TERM EMPLOYEE BENEFITS
The group operates two defined benefit pension schemes providing benefits
based on pensionable salary for staff employed by the company. For the
purposes of calculating the pension benefit obligations, the following
assumptions have been used:
Unaudited Unaudited Audited
30 June 2024 30 June 2023 31 December 2023
% p.a. % p.a. % p.a.
Rate of increase of pensions in payment:
- Laurence Keen Scheme 3.70 3.60 3.70
- Rathbone 1987 Scheme 3.00 3.20 2.90
Rate of increase of deferred pensions 3.20 3.30 3.10
Discount rate 5.10 5.10 4.40
Inflation* 3.20 3.30 3.10
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 12.00 12.00
- Rathbone 1987 Scheme 16.00 16.00 16.00
* Inflation assumptions are based on the Retail Price Index
Unaudited 30 June 2024 Unaudited 30 June 2023 Audited 31 December 2023
Males Females Males Females Males Females
Retiring today 22.9 24.6 23.4 25.0 22.8 24.5
Retiring in 20 years 24.4 26.2 24.9 26.7 24.3 26.1
The amount included in the statement of financial position arising from the
group's obligations in respect of the schemes is as follows:
Unaudited 30 June 2024 Unaudited 30 June 2023 Audited 31 December 2023
Rathbone Laurence Rathbone Laurence Rathbone Laurence
1987 Scheme Keen Scheme 1987 Scheme Keen Scheme 1987 Scheme Keen Scheme
£m £m £m £m £m £m
Present value of defined benefit obligations (85.1) (6.6) (85.8) (6.9) (93.8) (7.3)
Fair value of scheme assets 85.3 6.8 91.9 7.8 99.9 8.2
Total surplus 0.2 0.2 6.1 0.9 6.1 0.9
On 9 April 2024 both Schemes invested in a bulk annuity policy to match their
liabilities as part of a "buy-in" process. The Schemes' assets are now
therefore almost entirely invested in the bulk policies, with some residual
funds in the Schemes' bank accounts. In accordance with IAS 19, the fair value
of the bulk annuity policies has been calculated to be equal to the value of
the liabilities the policies cover.
The group made lump sum contributions into its pension schemes totalling £3.7
million during the period (30 June 2023: £0.2 million; 31 December 2023:
£3.0 million).
Following the purchase of the bulk annuities which match the Schemes'
liabilities, the risks relating to interest rates, inflation and mortality,
have been transferred to the insurer. The residual risks to the group arising
from both schemes are in respect of counterparty default risk and the risk
that there are changes to the premium.
The analysis of the scheme assets, measured at bid prices, at the statement of
financial position date was as follows;
Rathbone 1987 Scheme Unaudited Unaudited Audited Unaudited Unaudited Audited
six months six months year to six months six months year to
to 30 June to 30 June 31 December to 30 June to 30 June 31 December
2024 2023 2023 2024 2023 2023
£m £m £m % % %
Equity instruments - - - - - -
Debt instruments - - - - - -
Self Sufficiency Credit Funds - 90.0 98.4 - 98.0 99.0
Cash 0.2 1.9 1.5 0.2 2.0 1.0
Annuities 85.1 - - 99.8 - -
At period end 85.3 91.9 99.9 100.0 100.0 100.0
Laurence Keen Scheme Unaudited Unaudited Audited Unaudited Unaudited Audited
six months six months year to six months six months year to
to 30 June to 30 June 31 December to 30 June to 30 June 31 December
2024 2023 2023 2024 2023 2023
£m £m £m % % %
Equity instruments - - - - - -
Debt instruments - - 0.3 0.4 - 4.0 5.0
United Kingdom corporate bonds
Self Sufficiency - 7.3 7.7 - 93.0 93.0
Credit Funds
Cash 0.3 0.2 0.1 4.4 3.0 2.0
Annuities 6.5 - - 95.6 - -
At period end 6.8 7.8 8.2 100.0 100.0 100.0
18 SHARE CAPITAL, SHARE PREMIUM AND MERGER RESERVE
The following movements in share capital, share premium and the merger reserve
occurred during the period:
Number of voting Number of Exercise price Share capital Share premium Merger reserve Total
ordinary shares non-voting pence £m £m £m £m
ordinary shares
At 1 January 2023 63,394,837 - 3.2 310.0 77.0 390.1
Shares issued:
- to Share Incentive Plan 38,544 - 1,574.0 - 2,160.0 - 0.8 - 0.8
- to Save As You Earn scheme - - - - - - -
- to Employee Benefit Trust - - - - - - -
At 30 June 2023 (unaudited) 63,433,381 - - 3.2 310.8 77.0 390.9
Shares issued:
- in relation to business combinations 27,056,463 17,481,868 1,635.9 - 1,722.0 2.2 - 747.4 749.6
- to Share Incentive Plan 94,285 - 1,574.0 - 2,160.0 - 1.5 - 1.5
- to Save As You Earn scheme - - - - - - -
At 31 December 2023 (audited) 90,584,129 17,481,868 - 5.4 312.3 824.4 1,142.1
Shares issued:
- to Share Incentive Plan 139,206 - 1,556.0 - 1,790.0 - 2.3 - 2.3
- to Save As You Earn scheme 4,809 - 1,365.0 - 0.1 - 0.1
- to Employee Benefit Trust 69,000 - 5.0 - - - -
At 30 June 2024 (unaudited) 90,797,144 17,481,868 - 5.4 314.7 824.4 1,144.5
On 21 September 2023, the company issued to Investec Bank plc 27,056,463 of
ordinary shares at £17.22 per share, and 17,481,868 of convertible non-voting
ordinary shares at £16.36 per share.
