Final Results

RNS Number : 6276Q
Premier Asset Management Group PLC
01 December 2016
 

1 December 2016

Premier Asset Management Group PLC

("Premier" or the "Company")

 

Annual Results for the Year Ended 30 September 2016

 

 

Premier Asset Management Group PLC (AIM: PAM) today announces its audited annual results for the year ended 30 September 2016.

 

Highlights

 

·     Assets under management ("AUM") up 22% to £5.0bn as at 30 September 2016 (FY15: £4.1bn)

 

·     AUM as at 28 November 2016 of £5.1bn

 

·     Continued strong investment performance*:

-    Over three years to 30 September 2016

§ 96% of AUM above median

§ 71 % of AUM first quartile performance in IA Sector

-    Over five years to 30 September 2016

§ 94% of AUM above median

§ 73% of AUM first quartile performance in IA sector

 

·     14 consecutive quarters of net positive fund flows

·     Net flows of £778m (FY15: £965m) - despite market volatility in Q4 following the EU referendum decision

 

·     EBITDA up 36% to £10.9m (FY15: £8.0m)**

 

·     Profit before tax of £2.5m (FY15: £(0.8m))

 

·     Underlying profit before interest and tax of £10.6m (FY15: £7.8m)***

 

·     EPS of 71.68p (FY15: (48.37)p)

 

·     Admitted to trading on AIM on 7 October 2016, raising £47.4m for the Company, eliminating all debt and supporting long term growth ambitions

 

·     The Company intends to pay quarterly interim dividends, with the first dividend to be paid in relation to the three months ending 31 December 2016. The level of this dividend will be announced in January 2017.

 

 

Notes: * Retail fund AUM, excluding absolute return and volatility targeted funds

** Profit before interest, tax, depreciation, amortisation and exceptional items

*** Profit stated before exceptional items, amortisation, interest expense and tax

 

Mike O'Shea, Chief Executive, commented:

 

"2016 was another strong year for Premier. Very importantly, we have continued to deliver good investment outcomes for our clients, in terms of income, growth and risk adjusted performance. In addition, we have delivered strong net flows, AUM growth and increased EBITDA.

 

"Despite the market volatility following the EU referendum decision, we increased AUM over the fourth quarter and recorded positive net flows in each of the three months, supported by demand for the Company's multi-asset funds and this trend has continued through the first two months of the current financial year. Although the outlook for markets and investor sentiment remains uncertain, with the potential for further volatility ahead, we believe that the business is well placed for the current financial year as well as for the longer term.

 

"Implementing our strategy of offering relevant investment products to address the long term needs of UK investors, and maintaining a disciplined approach to cost management alongside a scalable operating platform, will support our objective of delivering strong net flows and sustainable earnings, cash flow and dividends for shareholders over time."

 

 

 

 

Enquiries:

Premier Asset Management Group PLC

Tel: 01483 306090

Mike O'Shea

Stifel Nicolaus Europe Limited (Nomad and Joint Broker)

Tel: 0207 710 7600

Gareth Hunt

Stewart Wallace

Numis Securities Limited

(Joint Broker)

Tel: 020 7260 1000

Andrew Holloway

Charles Farquhar

Smithfield Consultants

(Financial PR)

Tel: 020 7360 4900

John Kiely

Andrew Wilde

 

Note to editors 

About Premier

Premier is a fast-growing UK retail asset management group with a focus on delivering good investment outcomes for investors through relevant products and active management across its range of investment strategies, which include multi-asset, equity and absolute return funds.  Premier had £5 billion of assets under management as at 30 September 2016.

Chairman's & Chief Executive's Review

2016 was another successful year for Premier in terms of delivering good investment outcomes for clients and delivering strong financial results driven by positive net flows and a record high level of assets under management. This success paved the way for Premier to successfully begin trading on AIM, a market operated by the London Stock Exchange on 7 October 2016. As a result of the AIM listing and the associated fundraising, Premier has fully refinanced its balance sheet to become debt free and the Directors believe that the new plc structure is supportive of our long term growth ambitions. We are pleased to welcome Robert Colthorpe and William Smith to the Board as new independent Non-Executive Directors. We would also like to thank Paul Tobias for his help in delivering our growth plans and for his wise counsel over the period he has been on the Board.

 

Premier's strategy continues to be focused on offering relevant investment products, which are designed to meet the different long term needs of UK retail investors, and to produce good investment outcomes for investors, after all fees, through active management. This strategy is supported by Premier's well-resourced intermediary focused distribution capability and strong investment performance record. Premier's relevant, investment-led and outcome-focused funds include multi-asset, UK equity income, global equity and absolute return funds and, over the year, we have seen positive fund flows.

 

Funds and performance

 

Premier is an investment-led business, with a key focus on delivering good investment outcomes for clients. Inevitably, there is a focus on performance tables, but Premier's investment team is careful to keep its focus on delivering good investment outcomes for clients after charges, including producing good long term growth, income, growing income and risk-adjusted performance relative to the fund's investment objectives. This means supporting Premier's fund managers and backing their investment approaches during volatile market conditions. It also means focusing on long term results rather than being swayed by short term market movements.

 

We are pleased to report that investment performance continues to be strong over the key three and five year periods. 96% of Premier's retail fund assets under management performed above median over 3 years, and 94% of assets under management performed above median over 5 years. It is also pleasing to note that 71% and 73% of Premier's retail fund assets under management achieved first quartile performance in their respective IA sectors over the same time periods. These performance figures exclude absolute return and volatility targeted funds.

 

Over the period under review, our income-focused funds continued to deliver attractive yields and Premier's two absolute return funds, which aim to deliver positive returns over rolling three year periods with significantly lower volatility than equity markets, continued to meet their objectives.

 

At the end of the 2015 calendar year, four of our multi-asset funds completed four consecutive calendar years of top quartile performance in their respective sectors. These funds were Premier Multi-Asset Distribution Fund, Premier Multi-Asset Monthly Income Fund, Premier Multi-Asset Growth & Income Fund and Premier Multi-Asset Global Growth Fund.

 

Distribution

 

Over recent years, Premier has significantly strengthened its distribution and client service capabilities to cater for the large number of UK authorised advisers eligible to choose its funds. The Directors believe that this has been one of the key factors in helping to deliver strong sales and significant increases in the number of advisers using Premier funds. This is particularly the case for multi-asset funds, which are more typically used by financial advisers rather than wealth management firms. The strength of Premier's distribution capability has also allowed continued development of Premier's presence with national and network adviser firms. Overall, net flows for the year were £778 million which equates to approximately 19.1% of opening assets under management.

 

A key distribution focus in 2017 will continue to be on advisers for Premier's multi-asset funds, including income, growth and absolute return funds. Alongside this activity, the distribution team aims to continue to develop sales of equity and absolute return funds through both advisers and wealth managers.

 

During the course of the year, there has been continued investment in building Premier's brand through an ongoing programme of targeted sales and marketing activity. The marketing activity has included consistent advertising, direct marketing, PR, website information, video and conference events.

 

A combination of strong net flows and investment performance, including market movements, resulted in Premier reaching record high assets under management at the end of the period of £5 billion.

 

Awards

 

We are delighted that the quality of Premier's funds, fund performance and fund managers continues to be recognised through winning numerous awards. Group awards included Investment Week Multi-Manager/Fund of Funds Management Group of the Year 2015, Investment Week Specialist Group of the Year 2016 and Investment Life & Pensions Moneyfacts 2016 Award for Best Investment Provider. Individual fund awards were won by Premier's multi-asset funds, property securities fund, ethical equity fund, one of the absolute return funds and an investment trust managed by Premier.

 

Market developments

 

The future for asset managers and for investors will continue to include a mix of challenges and opportunities. Investors continue to be faced with market volatility, economic and political uncertainty and low interest rates. These conditions are expected to continue and, as a result, we believe there will be a continuing search by investors for funds with built-in diversification and full time management, as well as funds that offer an attractive yield or which offer potential as low risk alternatives to holding cash. The Directors believe that Premier's funds, including multi-asset, equity income and absolute return funds are well placed to meet this demand.

 

We also believe that government changes to savings and investment will provide a long term boost for the UK investment market. These changes include the pension reforms introduced in April 2015, and the introduction of the tax-free Dividend Allowance from April 2016. Both of these changes could result in more investors considering dividend income generating investments. Premier's focus and performance record for diversified income funds places it in a strong position to win business in these significant market growth areas.

 

It is too early to comment on the long term effects of the EU referendum held in the UK at the end of June 2016, but we believe that Premier continues to be well-positioned for the post-Brexit business environment. Premier is a UK business, managing UK funds for UK investors that are distributed through UK intermediaries. If there were to be a full Brexit without a replacement EU trade deal and without mutual passporting arrangements, then the Directors do not expect this to have a direct significant impact on the current business model. Inevitably, recent macro events such as Brexit are likely to have an ongoing impact on investment markets for some time to come. Against this backdrop, we believe that the importance of professional investment management aiming to deliver attractive outcomes for investors after charges has never been more important. Market investment returns going forward may well be lower than they have been in recent years and therefore those investment firms that can find the good investment opportunities, rather than simply tracking investment markets, are likely to produce superior returns in this environment. We believe that our managers have the experience and the skills required to achieve this.

