Half-year Report
IntegraFin Holdings plc - Interim results for the six months ended
31 March 2022
IntegraFin Holdings plc (IHP) today announces its interim results for the six months to 31 March 2022.
Headlines
· Net inflows up 16% to £2.68bn (H1 2021: £2.31bn)
· Group revenue up 13% to £67.0m (H1 2021: £59.4m)
· Transact platform profit before tax up 10% to £33.7m (H1 2021: £30.7m)
· Investment in T4A - loss for H1 2022 of £1.1m, and post combination payments of £1.5m
· Group profit before tax up 2% to £31.7m (H1 2021: £31.2m)
· Further investment through adding 50 additional software development and systems staff during H2 2022 and H1 2023 to strengthen the competitive advantage of our proprietary software and operations
Alex Scott, Chief Executive Officer, commented:
"We are pleased to announce our results for the first half of the year. In a challenging environment we have continued to grow Group revenue and profits.
Our Transact platform has delivered its highest ever gross and net inflows. This is despite reduced market confidence in the second quarter, driven by geopolitical events and rising inflation.
Growth in revenue over the period has been dampened, as the fall in world equity markets has impacted growth in Funds Under Direction (FUD), even with record net inflows. That said, platform revenue has still grown at 11%, after fee reductions, as we have continued improving the price our Transact clients pay, making our service even better value for money.
The number of clients on the platform increased by 9% year on year and in the same period the number of advisers using Transact increased by 5%.
Delivered by Time for Advice, our adviser practice management tool, CURO, has also shown steady growth over the period. The number of user licences in force has increased 31%, driving up core revenues. Ongoing contractual revenues have increased 53% year on year. The Time for Advice development of its new CURO 365 software has been impacted because some of their development partners are based in Ukraine. However, initial release of the new CURO365 system is still expected before the end of the calendar year.
Testament to the quality of both Transact and CURO, is the recent awards of: Investment Trends number 1 rated for service for Transact, Professional Adviser Best Large Adviser Platform for Transact, and Best Adviser Technology Provider for Time for Advice.
We will also continue to invest in our proprietary software and operational systems to ensure that we retain our competitive advantage. We plan to incrementally add 50 additional software development and systems staff during the remainder of 2022 and early 2023. This will further enable us to maintain our strong position as a focused provider of services to clients and their UK advisers, to efficiently scale the business and to deliver enhanced future profitability.
The general economic outlook has deteriorated from that prevailing this time last year. We have negotiated the safe return of staff to our offices and the implementation of flexible working plans, whilst continuing to deliver award winning services, but now we are faced with major global uncertainty arising from Russia's invasion of Ukraine and the significant, resultant effects. When added to the existing inflationary pressures, these are negative drivers for Transact revenue, and for all round expenses.
However, the Group is in a strong financial position and is committed to developing the Transact platform and CURO, as well as investing in our people and delivering value to all key stakeholders.
The Board has declared a first interim dividend in accordance with the Company's dividend policy. In respect of the six months to 31 March 2022, an interim dividend of 3.2 pence per ordinary share (H1 2021: 3.0 pence) will be payable on 30 June 2022 to ordinary shareholders on the register on 10 June 2022. The ex-dividend date will be 9 June 2022."
Contacts
|
|
|
|
|
Investors |
|
|
|
Luke Carrivick |
+44 (0)20 7608 5463 |
|
|
Media |
|
|
|
Lansons |
|
|
|
|
|
|
|
Maddy Morgan Williams |
+44 (0)79 4736 4578 |
|
Analyst presentation
IntegraFin Holdings plc will be hosting an analyst presentation on 26 May 2022, following the release of these results for the half year ended 31 March 2022. Attendance is by invitation only. Slides accompanying the analyst presentation will be available on the IntegraFin Holdings plc website.
Cautionary Statement
These Interim Results have been prepared in accordance with the requirements of English Company Law and the liabilities of the Directors in connection with these Interim Results shall be subject to the limitations and restrictions provided by such law.
These Interim Results are prepared for and addressed only to the Company's shareholders as a whole and to no other person. The Company, its Directors, employees, agents or advisers do not accept or assume responsibility to any other person to whom these Interim Results are shown or into whose hands it may come and any such responsibility or liability is expressly disclaimed.
These Interim Results contain forward looking statements, which are unavoidably subject to risk and uncertainty because they relate to events and depend upon circumstances that will occur in the future. It is believed that the expectations set out in these forward looking statements are reasonable but they may be affected by a wide range of variables which could cause future outcomes to differ from those foreseen. All statements in these Interim Results are based upon information known to the Company at the date of this report. Except as required by law, the Company undertakes no obligation to publicly update or revise any forward looking statement, whether as a result of new information, future events or otherwise.
Financial review
Operational performance - Transact inflows and outflows
Transact's gross inflows for the first half year of the financial year were a record £4.07 billion, and this was coupled with outflows that were lower than the first half of financial year 2021. The combined effect of strong inflows and lower outflows is a 16% increase in net inflows for the first half of the financial year 2022 (£2.68 billion), compared to the first half of financial year 2021 (£2.31 billion).
|
|
H1 2022 £m |
H1 2021 £m |
YE 2021 £m |
|
Opening FUD |
52,112 |
41,093 |
41,093 |
|
Inflows |
4,068 |
3,734 |
7,695 |
|
Outflows |
(1,385) |
(1,427) |
(2,744) |
|
Net flows |
2,683 |
2,307 |
4,951 |
|
Market movements |
(1,169) |
3,632 |
6,297 |
|
Other movements1 |
(126) |
(103) |
(229) |
|
Closing FUD |
53,500 |
46,929 |
52,112 |
1 Other movements includes fees, tax charges and rebates, dividends and interest.
Our investment platform gross inflows remain organic and increased by £334 million (9%) for the six months to 31 March 2022, when compared with the same period in the prior year. Gross outflows decreased by £42 million (3%) in the six months, representing an annualised outflow of 5%, which remains well within the range we expect.
Operational performance - Time for Advice (T4A)
T4A was acquired by IHP in January 2021 and has now been part of the IHP Group for over 12 months. In that time, and as expected, T4A has steadily progressed the development of its CURO365 adviser back office software, and this has been achieved through increasing the number of software developers and people that can support sales, and ongoing user training and experience.
The number of core CURO user licences has increased from 1,348 as at March 2021, to 1,765 as at March 2022, an impressive increase of 31%. These numbers exclude a large user that had commenced the process of terminating their CURO licences at the point T4A was acquired by IHP.
Group financial performance
|
|
H1 2022 Group |
H1 2022 **Platform |
H1 2021 Group |
H1 2021 **Platform |
YE 2021 Group |
||
|
|
£m |
£m |
£m |
£m |
£m |
||
|
Revenue |
67.0 |
65.3 |
59.4 |
58.6 |
123.7 |
||
|
Amortisation of deferred income liability |
- |
- |
*3.8 |
*3.8 |
- |
||
|
Cost of sales |
(0.9) |
(0.5) |
(0.6) |
(0.4) |
(1.5) |
||
|
Gross profit |
66.1 |
64.8 |
62.6 |
62.0 |
122.2 |
||
|
Operating expenses |
(32.9) |
(31.3) |
(25.7) |
(27.6) |
(55.7) |
||
|
Amortisation of deferred acquisition costs |
- |
- |
*(3.8) |
*(3.8) |
- |
||
|
Non-underlying expenses |
(1.5) |
|
(1.9) |
- |
(3.3) |
||
|
Operating profit attributable to shareholder returns |
31.7 |
33.5 |
31.2 |
30.6 |
63.2 |
||
|
|
|
|
|
|
|
||
|
Net interest income |
0.0 |
0.2 |
0.0 |
0.1 |
(0.1) |
||
|
Profit before tax attributable to shareholder returns |
31.7 |
33.7 |
31.2 |
30.7 |
63.1 |
||
|
|
|
|
|
|
|
||
|
Tax on ordinary activities |
(6.2) |
(6.1) |
(6.2) |
(5.6) |
(12.5) |
||
|
Profit after tax attributable to shareholders |
25.5 |
27.6 |
25.0 |
25.1 |
50.6 |
||
|
Profit after tax attributable to policyholders |
- |
- |
- |
- |
0.5 |
||
|
Profit after tax |
25.5 |
27.6 |
25.0 |
25.1 |
51.1 |
||
|
|
|
|
|
|
|
||
|
Operating margin
|
47% |
51% |
53% |
52% |
51% |
||
|
|
|
|
|
|
|
|
|
* Derecognition of deferred income liability and deferred acquisition costs
H1 2022 no longer includes revenue due to amortisation of deferred income liability, or expense due to amortisation of deferred acquisition costs. This is due to the derecognition of both deferred income liabilities and deferred acquisition costs at financial 2021 year end, and the amortisation through the statement of comprehensive income thereof. The derecognition had no impact on net profit as the two accounting entries were always equal and opposite, as detailed in note 17 of the 2021 Annual Report and Accounts
To ensure a true comparative, the H1 2021 numbers that are quoted in the narrative that follows have been adjusted to reflect the accounting treatment no longer applying, so gross profit figures have been reduced, as have total expenses, both by £3.8 million.
** The Platform represents the activities conducted on Transact and excludes the activities of T4A. The T4A activities are included in the Group column. The Platform is equivalent to the investment administration services and insurance and life assurance business segments in note 3.
Group profit
Gross profit for the six months to 31 March 2022 rose by £7.3 million (12%), to £66.1 million, from £58.8 million. This is a solid increase in gross profit, despite the dampening of investment platform revenue in the three months to March 2022, as the prospect and then reality of Russia further annexing Ukraine emerged. The rapid escalation of the situation caused international financial markets to fall and also contributed to an already inflationary economic environment, as energy prices soared. However, due to the proven strength of the business model, combining strength in FUD and inflows, plus growth in the number of clients and their tax wrappers on the platform, the Group continues to grow gross profit.
Group gross profit also includes T4A's gross profit of £1.5 million for the six month period, compared against the inclusion of £0.6 million for the three months from acquisition in January 2021 to March 2021.
Group profit before tax increased by £0.5 million to £31.7 million, or 2% year on year. Underpinning this was an increase in the investment platform profit before tax of 10% to £33.7 million. However, Group profit before tax was reduced, as projected and expected, by losses before tax relief generated in T4A of £1.1 million (H1 2021: (£0.3 million)).
Group profit after tax has grown by £0.5 million year on year, from £25.0 million at half year 2021 to £25.5 million at half year 2022.
Investment platform profit
The Transact investment platform is the primary driver of Group revenue and profitability. Platform FUD has grown year on year by 14%, increasing from £46.93 billion at half year 2021 to £53.50 billion at half year 2022.The rise in FUD is principally behind the increase in the investment platform's profit before tax from £30.7 million to £33.7 million, an increase of 10%. Profit after tax has grown £2.5 million at £27.6 million, also an increase of 10%. We are also pleased to note that our platform operating margin is at a level of 51% (H1 2021: 52%) which remains impressive.
Revenue
Following the acquisition of T4A in January 2021, there have been two streams of Group revenue: investment platform revenue and T4A revenue.