Share issue costs of £2.2 million were offset against the merger reserve.
At 30 June 2024, the group held 4,612,655 own shares (30 June 2023: 4,122,553;
31 December 2023: 4,443,517).
19 SHARE-BASED PAYMENTS
The group recognised total expenses of £14.8 million (30 June 2023: £10.7
million, 31 December 2023: £24.0 million) in relation to share-based payment
transactions in the period. This includes the staff costs in relation to the
acquisitions of Speirs & Jeffrey, Saunderson House and IW&I, 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 2024 (unaudited) Level 1 Level 2 Level 3 Total
£m £m £m £m
Financial assets
Fair value through profit or loss:
- equity securities - - - -
- - - -
At 30 June 2023 (unaudited) Level 1 Level 2 Level 3 Total
£m £m £m £m
Financial assets
Fair value through profit or loss:
- equity securities - - 3.1 3.1
- - 3.1 3.1
At 31 December 2023 (audited) Level 1 Level 2 Level 3 Total
£m £m £m £m
Financial assets
Fair value through profit or loss:
- equity securities - - 1.2 1.2
- - 1.2 1.2
The group recognises transfers between levels of the fair value hierarchy at
the end of the reporting period during which the change has occurred. There
have been no transfers between levels during the period.
The fair 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 2024
was £1,393.4 million (30 June 2023: £1,234.2 million; 31 December 2023:
£1,296.8 million) and the carrying value was £1,392.9 million (30 June 2023:
£1,233.8 million; 31 December 2023: £1,294.6 million). 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) represent Tier 2 capital for
regulatory capital purposes. The fair value of the loan notes at 30 June 2024
was £35.5 million (30 June 2023: £37.3 million; 31 December 2023: £37.4
million) and the carrying value was £39.9 million (30 June 2023: £39.9
million; 31 December 2023: £39.9 million). 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
At 31 December 2023, the group held 517 shares in Euroclear Holdings SA (which
were valued at £1.2 million by reference to the price secured from the sale
of 1,292 of the group's shares during 2023), which are classed as Level 3 in
the fair value hierarchy, since readily available observable market data is
not available.
During the six months to 30 June 2024, the group sold its total remaining
shares in Euroclear at the same price used to value its shareholding at 31
December 2023.
Changes in the fair values of financial instruments categorised as level 3
within the fair value hierarchy were as follows:
Unaudited Unaudited Audited
Six months to Six months to Year to
30 June 2024 30 June 2023 31 December 2023
£m £m £m
At 1 January 1.2 3.2 3.1
Total unrealised gains/(losses) recognised in profit - (0.1) 1.0
or loss
Total disposals (1.2) - (2.9)
At end of period - 3.1 1.2
EXPECTED CREDIT LOSS PROVISION
The expected credit loss provision is recalculated on a quarterly basis and
recognised in the statement of financial position. The provision calculated is
immaterial.
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 and/or directors of client companies
and providing other services.
(b) Capital expenditure authorised and contracted for at 30 June 2024 but not
provided for in the condensed consolidated interim financial statements
amounted to £14.2 million (30 June 2023: £0.5 million; 31 December 2023:
£14.0 million).
