Final Results
7 December 2023
AJ Bell plc
Final results for the year ended 30 September 2023
AJ Bell plc ('AJ Bell' or the 'Company'), one of the UK's largest investment platforms, today announces its final results for the year ended 30 September 2023.
Highlights
Financial performance
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Record financial performance, with revenue up 33% to £218.2 million (FY22: £163.8 million) and profit before tax (PBT) up 50% to £87.7 million (FY22: £58.4 million) |
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PBT margin of 40.2% (FY22: 35.6%), reflecting an increased revenue margin of 29.8bps (FY22: 22.6bps) together with total cost growth in line with previous guidance |
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Diluted earnings per share up 46% to 16.53 pence (FY22: 11.35 pence) |
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Final dividend of 7.25 pence per share proposed, increasing the total ordinary dividend for the year by 46% to 10.75 pence per share (FY22: 7.37 pence per share) in line with the Company's stated dividend policy. This is the 19th consecutive year of ordinary dividend growth |
Platform business
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Another successful year, with customers increasing by 50,880 to 476,532 and platform net inflows of £4.2 billion (FY22: £5.8 billion) |
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Record assets under administration (AUA) of £70.9 billion (FY22: £64.1 billion), up 11% driven by the net inflows across the platform and favourable market movements of £2.6 billion |
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Customer retention rate remained high at 95.2% (FY22: 95.5%) |
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Consistently high customer service levels evidenced by AJ Bell's Trustpilot rating of 4.8 |
AJ Bell Investments
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Record net inflows in the year of £1.65 billion, up 57% versus the prior year (FY22: £1.05 billion underlying net inflows) |
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Assets under management ("AUM") of £4.7 billion, up 68% in the year (FY22: £2.8 billion) |
Michael Summersgill, Chief Executive Officer at AJ Bell, commented:
"I am pleased to report another year of strong financial performance for the business which has demonstrated our ability to continue to grow in different market conditions. Revenue increased 33% to £218.2 million, enabling us to reinvest in our customer proposition and our people, whilst delivering a record profit before tax of £87.7 million which supports an increased dividend for shareholders.
"We added over 50,000 customers to the platform in the year, reflecting the quality and value of our propositions, as well as increased investment in our brand. The growth in customers enabled us to deliver over £4 billion of net inflows, an excellent result which again highlights the benefit of operating our dual-channel platform.
"As we approach half a million platform customers, we remain focused on providing a great value proposition, with a philosophy of sharing our scale benefits with customers. Having reduced several fees across the platform in 2022, this year we have increased the interest rates paid to customers several times and will soon be increasing them further, with a particular focus on pension drawdown where there is a customer need to hold cash to fund income payments.
"We continue to invest in our customer proposition with a focus on making it easy for people to invest. In the D2C market we have recently added the option to purchase bonds and gilts online in response to increased demand for these investments in the higher interest rate environment. Our free pension finding service has proved popular with customers trying to track down and consolidate lost pension pots and next year we will be expanding this into a low-cost pension consolidation service. This will enable people to find and automatically consolidate their existing pensions into one simple pension with ready-made investment options and a single annual charge of between 0.45% and 0.60%.
"In the advised market we continue to invest in new functionality to help advisers manage their client portfolios. A focus this year has been supporting advisers with the implementation of the Consumer Duty and next year we will roll out a new client onboarding process which will streamline the new business process for advisers. We have recently added a money market portfolio to our MPS range to provide another investment option for advisers and their clients in the current interest environment.
"Maintaining a strong culture and motivated workforce is essential to facilitating our continued business growth. We made several enhancements to our pay and benefits package in the year, including a new free share award scheme for all employees which encourages our staff to think and act like business owners. The success of our business is down to the quality of work and commitment of our people, and I would like to thank them for their outstanding contribution during the year.
"The strong financial performance of the business has led the Board to propose a final ordinary dividend of 7.25 pence per share, increasing the ordinary dividend for the year by 46% to 10.75 pence per share. This extends our record of ordinary dividend increases to 19 years.
"Our dual-channel platform has continued to perform strongly against the current backdrop of elevated inflation and interest rates, demonstrating our resilience through the economic cycle. Whilst the current challenging environment is likely to persist in the short term, I am confident that our long-term focus and continued investment in the business positions us well to take advantage of the structural growth opportunity for the platform market."
Financial highlights
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Year ended 30 September 2023 |
Year ended 30 September 2022 |
Change |
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Revenue |
£218.2 million |
£163.8 million |
33% |
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Revenue per £AUA* |
29.8bps |
22.6bps |
7.2bps |
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PBT |
£87.7 million |
£58.4 million |
50% |
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PBT margin |
40.2% |
35.6% |
4.6ppts |
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Diluted earnings per share |
16.53 pence |
11.35 pence |
46% |
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Total ordinary dividend per share |
10.75 pence |
7.37 pence |
46% |
Non-financial highlights
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Year ended 30 September 2023 |
Year ended 30 September 2022 |
Change |
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Number of retail customers |
491,402 |
440,589 |
12% |
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- Platform |
476,532 |
425,652 |
12% |
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- Non-platform |
14,870 |
14,937 |
- |
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AUA* |
£76.1 billion |
£69.2 billion |
10% |
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- Platform |
£70.9 billion |
£64.1 billion |
11% |
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- Non-platform |
£5.2 billion |
£5.1 billion |
2% |
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AUM* |
£4.7 billion |
£2.8 billion |
68% |
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Customer retention rate |
95.2% |
95.5% |
(0.3ppts) |
*see definitions
Contacts:
AJ Bell
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Shaun Yates, Investor Relations Director |
+44 (0) 7522 235 898 |
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Mike Glenister, Head of PR |
+44 (0) 7719 554 575 |
Results presentation details
A pre-recorded video with Michael Summersgill (CEO) and Peter Birch (CFO) discussing these results will be available on our website (ajbell.co.uk/investor-relations) along with an accompanying investor presentation from 07.00 GMT today. Management will be hosting a meeting for sell-side analysts at 09:30 GMT today. Attendance is by invitation only.
Management will also be hosting a group call for investors at 15.00 GMT today. Please contact Camilla Crowe at c.crowe@dbnumis.com for registration details.
Forward-looking statements
The full year results contain forward-looking statements that involve substantial risks and uncertainties, and actual results and developments may differ materially from those expressed or implied by these statements. These forward-looking statements are statements regarding AJ Bell's intentions, beliefs or current expectations concerning, among other things, its results of operations, financial condition, prospects, growth, strategies, and the industry in which it operates. By their nature, forward-looking statements involve risks and uncertainties because they relate to events and depend on circumstances that may or may not occur in the future. These forward-looking statements speak only as of the date of these full year results and AJ Bell does not undertake any obligation to publicly release any revisions to these forward-looking statements to reflect events or circumstances after the date of these results.
Chair's statement
Dear shareholder
"AJ Bell is a great business with a justifiable reputation for innovation, customer focus and a commitment to delivering real value to customers and advisers."
I am delighted to present my first Annual Report as your new Chair.
Since my appointment on 1 May 2023, I have spent time getting to know many people across the business, as well as having the pleasure of engaging with some of our shareholders and other key stakeholders, discussing both AJ Bell's business and the wider platform market. It has been a really interesting and informative period since joining, which has reaffirmed my initial very favourable impression of the people and the business. I am very excited to lead the Board and support the executive team in the goals we have set ourselves.
I am pleased to report that we have delivered a strong financial performance during the year with PBT of £87.7 million. Over the past 12 months customer numbers increased by 50,813 to 491,402 and we delivered £4.1 billion of net inflows, ending the year with total AUA of £76.1 billion. This strong performance demonstrates the resilience of our business model during a challenging year and continued uncertainties around the UK economy. The Financial review contains further information on this year's performance.
As the uncertainties in the wider economy continued into 2023, it created further challenges for our customers, our people and our wider stakeholders. As a Board we were particularly mindful of this and so our focus remained on the wellbeing of our staff, while maintaining a high-quality, value-for-money service to our customers and delivering positive outcomes for all our stakeholders.
Our governance structure and cohesive culture provide a solid framework for achieving our long-term strategic goals. The Board remains focused on delivering AJ Bell's purpose; to help people invest.
Culture, purpose and stakeholder engagement
The Board plays a vital role in shaping and embedding a strong and healthy culture through promoting the core values and principles of the Group and this continued to be a focus throughout the year. We welcomed the opportunity to engage with our staff and shareholders in person again this year, providing invaluable insight into the operation and culture of our business. I was delighted to be appointed as the nominated Employee Engagement Director in May, which has given me an opportunity to refresh the Employee Voice Forum (EVF).
During the year we also reviewed the AJ Bell Way and our guiding principles; challenging ourselves on their continued alignment with our purpose and culture following significant growth of the business. It was encouraging to see the level of engagement from our people and our customers and advisers, affirming how well our core values resonate with our key stakeholders. Whilst the key elements of our guiding principles remain relevant, some refinements have been made to simplify them and reflect the feedback received to ensure they continue to be embraced by our people on a day-to-day basis.
Consideration of our wider stakeholders in some of our key decisions in the year are outlined in our Section 172 statement.
We recognise the importance of an engaged workforce and it was pleasing to see that this year's staff survey showed positive progress with an overall response rate of 87%. Our people are at the heart of our continued growth and success and so how we motivate, reward and support them is a key priority for the Board. The introduction of the new free share award scheme for all employees has been very well received and we expect the level of share ownership to increase further for the coming year. Our pay and benefits package introduced at the start of FY23 has also seen further enhancements to base pay and pension contributions for the coming year.
We have made good progress embedding our Diversity and Inclusion framework. As reported last year our primary focus was on the senior management and talent pipeline where I am pleased to see we have already made positive steps on the recruitment at executive level. The Board will continue to monitor and challenge progress on our initiatives for the wider workforce where we expect to see further improvements in the coming year.
Further details on our ESG-related activities can be found in our Responsible Business section.
Board changes and succession
On 1 May 2023 I succeeded Baroness Helena Morrissey as Chair. On behalf of the Board, I would like to thank Helena for her significant contribution to AJ Bell as Chair and look forward to her continued involvement through her consultancy role where we are benefiting from her passion and commitment to diversity and inclusion.
As previously announced when Andy Bell stepped down from the Board in September 2022, it was agreed that he would have the right to nominate a Non-Executive Director to represent his interests on the Board whilst a significant shareholder. This agreement was formalised in July 2023 when we announced that Les Platts would join the Board as Andy's Representative Director. I would like to take this opportunity to formally welcome Les to the Board and very much look forward to working with him. Les' in-depth knowledge of the financial services sector and AJ Bell in particular, will further enhance the experience on the Board and help us drive the future growth of the Company.
During the year we resumed our search for two new independent Non-Executive Directors (NED), the first being a replacement for Simon Turner who has completed nine years' service and will step down from the Board once a successful handover is complete. The Board is extremely mindful of the importance of having a diverse range of skills, experience and perspective around the Board table and so this was at the forefront of our minds throughout the recruitment process. I am pleased to report that since the year end we have appointed Fiona Fry as an independent Non-Executive Director with effect from 7 December 2023. Fiona will succeed Simon Turner, as Chair of the Risk & Compliance Committee, subject to regulatory approval. Fiona is a highly experienced risk professional, having spent the majority of her career at KPMG where, as a partner she focused on financial services regulation. Fiona sat on the UK Board of KPMG for six years. She was previously Head of investigations at the Financial Services Authority (now the FCA). Fiona is currently Chair of the Risk Committee at Aviva Insurance Limited.
Our commitment to addressing both the Parker Review recommendations and the FCA diversity requirements remains a key consideration as we continue our search for a further independent NED to join the Board in the coming year. Whilst we are pleased with our progress, we acknowledge there is still more to be done to continue to drive greater diversity at both Board and executive level.
Further details on Board changes can be found in the Nomination Committee report.
Dividend
In line with our commitment to a progressive dividend, the Board is pleased to announce a final ordinary dividend of 7.25p per share, reflecting the financial strength of the business and strong capital position. The final ordinary dividend will be paid, subject to shareholder approval, at our AGM on 30 January 2024, to shareholders on the register at the close of business on 12 January 2024.
This brings the total ordinary dividend for the financial year to 10.75p per share, representing an increase of 46% on the previous year.
Looking ahead
I have really enjoyed my first seven months as AJ Bell's Chair. First impressions are of a committed, strong management team, collaborative Board and strong performance despite the wider economic backdrop. I truly believe this is a great business and I can see the growth potential. Our dual-channel business model is a real strength in the investment platform market and with a focus on ease of use and value for money, AJ Bell is well-positioned to continue to attract new customers and assets to the platform and further increase our market share.
I am very grateful to the Board and all those in the business who have helped me over the first few months as part of my induction and I am very much looking forward to continuing to work with them over the coming years.
AJ Bell is a financially strong business as evidenced by a profitable, well-capitalised and highly cash-generative business model, and the Board remains confident in the long-term prospects of the business. Whilst the macroeconomic environment remains challenging in the short term, it is clear that the fundamental growth drivers for the platform market remain firmly in place and I look forward to working with Michael, the executive team and the Board to ensure the business takes advantage of the growth opportunities that lie ahead.
Fiona Clutterbuck
Chair
6 December 2023
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Board Priorities
Performance and resilience:
I am very proud of the strong performance that the business has delivered in 2023. However, I am acutely aware of the need to continue growing the business, whilst at the same time managing our cost base against a backdrop of significant macroeconomic uncertainty. These are two key priorities in the coming year. I am also keen that we continue to embrace the entrepreneurial culture which was so much a hallmark of the business under Andy Bell's leadership.
Performance such as that which the business has demonstrated this year is only achievable if the business is resilient; technology plays a very important role in embedding this resilience so this too will be a focus for FY24.
Culture:
AJ Bell has always justifiably prided itself on a strong cohesive culture. In my first few months as Chair I have had the opportunity to experience this first hand. Interactions with my colleagues across the business have confirmed an open and transparent culture that permeates throughout the whole organisation. Our role as a Board is to monitor how we nurture this culture and ensure it remains a real strength as we continue to grow.
One of the most important facets of the AJ Bell purpose-led culture has been its extraordinary focus on doing the right thing for its customers. We place good customer outcomes at the heart of everything we do, with good value products, simple communications and strong processes to support our customers.
The initial implementation of the Consumer Duty has been a key area of focus for the Board and the business as a whole during the year, with Simon Turner, our Chair of the Risk & Compliance Committee being appointed as our designated Non-Executive Director Consumer Duty Champion. Although we believe our culture is aligned with the requirements of Consumer Duty, we are by no means complacent and the Board's focus during FY24 will be on maintaining oversight to ensure the business is delivering good outcomes for its customers which are consistent with the Duty.
Succession planning:
The Board remains focused on maintaining good corporate governance and ensuring these principles are embedded into our culture. I strongly believe that diversity in all its forms leads to more productive and balanced Board discussions, and maintaining a diverse and inclusive Board is a key priority. This includes meeting our targets for gender and ethnic diversity, whilst at the same time ensuring that all Board appointments are made on merit.
As I have already mentioned, we are well progressed in our search for two new independent NEDs. It will be important to ensure that our new NEDs receive an appropriate induction, matched to their skills and experience, together with the right level of support from the Board in their first year. We will also be focusing on putting in place succession planning for the Committee Chair roles. |
Chief Executive Officer's review
Overview
"We are in a great position to maintain our growth momentum and capitalise on the significant long-term opportunities in our market by providing investors with an easy-to-use, low-cost platform, supported by excellent customer service."
We are pleased to report another strong set of results for 2023, delivering organic growth in customer numbers, AUA and AUM, across both the advised and D2C market segments. This growth, alongside a record financial performance, demonstrates the strength of our dual-channel platform and diversified revenue model to deliver in different market conditions.
In the five years since our IPO in December 2018 we have delivered the significant growth that was expected, increasing our share of the fast-growing platform market each year, whilst also paying an increasing ordinary dividend to shareholders. Our focus on providing great value through our high-quality products has led to nearly half a million platform customers now trusting us with their investments.
The investment platform market continues to grow. Whilst we are winning new business from our competitors within the platform market, crucially we are still growing the platform market by attracting assets held off-platform in legacy products, as investors seek the flexibility and control that platforms offer. This growth is set to continue with approximately two-thirds of the estimated £3 trillion addressable market currently held off-platform. Our dual-channel model, serving both the advised and D2C segments of the market, enables us to capture assets across the whole addressable market, whilst the benefits of our scale, coupled with our efficient operating model, enable us to keep costs low for customers and invest in our platform with a focus on ease of use. Together with our market-leading customer service levels, these factors have been key to our success to date and ensure we are positioned at the forefront of the platform market to capitalise on the significant long-term growth opportunities.
The current macroeconomic environment has presented challenges for investors and advisers, with high inflation leading to higher interest rates. These conditions have impacted consumer confidence and led to stronger demand for cash savings products. We expect these conditions to persist in the short term, however the versatility of our open-architecture platform enables us to continue to grow across a range of market conditions, as demonstrated in recent years. Our platform provides customers with the flexibility to choose from a broad range of investment options, enabling them to respond to changing market dynamics. In the higher interest rate environment, we have seen increased demand for government bonds and money market funds. Separately, our Cash savings hub has provided a convenient option for customers seeking higher returns on their cash savings.
Strong performance
Our platform delivered growth of over 50,000 customers in the year, increasing total platform customers by 12% to 476,532 (FY22: 425,652). Our low-cost products position us well at a time when customers are increasingly looking for value. Demand has been strong from D2C customers, supported by the investments in our brand and improved mobile app functionality. We maintained our excellent service levels throughout this period, as evidenced by our high customer retention rate of 95.2% (FY22: 95.5%).
The strength of our open-architecture platform, offering customers a wide range of investment options, was demonstrated as we delivered over £4 billion of net inflows. This contributed to an 11% increase in platform AUA which ended the year at £70.9 billion (FY22: £64.1 billion). Our investments business achieved another year of significant growth, with total AUM increasing by 68% to £4.7 billion (FY22: £2.8 billion). The strong demand has been fuelled by our excellent long-term investment performance, with all six of our multi-asset growth funds being placed in the top quartile of returns when compared to their Investment Association peers over the last five years.
Our diversified revenue model has enabled us to deliver a record financial performance whilst also investing in long-term initiatives to support future growth. Revenue increased by 33% to £218.2 million (FY22: £163.8 million), largely driven by growth in platform AUA and higher rates of interest generated on cash balances held on the platform.
We have been mindful of the need to share the benefits of higher revenue margins across all our stakeholders. For customers we have kept our prices low, paid a competitive interest rate on their cash balances and invested in our propositions; for our people we have improved our pay and benefits package in response to the rising cost of living; and for our shareholders our investments in brand and propositions position us to continue to increase our market share, whilst once again increasing our ordinary dividend.
Investing for long-term growth
We continue to innovate and invest in our products with a focus on ease of use.
A significant proportion of our addressable market sits in legacy pension products. Most adults have several employers during their career, and subsequently accumulate a number of different pension pots which can be inefficient to manage separately. Our free pension finding service, which is now live for new and existing customers, has proved popular with customers trying to track down and consolidate pension pots. In FY24, we will launch our new ready-made pension product that consolidates a customer's pension into a simple product, offering an investment range of four AJ Bell growth funds with a transparent all-in charging structure starting from 45bps. The streamlined nature of this product will reduce barriers for customers who are less confident in managing their own investments and provides an enhanced journey for new customers opening a pension with us in the future.
