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RNS
Charles Stanley Group PLC  -  CAY   

Final Results

Released 07:00 14-Jun-2017

RNS Number : 0045I
Charles Stanley Group PLC
14 June 2017
 

14 June 2017

Charles Stanley Group PLC

 

Results for the year ended 31 March 2017

 

Charles Stanley Group PLC (the Group) or (Charles Stanley) today announces its preliminary results for the year ended 31 March 2017:

 

Financial highlights:

·      Reported profit before tax of £8.8 million (2016: £0.3 million loss)

·      Reported revenue in line with previous year despite disposal of non-core activities - £141.6 million (2016: £141.6 million)

·      Balance sheet strengthened - Group cash balance increased to £58.4 million (2016: £48.4 million)

·      Funds under Management and Administration up 17.1% to £24.0 billion (2016: £20.5 billion)

·      Core Business operating margin improved to 7.1% (2016: 3.1%); 2020 target of 15%

·      Total 2017 dividend increased 20% to 6.0 pence per share (2016: 5.0 pence per share)

 

Operational highlights:

·      New remuneration arrangements for investment managers successfully completed

·      Transformation programme beginning to deliver increased profitability

·      All non-core activities disposed of - EBS sale completed on 31 May 2017

·      Governance framework overhauled, providing clarity of divisional mandates and individual responsibilities

 

Paul Abberley, Chief Executive Officer, commented:

"2017 was a year of significant progress at Charles Stanley with our transformation programme delivering increased profitability, more satisfied clients and improved staff engagement.  Our strategy is now in place with improved governance, better cost control, a revised remuneration policy and clear plans to grow each of our client servicing divisions - Investment Management Services, Asset Management, Financial Planning and Charles Stanley Direct - and to extract operating efficiencies across front and back office alike. As a result we are more streamlined, focused and in a position to deliver profitably the products and services our clients want and need.

 

Looking ahead, our aim remains to become the UK's leading wealth manager by 2020. The Group has benefited this year from favourable markets but there is global economic and political uncertainty to be navigated including the UK's departure from the EU. While there is much speculation about the impact of Brexit on the financial services industry, we are confident that Charles Stanley, which has been at the heart of the City for over two centuries and weathered many storms, will continue successfully to serve our clients."

 

For further information, please contact: 

Charles Stanley

Christopher Aldous

Via Redleaf Communication

Canaccord Genuity

Andrew Buchanan

020 7523 4661

Peel Hunt

Guy Wiehahn

020 7418 8893

Redleaf Communications

Charlie Geller

020 7382 4730

CScapitalmarkets@redleafpr.com

 

 

Notes to editors:

Charles Stanley traces its origins back directly to 1792 and is one of the oldest firms on the London Stock Exchange. Charles Stanley today provides holistic wealth management services to private clients, charities and smaller institutions.  These are delivered by over 400 professionals located in 24 offices throughout the UK, both direct to clients and to intermediaries. Our services include investment portfolio management and financial planning, supported by in-house administration to enhance the quality of service provided. In addition, Charles Stanley Direct provides an award winning direct to customer execution-only dealing platform for equities and funds.

 

 

Financial highlights:

 

2017

2016

Profit before tax from Core Business1 (£m)

9.8

4.2

Reported profit/(loss) before tax (£m)

8.8

(0.3)

Basic earnings per share from Core Business (p)

15.33

6.90

Reported basic earnings per share (p)

12.35

(0.61)

Dividend per share (p)

6.0

5.0

 

 

Business highlights:

 

 

2017

2016

FuMA2 (£bn)

24.0

20.5

Discretionary funds (£bn)

11.4

9.4

Core Business revenue (£m)1

138.6

133.5

 

 

Core Business revenue by division:

 

 

2017

2016

Investment Management Services (£m)3

122.7

117.2

Asset Management (£m)

6.6

5.5

Financial Planning (£m)3

5.0

6.0

Charles Stanley Direct (£m)

4.3

4.8

 

 

Financial calendar:

 

Ex-dividend date for final dividend

29 June 2017

Final dividend record date

30 June 2017

Deadline for elections under DRIP4

6 July 2017

Annual General Meeting

27 July 2017

Final dividend payment date

31 July 2017

 

1The Core Business figures represent the results of the Group's four main operating divisions, excluding held for sale activities and adjusted for one-off items.

 

2Funds under Management and Administration.

 

3The 2016 figures have been restated to exclude the results of EBS Management PLC so as to report a comparable year-on-year performance.  Moreover, the comparative results for Investment Management Services and Financial Planning have been restated to account for a number of investment managers who transferred out of the latter to the former at the start of the year.

 

4Dividend Reinvestment Plan.

 

 

 

 

 

 

Chairman's statement

2017 has been another year of significant transformation for the Group and we have made good progress against our articulated strategy. It is pleasing to announce that the transformation programme is bearing fruit, with sustained revenues despite the disposal of non-core activities last year, and a welcome return to profitability.

 

Financial results

The Group's reported revenue for the year ended 31 March 2017 was £141.6 million, in line with that reported in the previous year. The reported profit before tax improved to £8.8 million, compared with a loss of £0.3 million in the previous year and a loss of £6.1 million in the year before that. The positive direction of travel is clear, as is the success of our programme of cost control.

 

Funds under Management and Administration stood at £24.0 billion at the year-end, compared with £20.5 billion the year before, an increase of 17.1% This mirrors the improvement in the market index that we track, though the increase in Discretionary funds was significantly ahead of this over the 12-month period, up from £9.4 billion to £11.4 billion, or 21.3%.

 

Our cash position remains strong at £58.4 million compared with £48.4 million at the previous year-end (both years are inclusive of cash balances held within assets held for sale).

 

Remuneration structures

It is pleasing to report that by the year-end we had substantially completed our major project of restructuring the remuneration arrangements of our investment managers. The Board has been closely involved in the remuneration project, as I described in my statement last year, and I should like to thank all of our investment managers for their help and support in bringing this exercise to a successful completion. As a consequence we have greater alignment with the strategy of the business and better regulatory outcomes - for example the incentive structures in Investment Management Services and Financial Planning are no longer purely financial but are also linked directly to standards of conduct. Throughout, the interests of our clients have always been, and remain, uppermost. The high score of 93% overall client satisfaction achieved in this year's surveys are testament to this.

 

Our Chief Executive Officer (CEO), Paul Abberley, addresses in greater detail our strategic development and implementation in his Chief Executive Officer's report. 

 

Governance review

During the year, considerable work has been carried out reviewing our corporate governance framework. We have restructured the relationship between our two principal boards - Charles Stanley Group PLC (the holding company, or CSG) and Charles Stanley & Co. Limited (the principal regulated entity, or CSC) - and reorganised the committee arrangements. More senior managers have joined the Executive Committee, chaired by Paul Abberley, which not only develops and implements strategy as agreed by the CSG Board, but also manages the business on a day-to-day basis.

 

Board changes

David Pusinelli has decided not to put his name forward for re-election as a Non-executive Director at the forthcoming Annual General Meeting. David has been a highly valued member of the team, and has managed his roles as chairman of the Audit Committee and as Senior Independent Director with skill and effectiveness. David joined the Board in 2012 and has contributed significantly to the progress of the Group. The Board thanks him sincerely for his help and advice, and wishes him good health and a long retirement. A search is well advanced for additional Non-executive Directors, with the guidance of professional external consultants, and we hope to make an announcement to shareholders in the near future.

 

Turning to our Executive Directors, it was to our regret that Michael Lilwall advised us in the autumn of his wish to step down from the Board for personal reasons. Michael joined Charles Stanley in 1997 and has played a significant role in many of our developments since that time. We are delighted that, though no longer a Director, he remains with the Group and will continue to look after a number of valued clients.

 

In last year's report I referred to the resignation, just after the year-end, of Anthony Scott. Anthony was a Director and the co-head of the Investment Management Services division, which represents the great majority of our business. To both Michael and Anthony I express the warmest thanks on behalf of the Group for their substantial contribution.

 

Our team

Throughout a very busy year our staff have worked tirelessly to look after our clients, demonstrating our core values of being Caring, Fair and Progressive. So it gives me great pleasure to announce that the annual staff engagement survey carried out in November 2016 showed a sharp 11% increase in the overall engagement score to 67%. This illustrates that our staff are taking an active and engaged approach to our significant programme of improvement.

 

I would also like to pay tribute on behalf of the Board to the considerable achievements of our CEO, Paul Abberley, in masterminding the transformation process that is under way. He has led from the front and carried us all with him, embodying our theme of 'One Charles Stanley'. He has been ably supported by Ben Money-Coutts, our Chief Financial Officer, and Gary Teper, the Head of our Investment Management Services division. Our Non-executive Directors have also had a very busy and challenging year and have contributed greatly. I also thank our shareholders for their continuous support.

 

Dividend

I have previously outlined our policy to return to a pattern of steadily increasing dividends once profitability starts to improve significantly. The Board is therefore recommending a final dividend of 4.5 pence per share. Taken together with the interim dividend of 1.5 pence per share, this results in a total dividend for the year of 6.0 pence per share, an increase of 20% compared to 5.0 pence per share paid in the prior year.

 

Outlook

The two principal external drivers of our growth - the level of markets and the volume of investment trading - both surged after the Brexit vote on 23 June 2016 and have remained buoyant ever since. Much of the uncertainty which I spoke of last year has now dissipated with the EU referendum result and the election of President Trump, but we now have further uncertainty over the shape of the UK government, following the election on 8 June 2017.

 

Looking further ahead, the macro uncertainties remain as great as ever. There is a lot of focus on what the UK's exit from the EU will mean for the UK financial services industry. Our business, being predominantly UK based and serving UK based clients, is, we believe, relatively well placed to ride out any storm that might arise for the financial services sector from the Brexit negotiations.

