REG - Rathbones Group PLC - Preliminary results 2024
26/02/2025 07:15
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RNS Number : 4489Y Rathbones Group PLC 26 February 2025
PRELIMINARY RESULTS FOR THE 12 MONTHS ENDED 31 DECEMBER 2024
HARNESSING OUR COMBINED STRENGTHS TO DRIVE GROWTH
Paul Stockton, Group Chief Executive, said:
"2024 has been a very exciting year for the Group as we began in earnest to
bring Rathbones and IW&I together as one combined business committed to
helping our clients achieve their longer-term financial goals. In an eventful
year, we attracted record gross inflows by leveraging our enlarged platform,
grew underlying operating margin, exceeded the 2024 synergy targets we set out
for the IW&I combination, and increased our dividend by 6.9%.
Throughout the year, we have continued to improve our services and investment
processes, taking advantage of the best that the Rathbones and IW&I teams
have to offer. The combination creates some significant future growth
opportunities and provides a pathway to greater innovation as ideas are shared
and acted upon. I am grateful for the efforts of all teams around the Group
who have helped us start 2025 in such a strong position.
Rathbones remains well-equipped to navigate the challenges associated with
industry change and the potential impacts of geopolitical instability on
investment markets. Alongside initiatives to enhance our services to clients
and improve organic growth rates, our priorities for 2025 include completing
the migration of IW&I clients and fully integrating our businesses onto
one platform."
FINANCIAL AND OPERATIONAL HIGHLIGHTS
2024 is the first full financial year following the combination with IW&I.
The increase in operating income, profit and earnings per share reported this
year reflects the benefits of the combination and the extent to which our
delivery of the related synergies have exceeded the targets we set for 2024.
The comparative figures for 2023 include three months of IW&I's
contribution from 1 October 2023, reflecting the timing of the completion of
the combination.
- FUMA reached £109.2 billion at 31 December 2024 (31 December 2023:
£105.3 billion), including £43.0 billion from IW&I.
- We have made significant progress during the year in our ambition to grow
our underlying operating margin, which has increased to 25.4% (2023: 22.3%) as
we continue to realise the benefits of our increased scale.
- Underlying profit before tax increased 79.1% to £227.6million (2023:
£127.1 million).
- Profit before tax increased by 72.9% to £99.6 million (31 December2023:
£57.6 million), largely reflecting acquisition and integration costs related
to the combination with IW&I, along with higher amortisation charges
following the transaction.
- We have delivered cost and revenue synergies well ahead of our first year
£15 million target, with run-rate synergy realisation of £30.1 million at
the end of 2024. This was largely due to organisational changes and our
property consolidation programme being secured ahead of the planned timeframe.
- The Rathbones and IW&I combination made significant progress in 2024.
The client consent process is nearly complete, and we expect to migrate almost
all c. 55,000 IW&I clients by the end of H1. To date, 0.3% have declined
to migrate to Rathbones, and we expect a small proportion of relationships to
leave the Group where a suitable proposition is not available. We remain
focused on maintaining high client service levels and look forward to
welcoming clients to the Rathbones platform in the coming months.
- During the year, we completed the integration of Saunderson House,
creating a business model that now includes a well-established financial
planning capability to complement our investment strengths.
FOCUSING ON GROWTH
Although much of our recent focus has been on ensuring that the benefits of
the combination are realised, we have also taken some significant steps toward
improving organic growth rates.
We continue to believe that relationship-led services are the best way to
secure high quality, resilient future revenues so alongside our pursuit of
efficiencies to optimise delivery costs and enhancements to our investment
process, we are working to:
- Strengthen our marketing and distribution capability
- Deliver more advice-led conversations whilst working
flexibly to provide investment only services to third-party advisors
- Improve client choice with services that meet their
changing demands
- Leverage our extensive strategic partner relationships
- Continue to grow Rathbones Asset Management
2024 2023
£m £m
(unless stated)
(unless stated)
Operating income 895.9 571.1
Underlying operating expenses(1) (668.3) (444.0)
Underlying profit before tax(1) 227.6 127.1
Underlying operating margin(1) 25.4% 22.3%
Profit before tax 99.6 57.6
Underlying earnings per share(1) 161.6p 135.8p
Earnings per share 63.0p 52.6p
Dividend per share 93.0p 87.0p
I. A reconciliation between the underlying measure and its
closest IFRS equivalent is provided in the financial performance section.
OUTLOOK AND GUIDANCE
We are making good progress towards delivering an underlying operating margin
of 30% from September 2026, notwithstanding the additional headwinds that
have arisen since we set out this target, which include ongoing inflationary
pressures and the estimated impact of NlCs from April 2025. Delivery of this
will be on a run-rate basis from three years following completion of the
IW&I transaction, i.e. September 2026.
This margin growth will be underpinned by a combination of:
- Modest market growth in line with inflation
- A return to organic net inflows, supported by growth in advice,
refreshed marketing and distribution capabilities and growth in our Asset
Management business
- Ongoing cost discipline, in what we expect to be a more normalised
inflationary environment
- Synergy delivery in line with guidance.
We expect the improvement in the underlying operating margin to arise mostly
during 2026, with a more modest improvement in 2025. This principally
reflects the timing of further synergy benefits, which will be weighted
towards the second half of the 2025 financial year, when the cost savings
which are linked to the migration to a single operating platform will
materialise and we work towards IW&I ceasing to run as a separate,
regulated entity. Performance in 2025 will also reflect the increase in NIC
costs and a full year of the 2024 salary reviews, which were undertaken in
the higher inflationary environment. We also expect to see a flatter seasonal
spike in transaction-based commission income in March 2025 as a result of the
additional activity that arose on client portfolios ahead of the 2024 Autumn
Budget.
We expect to see growth in advice revenues in 2025 as a result of increased
advisor capacity following completion of the Saunderson House migration and
our continuing focus on advice, along with increased demand following the
taxation changes announced in the 2024 Autumn Budget. Net interest income will
benefit from the delivery of revenue synergies in the second half of 2025
following the IW&I client migration, with net interest margins expected to
see only a modest impact from the reductions in central bank rates that are
anticipated. We will be focused on our growth agenda in 2025 to drive improved
net flows.
Delivering sustainable value to our shareholders and maintaining a disciplined
and efficient approach to managing shareholder capital is of the highest
importance to the Board. The Group continues to maintain a robust capital
base, with a surplus of capital above the regulatory minimum of £207.2
million at 31 December 2024 (prior to taking into account the proposed final
dividend for the year) which supports strategic investment, the ongoing
integration of the IW&I business and our progressive dividend policy.
The business remains highly cash generative and we expect to see a further
increase in cash generation once the integration of IW&I is complete and
we see the full benefits of the combination synergies. As such, we will review
our capital allocation policy, including an evaluation of our capacity for
surplus returns, following the migration of IW&I onto a single operating
platform later this year.
DECLARATION OF FINAL DIVIDEND
In July, we announced an interim dividend of 30p. Given the strength of our
balance sheet and our confidence in the long-term future of the business, the
Board has recommended a final dividend of 63.0p per share for 2024 (2023:
24.0p). This brings the total dividend for the year to 93.0p (2023: 87.0p),
representing a 6.9% increase compared to 2023. The dividend will be paid on
13 May 2025, subject to shareholder approval at our 2025 Annual General
Meeting (AGM) on 8 May 2025.
2024 RESULTS PRESENTATION
A presentation to analysts and investors will take place this morning at
10:00am at our offices at 30 Gresham Street, London, EC2V 7QN. Participants
who wish to join the presentation virtually can do so by either joining the
video webcast
(https://www.investis-live.com/rathbones-group-plc/677d62be995564000f839a0f/rgwd
(https://www.investis-live.com/rathbones-group-plc/677d62be995564000f839a0f/rgwd)
) 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: 129625
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.
Issued on 26 February 2025
For further information contact:
Rathbones Group Plc
Investors
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)
Press
Tessa Curtis, Director of Corporate Communications & Affairs
Tel: 07833 346238
Email: tessa.curtis@rathbones.com (mailto:tessa.curtis@rathbones.com)
Camarco
Ed Gascoigne-Pees
Tel: 020 3757 4984
Email: ed.gascoigne-pees@camarco.co.uk
(mailto:ed.gascoigne-pees@camarco.co.uk)
Rathbones Group Plc
Rathbones is a leading provider of individual Wealth Management, Asset
Management and related services to Private Clients, Charities, Trustees and
Professional Partners. We have been trusted for generations to manage and
preserve our clients' wealth. Our tradition of thinking, acting and investing
for everyone's tomorrow has been with us from the beginning and continues to
lead us forward.
Rathbones headquarters is 30 Gresham Street, London, EC2V 7QN.
www.rathbones.com
CHAIR'S STATEMENT
HONOURING OUR PAST, SHAPING OUR FUTURE
DEAR SHAREHOLDER
In 2023, we announced our combination with IW&I. Throughout 2024, we have
made significant strides to integrate the two businesses to further our
position as the UK's leading discretionary wealth manager. We have exceeded
both the strategic and financial objectives that we set for ourselves in the
first year following the announcement. This is testament to the hard work,
commitment, and collaboration of all of our colleagues.
CLIENTS
Our clients have always been, and will continue to be, at the heart of our
business. Their interests remain paramount in everything we do. This is
demonstrated by our Net Promoter Score (NPS) of 56%, above the industry
average of 54%. This score is reassuring, particularly at a time of
transition for the firm, that our client service and experience has continued
to be strong.
Following the combination with IW&I, we prioritised client engagement in
2024, focusing on providing reassurance and stability. We will strengthen
these relationships throughout 2025, as clients move on to the Rathbones
platform.
COLLEAGUES
The Board recognises the hard work and commitment of our colleagues during
this year of change and transition. This year has presented both challenges
and opportunities as we navigated a transformative combination, requiring
adjustments to new structures and ways of working. On behalf of the Board, I
want to express my gratitude for their contributions during this pivotal time.
Fostering a stable and equitable culture is essential to motivate and reward
our colleagues, who are the foundation of Rathbones' success. The Board's
workforce engagement programme ensures we consider employee perspectives and
strengthens the connection with our colleagues.
The Board is committed to regularly reviewing workforce metrics, such as
engagement survey results, retention rates, and satisfaction, to
drive continuous improvement. We will continue to do this in 2025 and beyond.
ENGAGING WITH SHAREHOLDERS
We are committed to fostering meaningful engagement with our shareholders. We
deeply value the open and transparent communication that we maintain with our
investors, and I am personally grateful for the opportunity to connect with
many of you over the past year. These conversations are vital in helping us
align our strategy with your expectations. I look forward to continuing our
productive dialogue in the future.
SHAREHOLDER RETURNS AND DIVIDENDS
Rathbones is focused on driving long-term shareholder value. We therefore
reaffirm our progressive dividend policy, which has been in place for more
than 25 years and has never seen a reduction in the dividend.
In July, we announced an interim dividend of 30p. Given the strength of our
balance sheet and our confidence in the long-term future of the business, the
Board has recommended a final dividend of 63p per share. This brings the total
dividend for the year to 93.0p per share (2023: 87.0p), representing a 6.9%
increase compared to 2023.
The final dividend is scheduled to be paid on 13 May 2025, subject to
shareholder approval at our Annual General Meeting (AGM) on 8 May 2025, to
shareholders on the register as of 11 April 2025.
GOVERNANCE AND CULTURE
The Board places a strong emphasis on good governance, as a cornerstone of
long-term enterprise success. We are committed to high standards of
transparency, accountability, and ethical conduct at every level of the
organisation. This is supported by a robust governance framework. We conduct
regular reviews of our governance processes, including independent risk
assessments, to ensure effective oversight.
We recognise that good governance goes beyond mere compliance. It is about
creating a positive and inclusive culture that aligns with our values and
strategic objectives. We strive to build an environment where employees feel
empowered to share their diverse perspectives and expertise. This culture not
only allows for personal growth, but also contributes to the long-term
sustainability of our business.
The Board views leadership as a key enabler of this culture and seeks to set
the tone throughout the organisation. In line with this, the Board uses a
culture dashboard to evaluate progress and impact. As our purpose and values
work for the enlarged Group is completed, the dashboard will be updated.
This year, in line with the UK Corporate Governance Code, the Board appointed
an external evaluator to review its effectiveness and performance. The overall
findings and tone of the report was positive and indicated that the Board and
its committees continued to operate effectively. The Board will work to
consider opportunities for incremental improvements during the year ahead.
BOARD COMPOSITION AND SUCCESSION
Following significant changes in 2023, the composition of the Board has
remained stable in 2024.
Sarah Gentleman, Senior Independent Director, has exceeded her nine-year
tenure on the Board. The Nomination Committee has agreed to extend her tenure
in order to ensure continuity on the Board following the combination with
IW&I. Succession planning is always a priority, and we will consider
non-executive director succession during 2025.
The Board has aligned its diversity policy for appointments with the new
targets outlined in the Listing Rules and is proud to have met these
objectives. As of the end of 2024, our Board comprises four female directors
out of nine, exceeding the FTSE 350 commitment for female Board representation
set by the FTSE Women Leaders Initiative. We also continue to meet the
requirements of the Parker Review, with at least one director from an ethnic
minority background.
LOOKING AHEAD
The integration of IW&I is progressing well. We are excited to build on
the momentum of 2024 as we operate as a unified and cohesive business.
Concluding the integration in 2025 will mark a pivotal moment in our journey.
We remain confident that it will support growth and enhance the propositions
and investment output we can deliver to our clients in 2025 and beyond.
On behalf of the Board, I would like to express our sincere gratitude to our
clients, shareholders, colleagues, and wider stakeholders for your support and
commitment during this transformative year. Your continued trust and
engagement are invaluable and will remain so, as we navigate Rathbones' next
exciting phase of growth. We look forward to achieving even greater milestones
in Rathbones' illustrious 283 year history.
CLIVE C R BANNISTER
CHAIR
GROUP CHIEF EXECUTIVE OFFICER'S REVIEW
HARNESSING OUR COMBINED STRENGTHS TO DRIVE GROWTH
2024 IN REVIEW
2024 has been a very exciting year for the Group as we began in earnest to
bring Rathbones and IW&I together as one combined business committed to
helping our clients achieve their longer-term financial goals. In an eventful
year, we attracted record gross inflows by leveraging our enlarged platform
and exceeded the 2024 synergy targets we set out for the IW&I combination.
This year heralded an improvement in investor sentiment after what was a
challenging two years for multi-asset investing. Asset values rebounded as
interest rates began to fall, and stronger economic fundamentals bedded in,
creating conditions that benefited our results. The UK Budget at the end of
October prompted a short-term increase in withdrawals of funds by existing
clients, but it also proved to be a catalyst that created a welcome number of
client investment enquiries and advisory discussions.
Throughout the year, we have continued to improve our services and investment
processes, taking advantage of the best that the Rathbones and IW&I teams
have to offer. The combination creates some significant future growth
opportunities and provides a pathway to greater innovation as ideas are shared
and acted upon. I am grateful for the efforts of all teams around the Group
who have helped us start 2025 in such a strong position.
PERFORMANCE AND FLOWS
Funds under management and administration (FUMA) managed by Rathbones Group
grew 3.7% in the year to £109.2 billion at 31 December 2024, despite the
considerable agenda of internal change being undertaken in the Group
following the IW&I combination.
Gross inflows across the combined Group were strong at £12.1 billion (2023:
£7.7 billion), representing 11.5% of opening FUMA. Gross inflows in Rathbones
discretionary and managed propositions were £6.3 billion (2023: £5.1
billion), and gross inflows in IW&I were resilient at £4.0 billion,
taking account of the considerable time spent by client facing teams to manage
an extensive client consent process.
Gross outflows of £13.5 billion (2023: £8.5 billion) were elevated by
accounts that we exited following the completion of the migration of former
Saunderson House FUMA in July and outflows linked to a limited number of
investment manager departures in the IW&I business that occurred prior to
the announcement of the combination. After both transactions, investment
manager and financial planner attrition has remained low. We also saw a
short-term impact of elevated outflows around the UK Budget as more clients
looked to redistribute wealth, crystallise capital gains or access their
pension wealth.
Flows in single strategy funds continue to reflect the challenging market
environment for active asset managers with net outflows of £0.6 billion in
the year (2023: net outflows of £0.5 billion), in spite of the delivery of
first or second quartile performance over one and five years in our two
largest funds, Rathbone Global Opportunities and Rathbone Ethical Bond.
Market and investment performance added £5.3 billion (2023: £5.1 billion) to
Group FUMA in the year, recognising that many benchmarks were difficult to
beat. The IW&I combination has presented us a unique opportunity to bring
together and strengthen our research capability and we are continuing to
improve our investment process by enhancing portfolio analysis tools and
portfolio construction resources. Further information on performance and flows
can be found in the Group Chief Financial Officer's Review.
INTEGRATION UPDATE
The combination of Rathbones and IW&I has made significant progress in
2024. The client consent process is now largely complete such that we expect
to migrate almost all of the c.55,000 IW&I clients by the end of H1. To
date, 0.3% of clients have declined to migrate to Rathbones, and we expect a
small proportion of relationships to leave the Group where we are unable to
provide a suitable proposition. We continue to place a high priority on
maintaining client service levels and look forward to welcoming clients fully
onto the Rathbones platform in the coming months. At the heart of our approach
has been a focus on maintaining service levels throughout the process.
We have delivered cost and revenue synergies well ahead of our first year £15
million target, with run-rate synergy realisation of £30.1 million at the end
of 2024. This was largely due to organisational changes and our property
consolidation programme being secured ahead of the planned timeframe.
During the year, we consolidated all offices where we had a dual presence -
Birmingham, Cheltenham, Exeter, Glasgow, Edinburgh, London, Bristol and
Liverpool - and have successfully completed the consolidation
of our property footprint that now operates in all main UK wealth centres.
Completion of the client migration in the first half of this year is the next
main milestone for synergy delivery, enabling at least 70% of the total £60
million to be realised on a cumulative run-rate basis towards the end of 2025.
We remain confident in our ability to achieve all remaining synergies by the
end of 2026. At the time of the combination, we expected the deal to be
accretive to underlying EPS in the first full year following the completion.
This has been achieved with underlying EPS of 161.6p (2023: 135.8p).
Combinations inevitably create change, and this has been well supported by our
colleagues, harnessing the considerable talent across the Group. We have
completed nearly all key leadership appointments and announced the majority
of organisational design changes necessary to establish our future operating
model, with the remainder set to complete this year. We continue to prioritise
business stability and the retention of key talent by providing clear
communication, addressing concerns, and fostering an environment where our
colleagues feel supported during this period of change.
Operationally, the focus has been on aligning systems, processes, and client
service models to ensure that we provide clients and advisors with a seamless
experience while preserving the best elements of both firms' cultures. The
enlarged Group has enhanced its investment and advice capabilities and will
look to leverage this in 2025, marking the end of a multi-year journey that
has significantly strengthened our financial planning capabilities.
I am excited about the opportunities ahead for our expanded Group as we embed
our combined infrastructure and look to build upon it.
FOCUSING ON GROWTH AND THE CLIENT/ADVISOR PROPOSITION AND EXPERIENCE
Although much of our recent focus has been on ensuring that the benefits of
the combination are realised, we have also taken some significant steps toward
improving organic growth rates.
We continue to believe that relationship-led services are the best way to
secure high quality, resilient future revenues, so alongside our pursuit of
efficiencies to optimise delivery costs and enhancements to our investment
process, we are working to:
• Strengthen our marketing and distribution capability
• Deliver more advice-led conversations whilst working flexibly to provide
investment only services to third-party advisors
• Improve client choice with services that meet their changing demands
• Leverage our extensive strategic partner relationships
• Continue to grow Rathbones Asset Management (RAM)
In September, we announced the appointment of a new Chief Client Officer role.
A key aspect of this role will be to leverage our combined marketing expertise
and strengthen our brand presence. The newly formed Client Office will ensure
that Rathbones stands out more in a competitive market, building both
digital and face-to-face lead generation, as well as improving the client
experience by working with teams across the business to orchestrate further
improvements to our already strong service reputation.
The team will also focus on key target markets within the Private Client,
Charity, and Independent Financial Advisor (IFA) sectors through more
targeted, data-driven client prospecting. This approach will involve greater
collaboration across our teams and support sustained future organic growth.
Over the past year, we have restructured our Group Distribution team under our
Chief Distribution Officer with a goal to develop a strong, client-centric
distribution strategy, that not only boosts our market presence but also
fosters enduring relationships with clients. We have implemented a cohesive
approach across the Group, establishing a channel-led, go-to-market strategy
across Wealth Management, Strategic Partnerships, Asset Management and
Charities. This segmentation will be robustly supported by dedicated sales
teams and improved sales enablement resources and advisor journeys.
We recognise that clients and advisors have many different preferences as to
how to work with us and we are responding to this by being able to offer the
mix of investment products and financial advice services that best meets their
needs. Recent transactions have created a team of 122 financial planners that
are dedicated to meeting the increasingly complex planning needs of our
clients but we also have 678 dedicated investment managers. The combination
gives us the opportunity to blend these capabilities much more effectively to
increase the number of wealth-led conversations we have with clients. We can
now allow employees to specialise in either discipline, form larger combined
teams, and benefit from training that expands their qualifications to deepen
client and advisor relationships.
We understand the necessity to adapt our current offerings in the IFA market
to address the increasing demand for high-quality service at a lower cost,
amid ongoing sector consolidation. Our multi-asset funds provide CPI targeted
solutions both directly and as part of our managed service, through investment
platforms and financial advisors, but will also support the launch of an
upgraded Managed Portfolio Service (MPS) for IFAs in 2025, subject to
regulatory approval.
We also intend to offer a competitive decumulation offering in 2025, as well
as a new fund-based Charity Authorised Investment Fund (CAIF) solution,
specifically designed for Charities. Additionally, we are seeking to establish
an office in Dublin to offer investment solutions through third-party advisors
in the EU markets, subject to regulatory approval.
Alongside our in-house financial planning team, Vision Independent Financial
Planning (Vision) continues to play an integral role in our advice
proposition, with 142 planners on the network. We value the strong
relationship with Vision and continue to leverage it as a key driver of flows.
In 2025, Vision will continue to recruit new IFAs to its network and
Rathbones will continue to dedicate specialist sales and bespoke relationship
management capability to support the network.
We continue to build referrals through our strategic partnership with Investec
Bank and have seen an encouraging amount of new business coming through this
channel as we develop this relationship. We remain excited about the prospect
of building our dedicated service team to increase business development
activity and foster new and important client relationships.
Having a respected asset manager in-house provides us with a distinct
advantage, and RAM, with £15.8 billion in FUM, continues to grow and
be highly regarded. The long-standing tenure of our fund managers has
contributed to the growth and success of RAM over the years, with seven fund
managers each having more than 18 years of experience with Rathbones. RAM
remains an important part of the Group as we look to leverage recent
investment in distribution and systems to broaden our fund range and extend
its institutional reach.
EMBRACING TECHNOLOGY
Our combination with IW&I has presented a number of opportunities to
refine how we deploy applications into Rathbones, as we invest in our
technology infrastructure. The combination of our 'best of both' chosen
technology solutions, coupled with our people, allows us to differentiate and
deliver improved client services. Development of client-facing technology in
our business has been well received by clients, with a digital satisfaction
score of 8.3/10 in the most recent Alpha FMC survey, compared to an industry
benchmark of 8.0.
In addition to launching the InvestCloud Client Lifecycle Management (CLM)
system earlier this year, we also deployed common financial planning,
intermediated distribution, and marketing software systems across
the combined Group. We will continue to launch tactical enhancements to CLM
throughout 2025.
During the second half of 2024, we migrated Rathbones custody, settlement and
investment systems into the Cloud. This was a major undertaking but has made
our core books of record and portfolio management solutions more resilient and
future proof, ready for the upcoming migration of IW&I clients onto
the platform.
In addition, we are now receiving technology services from Investec Bank via
an outsourced service agreement, enabling us to leverage improved capabilities
in a scalable delivery model. This sits alongside further development of data
and analytics capabilities, to support decision-making and drive greater
insight.
Embracing technology alongside our people will support the achievement of our
strategic goals. Technology and application development will continue to
progress in 2025 as part of our normal change and development agenda. Ongoing
investment will include the selected application of AI, robotic processing and
data management tools to improve efficiency and client service.
OUR PEOPLE
We must recognise the hard work and commitment of our colleagues during this
significant period of change and transition for the business. This year has
brought both challenges and opportunities as we have navigated a
transformative combination, requiring us to adapt to new structures, systems,
and ways of working.
After completing an extensive consultation process, we are now in a strong
position to embed new organisational designs across the business that support
both growth and efficiency. The professionalism shown by our teams in
embracing these changes and contributing to the successful integration of both
businesses has been truly remarkable.
We have made great strides in supporting the well-being of our colleagues,
enhancing our family-friendly policies, expanding diversity, equality and
inclusion (DE&I) initiatives, aligning benefits across the Group
(including offering Rathbones share schemes to IW&I colleagues as part of
their overall remuneration), and improving overall employee support.
I understand that this transition has asked a great deal of everyone, and I,
along with the entire leadership team would like to express our gratitude for
everything our colleagues have contributed during this pivotal time.
RESPONSIBLE BUSINESS
Considering our increased size following the combination, we continue to
respond to heightened expectations from our stakeholders. As a larger Group,
we reaffirm our commitment to generating long-term value, benefiting society
and actively mitigating any adverse impacts our activities may have on the
environment and our communities. In 2024, we have worked to update our
approach to responsible business and we will share our updated framework in
our 2024 reports over the coming months. The combination has enabled us to
undertake some exciting initiatives that support the delivery of our future
ambition.
RISK MANAGEMENT AND REGULATION
Our risk management framework and risk processes are well established and have
further matured during 2024, through the embedding of risk software where we
collate and analyse our risks. Our risk landscape throughout the year
reflected external economic and political factors, as well as internal
strategic changes relating to our digital transformation and the integration
with IW&I. Conflicts overseas and the election outcomes in the UK and US
have been monitored closely by our investment teams. We continue to embed our
approach towards Consumer Duty, and the principles of fairness and
transparency have underpinned our approach to the integration of IW&I.
From an internal perspective, change risk has been monitored carefully in
2024, particularly as people and process risks have come to the fore in the
latter half of the year as integration activities gathered momentum. These
risks will remain in 2025 and our focus will be unrelenting in order to
ensure that clients can continue to be reassured by our ongoing strong
oversight of controls and processes.
