Full Year Results

RNS Number : 5435G

Premier Miton Group PLC

26 November 2020

 

PREMIER MITON GROUP PLC

FULL YEAR RESULTS FOR THE YEAR ENDED 30 SEPTEMBER 2020

Premier Miton Group plc ('Premier Miton', 'Company' or 'Group'), the AIM quoted fund management group, today announces its final results for the year ended 30 September 2020.

Highlights 

· £10.6 billion closing Assets under Management ⁴ ('AuM') (2019: £6.6 billion)

· £11.6 billion closing AuM as at 20 November 2020 (unaudited)

· Net outflows of £619 million for the year

· Adjusted profit before tax ^1,4 of £22.4 million (2019: £19.0 million)

· Adjusted earnings per share ^2,4 of 12.46 pence (2019: 15.10 pence)

· Profit before tax ³ of £9.6 million (2019: £13.7 million)

· Cash balances totalled £36.0 million at 30 September 2020 (2019: £20.7 million)

· Final proposed dividend of 4.5 pence per share (2019: 5.4 pence per share)

Notes

(1) Adjusted profit before tax is calculated before the deduction of taxation, amortisation, share-based payments, merger related costs and exceptional costs. Reconciliation included within the Financial Review section.

(2)  Adjusted earnings per share is calculated before the deduction of amortisation, share-based payments, merger related costs and exceptional costs.

(3) Merger related costs totalled £4.5 million during the year (2019: nil).

(4)  These are Alternative Performance Measures ('APMs').

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

"It has been a landmark year for Premier Miton. Our financial year commenced following the announcement of the merger between Premier Asset Management Group plc and Miton Group plc and I am pleased to report that the integration process has gone to plan in terms of people integration and operational and financial synergies. We have also faced the significant market disruption arising from the COVID-19 pandemic and I am pleased with the overall strong performance delivered by our investment strategies via genuine active management."

 

"We have made a number of key investment team hires during the year in fixed income, global sustainable equities, global smaller companies, and UK equities, which further strengthens our business for the future. Although we had net outflows during the year, we are encouraged by our continued positive fund flow momentum into our equity and fixed income funds, the strong performance across our broad range of multi-asset funds, and the potential of our new investment capabilities."

 

"The Group seeks to maintain a dividend policy that targets an ordinary dividend payout of approximately 50% to 65% of adjusted profit after tax, and despite the challenging environment we are proposing a final dividend of 4.5p per share, bringing the total for the full year to 7p."

 

"Following the successful integration, we now have an even stronger and scalable investment and operating platform.  We see exciting growth opportunities across our range for both our new and established funds and believe that Premier Miton is well positioned for the future."

ENDS

For further information, please contact:

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

www.premiermiton.com  

About Premier Miton

Premier Miton Investors is focused on delivering good investment outcomes for investors through relevant products and active management across its range of investment strategies, which include multi-asset, equity, absolute return and fixed income.

 

LEI Number: 213800LK2M4CLJ4H2V85

 

 

Chairman's Statement

 

The past 12 months have been a time of considerable activity, most notably with our business embarking on a corporate merger and dealing with the ramifications of COVID-19.

 

On 15 November 2019 we successfully merged two highly regarded companies - Miton Group plc and Premier Asset Management Group plc, via a court-sanctioned scheme of arrangement. The newly enlarged Premier Miton Group plc offers a more balanced and broader range of products for our clients.

 

From 16 March 2020 our employees moved to remote working supported by the Group's business continuity arrangements. The leadership team acted swiftly to establish measures that ensured the safety of our employees and those in vulnerable categories whilst still providing a full service to our clients. At the time of writing we continue to assess a phased approach to returning to the office, whilst still recognising the success of our working from home arrangements and the future state of flexible working.

 

Whilst the past year has shown a great deal of volatility in financial markets, as a business we remain fiscally strong and profitable. More than ever, our business platform is in a strong position to support the growth of our Assets under Management ('AuM') and continue to provide solutions that meet our clients' needs.

 

Results

The ramifications of the COVID-19 pandemic have caused many investors to be cautious. This year we have seen net outflows of £619 million, predominantly from our multi-manager funds due to their weaker short-term performance figures. Pleasingly however several of the Group's other strategies have seen positive inflows during the year and many funds benefited from the recovery in asset prices during May and June. Total AuM ended the year at £10.6 billion, up 16% since the half year.

 

Our key measure for financial decision making, Adjusted Profit Before Tax (adjusted for merger related costs, exceptional costs, share-based payments and amortisation) was £22.4 million, up by 18% against the comparative year. Cash was £36.0 million at year end (2019: £20.7 million).

 

Earnings per share ('EPS') for the year was 4.14p (2019: 10.82p). Understandably this was lower than the previous year because of non-recurring costs associated with the merger combined with the increased amortisation charge arising from the intangible assets recognised on the business combination.

 

A final dividend of 4.5p per share is proposed, bringing total dividends for the year to 7.0p (2019: 10.5p) representing a 58.4% payout ratio of adjusted profit after tax (2019: 86%). As noted at the half year, the Board made the prudent decision to reduce the quantum of the second interim dividend and adopted a dividend policy that targets an annual payout ratio of between 50% and 65% of adjusted profit after tax.

 

Strategy and culture

Being a public company, we endeavour to deliver durable long-term value to our stakeholders. The Group's strategy of product diversification coupled with the absence of 'house views' gives us the ability to provide differentiated outcomes for clients. Our fund managers have the freedom to express differing views - this is at the heart of our active approach to fund management. Our scalable operating platform supports this approach and facilitates growth in AuM through a client-centric business model.

 

As a Group we aim to achieve sustainable and durable growth over the coming years. We have sufficient capacity in our current product range and feel confident that with the right distribution strategy, talent management and effective leadership we are well placed to deliver this strategic achievement for the benefit of all our stakeholders.

 

The recent period of heightened volatility emphasises the importance of sound balance sheet management. As a Board we aim to safeguard our strong capital position through market cycles and apply a long-term view in the deployment of capital. The Group currently holds no bank debt on its balance sheet.

 

Since the merger, as an enlarged Group we have undertaken a series of interviews with key staff members to delve deeper into the Group's culture and purpose. We have solidified our purpose as being to actively steward our clients' capital for a better future.

 

Governance

As part of the merger integration process the Board undertook an internal review of its corporate governance structure during the year. This review included assessing the rights and responsibilities of each committee and its respective contribution to achieving the Group's long-term aspirations and the mitigation of risk. The recommendations of this review, we believe, will enhance the performance of the Group's committees, along with streamlining the reporting processes to our regulated entities and, ultimately, to the Board.