 

Despite these longer term uncertainties, market conditions are more settled, and more favourable, than they were at this time last year.  This provides a favourable backdrop for our transformation programme and should bring growth in revenues, profits and margins, which in turn will support our progressive dividend policy and thus generate long-term shareholder value.

 

 

Sir David Howard

Chairman

13 June 2017

 

 

 

 

Chief Executive Officer's report

Charles Stanley's transformation programme is on track. As previously communicated, our aim is to push our business into the first quartile for client satisfaction, staff engagement and stock market rating by 2020. We have made good progress during the 2017 financial year and I am confident that we will hit our targets and become the UK's leading wealth manager within three years.

 

Financial performance

The Group made a healthy return to profitability with a reported profit before tax of £8.8 million compared to a loss of £0.3 million in the previous year. This was aided by strong financial markets but driven primarily by the transformation implemented over the past two years. The Group is streamlined, focused and positioned to deliver profitably the wealth management services and products sought and needed by UK clients. This has been delivered without recourse to a restructuring charge and the precautionary capital raised from shareholders in April 2015 remains intact.

 

As planned, the financial improvements were broad-based. A strong cost control culture was evident across all units and each of our four client-facing divisions delivered positive underlying momentum. Profits from the Core Business increased from £4.2 million in 2016 to £9.8 million this year reflecting an improvement in operating margin from 3.1% to 7.1%, paving the way towards our medium-term target of a 15% operating margin.

 

Strategy implementation

The strategy determined in early 2015 required considerable preparatory work but I am pleased to be able to report that this is now largely in place and the benefits to both clients and shareholders are materialising. Our four client-facing divisions provide a full service, holistic wealth management offering, from discretionary fund management to simple execution, with financial planning advice as needed. We remain an investment-led firm and the delivery of discretionary fund management by empowered investment professionals is at the heart of our offering. Indeed, we are experiencing a steady trend in previously self-directed clients seeking a discretionary service instead.

 

The year ahead

The benefits of the strategy have started to crystallise and we remain confident that this momentum will be maintained. Indeed, with a renewed focus on reaching new clients and serving our existing clients more comprehensively, we expect an acceleration in new business revenues. The underlying commercial models in each of our four client-facing divisions have been re-engineered to ensure profitable delivery and to underpin the operational gearing which, over time, will support margin growth. Growing revenues and building operational efficiency will now be the central focus.

 

Recourse to technology in divisions such as Charles Stanley Direct allows the Group to serve a broader range of client needs, often at an earlier stage in our clients' lifetime financial journeys. While profound digital disruption is not yet on the horizon, it is important to ensure that our technology platforms permit a timely and flexible response to evolving client needs. We intend to foster such preparedness whilst continuing to provide first class advice to our clients.

 

Our Chairman, Sir David Howard, referred to the new governance framework and this will become a vital enabler, particularly given the new wave of regulatory requirements for which implementation is under way. We are well prepared.

 

Continuing successful delivery of our strategy moves the Group closer to the 2020 vision of becoming the UK's leading wealth manager as measured by the quantitative scores for relative client satisfaction, staff engagement and stock market rating.  Delivery will ensure that all our stakeholders are appropriately served and we look forward to the new financial year with growing confidence.

 

Paul Abberley

Chief Executive Officer

13 June 2017

 

 

 

The Chief Financial Officer's review of the year

Financial year 2017 was the second year of our five-year turnaround programme. Whereas the focus for 2016 had been to reduce losses, dispose of non-core activities, strengthen the balance sheet and formulate a detailed plan to achieve the Group's strategy, that for 2017 was to return to profitability and to lay down the foundations for long-term growth. Whilst we still have a long way to travel in terms of improving top line growth, productivity and operating efficiency, good progress has been achieved during 2017 across all divisions. We remain on track to deliver on the Group's strategic targets by 2020.

 

Overview of 2017 full year results

The Group's overall revenues for 2017 were at the same level as 2016 at £141.6 million. This is due to the fact that the 3.8% increase in revenues of our Core Business (comprising the Investment Management Services, Asset Management, Financial Planning and Charles Stanley Direct divisions), was offset by the elimination of revenues associated with our held for sale activities disposed of during the previous year.

 

Overall expenditure decreased by 3.7% to £136.8 million (2016: £142.1 million), mainly due to tight cost control.

 

Various aspects of our reorganisation programme gave rise to an exceptional level of net finance income of £3.8 million (2016: £0.1 million). The main contributor was the profit on disposal of a long leasehold office in Luke Street, London which helped finance the rationalisation of all our London offices into a single office at 55 Bishopsgate. Details of this and other one-off adjusting items are set out later in this section.

 

As a result of the above factors, the adjusted profit before tax from the Core Business (excluding held for sale activities) for 2017 improved by 133.3% to £9.8 million (2016: £4.2 million) and overall the Group achieved a reported profit before tax of £8.8 million compared to a loss of £0.3 million in the prior year.

 

Funds under Management and Administration

The Group's revenue is substantially driven by the level of its FuMA. These increased by a very healthy 17.1% to £24.0 billion at 31 March 2017 (2016: £20.5 billion). The increase was ahead of the benchmark WMA Balanced Index which rose 15.9% over the same period.

 

FuMA movement

 

2017

2016

Change

 

£bn

£bn

 %

As at 31 March

 

 

 

Discretionary funds

11.4

9.4

21.3

Advisory Managed funds

2.4

2.6

(7.7)

Total managed funds

13.8

12.0

15.0

Advisory Dealing funds

1.8

1.7

5.9

Execution-only funds

8.4

6.8

23.5

Total administered funds

10.2

8.5

20.0

Total Funds under Management and Administration

24.0

20.5

17.1

 

 

 

 

WMA Balanced Index

4,121

3,556

15.9

 

The movement of FuMA continued the trend of recent years toward Discretionary and online Execution-only services. These increased by 21.3% and 23.5% respectively year-on-year. Advisory Dealing funds showed modest growth of 5.9% whilst Advisory Managed funds fell 7.7%, largely as a result of clients upgrading to the discretionary service. The Execution-only funds on the Charles Stanley Direct platform increased by 35.7% to £1.9 billion.

The £3.5 billion net increase in FuMA since 31 March 2016 comprised inflows from new (£1.4 billion) and existing (£0.5 billion) clients and positive market performance of £3.0 billion; offset by client accounts closed during the period of £1.4 billion, of which £0.4 billion was accounted for by clients of departing investment managers.

 

Results and performance

The Group's financial performance for the year ended 31 March 2017 and for the prior year are summarised in the tables below. These tables show the results of the Core Business, the held for sale activities (Charles Stanley Securities and Charles Stanley Financial Solutions Limited, both of which were disposed of by 1 April 2016, and EBS Management PLC, the sale of which was completed on 31 May 2017), and various adjusting items details of which are set out later in this section.

 

 

Core

Held

Adjusting

Reported

 

Business

for sale

items

performance

 

£m

£m

£m

£m

31 March 2017

 

 

 

 

Revenue

138.6

3.0

-

141.6

Expenses

(129.1)

(3.0)

(4.7)

(136.8)

Other income

0.2

 -

 -

0.2

Operating profit/(loss)

9.7

 -

(4.7)

5.0

Net finance income

0.1

 -

3.7

3.8

Profit/(loss) before tax

9.8

 -

(1.0)

8.8

Tax expense

(2.0)

 -

(0.5)

(2.5)

Profit/(loss) after tax

7.8

 -

(1.5)

6.3

 

 

 

 

Basic earnings per share (p)

15.33

-

-

12.35

 

 

 

 

 

31 March 2016

 

 

 

 

Revenue

133.5

8.1

 -

141.6

Expenses

(129.5)

(8.7)

(3.9)

(142.1)

Other income

0.2

 -

 -

0.2

Operating profit/(loss)

4.2

(0.6)

(3.9)

(0.3)

Net finance income

0.1

 -

 -

0.1

(Loss)/gain on sale of business

(0.1)

0.1

(0.1)

(0.1)

Profit/(loss) before tax

4.2

(0.5)

(4.0)

(0.3)

Tax (expense)/credit

(0.7)

(0.1)

0.8

 -

Profit/(loss) after tax

3.5

(0.6)

(3.2)

(0.3)

 

 

 

 

 

Basic earnings per share (p)

6.90

-

-

(0.61)

 

Core Business revenues

Revenues from the Core Business increased by 3.8% from £133.5 million in 2016 to £138.6 million in 2017. The anticipated reduction in trail commissions and interest earned on client cash balances was more than offset by higher investment management fees largely arising from the uplift in markets seen during the year.

 

Core Business expenditure

Expenditure within the Core Business has remained relatively flat on prior year at £129.1 million (2016: £129.5 million). The Group's single largest cost is staff costs and these rose £0.4 million as the variable element increased by £3.2 million and the fixed element reduced by £2.8 million. The increase in the variable compensation amount was to be expected given the improved operating performance while the reduction in the fixed element followed a lower average headcount, excluding employees held within held for sale activities, of 778 (2016: 831). Other significant changes in expenditure included increases in IT and marketing spend of £0.5 million each and a £1.6 million reduction in external professional fees.

 

Core Business pre-tax profit

The Core Business pre-tax profit increased from £4.2 million to £9.8 million, reflecting a margin improvement from 3.1% to 7.1%. This was in line with our expectations but still a long way from our stated medium-term target of 15%. To achieve this we need to continue along the path of increasing FuMA and revenues, achieving greater productivity in the front office and improving operating efficiency in the back office.

 

Divisional review

The table below shows the Core Business results broken into the Group's four main operating divisions: Investment Management Services, Asset Management, Financial Planning and Charles Stanley Direct.