As we mentioned in our interim update, pension risk exposure has reduced as
a result of action taken by the pension scheme trustees to complete a full
buy-in process, thereby insuring away all future liabilities of our defined
benefit schemes.
OUTLOOK FOR 2025
Rathbones remains well-equipped to navigate the challenges associated with
industry change and the potential impacts of geopolitical instability on
investment markets. Alongside initiatives to enhance our services to clients
and improve organic growth rates, our priorities for 2025 include completing
the migration of IW&I clients and fully integrating our businesses onto
one platform.
We are making good progress towards delivering an underlying operating margin
of 30%, and notwithstanding the additional headwinds that have arisen since
we set out this target (including ongoing inflationary pressures and the
estimated additional annual cost of £7 million of National Insurance
Contributions from April 2025), we continue to work towards the delivery of
this on a run-rate basis from three years following completion of the
IW&I transaction (September 2026). Further detail on our path to
achieving this can be found in the Group Chief Financial Officer's Review.
I would like to thank all colleagues and stakeholders for their continued
commitment and support throughout what has been a transformative year. We look
forward to further building a sustainable and profitable business together in
the years to come.
PAUL STOCKTON
GROUP CHIEF EXECUTIVE OFFICER
GROUP CHIEF FINANCIAL OFFICER'S REVIEW
EMBRACING CHANGE, CREATING VALUE
2024 is the first full financial year following the combination with Investec
Wealth & Investment UK (IW&I). The increases in operating income,
profit and earnings per share that we report this year reflect both the
strength of the underlying business, the benefits of the combination and the
extent to which our delivery of the related synergies has exceeded the targets
we set for 2024.
Total synergies delivered at 31 December 2024 amount to £30.1 million on an
annualised run‑rate basis. This represents 50% of our overall synergy target
and is well ahead of the £15 million originally expected for this stage
in the integration process, reflecting the organisational and property
changes that we have been able to deliver earlier than planned. The synergies
delivered in 2024 have arisen over the course of the year, resulting in an
overall benefit to 2024 operating profit of £24.6 million.
We remain confident that we will deliver the full £60.0 million of synergies
in line with the timeframe that we committed to at the time we announced the
transaction. We remain focused on maximising our overall synergy delivery,
in addition to maintaining a high degree of cost discipline across the
Group.
The costs of delivering the integration, which are reported as non-underlying
costs, remain in line with our expectations. We remain confident that we will
complete the integration within our original timeframe and overall
cost guidance.
In addition to synergy realisation, business performance benefited from higher
levels of Funds Under Management and Administration (FUMA), which increased by
3.7% during the year to £109.2 billion on 31 December 2024 (2023: £105.3
billion).
TABLE 1. GROUP'S OVERALL PERFORMANCE
2024 2023
£m (unless stated) £m (unless stated)
Operating income 895.9 571.1
Underlying operating expenses¹ (668.3) (444.0)
Underlying profit before tax¹ 227.6 127.1
Underlying operating margin¹ 25.4% 22.3%
Profit before tax 99.6 57.6
Effective tax rate 34.2% 34.9%
Taxation (34.1) (20.1)
Profit after tax 65.5 37.5
Underlying earnings per share¹ 161.6p 135.8p
Earnings per share 63.0p 52.6p
Dividend per share² 93.0p 87.0p
Return on capital employed (ROCE) 4.8% 4.9%
Underlying return on capital employed¹ 12.0% 12.1%
1. Reconcliation between the measure stated and its closest IFRS
equivalent is shown in table 4
2. The total interim and final dividend proposed for the financial year
Our ambition is set firmly on growing our underlying operating margin. We have
made significant progress this year with our margin increasing to 25.4% for
2024 from 22.3% in2023 as we continue to realise the benefits of our
increased scale.
We have maintained a strong capital base throughout the year as we work
through the integration of IW&I and remain committed to our progressive
dividend policy. The Board is recommending a total dividend for the year of
93.0p per share (2023: 87.0p per share), an increase of 6.9%. Our policy
recognises that this year's dividend is uncovered at statutory profit level.
However, this reflects the effect of integration costs that will fall
away in future years.
Our results for 2024 include the contribution of IW&I for the full
financial year. The comparative figures for 2023 include three months of
IW&I's contribution from 1 October 2023, reflecting the timing of the
completion of the combination.
The movements in income and costs relative to the prior year therefore
largely reflect the additional nine months of IW&I's contribution
in 2024 relative to 2023.
Operating income increased by 56.9% to £895.9 million (2023: £571.1
million), of which IW&I contributed £364.5 million (2023: £87.9
million) and the legacy Rathbones Group contributed £531.4 million (2023:
£483.2 million). Investment management and asset management fees benefited
from higher levels of FUMA, which increased by 3.7% to £109.2 billion
during the year.
Interest income increased steadily over the course of the prior year as
interest rates rose. The benefit of the higher level of this income at the
end of 2023 was carried into 2024 and mostly maintained throughout the year.
Net interest income contributed £63.9 million to operating income in 2024
(2023: £51.7 million). This income relates mainly to the legacy Rathbones
Group, as IW&I does not hold banking deposits on its own balance sheet.
Interest relating to client money deposits within IW&I, which increased
during the year due to the benefit of a full year of higher interest rates, is
recognised within other income. This will be reported as net interest income
following the migration of IW&I into Rathbones Investment Management.
Commission income improved as a result of higher transaction volumes relative
to the prior year. In particular, we saw an unseasonal up-tick in volumes
around the time of the UK Autumn Budget due to a greater propensity to
crystallise capital gains ahead of the tax changes anticipated in the Budget.
Underlying operating expenses increased as a result of the inclusion of a full
year of the IW&I cost base, net of the benefit of synergies delivered
during the year. Expenditure was driven higher by the effects of inflation and
related salary increases, which averaged 3.6% and took effect from April
(Rathbones) and June (IW&I). Employee costs in 2024 also reflect a full
year of the cost of the headcount recruited during 2023. Variable remuneration
increased as a result of income growth.
Total headcount includes 101 heads (measured on a full-time equivalent basis)
at 31 December 2024 who are dedicated entirely to the IW&I integration
project and whose costs form part of the costs to achieve the integration,
which are reported as non-underlying costs. Technology costs increased as we
develop and enhance our systems across the business, including our client
service, operational and data infrastructure capabilities. A portion of the
increase is short-term as we implement outsourcing of certain services.
The 2024 FSCS levy of £4.4 million was expensed in full during the first
half of 2024. The cost for the year represents an increase of £3.8 million
relative to the prior year, inclusive of the levy relating to IW&I. The
levy in the prior year was suppressed as a result of the FSCS utilising
existing surpluses.
The underlying operating margin, which is calculated as the ratio of
underlying profit before tax to operating income, improved to 25.4% (2023:
22.3%). This increase represents a significant step towards our target of
delivering a margin in excess of 30% from September 2026, being three years
following the completion of the IW&I transaction.
The InvestCloud Client Lifecycle Management system (CLM) was launched into the
business in June 2024. Operating expenses for the year include £14.7 million
in relation to this system. Total investment during the current and previous
financial years up to the point of launch amounted to £45 million, in line
with our previous guidance.
Underlying profit before tax, which is net of the CLM costs referred to
above, was £227.6 million for the year ended 31 December 2024
(2023: £127.1million), representing an increase of 79.1%
Costs directly related to the integration of IW&I, net of £16.9 million
of credits arising on the disposal of 8 Finsbury Circus, amounted to £75.5
million during the year (2023: £36.5 million), which is in line with
our guidance.
These costs are reported within non-underlying costs, which also include
amortisation of intangible assets of £44.6 million and acquisition costs of
£7.9 million (2023: £6.8 million) relating to deferred consideration payable
for the Saunderson House acquisition.
Statutory profit before tax increased by 72.9% to £99.6 million for the year
(2023: £57.6 million), after expensing amortisation of client relationship
intangible assets of £44.6 million (2023: 25.2 million) and integration
related costs of £83.4 million (2023: £44.3 million acquisition-related and
integration costs).
The effective rate of tax reduced to 34.2% for the year (2023: 34.9%). The
prior year rate was elevated by the effect of disallowable costs relating to
the IW&I transaction. Whilst these costs were specific to the transaction
and have not recurred in the current year, the effective tax rate for 2024 has
been elevated by certain non-underlying integration costs along with the
statutory rate of 25.0% applying for the full financial year. Once the
integration of IW&I has been completed, we expect the effective tax rate
to run at an average of 2 to 3 percentage points above the statutory rate,
reflecting normal levels of disallowable costs.
The Board considers underlying and statutory measures of income, expenditure
and earnings when assessing the performance of the Group. The underlying
balances are considered to provide useful information on business performance,
rather than reviewing results on a statutory basis only. These measures are
also widely used by research analysts covering the Group.
OUTLOOK AND GUIDANCE
The Group's recurring fee income and overall financial performance remains
closely linked to the level of FUMA and therefore the direction of global
investment markets. Markets have had a positive impact on FUMA during the year
but FUMA and performance remain sensitive to future movements, including those
driven by continuing levels of uncertainty in the economic and geopolitical
environment.
The reduction in the rate of UK inflation during the year is welcome and we
remain focused on ensuring a high degree of discipline in managing our
cost base. While 2025 will see a full year of the 2024 annual salary
reviews, we expect salary inflation to be lower in 2025 at around 2%.
The lower rate of inflation has led to reductions in central bank interest
rates during the second half of 2024. These reductions have so far had a
relatively small impact on net interest income, due to the effect on interest
earned and interest paid to clients being broadly matched. Should further
reductions materialise in 2025 in line with market expectations, we expect
to see a modest reduction in our net interest margin, albeit that may be more
than offset by higher fee revenues in the event that equity prices react
positively to rate reductions materialising.
The UK government announced an increase in the rate of employers' National
Insurance Contributions (NIC) in its Autumn Budget, which will take effect
in April 2025. The changes announced will increase NIC costs by around
£7.0 million per annum from April 2025, based on current levels of
remuneration and headcount.
Headcount is expected to reduce over the course of 2025. This reduction will
principally result from synergy delivery, along with ongoing cost discipline.
We are making good progress towards delivering an underlying operating margin
of 30% from September 2026, notwithstanding the additional headwinds that
have arisen since we set out this target, which include ongoing inflationary
pressures and the estimated impact of NlCs from April 2025. Delivery of this
will be on a run-rate basis from three years following completion of the
IW&I transaction, i.e. September 2026.
This margin growth will be underpinned by a combination of:
- Modest market growth in line with inflation
- A return to organic net inflows, supported by growth in advice,
refreshed marketing and distribution capabilities and growth in our Asset
Management business
- Ongoing cost discipline, in what we expect to be a more normalised
inflationary environment
- Synergy delivery in line with guidance.
We expect the improvement in the underlying operating margin to arise mostly
during 2026, with a more modest improvement in 2025. This principally
reflects the timing of further synergy benefits, which will be weighted
towards the second half of the 2025 financial year, when the cost savings
which are linked to the migration to a single operating platform will
materialise and we work towards IW&I ceasing to run as a separate,
regulated entity. Performance in 2025 will also reflect the increase in NIC
costs and a full year of the 2024 salary reviews, which were undertaken in
the higher inflationary environment. We also expect to see a flatter seasonal
spike in transaction-based commission income in March 2025 as a result of the
additional activity that arose on client portfolios ahead of the 2024 Autumn
Budget.
We expect to see growth in advice revenues in 2025 as a result of increased
advisor capacity following completion of the Saunderson House migration and
our continuing focus on advice, along with increased demand following the
taxation changes announced in the 2024 Autumn Budget. Net interest income will
benefit from the delivery of revenue synergies in the second half of 2025
following the IW&I client migration, with net interest margins expected to
see only a modest impact from the reductions in central bank rates that are
anticipated. We will be focused on our growth agenda in 2025 to drive improved
net flows.
Delivering sustainable value to our shareholders and maintaining a disciplined
and efficient approach to managing shareholder capital is of the highest
importance to the Board. The Group continues to maintain a robust capital
base, with a surplus of capital above the regulatory minimum of £207.2
million at 31 December 2024 (prior to taking into account the proposed final
dividend for the year) which supports strategic investment, the ongoing
integration of the IW&I business and our progressive dividend policy.
The business remains highly cash generative and we expect to see a further
increase in cash generation once the integration of IW&I is complete and
we see the full benefits of the combination synergies. As such, we will review
our capital allocation policy, including an evaluation of our capacity for
surplus returns, following the migration of IW&I onto a single operating
platform later this year.
FINANCIAL PERFORMANCE
BUSINESS PERFORMANCE: FUNDS UNDER MANAGEMENT
AND ADMINISTRATION (FUMA)
Total Group FUMA increased by 3.7% during the year to reach £109.2 billion at
31 December 2024 (2023: £105.3 billion). The increase is driven predominantly
by the effect of positive market movements.
The Group continued to drive strong gross inflows across both the Wealth
Management and Asset Management segments. However, outflows remained elevated,
reflecting both the economic backdrop and specific factors. Consequently, the
Group reported net outflows of £1.4 billion for the year.
FUMA for the Wealth Management segment increased by 3.3% during the year.
Gross inflows were strong, increasing by 76.4% relative to the prior year and
reaching record levels in the final quarter of the financial year as the
business continued to drive new business flows despite IW&I investment
teams committing significant time to undertaking the client consent process.
Rathbones discretionary and managed services delivered net inflows of £1.0
billion, representing an annual growth rate of 2.0% (2023: 1.5%). This
reflects gross inflows of £6.3 billion, an increase of 23.5% relative to
2023, as the business continued to drive strong levels of new business.
In addition to new business flows, Rathbones discretionary and managed FUMA
benefited from the final migration of Saunderson House client assets into
Rathbones investment solutions. IW&I contributed £4.0 billion (2023:
£0.8 billion) of gross inflows during the year. After taking account of
elevated gross outflows, IW&I reported net outflows for the year of £1.0
billion (2023: £0.3 billion).
Gross outflows within the Wealth Management segment remained elevated
throughout the year. This reflected the continuing general economic backdrop
of higher interest rates and the increased cost of living, which has driven
existing clients to partially withdraw funds from their portfolios.
In addition, IW&I experienced expected outflows relating to Investment
Managers who left the business prior to the announcement of the combination.
Investment Manager turnover since then has remained low. The level of these
outflows reduced over the course of the year, with those in the final
quarter being the lowest level for any quarter of the year. The migration of
former Saunderson House FUMA into Rathbones investment solutions was completed
during the year. Associated outflows of £0.5 billion included £0.2 billion
of FUMA relating to clients who did not complete the consent process. Wealth
Management outflows were also somewhat elevated in the short term as a result
of some net withdrawals of funds by existing clients around the time of the
UK government's Autumn Budget.
The Asset Management segment reported net inflows of £0.6 billion (2023:
£1.5 billion) for the year, representing a rate of net growth of 4.3% (2023:
13.7%). The segment was affected by the challenging market environment that
has continued to impact the UK asset management industry, where substantial
withdrawals from UK funds has continued across the sector. Our single strategy
funds were not immune from this backdrop, but showed relative resilience with
net outflows of £0.6 billion for the year (2023: £0.5 billion outflow),
representing 8.1% of opening FUMA (2023: 8.5%). These outflows were partially
offset by investment performance. Multi-asset funds continued to deliver net
inflows, inclusive of intra-group holdings, of £1.2 billion (2023: £2.1
billion). When adjusted for intra-group holdings, net inflows amounting to
£0.2 million for the year (2023: £0.3 million), represented annual growth
of 7.7% (2023: 13.8%) net of intra-group holdings. Asset Management
FUMA increased by 14.5% for the year overall.
Table 2 presents Group FUMA by Wealth Management and Asset Management segment
with associated intra-group holdings. Wealth Management FUMA incorporates our
core bespoke discretionary portfolio and managed portfolio services. It also
includes direct sales into our range of risk-targeted multi-asset funds, which
are designed to be used as wealth management solutions for both our direct
clients and those of investment platforms and financial advisors. Asset
Management FUMA includes our focused range of specialist 'single-strategy'
funds, which are designed to act as individual holdings within investment
portfolios.
TABLE 2. SEGMENT FUMA
Year ended 31 December 2024 Wealth Management £bn Asset Management Intra-group holdings Group FUMA £bn
£bn £bn
Opening FUMA 96.1 13.8 (4.6) 105.3
Gross Inflows 9.7 4.4 (2.0) 12.1
Gross Outflows (10.7) (3.8) 1.0 (13.5)
Net Flows (1.0) 0.6 (1.0) (1.4)
Market, Investment Performance & Transfers 4.2 1.4 (0.3) 5.3
Closing FUMA 99.3 15.8 (5.9) 109.2
Table 3 presents separately the FUMA and associated movements in those
services and products which support our wealth management propositions.
TABLE 3. BREAKDOWN OF FUMA AND FLOWS BY SERVICE LEVEL
31 December 2024 Opening FUMA Gross inflows Gross outflows £bn Net Transfers SHL migrated assets Market & Closing Net growth
£bn £bn flows £bn £bn investment FUMA (flows)
£bn performance £bn %
£bn
Rathbones Investment Management 48.8 5.3 (4.5) 0.8 - 1.2 2.1 52.9 1.7%
Bespoke portfolios 45.0 4.7 (4.1) 0.6 (0.4) 0.8 1.8 47.8 1.4%
Managed via in-house funds 3.8 0.6 (0.4) 0.2 0.4 0.4 0.3 5.1 5.1%
Multi-asset funds 2.5 1.0 (0.8) 0.2 0.1 - 0.3 3.1 7.7%
Rathbones discretionary and managed 51.3 6.3 (5.3) 1.0 0.1 1.2 2.4 56.0 2.0%
Non-discretionary service 0.7 - - - - - - 0.7 (2.9)%
IW&I 42.3 4.0 (5.0) (1.0) (0.3) - 2.0 43.0 (2.5)%
Saunderson House 1.6 0.1 (0.5) (0.4) - (1.2) - - (26.8)%
Single-strategy funds 6.7 1.3 (1.9) (0.6) - - 0.7 6.8 (8.1)%
Execution only and banking 2.7 0.4 (0.8) (0.4) 0.2 - 0.2 2.7 (14.5)%
Total Group 105.3 12.1 (13.5) (1.4) - - 5.3 109.2 (1.3)%
31 December 2023 Opening FUMA - proforma basis Gross inflows £bn Gross outflows £bn Net Transfers SHL migrated assets Market & Closing Net growth
£bn flows £bn £bn investment FUMA (flows)
£bn performance £bn %
£bn
Rathbones Investment Management 44.3 4.2 (3.8) 0.4 (0.2) 2.4 1.9 48.8 0.9%
Bespoke portfolios 42.9 3.8 (3.5) 0.3 (0.9) 1.1 1.6 45.0 0.6%
Managed via in-house funds 1.4 0.4 (0.3) 0.1 0.7 1.3 0.3 3.8 10.1%
Multi-asset funds 2.2 0.9 (0.6) 0.3 - - - 2.5 13.8%
Rathbones discretionary and managed 46.5 5.1 (4.4) 0.7 (0.2) 2.4 1.9 51.3 1.5%
Non-discretionary service 0.7 0.1 (0.1) - (0.1) - 0.1 0.7 (2.9)%
IW&I1 40.8 0.8 (1.1) (0.3) (0.1) - 1.9 42.3 (0.8)%
Saunderson House 4.1 0.1 (0.5) (0.4) - (2.4) 0.3 1.6 (9.5)%
Single-strategy funds 6.5 1.3 (1.8) (0.5) - - 0.7 6.7 (8.5)%
Execution only and banking 2.4 0.3 (0.6) (0.3) 0.4 - 0.2 2.7 (10.4)%
Total Group 101.0 7.7 (8.5) (0.8) - - 5.1 105.3 (0.8)%
1. 2023 Group FUMA and flows by service level has been prepared on a
proforma basis, opening FUMA has been uplifted by £40.8 billion to include
IW&I FUMA acquired with effect from 30 September 2023
OPERATING INCOME
Operating income increased by £324.8 million in 2024 to £895.9 million,
reflecting a full year of IW&I income in addition to the factors which
have driven income growth set out below.
Recurring fee income benefited from higher average FUMA and the increasing
revenue synergies resulting from the continuing migration of former Saunderson
House FUMA into Rathbones investment management and asset management
solutions. Transaction-based commission income was driven higher as volumes
returned to expected levels during the year. In addition, there was a marked
increase in trading volumes around the UK government's Autumn Budget as
clients opted to crystallise capital gains ahead of an anticipated increase in
the rate of capital gains tax.
Advice fees progressed relative to the prior year, albeit partly subdued by
the time committed by advisors to the completion of the migration of
Saunderson House clients and assets during the year. The first reductions in
the UK base rate had only a marginal adverse impact on net interest income
relative to the benefit of the run rate this income reached at the end of 2023
continuing into 2024.
OPERATING EXPENSES
Operating expenses of £796.3 million (2023: £513.5 million) comprise the
underlying operating expenses discussed below, together with non-underlying
operating expenses.
Underlying operating expenses increased by £224.3 million to £668.3 million
(2023: £444.0 million), an increase of 50.5%, reflecting the impact of a
full year of IW&I operating expenditure, net of the benefit of realised
cost synergies relating to the IW&I combination.
Underlying staff costs increased to £464.6 million (2023: £313.6 million)
reflecting inflationary pay rises which averaged 3.6% and took effect in
April, other than for the IW&I business which retained its June salary
review date for 2024. The increase also reflects a full year of costs in
relation to 2023 recruitment. Variable remuneration increased as a result of
revenue growth.
Underlying non-staff costs increased to £203.7 million (2023: £130.4
million). Inflation drove most cost lines higher relative to the prior year.
Other factors relevant to the increase include the outsourcing of certain
technology services to Investec Group (with a related reduction in headcount
and staff costs) which was agreed under the terms of the combination with
IW&I. Transaction-based costs increased in line with trading volumes.
Legal & professional fees increased largely due to regulatory related
activities. FSCS levy costs were suppressed in the prior year as a result of
the one-off benefit of the FSCS utilising existing surpluses. Levy costs
normalised in the year, increasing by £1.8 million. In addition to this,
£2.0 million was incurred in IW&I (2023: £nil).
Underlying non-staff costs includes the investment in our InvestCloud Client
Lifecycle Management (CLM) system which was launched into the business in June
2024. Development expenditure during the year up to the point of launch
amounted to £14.7 million, bringing our total investment to £45.0 million,
in line with our previous guidance.
TABLE 4. RECONCILIATION OF UNDERLYING PERFORMANCE MEASURES TO CLOSEST
EQUIVALENT IFRS MEASURES
2024 2023
£m (unless stated) £m (unless stated)
Operating income 895.9 571.1
Underlying operating expenses (668.3) (444.0)
Underlying profit before tax(1) 227.6 127.1
Charges in relation to client relationships and goodwill (44.6) (25.2)
Acquisition-related and integration costs (83.4) (44.3)
Profit before tax 99.6 57.6
Taxation (34.1) (20.1)
Profit after tax 65.5 37.5
Operating margin 11.1% 10.1%
Underlying operating margin(2) 25.4% 22.3%
Weighted average number of shares in issue 103.7 71.3
Earnings per share (p) 63.0p 52.6p
Underlying earnings per share (p)(3) 161.6p 135.8p
Monthly average total equity 1,363.5 787.9
Underlying monthly average total equity(4) 1,401.0 798.5
ROCE(5) 4.8% 4.9%
Underlying ROCE(6) 12.0% 12.1%
1. Operating income less underlying operating expenses
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
4. Monthly average equity adjusted for underlying operating expenses
5. Profit after tax as a percentage of monthly average total equity
6. Underlying profit after tax as a percentage of underlying monthly
average total equity
ALTERNATIVE PERFORMANCE MEASURES
Alternative Performance Measures (APMs) are a financial measure of historical
or future financial performance, financial position, or cash flow, other than
a financial measure under IFRS.
Charges in relation to client relationships and goodwill (note 8)
As explained in notes 1.14 and 2.1, 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. Amortisation of £44.6 million has been
charged to the income statement (2023: £25.2 million). This represents a
significant non-cash profit and loss item which is 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 and integration costs (note 5)
Acquisition and integration-related costs are significant non-recurring costs
that arise from strategic investments and corporate transactions 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 payable to the vendors of acquired businesses that are
conditional upon their continued employment with the Group, and the
non‑recurring costs of integrating the acquired businesses with those of the
existing Group.
During 2024, £75.5 million of integration costs (2023: £36.5 million,
acquisition and integration related) have been incurred in relation to the
IW&I integration. This comprised £48.3 million of integration related
staff costs (2023: £6.2 million), and £27.2 million of integration costs
(2023: £9.0 million), which form part of the total expected costs to deliver
the integration and achieve the related synergies. Acquisition related legal
and professional costs of £21.3 million were incurred in the prior year
relating to the execution of the transaction. No acquisition-related legal and
professional costs were recognised as non-underlying costs in 2024.
As part of the process of integrating IW&I with the existing Rathbones
Group, certain leasehold properties were planned to vacate earlier than their
respective lease expiry dates. During the year ended 31 December 2023, the
useful economic lives of these properties' right-of-use assets and their
fixtures and fittings were revised to reflect those expected dates of
vacation. Consequently, in 2023, the assets' residual values were calculated
and their depreciable amounts restated. As a result of the reduced useful
economic lives of those assets, accelerated depreciation charges were
recognised from the date of the combination to the respective dates the
properties are expected to be vacated. All properties were vacated as planned
over the course of 2024. This has therefore resulted in higher depreciation
charges during the year ended 31 December 2024 than would have been the case
had the useful economic lives of the property-related assets not reduced. With
a small number of exceptions, the vacated properties have been disposed of
either via sublet, assignment or early surrender, which is favourable against
the original anticipated costs of achieving property integration. At 31
December 2024, the two remaining vacant leasehold properties have been
reviewed for impairment to determine whether their carrying amounts are
supported by their recoverable amounts, and impairment charges have been
recognised as appropriate.
As a result, the Group recognised £5.6 million in relation to accelerated
depreciation and impairment charges on property assets during the year. Other
associated costs of vacating these properties of £3.0 million have also been
recognised. These costs represent additional non-recurring costs in excess of
the normal ongoing operating costs incurred in relation to the Group's
properties and were recognised as non-underlying operating expenses and are
therefore not included within underlying operating profit. In addition to
this, a net credit to profit or loss of £4.4 million was recognised during
the year in relation to the lease assignment of 8 Finsbury Circus (see note 9
for further detail) within non-underlying operating expenses. These balances
form part of the total acquisition and integration costs of £75.5 million
referred to above.
