TIDMJTC
RNS Number : 7107V
JTC PLC
11 April 2023
JTC PLC
("the Company") together with its subsidiaries ("the Group" or
"JTC")
Full year results for the year ended 31 December 2022
A year of exceptional organic growth, inorganic consolidation
and cash generation, with strong momentum carried into 2023
As reported Underlying*
2022 2021 Change 2022 2021 Change
----------------------------- ------ ----- ------- ------ ----- ------
Revenue (GBPm) 200.0 147.5 +35.6% 200.0 147.5 +35.6%
----------------------------- ------ ----- ------- ------ ----- ------
EBITDA (GBPm) 56.1 26.6 +110.9% 66.0 48.4 +36.4%
----------------------------- ------ ----- ------- ------ ----- ------
EBITDA margin 28.0% 18.0% +10.0pp 33.0% 32.8% +0.2pp
----------------------------- ------ ----- ------- ------ ----- ------
Operating profit/EBIT (GBPm) 33.8 9.0 +275.9% 43.8 30.8 +42.1%
----------------------------- ------ ----- ------- ------ ----- ------
Profit before tax (GBPm) 35.9 27.8 +29.3% 34.1 24.9 +36.7%
----------------------------- ------ ----- ------- ------ ----- ------
Earnings per share (p)** 23.92 20.49 +16.7% 33.27 25.55 +30.2%
----------------------------- ------ ----- ------- ------ ----- ------
Cash conversion 91% 79% +12pp 91% 87% +4pp
----------------------------- ------ ----- ------- ------ ----- ------
Net debt (GBPm) 120.4 117.2 +3.2 104.8 113.3 -8.5
----------------------------- ------ ----- ------- ------ ----- ------
Dividend per share (p) 9.98 7.67 +30.1% 9.98 7.67 +30.1%
----------------------------- ------ ----- ------- ------ ----- ------
* For further information on our alternative performance
measures ("APM") see the appendix to the CFO Review.
** Average number of shares (thousands) for 2022: 145,137 (2021: 130,044)
strong financial performance
-- Revenue +35.6% achieving GBP200.0m milestone, driven by
record net organic growth of 12.0% (2021: 9.6%)
-- Underlying EBITDA +36.4% to GBP66.0m (2021: GBP48.4m) with an
improvement in underlying EBITDA margin to 33.0% (2021: 32.8%)
-- Record new business wins +17.7% to GBP24.6m (2021: GBP20.9m)
-- Strong underlying cash conversion of 91% (2021: 87%)
substantially reducing leverage in the period by 0.75x, bringing it
to 1.59x underlying EBITDA at period end, towards the lower end of
the guidance range of 1.5 to 2.0x, providing headroom for further
growth
-- Total dividend +30.1% at 9.98p (2021: 7.67p)
Strategic momentum
-- Commercial Office further established to drive innovation and
growth, which has delivered strong results, with Banking revenues
of GBP11m, Tax Compliance Revenues of GBP9m and Strategic
Transformation Revenues of GBP6m
-- Primarily a year of consolidation for inorganic growth, with
the seven acquisitions made in 2021 integrating well onto the JTC
platform
-- Strategically important NYPTC acquisition made in Q4, enhancing our growing US business
-- Maintained our well invested platform, investing for long-term growth
-- Unique Shared Ownership culture underpinning industry leading employee retention
growth Outlook
-- Good momentum continued in the new year, with strong net
organic growth expected to continue in 2023 and beyond
-- Healthy pipeline of M&A opportunities across both Divisions
-- Remain well on track to deliver the Galaxy era plan, doubling
from FY20 position, earlier than anticipated
-- All medium-term guidance metrics maintained: net organic
revenue growth of 8% - 10% per annum; underlying EBITDA margin of
33% - 38%; cash conversion of 85% - 90% and net debt up to 2.0x
underlying EBITDA
Nigel Le Quesne, CEO of JTC, said:
"2022 was arguably our best year ever in my 30 years at JTC. We
reached the GBP200m revenue milestone, generated 12.0% net organic
revenue growth, secured record new business wins of GBP24.6m and
delivered an underlying EBITDA margin of 33.0%. All of this was
achieved while integrating a record seven acquisitions from 2021
onto our global platform, completing the strategically important
NYPTC deal at an attractive multiple in Q4 and reducing our
leverage to 1.59x underlying EBITDA. The Group has once again
extended its 35 year track record of profitable growth and carries
strong momentum into 2023. We expect to exceed our guidance for
organic growth and maintain a healthy pipeline of acquisition
opportunities. Thanks to the outstanding efforts of our global team
of employee-owners, we are on course to deliver our Galaxy era
business some two years earlier than anticipated."
