TIDMIFP
RNS Number : 3610I
IFG Group PLC
21 March 2018
IFG Group plc
Preliminary statement of results for the year ended 31 December
2017
Strategic Highlights
Group
-- Strong underlying performance in both James Hay and Saunderson House in 2017
-- Growth in fee revenue, clients and assets under
administration and advice underpins future embedded value
-- Total assets under administration and advice at year end up
15% to GBP30.6 billion (2016: GBP26.7 billion)
-- Focus on the resolution of legacy matters has resulted in
increased exceptional costs of GBP8.8 million (2016: GBP1.7
million), which has offset the underlying performance of the
business in 2017
-- Considering disposal of Saunderson House if accelerated Shareholder value can be achieved
James Hay
-- Net inflows of GBP3.4 billion (2016: GBP2.6 billion), with
assets under administration up 15% to GBP25.5 billion (2016:
GBP22.1 billion)
-- Flagship MiPlan product now represents 49% of the James Hay assets under administration
-- More than 6,100 new clients added
-- Pricing changes undertaken in H2 2017 provide a fairer
charging structure and underpin a more predictable profit
trajectory, reducing historical over-reliance on interest
income
Saunderson House
-- Assets under advice grew by 11% to GBP5.1 billion at year end (2016: GBP4.6 billion)
-- Added 247 new clients (2016: 215), growing total clients
served by 8.4% to 2,121 (2016: 1,956)
-- Discretionary management product is growing ahead of
expectations and is attracting a broader client range, providing
scalability to underpin our growth trajectory going forward
Financial Highlights
-- Revenue from James Hay and Saunderson House combined remained
constant, despite GBP5.9 million reduction in interest income,
GBP78.4 million (2016: GBP78.5 million)
-- Adjusted operating profit increased 5% to GBP10.5 million
(2016: GBP10.0 million) due to repricing in James Hay undertaken in
H2 2017 and a focus on cost management
-- Profit before tax from operations decreased to a loss of
(GBP0.4 million) (2016: profit GBP6.4 million)
-- Exceptional costs of GBP8.8 million increased materially due
to a number of legacy matters relating to administration and
documentation of advice, these costs being a combination of
remediation and legal costs and provisions for client redress,
together with previously announced reorganisation costs (2016:
GBP1.7 million)
-- Adjusted EPS increased by 10% to 8.34 pence (2016: 7.57
pence); basic loss per share of 0.32 pence (2016: earnings 4.98
pence)
-- Prudent decision of Board not to pay final dividend; remain
committed to a progressive dividend policy once legacy issues
resolved
-- Balance sheet remains strong with net cash of GBP24.6 million
(2016: GBP28.2 million) and no debt
-- The Group has regulatory capital resources of GBP49.5 million
(2016: GBP47.6 million compared to its Pillar 1 requirement of
GBP6.6 million (2016: GBP6.8 million)
Commenting on the results John Cotter, Chief Executive of IFG
Group plc, said:
"We have made substantive progress in improving our businesses,
increasing assets under administration and advice, growing the
client base, expanding our product offering and enhancing our
capability. The changes to our pricing models and the improving
interest rate environment, mean we are well positioned to deliver
sustainable growth and improved financial performance. We are
committed to bringing closure to legacy issues, which may continue
to impact financial performance, in order to return to paying a
progressive dividend and delivering increasing value to our
shareholders"
Contacts:
John Cotter Mark Dearsley
Group Chief Executive Interim Group Chief Financial Officer
IFG Group plc IFG Group plc
Tel: +44 20 3887 Tel: +44 20 3887 6181
6181
Presentation of results and dial-in
There will be a presentation of these results to analysts and
investors/fund managers at 9.30am today at Macquarie offices,
Ropemaker Place, 28 Ropemaker Street, London EC2Y 9HD. The slides
for this presentation can be downloaded from IFG's website,
www.ifggroup.com.
There will also be audio conference access to the presentation.
The access details for the presentation are:
Confirmation Code: 5951288
Location Phone Number
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United Kingdom +44 (0)330 336 9411
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Ireland +353 (0)1 246 5621
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France +33 (0)1 76 77 22 57
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Germany +49 (0)69 2222 2018
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Switzerland +41 (0)22 567 5750
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US +1 323 794 2093
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Extract from Chairman's Statement
CREATING SHAREHOLDER VALUE
Strategy and Performance
Since 2014 the Group has undergone a significant transformation,
disposing of several businesses and focusing our investment to
support the growth and development of James Hay and Saunderson
House. Strong underlying performance pre-exceptional costs in both
these businesses in 2017 reflects the benefits of the decisions we
have taken, and has positioned them for growth as we go into 2018.
We are also resolving a number of legacy issues, which has impacted
financial performance but reflects a desire to bring closure to
these issues. These matters are discussed in more detail in the
Chief Executive's report. In light of these legacy issues, the
Board reluctantly took a decision not to pay a final dividend in
respect of 2017, on the grounds of prudently retaining capital and
liquidity in the Group, but we remain committed to a progressive
dividend policy and to ensuring we reward shareholders in line with
the improvements to the underlying performance of our
businesses.
The Board has continued to evaluate how best to deliver
shareholder value and, having undertaken a strategic review, which
commenced in early 2017, is considering whether a disposal of
Saunderson House may accelerate value creation for shareholders, if
the business proves more valuable to prospective owners who can
leverage its capability more quickly. The Board will only consider
a disposal if appropriate value for shareholders can be
achieved.
Assets under Administration and Advice have grown by 15% to
GBP30.6bn (2016 - GBP26.7bn), and we are privileged to serve over
61,000 clients (2016 - 58,000), having added more than 6,300 new
clients across both businesses. Revenue was in line with 2016, a
robust performance given the reduction in interest income from
client balances in James Hay from GBP12.6 million in 2016 to GBP6.7
million in 2017. Whilst we increased adjusted operating profit
before exceptional costs by 5%, we reported a statutory loss due to
the level of exceptional costs associated with remediation of
legacy issues as detailed in the Financial Review.
The regulatory landscape has continued to change, with
significant initiatives such as Markets in Financial Instruments
Directive ("MIFID II") and the General Data Protection Regime
("GDPR") driving higher standards of transparency and protection
for consumers. We support these and other initiatives to ensure
good client outcomes, and the investments we have made, and
continue to make, will ensure the Group is well positioned to serve
our clients.
Our clients are at the heart of our business and our ability to
deliver quality advice and administration to our clients, current
and prospective, will ensure strong client retention and new client
growth, in competitive markets. The success we have had in 2017 in
attracting more than 6,300 new clients, demonstrates the quality of
our product capability, the strength of our relationships with
clients and advisers, and the benefits of a commitment to our
clients, which will deliver a sustainable business and long-term
shareholder value. We enter 2018 with both businesses growing
strongly, in markets which will continue to provide growth
opportunities for high-quality businesses like ours.
The loss attributable to the Equity Shareholders of the Parent
Company was GBP0.3 million (2016: profit GBP5.3 million). The Group
delivered adjusted earnings per share of 8.34 pence (2016 - 7.57
pence) and a basic loss per share of 0.32 pence (2016 - earnings
4.98 pence).
RETURNS TO SHAREHOLDERS
An interim dividend of 1.60p per share was paid to Shareholders
on 27th November 2017. In 2016, we articulated our commitment to a
progressive dividend policy. However, given the Group's desire to
conclude on a range of legacy matters, with resultant uncertainty
over the quantum and timing of potentially material contingent
exposures, the Board has reluctantly taken a prudent decision that
no final dividend will be paid in respect of 2017 (2016: 3.35 pence
per share).
The Board remains committed to a progressive dividend policy,
with two businesses which are cash generative. We intend to return
to paying dividends at the earliest possible time, once there is
more clarity on these uncertain potential exposures.
BOARD COMPOSITION AND RENEWAL
Strong governance is important in ensuring the Group is managed
to deliver on its strategy and operate in compliance with
regulatory standards and expectations. During the year we completed
the restructuring of the subsidiaries' governance structures, to
ensure those individual businesses have the appropriate oversight
and decision-making capability, which in turn has allowed the Group
Board to focus on strategic matters.
The Group Board is unchanged in 2017. The Boards of both
subsidiaries now have Independent Non-Executive Directors, as well
as representatives from the Group and the Executive leadership
teams. We were pleased to welcome Amanda Davidson to the Board of
Saunderson House, and Geoffrey Clarkson to the Board of James Hay.
The Independent Non-Executive Directors bring a wealth of industry
experience, which ensures an effective contribution from those
Boards to the strategic direction and management of the
businesses.
people
Recruiting, retaining and developing talented people is critical
to our ability to build first-class client-centric businesses. We
have added a number of talented management to the Group in 2017 and
increased our focus on training and development of all staff. This
has contributed, and will continue to contribute, to the long-term
growth and capability of our businesses, in line with our strategic
goals.
My thanks go to the Executive leadership of the Group and its
subsidiaries, and to all our employees, for their continued
diligence and contribution, in what has been a challenging year for
the Group. Our success in growing both businesses, serving our
existing clients and attracting new clients, is due to their hard
work and commitment.
OUTLOOK
We enter 2018 with a clear strategy for two businesses that are
growing strongly, winning clients, improving their capability and
well positioned for improved underlying financial performance. We
have addressed the historic over-reliance on interest income in
James Hay through repricing and will also benefit from the recent
increases in interest rates. The growth in the discretionary
offering in Saunderson House offers further opportunities to
accelerate the growth in that business. We are also considering the
potential disposal of Saunderson House, if it will deliver
appropriate shareholder value, benchmarked against the future
potential of the business if held within the Group. The resolution
of legacy matters and the potential disposal of Saunderson House
may result in some incremental costs in 2018.
