TIDMCBP
RNS Number : 1927L
Curtis Banks Group PLC
09 September 2021
9 September 2021
Curtis Banks Group plc
Interim Results for the 6 Months to 30 June 2021
Curtis Banks Group PLC (AIM: CBP) ("Curtis Banks" or the
"Group"), one of the UK's leading SIPP providers, announces its
interim results for the 6 months to 30 June 2021.
Financial Highlights
-- Revenue increased by 29.4% to GBP31.7m (2020: GBP24.5m),
through acquisitive and organic growth
-- Fee income from pension administration has increased 9.3%
from GBP18.0m to GBP19.7m on a like-for-like basis; total fee
income of GBP22.3m including Talbot and Muir represents a total
increase of 23.7%
-- Adjusted profit before tax [1] 6 remained at GBP6.3m (2020: GBP6.3m)
-- Adjusted operating margin [2] 6 of 21.3% (2020: 26.4%),
largely reflecting reduced reliance on interest income
-- Statutory profit before tax increased by 13% to GBP4.5m (2020: GBP4.0m)
-- Adjusted diluted EPS6 7.6p (2020: 9.2p5)
-- Statutory diluted EPS 5.5p (2020: 5.3p)
-- Interim dividend of 2.5p per share (2020: 2.5p)
Operational Highlights
-- Annualised gross organic growth in own Mid and Full SIPP numbers of 8.6% (2020: 7.7%)
-- Attrition rate on own Mid and Full SIPPs 6.3% (2020: 5.2%)
-- Total SIPPs, including third party administered, now 80,997 (June 2020: 76,306)
-- Assets under Administration ("AuA") increased by 26% to GBP36.0bn (June 2020: GBP28.6bn)
-- Reduced sensitivity to interest rates following increase in
annual SIPP administration fees in February
-- The launch of Imago Administration for SSAS Schemes evidences
progress made on the integration of Talbot and Muir and Dunstan
Thomas as they strengthen the Group's offering
-- Market-leading product, Your Future SIPP, continues to
provide growth and enhanced relationships
-- CB Labs is prototyping a bank of technical concepts,
including the adoption of machine learning and integration of
capabilities directly on IFA platforms
-- Solid progress made on the Group's five-year system strategy
and on track to a fully aligned target operating model
Highlights and Key Performance Indicators:
Unaudited six month Unaudited six month Audited year
period ended 30 period ended 30 ended 31 December
June 2021 June 2020 2020
Financial
Revenue GBP31.7m GBP24.5m GBP53.9m
Adjusted profit before GBP6.3m GBP6.3m GBP13.4m
tax1 6
Profit before tax GBP4.5m GBP4.0m GBP7.6m4
Adjusted operating margin2
6 21.3% 26.4% 26.0%
Diluted EPS 5.5p 5.3p 9.7p4
Adjusted diluted EPS6 7.6p 9.2p5 17.9p
Operational Highlights
Number of SIPPs Administered 80,997 76,306 82,224
Assets under Administration GBP36.0bn GBP28.6bn GBP32.4bn
Total organic new own
SIPPs in period 2,485 2,107 4,113
Attrition rates (Mid
& Full SIPP) 6.3%3 5.2%3 4.6%
Number of properties
administered 9,131 6,480 8,905
Will Self, Chief Executive Officer of Curtis Banks, commented:
"We have reached the half year point in very good shape. We have a
robust operating model, we are on a growth trajectory, and the
integration process of Talbot and Muir and Dunstan Thomas is going
extremely well. I would like to give thanks once again to all our
employees for their efforts during this testing time. Not only have
we minimised the effect of COVID-19 on the Group, we are also
making tremendous progress on our strategic priorities.
"The second half of the year is gearing up to be a busy period.
As part of our effort to reach new areas of an ever-increasing
addressable market, Curtis Banks is evolving from a primarily
focused SIPP administrator to a more holistic retirement group
which provides technology and complementary services to the advised
retirement market. I look forward to updating you all at the full
year as we continue to evidence good progress on our long-term
plans for growth and diversification."
Analyst Presentation
An analyst briefing is being held today, 9 September at 09:30
BST via an online video conference facility. To register your
attendance, please contact curtisbanks@instinctif.com.
For more information, please contact:
Curtis Banks Group plc via Instinctif Partners
Will Self - Chief Executive Officer
Dan Cowland - Chief Financial Officer
Peel Hunt LLP (Nominated Adviser &
Joint Broker) +44 (0) 20 7418 8900
James Britton
Rishi Shah
Singer Capital Markets Limited (Joint
Broker) +44 (0) 20 7496 3000
Mark Taylor
Rachel Hayes
Instinctif Partners (Financial PR) curtisbanks@instinctif.com / +44
(0) 20 7457 2020
Mark Walter
Ross Gillam
Chief Executive Officer's Review
Curtis Banks has made a promising start to the year. Strategic
initiatives undertaken to develop the business into a more
diversified and holistic retirement group combined with our fixed,
recurring fee model is providing a platform for continued growth.
This has contributed greatly to our success during the last twelve
months despite a challenging economic backdrop over the past 18
months during which we have made progress on integrating our most
recent acquisitions.
Our financial performance remains robust with revenue up 29%
year-on-year to GBP31.7m and a proactive change to our SIPP fee
model earlier this year has seen fee revenues increase by 9%
against the 2020 comparative. Once the contribution from Talbot and
Muir is included, fee revenue across the Group saw a 24% year on
year increase and is an improvement in the quality of the Group's
earnings as it diversifies and shifts away from its reliance on
interest income. Interest income as a proportion of total revenue
fell from 27% in H1 2020 to 13% in H1 2021.
Adjusted profit before tax remained at GBP6.3m for the half year
and our adjusted operating margin reduced to 21.3%, primarily due
to planned reduction in reliance on interest income. We continue to
make good progress on our five-year systems strategy as we pursue
our target operating margin of 30%. We are also pleased to have
been able to maintain our dividend at 2.5p per share which, despite
the challenging environment of the past 18 months, remains well
covered by earnings, as well as improving cash held on balance
sheet.
We saw continued growth in our core product offering, Your
Future SIPP, during the period and this market leading product
continues to have a positive impact on the Group's organic growth
and with our relationships with advisers and introducers. Most
importantly, this success means that we are well placed to further
increase our organic growth in the number of new Full and Mid SIPPs
over the coming years.
The total number of properties now administered by the Group has
increased to 9,131 (H1 2020: 6,480) and we expect this upward trend
to continue following a strong pipeline of enquiries within both
the Curtis Banks and Talbot and Muir businesses.
Innovation and the integration of key acquisitions
The acquisitions we completed during 2020 are having a very
positive impact on the business. Both Dunstan Thomas and Talbot and
Muir form a critical part of our strategy to scale up, diversify
and transition into a more holistic retirement group, providing
multiple complementary solutions, including FinTech, legal and
property services for the advised retirement market.
Critical to this enhanced offering is the greater diversity of
products and services that both businesses bring to the Group,
coupled with the innovation and operational efficiency to which
they contribute. Talbot and Muir is proving to be a seamless
bolt-on acquisition that provides greater volumes at a very
attractive operating margin. Meanwhile, Dunstan Thomas has become
particularly effective in broadening our client base by introducing
Fintech solutions for wealth managers helping the Group to reach a
wider target market and pursue natural cross-sell opportunities to
our existing SIPP administration offering.
During its first twelve months in the Group, Dunstan Thomas has
already shown the critical role it will play in the development of
Curtis Banks Group's technological future. During the first half
year, the business launched Imago Administration for Small
Self-Administered Schemes ("SSAS") pensions and we are already
looking at how the Imago system and administration platform can be
combined with Curtis Banks Trustee Services.
It is also worth highlighting Dunstan Thomas's contribution to
CB Labs, our innovation hub and collaboration centre, which is also
helping to drive integration. Great strides are being made at CB
Labs to bring our bank of ideas and technical concepts to life,
with many now moving to prototyping. This includes machine learning
to lessen Curtis Banks advisers' and customers' dependence on
telephony and we are also developing a solution that will enable
our SIPP application and quote process to be easily added directly
into IFA platforms. This has the potential to grow market share and
expand our target market. CB Labs is also developing adviser tools
to further support advisers and their customers.
Despite the obvious operational challenges presented by Covid-19
over the past 18 months, our five-year systems strategy is also
progressing according to plan. A key component of this activity is
to have a fully aligned operating model, which many of the
innovations supported by Dunstan Thomas and CB Labs are
successfully driving as part of their integration. The
centralisation of our commercial property administration is now
complete, a new telephony system has been installed to support our
customers and their advisers and the rationalisation of our product
portfolio is progressing well.
The addition of Talbot and Muir to the Group has further
strengthened our levels of recurring revenues and continued to
dilute the contribution of interest income across the organisation.
Talbot and Muir have also added a number of valuable adviser
relationships further reinforcing the Group's position as the SIPP
provider of choice across the industry. Whilst new business within
Talbot and Muir has been positive, one key new distribution partner
has been materially delayed leading to a modest variance in
associated revenues.
We are therefore delighted with progress made on innovation and
the integration of Dunstan Thomas and Talbot and Muir. Both
transactions are critical to the execution of our strategy to add
greater scale, additional and diversified revenue streams and
enhanced profitability to the Curtis Banks Group.
