Final Results

RNS Number : 5682V

Impax Asset Management Group plc

04 December 2019

 

Impax Asset Management Group plc

Results for the year ended 30 September 2019

London 4 December 2019 - Impax Asset Management Group plc ("Impax" or the "Company"), the specialist investor focused on the transition to a more sustainable global economy, today announces final audited results for the year ending 30 September 2019 (the "Period").

 Business highlights

·     Assets under management ("AUM") increased 21% to £15.1 billion (2018: £12.5 billion)

·     Net inflows of £1.4 billion, including multiple segregated mandates and flows into mutual funds

·     Strong long-term investment performance extended

·     Further integration of Pax World Management acquisition and development of new opportunities

·     Won multiple awards including Shares Magazine AIM Company of the Year and Funds Europe's European Specialist Investment Firm

·     Net inflows of over £0.5 billion in the first two months of the new financial year contributed significantly to AUM rising to £15.7 billion by 30 November

 Financial highlights

·     Revenue increased 12% to £73.7 million (2018: £65.7 million)

·     Profit before tax increased 29% to £18.9 million (2018: £14.6 million)

·     Shareholders equity increased 20% to £63.2 million (2018: £52.6 million)

·     Adjusted operating profit £18.0 million (2018: £20.0 million)

·     Acquisition debt repaid early and in full

·     Proposed final dividend of 4.0 pence per share, resulting total dividend for the year of 5.5 pence per share inclusive of interim dividend of 1.5 pence per share, a year-on-year increase of 34% (2018: 4.1 pence per share and special dividend of 2.6p per share)

·     New dividend policy: paying, in normal circumstances, an annual dividend within a range of 55% and 80% of adjusted profit after tax

Keith Falconer, Chairman, commented:

"The last 12 months have seen unprecedented concern globally about environmental issues and rapidly expanding opportunities from the transition to a more sustainable economy. Against this backdrop it has been yet another strong year for Impax. The key investment strategies maintained their track record of out-performing global equity markets, AUM continues to increase and we see growing interest from investors in our broad product range."

 Ian Simm, Chief Executive, added:

"Impax expanded significantly in 2019, with double digit growth across key performance indicators including, AUM (+21%), revenue (+12% year-on-year) and final dividend (+34% year-on-year).

"Positive net inflows of £1.4 billion underpin these results and we have a strong pipeline in place for 2020. The drivers behind the global economy's transition to a more sustainable model are only increasing and we remain ideally positioned to benefit from this.  The solid foundations we've laid down over the last twenty years and the investments we have made in our business should support significant further growth for the Company.

"Impax received a number of awards during the period, most notably the Circulars Investor Award at the World Economic Forum in Davos, Shares Magazines AIM Company of the Year Award and Funds Europe's European Specialist Investment Firm Award. Furthermore, the London Stock Exchange awarded Impax its new Green Economy Mark in 2019, increasing our visibility as one of just 75 companies currently listed across the Main Markets and AIM with 50% or more of revenues from environmental solutions."

Enquiries:

Ian Simm, Chief Executive

[phone] (switchboard)

Karen Wagg, Head of Communications

[phone] / [e-mail]

Nominated Adviser, Peel Hunt LLP

[phone]

Guy Wiehahn, Rishi Shah

Montfort Communications

[phone]

Gay Collins, Louis Supple, Jack Roddan

LEI number: 213800AJDNW4S2B7E680

Chairman's Introduction

I am pleased to report on another year of strong growth and the achievement of important milestones for Impax Asset Management Group plc ("Impax" or the "Company"). During the twelve months to 30 September 2019 (the "Period"), Impax's assets under management and advice ("AUM") rose by 21% to £15.1 billion, and we continue to receive strong net inflows of new client money. Our major investment strategies maintained their record of out-performing global equity markets, and we see growing interest from investors in our products across all asset classes. It is also pleasing to report on the success of the integration of Impax Asset Management LLC ("Impax NH"), and the positive feedback on our progress that we have received from our staff, clients, distribution partners and shareholders.

J Keith R Falconer

3 December 2019

Chief Executive's Report

During the Period Impax's AUM increased by 21% to reach £ 15.1 billion. Notwithstanding a challenging backdrop for equity markets, we have continued to attract strong net inflows with £1.4 billion of net new client money, and our major investment strategies maintained their record of out-performance versus global equity indices.

The long-term drivers of this transition, namely the expanding global population, rising living standards, natural resource constraints, pollution and environmental damage, are underpinning a widening range of attractive investment opportunities. Particularly noteworthy is the unprecedented flow of private capital into companies that are contributing to the mitigation of and adaptation to climate change.

Net inflows of over £0.5 billion in the first two months of the new financial year contributed significantly to AUM rising to £15.7 billion by 30 November.

An increasingly compelling investment landscape

Since Impax began managing client money in 1998, the markets for goods and services that are addressing environmental problems and/or improving resource efficiency have expanded dramatically, propelled by rising demand, new business models based on emerging technologies, and supportive policy. Looking ahead, these trends are set to accelerate and huge investment in environmental markets will be needed over decades if we are to maintain global temperature increase to within 1.5 degrees Celsius of pre-industrial levels, as agreed by the 183 nations and the European Union that ratified the Paris Climate Agreement in 2016.

In addition to developments in technology and business models, Government policy continues to be highly supportive of our investment thesis. In 2018 the EU adopted aggressive 2030 goals, particularly to cut greenhouse gas emissions by at least 40% from 1990 levels, to increase renewable energy to 32% (of total energy) and to improve energy efficiency by at least 32.5%. These targets are likely to be tightened further early in the next decade following the COP26 Climate Summit next year, which is expected to focus on heightened levels of ambition for national emissions targets. Reflective of these policies, and supported by falling technology costs, markets for clean power generation, low emissions transportation, advanced waste processing and sustainable food are expanding rapidly.

This year the UK became the first major economy to legislate for "net zero" greenhouse gas emissions by 2050 and is in the process of ensuring that sector policies are harmonised with this ambitious goal.

The UK Government also recently announced its Green Finance Strategy, which includes plans to ensure that the financial risks and opportunities from climate change are integrated into mainstream financial decision making.

In the United States, the approach to environmental policy is currently mixed, with Federal agencies being directed to reverse a number of statutes and stall further development, whilst at the state and municipal levels there is a high level of activity and commitment, particularly in the face of unprecedented levels of flooding, storm damage and drought. Meanwhile, demand for environmental goods and services continues to rise and these markets are expanding more rapidly than the broader economy.

During 2019 many Asian governments implemented further new policies supportive of sustainable development. In China the government announced the setting of new carbon emissions limits on key energy intensive sectors, and that it had cut carbon dioxide emissions per unit of GDP by 46% versus 2005 levels, surpassing its 2020 target three years early. The government also met its 2018 target to invest a trillion yuan in water conservation projects. Meanwhile the Indian government has announced ambitious plans to end the sale of all diesel and petrol vehicles and move towards an all-electric car fleet by 2030.

Fund flows and distribution

During the Period we received £1.4 billion in net new client money, including several new significant mandates, and sustained inflows into most of the open-ended funds managed by Impax Asset Management Limited or Impax Asset Management AIFM Limited (together known as "Impax LN").

AUM Movement 12 months to 30 September 2019	Impax LN			Impax NH		Total firm £m
	Listed equities £m	Real assets1 £m		Fixed income, smart beta, US equities £m	Reconciliation2 £m
Total AUM at 30 September 2018	9,024	450		3,644	(603)	12,515
Net flows	1,691	(4)		(251)	(57)	1,379
Market movement, FX and performance	941	(1)		266	(49)	1,157
Total AUM at 30 September 2019	11,656	445		3,659	(709)	15,051

1 Real Assets comprise Private Equity and Property funds

2 Avoidance of double count of Pax World Global Environmental Markets Fund and Pax Global Opportunities Fund

In December 2018, St James's Place hired us to run our Global Opportunities strategy for their Sustainable and Responsible Equity fund, which launched at £283 million and had reached £439 million by the end of the Period. We have seen major allocations to our Leaders strategy with three new mandates investing in this strategy. These include AP7, the government agency which manages Sweden's premium pension funds and the Luxembourg State Pension Fund. In May we began the management of an account for the California State Teachers Retirement System. Just before the Period end, Formuepleje, the largest non-bank owned asset manager in Denmark, mandated Impax to manage its Better World Global Opportunities fund.

At the time of writing we have several material mandates in the pipeline from institutional investors in Europe and North America.