 

Board and people

On 14 May 2020 we announced the appointment of Alison Fleming as Non-Executive Director. Alison is a highly experienced financial services practitioner and has had an extensive career in financial markets over the last 25 years, holding senior positions within investment banks and boutique asset managers.

 

We also announced the departure of Non-Executive Director, Katrina Hart. We thank Katrina for her significant

contribution during her nine years' service and wish her well in future endeavours.

 

Products

The merger with Miton brought an additional 16 investment products to the Group's offering. Since then we have

welcomed a new fixed income team, a global smaller companies team, a global sustainable equity manager and, more recently, we announced the appointment of Emma Mogford to manage our UK equity income funds.

 

Outlook

The merger with Miton has been delivered against a backdrop of volatility in markets coupled with the added pressures of operating in a remote working environment.

 

I would like to thank the senior executive team for their hard work during the last 12 months and all our people for their valued contribution to the long-term success of the business.

 

Could I also extend thanks to the Board for their continued leadership over the past year. Clearly it has been a turbulent period for indices and the economic landscape over the coming 12 months remains as hard to predict as ever. The dominant issues driving economic uncertainty at the beginning of the year (Brexit, the General Election) seem a distant memory.

 

The talent, enthusiasm and professionalism across all areas of our organisation continues to impress. It is exciting to see the development of the enlarged Group under the new brand of Premier Miton Investors. Our actively managed products offer clear and transparent objectives for our clients and their advisers. I believe the Group is well positioned for future growth and to achieve its potential as a balanced business of high performing, active investment products.

 

Mike Vogel

Chairman

25 November 2020

 

Chief Executive Officer's Statement

 

It has been a landmark year in many ways for Premier Miton. Our financial year commenced following the announcement of the merger between two highly regarded businesses: Premier Asset Management Group plc and Miton Group plc. In mid-November we began the amalgamation of both businesses and pleasingly we have managed the integration process successfully to date, despite the challenges arising from the COVID-19 pandemic.

 

Business performance

The first half of the financial year saw an unprecedented market environment with markets falling heavily during March before rallying in April and into May following the support provided by central banks across the world. The Group's Assets under Management ('AuM') has increased by 16% since the half year to £10.6 billion as at 30 September 2020. The average AuM for the year was £10.1 billion versus £6.7 billion for the previous year, an increase of 51%.

 

Net outflows for the year were £619 million (2019: £306 million). Whilst it is disappointing to report a net outflow position we continued to see strong demand for our non-UK focused funds with the LF Miton European Opportunities Fund seeing net inflows of £712 million and the LF Miton US Opportunities Fund net inflows of £78 million since the completion of the merger. By the year end the new fixed income team had achieved net inflows of £136 million following their arrival in August 2020.

 

The net management fee margin (the retained revenue of the firm after deducting the costs of fund administration, external Authorised Corporate Directors ('ACD') and other direct costs), was 65.9bps compared with 72.3bps last year. This reflects the Group's balanced product mix, with the addition of a larger proportion of single strategy funds and inflows into the fixed income products.

 

The adjusted profit margin decreased against the comparative period, from 39.1% to 33.5%. Whilst disappointing to see a decrease, it is hard to draw meaningful comparisons between these two figures given they represent two different groups.

 

COVID-19

The COVID-19 pandemic provided an added challenge during the year. From early March our newly formed COVID-19 Response Committee made it a priority to protect the safety of our people whilst continuing to actively steward our clients' capital. Our operational platform and capability to manage our range of funds continued unaffected as our workforce transitioned to work remotely. As a newly formed Group, we have been able to demonstrate our resilience and ability to work as a team.

 

In June we engaged external, specialist health and safety advice, including detailed risk assessments, to assess the potential of allowing some of our people to return to our offices.

 

At the time of writing we have extended our flexible working from home business model to at least 31 March 2021 and we are actively discussing the design of future working arrangements for all employees. I am pleased that our current arrangements are continuing to provide high levels of service and investment outcomes for our clients. Longer term, we expect to successfully incorporate a more flexible working regime into our business.

 

For the small number of staff members currently attending our offices, we continue to practice social distancing and work to ensure that their health and wellbeing is maintained.

 

I recognise how challenging it has been to transition from an office-based to home working environment and I wish to thank our team for their hard work, passion and dedication during this difficult period.

 

Merger progress

I am pleased to say that the team have shown great fortitude in continuing to be ahead of target with the integration, particularly considering the macro challenges during the year. There has been a considerable amount of work undertaken to get us to this point, including managing the legal change of companies, amalgamation of systems such as Bloomberg, establishing a centralised dealing desk and much more.

 

From 24 April 2020 all fund management moved to a single entity, allowing the unification of the Group's investment teams under one corporate umbrella and the ability to share ideas. At the end of November, we will complete the transition to one ACD and the harmonisation of fund names across the range. They will be prefixed with 'Premier Miton' in place of 'Premier' or 'Miton', with no additional prefix for third-party ACD providers, making fund names consistent and easier for clients to identify. These achievements represent key milestones in achieving the recurring synergies outlined at the time of the merger.

 

As I have said before, merging two businesses creates a degree of change which can be unsettling. We endeavour to foster a culture where people's concerns are heard, and their ideas are considered. We continue to take the best practices of both businesses to ensure we are in the strongest position to deliver the best outcomes for our clients.

 

Investment performance

The strong performance of our single strategy funds continued during the period with 6 out of 16 funds performing in the top decile of their respective IA sectors since the tenure of the fund manager. Three of these funds are ranked as the top performing fund in their respective sectors. In recognising this outperformance, several of our funds received industry awards. The LF Miton European Opportunities Fund, managed by Carlos Moreno and Thomas Brown won Best Europe Fund at the Investment Week Fund Manager of the Year Awards 2020 in June and won Best Europe Fund in the Money Observer Fund Awards 2020. Nick Ford and Hugh Grieves, who manage the LF Miton US Opportunities Fund and the LF Miton US Smaller Companies Fund, were winners at the Investment Week Fund Manager of the Year Awards 2020.

 

Our UK equity growth teams have done well over the year under review with four of the five funds achieving first quartile outcomes over one and three years and one achieving second quartile. Longer-term numbers are also good with every fund achieving first quartile returns since manager tenure. Our UK equity income funds have found progress more difficult with their natural bias towards more value-orientated stocks and UK domestic names, which have been out of favour with investors.

 

Our new fixed income team under Lloyd Harris, who joined us from Merian Global Investors as Head of Fixed Income in August, have made a strong start. We have launched two new fixed income funds that have already enjoyed some early investor support and which, we believe, will have strong appeal in the market going forward. On 22 October 2020 the team were appointed to manage £330 million across two external mandates bringing the current AuM across the fixed income products to £821 million as at 31 October 2020.

