Half Year Results

RNS Number : 6872N

Premier Miton Group PLC

22 May 2020

 

PREMIER MITON GROUP PLC

HALF YEAR RESULTS FOR THE SIX MONTHS ENDED 31 MARCH 2020

Premier Miton Group plc ('Premier Miton', 'Company' or 'Group'), the AIM quoted fund management group, today announces its half year results for the six months ended 31 March 2020 (the 'Period').

Highlights 

· £9,145 million closing AuM versus £6,793 million at 31 March 2019

· £9,925 million closing AuM as at 30 April 2020

· Net outflows of £389 million in the Period

· Eight funds at Period end each with AuM greater than £300 million

· Adjusted profit before tax of £12.2 million (2019 half year: £9.3 million)

· Half year cash balances totalled £29.3 million (30 September 2019: £20.7 million)

Financial performance

	Unaudited six months to 31 March 2020 £m	Unaudited six months to 31 March 2019 £m	%	Audited year to 30 September 2019 £m
Closing AuM	9,145	6,793	+34.6	6,556
Average AuM(1)	9,928	6,643	+49.4	6,695
Net revenue	33.4	24.0	+39.2	48.6
Adjusted profit before tax(2)	12.2	9.3	+31.2	19.0
Profit before tax(3)	5.3	7.2	-26.4	13.7
Total cash	29.3	15.3	+91.5	20.7
	pence	pence		pence
Adjusted earnings per share(2)	7.29	7.22	+0.97	15.10
Basic earnings per share	2.35	5.30	-55.7	10.82

Notes

(1) Average AuM is calculated on a daily basis for each product managed by the Group.

(2) Adjusted profit and adjusted earnings per share are calculated before the deduction of amortisation, exceptional items and share-based payments.

(3) There were exceptional items of £3.1 million during the period (30 September 2019: £1.2 million).

Mike O'Shea, Chief Executive of Premier Miton Group, commented:

"I am pleased to announce that we are ahead of target with the integration of our two highly regarded companies. It has been a period of considerable change and challenge but despite this, we continue to build a scalable platform for growth."

"Our people have shown substantial resilience and dedication during the recent COVID-19 pandemic. By continuing with clear implementation plans, straightforward communication and the passion of our staff we have delivered our goal of business continuity, notwithstanding the challenging circumstances we are experiencing across the globe."

"As we look forward, the business is well placed to take advantage of the broad range of investment capabilities, collegiate investment culture and the scalable operating platform we now have for the benefit of our clients and stakeholders."

ENDS

For further information, please contact:

Premier Miton Group plc Mike O'Shea (Chief Executive Officer)	01483 306 090
Numis Securities Limited (NOMAD and Broker) Kevin Cruickshank / Charles Farquhar / Huw Jeremy	020 7260 1000
Liberum Capital Limited (Joint Broker) Richard Crawley / Jamie Richards	020 3100 2000
Smithfield Consultants (Financial PR) John Kiely / Andrew Wilde	020 3047 2544 / 07785 275665

www.premiermiton.com  

About Premier Miton

Premier Miton Investors is focused on delivering good investment outcomes for investors through relevant products and active management across its range of investment strategies, which include multi-asset, equity, absolute return and fixed income. The Company had assets under management of £9.1 billion at 31 March 2020.

 

LEI Number: 213800LK2M4CLJ4H2V85

 

Chairman's Statement - Merger Update

 

This has been a period of positive corporate change for our business, coupled with significant global events. On 4 September 2019 the respective Boards of Premier Asset Management Group plc ('Premier') and Miton Group plc ('Miton') announced a recommended all-share merger via a court-sanctioned scheme of arrangement (the 'merger').

 

The merger became effective on 15 November 2019 with the enlarged business being named Premier Miton Group plc (the 'Group').

 

The bringing together of the two businesses has created a more diversified client-focused UK asset manager with stronger active management investment capabilities, enhanced intermediary distribution relationships and greater financial strength. This makes us even better positioned to serve our clients and grow as the enlarged Group has a greater footprint in the UK adviser and wealth management markets.

 

At the end of the half year Assets under Management ('AuM') stood at £9.15 billion, following an unprecedented market environment in the second quarter.

 

The falls and volatility in markets are challenging for any business in the asset management sector and we have taken appropriate steps to ensure the Group maintains a strong financial position whilst working to balance the requirements of all stakeholders.

 

The Board has declared interim dividends of 1.75p and 0.75p during the period, with an expectation to now adopt a dividend policy that targets an ordinary dividend pay-out of approximately 50 to 65% of profit after tax, adjusted for exceptional costs, share-based payments and amortisation.

 

Further to the merger there were a number of executive management and directorate changes. I am delighted to chair the enlarged Group. Mike O'Shea continues as the Chief Executive Officer with Piers Harrison, previously Chief Operating Officer of Miton Group plc, appointed as Chief Financial Officer.

 

Two Miton directors, David Barron, previously Chief Executive Officer of Miton, and Katrina Hart became Non-Executive Directors of the new Group. Neil Macpherson, Finance Director of Premier resigned as a Director and Luke Wiseman, Non-Executive Director of Premier also resigned from the Board. Robert Colthorpe and William Smith continue as Non-Executive Directors.

 

We now have the added challenge of COVID-19. The situation is changing rapidly but we have a clear response focused on several key areas: the health and wellbeing of our staff; playing an active role in trying to reduce the transmission of the virus in our wider community; and continuing to provide a full investment management service to our clients.