 

Conclusion

 

In conclusion, after another strong year for Premier, the Company delivered good investment performance, strong net flows, AUM growth and increased EBITDA and profit before tax. Although the outlook for markets and investor sentiment remains uncertain, with the potential for further volatility, the Directors believe that the business performance remains robust and is well placed for the year ahead and for the longer term. Implementing strategy and maintaining a disciplined approach to cost management, alongside a scalable operating platform, will support Premier's objective of delivering strong net flows and sustainable earnings, cash flow and dividends for shareholders over time.

 

Both the Directors and staff at Premier are very conscious that, as their investment manager, our clients are relying on each of us as custodians of their money and, in many cases, for their savings for retirement: this is a responsibility that everyone at Premier takes very seriously. As such, we would like to conclude by saying thank you to our investors and to their advisers for their continued trust in us, and to our staff for their skill and hard work which has enabled us to generate good investment and service outcomes. Our business depends on the diligence and expertise of our people and the support and confidence of intermediaries and investors and we are immensely grateful to both for their support.

 

 

 

Michael Vogel

Michael O'Shea

Chairman              

Chief Executive

 

Financial Review

2016 saw significant growth in AUM driven by strong net flows and investment performance, increased revenue and increased EBITDA.

Assets under management ("AUM")

 

AUM increased 22% to £5bn as at 30 September 2016 with net flows of £778m over the year, including positive net flows of £95m in Q4 despite market volatility as a result of the EU referendum decision in the UK.

 

FY16 quarterly fund progression:

Q1FY16

Q2FY16

Q3FY16

Q4FY16


£m

£m

£m

£m

Opening AUM

4,081

4,410

4,543

4,594

-       Sales

458

462

566

458

-       Redemptions

(223)

(275)

(305)

(363)

Net flows

235

187

261

95

Closures

(44)

-

(130)

-

Performance

138

(54)

(80)

309

Closing AUM

4,410

4,543

4,594

4,998

 

FY15 and FY16 fund progression:

 

2016

2015


£m

£m

Opening AUM

4,081

3,051

-       Sales

1,944

1,792

-       Redemptions

(1,166)

(827)

Net sales

778

965

Closures

(174)

(21)

Performance

313

86

Closing AUM

4,998

4,081

 

The Company's AUM as at 28 November 2016 was £5.1bn comprising £4.8bn in mutual funds, £0.1bn in investment trusts and £0.2bn in segregated mandates.

 

Key performance indicators

 

The Group has the following key performance indicators:

 

·      Growth in AUM

·      Growth in EBITDA

·      Growth in EBITDA margin

 

A summary of the key performance indicators for the past three years is shown in the table below:

 

 

2016

2015

2014

Closing funds under management (£m)

4,998

4,081

3,051

Average funds under management (£m)

4,526

3,659

2,708

EBITDA (£m)*

10.9

8.0

5.4

EBITDA / Net revenue (%)

32.7

29.0

25.3

 

Note: * Profit before interest, tax, depreciation, amortisation and exceptional items

 

Revenue

 

Total revenues for the year were £39.1m (FY15: £35.8m), 9.5% ahead of 2015, driven by a rise in management fees to £38.9m (FY15: £35.6m) resulting in a rise in net management fees to £33.3m (FY15: £27.6m). Net fee margin for the year was 73.5 bps (FY15: 75.5 bps) reflecting expected margin compression as growth in the Company's AUM has led to a greater proportion of AUM with post-RDR normalised net margins and sourced through investment platforms.

 

Administrative expenses

 

Total operating costs rose by 1.4% to £34.1m (FY15: £33.7m). This includes an amortisation charge of £5.1m (FY15: £5.1m) and exceptional items of £0.5m (FY15: £0.6m). Certain intangible assets are expected to fully amortise in FY17 which will reduced the amortisation charge significantly from that year onwards. Fixed costs stood at £14.2m (FY15: £12.9m) and variable costs were £14.3m (FY15: £15.0m).

 

Total staff costs increased to £12.7m (FY15: £10.8m), in part due to an increase in headcount to support the Company's growth. These staff costs comprised a significant proportion of administrative expenses, consistent with the prior year.

 

The Company now has a scalable operating platform supporting the investment and sales teams which the Directors believe will provide a strong platform to support future growth.

 

Underlying profit before interest and tax

 

The Company is debt free following its IPO and expects its future amortisation profile to reduce. The Company therefore believes its underlying profit before interest and tax represents a useful reflection of its underlying profitability. Underlying profit before interest and tax grew to £10.6m (FY15: £7.8m) as a result of the improvement in net management fees.

 

 

 

 

2016

 

2015

 

 

 

£000

 

£000

Reported PBT

 

 

2,531

 

(772)

Add back:

    Interest payable

 

 

2,497

 

 

2,886

    Amortisation of intangible assets

 

 

5,131

 

5,128

    Exceptional items

 

 

485

 

552

Underlying profit before interest and tax

 

 

10,644

 

7,794

 

Profit before tax

 

Profit before tax for the year was £2.5m (FY15: £(0.8m)). This was driven primarily by a 24% rise in the average assets under management compared to the previous financial year.

 

Earnings per share

 

Reported earnings per share has been calculated as follows:

 

The calculation of basic earnings per share is based on profit/(loss) after taxation for the year and the weighted average number of ordinary shares in issue for each period (there were no dilutive securities in issue). Subsequent to the year end, the Company issued additional shares and undertook a 50 for 1 share split as part of its IPO.

 

 

 

 

2016

 

2015

 

 

 

£000

 

£000

Basic:

 

 

 

 

 

Profit/(loss) attributable to equity holders of the Group

 

 

985

 

(644)

Weighted average number of ordinary shares in issue

 

 

1,374,851

 

1,335,162

Basic earnings per share

 

 

71.68p

 

(48.37)p

 

 

 

 

 

 

 

 

 

 

 

 

Balance sheet

 

Borrowings at the year-end were £42.7m (FY15: £48.9m). On 7 October 2016 the Company's shares were admitted to trading on AIM and 35,875,660 ordinary shares of 0.02 pence each were allotted at a price of 132 pence per share, increasing the number of issued ordinary share capital to 105,801,310 shares. The gross proceeds of the allotment, which amounted to £47.4m were used on 7 October 2016 firstly, to redeem the 13,500,000 8% preference shares and pay accrued interest thereon of £2,252,429 and secondly, to redeem the 29,170,000 4% preference shares and pay accrued interest thereon of £2,433,449. This has resulted in the Company's total borrowings being reduced to zero post the year-end.

 

 

Cash flow

 

The Company has a high conversion ratio of operating earnings to cash, generating positive operating cash flows after tax in 2016 of £10.4m (FY15: £2.8m). The end of year cash position was £10.6m (FY15: £8.9m).

 

Long-term incentive plan (LTIP)

Going forward into FY17 it is the Company's intention to grant share awards to certain employees and Directors of the Company out of an Employee Benefit Trust under an LTIP scheme. The Employee Benefit Trust currently holds 1.6m ordinary shares in the Company, representing 1.5% of issued share capital. The terms of any LTIP will be announced when finalised.

 

Dividend policy

As detailed in the Company's admission document, the Directors intend to adopt a progressive dividend policy to reflect the expectation of future cash flow generation and the long-term earnings potential of Premier.

 

The Company intends to pay quarterly interim dividends, with the first dividend to be paid in relation to the three months ending 31 December 2016. The level of this dividend will be announced in January 2017. As part of its policy, the Company expects to pay three smaller dividends, representing approximately half the estimated total dividend for the full financial year, followed by a larger, final dividend. No dividend has been declared in relation to the financial year ended 30 September 2016.

 

 

 

Neil Macpherson                   

Group Finance Director                     

 

 

Consolidated statement of comprehensive income

For the year ended 30 September 2016

 

 

 

 

Year to

30 September 2016

 

Year to

30 September 2015

 

Note

 

£000

 

£000

Revenue

3

 

39,149

 

35,765

 

 

 

 

 

 

Administrative costs

 

 

(28,505)

 

(27,971)

Amortisation of intangible assets

 

 

(5,131)

 

(5,128)

Exceptional items

4

 

(485)

 

(552)

Total operating costs

 

 

(34,121)

 

(33,651)

Operating profit

5

 

5,028

 

2,114

 

 

 

 

 

 

Finance costs

7

 

(2,497)

 

(2,886)

Profit/(loss) on ordinary activities before taxation

 

 

2,531

 

(772)

 

 

 

 

 

 

Tax (expense)/credit

8

 

(1,546)

 

128

Profit/(loss) on ordinary activities after taxation

 

 

985

 

(644)

 

 

 

 

 

 

Other comprehensive income

 

 

-

 

-

Total comprehensive income

 

 

985

 

(644)

 

 

 

 

 

 

Basic earnings/(loss) per share

9

 

71.68p

 

(48.37)p

Diluted basic earnings/(loss) per share

9

 

71.68p

 

(48.37)p

 

All the amounts relate to continuing operations.