(c) The contractual amounts of the group's commitments to extend credit to its
clients are as follows:
Unaudited Unaudited Audited
30 June 2024 30 June 2023 31 December 2023
£m £m £m
Undrawn commitments to lend of one year or less 14.5 15.9 11.8
Undrawn commitments to lend of more than one year 0.6 5.6 3.6
15.1 21.5 15.4
(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 may result in significant levies on the
industry. 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 2024 30 June 2023 31 December 2023
£m £m £m
Cash and balances at central banks 1,033.0 1,139.0 1,036.0
Loans and advances to banks 230.3 98.3 266.9
1,263.3 1,237.3 1,302.9
Cash flows arising from issue of ordinary shares comprise:
Unaudited Unaudited Audited
Six months to Six months to Year to
30 June 2024 30 June 2023 31 December 2023
£m £m £m
Share capital issued (note 18) - - 2.2
Share premium on shares issued (note 18) 2.4 0.8 2.3
Merger reserve on shares issued (note 18) - - 747.4
Shares issued in relation to share-based schemes for which no cash - - (751.9)
consideration was received
Proceeds from issue of share capital 2.4 0.8 -
Shares repurchased and placed into the employee benefit trust (8.9) (6.7) (16.0)
Net repurchase of ordinary shares (6.5) (5.9) (16.0)
In 2023, £751.9 million of shares were issued as consideration of the
IW&I transaction. There was no cash consideration received for this
transaction.
During the current period, £8.9 million of shares were repurchased and placed
into the group employee benefit trust (30 June 2022: £6.7 million; 31
December 2023: £16.0 million).
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 £0.1 million were paid in the period (six months ended 30
June 2023: £0.2 million; year ended 31 December 2023: £0.3 million) in
respect of ordinary shares held by key management personnel.
At 30 June 2024, key management personnel and their close family members had
gross outstanding deposits of £2.2 million (30 June 2023: £2.0 million; 31
December 2023: £1.0 million). 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.
As a result of the IW&I transaction on 21 September 2023, Rathbones Group
Plc is an associate of Investec Bank plc. Investec Bank plc currently provide
services to Rathbones Group Plc under a Transitional Services Agreement (TSA),
entered into on acquisition of IW&I. In April 2024 an Outsourced Service
Agreement (OSA) was established.
As at 30 June 2024 there was a net payable balance with Investec Bank plc of
£16.9 million (30 June 2023: £nil; 31 December 2023: £8.3 million). The
balance outstanding as at the reporting date is predominantly related to
IW&I employee salary costs and associated payroll taxes which are
outsourced to Investec Bank plc under the TSA.
The total expense recognised for TSA and OSA services in the period are as
follows:
Unaudited Unaudited Audited
Six months to Six months to Year to
30 June 2024 30 June 2023 31 December 2023
£m £m £m
Expense incurred under TSA 6.5 - 4.8
Expense incurred under OSA 4.5 - -
11.0 - 4.8
IW&I partially sublets certain regional office space to Investec Bank plc
subsidiary companies and charges Investec Bank plc for the use of research.
Total fees receivable under these arrangements at 30 June 2024 are as follows:
Unaudited Unaudited Audited
Six months to Six months to Year to
30 June 2024 30 June 2023 31 December 2023
£m £m £m
Research fees 0.3 - 0.3
Property fees 0.2 - 0.1
0.5 - 0.4
One group subsidiary, Rathbones Asset Management Limited, has authority to
manage the investments within a number of unit trusts. During the first half
of 2024, the group managed 28 unit trusts, Sociétés d'Investissement à
Capital Variable (SICAVs) and open-ended investment companies (OEICs)
(together, 'collectives') (six months ended 30 June 2023: 26 collectives; year
ended 31 December 2023: 28 collectives).
The group charges each fund an annual management fee for these services, but
does not earn any performance fees on the unit trusts. The management charges
are calculated on the bases published in the individual fund prospectuses,
which also state the terms and conditions of the management contract with the
group.
The following transactions and balances relate to the group's interest in the
unit trusts:
Unaudited Unaudited Audited
Six months to Six months to Year to
30 June 2024 30 June 2023 31 December 2023
£m £m £m
Total management fees 40.4 33.8 69.6
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 2024 30 June 2023 31 December 2023
£m £m £m
Management fees owed to the group 6.9 5.9 6.5
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 statement of financial position. The maximum
exposure to loss is limited to the carrying amount on the consolidated interim
statement of financial position 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 30.0p per share was declared on 30 July 2024 (note 9).
There have been no other material events occurring between the balance sheet
date and 30 July 2024.
REGULATORY CAPITAL
As a banking group, Rathbones is required to operate in accordance with the
requirements relating to capital resources and banking exposures prescribed by
the Capital Requirements Regulation, as applied in the UK by the Prudential
Regulation Authority (PRA).