Our product philosophy of utilising our scale to keep charges low for our customers ensures we continue to provide excellent value for money. We reduced a number of charges across our full-service propositions in the second half of FY22 and are committed to continually reviewing our customer charges as we grow.
Trust and brand awareness are key drivers of a new customer's decision when choosing an investment platform.
We have built a brand which is highly trusted by our customers, and this year, we commenced our multi-year strategy to enhance brand awareness and to continue increasing our share of the growing platform market. This strategy was kick-started with our 'feel good, investing' multi-channel advertising campaign, alongside our new five-year partnership as the title sponsor of the Great Run Series.
Q&A with Michael Summersgill
It has now been five years since AJ Bell's IPO. How do you reflect on this time?
We have achieved significant organic growth in customers and AUA, in line with the strategy set out to investors at the time of the IPO. Over this period, platform AUA has increased by 84% to £70.9 billion and platform customers have risen by 160% to 476,532. This growth has been organic and hasn't required shareholder capital, in fact we have paid £147.5 million in dividends since the IPO.
Key to this growth has been investing in our platform propositions whilst consistently delivering excellent service to our customers, as reflected by our recognition as the Which? Recommended Investment Platform provider for five consecutive years and our market-leading Trustpilot score of 4.8-stars.
This service would not be possible without the dedication of our people. Culture and employee engagement have always been key strengths of the business, and we have maintained this as we continued to grow, achieving a 3-star accreditation in the Best Companies to Work For survey every year since we listed.
Looking ahead to the next five years, I am confident we will deliver on the significant growth opportunities our market continues to present.
How will your platform products drive growth?
I expect AJ Bell and Investcentre, our well-established full-service platform propositions, to continue to be the core drivers of growth. Alongside this, our new simplified products represent a key area of our growth strategy. Dodl, our simplified D2C platform proposition, is aimed at less-experienced investors. Given the success we have seen on our D2C brand work in 2023, we have decided to revitalise Dodl in FY24, so that it is brought much closer to our core AJ Bell branding and delivers an optimised marketing approach. We are confident in the high-quality customer outcomes the product delivers and this change will help to maximise future growth.
We continue to develop Touch, our simplified advised product. This will expand our offering for advisers, helping them to cater for clients looking for a digital service model. We completed a closed beta launch in the year and plan to deliver the initial proposition to market during 2024.
How will you maintain a strong culture?
Maintaining a strong, purpose-led culture is key for me. Our guiding principles are an important tool in fostering the right culture, having been first established around 10 years ago. We have revisited them this year to ensure they continue to reflect who we are as a business. This involved stakeholder engagement which highlighted how deep-rooted our guiding principles are. We have made some changes which are a refinement of the existing framework that has served us well, rather than a fundamental change. These refreshed guiding principles have been embraced by our people who continue to apply them in their roles each day.
Employee share ownership is ingrained in our culture, ensuring staff share in the success of the business. The introduction of our annual all-employee free share scheme will facilitate a continuation of this culture, with the first awards having been made in January 2023.
Business update
Advised
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Advised customers |
Advised AUA |
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159,256 |
£48.2 billion |
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+10% |
+8% |
Our advised business has performed resiliently during a challenging period for the market, delivering a 13,885 increase in customer numbers and £3.4 billion increase in AUA. This increase was driven by net AUA inflows of £1.9 billion (FY22: £3.3 billion) and £1.5 billion of favourable market movements (FY22: £4.3 billion of adverse market movements). Net AUA inflows were 42% lower than prior year as a result of a moderation in transfer activity as advisers and their clients exercised more caution in the face of ongoing uncertainty in the macroeconomic environment.
We have continued to develop our full-service advised proposition, Investcentre, with a focus on ease of use. This included new dealing functionality which allows advisers to make one-off investments using their customers' model portfolio asset allocation, helping to avoid any unnecessary friction when adding money to portfolios. We have also made significant progress on enhancements to the onboarding journey, due to be rolled out in the first half of FY24, delivering an improved interface mapped to the advice process which streamlines the new business process for advisers.
In the higher interest environment a number of customers are looking for cash-like returns, whilst maintaining the benefits of remaining in their existing tax wrappers and having the flexibility to easily invest in other assets again at a time of their choosing. To support advisers in servicing those customers, we launched the AJ Bell Investments Money Market MPS in November. This product is at a market-leading low-price with no management fees and an ongoing charges figure (OCF) of just 10bps.
We engage with advisers through a range of events and technical support every year. We continued our 'on and off the road' seminars, and hosted our flagship Investival conference in November, which was attended by over 400 financial professionals. This regular communication with advisers allows us to forge strong relationships and earn their trust as a platform provider.
D2C
|
D2C customers |
D2C AUA |
|
317,276 |
£22.7 billion |
|
+13% |
+18% |
Our D2C business has delivered a strong performance, with a 36,995 increase in customer numbers and a £3.4 billion increase in AUA. This increase was driven by net inflows of £2.3 billion (FY22: £2.5 billion), with over 95% of these net inflows into tax-wrappers and dealing accounts, and £1.1 billion of favourable market movements (FY22: £2.7 billion of adverse market movements).
At the start of the financial year we retired the Youinvest sub-brand, renaming our full-service D2C platform as AJ Bell. This change has helped to drive the strong growth in the year by simplifying the journey for new customers, and improving the effectiveness of our direct marketing activity.
We have continued to focus on making the customer journey easier and have rolled out multiple enhancements to the AJ Bell platform. In November, we introduced the ability to purchase a select list of gilts online in response to increased demand for those instruments in the higher interest rate environment. We also delivered our pension finding service for new and existing customers.
Following the increases in the UK base rate throughout the year, we raised the rates we pay to customers on cash held on the platform. Early in 2024, we will be introducing a higher interest rate on cash held in SIPP drawdown, reflecting the fact that these customers often hold more of their portfolio in cash to fund their short-to-medium term retirement plans, as well as higher rates for SIPP and ISA customers with large cash balances.
We provide high-quality investment content for our D2C customers, covering the latest market trends. In May, we made our weekly Shares magazine free for all D2C customers, and our weekly Money & Markets and Money Matters podcasts provide further market information and expert analysis to support our customers in navigating their investment decisions.
Investments
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AUM £4.7 billion +68% |
|
Our investments business offers a range of simple, transparent investment solutions at a low cost. In a market where many asset managers are suffering persistent net outflows, the strong performance and low-cost nature of our multi-asset investment solutions continue to attract new assets in both the advised and D2C markets.
The growth has been particularly strong from advised and external platform customers who value the long-term track record of performance our investments have delivered.
Customer services and technology
We provide a high-quality service to our customers, with over 95% of customer calls in the year answered within 20 seconds. This excellent service is reflected in our 4.8-star Trustpilot score, as rated by our D2C customers, and our 95.2% platform customer retention rate.
We continue to invest in our technology to deliver a great customer experience. Our secure and scalable platform has been designed to facilitate growth and drive operational gearing, utilising a hybrid technology model which allows us to build adaptable, easy-to-use interfaces. During the year, we have continued to invest in the resilience of our platform through further investment in our cyber security and disaster recovery capabilities. In addition, we have increased the resource in the change teams in order to improve the speed at which we deliver further enhancements to our platform propositions.
We recognise the significant opportunities that artificial intelligence presents for us to increase our efficiency as a business as well as the risks it presents for customer security. In June, we dedicated engineering and business resources to execute an artificial intelligence hackathon, building several innovative proofs of concept. The output of this process was very encouraging, with lots of initiatives discussed and many ideas generated which we will consider adopting in the future. We will embrace artificial intelligence, with the focus initially on internal, non-customer-facing operations, as part of our efforts to continually improve operational efficiency.
People and culture
As our business continues to grow, it is important that we maintain a strong culture, along with our high levels of staff engagement and wellbeing. It is therefore pleasing to have once again achieved a 3-star accreditation in the 'Best Companies to Work For', and to be recognised as one of the top 20 large companies to work for in the UK.
At the start of FY23 we introduced several enhancements to our pay and benefits package, representing an increase in staff costs of over 10%, including our new free share award scheme for all employees. We remained mindful of the impact of the continuing cost-of-living pressures on our people when considering employee benefits for the forthcoming year. A number of additional enhancements to our pay and benefits package were made, including an average increase in base pay of 5.8% and a further uplift in pension contributions.
As part of our review of the AJ Bell Way, we have refreshed some of our guiding principles and relaunched these to staff across the business, further details of which can be found in our Responsible Employer section.
Our apprenticeship programmes continue to be a huge success, with this year's intake of 34 new digital and investment apprentices being the largest cohort since it was launched in 2017. We were also pleased to have been recognised as the 'Large Employer of the Year' at the North West Apprenticeship Awards. In addition, our commitment to developing our internal talent pipeline was recognised with an 'Outstanding' Ofsted rating following their inspection of our Talent Development Programme which upskills and develops our Team Leaders and Managers through apprenticeships.
We launched the AJ Bell Futures Foundation at the start of the year to develop long-term partnerships with our local communities. It has been great to see staff participating in volunteering activities with both of our partner charities, Smart Works and IntoUniversity, as well as taking up the chance to nominate local charities for donations. Further information on the work of the Foundation can be found in our Responsible Business report.
Regulatory developments
There are a number of ongoing regulatory developments that will impact customers in our market and we continue to engage proactively with Government and regulators on their behalf.
We were well prepared for the implementation of the new Consumer Duty which came into force at the end of July. We are supportive of this development and believe it will be positive for consumers, with an increased focus on value for money and ensuring good customer outcomes. It is disappointing the new Duty does not yet apply to legacy schemes, as the FCA has recently stated savers in older schemes may be at greatest risk of poor value for money.
We are continuing to work with the Government and the FCA on their review of the boundary between advice and guidance, and their exploration of new ways to offer support and guidance to consumers. We believe any new rules should be applicable to new and existing D2C customers and enable firms to deliver solutions that meet the needs of their customer cohorts. An overly prescriptive approach would stifle innovation and risk poor customer outcomes.
ISAs should be a simple, easy-to-use tax-efficient savings vehicle but we now have six variations of ISAs, all aiming to cater for slightly different customer needs, with complicated rules. We have been campaigning for the Government to simplify ISAs by creating a single ISA solution that is easy for consumers to understand and will encourage them to invest more. Whilst some relaxations were announced in the Autumn Statement such as allowing people to subscribe to more than one of the same type of ISA each year, we think this was a missed opportunity to launch a wider consultation with the aim of simplifying ISAs and helping people to invest. Whilst significant change may take some time to achieve, our proposals have been received well both by government and the industry, so we will continue to campaign for further change in this area.
Executive Committee changes
Bruce Robinson stepped down from his role as Company Secretary and Group Legal Services Director, and as a member of the Executive Committee, at the end of September 2023. I would like to thank Bruce for his exceptional service over the last 11 years at AJ Bell and look forward to continuing to work with him in his new role as an Executive Consultant.
Following this, I am pleased to report the internal promotion of Kina Sinclair to the role of Group Legal Services Director and as a member of the Executive Committee with effect from 1 October 2023. Kina joined AJ Bell in July 2018 and brings extensive knowledge of the business alongside her broad commercial law expertise.
As part of the succession plan for Bruce, we have separated the Company Secretary role and are pleased to announce the appointment of Olubunmi Likinyo as Company Secretary with effect from 1 October 2023.
Following the year end Kevin Doran, Managing Director of D2C and Investments, informed the business of his decision to leave. He will therefore be departing AJ Bell in the new year. Kevin has helped us to build a terrific investment business and I would particularly like to thank him for his work in this part of the business. I am pleased to announce that Charlie Musson, our Chief Communications Officer, has taken over as Acting Managing Director D2C. Having worked with Charlie for many years, I look forward to working with him in his new role as we continue to drive our D2C platform propositions forward.
Outlook
Investment platforms play a hugely important role in helping individuals to take control of their long-term investments. At AJ Bell, we operate a scalable platform that provides a high-quality, trusted service to our customers. Our continued investment in our advised and D2C platform propositions means we are well equipped and ready to serve both existing platform customers and new customers seeking to invest in the future.
In the short term, the macroeconomic environment will continue to present some headwinds. However, as we have seen this year, our versatile platform offering enables us to continue delivering robust growth in these conditions and the long-term structural drivers of growth in the UK platform market remain strong. Our aim remains to continue increasing our share of the platform market, which for many years has grown quicker than the broader financial services sector.
Our diversified revenue model means we are well placed to succeed in different macroeconomic conditions. Our philosophy remains to continually re-invest the benefits of our scale to drive long-term growth, ensuring that we offer a great value proposition to customers whilst investing in our brand, technology and people at the levels required to deliver on our long-term growth ambitions.
As a final point, I would like to thank all of our staff; without their ongoing commitment and quality of work our continued success would not be possible.
Michael Summersgill
Chief Executive Officer
6 December 2023
Financial review
"The advantages of our dual-channel model and diversified revenue streams enabled us to deliver a record financial performance in the year."
Overview
Our dual-channel platform achieved robust net inflows of £4.2 billion (FY22: £5.8 billion) and customer growth of 12% (FY22: 16%) in a challenging external environment. Our ability to continue to grow in these circumstances is testament to the quality of our platform propositions.
Our diversified revenue model enabled us to deliver a strong financial performance, with revenue increasing by 33% to £218.2 million (FY22: £163.8 million) and PBT up 50% to £87.7 million (FY22: £58.4 million), whilst investing in our people, propositions and brand to ensure we are well placed to achieve future growth.
Business performance
Customers
Customer numbers increased by 50,813 during the year to a total of 491,402 (FY22: 440,589). This growth has been driven by our platform propositions, with our advised customers up by 10% and our D2C customers increasing by 13%.
Our platform customer retention rate remained high at 95.2% (FY22: 95.5%).
|
|
|
|
|
Year ended 30 September 2023 No. |
Year ended 30 September 2022 No. |
|
Advised platform |
|
|
|
159,256 |
145,371 |
|
D2C platform |
|
|
|
317,276 |
280,281 |
|
Total platform |
|
|
|
476,532 |
425,652 |
|
Non-platform |
|
|
|
14,870 |
14,937 |
|
Total |
|
|
|
491,402 |
440,589 |
Assets under administration
Year ended 30 September 2023
|
|
Advised platform £bn |
D2C platform £bn |
Total platform £bn |
Non-platform £bn |
Total £bn |
|
As at 1 October 2022 |
44.8 |
19.3 |
64.1 |
5.1 |
69.2 |
|
Inflows |
5.0 |
4.3 |
9.3 |
0.2 |
9.5 |
|
Outflows |
(3.1) |
(2.0) |
(5.1) |
(0.3) |
(5.4) |
|
Net inflows / (outflows) |
1.9 |
2.3 |
4.2 |
(0.1) |
4.1 |
|
Market and other movements |
1.5 |
1.1 |
2.6 |
0.2 |
2.8 |
|
As at 30 September 2023 |
48.2 |
22.7 |
70.9 |
5.2 |
76.1 |
Year ended 30 September 2022
|
|
Advised platform £bn |
D2C platform £bn |
Total platform £bn |
Non-platform £bn |
Total £bn |
|
As at 1 October 2021 |
45.8 |
19.5 |
65.3 |
7.5 |
72.8 |
|
Inflows |
6.2 |
3.9 |
10.1 |
0.2 |
10.3 |
|
Outflows |
(2.9) |
(1.4) |
(4.3) |
(2.2) |
(6.5) |
|
Net inflows / (outflows) |
3.3 |
2.5 |
5.8 |
(2.0) |
3.8 |
|
Market and other movements |
(4.3) |
(2.7) |
(7.0) |
(0.4) |
(7.4) |
|
As at 30 September 2022 |
44.8 |
19.3 |
64.1 |
5.1 |
69.2 |
We achieved robust total net inflows of £4.1 billion (FY22: £3.8 billion), driven by our platform.
Total advised platform net inflows were £1.9 billion (FY22: £3.3 billion). The year-on-year reduction was driven by a fall in gross inflows to £5.0 billion (FY22: £6.2 billion). There has been a moderation in transfer activity as advisers and their clients exercise more caution in the face of ongoing uncertainty in the macroeconomic environment, whilst existing customer inflows into tax-wrapped products remained stable. Advised outflows in the year increased to £3.1 billion (FY22: £2.9 billion).
Total D2C platform net inflows were £2.3 billion (FY22: £2.5 billion). Gross inflows increased to £4.3 billion (FY22: £3.9 billion) with the increase driven by changes to the annual pension allowance, competitive dynamics and strong inflows from new customers supported by the investments made in our brand. Outflows increased to £2.0 billion (FY22: £1.4 billion) as customers drew down on their investments amidst the cost-of-living pressures.
Non-platform net outflows of £0.1 billion (FY22: £2.0 billion) were significantly lower than FY22 following the closure of the institutional stockbroking business in the prior year.
Favourable market movements contributed £2.8 billion as global equity markets recovered some of the losses experienced in the prior year, when adverse market movements contributed to a £7.4 billion reduction in AUA. This resulted in closing AUA of £76.1 billion (FY22: £69.2 billion).
Assets under management
|
|
|
|
|
Year ended 30 September 2023 £bn |
Year ended 30 September 2022 £bn |
|
Advised |
|
|
|
2.5 |
1.7 |
|
D2C |
|
|
|
1.3 |
1.0 |
|
Non-platform |
|
|
|
0.9 |
0.1 |
|
Total |
|
|
|
4.7 |
2.8 |
Our range of funds and MPSs are highly valued by financial advisers, their clients and our retail customers. Total AUM closed at £4.7 billion (FY22: £2.8 billion), representing a 68% increase in the year. The growth has been particularly strong from our advised customers, as well as a significant increase in AUM from customers investing via external third-party platforms.
Financial performance
Revenue
|
|
|
|
|
Year ended 30 September 2023 £000 |
Year ended 30 September 2022 £000 |
|
Recurring fixed |
|
|
30,666 |
29,787 |
|
|
Recurring ad valorem |
|
|
161,152 |
102,184 |
|
|
Transactional |
|
|
26,416 |
31,876 |
|
|
Total |
|
|
|
218,234 |
163,847 |
Revenue increased by 33% to £218.2 million (FY22: £163.8 million).
Revenue from recurring fixed fees increased by 3% to £30.7 million (FY22: £29.8 million), primarily due to higher pension administration revenue from our advised platform customers.
Recurring ad valorem revenue grew by 58% to £161.2 million (FY22: £102.2 million). The key driver of this growth was the higher levels of interest generated on cash balances held on the platform following increases to market rates of interest in the year, combined with elevated average cash balances in the first half of the year. Our economies of scale enable us to benefit from these interest rate rises whilst also sharing them with our customers by paying a market-competitive rate on their cash balances. Further information on the impact to revenue of changes to the UK base interest rate has been disclosed in note 25 to the consolidated financial statements. Increased custody fee income as a result of higher average platform AUA also contributed to this revenue growth.
Revenue from transactional fees decreased by 17% to £26.4 million (FY22: £31.9 million). This decrease was due to lower dealing activity levels in the current year, impacted by the macroeconomic environment.
Our overall revenue margin increased by 7.2bps to 29.8bps (FY22: 22.6bps).
Administrative expenses
|
|
|
|
|
Year ended 30 September 2023 £000 |
Year ended 30 September 2022 £000 |
|
Distribution |
|
|
25,928 |
14,998 |
|
|
Technology |
|
|
40,317 |
32,706 |
|
|
Operational and support |
|
|
65,769 |
57,162 |
|
|
Total |
|
|
|
132,014 |
104,866 |
Administrative expenses increased by 26% to £132.0 million (FY22: £104.9 million), in line with expectation, as we delivered our planned investment in our people, technology and brand, whilst absorbing some one-off inflationary impacts and supporting sustainable growth. Total staff costs increased by £9.9 million across the business driven by the roll out of a comprehensive new pay and benefits package which took effect on 1 October 2022 and increased headcount to support our growth.