ENQUIRIES:
JTC PLC +44 (0) 1534 700 000
Nigel Le Quesne, Chief Executive Officer
Martin Fotheringham, Chief Financial Officer
David Vieira, Chief Communications Officer
Camarco +44(0)20 3757 4985
Geoffrey Pelham-Lane
Georgia Edmonds
Sam Morris
A presentation for analysts will be held at 09:30 today via
audio-conference arranged by Camarco.
An audio-cast of the presentation will subsequently be made
available on the JTC website:
www.jtcgroup.com/investor-relations
FORWARD LOOKING STATEMENTS
This announcement may contain forward looking statements. No
forward-looking statement is a guarantee of future performance and
actual results or performance or other financial condition could
differ materially from those contained in the forward looking
statements. These forward-looking statements can be identified by
the fact they do not relate only to historical or current facts.
They may contain words such as "may", "will", "seek", "continue",
"aim", "anticipate", "target", "projected", "expect", "estimate",
"intend", "plan", "goal", "believe", "achieve" or other words with
similar meaning. By their nature forward looking statements involve
risk and uncertainty because they relate to future events and
circumstances. A number of these influences and factors are outside
of the Company's control. As a result, actual results may differ
materially from the plans, goals and expectations contained in this
announcement. Any forward-looking statements made in this
announcement speak only as of the date they are made. Except as
required by the FCA or any applicable law or regulation, the
Company expressly disclaims any obligation or undertaking to
release publicly any updates or revisions to any forward-looking
statements contained in this announcement.
ABOUT JTC
JTC is a publicly listed, global professional services business
with deep expertise in fund, corporate and private client services.
Every JTC person is an owner of the business, and this fundamental
part of our culture aligns us with the best interests of all our
stakeholders. Our purpose is to maximize potential and our success
is built on service excellence, long-term relationships and
technology capabilities that drive efficiency and add value.
www.jtcgroup.com
Chief Executive Officer's review
Growing Together
NIGEL LE QUESNE
CHIEF EXECUTIVE OFFICER
An exceptional year
I am delighted to be able to start the review of 2022 by stating
that it has been arguably the best ever in my 30 years at JTC.
AHEAD OF PLAN TO DELIVER OUR GALAXY ERA GOAL
As a business with a track record of 35 consecutive years of
revenue and profit growth, we are proud of our ability to deliver
against stretching multi-year business plans, which we call eras.
After listing in March 2018, we embarked on our 'Odyssey era'
business plan and doubled the size of the Group (as measured by
revenue and underlying EBITDA) by the end of 2020. We then set
ourselves the challenge of doubling again and named this latest era
'Galaxy', anticipating a four to five year timeframe. 2021 saw us
deliver a record seven acquisitions as well as net organic revenue
growth of 9.6% (17.5% gross). This excellent start to the Galaxy
era continued in 2022 when we delivered a record 12.0% net organic
revenue growth (18.4% gross) and acquired NYPTC in Q4, alongside
successfully integrating the seven acquisitions from 2021. This
exceptional performance against our strategy means that we are
ahead of plan and well on way to delivering Galaxy by the end of
2023.
FINANCIAL PERFORMANCE
Revenue grew 35.6% to reach GBP200.0m for the first time (2021:
GBP147.5m) another significant milestone and underlying EBITDA
increased 36.4% to GBP66.0m (2021: GBP48.4m). Net organic revenue
growth was a record 12.0% (2021: 9.6%) driven by another record in
new business wins of GBP24.6m (2021: GBP20.9m). Despite the
excellent organic growth performance and associated costs of
on-boarding new business, underlying EBITDA margin also increased
by 0.2pp to 33.0% (2021: 32.8%). Cash conversion was once again
robust and above guidance at 91% (2021: 87%) and even with the
acquisition of NYPTC in Q4, which was funded from cash, leverage
stood at 1.59x underlying EBITDA at period end, which is towards
the lower end of our guidance range of 1.5x to 2.0x.