 

Consolidated statement of financial position

As at 30 September 2016

 

 

 

 

2016

 

2015

 

Note

 

£000

 

£000

Assets

 

 

 

 

 

Non-current assets

 

 

 

 

 

Intangible assets

10

 

17,701

 

22,832

Goodwill

10

 

15,597

 

15,597

Property, plant and equipment

11

 

933

 

959

Deferred tax asset

8

 

1,580

 

1,802

Total non-current assets

 

 

35,811

 

41,190

 

 

 

 

 

 

Current assets

 

 

 

 

 

Financial assets at fair value through profit and loss

14

 

1,061

 

551

Trade and other receivables

13

 

36,624

 

38,712

Cash and cash equivalents

15

 

10,638

 

8,852

Total current assets

 

 

48,323

 

48,115

 

 

 

 

 

 

Total assets

 

 

84,134

 

89,305

 

 

 

 

 

 

Equity

 

 

 

 

 

Capital and reserves attributable to equity holders

 

 

 

 

 

Share capital

 

 

14

 

546

Share premium

 

 

34

 

13

Capital redemption reserve

21

 

4,532

 

-

Retained earnings

 

 

(9,278)

 

(6,263)

Total equity

 

 

(4,698)

 

(5,704)

 

 

 

 

 

 

Liabilities

 

 

 

 

 

Current liabilities

 

 

 

 

 

Trade and other payables

16

 

40,138

 

41,712

Current tax liabilities

 

 

1,375

 

911

Borrowings

17

 

-

 

2,250

Provisions and other liabilities

19

 

-

 

530

Total current liabilities

 

 

41,513

 

45,403

 

 

 

 

 

 

Non-current liabilities

 

 

 

 

 

Borrowings

17

 

42,670

 

46,670

Deferred consideration

 

 

-

 

193

Provisions and other liabilities

19

 

4,649

 

2,743

Total non-current liabilities

 

 

47,319

 

49,606

 

 

 

 

 

 

Total liabilities

 

 

88,832

 

95,009

Total equity and liabilities

 

 

84,134

 

89,305

 

Consolidated statement of changes in equity

For the year ended 30 September 2016

 

 

Share capital

 

Share premium

 

Capital redemption reserve

 

Retained

earnings

 

Total

equity

 

£000

 

£000

 

£000

 

£000

 

£000

At 1 October 2014

 

39,211

 

-

 

(49,633)

 

(5,083)

Shares issued

-

 

23

 

-

 

-

 

  23

Capital reduction

(4,793)

 

(39,221)

 

-

 

44,014

 

-

Loss for the financial year

-

 

-

 

-

 

(644)

 

(644)

At 30 September 2015

 

  13

 

-

 

(6,263)

 

(5,704)

Shares issued

-

 

21

 

-

 

-

 

  21

Capital redemption reserve (note 21)

(532)

 

-

 

4,532

 

(4000)

 

-

Profit for the financial year

-

 

-

 

-

 

985

 

985

At 30 September 2016

14

 

34

 

4,532

 

(9,278)

 

(4,698)

 

Consolidated statement of cash flow

For the year ended 30 September 2016

 

 

 

 

2016

 

2015

 

Note

 

£000

 

£000

Cash flows from operating activities

 

 

 

 

 

Profit/(loss) for the year

 

 

985

 

(644)

Adjustments for:

 

 

 

 

 

Financial income

7

 

-

 

(1)

Financial expense

7

 

2,497

 

2,887

Taxation

8

 

1,546

 

(128)

Depreciation

11

 

239

 

213

Loss/(profit) on sale of property, plant and equipment

 

 

1

 

(12)

Gain on sale of financial assets at fair value through profit and loss

 

 

(12)

 

-

Gain on revaluation of current asset investments

 

 

(46)

 

-

Amortisation

10

 

5,131

 

5,128

Changes in working capital:

 

 

 

 

 

Decrease/(increase) in trade and other receivables

 

 

2,088

 

(8,760)

(Decrease)/increase in trade and other payables 

 

 

(673)

 

3,961

(Decrease)/increase in provisions

 

 

(530)

 

169

Cash generated from operations

 

 

11,226

 

2,813

Interest paid

 

 

(42)

 

(160)

Interest received

 

 

-

 

1

Tax paid

 

 

(867)

 

-

Net cash from operating activities

 

 

10,317

 

2,654

 

 

 

 

 

 

Cash flows from investing activities

 

 

 

 

 

Acquisition of other intangible assets

 

 

(1,275)

 

(225)

Acquisition of assets at fair value through profit and loss

 

 

(543)

 

(281)

Proceeds from disposal of assets at fair value through profit and loss

 

 

89

 

227

Acquisitions of property, plant and equipment

11

 

(214)

 

(178)

Proceeds from sale of property, plant and equipment

 

 

-

 

14

Net cash from investing activities

 

 

(1,943)

 

(443)

 

 

 

 

 

 

Cash flows from financing activities

 

 

 

 

 

Repayment of borrowings

 

 

(6,250)

 

(3,000)

Interest paid on borrowings

 

 

(359)

 

-

Proceeds from the issue of share capital

 

 

21

 

23

Net cash from financing activities

 

 

(6,588)

 

(2,977)

 

 

 

 

 

 

Net increase/(decrease) is cash and cash equivalents

 

 

1,786

 

(766)

Cash and cash equivalents at the beginning of the period

 

 

8,852

 

9,618

Cash and cash equivalents at the end of the period

 

 

10,638

 

8,852

 

Notes to the financial statements

At 30 September 2016

 

1.   Authorisation of financial statements and statement of compliance with IFRS

The consolidated financial statements of Premier Asset Management Group PLC (the 'Company') and its subsidiaries (the 'Group') for the year ended 30th September 2016 were authorised for issue by the Board of Directors on 30th November 2016 and the statement of financial position was signed on the Board's behalf by Mike O'Shea and Neil Macpherson. The Company is incorporated and domiciled in England and Wales.

 

These consolidated financial statements were prepared in accordance with International Financial Reporting Standards (IFRS) as adopted by the EU. The consolidated financial statements are presented in Sterling and all values are rounded to the nearest thousand pounds (£000) except when otherwise indicated.

 

The principal accounting policies adopted by the Group are set out in note 2.

 

2.   Accounting policies

2.1   Basis of preparation

The Group prepared its first set of consolidated financial statements for the year ended 30th September 2015, in accordance with IFRS, for inclusion in a circular to shareholders. The date of transition to IFRS was 1st October 2012. These consolidated financial statements for the year ended 30th September 2016 have been prepared in accordance with IFRS. Note 2.3 sets out further information on how the Group adopted IFRS. The consolidated financial statements have been prepared under the historical cost convention, as modified by the revaluation of financial assets and financial liabilities measured at fair value through profit or loss. Costs are expensed as incurred.

 

2.2   Basis of consolidation

The consolidated financial statements comprise the financial statements of the Company and its subsidiary undertakings as at 30th September 2016. The results of subsidiary undertakings acquired during a year are included from the date of acquisition. Profits and losses on intra-group transactions are eliminated in full. On acquisition of a subsidiary, all of the subsidiary's identifiable assets and liabilities which exist at the date of acquisition are recorded at their fair values reflecting their condition at that date.

 

Control is achieved when the Group is exposed, or has rights, to variable returns from its involvement with the investee and has the ability to affect those returns through its power over the investee. Specifically, the Group controls an investee if, and only if, the Group has:

 

(i)    power over the investee (i.e., existing rights that give it the current ability to direct the relevant activities of the investee);

(ii)   exposure, or rights, to variable returns from its involvement with the investee; and

(iii) the ability to use its power over the investee to affect its returns

 

Consolidation of a subsidiary begins when the Group obtains control over the subsidiary and ceases when the Group loses control of the subsidiary. Assets, liabilities, income and expenses of a subsidiary acquired or disposed of during the year are included in the consolidated financial statements from the date the Group gains control until the date the Group ceases to control the subsidiary.

 

When necessary, adjustments are made to the financial statements of subsidiaries to bring their accounting policies into line with the Group's accounting policies. All intra-group assets and liabilities, equity, income, expenses and cash flows relating to transactions between members of the Group are eliminated in full on consolidation.

 

2.3   New standards, amendments and interpretations

At the date of authorisation of these financial statements, the following Standards and Interpretations which have not been applied in these financial statements were in issue but not yet effective (and in some cases had not yet been adopted by the EU):

 

(i)    IFRS 9 'Financial instruments' (effective 1st January 2018)

(ii)   IFRS 15 'Revenue from contracts with customers' (effective 1st January 2018)

(iii) IFRS 16 'Leases' (effective 1st January 2019)

 

The Group is assessing the impact of these Standards. There are no other IFRSs or IFRIC interpretations that are not yet effective and would be expected to have a material impact on the Group.

 

The Directors do not expect that the adoption of the above standards will have a material impact on the Group's financial statements except with respect to disclosures.