Distribution costs increased by 73% to £25.9 million (FY22: £15.0 million) as we executed our plans to increase investment in our brand. This included our multi-channel 'feel good, investing' advertising campaign, and our new partnership as the title sponsor of the AJ Bell Great Run Series.
Technology costs increased by 23% to £40.3 million (FY22: £32.7 million). This increase reflects investment in our proposition development teams, as well as increases to our licensing and external hosting costs.
Operational and support costs increased by 15% to £65.8 million (FY22: £57.2 million). The higher costs were driven by an increase in the average number of employees in order to support our continued growth, as well as the investment in our pay and benefits package for staff. This was partially offset by lower dealing costs in the year as a result of reduced customer dealing activity.
The 26% total increase in the year reflects our investments, as planned, to deliver on our long-term growth plans. In FY24 we expect this growth rate to moderate to around 15% as inflationary pressures settle and we benefit from the operational gearing inherent in our business model, along with a focus on efficiency. The same factors are expected to result in lower levels of cost growth in the medium term.
Profitability and earnings
PBT increased by 50% to £87.7 million (FY22: £58.4 million) whilst PBT margin increased to 40.2% (FY22: 35.6%). The higher margin versus the prior year reflects the higher revenue margin.
Corporation tax for the period has been calculated at a rate of 22.0%, representing the average annual tax rate for the year, as the standard rate of UK corporation tax increased from 19.0% to 25.0% on 1 April 2023. Our effective rate of tax for the period was 22.2% (FY22: 20.0%).
Basic earnings per share rose by 46% to 16.59 pence (FY22: 11.39 pence) in line with the increase to PBT. Diluted earnings per share (DEPS), which accounts for the dilutive impact of outstanding share awards, also increased by 46% to 16.53 pence (FY22: 11.35 pence).
Financial position
The Group's financial position remains strong, with net assets totalling £166.0 million (FY22: £133.4 million) as at 30 September 2023 and a return on assets of 41% (FY22: 35%).
Financial resources and regulatory capital position
Our financial resources are continually kept under review, incorporating comprehensive stress and scenario testing which is formally reviewed and agreed at least annually.
|
|
|
|
|
Year ended 30 September 2023 £000 |
Year ended 30 September 2022 £000 |
|
Total shareholder funds |
166,037 |
133,394 |
|||
|
Less: unregulated business capital |
(3,675) |
(3,718) |
|||
|
Regulatory group shareholder funds |
162,362 |
129,676 |
|||
|
Less: foreseeable dividends |
(29,807) |
(18,843) |
|||
|
Less: non-qualifying assets |
(12,887) |
(14,233) |
|||
|
Total qualifying capital resources |
119,668 |
96,600 |
|||
|
Less: capital requirement |
(53,930) |
(49,252) |
|||
|
Surplus capital |
65,738 |
47,348 |
|||
|
% of capital resource requirement held |
222% |
196% |
|||
During the year, we have continued to maintain a healthy surplus over our regulatory capital requirement and as at the balance sheet date this was 222% (FY22: 196%) of the capital requirement.
We operate a highly cash-generative business, with a short working-capital cycle that ensures profits are quickly converted into cash. We generated cash from operations of £120.5 million (FY22: £57.2 million) and held a significant surplus over our basic liquid asset requirement during the period, with our year end balance sheet including cash balances of £146.3 million (FY22: £84.0 million).
Dividend
At half year, the Board declared an interim dividend of 3.50 pence per share (FY22: 2.78 pence per share). This was higher than would have resulted from applying our stated interim dividend policy, to ensure that the growth in interim dividend more closely aligned with the increase in financial performance during the current year.
The full year dividend policy of paying out 65% of statutory profit after tax remains unchanged and therefore the Board has recommended a final dividend of 7.25 pence per share (FY22: 4.59 pence per share), resulting in a total ordinary dividend of 10.75 pence (FY22: 7.37 pence).
Peter Birch
Chief Financial Officer
6 December 2023
Principal risks and uncertainties
The Board is committed to a continual process of improvement and embedment of the risk management framework within the Group. This ensures that the business identifies both existing and emerging risks and continues to develop appropriate mitigation strategies.
The Board believes that there are a number of potential risks to the Group that could hinder the successful implementation of its strategy. These risks may arise from internal and external events, acts and omissions. The Board is proactive in identifying, assessing and managing all risks facing the business, including the likelihood of each risk materialising in the shorter or longer term.
The principal risks and uncertainties facing the Group are detailed below, along with potential impacts and mitigating actions. The majority of the Group's principal risks and uncertainties' residual risk has remained stable, however the residual risk has increased for information security and financial crime due to the heightened threat landscape in these areas.
Residual risk direction
↑ Increased ↔ Stable ↓ Decreased
|
Risk |
Potential impact |
Mitigations |
|
Strategic risk |
||
|
Strategic risk
Residual risk direction
↔ Stable
|
· Loss of competitive advantage, such that AUA and customer number targets are adversely impacted. This would have a negative impact on profitability. · Reputational damage as a result of underperformance and / or regulatory scrutiny.
|
The Group regularly reviews its products against competitors, in relation to pricing, functionality and service, and actively seeks to make enhancements where necessary to maintain or improve its competitive position in line with the Group's strategic objectives. |
|
ESG risk
The risk that environmental, social and governance factors could negatively impact the Group, its customers, investors and the wider community.
Residual risk direction
↔ Stable
|
· Environmental, physical and transition risks resulting from climate change, which may impact the Group and our customers' assets. · Social risks, include employee wellbeing and diversity and inclusion. · Governance risks, including the risks related to the Group's governance structures being ineffective, which could manifest in governance-related reputational and conduct risks. |
The Group has established an ESG Working Group to manage all ESG-related matters, including people- and social-related matters, as well as the Group's Task Force for Climate-related Financial Disclosures (TCFD). ESG-related strategic objectives are incorporated in the Group's Business Planning Process (BPP). The Group is committed to creating an inclusive workplace and prioritising employee wellbeing, to establish an environment where all employees feel valued and supported. The Group's Employee Voice Forum promotes health and wellbeing in and outside of the office. The Group has a robust governance framework. |
|
Operational risk |
||
|
Legal and regulatory risk
Residual risk direction
↔ Stable
|
· Regulatory censure and / or fines, including fines from the FCA and Information Commissioner's Office (ICO). · Related negative publicity could reduce customer confidence and affect ability to generate new inflows. · Poor conduct could have a negative impact on customer outcomes, impacting the Group's ability to achieve strategic objectives.
|
The Group maintains a strong compliance culture geared towards positive customer outcomes and regulatory compliance. The Group performs regular horizon scanning to ensure all regulatory change is detected and highlighted to the Group for consideration. The Group maintains an open dialogue with the FCA and actively engages with them on relevant proposed regulatory change. The Compliance function is responsible for ensuring all standards of the regulatory system are being met by the Group. This is achieved by implementing policies and procedures across the business, raising awareness and developing an effective control environment. Where appropriate, the Compliance Monitoring Team conducts reviews to ensure compliance standards have been embedded into the business. |
|
Information security risk
Residual risk direction
↑ Increased
|
· Information security breaches could adversely impact individuals' data rights and freedoms and could result in fines / censure from regulators, such as the ICO and FCA. · Failure to maintain or quickly recover operations could lead to intolerable harm to customers and the Group. · The Group could suffer damage to its reputation eroding trust and making it difficult to attract and retain customers, employees, partners, and investors. |
The Group continually reviews its cyber security position to ensure that it protects the confidentiality, integrity and availability of its network and the data that it holds. A defence in-depth approach is in place with firewalls, web gateway, email gateway and anti-virus amongst the technologies deployed. Staff awareness is seen as being a key component of the layered defences, with regular updates, training and mock phishing exercises. The Group regularly assesses its maturity against an acknowledged security framework, which includes an ongoing programme of staff training and assessment through mock security exercises. |
|
Data risk
Data risk is defined as the potential threats and vulnerabilities that can compromise the confidentiality, integrity, availability, and compliance of sensitive or valuable data within the Group and its third-party suppliers. This risk encompasses the possibility of unauthorised access, loss, theft, alteration, or exposure of data.
Residual risk direction
↔ Stable
|
· Data breaches could adversely impact individuals' data rights and freedoms and could result in fines / censure from regulators, such as the ICO and FCA. · A data breach could result in financial loss due to the cost of investigating the breach, notifying impacted individuals, and implementing remediation measures. · The Group could suffer damage to its reputation, eroding trust and making it difficult to attract and retain customers, employees, partners, and investors. |
The Group monitors the adequacy of its data governance framework via the Data Forum. The Group has data protection policies and procedures, security controls to protect data such as encryption, access controls and monitoring. The Group educates employees about data security and the importance of protecting sensitive data. The Group conducts regular data audits to identify and address potential security risks. The Group's Data Protection Officer / CRO provides an assessment of the adequacy of the Group's data protection framework as part of the annual DPO report. |
|
Financial crime risk The risk of failure to protect the Group and its customers from all aspects of financial crime, including anti-money laundering, terror financing, proliferation financing, sanctions restrictions, market abuse, fraud, cyber-crime and the facilitation of tax evasion.
Residual risk direction
↑ Increased
|
· The Group may be adversely affected, including regulatory censure or enforcement, if we fail to mitigate the risk of being used to facilitate any form of financial crime. · Potential customer detriment as customers are at risk of losing funds or personal data, which can subject them to further loss via other organisations. · Fraudulent activity leading to identity fraud and / or loss of customer holdings to fraudulent activity. · The Group could suffer damage to its reputation, eroding trust and making it difficult to attract and retain customers, employees, partners, and investors.
|
Extensive controls are in place to minimise the risk of financial crime. Policies and procedures include: mandatory financial crime training in anti-money laundering and counter-terrorist financing, fraud, market abuse and the Criminal Finances Act for all employees to aid the detection, prevention and reporting of financial crime. The Group has an extensive recruitment process in place to screen potential employees. |
|
Third-party management risk
Residual risk direction
↔ Stable
|
· Loss of service from a third-party provider could have a negative impact on customer outcomes due to website unavailability, delays in receiving and / or processing customer transactions or interruptions to settlement and reconciliation processes. · Financial impact through increased operational losses. · Regulatory fine and / or censure. |
To mitigate the risk posed by third-party suppliers, the Group conducts onboarding due diligence and monitors performance against documented service standards to ensure their continued commitment to service, financial stability and viability. Performance metrics are discussed monthly with documented actions for any identified improvements. |
|
Technology risk
Residual risk direction
↔ Stable
|
· The reliance on evolving technology remains crucial to the Group's effort to develop its services and enhance products. Prolonged underinvestment in technology would affect our ability to serve our customers and meet their needs. · Failing to deliver and manage a fit-for-purpose technology platform could have an adverse impact on customer outcomes and affect our ability to attract new customers. · Technology failures may lead to financial or regulatory penalties, and reputational damage. |
The Group continues to implement a programme of increasing annual investment in the technology platform. This is informed by recommendations that result from regular architectural reviews of applications and of the underpinning infrastructure and services. Daily monitoring routines provide oversight of performance and capacity. |
|
Operational resilience risk
Residual risk direction
↔ Stable
|
· Failure to maintain or quickly recover operations could lead to intolerable harm to customers and the Group. · Operational resilience disruptions may lead to financial or regulatory penalties, and reputational damage. |
The Group has developed a comprehensive operational resilience framework, under the direction of the Operations sub-committee of ExCo. The R&CC and Board also provide oversight. An annual operational resilience self-assessment document is reviewed by the Board and R&CC. The Group's Risk Team also provide a 2nd line of defence review of the operational resilience self-assessment. |
|
Process risk
Residual risk direction
↔ Stable
|
· A decline in the quality of work would have a financial impact through increased operational losses. · Unexpectedly high volumes coupled with staff recruitment and retention issues could lead to poor customer outcomes and reputational damage. |
There is an ongoing programme to train staff on multiple operational functions. Diversifying the workforce enables the business to deploy staff when high work volumes are experienced. Causes of increased volumes of work, for example competitor behaviour, are closely monitored in order to plan resource effectively. The Group focuses on increasing the effectiveness of its operational procedures and, through its business improvement function, aims to improve and automate more of its processes. This reduces the need for manual intervention and the potential for errors. |
|
Change risk
The risk of potential negative consequences and uncertainties associated with introducing modifications, alterations, or adjustments to established processes or systems.
Residual risk direction
↔ Stable
|
· Operational resilience disruptions resulting from crystallisation of change risk may lead to financial or regulatory penalties, and reputational damage. · Change can increase costs if not delivered within budget or introduce complexity to end users due to a lack of compatibility with existing systems. · Reduced quality because of a change can lead to customer dissatisfaction, rework, and additional costs. · An inability to deliver change can result in reputational damage to the Group, making it difficult to attract customers and talent. |
All operational and regulatory change is prioritised, captured, and monitored through the Operations sub-committee of ExCo. Technical Change is prioritised, captured, and monitored within Technology Services and through associated Committees. Product Change is managed within the Product areas and overseen by the corresponding Proposition Committee. |
|
Financial control environment risk
Residual risk direction
↔ Stable
|
· Reputational damage with regulators, leading to increased capital requirement. · Potential customer detriment resulting from inadequate protection of customer assets. · Increased expenditure in order to compensate customers for loss incurred. |
The Group's financial control and fraud prevention policies and procedures are designed to ensure that the risk of fraudulent access to customer or corporate accounts is minimised. |
|
Conduct / Consumer Outcomes risk
Residual risk direction
↔ Stable
|
· Poor conduct could have a negative effect on customer outcomes. · Reputational damage resulting from poor levels of customer service. · The Group may be adversely affected, including regulatory censure or enforcement. |
The Group's customer focus is founded on our guiding principles, which drive the culture of the business and ensure customers remain at the heart of everything we do. Training on the importance and awareness of the delivery of good customer outcomes is provided to all staff on a regular basis. The Group continues to focus on enhancements to its framework, in relation to the identification, monitoring and mitigation of risks of poor customer outcomes, and to its product management process to reduce the potential for customer detriment. All developments are assessed for potential poor customer outcomes, and mitigating actions are delivered alongside the developments as appropriate. The Group implemented the Consumer Duty in July 2023 which provides higher and clearer standards of consumer protection. |
|
People risk
The risk that the Group fails to attract, retain, develop and engage employees who are aligned to the Group's guiding principles.
Residual risk direction
↔ Stable
|
· Difficulties in recruiting the right people to work for the Group. · Existing employees who are not motivated, do not perform well and may leave the Group. · Talented employees who are not appropriately developed and / or have limited opportunities to progress are likely to leave the Group. · Resource shortfalls may impact quality and service and could lead to poor service / consumer outcomes and reputational damage. |
The Group has improved its recruitment processes to attract the best people possible to join the Group. The Group undertakes a staff engagement survey at least annually and uses this feedback to address any areas for improvement to ensure staff engagement remains high. The Group conducts regular reviews of its employee benefits package to ensure it is competitive. The Group operates a talent development programme. |
|
Investment risk
Risk of failures surrounding the investment activities carried out by AJ Bell Investments (AJBI). The risks specific to the AJBI entity include operational, reputational and conduct risks.
Residual risk direction
↔ Stable
|
· Outflows or loss of assets under management as a result of underperformance or reputational damage. · Compensation required to cover operational losses, such as trading errors. · Potential customer detriment resulting from inadequate governance arrangements.
|
The Group maintains robust Investment Governance arrangements for decision making in relation to the AJBI products and services. The performance of AJBI products and services is monitored on an ongoing basis for alignment with customer expectations and mandates, including through dedicated committees and by the independent 2nd line of defence Investment Risk function. Enterprise risks are reviewed and monitored through AJBI's Department Risk Forum, with escalation routes to the Investment Proposition Committee (IPC) and Risk & Compliance Committee. Consumer Duty Evidential MI is monitored and reported up through the IPC and Operational Committee. Any trading undertaken on the AJ Bell Funds or in model portfolios is subject to a number of internal controls to minimise the risk of any operational losses. |
|
Financial risk |
||
|
Market risk
Residual risk direction
↔ Stable
|
· Adverse effect on customer transactional activity or ad valorem fees generated from assets under administration from which the Group derives revenue. Sensitivities for interest rate and market movements are shown in note 25 to the consolidated financial statements.
|
The Group's products are targeted at UK residents. We do not do business in any other countries and have relatively few customers outside the UK. However, in the event that the economy falls back into a prolonged recession, this may impact contribution levels and confidence generally in the savings and investment markets. The Directors believe that the Group's overall income levels and in particular the balance between the different types of assets and transactions from which that income is derived, provide a robust defensive position against a sustained economic downturn. The Group has a variety of transactional and recurring revenue streams, some of which are monetary amounts while others are ad valorem. This mix of revenue types helps to limit the Group's exposure to interest rate fluctuations and capital market fluctuations. |
|
Capital risk
Residual risk direction
↔ Stable
|
· Inability to cover unexpected losses. · Additional regulatory scrutiny and potential increased regulatory capital resource requirements.
|
The Group adopts a cautious and controlled approach to managing its capital risk. The Group conducts an Internal Capital and Risk Assessment (ICARA) process aligned with its risk management framework to identify, monitor and mitigate harms. Where harms cannot be mitigated, the Group holds capital to cover potential unexpected losses (its capital resource requirement). The Group's capital risk appetite is to maintain its capital resources at least >125% more than the Group's capital resource requirement. |
|
Credit risk
Residual risk direction
↔ Stable
|
· Unintended market exposure. · Customer detriment.
|
The Group's credit risk extends principally to its financial assets, cash balances held with banks and trade and other receivables. The Group carries out initial and ongoing due diligence on the market counterparties and banks that it uses, and regularly monitors the level of exposure. The Group will maintain its existing strategy of diversification to ensure acceptable exposure across a wide range of well-capitalised banks with appropriate credit ratings. It will continue to regularly monitor its level of exposure and to assess the financial strength of its banking counterparties. |
|
Liquidity risk
Residual risk direction
↔ Stable |
· Reputational damage. · Potential customer detriment. · Financial loss. · Unable to meet obligations as they fall due.
|
The Group has robust systems and controls and monitors all legal entities to ensure they have sufficient funds to meet their liabilities as they fall due.
The Group continues to monitor trade settlement on both an intra-day and daily basis.
The Group continues to be a highly cash-generative business and to maintain sufficient cash and standby banking facilities to fund its foreseeable trading requirements. |
Viability statement
In accordance with provision 31 of the UK Corporate Governance Code 2018, the Board has assessed the viability of the Group, considering a four-year period to September 2027. The Board considers a four-year horizon to be an appropriate period to assess the Group's strategy and its capital requirements, considering the investment needs of the business and the potential risks that could impact the Group's ability to meet its strategic objectives.
This assessment has been made considering the Group's financial position and regulatory capital and liquidity requirements in the context of its business model, strategy and four-year financial forecasts and in consideration of the principal risks and uncertainties, as detailed in the Strategic report. The principal risks and uncertainties are those that may adversely impact the Group based on its business model and strategy and are derived from both the Group's business activities and the wider macroeconomic environment in which the Group operates but does not control.
