Business and financial review
Profit before tax and exceptional items increased 6% to £644.7 million.
I am pleased to present another year of record results for the Group, with net income*, profit and our new KPI of AUMA all reaching record levels. The referendum on the UK’s membership of the European Union led to a devaluation in sterling. As a company which reports in sterling, this has had a significant impact on this year’s results, increasing our AUMA and net operating revenues as the majority of money we manage is in currencies other than sterling.
Our cost base also increased as a result of foreign currency movements, although as a net exporter of investment services a significant proportion of our costs arise in sterling. Overall the Group’s results have benefited from the sterling devaluation. Our substantial operations in continental Europe mean we are well placed to address the challenges that may arise as the UK government begins the process of removing the UK from the European Union.
The Group’s profit before tax and exceptional items increased by 6% in 2016 to £644.7 million. Basic earnings per share before exceptional items were up 5% to 186.3 pence. After exceptional items, profit before tax was up 5% to £618.1 million, resulting in a 4% increase in basic earnings per share to 178.3 pence.
This increase in profits has been driven by the growth in our AUMA as well as the strategic developments we have made in the business. The Group’s AUM increased by 23%, primarily due to strong investment returns, including currency movements, but also as a result of business acquisitions and net new business flows.
Our acquisition of Benchmark Capital, which completed in December 2016, introduced a new category of assets under administration (AUA), with £11.1 billion of assets generating revenues linked to the provision of services to Independent Financial Advisers (IFAs). The acquisition also added £3.4 billion of AUM and associated revenues.
Based on these strong results, the Board is recommending a final dividend of 64 pence per share, bringing the total dividend for the year to 93 pence, an increase of 7% from 2015. This is in line with our stated policy to increase the dividend progressively, in line with the trend in profitability, and represents a dividend payout ratio of 50%.
The following commentary provides a more detailed review of our business development and the financial results of the Group in 2016. It is supplemented by further information on the financial position, capital strength and liquidity of the Group which can be found on . pages 102, 104 and 106
Chief Financial Officer