Flows into the Pax World Funds were negative in aggregate over the Period but had turned positive (on a monthly basis) by September 2019 as clients and prospects responded to improved investment performance. The Global Women's Leadership Fund, which employs a factor-based investment approach, and which invests in a basket of listed companies with strong female leadership representation, was particularly successful, registering US$130 million of net inflows over the Period. Net outflows were highest in the US Small Cap Fund and the Balanced Fund.

Investment performance

Listed Equity

The Impax LN managed listed equity strategies performed well over one year with all strategies other than Sustainable Food out-performing the ACWI, their global benchmark index. The Global Opportunities strategy, which we launched in January 2015, has extended its significant out-performance; over the Period, this strategy returned 14.5%3 compared to the ACWI which delivered 7.3%4, reflecting in particular strong stock selection in the IT, Materials and Healthcare sectors.

Performance from the Pax World Funds managed by Impax NH improved significantly with eight out of eleven funds delivering top quartile performance in their peer group over the Period.

3 In line with market standards, the strategy returns are calculated including the dividends reinvested, net of withholding taxes gross of management fee and are represented in sterling

4  MSCI indices are total net return (net dividend reinvested)

Real Assets

Impax's private equity infrastructure business focused on renewable energy continues to advance. Our third fund, Impax New Energy Investors III ("NEF III"), which closed to new investors last year with €357 million of commitments, has already invested, committed or reserved over 50% of its capital; the portfolio now includes a developer of wind and solar assets in France, a developer of hydropower projects in Norway and a 110 MW solar PV scheme in the Netherlands, which when built will be the largest of its kind. We are also planning to re-power operational wind assets in France and Germany.

Impax New Energy Investors II ("NEF II") has produced attractive returns for investors and we have made good progress in selling the small number of remaining assets in the Fund.

During 2020 we plan to make further investments in NEF III, and given the highly encouraging pipeline of opportunities we are already starting to gauge investor appetite for new investment products in this area.

Developing the Impax team

Impax has one of the largest specialist investment teams globally focused on the transition to a more sustainable global economy. We now have 156 staff based in our London headquarters, Hong Kong and our US offices in Portsmouth NH, Greenwich CT and Portland OR. During the Period we added a net thirteen positions covering a wide range of functions. As the Company has grown, we have endeavoured to sustain a strong culture and develop systems and policies that make Impax an attractive place to work. Following the acquisition of Impax NH, a project team consulted with staff to update the statement of our values in order to reflect our approach to working practices, diversity/inclusion, community involvement and environmental management.

The integration of Impax NH is well on track. Most areas of the Support Team are now well integrated, while the Client Service and Business Development teams are collaborating closely, particularly in the United States where there are many common clients. Although the investment teams remain separately managed today, they already use a common IT portal to access research and are sharing best practice in managing the investment process.

Earlier this year we repeated the 2017 staff engagement survey in order to gauge changes in staff attitudes, particularly in light of Impax's strong growth and the Impax NH acquisition. We were very pleased with the results, which included a 92% response rate and a 90% "engagement" score.  Based on the results, we were awarded the 5 Star Employer Award 2019 from Work Buzz; this followed last year's award for Impax LN from Investment Week as one of the "Best Places to Work in Investment in 2018". Furthermore, for the fourth consecutive year, Business NH Magazine has named Impax NH one of the best companies to work for in the state of New Hampshire.

Beyond investment returns

As one of the pioneers of investment focused on sustainable development, Impax has always sought to contribute to thought leadership in this area. For example, in 1999 we developed one of the world's first taxonomies of the green economy, which was adopted in 2007 by FTSE Russell; we remain FTSE Russell's partner in the development of classification systems and financial indices covering the sustainable economy. In October 2019, the London Stock Exchange launched the Green Economy Mark to recognise companies that derive more than 50% of their revenues from environmental solutions; Impax Asset Management Group plc and Impax Environmental Markets plc, the investment trust that we manage, were among the first recipients of the new Mark.

Since 2014, in response to client concerns about the investment risk posed by climate change, we have co-led a research programme with Imperial College, London, to develop a quantitative tool that allows investors to manage "transition risk", i.e. the shifts in the economy necessary to reduce emissions. We are currently active in industry groups to develop best practice in climate risk assessment and disclosure, and we are working with peers and environmental scientists to investigate methodologies for the measurement of physical climate risk.

Our work to help improve the governance, strategy and risk management of the companies we invest in is particularly valued by clients. Over the Period our engagement work focused on a number of Asian companies, in particular those where board structure and levels of disclosure often fall short of best practice. We are also increasing our dialogue with companies to discuss their exposure to, and plans to manage, physical climate risks.

Client interest in the non-financial outcomes of Impax-managed investment portfolios continues to build. This is the fifth year that we have published environmental impact metrics, quantifying and disclosing the environmental benefit derived from portfolio companies' activities. We report the climate impact of our strategies compared with the current global economy, and an economy consistent with two degrees of warming. We also show how our five largest strategies are aligned with the United Nations' Sustainable Development Goals.

Awards and industry recognition

This year, in addition to being named "AIM Company of the Year"5, we were delighted to receive two prestigious industry awards acknowledging the quality of our work. At the World Economic Forum's Annual Meeting in Davos in January, Impax was presented with the Circulars 'Investor' Award in recognition of our work "leading the way in investment to support a transition to a more circular economy." In August we were also awarded "Boutique Manager of the Year" at the Environmental Finance Sustainable Investing awards.

5 Shares magazine

Regulatory update and Brexit

Impax is preparing for compliance with the FCA's Senior Managers & Certification Regime ("SM&CR") to UK asset managers from 9 December 2019. We have reviewed our governance structures and committee representation to reflect the requirements of SM&CR. As a result, we have optimised individual accountability and reviewed standards of personal conduct.

At the time of writing the UK faces renewed uncertainty over Brexit and the exact impact that this may have on the Company remains hard to predict. We have well-developed, detailed contingency plans and have established an entity authorised in the EU27 as a UCITS management company and an Alternative Investment Fund Manager with ancillary MiFID permissions.

This legal entity is domiciled in Ireland, enabling Impax to continue providing services to existing EU clients and develop future EU relationships. In the event of the UK departing the EU on World Trade Organization (WTO) terms, it is expected that less than five percent of the Group's assets would need to be managed from our Dublin office.

Outlook

In 2019 markets have become harder for investors to navigate. With the US-China trade war leading to the implementation of tariffs, widespread concerns about prospects for global growth, and unprecedented levels of political turmoil in several countries, including the UK, there are many reasons for investors to be cautious.

Nevertheless, the commitment of policy makers, the business community and wider civil society to combatting climate change, reducing pollution and forging a path towards a more sustainable economy has never been stronger. Against this backdrop, Impax's committed teams, well-established investment philosophy, broad range of investment solutions and acknowledged leadership position across many markets should stand the Company in good stead to deliver further growth over the coming years.

Ian R Simm

3 December 2019

FINANCIAL REVIEW

As in previous periods, in order to facilitate comparison of performance with previous time periods and to provide an appropriate comparison with our peers, the Board encourages shareholders to focus on financial measures after adjustment for non-recurring acquisition costs, accounting charges or credits arising from the acquisition accounting from Impax NH, and adjustments arising from the accounting treatment of National Insurance costs on share based payment awards.

These financial results include Impax NH for a full 12 months (2018: 8.5 months). A reconciliation of the International Financial Reporting Standards ("IFRS") and adjusted numbers is provided in Note 4 to this report.

	2019	2018
AUM	£15.1bn	£12.5 bn
Revenue	£73.7m	£65.7m
Adjusted operating profit	£18.0m	£20.0m
Adjusted profit before tax	£18.1m	£19.2m
Adjusted diluted earnings per share	11.5p	12.4p
Debt	-	£10.0m
Cash reserves	£26.2m	£24.6m
Seed investments	£4.6m	£3.8m
Dividend per share	1.5p interim + 4.0p final	1.1p interim + 3.0p final + 2.6p special
	2019	2018
IFRS operating profit	£18.8m	£15.5m
IFRS profit before tax	£18.9m	£14.6m
IFRS adjusted diluted earnings per share	12.1p	8.9p

Revenue

Revenue for the Period grew by £8.0 million to £73.7 million (2018: £65.7million).  Growth was driven by continued strong inflows for Impax LN and the inclusion of a full 12 months of Impax NH revenue, offset by the loss of one-off private equity income recorded in 2018 (£6.1 million) and the market falls in the fourth quarter of 2018.