As an FCA-regulated entity, as part of its Internal Capital and Risk Assessment (ICARA) the Group is required to use stress testing of the business model and strategy to identify whether it holds sufficient own funds and liquid assets. Forward-looking hypothetical stress testing scenarios have been determined by considering potential macroeconomic and idiosyncratic events that would have a significant adverse impact on the Group's ability to generate profits, and therefore maintain the existing levels of own funds and liquid assets, over the business planning period.
The Board-approved four-year financial forecast assumes the business continues to grow customer numbers and AUA through investment in our brand, product propositions, technology and people. The financial forecasts assume that the Bank of England base interest rate has peaked, gradually falling throughout the forecast period, in line with market projections. There are no significant market movements in underlying asset values based on the position at the point the projections were approved by the Board.
The Board has considered the potential impact of three stress test scenarios, which cumulatively represent a severe, remote but plausible scenario:
1) Macroeconomic (Market risk) - a significant reduction in equity market values, based on the 2008-09 global financial crisis. Asset values fall by 40% in year one, recovering to 20% below the level they were prior to the fall in year two, and remain flat in years three and four.
2) Macroeconomic (Market risk) - Bank of England base interest rate reduced to 0.50% throughout the assessment period, leading to a lower interest rate retained on customer cash balances.
3) Idiosyncratic (Technology risk, Third-party management risk) - prolonged IT issues with key operating software suppliers cause significant damage to AJ Bell's service and reputation, which results in a reduction in customers. Following year one the Group incurs development and license costs to upgrade or replace key components of the platform software, with service levels and net inflows returning to normal in year three.
The Board have identified a number of potential management actions that could be taken, the action selected would be dependent upon the nature of the scenario.
The results have confirmed that the Group would be able to withstand the adverse financial impact of these three scenarios occurring simultaneously over the four-year assessment period. This assumes that dividends are paid in line with the recommendation made in the 30 September 2023 annual report and with the Group dividend policy on a forward-looking basis. During the period, the Group continues to retain surplus financial resources over and above its regulatory capital and liquidity requirements, with or without any management remediation actions.
The Group's strategy and four-year financial forecasts were approved by the Board in September 2023. The Directors confirm that they have a reasonable expectation that the Group will be able to continue in operation and meet its liabilities as they fall due over the four-year period ending September 2027.
The Strategic report was approved by the Board of Directors and signed on its behalf by:
Michael Summersgill
Chief Executive Officer
6 December 2023
Statement of Directors' responsibilities
The Directors are responsible for preparing the Annual Report and the Financial Statements in accordance with UK-adopted international accounting standards and applicable law and regulations.
Company law requires the Directors to prepare Group and Parent Company financial statements for each financial year. Under that law the Directors are required to prepare the Group financial statements in accordance with UK-adopted international accounting standards and have elected to prepare the Parent Company financial statements in accordance with UK accounting standards and applicable law including FRS 101 Reduced Disclosure Framework.
Under company law the Directors must not approve the financial statements unless they are satisfied that they give a true and fair view of the state of affairs of the Group and Parent Company and of the profit or loss for the Group for that period. The Directors are also required to prepare the Group financial statements in accordance with international financial reporting standards as adopted by the UK.
In preparing these financial statements, the Directors are required to:
· select suitable accounting policies and then apply them consistently;
· make judgements and accounting estimates that are reasonable and prudent;
· for the Group financial statements, state whether they have been prepared in accordance with UK-adopted international accounting standards, subject to any material departures disclosed and explained in the financial statements;
· for the Parent Company financial statements, state whether applicable UK accounting standards have been followed, subject to any material departures disclosed and explained in the financial statements;
· prepare the financial statements on the going concern basis unless it is inappropriate to presume that the Group or Parent Company will continue in business; and
· prepare a Directors' report, a Strategic report and Directors' Remuneration report which comply with the requirements of the Companies Act 2006.
The Directors are responsible for keeping adequate accounting records that are sufficient to show and explain the Parent Company's transactions and disclose with reasonable accuracy at any time the financial position of the Parent Company and enable them to ensure that the financial statements comply with the Companies Act 2006.
They are also responsible for safeguarding the assets of the Group and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities.
The Directors are responsible for ensuring the Annual Report and the Financial Statements are made available on a website. Financial statements are published on the Company's website in accordance with legislation in the United Kingdom governing the preparation and dissemination of financial statements, which may vary from legislation in other jurisdictions. The maintenance and integrity of the Company's website is the responsibility of the Directors. The Directors' responsibility also extends to the ongoing integrity of the financial statements contained therein.
Each of the Directors, whose names and responsibilities are listed in the Corporate Governance report, confirms that, to the best of their knowledge:
· The financial statements have been prepared in accordance with the applicable set of accounting standards and give a true and fair view of the assets, liabilities, financial position and profit and loss of the Group.
· The Annual Report includes a fair review of the development and performance of the business and the financial position of the Group and Parent Company, together with a description of the principal risks and uncertainties that they face.
We consider that the Annual Report and Financial Statements, taken as a whole, are fair, balanced and understandable and provide the information necessary for shareholders to assess the Group's position and performance, business model and strategy.
Approved by the Board on 6 December 2023 and signed on its behalf by:
Olubunmi Likinyo
Company Secretary
4 Exchange Quay
Salford Quays
Manchester
M5 3EE
Consolidated income statement
for the year ended 30 September 2023
|
|
|
|
2023 |
|
2022 |
|
|
|
Notes |
£000 |
|
£000 |
|
Revenue |
|
5 |
218,234 |
|
163,847 |
|
Administrative expenses |
|
(132,014) |
|
(104,866) |
|
|
Operating profit |
6 |
86,220 |
|
58,981 |
|
|
Investment income |
8 |
2,393 |
|
198 |
|
|
Finance costs |
9 |
(952) |
|
(768) |
|
|
Profit before tax |
|
87,661 |
|
58,411 |
|
|
Tax expense |
10 |
(19,442) |
|
(11,672) |
|
|
Profit for the financial year attributable to: |
|
|
|
|
|
|
Equity holders of the parent company |
|
68,219 |
|
46,739 |
|
|
Earnings per share |
|
|
|
|
|
|
Basic (pence) |
12 |
16.59 |
|
11.39 |
|
|
Diluted (pence) |
12 |
16.53 |
|
11.35 |
|
|
|
|
|
|
|
|
All revenue, profit and earnings are in respect of continuing operations.
There were no other components of recognised income or expense in either period and, consequently, no statement of other comprehensive income has been presented.
Consolidated statement of financial position
as at 30 September 2023
|
|
|
|
|
|
|
2023 |
|
2022 |
|
|
|
|
|
|
Notes |
£000 |
|
£000 |
|
Assets |
|
|
|
|
|
|
|
|
|
Non-current assets |
|
|
|
|
|
|
|
|
|
Goodwill |
|
|
|
|
13 |
6,991 |
|
6,991 |
|
Other intangible assets |
|
|
14 |
7,433 |
|
8,779 |
||
|
Property, plant and equipment |
|
|
15 |
3,809 |
|
3,325 |
||
|
Right-of-use assets |
|
|
|
16 |
10,800 |
|
12,273 |
|
|
Deferred tax asset |
|
|
|
18 |
484 |
|
610 |
|
|
|
|
|
|
|
|
29,517 |
|
31,978 |
|
Current assets |
|
|
|
|
|
|
|
|
|
Trade and other receivables |
|
|
19 |
58,501 |
|
49,436 |
||
|
Current tax receivable |
|
|
|
- |
|
38 |
||
|
Cash and cash equivalents |
|
|
20 |
146,304 |
|
84,030 |
||
|
|
|
|
|
|
|
204,805 |
|
133,504 |
|
Total assets |
|
|
|
|
234,322 |
|
165,482 |
|
|
Liabilities |
|
|
|
|
|
|
|
|
|
Current liabilities |
|
|
|
|
|
|
|
|
|
Trade and other payables |
|
|
21 |
(52,437) |
|
(15,604) |
||
|
Current tax liability |
|
|
|
|
(151) |
|
- |
|
|
Lease liabilities |
|
|
|
16 |
(1,540) |
|
(1,566) |
|
|
Provisions |
|
|
|
|
22 |
(1,126) |
|
(519) |
|
|
|
|
|
|
|
(55,254) |
|
(17,689) |
|
Non-current liabilities |
|
|
|
|
|
|
||
|
Lease liabilities |
|
|
|
16 |
(10,866) |
|
(12,395) |
|
|
Provisions |
|
|
|
|
22 |
(2,165) |
|
(2,004) |
|
|
|
|
|
|
|
(13,031) |
|
(14,399) |
|
Total liabilities |
|
|
|
|
(68,285) |
|
(32,088) |
|
|
|
|
|
|
|
|
|
|
|
|
Net assets |
|
|
|
|
166,037 |
|
133,394 |
|
|
Equity |
|
|
|
|
|
|
|
|
|
Share capital |
|
|
|
23 |
52 |
|
51 |
|
|
Share premium |
|
|
|
|
8,963 |
|
8,930 |
|
|
Own shares |
|
|
|
|
(2,377) |
|
(473) |
|
|
Retained earnings |
|
|
|
|
159,399 |
|
124,886 |
|
|
Total equity |
|
|
|
|
166,037 |
|
133,394 |
|
The financial statements were approved by the Board of Directors and authorised for issue on 6 December 2023 and signed on its behalf by:
Peter Birch
Chief Financial Officer
AJ Bell plc
Company registered number: 04503206
Consolidated statement of changes in equity
for the year ended 30 September 2023
|
|
|
|
|
|
|
Share |
Share |
Retained |
Own |
Total |
|
|
|
|
|
|
|
capital |
premium |
earnings |
shares |
equity |
|
|
|
|
|
|
|
£000 |
£000 |
£000 |
£000 |
£000 |
|
Balance at 1 October 2022 |
|
|
|
|
51 |
8,930 |
124,886 |
(473) |
133,394 |
|
|
Total comprehensive income for the year: |
|
|
|
|
|
|
|
|
||
|
Profit for the year |
|
|
|
|
- |
- |
68,219 |
- |
68,219 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Transactions with owners, recorded directly in equity: |
|
|
|
|
|
|
|
|||
|
Issue of shares |
|
|
|
|
|
1 |
33 |
- |
- |
34 |
|
Dividends paid |
|
|
|
|
|
- |
- |
(33,294) |
- |
(33,294) |
|
Equity settled share-based payment transactions |
|
- |
- |
(110) |
- |
(110) |
||||
|
Deferred tax effect of share-based payment transactions |
|
|
- |
- |
(88) |
- |
(88) |
|||
|
Tax relief on exercise of share options |
|
|
|
- |
- |
123 |
- |
123 |
||
|
Share transfer relating to EIP (note 23) |
|
|
|
- |
- |
(96) |
96 |
- |
||
|
Payment of tax from employee benefit trust |
|
|
|
- |
- |
(241) |
- |
(241) |
||
|
Own shares acquired (note 23) |
|
|
|
|
- |
- |
- |
(2,000) |
(2,000) |
|
|
Total transactions with owners |
|
|
|
|
1 |
33 |
(33,706) |
(1,904) |
(35,576) |
|
|
Balance at 30 September 2023 |
|
|
|
|
52 |
8,963 |
159,399 |
(2,377) |
166,037 |
|
|
|
|
|
|
|
|
Share |
Share |
Retained |
Own |
Total |
|
|
|
|
|
|
|
capital |
premium |
earnings |
shares |
equity |
|
|
|
|
|
|
|
£000 |
£000 |
£000 |
£000 |
£000 |
|
Balance at 1 October 2021 |
|
|
|
|
51 |
8,658 |
122,739 |
(740) |
130,708 |
|
|
Total comprehensive income for the year: |
|
|
|
|
|
|
|
|
||
|
Profit for the year
|
|
|
|
|
- |
- |
46,739 |
- |
46,739 |
|
|
Transactions with owners, recorded directly in equity: |
|
|
|
|
|
|
||||
|
Issue of shares |
|
|
|
|
|
- |
272 |
- |
- |
272 |
|
Dividends paid |
|
|
|
|
|
- |
- |
(50,383) |
- |
(50,383) |
|
Equity settled share-based payment transactions |
|
|
- |
- |
6,162 |
- |
6,162 |
|||
|
Deferred tax effect of share-based payment transactions |
|
|
- |
- |
(275) |
- |
(275) |
|||
|
Tax relief on exercise of share options |
|
|
|
- |
- |
171 |
- |
171 |
||
|
Share transfer relating to EIP |
|
|
|
|
- |
- |
(267) |
267 |
- |
|
|
Total transactions with owners |
|
|
|
|
- |
272 |
(44,592) |
267 |
(44,053) |
|
|
Balance at 30 September 2022
|
|
|
51 |
8,930 |
124,886 |
(473) |
133,394 |
|||
Consolidated statement of cash flows
for the year ended 30 September 2023
|
|
|
2023 |
|
2022 |
|
|
Notes |
£000 |
|
£000 |
|
Cash flows from operating activities |
|
|
|
|
|
Profit for the financial year |
|
68,219 |
|
46,739 |
|
Adjustments for: |
|
|
|
|
|
Investment income |
|
(2,393) |
|
(198) |
|
Finance costs |
|
952 |
|
768 |
|
Income tax expense |
|
19,442 |
|
11,672 |
|
Depreciation, amortisation and impairment |
|
4,788 |
|
3,643 |
|
Share-based payment expense |
24 |
1,103 |
|
4,728 |
|
Increase/(decrease) in provisions |
|
607 |
|
(1,007) |
|
Loss on disposal of property, plant and equipment |
|
16 |
|
21 |
|
Increase in trade and other receivables |
|
(9,065) |
|
(11,974) |
|
Increase in trade and other payables |
|
36,833 |
|
2,839 |
|
Cash generated from operations |
|
120,502 |
|
57,231 |
|
Income tax paid |
|
(19,092) |
|
(11,433) |
|
Net cash flows from operating activities |
|
101,410 |
|
45,798 |
|
Cash flows from investing activities |
|
|
|
|
|
Purchase of other intangible assets |
14 |
(1,926) |
|
(2,365) |
|
Purchase of property, plant and equipment |
15 |
(1,574) |
|
(1,014) |
|
Interest received |
|
2,393 |
|
198 |
|
Net cash flows used in investing activities |
|
(1,107) |
|
(3,181) |
|
Cash flows from financing activities |
|
|
|
|
|
|
|
|
|
|
|
Payments of principal in relation to lease liabilities |
16 |
(1,576) |
|
(1,716) |
|
Payment of interest on lease liabilities |
16 |
(952) |
|
(768) |
|
Proceeds from issue of share capital |
23 |
34 |
|
272 |
|
Purchase of own shares for employee share schemes |
23 |
(2,000) |
|
- |
|
Payment of tax from employee benefit trust |
|
(241) |
|
- |
|
Dividends paid |
11 |
(33,294) |
|
(50,383) |
|
Net cash flows used in financing activities |
|
(38,029) |
|
(52,595) |
|
Net increase/(decrease) in cash and cash equivalents |
|
62,274 |
|
(9,978) |
|
Cash and cash equivalents at beginning of year |
20 |
84,030 |
|
94,008 |
|
Total cash and cash equivalents at end of year |
20 |
146,304 |
|
84,030 |
Notes to the consolidated financial statements
for the year ended 30 September 2023
1 General information
AJ Bell plc (the 'Company') is the Parent Company of the AJ Bell group of companies (together the 'Group'). The Group provides investment administration, dealing and custody services. The nature of the Group's operations and its principal activities are set out in the Strategic report and the Directors' report.
The Company is a public limited company which is listed on the Main Market of the London Stock Exchange and incorporated and domiciled in the United Kingdom. The Company's number is 04503206 and the registered office is 4 Exchange Quay, Salford Quays, Manchester, M5 3EE. A list of investments in subsidiaries, including the name, country of incorporation, registered office, and proportion of ownership is given in note 6 of the Company's separate financial statements.
The consolidated financial statements were approved by the Board on 6 December 2023.
The financial information contained in this report does not constitute statutory accounts within the meaning of Section 434 of the Companies Act 2006. The financial information set out in this report has been extracted from the Group's 2023 Annual Report and Financial Statements, which have been approved by the Board of Directors on 6 December 2023. The Auditors have reported on the 2022 and 2023 accounts, their reports were (i) unqualified; (ii) did not include a reference to any matters to which the Auditors drew attention by way of emphasis without qualifying their report and (iii) did not contain a statement under sections 498(2) or (3) of the Companies Act 2006.
2 Significant accounting policies
Basis of accounting
The consolidated financial statements of AJ Bell plc have been prepared in accordance with UK-adopted International Financial Reporting Standards.
The financial statements are prepared on the historical cost basis and prepared on a going concern basis. They are presented in sterling, which is the currency of the primary economic environment in which the Group operates, rounded to the nearest thousand.
The accounting policies have been applied consistently to all periods presented in these financial statements and by all Group entities, unless otherwise stated.
Changes to International Reporting Standards
Interpretations and standards which became effective during the year:
The following amendments and interpretations became effective during the year. Their adoption has not had any significant impact on the Group.
|
|
|
Effective from |
|
IAS 37 |
Onerous Contracts: Cost of Fulfilling a Contract (Amendments) |
1 January 2022 |
|
IAS 16 |
Property, Plant and Equipment: Proceeds before intended use (Amendments) |
1 January 2022 |
|
|
Annual Improvements to IFRS Standards 2018-2020 |
1 January 2022 |
|
IFRS 3 |
Reference to the Conceptual Framework (Amendments) |
1 January 2022 |
Interpretations and standards in issue but not yet effective
The Group has not early adopted any other standard, interpretation or amendment that has been issued but is not yet effective.
Basis of consolidation
The consolidated financial statements incorporate the financial statements of the Company and entities controlled by the Company (its subsidiaries) made up to 30 September each year. The Group controls an entity when it is exposed to, or it has rights to variable returns from its involvement with the entity and has the ability to affect those returns through its power over the entity. The Group reassesses whether it controls an entity if facts and circumstances indicate there are changes to one or more elements of control. The results of a subsidiary undertaking are included in the consolidated financial statements from the date the control commences until the date that control ceases.
All intercompany transactions, balances, income and expenses are eliminated on consolidation.
2.1 Going concern
The Group's business activities, together with its financial position and the factors likely to affect its future development and performance are set out in the Strategic report and the Directors' report. Note 25 includes the Group's policies and processes for managing exposure to credit and liquidity risk.
The Group's forecasts and objectives, considering a number of potential changes in trading conditions, show that the Group should be able to operate at adequate levels of both liquidity and capital for at least 12 months from the date of signing this report. The Directors have performed a number of stress tests, covering a significant reduction in equity market values, a fall in the Bank of England base interest rate leading to a lower interest rate retained on customer cash balances, and a further Group-specific idiosyncratic stress relating to a scenario whereby prolonged IT issues cause a reduction in customers. Further detail of the forecasts and stress test scenarios are set out in the Viability statement. These scenarios provide assurance that the Group has sufficient capital and liquidity to operate under stressed conditions.
Consequently, after making reasonable enquiries, the Directors are satisfied that the Group has sufficient financial resources to continue in business for at least 12 months from the date of signing the report and therefore have continued to adopt the going concern basis in preparing the financial statements.