 

2.4   Judgements and key sources of estimation uncertainty

The preparation of consolidated financial statements requires management to make judgements, estimates and assumptions that affect the amounts reported for assets and liabilities as at the statement of financial position date and the amounts reported for revenue and expenses during the year. However, the nature of estimation means that actual outcomes could differ from those estimates.

 

(a)   Deferred taxation - Management judgement is required to determine the amount of deferred tax assets that can be recognised, based upon the likely timing and level of future taxable profits together with an assessment of the effect of future tax planning strategies. Deferred income tax assets are recognised for tax loss carry-forwards to the extent that the realisation of the related tax benefit through future taxable profits is probable. Management believes recognition is probable because sufficient taxable profits are expected according to the annual budget and two year forecast. It is expected that the deferred tax asset will decrease in future years due to reductions in the corporation tax charge charged by HMRC as and when enacted. Further details are contained in note 8.

 

(b)   The Group tests annually whether goodwill has suffered any impairment, in accordance with the accounting policy stated in note 2.5(a). The recoverable amounts of cash-generating units have been determined based on value-in-use calculations. These calculations require the use of estimates, which are further disclosed in note 10, including a sensitivity analysis.

 

2.5   Significant accounting policies

(a)   Business combinations and goodwill

Business combinations are accounted for using the acquisition method. The cost of an acquisition is measured as the aggregate of the consideration transferred plus acquisition-related costs, which is measured at the acquisition date fair value and the amount of any non-controlling interest in the acquiree. For each business combination, the Group elects whether to measure the non-controlling interest in the acquiree at fair value or at the proportionate share of the acquiree's identifiable net assets.

 

When the Group acquires a business, it assesses the financial assets and liabilities assumed for appropriate classification and designation in accordance with the contractual terms, economic circumstances and pertinent conditions as at the acquisition date. This includes the separation of embedded derivatives in host contracts by the acquiree.

 

Any contingent consideration to be transferred by the acquirer will be recognised at fair value at the acquisition date. All contingent consideration is measured at fair value with the changes in fair value in profit or loss.

 

Goodwill is initially measured at cost (being the excess of the aggregate of the consideration transferred and the amount recognised for non-controlling interests) and any previous interest held, over the net identifiable assets acquired and liabilities assumed. If the fair value of the net assets acquired is in excess of the aggregate consideration transferred, the Group re-assesses whether it has correctly identified all of the assets acquired and all of the liabilities assumed and reviews the procedures used to measure the amounts to be recognised at the acquisition date. If the reassessment still results in an excess of the fair value of net assets acquired over the aggregate consideration transferred, then the gain is recognised in profit or loss. Goodwill is monitored at the Group level.

 

Goodwill is not amortised but is tested annually for impairment or more frequently if events or changes in circumstances indicate potential impairment. After initial recognition, goodwill is measured at cost less any accumulated impairment losses.

 

In respect of goodwill, the recoverable amount is estimated at each annual balance sheet date. The recoverable amount is the higher of fair value less costs to sell and value in use. Impairment losses represent the amount by which the carrying amount exceeds the recoverable amount; they are recognised in profit and loss. Impairment losses recognised in respect of cash generating units are allocated first to reduce the carrying amount of any goodwill allocated to the cash generating unit and then to reduce the value of any other assets in the unit on a pro-rata basis.

 

An impairment loss in respect of goodwill is not reversed.

 

(b)   Property, plant and equipment

Plant and equipment is stated at cost less accumulated depreciation and accumulated impairment losses. Cost comprises the aggregate amount paid and the fair value of any other consideration given to acquire the asset and includes costs directly attributable to making the asset capable of operating as intended.

 

Depreciation is provided on all property, plant and equipment, other than land, on a straight line basis over its expected useful life as follows:

 

Short leasehold property - the term of the lease

Plant and equipment - 5 years

Computer equipment - 3 years

Motor vehicles - 3 years

Fixtures and fittings - 15%

 

The carrying amounts of property, plant and equipment are reviewed for impairment if events or changes in circumstances indicate the carrying amount may not be recoverable, and are written down immediately to their recoverable amount. Useful lives and residual values are reviewed annually and where adjustments are required these are made prospectively.

 

An item of property, plant and equipment is derecognised upon disposal or when no future economic benefits are expected to arise from the continued use of the asset. Any gain or loss arising on the derecognition of the asset is included in the income statement in the period of derecognition.

 

(c)    Trade and other receivables

Trade and other receivables are initially recognised at fair value and subsequently at amortised cost. A bad debt provision is made when there is objective evidence that the Group will not be able to recover balances in full. Balances are written off when the probability of recovery is assessed as being remote. Other receivables mainly comprise of refundable rent deposits and amounts the Group is due to receive from third parties in the normal course of business.

 

(d)   Provisions and other liabilities

A provision is recognised when the Group has a legal or constructive obligation as a result of a past event; it is probable that an outflow of economic benefits will be required to settle the obligation; and a reliable estimate can be made of the amount of the obligation.

 

Where the effect of the time value of money is material provisions are discounted. The increase in the provision due to passage of time is recognised as a finance cost.

 

Where the Group, as lessee, is contractually required to restore a leased property to an agreed condition prior to the release by a lessor, provision is made for such costs as they are identified.

 

Where the Group expects some or all of a provision to be reimbursed, the reimbursement is recognised as a separate asset but only when recovery is virtually certain.

 

(e)   Income taxes

Current and deferred tax are recognised in income or expense, except when they relate to items that are recognised in other comprehensive income or directly in equity, in which case the current and deferred tax are also recognised in other comprehensive income or directly in equity respectively. Current tax assets and liabilities are measured at the amount expected to be recovered from or paid to the taxation authorities based on tax rates and laws that are enacted or substantively enacted by the statement of financial position date.

 

Deferred income tax is recognised on all temporary differences arising between the tax bases of assets and liabilities and their carrying amounts in the financial statements, with the following exceptions:

 

(i)    where the temporary difference arises from the initial recognition of goodwill or of an asset or liability in a transaction that is not a business combination that at the time of the transaction affects neither accounting nor taxable profit or loss;

(ii)   in respect of taxable temporary differences associated with investments in subsidiaries, associates and joint ventures, where the timing of the reversal of the temporary differences can be controlled and it is probable that the temporary differences will not reverse in the foreseeable future; and

(iii) deferred income tax assets are recognised only to the extent that it is probable that taxable profit will be available against which the deductible temporary differences, carried forward tax credits or tax losses can be utilised.

 

Deferred income tax assets and liabilities are measured on an undiscounted basis at the tax rates that are expected to apply when the related asset is realised or liability is settled, based on tax rates and laws enacted or substantively enacted at the statement of financial position date.

 

The carrying amount of deferred income tax assets is reviewed at each statement of financial position date and reduced to the extent that it is no longer probable that sufficient taxable profits will be available to allow all or part of the asset to be recovered.

 

(f)    Foreign currencies

The Group's consolidated financial statements are presented in pounds sterling. The functional currency of the Group's entities is pounds sterling. Transactions in foreign currencies are initially recorded in the functional currency by applying the spot exchange rate ruling at the date of the transaction. Monetary assets and liabilities denominated in foreign currencies are retranslated at the functional currency rate of exchange ruling at the statement of financial position date. All differences are taken to the profit and loss account.

 

Non-monetary items that are measured in terms of historical cost in a foreign currency are translated using the exchange rates as at the dates of the initial transactions. Non-monetary items measured at fair value in a foreign currency are translated using the exchange rates at the date when the fair value was determined.

 

The Group does not apply hedge accounting of foreign exchange risks in its company financial statements.

 

(g)   Financial instruments

(i)    Financial assets

Initial recognition and measurement - Financial assets within the scope of IAS 39 are classified as financial assets at fair value through profit and loss, loans and receivables or available for sale financial assets, as appropriate. Management determines the classification of its financial assets at initial recognition. All financial assets are recognised initially at fair value plus directly attributable transaction costs.

 

Subsequent measurement - The subsequent measurement of financial assets depends on their classification as follows:

 

Ø Financial assets at fair value through profit of loss - Financial assets at fair value through profit or loss include financial assets held for trading and financial assets designated upon initial recognition at fair value through profit or loss. Financial assets are classified as held for trading if they are acquired for the purpose of selling in the near term. The Group has designated financial assets in this category if acquired principally for the purpose of selling in the short term or if so designated by management. Financial assets at fair value through profit and loss are carried in the statement of financial position at fair value with changes in fair value recognised in finance revenue or finance expense in the income statement.

 

Ø Loans and receivables

Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. Such assets are carried at amortised cost using the effective interest (EIR) method, less impairment. Amortised cost is calculated by taking into account any discount or premium on acquisition and fees or costs that are an integral part of the EIR. The EIR amortisation is included in finance revenue in the income statement. The losses arising from impairment are recognised in the income statement in other operating expenses. They are included in current assets, except for maturities greater than 12 months after the end of the reporting period. Loans and receivables comprise mainly cash and cash equivalents and trade and other receivables.