Deferred consideration
Deferred consideration costs are 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
2, any deferred consideration that is payable to former shareholders of the
acquired business who are required to remain in employment with the Group for
a certain period must be treated as remuneration and expensed to the income
statement over the period to which the employment condition applies.
£3.3 million of deferred consideration payments (2023: £3.9 million) and
£4.6 million of integration costs (2023: £2.9 million) were charged to the
income statement during 2024 in relation to the acquisition of Saunderson
House. In 2023, £1.0 million of deferred consideration payments were charged
to the income statement in relation to the acquisition of Speirs and Jeffrey,
with no further charges recognised in 2024.
TAXATION
The corporation tax charge for 2024 was £34.1 million (2023: £20.1 million)
(see note 6). The effective tax rate reduced to 34.2% in 2024 (2023: 34.9%).
The effective tax rate reflects both an increase in the average statutory
rate for the year to 25.0% (2023: 23.5%) as a result of 2024 being the first
full financial year following the increase in the statutory rate to 25.0%,
and the impact of disallowable legal and professional costs incurred in
relation to the relocation of our London premises from Finsbury Circus to
Gresham Street.
Once the integration of IW&I has been completed, the effective tax rate is
expected to be 2 to 3 percentage points above the statutory rate as a result
of normal levels of disallowable costs.
BASIC EARNINGS PER SHARE
Basic earnings per share for the year ended 31 December 2024 were 63.0p (2023:
52.6p). The increase in the year reflects the benefit to statutory profit
after tax of the IW&I combination, with 2024 being the first full
financial year of the combined business, and the benefit of the synergies
delivered during the year.
On an underlying basis, basic earnings per share were 161.6p in 2024, compared
to 135.8p in 2023 (see note 12). The increase in the year is similarly due to
increased underlying profit after tax resulting from the IW&I combination,
partially offset by the increased number of shares in issue.
RETURN ON CAPITAL EMPLOYED
The Board monitors the underlying return on capital employed (ROCE) as a key
performance measure. For monitoring purposes, underlying ROCE is defined as
underlying profit after tax expressed as a percentage of underlying monthly
average total equity across the year.
Assessment of underlying return on capital is a key consideration for all
investment decisions, particularly in relation to acquired growth.
In 2024, underlying ROCE was 12.0% (2023: 12.1%). Underlying average total
equity increased by £602.5 million in 2024 compared to 2023, reflecting the
full year of the higher capital base that resulted from the combination. The
marginal reduction in ROCE in 2024 reflects this higher capital base that has
applied throughout the year relative to the partial delivery of the overall
synergy target during the year. Statutory ROCE was 4.8% in 2024 (2023: 4.9%).
In addition, the average statutory rate of corporation tax increased to 25.0%
in 2024 (2023: 23.5%), reducing ROCE by 0.2 percentage points.
SEGMENTAL REVIEW
The Group operates through two segments: Wealth Management and Asset
Management.
TABLE 5. RECONCILIATION OF FUMA BY SERVICE LEVELS TO SEGMENTAL PRESENTATION AS
AT 31 DECEMBER 2024
Wealth Intra-group Wealth Asset Group
Management holdings(1) Management Management FUMA
FUMA £bn FUMA FUMA £bn
(including £bn £bn
intra-group
holdings)
£bn
Rathbones Investment Management 52.9 (5.7) 47.2 5.7 52.9
Bespoke portfolios 47.8 (0.7) 47.1 0.7 47.8
Managed via in-house funds 5.1 (5.0) 0.1 5.0 5.1
Multi-asset funds - - - 3.1 3.1
Rathbones discretionary and managed 52.9 (5.7) 47.2 8.8 56.0
Non-discretionary service 0.7 - 0.7 - 0.7
IW&I 43.0 (0.2) 42.8 0.2 43.0
Saunderson House - - - - -
Single-strategy funds - - - 6.8 6.8
Execution only and banking 2.7 - 2.7 - 2.7
Total Group 99.3 (5.9) 93.4 15.8 109.2
1. Intra-group holdings represent in-house funds of the Asset Management
segment held within investment management portfolios managed by the Wealth
Management segment.
WEALTH MANAGEMENT
The results of the Wealth Management segment described below include the
trading results of Rathbones Investment Management, Rathbones Trust Company,
Vision Independent Financial Planning, Saunderson House and IW&I.
Wealth Management income is largely driven by income margins earned from FUMA.
Income margins are expressed as a basis point return, which depends on a mix
of tiered annual fee rates and commissions charged for transactions undertaken
on behalf of clients.
FUNDS UNDER MANAGEMENT AND ADMINISTRATION
Year-on-year changes in the key performance indicators for Wealth Management
are shown in table 6. Total Wealth Management FUMA including intra-group
holdings increased by 3.3% to £99.3 billion as at 31 December 2024,
predominately driven by positive market movements.
TABLE 6. WEALTH MANAGEMENT - KEY PERFORMANCE INDICATORS
2024 2023
FUMA at 31 December(1) £99.3bn £96.1bn
Rate of total net growth (net flows) in Wealth Management funds under (1.1)% 0.3%
management and administration(2)
Average net operating basis point income margin(3) 67.5 66.7
Number of Investment Management clients 114,700 114,200
Number of investment managers 678 681
1. FUMA disclosed on a gross basis (Inclusive of intra-group FUMA).
Previously this table was presented on the basis of net FUMA in the Annual
Report & Accounts
2. See table 7 (percentages calculated on unrounded figures)
3. Income margin based on fee and commission income. See table 11
TABLE 7. WEALTH MANAGEMENT - FUNDS UNDER MANAGEMENT AND ADMINISTRATION
Year ended 31 December 2024 2023
£bn
£bn
As at 1 January(1) 96.1 51.5
Inflows 9.7 46.3
- organic(2) 9.7 5.5
- acquired(3) - 40.8
Outflows and transfers (10.7) (6.1)
Market movement & investment performance 4.2 4.4
Total Group 99.3 96.1
Rate of total net growth(4) (1.1)% 0.3%
1. Current and prior year FUMA disclosed on a gross basis (Inclusive of
intra-group FUMA). Previously this table was presented on the basis of net
FUMA in the Annual Report & Accounts
2. Value at the date of transfer in/(out)
3. £40.8 billion IW&I FUMA acquired with effect from 30 September 2023
4. 2023 net new business and acquired inflows as a percentage of opening
funds under management and administration excludes SHL and IW&I
post-acquisition flows
Table 7 reconciles the movement in FUMA during the year. Strong organic gross
inflows for the year of £9.7 billion, 10.1% of opening FUMA, demonstrate the
continued ability to generate new business. This was achieved across the
Wealth Management segment despite IW&I Investment Managers dedicating
significant time to integration related activities, including the client
consent process, during the year.
Table 8 (overleaf) provides an analysis of FUMA and new business by channel
and service level. Bespoke portfolios, whilst delivering strong gross inflows,
continued to experience elevated outflows, predominantly reflecting the
ongoing economic environment of higher interest rates and a higher cost of
living, resulting in partial withdrawals from portfolios. There was also
increased activity around the time of the UK Autumn Budget. IW&I outflows
include those linked to Investment Managers who left the business prior to
the announcement of the combination. Investment Manager turnover has since
remained low. These outflows have continued to decline over the course of the
year, with the final quarter of 2024 seeing the lowest level of such outflows
in the year.
Bespoke portfolios within the advisor linked channel saw net inflows of £0.6
billion (2023: £0.4 billion). Clients utilising the services of Rathbones
Financial Planning or Saunderson House continued to see growth during 2024
with combined net flows of £0.3 billion. Within the IW&I line there was
£0.2 billion of net flows in respect of clients using an IW&I Financial
Planner. The expansion of the IFA network within Vision Independent Financial
Planning to 142 IFAs also benefited the Group, with gross inflows of £0.4
billion (2023: £0.3 billion). At the year-end, advisor firms of the Vision
Independent Financial Planning network were advising on client assets of £4.0
billion (2023: £3.3 billion).
The migration of former Saunderson House FUMA was completed on 31 July 2024.
Gross outflows for the year include £245 million relating to clients who did
not complete the migration consent process. £4.4 billion of former Saunderson
House FUMA is included within Group FUMA at 31 December 2024.
Switches into execution-only services largely reflect the transfer of clients'
funds into probate accounts following their death (£0.2 billion).
TABLE 8. WEALTH MANAGEMENT - NEW BUSINESS BY CHANNEL
2024 Gross opening FUMA Gross Gross Net flows Transfers SHL migrated Market 2024 Gross closing FUMA 2024 Intra-group 2024 2023
£bn inflows outflows £bn £bn FUMA movement & performance £bn holdings1 Net closing Net FUMA
£bn £bn £bn £bn £bn FUMA £bn
£bn
Bespoke portfolios 33.0 3.1 (3.0) 0.1 (0.6) - 1.5 34.0 - - -
Managed via in-house funds 1.4 0.2 (0.2) - 0.4 - 0.1 1.9 - - -
Total direct 34.4 3.3 (3.2) 0.1 (0.2) - 1.6 35.9 - - -
Bespoke portfolios 12.0 1.6 (1.0) 0.6 0.2 0.9 0.1 13.8 - - -
Managed via in-house funds 2.4 0.3 (0.2) 0.1 0.1 0.4 0.2 3.2 - - -
Total financial advisor linked 14.4 1.9 (1.2) 0.7 0.3 1.3 0.3 17.0 - - -
Total discretionary and managed 48.8 5.2 (4.4) 0.8 0.1 1.3 1.9 52.9 (5.7) 47.2 44.5
Execution only and banking 2.7 0.4 (0.8) (0.4) 0.2 - 0.2 2.7 - 2.7 2.7
Non-discretionary service 0.7 - - - - - - 0.7 - 0.7 0.7
Saunderson House 1.6 0.1 (0.5) (0.4) - (1.3) 0.1 - - - 1.3
IW&I 42.3 4.0 (5.0) (1.0) (0.3) - 2.0 43.0 (0.2) 42.8 42.3
Total Wealth Management 96.1 9.7 (10.7) (1.0) - - 4.2 99.3 (5.9) 93.4 91.5
1. Holdings of the Group's in-house funds in Investment Management client
portfolios and in-house funds for which the management of the assets is
undertaken by Investment Management teams; the corresponding FUMA is reported
within Funds
FINANCIAL PERFORMANCE
Underlying profit before tax for the Wealth Management segment increased by
91.8% in the year to £202.2 million. This represents an underlying operating
margin of 24.8% (2023: 20.9%. This result reflects a full year of the
contribution of the IW&I business (2023 included one quarter of
contribution) and is net of the investment in the InvestCloud Client Lifecycle
Management (CLM) system, which forms a key part of our digital strategy.
Operating expenses for the year include £14.7 million in relation to the CLM
system, forming part of our overall multi-year spend on this project of £45
million which we have communicated previously.
Net investment management fee income increased by £225.0 million (64.3%) in
2024. This increase reflects higher levels of FUMA during the year, driven by
market growth, and the benefit of the migration of former Saunderson House
FUMA into Rathbones investment solutions.
Net commission income increased by 71.3% to £91.8 million (2023: £53.6
million). Transaction volumes returned to normal levels during the year and
also saw specific increases in activity around the time of the UK Government's
budget in October as clients sought to crystallise capital gains ahead of
expected increases in the rate of capital gains tax.
TABLE 9. WEALTH MANAGEMENT - FINANCIAL PERFORMANCE
2024 2023
£m £m
Net investment management fee income(1) 575.1 350.1
Net commission income 91.8 53.6
Net interest income 62.3 49.9
Fees from advisory services(2) 54.5 40.5
Operating income 814.2 503.9
Underlying operating expenses(3 4) (612.0) (398.5)
Underlying profit before tax 202.2 105.4
Underlying operating margin(5) 24.8% 20.9%
1. Net investment management fee income is stated after deducting fees and
commission expenses paid to introducers
2. Fees from advisory services includes income from trust, tax and
financial planning services (including Vision and Saunderson House)
3. See table 12
4. Included within underlying operating expenses are £14.7 million of costs
relating to the Group's digital strategy
5. Underlying profit before tax as a percentage of operating income.
Excluding £14.7 million of expenditure on our digital strategy in the year,
the underlying operating margin was 26.6%
Net interest income increased steadily over the course of the prior year as
interest rates rose. The benefit of the higher level of this income at the
end of 2023 was carried into 2024 and mostly maintained throughout the year.
The overall level of this income illustrates the continuing benefit of our
banking permissions.
Fees from advisory services increased by 34.6% to £54.5 million due to
continued growth in the advice proposition. Other income increased by 211.2%
to £30.5 million, driven by the inclusion of £26.5 million net interest
income generated from client money deposits within IW&I.
Underlying operating expenses were £612.0 million for the year (see table
12), an increase of 53.6% on the prior year. In addition to 2024 including a
full year of IW&I costs, costs were driven higher by the effect of
inflationary salary increases and recruitment in the prior year, in respect of
which a full year has been incurred in 2024. Variable staff costs increased
as a result of higher income levels.
TABLE 10. WEALTH MANAGEMENT - AVERAGE FUNDS UNDER MANAGEMENT AND
ADMINISTRATION (excluding IW&I)
2024 2023
£bn £bn
Valuation dates for billing
- 5 April 50.2 45.7
- 30 June 50.5 45.4
- 30 September 50.5 45.4
- 31 December 50.7 48.0
Quarterly average(1) 50.5 46.1
Average MSCI level(2) 1,894 1,721
1. Quarterly average FUMA excluding Saunderson House and IW&I
2. MSCI PIMFA Balanced Index is considered to be a reasonable external
comparison to Rathbones'portfolios. Based on the corresponding valuation dates
for billing
2024 2023
IW&I AVERAGE FUNDS UNDER MANAGEMENT AND ADMINISTRATION £bn £bn
Valuation dates for billing
- 28 Feb 41.9 -
- 31 May 42.9 -
- 31 August 43.2 -
- 30 November(1) 43.6 40.7
Quarterly average 42.9 -
Average MSCI level(2) 1,887 1,700
1. IW&I billing aligned to Rathbones quarterly billing cycle from
December 2024
2. MSCI PIMFA Balanced Index is considered to be a reasonable external
comparison to IW&I's portfolios. Based on the corresponding valuation
dates for billing
TABLE 11. WEALTH MANAGEMENT - REVENUE MARGIN
2024 2023
bps bps
Basis point return(1) from:
- fee income 58.5 57.9
- commission 9.0 8.8
Basis point return on FUMA 67.5 66.7
1. Fee or commission income, divided by the average gross funds under
management and administration on the quarterly billing dates (see table 10)
The method for calculating basis point return on funds under management and
administration for the Wealth Management segment has been revised in order to
reflect the gross FUMA of the segment from which the segment generates
income. This approach aligns with the approach applied to the Asset Management
segment. The calculation was previously based on FUMA net of Group's
eliminations.
TABLE 12. WEALTH MANAGEMENT - UNDERLYING OPERATING EXPENSES
2024 2023
£m £m
Staff costs(1)
- fixed 233.9 147.2
- variable 129.5 78.2
Total staff costs 363.4 225.4
Other operating expenses 248.6 173.1
Underlying operating expenses 612.0 398.5
Underlying cost/income ratio(2) 75.2% 79.1%
1. Represents the costs of investment managers and teams directly involved
in client-facing activities
2. Underlying operating expenses as a percentage of operating income (see
table 9)
ASSET MANAGEMENT
The financial performance of the Asset Management segment is principally
driven by the value of funds under management (FUM). Year-on-year changes in
the key performance indicators for Asset Management are shown in table 13.
FUNDS UNDER MANAGEMENT
Following the challenging trading conditions in 2023, 2024 continued to be a
tough environment for the industry. The year saw significant net redemptions
across the asset management industry (Investment Association (IA) data,
December 2024). Industry-wide funds under management grew to £1.5 trillion at
the end of December 2024 driven by market returns (2023: £1.4 trillion).
Gross inflows in Rathbones Asset Management fell 4% from £4.6 billion to
£4.4 billion in 2024, as Saunderson House assets migrating into Rathbones
funds, which made a significant contribution to 2023 inflows and was
materially completed in the first half of 2024, delivered a smaller in-year
boost than in 2023. Underlying gross inflows, excluding Saunderson House
migration, were therefore stronger than 2023. Continued investor concerns over
inflation, interest rates and equity market valuations have driven cautious
investor sentiment. Despite these macroeconomic impacts on investor
confidence, our range of funds, well balanced between multi-asset and
single-strategy, has helped serve our clients' changing needs and provided
some shelter from the market volatility for our overall FUM. The diverse
nature of our multi-asset investment mix, and its obvious continuing appeal to
clients in these challenging times, has ensured that positive net flows have
continued into these funds, partially offsetting the outflows experienced in
the single-strategy funds.
Consistent with the Wealth Management segment, we have seen continued higher
levels of investors withdrawing funds in response to the wider economic
environment. These factors have led to a continuation of the elevated gross
outflows experienced in 2023. Strong gross inflows, leading to positive net
flows in Multi-asset funds and favourable investment performance offsetting
net outflows in single strategy funds, ensured total FUM grew to a record high
of £15.8 billion at the end of 2024, an increase of 14% during the year (see
table 15).
TABLE 13. ASSET MANAGEMENT - KEY PERFORMANCE INDICATORS
2024 2023
FUM at 31 December(1) £15.8bn £13.8bn
Rate of net growth in Asset Management FUM(1) 4.3% 13.7%
Underlying profit before tax(2) £25.4m £21.7m
1. See table 15
2. See table 17
TABLE 14. ASSET MANAGEMENT - FUNDS UNDER MANAGEMENT BY PRODUCT
2024 2023
£bn £bn
Rathbone Multi-Asset Portfolios 6.9 5.3
Rathbone Global Opportunities Fund 4.1 3.6
Rathbone Ethical Bond Fund 2.0 2.2
Offshore funds 0.7 0.6
Rathbone Income Fund 0.6 0.7
Greenbank Multi-Asset Portfolios 0.5 0.4
Rathbone Active Income Fund for Charities 0.2 0.2
Rathbone Core Investment Fund for Charities 0.2 0.2
Rathbone High Quality Bond Fund 0.1 0.2
Rathbone Greenbank Global Sustainability Fund 0.1 0.1
Rathbone Strategic Bond Fund 0.1 0.1
Other funds 0.3 0.2
15.8 13.8
Volatility managed funds (multi-asset portfolios) dropped, according to
December IA data, from being the number one selling sector class but continued
to draw strong inflows to December 2024, with £4.0 billion of net sales
across the sector, and this trend was mirrored in Rathbones, which accounted
for approximately 30.0% of the industry total, with net sales totalling £1.2
billion in the year.
The Group's largest single-strategy fund, Rathbone Global Opportunities Fund,
saw a net £0.2 billion outflow over the course of the year, an improvement
of 33.0% compared to 2023 outflows (£0.3 billion), as consumer confidence in
global equity markets begins to bounce back. This was underscored by a strong
market performance for the fund, driving an overall growth in the year
of £0.5 billion.
The Global Opportunities fund maintained its excellent industry long-term
performance record in the year by maintaining a first quartile position for
performance measured over five years, which is a key factor in investors'
decision-making.
Rathbone Ethical Bond Fund had net redemptions of £0.2 billion in the year,
at a similar level to 2023 (2023: £0.2 billion), as some consumer demand
shifted towards funds with passive management styles.
During the year, the total number of investment professionals running the
funds increased by three to 26 at 31 December 2024 (2023: 23).
TABLE 15. ASSET MANAGEMENT - FUNDS UNDER MANAGEMENT
Year ended 31 December 2024 2023
£bn £bn
As at 1 January 13.8 11.0
Net inflows 0.6 1.5
- inflows(1) 4.4 4.6
- outflows(1) (3.8) (3.1)
Market movement & investment performance(3) 1.4 1.3
As at 31 December 15.8 13.8
Rate of net growth(4) 4.3% 13.7%
1. Valued at the date of transfer in or out
2. Bespoke funds transferred out during 2023 post the switch of Authorised
Corporate Director ('ACD') from Rathbones Asset Management Limited to Evelyn
Partners, an independent ACD
3. Impact of market movements and relative performance
4. Net inflows as a percentage of opening FUM
TABLE 16. ASSET MANAGEMENT - PERFORMANCE(1, 2, 4)
2024/(2023) Quartile ranking³ over 1 year 3 years 5 years
Rathbone Ethical Bond Fund 1 (1) 2 (2) 2 (1)
Rathbone Global Opportunities Fund 2 (1) 3 (3) 1 (1)
Rathbone Income Fund 4 (3) 3 (2) 3 (2)
Rathbone Strategic Bond Fund 2 (1) 3 (3) 3 (3)
Rathbone UK Opportunities Fund 3 (1) 4 (4) 4 (4)
1. Quartile ranking data is sourced from FE Trustnet
2. Excludes multi-asset funds (for which quartile rankings are prohibited
by the Investment Association (IA)), High Quality Bond Fund, which has no
relevant peer group against which to measure quartile performance,
non-publicly marketed funds and segregated mandates
3. Ranking of institutional share classes at 31 December 2024 and 2023
against other funds in the same IA sector, based on total return performance,
net of fees (consistent with investment performance information reported in
the funds' monthly factsheets)
4. Funds included in the above table account for 43% of the total FUM of the
fund's business
FINANCIAL PERFORMANCE
Income of the Asset Management segment is primarily derived from annual
management charges, which are calculated on a daily basis on the value of FUM
of each fund, net of rebates payable to intermediaries.
Net annual management charges increased to £79.4 million in 2024, reflecting
the rise in average FUM. Net annual management charges as a percentage of
average FUM fell by 0.7 bps to 53.2 bps (2023: 53.9 bps), as the multi-asset
funds, which have a lower annual management charge than single strategy funds,
continued to grow their proportion of total funds under management.
Underlying operating expenses detailed in table 18 increased by £10.8 million
to £56.3 million (2023: £45.5 million). Fixed staff costs of £7.9 million
for the year ended 31 December 2024 were £0.8 million higher than 2023. This
reflects general inflationary rises as well as the impacts of staffing
changes in the period.
Variable staff costs of £20.5 million were 53.0% higher than 2023. These
costs relate to deferred awards which are spread over multiple years; the
current year cost does not therefore solely reflect performance in the current
year.
Other operating expenses have increased by 11.6% to £27.9 million in 2024. A
large part of this cost increase, apart from the inflationary indexing on
third-party supplier contracts, relates to the direct impacts on variable
costs of the growth in revenues and scaling of the business. For example,
administration costs which are directly tied to FUM increased by £0.7 million
in the year to £6.8 million. We continue to make enhancements to our Charles
River Investment Management Solution, which provides a strong platform from
which we can serve our clients and further grow the business. This
expenditure forms part of our ongoing technology development and change
process.
TABLE 17. ASSET MANAGEMENT - FINANCIAL PERFORMANCE
2024 2023
£m £m
Net annual management charges 79.4 64.7
Interest and other income 2.3 2.5
Operating income 81.7 67.2
Underlying operating expenses(1) (56.3) (45.5)
Underlying profit before tax 25.4 21.7
Operating % margin(2) 31.1% 32.3%
1. See table 18
2. Underlying profit before tax divided by operating income
TABLE 18. ASSET MANAGEMENT - UNDERLYING OPERATING EXPENSES
2024 2023
£m £m
Staff costs
- Fixed 7.9 7.1
- Variable 20.5 13.4
Total staff costs 28.4 20.5
Other operating expenses 27.9 25.0
Underlying operating expenses 56.3 45.5
Underlying cost/income ratio(1) 68.9% 67.7%
1. Underlying operating expenses as a percentage of operating income (see
table 17)
FINANCIAL POSITION
SUMMARY OF FINANCIAL POSITIONS
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 and Pillar 2
requirements.
TABLE 19. GROUP'S FINANCIAL POSITION
2024 2023
£m £m
(unless stated) (unless stated)
Own funds1
- Common Equity Tier 1 ratio(2) 19.0% 17.8%
- Total own funds ratio(3) 20.6% 19.4%
- Total retained earnings 279.8 263.7
- Tier 2 subordinated loan notes(4) 39.9 39.9
- Total risk exposure amount 2,521.9 2,425.6
- Leverage ratio(5) 21.1% 18.7%
Other resources:
- Total assets 4,290.1 4,224.4
- Treasury assets(6) 2,737.4 2,601.0
- Investment Management loan book(7) 76.0 101.7
- Intangible assets from acquired growth(8) 468.5 502.7
- Tangible assets and software(9) 62.5 30.9
Liabilities:
- Due to customers(10) 2,352.1 2,253.3
- Net defined benefit pension asset 0.5 7.0
1. Stated inclusive of the retained profit for the year ended 31
December 2024 which became verified profit on 25 February 2025, but prior to
taking into account the proposed final dividend relating to 2024.
2. Common Equity Tier 1 capital as a proportion of total risk exposure
amount
3. Total own funds (see table 20) as a proportion of total risk exposure
amount
4. Represents the carrying value of the Tier 2 loan notes
5. Tier 1 capital as a percentage of total assets, excluding intangible
assets, plus certain off-balance-sheet exposures
6. Balances with central banks, loans and advances to banks and investment
securities
7. See note 16 to the financial statements
8. Net book value of acquired client relationships and goodwill (note 8)
9. Net book value of property, plant and equipment and computer software
(note 8)
10. Total amounts of cash in client portfolios held by Rathbones Investment
Management as a bank
The Group's Pillar 3 disclosures are published annually on our website
(rathbones.com/investor-relations/results-and-presentations) and provide
further details about regulatory capital resources and requirements. The
Group's key financial positions are set out in table 19.
The Group's CET1 and total capital ratios increased year on year despite a
higher Pillar 1 requirement (see table 21). The larger requirement was
countered by the increased own funds resources (see table 20) which benefited
from a reduction in the deduction attributable to the defined benefit pension
schemes following the completion of the buy-in during 2024.
The leverage ratio was 21.1% at 31 December 2024, up from 18.7% at 31 December
2023. The leverage ratio represents our Tier 1 capital (own funds) as a
percentage of the Group's total assets (i.e the 'exposure measure'), excluding
central bank exposure and intangible assets. Whilst total assets and Tier 1
capital increased in the year due to the IW&I combination, assets excluded
from the exposure measure (central bank exposure and regulatory deductions)
represented a lower proportion of the balance sheet. This resulted in an
uplift to the leverage ratio.
At 31 December 2024, neither Rathbones Investment Management Limited nor the
Rathbones Group were subject to a minimum leverage ratio requirement.
