Final Results
4 May 2023
Curtis Banks Group PLC
("Curtis Banks" or the "Group")
Final Results for the 12 Months to 31 December 2022
Curtis Banks (AIM: CBP), one of the UK's leading SIPP providers, announces its final results for the 12 months to 31 December 2022.
Financial Highlights
· Group revenue increased by 7.6% to £68.1m (2021: £63.3m)
· Pension administration fee income steadied at £45.3m (2021: £45.1m)
· Interest income associated with pension administration increased to £15.1m (2021: £8.3m)
· FinTech revenue decreased to £7.7m (2021: £9.9m)
· Group adjusted operating margin1 of 24.1% (2021: 23.5%1)
· Pension administration adjusted operating margin of 25.5% (2021: 23.9%)
· FinTech adjusted operating margin of 15.4% (2021: 21.9%), reflecting one-off lower key client activity
· Adjusted profit before tax1 increased by 10.0% to £15.4m (2021: £14.0m1)
· Loss before tax of £3.7m (2021: Profit before tax of £9.3m), impacted by a £11.5m goodwill impairment charge relating to Dunstan Thomas
· Adjusted diluted EPS1 increased to 18.7p (2021: 16.9p1)
Operational Highlights
· Total Full and Mid SIPPs increased to 56,929 (2021: 55,971), reflecting continued positive product range appeal
· Net growth in Full and Mid SIPPs of 1.7% (2021: 1.8%)
· Gross organic growth in Full and Mid SIPP plan numbers of 6.4% (2021: 7.9%)
· Attrition rate on Full and Mid SIPPs reduced to 4.7% (2021: 6.1%) reflecting initiatives taken by management to improve service levels across the Group
· Assets under Administration ("AuA") decreased by 4.3% to £35.8bn (2021: £37.4bn) due to external market movements
Post-period Highlights
· On 6 January 2023, the boards of Curtis Banks Group PLC, and Nucleus Clyde Acquisition Limited ('Bidco'), a wholly-owned subsidiary of Nucleus Financial Platforms Limited ('Nucleus'), announced that they have reached agreement on the terms of a recommended cash offer by Bidco to acquire the entire issued share capital of Curtis Banks for 350 pence per share
· On 27 February 2023, Curtis Banks's shareholders voted in favour of the proposed acquisition. Both parties are progressing the relevant regulatory and court approval processes and the acquisition is expected to complete, subject to these approvals, in the summer of 2023
· The transaction - which is expected to complete in the coming months - will create a leading financial planning and retirement-focused adviser platform in the UK, with combined Assets Under Administration of c.£80bn
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Key Performance Indicators |
Year ended 31 December 2022 |
Year ended 31 December 2021 |
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Financial |
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|
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Revenue |
£68.1m |
£63.3m |
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Adjusted profit before tax1 |
£15.4m |
£14.0m |
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(Loss) / Profit before tax |
£(3.7m) |
£9.3m |
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Adjusted operating margin1 |
24.1% |
23.5% |
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Diluted EPS |
(10.1p) |
11.5p |
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Adjusted diluted EPS1 |
18.7p |
16.9p |
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Operational Highlights |
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|
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Number of Full and Mid SIPPs Administered |
56,929 |
55,971 |
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Assets under Administration |
£35.8bn |
£37.4bn |
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Total organic new Full & Mid SIPPs |
3,602 |
4,329 |
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Gross organic growth in Full & Mid SIPPs |
6.4% |
7.9% |
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Attrition rate on Full & Mid SIPPs |
4.7% |
6.1% |
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Number of properties administered |
8,890 |
9,065 |
1 In addition to statutory IFRS performance measures, the Group has presented a number of non-statutory alternative performance measures ("APMs"). The Board believes that the APMs used give a more representative view of the underlying performance of the Group and enhance comparability of information between reporting periods. APMs are identified in the definitions at the end of this announcement.
David Barral, Non-Executive Chairman of Curtis Banks, commented:
"These are resilient results that demonstrate the strength of Curtis Banks' business model against a volatile market backdrop. The Group increased the size of its core SIPP book, added new adviser relationships and recorded good growth in revenue and underlying profitability.
"The modest growth in the core Full and Mid SIPP business was supported by a pleasing reduction in customer attrition, reflecting the measures taken to improve service levels across the business. In addition, the Group benefitted from the tailwind of interest income, which nearly doubled to £15.1 million, and our fixed-fee, inflation-linked pricing model, which continued to protect the business from macroeconomic pressures. The FinTech business continued to face commercial challenges in 2022, as outlined in the interim results, however the current year has started well and we remain optimistic over its medium-term prospects.
"The Board recognises the strategic value of being part of a larger group with enhanced scale and efficiencies. The proposed acquisition by Nucleus, which received shareholder approval in February, is an opportunity for Curtis Banks to be part of a leading retirement-focused adviser platform with approximately £80 billion of assets under administration. It will see us expand our offering, leverage the strengths of the combined Group, and deliver enhanced value to our advisers, customers and shareholders."
Enquiries:
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Curtis Banks Group PLC David Barral, Non-Executive Chairman Peter Docherty, Interim Chief Executive Officer Dan Cowland, Chief Financial Officer |
+44 (0)117 910 7910 |
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Peel Hunt LLP (Nominated Adviser & Joint Broker) Andrew Buchanan James Steel |
+44 (0)207 418 8900 |
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Singer Capital Markets (Joint Broker) Rick Thompson James Moat |
+44 (0)20 7496 3000 |
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Instinctif Partners (Financial PR) Tim Linacre Victoria Hayns Joe Quinlan |
curtisbanks@instinctif.com / +44 7949 939237 |
Chairman's Statement
The results for the year ended 31 December 2022 demonstrate that the Group's business model is robust and capable of withstanding challenges in the macroeconomic environment. Our Full and Mid SIPP achieved a modest growth in the number of policies of 1.7% (2021: 1.8%) with underlying gross sales growth of 6.4% (2021: 7.9%). Focus on intermediary and client service has driven a 1.4% improvement in attrition rates down to 4.7% (2021: 6.1%).
Group revenues increased by 7.6% to £68.1m (2021: £63.3m) following a favourable improvement in the interest rate environment. Revenue growth was also underpinned by our fixed fee, inflation-linked pricing model which provides resilience and protection against falling markets. Despite the slight easing of inflationary pressures in recent months, we expect the steepening of the yield curve observed in 2022 to have a material favourable impact on interest income generated from pension administration services into 2023. Inflation has remained stubbornly high in early 2023, and the return to the Bank of England's target rate of 2% is unlikely to be swift. Therefore, the Bank of England is still under pressure to maintain, if not slightly increase rates, in the short term.
The FinTech segment has delivered lower than expected results in the period, with revenues down 17.8% to £9.3m, reflecting a reduction in project activity from one of its major clients and lower new business in 2022. The current year has commenced more positively in this segment and we remain optimistic over the medium term prospects.
The Group has delivered adjusted profit before tax of £15.4m (2021: £14.0m) and maintains a strong balance sheet and cash flow profile, with our regulatory capital surplus above regulatory capital requirements.
While the strength of our operating model is evident, we also recognise that there is further room for improvement in order to fully capitalise on the advantages of operating leverage, in particular in achieving efficiencies through the streamlining of our technology and administrative systems.
Post balance sheet event - Acquisition by Nucleus
On 6 January 2023, the boards of Curtis Banks Group PLC, and Nucleus Clyde Acquisition Limited ("Bidco"), a wholly-owned subsidiary of Nucleus Financial Platforms Limited ("Nucleus"), announced that they have reached agreement on the terms of a recommended cash offer by Bidco to acquire the entire issued share capital of Curtis Banks for 350 pence per share. On 27 February 2023, Curtis Banks's shareholders voted in favour of the proposed acquisition. Both parties are progressing the relevant regulatory and court approval processes and the acquisition is expected to complete, subject to these approvals, in the summer of 2023.
The aggregate fees and expenses expected to be incurred by the Group as part of the acquisition are expected to be approximately £6.2m contingent to the completion of the acquisition, the breakdown of which is published in the Scheme document available on the Curtis Banks website at www.curtisbanks.co.uk/investors/pc-communications-library.
The proposed acquisition by Nucleus is expected to deliver significant benefits for our intermediaries and customers. The combination will bring together the strengths of both organisations, providing a full spectrum of enhanced and comprehensive product offering and capabilities across pension administration and platform technology.
One of the key benefits is the realisation of operational efficiencies for the enlarged group from Nucleus's outsourcing arrangements with FNZ, which will facilitate best-in-class service provision for financial advisers and their customers. This is a significant opportunity for Curtis Banks to become a key part of an enlarged organisation dedicated to positive customer outcome, and to leverage our strengths and expertise from our award-winning SIPP & SSAS offering and market leading commercial property administration expertise.
The completion of the transaction will create a leading financial planning and retirement-focused adviser platform in the UK, with combined Assets Under Administration of c. £80bn. The broader product set and enhanced distribution channels will enable an extension to the current reach and to service a greater number of intermediaries and customers more effectively. For example, our existing customer base and network of adviser firms will gain access to the broad range of products and services offered by Nucleus, including ISAs, GIAs and onshore/offshore bonds.
Furthermore, the Curtis Banks back office would benefit from the use of FNZ's platform administration solutions. The enhanced scale of the combined Group will enable greater investment in technology and product and service offerings that we would not be in a position to finance or execute on a standalone basis.
In summary, the proposed acquisition by Nucleus is a strategic opportunity that will enable us to expand our offering, leverage the strengths of the combined Group; and deliver enhanced value to our advisers, customers and shareholders.
The process of obtaining relevant regulatory and court approvals is currently progressing as planned and we expect to announce an update on this in the coming months.
SIPP Administration
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Number of policies |
Full SIPPs |
Mid SIPPs |
Total Full and Mid SIPPs |
eSIPPs |
Third Party Administered |
Total |
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As at 31 December 2021 |
21,272 |
34,699 |
55,971 |
17,881 |
5,827 |
79,679 |
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SIPPs added organically |
810 |
2,792 |
3,602 |
108 |
14 |
3,724 |
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Conversions & reclassifications |
(674) |
674 |
- |
- |
- |
- |
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SIPPs lost through attrition |
(1,134) |
(1,510) |
(2,644) |
(1,622) |
(545) |
(4,811) |
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As at 31 December 2022 |
20,274 |
36,655 |
56,929 |
16,367 |
5,296 |
78,592 |
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Gross organic growth rate |
3.8% |
8.0% |
6.4% |
0.6% |
0.2% |
4.7% |
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Attrition rate |
5.3% |
4.4% |
4.7% |
9.1% |
9.4% |
6.0% |
Despite the challenging macro-economic backdrop, our Full and Mid SIPP products grew organically by 6.4% on a gross basis (2021: 7.9%) reflecting continued positive momentum in our most popular products. Our Mid SIPP product experienced strong gross organic growth of 8.0% (2021: 10.7%) and net growth of 5.6% (2021: 8.5%). In combination, the Full and Mid SIPPs products increased by 1.7%, after accounting for attrition, to 56,929 (2021: 55,971), slightly below our target range of 2% - 6%. In 2022, we added 3,602 new Full and Mid SIPPs across 369 adviser firms and wealth managers, of which 179 were new relationships.
Attrition levels were lower at 4.7% (2021: 6.1%), reflecting improving service levels across the business. We continue to have an attractive and loyal client base and our average case size of c. £455k is amongst the highest in the industry with one-third of our clients having been with the Group for over 10 years.
The Talbot and Muir business, which the Group acquired in 2020, has also demonstrated strong client retention and positive net growth of 6.0% in policies in force to 7,817 (2021: 7,374).
As at 31 December 2022, the total number of non-core SIPPs administered decreased to 21,663 (2021: 23,708), following the on-going managed reduction in these lower margin eSIPP and Third Party Administered ("TPA") products and this is expected to continue for the medium-term.