Our run-rate⁶ revenue at the end of the Period was £78.3 million (2018: £69.6 million), giving a weighted average run rate revenue margin of 52 basis points (2018: 56.4 basis points) on the £15.1 billion of AUM.

6  Run-rate is calculated as the month of September 2019's result extrapolated for 12 months. Adjustments are also made to remove the effects of one-off transactions

Operating costs

Adjusted operating costs increased to £55.7 million (2018: £45.7 million).  Impax LN costs increased to £35.8 million as a result of planned growth in staff and other costs. Impax NH costs increased to £19.9 million, mainly as a result of including a full 12 months of operations.

We continue to invest selectively in the business to take advantage of strong growth opportunities, so expect cost increases in the near term to be modest.

IFRS operating costs include additional charges and credits, principally being the amortisation of intangible assets arising on the Impax NH acquisition, which for the Period is more than offset by the release of the provision for contingent consideration for the acquisition. Contingent consideration is re-assessed at each reporting date, and any adjustment is reported through IFRS operating profit; the outflows seen at Impax NH have led us to reduce our estimate to nil, leading to a credit of £3.5m.

Profits

We consider run-rate adjusted operating profits at the end of the Period as giving the best indication of the current profitability of the Group and these grew to £20.6 million (2018: £18.4 million) in line with business expansion. 

Overall, in light of the revenue and cost factors described above, adjusted operating profits for the Period were £18.0 million, ie lower than 2018 (£20.0 million). The contribution from Impax NH to adjusted operating profit of £1.3 million was lower than expected at the time of the acquisition due to outflows from the funds it manages in combination with the market falls. 

Fair value gains and other non-operating income offset interest expense and non-operating costs to give adjusted profit before tax of £18.1 million (2018: £19.2 million).

Tax

Tax rates were in line with the prior period.

Earnings per Share

Adjusted earnings per share fell to 11.5p (2018: 12.4p) as a result of the reduced adjusted profits and an increase in average shares in issue following the share issuance last year and option exercises.

IFRS earnings per share however benefited from the contingent consideration credit and the absence of acquisition costs in the Period and increased to 12.1p (2018: 8.9p).

Financial management

In order to fund the acquisition of Impax NH, the Company entered into a US$26 million debt facility with the Royal Bank of Scotland plc.  This facility comprised a US$13 million term loan facility (LIBOR plus 2.9%), repayable annually over a three year term, and a US$13 million five year term revolving facility (the "RCF") (LIBOR plus 3.3%).  As a result of our strong growth since the acquisition we are pleased to announce that we have repaid all this borrowing and retain US$13 million under the RCF.  At the Period end the Company held £26.2 million of cash resources.

During the Period, the Company redeemed £2 million by exiting its seed investment in the successful UCITS fund based on the Global Opportunities strategy. The cash raised was largely re-invested into a segregated account investing in our new Global Women's Select Strategy.

The Company's subsidiary, Pax Ellevate Management ("PEM"), manages the Pax Global Women's Leadership fund.  In July, the Company acquired the 49% minority stake in PEM that was owned by the third party Ellevate Asset Management, for net consideration of £0.75 million after settlement of amounts due to Impax by the third party (gross £1.8 million), giving the Group full ownership of the future revenues from this fast-growing product.

Share management

The Board intends that the Company will continue to purchase its own shares from time to time after due consideration of attractive alternatives for the use of the Company's cash resources. Shares purchased may be used to satisfy obligations linked to share incentive awards for employees.  Share purchases are usually made by funding the Company's Employee Benefit Trusts ('EBTs') which will then settle option exercises or hold shares for Restricted Share awards until they vest.

During the Period, the EBTs spent £2.5 million buying 1.2 million of the Company's shares at an average price of 212 pence.  At the Period end, the EBTs held a total of 9.0 million shares, 7.2 million of which were held for Restricted Shares leaving up to 1.9 million shares available for option exercises and future share incentive awards.  Net options outstanding at the Period end were 4.5 million, of which 2.7 million were exercisable.

The Company did not issue any shares in the Period. Equity issuance may arise in respect of staff option exercises that have not been previously matched by share purchase into the EBTs, and in 2021, conversion into Impax shares of Impax NH management's remaining 16.7% interest in Impax NH.

DIvidends

We have been following a progressive dividend policy over the ten years since we initiated payment in 2009, and have consistently grown the dividend for each year over this period.  We paid an interim dividend of 1.5 pence per share in July 2019.  In accordance with this progressive dividend policy, and reflecting the strong performance and prospects for the Company, the Board now recommends payment of a final dividend of 4.0 pence per share.  If this is approved by shareholders the aggregate dividend for the year would be 5.5 pence per share, which represents a 34% increase over the dividend for the previous year.

Looking to the future, and in the light of the Company's strong financial position and growth prospects, the Directors now regard it as appropriate to move to a policy of paying, in normal circumstances, an annual dividend within a range of 55% and 80% of adjusted profit after tax.  We will use residual cash to strengthen the Firm's capital position, in particular to ensure the continuing adequacy of regulatory capital and liquidity, to make seed investments and to advance the program of market share purchases.

This dividend proposal will be submitted for formal approval by shareholders at the Annual General Meeting on 19 March 2020. If approved, the dividend will be paid on or around 27 March 2020. The record date for the payment of the proposed dividend will be 21 February 2020 and the ex-dividend date will be 20 February 2020.

The Company operates a dividend reinvestment plan ("DRIP"). The final date for receipt of elections under the DRIP will be 6 March 2020. For further information and to register and elect for this facility, please visit www.signalshares.com and search for information related to the Company.

Going concern

The Financial Reporting Council requires all companies to perform a rigorous assessment of all the factors affecting the business when deciding to adopt a "going concern" basis for the preparation of the accounts. The Board has reviewed the Group's financial plans, budget and stress testing. Impax has a strong balance sheet and a predicable operating cost profile. After taking these factors into consideration the Directors consider that the adoption of a "going concern" basis, covering a period of at least 12 months from the date of this report, is appropriate.

Charles D Ridge

3 December 2019

Consolidated Income Statement

For the year ended 30 September 2019

		2019 £000	2018 £000
Revenue		73,695	65,683
Operating costs		(54,883)	(50,200)
Fair value gains/(losses) on investments and other financial income/(expense)		842	(337)
Interest expense		(912)	(670)
Non-controlling interest		156	184
Change in third-party interests in consolidated funds		-	(40)
Profit before taxation		18,898	14,620
Taxation		(3,028)	(3,219)
Profit after taxation		15,870	11,401
Earnings per share
Basic		12.2p	9.0p
Diluted		12.1p	8.9p
Dividends per share
Special dividend paid		-	2.6p
Interim dividend paid and final dividend declared for the year		5.5p	4.1p

Adjusted results are provided in Note 4

Consolidated Statement of Comprehensive Income

For the year ended 30 September 2019

	2019 £000	2018 £000
Profit for the year	15,870	11,401
Change in value of cash flow hedges	(12)	(74)
Tax on change in value of cash flow hedges	2	14
Exchange differences on translation of foreign operations	922	1,212
Total other comprehensive income	912	1,152
Total comprehensive income for the year attributable to equity holders of the parent	16,782	12,553

All amounts in other comprehensive income may be reclassified to income in the future.              

The statements have been prepared on the basis that all operations are continuing operations.