SIPP Numbers
As at 30 June 2021, the total number of SIPPs administered
increased by 6% to 80,997 (H1 2020: 76,306), thanks to a
combination of organic growth as well as the contribution of Talbot
and Muir which has contributed 6,082 SIPPs to this total.
The gross number of new own SIPPs, which are administered
directly by the Group increased by 2,485 organically (H1 2020:
2,107), representing a gross annualised organic growth rate of 6.6%
(H1 2020: 6.1%). In our two core areas of strategic focus, the Full
SIPP saw a slightly higher level of gross annualised organic growth
than last year at 3.6% (H1 2020: 2.9%) and our Mid SIPP gross
organic growth rate increased to 12.1% (H1 2020: 11.2%). Our total
own SIPP annualised attrition rate increased to 8.9% during the
year (H1 2020: 5.8%) although this rate was much lower (6.3%) for
our core Full and Mid SIPP products.
Target Operating Model
During the first half of 2021, we achieved adjusted profit
before tax of GBP6.3m, which is comparable to the previous interim
reporting period (2020: GBP6.3m), generating an adjusted operating
margin of 21.3% (H1 2020: 26.4%). This lower expected adjusted
operating margin is due to the significant reduction in interest
revenue generated for the first half of the year, representing
GBP4.2m of revenue versus GBP6.5m in H1 2020 and a reduction of
5.3% in operating margin, although this was not unexpected as the
Group looks to increase the quality of its earnings through
recurring annual fees.
During the period we successfully completed the centralisation
of the Group's commercial property administration. In addition to
this, the strategy to transition the Group to a single
administration system remains on target and within budget. As at 30
June 2021, we are progressing our systems strategy and development
work continues and is on track for completion in accordance with
the original project plan.
Industry context and outlook
The pension market has been a continued focus of the regulator
during the first half of the year. Our business model is clear and
we only work with regulated financial advisers and do not give any
advice or provide the investments held within our SIPPs. Our fee
structures also remain fair, transparent and competitive for our
target market and remains well positioned to withstand any industry
pressure on fee levels.
Non-standard investments continue to receive a large amount of
media coverage. While these are a significant issue for the wider
industry, we do not consider them to be a material risk to our
business. The Group continues to carry out robust due diligence on
non-standard investments both at outset and throughout the life of
the investment and all new Curtis Banks products have a clear
Schedule of Allowable Investments.
Our organisation remains resilient from both a regulatory
perspective but also in weathering the current expected medium-term
economic impact of the COVID-19 pandemic. Though there remains
significant uncertainty over what government measures will be
maintained or introduced, the Group continually reviews guidance
from the UK government and the NHS and ensures that all staff are
kept regularly updated and fully informed in order to reduce the
risk of spreading the virus and minimise the economic impact. We
continue to explore ways to further diversify our revenue
generation and reduce our sensitivity to market conditions, and we
continue to retain capital and liquidity well in excess of the
minimum regulatory requirements.
People, Culture and ESG update
As part of integrating ESG into our corporate strategy, we are
undertaking a materiality assessment of our business to ensure we
move forward with a strong purpose-led ESG policy that will help
guide the business for the next three to five years. To that end,
we will be talking to key stakeholders in the coming weeks to test
and evolve this policy before publishing it and we will be
allocating responsibility for the oversight of this policy to a
member of the Board of Directors.
Curtis Banks has always demonstrated a strong commitment to its
corporate and social responsibility activities, acknowledging the
role we play in the communities around us.
We have therefore reached the half year point in very good
shape. We have a robust operating model, the Group is on a growth
trajectory, and the integration process of Talbot and Muir and
Dunstan Thomas is going extremely well. I would like to give thanks
once again to all our employees for their efforts during this
testing time. Not only have we minimised the effect of COVID-19 on
the Group, we are also making tremendous progress on our strategic
priorities. The second half of the year is gearing up to be a busy
period and I look forward to updating you all at the full year.
Summary and outlook
Despite the continued uncertainty and challenges that the
pandemic has generated over the past six months, the Group has once
again demonstrated its financial robustness and that is not
sensitive to market movements, upon which our core SIPP
administration business model is based. The strong operating
performance reported within these statements is testament to this
and we remain hopeful that the staged lifting of restrictions will
provide a more conducive environment in which to do business,
particularly sales related activities across all Group
entities.
Strategically, the Board remains confident in the Group's
continued ability to make progress on, and achieve, its stated
objectives through diversification of our service offering, organic
growth across all parts of the Group, highly selective acquisitions
and continued operational efficiencies.
Will Self
Chief Executive Officer
8 September 2021
Chief Financial Officer's Review
Results
Group financial performance for the six month period to 30 June
2021 resulted in an adjusted profit before tax of GBP6.3m which was
unchanged compared to the previous interim reporting period (2020:
GBP6.3m), generating an adjusted operating margin of 21.3% (H1
2020: 26.4%).
Profit before tax, which includes amortisation and non-recurring
costs, improved 13% to GBP4.5m (H1 2020: GBP4.0m). Adjusted diluted
EPS reduced to 7.6p (H1 2020: 9.2p), while diluted EPS on a
statutory basis increased by 4% to 5.5p (H1 2020: 5.3p).
The encouraging performance of the first six months of 2021 was
achieved despite the challenging economic and social conditions,
with interest income impacted materially as expected in an
unprecedented low-rate environment. Organic sales have remained
robust in the face of these challenges and our stated strategy to
deliver a Target Operating Model remains on track, H1 2021 seeing
the conclusion of the centralisation of commercial property
administration within one office location. The centralisation of
the commercial property administration brings with it non-recurring
redundancy and restructuring costs associated with the transition
of work between office locations and this is described in more
detail below.
Revenues
Revenues of GBP31.7m in the six months ended 30 June 2021 were
significantly higher than the comparable period (H1 2020:
GBP24.5m), largely as a result of the inclusion of both Dunstan
Thomas and Talbot and Muir for the first time in our interim
statements.
Fee revenue from SIPPs and SSASs remains the predominant source
of income for the Group with a strong emphasis on recurring annual
fee income. In the six months ended 30 June 2021 fee income
represented 70% of the total income and 87% of this fee income is
recurring (H1 2020: 84%). The increase in the levels of recurring
income has achieved a dilution of the contribution made through
interest income and this improvement in the overall quality of
earnings has been supported by a GBP2.6m contribution from Talbot
and Muir.
SIPP fees are based on a recurring fixed monetary annual fee and
a menu of additional fixed fees depending on the services provided
to the SIPP. The annual fees for the Curtis Banks Mid and Full SIPP
products were amended as at 1(st) February 2021 and at the same
time we made a clear commitment to our clients as to how we will
share interest revenue with them and therefore remove any
discretion. All of the fees that are applied to our SIPP products
are subject to contractual annual inflationary rises linked to the
measurement of Average Weekly Earnings ("AWE").
Fees are not dependent on movements in the value of underlying
assets within SIPPs and as a result the recurring fee income of the
Group is not directly affected by the volatility in financial
markets. This is a key differential that sets us apart from most of
our competitors and provides an attractive product in terms of
competitive fees for higher value SIPPs. As the value of a SIPP
increases our product becomes increasingly affordable.
As expected, interest income reduced to GBP4.2m for the period,
compared to GBP6.5m for H1 2020, although this was anticipated
given the unprecedented low interest rate environment prevailing
since the reduction in the Bank of England Bank Rate to 0.1% in
March 2020. As at 30 June 2021, the Group held GBP1.052bn of client
deposits across a range of UK, PRA regulated banking counterparties
and managed the cash in line with its Treasury Framework.
Included for the first time are GBP5.8m of revenues generated by
Dunstan Thomas, separately classified within these statements as
Fintech income. Following a challenging sales environment due to
the on-going COVID-19 pandemic we haven't achieved the growth that
we anticipated in Dunstan Thomas and revenue is broadly in line
with 2020. This has resulted in a reduction of GBP0.6m to the total
related contingent consideration expected to be payable over the
earn out period and a corresponding credit to the consolidated
statement of comprehensive income.
Expenses
The period ended 30 June 2021 saw administrative expenses
increase to GBP25.0m (H1 2020: GBP18.1m).
Staff costs for the period increased by 55% to GBP17.7m (2020:
GBP11.4m) and again these figures have been heavily influenced by
the addition of staff from Dunstan Thomas and Talbot Muir to the
Group which represented 47% of this increase. In addition to the
impact from acquisitions, headcount increased within the standalone
Curtis Banks business following recruitment inactivity in the first
half of 2020 due to the impact of the pandemic. Staff costs in the
period were impacted by further share based payment awards under
the Group's Long Term Incentive Plan and Save As You Earn ("SAYE")
option schemes, as well as the annual pay review. The share
incentive schemes have been extended to both Dunstan Thomas and
Talbot Muir and the commitment to all of these awards demonstrates
the Group's continuing commitment to improving levels of key staff
retention and morale, which in turn provide the required service
levels to all of our clients and introducers of business.
Overall headcount stood at 823 as at 30 June 2021 compared to
639 as at 30 June 2020 and 821 as at 31 December 2020. Of the
headcount at 30 June 2021, members of staff at Dunstan Thomas and
Talbot and Muir accounted for 152.