The group is required to ensure it maintains adequate capital resources to
meet its combined Pillar 1, Pillar 2 requirements and buffer requirements.
The increase in own funds in the period of £16.2 million was largely
attributable to a reduction in intangible assets (£22.5 million) and the
pension asset (£6.6 million). This was offset by a £9.8 million reduction in
reserves, which resulted from share-based awards vesting, and an increase of
£5.5 million in own shares held. This resulted in a capital surplus at 30
June 2024 of £145.6 million, up from £134.5 million at 31 December 2023.
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 2024 30 June 2023 31 December 2023
£m £m £m
Share capital and share premium 320.1 314.0 317.7
- Reserves 1,078.3 337.3 1,088.1
Less:
- prudent valuation of assets held at fair value - - -
through profit or loss
- own shares (61.1) (47.9) (55.6)
- intangible assets (net of deferred tax) (889.3) (318.6) (911.8)
- pension asset (0.4) (7.0) (7.0)
Total Common Equity Tier 1 capital 447.6 277.8 431.4
Tier 2 capital 40.0 40.0 40.0
Total own funds 487.6 317.8 471.4
The group's own funds requirements were as follows:
Unaudited Unaudited Unaudited
30 June 2024 30 June 2023 31 December 2023
£m £m £m
Own funds requirement for credit risk, counterparty credit risk and settlement 75.6 60.1 72.3
risk
Own funds requirement for market risk - - -
Own funds requirement for operational risk 121.8 65.9 121.7
Pillar 1 own funds requirement 197.4 126.0 194.0
Pillar 2A own funds requirement 39.5 39.6 39.4
Total Pillar 1 and 2A own funds requirement 236.9 165.6 233.4
CRD IV buffers:
- capital conservation buffer (CCB) 61.7 39.4 60.6
- countercyclical capital buffer (CCyB) 43.4 14.7 42.9
Total Pillar 1 and 2A own funds requirement and CRD IV buffers 342.0 219.7 336.9
Total capital surplus 145.6 98.1 134.5
OWN FUNDS REQUIREMENTS
The group is required to hold capital to cover a range of own funds
requirements, classified as Pillar 1, Pillar 2 and buffers.
PILLAR 1 - OWN FUNDS REQUIREMENT
Pillar 1 determines a total risk exposure amount (also known as 'risk-weighted
assets') for the group, taking into account expected losses in respect of the
group's exposure to credit, counterparty credit, market and operational risks,
and sets a minimum requirement for the amount of capital the group must hold.
At 30 June 2024, the group's risk-weighted assets were £2,467.4 million (30
June 2023: £1,575.7 million; 31 December 2023: £2,425.6 million).
PILLAR 2A - OWN FUNDS REQUIREMENT
The Pillar 2 requirement 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 as part of its
supervisory review process and the calculation of it remains confidential to
the PRA. The requirement reflects those risks that are specific to the firm
that are not fully captured under the Pillar 1 own funds requirement. The
group-specific risks that are reflected in the Pillar 2A requirement are set
out below:
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 and the pension buy-in in the period.
Interest rate risk in the banking book
The group operates on a non-trading book basis, whereby all assets held are
with the intent of holding to maturity. Assets are not actively traded in
secondary markets for speculative purposes. The resulting interest rate risk
represents losses that could arise for a 2% parallel shift in the Bank of
England base rate. The exposure would measure the time to reprice interest
bearing assets and liabilities.
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 is set by the PRA. The CCB is set at 2.5% of the group's total
risk exposure amount as at 30 June 2024.
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 value of the buffer is
calculated as a percentage of the group's total risk exposure amount. For UK
credit risk exposures, the percentage rate that applies is set by the
Financial Policy Committee ('FPC'). For other jurisdictions where the group
has exposures, the percentage rate applicable to each jurisdiction is applied.
The percentage buffer rate for UK exposures is currently 2.0%. The group has
relevant credit exposures in other jurisdictions where a different rate
applies, resulting in a weighted rate of 1.76% as at 30 June 2024.
ALTERNATIVE PERFORMANCE MEASURES
Alternative Performance Measures (APM) are financial measures of historical or
future financial performance, financial position, or cash flow, other than a
financial measure under IFRS.