 

Ø Available for sale financial assets

Available for sale financial investments include equity securities. Equity investments classified as available for sale are those, which are neither classified as held for trading nor designated at fair value through profit or loss. After initial measurement, available for sale financial investments are subsequently measured at fair value with unrealised gains or losses recognised as other comprehensive income in the unrealised gains and losses reserve until the investment is derecognised, at which time the cumulative gain or loss is recognised in other operating income, or determined to be impaired, at which time the cumulative loss is recognised in the income statement in other operating expenses and removed from the unrealised gains and losses reserve. The Company evaluates its available for sale financial assets and whether the ability and intent to sell them in the near term is still appropriate. When the Company is unable to trade these financial assets due to inactive markets and management's intent significantly changes to do so in the foreseeable future, the Company may elect to reclassify these financial instruments in rare circumstances. Reclassification to loans and receivables is permitted when the financial asset meets the definition of loans and receivables and when the Company has the intent and ability to hold these assets for the foreseeable future or until maturity. The Company has not designated any financial assets upon initial recognition as available for sale.

 

Derecognition of financial assets - A financial asset is derecognised when (i) the rights to receive cash flows from the asset

have expired or (ii) the Group has transferred its rights to receive cash flows from the asset or has assumed an obligation to pay the received cash flows in full without material delay to a third party under a "pass through" arrangement; and either (a) the Group has transferred substantially all the risks and rewards of the asset, or (b) the Group has neither transferred nor retained substantially all the risks and rewards of the asset, but has transferred control of the asset.

 

Impairment of financial assets - The Group assesses at each reporting date whether there is any objective evidence that a financial asset or group of financial assets is impaired. If there is objective evidence that an impairment loss on loans and receivables carried at amortised cost has been incurred, the amount of the loss is measured as the difference between the asset's carrying amount and the present value of estimated future cash flows (excluding future credit losses that have been incurred) discounted at the financial asset's original effective interest rate (i.e. the effective interest rate computed at initial recognition). The carrying amount of the asset is reduced, with the amount of the loss recognised in administration costs.

 

If, in a subsequent period, the amount of the impairment loss decreases and the decrease can be related objectively to an event occurring after the impairment was recognised, the previously recognised impairment loss is reversed. Any subsequent reversal of an impairment loss in recognised in the profit and loss account, to the extent that the carrying amount of the asset does not exceed its amortised cost at the reversal date.

 

(ii)   Financial liabilities and equity

Debt and equity instruments are classified as either financial liabilities or as equity in accordance with the substance of the contractual arrangement. Generally, an obligation to deliver cash or other financial asset to another party at a fixed date in the future would require presentation of a financial instrument as a liability.

 

No significant restrictions exist to transfer cash or assets within the Group or pay out dividends, except for regulatory capital restrictions within the regulated companies.

 

Preference shares, which are mandatorily redeemable on a specific date, are classified as liabilities. The fair value of preference shares is not materially different to their carrying value. The dividends on these preference shares are recognised in the income statement as interest expense.

 

(iii) Other financial liabilities

Other financial liabilities, including borrowings, are initially measured at fair value, net of transaction costs. Other financial liabilities are subsequently measured at amortised cost using the EIR, with interest expense recognised on an effective yield basis.

 

The EIR used to recognise interest expense is the rate that exactly discounts estimated future cash payments through the expected life of the financial liability, or, where appropriate, a shorter period, to the net carrying amount on initial recognition.

 

The Group derecognises financial liabilities when the Group's obligations are discharged, cancelled or expired.

 

(iv)  Fair values

The fair value of financial instruments that are traded in active markets at the reporting date is determined by reference to quoted market prices or dealer price quotations (bid price for long positions and ask price for short positions), without any deduction for transaction costs. For financial instruments not traded in an active market, the fair value is determined using appropriate valuation techniques. Such techniques may include using recent arm's length market transactions; reference to the current fair value of another instrument that is substantially the same; discounted cash flow analysis or other valuation models.

 

(h)   Cash and cash equivalents

Cash and cash equivalents comprise cash balances and highly liquid short-term deposits that are readily convertible to known amounts of cash within three months or less. Bank overdrafts that are repayable on demand and form an integral part of the Group's cash management are included as a component of cash and cash equivalents for the purpose of the statement of cash flows and are presented in current liabilities.

 

(i)    Exceptional items

The Group presents as exceptional items those material items of income and expense which, because of the nature and expected infrequency of the events giving rise to them, merit separate presentation to allow shareholders to understand better the elements of financial performance in the year, so as to facilitate comparison with prior periods and to assess better trends in financial performance.

 

(j)    Revenue recognition

Revenue is recognised to the extent that it is probable that the economic benefits will flow to the Group and the revenue can be reliably measured. Revenue is measured at the fair value of the consideration received, excluding value added tax.

 

The Group's primary source of income is fee income from investment management activities. These fees are generally based on an agreed percentage, as per the management contract, of the assets under management and are recognised as the service is provided.

 

Commission includes fees based on a set percentage of certain flows into our funds and are recognised on receipt.

 

(k)    Pensions

The Group operates defined contribution plans. The Group has no further payment obligations once the contributions have been paid. The contributions are recognised as employee benefit expense when they are due. Prepaid contributions are recognised as an asset to the extent that a cash refund or a reduction in the future payments is available.

 

(l)    Leases

All leases are classified as operating leases. Rents payable under operating leases are charged to income on a straight-line basis over the term of the relevant lease. Contingent rentals arising under operating leases are recognised as an expense in the period in which they are incurred.

 

In the event that lease incentives are received to enter into operating leases, such incentives are recognised as a liability. The aggregate benefit of incentives is recognised as a reduction of rental expense on a straight-line basis over the lease term.

 

(m)  Intangible assets

Intangible assets with finite lives are amortised over the useful economic life and assessed for impairment whenever there is an indication that the intangible asset may be impaired. The amortisation period and the amortisation method are reviewed at least at each financial year end. Changes in the expected useful life or the expected pattern of consumption of future economic benefits embodied in the asset is accounted for by changing the amortisation period or method, as appropriate, and are treated as changes in accounting estimates. Gains or losses arising from derecognition of an intangible asset are measured as the difference between the net disposal proceeds and the carrying amount of the asset and are recognised in the income statement when the asset is derecognised.

 

Investment management contracts purchased by the Group are capitalised as intangible fixed assets and are amortised over periods ranging from 7 to 20 years depending on the nature of the assets purchased.

 

(n)   Trade and other payables

Trade payables are obligations to pay for goods or services that have been acquired in the ordinary course of business from suppliers. Accounts payable are classified as current liabilities if payment is due within one year or less (or in the normal operating cycle of the business if longer). If not, they are presented as non-current liabilities.

 

Trade payables are recognised initially at fair value and subsequently measured at amortised cost using the effective interest method.

 

(o)   Borrowings

Borrowings, are recognised initially at fair value, net of attributable transaction costs. Subsequent to initial recognition, borrowings are carried at amortised cost, with any difference between the proceeds (net of transaction costs) and the redemption value being recognised in the statement of comprehensive income over the period of the borrowings using the EIR.

 

All other borrowing costs are recognised in profit and loss in the period in which they are incurred.

 

(p)   Related party transactions

All companies forming part of the consolidated Group are considered to be related parties as these companies are owned either directly or indirectly by Premier Asset Management Group PLC. Key management, being the members of the Executive Committee, are also identified as a related party.

 

The adoption of IFRS 10 Consolidated Financial Statements has not resulted in the consolidation of additional funds where the Group is now deemed to have a controlling interest under the definition of this standard. The Group did not hold a material investment in any of the funds managed by the Group and has therefore determined that no controlling interest was held.

 

(q)   Earnings per share

Basic earnings per share is calculated by dividing the total comprehensive income for the year by the weighted average number of ordinary shares in issue during the year, excluding the average number of ordinary shares purchased by the Group and held as treasury shares.

 

3.   Revenue

Revenue recognised in the statement of comprehensive income is analysed as follows:

 

 

 

 

2016

 

2015

 

 

 

£000

 

£000

Management fees

 

 

38,957

 

35,596

Commissions

 

 

70

 

86

Other income

 

 

122

 

83

Total revenue

 

 

39,149

 

35,765

 

All revenue is derived from the United Kingdom and Channel Islands.

 

4.   Exceptional items

Recognised in arriving at operating profit from continuing operations:

 

 

 

 

2016

 

2015

 

 

 

£000

 

£000

Staff redundancy costs

 

 

121

 

443

Fund rationalisation, closures and mergers

 

 

17

 

27

Corporate reconstruction

 

 

-

 

(6)

Irrecoverable VAT

 

 

333

 

-

Capital reduction

 

 

14

 

88

Total exceptional items

 

 

485

 

552

 

Staff redundancy costs are in relation to the rationalisation and restructuring of various departments and functions.

Fund rationalisation, closure and merger costs are in relation to funds which were merged or closed in 2016 and 2015.

The capital reconstruction relates to a single event, the costs of which spanned two financial years. Irrecoverable VAT represents input tax that was payable following the outcome of discussions with HMRC regarding the operation of an agreed partial exemption special method.