Non-staff costs in aggregate grew to GBP7.3m from GBP6.7m in H1
2020 although, if the costs relating to Dunstan Thomas and Talbot
and Muir of GBP0.7m are excluded, non-staff costs actually saw a
reduction on a like for like comparison basis of GBP0.1m.
The Group continues to take steps to improve its adjusted
operating margin through a combination of revenue enhancements,
cost saving measures and operational improvements. The Board
remains confident that an improved operating margin is achievable
in the medium term through both our planned internal strategic
activities, centred on our systems strategy, organic growth and the
revenue opportunities being developed with Dunstan Thomas.
Non-recurring costs
Non-recurring costs for the six months ended 30 June 2021 are
net income of GBP0.2m (2020: costs of GBP1.4m) and comprise
principally of internal restructuring costs and some of the
external costs associated with the acquisitions of Dunstan Thomas
and Talbot and Muir but are offset by a credit of GBP0.6m in
respect of a revision to the fair value of deferred contingent
consideration payable on their acquisitions.
As referenced earlier, the centralisation of commercial property
administration within one office was completed during the first six
months, resulting in a non-recurring cost of GBP0.2m being
recognised during the period.
Accounting Policies
There have been no changes in accounting policies during the
period although the audited results for year ended 31 December 2020
have been restated to account for measurement period adjustments
arising under IFRS 3 Business Combinations relating to the
acquisitions of the Dunstan Thomas Group and the Talbot and Muir
Group that took place in H2 2020. This follows a reassessment of
the fair value of assets and liabilities acquired assisted by third
party valuation experts to provide a more accurate estimate and a
reassessment of the relevant discount factor that ought to be
applied to future expectations of cash flows arising on intangible
assets and contingent consideration payable on each of the
acquisitions made in 2020. Further details can be found in note 2.4
to these statements.
Cash flows
Shareholder cash balances at period end were GBP32.2m compared
to GBP24.9m at the end of June 2020.
Net cash inflows from shareholder operating activities for the
period were GBP7.2m (H1 2020: GBP0.4m net cash inflow), the
increase in cash generation attributable to the additional working
capital introduced from Dunstan Thomas and Talbot and Muir, a
reduction of tax paid in the period and an increase in profit
before tax for the period.
Suffolk Life Annuities Limited
Part of the Group, Suffolk Life Annuities Limited, is an
insurance company that writes SIPP products as insurance contracts.
These are all non-participating insurance policy contracts and so
the Group does not bear any insurance risk. As the policies are
non-participating contracts, the client related assets and
liabilities in Suffolk Life Annuities Limited match. In addition,
the revenues, expenses and investment returns of the
non-participating insurance policy contracts are shown in the
consolidated statement of comprehensive income. Again, these
income, expense items and investment returns due to the
policyholders are completely matched. An illustrative balance sheet
as at 30 June 2020 showing the financial position of the Group
excluding the policyholder assets and liabilities is included as
supplementary information after the notes to the financial
statements. An illustrative cash flow on the same basis has also
been provided.
Systems Development
As reported in our financial statements for the year ended 31
December 2019, the decision was taken to improve our IT
infrastructure by both upgrading the existing operating systems
within Curtis Banks and to move all the back office systems onto
one of our incumbent systems (Navision).
Costs associated with these upgrades and operating system
changes where appropriate will be capitalised and amortised in
accordance with their useful economic life. Amortisation will
commence once the upgrades are completed and fully operational.
Upon completion in 2024, the Group expects to crystallise savings
of GBP1.2m per annum.
Employee Benefit Trust
The Group operates an independent Employee Benefit Trust ("EBT")
to acquire shares in the Company in the market to satisfy future
option and long term incentive awards. The financial statements of
the EBT are consolidated within the overall Group financial
statements and these shares are shown on the balance sheet of the
Group as Treasury Shares and are included within total equity.
Capital requirements
The Group's regulated subsidiary companies submit regular
returns to the FCA and the PRA relating to their capital resources.
At 30 June 2021 the total regulatory capital requirement across the
Group was GBP15.1m (30 June 2020: GBP14.7m) and the Group had an
aggregate surplus above this of GBP15.7m (30 June 2020: GBP15.4m)
across all regulated entities. In addition to this it is Group
internal policy for regulated companies within the Group to hold at
least 130% of their required regulatory capital and this has been
maintained throughout the period.
Financial Position
The statement of Financial Position as at 30 June 2021 shows a
strong position with shareholder net assets increasing from
GBP54.4m at 30 June 2020 to GBP80.2m as at 30 June 2021.
As at 30 June 2021 the Group had net shareholder cash (after
debt)* of GBP10.4m (30 June 2020: GBP15.1m).
Dan Cowland
Chief Financial Officer
8 September 2021
* In addition to statutory IFRS performance measures, the Group
has presented a number of non-statutory alternative performance
measures ("APMs"). The Board believes that the APMs used give a
more representative view of the underlying performance of the Group
and enhance comparability of information between reporting periods.
APMs are identified in the definitions at the end of this
announcement.
Condensed consolidated statement of comprehensive income
Unaudited 6 month period Unaudited 6 month period Audited year ended 31 December
ended 30 June 2021 ended 30 June 2020 2020 - As restated*
Before Before Before
amortisation Amortisation amortisation Amortisation amortisation Amortisation
and and and and and and
non-recurring non-recurring non-recurring non-recurring non-recurring non-recurring
costs costs Total costs costs Total costs costs Total
Notes GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Revenue 31,718 - 31,718 24,529 - 24,529 53,871 - 53,871
Administrative
expenses (24,959) (1,250) (26,209) (18,061) (1,978) (20,039) (39,885) (5,057) (44,942)
Impairment on
client
portfolios - - - - (344) (344) - (344) (344)
Policyholder
investment
returns 216,954 216,954 (113,907) - (113,907) 125,231 - 125,231
Non-participating
investment
contract expenses (17,090) - (17,090) (17,531) - (17,531) (35,343) - (35,343)
Changes in
provisions:
Non-participating
investment
contract
liabilities (199,864) - (199,864) 131,438 - 131,438 (89,888) - (89,888)
-------------- -------------- ---------- -------------- -------------- ---------- -------------- -------------- ---------
Policyholder total - - - - - - - - -
Operating profit 6,759 (1,250) 5,509 6,468 (2,322) 4,146 13,986 (5,401) 8,585
Finance income 9 - 9 53 - 53 83 - 83
Finance costs (452) (580) (1,032) (240) - (240) (697) (342) (1,039)
-------------- -------------- ---------- -------------- -------------- ---------- -------------- -------------- -----------
Profit before tax 6,316 (1,830) 4,486 6,281 (2,322) 3,959 13,372 (5,743) 7,629
Tax (1,171) 348 (823) (1,496) 441 (1,055) (2,823) 1,091 (1,732)
-------------- -------------- ---------- -------------- -------------- ---------- -------------- -------------- -----------
Total comprehensive
income
for the period 5,145 (1,482) 3,663 4,785 (1,881) 2,904 10,549 (4,652) 5,897
============== ============== ========== ============== ============== ========== ============== ============== ===========
Attributable to:
Equity holders of
the
company 3,669 2,904 5,897
Non-controlling (6) - -
interests
---------- ---------- -----------
3,663 2,904 5,897
========== ========== ===========
Earnings per
ordinary
share on net
profit
Basic (pence) 5 5.5 5.4 9.9
Diluted (pence) 5 5.5 5.3 9.7
*The audited results for year ended 31 December 2020 have been
restated to account for measurement period adjustments arising
under IFRS 3 Business Combinations relating to the acquisitions of
the Dunstan Thomas Group and the Talbot and Muir Group that took
place in H2 2020. The changes impact amortisation, non-recurring
costs and tax only. The adjustments made to restate the 31 December
2020 comparatives, as further detailed in note 2.4, have not been
subject to audit.
Condensed consolidated statement of changes in equity
Equity
share
Issued Share based Treasury Retained Non-controlling Total
capital premium payments shares earnings* Total* interest Equity*
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
As at 1
January 2020
- audited 271 33,659 2,313 (534) 19,730 55,439 14 55,453
Comprehensive
income
for the
period - - - - 2,904 2,904 - 2,904
Share based
payments - - 410 - - 410 - 410
Ordinary
shares bought
and sold by
EBT - - - (590) - (590) - (590)
Deferred tax
on share
based
payments - - - - (312) (312) - (312)
Ordinary
dividends
paid - - - - (3,507) (3,507) - (3,507)
---------
As at 30 June
2020 -
unaudited 271 33,659 2,723 (1,124) 18,815 54,344 14 54,358
Comprehensive
income
for the
period* - - - - 2,994 2,994 - 2,994
Share based
payments - - 24 - - 24 - 24
Deferred tax
on share
based
payments - - - - (33) (33) - (33)
Ordinary
shares issued 59 24,140 - - - 24,199 - 24,199
Ordinary
shares bought
and sold by
EBT - - - 383 - 383 - 383
Ordinary
dividends
paid - - - - (1,642) (1,642) - (1,642)
---------
As at 31
December 2020
- audited -
restated* 330 57,799 2,747 (741) 20,134 80,269 14 80,283
Comprehensive
income
for the
period - - - - 3,669 3,669 (6) 3,663
Share based
payments - - 92 - - 92 - 92
Ordinary
shares bought
and sold by
EBT - - - 301 - 301 - 301
Ordinary
shares issued 2 288 - - - 290 - 290
Deferred tax
on share
based
payments - - - - (99) (99) - (99)
Ordinary
dividends
paid - - - - (4,338) (4,338) - (4,338)
As at 30 June
2021 -
unaudited 332 58,087 2,839 (440) 19,366 80,184 8 80,192
======== ======== ========= ========= ========== ======== ================ ========
*The audited results for year ended 31 December 2020 have been
restated to account for measurement period adjustments arising
under IFRS 3 Business Combinations relating to the acquisitions of
the Dunstan Thomas Group and the Talbot and Muir Group that took
place in H2 2020. The adjustments made to restate the 31 December
2020 comparatives, as further detailed in note 2.4, have not been
subject to audit.