 

Despite these challenges, we have created a financially stronger and broader business which makes us better positioned to serve our clients through genuinely active management, both today and in the future.

 

On 14 May 2020, we announced the appointment of a new Non-Executive Director, Alison Fleming and the stepping down of Katrina Hart from her role as Non-Executive Director on the same date. I would like to thank Katrina for her valued contribution to the Group and her stewardship of the Miton group over the last nine years.

 

Lastly, I would also like to thank my past and present Directors, as well as our staff across our whole business for their hard work and commitment. We look forward to a bright future for Premier Miton.

 

Mike Vogel

Chairman

21 May 2020

 

 

Chief Executive's Statement

On 15 November 2019 we commenced the start of a new journey with the amalgamation of two complementary businesses and I am pleased to report that there has been good progress made on the post-merger integration. This is testament to the dedication of our teams across our newly enlarged business as we continue to deliver our goal of business continuity, despite the challenging circumstances that the COVID-19 pandemic has presented across the globe.

Our aim is to create a Group that is purposefully balanced to meet and beat the expectations of our clients, with a broader product range and greater financial strength.

Following the merger, the Group launched its brand name, Premier Miton Investors. This new personality of our business provides a framework of how we operate and was incorporated in all marketing materials, documentation, websites and advertising.

An Integration Committee, comprised of key senior individuals selected from both sides of the business, was established on day one to drive and supervise the integration process. This committee continues to manage the merger process as well as communications with our customers, clients and staff.

The potential to deliver compelling value creation was underpinned by expected recurring synergies of approximately £7 million per annum to be achieved three years after completion of the merger. The elements of these cost synergies, which were expected to originate from both Premier and Miton, included:

1)  Rationalisation of central and head office functions - circa 20% of total synergies

Progress in the period:

• Completed. Central and head office functions have been amalgamated.

• Additional capacity for staff has been facilitated at the head office in London without any additional cost.

• Rationalisation of existing office space across the Group is under way.

2)  Harmonisation of operating models from alignment of third-party service providers, IT systems as well as consolidated operating functions - circa 45% of total synergies

Progress in the period:

• On track for completion by 31 December 2020.

• From 24 April 2020 all fund management moved to a single entity, Premier Fund Managers Limited. This represents a key milestone in the process of creating a unified product range, one investment team, one fund management company, and one consistent range of fund names.

• As a result, the Group's high-quality investment teams covering multi-asset, bond, equity and absolute return funds are able to come together as a single team allowing for the sharing of ideas, learning and collaboration.

3)  Other areas of overlap including the elimination of duplication in staff roles, whilst retaining the best of both franchises - circa 35% of total synergies

Progress in the period:

• Duplicated staff roles have been removed.

• The Group moved swiftly to provide clarity to all staff with clear reporting lines and responsibilities implemented across the enlarged Group.

• Other areas of overlap are on track to be completed by 31 December 2021.

Non-recurring integration costs of £10 million were expected over the three-year period. At 31 March 2020 £3 million of exceptional costs had been incurred, see note 5 for further details.

There has been a lot of work undertaken to get us to this point, including managing the legal change of companies, amalgamation of systems such as Bloomberg, establishing a centralised dealing desk and much more besides.

Our overriding objective has been to allow the best ideas and best practices from both businesses to flourish to ensure we are in the strongest position to deliver the best outcomes for our clients.

Any merger will naturally create change which can be unsettling. However, I have been impressed with the enthusiasm, skill and good humour of the entire Premier Miton team in ensuring that our progress to date has been achieved with the minimum of disruption to our clients. I would like to say thank you to every member of the Premier Miton team for their efforts and energy in adapting to this challenge whilst at the same time dealing with the threat and restrictions that COVID-19 has placed upon society.

By continuing with clear implementation plans, straightforward communication and the passion of our staff, I am confident that we will continue to deliver on our merger plans. This will leave the business extremely well placed to capitalise on the broad range of investment capabilities, collegiate investment culture and scalable operating platform for the benefit of our clients and stakeholders.

Mike O'Shea

Chief Executive Officer

21 May 2020

Financial Review

Assets under Management ('AuM')

AuM ended the period at £9,145 million (2019 FY: £6,556 million), an increase of 39% on the opening position for the period. The increase was driven by the merger with Miton Group plc which completed on 14 November 2019 adding £4,701 million in AuM at that date.

The Group saw net outflows for the period of £389 million (2019 HY: £67 million net inflows). Within this total, the equity funds had net inflows of £116 million with the main contributor being the LF Miton European Opportunities Fund. The fixed income funds saw outflows of £180 million along with £325 million of outflows across a range of multi-asset funds in the period.

AuM and flows by asset class and fund type

	Opening AuM 1 October 2019 £m	Merger 14 November 2019 £m	Half year net flows1 £m	Market/ investment performance1 £m	Closing AuM 31 March 2020  m
Equity funds	1,312	3,406	116	(784)	4,050
Multi-asset funds	4,423	795	(325)	(801)	4,092
Fixed income funds	576	-	(180)	(13)	383
Investment trusts	150	500	-	(119)	531
Segregated mandates	95	-	-	(6)	89
Total	6,556	4,701	(389)	(1,723)	9,145

¹ Includes the former Miton Group plc fund range with effect from close of business 14 November 2019

The market turbulence from the COVID-19 pandemic has created volatility in the Group's revenue base arising from the falls in underlying market valuations and the resulting AuM managed by the Group.