 

5.   Operating profit

(a)   Operating profit is stated after charging:

 

 

 

 

2016

 

2015

 

Note

 

£000

 

£000

Auditors' remuneration

5(b)

 

250

 

188

Staff costs

6

 

12,720

 

10,786

Operating lease payments - rent

18

 

282

 

281

Amortisation of intangible assets

10

 

5,131

 

5,128

Exceptional items

4

 

485

 

552

Depreciation of property, plant and equipment

11

 

239

 

213

 

(b)   Auditors' remuneration

The remuneration of the auditors is analysed as follows:

 

 

 

 

2016

 

2015

 

 

 

£000

 

£000

Audit of the consolidated financial statements

 

 

14

 

13

Audit of the Company's subsidiaries

 

 

101

 

83

 

 

 

115

 

96

Other fees to auditors - tax compliance services

 

 

17

 

40

Other fees to auditors - other assurance services

 

 

118

 

52

Total auditors remuneration

 

 

250

 

188

 

6.   Staff costs and Director's remuneration

(a)   Staff costs during the year were as follows:

 

 

 

 

2016

 

2015

 

 

 

£000

 

£000

Salaries, bonus and performance fee share

 

 

10,915

 

9,261

Social security costs

 

 

1,414

 

1,168

Other pension costs

 

 

391

 

357

Total staff costs

 

 

12,720

 

10,786

 

The average monthly number of employees of the Group during the year was made up as follows:

 

 

 

 

2016

 

2015

Directors

 

 

5

 

5

Investment management

 

 

26

 

25

Sales and marketing

 

 

28

 

27

Finance and systems

 

 

6

 

5

Legal and compliance

 

 

8

 

8

Administration

 

 

24

 

21

Total employees

 

 

97

 

 

 

 

(b)   Directors' remuneration

The remuneration of the Directors during the year was as follows:

 

 

 

Fees and salary

Bonus

Pension

Benefits

2016

 

2015

 

£000

£000

£000

£000

£000

 

£000

Executive Directors

 

 

 

 

 

 

 

Michael Patrick O'Shea

235

250

14

3

502

 

437

Neil Macpherson

151

75

14

16

256

 

207

Non-executive Directors

 

 

 

 

 

 

 

Michael Andrew Vogel

100

-

-

-

100

 

100

Luke Anton Wiseman

35

-

-

-

35

 

35

Paul Davidson Tobias (resigned 7th October 2016)

35

-

-

-

35

 

35

Total Director's remuneration

556

325

28

19

928

 

814

 

The number of Directors accruing benefits under money purchase pension schemes at the year end was nil (2015: nil).

 

In respect of the highest paid Director:

 

 

 

 

2016

 

2015

 

 

 

£000

 

£000

Remuneration

 

 

488

 

411

Pension contributions

 

 

14

 

26

Total highest paid Director remuneration

 

 

502

 

437

 

7.   Finance costs

 

 

 

 

2016

 

2015

 

 

 

£000

 

£000

Interest receivable

 

 

-

 

1

Bank loans and overdrafts

 

 

50

 

160

Other loans (including the debt component of preference shares)

2,266

 

2,567

Total interest expense

 

 

2,316

 

2,727

Unwinding of discount on deferred consideration

 

 

181

 

160

Net finance costs

 

 

2,497

 

2,886

 

8.   Income taxes

(a)   Tax charged in the statement of comprehensive income

 

 

 

 

2016

 

2015

 

 

 

£000

 

£000

Current income tax:

 

 

 

 

 

UK corporation tax

 

 

1,291

 

650

Current income tax charge

 

 

1,291

 

650

Adjustments in respect of prior periods

 

 

33

 

80

Total current income tax

 

 

1,324

 

730

Deferred tax:

 

 

 

 

 

Origination and reversal of temporary differences

 

 

(51)

 

(858)

Adjustments in respect of prior periods

 

 

3

 

-

Impact of changes in tax rate

 

 

270

 

-

Total deferred tax

 

 

222

 

(858)

Tax expense / (credit) in the statement of comprehensive income

1,546

 

(128)

 

(b)   Reconciliation of the total tax charge

The tax expense in the comprehensive statement of income for the year is higher than the standard rate of corporation tax in the UK of 20% (2015: 20.5%). The differences are reconciled below:

 

 

 

 

2016

 

2015

 

 

 

£000

 

£000

Profit / (loss) on ordinary activities before taxation

 

 

2,531

 

(772)

Tax calculated at UK standard rate of corporation tax of 20% (2015: 20.5%)

 

 

506

 

(158)

Deferred tax previously not recognised

 

 

(382)

 

(863)

Expenses not deductible for tax purposes

 

 

15

 

32

Dividends on preference shares included in finance costs

 

453

 

526

Amortisation not deductible

 

 

265

 

271

Income not subject to UK tax

 

 

(27)

 

(29)

Change in tax rate

 

 

661

 

-

Fixed asset differences

 

 

19

 

13

Adjustments in respect of prior periods

 

 

36

 

80

Tax expense / (credit) in the statement of comprehensive income

1,546

 

(128)

 

(c)    Change in Corporation Tax rate

A reduction in the UK corporation tax rate from 21% to 20% (effective from 1st April 2015) was substantively enacted on 2nd July 2013. Further reductions to 19% (effective from 1st April 2017) and to 18% (effective 1st April 2020) were substantively enacted on 26th October 2015, and an additional reduction to 17% (effective 1st April 2020) was substantively enacted on 6th September 2016. This will reduce the Group's future current tax charge accordingly. The deferred tax asset at 30th September 2016 has been calculated based on these rates.

 

(d)   Deferred tax

The deferred tax included in the Group statement of financial position is as follows:

 

 

 

 

2016

 

2015

 

 

 

£000

 

£000

Deferred tax asset:

 

 

 

 

 

Fixed asset timing differences

 

 

(74)

 

(69)

Pension accrued

 

 

-

 

8

Accrued bonuses

 

 

270

 

202

Losses and other deductions

 

 

1,384

 

1,661

Deferred tax disclosed on the statement of financial position

1,580

 

1,802

 

 

 

 

2016

 

2015

 

 

 

£000

 

£000

Deferred tax in the statement of comprehensive income:

 

 

 

 

Origination and reversal of temporary differences

 

 

(51)

 

(858)

Adjustments in respect of prior periods

 

 

3

 

-

Impact of changes in tax rate

 

 

270

 

-

Deferred tax expense / (credit)

 

 

222

 

(858)

 

 

 

 

2016

 

2015

 

 

 

£000

 

£000

Unprovided deferred tax asset:

 

 

 

 

Non trade loan relationship losses

 

 

1,693

 

2,075

Excess management expenses

 

 

53

 

53

Non trade intangible fixed asset losses

 

 

420

 

420

Deferred tax expense

 

 

2,166

 

2,548

 

9.   Earnings per share

Reported earnings per share has been calculated as follows:

 

The calculation of basic earnings per share is based on profit/(loss) after taxation for the year and the weighted average number of ordinary shares in issue for each period.

 

 

 

 

2016

 

2015

 

 

 

£000

 

£000

Basic:

 

 

 

 

 

Profit/(loss) attributable to equity holders of the Group

 

 

985

 

(644)

Weighted average number of ordinary shares in issue

 

 

1,374,851

 

1,335,162

Basic earnings per share

 

 

71.68p

 

(48.37)p

 

 

 

 

 

 

Diluted:

 

 

 

 

 

Profit/(loss) attributable to equity holders of the Group

 

 

985

 

(644)

Weighted average number of ordinary shares in issue

 

 

1,374,851

 

1,335,162

Diluted earnings per share

 

 

71.68p

 

(48.37)p

 

10. Goodwill and other intangible assets

Cost amortisation and net book value of intangible assets are as follows:

 

 

Goodwill

 

Other

 

Total

 

£000

 

£000

 

£000

Cost:

 

 

 

 

 

At 1 October

22,576

 

56,231

 

78,807

At 30 September

22,576

 

56,231

 

78,807

 

 

 

 

 

 

Amortisation and impairment:

 

 

 

 

 

At 1 October

6,979

 

33,399

 

40,378

Amortisation during the year

-

 

5,131

 

5,131

At 30 September

6,979

 

38,530

 

45,509

 

 

 

 

 

 

Carrying amount:

 

 

 

 

 

At 30 September 2016

15,597

 

17,701

 

33,298

At 30 September 2015

15,597

 

22,832

 

38,429

 

Impairment tests for goodwill

Goodwill is monitored by management at the operating segment level, which reflects the entire Group. Therefore, no further allocation of goodwill has been made.

 

The recoverable amount of the Group has been determined based on value-in-use calculations. These calculations are for the four-year period following the year end and are based on the next years' annual budget and subsequent three year forecasts.  Budgeted increases in the level of assets under management, revenues and associated costs have been taken into account.  Management forecasts revenues and associated costs based on the current structure of the business, adjusting for inflationary increases and these do not reflect any future restructurings or cost saving measures.  To arrive at the net present value, the cash flows have been discounted using a discount factor of 15%. The overall value in use was greater than the carrying amount and so no impairment charge has been recognised.  The key assumptions used in calculating the value in use were the net cash flows and the discount rate. In determining the net cash flows assumptions were made on the level of future fund inflows, fund redemptions and market growth.