2.2 Business combinations
A business combination is recognised where separate entities or businesses have been acquired by the Group. The acquisition method of accounting is used to account for the business combinations made by the Group. The cost of a business combination is measured at the aggregate of the fair values (at the date of exchange), of assets given, liabilities incurred or assumed and equity instruments issued by the Group in exchange for control of the acquired entity. Where the consideration includes a contingent consideration arrangement, the contingent consideration is measured at its acquisition date fair value and included as part of the cost of the acquisition. Subsequent changes in such fair values are adjusted against the cost of acquisition where they qualify as measurement period adjustments. All other subsequent changes in the fair value of contingent consideration are charged to the income statement, except for obligations that are classified as equity, which are not re-measured. Where consideration is dependent on continued employment within the business this is treated as a separate transaction as post-acquisition remuneration.
Acquisition related costs are expensed as incurred in the income statement, except if related to the issue of debt or equity securities. Identifiable assets acquired and liabilities and contingent liabilities assumed in the business combination are measured initially at their fair values at the acquisition date. The excess of the cost of acquisition over the fair value of the Group's share of the identifiable net assets acquired is recorded as goodwill. If this is less than the fair value of the Group's share of the identifiable net assets of the subsidiary acquired, the difference is taken immediately to the income statement.
2.3 Segmental reporting
The Group determines and presents operating segments based on the information that is provided internally to the Board, which is the Group's Chief Operating Decision Maker (CODM). In assessing the Group's operating segments the Directors have considered the nature of the services provided, product offerings, customer bases, operating model and distribution channels amongst other factors. The Directors concluded there is a single segment as it operates with a single operating model; operations, support and technology costs are managed and reported centrally to the CODM. A description of the services provided is given within note 4.
2.4 Revenue recognition
Revenue represents fees receivable from investment administration and dealing and custody services for both client assets and client money. Revenue is measured based on the consideration specified in a contract with a customer. The Group recognises revenue when it transfers control over a good or service to a customer.
Recurring fixed
Recurring fixed revenue comprises recurring administration fees and media revenue.
Administration fees include fees charged in relation to the administration services provided by the Group and are recognised over time as the related service is provided.
Included within administration fees are annual pension administration fees. The Group recognises revenue from such fees over time, using an input method to measure progress towards complete satisfaction of a single performance obligation. The Group determined that the input method is the best method in measuring progress of the services relating to these fees because there is a direct relationship between the Group's effort (i.e. labour hours incurred) and the transfer of service to the customer.
The Group recognises revenue on the basis of the labour hours expended relative to the total expected labour hours to complete the service.
Certain pension administration fees are received in arrears or in advance. Where revenue is received in arrears for an ongoing service, the proportion of the income relating to services provided but not yet received is accrued. This is recognised as accrued income until the revenue is received. Where revenue is received in advance for an ongoing service, the proportion of the income relating to services that have not yet been provided is deferred. This is recognised as deferred income until the services have been provided.
Media revenue includes advertising, subscriptions, events and award ceremony and corporate solutions contracts. Subscriptions and corporate solutions revenue is recognised evenly over the period in which the related service is provided. Advertising, event and award ceremony revenue is recognised in the period in which the publication is made available to customers or the event or award ceremony takes place.
Recurring ad valorem
Recurring ad valorem revenue comprises custody fees, retained interest income and investment management fees provided by the Group and is recognised evenly over the period in which the related service is provided.
Ad valorem fees include custody fees charged in relation to the holding of client assets and interest received on client money balances. Custody fees and investment management fees are accrued on a time basis by reference to the AUA.
Transactional fees
Transactional revenue comprises dealing fees and pension scheme activity fees. Transaction-based fees are recognised when received in accordance with the date of settlement of the underlying transaction.
Other non-recurring fees are recognised in the period to which the service is rendered.
Customer incentives
Customer incentives paid to new retail customers are considered to be a reduction in revenue under IFRS 15. In line with IFRS 15, customer incentives to acquire new customers are offset against recurring ad valorem revenue and spread over the period which the customer is required to remain a customer in order to be eligible for the incentive. Customer incentives are paid in cash.
2.5 Share-based payments
The Group operates a number of share-based payment arrangements for its employees and non-employees. These generally involve an award of share options (equity-settled share-based payments) which are measured at the fair value of the equity instrument at the date of grant.
The share-based payment arrangements have conditions attached before the beneficiary becomes entitled to the award. These can be performance and/or service conditions.
The total cost is recognised, together with a corresponding increase in the equity reserves, over the period in which the performance and/or service conditions are fulfilled. Costs relating to the development of internally generated intangible assets are capitalised in accordance with IAS 38. The cumulative cost recognised for equity-settled transactions at each reporting date until the vesting date reflects the extent to which the vesting period has expired and management's estimate of shares that will eventually vest. At the end of each reporting period, the entity revises its estimates of the number of share options expected to vest based on the non-market vesting conditions. It recognises any revision to original estimates in the income statement and to intangible assets where appropriate, with a corresponding adjustment to equity reserves.
No cost is recognised for awards that do not ultimately vest, except for equity-settled transactions for which vesting is conditional upon a market or non-vesting condition. These are treated as vested irrespective of whether or not the market or non-vesting condition is satisfied, provided that all other performance and/or service conditions are satisfied.
The cost of equity-settled awards is determined by the fair value at the date when the grant is made using an appropriate valuation model or the market value discounted to its net present value, further details of which are given in note 24. The expected life applied in the model has been adjusted based on management's best estimate for the effects of non-transferability, exercise restrictions and behavioural considerations.
2.6 Investment income
Investment income comprises the returns generated on corporate cash at banks and short-term highly-liquid investments. Investment income is recognised in the income statement as it accrues, using the effective interest rate method.
2.7 Finance costs
Finance costs comprise interest incurred on lease liabilities recognised under IFRS 16. Finance costs are recognised in the income statement using the effective interest rate method.
2.8 Taxation
The tax expense represents the sum of the current tax payable and deferred tax. Tax is recognised in the income statement except to the extent that it relates to items recognised directly in equity, in which case it is recognised in equity.
Current tax is the expected tax payable or receivable on the taxable income or loss for the year and any adjustment to tax payable or receivable in respect of previous years, using tax rates enacted or substantively enacted at the reporting date.
Deferred tax is provided on temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for taxation purposes. Deferred tax is not recognised if the temporary difference arises from:
• the initial recognition of goodwill; or
• investments in subsidiaries to the extent that the Group is able to control the timing of the reversal of the temporary differences and it is probable they will not reverse in the foreseeable future; or
• the initial recognition of an asset and liability in a transaction other than a business combination that, at the time of the transaction, affects neither the accounting nor taxable profit or loss.
Deferred tax assets are recognised for unused tax losses, unused tax credits and deductible temporary differences to the extent that it is probable that taxable profits will be available in the future, against which deductible temporary differences can be utilised. Recognised and unrecognised deferred tax assets are reassessed at each reporting date.
The principal temporary differences arise from accelerated capital allowances, provisions for share-based payments and unutilised losses.
Deferred tax is measured at the tax rates that are expected to be applied to temporary differences when they reverse, using tax rates enacted or substantively enacted at the reporting date.
Deferred tax assets and liabilities are offset when there is a legally enforceable right to set off current tax assets against current tax liabilities and when they relate to income taxes levied by the same taxation authority and the Group intends to settle its current tax assets and liabilities on a net basis.
2.9 Dividends
Dividend distributions to the Company's shareholders are recognised in the period in which the dividends are declared and paid. The final dividend is approved by the Company's shareholders at the Annual General Meeting.
2.10 Goodwill
Goodwill arising on consolidation represents the difference between the consideration transferred and the fair value of net assets acquired of the subsidiary at the date of acquisition. Goodwill is not amortised, but is reviewed at least annually for impairment. Any impairment is recognised immediately through the income statement and is not subsequently reversed.
For the purposes of impairment testing goodwill acquired in a business combination is allocated to the cash generating unit (CGU) expecting to benefit from the synergies of the combination. CGUs to which goodwill has been allocated are reviewed annually or more frequently when there is an indication that the goodwill relating to that CGU may have been impaired. If the recoverable amount from the CGU is less than the carrying amount of the assets present on the consolidated statement of financial position forming that CGU, the impairment loss is allocated first to reduce the carrying amount of any goodwill
allocated to the assets forming that CGU and then to the assets of the CGU pro-rata on the basis of the carrying amount of each asset in the CGU.
On disposal of a subsidiary, the attributable amount of goodwill is included in the determination of the profit or loss on disposal.
2.11 Intangible assets (excluding goodwill)
Intangible assets comprise computer software and mobile applications, and the Group's Key Operating Systems (KOS). These are stated at cost less amortisation and any recognised impairment loss. Amortisation is charged on all intangible assets excluding goodwill and assets under construction at rates to write off the cost or valuation, less estimated residual value, of each asset evenly using a straight-line method over its estimated useful economic life as follows:
Computer software and mobile applications - 3 - 4 years
KOS - 15 years
KOS enhancements - Over the remaining life of the KOS
The assets' estimated useful lives, amortisation rates and residual values are reviewed, and adjusted if appropriate at the end of each reporting period. An asset's carrying value is written down immediately to its recoverable amount if its carrying value is greater than the recoverable amount.
The gain or loss arising on the disposal or retirement of an asset is determined as the difference between the sales proceeds and the carrying amount of the asset and is recognised in the income statement immediately.
2.12 Internally-generated intangible assets
An internally-generated asset arising from work performed by the Group is recognised only when the following criteria can be demonstrated:
|
• |
the technical feasibility of completing the intangible asset so that it will be available for use or sale; |
|
• |
the intention to complete the intangible asset and use or sell it; |
|
• |
the ability to use or sell the intangible asset; |
|
• |
how the intangible asset will generate probable future economic benefits; |
|
• |
the availability of adequate technical, financial and other resources to complete the development and to use or sell the intangible asset; and |
|
• |
the ability to measure reliably the expenditure attributable to the intangible asset during its development.
|
The amount initially recognised for internally-generated intangible assets is the sum of expenditure incurred from the date when the asset first meets the recognition criteria listed above. Development expenditure that does not meet the criteria is recognised as an expense in the period which it is incurred.
Subsequent to initial recognition, internally-generated intangible assets are reported at cost less accumulated amortisation and accumulated impairment losses, on the same basis as intangible assets that are acquired separately. Assets under construction are not amortised until the asset is operational and available for use.
Expenditure on research activities is recognised as an expense in the period in which it is incurred.
2.13 Property, plant and equipment
All property, plant and equipment is stated at cost, which includes directly attributable acquisition costs, less accumulated depreciation and any recognised impairment losses. Depreciation is charged on all property, plant and equipment, except assets under construction, at rates to write off the cost, less estimated residual value, of each asset evenly using a straight-line method over its estimated useful economic life as follows:
Leasehold improvements - Over the life of the lease
Office equipment - 4 years
Computer equipment - 3 - 5 years
The assets' estimated useful lives, depreciation rates and residual values are reviewed, and adjusted if appropriate at the end of each reporting period. An asset's carrying value is written down immediately to its recoverable amount if its carrying value is greater than the recoverable amount.
Assets under construction relate to capital expenditure on assets not yet in use by the Group and are therefore not depreciated.
The gain or loss arising on the disposal or retirement of an asset is determined as the difference between the sales proceeds and the carrying amount of the asset and is recognised in the income statement immediately.
2.14 Leased assets and lease liabilities
Leases
(i) Right-of-use assets
The Group recognises right-of-use assets at the commencement date of the leases. Right-of-use assets are measured at cost, less any accumulated depreciation and impairment losses, and adjusted for any re-measurement of lease liabilities. The cost of right-of-use assets includes the amount of lease liabilities recognised, initial direct costs incurred, and lease payments made at or before the commencement date less any lease incentives received.
Depreciation is applied in accordance with IAS 16: Property, Plant and Equipment. Right-of-use assets are depreciated over the lease term.
Right-of-use assets are subject to impairment.
(ii) Lease liabilities
At the commencement date of the lease, the Group recognises lease liabilities measured at the present value of lease payments to be made over the lease term. The lease payments include fixed payments less any lease incentives receivable.
In calculating the present value of lease payments, the Group uses the incremental borrowing rate at the lease commencement date if the interest rate implicit in the lease is not readily determinable. After the commencement date, the amount of lease liabilities is increased to reflect the addition of interest and reduced for the lease payments made. In addition, the carrying amount of lease liabilities is re-measured if there is a modification, a change in the lease term, a change in the fixed lease payments or a change in the assessment to purchase the underlying asset.
2.15 Impairment of intangible assets (excluding goodwill), property, plant and equipment and leased assets
At each reporting date the Group reviews the carrying amount of its intangible assets, property, plant and equipment and leased assets to determine whether there is any indication that those assets have suffered impairment. If such an indication exists then the recoverable amount of that particular asset is estimated.
An impairment test is performed for an individual asset unless it belongs to a CGU, in which case the present value of the net future cash flows generated by the CGU is tested. A CGU is the smallest group of assets that generates cash inflows from continuing use that are largely independent of the cash inflows of other assets or of groups of other assets. An intangible asset with an indefinite useful life or an intangible asset not yet available for use is tested for impairment annually and whenever there is an indication that the asset may be impaired.
The recoverable amount is the higher of its fair value less costs to sell and its value-in-use. In assessing its value-in-use, the estimated net future pre-tax cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset for which the estimates of future cash flows have not been adjusted.
If the recoverable amount of an asset or CGU in which the asset sits is estimated to be lower than the carrying value, then the carrying amount is reduced to the recoverable amount. An impairment loss is recognised immediately in the income statement as an expense.
An impairment loss is reversed only if subsequent events reverse the effect of the original event which caused the recognition of the impairment. An impairment loss is reversed only to the extent that the asset's carrying amount does not exceed the carrying amount that would have been determined, net of depreciation or amortisation, if no impairment loss had been recognised. An impairment reversal is recognised in the income statement immediately.
2.16 Retirement benefit costs
The Group makes payments into the personal pension schemes of certain employees as part of their overall remuneration package. Contributions are recognised in the income statement as they are payable.
The Group also contributes to employees' stakeholder pension schemes. The assets of the scheme are held separately from those of the Group in independently-administered funds. Any amount charged to the income statement represents the contribution payable to the scheme in respect of the period to which it relates.
2.17 Provisions
Provisions are recognised when the Group has a present obligation (legal or constructive) as a result of a past event and it is probable that the Group will be required to settle that obligation.
The amount recognised as a provision is the Directors' best estimate of the consideration required to settle that obligation at the reporting date and is discounted to present value where the effect is material.
2.18 Levies
The Group applies the guidance provided in IFRIC 21 to levies issued under the Financial Services Compensation Scheme. The interpretation clarifies that an entity should recognise a liability when it conducts the activity that triggers the payment of the levy under law or regulation.
2.19 Financial instruments
Financial assets and liabilities are recognised in the statement of financial position when a member of the Group becomes party to the contractual provisions of the instrument.
Financial assets
Financial assets are classified according to the business model within which the asset is held and the contractual cash-flow characteristics of the asset. All financial assets are classified at amortised cost.
Financial assets at amortised cost
The Group's financial assets at amortised cost comprise trade receivables, loans, other receivables and cash and cash equivalents.
Financial assets at amortised cost are initially recognised at fair value including any directly attributable costs. They are subsequently measured at amortised cost using the effective interest method, less any impairment. No interest income is recognised on financial assets measured at amortised cost, with the exception of cash and cash equivalents, as all financial assets at amortised cost are short-term receivables and the recognition of interest would be immaterial. Financial assets are derecognised when the contractual right to the cash flows from the asset expire.
Trade and other receivables
Trade and other receivables are initially recorded at the fair value of the amount receivable and subsequently measured at amortised cost using the effective interest method, less any provision for impairment. Other receivables also represent client money required to meet settlement obligations.
Cash and cash equivalents
Cash and cash equivalents include cash in hand, on demand deposits with banks and other short-term highly-liquid investments with original maturities of three months or less, or those over which the Group has an immediate right of recall. Where appropriate, bank overdrafts are shown within borrowings in current liabilities in the consolidated statement of financial position.
Impairment of financial assets
The Group applies the IFRS 9 simplified approach to measuring expected credit losses which uses a lifetime expected loss allowance for all trade receivables and contract assets. To measure the expected credit losses, trade receivables have been grouped based on shared credit risk characteristics and number of days past due. The Group considers a trade receivable to be in default when it is past due by more than 90 days, or when the value of a client's receivable balance exceeds the value of the assets they hold with AJ Bell.
The expected loss rates are based on the payment profiles of sales over a period of 12 months before 30 September 2023 and the corresponding historical credit losses experienced within this period.
The carrying amount of the financial assets is reduced by the use of a provision. When a trade receivable is considered uncollectable, it is written off against the provision. Subsequent recoveries of amounts previously written off are credited against the provision. Changes in the carrying amount of the provision are recognised in the income statement.
Financial liabilities
Financial liabilities are classified according to the substance of the contractual arrangements entered into.
Lease liabilities
Lease liabilities consist of amounts payable by the Group measured at the present value of lease payments to be made over the lease term.
Other financial liabilities
The Group's other financial liabilities comprised borrowings and trade and other payables. Other financial liabilities are initially measured at fair value, net of transaction costs. They are subsequently carried at amortised cost using the effective interest rate method. A financial liability is derecognised when, and only when, the Group's obligations are discharged, cancelled or they expire.
Trade and other payables
Trade and other payables consist of amounts payable to clients and other counterparties and obligations to pay suppliers for goods and services in the ordinary course of business, including amounts recognised as accruals. Trade and other payables are measured at amortised cost using the effective interest method.
2.20 Employee benefit trust
The employee benefit trusts provide for the granting of shares, principally under share option schemes. AJ Bell plc is considered to have control of the trusts and so the assets and liabilities of the trusts are recognised as those of AJ Bell plc.
Shares of AJ Bell plc held by the trusts are treated as 'own shares' held and shown as a deduction from equity. Subsequent consideration received for the sale of such shares is also recognised in equity, with any difference between the sales proceeds and original cost being taken to equity.
3 Critical accounting adjustments and key sources of estimation uncertainty
In the application of the Group's accounting policies, which are described in note 2, the Directors are required to make judgements, estimates and assumptions to determine the carrying amounts of certain assets and liabilities. The estimates and associated assumptions are based on the Group's historical experience and other relevant factors. Actual results may differ from the estimates applied.
Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimate is revised if the revision affects only that period, or in the period of the revision and future periods if the revision affects both current and future periods.
There are no judgements made, in applying the accounting policies, about the future, or any other major sources of estimation uncertainty at the end of the reporting period, that have a significant risk of resulting in a material adjustment to the carrying amounts of assets and liabilities within the next financial year.
4 Segmental reporting
It is the view of the Directors that the Group has a single operating segment being investment services in the advised and D2C space administering investments in SIPPs, ISAs and General Investment/Dealing accounts. Details of the Group's revenue, results and assets and liabilities for the reportable segment are shown within the consolidated income statement and consolidated statement of financial position.
The Group operates in one geographical segment, being the UK.
Due to the nature of its activities, the Group is not reliant on any one customer or group of customers for generation of revenues.
5 Revenue
The analysis of the consolidated revenue is as follows:
|
|
2023 |
|
2022 |
|
|
£000 |
|
£000 |
|
Recurring fixed |
30,666 |
|
29,787 |
|
Recurring ad valorem |
161,152 |
|
102,184 |
|
Transactional |
26,416 |
|
31,876 |
|
|
218,234 |
|
163,847 |
Recurring ad valorem fees include custody fees. These recurring charges are derived from the market value of retail customer assets, based on asset mix and portfolio size, and are therefore subject to market and economic risks. The rate charged is variable dependent on the product, portfolio size and asset mix within the portfolio. The risks associated with this revenue stream in terms of its nature and uncertainty is discussed further within the financial instruments and risk management note..