Consolidated Statement of Financial Position

As at 30 September 2019

		2019		2018
		£000	£000	£000	£000
Assets
Goodwill		12,804		12,171
Intangible assets		24,518		25,565
Property, plant and equipment		1,779		1,836
Deferred tax assets		3,757		4,450
Total non-current assets			42,858		44,022
Trade and other receivables		16,740		15,858
Investments		4,626		4,349
Current tax asset		239		890
Cash invested in money market funds and long-term deposit accounts		15,235		11,211
Cash and cash equivalents		11,939		15,529
Total current assets			48,779		47,837
Total assets			91,637		91,859
Equity and liabilities
Ordinary shares		1,304		1,304
Share premium		9,291		9,291
Exchange translation reserve		1,936		1,014
Hedging reserve		(54)		(44)
Retained earnings		50,751		41,054
Equity attributable to owners of the Company			63,228		52,619
Non-controlling interests			-		898
Total equity			63,228		53,517
Trade and other payables		23,581		24,755
Loans		-		3,326
Third-party interest in consolidated funds		-		87
Current tax liability		124		130
Total current liabilities			23,705		28,298
Trade and other payables		704		228
Loans		-		6,652
Deferred tax liability		4,000		3,164
Total non-current liabilities			4,704		10,044
Total equity and liabilities			91,637		91,859

Consolidated Statement of Changes In Equity

For the year ended 30 September 2019

	Share capital £000	Share premium £000	Exchange translation reserve £000	Hedging reserve £000	Retained earnings £000	Total Equity £000
Balance at 1 October 2017	1,277	4,093	(198)	16	30,456	35,644
Transactions with owners of the Company:
Shares issued	27	5,198	-	-	-	5,225
Dividends paid	-	-	-	-	(7,386)	(7,386)
Acquisition of own shares	-	-	-	-	(2,534)	(2,534)
Cash received on option exercises	-	-	-	-	4,477	4,477
Impax NH management equity scheme - value assigned to pre-acquisition service	-	-	-	-	1,917	1,917
Tax credit on long-term incentive schemes	-	-	-	-	2,352	2,352
Fair value of put option over non-controlling interest	-	-	-	-	(1,451)	(1,451)
Share based payment charges	-	-	-	-	1,822	1,822
Total transactions with owners of the Company	27	5,198	-	-	(803)	4,422
Profit for the year	-	-	-	-	11,401	11,401
Other comprehensive income:
Change in value of cashflow hedges	-	-	-	(74)		(74)
Tax on change in value of cashflow hedges	-	-	-	14	-	14
Exchange differences on translation of foreign operations	-	-	1,212	-	-	1,212
Total other comprehensive Income	-	-	1,212	(60)		1,152
Balance at 30 September 2018	1,304	9,291	1,014	(44)	41,054	52,619
Transactions with owners of the Company:
Dividends paid	-	-	-	-	(5,792)	(5,792)
Acquisition of own shares	-	-	-	-	(2,505)	(2,505)
Cash received on option exercises	-	-	-	-	111	111
Tax credit on long-term incentive schemes	-	-	-	-	251	251
Share based payment charges	-	-	-	-	1,160	1,160
Fair value of put option over non-controlling interest	-	-	-	-	(328)	(328)
Acquisition of NCI without a change in control	-	-	-	-	930	930
Total transactions with owners of the Company	-	-	-	-	(6,173)	(6,173)
Profit for the year	-	-	-	-	15,870	15,870
Other comprehensive income:
Change in value of cash flow hedge	-	-	-	(12)	-	(12)
Tax on change in value of cashflow hedges	-	-	-	2	-	2
Exchange differences on translation of foreign operations	-	-	922	-	-	922
Total other comprehensive Income	-	-	922	(10)	-	912
Balance at 30 September 2019	1,304	9,291	1,936	(54)	50,751	63,228

Consolidated Cash Flow Statement

For the year ended 30 September 2019

		2019 £000	2018 £000
Operating activities
Cash generated from operations		20,848	23,436
Corporation tax (payment)/refund		(580)	1,583
Net cash generated from operating activities		20,268	25,019
Investing activities
Acquisition of subsidiary (Impax NH), net of cash acquired		-	(23,893)
Deconsolidation of investment fund		(67)	(255)
Net acquisition of property plant & equipment and intangible assets		(402)	(1,690)
Net (investments into)/redemptions from unconsolidated Impax funds		(485)	3,938
Net investment disposals from consolidated Impax funds7		-	932
Settlement of investment related hedges		258	(987)
Investment income received		236	279
Increase in cash held in money market funds and long-term deposit accounts		(4,024)	(3,431)
Net cash used by investing activities		(4,484)	(25,107)
Financing activities
Acquisition of non-controlling interest		(201)	-
Proceeds from bank borrowings		-	17,616
Repayment of bank borrowings		(10,371)	(8,779)
Interest paid on bank borrowings		(670)	(464)
Acquisition of own shares		(2,505)	(2,534)
Cash received on exercise of Impax staff share options		111	4,477
Investments made by third-party investors into consolidated funds7		-	17
Dividends paid		(5,792)	(7,386)
Net cash used in financing activities		(19,428)	2,947
Net (decrease)/increase in cash and cash equivalents		(3,644)	2,859
Cash and cash equivalents at beginning of year		15,529	12,932
Effect of foreign exchange rate changes		54	(262)
Cash and cash equivalents at end of year		11,939	15,529

7 The Group consolidates certain funds which it manages and includes the funds cash flows in the above statement

Cash and cash equivalents under IFRS does not include deposits in money market funds and cash held in deposits with more than an original maturity of three months. The Group however considers its total cash reserves to include these amounts. Cash held by consolidated funds or in RPAs are not included in cash reserves.

Movements on cash reserves are shown in the table below:

	At the beginning of the year £000	Cashflow £000	Foreign exchange £000	At the end of the year £000
Cash and cash equivalents	15,529	(3,644)	54	11,939
Cash invested in money market funds and long-term deposit accounts	11,211	4,024	-	15,235
Cash in RPAs	(2,074)	1,106	-	(968)
Cash held by consolidated funds	(67)	67	-	-
Total Group cash reserves	24,599	1,553	54	26,206

Notes to the Financial Statements

For the year ended 30 September 2019

1 REPORTING ENTITY

Impax Asset Management Group plc (the "Company") is incorporated and domiciled in the UK and is listed on the Alternative Investment Market ("AIM"). These consolidated financial statements comprise the Company and its subsidiaries (together referred to as the "Group").

2 BASIS OF PREPARATION

These financial statements have been prepared in accordance with International Financial Reporting Standards ("IFRSs") adopted for use by the European Union. At the time of approving the financial statements, the Directors have a reasonable expectation that the Group has adequate resources to continue in operational existence for the foreseeable future and have concluded that it is appropriate to adopt the going concern basis in preparing the financial statements of the Group.

The financial statements have been prepared under the historical cost convention, with the exception of the revaluation of certain investments and derivatives being measured at fair value.

The financial statements are presented in Sterling. All amounts have been rounded to the nearest thousand unless otherwise indicated.

3 USE OF JUDGEMENTS AND ESTIMATES

In preparing these financial statements management has made estimates that affect the reported amounts of assets, liabilities, income and expenses. Actual results may differ from estimates. Revisions to estimates are recognised prospectively. The significant estimates are described below.

- Intangible assets impairment testing

The intangible assets acquired on acquisition of Impax NH represents investment management contracts. These are amortised over an 11 year life which is considered reasonable given the nature of the investors into these Funds. If there are any indications of impairment the assets are tested for impairment at each reporting date. The fair value at the date of acquisition was calculated using the discounted cash flow methodology and represented the valuation of the profits expected to be earned from the management contracts in place at the date of acquisition. The impairment test completed this year showed no impairment was required and used the following key assumptions - future subscription of new assets of US$0.34bn per annum on average (2018: USD$0.22bn), future equity fund performance of 5% (2018: 5%), an average operating margin of 23% (2018: 20%) and a discounted cost of capital of 13.5% (2018: 13.5%). The increase in the inflows assumption reflects an improvement in the performance and marketability of certain funds.

Changes in the assumptions would reduce the fair value of the intangible asset as follows: a consistent ten per cent decrease in inflows - reduction of £4.1 million; a 100 basis point annual reduction in performance each year - reduction of £4.8 million; a one per cent annual reduction in operating margin - reduction of £2.1 million.

- Goodwill impairment testing

As detailed in note 13 Goodwill arose on the acquisition of Impax NH in 2018. An impairment test on this goodwill is completed each year. In performing the impairment test, a calculation of the recoverable amount of the goodwill is prepared, using the value in use approach, and compared to the carrying value. The recoverable amount was based on the net present value of future earnings. Key assumptions used were long-term equity AUM growth rates of 5% an average operating margin of 23% and a discount rate of 12.5%. The recoverable value of Goodwill is in excess of the carrying value. Management do not believe there is a reasonable possibility of an impairment over the next 12 months and do not expect goodwill to be a significant estimate in future periods.

4 ADJUSTED PROFITS AND EARNINGS

The reported operating earnings, profit before tax and earnings per share are substantially affected by non-recurring acquisition costs, business combination effects and other items. The Directors have therefore decided to report an Adjusted operating profit, Adjusted profit before tax and Adjusted earnings per share which exclude these items in order to enable comparison with peers and provide consistent measures of performance over time. A reconciliation of the adjusted amounts to the IFRS reported amounts is shown below.         