Condensed consolidated statement of financial position
As restated*
Unaudited Unaudited Audited
30-Jun-21 30-Jun-20 31-Dec-20
Notes GBP'000 GBP'000 GBP'000
ASSETS
Non-current assets
Intangible assets 6 90,475 42,750 91,078
Investment property 1,214,551 1,219,856 1,208,605
Property, plant and equipment 9,395 5,742 7,658
Investments 2,137,522 1,842,818 2,072,317
Deferred tax asset - 435 -
------------ ------------ -------------
3,451,943 3,111,601 3,379,658
------------ ------------ -------------
Current assets
Trade and other receivables 28,863 30,976 26,649
Cash and cash equivalents 401,110 440,790 430,578
Current tax asset 658 604 581
------------ ------------ -------------
430,631 472,370 457,808
------------ ------------ -------------
Total assets 3,882,574 3,583,971 3,837,466
------------ ------------ -------------
LIABILITIES
Current liabilities
Trade and other payables 20,915 16,893 18,895
Deferred income 30,533 26,345 26,995
Borrowings 42,079 34,486 53,533
Lease liabilities 837 909 672
Provisions 453 408 501
Contingent consideration 2,467 - 2,375
97,284 79,041 102,971
------------ ------------ -------------
Non-current liabilities
Borrowings 48,202 46,617 53,370
Lease liabilities 7,164 3,377 5,201
Provisions 7 - 7
Contingent consideration 6,454 - 6,537
Non-participating investment
contract liabilities 3,639,582 3,400,578 3,585,307
Deferred tax liability 3,689 - 3,790
3,705,098 3,450,572 3,654,212
------------ ------------ -------------
Total liabilities 3,802,382 3,529,613 3,757,183
------------ ------------ -------------
Net assets 80,192 54,358 80,283
------------ ------------ -------------
Equity attributable to owners
of the parent
Issued capital 332 271 330
Share premium 58,087 33,659 57,799
Equity share based payments 2,839 2,723 2,747
Treasury shares (440) (1,124) (741)
Retained earnings 19,366 18,815 20,134
------------ ------------ -------------
80,184 54,344 80,269
Non-controlling interest 8 14 14
Total equity 80,192 54,358 80,283
------------ ------------ -------------
*The audited results for year ended 31 December 2020 have been
restated to account for measurement period adjustments arising
under IFRS 3 Business Combinations relating to the acquisitions of
the Dunstan Thomas Group and the Talbot and Muir Group that took
place in H2 2020. The adjustments made to restate the 31 December
2020 comparatives, as further detailed in note 2.4, have not been
subject to audit.
Approved by the Board and authorised for issue on 8 September
2021. Dan Cowland - Chief Financial Officer
Condensed consolidated statement of cash flows
Unaudited Unaudited As restated*
6 month 6 month Audited
period ended period ended year ended
30-Jun-21 30-Jun-20 31-Dec-20
GBP'000 GBP'000 GBP'000
Cash flows from operating
activities
Profit before tax 4,486 3,959 7,629
Adjustments for:
Depreciation 915 694 1,499
Amortisation and impairments 1,445 941 2,088
Interest expense 452 240 697
Share based payment expense 92 410 434
Fair value losses/(gains) on
financial investments (143,455) 82,297 (119,957)
Additions of financial investments (336,457) (298,196) (631,200)
Disposals of financial investments 414,708 367,278 673,037
Fair value (gains)/losses on
investment properties (11,278) 57,664 60,751
Increase/(decrease) in liability
for investment contracts 54,278 (171,327) 13,403
Changes in working capital:
Increase in trade and other
receivables (1,797) (10,460) (2,737)
Increase/(decrease) in trade and
other payables 5,323 772 (1,105)
Taxes paid (1,324) (2,063) (2,996)
Net cash flows from operating
activities (12,612) 32,209 1,543
-------------- -------------- -------------
Cash flows from investing
activities
Purchase of intangible
assets (842) (264) (986)
Purchase of property, plant & equipment (169) (241) (591)
Purchase of investment property (52,176) (66,685) (122,449)
Purchase and sale of shares
in the Group by the EBT 301 (590) (207)
Receipts from sale of investment
property 57,506 54,948 118,877
Net cash flows from acquisitions 9 (152) (34,484)
Net cash flows used in investing
activities 4,629 (12,984) (39,840)
-------------- -------------- -------------
Cash flows from financing activities
Equity dividends paid (4,338) (3,507) (5,149)
Net proceeds from issue of ordinary
shares 290 - 24,199
Net increase/(decrease) in borrowings (16,670) 3,981 29,595
Principal elements of lease payments (490) (422) (934)
Interest paid (277) (34) (383)
Net cash flows used in financing
activities (21,485) 18 47,328
-------------- -------------- -------------
Net increase/(decrease) in cash
and cash equivalents (29,468) 19,243 9,031
-------------- -------------- -------------
Cash and cash equivalents at the
beginning of the period 430,578 421,547 421,547
============== ============== =============
Cash and cash equivalents at the
end of the period 401,110 440,790 430,578
============== ============== =============
*The audited results for year ended 31 December 2020 have been
restated to account for measurement period adjustments arising
under IFRS 3 Business Combinations relating to the acquisitions of
the Dunstan Thomas Group and the Talbot and Muir Group that took
place in H2 2020. The adjustments made to restate the 31 December
2020 comparatives, as further detailed in note 2.4, have not been
subject to audit.
Notes to the financial statements
1. Corporate information
Curtis Banks Group PLC ("the Company") is a public limited
company incorporated and domiciled in England and Wales, whose
shares are publicly traded on the AIM market of the London Stock
Exchange PLC. The interim condensed consolidated financial
statements were authorised for issue in accordance with a
resolution of the Directors on 8 September 2021.
The principal activity of the Group is that of the provision of
pension administration services principally for Self-Invested
Personal Pension schemes ("SIPPs") and Small Self-Administered
Pension schemes ("SSASs"). The Group is staffed by experienced
professionals who all have proven track records in this sector.
2 Basis of preparation and accounting policies
2.1 Basis of preparation
The interim condensed consolidated financial statements comprise
the Company and its subsidiaries ("the Group") and have been
prepared on a historical cost basis modified by revaluation of
financial assets and financial liabilities through profit and loss
where held at fair value, and are presented in pounds sterling,
with all values rounded to the nearest thousand pounds except when
otherwise indicated.
The interim condensed consolidated financial statements have
been prepared in accordance with IAS 34 Interim Financial Reporting
except for certain requirements in relation to financial instrument
disclosure. The board has considered the requirements of IAS 34 in
relation to policyholder assets and liabilities and, given the
unit-linked nature of these assets and liabilities, has concluded
that revaluing certain policyholder financial instruments for the
purposes of these interim financial statements would incur expense
which is disproportionate to any potential benefits of doing so.
Further, the board considers that the omission of updated
valuations for these certain policyholder financial instruments
will not influence the economic decisions of users of these
financial statements, as all revenue and expenditure associated
with these policyholder assets and liabilities is due back to the
policyholders under non-participating investment contracts and
therefore has nil impact on shareholder equity.
The interim condensed consolidated financial statements do not
include all the information and disclosures required in the annual
financial statements and should be read in conjunction with the
Group's financial statements for the year ended 31 December 2020,
which were prepared in accordance with International Financial
Reporting Standards adopted by the International Accounting
Standards Board ("IASB") and interpretations issued by the
International Financial Reporting Interpretations Committee
("IFRIC") of the IASB (together "IFRS") as adopted by the European
Union, and in accordance with the requirements of The Companies Act
2006 applicable to companies reporting under IFRS.
The information relating to the six months ended 30 June 2021
and the six months ended 30 June 2020 is unaudited and does not
constitute statutory financial statements within the meaning of
section 434 of the Companies Act 2006. The Group's statutory
financial statements for the year ended 31 December 2020 have been
reported on by its auditor and delivered to the Registrar of
Companies. The report of the auditor was unmodified and did not
contain a statement under section 498(2) or (3) of The Companies
Act 2006.
The interim condensed consolidated financial statements have
been reviewed by the auditor and their report to the Board of
Curtis Banks Group PLC is included within this interim report.
2.2 Basis of consolidation
The interim condensed consolidated financial statements
consolidate the financial statements of the Company and its
subsidiaries up to 30 June each year.