The following table provides a reconciliation of underlying performance
measures to the closest equivalent IFRS measure;
Unaudited Unaudited Audited
30 June 2024 30 June 2023 31 December 2023
£m £m £m
Operating income 447.4 238.0 571.1
Underlying operating expenses (335.3) (187.2) (444.0)
Underlying profit before tax(1) 112.1 50.8 127.1
Charges in relation to client relationships and goodwill (22.0) (9.5) (25.2)
Acquisition-related costs (24.8) (15.3) (44.3)
Profit before tax 65.3 26.0 57.6
Taxation (19.8) (6.3) (20.1)
Profit after tax 45.5 19.7 37.5
Operating margin 14.6% 10.9% 10.1%
Underlying operating margin(2) 25.1% 21.3% 22.3%
Weighted average number of shares in issue 103.7m 58.5m 71.3m
Earnings per share (p) 43.9 33.6 52.6
Underlying earnings per share (p)(3) 80.4 66.4 135.8
1. Operating income less underlying operating expense
2. Underlying profit before tax as a percentage of operating income
3. Underlying profit after tax divided by the weighted average number of
shares in issue
integration synergies (group ceo's review)
Cost synergies arising in relation to the integration of Rathbones and
IW&I are quantified by reference to the cost base for the 2022 financial
year, being the baseline for synergy measurement. Synergies are deemed to
have been delivered at the point the related action has been implemented.
The term 'run rate' refers to the annual cost saving that will arise from the
point of delivery onwards.
Charges in relation to client relationship intangible assets and goodwill
(note 14)
As explained in notes 1.14 and 2.1 of the annual report and accounts for the
year ended 31 December 2023, client relationship intangible assets are
recognised when the group acquires a business or investment management
contracts as a result of the recruitment of experienced investment managers
who have the capability to attract significant FUMA to the group.
These intangible assets are amortised over the expected duration of the
respective client relationships. The amortisation is charged to the income
statement each year. This represents a significant non-cash profit and loss
item which is therefore excluded from underlying profit in order to present an
alternative measure that represents largely cash-based results of the
financial reporting period. Research analysts commonly exclude these
amortisation costs when comparing the performance of firms in the wealth
management industry.
Acquisition-related costs (note 6)
Acquisition and integration related costs are significant non-recurring costs
which arise from strategic investments to grow the business rather than from
the business' operating activities and are therefore excluded from underlying
results.
These costs primarily comprise professional fees directly related to the
execution of the relevant transaction, certain elements of deferred
consideration which are conditional upon continuing employment with the group
and the costs of integrating the acquired businesses with those of the
existing group.
Deferred consideration costs are generally significant payments that form part
of the total consideration payable under the terms of the acquisition
agreement and are considered to be capital in nature, reflecting the cost to
acquire the business and the transfer of its ownership. However, in accordance
with IFRS 3, any deferred consideration that is payable to former shareholders
of the acquired business who are required to remain in employment with the
group must be treated as remuneration and are therefore expensed to the income
statement over the period to which the employment condition applies.
During the six months ending 30 June 2024, £6.5 million of deferred
consideration payments (30 June 2023: £2.2 million; 31 December 2023: £9.7
million) and £18.3 million of integration costs (30 June 2023: £13.1
million; 31 December 2023: £34.6 million) were charged to the income
statement.
Taxation (note 8)
The corporation tax charge for the six months ended 30 June 2024 was £19.8
million (30 June 2022: £6.3 million; 31 December 2023: £20.1 million) (see
note 8). The effective tax rate for the period ended 30 June 2024 is 30.3% (30
June 2023: 24.2%; 31 December 2023 34.9%). The effective tax rate reflects the
disallowable costs of the deferred consideration payments in relation to the
acquisitions of Speirs & Jeffrey, Saunderson House and IW&I, as well
as property related costs arising on the lease assignment of 8 Finsbury
Circus.
Basic earnings per share (note 10)
Basic earnings per share for the six months ended 30 June 2024 were 43.9p (30
June 2023: 33.6p; 31 December 2023: 52.6p). The increase in the period
reflects the growth in profit as a result of the IW&I merger which has
been partially offset by the increased number of shares and the increase in
the statutory rate of tax.
On an underlying basis, basic earnings per share were 80.4p at 30 June 2024,
compared to 66.4p at 30 June 2023 (31 December 2023: 135.8p). The increase in
the period is due to increased underlying profit after tax which has been
partially offset by the increased number of shares and the increase in the
statutory rate of tax.
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 2024, and as at 30 June
2024, 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
30 July 2024
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 2024 which comprises the consolidated interim statement of comprehensive
income, consolidated interim statement of changes in equity, consolidated
interim statement of financial position 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 2024 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
30 July 2024
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