 

The multi-asset macro-thematic team of David Jane and Anthony Rayner continued to deliver attractive returns to investors during 2020. Three of their four funds are first quartile over the year under review and one is second quartile. Longer-term numbers are also respectable with two funds in the first quartile and one in second quartile since manager tenure.

 

The multi-asset diversified suite of products managed by Neil Birrell and members of the wider investment team also performed strongly with four out of the five growth funds delivering above median performance over the year to 30 September 2020. The Diversified Growth Fund is also first quartile over three, five and seven years and since launch. The Diversified Income Fund is second quartile over one and three years and since launch.

 

The multi-asset multi-manager suite of products have found progress more difficult in their respective sectors. The team has had a higher weighting towards value and towards domestically focused companies than many of their peers whilst maintaining an underweight position towards growth companies and overseas equities. This has impacted negatively on relative performance in the short term. Many of the funds that the team manage do have an income bias and the team have successfully maintained an attractive income for investors over this volatile investment period led by the COVID-19 disruption.

 

Products

We continue to develop our business through the addition of new investment talent and by evolving our product range to meet significant client demand.

 

In December 2019 the Group launched the Premier Miton Managed Index Balanced Fund which is managed by Wayne Nutland. Wayne joined the Group from HSBC where he managed substantial multi-asset portfolios investing in exchange traded funds. The new fund offers further multi-asset choice to advisers and their clients.

 

Duncan Goodwin joined in January 2020 to manage a global sustainable equity growth strategy. Although it is still early in the process, we are very pleased to note the much improved performance on both of the global equity portfolios under Duncan's stewardship.

 

In March 2020 we launched our own no cost online portal for advisers, known as Connect. Connect allows advisers to hold our funds on our online portal with no additional fees thereby reducing the overall cost of investing in our funds for investors.

 

On 10 August 2020 we welcomed Lloyd Harris, Simon Prior and Rob James to an expanded fixed income team. This is an exciting development for our business whereby we can offer a wider range of fixed income funds to our clients. Following their arrival, we launched two new products: Premier Miton Strategic Monthly Income Bond Fund, that sits in the IA Sterling Strategic Bond sector; and the Premier Miton Financials Capital Securities Fund, that sits in the IA Specialist sector.

 

On 1 October 2020 Alan Rowsell joined the Group from Aberdeen Standard Investments. Alan will manage a new global smaller companies fund planned for launch in Q1 2021, subject to FCA approval. A highly active global smaller companies fund fits well into our product mix and plays to our strengths as a business. It will offer our investors access to the growth opportunities within the smaller companies universe. We now have a highly credible global equity offering for clients, alongside Duncan Goodwin's newly rebranded Global Sustainable Alpha Growth Fund and Jim Wright's Global Infrastructure Income Fund.

 

Distribution

During the year we refined our two specialist distribution teams. These teams are grouped according to two focus areas: the UK wealth manager market (typically equity and fixed income fund focused) and the UK adviser market (typically multi-asset fund focused). We have purposely resourced each team to meet the sales opportunities ahead and have developed a sales and marketing framework to focus on key products where we believe we will achieve the best net flow results.

 

Regulation

The Senior Managers and Certification Regime ('SM&CR') came into effect on 9 December 2019 and aims to strengthen market integrity by making individuals more accountable for their conduct and competence. We see it as an opportunity to continue to build a healthy culture through a robust governance framework and the appointment of clear responsibilities. As part of the implementation of SM&CR, we have agreed which roles and staff fall within each level - senior managers, certification regime and those who are subject to the new individual conduct rules.

 

Corporate Social Responsibility ('CSR')

During the year the Group continued to develop its CSR to allow us to play a positive, active and growing role in building a more sustainable future whilst promoting the successful business performance of the Group. Our CSR approach is designed to cover four areas: responsible investing (investing our clients' money in a responsible way); our team (making Premier Miton a good place to work including by promoting diversity and inclusion, wellbeing and personal development); environmental responsibility (managing our business to help tackle climate change); and community responsibility (engaging with charities and community/volunteer work).

 

In August, we submitted Premier Miton's first annual CDP climate change report. CDP runs a global disclosure system for corporate environmental reporting. We believe that disclosure is an essential step to drive positive environmental action. Each year the programme requests information on greenhouse gas emissions, energy use and the risks and opportunities from climate change. More and more investors are requesting companies to disclose their environmental position and data through CDP and we believe taking part in this disclosure process fits with our CSR approach.

 

Outlook

The economic environment continues to be impacted by COVID-19 with central banks doing everything they can to provide stimulus. It seems likely that the economic recovery will be fragile, and dependent on both unemployment figures and any further lockdown restrictions. Financial markets continue to be buoyed by central banks rather than the traditional metric that might demonstrate the health of an economy.

 

In this environment, we believe strongly that there is an opportunity for active management to perform well for investors. We have a balanced range of funds at Premier Miton backed up by a strong team across all areas of the business. We are working hard to emerge from this crisis having done a great job for investors through genuinely active asset management across our open ended funds, investment trusts and portfolio management service.

 

Although the outlook remains unclear, we should be encouraged by the excellent long and short-term performance of many of our active fund managers, despite the extreme market disruption. We should also be encouraged by the conviction expressed by our fund managers that the post coronavirus environment will prove to be a great opportunity for active managers, active management companies and very importantly for our clients.

 

We now have a strong and scalable operating platform, a focused distribution and marketing team, excellent investment products and, of course, great people throughout the organisation. I see exciting growth opportunities across our range for both new and established funds and believe that Premier Miton is well positioned for the future.

 

Mike O'Shea

Chief Executive Officer

25 November 2020

Financial Review

Financial performance

Profit before tax decreased to £9.6 million (2019: £13.7 million). The decline in profit before tax is after the inclusion of £4.5 million of non-recurring costs primarily associated with the merger with Miton Group plc coupled with a charge of £3.1 million relating to the amortisation of intangible assets recognised on completion of the merger.

 

Adjusted profit before tax*, which is after adjusting for amortisation, share-based payments, merger related costs and exceptional costs increased to £22.4 million (2019: £19.0 million).

	2020 £m	2019 £m	% Change
Net revenue	66.8	48.6	37.4
Administrative expenses	(44.4)	(29.6)	50.0
Adjusted profit before tax *	22.4	19.0	18.0
Amortisation	(4.5)	(1.5)
Share-based payments	(3.6)	(2.6)
Merger related costs	(4.5)	-
Exceptional costs	(0.2)	(1.2)
Profit before tax	9.6	13.7	(29.9)

* This is an Alternative Performance Measure ('APM').