Investment platform revenue
Platform revenue comprises three elements, two of which are recurring. The recurring revenue streams are annual commission income (an annual, ad valorem tiered fee on FUD) and wrapper administration fee income (quarterly fixed wrapper fees for each of the tax wrapper types available). The third platform revenue stream is other income, which is composed of buy commission and dealing charges.
|
|
H1 2022 |
H1 2021 |
YE 2021 |
|
Platform revenue |
£m |
£m |
£m |
|
Annual commission income |
58.4 |
51.8 |
107.7 |
|
Wrapper fee income |
5.7 |
5.2 |
10.6 |
|
Other income |
1.2 |
1.6 |
3.0 |
|
Total platform revenue |
65.3 |
58.6 |
121.3 |
|
T4A revenue |
1.7 |
0.7 |
2.4 |
|
Total revenue |
67.0 |
59.4 |
123.7 |
Recurring revenue streams constituted 98% (H1 2021: 97%) of total fee income in the six months to 31 March 2022.
Annual commission income increased by £6.6 million (13%) in the period versus the same period in the prior financial year, after allowing for the fee reduction effective after the prior comparative period. Whilst average FUD over the H1 2022 period was £53.04 billion, an increase of 19% on H1 2021, the quarter to December 2021 outperformed the quarter to March 2022, with average FUD falling from £53.51 billion in the first quarter, to an average of £52.55 billion in the second quarter and, hence, this impacted annual revenue in the second quarter.
Wrapper administration fee income increased by £0.5 million (9%) year on year, reflecting the increase in the number of open tax wrappers.
Buy commission, included in other income, reduced by £0.4 million year on year. The primary reason for this fall was the reduction in the buy commission rebate threshold in March 2021 and March 2022. The required portfolio value for client family groups to receive the rebate was reduced from £0.4 million to £0.3 million from 1 March 2021 and further reduced from £0.3 million to £0.2 million from 1 March 2022. The purpose of the reductions was to take an increasing proportion of clients out of the buy commission charge, simplifying the fee structure and delivering better value for money for them.
T4A revenue
T4A's revenue was £1.7 million to March 2022, compared with £0.7 million from 11 January 2021 to 31 March 2021. T4A's main revenue stream is licence fee income, which is recurring revenue generated from adviser firms who sign up to the CURO software, and accounts for 88% of its revenue, or £1.5 million of the total revenue of £1.7 million. Removing licence fee revenue from the user that has been in the process of terminating their contract since prior to acquisition, then total revenue has increased from £0.5 million from 11 January 2021 to March 2021, to £1.6 million in H1 2022.
The other significant revenue stream is consultancy fee income, accounting for 10% of its revenue.
T4A has grown average monthly revenue, excluding the user in the process of terminating their contract, from £172k per month from 11 January to 31 March 2021 to £286k per month in H1 2022, an increase of 53%.
Operating expenses
|
|
H1 2022 £m |
H1 2021 £m |
YE 2021 £m |
|
Staff costs |
23.7 |
20.3 |
41.6 |
|
Occupancy |
1.2 |
0.4 |
1.4 |
|
Regulatory and professional fees |
4.6 |
3.2 |
7.6 |
|
Non-underlying expenses |
1.5 |
1.9 |
3.3 |
|
Other income - tax relief due to shareholders |
(0.6) |
(1.6) |
(2.2) |
|
Other costs |
2.3 |
2.0 |
3.9 |
|
Total expenses |
32.7 |
26.2 |
55.6 |
|
Depreciation and amortisation |
1.6 |
1.4 |
3.1 |
|
Total operating expenses |
34.3 |
27.6 |
58.7 |
In the six months to March 2022, total operating expenses increased by £6.7 million (24%), compared with the six months to March 2021. This is attributable to a number of factors.
Staff costs
Staff costs have increased by £3.4 million (17%) to £23.7 million in the six months to March 2022.
A significant element of the increase in staff costs is the inclusion of six months of T4A staff costs in H1 2022 of £2.0 million, whereas only three months of costs - £694k - were included in H1 2021. T4A has increased headcount from 54 employees at March 2021, to 67 employees at March 2022. This is in line with the business plan and is with the intent of increasing sales capacity, as well as software development and ongoing training and support capacity. The average monthly payroll has risen by 26% from March 2021 to March 2022, which is broadly in line with the increase in staff of 24% and demonstrates that growth in payroll costs is not outstripping headcount.
Excluding T4A, staff costs for the remainder of the Group have increased by 11% to £21.7 million, from £19.6 million at the end of March 2021, with a corresponding increase in headcount from 504 at H1 2021 to 536 (6%) at H1 2022. Over half of this increase in headcount is due to investing in roles that will enhance the investment platform adviser and client onboarding and ongoing user experience, with 17 roles added in these areas, reflecting growth in the number of advisers and clients using the platform. The remainder of the increase in headcount and costs is attributable to pre lockdown vacancies being filled post-lockdown and general inflationary cost increases.
Regulatory fees
Regulatory fees and FSCS costs increased by £300k (19%), from £1.6 million in H1 2021 to £1.9 million in H1 2022. This is attributed to an increase in fees levied on two of the regulated entities in the Group: Integrated Financial Arrangements Ltd (IFAL) and IntegraLife UK Ltd (ILUK). The uplift in these costs is due to increasing business volumes and impact the financial services industry as a whole.
Professional fees
Professional fees have increased year on year by £1.1 million (69%), from £1.6 million in H1 2021 to £2.7 million in H1 2022. However, due to VAT on non-underlying costs and stamp duty on the acquisition of T4A, totalling £0.2 million, being included in other costs in H1 2021, rather than professional fees, the true uplift in professional fees year on year is £0.9 million, or 56%.
As with other expenses, six months of T4A expenses are included in H1 2022, versus three months in H1 2021. This also applies to professional fees and has resulted in an uplift of £0.2 million in the six months to March 2022.
The remainder of the uplift in professional fees of £0.7 million relates to one off consultancy and advisory engagements relating to the rest of the Group.
The streams of work worthy of mention have involved: a survey on staff engagement and making sure our office was fully ready for a safe return to work by our people; work on IT and cyber security, to ensure a hybrid working environment was fully secure; and, a review of the Group structure, with the aim of improving liquidity flows through the Group. Incurring such costs is vital to ensure the Group is secure and capital efficient, that we can continue to meet all regulatory requirements, and that we are listening to our people.
Occupancy
Occupancy costs have increased by £0.8 million in the half year to March 2022, principally due to recognition of a rates rebate of £0.7 million in H1 2021 for the Clement's Lane Head Office. The balance of the rebate is being recognised over the remainder of the lease, the impact of which is a reduction in occupancy costs of £0.1 million in the half year to March 2022.
Occupancy costs have also been affected by a very sharp inflationary increase in energy costs from December 2021 onwards. The impact of the increase in H1 2022 is an increase of £0.2 million. The increase in energy costs will continue for the remainder of the financial year and beyond.
Non-underlying expenses
Non-underlying expenses of £1.5 million arose in H1 2022 (H1 2021: £0.7 million), due to recognising post combination deferred and additional consideration payable to the original T4A shareholders in relation to the acquisition of T4A, as remuneration over the four years from January 2021 to December 2024. H1 2021 also included £1.2 million of one off costs relating to the purchase of T4A and consideration of Nucleus.
Other income
Other income has reduced by £1.0 million in the half year to March 2022. This is due to an additional release of aged policyholder tax provisions to the profit and loss in the half year to March 2021.
Net income attributable to policyholder returns, and policyholder tax
Net income/expense attributable to policyholder returns related to IntegraLife UK Ltd (ILUK, the UK insurance company in the Group), decreased by £26.0 million from net income of £17.8 million in March 2021, to net expense of £8.2 million in March 2022.
ILUK's policyholder tax decreased by £26.0 million, from a tax charge of £17.8 million in March 2021 to a tax credit of £8.2 million in March 2022.
Both movements were due to a decrease in the gains on investments held for the benefit of ILUK's policyholders, as a result of the fall in financial markets from January 2022 to the end of the reporting period. This led to policyholder tax recoverable on losses suffered, and a corresponding expense due to a reduction in the reserve charges taken from policyholders to cover future tax payments.
Financial position
The material items on the consolidated statement of financial position that merit comment are as follows:
Investments and cash held for the benefit of policyholders and liabilities for linked investment contracts
ILUK and IntegraLife International Limited (ILInt, the offshore insurance company in the Group) only write unit-linked insurance policies. They match the assets and liabilities of their linked policies such that, in their own individual statements of financial position, these items always net off exactly. These line items are required to be shown under IFRS in the consolidated statement of comprehensive income, the consolidated statement of financial position and the consolidated statement of cash flows, but they have zero net effect on the financial statements.
Investments and cash held for the benefit of ILUK and ILInt policyholders and the corresponding liabilities for linked investment contracts have increased by £562.7 million (2%) due to strong net inflows over the period but offset by significant drops in investment value, as financial markets fell from January onwards.
Deferred tax
Deferred ILUK policyholder tax liabilities have decreased by £10.3 million from £28.4 million at 30 September 2021 to £18.1 million at 31 March 2022. The decrease is due to the falls in the market in the quarter to March 2021. Sufficient cash is held by ILUK to meet this liability.
Provisions
Provisions have increased by £15.9 million. This is largely due to tax charges deducted from ILUK policyholders when markets rose being held in reserve for future tax liabilities, and may be paid back to policyholders if asset values do not recover such that the tax liability unwinds.
Dividends
During the six month period to 31 March 2022, the Company paid a second interim dividend of £23.2 million to shareholders in respect of financial year 2021. This was in addition to the first interim dividend of £9.9 million, which was paid in June 2021. The financial year total of £33.1 million compares with full year interim dividends of £27.4 million in respect of financial year 2020.
In respect of the six months to 31 March 2021 (and in line with dividend policy), the Board has declared a first interim dividend of £ 10.6 million, or 3.2 pence per ordinary share. This compares with an interim dividend of £9.9 million, or 3.0 pence per ordinary share, for the same period in the prior year.
Earnings per share
|
|
H1 2022 |
H1 2021 |
|
Profit after tax for the period |
£25.5m |
£25.0m |
|
Number of shares in issue |
331.3m |
331.3m |
|
Earnings per share - basic and diluted |
7.7p |
7.5p |
Earnings per share grew to 7.7p per share up 2% on the six months to 31 March 2021.
Principal risks and uncertainties
The Risk and Risk Management section on pages 40 to 46 of the 2021 Annual Report and Accounts, provided a comprehensive view of what the board considered to be the potential risks to the Group that could undermine the successful achievement of its strategic objectives, and threaten its business model or future performance. Effective risk management is key to the Group delivering on its strategy. The directors, with support from the business, have maintained a robust assessment of the principal risks facing the business in terms of its business model, future performance, solvency and liquidity as well as non-financial risks. These are captured and reviewed and reported to the IHP Group Audit and Risk Committee, which is also supported by the Risk Committee covering the Group's regulated entities.
The impacts of the Group's approach towards the COVID-19 pandemic were set out in the 2021 Annual Report and Accounts. Since then, we have continued to follow all appropriate government guidance and requirements. In light of that guidance, we have now implemented a flexible working arrangement combining office based and remote working, which is aligned to support our colleagues and meet our business requirements. We continue to put the health and safety of our colleagues at the forefront of our considerations, and in so doing we have followed the recommendations from government health and safety risk assessments and ensured all colleagues are aware of the safety measures put in place, including guidance on identifying and acting on COVID-19 symptoms. We have piloted this approach in our UK London office, which allows us to trial a range of working arrangements to ensure business operations and our adviser and customer experiences are optimised.