By 31 March 2020, the world's principal global equity indices had fallen within an approximate range of 15% to 30% from the position at 31 December 2019. Comparatively, the Group's AuM saw an aggregate reduction of 20.9% to £9,145 million including net outflows of £167 million for the three months to 31 March 2020.

Net management fees and margins

	Unaudited six months to 31 March 2020	Unaudited six months to 31 March 2019	Audited year to 30 September 2019
Average AuM1 (£m)	9,928	6,643	6,695
Net management fees2 (£m)	33.5	24.0	48.4
Other income (£m)	(0.1)	-	0.2
Net revenues (£m)	33.4	24.0	48.6
Net management fee margin3 (bps)	67.4	72.4	72.3

1 Average AuM is calculated on a daily basis

2 Being gross management fee income less trail/renewal commission expenses and the cost of fund accounting and external ACDs for the former Miton fund range

3 Net management fee margin represents net management fees divided by the average AuM

Net management fees for the period were £33.5 million, an increase of 40% over the comparative period reflecting the enlarged AuM being managed by the Group as a result of the merger.

Net management fee margin reduced to 67.4bps (2019 HY: 72.4bps) reflecting the post merger contribution of the Miton product range which is reported after the deduction of associated Authorised Corporate Director ('ACD') and fund accounting fees. The audited 2019 net management fee margin for the stand alone Miton group was 60.6bps.

On 11 December 2019 the Group launched the Premier Managed Index Balanced Fund. At the period end the Group managed 46 products (30 September 2019: 29 products).

Administration expenses

Administration expenses (excluding share-based payments) for the period were £21.3 million (2019 HY: £14.8 million), representing an increase of 43%. The increase included £5.2 million of Miton related costs since the merger completed.

The residual increase of £1.3 million was driven by:

• £0.4 million of additional staff costs associated with annual base salary rises coupled with employer's national insurance due on the first tranche of options that vested in the period.

• Increased regulatory costs of £0.25 million due to the inclusion of the FSCS levy costs which were presented as exceptional in the comparative period. See note 5 for further detail.

• Increased depreciation of £0.15 million reflecting the charge associated with the development costs of the Connect platform. Connect is a no-cost multi-asset portal enabling advisers to hold and manage their clients' investments in a range of Premier Miton Funds.

The largest component of administration expenses for both businesses, before the merger and as an enlarged Group, were staff costs. These amounted to £12.2 million during the period, representing 57% of total administration costs (2019 HY: 55%).

IFRS 16 'Leases'

The Group has commenced accounting for IFRS 16 from 1 October 2019 and now recognises a right-of-use ('ROU') asset and a corresponding lease liability in the balance sheet.

The nature of the expense has also changed with the recognition of a depreciation charge to unwind the ROU and an interest expense on the lease liabilities rather than a lease rental expense as in previous years.

Lease rental payments are now reflected in the cash flow statement under financing activities as and when they are paid. The Group has applied the modified retrospective approach, meaning any cumulative effect at 1 October 2019 is reflected in the retained earnings with no restatement of the comparatives.

Adjusted profit and Profit before Tax

	Unaudited six months to 31 March 2020 £m	Unaudited six months to 31 March 2019 £m	Audited 12 months to 30 September 2019 £m
Net revenue	33.4	24.0	48.6
Administrative expenses	(21.3)	(14.8)	(29.6)
Adjusted profit before tax	12.2	9.3	19.0
Amortisation	(2.1)	(0.8)	(1.5)
Share-based payments	(1.6)	(1.0)	(2.6)
Exceptional costs	(3.1)	(0.3)	(1.2)
Profit before tax	5.3	7.2	13.7

Amortisation

The amortisation of intangible assets in the period increased to £2.1 million (2019 HY: £0.8 million). The increase reflects a charge of £1.3 million arising from the intangible assets recognised as a result of the merger. See note 8 for further detail.

Share-based payments

The share-based payments charge increased to £1.6 million (2019 HY: £1.0 million) reflecting a full six month charge for the awards issued in the previous financial year.

As at 31 March 2020 the Group's Employee Benefit Trusts ('EBTs') held 9,921,565 ordinary shares representing 6.3% of the issued ordinary share capital (2019 HY: 3,242,830).

At the period end the outstanding awards totalled 7,324,487 compared to 3,020,000 as at 31 March 2019.

The increase in outstanding awards reflects not only the awards issued in the period but also the outstanding awards in the former Miton schemes which were converted at the merger exchange ratio of 0.30186 on 14 November 2019. See note 12 for further detail.

Exceptional costs

Exceptional costs incurred in the period amounted to £3.1 million (2019 HY: £0.3 million). As detailed in the Scheme Document released on 17 September 2019, the Group anticipated annualised synergies being achieved in year three after the merger of £7 million.

The exceptional costs to achieve these synergies were estimated at £10 million. During the period exceptional merger related costs totalled £3.0 million. See note 5 for further detail.

COVID-19

From 16 March 2020 all employees transitioned to remote working using the Group's business continuity arrangements. No material expenditure was required for the transition to remote working. All systems are continuing to operate as planned.

While the full implications of COVID-19 on the financial performance for the year remain difficult to determine at this stage, the Group has seen a recovery in AuM since the period end.

AuM at 30 April 2020 was £9.9 billion with net positive inflows of £19 million for the month of April.

We note that there are a number of measures available to the Board to reduce the cost base of the Group and to align expenditure with a more volatile revenue base.

Cuts to certain discretionary expenditure have already been implemented and, in addition, the senior management team have elected to take a reduction in salary for a period of six months.