We expect both businesses to continue their growth trajectory in
markets that offer strong fundamentals. We are focused on resolving
legacy issues that have overshadowed the significant progress we
have made in improving both of our businesses, and we believe we
are well positioned for improved financial performance in 2018.
The Board is committed and confident in our ability to create
value for you, our shareholders.
John Gallagher
Chairman
20 March 2018
Extract from Group Chief Executive's statement
DELIVERING SUSTAINABLE GROWTH IN PERFORMANCE
2017 in review
2017 was a challenging year for the Group, with strong growth
and improving underlying financial performance in both businesses
overshadowed by the impact of materially lower interest income and
the resolution of a number of legacy issues. It was with reluctance
that I recommended to the Board the decision not to pay a final
dividend for 2017, but it was a prudent position to take to ensure
we retain a strong capital base and liquidity within the businesses
whilst we resolve these legacy matters. It is my desire to ensure
we are in a position to return to our progressive dividend policy
as soon as possible.
The legacy issues, some of which have come to light as we make
changes and improvements to our businesses, have resulted in
materially increased exceptional costs, but we believe that
identifying all legacy issues and bringing them to closure, will
better position our two businesses to focus on sustainable growth
and improving profitability going forward. These legacy issues
relate to administration and documentation of advice, which may
result in HMRC sanction charges, client remediation payments and
legal costs. The costs and provisions relating to these and other
exceptional expenditure relating to restructuring in James Hay,
have consumed the underlying contribution from the businesses in
2017. Resolving these legacy issues is the priority to allow the
businesses to move forward and focus on achieving their potential,
free of legacy risk. The Elysian issue is potentially material,
with a potential maximum exposure of GBP20 million. Based on advice
from the Group's legal advisers, the Directors are confident that
the outcome at Tribunal and/or any settlement with HMRC would be
substantially lower than the maximum potential sanction charge. The
Directors are confident that any financial exposure would be
fundable from the Group's cash resources. The potential exposure
remains uncertain and is expected to remain so whilst discussions
with HMRC and/or any Tribunal proceedings continue.
We have improved the quality and capability of both James Hay
and Saunderson House through targeted investment in people and
technology, and these improvements have translated into strong
growth in clients and assets. The low interest rate environment in
2017 necessitated structural changes to James Hay's pricing model
and business, but we are now well positioned in a growing pensions
and retirement market for improved financial performance in 2018.
In Saunderson House, the growth of the discretionary management
proposition has exceeded our expectations, and this will be an
increasingly important part of the growth of Saunderson House going
forward.
We have also announced that, following a strategic review early
in 2017, we are considering whether a sale of Saunderson House
would create greater shareholder value. We are in discussions with
interested parties, but will only proceed to a transaction if
appropriate value, reflecting the quality of this business, is
realised for Shareholders.
We have made substantial progress in 2017 in achieving our
strategic goals, which positions both businesses and the Group
strongly, as we look forward to 2018 and beyond.
CULTURE AND VALUES
Successful businesses have strong cultural values, which
motivate people, deliver good behaviours and result in a focus on
delivering better outcomes for clients. Our two businesses serve
clients who are often high net worth clients, and who seek a
differentiated level of advice and administration to help them
manage their wealth, through their working lives and beyond. In
2017, having reassessed in 2016 how we deliver on our commitment to
serving our clients well, we continued to invest in enhancements to
our business model to ensure we can exceed our clients'
expectations. This ongoing investment in people and in technology,
allied to a 'tone from the top' which reinforces the standards we
expect, has positioned both businesses with enhanced capability to
deliver growth and improved financial performance, whilst meeting
ever increasing client and regulatory expectations.
CLIENTS
In 2016, we established a new Group-wide conduct framework which
reinforced our desire to put the client at the heart of everything
we do: delivering better client experience, enhancing our ability
to add value to our clients and improving the attractiveness of our
businesses to discerning clients. In 2017, this framework has been
embedded in the businesses, leading to changes in the way we
deliver our services. We have seen the benefits of these changes in
increased numbers of new clients coming to both businesses, and
strong retention of existing clients.
MARKET AND ENVIRONMENT
The markets in which we operate, UK high net worth platform and
advisory services, are growing in line with economic recovery and
supported by long-term structural changes. With increasing life
expectancy and changes to the pensions market increasingly
requiring individuals to own and manage their retirement planning
in a more systematic manner, the longer-term growth trajectory for
our businesses remains strong. The increasing complexity of
retirement planning, growing freedoms and taxation changes in
pension and savings legislation and a low interest rate
environment, place a premium on the services we offer to our
clients. We expect the recent trend of asset flows from legacy
pension arrangements, including Defined Benefit Schemes, into Self
Invested Personal Pensions ("SIPPs") to continue. In 2017 a
significant component of James Hay's new business was as a result
of such movement, and we expect that this will continue,
notwithstanding increased regulatory focus, as members of defined
benefit schemes continue to transfer out into alternative pension
arrangements, and individuals take ownership of managing their own
pensions into retirement. Market surveys indicate that up to GBP50
billion of existing assets will move into SIPPs over the coming
three years. The need for good advice in this regard has never been
higher, and our focus on strategic relationships with the larger
IFAs, will position the businesses well in helping clients to take
control of their pension arrangements.
In 2016, we saw significant macro-political events, including
the Brexit vote, that increased volatility in global markets. In
2017 markets performed strongly with less volatility, though the
need for advice has remained strong. Ongoing market volatility,
which may be exacerbated in the UK by the finalisation of the
Brexit process, will mean the need for advice and the ability to
manage retirement assets efficiently will remain critical to our
clients.
The reduction, in late 2016, in Bank of England base rates had a
significant impact on revenues in James Hay, where a component of
revenues is a function of interest rates. This necessitated a
change to the pricing philosophy and a move away from an
over-reliance on interest income. These changes were implemented
successfully during 2017, following appropriate consultation with
clients and advisers, ensuring that our already transparent pricing
model remains competitive, appropriate to the expectations of our
clients and charges fairly for the services we provide. The
increase, in late 2017, in the Bank of England base rates will
support revenue growth in 2018.
COMMENTARY ON KPIs
We are pleased with the underlying performance of the Group in
2017 which is discussed in detail in the Financial Review. However,
the overall financial result has been materially impacted by
exceptional costs related to legacy matters and restructuring.
-- The Group reported a loss in 2017 as operating performance,
and consequently earnings per share, was materially impacted by
exceptional costs, see note 6. These costs, which are a combination
of remediation and legal costs within the business, provisions for
redress for clients and reorganisation costs, are necessary to
ensure we address all historic issues within the Group, so we can
move forward with a focus on the future.
-- Adjusted operating profit and adjusted EPS increased despite
lower interest revenues, due to repricing in James Hay, a focus on
cost control and lower levels of performance related
remuneration.
-- Assets under administration and advice increased from GBP26.7
billion to GBP30.6 billion helped by high retention rates, good
growth in our discretionary offering in Saunderson House, strong
inflows from new and existing clients in both businesses, and
positive market movements.
-- Client retention remains strong in both businesses and the
quality of new client activity continues to improve, with average
AUA of new clients in both businesses increasing.
-- The business consumed cash overall due to the lower than
anticipated profits and exceptional costs, however, free cashflows
increased marginally from GBP5.5 million to GBP5.7 million
reflecting the Group's ability to generate cash from the underlying
business operations. Contingent consideration of GBP4.0 million in
respect of 2014 disposals was received in Q1 2017. The business is
expected to return to strong cash generation in 2018, subject to
any impact from resolving legacy matters.
THE BUSINESSES
James Hay
James Hay is continuing its development from being a specialist
Self-Invested Personal Pension (SIPP) provider to becoming a
broader platform for retirement wealth management, offering
Individual Savings Account (ISA) and General Investment Account
(GIA) capability to its existing broad range of pension products.
We offer a tailored service, a broad range of investment options,
together with online capability in account opening, trading and
access to valuation and documentation.
The distribution strategy for James Hay focuses on building
strategic partnerships with larger IFAs, enhancing our
technological interfaces with them, so we serve both the adviser
and the end clients effectively and efficiently. This has
contributed to the increased number of new clients coming to James
Hay in 2017, with more than 52% of new clients being advised by our
Top 25 key relationships. The average level of client assets has
also increased materially from GBP394,000 to GBP436,000, thereby
improving the quality and consistency of new business flows. We
retain our direct to consumer offering, but our focus remains on
the intermediated advised business.
The investment programme in James Hay, in terms of the senior
leadership team, the training and development of all of our staff
and investment in technology, has delivered a much-improved
business capability, with a lower level of staffing in support
functions, increasing our ability to grow the business without
commensurate increases in the cost base. We believe these
investments will not only mitigate increases in the cost base going
forward, but will support accelerated growth at lower marginal
cost.
Whilst the revenue in 2017 was adversely affected by the changes
to Bank of England base rates in 2016, the changes we have made to
pricing have addressed this in the second half of 2017, leading to
an improved and more sustainable margin going forward. We expect
the underlying financial performance in 2018 to improve and also
benefit from the increase in base rates in late 2017. We believe
the business is well positioned for strong growth in clients and
assets given current market conditions in the pensions market.
Saunderson House
Saunderson House continues to perform in line with expectations,
growing assets under advice, revenues and profits in 2017, aided by
the success of its discretionary management offering which is
attracting a broader range of clients to the business. Saunderson
House's deep relationships with its circa 2,100 clients, its
continued excellence in investment performance and delivery of
tailored client service, differentiates the business from many of
its competitors.
We continue to invest in the capability of the business, as it
has grown from less than 100 people in 2013 to 180 people at the
end of 2017. We made further investments in technology to support
the investment proposition. This is designed to enhance the
analytics to manage the GBP5.1 billion under advice, and provide
scalability to the growing discretionary offering, which is growing
ahead of expectations. It is also enabling an enhanced and more
efficient delivery of service to our clients which is proving
beneficial to clients across the wealth spectrum.