		Year ended 30 September 2019
				Adjustments
			Reported - IFRS £000	Business combination effects £000	Other £000	Adjusted £000
Revenue		73,695				73,695
Operating costs		(54,883)				(55,717)
Amortisation of intangibles arising on acquisition				2,528
Credit from contingent consideration adjustment				(3,543)
Acquisition equity incentive scheme charges				(21)
Mark-to-market charge on equity awards*					202
Operating Profit		18,812		(1,036)	202	17,978
Fair value gains/(losses) on investments and other financial income/(expense)		842		209	(154)	897
Interest Payable		(912)				(912)
Non-controlling interest		156				156
Change in third-party consolidated funds		-				-
Profit before taxation		18,898		(827)	48	18,119
Taxation		(3,028)				(3,037)
Tax credit on adjustments					(9)
Profit after taxation		15,870		(827)	39	15,082
Diluted earnings per share		12.1p		(0.6p)	0.0p	11.5p

*  The charge is offset by £251,000 of tax credits shown in the statement of changes in equity

	Year ended 30 September 2018
		Adjustments
	Reported - IFRS £000	Non-recurring acquisition costs £000	Business combination effects £000	Other £000	Adjusted £000
Revenue	65,683				65,683
Operating costs	(50,200)				(45,696)
Acquisition costs		866
Amortisation of intangibles arising on acquisition			1,676
Credit from contingent consideration adjustment			(170)
Acquisition equity incentive scheme charges			236
Mark to market charge on equity awards				1,896
Operating Profit	15,483	866	1,742	1,896	19,987
Fair value (losses)/gains on investments and other financial (expense)/income	(337)		254	(170)	(253)
Interest Payable	(670)				(670)
Non-controlling interest	184				184
Change in third-party consolidated funds	(40)				(40)
Profit before taxation	14,620	866	1,996	1,726	19,208
Taxation	(3,219)				(3,667)
Tax credit on adjustments		(120)		(328)
Profit after taxation	11,401	746	1,996	1,398	15,541
Diluted earnings per share	8.9p	0.6p	1.7p	1.2p	12.4p

The adjusted diluted earnings per share is calculated using the adjusted profit after taxation shown above including the IFRS adjustment for profit attributable to owners of restricted shares of £867,000 (2018: £738,000). The diluted number of shares is the same as used for the IFRS calculation of earnings per share

Mark-to-market charge on equity incentive awards  

The group has awarded employees in prior years and the current period options over the Group's shares, some of which are either unvested or unexercised at the balance sheet date. The Group has also made awards of restricted shares ("RSS awards") the majority of which have not vested at the balance sheet date. Employers National Insurance Contributions ("NIC") are payable on the option awards when they are exercised and on the RSS awards when they vest, based on the valuation of the underlying shares at that point. The Group does however receive a corporation tax credit equal to the value of the awards at the date they are exercised (options) or vest (RSS awards). A charge is accrued for the NIC within IFRS operating profit based on the share price at the balance sheet date. Similarly, a credit for the corporation tax is accrued within IFRS other comprehensive income.

An additional retention payment is made to holders of legacy LTIP awards ("LTIP") when they are exercised, all of which are fully vested at the balance sheet date. The payment will be equal to the corporation tax benefit the Group receives on the exercise of the options minus the amount of NIC payable on exercise. This charge is accrued based on the share price at the balance sheet date.

These two charges vary based on the Group's share price (together referred to as mark to market charge on equity incentive schemes) and are not linked to the operating performance of the Group. They are therefore eliminated when reporting adjusted profit.

Contingent consideration

We are required to review and adjust our estimate of the contingent consideration payable in respect of the Impax NH acquisition.  Any adjustment is recorded through income but is excluded from adjusted profit.

Amortisation of intangibles

Intangible management contracts were acquired as part of the Impax NH acquisition and are amortised over their 11 year life. This is not reflective of the operating performance of the Impax NH business and is therefore eliminated from operating costs.

Fair value losses/gains on investments and other financial income/expense

The adjustments represent the removal of charges in respect of unwinding the discount of the contingent consideration payable (see above) and of legacy royalty income.

5 SEGMENTAL REPORTING

In January 2018, Pax World Management LLC was acquired by Impax and has been re-named Impax Asset Management LLC. This company is based in Portsmouth, New Hampshire and we refer to it as "Impax NH". Impax NH is the manager of the Pax World Funds. Impax Asset Management Ltd and Impax Asset Management (AIFM) Ltd manage or advise listed equity funds and accounts, and the Real Assets division. The majority of this business is based in London so we refer to it as "Impax LN". Impax LN itself has two operating segments: "Listed Equity" and "Private Equity". The results of these segments have been aggregated into a single reportable segment for the purposes of these financial statements because they have characteristics so similar that they can be expected to have essentially the same future prospects. These segments have common investors, operate under the same regulatory regimes and their distribution channels are substantially the same. Additionally, management allocates the resources of Impax LN as though there is one operating unit.

Segment information is presented on the same basis as that provided for internal reporting purposes to the Group's chief operating decision maker, the Chief Executive.

Year ended 30 September 2019

	Impax LN £000	Impax NH £000	Adjustments £000	Total £000
Revenue
External customers	50,030	23,665	-	73,695
Inter-segment	2,349	-	(2,349)	-
Total revenue	52,379	23,665	(2,349)	73,695
Segment profit - adjusted operating profit	16,630	1,348	-	17,978

Year ended 30 September 2018

	Impax LN £000	Impax NH £000	Adjustments £000	Total £000
Revenue
External customers	48,262	17,421	-	65,683
Inter-segment	1,459	-	(1,459)	-
Total revenue	49,721	17,421	(1,459)	65,683
Segment profit - adjusted operating profit	17,716	2,271	-	19,987

For the year ended 30 September 2018 Impax NH was only an operating segment for eight and half months from the date of acquisition.

6 OPERATING COSTS

The Group's largest operating cost is staff costs. Other significant costs include direct fund expenses, premises costs (rent payable on office building leases, rates and service charge), amortisation of intangible assets, mark-to-market charges on share awards and acquisition costs.               

	2019 £000	2018 £000
Staff costs (note 7)	36,657	31,543
Direct fund expenses	5,488	4,024
Premises costs	2,496	2,002
Research costs	322	259
Professional fees	2,596	2,242
IT and communications	3,458	2,513
Depreciation and amortisation	2,952	1,997
Acquisition costs	-	526
Mark-to-market charges on share awards	202	2,137
Other costs	4,255	2,957
Sub-total	58,426	50,200
Contingent consideration	(3,543)	-
Total	54,883	50,200

Operating costs includes £791,000 (2018: £312,000) in respect of placing agent fees paid to related parties

7       STAFF COSTS AND EMPLOYEES

	2019 £000	2018 £000
Salaries and variable bonuses	29,290	23,672
Social security costs	1,661	2,443
Pensions	834	633
Share-based payment charge (see note 8)	1,160	1,822
Other staff costs	3,712	2,973
Total	36,657	31,543

Staff costs include salaries, a variable bonus, social security cost (principally UK Employers' National Insurance on salary, bonus and share awards), the cost of contributions made to employees' pension schemes and share-based payment charges. Further details of the Group's remuneration policies, including how the total variable bonus pool is determined, are provided in the Remuneration Report. Share-based payment charges are offset against the total cash bonus pool paid to employees. National Insurance charges on share-based payments are accrued based on the share price at the balance sheet date.

The Group contributes to private pension schemes. The assets of the schemes are held separately from those of the Group in independently administered funds. The pension cost represents contributions payable by the Group to these funds. Contributions totalling £48,000 (2018: £12,137) were payable to the funds at the year end and are included in trade and other payables.

Other staff costs include the cost of providing health and other insurances for staff, Non-Executive Directors' fees, contractor fees, recruitment fees and redundancy costs.

Employees

The average number of persons (excluding Non-Executive Directors and including temporary staff), employed during the year was 151 (2018: 137).