FinTech business
The segment performed below the Group's expectation in the year, with revenues of £9.3m (2021: £11.2m) due to difficulty in securing material new external revenue and a reduction in project activity from a key client. Consequently, an £11.5m impairment to the goodwill in relation to the Dunstan Thomas segment was recognised. The Board remains focused on improving the performance of Dunstan Thomas's third party business and the sales pipeline for FY23 remains strong with expectation of increased margins.
Dunstan Thomas continues to support the successful delivery of Curtis Banks's own technology strategy, providing internal efficiencies and enhancing our capabilities. CB Labs, established in conjunction with Dunstan Thomas's technical expertise, has delivered Chatbots, an annual allowance tool, a salary sacrifice tool, and the additional projects will further strengthen our product offerings. Dunstan Thomas is also prototyping a bank of technical concepts, including the adoption of machine learning and integration of capabilities directly on IFA platforms. As an integral part of the Group, we expect to further leverage Dunstan Thomas's expertise in FinTech to help us continue to develop our propositions for both advisers and clients. Nucleus intends to undertake a detailed review of the strategic fit of Dunstan Thomas within the Combined Group following the acquisition.
Industry backdrop
Despite the market volatility experienced in the last two years, Curtis Banks's business model has again proven to be resilient with our fixed fee approach delivering consistent revenue generation that is inflation proof. Our diverse product offering and extensive range of services enable us to respond to the evolving retirement market, which has faced greater levels of macroeconomic volatility in recent years.
The UK retail saving and investment market has experienced growth but faces headwinds due to the cost of living crisis, changing client preferences towards Environmental, social, and governance ("ESG") and responsible investing, and the uncertainty caused by the post pandemic inflationary economic environment. Individuals and households are facing affordability challenges due to ongoing inflationary pressures.
The Group is well advanced in preparation for the upcoming Consumer Duty regulations that are being introduced by the FCA. The new Consumer Duty sets higher and clearer standards of consumer protection across financial services and requires firms to put consumers at the heart of their business and focus on delivering good outcomes for customers.
Planning is underway to meet the deadlines and staff are fully engaged on all key activity. The milestones we are working towards are:
· 30 April 2023 - Completion of manufacturer reviews necessary to meet outcome rules for all Curtis Banks Group existing open products and services so that we can share with distributors to meet their obligations under the Duty and identify where changes need to be made.
· 31 July 2023 - Meeting implementation deadline for new and existing products.
· 31 July 2024 - Meeting implementation deadline for closed products.
Toby Larkman, Chief Commercial Officer, is the Programme Sponsor and Susan McInnes, Non-Executive Director, is the Board Consumer Duty Champion.
Target Operating Model
We reported in our half year results to 30 June 2022 that despite the progress on the consolidation of our back office administration systems, and the delivery of a number of elements of the programme, the completion date of 2024 was at risk.
In light of the planned acquisition by Nucleus, we are re-evaluating our objectives roadmap while remaining committed to enhancing efficiency and accountability, regardless of the path we choose.
Dividend
We paid an interim dividend of 2.5p per share (2021: 2.5p) on 11 November 2022. In light of the Nucleus transaction, the Board has decided not to propose a final dividend.
People update
In May 2022, Chris Macdonald (Chairman) and Jules Hydleman (Non-Executive Director) retired from the Board. Christopher Mills and I joined the Board as Non-Executive Director and Chairman of the Group respectively.
In August 2022, Will Self stepped down as Chief Executive Officer and as an Executive Director of the Group Board. I would like to once again thank Will for the commitment that he showed to the business and the huge contribution that he made throughout his time with the Group.
Following Will's departure, I assumed the role of Executive Chairman while we undertook searches to find a successor. I am pleased to report that on 10 January 2023 we appointed Peter Docherty as our new Chief Executive Officer, and I reverted to the role of Non-Executive Chairman on 1 February 2023. Peter is very well positioned to lead the business with over 20 years of experience in financial services, having most recently been the Chief Executive and Managing Director of the Embark Platform during which time he led a significant increase in customers and assets under administration driven by organic growth and integration initiatives. Previous positions include the roles of Chief Executive Officer and Chief Risk Officer of Alliance Trust Savings Limited. He joins us at an exciting time as we work towards the intended completion of the acquisition by Nucleus.
In November 2022, the Board appointed Susan McInnes as a Non-Executive Director and chair of the Remuneration Committee, taking over from Jill Lucas who resigned in December 2022. The Board also appointed Alastair Clarkson in December 2022 as a Non-Executive Director and chair of the regulated subsidiary entities of the Group. Both appointments bring a broad range of experience to the Group, particularly within customer outcomes, people, risk management and finance.
On 1 May 2023, Jane Ridgley retired from Curtis Banks and stepped down as the Group's Chief Operating Officer and from her directorships of all Group companies. I would like to take this opportunity to thank Jane for her dedication, hard work and leadership which have been instrumental in helping us achieve our goals. I am truly grateful for her many years of outstanding service to the Group and I wish Jane the very best of luck as she embarks on her retirement.
I am pleased to announce that Ross Allan replaced Jane as the Chief Operating Officer with effect from 1 May 2023. Ross brings a wealth of experience to Curtis Banks, having previously worked for abrdn and Standard Life and we are delighted to have him take on this important role with us.
I am also delighted to announce the addition of several new Executive Committee and senior management appointments within our IT, Transformational Change and Operations teams. These new hires bring a wealth of experience and expertise to the Group, and I am confident that they will play a crucial role in strengthening these key areas.
ESG
Curtis Banks offers a platform for clients to build, invest and access their pension through a variety of ways, including a wide range of investment options and flexible passing of wealth. We understand and appreciate our responsibility to our customers, as well as the ongoing commitments we have to our staff, customers, communities and the wider environment. The Group's purpose-led ESG strategy continues to recognise our delivery against these commitments, and this progress is outlined in this announcement. Our ESG policy (https://www.curtisbanks.co.uk/esg/) sets out our priorities and plans in implementing positive change. The Group's ESG performance is overseen at Board level by the Group's CEO, Peter Docherty.
Outlook
We expect revenue and profit margins to continue to improve in 2023 as interest on deposit balances benefit from a higher yield curve, alongside improvement in our FinTech segment which has been a key focus over H2 2022, and underlying stability in our pension administration fees.
The management team are also heavily focused on facilitating the proposed acquisition by Nucleus, however remain very mindful of the potential for delays or the unlikely event which causes the acquisition not to proceed. As such, we are investing substantial time and effort into delivering service improvements for clients and advisers, paying particular attention to incoming regulatory requirements, such as Consumer Duty. We are also strengthening the leadership team to accommodate expected integration activity with Nucleus and to ensure we maximise the potential of the core SIPP business (Full and Mid SIPPs), deliver systems improvements, and continue to maintain robust levels of service to our clients and advisers.
Section 172
The disclosures required under section 172 of the Companies Act are included in the Directors' report.
David Barral
Chairman
4 May 2023
Chief Financial Officer's Review
Results
Group financial performance for the year ended 31 December 2022 resulted in an adjusted profit before tax of £15.4m (2021: £14.0m), generating an adjusted operating margin of 24.1% (2021: 23.5%). By segment, the pension administration activity achieved an improved adjusted operating margin of 25.5% (2021: 23.9%); while the FinTech segment's adjusted operating margin decreased to 15.4% (2021: 21.9%). Adjusted diluted EPS increased to 18.7p (2021: 16.9p), while diluted EPS on a statutory basis reduced to a loss per share of 10.1p (2021: profit per share of 11.5p).
On a statutory basis, the loss before tax of £3.7m (2021: profit before tax of £9.3m) was materially driven by an impairment charge of £11.5m against the value of goodwill relating to the acquisition of Dunstan Thomas. As at 30 June 2022, goodwill associated with the acquisition of Dunstan Thomas was impaired by £9.8m due to expectations that the business segment's financial performance would fall materially short of expectations over the year. This created uncertainty over the forecast future cash flows, which was used to conduct the goodwill impairment assessment. It has subsequently been identified that in the assessment as at 30 June 2022 certain assumptions used in the discount rate were not reflective of risks specific to the CGU, and that a post-tax rate had been used rather than a pre-tax rate as required. Had these factors been reflected in the impairment assessment at 30 June 2022, the impairment would have been £11.5m which is the total impairment charge that has now been booked during the year ended 31 December 2022. There would have been no impact of these items on the financial statements for the prior year to 31 December 2021.
An additional driver of the loss before tax is the value of adjusting items recognised during the year. These included a previously disclosed incentive arrangement for the Chairman of the Group of £2.0m, and redundancy & restructuring costs of £2.7m, which included costs relating to Will Self's departure as CEO of the Group.
The challenging conditions of 2022 have been reflected in net growth in own Full and Mid SIPP plan numbers of 1.7%, this being slightly below our target range. The Group's financial performance has benefitted from an improvement in interest income, delivered by the yield curve steepening sharply, and also from a slight reduction in the level of regulatory costs incurred. In a challenging market place, organic sales remained robust, albeit lower than 2021, and attrition in Full & Mid SIPPs reduced compared to 2021.
The Group reports certain Alternative Performance Measures ("APMs") which we believe provide greater clarity to stakeholders over the Group's underlying performance and better enables stakeholders to form a view on the Group's future prospects. The principal APMs adopted are Adjusted Profit before Tax, Adjusted EPS and Adjusted Operating Margin, and these are presented further below.
Adjusting items are classified as such when the nature and quantum of the income or expense item is significant and arises from a business event, or activity, that does not form part of usual day-to-day operations. Examples of such items include acquisitions, including any subsequent re-measurement of contingent deferred consideration and amortisation of intangible assets, office relocations and restructuring activities.
A full reconciliation between the APMs and the statutory measures is disclosed below for 2022 and prior year comparatives:
|
£'000 |
Year ended 31 December 2022 |
|
Year ended 31 December 2021 |
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Revenue |
68,063 |
|
63,307 |
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Adjusted operating cost |
(51,639) |
|
(48,402) |
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Adjusted operating profit |
16,424 |
|
14,905 |
|
Adjusted operating margin |
24.1% |
|
23.5% |
|
Finance income |
134 |
|
20 |
|
Interest expense |
(1,196) |
|
(921) |
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Adjusted profit before tax |
15,362 |
|
14,004 |
|
|
|
|
|
|
Adjusting items: |
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|
|
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Dunstan Thomas acquisition costs |
- |
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(70) |
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Talbot and Muir acquisition costs |
- |
|
(63) |
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Other M&A related income/(costs) |
359 |
|
(1,401) |
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Movement on contingent consideration relating to acquisitions |
1,123 |
|
1,870 |
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Discount unwind on contingent consideration |
(499) |
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(879) |
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Redundancy & restructuring costs |
(2,665) |
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(626) |
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In-specie contributions |
- |
|
76 |
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Centralisation of pension administration system |
(273) |
|
(322) |
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Treasury solution implementation |
- |
|
(45) |
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Data cleansing provision |
63 |
|
(288) |
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Costs relating to the proposed acquisition by Nucleus |
(579) |
|
- |
|
Chairman's incentive - cash settled share based payment |
(2,000) |
|
- |
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Adjusting items |
(4,471) |
|
(1,748) |
|
|
|
|
|
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Impairment of Goodwill |
(11,545) |
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- |
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Intangible asset amortisation |
(3,086) |
|
(2,934) |
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IFRS (Loss)/Profit before tax |
(3,740) |
|
9,322 |
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Taxation |
(2,973) |
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(1,603) |
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IFRS (Loss)/Profit after tax |
(6,713) |
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7,719 |
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Adjusted EPS |
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Basic |
18.7p |
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17.1p |
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Diluted |
18.7p |
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16.9p |
Revenue
Revenue of £68.1m for 2022 was 7.6% higher than the comparable period (2021: £63.3m), driven by an increase in interest income. The Group saw a material reduction in Fintech revenue from Dunstan Thomas, along with a slight reduction in transactional SIPP fee volumes. In addition, the Group continued to progress its managed reduction in non-core eSIPP and TPA products. Despite this reduction, inflationary rises in fees levied, along with slight net growth in Full and Mid SIPPs and a robust fixed fee model, saw overall pension administration income remain stable year on year.
