Notes to the accounts
for the year ended 31 December 2007
3. Segmental reporting
(i) Primary reporting format - business segments
The Group has four continuing business segments: Asset Management, Private Banking, Private Equity and Group. Asset Management principally comprises investment management including advisory services, property, life company business and alternative assets; Private Banking principally comprises investment management and banking services provided to high net worth individuals and certain smaller institutions; Private Equity principally comprises the Group's investments in private equity, venture and buy-out funds and related vehicles; and Group consists of income on the Group's capital less Group costs and provisions, and the results of the leasing business, which was sold during the year.
The allocation of costs to individual business segments is undertaken in order to provide management information on the cost of providing services and to provide managers with a tool to manage and control expenditure. Costs are allocated on a basis that aligns the charge with the resources employed by the Group in a particular area of its business. Typical dynamic allocation bases are square footage occupied and number of staff employed by particular business segments.
Non-current assets held for sale are included within the Group segment.
| Year ended 31 December 2007 | Asset Management £mn |
Private Banking £mn |
Private Equity £mn |
Group £mn |
Inter-segment elimination £mn |
Total £mn |
|||||
|---|---|---|---|---|---|---|---|---|---|---|---|
| External revenue | 991.4 | 87.6 | 48.1 | 41.0 | - | 1,168.1 | |||||
| External net interest | - | 23.7 | - | - | - | 23.7 | |||||
| Inter-segment interest payable | - | (1.7) | - | - | 1.7 | - | |||||
| Total revenue | 991.4 | 109.6 | 48.1 | 41.0 | 1.7 | 1,191.8 | |||||
| Cost of sales | (228.6) | (3.7) | - | (0.1) | - | (232.4) | |||||
| Gross profit | 762.8 | 105.9 | 48.1 | 40.9 | 1.7 | 959.4 | |||||
| Administrative expenses | (518.9) | (64.6) | (4.7) | (23.6) | - | (611.8) | |||||
| Operating profit | 243.9 | 41.3 | 43.4 | 17.3 | 1.7 | 347.6 | |||||
| External interest receivable and similar income | 7.6 | - | - | 15.5 | - | 23.1 | |||||
| Inter-segment interest receivable | 8.0 | - | - | (6.3) | (1.7) | - | |||||
| Interest receivable and similar income | 15.6 | - | - | 9.2 | (1.7) | 23.1 | |||||
| Interest payable and similar charges | (0.2) | - | - | (0.3) | - | (0.5) | |||||
| Net finance income | 15.4 | - | - | 8.9 | (1.7) | 22.6 | |||||
| Share of profit of associates and joint ventures | 7.2 | - | 15.1 | - | - | 22.3 | |||||
| Profit before tax | 266.5 | 41.3 | 58.5 | 26.2 | - | 392.5 | |||||
| Administrative expenses include the following non-cash expenses: | |||||||||||
| Share-based payments | (28.0) | (2.3) | (0.1) | (2.5) | - | (32.9) | |||||
| Depreciation and amortisation of software | (8.1) | (0.6) | - | - | - | (8.7) | |||||
| Provisions | (0.1) | 0.2 | - | 5.3 | - | 5.4 | |||||
| (36.2) | (2.7) | (0.1) | 2.8 | - | (36.2) |
| Year ended 31 December 2007 | Asset Management £mn |
Private Banking £mn |
Private Equity £mn |
Group £mn |
Inter-segment elimination £mn |
Income tax £mn |
Total £mn |
|---|---|---|---|---|---|---|---|
| Segment assets | 3,649.11 | 2,078.6 | 95.12 | 1,252.1 | (248.6) | 50.4 | 6,876.7 |
| Segment liabilities | (3,229.8) | (1,870.2) | (2.4) | (267.0) | 248.6 | (59.7) | (5,180.5) |
| 419.3 | 208.4 | 92.7 | 985.1 | - | (9.3) | 1,696.2 | |
| Capital expenditure on segment assets | 28.5 | 0.3 | - | 1.7 | - | - | 30.5 |
Impairment losses and the reversal of impairment losses have been recognised in the year as follows:
| 2007 | |||||
|---|---|---|---|---|---|
| Asset Management £mn |
Private Banking £mn |
Private Equity £mn |
Group £mn |
Total £mn |
|
| Reversal of impairment losses recognised: In profit or loss |
- | 0.1 | - | - | 0.1 |
Inter-segment amounts represent interest payable and receivable on cash balances held by Private Banking on behalf of Group companies.