Recurring ad valorem fees also include retained interest income earned on the level of customer cash balances, which are based on product type, customers' asset mix and portfolio size and are therefore subject to market and economic risks. The risks associated with this revenue stream in terms of its nature and uncertainty is discussed further within the financial instruments and risk management note 25.
The total revenue for the Group has been derived from its principal activities undertaken in the United Kingdom.
6 Operating profit
Profit for the financial year has been arrived at after charging:
|
|
2023 |
|
2022 |
|
|
£000 |
|
£000 |
|
Amortisation and impairment of intangible assets |
2,055 |
|
1,034 |
|
Depreciation of property, plant and equipment |
1,079 |
|
1,019 |
|
Depreciation of right-of-use assets |
1,654 |
|
1,590 |
|
Loss on the disposal of property, plant and equipment |
16 |
|
21 |
|
Auditor's remuneration (see below) |
1,093 |
|
496 |
|
Staff costs (see note 7) |
64,758 |
|
54,887 |
During the year there was no expenditure in relation to research and development expensed to the income statement (2022: £nil).
Auditor's remuneration
The analysis of auditor's remuneration is as follows:
|
|
2023 |
|
2022 |
|
|
£000 |
|
£000 |
|
Fees payable to the Company's auditor for the audit of the Company's annual accounts |
329 |
|
155 |
|
|
|
|
|
|
Fees payable to the Company's auditor for the audit of the Company's subsidiaries' accounts, pursuant to legislation |
589 |
|
204 |
|
Audit-related assurance services |
115 |
|
89 |
|
Other assurance services |
60 |
|
48 |
|
|
1,093* |
|
496 |
* Of which £215,000 relates to the audit for the year ended 2022.
Of the above, audit-related services for the year totalled £1,063,000 (2022: £473,000).
|
7 Staff costs |
|
|
|
|
|
|
|
|
|
|
|
The average monthly number of employees (including Executive Directors) of the Group was: |
||||
|
|
|
|
|
|
|
|
2023 |
|
2022 |
|
|
|
No. |
|
No. |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operational and support |
856 |
|
761 |
|
|
Technology |
279 |
|
225 |
|
|
Distribution |
140 |
|
109 |
|
|
|
1,275 |
|
1,095 |
|
|
|
|
|
|
|
|
Employee benefit expense for the Group during the year: |
|
|
|
|
|
|
2023 |
|
2022 |
|
|
|
£000 |
|
£000 |
|
|
|
|
|
|
|
|
Wages and salaries |
51,854 |
|
41,427 |
|
|
Social security costs |
5,846 |
|
4,808 |
|
|
Retirement benefit costs |
5,937 |
|
3,857 |
|
|
Termination benefits |
18 |
|
67 |
|
|
Share-based payments (note 24) |
1,103 |
|
4,728 |
|
|
|
64,758 |
|
54,887 |
|
In addition to the above, £1,919,000 staff costs (2022: £1,315,000) have been capitalised as an internally generated intangible asset (see note 14).
8 Investment income
|
|
2023 |
|
2022 |
|||
|
|
£000 |
|
£000 |
|||
|
Interest income on cash balances |
2,393 |
|
198 |
|||
|
9 Finance costs |
|
|
|
|
||
|
|
|
|
|
|
||
|
|
2023 |
|
2022 |
|
||
|
|
£000 |
|
£000 |
|
||
|
Interest on lease liabilities |
952 |
|
768 |
|
||
|
10 Taxation |
|
|
|
|
|
|
|
|
|
Tax charged in the income statement: |
|
|
|
|
|
2023 |
|
2022 |
|
|
£000 |
|
£000 |
|
Current taxation |
|
|
|
|
UK Corporation Tax |
19,750 |
|
11,855 |
|
Adjustment to current tax in respect of prior periods |
(346) |
|
(238) |
|
|
19,404 |
|
11,617 |
|
|
|
|
|
|
Deferred taxation |
|
|
|
|
Origination and reversal of temporary differences |
(170) |
|
62 |
|
Adjustment to deferred tax in respect of prior periods |
341 |
|
45 |
|
Effect of changes in tax rates |
(133) |
|
(52) |
|
|
38 |
|
55 |
|
Total tax expense |
19,442 |
|
11,672 |
|
|
|
|
|
Corporation Tax is calculated at 22% of the estimated assessable profit for the year to 30 September 2023 (2022: 19%).
In addition to the amount charged to the income statement, certain tax amounts have been credited directly to equity as follows:
|
|
2023 |
|
2022 |
|
|
£000 |
|
£000 |
|
|
|
|
|
|
Deferred tax relating to share-based payments (note 18) |
88 |
|
275 |
|
Current tax relief on exercise of share options |
(123) |
|
(171) |
|
|
(35) |
|
104 |
The charge for the year can be reconciled to the profit per the income statement as follows:
|
|
2023 |
|
2022 |
|
|
£000 |
|
£000 |
|
|
|
|
|
|
Profit before tax |
87,661 |
|
58,411 |
|
|
|
|
|
|
UK Corporation Tax at 22% (2022: 19%): |
19,293 |
|
11,098 |
|
|
|
|
|
|
Effects of: |
|
|
|
|
Expenses not deductible for tax purposes |
(22) |
|
669 |
|
Income not taxable in determining taxable profit |
(16) |
|
(86) |
|
Amounts not recognised |
325 |
|
236 |
|
Effect of rate changes to deferred tax |
(133) |
|
(52) |
|
Adjustments to current and deferred tax in respect of prior periods |
(5) |
|
(193) |
|
|
19,442 |
|
11,672 |
|
Effective tax rate |
22.2% |
|
20.0% |
Deferred tax has been recognised at 25%, being the rate expected to be in force at the time of the reversal of the temporary difference (2022: 19% or 25%). A deferred tax asset in respect of future share option deductions has been recognised based on the Company's share price at 30 September 2023.
11 Dividends
|
|
2023 |
|
2022 |
|
|
£000 |
|
£000 |
|
Amounts recognised as distributions to equity holders during the year: |
|
|
|
|
Final dividend for the year ended 30 September 2022 of 4.59p (2021: 4.50p per share) |
18,893 |
|
18,460 |
|
Special dividend for the year ended 30 September 2022 of nil (2021: 5.00p per share) |
- |
|
20,511 |
|
Interim dividend for the year ended 30 September 2023 of 3.50p (2022: 2.78p per share) |
14,401 |
|
11,412 |
|
Total dividends paid on equity shares |
33,294 |
|
50,383 |
|
Proposed final dividend for the year ended 30 September 2023 of 7.25p (2022: 4.59p) per share |
29,807 |
|
18,843 |
|
|
|
|
|
A final dividend declared of 7.25p per share is payable on 9 February 2024 to shareholders on the register on 12 January 2024. The ex-dividend date will be 11 January 2024. The final dividend is subject to approval by the shareholders at the Annual General Meeting on 30 January 2024 and has not been included as a liability within these financial statements.
Dividends are payable on all ordinary shares as disclosed in note 23.
The employee benefit trusts, which held 1,082,343 ordinary shares (2022: 567,100) in AJ Bell plc at 30 September 2023, have agreed to waive all dividends. This represented 0.3% (2022: 0.1%) of the Company's called-up share capital. The maximum amount held by the trusts during the year was 1,082,343.
12 Earnings per share
Basic earnings per share is calculated by dividing the profit attributable to the owners of the Parent Company by the weighted average number of ordinary shares, excluding own shares, in issue during the year.
Diluted earnings per share is calculated by adjusting the weighted average number of shares to assume exercise of all potentially dilutive share options.
The weighted average number of anti-dilutive share options and awards excluded from the calculation of diluted earnings per share was 148,995 as at 30 September 2023 (FY22: 201,774).
The calculation of basic and diluted earnings per share is based on the following data:
|
|
2023 |
2022 |
|
|
£000 |
£000 |
|
Earnings |
|
|
|
Earnings for the purposes of basic and diluted earnings per share being profit attributable to the owners of the Parent Company |
68,219 |
46,739 |
|
|
|
|
|
|
2023 |
2022 |
|
|
No. |
No. |
|
Number of shares |
|
|
|
Weighted average number of ordinary shares for the purposes of basic EPS in issue during the year |
411,242,458 |
410,248,095 |
|
Effect of potentially dilutive share options |
1,405,191 |
1,485,721 |
|
|
|
|
|
Weighted average number of ordinary shares for the purposes of fully diluted EPS |
412,647,649 |
411,733,816 |
|
|
|
|
|
|
2023 |
2022 |
|
Earnings per share (EPS) |
|
|
|
Basic (pence) |
16.59 |
11.39 |
|
Diluted (pence) |
16.53 |
11.35 |
13 Goodwill
|
|
|
2023 |
|
2022 |
|
|
|
£000 |
|
£000 |
|
Cost |
|
|
|
|
|
As at 1 October and 30 September |
|
7,103 |
|
7,103 |
|
Impairment |
|
|
|
|
|
As at 1 October and 30 September |
|
(112) |
|
(112) |
|
Carrying value at 30 September |
|
6,991 |
|
6,991 |
Goodwill relates to acquisitions allocated to the Group's single cash generating unit (CGU).
The Group tests goodwill annually for impairment or more frequently if there are indications that goodwill might be impaired.
The recoverable amount of the assets within the CGU is determined using value-in-use calculations. In assessing the value-in-use the estimated future cash flows of the CGU are discounted to their present value using a pre-tax discount rate. Cash flows are based upon the most recent forecasts, approved by the Board, covering a two-year period.
The key assumptions for value-in-use calculations are those regarding discount rate, growth rates and expected changes to revenues and costs in the period, as follows:
- a compound rate of 9.5% (2022: 20%) has been used to assess the expected growth in revenue for the two-year forecast period. This is based on a combination of historical and expected future performance;
- benefits realised from our economies of scale are passed onto customers in the form of price reductions; and
- modest ongoing maintenance expenditure is required on the assets within the CGU in order to generate the expected level of cash flows.
The Directors have made these assumptions based upon past experience and future expectations in the light of anticipated market conditions and the results of streamlining processes through implementation of the target operating model for customer services.
Cash flows have been discounted using a pre-tax discount rate of 8.6% (2022: 8.1%).
The pre-tax discount rate has been calculated using an independent external source. The Directors have performed sensitivity analysis on their calculations, with key assumptions being revised adversely to reflect the potential for future performance being below expected levels. Changes to revenue are the most sensitive as they would have the greatest impact on future cash flows. However, even with nil growth in revenue, there would still be sufficient headroom to support the carrying value of the assets under the CGU.
Based upon the review above the estimated value-in-use of the CGU comfortably supports the carrying value of the assets held within it, and so the Directors are satisfied that for the period ended 30 September 2023 goodwill is not impaired.
14 Other intangible assets
|
|
Key operating system |
Contractual customer relationships |
Computer software and mobile applications |
Total |
|
|
£000 |
£000 |
£000 |
£000 |
|
|
|
|
|
|
|
Cost |
|
|
|
|
|
At 1 October 2021 |
11,681 |
2,135 |
6,469 |
20,285 |
|
Additions |
2,749 |
- |
1,050 |
3,799 |
|
Disposals |
- |
(2,135) |
(483) |
(2,618) |
|
At 30 September 2022 |
14,430 |
- |
7,036 |
21,466 |
|
Additions |
706 |
- |
7 |
713 |
|
Disposals |
- |
- |
(36) |
(36) |
|
At 30 September 2023 |
15,136 |
- |
7,007 |
22,143 |
|
Amortisation |
|
|
|
|
|
As at 1 October 2021 |
7,191 |
2,135 |
4,945 |
14,271 |
|
Amortisation charge |
337 |
- |
697 |
1,034 |
|
Eliminated on disposal |
- |
(2,135) |
(483) |
(2,618) |
|
At 30 September 2022 |
7,528 |
- |
5,159 |
12,687 |
|
Amortisation and impairment |
337 |
- |
1,718 |
2,055 |
|
Eliminated on disposal |
- |
- |
(32) |
(32) |
|
At 30 September 2023 |
7,865 |
- |
6,845 |
14,710 |
|
Carrying amount |
|
|
|
|
|
At 30 September 2023 |
7,271 |
- |
162 |
7,433 |
|
At 30 September 2022 |
6,902 |
- |
1,877 |
8,779 |
|
At 30 September 2021 |
4,490 |
- |
1,524 |
6,014 |
|
Average remaining amortisation period |
2 years |
|
Nil |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The amortisation and impairment charge above is included within administrative expenses in the income statement.
Additions include an amount of £706,000 relating to internally generated assets for the year ended 30 September 2023 (2022: £3,556,000).
Total additions in the period are net of a credit of £1,213,000 related to the reversal of capitalised share-based payment expenses (2022: additions of £1,434,000). The reversal recognised in the period is due to a change in estimate regarding the expected vesting of milestones relating to the earn-out arrangement (note 24).
The net carrying amount of key operating systems includes £6,430,000 (2022: £5,724,000), relating to assets in development which are currently not amortised. At the year end, the Group had not entered into any contractual commitments (2022: £103,000) for the acquisition of intangible assets.
15 Property, plant and equipment
|
|
Leasehold improvements |
Office equipment |
Computer equipment |
Total |
|
|
£000 |
£000 |
£000 |
£000 |
|
Cost |
|
|
|
|
|
At 1 October 2021 |
2,192 |
954 |
5,610 |
8,756 |
|
Additions |
9 |
22 |
983 |
1,014 |
|
Disposals |
- |
(1) |
(324) |
(325) |
|
At 30 September 2022 |
2,201 |
975 |
6,269 |
9,445 |
|
Additions |
186 |
42 |
1,346 |
1,574 |
|
Disposals |
- |
(9) |
(241) |
(250) |
|
At 30 September 2023 |
2,387 |
1,008 |
7,374 |
10,769 |
|
Depreciation |
|
|
|
|
|
At 1 October 2021 |
655 |
797 |
3,953 |
5,405 |
|
Charge for the year |
167 |
72 |
780 |
1,019 |
|
Eliminated on disposal |
- |
(1) |
(303) |
(304) |
|
At 30 September 2022 |
822 |
868 |
4,430 |
6,120 |
|
Charge for the year |
174 |
58 |
847 |
1,079 |
|
Eliminated on disposal |
- |
(9) |
(230) |
(239) |
|
At 30 September 2023 |
996 |
917 |
5,047 |
6,960 |
|
Carrying amount |
|
|
|
|
|
At 30 September 2023 |
1,391 |
91 |
2,327 |
3,809 |
|
At 30 September 2022 |
1,379 |
107 |
1,839 |
3,325 |
|
At 30 September 2021 |
1,537 |
157 |
1,657 |
3,351 |
The depreciation charge above is included within administrative expenses in the income statement.
At the year end, the Group had not entered into contractual commitments for the acquisition of property, plant and equipment (2022: £471,000).
Computer equipment includes assets under construction of £68,000 (2022: £37,000) which are currently not depreciated.
16 Leases
i) Right-of-use assets
|
|
Property |
Computer and office equipment |
Total |
|
|
£000 |
£000 |
£000 |
|
Cost |
|
|
|
|
At 1 October 2021 |
16,158 |
252 |
16,410 |
|
Additions |
538 |
- |
538 |
|
At 30 September 2022 |
16,696 |
252 |
16,948 |
|
Additions |
161 |
21 |
182 |
|
Disposals |
- |
(6) |
(6) |
|
At 30 September 2023 |
16,857 |
267 |
17,124 |
|
|
|
|
|
|
Depreciation |
|
|
|
|
At 1 October 2021 |
2,940 |
145 |
3,085 |
|
Charge for the year |
1,541 |
49 |
1,590 |
|
At 30 September 2022 |
4,481 |
194 |
4,675 |
|
Charge for the year |
1,617 |
37 |
1,654 |
|
Disposals |
- |
(5) |
(5) |
|
At 30 September 2023 |
6,098 |
226 |
6,324 |
|
|
|
|
|
|
|
|
|
|
|
Carrying amount |
|
|
|
|
At 30 September 2023 |
10,759 |
41 |
10,800 |
|
At 30 September 2022 |
12,215 |
58 |
12,273 |
|
At 30 September 2021 |
13,218 |
107 |
13,325 |
The depreciation charge above is included within administrative expenses in the income statement.
The Group has entered into various leases in respect of property and computer and office equipment as a lessee. Lease terms are negotiated on an individual basis and contain a range of different terms and conditions. Property leases typically run for a period of six to fifteen years and computer and office equipment for a period of one to six years.
Additions include £161,000 relating to the increase in the Group's dilapidation provision (2022: £455,000) (see note 22).
Other than property and computer and office equipment there are no further classes of assets leased by the Group.
ii) Lease liabilities
|
|
|
2023 |
2022 |
|
£000 |
£000 |
||
|
Current |
|
1,540 |
1,566 |
|
Non-current |
|
10,866 |
12,395 |
|
|
|
12,406 |
13,961 |
The undiscounted maturity analysis of lease liabilities is shown below:
|
|
|
2023 |
2022 |
|
|
|
£000 |
£000 |
|
|
|
|
|
|
Within one year |
|
2,384 |
2,517 |
|
In the second to fifth years inclusive |
|
8,216 |
8,579 |
|
After five years |
|
5,525 |
7,533 |
|
|
|
|
|
|
Total minimum lease payments |
|
16,125 |
18,629 |
The total lease interest expense for the year ended 30 September 2023 was £952,000 (2022: £768,000). Principal cash outflow for leases accounted for under IFRS 16 for the year ended 30 September 2023 was £1,576,000 (2022: £1,716,000).
17 Subsidiaries
The Group consists of a Parent Company, AJ Bell plc incorporated within the UK, and a number of subsidiaries held directly and indirectly by AJ Bell plc which operate and are incorporated in the UK. Note 6 to the Company's separate financial statements lists details of the interests in subsidiaries.
18 Deferred tax asset
|
|
|
|
|
2023 |
2022 |
|
|
|
|
|
£000 |
£000 |
|
Deferred tax asset |
|
|
|
999 |
906 |
|
Deferred tax liability |
|
|
|
(515) |
(296) |
|
|
|
|
|
484 |
610 |
The movement on the deferred tax account and movement between deferred tax assets and liabilities is as follows:
|
|
Accelerated capital allowances |
Share-based payments |
Short-term timing differences |
Losses |
Total |
|
|
|||||
|
|
|||||
|
|
£000 |
£000 |
£000 |
£000 |
£000 |
|
|
|
|
|
|
|
|
At 1 October 2021 |
(199) |
990 |
149 |
- |
940 |
|
(Charge)/credit to income statement |
(97) |
31 |
11 |
- |
(55) |
|
Charge to equity |
- |
(275) |
- |
- |
(275) |
|
At 30 September 2022 |
(296) |
746 |
160 |
- |
610 |
|
(Charge)/credit to income statement |
(219) |
80 |
101 |
- |
(38) |
|
Charge to equity |
- |
(88) |
- |
- |
(88) |
|
At 30 September 2023 |
(515) |
738 |
261 |
- |
484 |
The current year deferred tax adjustment relating to share-based payments reflects the estimated total future tax relief associated with the cumulative share-based payment benefit arising in respect of share options granted but unexercised as at 30 September 2023.
Deferred tax assets have been recognised in respect of other temporary differences giving rise to deferred tax assets where it is probable that these assets will be recovered. As at 30 September 2023, deferred tax assets have not been recognised on trading losses of £5,524,000 (2022: £4,051,000).