The Group's COVID-19 Response Committee closely monitors government advice. Our primary aims are to protect the health and safety of our staff, minimising the spread of the virus and continuing to provide investment management services to our clients.

The Directors continue to adopt the going concern basis of accounting in preparing the interim unaudited Condensed Consolidated Financial Statements as outlined in note 1.

Dividend

Dividends totalling £10.6 million were paid in the period (2019 HY: £7.2 million). See note 3 for further detail.

During the period the Board adopted a dividend policy that targets an ordinary dividend pay-out of approximately 50 to 65% of profit after tax, adjusted for exceptional costs, share-based payments and amortisation.

Due to the risks and global impact from COVID-19, and the uncertainties as to the duration and impact of the pandemic, the Board took the prudent decision to reduce the quantum of the second interim dividend to 0.75p per share payable on 29 May 2020.

For future dividends, the Group will distribute on a twice-yearly basis, moving away from the payment of quarterly interim dividends. Dividends going forward will be aligned with the Group's reporting calendar.

Balance sheet and cash management

At 31 March 2020 the cash balances of the Group totalled £29.3 million (2019 HY: £15.3 million). The Group has no debt.

In April the Group settled the variable remuneration relating to the Miton financial year ended 31 December 2019, the Group's remuneration cycles will now be aligned in accordance with the year ended 30 September 2020.

Piers Harrison

Chief Financial Officer

21 May 2020

Unaudited Condensed Consolidated Statement of Comprehensive Income

For the six months ended 31 March 2020

	Notes	Unaudited six months to 31 March  2020 £000	Unaudited six months to 31 March 2019 £000	Audited year to 30 September 2019 £000
Revenue	4	38,514	26,154	52,821
Fees and commission expenses		(5,117)	(2,133)	(4,235)
Net revenue		33,397	24,021	48,586
Administration expenses		(21,251)	(14,761)	(29,617)
Share-based payment expense	12	(1,636)	(1,006)	(2,551)
Amortisation of intangible assets	8	(2,055)	(761)	(1,522)
Exceptional items	5	(3,127)	(270)	(1,178)
Operating profit		5,328	7,223	13,718
Finance revenue		17	-	-
Profit for the period before taxation		5,345	7,223	13,718
Taxation	6	(2,140)	(1,790)	(2,696)
Profit for the period after taxation attributable to equity holders of the parent		3,205	5,433	11,022

		pence	pence	pence
Basic earnings per share	7(a)	2.35	5.30	10.82
Diluted earnings per share	7(a)	2.27	5.15	10.44

No other comprehensive income was recognised during 2020 or 2019. Therefore, the profit for the period is also the total comprehensive income.

Unaudited Condensed Consolidated Statement of Changes in Equity

For the six months ended 31 March 2020

	Notes	Share capital £000	Merger reserve £000	Employee  Benefit Trust  000	Capital redemption reserve  000	Retained earnings £000	Total £000
At 1 October 2019		50	-	(6,944)	4,532	47,688	45,326
Profit for the period		-	-	-	-	3,205	3,205
Issue of share capital on merger	8,11	10	94,312	-	-	-	94,322
Purchase of own shares held by an EBT	12(a)	-	-	(2,669)	-	-	(2,669)
Own shares held by an EBT acquired on merger	8	-	-	(5,178)	-	-	(5,178)
Exercise of options		-	-	142	-	(15)	127
Share-based payment expense	12	-	-	-	-	1,636	1,636
Deferred tax direct to equity		-	-	-	-	(4)	(4)
Equity dividends paid	3	-	-	-	-	(10,589)	(10,589)
At 31 March 2020 (Unaudited half year)		60	94,312	(14,649)	4,532	41,921	126,176
At 1 October 2018		50	-	(4,047)	4,532	44,733	45,268
Profit for the period		-	-	-	-	5,433	5,433
Share-based payment expense	12	-	-	-	-	1,006	1,006
Equity dividends paid	3	-	-	-	-	(7,179)	(7,179)
At 31 March 2019 (Unaudited half year)		50	-	(4,047)	4,532	43,993	44,528
At 1 October 2018		50	-	(4,047)	4,532	44,733	45,268
Profit for the year		-	-	-	-	11,022	11,022
Purchase of own shares held by an EBT		-	-	(2,897)	-	-	(2,897)
Share-based payment expense		-	-	-	-	2,551	2,551
Equity dividends paid		-	-	-	-	(10,618)	(10,618)
At 30 September 2019 (Audited)		50	-	(6,944)	4,532	47,688	45,326

Unaudited Condensed Consolidated Statement of Financial Position

As at 31 March 2020

	Notes	Unaudited 31 March  2020 £000	Unaudited 31 March  2019 £000	Audited 30 September 2019 £000
Non-current assets
Goodwill	8	71,478	15,597	15,597
Intangible assets	8	34,057	12,718	11,957
Other investments		100	-	-
Property and equipment		2,683	1,069	874
Right-of-use assets		2,777	-	-
Deferred tax asset		793	317	1,111
Trade and other receivables		152	-	-
		112,040	29,701	29,539
Current assets
Financial assets at fair value through profit and loss		1,618	4,905	827
Trade and other receivables		66,969	63,922	49,038
Cash and cash equivalents	9	29,259	15,339	20,689
		97,846	84,166	70,554
Total assets		209,886	113,867	100,093
Current liabilities
Trade and other payables		(75,945)	(69,339)	(54,767)
Lease liabilities		(784)	-	-
		(76,729)	(69,339)	(54,767)
Non-current liabilities
Provisions	10	(389)	-	-
Deferred tax liability	8	(4,104)	-	-
Lease liabilities		(2,488)	-	-
Total liabilities		(83,710)	(69,339)	(54,767)
Net assets		126,176	44,528	45,326
Equity
Share capital	11	60	50	50
Merger reserve	8	94,312	-	-
Own shares held by an Employee Benefit Trust	12	(14,649)	(4,047)	(6,944)
Capital redemption reserve		4,532	4,532	4,532
Retained earnings		41,921	43,993	47,688
Total equity shareholders' funds		126,176	44,528	45,326