Assets under Management * ('AuM')

AuM ended the year at £10,608 million (2019: £6,556 million). The increase was predominantly due to the merger with Miton Group plc which added £4,701 million of AuM at 14 November 2020. The Group's average AuM for the year was £10,110 million (2019: £6,695 million), the elevated levels of average AuM have driven the increase of 37.6% in the net management fees to end the year at £66.6 million (2019: £48.4 million).

 

The Group's revenue represents management fees generated on the assets being managed by the Group.

 

As noted at the half year, market turbulence from the COVID-19 pandemic created volatility in the Group's revenue base arising from the falls in the underlying market valuations and the resulting AuM managed by the Group. At 31 March 2020 the Group's AuM had reduced to £9,145 million before recovering to end the year at £10,608 million.

 

The Group's net management fee margin for the year was 65.9 basis points (2019: 72.3 basis points). The merger with Miton Group plc brought a lower average margin business, due to product mix along with a different operating model. The margin for the former Miton funds is reported after the deduction of associated Authorised Corporate Director ('ACD') and fund accounting fees. The Miton funds are expected to move to the in-house ACD model by the end of the calendar year.

 

Net revenue

	2020 £m	2019 £m	% Change
Net management fees 1	66.6	48.4	37.6
Other income	0.2	0.2	-
Net revenue	66.8	48.6	37.4
Average AuM 2	10,110	6,695	51.0
Net management fee margin 3 (bps)	65.9	72.3	(8.9)

1  Being gross management fee income less trail/rebate expenses and the cost of fund accounting and external ACD fees for the former Miton fund range

2  Average AuM is calculated based on monthly closing AuM

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

 

Administration expenses

Administration expenses (excluding share-based payments) totalling £44.4 million (2019: £29.6 million) were 50.0% higher than in 2019. The increase reflects the inclusion of ten and a half months of costs associated with Miton since the merger completed.

 

As is common for many financial services businesses, the largest component of administration expenses were staff costs, these consist of both fixed and variable elements.

 

The fixed staff costs, which includes salaries and associated national insurance, employers' pension contributions and other indirect costs of employment increased to £16.7 million (2019: £9.9 million).

 

The rise reflects the increase in the average headcount for the year from 108 in 2019 to 150, this was primarily due to the merger.

 

On completion of the merger, the Group had 161 full-time staff including Non-Executive Directors, as at the year end this had fallen to 149. The reduction is due to restructuring of the business completed post-merger whilst still adding to the talent across the Group, most recently with the hire of a five-strong fixed income team who joined before the year end.

 

Variable staff costs totalled £10.9 million (2019: £6.4 million). Included within this are general discretionary bonuses, sales bonuses and bonuses in respect of the fund management teams, plus associated employers' national insurance. These costs move in line with the net revenues of the Group and the adjusted profit before tax.

 

Overheads and other costs totalled £15.5 million (2019: 13.1 million) being 23.2% of net revenue (2019: 27.0%).

	2020 £m	2019 £m	% Change
Fixed staff costs	16.7	9.9	68.7
Variable staff costs	10.9	6.4	70.3
Overheads and other costs	15.5	13.1	18.3
Depreciation - fixed assets	0.6	0.2	200
Depreciation - leases	0.7	-	N/a
Administration expenses	44.4	29.6	50.0

 

The core elements of overheads and other costs are, fund administration costs where the Group acts as ACD, office costs, compliance, IT, irrecoverable VAT and sales and marketing costs. The latter of which saw a reduction in expenditure in the year arising from the restrictions due to COVID-19.

 

Merger

The merger with Miton Group plc was effected by way of a scheme of arrangement and satisfied through the issuance of new shares. The fair value of the equity consideration is reflected in shareholders' equity with the creation of a merger reserve. In accordance with IFRS 3, the Group has recognised an intangible asset of £24.8 million for the investment management agreements held by Miton. This asset is being amortised over seven years and has resulted in the increase in the amortisation charge for the year. See note 9 for further detail.

 

Share-based payments

The share-based payment charge for the year was £3.6 million (2019: £2.6 million).

 

As at 30 September 2020 the Group's Employee Benefit Trusts ('EBTs') held 9,921,565 ordinary shares representing 6.3% of the issued ordinary share capital (2019: 4,642,830 shares).

 

At the year end the outstanding awards totalled 9,319,115 (2019: 4,618,333). The increase reflects 4,130,000 awards issued during the year (2019: 1,733,333) along with the outstanding awards in the former Miton schemes which were converted at the merger exchange ratio of 0.30186 on 14 November 2019.

 

Exceptional costs and merger related non-recurring costs

Merger related and exceptional costs incurred in the year amounted to £4.7 million (2019: £1.2 million).

 

Of this balance £4.5 million related to the merger. See note 4 for further detail. As set out in the Scheme Document released on 17 September 2019, the Group anticipated incurring £10 million of non-recurring costs to achieve annualised synergies in year three after the merger of £7 million.

 

A component of the FCA FSCS levy costs in 2019 totalling £0.4 million were presented as exceptional. FSCS levy costs for the current year totalled £1 million, these have been presented within administration expenses.

 

IFRS 16 'Leases'

The Group commenced accounting for IFRS 16 from 1 October 2019 and now recognises a right-of-use ('ROU') asset and a corresponding lease liability in the balance sheet. At the year end the Group had a ROU asset of £2.4 milllion and a lease liability of £2.9 million.

 

The nature of the expense has also changed with the recognition of a depreciation charge to unwind the ROU and an interest expense on the lease liabilities rather than a lease rental expense as in previous years. Lease rental payments are now reflected in the cash flow statement under financing activities as and when they are paid.

 

Capital management

At 30 September 2020 the cash balances of the Group totalled £36.0 million (2019: £20.7 million). Included within this balance was £1.7 million (2019: £1.3 million) in trading account cash balances. The trading account cash balance relates to the designated bank accounts that are used for the settlement of trades in the open-ended funds operated by Premier Portfolio Managers Limited. The Group has no external bank debt.

 

Dividends

Dividends totalling £11.7 million were paid in the year (2019: £10.6 million). See note 16 for further details.

 

During the year the Board moved to the adoption of an interim and final dividend distribution frequency, aligning it with the Group's reporting calendar.

 

The Board is recommending a final dividend payment of 4.5p per share bringing the total dividend payment for 2020 to 7.0p per share (2019: 10.5p). If approved by the shareholders at the Annual General Meeting on 3 February 2021, the dividend will be paid on 12 February 2021 to shareholders on the register at the close of business on 15 January 2021.