	2019 No.	2018 No.
Listed Equity	55	51
Private Equity	11	12
Client Service and Business Development	43	36
Group	42	38
Total	151	137

8 SHARE-BASED PAYMENT CHARGES

The total expense recognised for the year arising from share-based payment transactions was £1,160,259 (2018: £1,822,000). The charges arose in respect of the Group's Restricted Share Scheme ("RSS"), the Group's Employee Share Option Plan ("ESOP") and the Group's Restricted Stock Units scheme ("RSU") which are described below. Share based payment charges also arose in respect of the Put and Call arrangement made with Impax NH Management to acquire their shares in Impax NH. These are described in note 19. Options are also outstanding in respect of the Group's Long-Term Incentive Plan ("LTIP") which fully vested on 30 September 2012. Details of all outstanding options are provided at the end of this note. The charges for each scheme are:

	2019 £000	2018 £000
RSS	1,099	1,333
ESOP	123	213
RSU	(41)	41
Put and Call	(21)	235
Total	1,160	1,822

Restricted Share Scheme

Restricted shares have been granted to employees in prior years under the 2014, 2015, 2017 and 2018 plans. After the Period end the Board approved the grant of a further 75,000 restricted shares under the 2019 plan. Details of the awards granted along with their valuation and the inputs used in the valuation are described in the table below. The valuation was determined using the Black-Scholes-Merton model with an adjustment to reflect that dividends are received during the vesting period. Following grant, the shares are held by a nominee for employees - who are then immediately entitled to receive dividends. After a period of three years continuous employment the employees will receive unfettered access to one third of the shares, after four years a further third and after five years the final third. The employees are not required to make any payment for the shares on grant
or when the restrictions lapse.

The expected volatility was determined by reviewing the historical volatility of the Company and that of comparator companies. The expected dividend rate is determined using the Company share price and most recent full year dividend.

	2014 RSS	2015 RSS	2017 RSS	2018 RSS	2019 RSS
Awards originally granted	1,250,000	3,140,000/ 1,000,000	2,550,000/ 500,000/ 675,000	478,250	75,000
In respect of services provided for period from	1 Oct 2013	1 Oct 2014/ 9 Feb 2016	14 Dec 2016/ 11 May 2017/ 1 Oct 2016	1 Oct 2017	1 Oct 2018
Option award value	49.9p	42.1p/41.5p	52.2p/87.7p/161.6p	201.3p	236.8p
Weighted average share price on grant	52.5p	41.4p	77.4p	202.8p	239.0p
Expected volatility	32%	32%/31%	29%/29%/29%	30%	31%
Weighted average option life on grant	5.3yrs	4.9yrs	4.3yrs	5.3yrs	5.3yrs
Expected dividend rate	3%	3%	4%/2%/2%	1%	2%
Risk free interest rate	1.2%	1.2%/0.8%	0.6%/0.6%/0.7%	1.2%	0.3%

Restricted shares outstanding	2019
Outstanding at 1 October 2018	8,364,749
Granted during the year	478,250
Vested during the year	(1,629,770)
Forfeited during the year	(27,750)
Outstanding at 30 September 2019	7,185,479

Employee share option plan

Options granted between 2012 and 2017

The strike price of these options was set at a 10% premium to the average market price of the Company's shares for the 30 business days (2015 and 2017 ESOP: five days) following the announcement of the results for each of the respective preceding financial years. The 2012 - 2015 ESOP options have vested. The 2017 options do not have performance conditions but do have a time vesting condition such that they vest subject to continued employment on 31 December 2020.

The valuation was determined using the Black-Scholes-Merton model.

Options granted in 2018 and 2019

In December 2018 500,000 options were granted under the 2018 plan. The strike price of these options was set at £1. The options do not have performance conditions but do have a time vesting condition such that the options vest subject to continued employment five years following grant. Vested shares are restricted from being sold for a further 5 year period (other than to settle any resulting tax liability).

After the Period end the Board approved the grant of 650,000 options under the 2019 plan with the same conditions as the 2018 plan.

The valuation was determined using the binomial model.

Options outstanding

An analysis of the outstanding options arising from Company's ESOP and LTIP plans is provided below:

	Number	Weighted average exercise price p
Options outstanding at 1 October 2018	4,275,500	69.6
Options granted	500,000	100.0
Options exercised	(250,000)	42.8
Options outstanding at 30 September 2019	4,525,500	74.4
Options exercisable at 30 September 2019	2,725,500	19.3

Exercise prices for the options outstanding at the end of the period were 1p for the LTIPs, 47.9p for the ESOP 2013, 56.9p for the ESOP 2014, 45.4p for the ESOP 2015, 180.2p for the ESOP 2017 and 100.0p for the ESOP 2018. The weighted average remaining contractual life was 2.96 years.

The Group purchases Shares to cover the exercise of LTIP, ESOP and the granting of RSS awards.

Restricted stock units

The Group awarded RSUs to Impax NH staff and management on 18 January 2018. The RSUs entitle holders to receive Impax shares with a total value equal to 10% of the Contingent Consideration paid for the Impax NH acquisition (see note 19). The number of shares that each individual will receive under the RSUs is determined on 15 January 2021 after the amount of Contingent Consideration payable is finalised using the average Impax share price for the 20 consecutive trading days ending 15 January 2021. There is a further two-year restriction on the holders' ability to sell the shares. The shares are forfeited if the individual leaves at any time before the restricted period ends.

The charge to the income statement for these awards is determined each year by estimating the total value of shares that will be awarded (using the estimate of Contingent consideration - see Note 19) and spreading this over the five year period until the restrictions cease. The estimates are updated each year and the charge adjusted accordingly.

Based on the current estimate of contingent consideration no shares will be issued.

Impax NH put and call arrangement

As detailed in note 19 the schemes put in place whereby Impax NH management acquired their holding in Impax NH and the put and call options which will require Impax to purchase those stakes using Impax shares represent a share based payment. The charge is spread over a three year period from the date of acquisition.

9 FAIR VALUE GAINS/(Losses) ON INVESTMENTS AND OTHER FINANCIAl INCOME/(Expense)

	2019 £000	2018 £000
Fair value gains/(losses)	103	(233)
Interest income	82	109
Other investment income	154	170
Unwinding of discount on contingent consideration	(213)	(254)
Foreign exchange gains/(losses)	716	(129)
Total	842	(337)

Fair value losses represent those arising on the revaluation of listed and unlisted investments held by the Group including those held by the Group's consolidated funds (see note 15) and any gains or losses arising on related hedge instruments held by the Group.

The fair value gain comprises realised losses of £149,000 and unrealised gains of £252,000 (2018: £576,000 of unrealised gains and £809,000 of unrealised losses).

10 TAXATION

The Group is subject to taxation in the countries in which it operates (the UK, the US and Hong Kong) at the rates applicable in those countries. The total tax charge includes taxes payable for the reporting period (current tax) and also charges relating to taxes that will be payable in future years due to income or expenses being recognised in different periods for tax and accounting periods (deferred tax).

(a) Analysis of charge for the year

	2019 £000	2018 £000
Current tax expense:
UK corporation tax	831	-
Foreign taxes	227	325
Adjustment in respect of prior years	185	(116)
Total current tax	1,243	209
Deferred tax expense/(credit):
Charge for the year	2,165	2,792
Adjustment in respect of prior years	(380)	218
Total deferred tax	1,785	3,010
Total income tax expense	3,028	3,219

A tax credit of £251,000 (2018: £2,352,000) is also recorded in equity in relation to tax deductions on share awards arising due to the share price increase.

(b) Factors affecting the tax charge for the year

The UK tax rate for the year is 19%. The tax assessment for the period is lower than this rate
(2018: higher). The differences are explained below:               

	2019 £000	2018 £000
Profit before tax	18,898	14,620
Tax charge at 19% (2018: 19%)	3,591	2,778
Effects of:
Increase in tax deductions re share awards from share price increases	-	-
Non-taxable income	(863)	(24)
Non-deductible expenses and charges	20	248
Adjustment in respect of historical tax charges	(195)	98
Effect of higher tax rates in foreign jurisdictions	95	240
Tax deductibility of goodwill	-	(66)
Tax losses not recognised	380	-
Utilisation of tax losses brought forward and not recognised	-	(55)
Total income tax expense	3,028	3,219

(c) Deferred tax

The deferred tax asset/(liability) included in the consolidated statement of financial position is as follows:

	Share-based payment scheme £000	Other assets £000	Total assets £000	Income not yet taxable £000	Other liabilities £000	Total liabilities £000
As at 1 October 2017	3,587	641	4,228	(1,660)	(621)	(2,281)
Credit/charge to equity	2,352	8	2,360	-	-	-
Exchange differences on consolidation	-	-	-	(12)	-	(12)
Credit/(charge) to the income statement	(2,326)	188	(2,138)	(1,179)	308	(871)
As at 30 September 2018	3,613	837	4,450	(2,851)	(313)	(3,164)
Credit to equity	251	2	253	-	-	-
Exchange differences on consolidation	-	2	2	1	-	1
Credit/(charge) to the income statement	(345)	(603)	(948)	(983)	146	(837)
As at 30 September 2019	3,519	238	3,757	(3,833)	(167)	(4,000)

A reduction in the UK corporation tax rate to 17% (effective 1 April 2020) was substantively enacted on 6 September 2016. The deferred tax liability at 30 September 2019 has been calculated using these rates.