 

Investment management contracts purchased by the Group are capitalised as intangible fixed assets and are amortised over periods ranging from 7 to 20 years depending on the nature of the assets purchased.

 

Sensitivity analysis

Sensitivity analysis has determined that an increase in the discount rate to 1,110% (2015: 84.5%) would be required before an impairment of goodwill would be considered.  The compound annual growth rate for the net cash flows over the forecast period is 0% (2015: 8.3%).

 

11. Property, plant and equipment

 

 

Land and buildings

Plant and equipment

Total

 

£000

£000

£000

Cost or fair value:

 

 

 

At 1 October 2015

977

870

1,847

Additions

139

75

 214

Disposals

(185)

(176)

(361)

At 30 September 2016

931

769

1,700

 

 

 

 

Depreciation and impairment:

 

 

 

At 1 October 2015

316

572

888

Depreciation during the year

144

95

239

Disposals

(185)

(175)

(360)

At 30 September 2016

275

492

 767

 

 

 

 

Carrying amount:

 

 

 

At 30 September 2016

656

277

933

At 30 September 2015

661

298

959

 

 

12. Group entities

At 30th September 2016 the Company held (directly and indirectly) 100% of the allotted share capital of the following subsidiary undertakings, all of which are incorporated in Great Britain with the exception of Premier Asset Management (Guernsey) Ltd which is incorporated in Guernsey. All subsidiary undertakings are consolidated within the Group accounts.

 

 

Class of share held

Proportion of voting rights and shares held

Nature of the business

(a)   Directly held

 

 

 

Premier Asset Management MidCo Limited

Ordinary

100%

Holding company

(b)   Indirectly held

 

 

 

Premier Asset Management Holdings Limited

Ordinary

100%

Holding company

Premier Asset Management Limited

Ordinary

100%

Holding company

Premier Investment Group Limited

Ordinary

100%

Holding company

Premier Portfolio Managers Limited

Ordinary

100%

Investment manager/ACD

PAM Plc

Ordinary

100%

Dormant

Premier Offshore Asset Management Limited

Ordinary

100%

Dormant

Premier Asset Management (Guernsey) Limited

Ordinary

100%

Investment manager

Eastgate Court Nominees Limited

Ordinary

100%

Nominee company

Premier Fund Managers Limited

Ordinary

100%

Investment manager

Premier Investment Administration Limited

Ordinary

100%

Dormant

Premier Discretionary Asset Management Plc

Ordinary

100%

Dormant

Premier Fund Services Limited

Ordinary

100%

Dormant

Premier Capital Management Limited

Ordinary

100%

Dormant

Eastgate Investment Services Limited

Ordinary

100%

Dormant

 

13. Trade and other receivables

 

 

2016

 

2015

 

£000

 

£000

Due from trustees/investors for open end fund redemptions/sales

31,914

 

34,285

Other trade debtors

161

 

223

Accrued income

3,605

 

3,322

Prepayments

516

 

373

Other taxes

-

 

263

Other receivables

428

 

246

Total trade and other receivables

36,624

 

38,712

 

Trade and other receivables are all current and any fair value difference is not material. Trade and other receivables are considered past due once they have passed their contracted due date.

 

The aging profile of trade receivables that are due but not impaired is:

 

 

2016

 

2015

 

£000

 

£000

Days

 

 

 

0 to 30

32,074

 

34,359

31 to 60

1

 

73

61 to 90

-

 

76

Over 90

-

 

-

Total trade receivables

32,075

 

34,508

 

These amounts have not been impaired as there has not been any significant changes in credit quality and the amounts are still considered recoverable.

 

14. Financial instruments

(a)   Financial assets at fair value through profit and loss

The financial instruments carried at fair value are analysed by valuation method. The different levels have been defined as follows:

 

(i) Quoted prices (unadjusted) in active markets for identical assets or liabilities (Level 1)

(ii) Inputs other than quoted prices included within level 1 that are observable for the asset or liability, either directly (that is, as prices) or indirectly (that is, derived from prices) (Level 2).

(iii) Inputs for the asset or liability that are not based on observable market data (that is, unobservable inputs) (Level 3).

 

The fair value of financial assets is as follows:

 

 

 

 

2016

 

2015

 

 

 

£000

 

£000

Other investments

 

 

 

 

 

Quoted - level 1

 

 

806

 

296

Unquoted - level 3

 

 

255

 

255

Total

 

 

1,061

 

551

 

Quoted investments - level 1

The Group holds units in a number of funds for which quoted prices in an active market are available. The fair value measurement is based on level 1 in the fair value hierarchy.

 

Unquoted investments - level 3

There is no active market for the unit investments. Valuation is based on the sales of the investment shortly after the year end.

 

Financial instruments measured at amortised cost, but fair value is disclosed

The following financial instruments are not measured at fair value in the balance sheet, but information about the fair value is disclosed.

 

Trade debtors and trade creditors

The trade debtors and trade creditors largely have a maturity of less than one year. The fair value of trade creditors and trade debtors are not materially different to their carrying value.

 

Borrowings and overdraft

The fair value of the bank borrowings and overdrafts are not materially different from the carrying value due to the variable interest rate and the short duration.

 

Preference shares

The fair value of the preference shares is not materially different to their carrying value. On 7th October 2016 the preference shares were redeemed in full at par; in addition all accrued interest up to the date of redemption was paid.

 

Financial risk management

The Group's activities expose it to a variety of financial risks: market risk (including foreign exchange risk, cash flow and fair value interest rate risk), credit risk and liquidity risk.

 

The Group monitors and manages the financial risks relating to the operations of the Group through internal risk reports which analyses exposure by degree and magnitude of risks.  These risks include market risk (including currency risk, fair value interest rate risk and price risk), credit risk, liquidity risk and cash flow interest rate risk.

 

Market risks

The Group is exposed to market risk through interest rates, availability of credit, liquidity and foreign exchange fluctuations.

 

(a)   Interest rate risk

The Group is exposed to interest rate risk as the Group borrows at floating interest rates.

 

A 1% increase in interest rates on the Group's debt balances at 30th September 2016, would increase the annual net interest payable in the statement of comprehensive income and reduce equity by £nil (2015: £23,000). The sensitivity has been calculated by applying the interest rate change to the variable rate borrowings.

 

(b)   Foreign exchange risk

The Group undertakes transactions denominated in US Dollars and Euros; consequently, exposures to exchange rate fluctuations arise.

 

At 30th September 2016, if the US Dollar and Euro had strengthened by 10% against the Pound with all other variables held constant, this would have had an £83,000 (2015: £73,000) impact on the statement of comprehensive income and equity.

 

(c)    Credit risk

The Group credit risk is primarily focused on trade receivables due from trustees/investors for open end fund redemptions/sales. The risk is that a counterparty fails to settle on a trade and thereby creates an illiquid asset. However, in such cases the Group has the ability to arrange with the trustees of the relevant fund to cancel the trade and to liquidate the units issued, thereby settling the trade. A possible exposure will arise in such an instance whereby the price achieved on a cancellation of a trade is less than the original price at which the units were issued.

 

The credit risk on liquid assets is limited because the counterparties are banks with relatively high credit ratings.

 

The Group has no significant concentration of credit risk as exposure is spread over a large number of counterparties and customers.

 

(d)   Liquidity risk

The Group's approach to managing liquidity risk is to ensure, as far as possible, that it will always have sufficient liquidity to meet its liabilities when due without incurring unacceptable losses or risking damage to the Group's reputation.  Details of the bank facilities provided to the Group are provided in note 17.

 

The table below analyses the Group's financial liabilities into relevant maturity groupings based on the remaining period at the balance sheet date to the contractual maturity date. The amounts disclosed in the table are the contractual undiscounted cash flows.

 

 

 

 

Less than

3 months

Between

3 months

 and 1 year

Between

1 and 5 years

Over 5 years

 

£000

£000

£000

£000

As at 30 September 2016

 

 

 

 

Borrowings

-

-

13,500

29,170

Trade and other payables

40,138

-

-

-

Other liabilities

-

-

2,235

2,414

 

40,138

-

15,735

31,584

As at 30 September 2015

 

 

 

 

Borrowings

-

2,250

-

46,670

Trade and other payables

41,712

-

-

-

Deferred consideration

-

1,025

250

-

Other liabilities

-

-

-

2,743

 

41,712

3,275

250

49,413

 

Capital Management

Working capital

The Group manages the level of its working capital on an ongoing basis. The Group uses detailed financial information provided by its forecasting model and by regular review of its consolidated management information.