Notwithstanding the transition out of lockdown, updates to the key risks and uncertainties associated with our strategic objectives over the next six months are as follows:
1. Increased operational risk: The implementation of the hybrid office based and remote working arrangements has invoked a requirement for a new set of operating protocols to be established across a flexible workforce. The extensive use of portable IT equipment with remote access is an essential feature for the future operating model and as such will continue to increase the inherent threat of external fraud and cyber-attack. Information security risk is potentially heightened with highly confidential, personal or price sensitive information at risk of being transported offsite as part of flexible working arrangements. The standards of delivery under the hybrid model of our critical business services may need to be reviewed and, in some instances, it may be necessary to amend the usual routines and procedures. The events in Ukraine require additional compliance and monitoring of sanctions over investment activities coupled with the increasing need for awareness and vigilance around cyber threats to ourselves and our external service suppliers e.g. banking, dealing and custody services.
Risk management and control: The return to office strategy involved consultation and agreement from the senior management team across the business. Senior business managers have been proactive in defining the service metrics for operational effectiveness and are using the UK London office pilot to review and optimise their tailored approach to the provision of the Transact service. All related modifications to operating procedures are reviewed by senior management and assessed by Risk Management for impact, prior to approval. Senior management will also consider any potential impact on clients with the aim to avoid client detriment. Key phases of the IT strategy have been delivered which includes backup servers, a more robust WiFi service and enhanced remote access controls. A series of pilot arrangements will be implemented to test on a phased basis the resilience of the office and remote working interface. Feedback from colleagues on their experiences and suggestions provides valuable insight and opportunities to improve processes. In this regard, proactive colleague engagement surveys will be undertaken to ensure the views and comments of our people are reflected to support them and the operating and strategic objectives of the business. The Group is supporting the UK Government's response to events in Ukraine and managing the necessary sanctions and investments recorded and added to the platform. The board has assessed its suppliers and feels that it has limited exposure to operations affected by restrictions imposed against Russia and from suppliers based in Ukraine.
2. Stock market volatility: World equity markets to date in 2022, have experienced a range of uncertain factors that has resulted in the initial bullish market response to COVID-19 in 2020 and 2021 becoming more volatile and reactive to other events. On a global basis, geo-political factors are creating uncertainty and markets are responding to events and news on a daily basis. In addition, a combination of economic indicators such as interest rates and inflation coupled with UK tax increases has influenced the sentiment of investors and provided significant uncertainty towards economic performance and recovery rates. Whilst we are learning to live with COVID-19, the potential for new variants remains and for further lockdown measures to be invoked. It is unclear exactly how this might impact markets further, with the current factors being very different from those two years earlier. This combination means that there remains potential for financial distress at individual and corporate levels. The sentiment for global growth over the remainder of 2022 therefore remains unclear and fragile and any unexpected outcomes individually, or collectively, from these factors will create uncertainty and potentially volatile movements in stock markets. This has an effect upon the value of FUD which then affects revenue.
Risk management and control: Stock market volatility, and its impact on revenue, is partly mitigated by the wide range of assets in which FUD is invested. This ensures that FUD based revenue is not wholly correlated to any one market. Clients are also able to switch into cash, which is experiencing an uptick in interest rates earned, and this is likely to remain on the platform. The wrapper fees are also not reduced by falls in the value of assets, as they are levied at a fixed rate. Additionally, expenses are closely monitored and controlled.
3. Service standards failure: Failure to maintain or to respond to reduced levels of service standards would affect our ability to attract and retain business. As highlighted above, circumstances and external influences have necessitated changes to working practices and crystallised a fuller understanding and appreciation of the dependencies the Group has on the services and resilience of third party suppliers. The changing and uncertain external environment as well as the shift towards the hybrid working pattern has the potential to make the sustainability of our high service levels harder to deliver.
Risk management and control: The risk of service standards failure is managed by providing client service teams with extensive initial and ongoing training. Collectively the Group is supported by experienced subject matter experts and managers. We now have a more detailed view of remote working capabilities and capacity which support service levels. We plan to use the London based working pilot approach, as set out above, to provide more insight on a flexible operating model and we will share these experiences collectively across the Group, as appropriate, to optimise operations and aim to ensure service standards are maintained. In addition, the business prepares regular market insights reports which compare our ratings against our peers on key indicators such as FUD increase, market share of inflows, transfer ratios and new adviser registrations. This provides a useful indication of service standards overall. Our continuous engagement with advisers allows us to gather further feedback in order to improve our service standards. Key business processes have been reviewed for efficiency and as a means of identifying opportunities for investment to improve delivery through process enhancements and the effective deployment of IT technical functionality of the platform. Counter measures have been established to reduce the dependency on third party suppliers in the event of their operational failure which is supported by a rigorous supplier due diligence process to assess operational resilience.
4. Increased competition: The market is competitive. Increased levels of competition for clients and advisers; improvements in offerings from other investment platforms; new entrants to the advised investment platform space; and consolidation in the financial adviser market may all make it more challenging to attract and retain business. Adviser and client expectations towards the use and deployment of technology as a means of completing business has increased with a higher demand for automation. The ease of completing business is becoming an increasing competitive factor.
Risk management and control: Competition is countered by focussing on providing exceptionally high levels of service and being responsive to client and financial adviser demands. The Group has embraced technology enhancements and continues to develop our market leading proprietary software for the Transact platform and the Time4Advice adviser back office system. Regular reviews ensure that processes and procedures support the most effective customer experience with prioritised improvements. Having a good level of insight on processes allows for the timely capture of efficiencies and also helps make possible a continued proposition of "value for money" involving the reduction of charges. Our service quality continues to be of paramount importance to the Group with record levels of inflows acting as testament that this has been strategically a sound and successful approach.
5. Reduced investment: The maintenance of quality and relevance requires ongoing investment. Any reduction in investment due to diversion of resources to other non-discretionary expenditure may affect our competitive position.
Risk management and control: This risk, whilst not significantly increasing has been brought more sharply into focus as we emerge from the COVID-19 pandemic. The customer drive to conduct business through technology has increased with a shift in expectations. Retaining a strong investment strategy is paramount to maintaining the operational resilience and capability of the Group. Our IT strategy is investing in the technological enablers to support the operating model whilst reducing the dependency on legacy systems. The risk of reduced investment in the business is managed through a disciplined approach to expense management and forecasting. In particular, forthcoming regulatory regime changes are noted and planned for and a contingency sum is maintained to allow for unexpected expenses.
6. Expense overrun: The current and short term outlook of inflation rates remain high and this will impact on the expenses of the business. It remains important to retain competitive market rates of pay in times where the employment market is buoyant in order to ensure we retain and attract experienced and capable staff. We are particularly aware that certain skills are in high demand across the recruitment market, particularly in the technology development and IT support sector, where experience, both in the UK and Australia, is commanding a salary premium. Geo-political events have significantly impacted utility supply chains and the cost of services, e.g. electricity prices will be higher than expected and budgeted. With these factors in mind, we expect to experience an associated increase in the cost base this year. The inflationary pressures on certain costs this year e.g. salaries, are likely to be retained as a new baseline, which, coupled with additional tax and on costs e.g. pension contributions linked to salaries, will be reflected in the fixed costs of the Group. Whilst the key constituent of expenses is salary cost, other expenses, such as legal, compliance or regulatory costs and levies are more likely to change unexpectedly. The outcome of a reconsideration of HMRC's view that Integrated Application Development Pty Ltd should be excluded from the UK VAT group, as set out in the RNS issued on 28 January 2020, is currently awaited. Following that, a formal review may be required and, possibly, a referral to the Tribunal and/or litigation before the matter is finally resolved. It is possible that a retrospective additional VAT charge (plus interest and/or a penalty) and/or a prospective increase in VAT charges might be applied.
Risk management and control: The most significant element of the expense base is staff cost. This is monitored through modelling staff requirements against forecast business volumes and factoring in expected efficiencies from platform and other systems developments. Expenditure requests that deviate from plan are rigorously challenged and must receive prior approval. The consolidated group costs are expected to increase as a result of external factors highlighted which are reflected in the updated group financial planning model.
7. Capital and liquidity strain: Unexpected, additional capital or liquidity requirements imposed by regulators could negatively impact solvency and liquidity coverage ratios.
Risk management and control: Specific resources are allocated to monitor the current and anticipated regulatory environment to ensure that all regulatory obligations are met. Assessments of capital and liquidity requirements are also undertaken, which includes running extreme stress and scenario tests to the point of regulatory failure. A buffer over and above the regulatory minimum solvency capital requirements is maintained. The capital position has not significantly changed in this regard and in the context of the implementation of the Investment Firm Prudential Regulations (IFPR). The regulated companies within the Group continue to maintain healthy solvency coverage ratios. The majority of corporate assets are highly liquid, such as UK Gilts and instant access deposits with regulated UK retail banks. No term deposits exceed 95 days with Board risk appetites set to monitor the adequacy of the liquidity profile. This is expected to remain the case over the remainder of the financial year.
All other principal risks and uncertainties not mentioned above are materially unchanged from those disclosed in the Annual Report for the year ending 30 September 2021.
Directors' responsibility statement
The Directors are responsible for preparing the condensed consolidated financial statements in accordance with applicable law and regulations. A list of current directors is maintained on the Group's website: https://www.integrafin.co.uk.
The Directors confirm that, to the best of their knowledge, the condensed consolidated financial statements have been prepared in accordance with International Accounting Standard 34 (IAS 34) Interim Financial Reporting as adopted for use in the UK, and give a true and fair view of the assets, liabilities, financial position and profit or loss of the issuer, or the undertakings included in the consolidation as a whole as required by DTR 4.2.4 R.
The Directors further confirm that the interim management report include a fair review of the information required by DTR 4.2.7R and DTR 4.2.8R, namely:
· an indication of important events that have occurred during the first six months of the financial year and their impact on the condensed set of consolidated Financial Statements, and a description of the principal risks and uncertainties for the remaining six months of the financial year; and
· material related-party transactions in the first six months and any material changes in the related party transactions described in the last Annual Report.
By Order of the Board
Helen Wakeford
Company Secretary
Registered Office
29 Clement's Lane
London
EC4N 7AE
25 May 2022
Independent review report to IntegraFin Holdings plc
Conclusion
We have been engaged by IntegraFin Holdings plc (the 'Company') to review the condensed set of financial statements in the half-yearly financial report for the six months ended 31 March 2022 which comprises the Condensed Consolidated Statement of Comprehensive Income, the Condensed Consolidated Statement of Financial Position, the Condensed Statement of Cash Flows, the Condensed Statement of Changes in Equity and the related notes 1 to17. We have read the other information contained in the half yearly financial report and considered whether it contains any apparent misstatements or material inconsistencies with the information in the condensed set of financial statements.
Based on our review, nothing has come to our attention that causes us to believe that the condensed set of financial statements in the half-yearly financial report for the six months ended 31 March 2022 is not prepared, in all material respects, in accordance with UK adopted International Accounting Standard 34 and the Disclosure Guidance and Transparency Rules of the United Kingdom's Financial Conduct Authority.
Basis for Conclusion
We conducted our review in accordance with International Standard on Review Engagements 2410 (UK and Ireland) "Review of Interim Financial Information Performed by the Independent Auditor of the Entity" issued by the Auditing Practices Board. A review of interim financial information consists of making enquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with International Standards on Auditing (UK) and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion.