CAPITAL MANAGEMENT
The Group continues to maintain a robust capital base, with a surplus of
capital above the regulatory minimum of £207.2 million at 31 December 2024
(including retained profit for the year ended 31 December 2024 which became
verified profit on 25 February 2025 but prior to reflecting the proposed final
dividend relating to 2024) which supports strategic investment, the ongoing
integration of the IW&I business and our progressive dividend policy.
As set out in the outlook and guidance section above, we will review our
capital allocation policy, including an evaluation of our capacity for surplus
returns, following the migration of IW&I onto a single operating platform
later this year.
CAPITAL RESOURCES
31 December 2024, the Group's regulatory own funds (including retained profit
for the year ended 31 December 2024 which became verified profit on 25
February 2025) were £520.2 million (2023: £471.4million). This figure is
prior to taking into account the proposed final dividend relating to 2024. Own
funds consisted of both Common Equity Tier 1 and Tier 2 capital (see table
20).
TABLE 20. GROUP'S REGULATORY OWN FUNDS1
2024 2023
£m £m
Share capital and share premium 323.3 317.7
Reserves 1,104.2 1,088.1
Less:
Own shares (68.1) (55.6)
Intangible assets(2) (878.7) (911.8)
Retirement benefit asset(3) (0.5) (7.0)
Common Equity Tier 1 own funds 480.2 431.4
Tier 2 own funds 40.0 40.0
Total own funds 520.2 471.4
1. Net book value of goodwill, client relationship intangible assets and
software is deducted directly from own funds, less any related deferred tax
2. The retirement benefit asset is deducted directly from own funds
The Tier 2 eligible own funds equate to £40.0 million of ten-year
subordinated loan notes, which were issued in October 2021 and have a carrying
value of £39.9 million. The notes introduced a small amount of gearing into
our balance sheet as a way of financing future growth in a cost-effective and
capital-efficient manner. They are repayable in October 2031, with a call
option for the issuer annually from 2026. Interest is payable at a fixed rate
of 5.6% per annum until the first option call date, and at a rate of 4.9% over
Compound Daily SONIA thereafter.
When taking the capital requirement into account, the resulting capital
surplus at the end of 2024 of £207.2 million represents an increase of £72.7
million relative to the surplus of £134.5 million as at 31 December 2023.
CAPITAL REQUIREMENT
The Group's own funds requirement (see table 21) is the combined total of both
the Group's Pillar 1 and Pillar 2 requirement. The Pillar 2 requirement
consists of both the Pillar 2A, set by the PRA, and the combined regulatory
buffer requirement.
TABLE 21. GROUP'S OWN FUNDS REQUIREMENTS
2024 2023
£m £m
Credit risk requirement 75.2 72.3
Market risk requirement - -
Operational risk requirement 126.6 121.7
Pillar 1 own funds requirement 201.8 194.0
Pillar 2A own funds requirement 0.6 39.4
Total Capital Requirement (TCR) 202.4 233.4
Combined buffer:
Capital Conservation Buffer (CCB) 63.0 60.6
Countercyclical Capital Buffer (CCyB) 47.6 42.9
Total Capital Requirement (TCR) and Combined buffer 313.0 336.9
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.
The combined exposure amount equates to the minimum requirement for the amount
of capital the Group must hold.
The increase in credit risk to £75.2 million in 2024 was due to a revised
allocation of the Group's treasury assets along with the consequences of
including IW&I exposures.
At 31 December 2024, the Group's total risk exposure amount was £2,521.9
million (2023: £2,425.6 million). The increase was driven principally by the
inclusion of IW&I exposures and following increased investment in treasury
assets.
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 overleaf:
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 relative to other overseas jurisdictions.
Further to the completion of the buy-in of the defined benefit pension scheme
in 2024, the Pillar 2A risk attributable to the scheme was reviewed by the
PRA as part of its supervisory review process and reduced to reflect the
transfer of risk. This is reflected in the decreased requirement set out in
table 21.
COMBINED BUFFER REQUIREMENT
The Group is also required to maintain two regulatory capital buffers, both of
which must be met with CET1 capital.
The capital conservation buffer (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 31 December 2024.
The countercyclical capital buffer (CCyB) reflects the credit conditions and
overall health of the financial system in a particular jurisdiction. The firm
specific CCyB reflects the weighted average of rates for relevant credit
exposures. For relevant 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 and set by their respective prudential policy
makers.
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 1.9% as at 31 December 2024.
CAPITAL AND LIQUIDITY MONITORING
As required under PRA rules, we perform an Internal Capital Adequacy
Assessment Process (ICAAP) and Internal Liquidity Adequacy Assessment Process
(ILAAP) annually for the consolidated Group. Both processes include performing
a range of stress tests to determine the appropriate level of regulatory
capital and liquidity that the Group should hold above the regulatory minimum.
In addition, we monitor a wide range of capital and liquidity ratio statistics
on a daily and monthly basis. Surplus capital levels are forecast monthly,
taking account of anticipated dividend and investment requirements, to ensure
that appropriate buffers are maintained. Investment of proprietary funds is
controlled by our Group treasury department.
We routinely horizon scan across the regulatory landscape to ensure we
maintain our compliance with future changes in prudential requirements. Our
preparations for the incoming Basel 3.1 regime and the accompanying Small
Domestic Deposit Takers (SDDT) regime are progressing and are a key focus for
the Group.
TOTAL ASSETS
Total assets at 31 December 2024 were £4.3 billion (2023: £4.2 billion), of
which £2.4 billion (2023: £2.3 billion) represents the cash element of
client portfolios that is held as a banking deposit.
RIM TREASURY ASSETS
As a licensed deposit taker, Rathbones Investment Management Limited holds the
Group's surplus liquidity on its balance sheet together with clients' cash.
Cash in client portfolios held on a banking basis of £2.4 billion (2023:
£2.3 billion) represented 3.2% of total Investment Management funds under
management and administration at 31 December 2024, compared to 4.7% at the end
of 2023. Cash held in client money accounts was £27.6 million (2023: £8.4
million), this increase is due to a higher proportion of client settlements
transactions outstanding in the market over year end. These balances are held
off balance sheet in accordance with Client Money Rules of the FCA.
The value of treasury assets held with the Bank of England increased to £1.2
billion (2023: £1.0 billion), as did investment in marketable securities
which increased in accordance with our treasury policy and risk appetite.
The Group treasury department of Rathbones Investment Management, reporting
through the banking committee to the Board, operates in accordance with
procedures set out in a Board-approved treasury manual and monitors exposure
to market, credit and liquidity risk as described in note 11 to the financial
statements. It invests in certain securities issued by a diversified range
of highly-rated counterparties. These counterparties must be single 'A-'
rated or higher by Fitch at the time of investment and are regularly reviewed
by the banking committee.
IW&I TREASURY ASSETS
The manner in which Investec Wealth & Investment Limited (a wholly owned
subsidiary of Rathbones Group Plc) holds its surplus client money is governed
by the CASS rules. In this regard these monies are off-balance sheet and held
in trust on behalf of clients.
The IW&I Cash & Credit Management Committee (CCMC) is mandated by the
Operations Committee to consider, approve, and keep under review, the
suitability of financial institutions for the placement of firm's and clients'
cash deposits in accordance with the CASS rules on client money and assets.
Approved institutions are subject to the IW&I Credit Policy and annual due
diligence which is undertaken in accordance with the CASS rules. Total Client
Money held was £1.3 billion as at 31 December 2024 (2023: £1.3 billion)
representing 3.0% of Investment Management funds under management at 31
December 2024 compared to 3.1% at the end of 2023.
Investec Wealth & Investment Limited also hold Firm's money, which is on
balance sheet, also subject to the IW&I Firm's Credit Policy Statement
and overseen by the CCMC. Total Firms Money held was £155.6 million as at the
31 December 2024 (2023: £161.9 million).
The treasury department of Investec Wealth & Investment Limited is
responsible for the cash management of both the Client and Firm's money,
reporting to the CCMC and operating in accordance with the Treasury Mandate.
The treasury department monitors diversification and liquidity on a daily
basis. Approved Institutions, other than Group companies, must have a minimum
of S&P Short Term rating of A-2, a S&P Long Term Rating of BBB+ and
are reviewed quarterly by the CCMC.
IW&I CLIENT MIGRATION
On migration, IW&I client deposits held on a CASS basis and off-balance
sheet will transfer to RIM. These deposits will be held on a banking basis
on-balance sheet and managed by the Group treasury department and in line with
existing Board-approved limits, as set out in the treasury manual.
LOANS TO CLIENTS
Loans are provided as a service to Wealth Management clients who have short to
medium term cash requirements. Such loans are normally made on a fully secured
basis against portfolios held in our nominee, with a requirement that the
value of the loan is covered two times by the value of the secured portfolio.
Loans are usually advanced for five years. In addition, charges may be taken
on property held by the client to meet security cover requirements.
Our ability to provide such loans is a valuable additional service to clients
who require short to medium term finance, typically for bridging finance when
buying and selling their homes.
Loans advanced to clients decreased to £76.0 million at end of 2024 (2023:
£101.7 million). As borrowing costs increased, we saw lower demand for new
loans as clients looked to reduce outstanding debt and finance their cash
requirements from other means, including drawing down from investment
portfolios, leading to higher outflows of funds under management
and administration.
INTANGIBLE ASSETS
Intangible assets arise principally from business combinations and are
categorised as goodwill and client relationships. Intangible assets reported
on the balance sheet also include purchased and developed software.
At 31 December 2024, the total carrying value of goodwill and client
relationship intangible assets was £973.4 million (2023: £1,010.5 million).
During the year, client relationship intangible assets of £11.6 million were
capitalised (2023: £352.9 million). A total of £2.4 million of client
relationship intangible assets were disposed of in the year
Client relationship intangible assets are amortised over the estimated life of
the client relationship, which is generally a period between 10 and 15 years.
The total amortisation charge for client relationships in 2024, including the
impact of any lost relationships, was £42.2 million (2023: £22.4 million),
the increase in the year is predominately due to a full year of amortisation
for the IW&I client relationship intangible asset.
CAPITAL EXPENDITURE
Capital expenditure during 2024 amounted to £48.7 million (2023: £4.5
million).
The increase in capital expenditure is driven by property spend, which has
increased by £44.0 million year on year due to implementation of the property
strategy for the enlarged Group as a result of the IW&I combination.
DEFINED BENEFIT PENSION SCHEMES
We operate two defined benefit pension schemes. With effect from 30 June 2017,
we closed both schemes, ceasing all future benefit accrual and breaking the
link to salary.
At 31 December 2024 the combined schemes' liabilities, measured on an
accounting basis, had decreased to £87.9 million, down 13.1% from £101.1
million at the end of 2023. This decrease primarily reflected an increase in
discount rates at the end of the year.
A bulk annuity policy buy-in of the of the Group's retirement benefits was
completed during the year for both schemes, fully securing all of their
liabilities. The buy-in was funded by the assets of the schemes, together
with a contribution of £3.7 million from the Group. An asset for the bulk
annuity policy was subsequently recognised at a fair value equivalent to the
liabilities secured. The reported position of the schemes as at 31 December
2024 was a surplus of £0.5 million (2023: surplus of £7.0 million) with the
decrease predominantly due to the cost of the bulk annuity policy being
greater than the balance sheet liability of the benefits secured.
LIQUIDITY AND CASH FLOW
As a bank, we are subject to the PRA's ILAAP regime, which requires us to hold
a suitable liquid assets buffer to ensure that short-term liquidity
requirements can be met under certain stressed scenarios. Liquidity risks are
actively managed on a daily basis and depend on operational and investment
transaction activity.
Cash and balances at central banks amounted to £1.2 billion at 31 December
2024 (2023: £1.0 billion). We continue to hold a substantial portion of the
Group's overall liquidity with central banks. We continue to hold a
substantial portion of the Group's overall liquidity with central banks. The
increase during the year is in line with the growth in client deposits.
Cash and cash equivalents, as defined by accounting standards, includes cash,
money market funds and banking deposits, which had an original maturity of
less than three months (see note 11 to the financial statements).
Consequently, cash flows, as reported in the financial statements, include the
impact of capital flows in treasury assets.
Net cash inflows from operating activities in the year largely reflect a
£90.2 million increase in banking client deposits (2023: £251.5 million
decrease) and a £147.6 million increase in interest received (2023: £111.9
million). Loans and advances to banks and customers decreased by £21.8
million in the year, (2023: £87.4 million) due to the repayment of portfolio
lending which is attributed in part to the higher cost of debt.
TABLE 22. EXTRACTS FROM THE CONSOLIDATED STATEMENT OF CASH FLOWS
2024 2023
£m £m
Cash and cash equivalents at the end of the year 1,459.2 1,302.9
Net cash inflows from operating activities 293.6 (89.4)
Net change in cash and cash equivalents 156.3 (269.8)
Cash used in investing activities included a net inflow of £18.6 million from
the purchase of certificates of deposit (2023: net outflow of £241.8
million), as we maintained our proportion of treasury assets held in
marketable instruments for the prior year. All investment decisions were made
under the existing low risk appetite framework set by the RIM Banking
Committee. Included within cash used in investing activities is cash of
£185.5 million acquired from the acquisition of IW&I.
The other significant non-operating cash flows during the year were as
follows:
- outflows relating to the payment of dividends of
£56.9 million (2023: £71.4 million);
- outflows relating to payments to acquire intangible
assets of £9.7 million (2023: £5.6 million), which includes payments in
respect of awards made to recently recruited investment managers in relation
to the delivery of new business growth, along with the development of client
applications;
- outflows of £46.9 million relating to capital
expenditure on tangible property, plant and equipment (2023: £5.1 million),
which relates predominantly to property fit-out costs.
RISK MANAGEMENT AND CONTROL
Our approach to risk management is fundamental to supporting the delivery
of our strategic objectives. Our risk governance and risk processes are
designed to enable the firm to manage risk effectively in accordance with our
risk appetite and to support the long-term future of the firm.
MANAGING RISK
The Board has overall responsibility for risk management across the Group,
regularly assessing the most significant risks and emerging threats to the
Group's strategy. The Board delegates oversight of risk management activities
to the Group Risk and Audit Committees. Our risk governance and
risk management framework supports the Chief Executive and executive
committee members with their day-to-day responsibility for managing risk.
RISK CULTURE
The risk culture embedded across the Group enhances the effectiveness of risk
management and decision-making. The Board promotes a strong risk culture,
reinforced by our executive and senior management team, which encourages
appropriate behaviours and collaboration on managing risk across the Group.
Risk management is an integral part of everyone's day-to-day responsibilities
and activities; it is linked to performance and development, as well as to the
Group's remuneration and reward schemes. We aim to create an open and
transparent working environment, encouraging employees to engage positively
in risk management in support of the achievement of our strategic objectives.
RISK GOVERNANCE AND THREE LINES OF DEFENCE
We operate a three lines of defence model to support risk governance and risk
management across the Group
GOVERNANCE
BOARD AUDIT COMMITTEE GROUP RISK COMMITTEE EXECUTIVE COMMITTEE EXECUTIVE RISK COMMITTEE BANKING COMMITTEE
Sets strategy and risk appetite across the Group, and is ultimately Monitors and reviews the effectiveness of internal controls with oversight of Oversees effectiveness of the risk management framework and activity across First line committees with responsibility for management of risk and internal
accountable for risk management. the internal audit function in line with the Group's risk profile on behalf the Group. Advises the Board on risk appetite, risk assessment, risk profile control across the Group.
of the Board. It also oversees the appointment and relationship with the and risk culture.
external auditor.
BUSINESS AREAS AND LINES OF DEFENCE
1 2 3
FIRST LINE OF DEFENCE SECOND LINE OF DEFENCE THIRD LINE OF DEFENCE
Senior management Risk, compliance and anti-money laundering functions Internal audit
Business operations and control functions
RESPONSIBILITY RESPONSIBILITY RESPONSIBILITY
Responsible for managing risk in line with risk appetite by developing and Responsible for the risk management framework and the independent Responsible for providing independent assurance to senior management
maintaining an effective system of internal control. oversight and challenge of first line risk management activity. on the effectiveness of governance, risk management and internal control.
RISK MANAGEMENT FRAMEWORK (RMF) OVERVIEW
Our RMF provides the foundation for identifying, evaluating, managing and
reporting risk and continually improving the effectiveness of risk management
throughout the firm.
RISK APPETITE
The Board approves the firm's risk appetite statement and framework at least
annually to ensure it remains consistent with our strategic objectives and
prudential responsibilities.
Specific risk appetite statements are set and measures established for each
principal risk.
The risk appetite framework supports strategic decision-making, as well as
providing a mechanism to monitor our risk exposures.
The position against our risk appetite statements and measures is assessed and
reported on a regular basis to the Executive Committee, Group Risk Committee
and the Board.
Given the current economic outlook and the evolving regulatory landscape
within the sector, the Board remains committed to having a relatively low
overall appetite for risk in line with our strategy. The Board recognises our
performance is susceptible to fluctuations in investment markets and has the
potential to bear losses from financial and non-financial risks from time to
time, either as reductions in income or increases in operating costs.
Risk appetite measures and thresholds have been approved by the Board for
2025, taking into account the combination between Rathbones and IW&I. This
year's measures reflect the scale of the enlarged Group but, other than this,
there have been no other material changes to our appetite for risk. Following
full client migration in 2025, an interim review will be completed to ensure
that measures remain appropriate for the Group and its individual entities
RISK CATEGORIES RISK APPETITE STATEMENT STRATEGIC ALIGNMENT
BUSINESS AND STRATEGIC RISK Business and strategic risks will be identified and actively managed BUSINESS RESILIENCE
to protect the ability to deliver sustainable growth.
Supporting and delivering growth
Change initiatives will be orientated towards longer-term client, stakeholder
and societal expectations.
FINANCIAL RISK Financial risks will be actively managed to preserve the Group's FINANCIAL RESILIENCE
overall resilience.
Supporting and delivering growth
Credit and market risk exposures will be managed to Board approved instruments
and limits in order to protect company assets and maintain prudent levels of
liquidity and regulatory own funds.
The Group will also continually monitor and respond to risks arising from
its pension scheme obligations.
NON-FINANCIAL RISK Conduct and regulatory risks associated with our business are recognised; REGULATORY AND
however, we have no appetite for intentionally inappropriate behaviour
OPERATIONAL RESILIENCE
(CONDUCT AND OPERATIONAL) or action by any entity within the Group or employees that could have
a material detrimental impact on clients, key stakeholders and Enriching the client and advisor
our reputation.
proposition and experience
Operational risks and losses can arise from inadequate or failed internal Inspiring our people
processes, people or systems, or from external events. We have an extremely
low appetite for losses and no appetite for systemic or materially high risk Operating more efficiently
events that could affect the operational resilience of important business
services.
RISK MANAGEMENT PROCESS
Our risk management process is a defined approach to identify, assess and
respond to risks that could affect delivery of strategic objectives and annual
business plans. The Board, executive and senior management are actively
involved in this process.
Risks are identified within a three-tier hierarchy, with the highest level
containing business and strategic, financial, conduct and operational risks.
Risks are assessed on an inherent and residual basis across a three-year
period according to several impact criteria, which include consideration of
the internal control environment and/or insurance mitigation.
We maintain a watch list to identify and evaluate current issues and emerging
risks as a result of business development or changes in the regulatory
landscape, as well as threats and issues in the wider external environment.
This helps inform the view of the firm's current and longer-term risk
profile, and influences management's decisions and actions.
Stress tests are undertaken to include consideration of the impact of a number
of severe but plausible events that could impact the business. This work
takes account of the availability and likely effectiveness
of mitigating actions that could be taken to avoid or reduce the impact
or likelihood of the underlying risks materialising.
The Group's risk profile, risk register, watch list and stress tests are
regularly reviewed and challenged by the executive, senior management, Group
Risk Committee and the Board. Throughout 2024, the Group risk governance
structure has not altered but its membership and inputs have been enhanced
to ensure oversight of the enlarged Group and its individual entities.
EXTERNAL EMERGING RISKS AND THREATS
Emerging risks, including legislative and regulatory change, which have the
potential to impact the Group and delivery of our strategic objectives, are
monitored through our watch list.
During the year, the executive committee continued to recognise and respond to
a number of emerging risks and threats to the financial services sector as a
whole and to our business.
Our view for 2025 is that we can reasonably expect current market conditions
and uncertainties to remain, given the wide range of global economic and
political scenarios which could emerge.
NEAR TERM
GLOBAL AND UK SPECIFIC POLITICAL TENSIONS Geopolitical events remains a threat to financial stability. War in the Middle
East and war between Russia and Ukraine as well as tension between the US and
China have driven increased inflation and market volatility. The US stance to
international relations has changed rapidly. Uncertainty is expected to
continue in the near term.
UK AND GLOBAL The final quarter of 2024 was shaped by diverging growth patterns and shifting
monetary policies. The US economy sustained steady growth, supported by
ECONOMIC CHALLENGES resilient consumer spending and a recovery in industrial production. Swiftly
implemented trade tariffs following Trumps re-election looks set to influence
the global economy and financial markets. In Europe, Germany entered a
technical recession as weak exports and manufacturing output weighed on its
economy. Meanwhile, the UK is facing several challenges in the form of subdued
growth and volatility in inflation which may slow the lowering of interest
rates. The full impact of tax changes in the Autumn Budget will be a watch
item throughout 2025.
CYBER THREATS The sophistication of cyber attacks is ever-evolving, especially as our
digital environment advances. Attacks have become far more persistent with a
AND SUPPLY CHAIN RESILIENCE notable increase in frequency since the invasion of Ukraine. Rathbones is
committed to enhancing the technology infrastructure to help mitigate the
risk.
MEDIUM TERM
CHANGING REGULATORY EXPECTATIONS The regulatory landscape is an area of fast paced change centred on client
advocacy, transparency and integrity. Of note Consumer Duty requirements have
continued to be embedded and preparation of the first board report is well
underway. The look ahead shows that 2025 will be another busy year with key
implementation dates for regulatory change.
PANDEMIC Whilst operational resilience to a future pandemic is much improved following
the COVID-19 outbreak, a future infectious disease epidemic could emerge and
with that comes the economic repercussions and slow recovery from it.
CLIMATE CHANGE Climate related shocks are becoming a more important macro factor and will
contribute to volatility in growth and inflation. Climate and environmental
TRANSITION RISK risk is a key focus as we move towards achieving net zero emissions by 2050 or
sooner. Alongside reviewing our governance structures, we will continue to
integrate data, develop metrics and increase disclosures in our client
reporting.
DIGITAL INNOVATION Developing technology across the wealth management sector poses a continual
threat to maintaining a competitive advantage. Digital capability is less of a
barrier to engaging clients and servicing their needs, in particular younger
generations where there is an expectation of online accessibility. Rathbones
is implementing a strategic programme of change to ensure our digital
technology meets the needs of our prospective and existing clients.
NEW ENTRANTS TO THE MARKET The threat of new non-traditional entrants to the investment sector is a
higher probability. There has been continued consolidation within the sector
AND ARTIFICIAL INTELLIGENCE AI including mergers and acquisitions driven by Private equity investments. In
addition, AI capabilities, from advanced analytics, automation and predictive
intelligence is fast becoming seen as a future competitive advantage within
the financial sector, however, research has shown that investors are reticent
to trust in these new tools.
LONGER TERM
GENERATIONAL Studies show that the over 45s and especially the post-war 'baby boomers'
retain a significant portion of the UK wealth in the form of property and
WEALTH CHANGE pensions. This wealth will begin to transfer to younger beneficiaries over the
next 30 years. Generational differences could drive changes in behaviours and
appetite towards investments.
SOCIAL CARE FINANCING Accessibility and inequality in the adult social care sector has been a topic
of concern for some time and it continues to be a risk to assets under
management, with clients drawing on their investments to pay for their care
fees.
PRINCIPAL RISKS
PROFILE AND MITIGATION OF PRINCIPAL RISKS
We continually assess our risk profile against both internal and external risk
drivers and are investing further in our people, processes and technology to
improve risk management. We remain focused on client service, the resilience
of our business and wellbeing of our colleagues and we believe our approach
continues to be effective.
Based upon our risk assessment processes, the Board believes that the
principal risks and uncertainties facing the Group that could impact the
delivery of our strategic objectives have been identified below. These risks
continue to reflect our strategic initiatives and transformation programme,
continual enhancements to the Group's business model in response to
environmental, societal and regulatory expectations, the evolving cyber threat
landscape, operational resilience in relation to our supply chain, the
importance of our people and the economic and political environment.
Information about our principal risks is set out on the following pages. The
risks are mapped out by their likelihood and impact on a residual risk basis,
having considered the effectiveness of controls in place to mitigate the
risk. Details of how our principal risks align with our strategic priorities
can be viewed in the link below.
We use ratings of high, medium, low and very low in our risk assessment.
High-risk items are those that have the potential to impact the delivery of
strategic objectives, with medium, low and very low rated risks having less
impact on the Group. Likelihood is similarly based on a qualitative
assessment.
We consider that the growth of the Group following the combination with
IW&I has proportionately increased the risk profile. The ratings of the
risks below are relative to the new scale of the organisation.
2024 OVERVIEW
As we moved into the integration phase of our combination with IW&I we
have seen this reflected in our principal risk profile. The integration of
both firms has naturally augmented associated risks. People risk has
materially increased in impact and likelihood and become one of our top risks
in the latter part of the year. To a lesser medium rated assessment, process
risk has become a watch item as we consolidate and streamline our
organisational design and operating procedures. This has not appeared in our
top risks before so is new in 2024. Continuing from 2023, Rathbones other top
risk in terms of a high residual risk assessment is change risk and
integration risk. Whilst both programmes continue to be successfully
delivered, it still represents a key risk and the outlook remains unchanged
into 2025. Our final risk profile movement is a positive change to pension
risk which has remained low throughout 2024 following the transfer of risk
through a pension 'buy-in'. All other risks are unchanged in 2024.
RISK AND OWNER CONTROL ENVIRONMENT RISK TREND 2024
CHANGE - Executive and Board oversight of material change This risk has remained high in 2024 as our digital transformation programmes
programmes delivered key functionality. Executive and senior management oversight has
The risk that the change portfolio does not support delivery of the Group's
remained agile and focused on targeted delivery outcomes, benefits
strategy - Differentiated governance approach to strategic realisation, budget alignment and the impact of change on our risk profile.
change programmes and business projects
RISK OWNER: Chief Operating Officer
- Dedicated change delivery function and use of
RISK PROFILE: internal and, where required, external subject matter experts
RISK APPETITE MEASURES: - Two-stage assessment, challenge and approval of
project plans
- Priority programmes rated red
- Planning and budgeting, monitoring of variances
- Programme overspend and actions to address.