We expect Saunderson House to continue to grow, in line with its
current trajectory, and we believe this will deliver an increase in
operating margins over time. The growth of the discretionary
offering will increasingly contribute to the development of the
business as we go forward. We continue to invest in training and
developing our staff to develop a sharper focus on how we engage
with prospective clients in light of the evolving proposition,
which will allow Saunderson House to penetrate existing and
adjacent markets more effectively and efficiently.
We are also considering the potential disposal of Saunderson
House, if it will deliver appropriate Shareholder value.
PEOPLE
The quality of our people, both in our operating businesses and
in Group functions, supports our success and our future growth
plans. Providing a culture and an environment that supports and
facilitates high performance is a key priority for executive
management.
Our approach to employee reward and development recognises our
staff's contribution to our business, aligns senior management
compensation and Shareholder interests and, importantly, ensures we
have the capability and capacity to meet current and future
expectations of our clients.
I would like to thank all colleagues throughout the Group for
their professionalism, their commitment to our clients and their
contribution to our success in 2017.
LOOKING FORWARD
Whilst 2017 has been a challenging year in terms of financial
performance and dealing with legacy issues, we enter 2018 with both
businesses having strengthened governance and control, and with
both positioned strongly to continue their growth trajectory whilst
better serving clients. Our markets remain highly competitive, the
landscape in the pension markets sees continued change and client
and regulatory expectations require businesses to continue to
evolve. Our clients demand best in class advice and administration,
and our success is founded upon delivering on those expectations.
We will continue to invest and to innovate, building our capability
and increasing efficiency, so we can effectively scale our
businesses and drive improved operating margins.
We see 2018 in a positive light. The decisions we have taken on
pricing combined with a more favourable interest rate environment
and the investments we have made, will deliver a stronger, more
profitable, more client-centric business with an improved growth
trajectory going forward. We will continue our disciplined focus on
cost control, but the resolution of legacy matters and the
potential disposal of Saunderson House may result in some
incremental costs in 2018. Whilst we expect meaningful organic
growth in 2018, subject to progress on resolving legacy issues, we
will be mindful of opportunities to accelerate that trajectory
through acquisition, principally in the platform business. A sale
of Saunderson House will be considered only if we believe it
delivers a value for shareholders which reflects the capability and
quality of this business.
John Cotter
Group Chief Executive
20 March 2018
Extract from financial review
STRONG FUNDAMENTALS AND GOOD GROWTH
REVIEW AND COMMENTARY On THE RESULTS
The Group's businesses both delivered strong underlying
performance in 2017, despite the challenges of a low interest rate
environment, which materially impacted H1 performance, but was
partly offset in H2 by the pricing changes we successfully
implemented. Our platform business, James Hay, continued to grow
assets under administration organically, adding more than 6,100 new
clients whilst delivering further improvements to our operating
model. In Saunderson House, the new Discretionary Management
Service accounted for 60% of our new clients, exceeding our
expectations both in terms of new clients and average assets per
client. The strong underlying performance, which positions both
businesses strongly going into 2018, was, however, adversely
affected by significant exceptional costs relating to ongoing
legacy matters, which impacted statutory results and contributed to
a decision to not pay a final dividend in respect of 2017.
Due to the statutory loss in 2017, and despite a focus on
working capital management, the business consumed cash in 2017. The
Board remains committed to the progressive dividend policy
implemented in 2015, and is focused on resolving all legacy issues
so that we can return to paying dividends as quickly as possible.
The Group remains well capitalised, with a strong and liquid
balance sheet.
This financial review provides an overview of the Group's
financial performance for the year to 31 December 2017, and of the
Group's financial position at that date. The two businesses are
separately disclosed as segments, with additional disclosure of the
central Group costs. The results include exceptional costs relating
to the ongoing legacy matters, as well as residual costs associated
with the business disposals made in 2014, and the costs associated
with the restructuring of the Group functions, principally the
closure of the Dublin and Swavesey offices and the previously
announced restructuring in James Hay.
-- Overall, revenue remained in line with 2016, with Saunderson
House increasing revenue by 4% to GBP32.2 million and James Hay
being slightly below 2016 due to the impact of lower interest
income only partly offset by increased fee revenue.
-- The results for 2017 show strong growth in the key metrics of
clients and assets under administration and advice.
-- The loss after tax of GBP0.3 million is materially lower than
2016 profits of GBP5.3 million, due to lower than expected revenues
which were impacted by the Bank of England base rate reduction
together with the material increase in exceptional costs.
-- Adjusted operating profits increased by 5% to GBP10.5
million, reflecting a lower contribution from James Hay, with
Saunderson House increasing its profits on the back of continued
client and asset growth and increased demand for its Discretionary
Management Services.
-- The statement of financial position is strong and liquid,
with capital in excess of regulatory requirements, which is
important in light of the material uncertainty over the contingent
exposure in relation to certain legacy issues.
-- Lower operating profits impacted cash flow, with a net
reduction in cash of GBP3.6 million from GBP28.2 million in 2016 to
GBP24.6 million.
Revenue
2017 2016
GBP'000 GBP'000
Platform 46,169 47,478
Independent wealth management 32,225 30,987
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Total revenue 78,394 78,465
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Revenue was in line with the prior year at GBP78.4 million (2016
- GBP78.5 million), with James Hay decreasing by 3% from GBP47.5
million to GBP46.2 million, and Saunderson House increasing by 4%
from GBP31.0 million to GBP32.2 million.
In James Hay, the full year effect of the lower interest rate
environment contributed to decreased revenue, though this impact
was partly offset by pricing changes in H2 2017. Interest income
fell by GBP5.9 million, from GBP12.6 million to GBP6.7 million,
whereas fee revenue increased to GBP39.5 million from GBP34.9
million. Following changes to pricing, fee revenue in H2 increased
from GBP19.1 million to GBP20.4 million, which together with the
increase in interest rates in late 2017, positions the business
well for material revenue growth in 2018.
Saunderson House benefitted from the full year effect of the
growth in client numbers in prior years, though the increased
demand for Discretionary Management Services has resulted in lower
average fees per client from clients who are often in an earlier
stage of wealth accumulation, compared to advisory clients. Markets
were less volatile in 2017, compared to 2016 where the Brexit
referendum was a factor. As a result, demand from existing clients
lessened somewhat, which facilitated an increased focus on new
client activity, which positions Saunderson House well in 2018.
Operating profit
The Group incurred an operating loss, after amortisation of
intangibles and exceptional costs, of GBP0.4 million (2016 Profit -
GBP6.2 million). Amortisation of intangibles, principally related
to the James Hay acquisition in 2010, remained in line with 2016 at
GBP2.1 million. However, exceptional costs increased materially to
GBP8.8 million (2016 - GBP1.7 million) due to the remediation of
legacy issues and restructuring in James Hay as outlined below.
These costs are net of actual and/or assumed recoveries under the
Group's insurance arrangements.
Adjusted operating profit
2017 2016
GBP'000 GBP'000
Platform 6,079 7,085
Independent wealth management 8,599 7,058
Group/other (4,179) (4,176)
--------------------------------------------- -------- --------
Total adjusted operating profit 10,499 9,967
Amortisation of intangibles (2,137) (2,014)
Exceptional costs (8,795) (1,727)
--------------------------------------------- -------- --------
Operating (loss)/profit (433) 6,226
Finance income 52 414
Finance costs - (437)
Dividend from associate - 242
--------------------------------------------- -------- --------
(Loss)/profit before income tax (381) 6,445
Income tax credit/(expense) 43 (1,195)
--------------------------------------------- -------- --------
(Loss)/profit for the year from operations (338) 5,250
--------------------------------------------- -------- --------
Adjusted operating profit, before amortisation of intangibles
and exceptional costs, increased by 5% from GBP10.0 million to
GBP10.5 million, principally driven by the repricing in James Hay
and a focus on costs, mainly staff related, which together offset
the impact of lower revenues from interest income. The contribution
from Saunderson House increased by 22% from GBP7.1 million to
GBP8.6 million, but James Hay's contribution fell 14% from GBP7.1
million to GBP6.1 million. However, James Hay delivered an adjusted
profit of GBP4.3 million in H2 2017, compared to GBP1.8 million in
H1 2017, an improvement in the operating margin from 8% to 18%,
which we believe is sustainable as we go into 2018. Group costs
remained broadly in line with 2016 at GBP4.2 million.
Adjusted EPS and adjusted earnings
The Group uses adjusted operating profit and adjusted earnings
as measures of performance to eliminate the impact of items it does
not consider indicative of ongoing underlying performance due to
their unusual, exceptional or non-recurring nature.
Year ended Year ended
31 December 31 December
2017 2016
Per Earnings Per Earnings
share GBP'000 share GBP'000
pence pence
(Loss)/Profit attributable
to owners of the Parent Company (0.32) (338) 4.98 5,250
Amortisation of acquisition
related intangible assets 1.83 1,933 1.47 1,552
Exceptional items 6.39 6,732 1.79 1,886
Release of provision against
receivable from associate - - (0.49) (516)
Discontinued operations 0.44 469 - -
Unwinding of discount applicable
to contingent consideration - - (0.18) (192)
---------------------------------- ------- --------- ------- ---------
Adjusted earnings 8.34 8,796 7.57 7,980
---------------------------------- ------- --------- ------- ---------
The table above shows how we calculate adjusted EPS and adjusted
earnings. The above amounts are net of tax, if applicable.
Group/other
Group costs include costs associated with our London based Group
teams, the Board of Directors, governance and oversight committees
and other costs associated with being a publicly listed
company.