Fee revenue from SIPPs and SSASs remains the predominant source of income for the Group with a strong emphasis on recurring annual fee income. In 2022, fee income represented 67% of the total income and 91% of this fee income is recurring (2021: 88%). Interest income saw a £6.8m increase on the prior period comparative whilst the Fintech revenue contribution from Dunstan Thomas fell by £2.2m.
SIPP fees are based on a recurring fixed monetary annual fee and a menu of additional fixed fees depending on the services provided to the SIPPs. The annual fees for the Curtis Banks Full and Mid SIPP products were amended as at 1 February 2021 and at the same time we made a clear commitment to our clients as to how we will share interest revenue with them and therefore remove any discretion. All of the fees that are applied to our SIPP products are subject to contractual annual inflationary rises linked to the measurement of Average Weekly Earnings ("AWE"). AWE applied from 1 January 2022 was 7.1%.
SIPP fees are not correlated to movements in the value of underlying assets within the SIPP and as a result the recurring fee income of the Group is not directly affected by the volatility in financial markets. This is a key differential that sets us apart from most of our competitors and provides an attractive product in terms of competitive fees for higher value SIPPs. As the value of a SIPP increases our product becomes increasingly affordable from a basis points perspective, and vice versa.
Client deposits remained relatively stable across the period and as at 31 December 2022 the Group held £1.004bn (2021: £1.027bn) of client deposits across a range of UK-based, PRA regulated banking counterparties and managed the cash in line with its established Treasury Framework. As at the reporting date, the Group is paying 1.72% to clients on cash held within their SIPPs and this is expected to increase from 1 July 2023 as the Bank of England continues to keep base rates under review, with the expectation of a consequent improvement in deposit rates available.
Revenues generated by Dunstan Thomas were down £2.2m, largely due to a reduction of project income from a key client and the current economic climate. The combined performance over the last 3 years has resulted in a reduction of £1.9m to the total related contingent consideration expected to be payable over the earn out period and a corresponding credit to the consolidated statement of comprehensive income. The remaining earn out for the acquisition of Talbot and Muir was settled post year end and the remaining earn out for the acquisition of Dunstan Thomas is expected to be paid before 30 June 2023.
Expenses
The year ended 31 December 2022 saw administrative expenses, excluding amortisation of intangibles, goodwill impairment and adjusting items, increase to £51.6m (2021: £48.4m).
Staff costs increased to £34.6m (2021: £30.5m), which include adjusting items of £2.0m charge for the chairman's incentive, expected to be payable on completion of the transaction with Nucleus, and a substantial proportion of the £2.7m redundancy and restructuring costs disclosed. Overall staff costs have not changed materially year on year, with annual pay increases offset by a decrease in headcount. These costs continue to be protected to a large extent by the contractual inflationary increases applied to our SIPP and SSAS products.
Overall headcount stood at 801 as at 31 December 2022 compared to 828 as at 31 December 2021.
Non-staff costs in aggregate grew to £20.9m from £15.3m in 2021, driven by higher professional fees and an increase in compensation costs. This was a result of a small number of individual high value financial detriment cases and despite a decrease in the overall level of complaint volumes.
The Group continues to take steps to improve its adjusted operating margin through a combination of revenue enhancements, cost saving measures and operational efficiency improvements.
Adjusting Items
Adjusting items for the year were a net expense of £4.5m (2021: net expense of £1.7m) and include redundancy and restructuring costs, an incentive scheme arranged for the Chairman, and costs associated with the proposed Nucleus transaction.
Acquisition related items
A net credit of £0.4m has been recognised in the period as other M&A related costs which relates to contingency fees no longer payable on a potential corporate transaction which did not subsequently proceed.
Movement in contingent consideration and discount unwind
The movements in contingent consideration payable (a £1.1m reduction) and the discount unwind (£0.5m expense) are related to the acquisitions of Dunstan Thomas and Talbot and Muir. The contingent considerations are dependent on the business performance post-acquisition. The underperformance in Dunstan Thomas during the year has contributed to the reduction in the liability.
As at the reporting date, the final consideration relating to the Talbot and Muir acquisition has been fully settled, and the settlement was materially in line with that estimated at the balance sheet date.
The final consideration relating to the Dunstan Thomas acquisition is expected to be concluded imminently.
Redundancy and restructuring costs
In the year ended 31 December 2022, the Group incurred restructure costs of £0.6m relating to the physical closure of the Dundee office location and the transition of all Dundee-based colleagues to remote working arrangements (2021: £nil). The Group also incurred senior executive restructure costs of £2.0m (2021: £0.6m) of which £1m relates to the former CEO's departure.
Centralisation of pension administration system
The Group has made progress in implementing its strategy to transition its entire SIPP administration onto a single administration platform. During the year, the upgrade of the current Navision platform, which supports the majority of the Group's SIPPs, to the Navision Business Central platform progressed and was subsequently completed in January 2023. Following the announcement of the Nucleus acquisition in January 2023, there is uncertainty around the future application of Navision, and this remains under review pending the outcome of the proposed transaction. The net book value of the intangible assets capitalised in relation to this is £1.5m as at 31 December 2022.
Data cleansing provision
As part of the consolidation and integration exercise undertaken in 2018, a review of data records relating to commercial properties held within SIPPs administered by the Group was undertaken and data cleansing provision was recorded as a result. In 2022, management have reassessed the potential liability and released a portion of the previously recorded provision, resulting in a net credit of £0.1m.
Proposed acquisition by Nucleus
External advice supporting the negotiation and due diligence process in relation to the proposed acquisition by Nucleus resulted in costs of £0.6m, primarily consisting of professional fees and legal fees.
Chairman incentive
In October 2022, an incentive scheme was announced for the Group's Chairman, David Barral. This incentive has been accounted for as a cash-settled share-based payment transaction. Although the proposed acquisition by Nucleus was not announced until January 2023, i.e. after the end of the reporting period (and is still yet to complete and therefore has not yet been paid), management determined that it was appropriate to record the estimated incentive payment, an amount of £2.0m, in the year end financial statements, as it represented the best available estimate of the rewards expected to vest as at 31 December 2022, in accordance with the relevant International Financial Reporting Standard (IFRS 2 Share -based payment). The £2.0m value is based on the acquisition price of 350p per share and the term of the incentive agreement. If the transaction is successful, the amount is payable upon Completion.
Amortisation of intangible assets
Amortisation of the Group's intangible assets represented a charge of £3,086k (2021: £2,934k) for the year.
Goodwill impairment
As mentioned in the Results section above, goodwill associated with the acquisition of Dunstan Thomas was impaired by £11.5m due to expectations at half year 2022 reporting that the business segment's financial performance would fall materially short of expectations over the year and an update to the discount rate assumptions at year end.
Accounting methodology
During the year, Dunstan Thomas restructured their commercial model of software licensing and related services. This was done in order to ensure consistency in standard licensing practices, better management of business risk, and to respond more effectively to changing customer needs. As a result, new template customer agreements have been created and are now being used for the majority of new software license contracts.
Alongside this change, a formal accounting methodology assessment was conducted with the support of third party specialists, which concluded that revenue recognition under IFRS 15 (Revenue from contracts with customers) for certain new contracts would be different to the existing accounting methodology. Specifically, revenue associated with the license performance obligation itself will be recognised separately from that associated with the service, and recognised at a point in time when the license is delivered to the customer, instead of on a straight-line basis over the contract period.
Cash flows
Shareholder cash balances at period end were £23.9m compared to £31.9m at the end of December 2021.
Net cash inflows from shareholder operating activities for the period were £9.2m (2021: £13.5m). The reduction was due to exceptional cash inflows in the prior year from the cash attributable to the additional working capital introduced from Dunstan Thomas and Talbot and Muir on their respective acquisitions, and a reduction in profits generated in the period.
Net cash outflows from investing activities for the period were £5.8m (2021: £2.8m) which is largely attributable to the deferred consideration paid on the Talbot and Muir acquisition, of £2.7m, and the addition of intangible assets of £2.2m (2021: £1.7m) which relate primarily to product development activity within Dunstan Thomas and computer software.
Net cash outflows from financing activities were £11.4m. These represent a marginal increase from prior year (£11.3m), with the increase coming from higher interest payments and the absence of shares being issued in the year (2021: £0.3m).
Suffolk Life Annuities
Part of the Group, Suffolk Life Annuities Limited, is an insurance company that writes SIPP products as insurance contracts. These are all non-participating investment contracts and so the Group does not bear any insurance risk. As the policies are non-participating contracts, the client related assets and liabilities in Suffolk Life Annuities Limited match. In addition, the revenues, expenses and investment returns of the non-participating investment contracts are shown in the consolidated statement of comprehensive income. An illustrative balance sheet as at 31 December 2022 showing the financial position of the Group excluding the policyholder assets and liabilities is included as supplementary information. An illustrative cash flow on the same basis has also been provided.
Employee Benefit Trust ("EBT")
The EBT continues to be used to acquire shares in the Group in the open market to satisfy future vesting of options and long term incentive awards. The EBT is funded by loans from the Group. As at 31 December 2022, the EBT held 332,591 shares in Curtis Banks Group PLC (2021: 488,296). A number of options awarded under the Company's SAYE schemes vested during the year and awards were made from the shares held by the EBT.
The financial statements of the EBT are consolidated within the overall Group financial statements and these shares are shown on the balance sheet of the Group as Treasury Shares and are included within total equity.
Capital requirements
The Group's four (2021: four) regulated subsidiary companies submit regular returns to the FCA and the PRA relating to their capital resources. As at 31 December 2022, the total regulatory capital requirement across the Group was £15.6m (2021: £15.1m) and the Group had an aggregate surplus of £6.9m (2021: 17.0m). The reduction in surplus was primarily driven by a timing differences relating to accrued interest receivable over 90 days which increased substantially over H2 2022 following the higher interest rate environment. All subsidiaries complied with their regulatory requirements throughout the year. In addition to this, it is the Group's internal policy for regulated companies within the Group to hold at least 130% of their required regulatory capital and to take corrective action should regulatory capital dip below this level.
One of the Group's FCA regulated entities dipped below the 130% internal policy for a short period due to a timing difference in recognising interest income for regulatory purposes. The audits of all regulated subsidiary results for 2022 have been completed as of the date of this announcement and consequently coverage has now returned above 130%, in line with the Group's internal policy.
Three (2021: three) of the principal trading subsidiaries of the Group are regulated by the FCA and are subject to the relevant capital adequacy rules. The fourth regulated entity, Suffolk Life Annuities Limited ("SLA"), being an insurance company, is subject to Solvency II rules and its capital requirement is determined by the Standard Formula as set out in the Solvency II directives. The regulatory solvency position (the ratio of the Company's own funds to the biting requirement) of SLA was 216% as at 31 December 2022 (2021: 319%). Full details of SLA's capital position are set out in the Solvency and Financial Condition Report published annually on the Group's website.
Financial Position
The statement of Financial Position as at 31 December 2022 reflects shareholder net assets decreasing from £81.6m at 31 December 2021 to £69.4m as at 31 December 2022 primarily as a result of the £11.5m impairment charge taken during the current period.
As at 31 December 2022 the Group had net shareholder cash (after debt) of £7.7m (2021: £12.0m).