| Year ended 31 December 2006 | Asset Management £mn |
Private Banking £mn |
Private Equity £mn |
Group £mn |
Inter-segment elimination £mn |
Total £mn |
|||||
|---|---|---|---|---|---|---|---|---|---|---|---|
| External revenue | 811.1 | 80.1 | 22.2 | 31.0 | - | 944.4 | |||||
| External net interest | - | 22.8 | - | - | - | 22.8 | |||||
| Inter-segment interest payable | - | (4.4) | - | - | 4.4 | - | |||||
| Total revenue | 811.1 | 98.5 | 22.2 | 31.0 | 4.4 | 967.2 | |||||
| Cost of sales | (166.2) | (2.8) | - | - | - | (169.0) | |||||
| Gross profit | 644.9 | 95.7 | 22.2 | 31.0 | 4.4 | 798.2 | |||||
| Administrative expenses | (436.6) | (68.8) | (3.2) | (33.7) | - | (542.3) | |||||
| Operating profit | 208.3 | 26.9 | 19.0 | (2.7) | 4.4 | 255.9 | |||||
| External interest receivable and similar income | 6.3 | - | - | 13.8 | - | 20.1 | |||||
| Inter-segment interest receivable | 5.2 | - | - | (0.8) | (4.4) | - | |||||
| Interest receivable and similar income | 11.5 | - | - | 13.0 | (4.4) | 20.1 | |||||
| Interest payable and similar charges | (0.6) | - | - | (0.8) | - | (1.4) | |||||
| Net finance income | 10.9 | - | - | 12.2 | (4.4) | 18.7 | |||||
| Share of profit of associates and joint ventures | (0.2) | - | 15.6 | - | - | 15.4 | |||||
| Profit before tax | 219.0 | 26.9 | 34.6 | 9.5 | - | 290.0 | |||||
| Administrative expenses include the following non-cash expenses: | |||||||||||
| Share-based payments | (23.3) | (1.5) | - | (2.7) | - | (27.5) | |||||
| Depreciation and amortisation of software | (5.0) | (2.5) | - | - | - | (7.5) | |||||
| Provisions | 0.1 | - | - | (5.9) | - | (5.8) | |||||
| (28.2) | (4.0) | - | (8.6) | - | (40.8) |
| Year ended 31 December 2006 | Asset Management £mn |
Private Banking £mn |
Private Equity £mn |
Group £mn |
Inter-segment elimination £mn |
Income tax £mn |
Total £mn |
|---|---|---|---|---|---|---|---|
| Segment assets | 2,375.11 | 1,936.4 | 170.3 2 | 853.8 | (285.6) | 60.9 | 5,110.9 |
| Segment liabilities | (1,983.9) | (1,745.9) | (2.2) | (186.6) | 285.6 | (34.3) | (3,667.3) |
| 391.2 | 190.5 | 168.1 | 667.2 | - | 26.6 | 1,443.6 | |
| Capital expenditure on segment assets | 10.8 | 1.2 | - | - | - | - | 12.0 |
Impairment losses and the reversal of impairment losses have been recognised in the year as follows:
| 2006 | |||||
|---|---|---|---|---|---|
| Asset Management £mn |
Private Banking £mn |
Private Equity £mn |
Group £mn |
Total £mn |
|
| Impairment losses recognised: | |||||
| In profit or loss | - | (0.2) | (1.4) | - | (1.6) |
Inter-segment amounts represent interest payable and receivable on cash balances held by Private Banking on behalf of Group companies.
(ii) Secondary segment information - geographical segments
The geographic analysis is based on the geographical location of the Group's clients.
The allocation of costs to individual geographic areas is undertaken in order to provide management information on the cost of providing services and to provide managers with a tool to manage and control expenditure. Costs are allocated on a basis that aligns the charge with the resources employed by the Group in a particular location. Typical dynamic allocation bases are square footage occupied and number of staff employed by different geographic areas.
Non-current assets held for sale are included in the Americas segment (£23.2 million) and the Asia Pacific segment (£14.3 million). Comparative amounts are included in the Americas segment (£50.1 million) and the United Kingdom segment (£10.0 million).
1See note 4