11 EARNINGS PER SHARE

Basic earnings per share ("EPS") is calculated by dividing the profit for the year attributable to ordinary equity holders of the Parent Company by the weighted average number of ordinary shares outstanding during the year, less the weighted average number of own shares held. Own shares are held in Employee Benefit Trusts ("EBTs").

Diluted EPS includes an adjustment to reflect the dilutive impact of option awards.

The number of shares to be issued under the Restricted Share Units is based on the Impax NH assets under management at the vesting date. Assets under management are currently below the threshold for shares to be issued so the RSUs are currently not dilutive. The put and call arrangement to acquire Impax NH management shares is also currently not dilutive.

	Earnings for the year £000	Shares 000s	Earnings per share
2019
Basic	15,003	122,887	12.2p
Diluted	15,003	124,056	12.1p
2018
Basic	10,663	118,758	9.0p
Diluted	10,663	119,581	8.9p

Earnings are reduced by £867,000 for the year ended 30 September 2019 (2018: £738,000) to reflect that holders of restricted shares receive dividends during the vesting period, see note 9.

The weighted average number of shares is calculated as shown in the table below:

	2019 000s	2018 000s
Weighted average issued share capital	130,415	129,612
Less own shares held not allocated to vested LTIP options	(7,528)	(10,854)
Weighted average number of ordinary shares used in the calculation of basic EPS	122,887	118,758
Additional dilutive shares regarding share schemes	2,800	2,550
Adjustment to reflect option exercise proceeds and future service from employees receiving awards	(1,631)	(1,728)
Weighted average number of ordinary shares used in the calculation of diluted EPS	124,056	119,580

The basic and diluted EPS includes vested LTIP option shares on the basis that these have an inconsequential exercise price (1p or 0p).

12 DIVIDENDS

Dividends are recognised as a reduction in equity in the period in which they are paid or in the case of final dividends when they are approved by shareholders. The reduction in equity in the year therefore comprises the prior year final dividend and the current year interim and special dividend.

Dividends declared/proposed in respect of the year

	2019 pence	2018 pence
Interim dividend declared per share	1.5	1.1
Special dividend	-	2.6
Final dividend proposed per share	4.0	3.0
Total	5.5	6.7

The proposed final dividend of 4.0p will be submitted for formal approval at the Annual General Meeting to be held on 19 March 2020. Based on the number of shares in issue at the date of this report and excluding own shares held the total amount payable for the final dividend would be £5,142,000.

Dividends paid in the year

	2019 £000	2018 £000
Prior year final dividend - 3.0p, 2.2p	3,864	2,752
Special dividend - 0p, 2.6p	-	3,256
Interim dividend - 1.5p, 1.1p	1,928	1,378
Total	5,792	7,386

13 GOODWILL

	Goodwill £000
Cost
At 1 October 2017	1,681
Acquisition of Impax NH	9,931
Impairment	(52)
Foreign exchange	611
At 30 September 2018	12,171
Foreign exchange	633
At 30 September 2019	12,804

The goodwill balance within the Group at 30 September 2019 arose from the acquisition of Impax Capital Limited on 18 June 2001 (Listed Equity and Private Equity operating segment) and the acquisition of Impax NH in January 2018.

Impax NH consists of only one cash-generating unit ("CGU"). Goodwill is allocated between CGUs at 30 September 2019 as follows - £11,175,000 to Impax NH and £1,629,000 to the combined Listed Equity and Private Equity CGUs.

The Group has determined the recoverable amount of its CGUs by calculating their value in use using a discounted cash flow model. The cash flow forecasts were derived from the Group budget for the year ended 30 September 2020, which was approved by the Directors in September 2019. The key assumptions used to calculate the cash flows in the budget were expected fund flows for each CGU (based on an aggregation of flows by product) and a discount rate of 12.5 per cent. The discount rate was derived from the Group's weighted average cost of capital adjusted to reflect the specific risks associated with US cashflows which we consider is reflective of a market participant's discount rate. See note 3 for sensitivities of assumptions.

There has been no impairment of goodwill related to the Listed Equity and Private Equity segment to date and there is significant headroom before an impairment would be required. As an indication, if the discount rate was increased by 3% there would be no impairment charge.

14 INTANGIBLE ASSETS

Intangible assets mainly represents the management contracts acquired as part of the acquisition of Impax NH (see note 19).

	Management contracts £000	Software £000	Total £000
Cost
As at 1 October 2017	112	342	454
Addition through Impax NH acquisition	25,669	0	25,669
Additions	-	76	76
Foreign exchange	1,600	-	1,600
As at 30 September 2018	27,381	418	27,799
Additions	-	97	97
Foreign exchange	1,635	-	1,635
As at 30 September 2019	29,016	515	29,531
Accumulated amortisation
As at 1 October 2017	112	325	437
Charge for the year	1,722	19	1,741
Foreign exchange	56	-	56
As at 30 September 2018	1,890	344	2,234
Charge for the year	2,528	48	2,576
Foreign exchange	203	-	203
As at 30 September 2019	4,621	392	5,013
Net book value
As at 30 September 2019	24,395	123	24,518
As at 30 September 2018	25,491	74	25,565
As at 30 September 2017	-	17	17

15 CURRENT ASSET INVESTMENTS

The Group makes seed investments into its own Listed Equity funds and also invests in its Private Equity funds. Where the funds are consolidated the underlying investments are shown in the table below. Investments made in unconsolidated funds are also included.

	Total £000
At 1 October 2017	13,013
Additions	2,336
Fair value movements	806
IEL Deconsolidation	(4,600)
Repayments/disposals	(7,206)
At 30 September 2018	4,349
Additions	2,522
Fair value movements	(155)
IGEO Deconsolidation	(53)
Repayments/disposals	(2,037)
At 30 September 2019	4,626

Pax Global Opportunities Fund (not consolidated)

On 27 June 2018 the Group launched the Pax Global Opportunities Fund ("Pax GO") and invested US$2,000,000 from its own resources into the fund. Pax GO invests in listed equities using the Group's Global Equity Strategy. The level of the Group's investment has meant that consolidation is not required.

Global Women's Select Strategy

On 31 May 2019 the Group launched a segregated account for a new strategy; the Global Women's Select Strategy and invested US$2,000,000 of its own resources. The segregated account is traded from the Group's balance sheet and the equities held are included in the table above. There are currently no external investors into this strategy.

Private equity funds (not consolidated)

The Group has invested in its private equity funds, Impax New Energy Investors LP, Impax New Energy Investors II LP and Impax New Energy Investors III LP ("INEI", "INEI II" and "INEI III"). The investments represent 3.76%, 1.14% and 1.12% respectively of these funds. The valuation of these level 3 investments is based on the value of the underlying investments in the Funds. The valuation technique used for the material investments is the price of recent transaction.

Impax Global Equity Opportunities Fund (not consolidated)

On 23 December 2014 the Group launched the Impax Global Equity Opportunities Fund ("IGEO") and invested from its own resources £2,000,000 in the fund. IGEO invests in listed equities using the Group's Global Equity Strategy. During the prior Period the Group redeemed £930,000 of its investment. During March 2019 the Group redeemed its remaining investment for £2,034,000. The Group's investment was not consolidated as it represented less than 50 per cent of IGEO's Net Asset Value ("NAV") throughout the current financial year until redemption. The investment was consolidated in previous periods when the investment represented more than 50% of the Fund's NAV.

The unlisted investments include £747,000 in related parties of the Group (2018: £97,582).    

Market risk and investment hedges

The investment in the Pax GO fund and Global Women's Select Strategy at 30 September 2019 are subject to market risk. The Group has attempted to hedge against the risk of market falls by the use of derivative contracts. The derivative contracts consist of short positions against a global equity index and are arranged through BNP Paribas, a related party. Any outstanding amounts on the short positions are settled daily.