Unaudited Condensed Consolidated Statement of Cash Flows

For the six months ended 31 March 2020

	Notes	Unaudited six months to 31 March  2020 £000	Unaudited six months to 31 March 2019 £000	Audited year to 30 September 2019 £000
Cash flows from operating activities:
Profit after taxation		3,205	5,433	11,022
Adjustments to reconcile profit to net cash flow from operating activities:
Tax on continuing operations	6	2,140	1,790	2,696
Finance revenue		(17)	-	-
Interest payable on leases		34	-	-
Depreciation - fixed assets		301	119	224
Depreciation - leases		327	-	-
Gain on sale of financial asset at fair value through profit and loss		(13)	-	(19)
Loss/(gain) on revaluation of financial assets at fair value through profit and loss		241	7	(7)
Loss on disposal of property, plant and equipment		-	-	327
Increase in employee benefit liability		1,182	-	-
Purchase of plan assets (held for employee benefit liability)		(1,182)	-	-
Amortisation of intangible assets	8	2,055	761	1,522
Share-based payment expense	12	1,636	1,006	2,551
(Increase)/decrease in trade and other receivables		(13,866)	(10,212)	4,671
Increase/(decrease) in trade and other payables		1,419	7,084	(5,058)
Cash generated from operations		(2,538)	5,988	17,929
Income tax paid		(1,791)	(54)	(4,182)
Net cash flow from operating activities		(4,329)	5,934	13,747
Cash flows from investing activities:
Interest received		17	-	-
Acquisition of assets at fair value through profit and loss		(11,308)	(4,218)	(4,229)
Proceeds from disposal of assets at fair value through profit and loss		10,290	217	4,338
Purchase of property and equipment		(120)	(189)	(426)
Cash acquired on merger	8	27,296	-	-
Net cash flow from investing activities		26,175	(4,190)	(317)
Cash flows from financing activities:
Lease payments		(145)	-	-
Exercise of options		127	-	-
Purchase of owns shares held an EBT	12(a)	(2,669)	-	(2,897)
Equity dividends paid	3	(10,589)	(7,179)	(10,618)
Net cash flow from financing activities		(13,276)	(7,179)	(13,515)
Increase/(decrease) in cash and cash equivalents		8,570	(5,435)	(85)
Opening cash and cash equivalents		20,689	20,774	20,774
Closing cash and cash equivalents	9	29,259	15,339	20,689

Notes to the Unaudited Condensed Consolidated Financial Statements

For the six months ended 31 March 2020

 

1. Basis of accounting

These interim unaudited Condensed Consolidated Financial Statements do not constitute statutory accounts within the meaning of section 435 of the Companies Act 2006. They have been prepared on the basis of the accounting policies as set out in the Group's Annual Report for the year ended 30 September 2019, with the exception of IFRS 16, as discussed below.

The interim unaudited Condensed Consolidated Financial Statements to 31 March 2020 have been prepared in accordance with IAS 34 'Interim Financial Reporting' and the Listing Rules of the Financial Conduct Authority.

Premier Miton Group plc (the 'Group') is the Parent Company of a group of companies which provide a range of investment management services in the United Kingdom and Channel Islands.

The Group's 2019 Annual Report is prepared in accordance with International Financial Reporting Standards ('IFRS') as adopted by the European Union, and is available on the Premier Miton Group plc website (www.premiermiton.com).

The Group has considerable financial resources and ongoing investment management contracts. As a consequence, the Directors believe that the Group is well placed to manage its business risks successfully. The Directors have a reasonable expectation that the Group has adequate resources to continue in operational existence for the foreseeable future. Thus, the Directors continue to adopt the going concern basis of accounting in preparing the interim unaudited Condensed Consolidated Financial Statements. This assessment has been made after considering the impact of COVID-19 on the business. The Directors note that the Group has no external borrowings and maintains significant levels of cash reserves. The Group has conducted financial modelling at materially lower levels of AuM with the business remaining cash generative.

These interim unaudited Condensed Consolidated Financial Statements were approved and authorised for issue by the Board acting through a duly appointed committee of the Board of Directors on 21 May 2020.

The full-year accounts to 30 September 2019 were approved by the Board of Directors on 27 November 2019 and have been delivered to the Registrar of Companies. The report of the auditors on those accounts was unqualified, did not contain an emphasis of matter paragraph and did not contain any statement under section 498 of the Companies Act 2006. The figures for the six months ended 31 March 2020 and the six months ended 31 March 2019 have not been audited.

IFRS 16 'Leases'

The Directors have applied the IFRS 16 modified retrospective approach with the cumulative effect of adopting IFRS 16 being recognised as an adjustment to the opening balance of retained earnings as at 1 October 2019, with no restatement of comparative information. The adoption of IFRS 16 in the six months ended 31 March 2020 resulted in an increase in depreciation of £326,730 and finance costs of £33,695. Other administration expenses decreased by £184,425.