Subsidiaries are fully consolidated from the date of
acquisition, being the date on which the Group obtains control, and
continue to be consolidated until the date that such control
ceases. The financial statements of subsidiaries are prepared for
the same reporting period as the parent company, using consistent
accounting policies. All inter-Group balances, income and expenses
and unrealised gains and losses resulting from intra-Group
transactions are eliminated in full.
The trading subsidiaries of Curtis Banks Group PLC as at 30 June
2021 were Curtis Banks Limited, Suffolk Life Pensions Limited,
Suffolk Life Annuities Limited, Rivergate Legal Limited, Templemead
Property Solutions Limited, Dunstan Thomas Group Limited, Digital
Keystone Limited, Dunstan Thomas Holdings Limited, Dunstan Thomas
Consulting Limited, Platform Action Limited, and Talbot and Muir
Limited.
The trading subsidiaries of Curtis Banks Group PLC as at 30 June
2020 were Curtis Banks Limited, Suffolk Life Pensions Limited,
Suffolk Life Annuities Limited, Rivergate Legal Limited and
Templemead Property Solutions Limited.
Certain trading subsidiaries of Curtis Banks Group PLC hold the
entire issued share capital of a number of non-trading trustee
companies. All of these companies are nominee companies for the
pension products administered by the trading subsidiaries of Curtis
Banks Group PLC and have been dormant or non-trading throughout the
period and are expected to remain dormant or non-trading.
2.3 Significant accounting policies
The accounting policies adopted in the preparation of the
interim condensed consolidated financial statements are consistent
with those followed in the preparation of the Group's annual
financial statements for the year ended 31 December 2020.
An IFRS 3 measurement period adjustment to finalise the fair
values attributed to assets and liabilities acquired from the
Dunstan Thomas acquisition that took place on 3 August 2020 has
been made during the current period. The adjustments made to
restate the 31 December 2020 comparatives, as further detailed in
note 2.4, have not been subject to audit. As a result of this
adjustment, changes in the accounting estimate for the useful
remaining economic life of certain intangible assets has been made,
and an estimate for the new intangible asset category of Brand has
been made. The following table sets out revised useful remaining
economic lives assigned to each category of intangible asset:
Intangible asset category Useful Economic Life
Goodwill Indefinite - reviewed at least annually
for impairment
Brand 10 years
Client Portfolios Between 5.4 years to 20 years
Computer Software Between 4 and 5 years
Internally Generated 10 years
Software
New standards issued but not yet effective
The IASB and IFRIC have issued standards and interpretations
with an effective date for periods starting on or after the date on
which these financial statements start. There are no newly issued
standards expected to potentially have a material impact on the
condensed consolidated interim financial statements and the
consolidated financial statements to the Group.
Financial statements for the year ending 31 December 2021
The accounting policies adopted in the preparation of the
interim condensed consolidated financial statements will be
consistent with those to be followed in the preparation of the
Group's annual financial statements for the year ending 31 December
2021.
2.4 Prior year restatements
IFRS 3 measurement period adjustment
The audited results for year ended 31 December 2020 have been
restated to account for measurement period adjustments arising
under IFRS 3 Business Combinations relating to the acquisitions of
the Dunstan Thomas Group and the Talbot and Muir Group that took
place in H2 2020.
In order to finalise the fair values attributed to assets and
liabilities acquired from the Dunstan Thomas acquisition an
independent expert valuation was undertaken, the results of which
were pending when the 2020 annual report was approved. The
valuation helped to better identify and reflect the different
components of intangible asset acquired, as principally reflected
in the change of cost allocated to each intangible asset category
within note 6 to these financial statements as a measurement period
adjustment, compared to that reported in the original financial
statements for the year ended 31 December 2020.
The results of the independent valuation also helped to inform a
more accurate estimate of the relevant discount factor that ought
to be applied to future expectations of cash flows arising on
intangible assets and contingent consideration payable.
Consequently, the fair value attributed to assets and liabilities
acquired from the Talbot and Muir acquisition has also been
restated as a measurement period adjustment.
The impact of these adjustments on previously reported figures
is summarised in the two tables below:
Originally reported As restated as Movement
as at 31 December at 31 December GBP'000
Consolidated statement 2020 2020
of financial position GBP'000 GBP'000
Intangible assets 91,166 91,078 (88)
Trade and other receivables 26,913 26,649 (264)
Contingent consideration
due <1 year (2,516) (2,375) 141
Contingent consideration
due >1 year (5,657) (6,537) (880)
Deferred tax liability (5,013) (3,790) 1,223
Retained earnings (20,002) (20,134) (132)
-
==========
Originally reported As restated for Movement
for the year the year ended GBP'000
ended 31 December 31 December 2020
Consolidated statement of 2020 GBP'000
comprehensive income GBP'000
Amortisation (2,098) (1,744) 354
Non-recurring finance costs (188) (342) (154)
Tax (1,664) (1,732) (68)
Total comprehensive income
for the year 132
==========
Adjusted Basic EPS and Adjusted Diluted EPS errors
The unaudited results for the six month period ended 30 June
2020 contained a clerical error in the reported level of adjusted
basic earnings per share and the adjusted diluted earnings per
share. The values previously reported were 9.7p per share and 9.5p
per share respectively, and this has now been restated to correctly
reflect 9.4p per share and 9.2p per share.
2.5 Critical accounting judgements and key sources of estimation uncertainty
Estimates and judgements are continually evaluated and are based
on historical experience and other factors, including expectations
of future events that are believed to be reasonable under the
circumstances.
In preparing the financial statements the Group has selected and
applied various accounting policies which are described in the
notes to the financial statements. In order to apply these
accounting policies the Group has made estimates and judgements
concerning the future.
There are no critical judgements in the application of
accounting policies.
The key sources of estimation uncertainty are disclosed
below:
Client portfolios
Client portfolios include books of SIPPs acquired that are
amortised over their useful economic life ("UEL") which management
estimate to be 20 years. This estimated UEL is based upon
management's historical experience of similar portfolios and
expectation of the future persistency of the portfolio. The
reasonableness of this estimate is assessed annually by comparison
to actual lapse rates and consideration of factors that may affect
it in the future, for example, changes to products.
Additionally, the Group reviews and judges whether acquired
client portfolios show any indicators of impairment at least on an
annual basis by considering actual versus forecast lapse rates and
comparing the carrying value and recoverable amount. An impairment
would exist where the recoverable amount determined is less than
the carrying value of the asset.
Assessing recoverable amount through value in use comprises an
estimation of future cash flows expected to arise from each client
portfolio, 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 that asset, together with
an estimated rate of attrition for each portfolio. The estimation
of future cash flows is derived by taking the current earnings
before tax, interest, depreciation and amortisation ("EBITDA")
margin of the Group and applying this against forecast revenue from
the relevant client portfolio.
One key source of estimation uncertainty is the level of future
interest income expected, and in particular the longevity of the
current low interest rate environment. Another key source of
estimation uncertainty arises from the attrition rates used. The
recoverable amount is most sensitive to both of these
assumptions.
A 20% increase to the attrition rate assumption would result in
a cumulative GBP44,000 decrease in the carrying value of client
portfolios. A 40% increase to the attrition rate assumption would
result in a cumulative GBP385,000 decrease in the carrying value of
client portfolios.
A 2% decrease in the EBITDA margin assumption would result in a
cumulative GBP538,000 decrease in the carrying value of client
portfolios. A 4% decrease in the EBITDA margin assumption would
result in a cumulative GBP1,436,000 decrease in the carrying value
of client portfolios.
IFRS 9 impairment
Trade and other receivables are impaired based on the IFRS 9
simplified approach to measure expected credit losses using a
lifetime expected loss allowance for all trade receivables. The
loss allowances for trade and other receivables are based on
assumptions about risk of default and expected loss rates. The
Group uses judgement in making these assumptions and selecting the
inputs to the impairment calculation, based on the Group's past
history of shared credit risk characteristics, days past due,
existing market conditions, as well as forward looking estimates at
the end of each reporting period.
The loss rates are considered the key source of estimation
uncertainty because the impact of a change in these could result in
a material change in the expected credit loss. The Group determines
its loss rates by reference to the underlying level of liquidity in
each of the Group's clients' SIPPs because clients' fees are
normally settled directly from their SIPP cash holdings. A lower
level of liquidity in the SIPP, or indeed illiquidity, indicates
reduced credit quality in the related trade receivable balance.
Changes in macroeconomic factors may impact the Group's clients'
use of the SIPP and cause the level of liquidity in the SIPP to
increase or decrease. A 10% increase or decrease in loss rates
estimated at the period end would have the following impact:
Increase / (decrease) Effect on profit
in percentage before tax
Period ended 30 June 2021 rates GBP'000
Loss rate 10% (807)
Loss rate (10)% 430
The Group charges fixed fees for its services reducing its
exposure to changes in macroeconomic factors such as COVID-19 which
may otherwise impact a percentage basis point fee charging
model.
The Group continually assesses historical recovery data to help
determine how the underlying level of liquidity in the SIPPs fits
into each of the credit quality ratings. Future historical data
available may lead to changes in the estimated categorisation of
trade receivables gross carrying amounts and associated loss
allowance.
Where trade and other receivables have been outstanding for more
than six years, amounts are deemed to have no reasonable
expectation of recovery and are written off.