 

The Group seeks to maintain a dividend policy that targets an ordinary dividend payout of approximately 50% to 65% of profit after tax, adjusted for exceptional costs, share-based payments and amortisation.

 

Shareholders' equity

Total shareholders' equity as at 30 September 2020 was £129.7 million (2019: £45.3 million).

 

Going concern

The Directors have assessed the prospects of the Group over a period of three years after the balance sheet date, rather than the 12 months required by the Going Concern provision.

 

The Directors confirm that they have a reasonable expectation that the Group will continue to operate and meet its liabilities, as they fall due, up to 30 September 2023. The Directors' assessment has been made with reference to the Group's current position and strategy, the Board's appetite for risk, the Group's financial forecasts, and the Group's principal risks and how these are managed, as detailed in the Strategic Report.

 

The Directors have also reviewed and examined the financial stress testing inherent in the Internal Capital Adequacy Assessment Process ('ICAAP').

 

The three-year period is consistent with the Group's current strategic forecast and ICAAP. The forecast considers the Group's profitability, cash flows, dividend payments and other key variables. Sensitivity analysis is also performed on certain key assumptions used in preparing the forecast, both individually and combined, in addition to scenario analysis that is performed as part of the ICAAP process, which is formally approved by the Board.

 

 

Piers Harrison

Chief Financial Officer

25 November 2020

Alternative Performance Measures ('APMs')

The Directors use the following APMs in evaluating the performance of the Group and for planning, reporting and incentive-setting.

 

	Unit	Used in management appraisals	Aligned with shareholder returns	Strategic KPI
Adjusted profit before tax (described in 2019 as 'underlying earnings before tax') Definition: Profit before taxation, amortisation, share-based payments, merger related costs and exceptional costs. Purpose: Except for the above costs, this encompasses all operating expenses in the business, including fixed and variable staff cash costs. Provides a proxy for cash generated and is the key measure of profitability for management decision making.	£	•	•	•
Adjusted profit margin Definition: Adjusted profit before tax divided by net revenue. Purpose: Used to determine the efficiency of operations and the ratio of operating expenses to revenues generated in the year.	%	•	•	•
Cash generated from operations Definition: Profit before taxation adjusted for the effects of transactions of a non-cash nature, any deferrals or accruals and items of income or expense associated with investing or financing cash flows. Purpose: Provides a measure in demonstrating the amount of cash generated from the Group's ongoing regular business operations.	£		•
AuM Definition: The value of assets that are managed by the Group. Purpose: Management fee income is calculated based on the level of AuM managed. The AuM managed by the Group is used to measure the Group's relative size against the industry peer group.	£	•	•	•
Net management fee Definition: The net revenue of the Group. Calculated as gross management fee income, less the cost of fund accounting, external ACDs and any enhanced fee arrangements. Purpose: Provides a consistent measure of the profitability of the Group and its ability to grow and retain clients, after removing amounts paid to third parties.	£		•
Net management fee margin Definition: Net management fees divided by average AuM. Purpose: A measure used to demonstrate the blended fee rate earned from the AuM managed by the Group. A basis point ('bps') represents one hundredth of a per cent, this measure is used within the asset management sector and provides comparability of the Group's net revenue generation.	bps	•	•
Adjusted earnings per share (basic) Definition: Profit after tax excluding amortisation, share-based payments, merger related costs and exceptional costs, divided by the weighted average number of shares in issue in the year. Purpose: Provides a clear measure to shareholders of the profitability of the Group from its underlying operations. The exclusion of amortisation, share-based payments, merger related costs and exceptional items provides a consistent basis for comparability of results year on year.	p	•	•	•

Financial Statements

Consolidated Statement of Comprehensive Income
for the year ended 30 September 2020

	Notes	2020 £000	2019 £000
Revenue	3	77,721	52,821
Fees and commission expenses		(10,948)	(4,235)
Net revenue		66,773	48,586
Administration costs		(44,408)	(29,617)
Share-based payment expense	15	(3,581)	(2,551)
Amortisation of intangible assets	9	(4,517)	(1,522)
Merger related costs	4	(4,467)	-
Exceptional items	4	(216)	(1,178)
Operating profit		9,584	13,718
Finance revenue		20	-
Profit for the year before taxation		9,604	13,718
Taxation	7	(3,714)	(2,696)
Profit for the year after taxation attributable to equity holders of the parent		5,890	11,022

		pence	pence
Basic earnings per share	8	4.14	10.82
Diluted earnings per share	8	4.00	10.44

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

comprehensive income.

All of the amounts relate to continuing operations.

Consolidated Statement of Changes in Equity
for the year ended 30 September 2020

	Notes	Share capital £000	Merger reserve £000	Own shares held by an EBT  000	Capital redemption reserve  000	Retained earnings £000	Total £000
At 1 October 2018		50	-	(4,047)	4,532	44,733	45,268
Profit for the year		-	-	-	-	11,022	11,022
Purchase of own shares held by an EBT		-	-	(2,897)	-	-	(2,897)
Share-based payment expense		-	-	-	-	2,551	2,551
Equity dividends paid		-	-	-	-	(10,618)	(10,618)
At 30 September 2019		50	-	(6,944)	4,532	47,688	45,326
Profit for the year		-	-	-	-	5,890	5,890
Issue of share capital on merger	9	10	94,312	-	-	-	94,322
Purchase of own shares held by an EBT		-	-	(2,669)	-	-	(2,669)
Shares issued to EBT as part of the merger		-	-	(5,178)	-	-	(5,178)
Exercise of options		-	-	142	-	(15)	127
Share-based payment expense	15	-	-	-	-	3,581	3,581
Deferred tax direct to equity		-	-	-	-	(6)	(6)
Equity dividends paid	16	-	-	-	-	(11,699)	(11,699)
At 30 September 2020		60	94,312	(14,649)	4,532	45,439	129,694