As disclosed in note 1, the annual financial statements of the Company will be prepared in accordance with UK adopted international accounting standards. The condensed set of financial statements included in this half-yearly financial report has been prepared in accordance with UK adopted International Accounting Standard 34, "Interim Financial Reporting".
Responsibilities of the directors
The directors are responsible for preparing the half-yearly financial report in accordance with the Disclosure Guidance and Transparency Rules of the United Kingdom's Financial Conduct Authority.
Auditor's Responsibilities for the review of the financial information
In reviewing the half-yearly report, we are responsible for expressing to the Company a conclusion on the condensed set of financial statements in the half-yearly financial report. Our conclusion is based on procedures that are less extensive than audit procedures, as described in the Basis for Conclusion paragraph of this report.
Use of our report
This report is made solely to the Company in accordance with guidance contained in International Standard on Review Engagements 2410 (UK and Ireland) "Review of Interim Financial Information Performed by the Independent Auditor of the Entity" issued by the Auditing Practices Board. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the Company, for our work, for this report, or for the conclusions we have formed.
Ernst & Young LLP
London
25 May 2022
Unaudited Condensed Consolidated Statement of Comprehensive Income
|
|
|
|
|
|
|
|
Note |
Six months to 31 March 2022 |
|
Six months to 31 March 2021 |
|
|
|
£'000 |
|
£'000 |
|
Revenue |
|
|
|
|
|
Fee income |
3 |
67,032 |
|
59,393 |
|
Amortisation of deferred income liability |
|
- |
|
3,841 |
|
Cost of sales |
|
(957) |
|
(575) |
|
Gross profit |
|
66,075 |
|
62,659 |
|
|
|
|
|
|
|
Administrative expenses |
|
(34,297) |
|
(27,572) |
|
Amortisation of deferred acquisition costs |
|
- |
|
(3,841) |
|
Credit loss allowance on financial assets |
|
(92) |
|
(33) |
|
Net (expense)/income attributable to policyholder returns |
7 |
(8,155) |
|
17,802 |
|
Operating profit |
|
23,531 |
|
49,015 |
|
|
|
|
|
|
|
Operating (loss)/profit attributable to policyholder returns |
7 |
(8,155) |
|
17,802 |
|
|
|
|
|
|
|
Operating profit attributable to shareholder returns |
|
31,686 |
|
31,213 |
|
|
|
|
|
|
|
Change in investment contract liabilities |
|
544,100 |
|
(1,594,215) |
|
Fee and commission expenses |
|
(101,861) |
|
(81,204) |
|
Investment returns |
|
(442,242) |
|
1,675,404 |
|
Interest income |
|
86 |
|
43 |
|
Interest expense |
|
(75) |
|
(90) |
|
|
|
|
|
|
|
Profit on ordinary activities before taxation |
|
23,539 |
|
48,953 |
|
|
|
|
|
|
|
(Loss)/profit on ordinary activities before taxation attributable to policyholder returns |
|
(8,155) |
|
17,802 |
|
|
|
|
|
|
|
Profit on ordinary activities before taxation attributable to shareholder returns |
|
31,694 |
|
31,151 |
|
|
|
|
|
|
|
Policyholder tax |
7 |
8,155 |
|
(17,802) |
|
|
|
|
|
|
|
Tax on profit on ordinary activities |
5 |
(6,184) |
|
(6,176) |
|
Profit for the period |
|
25,510 |
|
24,975 |
|
|
|
|
|
|
|
Other comprehensive (loss)/income |
|
|
|
|
|
|
|
|
|
|
|
Exchange gains/(losses) arising on translation of foreign operations |
|
67 |
|
(18) |
|
Total other comprehensive income/(loss) for the period |
|
67 |
|
(18) |
|
|
|
|
|
|
|
Total comprehensive income for the period |
|
25,577 |
|
24,957 |
|
Earnings per share |
|
|
|
|
Ordinary shares - basic and diluted |
4 |
7.7p |
7.5p |
All activities of the Group are classed as continuing.
Unaudited Condensed Consolidated Statement of Financial Position
|
|
|
31 March |
|
30 September |
|
|
Note |
2022 |
|
2021 |
|
|
|
£'000 |
|
£'000 |
|
Non-current assets |
|
|
|
|
|
Loans |
2 |
4,251 |
|
3,420 |
|
Intangible assets |
8 |
22,063 |
|
22,286 |
|
Property, plant and equipment |
|
1,481 |
|
1,827 |
|
Right of use assets |
|
2,883 |
|
3,632 |
|
Deferred tax assets |
6 |
716 |
|
716 |
|
|
|
31,394 |
|
31,881 |
|
|
|
|
|
|
|
Current assets |
|
|
|
|
|
Financial assets at fair value through profit or loss |
|
5,212 |
|
5,134 |
|
Other prepayments and accrued income |
|
16,130 |
|
15,951 |
|
Trade and other receivables |
13 |
9,842 |
|
3,719 |
|
Investments held for the benefit of policyholders |
10 |
22,201,415 |
|
21,787,106 |
|
Cash and cash equivalents |
12 |
1,592,483 |
|
1,442,362 |
|
Current tax asset |
|
1,042 |
|
1,122 |
|
|
|
23,826,124 |
|
23,255,394 |
|
|
|
|
|
|
|
Current liabilities |
|
|
|
|
|
Trade and other payables |
14 |
18,262 |
|
17,466 |
|
Provisions |
9 |
11,624 |
|
11,624 |
|
Lease liabilities |
|
2,362 |
|
2,362 |
|
Liabilities for linked investment contracts |
11 |
23,616,116 |
|
23,053,390 |
|
|
|
23,648,364 |
|
23,084,842 |
|
|
|
|
|
|
|
Non-current liabilities |
|
|
|
|
|
Provisions |
9 |
22,062 |
|
6,180 |
|
Contingent consideration |
|
1,262 |
|
791 |
|
Lease liabilities |
|
1,579 |
|
2,675 |
|
Deferred tax liabilities |
6 |
19,161 |
|
29,518 |
|
|
|
44,064 |
|
39,164 |
|
|
|
|
|
|
|
Net assets |
|
165,090 |
|
163,269 |
|
|
|
|
|
|
|
Capital and reserves |
|
|
|
|
|
Called up equity share capital |
|
3,313 |
|
3,313 |
|
Capital redemption reserve |
|
2 |
|
2 |
|
Share-based payment reserve |
|
2,256 |
|
2,404 |
|
Employee Benefit Trust reserve |
|
(2,356) |
|
(2,055) |
|
Foreign exchange reserve |
|
(27) |
|
(94) |
|
Non-distributable reserves |
|
5,722 |
|
5,722 |
|
Non-distributable insurance reserves |
|
- |
|
501 |
|
Profit or loss account |
|
156,180 |
|
153,476 |
|
Total equity |
|
165,090 |
|
163,269 |
These interim financial statements were approved by the Board of Directors on 25 May 2022 and are signed on their behalf by:
Alexander Scott, Director
Company Registration Number: 08860879
Unaudited Condensed Consolidated Statement of Cash Flows
|
|
|
|
|
|
|
|
|
|
Six months to 31 March 2022 |
|
Six months to 31 March 2021 |
|
|
|
|
£'000 |
|
£'000 |
|
|
Cash flows from operating activities |
|
|
|
|
|
|
Profit before tax |
|
23,539 |
|
48,953 |
|
|
Adjustments for: |
|
|
|
|
|
|
Amortisation and depreciation |
|
1,624 |
|
1,356 |
|
|
Share-based payments charge |
|
989 |
|
920 |
|
|
Interest on cash and loans held |
|
(86) |
|
(43) |
|
|
Interest charged on lease liability |
|
75 |
|
89 |
|
|
Investment returns |
|
3 |
|
15 |
|
|
Release of actuary reserve |
|
(501) |
|
- |
|
|
Increase in policyholder tax recoverable |
|
(5,895) |
|
(6,225) |
|
|
Increase in current asset investments |
|
(78) |
|
(58) |
|
|
|
|
19,670 |
|
45,007 |
|
|
|
|
|
|
|
|
|
Increase in receivables |
|
(6,302) |
|
(973) |
|
|
(Decrease)/increase in payables |
|
796 |
|
(1,423) |
|
|
(Decrease)/increase in provisions |
|
15,882 |
|
(7,469) |
|
|
Increase in contingent consideration |
|
471 |
|
- |
|
|
Decrease in share-based payment reserve |
|
(657) |
|
(916) |
|
|
Increase in investments held for the benefit of policyholders |
|
(414,309) |
|
(2,889,259) |
|
|
Increase in liabilities for linked investment contracts |
|
562,726 |
|
2,811,260 |
|
|
Cash generated from/(used in) operations |
|
178,277 |
|
(43,773) |
|
|
|
|
|
|
|
|
|
Income taxes paid |
|
(2,411) |
|
(6,802) |
|
|
Interest paid on lease liabilities |
|
(75) |
|
(89) |
|
|
Net cash flows from operating activities |
|
175,791 |
|
(50,664) |
|
|
|
|
|
|
|
|
|
Investing activities |
|
|
|
|
|
|
Acquisition of tangible assets |
|
(233) |
|
(408) |
|
|
Acquisition of subsidiary, net of cash acquired |
|
- |
|
(7,903) |
|
|
Increase in loans |
|
(831) |
|
(195) |
|
|
Interest on cash and loans held |
|
86 |
|
43 |
|
|
Investment returns |
|
(3) |
|
(15) |
|
|
Net cash used in investing activities |
|
(981) |
|
(8,478) |
|
|
|
|
|
|
|
|
|
Financing activities |
|
|
|
|
|
|
Purchase of own shares in Employee Benefit Trust |
|
(430) |
|
(438) |
|
|
Equity dividends paid |
|
(23,158) |
|
(18,532) |
|
|
Repayment of lease liabilities |
|
(1,168) |
|
(1,159) |
|
|
|
|
|
|
|
|
|
Net cash used in financing activities |
|
(24,756) |
|
(20,129) |
|
|
|
|
|
|
|
|
|
Net increase/(decrease) in cash and cash equivalents |
|
150,054 |
|
(79,272) |
|
|
|
|
|
|
|
|
|
Cash and cash equivalents at beginning of period |
|
1,442,362 |
|
1,539,843 |
|
|
|
|
|
|
|
|
|
Exchange gains/(losses) on cash and cash equivalents |
|
67 |
|
(18) |
|
|
|
|
|
|
|
|
|
Cash and cash equivalents at end of period |
|
1,592,483 |
|
1,460,555 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unaudited Condensed Consolidated Statement of Changes in Equity
|
|
Share capital |
Non-distributable reserves |
Other reserves |
Share-based payment reserve |
Non-distributable insurance reserves |
Employee benefit trust |
Retained earnings |
Total equity |
|
|
£'000 |
£'000 |
£'000 |
£'000 |
£'000 |
£'000 |
£'000 |
£'000 |
|
|
|
|
|
|
|
|
|
|
|
Balance at 1 October 2020 |
3,313 |
5,722 |
(20) |
1,698 |
501 |
(1,103) |
130,809 |
140,920 |
|
Comprehensive income for the year: |
|
|
|
|
|
|
|
|
|
Profit for the year |
- |
- |
- |
- |
- |
- |
24,975 |
24,975 |
|
Movement in currency translation |
- |
- |
(18) |
- |
- |
- |
- |
(18) |
|
Other movement |
- |
- |
- |
- |
- |
- |
- |
- |
|
Total comprehensive income for the year |
- |
- |
(18) |
- |
- |
- |
24,975 |
24,957 |
|
Distributions to owners: |
|
|
|
|
|
|
|
|
|
Dividends |
- |
- |
- |
- |
- |
- |
(18,531) |
(18,531) |
|
Share-based payment expense |
- |
- |
- |
919 |
- |
- |
- |
919 |
|
Settlement of share-based payment |
- |
- |
- |
(916) |
- |
- |
- |
(916) |
|
Purchase of own shares in EBT |
- |
- |
- |
- |
- |
(439) |
- |
(439) |
|
Total distributions to owners |
- |
- |
- |
3 |
- |
(439) |
(18,531) |
(18,967) |
|
Balance at 31 March 2021 |
3,313 |
5,722 |
(38) |
1,701 |
501 |
(1,542) |
137,253 |
146,910 |
|
|
|
|
|
|
|
|
|
|
|
Balance at 1 October 2021 |
3,313 |
5,722 |
(92) |
2,404 |
501 |
(2,055) |
153,476 |
163,269 |
|
Comprehensive income for the year: |
|
|
|
|
|
|
|
|
|
Profit for the year |
- |
- |
- |
- |
- |
- |
25,510 |
25,510 |
|
Movement in currency translation |
- |
- |
67 |
- |
- |
- |
- |
67 |
|
Total comprehensive income for the year |
- |
- |
67 |
- |
- |
- |
25,510 |
25,577 |
|
Distributions to owners: |
|
|
|
|
|
|
|
|
|
Share-based payment expense |
- |
- |
- |
989 |
- |
- |
- |
989 |
|
Settlement of share-based payment |
- |
- |
- |
(1,137) |
- |
- |
- |
(1,137) |
|
Purchase of own shares in EBT |
- |
- |
- |
- |
- |
(430) |
- |
(430) |
|
Exercised share options |
- |
- |
- |
- |
- |
129 |
(149) |
(20) |
|
Release of actuarial reserve |
- |
- |
- |
- |
(501) |
- |
501 |
- |
|
Dividends |
- |
- |
- |
- |
- |
- |
(23,158) |
(23,158) |
|
Total distributions to owners |
- |
- |
- |
(148) |
(501) |
(301) |
(22,806) |
(23,756) |
|
Balance at 31 March 2022 |
3,313 |
5,722 |
(25) |
2,256 |
- |
(2,356) |
156,180 |
165,090 |
Notes to the Financial Statements (unaudited)
1. Basis of preparation
The interim condensed consolidated financial statements have been prepared in accordance with IAS 34 Interim Financial Reporting as adopted for use in the UK and the Disclosure Guidance and Transparency Rules (the DTR) of the UK's Financial Conduct Authority (the UK FCA).