 

 

Investment Management Services

Asset Management

Financial Planning

Charles Stanley Direct

Core Business

 

£m

£m

£m

£m

£m

31 March 2017

 

 

 

 

 

Revenue

122.7

6.6

5.0

4.3

138.6

Expenditure

(109.0)

(6.1)

(7.8)

(6.2)

(129.1)

Other income

0.2

 -

 -

 -

0.2

Operating profit/(loss)

13.9

0.5

(2.8)

(1.9)

9.7

Net finance income

0.1

 -

 -

 -

0.1

Profit/(loss) before tax

14.0

0.5

(2.8)

(1.9)

9.8

 

 

 

 

 

 

31 March 20161

 

 

 

 

 

Revenue

117.2

5.5

6.0

4.8

133.5

Expenditure

(109.6)

(6.5)

(7.2)

(6.2)

(129.5)

Other income

0.2

 -

(0.1)

0.1

0.2

Operating profit/(loss)

7.8

(1.0)

(1.3)

(1.3)

4.2

Net finance income

0.1

 -

 -

 -

0.1

Loss on sale of business

 -

 -

 -

(0.1)

(0.1)

Profit/(loss) before tax

7.9

(1.0)

(1.3)

(1.4)

4.2

 

1The 2016 figures have been restated to exclude the results of EBS Management PLC so as to report a comparable year-on-year performance.  Moreover, the comparative results for Investment Management Services and Financial Planning have been restated to account for a number of investment managers who transferred out of the latter to the former at the start of the year

 

 

Investment Management Services

 

Trading review

The financial performance of the Investment Management Services division is largely driven by the value and mix of FuMA, the revenue margin earned on these assets (expressed as a basis point return) and the operating costs associated with managing them comprising both fixed and variable costs.

 

 

2017

2016

 

£bn

£bn

FuMA

20.3

17.5

 

 

 

 

2017

2016

 

£m

£m

Revenue

122.7

117.2

Direct costs:

 

 

 Fixed

(19.8)

(20.7)

 Variable

(35.5)

(35.3)

 Other direct operating expenses

(9.7)

(10.3)

Other income

0.2

0.2

Contribution

57.9

51.1

Allocated costs

(44.0)

(43.3)

Operating profit

13.9

7.8

 

 

 

KPIs:

2017

2016

Discretionary funds per CF30

 £42.6m

£32.1m

Discretionary funds as a percent of total FuMA

61.1%

61.7%

Discretionary average client account size

£300k

£261k

Discretionary revenue margin

85bps

84bps

Total revenue margin

 65bps

 66bps

Staff costs to revenue ratio

45.1%

47.8%

Other costs to revenue ratio

43.8%

45.7%

Operating margin

11.3%

6.7%

 

The division's FuMA increased by 16.0% overall in line with markets. Discretionary assets grew by 22.4% and now represent 51.2% of the division's overall FuMA. The level of average managed funds per regulated investment manager (a CF30), which is a key productivity measure, improved 26.5% to £51.6 million (2016: £40.8 million). One of Management's key objectives is to increase this further with a medium-term target set of £70.0 million per CF30.

 

Total costs for the division were relatively flat on last year at £109.0 million (2016: £109.6 million). Staff costs as a proportion of revenues reduced significantly from 47.8% to 45.1%, largely as a result of the staged implementation of the revised investment manager remuneration model and reduced headcount of 411 (2016: 435).

 

Overall, the Investment Management Services division reported a 78.2% improvement in its operating profit from £7.8 million in 2016 to £13.9 million in 2017 and its operating margin grew from 6.7% to 11.3%.

 

Outlook

The twin challenges faced by the division are to increase revenues through FuMA inflows, repricing and service upselling, whilst improving overall productivity levels which are below top industry standards, most notably in relation to FuMA per CF30 and staff costs ratios. We have a wide number of specific initiatives in train to help deliver on these key metrics and remain confident that, subject to stable or improving market conditions, we can continue to deliver progress on the division's overall performance.

 

Asset Management

 

Trading review

The Asset Management division's performance is driven by Funds under Management (FuM) and the revenue margin earned on these assets. By comparison to the Investment Management Services division, its costs are relatively fixed.

 

 

2017

2016

 

£bn

£bn

FuM - on platform

1.1

0.8

FuM - off platform1

0.2

0.2

FuM - total

1.3

1.0

 

1Off platform FuM comprises model portfolios on third party platforms and Open Ended Investment Companies (OEICs) or other clients whose assets are held by a third party custodian.

 

 

2017

2016

 

£m

£m

Revenue

6.6

5.5

Direct costs:

 

 

 Fixed

(1.7)

(1.9)

 Variable

(0.9)

(1.2)

 Other direct operating expenses

(1.0)

(1.5)

Contribution

3.0

0.9

Allocated costs

(2.5)

(1.9)

Operating profit/(loss)

0.5

(1.0)

 

 

 

 

 

 

KPIs:

2017

2016

Revenue margin2

 59bps

 60bps

Operating margin

7.6%

(18.2%)

 

2Revenue margin calculated on total funds (including both on and off platform FuM).

 

The division's total FuM have grown steadily by 30% during the year to £1.3 billion (2016: £1.0 billion). This was due to both investment performance and strong inflows, notably into the Inheritance Tax Portfolio service and the pension and institutional business. These latter accounts are typically of a larger average size and so attract a lower revenue margin which explains the division's slight overall revenue margin reduction from 60bps to 59bps.

 

During the year, the division underwent a restructuring to rationalise its product offering to make it fit both for the intermediary and institutional market, as well as to provide a scalable range of services for internal and external clients. This enabled the division to reduce its direct costs by 21.7% to £3.6 million (2016: £4.6 million) and overall costs, including Support Functions allocations, by 6.2% to £6.1 million (2016: £6.5 million). Consequently, the divisional moved from an operating loss in 2016 of £1.0 million to a profit for 2017 of £0.5 million.

 

Outlook

After a year of restructuring and reorganisation, the focus for the Asset Management division is now to grow its FuM. Its most scalable business, provision of discretionary model portfolios to the adviser industry, will be a key focus for financial year 2018, taking advantage of a streamlined product suite and an enlarged and retrained intermediary sales team. It also plans to extend its institutional marketing plan to include larger charities, academic institutions and other institutional funds, while continuing to grow the fiduciary management service for defined benefit pension schemes. New literature is being produced to support this marketing effort.

 

For the firm's smaller clients, we soft-launched our Personal Portfolio Service (PPS) in April 2017. This comprises a range of risk-rated multi-asset model portfolios managed by the division. In the first instance the PPS is being marketed to existing smaller clients of the Investment Management Services division for whom a bespoke solution is likely to be over-engineered and costly. We plan to extend the service to new clients and also to make a non-advised version of PPS available via Charles Stanley Direct. We will look to market the funds more widely as they gain in scale and traction. The Inheritance Tax Portfolio service continues to attract good inflows and there is potential to develop this area further over the coming years.

 

Financial Planning

 

Trading review

The principal driver of the Financial Planning division's performance is now its revenue per financial planner. Historically the division also included some investment management activities which have been transferred to the Investment Management Services division at the start of the year.

 

 

2017

2016

 

£m

£m

Revenue

5.0

6.0

Direct costs:

 

 

 Fixed

(3.6)

(4.1)

 Variable

(0.5)

 -

 Other direct operating expenses

(1.1)

(1.0)

Contribution

(0.2)

0.9

Allocated costs

(2.6)

(2.2)

Operating loss

(2.8)

(1.3)

 

 

 

 

 

 

KPIs:

2017

2016

Number of financial planners

19

23

Revenue per financial planner

£268k

£197k

Operating margin

(56.0%)

(21.7%)

 

The 2017 financial performance of the Financial Planning division reflected the restructuring the department underwent during the year. Firstly, a number of investment managers who had previously been part of the division and had accounted for £0.7 million of revenues in 2016, transferred to Investment Management Services. Secondly, there were a number of planned departures for under-performing financial planners. These changes led to the division's revenues declining to £5.0 million (2016: £6.0 million) and to an overall increase in its operating loss to £2.8 million (2016: £1.3 million). Underlying these figures, the revenue per financial planner which is a key productivity metric, rose 36% from £197 thousand in 2016 to £268 thousand in 2017. This was as a result of the measures taken and improved focus. The medium term target is to achieve £300 thousand per financial planner.

 

Outlook

Financial year 2018 is expected to see further investment in the Financial Planning division. It is intended to increase materially the number of financial planners by hiring good quality, experienced practitioners and to improve the productivity of the division by replacing the current business processing system. This investment, coupled with the roll-out of the new Financial Planning value proposition and pricing model, will see the division making an enhanced contribution to the Group and to its commitment to be the leading wealth manager by 2020.

 

 

Charles Stanley Direct

 

Trading review

Charles Stanley Direct's financial performance is driven by the value of Assets under Administration (AuA) on which a platform fee is charged and by the number of commission-earning bargains undertaken by clients.

 

2017

2016

 

£bn

£bn

AuA

 

 

Charles Stanley Direct

1.9

1.4

Charles Stanley Investment Choices

0.4

0.4

Total

2.3

1.8

 

AuA grew 27.8% to £2.3 billion (2016: £1.8 billion). The assets on the Charles Stanley Direct platform increased from £1.4 billion to £1.9 billion during the year, owing both to market increases and client take-on up 29.3% with the platform now servicing around 37,000 accounts. Charles Stanley Investment Choices (previously known as Garrison Investment Analysis) maintained its assets over the year.