Exceptional costs
Exceptional costs were GBP8.8 million (2016: GBP1.7 million),
principally driven by remediation costs and legal fees in relation
to the ongoing investigation and resolution of legacy issues in
relation to Elysian Fuels, pension administration and advice on
historical pension transfers where there are safeguarded benefits
(GBP5.4 million), previously announced James Hay redundancy costs
(GBP1.3 million), consultancy fees paid in relation to the detailed
review of legacy matters (GBP1.5 million), legal costs in relation
to the First Names claim (GBP0.5 million, including GBP0.3m of
costs awarded to First Names) and closure costs associated with the
Dublin and Swavesey offices (GBP0.1 million).
Tax
The effective tax rate for the Group reduced to 11.3% from 18.5%
in the prior year. The effective reduction in rate is primarily due
to a reduction in non-allowable expenses related to exceptional
costs which were expensed in UK subsidiaries. While mindful of our
obligations to Shareholders to ensure tax efficiency, we use only
legitimate tax reliefs for the purposes for which they were
intended and do not take part in aggressive tax planning or condone
tax avoidance as both would contravene our cultural values. See
note 5 for a full reconciliation of income tax.
Cash flows
2017 2016
GBP'000 GBP'000
Cash flows from operating activities 10,132 11,769
Capital expenditure (4,388) (6,236)
------------------------------------------------- -------- --------
Free cash flow 5,744 5,533
Interest and tax (2,213) 229
Dividend from associate - 242
Disposals of subsidiaries 550 (66)
Deferred consideration 4,037 -
Head office restructuring and exceptional costs (6,650) -
Dividends paid (5,217) (5,106)
Repayment of borrowings - (7,000)
Cash settlement of share awards (35) -
Share issues - 162
------------------------------------------------- -------- --------
Net cash outflow (3,784) (6,006)
------------------------------------------------- -------- --------
The Group generated GBP10.1 million (2016 - GBP11.8 million)
from operations, reflecting adjusted profits generated, offset by
small movements in working capital. The Group paid a net corporate
tax payment of GBP2.2 million in 2017 (2016: GBP0.2 million
refund), and invested a total of GBP4.4 million in capital
expenditure (2016: GBP6.2 million), compared to depreciation and
amortisation of GBP5.3 million (2016: GBP4.8 million). Total
dividends paid during 2017 were GBP5.2 million (2016: GBP5.1
million), resulting in a decrease in net cash of GBP3.6 million to
GBP24.6 million.
The businesses will continue to generate cash to fund ongoing
investment, subject to the resolution of a number of legacy
matters. The dividend policy will be kept under review and, pending
resolution of the legacy issues, the Board will seek to resume the
payment of dividends at the earliest possible date.
Return on capital employed
Return On Capital Employed is calculated as earnings before
finance income and/or costs and tax, divided by capital employed.
It measures how efficiently the Group generates profits from its
capital employed by comparing it to net operating profit.
The return on capital employed in 2017 has fallen to -0.6%
(2016: 7.8%), which was significantly impacted by the material
exceptional costs associated with legacy issues and restructuring,
as well as the full year effect of the lower interest rate
environment which contributed to decreased revenue.
Financial and capital position
The Consolidated Statement of Financial Position remains strong
and highly liquid. Net cash decreased from GBP28.2 million to
GBP24.6 million in the year (see note 9).
The Pillar 1 capital resource requirement for the Group have
been calculated in accordance with the Financial Conduct Authority
regulations. The Group has regulatory capital resources of GBP49.5
million (2016: GBP47.6 million) compared to its Pillar 1
requirement of GBP6.6 million (2016: GBP6.8 million), a coverage of
over 7.5 (2016: 7.0). The Group has also assessed its Pillar 2
capital resource requirements and confirms that it has sufficient
capital resources to meet these requirements for the foreseeable
future. Resolution of legacy matters will impact the actual capital
position of the Group, but will also reduce Pillar 2 requirements
going forward, as the assessment of potential capital requirements
will reduce when these legacy matters are resolved.
Financial risk management
The Group's Finance function oversees the management of the
Group's exposure to exchange risk, credit risk, liquidity and
interest rate risk, in line with defined policies and procedures.
The Group does not trade in financial instruments, except as
necessary to hedge foreign currency exposures. The Group does not
enter into leveraged derivative transactions. The Group treasury
function, under the management of the Group Financial Controller,
manages the overall Group funding and liquidity requirements,
working closely with the divisional finance teams.
The Group's financial reporting currency is Sterling, reflecting
the primary economic environment in which the businesses operate.
The Group's revenue is principally earned in Sterling, and the
majority of its expenditure is incurred in Sterling. The Group
incurs certain Euro-denominated costs, principally related to its
Irish subsidiary.
Share price and market capitalisation
The Company's shares traded in a range of between 130 pence and
184 pence during the year. The share price at 31 December 2017 was
184 pence (31 December 2016: 155 pence), reflecting an increase of
19% in the year. The market capitalisation at 31 December 2017 was
GBP194.0 million (2016: GBP163.4 million). There were 105,405,665
shares in issue at 31 December 2017.
Extract from operational review - James Hay
HIGHLIGHTS
- Revenue GBP46.2 million
- Adjusted operating profit GBP6.1 million
- Assets under administration GBP25.5 billion
- Total SIPPs 54,924
Industry overview - platform
The platform market has seen increased asset growth over the
year of 22% rising to just under GBP490bn(1) . The market has
benefitted from the migration of pension assets away from Defined
Benefit Pension schemes. This trend is expected to continue. The
sector continues to experience disruption due to consolidation,
re-platforming and migration to third party providers.
The regulatory agenda continues to impact the market with MiFID
II and GDPR absorbing much resource. In addition, the FCA are
currently conducting a platform review, with the sector required to
furnish information to support the review, and the Senior Managers
and Certification Regime ('SMCR'). The government continues to
evolve its pension strategy. The industry has experienced
significant change over recent years and will continue to evolve as
the focus for savings for retirement, broadens from a "pension"
focus to a wider "retirement wealth" focus.
Brexit continues to dominate the macro-political landscape, and
may contribute to market volatility in 2018, as the terms of the
UK's departure from the EU are finalised. We will ensure we are
well placed to react to our clients' and advisors needs, both in
terms of the quality of our administration and the flow of
information and analysis which our clients and advisors require to
properly manage their retirement assets.
(1) Platforum Q3 2017
Goal
Our goal is to be a successful, sustainable and increasingly
profitable business by supporting advisers and delivering good
outcomes to clients as they navigate their way through
pre-retirement and during retirement.
Our platform facilitates this by enabling clients and advisers
to manage their retirement wealth safely and securely via an
easy-to-use digital interface.
Business strategy
Distribution
The distribution strategy focuses on high quality Independent
Financial Advisor ('IFA') relationships, and we continue to invest
in enhancements to our client services. We will increase efficiency
by making better use of digital and self-serve capabilities.
Capabilities
The focus remains on creating a 'digital platform' for the
future responding to adviser and investor demand. This continues
the development programme, which delivered a range of new online
services. This contributes to increasing scalability and supports
our journey to becoming a fully functional platform for retirement
wealth management. Output from our Insight programme has provided
valuable information on what advisers and clients expect from a
platform. One of our responses to this was to introduce more
simplified language in our communication with clients.
Product
James Hay has a strong position in its core SIPP markets,
recognised for its capability at the complex end of the market.
However, this is yet to be reflected in adjacent ISA and GIA
markets, where we will continue to invest in enhancing our
capability. The platform space continues to see consolidation of
pension and savings assets from those with multiple
products/pensions, which we see as an opportunity to attract
incremental pension and non-pension assets from the existing
investor base.
GOVERNANCE
The addition of Geoffrey Clarkson as an independent
Non-Executive Director to the Board in February 2017, has increased
the experience of the Board, bringing extensive expertise in the
financial services industry, specialising in corporate governance,
risk management and regulatory standards and practice.
Business Review
The retirement market continues to remain buoyant, underpinned
by strong pension transfer business. Independent data from Origo,
published in Money Marketing in early 2018, confirms that pension
transfer volumes increased by 30% in 2017.
The quality of new client flows has continued to improve as we
continue to focus our distribution strategy on higher quality
adviser relationships.
The reduction in interest rates during the second half of 2016
materially impacted 2017 results. However, the pricing initiatives
rolled out throughout the year helped to materially mitigate this.
We ensured that the re-pricing exercise was appropriately
considered from a client and adviser perspective, and that our
offering remained both transparent and competitive in our chosen
markets. The business will benefit from the increase in interest
rates in late 2017.
Attrition remained stable year on year at 6.2% for the SIPP
business (2016 - 6.3%). We continue to rationalise our legacy
products and have been successful in transferring circa 1,100
clients from our legacy products to our flagship MiPlan. The
business ended 2017 having made substantial progress in its conduct
agenda, as well as establishing greater clarity on the required
remediation work to address legacy issues. We have enhanced the
senior management team and delivered our best ever year for organic
sales.
Meeting the needs of our clients is a guiding principle that
will ultimately drive the success of the business. Our investment
in the digital capabilities of our offering will further enhance
the quality of our service both to direct and advised clients. Our
growth focus will remain on the primary distribution channel of
financial advisers.
LEGACY MATTERS
It is disappointing that a number of legacy matters have
impacted the performance of the business, which are discussed in
more detail in the CEO report.