2. Segmental reporting

The Group has only one business operating segment, asset management for reporting and control purposes.

IFRS 8 'Operating Segments' requires disclosures to reflect the information upon which the Group's management uses for evaluating performance and the allocation of resources. The Group is managed as a single asset management business and

as such, there are no additional operating segments to disclose. Under IFRS 8, the Group is also required to make disclosures

by geographical segments. As Group operations are solely in the UK and Channel Islands, there are no additional geographical segments to disclose.

3. Dividend

The final interim dividend for the year ended 30 September 2019 of 5.4p per share was paid on 10 January 2020 leading to a distribution of £7,997,698. On 28 February 2020 the first interim dividend for 2020 of 1.75p per share was paid leading to a distribution of £2,591,136.

The total distribution of £10,588,834 is reflected in the Consolidated Statement of Changes in Equity (2019 HY: £7,179,094).

4. Revenue

Revenue recognised in the Consolidated Statement of Comprehensive Income is analysed as follows:

	Unaudited six months to 31 March 2020 £000	Unaudited six months  to 31 March 2019  000	Audited year to 30 September  2019 £000
Management fees	38,591	26,110	52,624
Commissions	3	9	16
Other income	(80)	35	181
Total Revenue	38,514	26,154	52,821

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

5. Exceptional items

	Unaudited six months to 31 March 2020 £000	Unaudited six months  to 31 March 2019  000	Audited year to 30 September  2019 £000
Fund development costs	51	-	-
Staff redundancy costs	-	44	44
FCA FSCS levy	-	-	397
Connect development costs	94	226	410
Office refurbishment write-off	-	-	327
Merger related costs	2,091	-	-
Merger employment restructuring costs	891	-	-
Total exceptional items	3,127	270	1,178

Exceptional items are those items of income or expenditure that are considered significant in size and/or nature to merit separate disclosure and which are non-recurring.

Merger related costs in the period totalling £2,091,208 represented legal and professional fees associated with the merger with Miton Group plc of £1,599,536 and merger integration costs of £491,672.

Employment restructuring costs arising as a result of the merger totalled £891,103 of which £883,336 related to redundancy costs and £7,767 of associated legal costs.

FCA FSCS levy costs in the current period totalling £396,213 have been presented within administration expenses, of this cost,

£92,830 was in respect to the Miton activities. In 2019, the comparative costs were presented as exceptional as a result of rising significantly due to the increased levels of compensation paid by the FSCS and the inclusion of an amount invoiced in 2019 by the FCA but which related to the previous year.

Connect development costs relate to external consultants who have been deployed in the testing of the new Connect platform during the development stage prior to launch.

6. Taxation

	Unaudited six months to 31 March 2020 £000	Unaudited six months  to 31 March 2019  000	Audited year to 30 September  2019 £000
Corporation tax charge	1,760	1,564	3,263
Deferred tax charge/(credit)	380	226	(567)
Tax charge reported in the Consolidated Statement of Comprehensive Income	2,140	1,790	2,696

7. Earnings per share

Basic earnings per share is calculated by dividing the profit for the period attributable to ordinary equity shareholders of the Parent Company by the weighted average number of ordinary shares outstanding during the period.

The weighted average of issued ordinary share capital of the Company is reduced by the weighted average number of shares held by the Group's Employee Benefit Trusts ('EBT'). Dividend waivers are in place over shares held in the Group's EBTs.

In calculating diluted earnings per share, IAS 33 'Earnings Per Share' requires that the profit is divided by the weighted average number of ordinary shares outstanding during the period plus the weighted average number of ordinary shares that would be issued on conversion of all the dilutive potential ordinary shares into ordinary shares during the period.

(a) Reported earnings per share

Reported basic and diluted earnings per share has been calculated as follows:

	Unaudited six months to 31 March 2020 £000	Unaudited six months  to 31 March 2019  000	Audited year to 30 September  2019 £000
Profit attributable to ordinary equity shareholders of the Parent Company for basic earnings (£000)	3,205	5,433	11,022
	No.000	No.000	No.000
Issued ordinary shares at 1 October	105,801	105,801	105,801
Effect of own shares held by an EBT	(8,517)	(3,243)	(3,891)
Effect of shares issued	39,297	-	-
Weighted average shares in issue	136,581	102,558	101,910
Effect of movement in share options	4,610	2,920	3,675
Weighted average shares in issue - diluted	141,191	105,478	105,585
Basic earnings per share (pence)	2.35	5.30	10.82
Diluted earnings per share (pence)	2.27	5.15	10.44

(b) Adjusted earnings per share

Adjusted earnings per share is based on adjusted profit after tax, where adjusted profit is stated after charging interest but before share-based payments, amortisation and exceptional items.