 

Regulatory capital requirements

In accordance with the Capital Requirements Directive (CRD), the Group is required to maintain a minimum level of capital as prescribed in the UK by the Financial Conduct Authority (FCA).  The Group is required to conduct an Internal Capital Adequacy Assessment Process (ICAAP), referred to as Pillar 2 capital requirements. The objective of this process is to ensure that firms have adequate capital to enable them to manage risks not deemed to be adequately covered under Pillar 1 minimum requirements. This is a forward looking exercise which includes stress testing on major risks, considering how the firm would cope with a significant market downturn, for example, and an assessment of the Group's ability to mitigate the risks. Each of the regulated companies in the Group maintained surpluses of regulatory capital throughout the year.

 

The primary objective of the Group's capital management is to maintain a strong capital base in order to maintain investor, creditor and market confidence and to provide a suitable base to sustain the future development of the business, while ensuring compliance with regulatory capital requirements.

 

Offsetting financial assets and financial liabilities

There are no financial assets and liabilities subject to offsetting, enforceable master netting arrangements and similar agreements.

 

15. Cash and cash equivalents

 

 

 

 

2016

 

2015

 

 

 

£000

 

£000

Cash at bank and in hand

 

 

10,638

 

8,852

Total cash and cash equivalents

 

 

10,638

 

8,852

 

16. Trade and other payables

 

 

2016

 

2015

 

£000

 

£000

Due to trustees/investors for open end fund creations/redemptions

31,885

 

34,314

Other trade payables

420

 

870

Other tax and social security payable

759

 

638

Accruals

5,534

 

4,434

Pension contributions

24

 

47

Other payables

1,516

 

1,409

Total trade and other payables

40,138

 

41,712

 

Trade creditors and accruals principally comprise amounts outstanding for trade purchases and ongoing costs.  The Group has financial risk management policies in place to ensure that all payables are paid within the pre-agreed credit terms.

 

The Directors consider that the carrying amount of trade payables approximates to their fair value.

 

17. Borrowings

 

 

 

 

2016

 

2015

 

 

 

£000

 

£000

Bank loans

 

 

-

 

2,250

Preference shares of £1 each

 

 

42,670

 

46,670

Total borrowings

 

42,670

 

48,920

 

 

 

 

2016

 

2015

 

 

 

£000

 

£000

Current

 

 

-

 

2,250

Non-current

 

 

42,670

 

46,670

Total borrowings

 

42,670

 

48,920

 

Preference shares

The 8% and 4% Preference shares were issued on 5th September 2014 as part of a capital reorganisation whereby the A and B Ordinary shares of 1p each were re-designated as Ordinary shares of 1p each, each Deferred share of 5p each was subdivided into five Deferred shares of 1p each, the G Ordinary share was re-designated as five Deferred shares of 1p each, and the B Preference shares, together with accumulated interest amounting to £46,890,000 were converted into 17,500,000 8% Preference shares of £1 each, 29,170,000 4% Preference shares of £1 each and 606,425 Ordinary shares of 1p each.

 

The 8% and 4% Preference shares are cumulative redeemable preference shares of £1 each and have the right to a fixed cumulative preferential dividend of 8% and 4% per annum respectively. The Company shall redeem the 8% and 4% Preference shares on the earlier of an exit and, in the case of the 8% Preference shares, 31st December 2020 and in the case of the 4% Preference shares, 31st December 2021. The Company may redeem at any time all or any number of the 8% Preference shares by serving notice on the 8% Preference shareholders specifying the number of 8% Preference shares to be redeemed and a date between 14 and 28 days later on which the redemption is to take place. Provided that all the 8% Preference shares have been redeemed in full, the Company may at any time redeem all or any number of the 4% Preference shares by serving notice on the 4% Preference shareholders specifying the number of 4% Preference shares to be redeemed and a date between 14 and 28 days later on which the redemption is to take place.

 

On 19th October 2015 £4,000,000 of the 8% Preference shares, plus £359,452 of accrued interest, was redeemed.

 

On 7th October 2016 the Company redeemed the 13,500,000 8% preference shares and 29,170,000 4% preference shares, and paid accrued interest of £2,252,429 and £2,433,449 respectively.

 

18. Obligations under leases

Operating lease agreements where the Group is lessee.

The Group has entered into commercial leases on certain properties. These leases have an average duration of between 3 and 10 years.

 

Future minimum rentals payable under non-cancellable operating leases are as follows:

 

 

 

 

2016

 

2015

 

 

 

£000

 

£000

Between zero and one year

 

 

29

 

-

Between one and two years

 

 

65

 

94

Between two and five years

 

 

-

 

-

Over five years

 

 

221

 

221

Total lease obligations

 

 

315

 

315

 

19. Provisions and other liabilities

Analysis of total provisions and other liabilities:

 

 

 

 

2016

 

2015

 

 

 

£000

 

£000

Interest on preference shares

 

 

4,649

 

2,743

VAT provision

 

 

-

 

530

Total provisions and other liabilities

 

 

4,649

 

3,273

 

Interest on preference shares

The accrued interest relates to the Preference shares (note 17). The entire interest accrual is non-current.

 

VAT provision

The Group was in discussion with HMRC regarding the operation of an agreed partial exemption special method. The VAT provision represented input tax which may have been payable pending the outcome of the discussions with HMRC. On 8th July 2016 the Group made a payment to HMRC of £449,891 in full and final settlement of the matter.

 

20. Share capital

 

 

 

 

2016

 

2015

Authorised

 

 

 

 

 

  Ordinary shares

 

 

1,398,513

 

1,398,513

  Deferred shares

 

 

-

 

532,513,706

 

 

 

 

 

 

Allotted, issued and fully paid

 

 

 

 

 

  Ordinary shares

 

 

1,398,513

 

1,357,052

  Deferred shares

 

 

-

 

532,513,706

 

On 29th September 2016 the deferred shares were cancelled.

 

The 8% and 4% Preference shares (note 17) were issued on 5th September 2014 as part of a capital reorganisation but have since been redeemed post the period end.

 

21. Capital redemption reserve

 

 

 

 

2016

 

2015

 

 

 

£000

 

£000

Redemption of preference shares

 

 

4,000

 

-

Cancellation of deferred shares

 

 

532

 

-

Total capital redemption reserve

 

 

4,532

 

-

 

On the redemption of the Preference shares a transfer was made from retained earnings to the capital redemption reserve equivalent to the nominal value of the Preference shares redeemed. On 19th October 2015 £4,000,000 of the 8% Preference shares, plus £359,452 of accrued interest, was redeemed.

 

22. Related party transactions

All companies forming part of the consolidated Group are considered to be related parties as these companies are owned either directly or indirectly by Premier Asset Management Group PLC.

 

The Group manages, through its subsidiaries, a number of open ended investment companies and investment trusts. The subsidiary companies receive management fees from these entities for managing assets and in some instances receive performance fees. The Group acts as manager and/or authorised corporate director for 27 (2015: 33) funds as at 30th September 2016.

 

(a)   Asset management vehicles

The Group provides investment management services for a number of collective investment schemes where Group companies are investment managers/advisors of underlying funds and which meet the criteria of related parties (note 2.5(p)). In return the Group receives management fees for the provision of these services.

 

 

 

 

2016

 

2015

 

 

 

£000

 

£000

Management fees

 

 

37,906

 

34,764

Amounts outstanding at the year end

 

 

3,448

 

3,134

 

(b)   Key management compensation

The key management personnel compensation that is represented by the Executive Committee, for employee and Director services during the year is shown below:

 

 

 

 

2016

 

2015

 

 

 

£000

 

£000

Short-term employee benefits

 

 

2,543

 

2,206

 

23. Post balance sheet events

On 23rd September 2016, and in accordance with rule 2 of the AIM rules, the Company issued an announcement to the London Stock Exchange giving notice of its intention to apply for admission of its shares onto the Alternative Investment Market ("AIM"). In preparation for the proposed listing of its shares, the company applied to, and received consent from, Companies House to re-register from a private company to a public company with effect from 29th September 2016.

 

The Company then issued on 4th October 2016 an announcement to the London Stock Exchange giving notice of its proposed admission to trading on AIM and announced its initial public offering by way of a placing of 35,875,660 new and 12,381,916 existing ordinary shares of 0.02 pence each at a price of 132 pence per share, raising gross proceeds of £63.7 million.

 

On 7th October 2016 the Company subdivided its ordinary share capital, with each ordinary share of 1 pence each being replaced by 50 ordinary shares of 0.02 pence each. The effect of this subdivision was to replace the 1,398,513 ordinary shares of 1 pence each with 69,925,650 new ordinary shares of 0.02 pence each.

 

On 7th October 2016 the Company's shares were admitted to trading on AIM and 35,875,660 ordinary shares of 0.02 pence each were allotted at a price of 132 pence per share, increasing the number of issued ordinary share capital to 105,801,310 shares. The gross proceeds of the allotment, which amounted to £47,355,871 were used on 7th October 2016 firstly, to redeem the 13,500,000 8% preference shares and pay accrued interest thereon of £2,252,429 and secondly, to redeem the 29,170,000 4% preference shares and pay accrued interest thereon of £2,433,449.

 


This information is provided by RNS
The company news service from the London Stock Exchange
 
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