GROWING, WHATEVER THE WEATHER
Our ability to grow consistently even through periods of macro
volatility is something I am often asked to explain and it is
always an opportunity to highlight the strengths of our business
model and global platform. In simple terms, we like to think of it
as in-built load balancing capabilities, but to a large degree it
stems from a culture of constant improvement and an expectation of
improved financial performance year on year, with every team member
knowing that we never settle for less. When the macro environment
is buoyant, we typically benefit from greater flows of new
business, especially from new clients, as institutions and
individuals seek to establish and launch new structures. When
market conditions are less favourable, we often observe a modest
reduction in 'new work from new clients' business volumes, but this
is countered by an increase in activity from existing clients as
they respond to threats and opportunities in relation to their
current structures. As a professional services business with client
contracts that now typically span 14 years or more, the increased
activity within the existing client base generates meaningful
growth. In addition, we are constantly innovating and expanding our
range of services - both through M&A activity and internal
commercial development - to grow the scope of engagement with
existing clients and to win new ones. The most recent examples of
service line expansion include a banking platform (incorporating
foreign exchange, treasury and custody), tax compliance regulatory
reporting and strategic transformation solutions. This constant
desire to innovate and support our clients, extend our
relationships and services, supplemented by new acquisitions,
ensures JTC grows consistently year on year irrespective of the
prevailing external factors.
INSTITUTIONAL CLIENT SERVICES DIVISION
Revenue increased 47.4% to GBP136.7m (2021: GBP92.7m) with a
53.5% increase in underlying EBITDA to GBP43.0m (2021: GBP28.0m).
Pleasingly, and in keeping with the consistent progress seen over
the past two years, the underlying EBITDA margin increased by 1.3pp
to 31.5% (2021: 30.2%) and has increased 3.6pp since 2020. Net
organic growth was strong and increased by 3.1pp to 14.6% (2021:
11.5%) with the annualised value of new business wins increasing by
31% to a record GBP17.2m (2021: GBP13.1m).
In 2021 we completed a record seven acquisitions within the
Division, creating a natural focus in 2022 around integration,
organisation and value capture. The INDOS and Ballybunion
businesses contributed to our growing platform in Ireland, which
also saw us move to a new environmentally friendly office in Dublin
and secure a fund services licence, giving us the complete set of
fund administration, Alternative Investment Fund Manager (AIFM),
depositary and corporate services in the jurisdiction. The RBC cees
business, re-branded to JTC Employer Solutions, remains one of our
most successful acquisitions and continued to go from strength to
strength in terms of growth and margin. We also added the
innovative perfORM Operational Due Diligence (ODD) business, which
is an excellent example of how we expand our range of services
through M&A in a way that complements our organic growth
ambitions. Crucially, we assembled the pieces that will form the
next phase of our push into the large, high-growth US market. The
SALI Fund Services, Segue Partners and EFS acquisitions have been
brought together with our original market-entry deal (NESF, which
was acquired in 2020) to create a substantial US ICS platform of
scale. Our US business now has over 130 employees across seven
offices, serving over 410 clients, including some of the biggest
global names in asset management and insurance.
Outside of those regions bolstered by recent M&A activity,
we also saw good growth in our UK and Luxembourg offices with
stable performance from the Netherlands, Channel Islands and South
Africa. At the end of the year, the Division stood at some 900
people serving clients from 16 offices and generating 68.3% of
Group revenues. This scale and reach, combined with our focus on
providing client service excellence enabled by best-in-class
technology, stands us in good stead to succeed in a competitive
market.
In the second half of the year, the Group Head of ICS, Jon
Jennings, left the business for a new challenge after four
successful years with the Group. Jon was replaced by Dean
Blackburn, who had been appointed the Group Chief Commercial
Officer in 2020 and after a successful tenure working with the ICS
team he was promoted to Group Head of ICS post period end, in
January 2023.
Overall, the ICS Division made exceptional progress in 2022 and
has been a major component of the Group's accelerated progress
through the Galaxy era. As the Division continues to scale,
particularly in the US, we anticipate further strong organic
growth, additional opportunities for M&A and more service line
innovation. I know that Dean is ambitious for long-term success for
the Division and he is supported by a world-class, global team.
PRIVATE CLIENT SERVICES DIVISION
Revenue increased 15.7% to GBP63.4m (2021: GBP54.8m) with an
increase of 12.9% in underlying EBITDA to GBP23.0m (2021:
GBP20.4m). The underlying EBITDA margin decreased slightly, as
anticipated, by 0.9pp to 36.3% (2021: 37.2%) but remains squarely
within our guidance range of 33% - 38% and is as a result of
continued investment in the PCS platform. Reflecting this
investment, net organic growth increased 1.6pp to 8.7% (2021: 7.1%)
with the annualised value of new business wins being GBP7.4m, which
was a strong result against a tough 2021 comparator of GBP7.8m that
included the Group's largest ever single win for 'Project Amaro',
the provision of 'white label' services to a US-based global bank
and its clients. Project Amaro is a prime example of our ability to
deliver strategic transformation services to large clients in a
range of financial services sub-sectors, including banking,
investment management, legal and trust services. Importantly,
strategic transformation spans both our Divisions and will be
actively promoted as a JTC capability in 2023, alongside a direct
to market programme that will target specific prospective
clients.