Consolidated Statement of Financial Position

as at 30 September 2020

	Notes	2020 £000	2019 £000
Non-current assets
Goodwill	9	70,948	15,597
Intangible assets	9	32,234	11,957
Other investments		100	-
Property and equipment		2,385	874
Right-of-use assets		2,414	-
Deferred tax asset	7	1,599	1,111
Trade and other receivables	10	367	-
		110,047	29,539
Current assets
Financial assets at fair value through profit and loss		2,697	827
Trade and other receivables	10	44,409	49,038
Cash and cash equivalents	11	35,992	20,689
		83,098	70,554
Total assets		193,145	100,093
Current liabilities
Trade and other payables	12	(53,046)	(52,883)
Current tax liabilities		(2,948)	(1,884)
Lease liabilities		(857)	-
		(56,851)	(54,767)
Non-current liabilities
Provisions	13	(389)	-
Deferred tax liability	7	(4,152)	-
Lease liabilities		(2,059)	-
Total liabilities		(63,451)	(54,767)
Net assets		129,694	45,326
Equity
Share capital	14	60	50
Merger reserve	9	94,312	-
Own shares held by an Employee Benefit Trust		(14,649)	(6,944)
Capital redemption reserve		4,532	4,532
Retained earnings		45,439	47,688
Total equity shareholders' funds		129,694	45,326

Consolidated Statement of Cash Flows

for the year ended 30 September 2020

	Notes	2020 £000	2019 £000
Cash flows from operating activities:
Profit for the year		5,890	11,022
Adjustments to reconcile profit to net cash flow from operating activities:
Tax on continuing operations	7	3,714	2,696
Finance revenue		(20)	-
Interest payable on leases		93	-
Depreciation - fixed assets		617	224
Depreciation - leases		689	-
Gain on sale of financial asset at fair value through profit and loss		(13)	(19)
Loss/(gain) on revaluation of financial assets at fair value through profit and loss		6	(7)
Loss on disposal of property and equipment		-	327
Increase in employee benefit liability		1,182	-
Purchase of plan assets (held for employee benefit liability)		(1,182)	-
Amortisation of intangible assets	9	4,517	1,522
Share-based payment expense	15	3,581	2,551
Decrease in trade and other receivables		8,479	4,671
Decrease in trade and other payables		(19,533)	(5,058)
Cash generated from operations		8,020	17,929
Income tax paid		(3,226)	(4,182)
Net cash flow from operating activities		4,794	13,747
Cash flows from investing activities:
Interest received		20	-
Acquisition of assets at fair value through profit and loss		(12,166)	(4,229)
Proceeds from disposal of assets at fair value through profit and loss		10,304	4,338
Purchase of property and equipment		(138)	(426)
Cash acquired on merger	9	27,296	-
Net cash flow from investing activities		25,316	(317)
Cash flows from financing activities:
Lease payments		(566)	-
Exercise of options		127	-
Purchase of own shares held by an EBT		(2,669)	(2,897)
Equity dividends paid		(11,699)	(10,618)
Net cash flow from financing activities		(14,807)	(13,515)
Increase/(decrease) in cash and cash equivalents		15,303	(85)
Cash and cash equivalents at the beginning of the year		20,689	20,774
Cash and cash equivalents at the end of the year	11	35,992	20,689

Selected notes to the Consolidated Financial Statements

For the year ended 30 September 2020

 

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

The Consolidated Financial Statements of Premier Miton Group plc (the 'Company') and its subsidiaries (the 'Group') for the year ended 30 September 2020 were authorised for issue by the Board of Directors on 25 November 2020 and the Consolidated Statement of Financial Position was signed on the Board's behalf by Mike O'Shea and Piers Harrison. The Company is a public limited company incorporated and domiciled in England and Wales. The Company's ordinary shares are traded on AIM.

This financial information does not constitute statutory accounts but has been extracted from the statutory accounts for the years ended 30 September 2020 and 30 September 2019 on which unqualified audit reports, which did not contain a statement under s498(2) or s498(3) of the Companies Acts 2006, have been issued. The statutory accounts for the year ended 30 September 2019 were posted to shareholders on 16 December 2019 and delivered to the Registrar on 6 January 2020. The results announcement has been approved for issue by the Board of Directors on 25 November 2020.

Copies of the Annual Report and Accounts will be posted to shareholders and published on the Group's website premiermiton.com on 14 December 2020.

The Company's Annual General Meeting which will be held at 10.00am on 3 February 2021 at the registered office of the Company, Eastgate Court, High Street, Guildford, Surrey, GU1 3DE.

2. Accounting policies

Basis of preparation

The Consolidated Group Financial Statements for the year ended 30 September 2020 have been prepared in accordance with

IFRS. The Consolidated Financial Statements have been prepared on a going concern basis, under the historical cost convention, as modified by the revaluation of financial assets and financial liabilities measured at fair value through profit or loss. Costs are expensed as incurred. The Consolidated Financial Statements are presented in Sterling and all values rounded to the nearest thousand pounds (£000).

The Directors have assessed the prospects of the Group over a period of three years after the balance sheet date, rather than the 12 months required by the Going Concern provision. This assessment has been made after considering the impact of COVID-19 on the business. The Directors note that the Group has no external borrowings and maintains significant levels of cash reserves.

This results announcement contains certain forward-looking statements with respect to the financial condition, results of operations and businesses and plans for Premier Miton Group plc. These statements and forecasts involve risk and uncertainty because they relate to events and depend upon circumstances that have not yet occurred. There are several different factors that could cause actual results or developments to differ materially from those expressed or implied by these forward-looking statements. Nothing in this statement should be construed as a profit forecast or be relied upon as a guide to future performance.

Segmental reporting

The Group operates a single business segment of asset management for reporting and control purposes.

IFRS 8 Operating Segments requires disclosures to reflect the information which Group management uses for evaluating performance and the allocation of resources. The Group is managed as a single asset management business and as such, there are no additional operating segments to disclose.

Under IFRS 8, the Group is also required to make disclosures by geographical segments. As Group operations are solely in the UK and Channel Islands, there are no additional geographical segments to disclose.

3. Revenue

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

	2020 £000	2019 £000
Management fees	77,506	52,624
Commissions	7	16
Other income	208	181
Total Revenue	77,721	52,821

All revenue is derived from the UK and Channel Islands.

4. Exceptional items and merger related costs

Recognised in arriving at operating profit from continuing operations:

	2020 £000	2019 £000
Fund development costs	52	-
Staff redundancy costs	-	44
Component of FCA FSCS levy	-	397
Connect development costs	164	410
Office refurbishment PPE write off	-	327
Total exceptional costs	216	1,178

Merger related costs	2,560	-
Merger employment restructuring costs	1,907	-
Total merger related costs	4,467	-

Exceptional items are those items of income and expense, which are considered not to be incurred in the normal course of business of the Group's operations, and because of the nature of the events giving rise to them, merit separate presentation to allow shareholders to understand better the elements of financial performance in the year.

FCA FSCS levy costs in the year totalling £1,089,653 have been presented within administration expenses, of this cost, £318,627 related to the former Miton regulated entities. In 2019, the comparative costs were presented as exceptional as a result of rising significantly due to the increased levels of compensation paid by the FSCS and the inclusion of an amount invoiced in 2019 by the FCA but related to the previous year. Connect development costs relate to external consultants who have been deployed on the testing of the Connect platform during the development stage prior to launch.