PERFORMANCE
-- Assets under administration increased 15% to GBP25.5bn
-- Revenue fell marginally from GBP47.5 million to GBP46.2 million, a decrease of 3%
-- Operating profit decreased from GBP5.2 million to a loss of GBP2.3 million
-- Adjusted profits decreased from GBP7.1 million to GBP6.1 million, a decrease of 14%
-- Total net flows were GBP3.4 billion, including market movement
-- Total new clients of 6,116
-- Total new SIPP cases of 5,836 during the year
-- Overall attrition levels decreased to 6.4% (6.9% 2016)
-- Average new client case size for the Modular iPlan increased by 5% to GBP445,000
-- Exceptional costs were GBP6.3 million due to the remediation
and resolution of a number of legacy matters
At the end of December 2017, James Hay administered assets on
behalf of more than 58,000 individual clients. The rate of new
business acquisitions and attrition is shown below:
SIPPs 2017 2016 Change
Opening 52,391 52,101 +1%
Additions 5,836 4,396 +33%
Accounts consolidation (169) (531) -68%
Attrition (3,134) (3,575) -12%
------------------------ -------- -------- -------
Closing 54,924 52,391 +5%
------------------------ -------- -------- -------
KEY ACHIEVEMENTS
-- Operational efficiency delivered productivity gains equivalent to 46 employee headcount.
-- Restructured shared support and commercial functions reduced headcount by 20
-- Focused distribution strategy, delivered strong growth with higher average case size
-- Focus on clients has delivered a more responsive business
OUR CLIENTS
We believe that meeting client expectations is central to our
success as a business. Our investment programme continues to focus
on improving the client experience. The conduct framework
implemented last year is now embedded in the business.
Investment in our People
Alongside our investment in technology, we have also continued
to invest in our people to support their training and development.
We have implemented a flexible employee benefit programme and
completed market salary reviews. We have enhanced our performance
management process and aligned them with our conduct agenda.
Extract from operational review - Saunderson House
HIGHLIGHTS
- Revenue GBP32.2 million
- Adjusted operating profit GBP8.6 million
- Assets under advice GBP5.1 billion
- 8% growth in clients bringing total clients to 2,121, 246 of which are DMS clients
Industry overview - independent wealth management
Macro environmental factors remain positive for the wealth
management industry. Wealth in the UK is becoming increasingly
concentrated among the top 10% of a growing population, whilst an
ageing demographic profile underpins growing demand for advice and
products focused around retirement, as well as tax-efficient ways
to pass on wealth to future generations. Demand for discretionary
management services has continued to grow, whilst advisory asset
levels have remained relatively stable. The addition of our
Discretionary Management Service in 2016, alongside our existing
advisory model, ensures we are well-placed to meet a range of
investment preferences from prospective clients.
Changes in consumer behaviour, particularly with regards to
digital demand, provide opportunities to engage with our clients
through new channels, such as our client portal. Life events are
increasingly influencing the demand for financial advice.
2017 saw the sixth consecutive year of rising equity markets,
alongside some of the lowest levels of volatility experienced in
recent years. Once again, Saunderson House clients benefitted from
strong investment performance, both in real-terms and in relation
to our competitor peer group. The independently constituted Asset
Risk Consultants (ARC) rankings placed 10 of Saunderson House's 12
model portfolios in the top quartile of their peer group over one,
three, five and 10 years.(1)
Although markets have performed well, uncertainty surrounding
the likely outcomes of Brexit negotiations and its potential
financial and economic impacts continues to instil uncertainty
within markets and amongst investors. From a financial planning
perspective, there is concern around the medium-term outlook for
the UK's political landscape, and the likely tax implications that
a shift in government policy could have for individuals at the
higher end of the wealth spectrum. These factors reinforce the
benefits of high quality financial advice.
Competition is increasing, with firms seeking to position
themselves at the front of the value chain, where propositions are
less commoditised and margins are more favourable. This has
encouraged continued consolidation, as well as expansion in the
breadth of competitor propositions. In contrast with the potential
threat this presents to many advisory businesses, our focused
business model, operating in niche market segments, enables us to
differentiate Saunderson House from our peers and deliver a higher
quality service to our clients.
We are seeing opportunities to attract new clients who are
dissatisfied with their current providers. This sentiment has been
reflected by industry research, with one survey finding that over
30% of clients stated they were "very likely" to change their
wealth provider within the next 12 months.(2) Saunderson House's
unique service proposition, strong investment track record and
consistently high client retention rates, position the business to
capitalise on this opportunity.
Brexit continues to dominate the macro-political landscape, and
may contribute to market volatility in 2018, as the terms of the
UK's departure from the EU are finalised. We will ensure we are
well placed to react to our clients' needs, both in terms of the
quality of our advice and the flow of information and analysis
which our clients and advisors require to properly manage their
wealth.
(1) Returns to 31 December 2017
(2) Compeer (2017)
Goal
We strive to be the first-choice wealth manager in our chosen
markets. We achieve this through the strength of our client
relationships and delivering the standards of service and advice
which exceeds our clients' expectations.
Business strategy
We continue to see strong growth opportunities in our existing
market segments and within adjacent markets. Whilst acknowledging
the pace of change within the industry has accelerated, Saunderson
House's relationship-led offering and niche expertise remains an
attractive proposition for new and potential clients particularly
for individuals with between GBP0.5 million and GBP3.0 million to
invest.
Our discretionary offering continues to grow since our launch in
2016 and we are beginning to see the benefits of the investments in
technology, which will continue to support growth going
forward.
Our clients are our greatest advocates, with circa 60% of new
clients originating from current client referrals. During 2017, we
created specialist teams to focus on specific growth initiatives
and pursue new markets with similar characteristics to our existing
segments. Targeting adjacent markets enables us to leverage our
strong relationships.
To achieve good client outcomes, we strive to deliver a
comprehensive service which positions us as the first point of
contact for all our clients' personal financial matters. We have
built relationships with a number of other professional service
providers to deepen our client support capabilities. We continue to
build appropriate technology solutions in order to keep pace with
market, and client demands, to create an efficient service model
and improve the control environment.
GOVERNANCE
To provide a greater balance between executive and non-executive
directors and bring us in line with industry best practice, we
reconstituted the Saunderson House Board structure in early 2017.
This included the appointment of Amanda Davidson as a Non-Executive
Director and Chair of the Risk, Audit and Compliance Committee. The
addition of Amanda as an independent Non-Executive Director to the
Board in July 2017, has increased the experience of the Board,
bringing extensive expertise in the financial services industry,
having held a number of Board roles within financial services
firms, as well as serving on the boards of financial regulators the
FCA (Financial Conduct Authority), FSA (Financial Services
Authority) and the PIA (Personal Investment Authority).
We also appointed Rob Nieves as Director of Risk and Compliance.
Having spent over 25 years within the financial services industry,
his experience spans front office change and programme delivery in
fund managers and banks, derivatives sales and risk and
compliance.
Business review
In 2017, our client retention rates remained stable at 96%.
Around 60% of new client wins were generated from existing client
referrals, evidencing our ability to deliver exceptional client
service which our clients recognise.
We have continued to embed a number of change projects to
support the firm's growth. Newly created client service management
and client relationship management roles were established to instil
greater clarity to our service model and provide clearer career
paths for those managing client relationships and those that manage
the business. This evolution has been further supported by the
creation of a middle office to free up our highly qualified
financial planning teams to focus on delivering added-value
services to clients.
We further developed our infrastructure to create future
scalability. In 2017, this involved the overhaul of a number of our
back-office systems, including the completion of new portfolio
management, human resources and employee engagement and finance
systems. We also migrated our networks and data centres to new
providers, as part of our longer-term technological infrastructure
programme to ensure resilience in our IT services.
Towards the end of 2017, we agreed terms for additional office
space to cater for our growing workforce and facilitate more modern
working practices. A number of staff will be relocating to the new
premises in Q1 2018.
LEGACY MATTERS
It is disappointing that one legacy matter has impacted the
performance of the business. This is discussed in more detail in
the CEO report.
PERFORMANCE
-- Assets under advice up to GBP5.1 billion at the end of 2017, from GBP4.6 billion in 2016
-- 247 new clients joined Saunderson House (2016: 215)
-- Total clients increased from 1,956 to 2,121
-- Revenue increased from GBP31.0 million to GBP32.2 million, an increase of 4%
-- Operating profit decreased from GBP8.2 million to GBP7.2 million
-- Adjusted profits increased from GBP7.1 million to GBP8.6 million, an increase of 22%
-- Operating margin improved illustrating disciplined cost control
-- Exceptional costs of GBP1.6 million incurred during the year,
relating to the resolution and remediation of the legacy matter
identified
KEY ACHIEVEMENTS
-- Delivery of our portfolio management solution to improve
investment controls and provide a platform for scalability of our
investment proposition
-- Completion of our networks and data centres services project,
which is providing the business with improved technological
performance and resilience
-- Implementation of a new HR and rewards system to enhance employee engagement
-- Launched our new external website, www.saundersonhouse.co.uk
OUR CLIENTS
Our client advocacy score during the year remained exceptionally
high at 9.3(1) , producing a net promoter score of 85(2) . This, in
conjunction with a client retention rate of circa 96%, reflects the
emphasis the business places on client service and demonstrates the
longevity in the relationships we hold with our clients. Feedback
from our clients highlights the personal service, clear
communication, straightforward advice and strong investment
performance that they receive.
An in-depth analysis of the needs of our clients revealed the
broad roles that each of our clients require advisers to fulfil to
meet both their economic and emotional needs. Examples included the
role of the 'coach', to challenge our clients' financial goals and
market views, the role of the 'navigator' to avoid the compliance,
political, economic or legislatorial pitfalls that they may
otherwise be susceptible to and the role of the 'educator', to help
reassure clients about their financial situation. Understanding the
true needs of our clients and how we address these is key to both
retaining and growing our client base, as well as our ability to
differentiate our offering from other firms in the marketplace.
(1) Based on a scale of 0 to 10 on the question, "How likely is
it that you would recommend us to a friend or colleague?"
(2) On a scale of -100 to 100
Investment in our People
People are our most important asset. During 2017, we undertook
an extensive review of our reward framework to further embed within
our culture the alignment of performance rewards with our company
values, good client outcomes and strategic objectives. Our aim is
to develop our people to fulfil their full potential and reward
them for delivering excellent client outcomes.