INTEGRATION - Integration project plan This was a new risk in 2023. We began the process of integrating Rathbones and
IW&I businesses in early 2024. The risk remains high as we progress
The risk that the integration of systems, people and processes fails or is - Executive oversight of integration programme through the integration plan. In 2025 we will move into the client migration
ineffective
phase of the programme.
- Board oversight of programme delivery
RISK OWNER: Chief Operating Officer
- Transformation office programme Board oversight
RISK PROFILE: and delivery-focused operating model
RISK APPETITE MEASURES: - Cost/benefit monitoring
- Budget compliance - KRI tracking
- Cost synergy - External party appointed to provide independent
assurance.
PEOPLE - Board and executive oversight We have continued to operate effectively in spite of a difficult labour market
over the past few years. Continued high inflation and cost of living pressures
The risk of loss of key employees, lack of skilled resources or inappropriate - Succession and contingency planning will remain a risk driver into next year. Management action, and our agile
behaviour or actions. This could lead to lack of capacity or capability
approach to support our colleagues, has been positively received however, we
threatening the delivery of business objectives, or to behaviour leading to - Transparent, consistent and competitive continue to engage frequently through our employee survey tool.
complaints, litigation or regulatory action remuneration schemes
RISK OWNER: Chief People Officer - Contractual clauses with restrictive covenants
RISK PROFILE: - Continual investment in employee training and
development
RISK APPETITE MEASURES:
- Employee engagement survey
- Regretted leavers
- Appropriate balanced performance measurement
- Turnover ratio system
- Employee behaviour - Culture monitoring and reporting
- Conduct risk framework and committee
- Training and competence framework
- Whistleblowing policy and process.
INVESTMENT PERFORMANCE - Investment policy Challenging market conditions are likely to continue in 2025. The position of
client portfolios and investment performance are closely monitored.
The risk that investment performance fails to meet clients' objectives or - Performance versus benchmarking monitoring
expectations
- Defined investment strategy
RISK OWNER: Managing Director Rathbones Investment Management
- Exception reporting
RISK PROFILE:
- Product and proposition oversight
RISK APPETITE MEASURES:
- Client engagement and portfolio reviews.
- Actual performance versus performance benchmark
- Portfolio alignment
- Assessment of fund value rating
PROCESSING RISK - Control assurance routines As a natural consequence of people risk increasing due to the integration,
the potential for process risk has also increased. It has not previously
The risk of loss due to ineffective processes and systems - Policy framework featured in our principal risks so this is a new medium rated risk in 2024.
Established control routines continue to operate effectively.
RISK OWNER: Chief Operating Officer - Procedures committee
RISK PROFILE: - Tracking and monitoring routines
RISK APPETITE MEASURES: - Board and executive oversight.
- Loss amounts over preceding months
- Reportable issues and events
REGULATORY COMPLIANCE AND LEGAL - Board and executive oversight While this risk has remained stable in 2024, the landscape and expectations on
firms and our sector continue to evolve. We have continued to invest in and
The risk of failure by the Group or a subsidiary to fulfil its regulatory or - Management oversight and active involvement with develop our first and second line oversight teams, including the deployment of
legal requirements and comply with the introduction of new or updated industry bodies software to support regulatory compliance.
regulations and laws
- Compliance monitoring programme to examine the Consumer Duty continues to be embedded with regular reporting to Group Risk
RISK OWNER: Group Chief Executive Officer and Chief Risk Officer control of key regulatory risks Committee.
RISK PROFILE: - Separate anti-money laundering function with
specific responsibility
RISK APPETITE MEASURES:
- Oversight of industry and regulatory developments
- Compliance monitoring review outcomes
- Documented policies and procedures
- Regulatory review outcomes
- Employee training and development
- Complaints data
- Panel of external legal advisers
- Whistleblowing policy and process.
SUSTAINABILITY - Board, Executive and Responsible Business 2024 has presented challenging market conditions given the external
Committee oversight environment, including a volatile economic and political landscape.
The risk that the business model does not respond sufficiently to changing
market conditions, including environmental and social factors, such that - A documented strategy, including Responsible We do, however, have a strong balance sheet and recognised market position.
sustainable growth, market share or profitability are adversely affected Investment Policy
Climate risk has been integrated into our risk management framework to support
RISK OWNER: Group Chief Executive Officer - Monitoring of strategic risks the transition to net zero.
RISK PROFILE: - Annual business targets, subject to regular review We are responding to evolving expectations of firms to manage climate and
and challenge other ESG risks, which remain a key priority of our responsible
RISK APPETITE MEASURES:
business agenda.
- Regular reviews of pricing structure and client
- Underlying dividend cover propositions
- Net organic growth rate - Continued investment in the investment process,
service standards and marketing
- Net organic outflow rate
- Regular competitor benchmarking and analysis
- Climate targets
- Trade body participation
- Diversity targets
- ESG factors integrated into the investment process
- Dedicated responsible investment project to drive
changes to achieve sustainability goals
- Diversity targets included in risk appetite
measures.
INFORMATION SECURITY AND CYBER - Board and executive oversight The threat landscape in 2025 continues to be influenced by the volatile
external environment. However, we continue to invest in our control
The risk of inappropriate access to manipulation, or disclosure of, client or - Data governance committee and information security environment and resources to improve our security posture and ensure our
company-sensitive information steering Group oversight infrastructure and employees are well positioned against an ever-changing
threat landscape.
RISK OWNER: Chief Operating Officer - Information security policy, data protection
policy and associated procedures
RISK PROFILE:
- System access controls and encryption
RISK APPETITE MEASURES:
- Penetration testing and multi-layer network
- Number of cyber incidents security
- Number of data privacy events - Training and employee awareness programmes
- Cyber external threat landscape rating - Physical security.
THIRD-PARTY SUPPLIER - Board and executive oversight Our framework for third-party supplier and outsourcing risk management has
continued to be embedded and developed in 2024. We have focused on a
The risk of one or more third-party suppliers failing to provide or perform - Third-party supplier and outsourcing framework technology solution which further improves our controls in this area. We see
authorised and/or outsourced services to standards expected by the Group,
this risk remaining medium in 2025 as we add further systemic control to
impacting the ability to deliver core services. This includes intra-Group - Senior dedicated relationship managers support operational resilience.
outsourcing activity.
- Supplier contracts and defined service level
RISK OWNER: Chief Operating Officer and Chief Executive Officer, Rathbone agreements/KPIs
Asset Management
- Supplier due diligence and approval process
RISK PROFILE:
- Close liaison, contractual reviews and regular
RISK APPETITE MEASURES: service review meetings
- Supplier chain performance - Documented policy and procedures
- Whistleblowing policy and process.
SUITABILITY - Board, executive and general managers committee Throughout 2024 we have seen the benefit of the improvements to improve
oversight processes and oversight of investment and suitability risk which were
The risk of an unsuitable client outcome either through service, investment
implemented in 2023. This area continues to be strengthened with regular
mandate, investment decisions taken, investment recommendations made or - Investment governance and structured committee review routines in place supported by dedicated expertise. Our ongoing
portfolio or fund construction oversight investment in technology will also further improve suitability processes and
controls in 2025.
RISK OWNER: Managing Director Rathbones Investment Management - Management oversight and segregated quality
assurance and performance teams
RISK PROFILE:
- Performance measurement information and
RISK APPETITE MEASURES: attribution analysis
- Timely portfolio reviews - 'Know your client' (KYC) suitability processes
- Timely client reviews - Weekly investment management meetings
- Quality scores - Training and competence framework
- Investment manager reviews through supervisor
sampling
- Compliance monitoring
- Defined investment mandates and tracking
- Exception reporting
- Complaints analysis.
PENSION - Board, senior management and trustee oversight The Group has recently undertaken an insurance 'buy-in' so Rathbones liability
no longer represents the same level of risk.
The risk that the cost of funding our defined benefit pension schemes - Monthly valuation estimates
increases, or their valuation affects dividends, reserves and regulatory own
funds - Triennial independent actuarial valuations
RISK OWNER: Chief Financial Officer - Investment policy
RISK PROFILE: - Senior management review and defined management
actions
RISK APPETITE MEASURES:
- Annual ICAAP.
- Pillar 2A Net Stressed deficit
- IFRS deficit
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
FOR THE YEAR ENDED 31 DECEMBER 2024
2024 2023
£m £m
Interest and similar income 147.8 128.8
Interest expense and similar charges (83.9) (77.1)
Net interest income 63.9 51.7
Fee and commission income 835.1 538.6
Fee and commission expense (34.3) (29.7)
Net fee and commission income 800.8 508.9
Other operating income 31.2 10.5
Operating income 895.9 571.1
Charges in relation to client relationships and goodwill (44.6) (25.2)
Acquisition-related and integration costs (83.4) (44.3)
Other operating expenses (668.3) (444.0)
Operating expenses (796.3) (513.5)
Profit before tax 99.6 57.6
Taxation (34.1) (20.1)
Profit after tax 65.5 37.5
Profit for the year attributable to equity holders of the company 65.5 37.5
Other comprehensive income:
Items that will not be reclassified to profit or loss
Net remeasurement of defined benefit asset or liability (10.6) (5.8)
Deferred tax relating to net remeasurement of defined benefit asset or 2.7 1.5
liability
Other comprehensive income net of tax (7.9) (4.3)
Total comprehensive income for the year net of tax attributable to equity 57.6 33.2
holders of the company
Dividends paid and proposed for the year per ordinary share 93.0p 87.0p
Dividends paid and proposed for the year 96.9 62.9
Earnings per share for the year attributable to equity holders of the company:
basic 63.0p 52.6p
diluted 60.4p 50.8p
The accompanying notes form an integral part of the consolidated financial
statements.
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
FOR THE YEAR ENDED 31 DECEMBER 2024
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 year - - - - 37.5 37.5
Net remeasurement of defined benefit liability - - - - (5.8) (5.8)
Deferred tax relating to components of other comprehensive income - - - - 1.5 1.5
Other comprehensive income net of tax - - - - (4.3) (4.3)
Dividends paid - - - - (71.4) (71.4)
Issue of share capital 2.2 2.3 747.4 - − 751.9
Share-based payments: -
- cost of share-based payment arrangements - - - - 24.0 24.0
- cost of vested employee remuneration and share - - - - (6.0) (6.0)
plans
- cost of own shares vesting - - - 13.0 (13.0) -
- cost of own shares acquired - - - (16.0) - (16.0)
- tax on share-based payments - - - - (0.3) (0.3)
31 December 2023 5.4 312.3 824.4 (55.6) 263.7 1,350.2
Profit for the year - - - - 65.5 65.5
Net remeasurement of defined benefit asset - - - - (10.6) (10.6)
Deferred tax relating to components of other comprehensive income - - - - 2.7 2.7
Other comprehensive income net of tax - - - - (7.9) (7.9)
Dividends paid - - - - (56.9) (56.9)
Issue of share capital 0.1 5.5 - - − 5.6
Share-based payments: -
- cost of share-based payment arrangements - - - - 29.1 29.1
- cost of vested employee remuneration and share - - - - (4.2) (4.2)
plans
- cost of own shares vesting - - - 9.5 (9.5) -
- cost of own shares acquired - - - (22.0) - (22.0)
- tax on share-based payments - - - - - -
31 December 2024 5.5 317.8 824.4 (68.1) 279.8 1,359.4
The accompanying notes form an integral part of the consolidated financial
statements.
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
AS AT 31 DECEMBER 2024
2024 2023
£m £m
Assets
Cash and balances with central banks 1,166.0 1,038.3
Settlement balances 128.3 165.7
Loans and advances to banks 293.2 266.9
Loans and advances to customers 96.1 115.6
Investment securities:
- fair value through profit or loss - 1.2
- amortised cost 1,278.2 1,294.6
Prepayments, accrued income and other assets 242.8 225.3
Property, plant and equipment 53.2 16.1
Right-of-use assets 42.3 64.5
Current tax asset (UK) 6.8 3.9
Intangible assets 982.7 1,025.3
Net defined benefit asset 0.5 7.0
Total assets 4,290.1 4,224.4
Liabilities
Deposits by banks 3.8 12.4
Settlement balances 133.6 172.1
Due to customers 2,352.1 2,253.3
Accruals and other liabilities 249.9 209.6
Provisions 28.1 25.5
Lease liabilities 44.8 74.9
Current tax liabilities (overseas) 0.5 0.5
Net deferred tax liability 78.0 86.0
Subordinated loan notes 39.9 39.9
Total liabilities 2,930.7 2,874.2
Equity
Share capital 5.5 5.4
Share premium 317.8 312.3
Merger reserve 824.4 824.4
Own shares (68.1) (55.6)
Retained earnings 279.8 263.7
Total equity 1,359.4 1,350.2
Total liabilities and equity 4,290.1 4,224.4
The financial statements were approved by the Board of Directors and
authorised for issue on
25 February 2025 and were signed on its behalf by:
PAUL
STOCKTON
IAIN HOOLEY
GROUP CHIEF EXECUTIVE OFFICER
GROUP CHIEF
FINANCIAL OFFICER
Company registered number: 01000403
The accompanying notes form an integral part of the consolidated financial
statements.
CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED 31 DECEMBER 2024
2024 2023
£m £m
Cash flows from operating activities
Profit before tax 99.6 57.6
Change in fair value through profit or loss - (1.0)
Net interest income (63.9) (51.7)
Impairment losses on financial instruments - 0.1
Net charge for provisions 14.9 9.4
Loss on disposal of property, plant and equipment 0.1 -
Depreciation, amortisation and impairment 80.4 47.1
Gain on modification of leases (13.5) -
Foreign exchange movements (1.0) 3.4
Defined benefit pension scheme credits (0.4) (0.5)
Defined benefit pension contributions paid (3.7) (2.9)
Share-based payment charges 29.1 24.0
Interest paid (79.8) (67.7)
Interest received 147.6 111.9
209.4 129.7
Changes in operating assets and liabilities:
Net decrease in loans and advances to banks and customers 21.8 87.4
Net decrease in settlement balance debtors 37.4 133.3
Net increase in prepayments, accrued income and other assets (12.1) (36.2)
Net increase/(decrease) in amounts due to customers and deposits by banks 90.2 (251.5)
Net decrease in settlement balance creditors (38.5) (123.6)
Net increase in accruals, provisions and other liabilities 27.2 1.0
Cash generated from/(used in) operations 335.4 (59.9)
Tax paid (41.8) (29.5)
Net cash inflow/(outflow) from operating activities 293.6 (89.4)
Cash flows from investing activities
Cash acquired on acquisition of subsidiaries - 172.6
Purchase of property, plant, equipment and intangible assets (56.6) (10.7)
Purchase of investment securities (2,028.0) (2,059.9)
Proceeds from sale and redemption of investment securities 2,046.6 1,818.1
Net cash used in investing activities (38.0) (79.9)
Cash flows from financing activities
Issue of ordinary shares 5.6 -
Repurchase of ordinary shares (22.0) (16.0)
Dividends paid (56.9) (71.4)
Payment of lease liabilities (20.9) (7.5)
Interest paid (5.1) (5.6)
Net cash used in financing activities (99.3) (100.5)
Net increase/(decrease) in cash and cash equivalents 156.3 (269.8)
Cash and cash equivalents at the beginning of the year 1,302.9 1,572.7
Cash and cash equivalents at the end of the year 1,459.2 1,302.9
The accompanying notes form an integral part of the consolidated financial
statements.
NOTES TO THE CONSOLIDATED STATEMENTS
1 PRINCIPAL ACCOUNTING POLICIES
Rathbones Group Plc ('the company') is a public company limited by shares
incorporated and domiciled in England and Wales under the Companies Act 2006.
1.1 BASIS OF PREPARATION
The consolidated and company financial statements have been prepared in
accordance with
UK-adopted International Accounting Standards.
The financial statements have been prepared on the historical cost basis,
except for certain financial instruments that are measured at fair value
(notes 1.9, 1.12, 1.16 and 1.18). The principal accounting policies adopted
are set out in this note and, unless otherwise stated, have been applied
consistently to all periods presented in the consolidated financial
statements.
1.2 BASIS OF CONSOLIDATION
The consolidated financial statements incorporate the financial statements of
the company and entities controlled by the company (its subsidiaries),
together 'the Group', made up to 31 December each year.
The Group controls an entity when it is exposed to, or has rights to, variable
returns from its involvement with the entity and has the ability to affect
those returns through its power over the entity. Subsidiaries are fully
consolidated from the date on which control is obtained, and no longer
consolidated from the date that control ceases; their results are included in
the consolidated financial statements up to the date that control ceases.
Inter-company transactions and balances between Group companies are eliminated
on consolidation.
1.3 DEVELOPMENTS IN REPORTING STANDARDS AND INTERPRETATIONS
Standards and interpretations affecting the reported results or the financial
position
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
- Classifications of liabilities as current or non-current (Amendments to
IAS 1)
- Amendments to IAS 7 Statements 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 on or 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.
The following standard is expected to have a material impact on the Group's
financial statements. This standard has not yet been endorsed in the UK.
Standards available for early adoption Effective date
IFRS 18 Presentation and Disclosure in Financial Statements 01 January 2027
The following standards are not expected to have a material impact on the
Group's financial statements.
Standards available for early adoption Effective date
Sale or Contribution of Assets between an Investor and its Associate or Joint Optional
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 IFRS 7
Contracts Referencing Nature-dependent Electricity - Amendments to IFRS 9 and 01 January 2026
IFRS 7
Annual Improvements to IFRS Accounting Standards - Amendments to IFRS 1, IFRS 01 January 2026
7, IFRS 9, IFRS 10 and IAS 7
IFRS 19 Subsidiaries without Public Accountability: Disclosures (not yet 01 January 2027
endorsed in the UK)
1.4 BUSINESS COMBINATIONS
Business combinations are accounted for using the acquisition method. The
consideration for each acquisition is measured at the aggregate of the fair
values (at the date of exchange) of assets transferred, liabilities assumed
and equity instruments issued by the Group in exchange for control of the
acquiree. Acquisition-related costs are recognised in profit or loss as
incurred.
Where applicable, the consideration for the acquisition includes any asset or
liability resulting from a contingent consideration arrangement, measured at
its acquisition-date fair value. Subsequent changes in such fair values are
adjusted against the cost of acquisition where they qualify as measurement
period adjustments. All other subsequent changes in the fair value of
contingent consideration classified as an asset or liability are accounted for
in accordance with relevant asset / liability recognition and measurement
guidance in IFRS. Changes in the fair value of contingent consideration
classified as equity are not recognised.
1.5 GOING CONCERN
The directors have, at the time of approving the financial statements, a
reasonable expectation that the company and the Group have adequate resources
to continue in operational existence. In forming this view, the directors
have considered the company's and the Group's prospects for a period of at
least 12 months from the date of approval of the annual report. The directors'
assessment included consideration of the Group's profit and capital forecasts;
the impact of capital and liquidity stress tests; the impact of reverse stress
testing and the management actions available to mitigate this impact. The
assessment also ensured that the assumptions applied were consistent with
those used in other forward-looking areas of the financial statements, such
as impairment testing. The directors continue to adopt the going concern basis
of accounting in preparing the financial statements.
1.6 FOREIGN CURRENCIES
The functional and presentational currency of the company and its subsidiaries
is sterling.
Transactions in currencies other than the relevant Group entity's functional
currency are recorded at the rates of exchange prevailing on the dates of the
transactions. At each balance sheet date, monetary assets and liabilities that
are denominated in foreign currencies are retranslated at the rates prevailing
on the balance sheet date. Gains and losses arising on retranslation are
included in profit or loss for the year.
1.7 INCOME
Net interest income
Interest income or expense is recognised within net interest income using the
effective interest method.
The effective interest method is the method of calculating the amortised cost
of a financial asset or liability (or group of assets and liabilities) and of
allocating the interest income or interest expense over the relevant period.
The effective interest rate is the rate that exactly discounts the expected
future cash payments or receipts through the expected life of the financial
instrument, or when appropriate, a shorter period, to:
- the gross carrying amount of the financial asset; or
- the amortised cost of the financial liability.
The application of the method has the effect of recognising income (or
expense) receivable (or payable) on the instrument evenly in proportion to
the amount outstanding over the period to maturity or repayment. In
calculating effective interest, the Group estimates cash flows considering
all contractual terms of the financial instrument but excluding the impact of
future credit losses.
The interest charged on the Group's lease liabilities and subordinated loan
notes is included within cash used in financing activities in the Group
statement of cash flows. Interest charged on client funds is included within
cash generated from operations. .
Net fee and commission income
Portfolio or investment management fees, commissions receivable or payable and
fees from advisory services are recognised on a continuous basis over the
period that the related service is provided.
Commission charges for executing transactions on behalf of clients are
recognised when the transaction is dealt at the trade date.
The Group has made an assessment as to whether the work performed to earn such
fees constitutes the transfer of services and, therefore, fulfils any
performance obligation(s). If so, then these fees are recognised when the
relevant performance obligation has been satisfied; if not, then the fees are
only recognised in the period in which the services are provided.
A breakdown of the timing of revenue recognition can be found in note 3.
Dividend income
Dividend income from final dividends on equity securities is accounted for on
the date the security becomes ex-dividend. Interim dividends are recognised
when received.
Other income
In cases where cash held within client portfolios does not represent a banking
deposit, the Group invests this cash in cash securities with approved
financial institutions. The margin earned on these funds, being the difference
between the rate of interest paid by the custodian bank and that paid
to clients, represents the rate of return available to the Group through the
pooling of client funds. This margin is included within other operating income
in the financial statements.
1.8 LEASES
At inception of a contract, the Group assesses whether a contract is, or
contains, a lease. A contract is, or contains, a lease if the contract conveys
the right to control the use of an identified asset for a period of time in
exchange for consideration. To assess whether a contract conveys the right to
control the use of an identified asset, the Group uses the definition of a
lease in IFRS 16.
The Group recognises a right-of-use asset and a lease liability at the
inception date of the lease. The right-of-use asset is initially measured at
cost, which comprises the initial amount of the lease liability adjusted for
any lease payments made at or before the commencement date, plus any initial
direct costs incurred and an estimate of dilapidation costs to dismantle and
remove the underlying asset or to restore the underlying asset or the site on
which it is located, less any lease incentives received. As a result of new
information, the Group revised its recognition of dilapidations during 2024.
The estimate for recognition of dilapidation assets, which reflect costs to
dismantle and remove structural changes made to leased premises, was revised
from 100% of the total cost of dilapidations to 50%. The remaining 50% is
charged to profit or loss over the useful life of the lease and recognised as
a provision. In line with IAS 8, this change in accounting estimate was
applied prospectively to new leases entered into from 1 January 2024. The
impact of the change was a reduction to the dilapidation asset by £0.4
million, and an equal reduction in the related provision.
The right-of-use assets and dilapidations assets are subsequently depreciated
on a straight-line basis over the shorter of the expected life of the asset
and the lease term, adjusted for any remeasurements of the lease liability.
At the end of each reporting period, the assets are assessed for indicators
of impairment in accordance with IAS 36.
The lease liability is initially measured at the present value of the lease
payments that are not paid at the commencement date, discounted using the
interest rate implicit in the lease or, if that rate cannot be readily
determined, the Group's incremental borrowing rate. The Group uses an
incremental borrowing rate of 5.6%, derived from its subordinated loan notes,
as the discount rate for all leases entered into prior to the acquisition of
IW&I on 21 September 2023. For all leases entered into or modified after
this date, an incremental borrowing rate is determined on a lease-by-lease
basis, with reference to the lease term and rental payments specific to each
lease.
Lease payments included in the measurement of the lease liability comprise the
following:
- fixed payments, including in-substance fixed payments
- variable lease payments that depend on an index or a rate, initially
measured using the index or rate as at the commencement date
- amounts expected to be payable under a residual value guarantee
- the exercise price under a purchase option that the Group is reasonably
certain to exercise, lease payments in an optional renewal period if the Group
is reasonably certain to exercise an extension option, and penalties for early
termination of a lease unless the Group is reasonably certain not
to terminate early.
The lease liability is subsequently measured by adjusting the carrying amount
to reflect the interest charge, the lease payments made and any reassessment
or lease modifications. The lease liability is remeasured if the Group
changes its assessment of whether it will exercise a purchase, extension
or termination option.
When the lease liability is remeasured in this way, a corresponding adjustment
is made to the carrying amount of the right-of-use asset, or is recorded in
profit or loss if the carrying amount of the right-of-use asset has been
reduced to zero.
Where the Group is an intermediate lessor in a sub-lease, it accounts for its
interests in the head lease and the sub-lease separately. It assesses the
lease classification of a sub-lease with reference to the right-of-use asset
arising from the head lease, not with reference to the underlying asset.
Leases that qualify for the low-value asset exemption or short-term lease
exemption do not fall within the scope of IFRS 16 and continue to be treated
as off balance sheet.
1.9 SHARE BASED PAYMENTS
The Group engages in equity-settled and cash-settled share-based payment
transactions in respect of services received from its employees.
Equity-settled awards
For equity-settled share-based payments, the fair value of the award is
measured by reference to the fair value of the shares or share options granted
on the grant date. The cost of the employee services received in respect of
the shares or share options granted is recognised in profit or loss over the
vesting period, with a corresponding credit to equity.
The fair value of the awards or options granted is determined using a binomial
pricing model, which takes into account the current share price, the risk-free
interest rate, the expected volatility of the company's share price over the
life of the option or award, any applicable exercise price and other relevant
factors. Only those vesting conditions that include terms related to market
conditions are taken into account in estimating fair value. Non-market vesting
conditions are taken into account by adjusting the number of shares or share
options included in the measurement of the cost of employee services so that,
ultimately, the amount recognised in profit or loss reflects the number of
vested shares or share options, with a corresponding adjustment to equity.
Where vesting conditions are related to market conditions, the charges for the
services received are recognised regardless of whether or not the
market-related vesting condition is met, provided that any non-market vesting
conditions are also met. Shares purchased and issued are recorded directly in
equity.
Cash-settled awards
For cash-settled share-based payments, a liability is recognised for the
services received, and the related employer's taxes, at the balance sheet
date, measured at the fair value of the liability. At each subsequent balance
sheet date and at the date on which the liability is settled, the fair value
of the liability is remeasured with any changes in fair value recognised in
profit or loss.
1.10 TAXATION
Current Tax
Current tax is the expected tax payable or receivable on net taxable income
for the year. Current tax is calculated using tax rates enacted or
substantively enacted by the balance sheet date, together with any adjustment
to tax payable or receivable in respect of previous years.