Adjusted Profit for calculating adjusted earnings per share:

	Unaudited six months to 31 March 2020 £000	Unaudited six months  to 31 March 2019  000	Audited year to 30 September  2019 £000
Profit before taxation	5,345	7,223	13,718
Add back:
Share-based payment expense	1,636	1,006	2,551
Amortisation of intangible assets	2,055	761	1,522
Exceptional items	3,127	270	1,178
Adjusted profit before tax	12,163	9,260	18,969
Taxation:
Tax in the Consolidated Statement of Comprehensive Income	(2,140)	(1,790)	(2,696)
Tax effect of adjustments	(71)	(69)	(886)
Adjusted Profit after tax for the calculation of adjusted earnings per share	9,952	7,401	15,387

Adjusted earnings per share was as follows using the number of shares calculated at note 7(a):

	Unaudited six months to 31 March 2020 pence	Unaudited six months  to 31 March 2019  pence	Audited year to 30 September  2019 pence
Adjusted earnings per share	7.29	7.22	15.10
Diluted adjusted earnings per share	7.05	7.02	14.57

8. Goodwill and other intangible assets

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

Goodwill	Unaudited six months to 31 March 2020 £000	Unaudited six months  to 31 March 2019  000	Audited year to 30 September  2019 £000
Cost:
At 1 October	22,576	22,576	22,576
Additions	55,881	-	-
At 31 March/30 September	78,457	22,576	22,576
Amortisation and impairment:
At 1 October	6,979	6,979	6,979
Amortisation during the year	-	-	-
At 31 March/30 September	6,979	6,979	6,979
Carrying amount:
At 31 March/30 September	71,478	15,597	15,597

Other intangible assets	Unaudited six months to 31 March 2020 £000	Unaudited six months  to 31 March 2019  000	Audited year to 30 September  2019 £000
Cost:
At 1 October	56,231	56,231	56,231
Additions	24,155	-	-
At 31 March/30 September	80,386	56,231	56,231
Accumulated amortisation and impairment:
At 1 October	44,274	42,752	42,752
Amortisation during the year	2,055	761	1,522
At 31 March/30 September	46,329	43,513	44,274
Carrying amount:
At 31 March/30 September	34,057	12,718	11,957

As a result of the all-share merger with Miton Group plc, which was effected by way of a scheme of arrangement, the shareholders of Miton Group plc received 0.30186 of a share in Premier Miton Group plc on 15 November 2019 satisfied through newly issued shares.

The additions to goodwill and intangible assets in the period relate solely to the acquisition of Miton Group plc.

The acquired business contributed net revenues of £10,699,074 and a net profit after taxation of £3,406,754 to the Group for the period from 15 November 2019 to 31 March 2020. The contribution to the Group's net profit is after charging £984,925 of exceptional restructuring costs incurred since acquisition.

At the acquisition date the consideration and net assets acquired from Miton Group plc were as follows:

14 November 2019	£000
Fair value of equity consideration	94,322
Net assets acquired:
Intangible assets	24,155
Deferred tax liability on intangible assets acquired	(4,104)
Investments	100
Cash and cash equivalents	27,296
Property, plant and equipment	491
Trade and other receivables	5,740
Loan to the Employee Benefit Trust	5,178
Trade and other payables	(19,741)
Provisions	(389)
Right-of-use assets (net)	(285)
Net assets acquired	38,441
Goodwill	55,881

The fair value of the equity consideration has been calculated by reference to the number of shares issued and the share price at the completion date. Intangible assets acquired in the business combination related to the investment management agreements between Miton and the funds to which Miton was the investment manager and the value arising from the underlying client relationships.

Goodwill arising on the acquisition of Miton is mainly attributable to the skills and technical talent of Miton's workforce, expected cash flows from new customers and significant synergies which are expected to be realised from integrating the company. The Group has determined that it has a single cash generating unit ('CGU') for the purpose of assessing the carrying value of goodwill. Impairment testing is performed at least annually whereby the recoverable amount of the goodwill is analysed via the value in use method and compared to the respective carrying value. In response to the market volatility arising from COVID-19, an impairment assessment was completed during the period using materially lower levels of AuM. Due to the cash generative nature of the business, no impairment was identified at these lower levels of AuM.

9. Cash and cash equivalents

	Unaudited six months to 31 March 2020 £000	Unaudited six months  to 31 March 2019  000	Audited year to 30 September  2019 £000
Cash at bank and in hand	28,909	15,174	20,638
Cash held in Employee Benefit Trust	350	165	51
	29,259	15,339	20,689

10. Provisions

	£000
At 1 October 2019	-
Arising on merger	389
At 31 March 2020 (Unaudited)	389
Current	-
Non-current	389
	389

At 1 October 2018 and 31 March 2019 (Unaudited)	-
At 1 October 2018 and 30 September 2019 (Audited)	-

Provisions primarily relate to dilapidations for the offices at 6th Floor, Paternoster House, London, and the Group's disaster recovery office in Reading. The lease on Paternoster House runs to 28 November 2023 and the provision for dilapidations on this office has been disclosed as non-current.

 

11. Share capital

Allotted, called up and fully paid: Number of shares	Ordinary shares 0.02 pence each Number	Deferred shares Number
At 1 October 2019	105,801,310	1
Issued on merger	52,111,725	-
At 31 March 2020 (Unaudited)	157,913,035	1
At 1 October 2018 and 31 March 2019 (Unaudited)	105,801,310	1
At 1 October 2018 and 30 September 2019 (Audited)	105,801,310	1

 

Allotted, called up and fully paid: Value of shares	Ordinary shares 0.02 pence each £000	Deferred shares £000	Total £000
At 1 October 2019	21	29	50
Issued on merger	10	-	10
At 31 March 2020 (Unaudited)	31	29	60
At 1 October 2018 and 31 March 2019 (Unaudited)	21	29	50
At 1 October 2018 and 30 September 2019 (Audited)	21	29	50

 

On 14 November 2019 the Company completed an all-share merger with Miton Group plc. The Company issued 52,111,725 new ordinary shares on 15 November 2019 ranked pari passu in all respects with the Company's existing shares in issue.