We have heavily invested in 'people' technology through the
introduction of a self-service HR system, online performance
management system, learning management system and an engagement,
recognition and internal communications platform. These investments
have improved the efficiency of delivering online training and
development to staff and our ability to communicate effectively as
the firm grows.
As part of our desire to understand our people and cater for
their needs, we have commenced regular surveys as part of a wider
employee engagement programme. This is aimed to help inform our
future people policies and approaches to personal development.
Consolidated Income Statement
Year ended 31 December 2017
Notes 2017 2016
GBP'000 GBP'000
From operations
Revenue 3 78,394 78,465
Staffing expense (49,265) (51,647)
Depreciation and amortisation (5,330) (4,764)
Other operating expenses (24,363) (17,323)
Other gains 131 1,495
----------------------------------------- ------ --------- ---------
Operating (loss)/profit (433) 6,226
----------------------------------------- ------ --------- ---------
Analysed as:
Operating profit before exceptional items 8,362 7,953
Exceptional items 4 (8,795) (1,727)
---------
Operating (loss)/profit (433) 6,226
Finance income 52 414
Finance costs - (437)
Share of profit in associate - 242
(Loss)/profit before income tax (381) 6,445
Income tax credit/(expense) 5 43 (1,195)
----------------------------------------- ------ --------- ---------
(Loss)/profit for the financial
year (338) 5,250
Earnings per share from continuing and discontinued
operations attributable to the owners of the Company
during the year:
2017 2016
Basic (loss)/earnings per ordinary
share (pence)
From operations (0.32) 4.98
From (loss)/profit for the financial
year 6 (0.32) 4.98
----------------------------------------- ------ --------- ---------
Diluted (loss)/earnings per ordinary
share (pence)
From operations (0.32) 4.96
From (loss)/profit for the financial
year 6 (0.32) 4.96
----------------------------------------- ------ --------- ---------
Consolidated Statement of Comprehensive Income
Year ended 31 December 2017
2017 2016
GBP'000 GBP'000
(Loss)/profit for the financial year (338) 5,250
Other comprehensive income:
Items that may be reclassified subsequently
to profit or loss:
Exchange differences on translation
of foreign currency operations 143 419
Reclassification of exchange reserve
upon strike off of subsidiaries - (516)
Items reclassified to profit or loss:
Recycled to the Consolidated Income
Statement on disposal of subsidiaries - (48)
Other comprehensive income/(loss) 143 (145)
---------------------------------------------- -------- --------
Total comprehensive (loss)/income for
the financial year (195) 5,105
---------------------------------------------- -------- --------
Consolidated Statement of Financial Position
Year ended 31 December 2017
2017 2016
GBP'000 GBP'000
ASSETS
Non-current assets
Property, plant and equipment 4,181 4,322
Intangible assets 53,720 55,074
Deferred income tax asset 703 9
Total non-current assets 58,604 59,405
----------------------------------- --------- ---------
Current assets
Trade and other receivables 18,054 22,828
Income tax asset 133 -
Cash and cash equivalents 24,572 28,226
----------------------------------- --------- ---------
Total current assets 42,759 51,054
----------------------------------- --------- ---------
Total assets 101,363 110,459
----------------------------------- --------- ---------
LIABILITIES
Non-current liabilities
Deferred income tax liabilities 2,252 2,323
Provisions for other liabilities 449 1,032
----------------------------------- --------- ---------
Total non-current liabilities 2,701 3,355
----------------------------------- --------- ---------
Current liabilities
Trade and other payables 19,239 22,551
Income tax liabilities 168 1,902
Provisions for other liabilities 4,539 2,445
----------------------------------- --------- ---------
Total current liabilities 23,946 26,898
----------------------------------- --------- ---------
Total liabilities 26,647 30,253
----------------------------------- --------- ---------
Net assets 74,716 80,206
----------------------------------- --------- ---------
EQUITY
Ordinary share capital presented
as equity 10,093 10,093
Share premium 82,404 82,404
Other reserves (14,118) (14,054)
Retained earnings (3,663) 1,763
----------------------------------- --------- ---------
Total equity 74,716 80,206
----------------------------------- --------- ---------
Consolidated Statement of Cash Flows
Year ended 31 December 2017
Notes 2017 2016
GBP'000 GBP'000
Cash flows from operating activities
Cash generated from operations 8 10,132 11,769
Exceptional items paid (6,650) -
Interest received 48 212
Income tax (paid)/refund (2,261) 208
Net cash generated from operating
activities 1,269 12,189
Cash flows from investing activities
Purchase of property, plant and
equipment (1,622) (2,751)
Sale of property, plant and equipment 550 -
Dividend from associate - 242
Disposal of subsidiaries 4,037 (66)
Acquisition of intangible assets (2,766) (3,485)
---------------------------------------- ------ -------- ---------
Net cash generated/(used) in investing
activities 199 (6,060)
Cash flows from financing activities
Dividends paid (5,217) (5,106)
Interest paid - (191)
Repayment of bank borrowings - (7,000)
Cash settlement of vested share (35) -
options
Proceeds from issue of share capital - 162
Net cash used in financing activities (5,252) (12,135)
---------------------------------------- ------ -------- ---------
Net decrease in cash and cash
equivalents (3,784) (6,006)
Cash and cash equivalents at the
beginning of the financial year 28,226 34,085
Effect of foreign exchange rate
changes 130 147
---------------------------------------- ------ -------- ---------
Cash and cash equivalents at end
of financial year 24,572 28,226
---------------------------------------- ------ -------- ---------
Notes 2017 2016
GBP'000 GBP'000
Cash and short-term deposits
- as disclosed on the Consolidated
Statement of Financial Position 9 24,572 28,226
Cash and cash equivalents at end
of financial year 24,572 28,226
---------------------------------------- ------ -------- ---------
Consolidated Statement of Changes in Equity
Share Share Other Retained Total
capital premium reserves earnings equity
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
================================== ======== ======== ========= ========= ========
At 1 January 2016 10,078 82,257 (13,766) 629 79,198
================================== ======== ======== ========= ========= ========
Profit for financial year - - - 5,250 5,250
Other comprehensive income
Currency translation:
- arising in the financial
year - - 419 - 419
- reclassification of exchange
reserve upon strike-off of
subsidiaries - - (516) - (516)
- recycled to the Consolidated
Income Statement on disposal
of subsidiaries - - (48) - (48)
================================== ======== ======== ========= ========= ========
Total comprehensive income
for the
financial year - - (145) 5,250 5,105
================================== ======== ======== ========= ========= ========
Dividends - - - (4,909) (4,909)
Issue of share capital 15 147 - - 162
Transfer of vested share-based
payment - - (277) 277 -
Reclassification of exchange
reserve upon strike-off of
subsidiaries - - - 516 516
Share-based payment compensation:
- value of employee services
- share options - - 134 - 134
Transaction with owners 15 147 (143) (4,116) (4,097)
================================== ======== ======== ========= ========= ========
At 31 December 2016 10,093 82,404 (14,054) 1,763 80,206
================================== ======== ======== ========= ========= ========
Loss for financial year - - - (338) (338)
Other comprehensive income
Currency translation:
- arising in the financial
year - - 143 - 143
- reclassification of exchange
reserve upon strike-off of
subsidiaries - - - - -
- recycled to the Consolidated
Income Statement on disposal
of subsidiaries - - - - -
================================== ======== ======== ========= ========= ========
Total comprehensive (loss)/income
for the
financial year - - 143 (338) (195)
================================== ======== ======== ========= ========= ========
Dividends - - - (5,217) (5,217)
Issue of share capital - - - - -
Transfer of vested share-based
payment - - (164) 164 -
Reclassification of exchange
reserve upon strike-off of
subsidiaries - - - - -
Share-based payment compensation:
- value of employee services
- share options - - (43) - (43)
- Cash settlement of vested
share options - - - (35) (35)
Transaction with owners - - (207) (5,088) (5,295)
================================== ======== ======== ========= ========= ========
At 31 December 2017 10,093 82,404 (14,118) (3,663) 74,716
================================== ======== ======== ========= ========= ========
Notes to the Group financial statements
1. General information
IFG Group plc is a public company, listed on the Irish and
London Stock Exchanges and is registered and domiciled in the
Republic of Ireland (registration number 21010). The Group's
registered address is 70 Sir John Rogerson's Quay, Grand Canal
Dock, Dublin 2, Ireland. These consolidated statements comprise the
Company and its subsidiaries. The Group provides a range of
financial solutions including full platform services, pension
administration and independent financial advice.
These consolidated financial statements are presented in
Sterling, which is the Company's functional currency. All amounts
have been rounded to the nearest thousand, unless otherwise
indicated.
2. Basis of preparation
The Group financial statements have been prepared in accordance
with International Financial Reporting Standards as adopted by the
EU (IFRS), IFRIC interpretations and those parts of the Companies
Act 2014 applicable to companies reporting under IFRS.
The financial information in this report has been prepared in
accordance with the listing rules of the Irish Stock Exchange and
in accordance with Group accounting policies. Full details of the
accounting policies adopted by the Group are contained in the
consolidated financial statements included in the Company's annual
report for the year ended 31 December 2016, which is available on
the Group's website at www.ifggroup.com.
The preliminary accounts are prepared to provide shareholders
and investors with reliable and timely information on the
performance of the Group for the year.
The Group financial statements have been prepared on a basis
consistent with that reported for the year ended 31 December 2016.
No new standards, amendments or interpretations, which became
effective in 2017, have had a material effect on the Group
financial statements.
The financial information presented in this preliminary release
does not constitute "full group accounts" under Regulation 40(1) of
the European Communities (Companies: Group Accounts) Regulations,
1992. The preliminary release was approved by the Board of
Directors. The annual report and accounts have also been approved
by the Board of Directors with an unqualified report from the
external auditors. The financial information has been extracted
from the audited annual report and accounts. The full Group
accounts will be laid before the AGM on 9 May 2018 and distributed
to Shareholders in advance. They will be filed with the Irish
Registrar of Companies following the AGM.