 

2017

2016

 

£m

£m

Revenue

4.3

4.8

Direct costs:

 

 

 Fixed

(1.6)

(1.4)

 Other direct operating expenses

(1.4)

(1.5)

 Other income

-

0.1

Contribution

1.3

2.0

Allocated costs

(3.2)

(3.3)

Operating loss

(1.9)

(1.3)

 

KPIs:

2017

2016

AuA growth

27.8%

12.5%

Revenue margin

 22bps

 28bps

Operating margin

(44.2%)

(27.1%)

 

As anticipated, the division's revenues declined in 2017 by comparison to the prior year owing to the conclusion in February 2016 of "white label" trading services provided to the Fidelity network which accounted for £0.9 million of revenue in that year. This also accounted for the decline in the division's overall revenue margin to 22 bps. Excluding Fidelity, underlying revenues increased by 11% and revenue margins were steady. Overall costs have been kept stable on prior year at £6.2 million. As a result of the reduction in revenues, the division has reported an increase in its operating loss to £1.9 million (2016: £1.3 million).

 

Outlook

During the year the division completed a number of initiatives which are expected to help improve performance further during the coming financial year. These have included changes to the pricing tariffs which took effect from November 2016; the mobile optimisation of the website; and changes to processes that make it easier for existing voice-broked Execution-only clients of Charles Stanley to switch to the Charles Stanley Direct platform. Although the charges for the online service are less than for the traditional voice-broked service and may therefore lead to a reduction in the overall revenue generated for the Group from this source, we believe it is often in the clients' best interests to make the switch and it enables the Group to provide the service through a scalable delivery platform. It is also the intention shortly to launch the Group's Personal Portfolio Service via Charles Stanley Direct, which will provide guided but non-advised access to the Group's range of risk-rated multi-asset model portfolios.

 

 

Having rebranded our fund broking business as Charles Stanley Investment Choices during the course of the year and relaunched its website, this business is set to grow again in the coming year. This is being supported both by a significant paper-based marketing exercise, pro-active engagement with existing clients and greater internal marketing within the rest of the Charles Stanley Group. Costs have also been addressed so this activity's contribution is expected to increase significantly in the coming financial year.

 

Support Functions

The costs incurred by the Group's support functions are either charged directly to the four main operating divisions, for example market data costs, or recharged as an allocated cost. However, it is worthy of note that an important contribution to the Group's improved profitability is coming about through savings and process efficiencies being achieved in support areas. Examples include changes to automate the transfers process, the dematerialisation of paper holdings using AllFunds as custodian and the streamlining of the client amendment process. Moreover, the London office rationalisation has allowed us to move some support teams to our Chelmsford site and outsource the provision of certain services which will bring further savings on occupancy costs in the coming financial year.

 

Ongoing costs for all Support Functions for 2017 were £48.8 million, reflecting a 4.5% reduction on the prior year of £51.1 million. The key area of reduction was in fixed employment costs, down by £1.4 million, primarily driven from a 4.4% decrease in headcount. The increased spend in IT and Marketing costs was more than off-set by savings on external professional fees (net decrease of £0.6 million on 2016).

 

As noted above, the Group has achieved a number of operational efficiencies across its Support Functions during the year. Looking forward, we see further opportunity to reduce Support Functions operating costs by reviewing process flows and increasing straight through processing. The extent and pace with which we will be able to do this will in part be dependent on the harmonisation of front office processes. Conversely, we expect to see continued cost pressure in a number of areas including Market data, IT and regulation.

 

Held for sale activities - EBS Management PLC (EBS)

Following the announcement on 11 April 2017 that the Group had exchanged contracts for the sale of EBS, the Group's pension administrator, to Embark Group Limited, its results have been presented as held for sale for both 2017 and 2016.

 

During 2017, EBS grew the number of pension schemes under administration by 18.3% to 15,068 (2016: 12,737) and revenues by 3.5% to £3.0 million (2016: £2.9 million).

 

The decision to sell EBS was taken because significant investment was required in its operating systems and because pension administration was not a core area of focus for the Group's Management. The disposal, which completed on 31 May 2017, was in the best interest of all stakeholders of the EBS business, and most importantly the underlying consumers. Under Embark's ownership, EBS will continue to provide "white label" SIPP services to Charles Stanley so we look forward to a long commercial partnership with them.

 

 

Adjusting items

The Board considers the Core Business profit before tax and earnings per share to be a better reflection of underlying business performance than the statutory figures reported in the consolidated financial statements. To calculate the Core Business results the Board has excluded the adjusting items detailed below:

 

 

2017

2016

 

£m

£m

London office rationalisation:

 

 

 1. Net gain on surrender of long term lease

3.2

-

 2. Overlapping rent and occupancy costs1

(3.1)

-

 3. Dilapidations1

0.1

(0.8)

Amortisation of client relationships1

(1.6)

(1.6)

Impairment of intangible assets

(0.7)

(0.4)

Profit on part disposal of investment in Runpath Group Limited

0.4

-

Refund of under-recovered VAT in prior years1

0.7

-

Transition bonus accrual1

-

(1.4)

Exceptional professional fees1

-

(0.8)

Profit on disposal of Matterley Undervalued Fund1

-

0.2

Defined benefit pension scheme credit1

-

0.8

Net charge from adjusting items

(1.0)

(4.0)

 

1These adjusting items are included within administrative expenses in the consolidated income statement.

 

London office rationalisation

A number of the adjusting items relate to the rationalisation of the Group's London office footprint. The Group historically occupied five buildings in the City of London and has now consolidated into one building at 55 Bishopsgate. This has enabled the Group to sell the remainder of its long lease at 35 Luke Street to realise a profit but has also necessitated the acceleration of dilapidation charges and resulted in double running costs of the new office whilst it was fitted out prior to occupancy. The specific one-off income and expenditure comprised:

 

1. Net gain on surrender of long term lease: (£3.2 million credit)

On 8 September 2016, the Group surrendered the remaining term of its long-term lease at 35 Luke Street for proceeds of £5.6 million. This gain was partially off-set by the acquisition costs of the new lease at 55 Bishopsgate of £0.2 million, and a loss incurred on decommissioning the fixed assets held in the vacant London offices at their carrying value of £2.2 million, resulting in a net gain of £3.2 million.

 

2. Overlapping rent and occupancy costs: (£3.1 million expense)

During the year, the Group incurred double running costs in respect of rent, rates and other occupancy costs of £3.1 million covering both the vacating sites, primarily 131 Finsbury Pavement, and the new offices at 55 Bishopsgate. Since the move of the Group's London employees to 55 Bishopsgate had fully completed by the end of the financial year, no further double running costs are expected.

 

3. Dilapidations: (£0.1 million credit)

A leasehold dilapidations provision was set up in March 2016 in respect of obligations applicable under the lease agreements of the Group's vacating London sites. The current year credit of £0.1 million represents a release to the income statement of unutilised amounts following the settlement of these obligations.

 

Amortisation of client relationships: (£1.6 million expense)

Payments made for the introduction of customer relationships that are deemed to be intangible assets are capitalised and amortised over their useful life, which has been assessed to be 10 years. This amortisation charge has been excluded from the Core Business profit since it is a significant non-cash item.

 

Impairment of intangible assets (£0.7 million expense)

During the year, the Group recognised an impairment charge in respect of goodwill held in connection with a departing investment management team based in one of the regional offices for £0.7 million.

 

Profit on part disposal of investment in Runpath Group Limited: (£0.4 million credit)

In June 2016, the Group entered into an agreement to convert loan notes held in Runpath Group Limited into equity and subsequently disposed of 25% of its enlarged equity holding in the company resulting in a an overall gain of £0.4 million.

 

Refund of under-recovered VAT in prior years: (£0.7 million credit)

During the year, the Group recognised a credit of £0.7 million in respect of under-recovered VAT in prior years.

 

Taxation

The corporation tax charge for the year was £2.5 million (2016: £0.05 million credit) representing an effective tax rate of 28.4%.  A detailed reconciliation between the standard and effective rate of corporation tax is provided in note 12 of the 2017 Annual Report and Accounts.

 

Earnings per share

The Group's reported basic earnings per share for the year were 12.35 pence (2016: loss of 0.61 pence). The Core Business basic earnings per share increased significantly to 15.33 pence from 6.90 pence in 2016.

 

Dividends

The Board has proposed a final dividend of 4.5 pence per share (2016: 3.5 pence per share). Taking into account the interim dividend of 1.5 pence per share, this results in a total dividend for the year of 6.0 pence per share (2016: 5.0 pence per share), an increase of 20%. The proposed total dividend is 2.1 times covered by basic reported earnings and 2.6 times covered by basic Core Business earnings. The recommended final dividend is subject to shareholders' approval, which will be sought at the Company's Annual General Meeting on 27 July 2017.

 

Financial position

The Group maintained its strong financial position with total net assets at 31 March 2017 of £89.1 million (2016: £85.4m) including £58.4 million of cash resources.

 

The Group operates a defined benefit pension scheme which was closed to new members in 1998 and also closed to further accruals for the remaining 25 active members at 31 March 2016. The most recent actuarial assessment of the Group's defined benefit scheme's liabilities shows a deficit at 31 March 2017 of £10.5 million (31 March 2016: £10.1 million).

 

During the second half of the year, the Scheme's Trustees changed the investment management strategy of the scheme's assets. The long-term investment objective is now to achieve self-sufficiency which means achieving a funding level whereby scheme assets grow to the same level as their liabilities. A five stage de-risking flight plan has been adopted to reduce risk gradually over life of the plan as the scheme nears its objective. Stage 1 of the flight plan, which has involved restructuring the underlying portfolio to increase asset class diversification and building an initial liability hedge of 70% of assets, is substantially complete. Further details on the Group's defined benefit pension scheme and the assumptions underpinning the valuation are provided in note 11 of the 2017 Annual Report and Accounts.