The interim condensed consolidated set of financial statements has been prepared by applying the accounting policies and presentation that were applied in the preparation of the Group's published consolidated financial statements for the year ended 30 September 2021, which were prepared in accordance with International Financial Reporting Standards (IFRSs) adopted pursuant to Regulation (EC) No 1606/2002 as it applies in the European Union and in accordance with international accounting standards in conformity with the requirements of the Companies Act 2006, which are materially the same as UK-adopted international accounting standards. The annual financial statements of the Group for the year ended 30 September 2022 will be prepared in accordance with UK-adopted international accounting standards.
The financial information contained in these interim financial statements are unaudited and do not constitute statutory accounts within the meaning of Section 434 of the Companies Act 2006. The information has been reviewed by the company's auditor, Ernst & Young LLP, and their report is presented on pages 14-15.
The comparative financial information for the year ended 30 September 2021 in this interim report does not constitute statutory accounts for that year.
The statutory accounts for 30 September 2021 have been delivered to the Registrar of Companies. The auditor's report on those accounts was unqualified, did not draw attention to any matters by way of emphasis, and did not contain a statement under 498(2) or 498(3) of the Companies Act 2006.
These interim financial statements should be read in conjunction with the Annual Report and Accounts for the year ended 30 September 2021. The Group's accounting policies, areas of significant judgement and the key sources of estimation uncertainty are consistent with those applied to the consolidated financial statements as at, and for, the year ended 30 September 2021.
Going Concern
The interim financial statements have been prepared on a going concern basis, following an assessment by the board.
Going concern is assessed over the 12 month period from when the Interim Results are approved, and the board has concluded that the Group has adequate resources to continue in operational existence for the 12 months from the approval of the Interim Results. This is supported by:
· The current financial position of the Group;
o The Group maintains a conservative balance sheet and manages and monitors solvency and liquidity on an ongoing basis, ensuring that it always has sufficient financial resources for the foreseeable future.
o As at 31 March 2022, the Group had £177.8 million of shareholder cash on the balance sheet, demonstrating that liquidity remains strong.
· Detailed cash flow and working capital projections; and
· Stress-testing of liquidity, profitability and regulatory capital, taking account of possible adverse changes in trading performance, including the impact of events in Ukraine, rising inflation rates and COVID-19.
When making this assessment, the board has taken into consideration both the Group's current performance and the future outlook, including the impact of events in Ukraine, rising inflation rates and COVID-19. Market volatility and uncertainty is expected to continue for some time, due to these evolving world events and the effect of measures taken to combat these, but the Group's fundamentals remain strong.
Having conducted detailed cash flow and working capital projections, and stress-tested liquidity, profitability and regulatory capital, the board is satisfied that the Group is well placed to manage its business risks.
The board is also satisfied that it will be able to operate within the regulatory capital limits imposed by the Financial Conduct Authority (FCA), Prudential Regulation Authority (PRA), and Isle Man Financial Services Authority (IoM FSA). Accordingly, the board does not believe a material uncertainty exists that would have an effect on the going concern of the Group and have prepared the interim financial statements on a going concern basis.
Principal risks and uncertainties
The Group's principal risks and uncertainties are listed on pages 9-12.
Basis of consolidation
The consolidated financial statements incorporate the financial statements of the Company and its subsidiaries.
Business combinations
The acquisition method of accounting is used to account for all business combinations, regardless of whether equity instruments or other assets are acquired. The consideration transferred for the acquisition of a subsidiary comprises the:
· fair values of the assets transferred ;
· liabilities incurred to the former owners of the acquired business;
· equity interests issued by the group;
· fair value of any asset or liability resulting from a contingent consideration arrangement; and
· fair value of any pre-existing equity interest in the subsidiary.
Identifiable assets acquired and liabilities and contingent liabilities assumed in a business combination are measured initially at their fair values at the acquisition date.
Acquisition-related costs are expensed as incurred.
The excess of the consideration transferred over the fair value of the net identifiable assets acquired is recorded as goodwill. If those amounts are
less than the fair value of the net identifiable assets of the business acquired, the difference is
recognised directly in the statement of comprehensive income.
Where settlement of any part of cash consideration is deferred, the amounts payable in the future are discounted to their present value as at the date of exchange. The discount rate used is the entity's incremental borrowing rate, being the rate at which a similar borrowing could be obtained from an independent financier under comparable terms and conditions.
Contingent consideration is classified either as equity or a financial liability. Amounts classified as a financial liability are subsequently remeasured to fair value, with changes in fair value recognised in the statement of comprehensive income.
Contingent arrangements payable to selling shareholders that continue providing services are assessed to determine if there is an element of payment for post-combination services. The element that is determined to relate to post-combination services is recognised in in the statement of comprehensive income across the periods to which the services relate.
2. Financial instruments
Principal financial instruments
The principal financial instruments, from which financial instrument risk arises, are as follows:
· Trade and other receivables
· Accrued fees
· Cash and cash equivalents
· Investments in quoted debt instruments
· Listed shares and securities
· Trade and other payables
· Loans
Financial instruments by category
Financial assets and liabilities have been classified into categories that determine their basis of measurement and, for items measured at fair value, whether changes in fair value are recognised in the statement of comprehensive income. The following tables show the carrying values of assets and liabilities for each of these categories for the Group:
Financial assets:
|
|
|
|
|
|
|
|
|
Fair value through profit or loss |
Amortised cost |
|
||
|
|
31 Mar |
30 Sep |
31 Mar |
30 Sep |
|
|
|
2022 |
2021 |
2022 |
2021 |
|
|
|
£'000 |
£'000 |
£'000 |
£'000 |
|
|
Cash and cash equivalents |
- |
- |
1,592,483 |
1,442,362 |
|
|
Listed shares and securities |
258 |
165 |
- |
- |
|
|
Loans |
- |
- |
4,251 |
3,420 |
|
|
Investments in quoted debt instruments |
4,954 |
4,969 |
- |
- |
|
|
Accrued income |
- |
- |
12,179 |
12,030 |
|
|
Trade and other receivables |
- |
- |
1,987 |
934 |
|
|
Investments held for the benefit of policyholders |
22,201,415 |
21,787,106
|
- |
- |
|
|
Total financial assets |
22,206,627 |
21,792,240 |
1,610,900 |
1,458,746 |
|
Financial liabilities:
|
|
Fair value through profit or loss |
Amortised cost |
|
||
|
|
31 Mar |
30 Sep |
31 Mar |
30 Sep |
|
|
|
2022 |
2021 |
2022 |
2021 |
|
|
|
£'000 |
£'000 |
£'000 |
£'000 |
|
|
Trade and other payables |
- |
- |
7,613 |
7,056 |
|
|
Accruals |
- |
- |
4,355 |
7,906 |
|
|
Lease liabilities |
- |
- |
3,941 |
5,037 |
|
|
Deferred consideration |
- |
- |
634 |
1,741 |
|
|
Contingent consideration |
1,262 |
791 |
- |
- |
|
|
Liabilities for linked investments contracts |
23,616,115 |
23,053,390 |
- |
- |
|
|
Total financial liabilities |
23,617,377 |
23,054,181 |
16,543 |
21,740 |
|
|
|
|
|
|
|
|
The following tables show the carrying values of assets and liabilities for each of these categories for the Company:
Financial assets:
|
|
|
|
|
|
|
|
|
Fair value through profit or loss |
Amortised cost |
|
||
|
|
31 Mar |
30 Sep |
31 Mar |
30 Sep |
|
|
|
2022 |
2021 |
2022 |
2021 |
|
|
|
£'000 |
£'000 |
£'000 |
£'000 |
|
|
Cash and cash equivalents |
- |
- |
20,571 |
30,962 |
|
|
Trade and other receivables |
- |
- |
142 |
- |
|
|
Loans |
- |
- |
4,251 |
3,420 |
|
|
Total financial assets |
- |
- |
24,964 |
34,382 |
|
Financial liabilities:
|
|
Fair value through profit or loss |
Amortised cost |
|
||
|
|
31 Mar |
30 Sep |
31 Mar |
30 Sep |
|
|
|
2022 |
2021 |
2022 |
2021 |
|
|
|
£'000 |
£'000 |
£'000 |
£'000 |
|
|
Trade and other payables |
- |
- |
340 |
22 |
|
|
Loans |
- |
- |
9,000 |
9,000 |
|
|
Deferred consideration |
- |
- |
634 |
2,533 |
|
|
Contingent consideration |
1,262 |
791 |
- |
- |
|
|
Accruals |
- |
- |
164 |
359 |
|
|
Total financial liabilities |
1,262 |
791 |
10,138 |
11,914 |
|
|
|
|
|
|
|
|
Financial instruments not measured at fair value
Financial instruments not measured at fair value include cash and cash equivalents, accrued fees, loans, trade and other receivables, and trade and other payables. Due to their short-term nature and/or annual impairment review, The Group considers that the carrying amount of these financial instruments are a reasonable approximation of their fair value.