Full Group accounts for the year ended 31 December 2016 received
an unqualified audit report and have been filed with the Irish
Registrar of Companies.
Use of alternative performance measures in the Group financial
statements
The Group has identified certain measures that it believes will
assist in the understanding of the performance of the business.
These measures are not defined under IFRS and they may not be
directly comparable with other companies' adjusted measures.
These alternative performance measures are not intended to be a
substitute for, or superior to, any IFRS measures of performance
but
management have included them as they consider them to be
important comparables and key measures used within the
business for assessing performance.
The following are key alternative performance measures
identified by the Group and used in the Group financial statements
and
in the financial information presented herein.
Adjusted operating profit
Adjusted operating profit is defined as operating profit,
excluding acquisition-related amortisation, exceptional items
and
discontinued operations. Management believes excluding these
items from the calculation of operating profit is useful
because
management excludes items that are not comparable when measuring
operating profitability, evaluating performance trends and
setting performance objectives. It allows investors to evaluate
the Group's performance for different periods on a more
comparable basis.
The reconciliation of adjusted operating profit to profit before
income tax is disclosed in note 3.
Adjusted earnings and adjusted earnings per share
Adjusted earnings is defined as profit attributable to owners of
the Parent Company before amortisation of acquisition related
intangible assets, exceptional items, discontinued operations and
unwinding of discount applicable to contingent consideration, net
of tax where applicable.
Adjusted EPS is defined as the continuing basic earnings per
ordinary share adjusted for amortisation of acquired
intangibles,
exceptional items, discontinued operations and unwinding of
discount applicable to contingent consideration, net of tax
where applicable.
The Group uses adjusted operating profit, adjusted earnings and
adjusted EPS as measures of performance to eliminate the impact of
items it does not consider indicative of ongoing operating
performance due to their inherent unusual, exceptional, or
non-recurring nature or because they result from an event of a
similar nature.
A table showing the reconciliation from basic EPS to adjusted
EPS and a reconciliation from profit attributable to owners of
the
Parent Company to adjusted earnings is included in the financial
review.
Free Cash Flow
Free cash flow represents the cash flow generated from adjusted
operating activities less cash used in relation to capital
expenditure.
Management considers free cash flow an important measure of the
Group's ability to generate cash and profits. It is an accurate
measure of how much cash the Group has generated to service its
debts, pay dividends and further invest in its operations. The
financial review includes a reconciliation of free cash flow to
the net cash flow in the period.
Return on capital employed
Return on capital employed is calculated as earnings before
interest and tax divided by capital employed. It measures how
efficiently the Group generates profits from its capital employed
by comparing it to net profit.
The Group financial statements have been prepared on a basis
consistent with that reported for the year ended 31 December
2016.
3. Segmental information
In line with the requirements of IFRS 8, 'Operating segments',
the Group has identified the Group Chief Executive of the Company
as its Chief Operating Decision Maker (CODM). The Group Chief
Executive reviews the Group's internal reporting in order to assess
the performance of the Group and allocate resources. The operating
segments have been identified based on these reports.
Throughout the year, the Group Chief Executive considered the
business line perspective, based on two reporting segments:
platform and independent wealth management. The segments were
managed by senior executives who reported to The Group Chief
Executive and the Board of Directors.
The Group Chief Executive assesses the performance of the
segments based on a measure of adjusted earnings. He reviews
working capital and overall balance sheet performance on a Group
wide basis but also receives reports on all measures at an
individual business level.
The Group earns its revenues in these segments by way of fees
from the provision of services and commissions earned in the
intermediation of financial service products.
Goodwill is allocated to cash-generating units on a reporting
segment level and that is the level at which it is assessed for
impairment.
Income tax is managed on a centralised basis and therefore the
item is not allocated between operating segments for the purpose of
presenting information to the CODM and accordingly is not included
in the detailed segmental analysis below.
Intersegment revenue is not material and thus not subject to
separate disclosure.
The information provided to the Group Chief Executive for the
reportable segments, for the year ended 31 December 2017, is as
follows:
Independent
wealth Group
/
Platform management other Total
GBP'000 GBP'000 GBP'000 GBP'000
Revenue 46,169 32,225 - 78,394
----------------------------------- --------- ------------ -------- --------
Adjusted operating profit/(loss) 6,079 8,599 (4,179) 10,499
Amortisation of acquired
intangibles (2,137) - - (2,137)
Exceptional items (6,262) (1,425) (1,108) (8,795)
Operating (loss)/profit (2,320) 7,174 (5,287) (433)
Finance income 35 17 - 52
Finance costs - - - -
Dividend from associate - - - -
(Loss)/profit before income
tax (2,285) 7,191 (5,287) (381)
Income tax credit 43
----------------------------------- --------- ------------ -------- --------
Loss for the year from operations (338)
----------------------------------- --------- ------------ -------- --------
The 2016 comparatives, excluding discontinued operations, are as
follows:
Independent
wealth Group
/
Platform management other Total
GBP'000 GBP'000 GBP'000 GBP'000
Revenue 47,478 30,987 - 78,465
-------------------------------------- --------- ------------ -------- --------
Adjusted operating profit 7,085 7,058 (4,176) 9,967
Amortisation of acquired intangibles (2,014) - - (2,014)
Exceptional items - 979 (2,706) (1,727)
-------------------------------------- --------- ------------ -------- --------
Operating profit 5,071 8,037 (6,882) 6,226
Finance income 135 113 166 414
Finance costs - - (437) (437)
Dividend from associate - - 242 242
-------------------------------------- --------- ------------ -------- --------
Profit/(loss) before income
tax 5,206 8,150 (6,911) 6,445
Income tax expense (1,195)
-------------------------------------- --------- ------------ -------- --------
Profit for the year from operations 5,250
-------------------------------------- --------- ------------ -------- --------
Assets and liabilities - 2017 Independent
wealth Group
/
Platform management other Total
GBP'000 GBP'000 GBP'000 GBP'000
ASSETS
Segment assets 69,812 23,855 6,860 100,527
Deferred income tax asset 703
Income tax asset 133
--------------------------------- --------- ------------ -------- -----------
Total assets as reported on
the Consolidated Statement
of Financial Position 101,363
--------------------------------- --------- ------------ -------- -----------
LIABILITIES
Segment liabilities (12,251) (9,519) (2,457) (24,227)
Current income tax liabilities (168)
Deferred income tax liabilities (2,252)
Total liabilities as reported
on the Consolidated Statement
of Financial Position (26,647)
--------------------------------- --------- ------------ -------- -----------
The 2016 comparatives are as Independent
follows:
wealth Group
/
Platform management other Total
ASSETS GBP'000 GBP'000 GBP'000 GBP'000
Segment assets 77,237 25,716 7,497 110,450
Deferred income tax asset 9
Income tax asset -
--------------------------------- --------- ------------ -------- -----------
Total assets as reported on
the Consolidated Statement
of
Financial Position 110,459
--------------------------------- --------- ------------ -------- -----------
LIABILITIES
Segment liabilities (10,177) (11,417) (4,434) (26,028)
Current income tax liabilities (1,902)
Deferred income tax liabilities (2,323)
Total liabilities as reported
on the Consolidated Statement
of
Financial Position (30,253)
--------------------------------- --------- ------------ -------- -----------
Other segmental information Independent
- 2017
wealth Group/
Platform management other Total
GBP'000 GBP'000 GBP'000 GBP'000
---------------------------------- --------- ------------ -------- --------
Property, plant and equipment
- additions 586 1,011 25 1,622
Intangible assets - additions 1,974 792 - 2,766
Property, plant and equipment
- depreciation (819) (327) (120) (1,266)
Intangible assets - amortisation (1,570) (413) - (1,983)
Acquired intangible assets
- amortisation (2,137) - - (2,137)
---------------------------------- --------- ------------ -------- --------
Included In depreciation for the year were GBP54,000
of costs relating to the Dublin head office closure
which were treated as exceptional costs
The 2016 comparatives are as Independent
follows:
wealth Group/
Platform management other Total
GBP'000 GBP'000 GBP'000 GBP'000
---------------------------------- --------- ------------ -------- --------
Property, plant and equipment
- additions 1,668 561 522 2,751
Intangible assets - additions 2,600 885 - 3,485
Property, plant and equipment
- depreciation (593) (390) (56) (1,039)
Intangible assets - amortisation (1,420) (291) - (1,711)
Acquired intangible assets
- amortisation (2,014) - - (2,014)
---------------------------------- --------- ------------ -------- --------
Breakdown of revenue by country of operation
The country of domicile of IFG Group plc is the Republic of
Ireland. The Group's continuing revenues are derived from the
UK.
Analysis of revenue by category
2017 2016
GBP'000 GBP'000
Platform 46,169 47,478
Independent wealth management 32,225 30,987
------------------------------- -------- --------
Total 78,394 78,465
------------------------------- -------- --------
During the year, there were no revenues derived from a single
customer that represent 10% or more of total revenues, in line with
2016.
Analysis of total non-current assets, at the year end, by
geographical region
The total non-current assets (excluding deferred income tax
assets), at the year end, split by geographical region are as
follows:
2017 2016
GBP'000 GBP'000
Ireland - 55
United Kingdom 57,901 59,341
Total 57,901 59,396
---------------- -------- --------
4. Exceptional items
Exceptional items charged against operating 2017 2016
profit
GBP'000 GBP'000
Redundancy and restructuring costs (1,385) (2,694)
Legal, Remediation and governance fees (5,375) (528)
Consultancy costs (1,566) -
Release of provision against receivable from
associate - 516
Loss on disposal of International division (469) -
Gain on disposal of IFG UK Financial Services - 979
----------------------------------------------- -------- --------
Total (8,795) (1,727)
----------------------------------------------- -------- --------
2017
Redundancy and restructuring costs
Redundancy costs relating to the restructure of the James Hay
business of GBP1.3 million, and a cost of GBP0.1 million related to
the impairment of the Swavesey office and the delayed closure of
the Dublin office.