 

 

Regulatory capital resources

Charles Stanley & Co. Limited, the Group's main operating subsidiary, is an IFPRU 125k Limited License Firm regulated by the Financial Conduct Authority. In view of this, the Group is classified as a regulated group and subject to the same regime. At 31 March 2017, the Group had regulatory capital resources of £61.4 million (2016: £55.4 million):

 

 

2017

2016

Ordinary share capital

12,672

12,669

Share premium

4,429

4,402

Retained earnings

51,143

48,686

Other reserves

15,946

16,418

Regulatory adjustments

(22,754)

(26,785)

Total regulatory capital resources

61,436

55,390

 

The Group monitors a range of capital and liquidity statistics on a daily, weekly and monthly basis. As required under FCA rules, the Group maintains an Internal Capital Adequacy Assessment Process (ICAAP), which includes performing a range of stress tests to determine the appropriate level of regulatory capital and liquidity that the Group needs to hold. The last review of the ICAAP conducted and signed off by the Board was in October 2016. Regulatory capital forecasts are performed monthly and take into account expected dividends and intangible assets acquisitions and disposal as well as budgeted and forecast trading results.

 

The Group's Pillar III disclosures are published annually on the Group's website (charles-stanley.co.uk) and provide further details about the Group's regulatory capital resources and requirements.

 

 

 

Risk management and principal risks

The Group's risk management framework is a fundamental component of the operating
model and is embedded across all processes and controls. The Chief Risk Officer (CRO), under the supervision of the Risk Committee, has the principal responsibility for risk awareness, monitoring and management across all areas of the business.

 

Charles Stanley's approach to risk management is documented in the Group Risk Policy and the Risk Appetite Statement (RAS), which is reviewed, challenged and approved by the Board on an annual basis. The RAS takes into consideration the Group's strategic objectives, strategy and business plans, and underpins the implementation of robust risk monitoring and risk reporting processes which continue to evolve.

 

The RAS sets out the Group's tolerance to various types of risks and includes both quantitative and qualitative measures against which Management and the Board monitor risk on a periodic basis.

 

Set out below is the Director's Viability statement covering the three years to 31 March 2020, which is then followed with an assessment of the principal risks relevant to the Group's long-term performance.

 

Viability statement

In accordance with the revised UK Corporate Governance Code, the Directors have assessed the prospects of the Group over the three-year period from 31 March 2017 to 31 March 2020. The assessment of the Group's viability over a three-year time period is in alignment with the Group's strategy, budgeting process and the scenarios set out in the ICAAP.

 

The Directors consider a three-year time horizon appropriate as it is most meaningful in planning the Group's new long-term strategy; a five-year horizon stretches forecasting inputs and assumptions beyond a realistic threshold.

 

In assessing the future viability of the overall business, the Directors have considered the corporate strategy and the changes within the business executed in the last two years, including the significant business divisional restructuring and changes to reward arrangements. They have also considered the business environment of the Group and the potential threats to its business model arising from progressive technological, sectorial, demographic and regulatory changes.

 

The Board oversees the Group's principal risks (see the Risk Committee report in the Governance section) and is accountable for the Group's risk management by:

 

·

Overseeing the processes and procedures to monitor and mitigate the principal risks

 

·

Reviewing high level management information from key departments which monitor whether the Group is operating within the parameters set out in the RAS linked to the principal risks

 

·

Deciding the appropriate actions if any of the Group's risk appetites are breached.

 

On a detailed level, extensive management information is analysed by the Enterprise Risk Committee (ERC) which meets monthly and oversees operational risk across the Group by:

 

·     

Monitoring quantitative and qualitative management information across the Group to highlight areas of risk which require enhanced or additional controls

 

·     

Delegating to the appropriate committees any issues raised as part of the management information which require further action

 

·     

Carrying out annual 'deep dive' risk analysis of key departments which are discussed by the Committee and department heads

 

 

·     

Reviewing the reports of the internal and external auditors concerning systems and controls, reviewing the resolution of proposed control enhancements and monitoring any remaining open issues.

 

The Risk Committee has oversight of the above processes, ensuring the monitoring and escalation procedures are operating effectively and completed in a timely manner.

 

The Board reviews and challenges the Group's three-year strategic plan against the principal risks at least annually, stress testing the base case projections by applying multiple shock events. These stresses have been derived from workshops attended by Senior Management, with the use
of external events to substantiate the Board's comfort level
that the shock events are sufficiently severe and appropriate.

 

The Group undertakes an ICAAP which is a detailed process owned and overseen by the Board and regularly assesses:

 

·           the Group's processes, strategies and systems

 

·           the major sources of risks faced by the Group that may impact its ability to meet its obligations

 

·           the results of internal stress testing of these risks

 

·      the amounts and types of financial resources and internal capital, including own funds and liquidity resources, and whether these are adequate both as to amount and quality to ensure that there is not significant risk that its liabilities cannot be met as they fall due.

 

Scenario analysis and stress testing are performed as part of the ICAAP to assess the Group's exposure to a range of extreme but plausible situations, as well as an assessment of the Group's wind-down scenarios and a review of the reverse stress tests which would cause the Group's business model to become unviable.

 

Based on the results of the latest ICAAP, the Board believes that, by taking the projected actions to reduce expenditure and, if required, dividends, the Group's business model is resilient and holds sufficient capital to survive a range of severe but plausible scenarios.

 

Given the extensive controls and procedures in place, the Directors are of the opinion that it is reasonable to conclude that the Group has sufficient resources to meet its obligations and continue business operations over the assessed three-year period.

 

 

 

 

 

Principal risks

Key mitigants and controls

 

 

Business Model and Strategy

The risk that the business model and strategy do not respond in an optimal manner to changing market conditions such that sustainable growth, market share or profitability is adversely impacted.

The Group Chief Risk Officer participates in the setting of Group strategic plans from the beginning and has a voice in the early stage of strategy development, as well as providing a formal report on the strategy and on key business decisions.


As part of the strategy setting process, a review is undertaken of the risks to the business model which includes an analysis of internal and external pressures on the Group strategy and the potential threats to its business model.


The report is presented to the Executive Committee and the Board alongside the proposed business plan to support the decision making.

 

Financial Strength Risk

Failing to maintain financial strength in order to support business objectives, meet regulatory capital requirements, and provide shareholders with an acceptable return.

To achieve our financial goals, a series of risk appetite limits have been set around operating margin, cash balances, regulatory capital and dividend cover.


These are monitored by the Board on a regular basis.

The Group is exposed to interest rate movements directly through its variable rate assets and liabilities. This is tracked by reporting on exposure levels at the Treasury Committee.

 

Credit and Counterparty Risk

The potential failure of clients or counterparties to fulfil their contractual obligations.

Charles Stanley does not offer any formal lines of credit to clients. The Group however has an exposure to counterparty failures and late payment and settlement. It therefore establishes clear risk appetite limits for client and Group cash placed and maintained with authorised institutions and for trading purposes which must be adhered to by the business.


The Group's Treasury Committee is responsible for the initial assessment and ongoing monitoring of deposit-taking counterparties. The following criteria govern how the Group's credit and counterparty risk is managed:

- Assets will only be placed and maintained with counterparties deemed to be financially sound


- Client and Group cash held at any individual counterparty should not exceed its respective limit set by the Treasury Committee unless written approval has been provided


- Counterparty limits for the purpose of trading are set by the Market Exposure Committee (MEC)


- Counterparties with no set trading limits should be assessed on an individual basis on the day of the trade by the MEC


- Breaches of any counterparty trading limits without approval must be escalated immediately to the MEC.

 

Market risk

The risk of losses arising as a result of exposure to market movements, including foreign exchange and interest rates.

Charles Stanley does not undertake any proprietary trading other than that arising from incidental dealing errors and therefore takes minimal market risks. Dealing losses are captured as operational losses.


The majority of the Group's cash is kept in GBP across a number of banks. Limited foreign currency is held only to facilitate settlement and dealing activity on behalf of clients. The Treasury Committee manages the Group's account balances both in GBP and foreign currencies to our requirements and limits exposures to the Group's operational needs.

 

Liquidity Risk

The risk that the Group, although solvent, either does not have available sufficient financial resources to enable it to meet its obligations as they fall due, or can only secure such resources at excessive cost.

 

Charles Stanley's liquidity risk is overwhelmingly short-term in nature and arises predominantly from the settlement of trades within the stockbroking business. The Treasury Committee operates within strict policies and procedures approved by the Board to manage the Group's liquidity risk. These include:

 

- The Group ensuring that all legal entities have sufficient funds to meet their liabilities as they fall due, with surplus cash transferred on a monthly basis to Charles Stanley & Co. Limited. The Group will ensure that it has overdraft facilities if the Committee considers them necessary to meet liabilities

 

 

- Utilising financial instruments, which include borrowings, cash and liquid resources, and various items including trade debtors and trade creditors that arise directly from its operations. The credit quality of counterparties is reviewed frequently and we   limit aggregate credit exposures accordingly.

 

 

The Group has, for many years, not used overdraft facilities for working capital purpose as it has not required such a facility.

 

Pension Risk

The risk that the cost of the Group's defined benefit pension scheme increases, or its valuation affects dividends, reserves and capital. This would materialise when the pension obligations exceed the assets set aside to cover them.

Charles Stanley continues to support a defined benefit pension scheme which is closed to new members and ceased accruing for existing members in April 2016 and which is reviewed regularly for viability and to remain within an agreed deficit level.

 

Bond yields continued to fall globally during 2016 which has been reflected in the Group's pension deficit levels, which are monitored regularly and stand at £10.5 million at 31 March 2017. The Group is working closely with the trustees of the scheme to reduce the deficit and, where possible, match investments with future liabilities.