Deferred tax
Deferred tax is accounted for under the balance sheet liability method in
respect of temporary differences using tax rates (and laws) that have been
enacted or substantively enacted by the balance sheet date and are expected to
apply when the liability is settled or when the asset is realised.
Deferred tax liabilities are recognised for all temporary differences and
deferred tax assets are recognised to the extent that it is probable that
taxable profits will be available against which deductible temporary
differences may be utilised, except where the temporary difference arises:
- from the initial recognition of goodwill;
- from the initial recognition of other assets and liabilities in a
transaction, which affects neither the tax profit nor the accounting profit,
other than in a business combination; or
- in relation to investments in subsidiaries and associates, where the Group
is able to control the reversal of the temporary difference and it is the
Group's intention not to reverse the temporary difference in the foreseeable
future.
Deferred tax assets and liabilities are offset when they relate to income
taxes levied by the same taxation authority and the Group intends to settle
its current tax assets and liabilities on a net basis.
Current and deferred tax are recognised:
- in other comprehensive income if they relate to items recognised in other
comprehensive income
- directly in retained earnings if they relate to items recognised directly in
retained earnings.
1.11 CASH AND CASH EQUIVALENTS
Cash comprises cash in hand and demand deposits.
Demand deposits include balances with central banks which are realisable on
demand.
Cash equivalents includes loans and advances to banks with a maturity of less
than three months from the date of acquisition.
For the purposes of the consolidated statement of cash flows, cash and cash
equivalents consist of cash and cash equivalents as defined above, net of
outstanding bank overdrafts, which are included in the Group's cash
management.
1.12 FINANCIAL ASSETS
Initial recognition and measurement
Financial assets, excluding trade debtors, are initially recognised when the
Group becomes party to the contractual provisions of the asset. Trade debtors
are recognised when cash is advanced to the borrowers.
Financial assets are initially recognised at fair value plus transaction costs
that are directly attributable to their acquisition (except those assets
classified at fair value through profit or loss). Trade debtors without a
significant financing component are initially measured at the
transaction price.
Financial assets are not reclassified subsequent to their initial recognition
unless the Group changes its business model for managing financial assets, in
which case all affected financial assets are reclassified on the first day of
the first reporting period following the change in the business model.
For settlement balances, trade date accounting is applied to all regular way
purchases and sales of assets.
Classification and subsequent measurement
Financial assets are classified and measured in the following categories:
- amortised cost
Financial assets are measured at amortised cost if their contractual terms
give rise to cash flows that are solely payments of principal and interest on
the principal amount outstanding and they are held within a business model
whose objective is to hold assets to collect contractual cash flows.
Assets are measured at amortised cost using the effective interest rate method
(note 1.7), less any impairment losses. Interest income, foreign exchange
gains and losses and impairment are recognised in profit or loss. Any gain or
loss on derecognition is recognised in profit or loss.
- at fair value through other comprehensive income
(FVOCI)
Debt instruments are measured at FVOCI if their contractual terms give rise to
cash flows that are solely payments of principal and interest on the principal
amount outstanding and they are held within a business model whose objective
is both to hold assets to collect contractual cash flows and to sell the
assets.
For debt instruments, interest income is calculated using the effective
interest method. For equity instruments, dividends are recognised as income in
profit or loss unless the dividend clearly represents a recovery of part of
the cost of the investment. All other gains and losses on assets at FVOCI are
recognised in OCI.
- at fair value through profit or loss (FVTPL)
All equity instruments are measured at FVTPL unless the instrument is not held
for trading, the Group irrevocably elects to measure the instrument at FVOCI.
This election is made on an investment-by-investment basis.
All financial assets not classified as measured at amortised cost or FVOCI as
described above are measured at FVTPL. On initial recognition, the Group may
irrevocably designate a financial asset that otherwise meets the requirements
to be measured at amortised cost or FVOCI at FVTPL if doing so eliminates or
significantly reduces an accounting mismatch that would otherwise arise.
Net gains and losses, including any interest or dividend income, are
recognised in profit or loss.
Business model assessment
The Group assesses the objective of the business model in which a financial
asset is held at a portfolio level. The information considered includes:
- the objectives for the portfolio and how those tie in to the current and
future strategy of the Group
- how the performance of the portfolio is evaluated and reported to the
Group's management
- the risks that affect the performance of the business model (and the
financial assets held within that business model) and how those risks are
managed
- how Group employees are compensated, e.g. whether compensation is based on
the fair value of the assets managed or the contractual cash flows collected
- the frequency, volume and timing of sales of financial assets in prior
periods, the reasons for such sales and expectations about future sales
activity.
Payments of principal and interest criterion
In assessing whether the contractual cash flows are solely payments of
principal and interest, the Group considers:
- the contractual terms of the instrument, checking consistency with basic
lending criteria
- the impact of the time value of money
- features that would change the amount or timing of contractual cash flows
- other factors, such as prepayment or extension features.
Derecognition
Financial assets are derecognised when the contractual rights to receive cash
flows have expired or the Group has transferred substantially all the risks
and rewards of ownership.
Impairment of financial assets
The Group recognises loss allowances for expected credit losses (ECLs) on
financial assets measured at amortised cost and FVOCI and loan commitments
held off balance sheet.
A financial asset will attract a loss allowance equal to either:
- 12-month ECLs (losses resulting from possible defaults within the next 12
months); or
- lifetime ECLs (losses resulting from possible defaults over the remaining
life of the financial asset).
The latter applies if there has been a significant deterioration in the credit
quality of the asset; albeit lifetime ECLs will always be recognised for trade
receivables, contract assets or lease receivables without a significant
financing component.
The maximum period considered when estimating ECLs is the maximum contractual
period over which the Group is exposed to credit risk.
The Group measures loss allowances at an amount equal to lifetime ECLs, except
for treasury book and investment management loan book exposures (see note 11)
for which credit risk has not increased significantly since initial
recognition, which are measured at 12-month ECLs.
Loss allowances for trust and financial planning debtors are always measured
at an amount equal to lifetime ECLs.
When assessing whether the credit risk of a financial asset has increased
significantly between the reporting date and initial recognition, quantitative
and qualitative indicators are used. More detail can be found at note 11.
Measurement of ECLs
Treasury book and investment management loan book
The Group has developed a model for calculating ECLs on its treasury book and
investment management loan book (which includes loan commitments held off
balance sheet). The Group has developed three different economic scenarios: a
base case, an upside and a downside.
The base case is assigned a 60% probability of occurring with the upside and
downside each assigned a 20% probability of occurring.
The economic scenarios are based on the projections of GDP, inflation,
unemployment rates, house price indices, financial markets and interest rates
as set out in the banking system stress testing scenario published annually by
the PRA.
Management adjust the projections for the economic variables in arriving at
the upside and downside scenarios.
Under each resultant scenario, an ECL is forecast for each exposure in the
treasury book and investment management loan book. The ECL is calculated based
on management's estimate of the probability of default, the loss given default
and the exposure at default of each exposure taking into account industry
credit loss data, the Group's own credit loss experience, the expected
repayment profiles of the exposures and the level of collateral held. Industry
credit loss information is drawn from data on credit defaults for different
categories of exposure published by the Council of Mortgage Lenders and
Standard & Poor's.
The model adopts a staging allocation methodology, primarily based on changes
in the internal and/or external credit rating of exposures to identify
significant increases in credit risk since inception of the exposure.
The Group has not rebutted the presumption that if an exposure is more than 30
days past due, the associated credit risk has significantly increased.
More detail on the Group's staging criteria is provided in note 11.
ECLs are discounted back to the balance sheet date at the effective interest
rate of the asset.
Trust and financial planning debtors
The Group's trust and financial planning debtors are generally short term and
do not contain significant financing components. Therefore, the Group has
applied a practical expedient by using a provision matrix to calculate
lifetime ECLs based on actual credit loss experience over the past
four years.
Credit-impaired financial assets
At each reporting date, the Group assesses whether financial assets carried at
amortised cost and FVOCI are credit-impaired. A financial asset is
'credit-impaired' when one or more events that have a detrimental impact on
the estimated future cash flows of the financial asset have occurred.
The Group's definition of default is given in note 11.
Presentation of impairment
The carrying amount of financial assets measured at amortised cost is reduced
by a loss allowance. The carrying value of assets measured at FVOCI, is not
adjusted by loss allowance but instead the loss allowance is recorded in
equity.
Impairment losses related to the Group's treasury book and investment
management loan book are presented in 'interest expense and similar charges'
and those related to all other financial assets (including trust and financial
planning debtors) are presented under 'other operating expenses'. No losses
are presented separately on the statement of the comprehensive income and
there have been no reclassifications of amounts previously recognised under
IAS 39.
1.13 PROPERTY, PLANT AND EQUIPMENT
All property, plant and equipment is stated at historical cost, which includes
directly attributable acquisition costs, less accumulated depreciation and
impairment losses. Depreciation is charged so as to write off the cost of
assets to their estimated residual value over their estimated useful lives,
using the straight-line method, on the following bases:
- leasehold improvements: 10 years or over the lease term.
- plant, equipment and computer hardware: over 3 to 10 years.
The assets' residual lives are reviewed, and adjusted if appropriate, at each
balance sheet date. Gains and losses on disposals are determined by comparing
proceeds with the carrying amount and these are included in profit or loss.
1.14 INTANGIBLE ASSETS
Goodwill
Goodwill arises through business combinations and represents the excess of the
cost of acquisition over the Group's interest in the fair value of the
identifiable assets, liabilities and contingent liabilities of a business at
the date of acquisition.
Goodwill is recognised as an asset and measured at cost less accumulated
impairment losses. It is allocated to Groups of cash-generating units, which
represent the lowest level at which goodwill is monitored for internal
management purposes. Cash-generating units are identified as the smallest
identifiable group of assets that generates cash inflows that are largely
independent of the cash inflows from other assets or groups of assets, and are
no larger than the Group's operating segments, as set out in note 3.
On disposal of a subsidiary, the attributed amount of goodwill that has not
been subject to impairment is included in the determination of the profit or
loss on disposal.
Client relationships
Client relationships acquired as part of a business combination are initially
recognised at fair value (note 1.4). Determining whether a transaction that
involves the purchase of client relationships is treated as a business
combination or a separate purchase of intangible assets requires judgement.
The factors that the Group takes into consideration in making this judgement
are set out in note 2.1.
Individually purchased client relationships are initially recognised at cost.
Where a transaction to acquire client relationship intangible assets includes
an element of variable deferred consideration, an estimate is made of the
value of consideration that will ultimately be paid. The client relationship
intangible asset recognised on the balance sheet is adjusted for any
subsequent change in the value of deferred consideration. Note 2.1 sets out
the approach taken by the Group where judgement is required to determine
whether payments made for the introduction of client relationships should
be capitalised as intangible assets or charged to profit or loss.
Client relationship intangible assets are subsequently carried at the amount
initially recognised less accumulated amortisation, which is calculated using
the straight-line method over their estimated useful lives (normally 10 to 15
years, but not more than 15 years).
Computer software and software development costs
Costs incurred to acquire and bring to use computer software licences are
capitalised and amortised through profit or loss over their expected useful
lives (3 to 4 years).
Costs that are directly associated with the production of identifiable and
unique software products controlled by the Group are recognised as intangible
assets when the Group is expected to benefit from future use of the software
and the costs are reliably measurable. Other costs of producing software
are charged to profit or loss as incurred. Computer software development
costs recognised as assets are amortised using the straight-line method over
their useful lives (not exceeding 4 years).
Where services provided by a software-as-a-service arrangement do not result
in the recognition of an intangible asset, non-distinct configuration and
customisation costs are expensed when access to the software is provided. The
cost is spread over the contractual term.
1.15 IMPAIRMENT OF GOODWILL AND INTANGIBLE ASSETS
At each balance sheet date, the Group reviews the carrying amounts of its
intangible assets to determine whether there is any indication that those
assets have suffered an impairment loss. If any such indication exists, the
recoverable amount of the asset is estimated in order to determine the extent
of the impairment loss (if any). Where the asset does not generate cash flows
that are independent from other assets, the Group estimates the recoverable
amount of the cash-generating unit to which the asset belongs. The recoverable
amount is the higher of fair value less costs to sell and value in use. See
note 2.1 for further detail.
Goodwill is tested for impairment at least annually. For the purposes of
impairment testing, goodwill is allocated to groups of cash-generating units.
The carrying amount of each group of cash-generating units is compared to its
value in use, calculated using a discounted cash flow method. If the
recoverable amount of the group of cash-generating units is less than the
carrying amount of the group of units, the impairment loss is allocated first
to reduce the carrying amount of the goodwill allocated to that group of units
and then to the other assets of the group of units pro rata on the basis of
the carrying amount of each asset in the group of units.
Client relationship intangible assets are reviewed bi-annually for indicators
of impairment. Intangible assets acquired through business combinations are
tested for impairment by reviewing the key inputs supporting the initial
valuation of the asset at acquisition against the Group's current forecasts of
those inputs, including revenue margins and net client flows. Intangible
assets acquired through newly recruited investment managers under contractual
agreements are tested for impairment by reviewing lost client relationships in
the period. In determining whether a client relationship is lost, the Group
considers factors such as the level of funds withdrawn and the existence of
other retained family relationships. When client relationships are lost, the
full amount of unamortised cost is recognised immediately in profit or loss
and the intangible asset is derecognised. See note 2.1 for further detail.
If the recoverable amount of any asset other than goodwill or client
relationships is estimated to be less than its carrying amount, the carrying
amount of the asset is reduced to its recoverable amount.
Any impairment loss is recognised immediately in profit or loss.
1.16 FINANCIAL LIABILITIES
Initial recognition and measurement
Financial liabilities are initially recognised at fair value plus transaction
costs that are directly attributable to their acquisition or issue.
Classification and subsequent measurement
Financial liabilities are classified as measured at amortised cost or at fair
value through profit or loss.
The Group has not designated any liabilities as fair value through profit or
loss and holds no liabilities as held for trading. Financial liabilities are
measured at amortised cost using the effective interest method (note 1.7).
Amortised cost is calculated by taking into account any issue costs and any
discounts or premiums on settlement. Interest expense and foreign exchange
gains and losses are recognised in profit or loss. Any gain or loss on
derecognition is also recognised in profit or loss.
For settlement balances, trade date accounting is applied to all regular way
purchases and sales of assets.
Derecognition
The Group derecognises financial liabilities when its contractual obligations
are discharged, cancelled or expired, or when the financial liability is
substantially modified..
1.17 PROVISIONS AND CONTINGENT LIABILITIES
Provisions are recognised when the Group has a present obligation (legal or
constructive) as a result of a past event and it is probable that an outflow
of economic benefits, that can be reliably estimated, will occur. Provisions
are measured at the present value of the expenditures expected to be required
to settle the obligation, discounted using a pre-tax rate that reflects
current market assessments of the time value of money and the risks specific
to the obligation.
Contingent liabilities are possible obligations that depend on the outcome of
uncertain future events or those present obligations where the outflows of
resources are uncertain or cannot be measured reliably. Contingent liabilities
are not recognised in the financial statements but are disclosed unless the
likelihood of crystallisation is judged to be remote.
1.18 RETIREMENT BENEFIT OBLIGATIONS ON RETIREMENT BENEFIT SCHEMES
The Group's net liability/asset in respect of defined benefit pension plans is
calculated separately for each plan by estimating the amount of future benefit
that employees have earned in return for their service in the current and
prior years; that benefit is discounted to determine its present value, and
the fair value of any plan assets (at bid price), including the value of any
bulk annuity policies, is deducted. Any asset resulting from this calculation
is limited to the present value of available refunds and reductions in future
contributions to the plan.
The cost of providing benefits under defined benefit plans is determined using
the projected unit credit method, with actuarial valuations being carried out
at each balance sheet date. Net remeasurements of the defined benefit
liability/asset are recognised in full in the period in which they occur in
other comprehensive income.
Past service costs or gains are recognised in profit or loss immediately in
the period of a plan amendment. Interest income on defined benefit assets and
interest expense on the defined benefit obligations are also recognised in
profit or loss in the period.
The amount recognised in the balance sheet for death-in-service benefits
represents the present value of the estimated obligation, reduced by the
extent to which any future liabilities will be met by insurance policies.
The company determines the net interest on the net defined benefit
liability/asset for the year by applying the discount rate used to measure the
defined benefit obligation at the beginning of the year to the net defined
benefit liability/asset.
Contributions to defined contribution retirement benefit schemes are charged
to profit or loss as an expense as they fall due.
1.19 SEGMENTAL REPORTING
The Group determines and presents operating segments based on the information
that is provided internally to the Group Executive Committee, which is the
Group's chief operating decision-maker. Operating segments are organised
around the services provided to clients.
Transactions between operating segments are reported within the income or
expenses for those segments; intra-segment income and expenditure is
eliminated at Group level. Indirect costs are allocated between segments in
proportion to the principal cost driver for each category of indirect costs
that is generated by each segment.
1.20 FIDUCIARY ACTIVITIES
The Group commonly acts as trustee and in other fiduciary capacities that
result in the holding or placing of assets on behalf of individuals, trusts,
retirement benefit plans and other institutions. Such assets and income
arising thereon are excluded from these financial statements, as they are not
assets of the Group. Largely as a result of cash and settlement processing,
the Group holds money on behalf of some clients in accordance with the Client
Money Rules of the Financial Conduct Authority, the Jersey Financial Services
Commission, the Guernsey Financial Services Commission and the Solicitors'
Accounts Rules issued by the Solicitors Regulation Authority, as applicable.
Such monies and the corresponding amounts due to clients are not shown on the
balance sheet as the Group is not beneficially entitled to them.
1.21 MERGER RESERVE
The merger reserve is used where more than 90% of the share capital in a
subsidiary is acquired, and the consideration includes the issue of new shares
by the Company, thereby attracting merger relief under Section 612 of the
Companies Act 2006.
1.22 FAIR VALUE MEASUREMENT
The fair values of quoted financial instruments in active markets are based on
current bid prices. Such instruments would be included in level 1 of the fair
value hierarchy. If an active market for a financial asset does not exist, the
Group establishes fair value by using valuation techniques. These include the
use of recent arm's-length transactions, discounted cash flow analysis, option
pricing models and other valuation techniques commonly used by market
participants. These instruments would be classified under level 3 in the fair
value hierarchy.
The Group recognises transfers between levels of the fair value hierarchy at
the end of the reporting period during which the change has occurred.
2 CRITICAL ACCOUNTING JUDGEMENTS AND KEY SOURCES OF ESTIMATION UNCERTAINTY
The Group makes judgements and estimates that affect the application of the
Group's accounting policies and reported amounts of assets, liabilities,
income and expenses within the next financial year. Estimates and assumptions
are continually evaluated and are based on historical experience and other
factors, including expectations of future events that are believed to be
reasonable under the circumstances.
The following key accounting policies involve critical judgements made in
applying the accounting policies and involve material estimation uncertainty.
2.1 CLIENT RELATIONSHIP INTANGIBLES (NOTE 8)
Critical judgements
Client Relationship intangibles purchased through corporate transactions
When the Group purchases client relationships through transactions with other
businesses, a judgement is made as to whether the transaction should be
accounted for as a business combination or as a separate purchase of
intangible assets. In making this judgement, the Group assesses the assets,
liabilities, operations and processes that were the subject of the transaction
against the definition of a business combination in IFRS 3. In particular,
consideration is given to whether ownership of a corporate entity has been
acquired, among other factors.
Payments to newly recruited investment managers
The Group assesses whether payments made to newly recruited investment
managers under contractual agreements represent payments for the acquisition
of client relationship intangible assets or remuneration for ongoing services
provided to the Group. If these payments are incremental costs of acquiring
investment management contracts and are deemed to be recoverable (i.e. through
future revenues earned from the FUMA that relate to the investment management
contract), they are capitalised as client relationship intangible assets (note
8). Otherwise, the payments are judged to be in relation to the provision of
ongoing services and are expensed as remuneration costs in the period that
they are transferred. Upfront payments made to investment managers upon
joining are expensed as incurred, as they are not judged to be incremental
costs for acquiring client relationships. At 31 December 2024, these
intangible assets totalled £39.2 million (2023: £34.2 million).
Estimation uncertainty
Amortisation of client relationship intangible assets
The Group makes estimates as to the expected duration of client relationships
to determine the period over which the related intangible assets are
amortised. The amortisation period is estimated with reference to historical
data on the longevity of client relationships. During the year, client
relationship intangible assets were amortised over a period of between 10 and
15 years. As a result of the IW&I combination in 2023, the sensitivities
over the amortisation charge no longer meets the criteria of being at
significant risk of material adjustment for the enlarged Group within the next
financial year. Consequently, this is no longer considered to be an area of
estimation uncertainty, but this shall continue to be monitored.
Impairment review of client relationship intangible assets
At the end of each reporting period, the Group reviews the carrying amount of
its client relationship intangible assets acquired through business
combinations to determine whether there is any indication of impairment. At 31
December 2024, these intangible assets totalled £429.3 million (2023: £468.6
million). Significant judgment is required in determining whether certain
events or circumstances constitute indicators of impairment, and in
calculating the recoverable amount of the intangible assets when required.
If an indication of impairment exists, the recoverable amount of the asset is
estimated, being the higher of fair value less costs to sell and value-in-use.
Where value-in-use is used to calculate the recoverable amount, discounted
cash flow forecasts associated with the acquired client relationships are
produced, reflecting key assumptions for operating profit margin, net client
flows and pre-tax discount rates. Future cash flows are based on the latest
financial budgets approved by the Board, or historic data, where relevant.
Discount rates are aligned with the Group cost of capital. Where fair value is
estimated to calculate the recoverable amount of an asset, indicative trading
multiples from recent market acquisitions of comparable businesses in the same
industry are used. Changes in these inputs may impact the amount of any
impairment loss recognised in operating expenses.
At 31 December 2024, no indicators of impairment relating to the Group's
client relationship intangible assets were identified.
The largest individual client relationship intangible asset relates to the
acquisition of IW&I in 2023, with a carrying amount of £317.7 million at
31 December 2024. This asset was determined as having the greatest potential
for material impairment. During the year, the asset was assessed for
indicators of impairment using a fair value less cost to sell model. Our
estimate of the fair value less costs to sell, based on comparable business
FUM multiples, would have to fall by approximately 30% in order to trigger a
possible impairment of the client relationship intangible asset.
2.2 RETIREMENT BENEFIT OBLIGATIONS (NOTE 10)
Estimation uncertainty
The principal assumptions underlying the reported surplus of £0.5 million
(2023: £7.0 million surplus) are set out in note 10.
During the year, the Trustees of the Group's defined benefit pension schemes
entered into an agreement with Canada Life to fully insure the future benefits
of members of both schemes in a 'buy-in' arrangement. An asset for the bulk
annuity policy was subsequently recognised at a fair value equivalent to the
liabilities in the scheme. The liabilities continue to be revalued in line
with IAS 19, and the bulk annuity asset is revalued accordingly by an equal
and offsetting amount. Given that the risks relating to retirement benefits
are fully insured, we no longer consider this to be an area of estimation
uncertainty, although we note that the final premium payable to Canada Life is
subject to confirmation once a period of data cleanse is conducted, albeit
with no significant adjustments expected.
2.3 BUSINESS COMBINATIONS (NOTE 4)
2.3.1 Investec Wealth & Investment
Critical judgements
In 2023, the Group acquired the entire share capital of Investec Wealth &
Investment Limited (IW&I). The Group accounted for the transaction as a
business combination, as set out in Note 4.
Consideration receivable
A reduction in the value of IW&I goodwill by £5.1 million has been
recognised during the year. This is attributable to the recognition of
consideration receivable by the Group from the seller, Investec Bank plc,
under the terms of the acquisition. This reassessment of the fair value of net
assets acquired relates to new information received during the IFRS 3
measurement period about facts and circumstances that existed at the date of
acquisition. Any variance to the asset of £5.1 million recognised at 31
December 2024 will be a post-acquisition adjustment; a reasonable possible
change to this asset is an increase to cash by £0.9 million.
2.3.2 Saunderson House
Estimation uncertainty
In 2021, the Group acquired the entire share capital of Saunderson House
Limited which was recognised as a business combination. The consideration
included equity-settled deferred awards payable under the Saunderson House
Transaction Incentive Plan 2021, which was contingent on the recipients
remaining employees of the Group for a specific period, and was consequently
accounted for as remuneration for ongoing services from employment. The
amounts payable were expensed over the deferral period.
The amount payable under the Saunderson House Transaction Incentive Plan 2021
was subject to the achievement of certain operational and performance
targets, which were measured at 31 December 2024 ('the measurement date'). A
profit or loss charge was recognised in equity for the consideration payable.
Under the terms of the award, payment was calculated as 0.1% of the Saunderson
House funds under management (FUM) at the measurement date, excluding assets
that had not migrated to a Rathbones proposition by this date. In addition to
the FUM-based award were integration and discretionary awards.
These awards vested at 31 December 2024 (see note 4 for further detail),
therefore this matter is no longer considered an area of estimation
uncertainty.
3 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.
For management purposes, the Group is organised into two operating segments:
Wealth Management and Asset Management. Centrally incurred shared services are
allocated to these operating segments on the basis of the cost drivers that
generate the expenditure; principally, these are, the headcount of income
generating teams within the segment, the value of funds under management and
administration of the segment, the segment's total revenue, and the segment's
share of total expenditure. The allocation of these costs is shown in a
separate column in the table below, alongside the information presented for
internal reporting. Wealth Management Segmental Assets relate to assets held
within the Investment Management (which includes Financial Planning advice),
Banking and Trust Business Segments. Asset Management Segmental Assets are
assets held solely within the Asset Management Business Segment. Unallocated
Segmental Assets relate to the Net Defined Benefit Asset held on the balance
sheet.
IW&I was identified as a separate operating segment of the Group in 2023,
the results of the segment were presented in aggregate with the Group's Wealth
Management segment, on the basis that the long-term characteristics of both
are expected to align following the initial integration period of the
businesses. Due to the process of integrating IW&I into the wider business
during the current year, IW&I is no longer considered a separate operating
segment of the Group and is now considered to be a part of the Wealth
Management operating segment.