19 Trade and other receivables
|
|
|
|
|
|
|
|
2023 |
|
2022 |
|
|
|
|
|
|
|
|
£000 |
|
£000 |
|
Trade receivables |
2,613 |
|
2,207 |
||||||
|
Prepayments |
8,861 |
|
6,824 |
||||||
|
Accrued income |
33,662 |
|
21,960 |
||||||
|
Other receivables |
13,365 |
|
18,445 |
||||||
|
|
|
|
|
|
|
|
58,501 |
|
49,436 |
The Directors consider that the carrying amount of trade and other receivables approximates their fair value. Included within other receivables is client money required to meet settlement obligations and are payable on demand.
Included within accrued income is £1,081,000 (2022: £984,000) relating to contract assets, a movement of £97,000 (2022: £6,000) during the year due to increased revenues.
The ageing profile of trade receivables was as follows:
|
|
|
|
|
|
|
|
2023 |
|
2022 |
|
|
|
|
|
|
|
|
£000 |
|
£000 |
|
Current - not past due |
|
|
|
|
1,137 |
|
747 |
||
|
Past due: |
|
|
|
|
|
|
|
|
|
|
0 to 30 days |
|
|
|
|
|
476 |
|
886 |
|
|
31 to 60 days |
|
|
|
|
|
279 |
|
116 |
|
|
61 to 90 days |
|
|
|
|
|
173 |
|
39 |
|
|
91 days and over |
|
|
|
|
|
1,341 |
|
1,024 |
|
|
|
|
|
|
|
|
|
3,406 |
|
2,812 |
|
Provision for impairment |
|
|
|
|
|
(793) |
|
(605) |
|
|
|
|
|
|
|
|
|
2,613 |
|
2,207 |
The movement in the provision for impairment of trade receivables is as follows:
|
|
|
|
|
|
|
|
2023 |
|
2022 |
|
|
|
|
|
|
|
|
£000 |
|
£000 |
|
Opening loss allowance as at 1 October |
605 |
|
524 |
||||||
|
Loss allowance recognised |
254 |
|
174 |
||||||
|
Receivables written off during the year as uncollectable |
(8) |
|
(21) |
||||||
|
Unused amount reversed |
(58) |
|
(72) |
||||||
|
Balance at end of year |
|
|
|
|
793 |
|
605 |
||
20 Cash and cash equivalents
|
|
2023 |
|
2022 |
|
|
£000 |
|
£000 |
|
Group cash and cash equivalent balances |
146,304 |
|
84,030 |
Cash and cash equivalents at 30 September 2023 and 30 September 2022 are considered to be holdings of less than one month, or those over which the Group has an immediate right of recall.
21 Trade and other payables
|
|
2023 |
|
2022 |
|
|
£000 |
|
£000 |
|
Trade payables |
960 |
|
138 |
|
Social security and other taxes |
3,453 |
|
2,151 |
|
Other payables |
859 |
|
678 |
|
Accruals |
45,043 |
|
10,428 |
|
Deferred income |
2,122 |
|
2,209 |
|
|
52,437 |
|
15,604 |
Trade payables, accruals and deferred income principally comprise amounts outstanding for trade purposes including payment of interest to customers and ongoing costs of the business. The Directors consider that the carrying amount of trade payables approximates their fair value.
Deferred income in the current and prior year relates to contract liabilities. The prior year deferred income balance has now all been recognised as revenue and the current year balance all relates to cash received in the current period. Total deferred income as at 30 September 2023 is expected to be recognised as revenue in the coming year.
22 Provisions
|
|
Office dilapidations |
Other provision |
|
Total |
|
|
£000 |
£000 |
|
£000 |
|
At 1 October 2022 |
2,004 |
519 |
|
2,523 |
|
Additional provisions |
161 |
778 |
|
939 |
|
Provisions used |
- |
(171) |
|
(171) |
|
At 30 September 2023 |
2,165 |
1,126 |
|
3,291 |
|
Included in current liabilities |
- |
1,126 |
|
1,126 |
|
Included in non-current liabilities |
2,165 |
- |
|
2,165 |
Office dilapidations
The Group is contractually obliged to reinstate its leased properties to their original state and layout at the end of the lease terms. During the year, management reviewed the Group's dilapidation provision and the assumptions on which the provision is based. The estimate is based upon property location, size of property and an estimate of the charge per square foot. A further charge of £161,000 has been recognised in relation to an increase in the estimated charge per square foot. The office dilapidations provision represents management's best estimate of the costs which will ultimately be incurred in settling these obligations.
Other provisions
The other provisions relate to the settlement of an operational tax dispute, the costs associated with defending a legal case and compensation required to settle a small number of disputed claims. There is some uncertainty regarding the amount and timing of the outflows required to settle the obligations; therefore a best estimate has been made by assessing a number of different outcomes considering the potential areas and time periods at risk and any associated interest. The timings of the outflows are uncertain and could be paid within 12 months of the date of the statement of financial position, subject to the timing of a final resolution.
23 Share capital
|
|
2023 |
2022 |
2023 |
2022 |
|
Issued, fully-called and paid: |
Number |
Number |
£ |
£ |
|
Ordinary shares of 0.0125p each |
412,211,306 |
411,091,634 |
51,526 |
51,386 |
All ordinary shares have full voting and dividend rights.
The following transactions have taken place during the year:
|
Transaction type |
Share class |
Number of shares
|
Share premium £000 |
|
Exercise of CSOP options |
Ordinary shares of 0.0125p each |
31,462 |
33 |
|
Exercise of EIP options |
Ordinary shares of 0.0125p each |
530,303 |
- |
|
Free shares |
Ordinary shares of 0.0125p each |
557,907 |
- |
|
|
|
1,119,672 |
33 |
|
|
|
|
|
The holders of ordinary shares are entitled to receive dividends as declared from time to time and are entitled to one vote per share at general meetings of the Company. They are entitled to share in the proceeds on the return of capital, or upon the winding up of the Company in proportion to the number of and amounts paid on shares held. The shares are non-redeemable.
Own shares
As at 30 September 2023, the Group held 1,082,343 in own shares in employee benefit trusts to satisfy future share incentive plans. Shares held by the Trust are held at £2,377,000 (2022: £473,000) being the price paid to repurchase, and the carrying value is shown as a reduction within shareholders' equity.
During the year, 631,151 ordinary own shares were purchased through AJ Bell's employee benefit trust in exchange for consideration of £2,000,000 (2022: £nil). 115,908 EIP options were exercised and issued from the employee benefit trusts in the year.
The costs of operating the trusts are borne by the Group but are not material. The trusts waived the right to receive dividends on these shares.
24 Share-based payments
Company Share Option Plan (CSOP)
The CSOP is a HMRC approved scheme in which the Board, at their discretion, grant options to employees to purchase ordinary shares. Each participating employee can be granted options up to the value of £60,000. Options granted under the CSOP can be exercised between the third and tenth anniversary after the date of grant and are usually forfeited if the employee leaves the Group before the option expires. The expense for share-based payments under the CSOP is recognised over the respective vesting period of these options.
Option To Buy Scheme (OTB) - Growth shares
The OTB scheme is a historical award scheme whereby the Board at its discretion granted growth shares to employees. Growth shares entitled the holder to participate in the growth value of the Group above a certain threshold level, set above the current market value of the Group at the time the shares were issued. Growth shares granted under the OTB scheme had different vesting conditions. The vesting condition attached to all growth shares granted is that the threshold level needs to be met and an exit event needs to have occurred. As part of the AJ Bell listing process all awards were converted into ordinary shares and those awards granted with an additional employment condition of four or six years after the date of grant, continue to be recognised as a share-based payment. Awards that were issued subject to employment conditions are subject to buy back options under which the Group can buy back the shares for their issue price if the employee leaves the Group before the expiry of the employment condition period.
Buy As You Earn plan (BAYE)
The BAYE plan is an all-employee share plan under which shares can be issued to employees as either free shares or partnership shares.
The Company may grant free shares up to a maximum of £3,600 per employee in a tax year. During the year, free shares up to a maximum value of £2,000 have been offered to all employees who were employed by the Company at 30 September 2022 (2022: nil).
Employees have been offered the opportunity to participate in the partnership plan to enable such employees to use part of their pre-tax salary to acquire shares. The limit to the pre-tax salary deduction is £1,800 or, if lower, 10% of salary each year.
The plan entitles employees to use this deduction to buy shares in the Company on a monthly basis at the current market value. Employees are able to withdraw their shares from the plan at any time but may be subject to income tax and national insurance charges if withdrawn within three years of purchasing the shares. Therefore the monthly partnership plan does not give rise to a share-based payment charge.
Executive Incentive Plan (EIP)
The EIP is a performance share plan that involves the award of nominal cost options to participants conditional on the achievement of specified performance targets and continuous employment over a certain period of time. Individual grants will be dependent on the assessment of performance against a range of financial and non-financial targets set at the beginning of the financial year.
Senior Manager Incentive Plan (SMIP)
The SMIP is a performance share plan that involves the award of nominal cost options to participants conditional on the achievement of specified performance targets and continuous employment over a certain period of time. Individual grants will be dependent on the assessment of performance against a range of financial and non-financial targets set at the beginning of the financial year.
CSR initiative
A CSR initiative was introduced in December 2019 with the intention of giving an additional contribution to charity through the donation of share options should a number of stretching targets be met by the Group. The awards made are equity-settled awards and involved the grant of market value options to the AJ Bell Trust conditional on the achievement of diluted earnings per share (DEPS) targets for the financial years 2022, 2023 and 2024 (Performance Period).
The exercise of each tranche will be conditional upon the DEPS having increased in relation to the 7.47 pence DEPS for the year ended 30 September 2019, by more than:
- 90% for September 2022;
- 115% for September 2023; and
- 140% for 30 September 2024.
These are considered to be the lower DEPS targets. The upper DEPS target for each performance period is 10% above the lower DEPS target.
The percentage of shares granted that will vest in each performance period is determined as follows:
- If actual DEPS is below the lower DEPS target, the vesting percentage is equal to zero;
- If actual DEPS is above the upper DEPS target, the vesting percentage is equal to 100%; and
- If actual DEPS is between the lower and upper target, then the vesting percentage is determined by linear interpolation on a straight-line basis and rounded down to the nearest 10%.
As no service is being provided by the AJ Bell Trust, all conditions involved in the arrangement are considered to be non-vesting conditions. Non-vesting conditions should be taken into account when estimating the fair value of the equity instrument granted. The fair value has been estimated using the Monte Carlo simulation model.
Earn-out arrangement
The acquisition of Adalpha gave rise to an earn-out arrangement whereby share awards will be made should a number of operational and financial milestones, relating to AUA targets and the development of a simplified proposition for financial advisers, be met. The awards will be equity-settled and will vest in several tranches in line with the agreed milestones.
Under the terms of the acquisition agreement, shares will be awarded to eligible employees conditional upon the successful completion of certain performance milestones and their continued employment with the Group during the vesting period. There is no exercise price attached to the share award.
The fair value of the earn-out arrangement is estimated as at the date of grant calculated by reference to the quantum of the earn-out payment for each performance milestone and an estimated time to proposition completion, discounted to net present value. The performance conditions included within the arrangement are not considered market conditions and therefore the expected vesting is reviewed at each reporting date.
Movements during the year
The tables below summarise the outstanding options for each share-based payment scheme.
|
|
2023 |
2022 |
||
|
CSOP |
|
Weighted Average |
|
Weighted Average |
|
Number |
Exercise Price £ |
Number |
Exercise Price £ |
|
|
Outstanding at the beginning of the year |
1,101,893 |
3.90 |
1,015,763 |
3.23 |
|
Granted during the year |
223,167 |
3.73 |
461,744 |
3.73 |
|
Forfeited during the year |
(1,111,523) |
3.94 |
(108,611) |
4.05 |
|
Exercised during the year |
(31,462) |
1.04 |
(267,003) |
1.02 |
|
Outstanding at the end of the year |
182,075 |
3.91 |
1,101,893 |
3.90 |
|
Exercisable at the end of the year |
39,339 |
3.94 |
31,462 |
1.04 |
The lowest exercise price for share options outstanding at the end of the period was 298p (2022: 104p) and the highest exercise price was 434p (2022: 434p). The weighted average remaining contractual life of share options outstanding at the end of the period was 7.6 years (2022: 8.3 years).
|
|
2023 |
2022 |
||
|
OTB - Growth Shares |
|
Weighted Average |
|
Weighted Average |
|
Number |
Exercise Price £ |
Number |
Exercise Price £ |
|
|
Outstanding at the beginning of the year |
1,166,131 |
0.63 |
3,192,268 |
0.63 |
|
Vested |
- |
- |
(2,026,137) |
0.63 |
|
Outstanding at the end of the year |
1,166,131 |
0.63 |
1,166,131 |
0.63 |
Upon listing to the London Stock Exchange, all growth shares were converted to ordinary shares and therefore no exercise price exists for growth shares outstanding at the end of the period. The weighted average remaining contractual life of growth shares converted to ordinary shares under a call option agreement at the end of the period was 0.2 years (2022: 1.2 years).
|
|
2023 |
2022 |
||
|
EIP |
|
Weighted Average |
|
Weighted Average |
|
Number |
Exercise Price £ |
Number |
Exercise Price £ |
|
|
Outstanding at beginning of the year |
1,615,868 |
0.000125 |
1,487,313 |
0.000125 |
|
Granted during the year |
912,833 |
0.000125 |
736,015 |
0.000125 |
|
Exercised during the year |
(646,211) |
0.000125 |
(495,550) |
0.000125 |
|
Lapsed during the year |
(207,298) |
0.000125 |
(111,910) |
0.000125 |
|
Outstanding at the end of the year |
1,675,192 |
0.000125 |
1,615,868 |
0.000125 |
|
Exercisable at the end of the year |
349,055 |
0.000125 |
565,636 |
0.000125 |
The weighted average remaining contractual life of EIP shares outstanding at the end of the period was 8.3 years (2022: 8 years).
|
|
2023 |
|
|
SMIP initiative |
|
Weighted Average |
|
Number |
Exercise Price £ |
|
|
Outstanding at beginning of the year |
- |
- |
|
Granted during the year |
3,999 |
0.000125 |
|
Outstanding at the end of the year |
3,999 |
0.000125 |
|
Exercisable at the end of the year |
- |
- |
|
|
2023 |
2022 |
||
|
CSR initiative |
|
Weighted Average |
|
Weighted Average |
|
Number |
Exercise Price £ |
Number |
Exercise Price £ |
|
|
Outstanding at beginning of the year |
1,662,510 |
4.01 |
2,493,766 |
4.01 |
|
Forfeited during the year |
(332,502) |
4.01 |
(831,256) |
4.01 |
|
Outstanding at the end of the year |
1,330,008 |
4.01 |
1,662,510 |
4.01 |
|
Exercisable at the end of the year |
498,753 |
4.01 |
- |
- |
The weighted average remaining contractual life of CSR options outstanding at the end of the period was 6.2 years (2022: 7.2 years).
Weighted average share price of options exercised.
The weighted average share price of all options exercised during the year was £3.46 (2022: £3.67).
Earn-out arrangement
|
|
2023 |
2022 |
||
|
|
|
Weighted Average |
|
Weighted Average |
|
Number |
Exercise Price £ |
Number |
Exercise Price £ |
|
|
Shares granted during the year |
- |
- |
155,974 |
3.15 |
Measurement
The fair value of equity-settled share options granted is estimated as at the date of grant using the Black-Scholes model, taking into account the terms upon which the options and awards were granted.
The inputs into the Black-Scholes model and assumptions used in the calculations are as follows:
EIP
|
Grant date |
|
09/12/2022 |
09/12/2022 |
09/12/2022 |
|
Number of shares under option |
|
425,873 |
121,478 |
365,482 |
|
Fair value of share from generally accepted business model (£) |
|
3.54 |
3.40 |
3.33 |
|
Share price (£) |
|
3.61 |
3.61 |
3.61 |
|
Exercise price of an option (£) |
|
0.000125 |
0.000125 |
0.000125 |
|
Expected volatility |
|
36.90% |
35.09% |
35.09% |
|
Expected dividend yield |
|
2.04% |
2.04% |
2.04% |
|
Risk-free interest rate |
|
3.15% |
3.18% |
3.22% |
|
Expected option life to exercise (months) |
|
12 |
36 |
48 |
CSOP
|
Grant date |
|
08/12/2022 |
|
|
Number of shares under option |
|
223,167 |
|
|
Fair value of share option from generally accepted business model (£) |
|
0.82 |
|
|
Share price (£) |
|
3.61 |
|
|
Exercise price of an option (£) |
|
3.73 |
|
|
Expected volatility |
|
35.09% |
|
|
Expected dividend yield |
|
2.04% |
|
|
Risk-free interest rate |
|
3.18% |
|
|
Expected option life to exercise (months) |
|
36 |
|
SMIP
|
Grant date |
|
08/02/2023 |
|
|
Number of shares under option |
|
3,999 |
|
|
Fair value of share option from generally accepted business model (£) |
|
3.25 |
|
|
Share price (£) |
|
3.46 |
|
|
Exercise price of an option (£) |
|
0.000125 |
|
|
Expected volatility |
|
14.79% |
|
|
Expected dividend yield |
|
2.13% |
|
|
Risk-free interest rate |
|
3.15% |
|
|
Expected option life to exercise (months) |
|
36 |
|
Expected volatility is estimated by considering historic average share price volatility at the grant date.
The expected life of the options is based on the minimum period between the grant of the option, the earliest possible exercise date and an analysis of the historical exercise data that is not necessarily indicative of exercise patterns that may occur. The expected volatility reflects the assumption that historical volatility is indicative of future trends, which may also not necessarily be the case.
During the year, the Group recognised a total share-based payment expense of £1,103,000 (2022: £4,728,000), inclusive of a £1,213,000 reversal of capitalised share-based payment expense (2022: capitalised £1,434,000) within the statement of financial position.
The reversal recognised in the period is due to a change in estimate regarding the expected vesting dates of milestones relating to the earn-out arrangement. Under the terms of the earn-out arrangement, shares will be awarded to eligible employees conditional upon the successful completion of certain performance milestones and their continued employment with the Group during the vesting period. The performance condition included within the arrangement is not considered a market condition and therefore the expected vesting will be reviewed at each reporting date.
25 Financial instruments and risk management
The Group's activities expose it to a variety of financial instrument risks; market risk (including interest rate and foreign exchange), credit risk and liquidity risk. Information is presented below regarding the exposure to each of these risks, including the procedures for measuring and managing them.
Financial instruments include both financial assets and financial liabilities. Financial assets principally comprise trade and other receivables and cash and cash equivalents. Financial liabilities comprise trade and other payables, accruals and obligations under leases. The Group does not have any derivative financial instruments.
Risk management objectives
The Group has identified the financial, business and operational risks arising from its activities and has established policies and procedures to manage these items in accordance with its risk appetite. The Board of Directors has overall responsibility for establishing and overseeing the Group's risk management framework and risk appetite.
The Group's financial risk management policies are intended to ensure that risks are identified, evaluated and subject to ongoing monitoring and mitigation (where appropriate). These policies also serve to set the appropriate control framework and promote a robust risk culture within the business.
The Group regularly reviews its financial risk management policies and systems to reflect changes in the business, counterparties, markets and range of financial instruments that it uses.
The Group's Treasury Committee has principal responsibility for monitoring exposure to the risks associated with cash and cash equivalents. Policies and procedures are in place to ensure the management and monitoring of each type of risk. The primary objective of the Group's treasury policy is to manage short-term liquidity requirements whilst maintaining an appropriate level of exposure to other financial risks in accordance with the Group's risk appetite.