12. Share-based payment

The total expense recognised for share-based payments in respect of employee services received during the period to 31 March 2020 was £1,636,455 (2019 HY: £1,006,289).

During the period 2,075,000 (2019 HY: 135,000) nil cost contingent share rights over ordinary shares of 0.02p in the Company were granted to nine employees (2019 HY: two). Of the total award, 150,000 (2019: nil) nil cost contingent share rights were awarded to an Executive Director. The awards will be satisfied from the Group's EBTs in accordance with the provisions of the Premier Asset Management Group plc 2016 Long-term Incentive Plan.

The share-based payment expense is calculated in accordance with the fair value of the contingent share rights on the date of grant. The price per right at the date of grant was £1.35 resulting in a fair value of £2,801,250 to be expensed over the vesting periods of three to five years.

The key features of the awards include: a three to five-year vesting term, automatic vesting at the relevant anniversary date with the delivery of the shares to the participant within 30 days of the relevant vesting date.

During the period five participants forfeited nil cost contingent share rights over 146,460 ordinary 0.02p shares in the Company.

On 9 March 2020 1,184,476 nil cost contingent share rights over ordinary shares of 0.02p in the Company were exercised, the cost of the shares held by the EBTs was reduced by £15,087 being the original purchase price of the shares used to satisfy the exercises.

After the period end on 15 April 2020, 2,055,000 nil cost contingent share rights over ordinary shares of 0.02p in the Company were granted to 38 employees, of the total 400,000 were awarded to an Executive Director.

(a) Employee Benefit Trusts

Premier Miton Group plc established an EBT on 25 July 2016 to purchase ordinary shares in the Company to satisfy share awards to certain employees.

Prior to the merger, Miton Group plc had an established EBT. At merger, the EBT held 15,574,517 shares in Miton Group plc, on completion of the all-share merger these shares were converted at the merger exchange ratio of 0.30186 resulting in the EBT holding 4,701,323 ordinary 0.02p shares in Premier Miton Group plc.

During the period 1,894,043 (2019 HY: nil) shares were acquired and held by the Group's EBTs at a cost of £2,668,525 (2019 HY: £nil).

At 31 March 2020 9,921,565 (2019 HY: 3,242,830) shares are held by the Group's EBTs, of which 7,324,487 (2019 HY: 3,020,000) shares relate to outstanding awards.

At 31 March 2020, the cost of the shares held by the EBTs of £14,648,840 (2019 HY: £4,047,277) has been disclosed as own shares held by an EBT in the Consolidated Statement of Changes in Equity and the Consolidated Statement of Financial Position.

(b) Legacy Miton schemes

(i) Management Equity Incentive ('MEI')

The MEI was established on 14 April 2011. Awardees have the right to purchase Company shares at a pre-agreed subscription price.

On 14 November 2019 the outstanding MEI awards totalled 7,000,000, on completion of the all-share merger these awards were converted at the merger exchange ratio of 0.30186 resulting in 2,113,020 awards over ordinary 0.02p shares in the Company.

Following the merger, the awards continue to be subject to the terms of the Miton Management Equity Incentive Plan.

During the period, one participant elected to exercise an award over 120,744 ordinary 0.02p shares in the Company. On completion of the merger, MEI participants became entitled to receive a contingent award over additional shares if certain conditions were met. Accordingly, upon exercise of the above award the Trustees released 11,411 additional shares in the Company.

During the period three participants forfeited awards over 90,558 ordinary 0.02p shares in the Company.

At 31 March 2020 there were 1,901,718 outstanding MEI awards of which 1,343,277 had vested.

(ii) Management Incentive Plan ('MIP')

The MIP was a legacy scheme created in 2011.

On 14 November 2019 the vested outstanding MIP award of 200,000 was converted at the merger exchange ratio of 0.30186 resulting in 60,372 awards over ordinary 0.02p shares in the Company, this remained outstanding as at 31 March 2020.

Following the merger, the award continues to be subject to the terms of the Miton Management Incentive Plan.

(c) Share Incentive Plan ('SIP')

On 16 January 2020 the Group established the SIP scheme. This is an HMRC-approved scheme. Participants' contributions are matched by the Company up to a maximum contribution of £1,800 per year. The contributions are used to acquire ordinary 0.02p shares in the Company.

The former Miton group had a SIP scheme in place for its employees which was launched in October 2014. On the effective date of the merger this scheme ceased.

13. Subsequent events post balance sheet

As at 21 May 2020 the impact of the emerging coronavirus ('COVID-19') is being kept under review by the Group. A COVID-19 Response Committee has been appointed and is charged with managing the response to this evolving risk and to implement all government advice in order to safely continue to meet the needs of clients and stakeholders.

With effect from 16 March 2020 all employees transitioned to remote working, the Group continues to provide a full investment management service to our clients and all systems are operating as planned.

The full impact of COVID-19 on the financial performance of the Group for 2020 cannot be quantified at this stage. Should the recent volatility in financial markets due to the pandemic continue then the key impact to the Group will be a decline in revenue resulting from having lower AuM. As at 30 April 2020 the Group's AuM was £9.9 billion.

Premier Miton Group plc continues to carefully manage its cost base and communicate regularly with employees, shareholders, clients, IFAs and intermediaries and other suppliers as events unfold. COVID-19 will be monitored in the context of the Group's risk and control framework.

Management currently assesses these events to represent non-adjusting subsequent events as at the interim reporting date of 31 March 2020.

 

END

 

 

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