Outlook
The Group's profitability is not directly linked to market performance and therefore the growth in our SIPP numbers provides more visibility and less volatility of earnings, combined with discipline over our controllable cost base. We have benefited from the interest income increase as a result of the rising interest rate environment in the year and expect this to increase materially during 2023.
The proposed Nucleus transaction is expected to unlock significant new opportunities for the Group. With the investment, the combined business aims to further enhance business infrastructure to drive greater efficiency and offer even better services and products to our customers and advisors.
Dan Cowland
Chief Financial Officer
4 May 2023
Consolidated statement of comprehensive income
For The Year Ended 31 December 2022
|
|
|
|
|
|
Year ended 31 December 2022 |
|
Year ended 31 December 2021 |
||
|
|
|
|
|
|
Total |
|
Total |
||
|
|
|
|
|
|
£'000 |
|
£'000 |
||
|
Revenue |
|
|
|
|
68,063 |
|
63,307 |
||
|
|
|
|
|
|
|
|
|
||
|
Administrative expenses |
|
|
|
|
(58,697) |
|
(52,205) |
||
|
Impairment of goodwill |
|
|
|
|
(11,545) |
|
|
- |
|
|
Policyholder investment (losses)/returns |
|
|
|
(288,162) |
|
|
466,811 |
|
|
|
Non-participating investment contract expenses |
|
|
|
(34,372) |
|
|
(33,850) |
|
|
|
Changes in provisions: Non-participating investment contract liabilities |
|
|
|
322,534 |
|
|
(432,961) |
|
|
|
Policyholder total |
|
|
|
|
- |
|
- |
||
|
|
|
|
|
|
|
|
|
|
|
|
Operating (loss)/profit |
|
|
|
|
(2,179) |
|
|
11,102 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Finance income |
|
|
|
|
|
134 |
|
|
20 |
|
Finance costs |
|
|
|
|
|
(1,695) |
|
|
(1,800) |
|
(Loss)/Profit before tax |
|
|
|
|
|
(3,740) |
|
|
9,322 |
|
|
|
|
|
|
|
|
|
||
|
Taxation |
|
|
|
|
|
(2,973) |
|
|
(1,603) |
|
(Loss)/profit for the year and total comprehensive (loss)/income for the year |
|
(6,713) |
|
|
7,719 |
||||
|
|
|
|
|
|
|
|
|
||
|
Attributable to: |
|
|
|
|
|
|
|
||
|
Equity holders of the company |
|
|
|
|
|
(6,713) |
|
|
7,723 |
|
Non-controlling interests |
|
|
|
|
|
- |
|
|
(4) |
|
|
|
|
|
|
|
(6,713) |
|
|
7,719 |
|
(Loss) per ordinary share on the net loss /Earnings per ordinary share on net profit |
|
|
|
|
|
|
|
||
|
Basic (pence) |
|
|
|
|
(10.1) |
|
11.6 |
||
|
Diluted (pence) |
|
|
|
|
(10.1) |
|
11.5 |
||
The consolidated statement of comprehensive income has been prepared on the basis that all operations are continuing operations.
Consolidated statement of financial position
As at 31 December 2022
|
|
|
|
|
|
|
|
Group |
||
|
Group |
|
|
|
|
|
|
As at 31-Dec-22 £'000 |
|
As at 31-Dec-21 £'000 |
|
ASSETS |
|
|
|
|
|
|
|
|
|
|
Non-current assets |
|
|
|
|
|
|
|
|
|
|
Intangible assets |
|
|
|
|
|
|
77,362 |
|
89,814 |
|
Investment property |
|
|
|
|
|
|
1,108,073 |
|
1,316,468 |
|
Property, plant and equipment |
|
|
|
|
|
|
8,012 |
|
8,636 |
|
Investments |
|
|
|
|
|
|
1,970,567 |
|
2,224,965 |
|
|
|
|
|
|
|
|
3,164,014 |
|
3,639,883 |
|
Current assets |
|
|
|
|
|
|
|
|
|
|
Trade and other receivables |
|
|
|
|
|
|
31,859 |
|
27,981 |
|
Cash and cash equivalents |
|
|
|
|
|
|
404,816 |
|
410,133 |
|
Current tax asset |
|
|
|
|
|
|
371 |
|
957 |
|
|
|
|
|
|
|
|
437,046 |
|
439,071 |
|
|
|
|
|
|
|
|
|
|
|
|
Total assets |
|
|
|
|
|
|
3,601,060 |
|
4,078,954 |
|
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES |
|
|
|
|
|
|
|
|
|
|
Current liabilities |
|
|
|
|
|
|
|
|
|
|
Trade and other payables |
|
|
|
|
|
|
21,942 |
|
20,853 |
|
Deferred income |
|
|
|
|
|
|
30,943 |
|
29,960 |
|
Borrowings |
|
|
|
|
|
|
40,632 |
|
46,832 |
|
Lease liabilities |
|
|
|
|
|
|
1,040 |
|
964 |
|
Provisions |
|
|
|
|
|
|
484 |
|
453 |
|
Contingent consideration |
|
|
|
|
|
|
4,355 |
|
2,467 |
|
|
|
|
|
|
|
|
99,396 |
|
101,529 |
|
Non-current liabilities |
|
|
|
|
|
|
|
|
|
|
Borrowings |
|
|
|
|
|
|
34,903 |
|
43,957 |
|
Lease liabilities |
|
|
|
|
|
|
6,290 |
|
6,774 |
|
Provisions |
|
|
|
|
|
|
2 |
|
178 |
|
Contingent consideration |
|
|
|
|
|
|
- |
|
5,199 |
|
Non-participating investment contract liabilities |
|
|
|
|
3,387,893 |
|
3,836,211 |
||
|
Deferred tax liability |
|
|
|
|
|
|
3,214 |
|
3,464 |
|
|
|
|
|
|
|
|
3,432,302 |
|
3,895,783 |
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities |
|
|
|
|
|
|
3,531,698 |
|
3,997,312 |
|
|
|
|
|
|
|
|
|
|
|
|
Net assets |
|
|
|
|
|
|
69,362 |
|
81,642 |
|
|
|
|
|
|
|
|
|
|
|
|
Equity attributable to owners of the parent |
|
|
|
|
|
|
|
|
|
|
Issued capital |
|
|
|
|
|
|
332 |
|
332 |
|
Share premium |
|
|
|
|
|
|
58,087 |
|
58,087 |
|
Equity share based payments |
|
|
|
|
|
|
3,079 |
|
2,840 |
|
Treasury shares |
|
|
|
|
|
|
(1,284) |
|
(1,382) |
|
Retained earnings |
|
|
|
|
|
|
9,148 |
|
21,755 |
|
|
|
|
|
|
69,362 |
|
81,632 |
||
|
|
|
|
|
|
|
|
|
|
|
|
Non-controlling interest |
|
|
|
|
|
- |
|
10 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Total equity |
|
|
|
|
|
|
69,362 |
|
81,642 |
Company statement of financial position
As at 31 December 2022
|
|
|
|
|
|
|
|
Company |
||
|
Company |
|
|
|
|
|
|
As at 31-Dec-22 £'000 |
|
As at 31-Dec-21 £'000 |
|
ASSETS |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-current assets |
|
|
|
|
|
|
|
|
|
|
Investments |
|
|
|
|
|
|
97,932 |
|
109,317 |
|
|
|
|
|
|
|
|
97,932 |
|
109,317 |
|
Current assets |
|
|
|
|
|
|
|
|
|
|
Trade and other receivables |
|
|
|
|
|
|
321 |
|
377 |
|
Cash and cash equivalents |
|
|
|
|
|
|
3,232 |
|
4,458 |
|
Current tax asset |
|
|
|
|
|
|
519 |
|
519 |
|
|
|
|
|
|
|
|
4,072 |
|
5,354 |
|
|
|
|
|
|
|
|
|
|
|
|
Total assets |
|
|
|
|
|
|
102,004 |
|
114,671 |
|
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES |
|
|
|
|
|
|
|
|
|
|
Current liabilities |
|
|
|
|
|
|
|
|
|
|
Trade and other payables |
|
|
|
|
|
|
2,885 |
|
1,383 |
|
Borrowings |
|
|
|
|
|
|
4,565 |
|
4,507 |
|
Contingent consideration |
|
|
|
|
|
|
4,355 |
|
2,467 |
|
|
|
|
|
|
|
|
11,805 |
|
8,357 |
|
Non-current liabilities |
|
|
|
|
|
|
|
|
|
|
Borrowings |
|
|
|
|
|
|
11,628 |
|
15,399 |
|
Contingent consideration |
|
|
|
|
|
|
- |
|
5,199 |
|
|
|
|
|
|
|
|
11,628 |
|
20,598 |
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities |
|
|
|
|
|
|
23,433 |
|
28,955 |
|
|
|
|
|
|
|
|
|
|
|
|
Net assets |
|
|
|
|
|
|
78,571 |
|
85,716 |
|
|
|
|
|
|
|
|
|
|
|
|
Equity attributable to owners of the parent |
|
|
|
|
|
|
|
|
|
|
Issued capital |
|
|
|
|
|
|
332 |
|
332 |
|
Share premium |
|
|
|
|
|
|
58,087 |
|
58,087 |
|
Equity share based payments |
|
|
|
|
|
|
3,079 |
|
2,840 |
|
Retained earnings |
|
|
|
|
|
|
17,073 |
|
24,457 |
|
Total equity |
|
|
|
|
|
|
78,571 |
|
85,716 |
As permitted by section 408 Companies Act 2006, the holding company's profit and loss account has not been included. The Company's loss after tax for the year was £1,400k (2021: profit of £11,656k).