In the final quarter of the year we acquired New York Private
Trust Company (NYPTC), a high quality private client business
headquartered in Delaware.
This deal enabled us to become the first non-US, non-bank firm
to be licensed to provide trust company services from Delaware, an
important competitive advantage that we will leverage as we use the
acquisition to help build out our domestic trust offering in the
US. Post period end, we also secured a licence to operate in the
Bahamas to support Project Amaro, further expanding the footprint
of the PCS business and providing greater optionality for
clients.
More broadly, the Division's global network continued to deliver
growth across a number of key regions, including its original nexus
in the Channel Islands.
Under Iain's consistent leadership and drive for growth and
innovation, the PCS Division continues to be regarded as the
pre-eminent trust company business and a leader in its markets. It
is now evolving to become more than just a trust company and this
is evidenced by growth in revenues from sophisticated and enhanced
services, such as JTC Private Office, and Group wide services
including strategic transformation, treasury, custody, tax
compliance and regulatory reporting. We are successfully redefining
the parameters of a world-class PCS offering, which in turn
enlarges our addressable market. This innovative and
growth-orientated approach, coupled with our geographic expansion,
particularly in the US, and well-established reputation for client
service excellence, sets the PCS Division on an exciting course for
2023 and beyond.
RISK
JTC continues to have an excellent record in managing the risks
associated with being a leading regulated professional services
business. In 2022 the senior risk team once again focused a large
amount of their time and effort on developing and enhancing our
Risk & Compliance function globally to meet the ever evolving
and increasing burden of international regulation. While this
brings a number of complex challenges, it also provides huge
opportunities for growth and we are embracing these as clients of
all sizes, but especially larger and more complex organisations,
look to us for support and recognise the value we offer in this
area. Emerging service lines such as strategic transformation, tax
compliance and regulatory reporting are all driven, in part or in
whole, by the expanding regulatory landscape.
We continue to see long-term emerging risks come into greater
focus, and in particular, transition risks associated with the
world moving to a low carbon future. In 2022, we created an ESG
Forum within the Executive arm of the business to manage and
deliver our internal sustainability roadmap and oversee target
setting and disclosures. At Board level, the former Audit &
Risk Committee was separated into an Audit Committee and a new Risk
& Governance Committee, with the latter taking responsibility
for oversight of risk at a Group level, as well as providing
guidance on our ongoing sustainability journey and the commercial
opportunities the Group might capture through the provision of ESG
services to clients. We were once again a Carbon Neutral+
organisation in 2022 and post period end, have set ourselves the
goal to achieve net zero by 2030 at the latest. More detail,
including our latest TCFD disclosures, can be read in the
Sustainability section of the Annual Report.
At the time of writing, the conflict in Ukraine is entering its
second year and it remains unclear how or when it will come to an
end. As reported last year, as a Group, we have virtually no
exposure to Russia, Ukraine or Belarus with no operations there and
limited exposure amongst a small number of clients to those
countries. However, we remain acutely aware of our responsibilities
in relation to sanctions compliance and enforce all such measures
rigorously. The knock-on effects relating to energy prices,
inflation and interest rates have been monitored closely at all
times and successfully navigated to date.
OUTLOOK
2022 was an exceptional year for JTC and I am delighted with the
accelerated progress made towards the Galaxy era goal of once again
doubling the size of the Group. Our ability to grow consistently
through periods of volatility is a fundamental feature of the
business that has been refined over 35 years of operations. The
natural rhythm we observe between growth contributions from new and
existing clients is supplemented by our ability to source and
secure the right acquisitions in a consolidating market and to
shape our own future through sophisticated innovation and service
expansion.
None of this would be possible without our people and I am more
convinced than ever that our shared ownership culture is the unique
and vital glue that bonds us together and allows us to execute our
strategies with passion, energy and commitment. This culture
infuses every aspect of our approach to growth, including our
proven ability to integrate acquisitions fully onto the JTC
platform.
Our two Divisions continue to provide balance and
diversification to the Group with the added catalyst of the
Commercial Office and are generating more cross-pollination
opportunities than ever before, particularly in the exciting area
of strategic transformation.