Merger related costs in the year totalling £2,560,242 represented legal and professional fees associated with the merger with Miton Group plc of £1,687,116 and merger integration costs of £873,126.

Employment restructuring costs arising as a result of the merger totalled £1,906,618 of which £1,900,618 related to redundancy costs and £6,000 of associated legal costs.

5. Operating profit

(a) Operating profit is stated after charging:

	Notes	2020 £000	2019 £000
Auditor's remuneration	5(b)	511	485
Staff costs	6	29,978	18,234
Operating lease payments - rent		-	394
Interest - leases		93	-
Amortisation of intangible assets		4,517	1,522
Exceptional items	4	216	1,178
Merger related costs	4	4,467	-
Depreciation - fixed assets		617	224
Depreciation - leases		689	-

(b) Auditor's remuneration:

The remuneration of the auditors is analysed as follows:

		2020 £000	2019 £000
Audit of Company		75	52
Audit of subsidiaries		188	69
Total audit		263	121
Audit-related assurance services		95	101
- Tax compliance services		38	40
- Services related to corporate finance transactions not covered above		-	181
- Other non-audit services not covered above		115	42
Total other non-audit services		153	263
Total non-audit services		248	364
Total fees		511	485

6.  Staff costs

Staff costs, including Directors, during the year were as follows:

		2020 £000	2019 £000
Salaries, bonus and performance fee share		22,471	13,387
Social security costs		3,085	1,722
Share-based payments		3,581	2,551
Other pension costs		841	574
Total staff costs		29,978	18,234

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

		2020 number	2019 number
Directors		7	6
Investment management		44	29
Sales and marketing		38	29
Finance and systems		13	7
Legal and compliance		11	7
Administration		37	30
Total employees		150	108

7. Taxation

(a) Tax recognised in the Consolidated Statement of Comprehensive Income

	2020 £000	2019 £000
Current income tax:
UK corporation tax	4,326	3,025
Current income tax charge	4,326	3,025
Adjustments in respect of prior periods	(82)	238
Total current income tax	4,244	3,263
Deferred tax:
Origination and reversal of temporary differences	(536)	37
Adjustments in respect of prior periods	6	(604)
Total deferred tax income	(530)	(567)
Income tax charge reported in the Consolidated Statement of Comprehensive Income	3,714	2,696

(b)  Reconciliation of the total income tax charge

The tax expense in the Consolidated Statement of Comprehensive Income for the year is higher than the standard rate of corporation tax in the UK of 19% (2019: 19%). The differences are reconciled below:

	2020 £000	2019 £000
Profit before taxation	9,604	13,718
Tax calculated at UK standard rate of corporation tax of 19% (2019: 19%):	1,824	2,607
- Other differences	69	-
- Share-based payments	906	178
- Expenses not deductible for tax purposes	324	13
- Amortisation not deductible	252	255
- Income not subject to UK tax	(23)	(28)
- Change in tax rate	395	(40)
- Tax relief on vested options	(3)	-
- Fixed asset differences	46	77
- Adjustments in respect of prior periods	(76)	(366)
Income tax charge in the Consolidated Statement of Comprehensive Income	3,714	2,696

(c) Change in corporation tax rate

On 11 March 2020 it was announced (and substantively enacted on 17 March 2020) that the UK corporation tax rate would remain at 19% and not reduce to 17% (the previously enacted rate) from 1 April 2020. The deferred tax balances included within the Consolidated Financial Statements have been calculated with reference to the rate of 19%, as required under IFRS.

(d)  Deferred tax

The deferred tax included in the Group's Consolidated Statement of Financial Position is as follows:

	2020 £000	2019 £000
Deferred tax asset:
- Fixed asset temporary differences	(236)	(110)
- Accrued bonuses	782	447
- Share-based payments	491	689
- Losses and other deductions1	562	85
Deferred tax disclosed on the Consolidated Statement of Financial Position	1,599	1,111

1 Deferred tax assets have been recognised in respect of this item because it is probable that future taxable profits will be available against which the Group can use therefrom

	2020 £000	2019 £000
Deferred tax liability:
- Arising on acquired intangible assets	4,119	-
- Fixed asset temporary differences	33	-
Deferred tax disclosed on the Consolidated Statement of Financial Position	4,152	-

	2020 £000	2019 £000
Deferred tax in the Consolidated Statement of Comprehensive Income:
- Origination and reversal of temporary differences	(536)	37
- Adjustments in respect of prior periods	6	(604)
Deferred tax (income)	(530)	(567)

	2020 £000	2019 £000
Unprovided deferred tax asset:
- Non trade loan relationship losses	1,764	1,764
- Excess management expenses	46	46
- Non trade intangible fixed asset losses	357	357
Unprovided deferred tax asset	2,167	2,167

8. Earnings per share

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

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

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

(a) Reported earnings per share

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

	2020	2019
Profit attributable to ordinary equity shareholders of the Parent Company for basic earnings (£000)	5,890	11,022
	Number 000	Number 000
Issued ordinary shares at 1 October	105,801	105,801
- Effect of own shares held by an EBT	(9,220)	(3,891)
- Effect of shares issued	45,705	-
Weighted average shares in issue	142,286	101,910
- Effect of movement in share options	5,056	3,675
Weighted average shares in issue - diluted	147,342	105,585
Basic earnings per share (pence)	4.14	10.82
Diluted earnings per share (pence)	4.00	10.44

(b) Adjusted earnings per share

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

Adjusted Profit for calculating adjusted earnings per share:

	2020 £000	2019 £000
Profit before taxation	9,604	13,718
Add back:
- Share-based payment expense	3,581	2,551
- Amortisation of intangible assets	4,517	1,522
- Merger related costs	4,467	-
- Exceptional items	216	1,178
Adjusted profit before tax	22,385	18,969
Taxation:
- Tax in the Consolidated Statement of Comprehensive Income	(3,714)	(2,696)
- Tax effects of adjustments	(936)	(886)
Adjusted profit after tax for the calculation of adjusted earnings per share	17,735	15,387

Adjusted earnings per share was as follows using the number of shares calculated at note 8(a):

	2020 (pence)	2019 (pence)
Adjusted earnings per share	12.46	15.10
Diluted adjusted earnings per share	12.04	14.57

9. Goodwill and other intangible assets

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

	Goodwill £000	Other £000	Total £000
Cost:
At 1 October 2019	22,576	56,231	78,807
Additions	55,351	24,794	80,145
At 30 September 2020	77,927	81,025	158,952
Amortisation and impairment:
At 1 October 2019	6,979	44,274	51,253
Amortisation during the year	-	4,517	4,517
At 30 September 2020	6,979	48,791	55,770
Carrying amount:
At 30 September 2020	70,948	32,234	103,182
At 30 September 2019	15,597	11,957	27,554

As a result of the all-share merger with Miton Group plc, which was effected by way of a scheme of arrangement, the shareholders of Miton Group plc received 0.30186 of a share in Premier Miton Group plc on 15 November 2019 satisfied through newly issued shares. The additions to goodwill and intangible assets in the year relate solely to the acquisition of Miton Group plc.