31 December 2024 Wealth Management Asset Management Shared Services Total
£m £m £m £m
Net investment management fee income 575.1 79.4 - 654.5
Net commission income 91.8 - - 91.8
Net interest income 62.3 1.6 - 63.9
Fees from advisory services 54.5 - - 54.5
Other income 30.5 0.7 - 31.2
Operating income 814.2 81.7 - 895.9
Staff costs − fixed (233.9) (7.9) (54.6) (296.4)
Staff costs − variable (129.5) (20.5) (18.2) (168.2)
Total staff costs (363.4) (28.4) (72.8) (464.6)
Other direct expenses (108.3) (15.4) (80.0) (203.7)
Allocation of shared services (140.3) (12.5) 152.8 -
Underlying operating expenses (612.0) (56.3) - (668.3)
Underlying profit before tax 202.2 25.4 - 227.6
Charges in relation to client relationships and goodwill (44.6) - - (44.6)
Acquisition-related and integration costs (83.4) - - (83.4)
Segment profit before tax 74.2 25.4 - 99.6
Profit before tax attributable to equity holders of the company 99.6
Taxation (34.1)
Profit for the year attributable to equity holders of the company 65.5
Wealth Management Asset Management Unallocated Assets Total
£m £m £m £m
Segment total assets 4,218.8 70.8 0.5 4,290.1
31 December 2023 Wealth Management Asset Management Shared Services Total
£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 40.5 - - 40.5
Other income 9.8 0.7 - 10.5
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 relationships and goodwill (25.2) - - (25.2)
Acquisition-related and integration costs (11.0) - (33.3) (44.3)
Segment profit before tax 69.2 21.7 (33.3) 57.6
Profit before tax attributable to equity holders of the company 57.6
Taxation (20.1)
Profit for the year attributable to equity holders of the company 37.5
Wealth Management Asset Management Unallocated Assets Total
£m £m £m £m
Segment total assets 4,099.6 117.8 7.0 4,224.4
The following table reconciles underlying operating expenses to operating
expenses:
2024 2023
£m £m
Underlying operating expenses 668.3 444.0
Charges in relation to client relationships and goodwill 44.6 25.2
Acquisition-related costs 83.4 44.3
Operating expenses 796.3 513.5
GEOGRAPHIC ANALYSIS
The following table presents operating income analysed by the geographical
location of the Group entity providing the service:
2024 2023
£m £m
United Kingdom 874.4 553.4
Channel Islands 21.5 17.7
Operating income 895.9 571.1
The following is an analysis of the carrying amount of non-current assets
analysed by the geographical location of the assets:
2024 2023
£m £m
United Kingdom 1,075.2 1,103.0
Channel Islands 3.0 2.9
Non-current assets 1,078.2 1,105.9
TIMING OF REVENUE RECOGNITION
The following table presents operating income analysed by the timing of
revenue recognition of the operating segment providing the service:
2024 2023
Wealth Management Asset Management Wealth Management Asset Management
£m £m £m £m
Products and services transferred at a point in time 96.9 - 44.4 -
Products and services transferred over time 717.3 81.7 459.5 67.2
814.2 81.7 503.9 67.2
MAJOR CLIENTS
The Group is not reliant on any one client or group of connected clients for
generation of revenues.
4 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 4
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 Group Plc.
As set out in note 8, the value of acquired goodwill has been adjusted during
the year for new information relating to facts and circumstances that existed
at the acquisition date.
Deferred Incentive awards
Deferred awards and contingent payments were granted to certain 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 each
respective vesting period. Details of the share awards are as follows:
Gross Grant date Grant date Final vesting date
amount fair value
£m £m
Rathbones Integration Incentive Scheme 39.0 6 October 2023 31.2 22 September 2027
The Rathbone Integration Incentive Scheme award of £39.0 million is payable
in shares, and will vest in three equal tranches annually on the second, third
and fourth anniversaries of the acquisition completion date, subject to
conditions relating to the client migration process. Vesting of the final
one-third of the shares on the fourth anniversary of the date of grant will be
subject to engagement in the client migration process. The gross amount of
£39.0 million represents management's best estimate of the extent to which
these conditions will be met. The fair value at the date of grant was
determined with reference to the share price at the date of grant less the
value of expected dividends receivable over the period up to vesting, as no
dividends will be receivable during the vesting period. There are no
market-related performance conditions attached to these awards.
A Business Enablement award of £6.9 million was also granted during the prior
year and is payable predominantly in cash to different groups of employees in
key business enablement functions. Recipients of the award who are classified
by the company as material risk-takers receive 50% of their total variable pay
in the form of shares of Rathbones Group plc. Approximately 30% of the total
award vested on 31 March 2024, and the remainder will vest on 31 March 2025,
subject to the recipients remaining employed until this date and other
conditions being met. The Group treats the cash element of the award as an
employee benefit under IAS 19, with a corresponding liability recognised for
the services received at the balance sheet date, and the share element of the
awards as equity-settled share-based payments under IFRS 2.
In May and June 2024, two additional awards were granted to certain employees
of 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 in the income statement for the above elements is as follows;
2024 2023
£m £m
Incentivisation awards 15.9 4.8
These costs are being reported as staff costs within integration-related costs
(see note 5).
SAUNDERSON HOUSE
On 20 October 2021, the Group acquired 100% of the ordinary share capital of
the Saunderson House Group.
Other Deferred Payments
In addition to a total cash consideration of £98.9 million paid in prior
years, the sale and purchase agreement detailed other deferred and contingent
payments to be made to the vendors for the sale of the shares of the
Saunderson House Group. These payments were contingent on the recipients
remaining in employment with the Group for the duration of the respective
deferral periods. Consequently, the awards were treated as remuneration for
post-combination services and the cost was charged to the income statement
over the respective vesting periods. Details of each of these elements are as
follows:
Gross Grant date Grant date Vesting date
amount fair value
£m £m
Initial share consideration 5.2 20 October 2021 5.5 20 October 2024
Management incentive scheme 5.7 20 December 2021 4.9 31 December 2024
All of these payments were accounted for as equity-settled share-based
payments under IFRS 2.
- Initial share consideration of £5.2 million was
issued on the date of acquisition and vested on the third anniversary of the
acquisition date, which fell during the year. As the share issuance was in
pursuance of the arrangement to acquire the shares of the Saunderson House
Group, the premium of £5.2 million on the issuance of these shares was
recognised within the merger reserve.
- The incentive plan for the Saunderson House senior
management team was subject to certain operational and financial performance
targets at the measurement date of 31 December 2024. The award was calculated
as 0.1% of qualifying funds under management at the measurement date (see note
2). Additionally, £1.0 million of integration awards vested at this date.
£0.5 million of discretionary awards were granted to employees as part of the
scheme in previous years.
These costs are being reported as staff costs within acquisition-related costs
(see note 5).
5 ACQUISITION-RELATED AND INTEGRATION COSTS
During 2024 £83.4 million of acquisition-related and integration costs were
incurred (2023: £44.3 million).
2024 2023
£m £m
Acquisition of Speirs & Jeffrey - 1.0
Acquisition of Investec Wealth & Investment 75.5 36.5
Acquisition of Saunderson House 7.9 6.8
Acquisition-related and Integration costs 83.4 44.3
Total acquisition-related staff costs of £21.4 million (2023: 11.0 million)
during the year relate to equity-settled share-based payments.
COSTS RELATING TO THE ACQUISITION OF INVESTEC WEALTH & INVESTMENT
(IW&I)
The Group has incurred the following costs in relation to the acquisition of
IW&I, summarised by the following classification within the income
statement:
2024 2023
£m £m
Acquisition costs:
Acquisition-related legal and advisory costs - 21.3
Integration costs:
Integration related staff costs 48.3 6.2
Other Integration Costs 27.2 9.0
Acquisition-related and Integration costs 75.5 36.5
Acquisition-related legal and advisory costs of £nil (2023: £21.3 million)
and integration costs of £nil (2023: £9.0 million) have not been allocated
to a specific operating segment (note 3).
Integration-related staff costs of £48.3 million (2023: £6.2 million)
predominately relate to restructuring costs of £20.1 million, the majority of
which have not yet been settled and have been recognised within accruals and
other liabilities, and deferred incentive awards of £20.4 million.
Other integration costs of £27.2 million (2023: £9.0 million) mainly relate
to technology and consultancy costs.
COSTS RELATING TO THE ACQUISITION OF SPEIRS & JEFFREY
The Group has incurred the following costs in relation to the 2018 acquisition
of Speirs & Jeffrey, summarised by the following classification within the
income statement:
2024 2023
£m £m
Acquisition costs:
Staff costs - 1.0
Acquisition-related and Integration costs - 1.0
COSTS RELATING TO THE ACQUISITION OF SAUNDERSON HOUSE
The Group has incurred the following costs in relation to the acquisition of
Saunderson House Group, summarised by the following classification within the
income statement:
2024 2023
£m £m
Acquisition costs:
Staff costs 3.3 3.9
Integration costs:
Other Integration Costs 4.6 2.9
Acquisition-related and Integration costs 7.9 6.8
Integration costs of £nil (2023: £2.9 million) have not been allocated to a
specific operating segment (note 3).
Staff costs of £3.3 million (2023: £3.9 million) relate to deferred
remuneration.
6 INCOME TAX EXPENSE
2024 2023
£m £m
Current tax:
- charge for the year 41.1 22.8
- adjustments in respect of prior years (2.2) 1.1
Deferred tax:
- credit for the year (6.4) (1.9)
- adjustments in respect of prior years 1.6 (1.9)
34.1 20.1
The tax charge is calculated based on the estimated amount payable as at the
balance sheet date. Any subsequent differences between these estimates and the
actual amounts paid are recorded as adjustments in respect of prior years.
The tax charge on profit for the year is higher (2023: higher) than the
standard rate of corporation tax in the UK of 25.0% (2023: 23.5%). 23.5% is a
composite tax rate, since the UK corporation tax rate was 19.0% until 31 March
2023 and 25.0% for the remainder of the financial year.
The differences are explained below:
2024 2023
£m £m
Tax on profit from ordinary activities at the standard rate of 25% 24.9 13.6
(2023: 23.5%)
Effects of:
- disallowable expenses 7.1 8.0
- share-based payments 2.9 (0.2)
- tax on overseas earnings (0.8) (0.7)
- adjustments in respect of prior year (0.6) (0.8)
- deferred payments to previous owners of acquired - 0.3
companies
- change in corporation tax rate on deferred tax - (0.1)
- Tax impact on intra-group dividends 0.6 -
34.1 20.1
£nil of current tax on share-based payments was charged to equity during the
year (2023: £0.4 million).
On 11 July 2023, the government of the United Kingdom, 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%. We have undertaken a review of the
regime and determined that the Group will not be in scope for Pillar II income
tax reporting until the year ended 31 December 2026, we will continue to
monitor.
7 DIVIDENDS
2024 2023
£m £m
Amounts recognised as distributions to equity holders in the year:
- final dividend for the year ended 31 December 2023 25.2 33.4
of 24.0p (2022: 56.0p) per share
- interim dividend for the year ended 31 December 31.7 17.5
2024 of 30.0p (2023: 29.0p) per share
- second interim dividend for the year ended 31 - 20.5
December 2023 of 34.0p per share
Dividends paid in the year of 54.0p (2023: 119.0p) per share 56.9 71.4
Proposed final dividend for the year ended 31 December 2024 of 60.0p (2023: 65.2 24.9
24.0p) per share
An interim dividend of 30.0p per share was paid on 1 October 2024 to
shareholders on the register at the close of business on 6 September 2024
(2023: 29.0p).
A second interim dividend was not paid in 2024 (2023: 34.0p).
A final dividend declared of 63.0p per share (2023: 24.0p) is payable on
13 May 2025 to shareholders on the register at the close of business on
11 April 2025. The final dividend is subject to approval by shareholders at
the Annual General Meeting on 8 May 2025 and has not been included as a
liability in these financial statements.
8 INTANGIBLE ASSETS
Goodwill of £340.1 million was initially recognised in 2023 as a result of
the acquisition of IW&I (see note 4), representing 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 £337.3 million, due to management
receiving information during the 12 month measurement period post-acquisition
about facts and circumstances that existed at the acquisition date. A
reduction of £5.1 million was attributable to the recognition of
consideration receivable owed to the Group by the seller (see note 2). 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, and a £1.5 million increase attributable to a
re-measurement of acquired property lease assets.
Client relationships of £350.3 million were initially recognised as part of
the acquisition of IW&I (see note 4). An average useful life of 14 years
was assigned to these relationships, based on observed historic attrition
rates. During the year, these intangible assets 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 also reduced accordingly by £0.5 million.
2024 2023
£m £m
Goodwill 504.9 507.8
Other intangible assets 477.8 517.5
982.7 1,025.3
GOODWILL
Goodwill acquired in a business combination is allocated, at acquisition, to
the cash-generating units (CGUs) that are expected to benefit from that
business combination.
The carrying amount of goodwill has been allocated as follows:
Wealth IW&I Asset Management Total
Management
£m £m £m £m
Cost
At 1 January 2023 167.7 - 1.9 169.6
Acquired through business combinations 82.1 258.0 - 340.1
At 1 January 2024 249.8 258.0 1.9 509.7
Other movements - (2.9) - (2.9)
Reclassification 255.1 (255.1) - -
At 31 December 2024 504.9 - 1.9 506.8
Impairment
At 1 January 2023 - - 1.9 1.9
Charge for the year - - - -
At 1 January 2024 - - 1.9 1.9
Charge for the year - - - -
At 31 December 2024 - - 1.9 1.9
Carrying amount at 31 December 2024 504.9 - - 504.9
Carrying amount at 31 December 2023 249.8 258.0 - 507.8
Carrying amount at 1 January 2023 167.7 - - 167.7
Due to a change in the Groupʼs reporting structure and operating segments in
the year (see note 3), the Group now monitors total goodwill at the Wealth
Management reporting segment level, whereas previously IW&I goodwill was
monitored separately. This has resulted in a reclassification of the total
acquired IW&I goodwill to the Wealth Management column in the table above
as the CGU groups are considered to have merged.
IMPAIRMENT
The recoverable amounts of the CGUs to which goodwill is allocated are
assessed using value-in-use calculations. The Group prepares cash flow
forecasts derived from the most recent financial budgets approved by the
Board, 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 CGU (see table below), 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 economic growth rate. 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 each CGU.
The pre-tax rate used to discount the forecast cash flows for each CGU is
shown in the table below; 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 CGU operates.
There was no impairment to the goodwill allocated to the Wealth Management CGU
during the period. The Group has considered any reasonably foreseeable changes
to the assumptions used in the value-in-use calculation and the level of risk
associated with those cash flows. Based on this assessment, no such change
would result in an impairment of goodwill.
Wealth Management
At 31 December 2024 2023
Discount rate 16.1% 14.6%
Average annual revenue growth rate 4.5% 4.1%
Average annual profit margin 28.6% 21.0%
Terminal growth rate 1.5% 1.5%
The terminal growth rate of 1.5% is aligned with current expectations
of long-term UK economic growth. The increase in the average annual revenue
growth rate since the prior year primarily reflects forecast growth in funds
under management. The increase in the expected operating profit margin is
primarily due to higher funds under management and the realisation of
synergies as a result of the integration of IW&I into the Group's Wealth
Management operating segment.
OTHER INTANGIBLE ASSETS
Client Software Purchased Total
relationships development software
costs
£m £m £m £m
Cost
At 1 January 2023 300.9 13.5 54.9 369.3
Internally developed in the year - 1.0 - 1.0
Acquired through business combinations 350.3 1.7 2.0 354.0
Purchased in the year 2.6 - 2.2 4.8
Disposals (2.8) - - (2.8)
At 1 January 2024 651.0 16.2 59.1 726.3
Internally developed in the year - 1.0 - 1.0
Other movements (1.2) - - (1.2)
Purchased in the year 11.6 - 0.8 12.4
Disposals (2.4) - (5.5) (7.9)
At 31 December 2024 659.0 17.2 54.4 730.6
Amortisation and impairment
At 1 January 2023 125.9 10.0 44.9 180.8
Amortisation charge 25.2 1.8 3.8 30.8
Disposals (2.8) - - (2.8)
At 1 January 2024 148.3 11.8 48.7 208.8
Amortisation charge 44.6 2.2 5.1 51.9
Disposals (2.4) - (5.5) (7.9)
At 31 December 2024 190.5 14.0 48.3 252.8
Carrying amount at 31 December 2024 468.5 3.2 6.1 477.8
Carrying amount at 31 December 2023 502.7 4.4 10.4 517.5
Carrying amount at 1 January 2023 175.0 3.5 10.0 188.5
Purchases of client relationships of £11.6 million (2023: £2.6 million) in
the year relate to payments made to investment managers and third parties on
the acquisition of client relationships.
The total amount charged to profit or loss in the year in relation to client
relationship intangible assets was £44.6 million (2023: £25.2 million).
Purchased software with a cost of £37.6 million (2023: £36.4 million) has
been fully amortised but remains in use.
9 PROVISIONS
Deferred, Deferred Legal & professional and Property- Onerous Contract Total
variable costs consideration compensation related
to acquire client in business
relationship combinations
intangible assets
£m £m £m £m £m £m
At 1 January 2023 4.4 - 2.7 5.8 - 12.9
Charged to profit or loss - - 9.1 0.2 1.2 10.5
Unused amount credited to - (0.1) (1.1) - - (1.2)
profit or loss
Net charge to profit or loss - (0.1) 8.0 0.2 1.2 9.3
Acquisitions through business combinations - 3.4 1.9 5.4 - 10.7
Other movements 2.6 - - - - 2.6
Utilised/paid during the year (2.3) - (7.7) - - (10.0)
At 1 January 2024 4.7 3.3 4.9 11.4 1.2 25.5
Charged to profit or loss - - 6.4 13.1 3.1 22.6
Unused amount credited to profit or loss - - (2.6) (4.9) (0.2) (7.7)
Net charge to profit or loss - - 3.8 8.2 2.9 14.9
Other movements 11.6 - - - - 11.6
Utilised/paid during the year (7.9) (0.7) (2.6) (11.2) (1.5) (23.9)
At 31 December 2024 8.4 2.6 6.1 8.4 2.6 28.1
Payable within 1 year 0.1 2.6 5.7 3.0 1.8 13.2
Payable after 1 year 8.3 - 0.4 5.4 0.8 14.9
8.4 2.6 6.1 8.4 2.6 28.1
DEFERRED, VARIABLE COSTS TO ACQUIRE CLIENT RELATIONSHIP INTANGIBLE ASSETS
Other movements in provisions relate to deferred payments to investment
managers and third parties on the acquisition of client relationships, which
have been previously capitalised.
DEFERRED CONSIDERATION IN BUSINESS COMBINATIONS
Deferred Consideration in Business Combinations relates to IW&I'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 & PROFESSIONAL AND COMPENSATION
During the ordinary course of business the Group may, from time to time, be
subject to complaints, as well as threatened with 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, representing
the Group's best estimate of the amount required to settle the obligation at
the relevant balance sheet date. The Group's best estimate is based on legal
advice and management's expectation of the most likely outcome, the estimation
of which may be supported 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 £8.4 million relate to dilapidation
obligations expected to arise on leasehold premises held by the Group (2023:
£11.4 million). During the year, the Group's policy for calculating
dilapidation provisions was revised (see note 1.8).
During the year, the Group assigned its lease at 8 Finsbury Circus to a new
tenant. As a result, the Group recognised a property-related provision of
£11.2 million at the date the property was vacated, which was paid during the
year. The Group also released its dilapidation obligations relating to the
property of £3.1 million. The net cost has been recognised within
acquisition-related costs.
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 prior year
end. The provision was settled in full during the year.
The onerous contract provision of £2.7 million (2023: £nil) relates to the
estimated cost to exit contracts that are no longer required as a result of
the combination of IW&I with Rathbones, where the term of the contract
exceeds the period over which IW&I, or the wider Rathbones Group, is
expected to derive benefit from that contract.
Amounts payable after one year
Property-related provisions of £5.4 million are expected to be settled within
10 years of the balance sheet date, which corresponds to the longest lease for
which a dilapidations provision is being held. Remaining provisions payable
after one year are expected to be settled within 9 years of the balance sheet
date.
10 LONG-TERM EMPLOYEE BENEFITS
DEFINED CONTRIBUTION PENSION SCHEME
The Group operates a defined contribution group personal pension scheme and
contributes to various other personal pension arrangements for certain
directors and employees. The total contributions made to these schemes during
the year were £32.3 million (2023: £21.0 million). The Group also operates
a defined contribution scheme for overseas employees, for which the total
contributions were £0.1 million (2023: £0.1 million).
DEFINED BENEFIT PENSION SCHEMES
The Group operates two defined benefit pension schemes that operate within the
UK legal and regulatory framework: the Rathbone 1987 Scheme and the Laurence
Keen Retirement Benefit Scheme. The schemes' investments are managed on a
discretionary basis, in accordance with the statements of investment
principles agreed by the trustees. Scheme assets are held separately from
those of the Group.
The trustees of the schemes are required to act in the best interest of the
schemes' beneficiaries. The appointment of trustees is determined by the
schemes' trust documentation and legislation. The Group has a policy that one
third of all trustees should be nominated by members of the schemes.
The Laurence Keen Scheme was closed to new entrants and future accrual with
effect from 30 September 1999. Past service benefits continue to be calculated
by reference to final pensionable salaries. From 1 October 1999, all the
active members of the Laurence Keen Scheme were included under the Rathbone
1987 Scheme for accrual of retirement benefits for further service. The
Rathbone 1987 Scheme was closed to new entrants with effect from 31 March 2002
and to future accrual from 30 June 2017.
The schemes are valued by independent actuaries at least every three years
using the projected unit credit method, which looks at the value of benefits
accruing over the years following the valuation date based on projected salary
to the date of termination of services, discounted to a present value using a
rate that reflects the characteristics of the liability. The valuations are
updated at each balance sheet date in between full valuations. The latest full
actuarial valuations were carried out as at 31 December 2022.
In June 2023, the High Court handed down a judgement that casts doubt on the
validity of previous pension scheme amendments made by schemes which were
previously contracted out. This was in the Court Case of Virgin Media Limited
Vs NTL Pension Trustees II Limited, where it was determined that a Deed of
Amendment was not valid because the accompanying written actuarial
confirmation under Section 37 of the Pensions Act 1995 was not present. An
appeal to the ruling in July 2024 upheld the original ruling. There remains a
risk that the benefits of schemes affected by the ruling turn out to be
incorrect. The Rathbone 1987 Scheme was never contracted out and so is not
impacted by this ruling, however there could be a potential impact on the
Lawrence Keen Scheme if any amendments are found to be invalid. The impact is
not currently known. Based on the information currently available, which has
been assessed by the Actuary, we have not identified this as material to the
Group. We will continue to monitor.
The assumptions used by the actuaries, to estimate the schemes' liabilities,
are the best estimates chosen from a range of possible actuarial assumptions.
Due to the timescale covered by the liability, these assumptions may not
necessarily be borne out in practice.
The principal actuarial assumptions used, which reflect the different
membership profiles of the schemes, were:
Laurence Keen Scheme Rathbone 1987 Scheme
2024 2023 2024 2023
% % % %
(unless stated) (unless stated) (unless stated) (unless stated)
Rate of increase of salaries n/a n/a n/a n/a
Rate of increase of pensions in payment 3.7 3.7 3 2.9
Rate of increase of deferred pensions 3.2 3.1 3.2 3.1
Discount rate 5.4 4.4 5.4 4.4
Inflation* 3.2 3.1 3.2 3.1
Percentage of members transferring out of the schemes per annum - 2 - 2
Average age of members at date of transferring out (years) n/a 52.5 n/a 52.5
* *Inflation assumptions are based on the Retail Prices Index
Over the year, the financial assumptions have been amended to reflect changes
in market conditions. Specifically:
1. the discount rate has increased by 0.1% to reflect an increase in the
yields available on AA-rated Corporate Bonds;
2. the assumed rate of future inflation has increased by 0.1% and reflects
expectations of long-term inflation as implied by changes in the Bank of
England inflation yield curve;
3. the assumed rates of future increases to pensions in payment, where
linked to inflation, have increased by 0.1% for the Rathbone 1987 Scheme and
remain unchanged for the Laurence Keen Scheme
Over the year the mortality assumptions have been updated. The standard
mortality tables known as Series 4 tables (2023: Series 3) are used, with the
'Light' version of the tables used to reflect an expectation that members of
the schemes will experience longer than average life expectancies. The CMI
model used to project future improvements in mortality has been updated from
the 2022 version to the 2023 version.
2% of members not yet in receipt of their pension are assumed to transfer out
of the scheme each year (2023: 2%).
The proportion of members assumed to be married at retirement age is 80%
(2023: 80%).
The assumed duration of the liabilities for the Laurence Keen Scheme is 12
years (2023: 12 years) and the assumed duration for the Rathbone 1987 Scheme
is 15 years (2023: 16 years).
The normal retirement age for members of the Laurence Keen Scheme is 65 (60
for certain former directors). The normal retirement age for members of the
Rathbone 1987 Scheme is 60 for service prior to 1 July 2009 and 65 thereafter,
following the introduction of pension benefits based on Career-Average
Revalued Earnings (CARE) from that date.