Consolidated statement of changes in equity
For The Year Ended 31 December 2022
Group
|
|
Issued capital £'000 |
|
Share premium £'000 |
|
Equity share based payments £'000 |
|
Treasury shares £'000 |
|
Retained earnings £'000 |
|
Total £'000 |
|
Non-controlling interest £'000 |
|
Total Equity £'000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At 1 January 2021 |
330 |
|
57,799 |
|
2,747 |
|
(741) |
|
20,134 |
|
80,269 |
|
14 |
|
80,283 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Profit/(loss) and total comprehensive income for the year |
- |
|
- |
|
- |
|
- |
|
7,723 |
|
7,723 |
|
(4) |
|
7,719 |
|
Share based payments |
- |
|
- |
|
93 |
|
- |
|
- |
|
93 |
|
- |
|
93 |
|
Ordinary shares bought and sold by EBT |
- |
|
- |
|
- |
|
(641) |
|
- |
|
(641) |
|
- |
|
(641) |
|
Ordinary shares issued |
2 |
|
288 |
|
- |
|
- |
|
- |
|
290 |
|
- |
|
290 |
|
Deferred tax on share based payments |
- |
|
- |
|
- |
|
- |
|
(105) |
|
(105) |
|
- |
|
(105) |
|
Ordinary dividends declared and paid |
- |
|
- |
|
- |
|
- |
|
(5,997) |
|
(5,997) |
|
- |
|
(5,997) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At 31 December 2021 |
332 |
|
58,087 |
|
2,840 |
|
(1,382) |
|
21,755 |
|
81,632 |
|
10 |
|
81,642 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss and total comprehensive loss for the year |
- |
|
- |
|
- |
|
- |
|
(6,713) |
|
(6,713) |
|
- |
|
(6,713) |
|
Share based payments |
- |
|
- |
|
239 |
|
- |
|
- |
|
239 |
|
- |
|
239 |
|
Ordinary shares bought and sold by EBT |
- |
|
- |
|
- |
|
98 |
|
- |
|
98 |
|
- |
|
98 |
|
Deferred tax on share based payments |
- |
|
- |
|
- |
|
- |
|
90 |
|
90 |
|
- |
|
90 |
|
Ordinary dividends declared and paid |
- |
|
- |
|
- |
|
- |
|
(5,984) |
|
(5,984) |
|
(10) |
|
(5,994) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At 31 December 2022 |
332 |
|
58,087 |
|
3,079 |
|
(1,284) |
|
9,148 |
|
69,362 |
|
- |
|
69,362 |
Consolidated statement of changes in equity
For The Year Ended 31 December 2022
Company
|
|
Issued Capital £'000 |
|
Share Premium £'000 |
|
Equity share based payments £'000 |
|
Retained earnings £'000 |
|
Total £'000 |
|
|
|
|
|
|
|
|
|
|
|
|
At 1 January 2021 |
330 |
|
57,799 |
|
2,747 |
|
18,798 |
|
79,674 |
|
|
|
|
|
|
|
|
|
|
|
|
Profit and total comprehensive income for the year |
- |
|
- |
|
- |
|
11,656 |
|
11,656 |
|
Share based payments |
- |
|
- |
|
93 |
|
- |
|
93 |
|
Ordinary shares issued |
2 |
|
288 |
|
- |
|
- |
|
290 |
|
Ordinary dividends declared and paid |
- |
|
- |
|
- |
|
(5,997) |
|
(5,997) |
|
|
|
|
|
|
|
|
|
|
|
|
At 31 December 2021 |
332 |
|
58,087 |
|
2,840 |
|
24,457 |
|
85,716 |
|
|
|
|
|
|
|
|
|
|
|
|
Loss and total comprehensive loss for the year |
- |
|
- |
|
- |
|
(1,400) |
|
(1,400) |
|
Share based payments |
- |
|
- |
|
239 |
|
- |
|
239 |
|
Ordinary dividends declared and paid |
- |
|
- |
|
- |
|
(5,984) |
|
(5,984) |
|
|
|
|
|
|
|
|
|
|
|
|
At 31 December 2022 |
332 |
|
58,087 |
|
3,079 |
|
17,073 |
|
78,571 |
Consolidated statement of cash flows
For The Year Ended 31 December 2022
|
|
|
|
|
|
Group |
||||
|
|
|
|
|
|
Year ended 31 December |
||||
|
|
|
|
|
|
2022 £'000 |
|
*Restated 2021 £'000 |
||
|
Cash flows from operating activities |
|
|
|
|
|
|
|||
|
(Loss)/Profit before tax |
|
|
|
|
(3,740) |
|
9,322 |
||
|
Adjustments for: |
|
|
|
|
|
|
|
||
|
Depreciation |
|
|
|
|
1,645 |
|
1,806 |
||
|
Amortisation and impairments |
|
|
|
|
14,631 |
|
2,934 |
||
|
Finance costs |
|
|
|
|
1,695 |
|
1,800 |
||
|
Share based payment expense |
|
|
|
|
239 |
|
93 |
||
|
Fair value gains on movement in contingent consideration |
|
(1,123) |
|
(1,870) |
|||||
|
Fair value losses/(gains) on financial investments |
|
|
|
202,325 |
|
(213,701) |
|||
|
Additions of financial investments |
|
|
|
|
(620,331) |
|
(647,479) |
||
|
Disposals of financial investments |
|
|
|
|
672,404 |
|
708,532 |
||
|
Fair value losses/(gains) on investment properties |
|
|
175,450 |
|
(120,416) |
||||
|
(Decrease)/Increase in non-participating investment contract liabilities |
|
|
(448,318) |
|
250,904 |
||||
|
Changes in working capital: |
|
|
|
|
|
|
|
||
|
Increase in trade and other receivables |
|
(3,911) |
|
(1,330) |
|||||
|
Increase in trade and other payables |
|
|
2,032 |
|
5,017 |
||||
|
Taxes paid |
|
|
|
|
(2,514) |
|
(2,410) |
||
|
Net cash flows used in operating activities |
|
|
(9,516) |
|
(6,798) |
||||
|
|
|
|
|
|
|
|
|
||
|
Cash flows from investing activities |
|
|
|
|
|
|
|||
|
Payments for intangible assets |
|
|
|
|
(2,179) |
|
(1,670) |
||
|
Purchase of property, plant and equipment |
|
|
(683) |
|
(270) |
||||
|
Purchase of investment property |
|
|
(84,724) |
|
(92,456) |
||||
|
Net Sale/(purchase) of shares in the Group by EBT |
|
|
98 |
|
(641) |
||||
|
Receipts from sale of investment property |
|
|
117,669 |
|
105,009 |
||||
|
Payment for acquisition of subsidiary |
|
|
|
|
(2,687) |
|
(255) |
||
|
Net cash flows received from investing activities |
|
|
27,494 |
|
9,717 |
||||
|
|
|
|
|
|
|
|
|
||
|
Cash flows from financing activities |
|
|
|
|
|
|
|||
|
Equity dividends paid |
|
|
|
|
(5,984) |
|
(5,997) |
||
|
Net proceeds from issue of ordinary shares |
|
|
|
- |
|
290 |
|||
|
Net decrease in borrowings* |
|
|
|
|
(11,901) |
|
(10,148) |
||
|
Principal elements of lease payments |
|
|
|
|
(894) |
|
(762) |
||
|
Interest paid |
|
|
|
|
(876) |
|
(781) |
||
|
Net cash used in financing activities |
|
|
(19,655) |
|
(17,398) |
||||
|
|
|
|
|
|
|
|
|||
|
Net decrease in cash and cash equivalents |
|
|
(1,677) |
|
(14,479) |
||||
|
|
|
|
|
|
|
|
|
||
|
Cash and cash equivalents at the beginning of the year* |
|
|
386,187 |
|
400,666 |
||||
|
|
|
|
|
|
|
|
|||
|
Cash and cash equivalents at the end of the year* |
|
|
384,510 |
|
386,187 |
||||
Company statement of cash flows
For The Year Ended 31 December 2022
|
|
|
|
|
Company |
||||||
|
|
|
|
|
Year ended 31 December |
||||||
|
|
|
|
|
|
|
2022 £'000 |
|
As restated* 2021 £'000 |
||
|
Cash flows from operating activities |
|
|
|
|
|
|
|
|||
|
(Loss)/profit before tax |
|
|
|
|
|
(1,400) |
|
11,656 |
||
|
Adjustments for: |
|
|
|
|
|
|
|
|
||
|
Interest expense |
|
|
|
|
|
1,368 |
|
712 |
||
|
Impairment of investments |
|
|
|
|
|
11,701 |
|
- |
||
|
Fair value gains on movement in contingent consideration* |
|
|
|
(1,123) |
|
(1,870) |
||||
|
Changes in working capital: |
|
|
|
|
|
|
|
|
||
|
Decrease/(increase) in trade and other receivables |
|
|
|
56 |
|
(345) |
||||
|
Increase/(decrease) in trade and other payables |
|
|
|
|
1,533 |
|
693 |
|||
|
Taxes paid |
|
|
|
- |
|
(275) |
||||
|
Net cash flows received from operating activities |
|
|
|
12,135 |
|
10,571 |
||||
|
|
|
|
|
|
|
|
|
|
||
|
Cash flows from investing activities |
|
|
|
|
|
|
|
|||
|
Payment for acquisition of subsidiary |
|
|
|
|
(2,764) |
|
(255) |
|||
|
Net cash flows used in investing activities |
|
|
|
|
(2,764) |
|
(255) |
|||
|
|
|
|
|
|
|
|
|
|
||
|
Cash flows from financing activities |
|
|
|
|
|
|
|
|||
|
Equity dividends paid |
|
|
|
|
|
(5,984) |
|
(5,997) |
||
|
Net proceeds from issue of ordinary shares |
|
|
|
|
- |
|
290 |
|||
|
Net decrease in borrowings |
|
|
|
|
|
(4,000) |
|
(3,850) |
||
|
Interest paid |
|
|
|
|
|
(613) |
|
(712) |
||
|
Net cash used in financing activities |
|
|
|
(10,597) |
|
(10,269) |
||||
|
|
|
|
|
|
|
|
|
|||
|
Net (decrease)/increase in cash and cash equivalents |
|
|
|
(1,226) |
|
47 |
||||
|
|
|
|
|
|
|
|
|
|
||
|
Cash and cash equivalents at the beginning of the year |
|
|
|
4,458 |
|
4,411 |
||||
|
|
|
|
|
|
|
|
|
|||
|
Cash and cash equivalents at the end of the year |
|
|
|
3,232 |
|
4,458 |
||||
*The audited results for year ended 31 December 2021 has been restated to include additional line items including 'Fair value gains on movement in contingent consideration' and 'share based payments' which were included in working capital movements instead of disclosed separately. This restatement is a disclosure only reclassification that improves consistency over year on year.
1 Corporate information
Curtis Banks Group PLC ("the Company") is a public limited company incorporated and domiciled in England and Wales, whose shares are publicly traded on the AIM market of the London Stock Exchange PLC.
At 31 December 2022 the Group administered circa £35.8bn (2021: £37.4bn) of pension assets on behalf of over 78,500 (2021: 80,000) active customers. More than 800 staff are employed across its head office in Bristol and regional locations in Ipswich, Dundee, Portsmouth, Nottingham and Leeds.
The Executives have proven experience in the retail savings, pensions and wealth markets and have established a business that focuses on a service-driven proposition for the administration of flexible SIPPs. The Group's core pension products are primarily distributed by authorised and regulated financial advisers, targeted towards pension savers who wish to take full advantage of the features and flexibility offered in the UK's modern and changing pension regime. Strong, long-standing relationships with key distributors result in high levels of retention and repeat business.
The Group continues to be focussed on delivering value to both customers and shareholders and continuing to develop its client and service excellence.
Note: The Group includes an insurance company, Suffolk Life Annuities Limited, which provides SIPPs through non-participating individual insurance contracts. Due to Suffolk Life Annuities Limited's status as an insurance company, the consolidated results for the whole Group are required to include insurance policyholder assets and liabilities as well as the assets and liabilities and profits attributable to our shareholders. Notes 16 and 17 to this Announcement illustrate the split between policyholder and shareholder assets and liabilities and cash flows.