Financial instruments measured at fair value - fair value hierarchy
The table below classifies financial assets that are recognised on the statement of financial position at fair value in a hierarchy that is based on significance of the inputs used in making the measurements.
Investments held for the benefit of policyholders are stated at fair value and reported on a separate line in the statement of financial position. The assets are classified using the 'fair value through profit or loss' option with any resultant gain or loss recognised through the statement of comprehensive income .
Assets held at fair value also comprises investments held in gilts, and these are held at fair value through profit and loss.
The following table shows the three levels of the fair value hierarchy:
|
Fair value hierarchy |
Description of hierarchy |
Types of investments classified at each level |
|
Level 1 |
Quoted prices (unadjusted) in active markets for identical assets |
Listed equity securities, gilts, actively traded pooled investments such as OEICS and unit trusts. |
|
Level 2 |
Inputs other than quoted prices included within Level 1 that are observable for the asset either directly (i.e. as prices) or indirectly (i.e. derived from prices) |
Actively traded unlisted equity securities where there is no significant unobservable inputs, structured products and regularly priced but not actively traded instruments. |
|
Level 3 |
Inputs that are not based on observable market data (unobservable inputs). |
Unlisted equity securities with significant unobservable inputs, inactive pooled investments. |
For the purposes of identifying level 3 assets, unobservable inputs means that current
observable market information is no longer available. Where these assets arise management
will value them based on the last known observable market price. No other valuation techniques
are applied.
The following table shows the Group's assets measured at fair value and split into the three levels:
|
At 31 March 2022 |
Level 1 |
Level 2 |
Level 3 |
Total |
|
|
£'000 |
£'000 |
£'000 |
£'000 |
|
Investments and assets held for the benefit of policyholders |
|
|
|
|
|
- Term deposits |
- |
35,777 |
- |
35,777 |
|
- Investments and securities |
676,923 |
152,386 |
325 |
829,634 |
|
- Bonds and other fixed-income securities |
14,315 |
632 |
- |
14,947 |
|
- Holdings in collective investment schemes |
21,186,611 |
133,428 |
1,018 |
21,321,057 |
|
1 |
21,877,849 |
322,223 |
1,343 |
22,201,415 |
|
Other investments |
4,949 |
- |
- |
4,949 |
|
Total |
21,882,798 |
322,223 |
1,343 |
22,206,364 |
|
At 30 September 2021 |
Level 1 |
Level 2 |
Level 3 |
Total |
|
|
£'000 |
£'000 |
£'000 |
£'000 |
|
Investments and assets held for the benefit of policyholders |
|
|
|
|
|
- Investments and securities |
633,602 |
163,940 |
440 |
797,982 |
|
- Bonds and other fixed-income securities |
14,846 |
589 |
- |
15,435 |
|
- Holdings in collective investment schemes |
20,848,948 |
113,265 |
1,476 |
20,973,689 |
|
|
21,507,396 |
277,794 |
1,916 |
21,787,106 |
|
Other investments |
4,964 |
- |
- |
4,964 |
|
Total |
21,512,360 |
277,794 |
1,916 |
21,792,070 |
Level 1 valuation methodology
Financial assets included in Level 1 are measured at fair value using quoted mid prices that are available at the reporting date and are traded in active markets. These financial assets are mainly collective investment schemes and listed equity instruments.
Level 2 and Level 3 valuation methodology
The Group regularly reviews whether a market is active, based on available market data and the specific circumstances of each market. Where the Group assesses that a market is not active, then it applies one or more valuation methodologies to the specific financial asset. These valuation methodologies use quoted market prices, where available, and may in certain circumstances require the Group to exercise judgement to determine fair value.
Financial assets included in Level 2 are measured at fair value using observable mid prices traded in markets that have been assessed as not active enough to be included in Level 1.
Otherwise, financial assets are included in Level 3. These are assets where one or more inputs to the valuation methodology are not based on observable market data. The key unobservable input is the pre-tax operating margin needed to price asset holdings.
Level 3 sensitivity to changes in unobservable measurements
For financial assets assessed as Level 3, based on its review of the prices used, the Company
believes that any change to the unobservable inputs used to measure fair value would not result
in a significantly higher or lower fair value measurement at period end, and therefore would not
have a material impact on its reported results.
Changes to valuation methodology
There have been no changes in valuation methodology during the period under review.
Transfers between Levels
The Company's policy is to assess each financial asset it holds at the period end, based on the last known price and market information, and assign it to a Level.
The Company recognises transfers between Levels of the fair value hierarchy at the end of the reporting period in which the changes have occurred. Changes occur due to the availability of (or lack thereof) quoted prices, whether a market is now active or not, and whether there are indications of impairment.
Transfers between Levels 1 and 2 between 31 March 2022 and 30 September 2021 are presented in the table below at their valuation at 31 March 2021:
|
Transfers from |
Transfers to |
'000 |
|
|
Level 1 |
Level 2 |
17,940 |
|
|
Level 2 |
Level 1 |
3,498 |
|
|
|
|
|
|
The large movement from Level 1 to Level 2 is due to the suspension of several funds with exposure to Russian securities which suspended following the Russian invasion of Ukraine. Consequently these funds are no longer actively trading.
The reconciliation between opening and closing balances of Level 3 assets are presented in the table below:
|
|
31 March 2022 |
30 September 2021 |
|
|
£'000 |
£'000 |
|
Opening balance |
1,916 |
1,676 |
|
Unrealised gains or losses in the year ended 31 March 2022 |
- |
(236) |
|
Transfers in to Level 3 at 31 March 2022 valuation |
662 |
1,114 |
|
Transfers out of Level 3 at 31 March 2022 valuation |
(1,101) |
(578) |
|
Purchases, sales, issues and settlement |
(133) |
(60) |
|
Closing balance |
1,344 |
1,916 |
Any resultant gains or losses on financial assets held for the benefit of policyholders are offset by a reciprocal movement in the linked liability.
The Group regularly assesses assets to ensure they are categorised correctly and FVH levels adjusted accordingly. The Group monitors situations that may impact liquidity such as suspensions and liquidations while also actively collecting observable market prices from relevant exchanges and asset managers. Should an asset price become observable following the resumption of trading the FVH level will be updated to reflect this.
3. Segmental reporting
The revenue and profit before tax are attributable to activities carried out in the UK.
The Group has three classes of business as follows:
- provision of investment administration services;
- transaction of ordinary long term insurance and underwriting life assurance; and
- Adviser back-office technology.
Adviser back-office technology relates to the acquisition of T4A during the financial period ending 30 September 2021.
Further other Group entities comprise the entities within the group who provide functions which are not directly revenue generating for one of the three classes of business, such as the provision of shared services across the Group.
Analysis by class of business is given below.
Statement of comprehensive income - segmental information for the six months ended 31 March 2022:
|
|
Investment administration services |
Insurance and life assurance business |
Adviser back-office technology |
Other Group entities |
Consolidation adjustments |
Total |
|
||||||||||||||||
|
|
£'000 |
£'000 |
£'000 |
£'000 |
£'000 |
£'000 |
|
||||||||||||||||
|
Revenue |
|
|
|
|
|
|
|
||||||||||||||||
|
Annual commission income |
31,922 |
26,460 |
- |
- |
- |
58,382 |
|
||||||||||||||||
|
Wrapper fee income |
1,381 |
4,291 |
- |
- |
- |
5,672 |
|
||||||||||||||||
|
Adviser back-office technology |
- |
- |
1,713 |
- |
- |
1,713 |
|
||||||||||||||||
|
Other income |
760 |
505 |
- |
32,141 |
(32,141) |
1,265 |
|
||||||||||||||||
|
Total revenue |
34,063 |
31,256 |
1,713 |
32,141 |
(32,141) |
67,032 |
|
||||||||||||||||
|
|
|
|
|
|
|
|
|
||||||||||||||||
|
Cost of sales |
(293) |
(180) |
(246) |
(238) |
- |
(957) |
|
||||||||||||||||
|
|
|
|
|
|
|
|
|
||||||||||||||||
|
Gross profit/(loss) |
33,770 |
31,076 |
1,467 |
31,903 |
(32,141) |
66,075 |
|
||||||||||||||||
|
|
|
|
|
|
|
|
|
||||||||||||||||
|
Administrative expenses |
(18,644) |
(12,604) |
(2,603) |
(32,586) |
32,141 |
(34,297) |
|
||||||||||||||||
|
Credit loss allowance on financial assets |
(47) |
10 |
- |
(35) |
- |
(92) |
|
||||||||||||||||
|
Net expense attributable to policyholder returns |
- |
(8,155) |
- |
- |
- |
(8,155) |
|
||||||||||||||||
|
Operating profit/(loss) |
15,079 |
10,307 |
(1,136) |
(718) |
- |
23,531 |
|
||||||||||||||||
|
Operating loss attributable to policyholder returns |
- |
(8,155) |
- |
- |
- |
(8,155) |
|
||||||||||||||||
|
|
|
|
|
|
|
|
|
||||||||||||||||
|
Operating profit/(loss) attributable to shareholder returns |
15,079 |
18,462 |
(1,136) |
(718) |
- |
31,686 |
|
||||||||||||||||
|
Change in investment contract liabilities |
- |
544,100 |
- |
- |
- |
544,100 |
|
||||||||||||||||
|
Fee and commission expenses |
- |
(101,861) |
- |
- |
- |
(101,861) |
|
||||||||||||||||
|