Miton Group plc was an AIM quoted fund management group specialising in equity and multi-asset investing. See page 18 for further detail on the merger rationale. The acquired business contributed net revenues of £12,315,381 and a net profit after taxation of £2,672,573 to the Group for the period from 15 November 2019 to 30 September 2020. The contribution to the Group's net profit is after charging £1,118,011 of merger related costs incurred since acquisition.  At the acquisition date the consideration and net assets acquired from Miton Group plc were as follows:

	£000
Fair value of equity consideration	94,322
Net assets acquired:
- Intangible assets	24,794
- Deferred tax liability on intangible assets acquired	(4,213)
- Investments	100
- Cash and cash equivalents	27,296
- Property, plant and equipment	491
- Trade and other receivables	5,740
- Miton Group plc shares held by EBT	5,178
- Trade and other payables	(19,741)
- Provisions	(389)
- Right-of-use assets (net)	(285)
Net assets acquired	38,971
Goodwill	55,351

The fair value of the equity consideration has been calculated by reference to the number of shares issued and the share price at the completion date. The purchase consideration in the table above is grossed up for the value of the EBT shares issued. Intangible assets acquired in the business combination related to the investment management agreements between Miton and the funds to which Miton was the investment manager and the value arising from the underlying client relationships. Acquisition accounting principles under IFRS were applied.

Following initial recognition disclosed in the Interim Report 2020, the fair value of the intangible assets recognised on the business combination have been reassessed resulting in an increase of £0.6 million in intangible assets and a reduction in the goodwill balance of £0.5 million.

Goodwill arising on the acquisition of Miton is mainly attributable to the skills and technical talent of Miton's workforce, expected cash flows from new customers and significant synergies which are expected to be realised from integrating the company.

Impairment tests for goodwill and intangible assets

The Group has determined that it has a single CGU in relation to asset management for the purposes of assessing the carrying value of goodwill.

In line with IAS 36, Impairment of Assets, a full impairment review was undertaken as at 30 September 2020. The recoverable amount within the fund management CGU was determined by assessing the value-in-use using long-term cash flow projections for the CGU.

Data for the explicit forecast period of 2021-2025 is based on the 2021 budget and forecasts for 2022-2025. Increases in operating costs have been taken into account and include assumed new business volumes. Cash flows beyond the explicit forecast period are extrapolated using a long-term terminal growth rate of 3.0% (2019: 2.0%). To arrive at the net present value, cash flows have been discounted using a discount rate of 13.0% (2019: 12.35%).

The overall value-in-use was greater than the carrying value and hence no impairment charge has been recognised. The key assumptions used in determining this amount were expected aggregated fund flows and the discount rate.

Sensitivity analysis

Management have performed a sensitivity analysis as of 30 September 2020 and established that an increase in the discount rate to 25.25% would be required before an impairment of goodwill and other intangible assets would be considered necessary. In response to the market volatility arising from COVID-19, an impairment assessment was completed during the year using materially lower levels of AuM. Due to the cash generative nature of the business, no impairment was identified at these lower levels of AuM.

The compound annual growth rate for expected fund flows over the forecast period is 7.0% and would need to reduce to -4.5% per annum for the estimated recoverable amount to equal the carrying value.

Other intangible assets

Investment management contracts purchased by the Group are capitalised as other intangible assets and are amortised over periods ranging from seven to 20 years depending on the nature of the assets purchased. These finite life intangible assets were assessed for indicators of impairment by comparing AuM levels at the year end with those on the acquisition date. Additionally, both internal and external factors affecting these assets were considered. No indicators of impairment were noted.

The largest of the intangible assets was in relation to the merger with Miton Group plc with a carrying value of £21,676,510 and a remaining amortisation period of six years (2019: 2007 business combination with a carrying value of £11,878,607 and a remaining amortisation period of nine years).

10. Trade and other receivables

Current	2020 £000	2019 £000
Due from trustees/investors for open end fund redemptions/sales	34,491	41,753
Other trade debtors	2,566	46
Accrued income	3,549	4,356
Prepayments	2,487	2,560
Other receivables	1,316	323
Total trade and other receivables	44,409	49,038
Non-current
Other receivables	367	-

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

Non-current other receivables represent deferred compensation awards with maturities greater than 12 months after Consolidated Statement of Financial Position date. Deferred compensation awards are released in accordance with the employment period to which they relate.

11. Cash and cash equivalents

	2020 £000	2019 £000
Cash at bank and in hand	35,911	20,638
Cash held in EBTs	81	51
Total cash and cash equivalents	35,992	20,689

12. Trade and other payables

	2020 £000	2019 £000
Due to trustees/investors for open end fund creations/redemptions	34,488	41,751
Other trade payables	996	942
Other tax and social security payable	1,929	1,253
Accruals	14,398	8,265
Pension contributions	20	13
Other payables	1,215	659
Total trade and other payables	53,046	52,883

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

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

13. Provisions

 

	£000
At 1 October 2019	-
Arising on merger	389
At 30 September 2020	389
Current	-
Non-current	389
	389
At 1 October 2018 and 30 September 2019	-

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

14. Share capital

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

 

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

The deferred share carries no voting rights and no right to receive a dividend.

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

15. Share-based payments

The total charge to the Consolidated Statement of Comprehensive Income for share-based payments in respect of employee services received during the year to 30 September 2020 was £3,581,000 (2019: £2,551,000), of which £3,478,000 related to nil cost contingent share rights.

16. Dividends declared and paid

	2020 £000	2019 £000
Equity dividends on ordinary shares:
- First interim: 1.75 (2019: 1.7) pence per share	2,591	1,743
- Second interim: 0.75 (2019: 1.7) pence per share	1,110	1,720
- Third interim: nil (2019: 1.7) pence per share	-	1,720
- Final interim dividend for 2019 (2019: 2018 final interim)	7,998	5,435
Dividends paid	11,699	10,618

 

END

 

 

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