ROTHSCHILD & CO Paris, 24 November 2015
Half year results
2015/2016
Overall revenue for the first half year 2015/2016 up 1% at €679 million compared to €673 million in first half year 2014/2015 and second quarter up 4% versus the first quarter
Global Financial Advisory revenue down 4% compared to the same period in the prior year. M&A revenue up 8% but Financing advisory revenue down 23% affected by lower activity in European capital markets
Wealth & Asset Management revenue up 20% compared to the same period in the prior year, driven by the strong improvement in Assets under Management
Merchant Banking revenue decreased by 23% compared to the same period in the prior year, reflecting the unusually high investment profits in the first half year of 2014/2015 but still up 33% compared to average of last three years first half revenue
Profit before tax of €125 million. Net income - Group share of €39 million. Earnings per share of
€0.56
Significant positive foreign exchange translation effects of €50 million on revenue but a negative
€1 million on operating income
The Group sold its UK asset finance business, Five Arrows Leasing Group, on 3 November 2015. This transaction will generate an exceptional profit after tax of approximately €90 million in the second half of 2015/2016
'Rothschild & Co delivered a solid performance in the first half of 2015/2016. However the comparison with prior year is impacted by the first half revenue of 2014/2015 being particularly high due to the unusual level of realisations in Merchant Banking.' stated Nigel Higgins and Olivier Pécoux, Co-Chief Executive Officers of the Group. 'Each of our businesses achieved a good level of activity despite volatile and uncertain economic and market conditions. Global Financial Advisory performed well, benefiting from our leading market position in Europe to capture opportunities. This should continue in the second half of 2015/2016 due to a continuing strong deal flow. We were also pleased to see positive development in Wealth & Asset Management, with revenue at record highs due to the increase in Assets under Management. In Merchant Banking, the Group generated revenue below the level of the same period in the prior year, which explains a significant part of the decrease in Group profitability, but our revenue was still 33% above its first half average of the previous three years.'
Summary Income Statement(in €m) | Page | 6 months 2014/2015 | 6 months 2015/2016 | Var | Var % |
Revenue 1 | 3 - 6 | 673 | 679 | 6 | 1% |
Staff costs | 6 | (382) | (417) | 35 | 9% |
Administrative expenses | 6 | (116) | (122) | 6 | 5% |
Depreciation and amortisation | (18) | (20) | 2 | 11% | |
Impairments | 7 | (10) | (1) | (9) | (90)% |
Operating Income 1 | 147 | 119 | (28) | (19)% | |
Other income / expense (net) | 7 | 26 | 6 | (20) | (77)% |
Profit before tax | 173 | 125 | (48) | (28)% | |
Income tax | 7 | (36) | (29) | (7) | (19)% |
Consolidated net income | 137 | 96 | (41) | (30)% | |
Non-controlling interests | 7 | (58) | (57) | (1) | (2)% |
Net income - Group share | 79 | 39 | (40) | (51)% | |
Earnings per share | 1.15 € | 0.56 € | (0.59) | (51)% |
1 The foreign exchange translation effect between the first six months 2015/2016 and the same period in 2014/2015 is:
a positive impact on revenue of €50 million
a negative impact on operating income of €1 million
* * *
The Supervisory Board of Rothschild & Co SCA met on 24 November 2015 to review the consolidated financial statements for the half year from 1 April 2015 to 30 September 2015; these accounts had been previously approved by Rothschild & Co Gestion SAS, Managing Partner of Rothschild & Co.
We have two main activities within our Group: (1) Global Financial Advisory which focuses on providing advice in the areas of M&A, debt, restructuring and equity; and (2) Asset Management in a broad sense which comprises Wealth & Asset Management and Merchant Banking. In addition, we have a Banking business which predominantly relates to the legacy banking business.
Performance by businessThe analysis of revenue and operating income by business is as follows:
(in €m) | Banking | ||||
Revenues | 397 | 255 | 38 | (11) | 679 |
Operating expenses | (350) | (194) | (59) | 44 | (559) |
Impairments | - | - | 2 | (3) | (1) |
Operating income | 47 | 61 | (19) | 30 | 119 |
Swap settlement cost | - | - | 8 | - | 8 |
Operating income before swap | 47 | 61 | (11) | 30 | 127 |
2
settlement
Operating margin % 12% 24% 19%
2
(in €m) | Banking | ||||
Revenue | 413 | 243 | 28 | (11) | 673 |
Operating expenses | (356) | (161) | (41) | 42 | (516) |
Impairments | - | - | (3) | (7) | (10) |
Operating income | 57 | 82 | (16) | 24 | 147 |
Operating margin % | 14% | 34% | 22% |
1 Other comprises central costs, legacy businesses, including Banking & Asset Finance and other
2 IFRS Reconciliation mainly represents the treatment of profit share paid to French partners as non-controlling interests, the application of IAS 19 for defined benefit pension schemes, the reallocation of impairments and the accounting for deferred bonuses over the period earned.