Investment returns |
- |
(442,242) |
- |
- |
- |
(442,242) |
|
||||||||||||||||
|
Interest expense |
(3) |
- |
- |
(224) |
152 |
(75) |
|
||||||||||||||||
|
Interest income |
5 |
183 |
- |
50 |
(152) |
86 |
|
||||||||||||||||
|
|
|
|
|
|
|
|
|
||||||||||||||||
|
Profit/(loss) on ordinary activities before tax |
15,081 |
10,487 |
(1,136) |
(892) |
- |
23,539 |
|
||||||||||||||||
|
|
|
|
|
|
|
|
|
||||||||||||||||
|
Loss on ordinary activities before taxation attributable to policyholder returns |
- |
(8,155) |
- |
- |
- |
(8,155) |
|||||||||||||||||
|
|
|
|
|
|
|
|
|
||||||||||||||||
|
Profit/(loss) on ordinary activities before taxation attributable to shareholder returns |
15,082 |
18,641 |
(1,136) |
(892) |
- |
31,694 |
|
||||||||||||||||
|
|
|
|
|
|
|
|
|
||||||||||||||||
|
Policyholder tax |
- |
8,155 |
- |
- |
- |
8,155 |
|
||||||||||||||||
|
Tax on profit on ordinary activities |
(2,866) |
(3,234) |
206 |
(290) |
- |
(6,184) |
|
||||||||||||||||
|
|
|
|
|
|
|
|
|
||||||||||||||||
|
Profit/(loss) for the period |
12,217 |
15,407 |
(931) |
(1,183) |
- |
25,510 |
|
||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Statement of comprehensive income - segmental information for the six months ended 31 March 2021:
|
|
Investment administration services (restated) |
Insurance and life assurance business (restated) |
Adviser back-office technology |
Other group entities (restated) |
Consolidation adjustments (restated) |
Total |
||||||||||||||
|
|
£'000 |
£'000 |
£'000 |
£'000 |
£'000 |
£'000 |
|
|||||||||||||
|
Revenue |
|
|
|
|
|
|
|
|||||||||||||
|
Annual commission income |
28,368 |
23,479 |
- |
- |
- |
51,847 |
|
|||||||||||||
|
Wrapper fee income |
1,253 |
3,936 |
- |
- |
- |
5,189 |
|
|||||||||||||
|
Adviser back-office technology |
- |
- |
732 |
- |
- |
732 |
|
|||||||||||||
|
Other income |
924 |
687 |
- |
30,360 |
(30,346) |
1,625 |
|
|||||||||||||
|
Total income |
30,545 |
28,102 |
732 |
30,360 |
(30,346) |
59,393 |
|
|||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||||||
|
Amortisation of deferred income liability |
- |
3,841 |
- |
- |
- |
3,841 |
|
|||||||||||||
|
Cost of sales |
(210) |
(148) |
(84) |
(133) |
- |
(575) |
|
|||||||||||||
|
Gross profit/(loss) |
30,335 |
31,795 |
648 |
30,227 |
(30,346) |
62,659 |
|
|||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||||||
|
Administrative expenses |
(17,200) |
(10,348) |
(918) |
(29,452) |
30,346 |
(27,572) |
|
|||||||||||||
|
Amortisation of deferred acquisition costs |
- |
(3,841) |
- |
- |
- |
(3,841) |
|
|||||||||||||
|
Credit loss allowance on financial assets |
(17) |
(8) |
- |
(8) |
- |
(33) |
|
|||||||||||||
|
Net income/(expense) attributable to policyholder returns |
- |
17,802 |
- |
- |
- |
17,802 |
|
|||||||||||||
|
Operating profit |
13,118 |
35,400 |
(270) |
767 |
- |
49,015 |
|
|||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||||||
|
Operating profit attributable to policyholder returns |
- |
17,802 |
- |
- |
- |
17,802 |
|
|||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||||||
|
Operating profit/(loss) attributable to shareholder returns |
13,118 |
17,598 |
(270) |
767 |
- |
31,213 |
|
|||||||||||||
|
Change in investment contract liabilities |
- |
(1,594,215)
|
- |
- |
- |
(1,594,215) |
|
|||||||||||||
|
Fee and commission expenses |
- |
(81,204) |
- |
- |
- |
(81,204) |
|
|||||||||||||
|
Investment returns |
- |
1,675,404 |
- |
- |
- |
1,675,404 |
|
|||||||||||||
|
Interest income |
1 |
75 |
- |
37 |
(70) |
43 |
|
|||||||||||||
|
Interest expense |
- |
- |
- |
(160) |
70 |
(90) |
|
|||||||||||||
|
Profit/(loss) on ordinary activities before tax |
13,119
|
35,460 |
(270) |
644 |
- |
48,953 |
|
|||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||||||
|
Profit on ordinary activities before taxation attributable to policyholder returns |
- |
17,802 |
- |
- |
- |
17,802 |
|
|||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||||||
|
Profit/(loss) on ordinary activities before taxation attributable to shareholder returns |
13,119 |
17,658 |
(270) |
644 |
- |
31,151 |
|
|||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||||||
|
Policyholder tax |
- |
(17,802) |
- |
- |
- |
(17,802) |
|
|||||||||||||
|
Tax on profit on ordinary activities |
(2,493) |
(3,101) |
- |
(582) |
- |
(6,176) |
|
|||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||||||
|
Profit/(loss) for the period |
10,626 |
14,557 |
(270) |
62 |
- |
24,975 |
|
|||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The comparative segmental analysis has been restated to reflect the revised presentation format used in the current year.
Statement of financial position - segmental information as at 31 March 2022:
|
|
Investment administration services |
Insurance and life assurance business |
Licences |
Total |
||
|
|
£'000 |
£'000 |
£'000 |
£'000 |
||
|
Assets |
|
|
|
|
||
|
Non-current assets |
11,636 |
19,715 |
43 |
31,394 |
||
|
Current assets |
68,653 |
23,754,560 |
2,911 |
23,826,124 |
||
|
Total assets |
80,289 |
23,774,275 |
2,954 |
23,857,518 |
||
|
|
|
|
|
|
||
|
Liabilities |
|
|
|
|
||
|
Current liabilities |
8,608 |
23,639,021 |
735 |
23,648,364 |
||
|
Non-current liabilities |
2,281 |
41,783 |
- |
44,064 |
||
|
Total liabilities |
10,889 |
23,680,804 |
735 |
23,692,428 |
||
|
|
|
|
|
|
||
|
Net assets |
69,400 |
93,471 |
2,219 |
165,090 |
||
|
|
|
|
|
|
||
|
Non-current asset additions |
74 |
69 |
23 |
166 |
||
|
|
|
|
|
|
||
|
|
|
|
|
|
||
|
|
|
|
|
|
|
|
Statement of financial position - segmental information as at 30 September 2021:
|
|
Investment administration services |
Insurance and life assurance business |
Licences |
Total |
||
|
|
£'000 |
£'000 |
£'000 |
£'000 |
||
|
Assets |
|
|
|
|
||
|
Non-current assets |
11,884 |
19,967 |
30 |
31,881 |
||
|
Current assets |
67,309 |
23,184,219 |
3,866 |
23,255,394 |
||
|
Total assets |
79,193 |
23,204,186 |
3,896 |
23,287,275 |
||
|
|
|
|
|
|
||
|
Liabilities |
|
|
|
|
||
|
Current liabilities |
8,163 |
23,075,931 |
748 |
23,084,842 |
||
|
Non-current liabilities |
2,616 |
36,548 |
- |
39,164 |
||
|
Total liabilities |
10,779 |
23,112,479 |
748 |
23,124,006 |
||
|
|
|
|
|
|
||
|
Net assets |
68,414 |
91,707 |
3,148 |
163,269 |
||
|
|
|
|
|
|
||
|
Non-current asset additions |
329 |
304 |
26 |
660 |
||
|
|
|
|
|
|
|
|
Segmental information: Split by geographical location
|
Revenue |
Six months to 31 March 2022 |
Six months to 31 March 2021 |
|
|
£'000 |
£'000 |
|
United Kingdom |
61,609 |
53,887 |
|
Isle of Man |
2,622 |
2,447 |
|
Australia |
2,801 |
3,060 |
|
Total |
67,032 |
59,393 |
|
Non-current assets |
31 March 2022 |
30 September 2021 |
|
|
£'000 |
£'000 |
|
United Kingdom |
1,138 |
26,873 |
|
Isle of Man |
26,005 |
51 |
|
Total |
27,143 |
26,924 |
4. Earnings per share
|
|
Six months to 31 March 2022 |
|
Six months to 31 March 2021 |
|
Profit |
|
|
|
|
Profit for the year and earnings used in basic and diluted earnings per share |
£25.5m |
|
£25.0m |
|
|
|
|
|
|
Weighted average number of shares |
|
|
|
|
Weighted average number of Ordinary shares |
331.3m |
|
331.3m |
|
Weighted average numbers of Ordinary Shares held by Employee Benefit Trust |
(0.4m) |
|
(0.2m) |
|
Weighted average number of Ordinary Shares for the purposes of basic EPS |
330.9m |
|
331.1m |
|
Adjustment for dilutive share option awards |
0.4m |
|
0.2m |
|
Weighted average number of Ordinary Shares for the purposes of diluted EPS |
331.3 |
|
331.3m |
|
|
|
|
|
|
Earnings per share |
|
|
|
|
Basic earnings per share |
7.7p |
|
7.5p |
|
Diluted earnings per share |
7.7p |
|
7.5p |
5. Tax on profit on ordinary activities
The UK estimated weighted average effective tax rate was 19% for the six month period ended 31 March 2022 (31 March 2021: 19%), representing the tax rate enacted at the reporting date. For the entities within the Group operating outside of the UK, tax is charged at the relevant rate in each jurisdiction.
6. Deferred tax
Deferred tax is calculated in full on temporary differences under the liability method using a tax rate of 25% (2021: 19%). The increase in the UK corporation tax rate to 25% was substantively enacted in May 2021. This new rate has been applied to deferred tax balances which are expected to reverse after 1 April 2023, the date on which that new rate becomes effective.
Deferred Tax Asset
|
|
Accelerated capital allowances |
Share based payments |
Policyholder tax |
Other deductible temporary differences |
Total |
|
|
£'000 |
£'000 |
£'000 |
£'000 |
£'000 |
|
At 30 September 2020 |
|
402 |
- |
87 |
489 |
|
Excess tax relief charged to equity |
- |
19 |
- |
- |
19 |
|
Charge to income |
- |
192 |
- |
16 |
208 |
|
At 30 September 2021 |
- |
613 |
- |
103 |
716 |
|
Charge to income |
- |
- |
- |
- |
- |
|
As at 31 March 2022 |
- |
613 |
- |
103 |
716 |
Deferred Tax Liability
|
|
Accelerated capital allowances |
Share based payments |
Policyholder tax |
Other deductible temporary differences |
Total |
|
|
£'000 |
£'000 |
£'000 |
£'000 |
£'000 |
|
At 30 September 2020 |
121 |
- |
8,847 |
- |
8,968 |
|
Deferred tax acquired through business combination |
- |
- |
- |
821 |
821 |
|
Charge to income |
(49) |
- |
19,599 |
179 |
19,729 |
|
At 30 September 2021 |
72 |
- |
28,446 |
1,000 |
29,518 |
|
Charge to income |
- |
- |
(10,301) |
(56) |
(10,357) |
|
As at 31 March 2022 |
72 |
- |
18,145 |
944 |
19,161 |
7. Policyholder income and expenses
|
|
Six months to 31 March 2022 |
|
Six months to 31 March 2021 |
|
|
|
|
|
|
|
£'000 |
|
£'000 |
|
Net income / (expense) attributable to policyholder returns |
(8,155) |
|
17,802 |
|
Policyholder tax (charge) / credit |
8,155 |
|
(17,802) |
This relates to income and expenses, and the associated tax charges, on policyholder assets and liabilities.