 

Operational and IT Infrastructure Risk
A material failure of business processes or IT infrastructure may result in unanticipated financial loss of reputational damage.

Charles Stanley has constructed its framework of internal controls to minimise the risk of unanticipated financial loss or damage to its reputation. However, no system of internal control can completely eliminate the risk of error, financial loss, fraudulent actions or reputational damage. The Group records and monitors operational losses and near misses which are reviewed at the Enterprise Risk Committee, with reporting to the Joint Risk Committee and the Board, where required.


Management is required to notify the Board of all individual losses exceeding £10,000 and to provide regular reports to the Board on dealing and trading losses. These should not exceed £100,000 in any 12-month rolling period.


Insurance cover is in place and reviewed on an annual basis to ensure that there is an appropriate amount of cover to manage the impact of operational losses against our capital reserves.


The continuing incidence of low level technical issues are driving the technology risk up.  Charles Stanley's strategic change programme and its plans to continue growing the business also inherently lead to an increase to the operational risk profile of the Group, which will continue to invest in its system capabilities and business processes to ensure that it meets the expectations of its customers, complies with regulatory, legal and financial reporting requirements, and mitigates the risk of loss or reputational damage from operational risk events and external threats.

 

IT Security and Cyber Security Risk

The risk that Charles Stanley's system infrastructure is breached by external counterparties with or without malicious intention. Possible breaches could involve data theft, ransomware or a shutdown of systems.

Charles Stanley has limited appetite for unauthorised or inappropriate access to its IT systems due to the potential disruption to its business operations, adverse customer impacts and damage to its reputation. Similarly, the Group wishes to minimise the threat to its business activities from third party actions such as denial of service attacks.


Alongside setting a framework to prevent and detect unauthorised access attempts to its business systems, Charles Stanley seeks to ensure that the systems are resilient to current and emerging threats and maintains a rolling programme of activity which is informed by the day-to-day experience, threat intelligence and any emerging vulnerabilities identified.


Although Charles Stanley has not experienced any significant issues in relation to its own cyber security arrangements, the cyber security risk has increased due to the number of high profile attacks suffered by other firms in recent months.

 

People and Conduct Risk

The risk that clients or the wider market, as opposed to the firm, suffer detriment as a result of the Group's services, products or activities.

The Group recognises that its reputation and financial success is dependent on the performance and conduct of its staff. Charles Stanley's client-centric culture is founded on the Group's core values of being Caring, Fair and Progressive. It is committed to delivering good outcomes for clients by communicating effectively and providing products and services that meet their needs throughout the customer journey. It acts with integrity in the market, and operates in line with the agreed strategy and within the risk appetite.


Eighteen Conduct Outcomes have been identified and will be monitored and reported via various metrics through to the Conduct dashboards. A Conduct and Culture Committee has been instituted in May 2017 to provide enhanced oversight.


All clients are risk profiled to ensure that we clearly define, agree and manage our clients' portfolios in accordance with these risk profiles, investment objectives and capacity for loss. Suitability is a major focus which has quality assurance processes in place to assess suitability reviews performed by our staff. Careful monitoring of investment decision-making against the risk profile helps ensure that we achieve appropriate and suitable outcomes for our clients.

 

Legal & Regulatory Risk

The risk of breaching, or non-compliance with, regulations and restrictions enforced on the industry and the Group, resulting in regulatory censure and/or fines.

The Group has built a reputation as a high-quality provider of investment management and stockbroking and financial planning client services. This has been carefully developed over many years and as such there is an emphasis on maintaining this status. The risk is monitored and managed by emphasis on compliance with all aspects of relevant regulation, including those of the FCA.


There remains a significant regulatory change agenda with the Senior Manager Certification Regime (SMCR), the Markets in Financial Instruments Directive (MIFID II), the Packaged Retail Investment and Insurance-based Investment Products and the General Data Protection Regulation. While in the longer term, the UK exit from the EU will potentially lead to a rewriting of some legislation, until the UK formally leaves and the UK government legislate otherwise, EU-derived legislation will remain in force. The FCA continues to focus on its approach to consumer regulation, with the inherent risk that thematic reviews of historic industry practices lead to unanticipated additional costs.


Charles Stanley monitors the changes in the regulatory and legal agenda and has formal projects for major changes to ensure their successful implementation.

 

 

 

 

 

Consolidated income statement

Year ended 31 March 2017

 

 

Notes

2017

2016

 

 

£000

£000

Continuing operations

 

 

 

Revenue

3

141,630

138,650

Administrative expenses

3

(136,122)

(139,163)

Impairment of intangible assets

3

(650)

(465)

Other income

3

186

153

Operating profit/(loss)

3

5,044

(825)

Gain on surrender of lease

 

5,550

-

Loss on disposal of fixed assets

 

(2,199)

(131)

Gain on sale of business

 

148

299

Gain on sale of corporate investments

 

423

-

Impairment of corporate loans

 

(500)

-

Finance income

 

397

69

Finance costs

 

(64)

(99)

Net finance and other non-operating income

 

3,755

138

Profit/(loss) before tax

 

8,799

(687)

Tax (expense)/credit

5

(2,539)

47

Profit/(loss) from continuing operations

 

6,260

(640)

Discontinued operations

 

 

 

Profit from discontinued operations

 

-

333

Profit/(loss) for the year attributable to owners of the Company

 

6,260

(307)

 

 

 

 

 

 

 

 

Earnings per share

 

 

 

From continuing and discontinued operations

 

 

 

Basic

4

12.35p

(0.61p)

Diluted

4

12.34p

(0.61p)

 

 

 

 

From continuing operations

 

 

 

Basic

4

12.35p

(1.27p)

Diluted

4

12.34p

(1.27p)

 

 

 

 

 

Consolidated statement of comprehensive income

Year ended 31 March 2017

 

 

2017

£000

2016

£000

Profit/(loss) for the year

6,260

(307)

Other comprehensive income

 

 

Items that will never be reclassified to profit or loss

 

 

Remeasurement of the defined benefit plan obligation

(1,093)

2,515

Related tax

81

(753)

 

(1,012)

1,762

Items that are or may be reclassified to profit or loss

 

 

Available-for-sale financial assets - net change in fair value

737

(183)

Available-for-sale financial assets - reclassified to profit or loss

170

53

Related tax

(195)

90

 

712

(40)

Other comprehensive income for the year, net of tax

(300)

1,722

Total comprehensive income for the year attributable to owners of the Company

5,960

1,415

 

 

 

 

Consolidated statement of financial position

As at 31 March 2017

 

 

Notes

2017

2016

Assets

 

£000

£000

Intangible assets

6

21,220

25,400

Property, plant and equipment

 

9,976

10,732

Net deferred tax asset

 

1,878

2,042

Available-for-sale financial assets

 

5,626

6,969

Trade and other receivables

 

-

250

Non-current assets

 

38,700

45,393

Trade and other receivables

 

144,673

146,364

Financial assets at fair value through profit or loss

 

73

72

Current tax assets

 

-

118

Available-for-sale financial assets

 

2,450

-

Assets held for sale

 

8,965

1,722

Cash and cash equivalents

 

52,101

48,095

Current assets

 

208,262

196,371

Total assets

 

246,962

241,764

Equity

 

 

 

Share capital

 

12,672

12,669

Share premium

 

4,429

4,402

Revaluation reserve

 

3,378

2,666

Merger relief reserve

 

15,167

15,167

Retained earnings

 

53,424

50,461

Equity attributable to owners of the Company

 

89,070

85,365

Non-controlling interests

 

24

24

Total equity

 

89,094

85,389

Liabilities

 

 

 

Employee benefits

 

10,528

10,090

Provisions

 

1,108

-

Non-current liabilities

 

11,636

10,090

Trade and other payables

 

141,509

141,883

Current tax liabilities

 

994

-

Provisions

 

2,162

4,367

Liabilities held for sale

 

1,567

35

Current liabilities

 

146,232

146,285

Total liabilities

 

157,868

156,375

Total equity and liabilities

 

246,962

241,764

 

The financial statements were approved and authorised for issue by the Board on 13 June 2017.

Consolidated statement of changes in equity

Year ended 31 March 2017

 

 

Share capital

Share premium

Re-valuation reserve

Merger relief reserve

Retained earnings

Total

Non-controlling interests

Total equity

 

£000

£000

£000

£000

£000

£000

£000

£000

 

 

 

 

 

 

 

 

 

1 April 2016

12,669

4,402

2,666

15,167

50,461

85,365

24

85,389

Profit for the year

-

-

-

-

6,260

6,260

-

6,260

Other comprehensive income:

 

 

 

 

 

 

 

 

Revaluation of available-for-sale financial assets

 

 

 

 

 

 

 

 

- net profit from change in fair values

-

-

737

-

-

737

-

737

- net profit on disposal transferred to profit or loss

-

-

170

-

-

170

-

170

Deferred tax on available-for-sale financial assets

-

-

(195)

-

-

(195)

-

(195)

Remeasurement of defined benefit plan liability

-

-

-

-

(1,093)

(1,093)

-

(1,093)

actuarial loss in the year

 

 

 

 

 

 

 

 

- deferred tax movement on plan liability

-

-

-

-

(20)

(20)

-

(20)

- current tax relief

-

-

-

-

101

101

-

101

Total other comprehensive income for the year

-

-

712

-

(1,012)

(300)

-

(300)

Total comprehensive income for the year

-

-

712

-

5,248

5,960

-

5,960

Dividends paid

-

-

-

-

(2,534)

(2,534)

-

(2,534)

Share-based payments:

 

 

 

 

 

 

 

 