The assumed life expectancies on retirement were:
2024 2023
Males Females Males Females
Retiring today: aged 60 27.4 29.2 27.6 29.5
aged 65 22.7 24.2 22.8 24.5
Retiring in 20 years: aged 60 29.2 31 29.4 31.2
aged 65 24.2 25.9 24.3 26.1
The amount included in the balance sheet arising from the Group's assets in
respect of the schemes is as follows:
2024 2023
Laurence Keen Rathbone Total Laurence Keen Rathbone Total
Scheme 1987 £m Scheme 1987 £m
£m Scheme £m Scheme
£m £m
Present value of defined benefit obligations (6.2) (81.7) (87.9) (7.3) (93.8) (101.1)
Fair value of scheme assets 6.5 81.9 88.4 8.2 99.9 108.1
Net defined benefit asset 0.3 0.2 0.5 0.9 6.1 7.0
The amounts recognised in profit or loss, within operating expenses, are as
follows:
2024 2023
Laurence Keen Rathbone Total Laurence Keen Rathbone Total
Scheme
1987
£m
Scheme
1987
£m
£m
Scheme
£m
Scheme
£m
£m
Interest expense - (0.4) (0.4) (0.1) (0.4) (0.5)
- (0.4) (0.4) (0.1) (0.4) (0.5)
Remeasurements of the net defined benefit asset have been reported in other
comprehensive income. The actual return on scheme assets was a fall in value
of £1.2 million (2023: £0.4 million rise) for the Laurence Keen Scheme and a
fall in value of £18.7 million (2023: £3.6 million rise) for the Rathbone
1987 Scheme.
Movements in the present value of defined benefit obligations were as follows:
2024 2023
Laurence Keen Rathbone Total Laurence Keen Rathbone Total
Scheme 1987 £m Scheme 1987 £m
£m Scheme £m Scheme
£m £m
At 1 January 7.3 93.8 101.1 7.2 87.5 94.7
Interest cost 0.4 4.1 4.5 0.3 4.1 4.4
Actuarial experience gains/(losses) - (0.1) (0.1) 0.1 3.4 3.5
Actuarial gains/(losses) arising from:
- demographic assumptions (0.1) (0.4) (0.5) (0.1) (1.5) (1.6)
- financial assumptions (0.8) (12.8) (13.6) 0.2 2.8 3.0
Past service cost - - - - - -
Benefits paid (0.6) (2.9) (3.5) (0.4) (2.5) (2.9)
At 31 December 6.2 81.7 87.9 7.3 93.8 101.1
Movements in the fair value of scheme assets were as follows:
2024 2023
Laurence Keen Rathbone Total Laurence Keen Rathbone Total
Scheme
1987
£m
Scheme
1987
£m
£m
Scheme
£m
Scheme
£m
£m
At 1 January 8.2 99.9 108.1 8.1 96.0 104.1
Remeasurement of net defined benefit asset/(liability)
- interest income 0.4 4.4 4.8 0.4 4.5 4.9
- return on scheme assets (excluding amounts (1.5) (23.2) (24.7) - (0.8) (0.8)
included in interest income)
Contributions from the sponsoring companies - 3.7 3.7 0.1 2.8 2.9
Benefits paid (0.6) (2.9) (3.5) (0.4) (2.6) (3.0)
At 31 December 6.5 81.9 88.4 8.2 99.9 108.1
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 bulk policies, with some residual funds
in the Schemes' bank accounts or cash deposits. 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.
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 the following;
• counterparty default risk - risk of insurer default is considered low,
with a number of protections in place against this.
• risk that there are changes to the premium - final premium payable to
the insurer is subject to confirmation following a period of data cleanse, no
significant adjustments expected.
The analysis of the scheme assets, measured at bid prices, at the balance
sheet date was as follows:
2024 2023 2024 2023
Laurence Keen Scheme
Fair value Fair value Current Current
£m £m allocation allocation
% %
Equity instruments - - - -
Debt instruments:
- United Kingdom corporate bonds - 0.4
- 0.4 - 5.0
Liability-driven investments - 7.8 - 93.0
Cash 0.4 0.1 5.0 2.0
Annuities 6.1 - 95.0 -
At 31 December 6.5 8.3 100.0 100.0
2024 2023 2024 2023
Rathbone 1987 Scheme
Fair value Fair value Current Current
£m £m allocation allocation
% %
Liability-driven investments - 98.4 - 99.0
Cash 0.2 1.5 - 1.0
Other 81.7 - 100.0 -
At 31 December 81.9 99.9 100.0 100.0
The key assumptions affecting the results of the valuation are the discount
rate, future inflation, mortality. In order to demonstrate the sensitivity of
the results to these assumptions, the actuary has recalculated the defined
benefit obligations for each scheme by varying each of these assumptions
in isolation whilst leaving the other assumptions unchanged. Changes to these
assumptions of a different, but similar, magnitude would result in a broadly
proportional change in these figures. Where the changes to these assumptions
are more significant the impact will be more significant, but potentially not
proportional. These events within the sensitivity analysis are unlikely to
occur in isolation. For example, in order to demonstrate the sensitivity of
the results to the discount rate, the actuary has recalculated the defined
benefit obligations for each scheme using a discount rate that is 0.5% higher
than that used for calculating the disclosed figures. A similar approach has
been taken to demonstrate the sensitivity of the results to the other key
assumptions. A summary of the sensitivities in respect of the total of the two
schemes' defined benefit obligations is set out below.
Combined impact on schemes' liabilities
(Decrease)/increase (Decrease)/increase
£m %
0.5% increase in:
- discount rate (6.3) (7.2)
0.5% increase in:
- rate of inflation 3.6 4.1
1-year increase to:
- longevity at 60 3.5 4.0
The total contributions made by the Group to the 1987 Scheme during the year
were £3.7 million (2023: £2.8 million).
There have been no contributions (2023: £0.2 million) made by the Group to
the Laurence Keen Scheme during the year.
Per IAS 19, companies are required to limit the value of any defined benefit
asset to the lower of the surplus in the plan and the defined benefit asset
ceiling, where the asset ceiling is the present value of economic benefits
available in the form of refunds from the plan or reductions in future
contributions to the plan. The company expects to access any surplus assets
remaining in the plan once all members have left after gradual settlement of
the liabilities. Therefore, the net asset is deemed to be recoverable and the
effect of the asset ceiling is £nil.
11 FAIR VALUES
The table below analyses 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 31 December 2024 Level 1 Level 2 Level 3 Total
£m £m £m £m
Assets
Fair value through profit or loss:
- equity securities - - - -
- - - -
At 31 December 2023 Level 1 Level 2 Level 3 Total
£m £m £m £m
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 year (2023: none).
The fair values of the Group's other financial assets and liabilities are not
materially different from their carrying values, with the exception of the
following:
- Investment debt securities measured at amortised cost comprise bank and
building society certificates of deposit, which have fixed coupons, and
treasury bills. The fair value of the debt securities at 31 December 2024 was
£1,249.4 million (2023: £1,296.8 million) and the carrying value was
£1,278.2 million (2023: £1,294.6 million). Fair value of debt securities is
based on market bid prices, and hence would be categorised as level 1 within
the fair value hierarchy.
- Subordinated loan notes comprise Tier 2 loan notes. The fair value of
the loan notes at 31 December 2024 was £34.2 million (2023: £37.4 million)
and the carrying value was £39.9 million (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 in 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. During the current year, 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:
2024 2023
£m £m
At 1 January 1.2 3.1
Total unrealised gains/(losses) recognised in profit or loss - 1.0
Total disposals (1.2) (2.9)
At 31 December - 1.2
The gains or losses relating to the fair value through profit or loss equity
securities is included within 'other operating income' in the consolidated
statement of comprehensive income.
There were no other gains or losses arising from changes in the fair value of
financial instruments categorised as level 3 within the fair value hierarchy.
12 EARNINGS PER SHARE
Earnings used to calculate earnings per share on the bases reported in these
financial statements were:
2024 2023
Pre-tax Taxation Post-tax Pre-tax Taxation Post-tax
£m £m £m £m £m £m
Underlying profit attributable to shareholders 227.6 (59.9) 167.7 127.1 (30.3) 96.8
Charges in relation to client relationships and goodwill (44.6) 10.2 (34.4) (25.2) 5.9 (19.3)
Acquisition-related costs (83.4) 15.6 (67.8) (44.3) 4.3 (40.0)
Profit attributable to shareholders 99.6 (34.1) 65.5 57.6 (20.1) 37.5
Basic earnings per share has been calculated by dividing profit attributable
to shareholders by the weighted average number of shares in issue throughout
the year, excluding own shares, of 103,729,536 (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 and outstanding employee share options.
2024 2023
Weighted average number of ordinary shares in issue during the year - basic 103,729,536 71,269,129
Dilutive effect of share options and awards 4,481,773 2,605,448
Weighted average number of diluted ordinary shares outstanding 108,211,309 73,874,577
2024 2023
Earnings per share for the year attributable to equity holders of the company:
- basic 63.0p 52.6p
- diluted 60.4p 50.8p
Underlying earnings per share for the year attributable to equity holders of
the company:
- basic 161.6p 135.8p
- diluted 154.9p 131.0p
Underlying earnings per share is calculated in the same way as earnings per
share, but by reference to underlying profit attributable to shareholders.
13 RELATED PARTY TRANSACTIONS
TRANSACTIONS WITH KEY MANAGEMENT PERSONNEL
The remuneration of the key management personnel of the Group, who 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, is set out below.
In the current year, as part of a review of individuals defined as senior
management for the group, the prior year disclosure has been restated. The
result of the restatement has been to decrease short-term employee benefits by
£5.6 million, decrease other long-term benefits by £1.5 million and decrease
share based payments by £0.1 million for 2023.
Gains on options exercised by directors during the year totalled £nil (2023:
£nil).
2024 2023
£m £m
Short-term employee benefits 8.4 7.6
Other long-term benefits (0.1) (0.2)
Share-based payments 2.4 2.5
10.7 9.9
Dividends totalling £0.2 million were paid in the year (2023: £0.3 million)
in respect of ordinary shares held by key management personnel and their close
family members.
At 31 December 2024, key management personnel and their close family members
had gross outstanding deposits of £0.9 million (2023: £1.0 million) and
gross outstanding banking loans of £nil million (2023: 0.1 million). A
number of the Group's key management personnel 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. All transactions were made on
normal business terms.
OTHER RELATED PARTY TRANSACTIONS
The Group's transactions with the pension funds are described in note 10. At
31 December 2024, no amounts were outstanding with either the Laurence Keen
Scheme or the Rathbone 1987 Scheme (2023: none).
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 31 December 2024 12.6 million (2023: £8.3) which is predominately
related to IW&I employee salary costs and associated payroll taxes which
are outsourced to Investec Bank plc under the TSA. A gross receivable of £6.4
million has been recognised at year-end, predominately attributable to the
recognition of £5.1 million of consideration receivable by the Group from
Investec Bank plc under the terms of the acquisition agreement (note 2).
IW&I also has a small number of legacy client related arrangements with
Investec Bank plc. 6.4The total expense recognised with respect to Investec
Bank plc in the period is as follows:
2024 2023
£m £m
Expense incurred under TSA 10.7 4.8
Expense incurred under OSA 13.4 -
Expenses incurred on behalf of clients 0.5 -
24.6 4.8
IW&I partially sublets certain regional office space to Investec Bank plc
companies and charges Investec Bank plc for use of research. Total fees
receivable under these arrangements at 31 December 2024 are as follows;
2024 2023
£m £m
Research fees 0.2 0.3
Property fees 0.4 0.1
0.6 0.4
One Group subsidiary, Rathbones Asset Management Limited, has authority to
manage the investments within a number of unit trusts. During 2024, the Group
managed 28 unit trusts, Sociétés d'Investissement à Capital Variable
(SICAVs) and open-ended investment companies (OEICs) (together, 'collectives')
(2023: 28 unit trusts and OEICs).
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:
2024 2023
Year ended 31 December £m £m
Total management fees 82.7 69.6
2024 2023
As at 31 December £m £m
Management fees owed to the Group 7.2 6.5
7.2 6.5
Total management fees are included within 'fee and commission income' in the
consolidated statement of comprehensive income.
Management fees owed to the Group are included within 'accrued income'.
All amounts outstanding with related parties are unsecured and will be settled
in cash. No guarantees have been given or received. No expected credit loss
provisions have been made in respect of the amounts owed by related parties.
14 CONSOLIDATED STATEMENT OF CASH FLOWS
For the purposes of the consolidated statement of cash flows, cash and cash
equivalents comprise the following balances with less than three months until
maturity from the date of acquisition:
2024 2023
£m £m
Cash and balances at central banks 1,166.0 1,036.0
Loans and advances to banks 293.2 266.9
At 31 December 1,459.2 1,302.9
Mandatory reserve deposits of £nil (2023: £2.3 million) are held with
central banks in accordance with statutory requirements. As these deposits are
not held in demand accounts,
and are not available to finance the Group's day-to-day operations, they are
excluded from cash
and cash equivalents.
Cash flows arising from the issue/(repurchase) of ordinary shares comprise:
2024 2023
£m £m
Share capital issued 0.1 2.2
Share premium on shares issued 5.5 2.3
Merger reserve on shares issued - 747.4
Shares issued in relation to share-based schemes and business combinations for - (751.9)
which no cash consideration was received
Proceeds from issue of share capital 5.6 -
Shares repurchased and placed into own shares (22.0) (16.0)
Net issue/(repurchase) of ordinary shares (16.4) (16.0)
During the year, £22.0 million (2023: £16.0 million) of shares were
repurchased and recognised within the Group's own shares.
A reconciliation of the movements of financing liabilities and equity to cash
flows arising from financing activities is as follows:
Subordinated Lease liabilities Liabilities from financing activities Share capital/ Reserves Retained Total Total
loan notes £m £m premium £m earnings equity £m
£m £m £m £m
At 1 January 2024 39.9 74.9 114.8 317.7 768.8 263.7 1,350.2 1,465.0
Changes from financing cash flows
Proceeds from issue of share capital - - - 5.6 - - 5.6 5.6
Payments for share repurchases - - - - (22.0) - (22.0) (22.0)
Dividends paid - - - - - (56.9) (56.9) (56.9)
Interest charge (2.3) (2.8) (5.1) - - - - (5.1)
Payment for lease liabilities - (9.7) (9.7) - - - - (9.7)
Payment on exit of property leases - (11.2) (11.2) - - - - (11.2)
Total financing cash flows (2.3) (23.7) (26.0) 5.6 (22.0) (56.9) (73.3) (99.3)
Total non-cash movements 2.3 (6.4) (4.1) - 9.5 73.0 82.5 78.4
At 31 December 2024 39.9 44.8 84.7 323.3 756.3 279.8 1,359.4 1,444.1
Subordinated Lease liabilities Liabilities from financing Share capital/ Reserves Retained Total Total
loan notes £m activities premium £m earnings equity £m
£m £m £m £m £m
At 1 January 2023 39.9 50.5 90.4 313.2 24.4 297.2 634.8 725.2
-
Changes from financing cash flows -
Proceeds from issue of share capital - - - 2.3 (2.3) - - -
Payments for share repurchases - - - - (16.0) - (16.0) (16.0)
Dividends paid - - - - - (71.4) (71.4) (71.4)
Interest charge (2.3) (3.3) (5.6) - - - - (5.6)
Payment for lease liabilities - (7.5) (7.5) - - - - (7.5)
Total financing cash flows (2.3) (10.8) (13.1) 2.3 (18.3) (71.4) (87.4) (100.5)
Total non-cash movements 2.3 35.2 37.5 2.2 762.7 37.9 802.8 840.3
At 31 December 2023 39.9 74.9 114.8 317.7 768.8 263.7 1,350.2 1,465.0
15 EVENTS AFTER THE BALANCE SHEET DATE
There have been no material events occurring between the balance sheet date
and the date of signing this report.
INDEPENDENT AUDITOR'S REPORT TO THE SHAREHOLDERS OF RATHBONES GROUP PLC ON THE
PRELIMINARY ANNOUNCEMENT OF RATHBONES GROUP PLC
As the independent auditor of Rathbones Group Plc we are required by UK
Listing Rule LR 9.7A.1(2)R to agree to the publication of Rathbones Group
Plc's preliminary announcement statement of annual results for the period
ended 31 December 2024.
The preliminary statement of annual results for the period ended 31 December
2024 includes:
- Disclosures required by the Listing Rules;
- Chair's statement;
- Group Chief Executive's review;
- Financial performance;
- Segmental review;
- Financial position;
- Liquidity and cash flow;
- Risk management and control;
- Principal risks;
- Consolidated statement of comprehensive income;
- Consolidated statement of changes in equity;
- Consolidated balance sheet;
- Consolidated statement of cash flows; and
- Notes 1 to 15 to the preliminary announcement.
We are not required to agree to the publication of presentations to analysts,
trading statements, interim management statements.
The directors of Rathbones Group Plc are responsible for the preparation,
presentation and publication of the preliminary statement of annual results in
accordance with the UK Listing Rules.
We are responsible for agreeing to the publication of the preliminary
statement of annual results, having regard to the Financial Reporting
Council's Bulletin "The Auditor's Association with Preliminary Announcements
made in accordance with UK Listing Rules".
STATUS OF OUR AUDIT OF THE FINANCIAL STATEMENTS
Our audit of the annual financial statements of Rathbones Group Plc is
complete and we signed our auditor's report on 25 February 2025. Our
auditor's report is not modified and contains no emphasis of matter paragraph.
Our audit report on the full financial statements sets out the following key
audit matters which had the greatest effect on our overall audit strategy; the
allocation of resources in our audit; and directing the efforts of the
engagement team, together with how our audit responded to those key audit
matters and the key observations arising from our work. These matters were
addressed in the context of our audit of the financial statements as a whole,
and in forming our opinion thereon, and we did not provide a separate opinion
on these matters.
IMPAIRMENT OF CLIENT RELATIONSHIP INTANGIBLE ASSETS AND GOODWILL
KEY AUDIT MATTER DESCRIPTION
The Group holds client relationship intangible assets of £468.5 million
(2023: £502.7 million) comprising client relationships acquired both through
business combinations and through acquisition of individual investment
managers and their client portfolios. Of this balance, the IW&I client
relationship intangible contributes £317.7 million (2023: £344.0 million).
The Group also holds £504.9 million of goodwill (2023: 507.8 million).
As detailed in the summary of principal accounting policies in notes 1 and 2
(included within note 1 to this announcement), client relationship intangible
assets are reviewed bi-annually for indicators of impairment and, if an
indicator of impairment exists, a comparison of the asset's carrying amounts
with its recoverable amount is performed. Goodwill is tested for impairment at
least annually, whether or not indicators of impairment exist.
Management have either prepared a value-in-use or fair value less costs to
sell model to use within their impairment assessments. For the value-in-use
assessment, a discounted cash flow forecast is prepared where key assumptions
including operating profit margin, net client flows and pre-tax discount rates
are determined. For the fair value less costs to sell assessment, an
indicative trading multiple from recent market acquisition is determined.
Under both methods, there is judgement and complexity in the assumptions
applied.
For goodwill, the impairment assessment is performed by comparing the carrying
amount of each group of cash generating units ("CGU groups") to its
recoverable amount from its value-in-use ("VIU"), calculated using a
discounted cash flow method. In determining the VIU for the CGU groups,
judgement is required to make assumptions in relation to an appropriate income
growth rate, expenditure growth rate and the discount rate. The discount rate,
annual revenue growth rate and terminal growth rate used as disclosed in note
22 (included within note 8 to this announcement).
We have identified this as a key audit matter given the inherent judgement and
level of estimation in the assumptions that support the bi-annual measurement
of recoverable amount.
HOW THE SCOPE OF OUR AUDIT RESPONDED TO THE KEY AUDIT MATTER
We obtained an understanding of relevant controls in relation to the
impairment review process for client relationship intangible assets and
goodwill.
For client relationship intangible asset, we assessed the key judgements used
when determining whether there is any indication of impairment for each client
portfolio. We assessed the reasonableness of the judgement and evaluated the
accuracy of the inputs used. As the IW&I client relationship intangible
asset is the largest of the Group (£317.7m), and given the inherent
subjectivity in determining a reasonable deal multiplier and allocating fair
value to intangible assets, our audit response focused on this area.
We assessed the relevant assumptions and judgements made in determining
whether an impairment needed to be recognised through the calculation of the
assets' fair value. We also assessed whether they meet the requirement of IAS
36 "Impairment of Assets".
To challenge management's fair value model, we performed the following
procedures:
- Assessed the completeness and accuracy of data inputs
and key assumptions underpinning the fair value model;
- Engaged with internal valuation specialists to assess
the appropriateness of the deal multiplier applied within the fair value
model, by comparing to external market data;
- Tested the mechanical accuracy of management's fair
value model;
- Performed sensitivity analyses to assess the potential
impact of reasonably possible changes in key assumptions on asset's fair
value; and
- Performed a stand back assessment comparing the
calculated fair value against the discounted cash flow model utilised for the
purpose of valuing the client relationship intangibles at the point of
acquisition and evaluated any differences.
For goodwill, in order to challenge the appropriateness of the income and
expenditure growth assumptions used in the VIU calculations, we assessed the
assumptions used by comparing them against historical actual performance and
checked for consistency with forecasts used elsewhere in the business. We
evaluated with our valuation specialist to determine whether the discount rate
applied is appropriate by benchmarking to appropriate market rates of
interest.
We have also assessed the appropriateness of the disclosures within the
financial statement to determine whether all required information has been
disclosed for the impairment of client relationship intangible assets and
goodwill.
KEY OBSERVATIONS
We concluded that management's approach and impairment conclusion was
appropriate and that the carrying value of the client relationship intangible
assets and goodwill as of 31 December 2024 is not impaired.
RECOGNITION OF NET INVESTMENT MANAGEMENT FEE INCOME
KEY AUDIT MATTER DESCRIPTION
As detailed in the summary of principal accounting policies in notes 1 and 3
(included within note 3 to this announcement), operating income comprises net
investment management fee income of £654.5 million (2023: £414.8 million),
net commission income of £91.8 million (2023: £53.6 million), net interest
income of £63.9 million (2023: £51.7 million) and fees from advisory
services and other income of £85.7 million (2023: £51.0 million).
Investment management ("IM") fees from the IM segment account for
approximately 64.2% (2023: 61.3%) of total operating income and are based on a
percentage of an individual client's Funds Under Management ("FUM").
The Group's history of acquisitions and long-standing client relationships has
resulted in a complex fee structure and results in amendments to fee rate
cards during the financial year. As remuneration schemes for investment
managers often link to FUM and fee generation, there is an elevated risk of
fraud. This risk pertains particularly to potential manipulation of fee
amendments during the period and the onboarding of new clients.
Due to the time and resources utilised in the audit, we have determined this
to be a key audit matter and identified recognition of net investment
management fee income as an area with the potential for fraud.
HOW THE SCOPE OF OUR AUDIT RESPONDED TO THE KEY AUDIT MATTER
We have tailored the audit approach to each of the wealth management entities
(Rathbones Investment Management Limited ('RIM') and Investec Wealth &
Investment Limited), given their different control environments.
In both entities, we have performed the following procedures:
- Obtained an understanding of relevant manual and IT
controls which management have established so that fee rates are appropriately
applied.
- Agreed a sample of management fee rates through to
client agreements and correspondence, with a focus on new and amended fee
rates. Where manual fee rate amendments were made to system generated fees, we
inspected evidence of appropriate authorisation and rationale.
For the Rathbones legacy business (RIM), we have performed the following
additional procedures:
- Tested the manual and IT controls related to fee rates
applied.
- Engaged with our data analytics specialists to perform
a recalculation of the fees to gain comfort over the system generated fees.
In order to address the completeness and accuracy of FUM as a key input into
management fees in RIM, we tested the controls over FUM (including associated
IT controls) and agreed a sample of FUM holdings to third-party custodian
reports.
For the IW&I business, we have performed the following additional
procedures:
- Recalculated a sample of fee charges to gain comfort
over the system generated fees.
- Agreed a sample of FUM holdings to third-party
custodian reports to test the completeness and accuracy of FUM as a
key input.
KEY OBSERVATIONS
We concluded that the net investment management fee income is appropriately
recognised for the year ended 31 December 2024.
CLASSIFICATION AND DISCLOSURE OF ACQUISITION AND INTEGRATION COSTS
KEY AUDIT MATTER DESCRIPTION
The Group recognised £83.4 million (2023: £44.3 million) of acquisition and
integration costs. As a result of the Investec Wealth & Investment Limited
acquisition in 2023, there has been significant increase in the acquisition
and integration costs.
The classification of acquisition and integration costs relies on judgement,
and increases the potential for management bias, especially considering that
certain management remuneration schemes are linked to the integration's
success and the realisation of synergies.
Furthermore, we note that throughout the annual report and within the Group's
other public announcements, underlying profit and underlying earnings per
share are key performance indicators for the Group and an area of increased
focus by investors. They are adjusted for acquisition and integration costs,
as disclosed in note 9 (included within note 5 to this announcement) and
reported as key Alternative Performance Measures ("APMs") of the Group is
provided in the financial performance section. Because this gives rise to an
incentive to misclassify expense as acquisition and integration costs, we
identified this area as a key audit matter.
HOW THE SCOPE OF OUR AUDIT RESPONDED TO THE KEY AUDIT MATTER
We have obtained an understanding of the relevant controls in place in
relation to the classification of acquisition and integration costs.
We assessed the appropriateness of the Group's policy in recognising
acquisition and integration related costs. We also examined the year-on-year
consistency of the policy.
We have challenged the Group's policy for the recognition and classification
of the expenses, such as specific share-based payment schemes, and whether
these were incurred as part of the acquisition and integration activities.
As the classification of expenses impacts certain management remuneration
scheme, we evaluated the relevant remuneration schemes and the incentive
criteria.
For a sample of expenses, we have assessed management's rationale for
recognition and classification of these costs against management's policy.
We have assessed the appropriateness of disclosures included within the
financial statement to determine whether all required information has been
included for acquisition and integration costs.
KEY OBSERVATIONS
We have concluded that the classification and disclosure of acquisition and
integration expenses is appropriate for the year ended 31 December 2024.
Procedures performed to agree to the preliminary announcement of annual
results
In order to agree to the publication of the preliminary announcement of annual
results of Rathbones Group PLC we carried out the following procedures:
(a) checked that the figures in the preliminary announcement covering the
full year have been accurately extracted from the audited or draft financial
statements and reflect the presentation to be adopted in the audited financial
statements;
(b) considered whether the information (including the management
commentary) is consistent with other expected contents of the annual report;
(c) considered whether the financial information in the preliminary
announcement is misstated;
(d) considered whether the preliminary announcement includes a statement
by directors as required by section 435 of CA 2006 and whether the preliminary
announcement includes the minimum information required by UKLA Listing Rule
9.7A.1;
(e) where the preliminary announcement includes alternative performance
measures ("APMs"), considered whether appropriate prominence is given to
statutory financial information and whether:
- the use, relevance and reliability of APMs has been explained;
- the APMs used have been clearly defined, and have been given
meaningful labels reflecting their content and basis of calculation;
- the APMs have been reconciled to the most directly reconcilable line
item, subtotal or total presented in the financial statements of the
corresponding period; and
- comparatives have been included, and where the basis of calculation
has changed over time this is explained.
(f) read the management commentary, any other narrative disclosures and
any final interim period figures and considered whether they are fair,
balanced and understandable.
USE OF OUR REPORT
Our liability for this report, and for our full audit report on the financial
statements is to the company's members as a body, in accordance with Chapter
3 of Part 16 of the Companies Act 2006. Our audit work has been undertaken so
that we might state to the company's members those matters we are required to
state to them in an auditor's 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 and the company's members as a body, for our audit
work, for our audit report or this report, or for the opinions we
have formed.
SIMON CLEVELAND, FCA
(SENIOR STATUTORY AUDITOR)
For and on behalf of Deloitte LLP
Statutory Auditor
London, United Kingdom
25 February 2025
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