Significant accounting policies
Details of the significant accounting policies, including the criteria for recognition, the basis of measurement and the basis on which income and expenses are recognised, in respect of each financial asset and financial liability, are disclosed within note 2 to the financial statements.
Categories of financial instrument
The financial assets and liabilities of the Group are detailed below:
|
|
2023 |
2022 |
||||
|
|
Amortised cost |
Financial liabilities |
Carrying value |
Amortised cost |
Financial liabilities |
Carrying value |
|
|
£000 |
£000 |
£000 |
£000 |
£000 |
£000 |
|
Financial assets |
|
|
|
|
|
|
|
Trade receivables |
2,613 |
- |
2,613 |
2,207 |
- |
2,207 |
|
Accrued income |
33,662 |
- |
33,662 |
21,960 |
- |
21,960 |
|
Other receivables |
13,365 |
- |
13,365 |
18,445 |
- |
18,445 |
|
Cash and cash equivalents |
146,304 |
- |
146,304 |
84,030 |
- |
84,030 |
|
|
195,944 |
- |
195,944 |
126,642
|
- |
126,642 |
|
Financial liabilities |
|
|
|
|
|
|
|
Trade and other payables |
- |
46,030 |
46,030 |
- |
10,598 |
10,598 |
|
Lease liabilities |
- |
12,406 |
12,406 |
- |
13,961 |
13,961 |
|
|
- |
58,436 |
58,436 |
-
|
24,559 |
24,559 |
The carrying amount of all financial assets and liabilities is approximate to their fair value due to their short-term nature.
Market risk
Interest rate risk
The Group holds interest bearing assets in the form of cash and cash deposits. Cash at bank earns interest at floating rates based on daily bank deposit rates. Term deposits can also be made for varying periods depending on the immediate cash requirements of the Group, and interest is earned at the respective fixed-term rate. Based on the cash balances shown in the Group's statement of financial position at the reporting date, if interest rates were to move by 25bps it would change profit before tax by approximately:
|
|
2023 |
2022 |
|
|
£000 |
£000 |
|
+ 25 bps (0.25%) |
293 |
191 |
|
- 25 bps (0.25%) |
(293) |
(154) |
As at the year end the Group had no borrowings, and therefore was not exposed to a material interest rate risk related to debt as the interest rate is fixed at the inception of the lease.
The Group retains a proportion of the interest income generated from the pooling of customer cash balances and as a result, the Group revenue has an indirect exposure to interest rate risk. The cash balances are held with a variety of banks and are placed in a range of fixed-term, notice and call deposit accounts with due regard for counterparty credit risk, capacity risk, concentration risk and liquidity risk requirements. The spread of rate retained by the Group is variable dependent on rates received by banks (disclosed to customers at between 1.15% below and 0.15% above the prevailing base rate) and amounts paid away to customers.
The impact of a 50bps increase or decrease in UK base interest rates on the Group's revenue has been calculated and shown below. This has been modelled on a historical basis for each year separately assuming that the UK base rate was 50bps higher or lower for the year.
|
|
2023 |
2022 |
|
|
£000 |
£000 |
|
+ 50 bps (0.50%) |
- |
11,827 |
|
- 50 bps (0.50%) |
- |
(12,759) |
In FY23, movements in the UK base interest rate would not have impacted the retained interest income earned by the Group, as any increases or decreases to the UK base interest rate when it is at higher levels would be passed to customers in the form of higher or lower pay away rates respectively.
Conversely, in FY22 a 50bps increase would result in an additional £11.8m retained interest income, as the majority of the increased gross interest income earned would be retained by the Group to rebuild revenue margins when UK base is at low levels. A 50bps decrease would result in a reduction of £12.8m with the reduction in gross interest income earned being absorbed by the Group. At low levels of UK base rate it would not be possible to reduce the pay away rates significantly as they would already be at low levels.
Customer cash balances are not a financial asset of the Group and so are not included in the statement of financial position.
Market movement sensitivity
The Group's custody fees are derived from the market value of the underlying assets held by the retail customer in their account, based on product type, mix and portfolio size which are charged on an ad valorem basis. As a result, the Group has an indirect exposure to market risks, as the value of the underlying customers' assets may rise or fall. The impact of a 10% increase or reduction in the value of the customers underlying assets subject to the custody fees on the Group's revenue has been calculated and shown below. This has been modelled on a historical basis for each year separately assuming that the value of the customers' assets were 10% higher or lower than the actual position at the time.
|
|
2023 |
2022 |
|
|
£000 |
£000 |
|
+ 10% higher |
6,341 |
5,846 |
|
- 10% lower |
(6,341) |
(5,846) |
Foreign exchange risk
The Group is not exposed to significant foreign exchange translation or transaction risk as the Group's activities are primarily within the UK. Foreign exchange risk is therefore not considered material.
Credit risk
The Group's exposure to credit risk, which is the risk that a counterparty will be unable to pay amounts in full when due, arises principally from its cash balances held with banks and trade and other receivables.
Trade receivables are presented net of expected credit losses within the statement of financial position. The Group applies the IFRS 9 simplified approach to measuring expected credit losses which uses a lifetime expected loss allowance for all trade receivables. To measure the expected credit losses, trade receivables have been grouped based on shared credit risk characteristics and number of days past due. Details of those trade receivables that are past due are shown within note 19.
The Group has implemented procedures that require appropriate credit or alternative checks on potential customers before business is undertaken. This minimises credit risk in this area.
The credit and concentration risk on liquid funds, cash and cash equivalents is limited as deposits are held across a number of major banks. The Directors continue to monitor the strength of the banks used by the Group. The principal banks currently used by the Group are Bank of Scotland plc, Barclays Bank plc, Lloyds Bank plc, Lloyds Bank Corporate Markets plc, HSBC Bank plc, NatWest Markets plc, Santander UK plc, Clearstream Banking SA and Qatar National Bank (Q.P.S.C). Bank of Scotland plc, the Group's principal banker, is substantial and is 100% owned by Lloyds Banking Group plc. All these banks currently have long-term credit ratings of at least A (Fitch). Where the services of other banks are used, the Group follows a rigorous due diligence process prior to selection. This results in the Group retaining the ability to further mitigate the counterparty risk on its own behalf and that of its customers.
The Group has no significant concentration of credit risk as exposure is spread over a large number of counterparties and customers. The maximum exposure to credit risk is represented by the carrying amount of each financial asset at the reporting date. In relation to dealing services, the Group operates as agent on behalf of its underlying customers and in accordance with London Stock Exchange Rules.
Any settlement risk during the period between trade date and the ultimate settlement date is substantially mitigated as a result of the Group's agency status, its settlement terms and the delivery versus payment mechanism whereby if a counterparty fails to make payment, the securities would not be delivered to the counterparty. Therefore any risk exposure is to an adverse movement in market prices between the time of trade and settlement. Conversely, if a counterparty fails to deliver securities, no payment would be made.
There has been no material change to the Group's exposure to credit risk during the year.
Liquidity risk
This is the risk that the Group may be unable to meet its liabilities as and when they fall due. These liabilities arise from the day-to-day activities of the Group and from its obligations to customers. The Group is a highly cash-generative business and maintains sufficient cash and standby banking facilities to fund its foreseeable trading requirements.
There has been no change to the Group's exposure to liquidity risk or the manner in which it manages and measures the risk during the year.
The following table shows the undiscounted cash flows relating to non-derivative financial liabilities of the Group based upon the remaining period to the contractual maturity date at the end of the reporting period.
|
|
|
|
Due within 1 year £000 |
1 to 5 years £000 |
After 5 years £000 |
Total £000 |
|
|
|
|
||||
|
|
|
|
||||
|
2023 |
|
|
|
|
|
|
|
Trade and other payables |
|
|
46,030 |
- |
- |
46,030 |
|
Lease liabilities |
|
|
2,384 |
8,216 |
5,525 |
16,125 |
|
|
|
|
48,414 |
8,216 |
5,525 |
62,155 |
|
2022 |
|
|
|
|
|
|
|
Trade and other payables |
|
|
10,598 |
- |
- |
10,598 |
|
Lease liabilities |
|
|
2,517 |
8,579 |
7,533 |
18,629 |
|
|
|
|
13,115 |
8,579 |
7,533 |
29,227 |
Capital management
The Group's objectives in managing capital are to:
- safeguard the Group's ability to continue as a going concern so that it can continue to provide returns for shareholders, security for our customers and benefits for other stakeholders;
- maintain a strong capital base to support the development of its business; and
- comply with regulatory requirements at all times.
The capital structure of the Group consists of share capital, share premium and retained earnings. As at the reporting date the Group had capital of £166,037,000 (2022: £133,394,000).
Capital generated from the business is both reinvested in the business to generate future growth and returned to shareholders principally in the form of dividends. The capital adequacy of the business is monitored on an ongoing basis and as part of the business planning process by the Board. It is also reviewed before any distributions are made to shareholders to ensure it does not fall below the agreed surplus as outlined in the Group's capital management policy. The liquidity of the business is monitored by management on a daily basis to ensure sufficient funding exists to meet the Group's liabilities as they fall due. The Group is highly cash-generative and maintains sufficient cash and standby banking facilities to fund its foreseeable trading requirements.
The Group conducts an ICARA, as required by the FCA to assess the appropriate amount of regulatory capital and liquid resources to be held by the Group. Regulatory capital and liquid resources for ICARA are calculated in accordance with published rules.
The ICARA compares the Group's financial resources against regulatory capital and liquidity requirements as specified by the relevant regulatory authorities. Our current financial resources, regulatory capital and liquidity requirements can be found in the Financial Review.
The Group maintained a surplus of regulatory capital and liquid resources throughout the year. The disclosures required under MIFIDPRU 8 of the Investment Firms Prudential Regime are available on the Group's website at ajbell.co.uk.
26 Interests in unconsolidated structure entities
The Group manages a number of investment funds (open-ended investments) acting as agent of the Authorised Corporate Director. The dominant factor in deciding who controls these entities is the contractual arrangement in place between the Authorised Corporate Director and the Group, rather than voting or similar rights. As the Group directs the investing activities through its investment management agreement with the Authorised Corporate Director, the investment funds are deemed to be structured entities. The investment funds are not consolidated into the Group's financial statements as the Group is judged to act as an agent rather than having control under IFRS 10.
The purpose of the investment funds is to invest capital received from investors in a portfolio of assets in order to generate a return in the form of capital appreciation, income from the assets, or both. The Group's interest in the investment funds is in the form of management fees received for its role as investment manager. These fees are variable depending on the value of the assets under management.
The funds do not have any debt or borrowings and are financed through the issue of units to investors.
The following table shows the details of unconsolidated structured entities in which the Group has an interest at the reporting date:
|
|
|
Number of funds |
Net AUM of funds |
Annual management charge |
Management charge receivable at 30 September |
|
Year |
Type |
|
£m |
£000 |
£000 |
|
2023 |
OEIC |
9 |
2,426.6 |
2,859 |
280 |
|
2022 |
OEIC |
9 |
1,465.5 |
1,816 |
369 |
The annual management charge is included within recurring ad valorem fees within revenue in the consolidated income statement.
The annual management charge receivable is included within trade and other receivables in the consolidated statement of financial position.
The maximum exposure to loss relates to a reduction in future management fees should the market value of the investment funds decrease.
27 Reconciliation of liabilities arising from financing activities
|
|
1 October 2022 |
|
Cashflows |
Change in lease liability |
30 September 2023 |
|
2023 |
£000 |
|
£000 |
£000 |
£000 |
|
|
|
|
|
|
|
|
Lease liabilities |
13,961 |
|
(1,576) |
21 |
12,406 |
|
Total liabilities from financing activities |
13,961 |
|
(1,576) |
21 |
12,406 |
|
|
1 October 2021 |
|
Cashflows |
Change in lease liability |
30 September 2022 |
|
2022 |
£000 |
|
£000 |
£000 |
£000 |
|
|
|
|
|
|
|
|
Lease liabilities |
15,594 |
|
(1,716) |
83 |
13,961 |
|
Total liabilities from financing activities |
15,594 |
|
(1,716) |
83 |
13,961 |
28 Related party transactions
Transactions between the Parent Company and its subsidiaries, which are related parties, have been eliminated on consolidation and are not disclosed.
Transactions with key management personnel:
Key management personnel is represented by the Board of Directors and the ExCo.
The remuneration expense of key management personnel is as follows:
|
|
2023 |
|
2022 |
|
|
£000 |
|
£000 |
|
|
|
|
|
|
Short-term employee benefits (excluding NI) |
2,893 |
|
2,779 |
|
Retirement benefits |
66 |
|
114 |
|
Share-based payment |
1,484 |
|
2,389 |
|
|
4,443 |
|
5,282 |
During the year there were no material transactions or balances between the Group and its key management personnel or members of their close families, other than noted below.
Transactions with directors:
The remuneration of individual directors is provided in the Directors' Remuneration report.
Dividends totalling £163,000 (2022: £11,743,000) were paid in the year in respect of ordinary shares held by the Company's directors.
The aggregate gains made by the Directors on the exercise of share options during the year were £469,000 (2022: £772,000).
During the year Directors and their families received beneficial staff rates in relation to personal portfolios. The discount is not material to the Directors or to AJ Bell.
Other related party transactions:
Charitable donations
During the year the Group made donations of nil (2022: £298,000) to the AJ Bell Trust, a registered charity of which Mr A J Bell is a trustee.
EQ Property Services Limited
The Group is party to three leases with EQ Property Services Limited for rental of the Head Office premises, 4 Exchange Quay, Salford Quays, Manchester, M5 3EE. Mr M T Summersgill and Mr R Stott are directors and shareholders of both AJ Bell plc and EQ Property Services Limited, Mr A J Bell is a shareholder of both AJ Bell plc and EQ Property Services Limited. The leases for the rental of the building were entered into on 17 August 2016 for terms which expire on 30 September 2031, at an aggregate market rent of £2,009,000 (2022: £1,826,000 per annum).
At the reporting date, there is no payable outstanding (2022: £nil) with EQ Property Services Limited.
Andy Bell consultancy
On 1 October 2022 Andy Bell stepped down as CEO into a consultancy role for the Group, and remains a significant shareholder of AJ Bell plc. In his capacity as a consultant, he was paid £157,000 (2022: £nil).
Any amounts outstanding with related parties are unsecured and will be settled in cash. No guarantees have been given or received. No provision has been made for doubtful debts in respect of amounts owed by related parties.
29 Subsequent events
There have been no material events occurring between the reporting date and the date of approval of these consolidated financial statements.
Glossary
|
Adalpha |
AJ Bell Touch Limited and its wholly-owned subsidiaries |
|
AGM |
Annual General Meeting |
|
AJBI |
AJ Bell Investments |
|
AJBIC |
AJ Bell Investcentre |
|
BAYE |
Buy as you earn |
|
BBSL |
Blythe Business Services Limited |
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Board, Directors |
The Board of Directors of AJ Bell plc |
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BPP |
Business Planning Process |
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BPS |
Basis points |
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CAM |
Combined Assurance Model |
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CASS |
Client Assets Sourcebook |
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CBT |
Computer-Based Training |
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CDP |
Carbon Disclosure Project |
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CGU |
Cash Generating Unit |
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CODM |
Chief Operating Decision Maker |
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CSOP |
Company Share Option Plan |
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CSR |
Corporate Social Responsibility |
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CTP |
Competitive Tender Process |
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DC |
Defined Contribution |
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DEPS |
Diluted Earnings Per Share |
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DTR |
Disclosure Guidance and Transparency Rules |
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DWP |
Department for Work and Pensions |
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D2C |
Direct to Consumer |
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EIP |
Executive Incentive Plan |
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EPS |
Earnings Per Share |
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ERC |
Executive Risk Committee |
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ESG |
Environmental, Social and Governance |
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EVF |
Employee Voice Forum |
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EVIC |
Enterprise Value Including Cash |
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ExCo |
Executive Committee (formerly EMB) |
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FCA |
Financial Conduct Authority |
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FRC |
Financial Reporting Council |
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FRS |
Financial Reporting Standards |
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FTE |
Full Time Equivalent |
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FTSE |
The Financial Times Stock Exchange |
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FX |
Foreign Exchange |
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GHG |
Greenhouse Gas |
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HMRC |
His Majesty's Revenue and Customs |
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HR |
Human Resources |
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ICARA |
Internal Capital and Risk Assessment |
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ICO |
Information Commissioner's Office |
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IFRIC |
International Financial Reporting Interpretations Committee |
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IFPR |
Investment Firm Prudential Regime |
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IFRS |
International Financial Reporting Standards |
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IPO |
Initial Public Offering |
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ISA |
Individual Savings Account |
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ISO |
International Organisation for Standardisation |
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ISSB |
International Sustainability Standards Board |
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IT |
Information Technology |
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KOS |
Key Operating System |
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KPI |
Key Performance Indicator |
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KRI |
Key Risk Indicator |
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LISA |
Lifetime ISA |
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MiFID |
Markets in Financial Instruments Directive |
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MIFIDPRU |
Prudential Sourcebook for MiFID Investment Firms |
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MPS |
Managed Portfolio Service |
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MSCI |
Morgan Stanley Capital International |
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NGFS |
Network for Greening the Financial System |
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OCF |
Ongoing Charges Figure |
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OEIC |
Open-Ended Investment Company |
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OTB |
Option To Buy |
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PBT |
Profit Before Tax |
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PCAF |
Partnership for Carbon Accounting Financials |
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PLC |
Public Limited Company |
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PR&U |
Principal Risks and Uncertainties |
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R&CC |
Risk and Compliance Committee |
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RMF |
Risk Management Framework |
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SID |
Senior Independent Director |
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SIPP |
Self-Invested Personal Pension |
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SMIP |
Senior Management Incentive Plan |
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SSAS |
Small Self-Administered Scheme |
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TCFD |
Task Force on Climate-related Financial Disclosures |
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WACI |
Weighted Average Carbon Intensity |
Definitions
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Ad valorem |
According to value |
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AUA |
Assets Under Administration |
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AUM |
Asset Under Management |
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Customer retention rate |
The customer retention rate is the average number of funded platform customers during the financial year that remain funded at the year end |
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Lifetime value |
The total amount of revenue a business expects to generate over the lifetime of a customer |
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Listing rules |
Regulations subject to the oversight of the FCA applicable to companies listed on a UK stock exchange |
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MSCI ESG rating |
MSCI's assessment of a Company's resilience to long-term, industry material ESG risks and how well they manage those risks relative to peers |
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Own shares |
Shares held by the Group to satisfy future incentive plans |
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Platforum |
The advisory and research business specialising in investment platforms |
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Recurring ad valorem revenue |
Includes custody fees, retained interest income and investment management fees |
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Recurring fixed revenue |
Includes recurring pension administration fees and media revenue |
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Revenue per £ AUA |
Represents revenue as a percentage of the average AUA in the year. Average AUA is calculated as the average of the opening and closing AUA in each quarter averaged for the year |
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Transactional revenue |
Includes dealing fees and pension scheme activity fees |
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UK Corporate Governance Code |
A code which sets out standards for best boardroom practice with a focus on Board leadership and effectiveness, remuneration, accountability and relations with shareholders |
Company information
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Company number 04503206
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Company Secretary
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Registered office 4 Exchange Quay Salford Quays Manchester M5 3EE
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Auditor BDO LLP 55 Baker Street London W1U 7EU
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Banker Bank of Scotland plc The Mound Edinburgh EH1 1YZ
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