16 CASH AND CASH EQUIVALENTS, CASH INVESTED IN MONEY MARKET FUNDS AND LONG-TERM DEPOSITS

Cash and cash equivalents under IFRS does not include deposits in money market funds or cash held in deposits with an original maturity of more than three months. However the Group considers its total cash reserves to include these amounts. Cash held by consolidated funds is not considered to be available to the Group so it is not included in cash reserves. Cash held in Research Payment Accounts ("RPAs") is collected from funds managed by the Group and can only be used towards the cost of researching stocks. A liability of an equal amount is included in trade and other payables. This cash is also excluded from cash reserves. A reconciliation is shown below:

	2019 £000	2018 £000
Cash and cash equivalents	11,939	15,529
Cash invested in money market funds and long-term deposit accounts	15,235	11,211
Less: cash and cash equivalents held by consolidated funds	-	(67)
: cash held in RPAs	(968)	(2,074)
Cash reserves	26,206	24,599

17 LOANS

To part fund the acquisition of Impax NH the Group signed a debt facility with RBS. The facility consisted of a US$13 million term loan repayable annually over a 3 year term and a US$13 million revolving credit facility ("RCF") with a 5 year tenor. The term loan incurs interest at US LIBOR plus 2.9% and the revolving credit facility at US LIBOR plus 3.3%. On completion of the acquisition the Group drew down the term loan in full and US$12 million of the revolving credit facility. During 2018 the RCF was repaid in full and during the Period the term loan was repaid in full.

	2019 £000	2018 £000
Amounts due within one year	-	3,326
Amounts due after more than one year	-	6,652
Total	-	9,978

A reconciliation of the movement on the loan is provided below:

	2019 £000	2018 £000
At 1 October	9,978	-
Proceeds from bank borrowing	-	18,080
Repayments of bank borrowing	(10,371)	(8,779)
Foreign exchange	393	677
At 30 September	-	9,978

18 ORDINARY SHARES

Issued and fully paid	2019 No of shares/ 000s	2018 No of shares/ 000s	2019 £000	2018 £000
At 1 October	130,415	127,749	1,304	1,277
Shares issued/1p	-	2,666	-	27
At 30 September	130,415	130,415	1,304	1,304

19 ACQUISITION OF PAX WORLD MANAGEMENT LLC

On 18 January 2018, the Group completed the acquisition of Pax World Management LLC ("Pax"). Pax is a recognised leader in the field of sustainable investing in the United States. Based in Portsmouth, New Hampshire, Pax manages eleven mutual funds and at the date of acquisition had assets under management of US$3.5 billion. This business combination created scale for the Group's operations in North America and broadened the range of investment strategies the Group offers clients, including fixed income and passive equity.

Following completion of the acquisition Pax was renamed Impax Asset Management LLC ("Impax NH").

The Group has initially acquired an ca. 83.3% interest of Impax NH's share capital from the selling shareholders (the "Selling Shareholders") in exchange for the initial cash payable on the acquisition date of $36.2 million, 2,665,989 Impax shares and up to $31.3m of contingent payments ("Contingent Consideration"). Impax NH's management and staff shareholders (the "Management Shareholders"), representing the remaining ca.16.7% of Impax NH's issued share capital will retain their shareholding until 2021 when if either Impax or the Management Shareholders exercise a put and call option arrangement, the Group would acquire their entire holding for US$8.3 million and up to $6.3 million of Contingent Consideration. This would be paid in 2021 in Impax equity and/or cash, as the Group elects.

The cash payable on acquisition was determined as US$38.1 million less US$1.9 million of balance sheet adjustments for working capital.

The number of Group shares issued to the Selling Shareholders was determined using an agreed value of US$6.1 million, the 20 day average of the Group's share price to 12 January 2018 being 170.19 pence and a US$/GBP exchange rate of 0.7403. The fair value of these shares used to determine the total consideration in the table below was determined to be 196 pence, using the Group's mid-market closing share price on 17 January 2018.

The contingent consideration will be determined based on Impax NH's average AUM as at 30 June 2020, 30 September 2020 and 31 December 2020 and will rise linearly from zero, if Impax NH's average AUM is not more than US$5.5 billion, to US$37.5 million for the entire share capital of Impax NH, if Impax NH's average AUM is $8 billion or above. The fair value of the Contingent Consideration payable to the Selling Shareholders was estimated as $4.2 million at the acquisition date. As with the initial consideration, settlement of any Contingent Consideration payable to Impax NH's Management Shareholders is expected to be made in 2021 in the Group's ordinary shares at the share price prevailing at the time and or/cash as the Group elects.

The Group's estimate of the contingent consideration payable has been revised to nil based on the latest estimate of Impax NH's AUM.

Prior to the acquisition, Management Shareholders acquired their stake in Impax NH using loans provided by Impax NH with the distributions made by Impax NH being used to repay the loan and interest. The shares were subject to certain restriction linked to the employment of the individual. On acquisition the Group agreed to extend the period of these loans until 2021 in line with the put and call arrangements over the shares and have retained certain of the employment restrictions on the shares. The original arrangement is considered to be a share-based payment for the individuals which has been replaced by a new share-based payment in the Group's shares. The fair value of this equity scheme assigned to pre-acquisition service was included as part of the consideration on acquisition and a charge for new share-based payment award is included in the income statement over the period from acquisition to 31 December 2021, when the employment restriction over the shares ends.

An analysis of the consideration paid, the recognised amounts of asset acquired and liabilities assumed and the resulting goodwill is provided below:

Consideration	£000
Cash and cash equivalents	26,209
Group shares - 2,665,989 shares	5,225
Contingent Consideration	3,039
Value assigned to Management equity scheme	1,806
Total	36,279
Recognised amounts of identifiable assets acquired and liabilities assumed	£000
Assets
Property, plant and equipment	67
Intangible assets - management contracts	25,669
Cash	2,316
Trade receivables	3,041
Total assets	31,093
Liabilities
Trade and other payables	(3,763)
Total identifiable net assets at fair value	27,330
Non-controlling interest	(982)
Goodwill arising on acquisition	9,931
Total liabilities	36,279

Goodwill and intangible assets

The goodwill recognised is primarily attributed to the expected synergies and other benefits from combining the assets and activities of Impax NH with those of the Group. Impax NH consists of only one cash generating unit so no allocation of goodwill between CGUs was required.

The intangible assets acquired on acquisition represent investment management contracts. These are amortised over an 11 year life.

The acquired intangible assets and goodwill are deductible for US tax purposes.

Non-controlling interest

At the time of acquisition Impax NH owned 51% of Pax Ellevate Management LLC with the remaining shares being held by Ellevate Asset Management LLC ("EAM"). EAM had a put right to sell its Pax Ellevate units to Impax NH at any time. At the time of acquisition, a liability was recorded for the value of this put within Trade and other payables with a corresponding charge to equity. The 49% non-controlling interest was determined based on the fair value of the Pax Ellevate Management net assets (including intangible assets).

During the period the Put was exercised and the Group acquired the remaining 49% of shares.

Transaction Costs

Transaction costs were expensed in the income statement and are part of operating cash flows.

Pre-existing relationships

Impax LN sub managed Impax NH's Pax Global Environmental Markets Fund prior to the acquisition and continues to carry out this activity. The contract was and continues to be at fair value and accordingly no adjustment was made to the acquisition accounting.

Analysis of cash flows on acquisition:	£000
Net cash acquired with the subsidiary	2,316
Cash paid	(26,209)
Net cash flow on acquisition	(23,893)

20 NON-CONTROLLING INTERESTS

During the year a Put option was exercised by the non-controlling interest ("NCI") holder of the Group's subsidiary Pax Elevate Management. As a result the Group acquired the 49% stake owned by the third party for consideration of £1.81 million (£0.75 million after settlement of amounts due to Impax by Ellevate).

In the prior year a liability was recorded within payables for the cost of acquiring the non-controlling interest and changes in the liability were recorded in equity. On acquisition the carrying amount of the NCI acquired has been recognised as an increase in equity attributable to owners of the Company.

21 RECONCILIATION OF NET CASH FROM OPERATING ACTIVITIES

This note should be read in conjunction with the Consolidated cashflow statement. It provides a reconciliation to show how profit before tax, which is based on accounting rules, translates to cashflows.

	2019 £000	2018 £000
Profit before taxation	18,898	14,620
Adjustments for income statement non-cash charges/income
Depreciation of property plant and equipment and amortisation of intangible assets	2,952	2,051
Fair value gains/(losses) and other financial income/(expense)	(606)	616
Share-based payment charges	1,160	1,822
Non-controlling interest	(156)	(184)
Contingent Consideration credit	(3,543)	(170)
Adjustments for which the cash effects are investing or financing activities
Investment income	(236)	(279)
Interest payable	912	670
Changes in third party interests in consolidated funds	-	40
Adjustment for statement of financial position movements
Increase in trade and other receivables	(1,135)	(2,011)
Increase in trade and other payables	2,602	6,261
	20,848	23,436

 

END

 

 

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