8. Intangible assets
|
|
Software and IP rights |
Goodwill |
Customer relationships |
Software |
Brand |
Total |
|
Cost |
£'000 |
£'000 |
£'000 |
£'000 |
£'000 |
£'000 |
|
At 1 October 2021 |
12,505 |
18,286 |
2,086 |
1,975 |
260 |
35,112 |
|
Additions |
- |
- |
- |
- |
- |
- |
|
At 31 March 2022 |
12,505 |
18,286 |
2,086 |
1,975 |
260 |
35,112 |
|
|
|
|
|
|
|
|
|
Amortisation |
|
|
|
|
|
|
|
At 1 October 2021 |
12,505 |
- |
100 |
203 |
18 |
12,826 |
|
Charge for the year |
- |
- |
69 |
141 |
13 |
223 |
|
At 31 March 2022 |
12,505 |
- |
169 |
344 |
31 |
13,049 |
|
|
|
|
|
|
|
|
|
Net Book Value |
|
|
|
|
|
|
|
At 30 September 2021 |
- |
18,286 |
1,986 |
1,772 |
242 |
22,286 |
|
At 31 March 2022 |
- |
18,286 |
1,917 |
1,631 |
229 |
22,063 |
|
|
|
|
|
|
|
|
|
Cost |
|
|
|
|
|
|
|
At 1 October 2020 |
12,505 |
12,951 |
- |
- |
- |
25,456 |
|
Acquisitions through business combinations |
- |
5,335 |
2,086 |
1,975 |
260 |
9,656 |
|
At 30 September 2021 |
12,505 |
18,286 |
2,086 |
1,975 |
260 |
35,112 |
|
|
|
|
|
|
|
|
|
Amortisation |
|
|
|
|
|
|
|
At 1 October 2020 |
12,505 |
- |
- |
- |
- |
12,505 |
|
Charge for the year |
- |
- |
100 |
203 |
18 |
321 |
|
At 30 September 2021 |
12,505 |
- |
100 |
203 |
18 |
12,826 |
|
|
|
|
|
|
|
|
|
Net Book Value |
|
|
|
|
|
|
|
At 30 September 2020 |
- |
12,951 |
- |
- |
- |
12,951 |
|
At 30 September 2021 |
- |
18,286 |
1,986 |
1,772 |
242 |
22,286 |
Amortisation of intangible assets is recognised within administrative expenses in the statement of comprehensive income.
9. Provisions
|
|
31 March 2022 |
|
30 September 2021 |
|
|
£'000 |
|
£'000 |
|
Balance brought forward |
17,804 |
|
25,208 |
|
Increase in dilapidations provision |
26 |
|
52 |
|
Increase in ILInt non-linked unit provision |
- |
|
13 |
|
(Decrease)/increase in ILUK tax provision |
15,856 |
|
(7,469) |
|
Balance carried forward |
33,686 |
|
17,804 |
|
Amounts falling due within one year |
11,624 |
|
11,624 |
|
Amounts falling due after one year |
22,062 |
|
6,180 |
|
|
|
|
|
|
|
|
|
|
|
Dilapidations provisions |
542 |
|
516 |
|
ILInt non-linked unit provision |
54 |
|
54 |
|
Current ILUK tax provision |
- |
|
11,626 |
|
Non-current ILUK tax provision |
33,090 |
|
5,608 |
|
|
33,686 |
|
17,804 |
ILUK tax provision comprises claims received from HMRC that are yet to be returned to policyholders, charges taken from unit-linked funds and claims received from HMRC to meet current and future policyholder tax obligations. These are expected to be paid to policyholders over the course of the next seven years.
10. Investments held for the benefit of policyholders
|
|
31 March 2022 |
|
31 March 2022 |
30 September 2021 |
30 September 2021 |
|
|
Cost |
|
Fair value |
Cost |
Fair value |
|
ILInt |
£'000 |
|
£'000 |
£'000 |
£'000 |
|
Investments held for the benefit of policyholders |
1,882,215 |
|
2,166,442 |
1,737,512 |
2,102,209 |
|
|
1,882,215 |
|
2,166,442 |
1,737,512 |
2,102,209 |
|
ILUK |
|
|
|
|
|
|
Investments held for the benefit of policyholders |
17,292,864 |
|
20,034,973 |
16,146,376 |
19,684,897 |
|
|
17,292,864 |
|
20,034,973 |
16,146,376 |
19,684,897 |
|
|
|
|
|
|
|
|
Total |
19,175,079 |
|
22,201,415 |
17,883,888 |
21,787,106 |
All amounts are current as customers are able to make same-day withdrawal of available funds and transfers to third-party providers are generally performed within a month.
These assets are held to cover the liabilities for unit linked investment contracts. All contracts with customers are deemed to be investment contracts and, accordingly, assets are 100% matched to corresponding liabilities, with the remaining £1,415 million included within the cash balance (note 12).
11. Liabilities for linked investment contracts
|
|
31 March 2022 |
|
30 September 2021 |
|
|
Fair value |
|
Fair value |
|
ILInt |
£'000 |
|
|
|
Unit linked liabilities |
2,294,882 |
|
2,199,700 |
|
|
2,294,882 |
|
2,199,700 |
|
ILUK |
|
|
|
|
Unit linked liabilities |
21,321,234 |
|
20,853,690 |
|
|
21,321,234 |
|
20,853,690 |
|
|
|
|
|
|
Total |
23,616,116 |
|
23,053,390 |
Analysis of change in liabilities for linked investment contracts
|
|
31 March 2022 |
|
30 September 2021 |
|
|
Fair value |
|
Fair value |
|
|
£'000 |
|
£'000 |
|
|
|
|
|
|
Opening balance |
23,053,390 |
|
18,112,935 |
|
Investment inflows |
1,711,589 |
|
3,391,318 |
|
Investment outflows |
(575,777) |
|
(1,130,468) |
|
Compensation |
201 |
|
163 |
|
Changes in fair value of underlying assets |
(442,239) |
|
2,940,185 |
|
Policyholder credit on deemed losses |
1,563 |
|
|
|
Other fees and charges - Transact |
(30,750) |
|
(56,620) |
|
Other fees and charges - third parties |
(101,861) |
|
(204,123) |
|
Closing balance |
23,616,116 |
|
23,053,390 |
The benefits offered under the unit-linked investment contracts are based on the risk appetite of policyholders and the return on their selected collective fund investments, whose underlying
investments include equities, debt securities, property and derivatives. This investment mix is
unique to individual policyholders. When the diversified portfolio of all policyholder investments is considered, there is a clear correlation with the FTSE 100 index and other major world indices, providing a meaningful comparison with the return on the investments.
The maturity value of these financial liabilities is determined by the fair value of the linked assets at maturity date. There will be no difference between the carrying amount and the maturity amount at maturity date.
12. Cash and cash equivalents
|
|
31 March 2022 |
30 September 2021 |
|
|
£'000 |
£'000 |
|
Bank balances - Instant access |
170,282 |
169,578 |
|
Bank balances - Notice accounts |
7,502 |
6,502 |
|
Cash and cash equivalents held for the benefit of the policyholders - instant access - ILUK |
1,286,259 |
1,131,567 |
|
Cash and cash equivalents held for the benefit of the policyholders - term deposits - ILUK |
- |
37,225 |
|
Cash and cash equivalents held for the benefit of the policyholders - instant access - ILINT |
128,440 |
96,458 |
|
Cash and cash equivalents held for the benefit of the policyholders - term deposits - ILINT |
- |
1,032 |
|
Total |
1,592,483 |
1,442,362 |
Bank balances held in instant access accounts are current and available for use by the Group.
All of the bank balances held in notice accounts require less than 35 days' notice before they are available for use by the Group.
The cash and cash equivalents held for the benefit of the policyholders are held to cover the liabilities for unit linked investment contracts. These amounts are 100% matched to corresponding liabilities.
Following a review of the term deposits held for the benefit of policyholders, management has concluded that these should be recognised as investments held for the benefit of policyholders, rather than cash and cash equivalents . This is due to the fact that the original maturity is more than 90 days and they cannot be withdrawn early without penalties. The term deposits have therefore been reclassified in the period ended 31 March 2022, to bring the accounts in line with the accounting standards.
The impact is a reduction in cash and cash equivalents of £35.8 million and a corresponding increase in investments held for the benefit of policyholders . The treatment has had no impact on the profit or loss or net assets of the Group.
Management has considered the qualitative and quantitative impact of the above change, and has concluded that this does not have a material effect on the prior year financial statements, and a prior year adjustment is therefore not required. This is due to the fact that:
· The net impact on the statement of comprehensive income and on net assets is nil;
· the total balances are not material in the context of total policyholder assets and linked liabilities; and
· the users would not reasonably have any expectations regarding the measurement or disclosure of these items, as it fundamentally does not relate to them.
13. Trade and other receivables
|
|
31 March 2022 |
30 September 2021 |
|
|
£'000 |
£'000 |
|
Other receivables |
1,837 |
935 |
|
Less: credit loss allowance |
(122) |
(123) |
|
Other receivables net |
1,715 |
812 |
|
Amounts owed by Group undertakings |
- |
- |
|
Amounts due from HMRC |
7,060 |
1,800 |
|
Amount due from policyholders to meet current tax liability |
1,067 |
1,107 |
|
Total |
9,842 |
3,719 |
Amount due from HMRC is in respect of tax claimed on behalf of policyholders for tax deducted at source.
14. Trade and other payables
|
|
31 March 2022 |
30 September 2021 |
|
|
|
£'000 |
£'000 |
|
|
Trade payables |
2,163 |
439 |
|
|
PAYE and other taxation |
1,767 |
1,610 |
|
|
Deferred consideration |
- |
- |
|
|
Other payables |
6,148 |
5,460 |
|
|
Accruals and deferred income |
7,550 |
8,216 |
|
|
Deferred consideration |
634 |
1,741 |
|
|
Total |
18,262 |
17,466 |
|
15. Related parties
There were no material changes to the related party transactions during the period.
16. Events after the reporting date
There are no events subsequent to the reporting period that require disclosure in, or amendment to the interim financial statements.
17. Dividends
During the six month period to 31 March 2022 the Company paid an interim dividend of £23.2 million (7.0 pence per share) to shareholders in respect of financial year 2021. This was in addition to the first interim dividend of £9.9 million (3.0 pence per share) in respect of financial year 2021, which was paid in June 2021. The total of £33.1 million (10.0 pence per share) compares with a full year interim dividend of £27.4 million (8.3 pence per share) in respect of the full financial year 2020.
DIRECTORS, COMPANY DETAILS, ADVISERS
Executive Directors
Michael Howard
Alexander Scott
Jonathan Gunby
Non-Executive Directors
Richard Cranfield
Christopher Munro
Rita Dhut
Caroline Banszky
Victoria Cochrane
Robert Lister
Company Secretary
Helen Wakeford
Independent Auditors
Ernst and Young LLP, 25 Churchill Place, Canary Wharf, London, E14 5EY
Solicitors
Eversheds Sutherland, One Wood Street, London, EC2V 7WS
Corporate Advisers
Peel Hunt LLP, 100 Liverpool Street, London, England, EC2M 2AT
Barclays Bank PLC, 5 The North Colonnade, Canary Wharf, London, E14 4BB
Principal Bankers
NatWest Bank Plc, 135 Bishopsgate, London, EC2M 3UR
Registrars
Equiniti Group plc, Sutherland House, Russell Way, Crawley, RH10 1UH
Registered Office
29 Clement's Lane, London, EC4N 7AE
Investor Relations
Luke Carrivick 020 7608 4900
Website
Company number
8860879
LEI
213800CYIZKXK9PQYE87
IntegraFin Holdings plc, 29 Clement's Lane, London, EC4N 7AE Tel: (020) 7608 4900 Fax: (020) 7608 5300
(Registered office: as above; Registered in England and Wales under number: 8860879)
The holding company of the Integrated Financial Arrangements Ltd group of companies.
RNS may use your IP address to confirm compliance with the terms and conditions, to analyse how you engage with the information contained in this communication, and to share such analysis on an anonymised basis with others as part of our commercial services. For further information about how RNS and the London Stock Exchange use the personal data you provide us, please see our Privacy Policy.
Latest directors dealings
- 1 day ago The Renewables Infrastructure Group Limited
- 1 day ago The Renewables Infrastructure Group Limited
- 1 day ago Smurfit Westrock (DI)
- 1 day ago Menhaden Resource Efficiency
- 1 day ago BP