2 Revenue
Revenue is wholly derived from activities undertaken within the United Kingdom and comprises the following categories:
|
|
|
Year ended 31 December |
||||
|
|
|
|
|
2022 £'000 |
|
2021 £'000 |
|
|
|
|
|
|
|
|
|
Pension administration fees |
|
|
|
45,295 |
|
45,091 |
|
FinTech services |
|
|
|
7,694 |
|
9,900 |
|
Pension administration interest income |
|
|
|
15,074 |
|
8,316 |
|
|
|
|
|
|
|
|
|
|
|
|
|
68,063 |
|
63,307 |
3 Total comprehensive income for the year
Total comprehensive income for the year is arrived at after charging:
|
|
|
Year ended 31 December |
||||
|
|
|
|
|
2022 £'000 |
|
2021 £'000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amortisation and impairment of intangible assets |
|
|
|
14,631 |
|
2,934 |
|
Depreciation of property, plant and equipment |
|
|
|
1,645 |
|
1,806 |
|
Auditors' remuneration: |
|
|
|
|
|
|
|
- audit of the company and consolidated financial statements |
|
|
|
285 |
|
227 |
|
- audit of the financial statements of the subsidiaries |
|
|
|
440 |
|
397 |
|
- audit related assurance services |
|
|
|
71 |
|
40 |
4 Operating segment reporting
The following tables present revenue and profit information regarding the Group's operating segments for the two years ended 31 December 2022 and 31 December 2021 respectively.
|
Year ended 31 December 2022 |
Pension Administration £'000 |
|
FinTech £'000 |
|
Consolidation adjustments £'000 |
|
Consolidated £'000 |
|
|
|
|
|
|
|
|
|
|
|
|
Revenue |
|
|
|
|
|
|
|
|
|
External customers |
|
60,369 |
|
7,694 |
|
- |
|
68,063 |
|
Internal customers |
|
- |
|
1,557 |
|
(1,557) |
|
- |
|
|
|
60,369 |
|
9,251 |
|
(1,557) |
|
68,063 |
|
|
|
|
|
|
|
|
|
|
|
Administrative expenses |
|
|
|
|
|
|
|
|
|
External customers |
|
51,421 |
|
7,276 |
|
- |
|
58,697 |
|
Internal customers |
|
549 |
|
773 |
|
(1,322) |
|
- |
|
Impairment of goodwill |
|
- |
|
- |
|
11,545 |
|
11,545 |
|
|
|
51,970 |
|
8,049 |
|
10,223 |
|
70,242 |
|
|
|
|
|
|
|
|
|
|
|
Operating profit / (loss) |
8,399 |
|
1,202 |
|
(11,780) |
|
(2,179) |
|
|
Year ended 31 December 2021 |
Pension Administration £'000 |
|
FinTech £'000 |
|
Consolidation adjustments £'000 |
|
Consolidated £'000 |
|
|
|
|
|
|
|
|
|
|
|
|
Revenue |
|
|
|
|
|
|
|
|
|
External customers |
|
53,407 |
|
9,900 |
|
- |
|
63,307 |
|
Internal customers |
|
- |
|
1,349 |
|
(1,349) |
|
- |
|
|
|
53,407 |
|
11,249 |
|
(1,349) |
|
63,307 |
|
|
|
|
|
|
|
|
|
|
|
Administrative expenses |
|
|
|
|
|
|
|
|
|
External customers |
|
43,866 |
|
8,339 |
|
- |
|
52,205 |
|
Internal customers |
|
813 |
|
390 |
|
(1,203) |
|
- |
|
|
|
44,679 |
|
8,729 |
|
(1,203) |
|
52,205 |
|
|
|
|
|
|
|
|
|
|
|
Operating profit / (loss) |
8,728 |
|
2,520 |
|
(146) |
|
11,102 |
|
Corporate costs
The Group's operating segments are managed together as one business. Accordingly, certain corporate costs such as finance income and expenses, gains and losses on the disposal of assets, taxes, intangible assets and certain other assets and liabilities are not allocated to individual segments as they are managed on a group basis. Segment operating profit or loss reflects the measure of segment performance reviewed by the Board of Directors (the Chief Operating Decision Maker).
The following table presents a split of assets and liabilities of the Group's operating segments for the year ended 31 December 2022.
Corporate assets and liabilities are not allocated to individual operating segments as they are managed on a group basis. Policyholder assets and liabilities are not allocated to individual operating segments as all investment returns associated with these are due back to policyholders under non-participating investment contracts, alongside non-participating investment contract expenses and changes in provisions for non-participating investment contract liabilities, such that the impact on shareholder assets and liabilities, and profit or loss, is nil.
|
As at 31 December 2022 |
Pension Administra-tion £'000 |
|
FinTech £'000 |
|
Corporate £'000 |
|
Policyholder £'000 |
|
Consolidated £'000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total assets |
63,573 |
|
10,427 |
|
55,389 |
|
3,471,670 |
|
3,601,059 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities |
34,094 |
|
3,154 |
|
22,780 |
|
3,471,670 |
|
3,531,698 |
|
The split of assets and liabilities of the Group's operating segments as at 31 December 2021 is illustrated below:
|
As at 31 December 2021 |
Pension Administra-tion £'000 |
|
FinTech £'000 |
|
Corporate £'000 |
|
Policyholder £'000 |
|
Consolidated £'000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total assets |
65,960 |
|
9,508 |
|
70,853 |
|
3,932,633 |
|
4,078,954 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities |
32,793 |
|
3,113 |
|
28,773 |
|
3,932,633 |
|
3,997,312 |
|
5 Directors and employees
|
|
Year ended 31 December |
||||
|
|
|
|
2022 £'000 |
|
2021 £'000 |
|
|
|
|
|
|
|
|
Wages and salaries |
|
|
26,925 |
|
25,189 |
|
Social security costs |
|
|
2,878 |
|
2,644 |
|
Other pension costs |
|
|
2,576 |
|
2,327 |
|
Share-based incentive awards |
|
|
2,244 |
|
364 |
|
|
|
|
34,623 |
|
30,524 |
|
|
|
|
|
|
|
|
|
|
|
2022 |
|
2021 |
|
The monthly average number of employees during the year was: |
|
Number |
|
Number |
|
|
|
|
|
|
|
|
|
Directors |
|
|
8 |
|
7 |
|
Administration |
|
|
793 |
|
821 |
|
|
|
|
801 |
|
828 |
|
Details of emoluments paid to the directors and key management personnel of the Group are as follows:
|
|||||
|
|
Year ended 31 December |
||||
|
|
|
|
2022 £'000 |
|
2021 £'000 |
|
Total emoluments paid to: |
|
|
|
|
|
|
Directors |
|
|
|
|
|
|
Wages and salaries |
|
|
1,288 |
|
1,354 |
|
Social security costs |
|
338 |
|
162 |
|
|
Compensation for loss of office |
|
1,006 |
|
- |
|
|
Post-employment costs |
|
8 |
|
14 |
|
|
Share-based incentive awards |
|
2,057 |
|
80 |
|
|
Other key management personnel |
|
|
|
|
|
|
Wages and salaries |
|
1,066 |
|
1,005 |
|
|
Compensation for loss of office |
|
219 |
|
62 |
|
|
Social security costs |
|
158 |
|
129 |
|
|
Post-employment costs |
|
119 |
|
69 |
|
|
Share-based incentive awards |
|
15 |
|
2 |
|
|
|
|
6,274 |
|
2,877 |
|
|
Emoluments of highest paid director: |
|
|
|
|
|
|
Wages and salaries |
|
|
2,106 |
|
429 |
|
Pension contribution |
|
|
- |
|
6 |
|
|
|
|
2,106 |
|
435 |
Short term employee benefits include wages and salaries. Long term employee benefits include share-based incentive awards.
6 Finance costs
|
|
Year ended 31 December |
||||
|
|
|
|
2022 £'000 |
|
2021 £'000 |
|
|
|
|
|
|
|
|
Interest payable on bank loans |
|
|
869 |
|
702 |
|
Interest and finance costs on lease liabilities |
|
|
262 |
|
209 |
|
Other interest expense |
|
|
65 |
|
10 |
|
Total interest expense |
|
|
1,196 |
|
921 |
|
Unwind of discount on contingent consideration relating to: |
|
|
|
|
|
|
Acquisition of Dunstan Thomas |
|
|
161 |
|
364 |
|
Acquisition of Talbot and Muir |
|
|
338 |
|
515 |
|
|
|
|
|
|
|
|
Total finance costs |
|
|
1,695 |
|
1,800 |
7 Taxation
|
|
Year ended 31 December |
||||
|
|
|
|
2022 £'000 |
|
2021 £'000 |
|
Domestic current year tax |
|
|
|
|
|
|
UK Corporation tax |
|
|
2,615 |
|
1,875 |
|
Under provision in prior years |
|
|
551 |
|
121 |
|
|
|
|
|
|
|
|
Deferred tax |
|
|
|
|
|
|
Origination and reversal of temporary differences |
|
|
(193) |
|
(393) |
|
|
|
|
2,973 |
|
1,603 |
|
|
|
|
|
|
|
|
Factors affecting the tax charge for the year |
|
|
|
|
|
|
(Loss)/Profit before tax |
|
|
(3,740) |
|
9,322 |
|
|
|
|
|
|
|
|
(Loss)/Profit before tax multiplied by standard rate of UK Corporation tax of 19% (2021: 19%) |
|
|
(711) |
|
1,771 |
|
|
|
|
|
|
|
|
Effects of: |
|
|
|
|
|
|
Adjustment to prior year |
|
|
555 |
|
121 |
|
Non-deductible expenses |
|
|
2,868 |
|
93 |
|
Other tax adjustments |
|
|
261 |
|
(382) |
|
|
|
|
3,684 |
|
(168) |
|
Total tax charge |
|
|
2,973 |
|
1,603 |
8 (Loss)/Earnings per share
Basic earnings per share amounts are calculated by dividing net profit for the year attributable to equity holders of the Company by the weighted average number of ordinary shares outstanding during the year.
Diluted earnings per share amounts are calculated by dividing the net profit attributable to ordinary equity holders of the Company by the weighted average number of ordinary shares outstanding during the year plus the weighted average number of ordinary shares that would be issued on the conversion of all the dilutive potential ordinary shares into ordinary shares.
Changes in income or expense that would result from the conversion of the dilutive potential ordinary shares are deemed to be trivial, and therefore no separate diluted net profit is presented.
The following reflects the income and share data used in the basic and diluted earnings per share computations:
|
|
|
2022 £'000 |
|
2021 £'000 |
|
|
|
|
|
|
|
Net (loss)/profit available to equity holders of the Company |
(6,713) |
|
7,723 |
|
|
|
|
|
|
|
|
|
|
Number |
|
Number |
|
Weighted average number of ordinary shares: |
|
|
|
|
|
Issued ordinary shares at start of the year |
|
66,879,312 |
|
66,414,312 |
|
Effect of shares issued during the year |
|
- |
|
333,781 |
|
Effect of shares held by employee benefit trust |
|
(390,563) |
|
(316,688) |
|
Basic weighted average number of shares |
|
66,488,749 |
|
66,431,405 |
|
|
|
|
|
|
|
Effect of dilutive options |
|
265,012 |
|
510,602 |
|
Diluted weighted average number of shares |
|
66,753,761 |
|
66,942,007 |
|
|
|
|
|
|
|
|
|
Pence |
|
Pence |
|
Earnings per share: |
|
|
|
|
|
Basic |
|
(10.1) |
|
11.6 |
|
Diluted |
|
(10.1) |
|
11.5 |
9 Intangible assets
Group
|
|
|
Goodwill £'000 |
|
Brand £'000s |
|
Customer Portfolios £'000 |
|
Computer Software £'000 |
|
Internally Generated Software £'000 |
|
Total £'000 |
|||
|
Cost |
|
|
|
|
|
|
|
|
|
|
|
|
|||
|
At 1 January 2021 |
|
55,732 |
|
1,595 |
|
33,805 |
|
2,783 |
|
5,770 |
|
99,685 |
|||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||
|
Additions |
|
- |
|
- |
|
- |
|
492 |
|
1,178 |
|
1,670 |
|||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||
|
At 31 December 2021 |
|
55,732 |
|
1,595 |
|
33,805 |
|
3,275 |
|
6,948 |
|
101,355 |
|||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||
|
Additions |
|
- |
|
- |
|
- |
|
1,083 |
|
1,096 |
|
2,179 |
|||
|
Disposals |
|
- |
|
- |
|
- |
|
(30) |
|
- |
|
(30) |
|||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||
|
At 31 December 2022 |
|
55,732 |
|
1,595 |
|
33,805 |
|
4,328 |
|
8,044 |
|
103,504 |
|||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||
|
Amortisation and Impairment |
|
|
|
|
|
|
|
|
|
|
|
||||
|
At 1 January 2021 |
|
- |
|
66 |
|
6,854 |
|
1,447 |
|
240 |
|
8,607 |
|||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||
|
Charge for the year |
|
- |
|
160 |
|
1,878 |
|
264 |
|
632 |
|
2,934 |
|||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||
|
At 31 December 2021 |
|
- |
|
226 |
|
8,732 |
|
1,711 |
|
872 |
|
11,541 |
|||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||
|
Charge for the year |
|
- |
|
160 |
|
1,878 |
|
295 |
|
753 |
|
3,086 |
|||
|
Impairment |
|
11,545 |
|
- |
|
- |
|
- |
|
- |
|
11,545 |
|||
|
Disposals |
|
- |
|
- |
|
- |
|
(30) |
|
- |
|
(30) |
|||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||
|
At 31 December 2022 |
|
11,545 |
|
386 |
|
10,610 |
|
1,976 |
|
1,625 |
|
26,142 |
|||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||
|
Net book value |
|
|
|
|
|
|
|
|
|
|
|
|
|||
|
At 31 December 2020 |
|
55,732 |
|
1,529 |
|
26,951 |
|
1,336 |
|
5,530 |
|
91,078 |
|||
|
At 31 December 2021 |
|
55,732 |
|
1,369 |
|
25,073 |
|
1,564 |
|
6,076 |
|
89,814 |
|||
|
At 31 December 2022 |
|
44,187 |
|
1,209 |
|
23,195 |
|
2,352 |
|
6,419 |
|
77,362 |
|||
Goodwill
Goodwill totalling £28,903k arose on the acquisition of Suffolk Life Group Limited and its subsidiaries on 25 May 2016. Goodwill totalling £17,075k arose on the acquisition of Dunstan Thomas Group Limited and its subsidiaries on 3 August 2020. Goodwill totalling £9,754k arose on the acquisition of Talbot and Muir Limited and its subsidiaries on 30 October 2020.