Legal, remediation and governance costs
A cost of GBP5.4 million has been recognised in relation to
remediation and legal costs. Costs incurred include GBP2.0 million
in relation to the ongoing Elysian Fuels investigation (which
includes GBP1.3 million of provisions for legal costs), GBP1.6
million of costs relating to the historical pension transfers
review in Saunderson House, where there are safeguarded benefits
(which includes a provision of GBP0.9 million for potential client
remediation) and GBP1.8 million of costs associated with the review
of other legacy matters in James Hay, (including a provision of
GBP1.5 million for potential remediation).
Consultancy costs
Consultants costs of GBP1.6 million relating to the detailed
review associated with the ongoing legacy matters detailed above
were treated as exceptional during the year.
Loss on disposal of international division
The exceptional loss of GBP0.5 million relates to the legal
costs paid in relation to the First Names claim under the
indemnities provided in the sale of the International Segment of
which GBP0.3 million relates to interim assessment of costs awarded
by the judge and GBP0.1 million relates to legal costs provided
for.
2016
Redundancy and restructuring costs
Exceptional costs of GBP2.7 million relate to costs of closing
the Dublin Headquarters and the regional Swavesey office (GBP2.0
million) and increased costs associated with the lease break on the
former Group Headquarters in Booterstown, Co Dublin (GBP0.7
million).
Release of provision against receivable from associate
The exceptional gain of GBP0.5 million relates to the payment
received for an amount due from the Group's associate, Rayband
Limited, which was impaired in 2013.
Remediation and governance fees
One-off costs of GBP0.5 million relating to external advisers
who supported the work undertaken in relation to governance
changes.
Profit on disposal of IFG UK Financial Services
The exceptional gain of GBP1.0 million relates to the
finalisation of the sale consideration and costs associated with
the completion of the sale of IFG UK FS which was sold in 2014.
5. Income tax (credit)/expense
2017 2016
GBP'000 GBP'000
Current tax
Ireland (at 12.5%):
- current year 46 54
- prior year - 1
UK and other (primarily at 19.25% (2016:
20%)):
- current year 1,278 1,978
- prior year (602) (284)
-------------------------------------------- -------- --------
Total current tax expense 722 1,749
-------------------------------------------- -------- --------
Deferred tax
Ireland:
- current year 3 25
- prior year - 1
UK and other:
- current year (987) (544)
- prior year 219 (36)
Total deferred tax credit (765) (554)
-------------------------------------------- -------- --------
Total income tax (credit)/expense (43) 1,195
-------------------------------------------- -------- --------
The tax on the Group's profit before tax differs from the
theoretical amount that would arise using the weighted average tax
rate applicable to the profits of the consolidated entities as
follows:
2017 2016
GBP'000 GBP'000
(Loss)/profit before income tax (381) 6,445
------------------------------------------------- -------- --------
Tax calculated at domestic tax rates applicable
to results in the respective country (73) 1,289
Adjustment in respect of prior years (383) (318)
Re-measurement of deferred tax - impact
of change in UK tax rate 79 (159)
Non-taxable gain (9) (255)
Differences in overseas tax rates (19) (108)
Current year losses for which no deferred
tax asset was recognised 60 164
Utilisation of previous unrecognised tax
losses - (47)
Others including expenses not deductible
for tax purposes 302 629
------------------------------------------------- -------- --------
Income tax (credit)/expense (43) 1,195
------------------------------------------------- -------- --------
The weighted average applicable tax rate for the year was 11.3%
(2016: 18.5 %). During the year, the Company re-measured relevant
deferred tax balances that were impacted by the change in the UK
rate substantively enacted at the balance sheet date. In accordance
with the IFRS provisions, the rate of 17% is used as a basis for
the calculation of UK deferred taxes.
6. Earnings per ordinary share
2017 2016
Basic
(Loss)/profit after income tax (GBP'000)
From operations (338) 5,250
Total (338) 5,250
-------------------------------------------- ------------ ------------
Weighted average number of ordinary shares
in issue for the
calculation of earnings per share 105,405,665 105,394,326
-------------------------------------------- ------------ ------------
Basic (loss)/earnings per share (pence)
From operations (0.32) 4.98
From (loss)/profit for the year (0.32) 4.98
-------------------------------------------- ------------ ------------
2017 2016
Diluted
(Loss)/profit after income tax (GBP'000)
From operations (338) 5,250
-------------------------------------------- ------------ ------------
Total (338) 5,250
-------------------------------------------- ------------ ------------
Weighted average number of ordinary shares
in issue for the
calculation of earnings per share 105,405,665 105,394,326
Dilutive effect of share options 246,069 501,302
-------------------------------------------- ------------ ------------
Weighted average number of ordinary shares
for the calculation of
diluted earnings per share 105,651,734 105,895,628
-------------------------------------------- ------------ ------------
Diluted (loss)/earnings per share (pence)
Continuing operations (0.32) 4.96
From (loss)/profit for the year (0.32) 4.96
-------------------------------------------- ------------ ------------
7. Commitments, contingencies and guarantees
Given the nature of the business the Group undertakes, it may
from time to time receive complaints against it. The Group has
procedures in place to assess the veracity of the claims and
provision has been made to cover its best estimate of the exposure
in respect of these matters. No provisions have been recorded for
other contingencies, as the Group's obligations under them are not
probable and estimable.
Following a review during 2017, the Group has identified a
number of legacy matters which are still under consideration as set
out below.
ELYSIAN FUELS
As previously disclosed, the Group is incurring material legal
and remediation costs relating to James Hay's inception of Elysian
Fuels investments between 2011-2015. James Hay has now received
notices of assessment arising from Elysian Fuels for tax years
2011-2012 and 2012-2013, which have been appealed, and protective
notices of assessment in respect of 2013-2014 and 2014-2015. Our
discussions with HMRC seeking an acceptable resolution of James
Hay's inception of Elysian Fuels investments over the overall
2011-2015 period are on-going.
James Hay is committed to working collaboratively with HMRC to
resolve this matter and will continue to do so. However, James Hay
will apply to HMRC for the assessments to be discharged and pursue
appeals to the Tax Tribunals as necessary to protect its position.
The maximum potential sanction charge for the overall 2011-2015
period is approximately GBP20m, assuming all Elysian Fuels shares
are deemed valueless at inception, and no underlying clients
discharge their own tax liabilities.
Based on advice from the Group's legal advisers, the directors
are confident that the outcome at Tribunal and/or any settlement
with HMRC would be substantially lower than the maximum potential
sanction charge, and would be fundable from the Group's cash
resources at the time an obligation is anticipated to crystallise.
As a result of a range of disputed facts regarding our actions, any
resulting liability, which would be a function of investment
valuations, the level of any charge or client liability/recovery,
the potential exposure is highly uncertain and unquantifiable and
is expected to remain so whilst discussions with HMRC and/or any
Tribunal proceedings continue. Therefore, no provision, other than
for legal fees expected to be incurred in relation to this matter,
are provided for as the liability remains contingent. The Group
believes James Hay acted appropriately and in accordance with its
clients' instructions in relation to these investments.
OTHER LEGACY MATTERS
The Group has continued its reviews of other legacy business, to
ensure that any other contingent exposures are identified and
remediated. Over time these may result in further remediation
costs, including legal costs for legacy claims, however, the
exposures remain uncertain. These reviews remain in progress
although some matters have been provided in Exceptional costs in
respect of 2017, to the extent such liabilities have been deemed
likely and capable of being estimated with reasonable certainty.
The reviews being undertaken are designed to enable all identified
legacy issues in those businesses to be assessed and
remediated.
SALE OF THE INTERNATIONAL BUSINESS
The Group received a notice of a claim under the indemnities
provided in the sale of the International Segment completed in
2012. The underlying claim was settled by the acquirer of the
International segment during 2017 and the amount of the possible
claim has reduced from GBP3.0 million to GBP1.3 million, before
legal costs. The Group does not believe that the claim is valid. In
light of our view, which is supported by legal advice, the Group
does not currently believe a provision, other than for legal costs
to defend the claim, is quantifiable or necessary, in respect of
this matter.
8. Cash generated from operations
2017 2016
From operations GBP'000 GBP'000
(Loss)/profit before income tax (381) 6,445
Depreciation and amortisation 5,332 4,764
Disposal of subsidiaries - (48)
Finance costs - 437
Finance income (52) (414)
Foreign exchange movement 35 59
Non-cash share based payment compensation
charges (43) 134
Decrease/(increase) in trade and other receivables 750 (85)
Dividend from associate - (242)
Increase in current and non-current liabilities 4,491 719
---------------------------------------------------- -------- --------
Cash generated from continuing operations 10,132 11,769
---------------------------------------------------- -------- --------
9. Analysis of net cash/(debt)
Opening Cash Other Closing
balance flow movements balance
GBP'000 GBP'000 GBP'000 GBP'000
Cash and short-term
deposits 28,226 (3,784) 130 24,572
Total 28,226 (3,784) 130 24,572
--------------------- -------- -------- ---------- --------
Other movements
Other movements of GBP130,000 include the impact of exchange
rate movements arising on balances denominated in currencies other
than Sterling.
10. Events since the year end
The Board has reluctantly taken a prudent decision that no final
dividend will be paid in respect of 2017. There were no other
significant events since year end.
11. Approval of financial statements
This preliminary announcement was approved by the Board of
Directors on 20 March 2018.
This information is provided by RNS
The company news service from the London Stock Exchange
END
FR JMMPTMBJTBLP
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