Jupiter Annual Report 2010 - Jupiter Asset Management

Business review | Directors’ report
Other gains/losses
Other gains were £1.7m, arising from a £1.0m one-off gain on the
part disposal of our stake in Cofunds and a small net increase in
the market value of our seed capital investments. This is £0.7m lower
than the £2.4m in 2009.
Amortisation of intangible assets
Amortisation of £39.8m (2009: £39.8m) included £38.7m (2009:
£38.7m) relating to intangible assets acquired as part of the MBO
on 19 June 2007. These assets relate to the acquired investment
management contracts and the Jupiter brand name, and are amortised
on a straight line basis over seven and ten years respectively.
Exceptional costs
The Financial Services Compensation Scheme announced
on 20 January 2011 that a second interim levy for 2010/11 would be
imposed on the industry for the costs of major investment failures
such as Keydata Investment Services Limited. The cost to the Group
is £5.2m and the full amount has been recognised in 2010. This
charge did not arise from any action taken or omission by the Group.
The Group also recognised an exceptional cost for the year of £1.6m
(2009: £nil) which relates to expenses associated with the Listing.
Of the overall cost of Listing of £15.7m, £10.3m relating to the issue
of new equity was written off against the share premium account and
£3.8m of loan amendment fees are included within finance expense
in the income statement.
Finance expense
Finance expenses decreased by £17.4m to £29.0m (2009: £46.4m).
This includes £12.5m of non-recurring expenses relating to the MBO
capital structure and £3.8m of expenses incurred to modify the terms
of the bank loan in order to facilitate the Listing. After our Listing,
finance costs have only been incurred on our £283.0m bank loan.
Interest on this is paid at a margin of 3.75 per cent. over 3 month
LIBOR, although the Group fixed its interest rate on £70m of the
debt via swaps over three and four year periods with effect from
1 November 2010.
Figure 10
Finance expense reduced due to balance sheet restructuring
2009
£m
2010
29.0
Figure 11
Underlying EPS increased in line with increased profitability
46.4
Profit before tax
PBT for the year was £42.4m (2009: £7.2m). This increase was driven
by increased operating earnings and a reduction in finance expenses
in the second half of the year.
Tax expense
The effective tax charge for 2010 is 23 per cent. (2009: tax credit 19 per
cent.). The effective tax rate for 2010 is lower than the standard rate
of corporation tax of 28 per cent. due to the utilisation of brought
forward capital losses on gains made on disposal of investments during
the year and the effect of restating closing deferred tax balances in light
of the forthcoming changes to the standard rate of corporation tax. The
impact of these on the effective tax rate was magnified by PBT being
a relatively low number in 2010 due to the pre-Listing finance charges.
EPS
Profit before tax
for the year
(2009: £7.2m)
£
42.4m
In 2010 the Group’s basic and diluted EPS measures were 10.8p and
7.6p respectively. Comparisons with the prior period are not meaningful
because of the different capital structures and the Listing consequences.
The Board has also developed an underlying earnings per share
measure which it believes provides a more useful representation of
the Group’s trading performance as the statutory EPS measures are
affected by various accounting treatments, including the Listing, the
unwinding of the MBO capital structure and management’s share
vesting and lock-in agreements.
2010
2009
Underlying EPS*
£m
£m
Profit before tax 42.4 7.2
Adjustments:
Amortisation of acquired intangibles 38.7 38.7
Charge for options over pre-Listing shares 7.8 –
Exceptional Listing cost 1.6 –
FSCS levy exceptional cost 5.2 –
Pre-Listing loan amendment fees 3.8 –
Finance expense relating to pre-Listing
capital structure
12.5 26.8
Underlying profit before tax 112.0 72.7
Tax effect @ statutory rate 28% (31.4) (20.4)
Underlying profit after tax 80.6 52.3
2009
11.4p
Actual shares on post vesting basis/m 457.7 457.7
Underlying EPS 17.6p 11.4p
2010
17.6p
*Underlying EPS is a non-GAAP measure which the Group uses to assess
its performance.
The 2010 underlying EPS was 17.6p (2009: 11.4p). This increase
is the result of the improved trading performance of the Group.
Annual Report & Accounts 2010 22 Jupiter Fund Management plc