The Group tests goodwill for impairment annually or more frequently if there are indications that goodwill might be impaired. The recoverable amount of goodwill has been determined based on value-in-use calculations using a discount rate appropriate to the risk profile of the asset. These calculations use operating cash flow projections based on financial budget & forecast approved by management covering a five year period, assuming business then continues onwards after this period at a steady rate for the purpose of the analysis.
Impairment charges totalling £11,545k against the intangible asset relating to Goodwill within the Dunstan Thomas CGU have been recognised during the period ended 31 December 2022 (2021: £nil). This relates to lower than expected performance of the CGU in the period, a consequent reduction in the estimate of future cash flows expected from the CGU, combined with an update in discount rate assumptions used in the value-in-use calculation to better reflect the characteristics of the business.
Customer Portfolios
Represents individual customer portfolios acquired through business combinations and accounted for under the acquisition method. The directors consider that there is no impairment to assets as at the year-end (2021: £nil). The customer portfolios are being amortised over a period of 20 years.
The brought forward balance relates to the purchase by Curtis Banks Limited, a subsidiary company, of the trade and assets of Montpelier Pension Administration Services Limited on 13 May 2011, the full SIPP business of Alliance Trust Savings Limited on 18 January 2013, the full SIPP business and certain assets of Pointon York SIPP Solutions Limited on 31 October 2014, the full SIPP business of Rathbones Pension & Advisory Services Limited on 31 December 2014, a book of full SIPPs from Friends Life PLC (now Aviva PLC) on 13 March 2015 and a book of SIPPs from Hargreave Hale Limited on 10 December 2018.
The brought forward balance also includes the purchase by Suffolk Life Pensions Limited, a subsidiary company, of the trade and assets of European Pensions Management Limited on 14 July 2016, and books of SIPPs purchased from Pointon York SIPP Solutions Limited on 9 November 2012, Pearson Jones PLC on 30 April 2013, and Origen Investment Services Limited on 22 May 2013.
Lastly, the brought forward balance includes customer portfolios fair valued at £11,229k which arose on acquisition of Talbot and Muir Limited and its subsidiaries on 30 October 2020.
Computer Software
Computer software comprises costs that meet the recognition criteria under IAS 38 as Intangible Assets. General small computer software costs are amortised over their useful economic life of four years on a straight-line basis. Computer software costs for significant projects are amortised over an estimated UEL on a project by project basis.
Internally Generated Software
Internally generated software represents the value of principal software products owned and licensed by Dunstan Thomas. The asset includes both value arising on acquisition of Dunstan Thomas during the year ended 31 December 2020, and further development of the asset since. Internally generated software is being amortised over a period of 10 years.
Brand
Brand comprises the value of the Dunstan Thomas brand, which was obtained following acquisition of Dunstan Thomas during the year ended 31 December 2020. Dunstan Thomas has been established in the UK for over 30 years and has a strong market presence. The Group operates Dunstan Thomas as an independent brand. The value of the brand was assessed at acquisition and is being amortised over 10 years.
Research and development
The amount of research and development expenditure recognised as an expense is £7k (2021: nil).
10 Property, plant and equipment
Assets held at cost
Group
|
|
Right of use assets |
|
Computer equipment |
|
Office equipment, fixtures & fittings |
|
Total |
|
|
£'000 |
|
£'000 |
|
£'000 |
|
£'000 |
|
Cost |
|
|
|
|
|
|
|
|
At 1 January 2021 |
7,189 |
|
5,945 |
|
2,115 |
15,249 |
|
|
|
|
|
|
|
|
|
|
|
Additions |
2,627 |
|
265 |
|
5 |
2,897 |
|
|
Disposals |
(579) |
|
- |
|
(81) |
(660) |
|
|
|
|
|
|
|
|
|
|
|
At 31 December 2021 |
9,237 |
|
6,210 |
|
2,039 |
17,486 |
|
|
|
|
|
|
|
|
|
|
|
Additions |
341 |
|
621 |
|
62 |
1,024 |
|
|
Disposals |
- |
|
(118) |
|
(3) |
(121) |
|
|
|
|
|
|
|
|
|
|
|
At 31 December 2022 |
9,578 |
|
6,713 |
|
2,098 |
18,389 |
|
|
|
|
|
|
|
|
|
|
|
Accumulated depreciation |
|
|
|
|
|
|
|
|
At 1 January 2021 |
1,458 |
|
4,569 |
|
1,564 |
7,591 |
|
|
|
|
|
|
|
|
|
|
|
Arising from acquisitions |
- |
|
(14) |
|
14 |
- |
|
|
Charge for the year |
944 |
|
611 |
|
251 |
1,806 |
|
|
Disposals |
(469) |
|
- |
|
(78) |
(547) |
|
|
At 31 December 2021 |
1,933 |
|
5,166 |
|
1,751 |
8,850 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Charge for the year |
948 |
|
562 |
|
135 |
1,645 |
|
|
Disposals |
- |
|
(115) |
|
(3) |
(118) |
|
|
|
|
|
|
|
|
|
|
|
At 31 December 2022 |
2,881 |
|
5,613 |
|
1,883 |
10,377 |
|
|
|
|
|
|
|
|
|
|
|
Carrying value |
|
|
|
|
|
|
|
|
At 31 December 2020 |
5,731 |
|
1,376 |
|
551 |
7,658 |
|
|
At 31 December 2021 |
7,304 |
|
1,044 |
|
288 |
8,636 |
|
|
At 31 December 2022 |
6,697 |
|
1,100 |
|
215 |
8,012 |
The total cash outflow for leases was £0.8m (2021: £0.9m).
11 Cash and cash equivalents
As at 31 December 2022 and 2021 cash and cash equivalents were as follows:
|
|
Group |
Company |
|||||
|
|
As at 31 December |
As at 31 December |
|||||
|
|
2022 £'000 |
|
2021 £'000 |
|
2022 £'000 |
|
2021 £'000 |
|
|
|
|
|
|
|
|
|
|
Cash at bank and in hand |
23,853 |
|
31,891 |
|
3,232 |
|
4,458 |
|
Deposits with credit institutions |
378,746 |
|
376,856 |
|
- |
|
- |
|
Cash equivalents |
2,217 |
|
1,386 |
|
- |
|
- |
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents |
404,816 |
|
410,133 |
|
3,232 |
|
4,458 |
|
|
|
|
|
|
|
|
|
|
Bank overdraft (included within Borrowings) |
(20,306) |
|
(23,946) |
|
- |
|
- |
|
|
|
|
|
|
|
|
|
|
Balance as per Statement of Cash flows |
384,510 |
|
386,187 |
|
3,232 |
|
4,458 |
The Group considers potential expected credit losses on cash and cash equivalents to be insignificant.
12 Borrowings
|
|
|
Group |
Company |
|||||
|
|
|
As at 31 December |
As at 31 December |
|||||
|
|
|
2022 £'000 |
|
2021 £'000 |
|
2022 £'000 |
|
2021 £'000 |
|
Current |
|
|
|
|
|
|
|
|
|
Bank loans |
|
40,632 |
|
46,832 |
|
4,565 |
|
4,507 |
|
|
|
40,632 |
|
46,832 |
|
4,565 |
|
4,507 |
|
|
|
|
|
|
|
|
|
|
|
Non-current |
|
|
|
|
|
|
|
|
|
Bank loans |
|
34,903 |
|
43,957 |
|
11,628 |
|
15,399 |
|
|
|
34,903 |
|
43,957 |
|
11,628 |
|
15,399 |
|
|
|
|
|
|
|
|
|
|
|
Total borrowings |
|
75,535 |
|
90,789 |
|
16,193 |
|
19,906 |
|
|
|
|
|
|
|
|
|
|
Bank borrowings
The bank borrowings are repayable as follows:
|
|
Group |
Company |
||||||
|
|
As at 31 December |
As at 31 December |
||||||
|
|
|
2022 £'000 |
|
2021 £'000 |
|
2022 £'000 |
|
2021 £'000 |
|
|
|
|
|
|
|
|
|
|
|
Within 1 year |
|
40,632 |
|
46,832 |
|
4,565 |
|
4,507 |
|
Between 1 year and 5 years |
|
27,137 |
|
34,928 |
|
11,628 |
|
15,399 |
|
After more than 5 years |
|
7,766 |
|
9,029 |
|
- |
|
- |
|
|
|
75,535 |
|
90,789 |
|
16,193 |
|
19,906
|
Bank borrowings of the Company are repayable between January 2021 and July 2025 and bear average coupons of 2.25% plus compounded Sterling Overnight Index Average (SONIA) and a credit adjustment spread per annum.
Total borrowings of the Group include liabilities of £59,342k (2021: £70,883k) secured by legal charge over certain properties held within non-participating investment contracts, and liabilities of £16,193k (2021: £19,906k) secured on the shares of Curtis Banks Limited, Suffolk Life Pensions Limited, Suffolk Life Annuities Limited and Dunstan Thomas Group Limited.
The company's undiscounted borrowing repayable is £4,701k (2021: £4,477k) within one year and £12,814k (2021: 16,836k) over one year.
13 Provisions
|
|
|
|
|
||||||
|
Provisions |
|
Other provision £'000 |
|
Restructuring provision £'000 |
|
In-specie contributions provision £'000 |
|
Group Total £'000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance as at 1 January 2021 |
|
7 |
|
99 |
|
402 |
|
508 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Amounts provided |
|
211 |
|
93 |
|
11 |
|
315 |
|
|
Amounts utilised |
|
- |
|
(99) |
|
- |
|
(99) |
|
|
Amounts released as unutilised |
|
- |
|
- |
|
(93) |
|
(93) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance as at 31 December 2021 |
|
218 |
|
93 |
|
320 |
|
631 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Amounts provided |
|
- |
|
20 |
|
- |
|
20 |
|
|
Amounts utilised |
|
- |
|
(93) |
|
- |
|
(93) |
|
|
Amounts released as unutilised |
|
(72) |
|
- |
|
- |
|
(72) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance as at 31 December 2022 |
|
146 |
|
20 |
|
320 |
|
486 |
|
Other provision
As part of the consolidation and integration exercise undertaken during the year ended 31 December 2018 management initiated a review of data records relating to commercial properties held within SIPPs administered by the Group. A provision of £500,000 was made for the estimated costs of completing this exercise.
By 31 December 2019, the Group had completed its review enabling identification of the total number of cases potentially requiring remediation, and as of 31 December 2020, the vast majority of cases had been settled. There were no material variances to the original estimate of future remaining direct costs the Group expected to potentially bear.