- value of employee services

-

-

-

-

249

249

-

249

- issue of shares

3

27

-

-

-

30

-

30

31 March 2017

12,672

4,429

3,378

15,167

53,424

89,070

24

89,094

 

 

Consolidated statement of changes in equity

Year ended 31 March 2016

 

 

Share capital

Share premium

Re-valuation reserve

Merger relief reserve

Retained earnings

Total

Non-controlling interests

Total equity

 

£000

£000

£000

£000

£000

£000

£000

£000

1 April 2015

11,490

4,139

2,706

-

50,559

68,894

24

68,918

Loss for the year

-

-

-

-

(307)

(307)

-

(307)

Other comprehensive income:

 

 

 

 

 

 

 

 

Revaluation of available-for-sale financial assets

 

 

 

 

 

 

 

 

- net loss from change in fair values

-

-

(183)

-

-

(183)

-

(183)

- net profit on disposal transferred to profit or loss

-

-

53

-

-

53

-

53

Deferred tax on available-for-sale financial assets

-

-

90

-

-

90

-

90

Remeasurement of defined benefit plan liability

 

 

 

 

 

 

 

 

- actuarial gain in the year

-

-

-

-

2,515

2,515

-

2,515

- deferred tax movement on plan liability

-

-

-

-

(753)

(753)

-

(753)

Total other comprehensive income for the year

-

-

(40)

-

1,762

1,722

-

1,722

Total comprehensive income for the year

-

-

(40)

-

1,455

1,415

-

1,415

Dividends paid

-

-

-

-

(1,754)

(1,754)

-

(1,754)

Share-based payments:

 

 

 

 

 

 

 

 

- value of employee services

-

-

-

-

201

201

-

201

- issue of shares

30

263

-

-

-

293

-

293

Issues of ordinary shares

1,149

-

-

15,167

-

16,316

-

16,316

31 March 2016

12,669

4,402

2,666

15,167

50,461

85,365

24

85,389

Consolidated statement of cash flows

Year ended 31 March 2017

 

 

Notes

2017

£000

2016

£000

Cash flows from operating activities

 

 

 

Cash generated from operating activities

8

10,688

8,666

Interest received

 

195

136

Interest paid

 

(63)

(36)

Tax paid

 

(1,367)

(453)

Net cash from operating activities

 

9,453

8,313

Cash flows from investing activities

 

 

 

Proceeds from surrender of lease

 

5,550

-

Acquisition of intangible assets

 

(1,089)

(2,545)

Purchase of property, plant and equipment

 

(2,562)

(479)

Proceeds from disposal of property, plant and equipment

 

-

7

Purchase of available-for-sale financial assets

 

(1,842)

(327)

Proceeds from sale of available-for-sale financial assets

 

1,642

223

Net proceeds from disposal of business

 

1,180

1,623

Dividends received

 

186

152

Net cash generated from/(used in) investing activities

 

3,065

(1,346)

Cash flows from financing activities

 

 

 

Proceeds from issue of ordinary share capital

 

30

16,316

Purchase of ordinary shares for employee share schemes

 

-

294

Repayment of borrowings

 

-

(1,974)

Dividends paid

 

(2,534)

(1,754)

Net cash (used in)/generated from financing activities

 

(2,504)

12,882

Net increase in cash and cash equivalents

 

19,849

Cash and cash equivalents at start of year

 

48,415

28,566

Cash and cash equivalents at end of year

 

48,415

Cash and cash equivalents shown in current assets

 

52,101

48,095

Cash classified as assets held for sale

 

6,328

320

Cash and cash equivalents at end of year

 

58,429

48,415

 

 

 

 

 

1. General information

As required by section 435 of the Companies Act 2006, the Board confirms that the financial information contained in this preliminary announcement does not constitute the Group's financial statements for the year ended 31 March 2017.

 

The financial information set out in this preliminary announcement has been extracted from the Group's 2017 Annual Report and Accounts, which have been approved by the Board of Directors and agreed with KPMG LLP, the Company's auditor. The Auditor's Report was unqualified and did not draw attention to any matters by way of emphasis and did not contain statements under section 498(2) or (3) of the Companies Act 2006.

 

While the financial information has been prepared in accordance with the recognition and measurement criteria of International Financial Reporting Standards (IFRS) this preliminary announcement does not contain sufficient information to comply with IFRS.

 

The accounting policies used are consistent with those set out in note 1 to the 2016 Annual Report and Accounts which have been delivered to the Registrar of Companies.

 

The critical accounting judgements and key sources of estimation uncertainty are set out below.

 

The 2017 Annual Report and Accounts will be posted to shareholders during June 2017. Copies will be available from the registered office of the Company at 55 Bishopsgate, London, EC2N 3AS.  It will also be available on the Company's website www.charles-stanley.co.uk

 

 

2. Use of judgements and estimates

In the application of the Group's accounting policies, the Directors are required to make judgements, estimates and assumptions to determine the carrying amounts of certain assets and liabilities. The estimates and associated assumptions are based on the Group's historical experience and other relevant factors. Actual results may differ from the estimates applied.

 

Estimates and judgements are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimate is revised if the revision affects only that period, or in the period of the revision and future periods if the revision affects both current and future periods.

 

2.1 Critical judgements in applying the Group's accounting policies

The following critical judgements have been made by the Directors in applying the Group's accounting policies:

 

2.1.1 Intangible assets and goodwill

For the purposes of impairment testing, the Company and the Group assess goodwill and client relationships based on the recoverable amount of individual units making up the relevant intangible asset, in accordance with the accounting policy set out in note 2 of the 2017 Annual Report and Accounts. Recoverable amount is calculated based on assumptions which are set out in more detail in note 6.

 

Impairment charges in the year were allocated fully to goodwill and included in impairment of intangible assets and investments in the consolidated income statement. For further details on the impairment charge refer to note 6.

 

It was concluded that no other impairments to the carrying value of goodwill or intangible assets are required.

 

2.1.2 Retirement benefit obligations

In consultation with an independent actuary, the Company and the Group make estimates about a number of long-term trends and market conditions to determine the value of the deficit of its defined benefit pension scheme. These long-term forecasts and estimates are highly judgemental and subject to the risk that actual events may be significantly different from those forecast. The valuation performed as at 31 March 2017 resulted in an increase in the actuarial deficit of £0.4 million which has been reflected in these financial statements.

 

2.1.3 Available-for-sale assets

Unlisted available-for-sale financial assets include an investment in Euroclear PLC. The Directors have estimated the fair value of this investment based on a recent share buyback process undertaken by Euroclear PLC in which the Group sold part of its shareholding.

 

During the year, the value of the investment in Runpath Group Limited was reviewed based on the partial sale of the Group's holding.

 

Further information on the Group's available-for-sale financial assets is included in note 17 of the 2017 Annual Report and Accounts. No new information has become available that would require a change in the valuation of any further unlisted investment.

3. Operating segments

The Group has four operating divisions, representing the Core Business, which are its reportable segments. These segments are the basis on which the Group reports its performance to the Board, which is the Group's chief operating decision-maker.

 

 

Continued operations

 

 

 

Investment Management Services

Asset Management

Financial Planning2

Charles Stanley Direct

Support Functions

Subtotal

Discontinued operations

Total

 

£000

£000

£000

£000

£000

£000

£000

£000

Year ended

 

 

 

 

 

 

 

 

31 March 2017

 

 

 

 

 

 

 

 

Investment management fees

65,077

3,441

760

-

-

69,278

-

69,278

Administration fees

12,315

2,480

7,183

3,067

-

25,045

-

25,045

Total fees

77,392

5,921

7,943

3,067

-

94,323

-

94,323

Commission

45,303

702

25

1,277

-

47,307

-

47,307

Total revenue

122,695

6,623

7,968

4,344

-

141,630

-

141,630

Administrative expenses

(65,028)

(3,632)

(7,365)

(3,072)

(57,025)

(136,122)

-

(136,122)

Impairment of intangible assets

-

-

-

-

(650)

(650)

-

(650)

Other income

186

-

-

-

-

186

-

186

Operating contribution

57,853

2,991

603

1,272

(57,675)

5,044

-

5,044

Allocated costs

(48,699)

(2,500)

(3,358)

(3,118)

57,675

-

-

-

Operating profit/(loss)1

9,154

491

(2,755)

(1,846)

-

5,044

-

5,044

Segment assets

225,909

1,179

10,455

9,122

297

246,962

-

246,962

Segment liabilities

156,301

-

1,567

-

-

157,868

-

157,868

 

1The operating profit/(loss) per the above table is different to that presented in the divisional analysis within the Review of the year as the above table includes adjusting items which are excluded from the Core Business analysis within the Review of the Year.

 

2As at 31 March 2017, EBS Management PLC was included within the Financial Planning division within the above table and its assets and liabilities were classified as held for sale on the consolidated balance sheet. The disposal of EBS Management PLC was completed on 31 May 2017.  See note 13 of the 2017 Annual Report and Accounts for further information.