Contingent consideration payable on acquisitions
The Group has entered into certain acquisition agreements that
provide for a contingent consideration to be paid. A financial
instrument is recognised for all amounts management anticipates
will be paid under the relevant acquisition agreement. This
requires management to make an estimate of the expected future cash
flows from the acquired business using forecasts that cover the
contingent consideration period, and determine a suitable discount
rate for the calculation of the present value of any contingent
consideration payments.
A material change to the carrying value might occur if the
acquired businesses achieve significantly more or less than their
target earnings. The key assumption used in determining the value
of these provisions is the forecast financial performance as
applied in the terms of the contingent consideration arrangement. A
10% increase or reduction in achievement of forecast contingent
consideration targets would increase or reduce the value of
contingent consideration payable required by GBP0.9m.
Fair value of intangible assets acquired on acquisitions in
2020
An IFRS 3 measurement period adjustment to finalise the fair
values attributed to assets and liabilities acquired from the
Dunstan Thomas and Talbot and Muir acquisitions that took place in
2020 has been made during the current period. The adjustments made
to restate the 31 December 2020 comparatives, as further detailed
in note 2.4, have not been subject to audit. As part of this
adjustment, revised estimates have been made for the useful
remaining economic life of each intangible asset acquired as
follows:
Estimates as reported in the audited financial statements for
the year ended 31 December 2020:
Intangible asset category Useful Economic Life
Goodwill Indefinite - reviewed at least annually
for impairment
Brand N/A - not identified as an independent
asset
Client Portfolios 20 years
Internally Generated Between 5 to 7.5 years
Software
Revised estimates now reported in the unaudited financial
statements for the period ended 30 June 2021:
Intangible asset category Useful Economic Life
Goodwill Indefinite - reviewed at least annually
for impairment
Brand 10 years
Client Portfolios Between 5.4 years to 20 years
Internally Generated 10 years
Software
In deriving these revised estimates, initial internal
assessments were generated based upon historical data and
experience. These assessments were then benchmarked against market
data to ensure reasonableness.
Fair values derived are based on financial forecasts and balance
sheet data available at the time of acquisition, and use generally
accepted valuation methodologies in arriving at fair value
estimates.
Brand has been valued using a relief from royalty approach with
a royalty rate of 2%. Client portfolios have been valued using
variations of discounted cash flow analysis. Internally generated
software has been valued using a relief from royalty approach with
a royalty rate of 15%.
In assessing an appropriate base for the discount rate to be
used against estimated future cash flows, both the internal rate of
return and the weighted average cost of capital were considered. A
discount factor of 13% has been applied to all estimated future
cash flows based upon this analysis.
3 Operating segment reporting
The Group acquired FinTech provider Dunstan Thomas on 3 August
2020. Prior to this acquisition, all results were viewed as one
operating segment for the purposes of management decisions as all
operations were conducted within the UK and all material operations
were of the same nature and shared the same economic
characteristics including a similar customer base and nature of
product and services (i.e. pensions administration).
Following the acquisition of Dunstan Thomas during the year
ended 31 December 2020, the Group is now considered to have two
operating segments. Dunstan Thomas provides IT software
development, licences and consultancy services and, collectively,
these services are described in the Group's financial statements as
FinTech.
The following tables present revenue and profit information
regarding the Group's operating segments for the six month periods
ended 30 June 2021 and 30 June 2020, and the year ended 31 December
2020.
Unaudited Pension Administration FinTech Consolidation Consolidated
Period ended 30 June GBP'000 GBP'000 adjustments GBP'000
2021 GBP'000
Revenue
External customers 26,504 5,214 - 31,718
Internal customers - 573 (573) -
----------------------- ---------- -------------- --------------
26,504 5,787 (573) 31,718
----------------------- ---------- -------------- --------------
Administrative expenses
External customers 20,700 4,259 - 24,959
Internal customers 367 206 (573) -
----------------------- ---------- -------------- --------------
21,067 4,465 (573) 24,959
----------------------- ---------- -------------- --------------
Adjusted operating
profit 5,437 1,322 - 6,759
Adjusted operating
profit margin 20.5% 22.8% 21.3%
Unaudited Pension Administration Consolidated
Period ended 30 June GBP'000 GBP'000
2020
Revenue
External customers 24,529 24,529
24,529 24,529
----------------------- --------------
Administrative expenses
External customers 18,061 18,061
18,061 18,061
----------------------- --------------
Adjusted operating profit 6,468 6,468
Adjusted operating profit
margin 26.4% 26.4%
Audited Pension Administration FinTech Consolidation Consolidated
Year ended 31 December GBP'000 GBP'000 adjustments GBP'000
2020 GBP'000
Revenue
External customers 49,078 4,793 - 53,871
Internal customers - 485 (485) -
----------------------- ---------- -------------- --------------
49,078 5,278 (485) 53,871
----------------------- ---------- -------------- --------------
Administrative expenses
External customers 36,830 3,055 - 39,885
Internal customers - 485 (485) -
----------------------- ---------- -------------- --------------
36,830 3,540 (485) 39,885
----------------------- ---------- -------------- --------------
Adjusted operating
profit 12,248 1,738 - 13,986
Adjusted operating
profit margin 25.0% 32.9% 26.0%
Corporate costs
The Group's operating segments are managed together as one
business. Accordingly, certain corporate costs such as finance
income and expenses, non-recurring costs, gains and losses on the
disposal of assets, taxes, intangible assets and certain other
assets and liabilities are not allocated to individual segments as
they are managed on a group basis. Segment adjusted operating
profit or loss reflects the measure of segment performance reviewed
by the Board of Directors (the Chief Operating Decision Maker).
The following table reconciles the total segments adjusted
operating profit to statutory profit before tax:
Unaudited Unaudited As restated*
Period ended Period ended Audited
30 June 2021 30 June 2020 Year ended
GBP'000 GBP'000 31 December
2020
GBP'000
Total segments adjusted operating
profit 6,759 6,468 13,986
Amortisation and impairments (1,418) (941) (2,088)
Non-recurring administrative
expenses 168 (1,381) (3,313)
Finance income 9 53 83
Finance costs (1,032) (240) (1,039)
Profit before tax 4,486 3,959 7,629
=============== =============== =============
*The audited results for year ended 31 December 2020 have been
restated to account for measurement period adjustments arising
under IFRS 3 Business Combinations relating to the acquisitions of
the Dunstan Thomas Group and the Talbot and Muir Group that took
place in H2 2020. The adjustments made to restate the 31 December
2020 comparatives, as further detailed in note 2.4, have not been
subject to audit.
The following tables present a split of assets and liabilities
of the Group's operating segments as at 30 June 2021 and 31
December 2020. As at 30 June 2020 the Group had only one operating
segment, being Pension Administration, and consequently comparative
information is as disclosed in the Consolidated Statement of
Financial Position.
Unaudited Pension Administration
As at 30 GBP'000 FinTech Corporate Policyholder Consolidated
June 2021 GBP'000 GBP'000 GBP'000 GBP'000
Total assets 69,670 9,429 69,008 3,734,467 3,882,574
Total liabilities 32,711 3,537 31,667 3,734,467 3,802,382
As restated* Pension Administration
Audited GBP'000
As at 31 FinTech Corporate Policyholder Consolidated
December 2020 GBP'000 GBP'000 GBP'000 GBP'000
Total assets 64,420 8,079 73,511 3,691,456 3,837,466
Total liabilities 27,799 3,798 34,130 3,691,456 3,757,183
*The audited results for year ended 31 December 2020 have been
restated to account for measurement period adjustments arising
under IFRS 3 Business Combinations relating to the acquisitions of
the Dunstan Thomas Group and the Talbot and Muir Group that took
place in H2 2020. The adjustments made to restate the 31 December
2020 comparatives, as further detailed in note 2.4, have not been
subject to audit.
Corporate assets and liabilities are not allocated to individual
operating segments as they are managed on a group basis.
Policyholder assets and liabilities are not allocated to individual
operating segments as all investment returns associated with these
are due back to policyholders under non-participating investment
contracts, alongside non-participating investment contract expenses
and changes in provisions for non-participating investment contract
liabilities, such that the impact on shareholder assets and
liabilities, and profit or loss, is nil.
4 Non-recurring costs
Non-recurring costs comprise the following items:
Unaudited Unaudited
6 month period 6 month Audited
ended period ended year ended
30-Jun-21 30-Jun-20 31-Dec-20
GBP'000 GBP'000 GBP'000
Dunstan Thomas acquisition costs 15 195 769
Talbot and Muir acquisition costs 62 220 561
Contingent consideration on acquisitions (571) - -
Other acquisition related costs (33) 152 151
Redundancy & restructuring costs 185 814 1,091
In-specie contributions 51 - 402
Centralisation of pension administration 123 - -
systems
Treasury solution implementation - - 286
Data cleansing provision - - 53
(168) 1,381 3,313
================ ============== ============
Acquisition costs - Dunstan Thomas and Talbot and Muir
Two acquisitions were completed during the year ended 31
December 2020: FinTech provider Dunstan Thomas on 3 August 2020,
and fellow SIPP provider Talbot and Muir on 30 October 2020. The
Group has incurred legal and professional fees in connection with
these transactions and, in accordance with IFRS 3 Business
Combinations, these have been expensed and treated as non-recurring
costs. The Group expects that further costs may be recognised for
these acquisitions over the next three financial years in relation
to fair value changes to the amount of contingent consideration
payable.