The swap settlement cost of €8 million relates to the cost of settling interest rate swaps following the refinancing, on more favourable terms, of the debt that relates to our London office property.
Global Financial Advisory
Global Financial Advisory revenue for the six months to September 2015 was €397 million, compared to €413 million for the same period in the prior year, which was our best first half year since the financial crisis. Operating income was €47 million compared to €57 million due to lower revenues and higher investment costs.
M&A advisory revenue was €277 million for the first six months, compared to €257 million for the same period in the prior year (+8%); reflecting a continuation of the momentum seen last year. We remain among the top M&A advisers in the world, ranking 4th globally by number of completed transactions in the 6 months1. In Europe, we continue to be the market leader, advising on more M&A deals than any of our competitors - a position we have held for more than a decade.
Whilst M&A market activity, as measured by completed deal values, can vary significantly from quarter to quarter, the trend in global M&A has been strong this year, principally fuelled by a large number of US domestic mega-cap transactions. However, based on the number of deals completed, a key indicator in our activity, the market is at lower levels than in the same period of last year. Overall, in our key markets, we believe M&A activity is broadly flat in the first half year versus last year. In this context, our current pipeline for the financial year to March 2016 remains strong and above last year's levels at the same point in time.
1 Source: Thomson Reuters
Financing advisory revenue was €120 million for the first six months, compared to €156 million in the same period in the prior year (-23%). Revenue was affected by lower activity in European equity capital markets, although we succeeded in maintaining our position as adviser on more European equity capital market assignments than any other independent financial adviser2. In debt and
restructuring advisory, whilst we continue to be highly active in large and complex situations, revenue was also lower, principally in Europe partly offset by more activity in the US.
Rothschild advised the following clients on significant advisory assignments that completed in the six months to September 2015:
- Lafarge on its US$60 billion merger with Holcim to create LafargeHolcim;
- Visteon on the sale of its US$3.6 billion 70% stake in Halla Visteon Climate;
- TSB on its £1.7 billion recommended cash offer by Banco de Sabadell;
- CITIC Environment and CKM on their US$1.5 billion voluntary general offer for United Envirotech; and
-
PanAust on its US$950 million recommended cash offer by Guangdong Rising Assets
Management.
We are currently working on some of the largest and most complex announced transactions globally, including acting as financial advisor to:
-
Coca-Cola Iberian Partners on its €28 billion three-way merger with Coca-Cola Enterprises and
Coca-Cola Erfrischungsgetränke into a new Western European bottler, CCEP, the second largest ever consumer deal in Europe;
- Intel on its US$16.7 billion acquisition of Altera;
- Al Noor Hospitals Group of the UAE on its £6.9 billion combination with Mediclinic of South Africa;
-
Solera on its US$6.5 billion sale to Vista Equity Partners, the largest take private transaction of
2015 to date and;
- Bradesco on its US$5.2 billion acquisition of HSBC Brazil.
For further examples of Rothschild's completed and ongoing advisory assignments, please refer to Appendix 3.
Asset Management
For the six months to 30 September 2015, Asset Management revenue increased from €243 million to
€255 million for the same period in 2014/2015. This reflects a significant increase of Wealth & Asset Management revenue (up 20%) partially offset by the anticipated decrease of Merchant Banking revenue (down 23%).
For the six months to 30 September 2015, Asset Management operating income decreased from
€82 million to €61 million for the same period in 2014/2015, due to lower Merchant Banking investments gains.
Wealth & Asset Management
Wealth & Asset Management revenue for the six months to September 2015 was €187 million, up 20% compared to the same period last year (€156 million). This was driven by higher Assets under Management which were €48.3 billion as at 30 September 2015 compared to €45.2 billion as at 30 September 2014, an increase of 7%.
In the first half of 2015/2016 net new assets continued their positive trend (€0.7 billion) but were offset by market depreciation, negative exchange rate effects and reclassification of assets from managed to custodial that totalled €4.5 billion3. Net new assets were driven by inflows in Wealth Management
|
distributed by
|