 

3. Operating segments (continued)

 

Continued operations

 

 

 

Investment Management Services

Asset Management

Financial Planning2

Charles Stanley Direct

Support Functions

Subtotal

Discontinued operations

Total

Year ended

£000

£000

£000

£000

£000

£000

£000

£000

31 March 2016

 

 

 

 

 

 

 

 

Investment management fees

58,098

2,407

1,453

-

-

61,958

-

61,958

Administration fees

17,125

2,620

6,467

3,876

-

30,088

62

30,150

Corporate finance

-

-

-

-

-

-

2,741

2,741

Total fees

75,223

5,027

7,920

3,876

-

92,046

2,803

94,849

Commission

44,792

521

383

908

-

46,604

177

46,781

Total revenue

120,015

5,548

8,303

4,784

-

138,650

2,980

141,630

Administrative expenses

(69,440)

(6,943)

(7,699)

(2,816)

(52,475)

(139,373)

(2,458)

(141,831)

Impairment of intangible assets

-

-

(465)

-

-

(465)

-

(465)

Other income

153

-

-

-

-

153

-

153

Operating contribution

50,728

(1,395)

139

1,968

(52,475)

(1,035)

522

(513)

Allocated costs

(46,196)

430

(2,757)

(3,357)

52,090

210

(205)

5

Operating profit/(loss)1

4,532

(965)

(2,618)

(1,389)

(385)

(825)

317

(508)

Segment assets

144,250

1,502

6,908

7,102

81,684

241,446

318

241,764

Segment liabilities

127,303

2

35

18

28,963

156,321

54

156,375

 

1The operating profit/(loss) per the above table is different to that presented in the divisional analysis within the Review of the year as the above table includes adjusting items which are excluded from the Core Business analysis within the Review of the Year.

 

2As at 31 March 2016, Charles Stanley Financial Solutions was included within the Financial Planning division and its assets and liabilities were classified as held for sale. The disposal of Charles Stanley Financial Solutions Limited was completed on 1 April 2016. See note 13 of the 2017 Annual Report and Accounts for further information.

4. Earnings per share

Basic earnings per share is calculated by dividing the earnings attributable to equity holders of the Parent Company by the weighted average number of ordinary shares in issue during the period.

 

 

2017

2016

 

pence

pence

 

per share

per share

Basic earnings per share

 

 

From continuing operations

12.35

(1.27)

From discontinued operations

-

0.66

Total basic earnings per share

12.35

(0.61)

 

Diluted earnings per share is calculated by adjusting the weighted average number of ordinary shares to assume exercise of all potentially dilutive share options.

 

 

2017

2016

 

pence

pence

 

per share

per share

Diluted earnings per share

 

 

From continuing operations

12.34

(1.27)

From discontinued operations

-

0.66

Total diluted earnings per share

12.34

(0.61)

 

The Directors believe that a truer reflection of the performance of the Group's underlying business is given by the measure of Core Business earnings per share, which is presented in the Review of the year. This measure is also followed by the analyst community as a benchmark of the Group's underlying performance.

 

 

2017

2016

 

£000

£000

Earnings

 

 

Earnings used in the calculation of earnings per share from continuing operations

6,260

(640)

Earnings for the year from discontinued operations used in the calculation of earnings per share from discontinued operations

-

333

Earnings used in the calculation of basic earnings per share

6,260

(307)

 

 

2017

2016

 

£000

£000

Number of shares

 

 

Weighted average number of ordinary shares used in the calculation of basic earnings per share

50,683

50,386

Effect of potentially dilutive share options

41

-

Weighted average number of ordinary shares used in the calculation of diluted earnings per share

50,724

50,386

 

 

 

 

 

5. Income taxes

 

Tax recognised in the income statement

 

 

2017

2016

 

£000

£000

Current taxation

 

 

Current year expense/(credit)

2,283

(135)

Adjustment in respect of prior years

306

(57)

 

2,589

(192)

Deferred taxation

 

 

(Credit)/expense for the year

(50)

145

 

(50)

145

Total tax expense/(credit) on continuing operations

2,539

(47)

 

In addition to amounts charged to the income statement, deferred tax of £0.2 million relating to the revaluation of available-for-sale financial assets has been charged directly to equity (2016: £0.1 million credit).

 

Current tax of £0.1 million has been credited directly to equity (2016: £nil) and deferred tax of £0.02 million has also been credited directly to equity (2016: £0.8 million charge) in respect of the defined benefit plan.

 

The deferred tax asset at 31 March 2017 has been calculated based on the UK corporation tax rate of 17%, as this was substantively enacted at the balance sheet date.

  

 

 

 

 

6. Intangible assets

 

 

 

 

Internally

 

 

 

Customer

generated

 

 

Goodwill

relationships

software

Total

Cost

£000

£000

£000

£000

At 1 April 2015

21,507

22,769

4,167

48,443

Additions

-

624

1,921

2,545

At 31 March 2016

21,507

23,393

6,088

50,988

Additions

-

32

1,057

1,089

Transfer to held for sale

(1,294)

-

-

(1,294)

At 31 March 2017

20,213

23,425

7,145

50,783

Amortisation

 

 

 

 

At 1 April 2015

5,511

15,498

1,337

22,346

Charge for the year

-

1,635

1,607

3,242

At 31 March 2016

5,511

17,133

2,944

25,588

Charge for the year

-

1,556

1,769

3,325

Impairment

650

-

-

650

At 31 March 2017

6,161

18,689

4,713

29,563

Net book value

 

 

 

 

At 31 March 2017

14,052

4,736

2,432

21,220

At 31 March 2016

15,996

6,260

3,144

25,400

 

None of the intangible assets have been pledged as security.

 

Goodwill is allocated to the Group's operating divisions as follows:

 

 

2017

2016

Goodwill

£000

£000

Investment Management Services

8,805

10,449

Financial Planning

-

300

Charles Stanley Direct

5,247

5,247

 

14,052

15,996

 

6.1 Goodwill

The recoverable amount of goodwill allocated to a CGU is determined initially by calculating the CGU's fair value less costs to sell. If this is lower than the carrying amount or is not determinable, a value in use calculation is also prepared.

 

Fair value less costs to sell is calculated largely based on a percentage of FuMA. Where this approach is not appropriate a turnover multiple is used.

 

 

  

6. Intangible assets (continued)

The rates used in the fair value less costs to sell calculations are those implied by recent transactions in the market or, where appropriate, based on publicly available information for similar quoted businesses. When calculating the fair value less costs to sell, key assumptions are stress tested to determine whether the calculations are sensitive to reasonable potential changes in these assumptions.

 

At 31 March 2017, fair value less costs to sell was deemed to be higher than carrying value for each CGU. Therefore, no value in use calculations have been prepared.

 

6.1.1 Investment Management Services

The recoverable amount of goodwill related to Investment Management Services was assessed using fair value less costs to sell for the year ended 31 March 2017. The fair value was determined based on a percentage of FuMA. During the year, the Group recognised an impairment charge of £0.3 million in respect of goodwill attributable to a regional office which provided investment management services. In addition, goodwill of £1.3 million in respect of EBS Management PLC was transferred to assets held for sale at the reporting date. Consequently, the goodwill balance carried forward was £8.8 million.

 

6.1.2 Financial Planning

The recoverable amount of goodwill relating to Financial Planning was assessed using fair value less costs to sell for the year ended 31 March 2017. The brought forward balance of £0.3 million was fully impaired during the year as the business activities to which it related are no longer undertaken.

 

6.1.3 Charles Stanley Direct

The recoverable amount of goodwill relating to Charles Stanley Direct was assessed using fair value less costs to sell for the year ended 31 March 2017. The recoverable amount was determined to be higher than the carrying amount of the CGU and therefore the goodwill carrying value is adequately supported.

 

6.2 Customer relationships

Purchases of customer relationships relate to payments made to investment managers and third parties for the introduction of customer relationships.

 

6.3 Internally generated software

Internally generated software is software designed, developed and commercialised by the Group.

 

 

7. Dividends

The following dividends were declared and paid by the Group in the year:

 

 

2017

2016

 

£000

£000

Final dividend paid for 2016: 3.50p per share (2015: 2.00p)

1,774

996

Interim dividend paid for 2017: 1.50p per share (2015: 1.50p)

760

758

 

2,534

1,754

 

 

 

 

8. Reconciliation of net profit/(loss) to cash generated from operations

 

 

2017

2016

 

£000

£000

Profit/(loss) before tax

8,799

(272)

Adjustments for:

 

 

Depreciation

2,112

2,896

Amortisation of intangible assets

3,325

3,242

Impairment of intangible assets

650

465

Impairment of corporate loans

500

-

Gain on surrender of long-term lease

(5,550)

-

Share-based payments - value of employee services

249

199

Retirement benefit scheme

(655)

(480)

Dividend income

(186)

(152)

Interest income

(195)

(136)

Interest expense

63

36

Loss on disposal of property, plant and equipment

2,199

131

Gain on disposal of business

(148)

(99)

Changes in working capital:

 

 

(Increase)/decrease in financial assets at fair value through profit or loss

(1)

28

Decrease in receivables

467

103,357

Decrease in payables

(941)

(100,549)

Net cash inflow from operations

10,688

8,666

 

9. Subsequent events

The Group announced the sale of EBS Management PLC to Embark Group on 11 April 2017. The sale completed on 31 May 2017 for total consideration of £4.0 million. The consideration is to be satisfied by the payment of £2.0 million in cash on completion, £1.0 million of fixed deferred consideration and £1.0 million of contingent deferred consideration. 50% of each element of deferred consideration is payable one year after completion, with the remaining balance due two years after completion.

 

On 28 April 2017 the Group was notified that it had been successful in tendering 3,672 shares in Euroclear PLC for total consideration of €2.8 million. At the balance sheet date, this holding was presented as available-for-sale assets within current assets. The remaining shares in Euroclear PLC held by the Group were included within non-current assets at the reporting date. Further information on this disposal can be found in note 17 of the 2017 Annual Report and Accounts. 

 

 

 

10. Forward-looking statements

This announcement has been prepared to provide information to shareholders to assess the current position and future potential of Charles Stanley Group. It contains certain forward-looking statements with respect to the Group's financial condition, operations, and business opportunities. Forward-looking statements involve known and unknown risks, uncertainties and other important factors that could cause actual results to differ materially from what is expressed or implied by the statements. Any forward-looking statement is made in good faith based on information available to the Directors as of the date of the statement. Past performance cannot be relied on as a guide to future performance.

 


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