Contingent consideration on acquisitions
As at 30 June 2021, the Group updated its estimate of the amount
of contingent consideration payable on the acquisitions of Dunstan
Thomas and Talbot and Muir and this resulted in a reduction in the
liability held on the consolidated statement of financial
position.
Other acquisition related costs
During the year, the Group recovered some cost in relation to
the acquisition of European Pension Management Ltd.
Redundancy & restructuring costs
During the reported periods above, the Group progressed its
strategy to deliver its Target Operating Model and centralise
commercial property administration within one office location.
Redundancy costs associated with this decision as well as costs
associated with duplicated staff efforts while work is transferred
between offices have been included within non-recurring costs.
In-specie contributions
As previously reported, the Group has been in correspondence
with HMRC regarding processes and documentation in respect of
in-specie contributions. HMRC has alleged that incorrect procedures
were followed and is seeking to reclaim tax reliefs granted and
interest thereon. This is an industry wide issue affecting other
SIPP operators and has been challenged by the sector as a whole.
Following a favourable ruling for HMRC in a case affecting another
SIPP operator, and having taken further legal advice, the Directors
now consider it more likely than not that some cost associated with
this issue will be incurred by the Group and this has been provided
for.
Centralisation of pension administration systems
During the period ended 30 June 2021, the Group progressed its
IT strategy to consolidate and centralise pension administration
systems used. The investment is intended to lead to licence cost
savings and allow for further progression of the Group's Target
Operating Model in future years. Costs associated with this
investment that did not meet the criteria for capitalisation have
been treated as non-recurring cost.
Treasury solution implementation
During the year ended 31 December 2020, the Group invested in a
new strategic treasury solution with a global provider of back
office operational cash management software. The investment is
designed to innovate and improve the Group's treasury management
function through provision of a system that provides a multibank
facility. Costs associated with this investment that did not meet
the criteria for capitalisation have been treated as non-recurring
cost.
Data cleansing provision
As part of the consolidation and integration exercise undertaken
during the year ended 31 December 2018 management initiated a
review of data records relating to commercial properties held
within SIPPs administered by the Group. A small amount of further
cost, over and above amounts previously provided, associated with
this process arose during the year ended 31 December 2020.
5 Earnings per ordinary share
Basic earnings per share amounts are calculated by dividing net
profit for the period attributable to ordinary equity holders of
the parent by the weighted average number of ordinary shares
outstanding during the period.
Diluted earnings per share amounts are calculated by dividing
the net profit attributable to ordinary equity holders of the
parent by the weighted average number of ordinary shares
outstanding during the period plus the weighted average number of
ordinary shares that would be issued on the conversion of all the
dilutive potential ordinary shares into ordinary shares.
Changes in income or expense that would result from the
conversion of the dilutive potential ordinary shares are deemed to
be trivial, and therefore no separate diluted net profit is
presented. The following reflects the income and share data used in
the basic and diluted earnings per share computations:
Unaudited Unaudited As restated**
6 month 6 month Audited
period ended period ended year ended
30-Jun-21 30-Jun-20 31-Dec-20
GBP'000 GBP'000 GBP'000
Net profit available to equity holders
of the Group 3,669 2,904 5,897
============== ============== ==============
Net profit before tax, non-recurring
costs (note 3) and amortisation
(note 5) available to equity holders
of the Group 6,316 6,281 13,372
Number Number Number
Weighted average number of ordinary
shares:
Issued ordinary shares at start
of period 66,414,312 54,142,346 54,142,346
Effect of shares issued during the
year 197,818 - 5,859,094
Effect of shares held by Employee
Benefit Trust (155,401) (211,890) (296,835)
Basic weighted average number of
shares 66,456,729 53,930,456 59,704,605
Effect of dilutive options 720,135 1,187,876 886,707
Diluted weighted average number
of shares 67,176,864 55,118,332 60,591,312
============== ============== ==============
Pence Pence Pence
Earnings per share:
Basic 5.5 5.4 9.9
Diluted 5.5 5.3 9.7
Earnings per share on profit before
non-recurring costs and amortisation,
less an effective tax rate***:
Basic 7.7 9.4* 18.1
Diluted 7.6 9.2* 17.9
*As detailed in note 2.4, adjusted earnings per share on profit
before non-recurring costs and amortisation, less an effective tax
rate, for the unaudited six month period ended 30 June 2020 have
been restated due to identification of an error.
**The audited results for year ended 31 December 2020 have been
restated to account for measurement period adjustments arising
under IFRS 3 Business Combinations relating to the acquisitions of
the Dunstan Thomas Group and the Talbot and Muir Group that took
place in H2 2020. The adjustments made to restate the 31 December
2020 comparatives, as further detailed in note 2.4, have not been
subject to audit.
***The effective tax rate used is the current tax rate
applicable to the accounting year. The current tax rate applicable
for the year ending 31 December 2021 is 19.00% (2020: 19.00%).
6 Intangible assets
Internally
Client Computer Generated
Goodwill Brand portfolios software Software Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Cost
At 1 January
2020 28,903 - 18,866 2,177 - 49,946
Additions - - - 264 - 264
--------- -----------
At 30 June
2020 28,903 - 18,866 2,441 - 50,210
Arising on
acquisitions* 26,829 1,595 14,939 - 5,390 48,753
Additions - - - 342 380 722
--------- -----------
At 31 December
2020 55,732 1,595 33,805 2,783 5,770 99,685
Additions - - - 309 533 842
At 30 June
2021 55,732 1,595 33,805 3,092 6,303 100,527
----------- --------- ------------- ---------- ----------- ----------
Amortisation
and impairments
At 1 January
2020 - - 5,320 1,199 - 6,519
Charge for
the period - - 473 124 - 597
Impairment - - 344 - - 344
--------- -----------
At 30 June
2020 - - 6,137 1,323 - 7,460
Charge for
the period* - 66 717 124 240 1,147
--------- -----------
At 31 December
2020 - 66 6,854 1,447 240 8,607
Charge for
the period - 80 938 130 297 1,445
At 30 June
2021 - 146 7,792 1,577 537 10,052
----------- --------- ------------- ---------- ----------- ----------
Net book value
At 31 December
2019 28,903 - 13,546 978 - 43,427
=========== ========= ============= ========== =========== ==========
At 30 June
2020 28,903 - 12,729 1,118 - 42,750
=========== ========= ============= ========== =========== ==========
At 31 December
2020* 55,732 1,529 26,951 1,336 5,530 91,078
=========== ========= ============= ========== =========== ==========
At 30 June
2021 55,732 1,449 26,013 1,515 5,766 90,475
=========== ========= ============= ========== =========== ==========
*As restated to account for measurement period adjustments
arising under IFRS 3 Business Combinations relating to the
acquisitions of the Dunstan Thomas Group and the Talbot and Muir
Group that took place in H2 2020. The adjustments made to restate
the 31 December 2020 comparatives, as further detailed in note 2.4,
have not been subject to audit.
7 Dividends paid
Unaudited Unaudited
6 month period 6 month period Audited
ended ended year ended
30-Jun-21 30-Jun-20 31-Dec-20
GBP'000 GBP'000 GBP'000
Ordinary dividends paid 4,338 3,507 5,149
4,338 3,507 5,149
================ ================ ============
A final dividend of 6.5p per ordinary share in respect of the
year ended 31 December 2019 was paid on 8 June 2020.
An interim dividend of 2.5p per ordinary share in respect of the
year ended 31 December 2020 was paid on 13 November 2020.
A final dividend of 6.5p per ordinary share in respect of the
year ended 31 December 2020 was paid on 4 June 2021.
8 Income tax
Tax is charged at 19% for the six months ended 30 June 2021 (30
June 2020: 19%) representing the best estimate of the average
annual effective tax rate expected to apply for the full year,
applied to the pre-tax income of the six month period.
Current tax for current and prior periods is classified as a
current liability to the extent that it is unpaid. Any amounts paid
in excess of amounts owed are classified as a current asset.
9 Contingent liabilities
Data cleansing
During the year ended 31 December 2018 management initiated a
review of data records related to properties held within SIPPs
administered by the Group.
This review required a case by case assessment of each of the
properties within the population in order to assess whether any
remedial action was required by the Group in respect of that
property or the associated SIPP.
The Directors' best estimate of this contingent liability is
GBP1.3m (30 June 2020: GBP1.8m). The decrease in estimate has
arisen following satisfactory resolution of a number of cases and
an overall reduction in the value of remaining cases and
uncertainty remaining.
There remain inherent uncertainties in the estimate due to the
potential for variations in the assumed action required to rectify
individual positions. This estimate continues to be reviewed
regularly, and any changes or refinements will be reported as
appropriate. The Directors currently expect that, with COVID-19
related working limitations and also additional forbearance having
been permitted in connection with the COVID-19 pandemic, any
potential material follow up actions will be completed during
2022.
