RBS 2005 Annual Report Download - page 6

04
Chairman’s statement
2005 was another year of excellent
performance by the Group. Increased
earnings and strong capital generation
have enabled us to continue investing
for organic growth, as well as raise our
dividend significantly and embark on a
programme of repurchasing our shares.
Financial performance
In 2005, Group operating profit increased by 16% to £8,251
million (2004 – £7,108 million). Total income grew by 14% to
£25,569 million (2004 – £22,515 million), while operating expenses
also grew by 14% to £11,298 million (2004 – £9,871 million).
We have maintained a high level of efficiency across the
Group, reaping the benefits of scale from our Manufacturing
operations while continuing to invest in our businesses.
All acquisition integration benefits are being achieved at or
ahead of expectations. The integration of Churchill, acquired
in September 2003, was completed in September 2005 with
benefits in excess of those forecast at acquisition.
Capital
Our first use of additional capital is to invest in profitable
business growth, and we see many opportunities to do so
across the Group. Whilst having no plans for large acquisitions,
we will continue to evaluate good opportunities to supplement
organic growth, using strict investment criteria and leveraging
our proven integration capabilities. In addition, it has always
been our plan to be capital generative beyond the development
needs of our businesses, and our 2005 results represent an
important milestone in that ambition as we are able to return
capital to shareholders in the form of an increased dividend
and share buyback.
Staff profit sharing
Reflecting the strong financial performance of the Group,
we are delighted that our staff are once again sharing in our
success with a profit share for the year at 10% of basic salaries.
Board of directors
The past year has seen significant change for our Board.
I am delighted that Sir Tom McKillop agreed to join last year
as our Deputy Chairman. Subject to his election, he will take
over from me as Chairman at the Annual General Meeting on
28 April 2006. As chief executive of AstraZeneca PLC he
enjoyed wide experience of operating successfully in different
international markets and his comprehensive understanding
of financial services from his previous directorship of a major
bank will be of great value to us.
We bade farewell to Sir Angus Grossart, Lord Vallance, Eileen
Mackay and Iain Robertson as non-executive directors, and
Fred Watt as Group Finance Director. Their contribution during
a period of dramatic growth and change for RBS has been
highly appreciated, as has their experience of the economic
cycle and its impact on business. On behalf of the Board
I would like to pay tribute to their loyal service and express
our thanks for the valued contribution they have made.
Over the same period we have welcomed the appointment of
two new non-executive directors, Janis Kong and, with effect
from 1 March 2006, Bill Friedrich. I am confident that, with their
different backgrounds and experience across our key markets,
both will greatly strengthen the Board as we embark on our
next phase of growth.
On 1 February 2006 Guy Whittaker joined the Board as Group
Finance Director. He is an experienced senior executive of the
highest calibre, with great breadth of international experience
in financial services. On 14 February 2006 the Group was also
very pleased to announce the appointments of Johnny Cameron,
Chief Executive of Corporate Markets, and Mark Fisher, Chief
Executive of Manufacturing, as executive directors, with effect
from 1 March 2006.
Outlook
Leaving an organisation which has been so important to me
for the last 18 years will mark a milestone for me also, but
I am pleased to be doing so at a time when the business
is in such good shape. We have demonstrated our ability
to generate capital consistently from a stable and diverse
platform and I believe we are well placed to take advantage
of the many opportunities that lie ahead, for the benefit of our
shareholders, customers and staff.
Sir George Mathewson, Chairman
Chairman’s statement