A contingent liability was also recorded in respect of possible remediation that might be required depending on the outcome of the review. The estimate of these possible costs at 31 December 2019 was £1,400,000. Having largely completed the review during 2021, management have been able to quantify the expected remediation costs and provision of £211,000 has been made to the remaining costs as at 31 December 2021. £68k of this provision was released in 2022.
Restructuring provision
A £93,000 provision in 2021 has been made to reflect the updated estimate of the impact from the restructuring activities. This has been fully utilised in 2022.
A new provision of £20k has been raised on the Dundee office dilapidation.
In-specie contributions provision
As previously reported, the Group has been in correspondence with HMRC regarding processes and documentation in respect of in specie contributions. HMRC have alleged that incorrect procedures were followed and is seeking to reclaim tax reliefs granted and interest thereon. This is an industry wide issue affecting other SIPP operators and has been challenged by the sector as a whole. Following a favourable ruling for HMRC in a case affecting another SIPP operator, and having taken further legal advice, the Directors now consider it more likely than not that some cost associated with this issue will be incurred by the Group.
The total exposure for affected customers is estimated at £1.1m inclusive of interest. However, in recognition of the possibility that some customers may have insufficient assets to settle their share of the cost, the Group recognised a provision of £0.4m as at 31 December 2020. In 2021, this was revised to £0.3m based on updated information. No changes have been made on this provision in 2022.
14 Dividends
|
|
|
Year to 31 December |
||||
|
|
|
|
|
2022 |
|
2021 |
|
|
|
|
|
£'000 |
|
£'000 |
|
|
|
|
|
|
|
|
|
Ordinary dividend declared and paid |
|
|
|
5,984 |
|
5,997 |
|
|
|
|
|
|
|
|
|
|
|
|
|
5,984 |
|
5,997 |
A final dividend in respect of the year ended 31 December 2021 of 6.5p per share was proposed by reference to audited distributable reserves as at 31 December 2021 and was paid on 1 June 2022.
An interim dividend in respect of the year ended 31 December 2022 of 2.5p per share was declared by reference to audited distributable reserves as at 31 December 2021 and paid on 11 November 2022.
15 Contingent consideration
The Group and Company has entered into certain acquisition agreements that provide for contingent consideration to be paid. These agreements and the basis of calculation of the net present value of the contingent consideration are summarised below. The Group estimates the fair value of the remaining contingent consideration payable is £4.4m (2021: £7.7m).
On 3 August 2020 the Group acquired Dunstan Thomas for total maximum consideration of up to £27.5m, comprising initial consideration of £21.9m in cash plus contingent consideration of up to £5.6m payable in cash after three years post completion date if certain financial targets based on growth in earnings before interest, tax, depreciation and amortisation are met. The Group estimates the fair value of the remaining contingent consideration at 31 December 2022 to be £1.4m (2021: £3.2m), and this is expected to be settled during H1 2023.
On 30 October 2020 the Group acquired Talbot and Muir for total maximum consideration of up to £25.25m, comprising initial consideration of £18.0m in cash plus contingent consideration of up to £7.25m payable in cash over a two year period post completion if certain financial targets based on growth in earnings before interest, tax, depreciation and amortisation are met. The Group determined the fair value of the remaining contingent consideration at 31 December 2022 to be £3.0m (2021: £4.5m), which was subsequently fully settled in February 2023.
16 Unaudited IFRS Consolidated Statement of Financial Position as at 31 December 2022 split between insurance policy holders and the Group's shareholders
|
|
|
2022 £'000 |
|
2022 £'000 |
|
2022 £'000 |
|
2021 £'000 |
|
ASSETS |
|
Group Total |
|
Policyholder |
|
Shareholder |
|
Shareholder |
|
Non-current assets |
|
|
|
|
|
|
|
|
|
Intangible assets |
|
77,362 |
|
- |
|
77,362 |
|
89,814 |
|
Investment property |
|
1,108,073 |
|
1,108,073 |
|
- |
|
- |
|
Property, plant and equipment |
|
8,012 |
|
- |
|
8,012 |
|
8,636 |
|
Investments |
|
1,970,567 |
|
1,970,567 |
|
- |
|
- |
|
|
|
3,164,014 |
|
3,078,640 |
|
85,374 |
|
98,450 |
|
Current assets |
|
|
|
|
|
|
|
|
|
Trade and other receivables |
|
31,859 |
|
11,945 |
|
19,914 |
|
15,144 |
|
Cash and cash equivalents |
|
404,816 |
|
380,963 |
|
23,853 |
|
31,892 |
|
Current tax asset |
|
371 |
|
122 |
|
249 |
|
835 |
|
|
|
437,046 |
|
393,030 |
|
44,016 |
|
47,871 |
|
|
|
|
|
|
|
|
|
|
|
Total assets |
|
3,601,060 |
|
3,471,670 |
|
129,390 |
|
146,321 |
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES |
|
|
|
|
|
|
|
|
|
Current liabilities |
|
|
|
|
|
|
|
|
|
Trade and other payables |
|
21,942 |
|
10,501 |
|
11,441 |
|
9,455 |
|
Deferred income |
|
30,943 |
|
13,934 |
|
17,009 |
|
15,819 |
|
Borrowings |
|
40,632 |
|
36,067 |
|
4,565 |
|
4,507 |
|
Lease liabilities |
|
1,040 |
|
- |
|
1,040 |
|
964 |
|
Provisions |
|
484 |
|
- |
|
484 |
|
453 |
|
Contingent consideration |
|
4,355 |
|
- |
|
4,355 |
|
2,467 |
|
|
|
99,396 |
|
60,502 |
|
38,894 |
|
33,665 |
|
Non-current liabilities |
|
|
|
|
|
|
|
|
|
Borrowings |
|
34,903 |
|
23,275 |
|
11,628 |
|
15,399 |
|
Lease liabilities |
|
6,290 |
|
- |
|
6,290 |
|
6,774 |
|
Provisions |
|
2 |
|
- |
|
2 |
|
178 |
|
Contingent consideration |
|
- |
|
- |
|
- |
|
5,199 |
|
Non-participating investment contract liabilities |
|
3,387,893 |
|
3,387,893 |
|
- |
|
- |
|
Deferred tax liability |
|
3,214 |
|
- |
|
3,214 |
|
3,464 |
|
|
|
3,432,302 |
|
3,411,168 |
|
21,134 |
|
31,014 |
|
|
|
|
|
|
|
|
|
|
|
Total liabilities |
|
3,531,698 |
|
3,471,670 |
|
60,028 |
|
64,679 |
|
|
|
|
|
|
|
|
|
|
|
Net assets |
|
69,362 |
|
- |
|
69,362 |
|
81,642 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||
|
Issued capital |
|
332 |
|
- |
|
332 |
|
332 |
|
Share premium |
|
58,087 |
|
- |
|
58,087 |
|
58,087 |
|
Equity share based payments |
|
3,079 |
|
- |
|
3,079 |
|
2,840 |
|
Treasury shares |
|
(1,284) |
|
- |
|
(1,284) |
|
(1,382) |
|
Retained earnings |
|
9,148 |
|
- |
|
9,148 |
|
21,755 |
|
|
|
69,362 |
|
- |
|
69,362 |
|
81,632 |
|
Non-controlling interest |
|
- |
|
- |
|
- |
|
10 |
|
Total equity |
|
69,362 |
|
- |
|
69,362 |
|
81,642 |
17 Unaudited IFRS Consolidated Statement of Cash Flows for the year ended 31 December 2022 split between insurance policy holders and the Group's shareholders
|
|
|
2022 £'000 Group Total |
|
2022 £'000 Policyholder |
|
2022 £'000 Shareholder |
|
2021 £'000 Shareholder |
|
Cash flows from operating activities |
|
|
|
|
|
|
|
|
|
(Loss)/profit before tax |
|
(3,740) |
|
- |
|
(3,740) |
|
9,322 |
|
Adjustments for: |
|
|
|
|
|
|
|
|
|
Depreciation |
|
1,645 |
|
- |
|
1,645 |
|
1,806 |
|
Amortisation and impairments |
|
14,631 |
|
- |
|
14,631 |
|
2,934 |
|
Finance costs |
|
1,695 |
|
- |
|
1,695 |
|
1,800 |
|
Share based payment expense |
|
239 |
|
- |
|
239 |
|
93 |
|
Fair value gains on movement in contingent consideration |
(1,123) |
|
- |
|
(1,123) |
|
(1,870) |
|
|
Fair value loss/(gains) on financial investments |
202,325 |
|
202,325 |
|
- |
|
- |
|
|
Additions of financial investments |
|
(620,331) |
|
(620,331) |
|
- |
|
- |
|
Disposals of financial investments |
|
672,404 |
|
672,404 |
|
- |
|
- |
|
Fair value losses on investment properties |
175,450 |
|
175,450 |
|
- |
|
- |
|
|
Increase in liability for investment contracts |
(448,318) |
|
(448,318) |
|
- |
|
- |
|
|
Changes in working capital: |
|
|
|
|
|
|
|
|
|
(Increase)/decrease in trade and other receivables |
|
(3,911) |
|
892 |
|
(4,803) |
|
(737) |
|
Increase/(decrease) in trade and other payables |
|
2,032 |
|
(1,104) |
|
3,316 |
|
2,631 |
|
Taxes paid |
|
(2,514) |
|
- |
|
(2,514) |
|
(2,510) |
|
|
|
|
|
|
|
|
|
|
|
Net cash flows from operating activities |
(9,516) |
|
(18,682) |
|
9,166 |
|
13,469 |
|
|
|
|
|
|
|
|
|
|
|
|
Cash flows from investing activities |
|
|
|
|
|
|
|
|
|
Payments for intangible assets |
|
(2,179) |
|
- |
|
(2,179) |
|
(1,670) |
|
Purchase of property, plant & equipment |
(683) |
|
- |
|
(683) |
|
(270) |
|
|
Purchase of investment property |
|
(84,724) |
|
(84,724) |
|
- |
|
- |
|
Net Sale/(purchase) of shares in the Group by EBT |
|
98 |
|
- |
|
98 |
|
(641) |
|
Receipts from sale of investment property |
117,669 |
|
117,669 |
|
- |
|
- |
|
|
Net cash flows from acquisitions |
|
(2,687) |
|
- |
|
(2,687) |
|
(255) |
|
|
|
|
|
|
|
|
|
|
|
Net cash flows from investing activities |
27,494 |
|
32,945 |
|
(5,451) |
|
(2,836) |
|
|
|
|
|
|
|
|
|
|
|
|
Cash flows from financing activities |
|
|
|
|
|
|
|
|
|
Equity dividends paid |
|
(5,984) |
|
- |
|
(5,984) |
|
(5,997) |
|
Net proceeds from issue of ordinary shares |
- |
|
- |
|
- |
|
290 |
|
|
Net decrease in borrowings |
|
(11,901) |
|
(7,901) |
|
(4,000) |
|
(4,000) |
|
Principal element of lease payments |
|
(894) |
|
- |
|
(894) |
|
(762) |
|
Interest paid |
|
(876) |
|
- |
|
(876) |
|
(781) |
|
|
|
|
|
|
|
|
|
|
|
Net cash flows from financing activities |
(19,655) |
|
(7,901) |
|
(11,754) |
|
(11,250) |
|
|
|
|
|
|
|
|
|
|
|
|
Net (decrease) / increase in cash and cash equivalents |
|
(1,677) |
|
6,362 |
|
(8,039) |
|
(617) |
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents at the beginning of the year |
|
386,187 |
|
354,295 |
|
31,892 |
|
32,509 |
|
Cash and cash equivalents at the end of the year |
|
384,510 |
|
360,657 |
|
23,853 |
|
31,892 |
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