10 Illustrative condensed consolidated statement of financial
position as at 30 June 2021 split between insurance policyholders
and the Group's shareholders
30-Jun-21 30-Jun-21 30-Jun-21 30-Jun-20
GBP'000 GBP'000 GBP'000 GBP'000
ASSETS Group Total Policyholder Shareholder Shareholder
Non-current assets
Intangible assets 90,475 - 90,475 42,750
Investment property 1,214,551 1,214,551 - 42
Property, plant and
equipment 9,395 - 9,395 5,742
Investments 2,137,522 2,137,522 - -
Deferred tax asset - - - 435
------------ ------------- ------------ ------------
3,451,943 3,352,073 99,870 48,969
------------ ------------- ------------ ------------
Current assets
Trade and other receivables 28,863 13,324 15,539 13,786
Cash and cash equivalents 401,110 368,947 32,163 24,868
Current tax asset 658 123 535 432
------------ ------------- ------------ ------------
430,631 382,394 48,237 39,086
------------ ------------- ------------ ------------
Total assets 3,882,574 3,734,467 148,107 88,055
------------ ------------- ------------ ------------
LIABILITIES
Current liabilities
Trade and other payables 20,915 12,225 8,690 6,678
Deferred income 30,533 14,183 16,350 12,569
Borrowings 42,079 38,016 4,063 1,456
Lease Liabilities 837 - 837 909
Provisions 453 - 453 408
Contingent consideration 2,467 - 2,467 -
97,284 64,424 32,860 22,020
------------ ------------- ------------ ------------
Non-current liabilities
Borrowings 48,202 30,461 17,741 8,300
Lease Liabilities 7,164 - 7,164 3,377
Provisions 7 - 7 -
Contingent consideration 6,454 - 6,454 -
Non-participating investment
contract liabilities 3,639,582 3,639,582 - -
Deferred tax liability 3,689 - 3,689 -
------------ ------------- ------------ ------------
3,705,098 3,670,043 35,055 11,677
------------ ------------- ------------ ------------
Total liabilities 3,802,382 3,734,467 67,915 33,697
------------ ------------- ------------ ------------
Net assets 80,192 - 80,192 54,358
------------ ------------- ------------ ------------
Equity attributable to owners
of the parent
Issued capital 332 - 332 271
Share premium 58,087 - 58,087 33,659
Equity share based payments 2,839 - 2,839 2,723
Treasury shares (440) - (440) (1,124)
Retained earnings 19,366 - 19,366 18,815
------------ ------------- ------------ ------------
80,184 - 80,184 54,344
Non-controlling interest 8 - 8 14
Total equity 80,192 - 80,192 54,358
------------ ------------- ------------ ------------
11 Illustrative condensed consolidated statement of cash flows
for the six month period ended 30 June 2021 split between insurance
policyholders and the Group's shareholders
30-Jun-21 30-Jun-21 30-Jun-21 30-Jun-20
GBP'000 GBP'000 GBP'000 GBP'000
Group Total Policyholder Shareholder Shareholder
Cash flows from operating
activities
Profit before tax 4,486 - 4,486 3,959
Adjustments for:
Depreciation 915 - 915 694
Amortisation and impairments 1,445 - 1,445 941
Interest expense 452 - 452 240
Share based payment expense 92 - 92 410
Fair value gains on financial
investments (143,455) (143,455) - -
Additions of financial
investments (336,457) (336,457) - -
Disposals of financial
investments 414,708 414,708 - -
Fair value gains on investment
properties (11,278) (11,278) - -
Increase in liability for
investment contracts 54,278 54,278 - -
Changes in working capital:
Increase in trade and other
receivables (1,797) (663) (1,134) (4,351)
Increase in trade and other
payables 5,323 3,085 2,238 599
Taxes paid (1,324) - (1,324) (2,063)
Net cash flows from operating
activities (12,612) (19,782) 7,170 429
------------- -------------- ------------- -------------
Cash flows from investing
activities
Purchase of intangible
assets (842) - (842) (264)
Purchase of property, plant
& equipment (169) - (169) (241)
Purchase of investment property (52,176) (52,176) - -
Purchase and sale of shares
in the Group by the EBT 301 - 301 (590)
Receipts from sale of investment
property 57,506 57,506 - -
Net cash flows from acquisitions 9 - 9 (152)
Net cash flows from investing
activities 4,629 5,330 (701) (1,247)
------------- -------------- ------------- -------------
Cash flows from financing
activities
Equity dividends paid (4,338) - (4,338) (3,507)
Net proceeds from issue
of ordinary shares 290 - 290 -
Net decrease in borrowings (16,670) (14,670) (2,000) (1,579)
Principal elements of
lease payments (490) - (490) (422)
Interest paid (277) - (277) (34)
Net cash flows from financing
activities (21,485) (14,670) (6,815) (5,542)
------------- -------------- ------------- -------------
Net increase/(decrease)
in cash and cash equivalents (29,468) (29,122) (346) (6,360)
------------- -------------- ------------- -------------
Cash and cash equivalents
at the beginning of the
period 430,578 398,069 32,509 31,228
============= ============== ============= =============
Cash and cash equivalents
at the end of the period 401,110 368,947 32,163 24,868
============= ============== ============= =============
12 Illustrative table of SIPP number movements over the six
month period ended 30 June 2021
Full Mid SIPPs eSIPPs Total own Third Party Total
SIPPs SIPPs Administered
As at 30 June 2021 21,629 33,991 19,220 74,840 6,157 80,997
-------- ---------- -------- ---------- -------------- --------
As at 31 December
2020 23,013 31,985 20,742 75,740 6,484 82,224
-------- ---------- -------- ---------- -------------- --------
Annualised gross
organic growth rate* 3.6% 12.1% 1.3% 6.6% 0.5% 6.1%
-------- ---------- -------- ---------- -------------- --------
SIPPs added organically 411 1,941 133 2,485 17 2,502
-------- ---------- -------- ---------- -------------- --------
Conversions and reclassifications (1,046) 1,046 - - - -
-------- ---------- -------- ---------- -------------- --------
SIPPs lost through
attrition (749) (980) (1,656) (3,385) (344) (3,729)
-------- ---------- -------- ---------- -------------- --------
Annualised attrition
rate * 6.5% 6.1% 16.0% 8.9% 10.6% 9.1%
-------- ---------- -------- ---------- -------------- --------
(*Growth and attrition percentage rates are annualised and are
based on the 6 months' worth of SIPPs added organically or lost
through attrition to 30 June 2021)
Company information
Directors
Will Self - Chief Executive Officer
Dan Cowland - Chief Financial Officer
Jane Ridgley - Chief Operating Officer
Chris Macdonald - Non-Executive Chairman
Bill Rattray - Non-Executive Director
Jules Hydleman - Non-Executive Director
Jill Lucas - Non-Executive Director
Registered Office
3 Temple Quay
Temple Back East
Bristol
BS1 6DZ
Registered Number
07934492
Nominated Adviser and Broker Joint Broker
Peel Hunt LLP Singer Capital Markets
Moor House 1 Bartholomew Lane
120 London Wall London
London EC2N 2AX
EC2Y 5ET
Independent Auditors
PricewaterhouseCoopers LLP
7 More London Riverside
London
SE1 2RT
Registrars
Computershare PLC
The Pavilions
Bridgewater Road
Bristol
BS13 8AE
Definitions
Adjusted diluted EPS
This is calculated by taking adjusted profit before tax for the
financial period, deducting an effective tax rate of 19% (2020:
19%), and dividing the total by the diluted weighted average number
of shares in issue.
Adjusted operating margin
This is calculated by taking operating profit for the financial
period and adding back amortisation and non-recurring costs, then
dividing this total by revenue for the financial period.
Adjusted profit before tax
This is calculated by taking profit before tax for the financial
period and adding back amortisation and non-recurring costs.
Annualised gross organic growth rate
A pro rata calculation of gross organic growth rate. The calculation
is derived by taking actual new SIPPs gained from organic growth
for the financial period, dividing by the total number of months
in the financial period, and multiplying this by 12 to obtain
a hypothetical annualised quantity of new SIPPs gained. The annualised
quantity is then divided by the brought forward quantity of SIPPs
held to derive the annualised gross organic growth rate.
Annualised attrition rate
A pro rata calculation of attrition rate. The calculation is derived
by taking actual SIPPs lost during the financial period, dividing
by the total number of months in the financial period, and multiplying
this by 12 to obtain a hypothetical annualised quantity of SIPPs
lost. The annualised quantity is then divided by the brought forward
quantity of SIPPs held to derive the annualised attrition rate.
AUA
Assets Under Administration
Brexit
The exit of the United Kingdom from the European Union
Net shareholder cash (after debt)
This is calculated by taking shareholder only amounts as split
within the illustrative condensed consolidated statement of financial
position in note 10 for cash and cash equivalents, and deducting
borrowings.
1 Profit before tax, amortisation and non-recurring costs
2 The ratio of operating profit before amortisation and
non-recurring costs to revenue
3 Annualised rates of attrition
4 As further detailed in note 2.4, results for the year ended 31
December 2020 have been restated to account for measurement period
adjustments arising under IFRS 3 Business Combinations. The
adjustments have not been subject to audit.
5 As further detailed in note 2.4, adjusted diluted EPS for the
six month period ended 30 June 2020 has been restated due to
identification of an error.
6 In addition to statutory IFRS performance measures, the Group
has presented a number of non-statutory alternative performance
measures ("APMs"). The Board believes that the APMs used give a
more representative view of the underlying performance of the Group
and enhance comparability of information between reporting periods.
APMs are identified in the definitions at the end of this
announcement.
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