Looking ahead, we have carried good momentum into 2023 and
anticipate continued strong organic growth. We are energised by the
Galaxy era progress already made as well as the prospect of what is
possible in the future. We will continue to ensure that our
platform remains well-invested at all times and that our talented
global team are ready and equipped to grow with the business,
maximise their individual potential and exceed the expectations of
our clients. In a sector that remains primed for consolidation, we
have a healthy pipeline of opportunities and will maintain our
disciplined approach to M&A. JTC will continue to innovate and
shape the markets we serve in a way that supports long-term value
creation for the Group and its stakeholders.
In concluding, I once again extend my thanks to every member of
the growing, talented and market leading JTC team for their efforts
in 2022. We are both stronger together and growing together.
Nigel le Quesne
CHIEF EXECUTIVE OFFICER
Chief Financial Officer's review
Record revenue growth and profits
Martin Fotheringham
CHIEF FINANCIAL OFFICER
REVENUE
In 2022, revenue was GBP200.0m, an increase of GBP52.5m (+35.6%)
from 2021. Revenue growth on a constant currency basis was +32.0%
(2021: +30.9%).
Net organic growth was a record high 12.0% and above our
medium-term guidance range of 8% - 10%. The three year average
stands at 9.8% and the outstanding performance across both these
metrics provides continued evidence and assurance of our ability to
deliver tangible revenue growth from our capital allocation
choices.
Gross new revenue for the year was 18.4% (2021: 17.5%), driven
by new business wins of GBP24.6m (2021: GBP20.9m), with GBP14.4m
recognised in the year (2021: GBP9.8m). Additional revenue
contributed from acquisitions in 2022 was GBP32.8m (2021:
GBP24.7m). This was offset by attrition of 6.4% (2021: 7.9%), with
the three year average now 7.7% (2021: 7.9%). We have seen the
longevity of our client relationships increase and this is driving
the reduction in attrition rates.
The retention of revenues that were not end of life increased to
98.3% (2021: 97.4%). The rolling three year average improved to
97.4%.
We have seen strong growth in the UK & Channel Islands, and
particularly strong growth in the US where we continue to expand
our capabilities whilst integrating numerous acquisitions.
As our business has grown, our revenues have become less
concentrated by region. The table below illustrates clearly that
the US is an increasingly large component of our business. Given
the organic and inorganic growth opportunities in that region, we
anticipate that we will see a continuance of that trend.
Geographical growth is summarised as follows:
2022 2021
Revenue Revenue GBP +/- % +/-
--------------------- ---------- ---------- ---------- -------
UK & Channel Islands GBP107.8m GBP87.0m +GBP20.8m +23.8%
US GBP38.0m GBP15.7m +GBP22.3m +142.9%
Rest of Europe GBP34.3m GBP29.9m +GBP4.4m +14.9%
Rest of the World GBP19.9m GBP14.9m +GBP5.0m +33.2%
GBP200.0m GBP147.5m +GBP52.5m +35.6%
---------- ---------- -------------------------------- -------
Off the back of a strong year for new business, we continue to
report a healthy pipeline of GBP45.8m at 31 December 2022 (2021:
GBP47.9m).
Revenue growth, on a constant currency basis, is summarised as
follows:
2021 Revenue GBP151.6m
------------------------------------- ---------
Lost - JTC decision (GBP0.3m)
------------------------------------- ---------
Lost - Moved service provider (GBP2.0m)
------------------------------------- ---------
Lost - End of life/no longer required (GBP6.0m)
------------------------------------- ---------
Net more from existing clients GBP13.5m
------------------------------------- ---------
New clients GBP10.4m
------------------------------------- ---------
Acquisitions* GBP32.8m
------------------------------------- ---------
2022 Revenue GBP200.0m
------------------------------------- ---------
* When JTC acquires a business, the acquired book of clients are
defined as inorganic for the first two years of JTC ownership.
Acquired clients contributed an additional GBP32.8m in 2022 and is
broken down as follows: NYPTC GBP1.0m, EFS GBP1.5m, SALI GBP13.3m,
Ballybunion GBP1.7m, perfORM GBP0.2m, Segue GBP1.3m, INDOS GBP1.5m,
and RBC cees GBP12.3m.
Management re-iterates its medium-term guidance range of 8% -
10% net organic growth, albeit with the expectation that short-term
growth will be in excess of this guidance range.
UNDERLYING EBITDA AND MARGIN PERFORMANCE
Underlying EBITDA in 2022 was GBP66.0m, an increase of GBP17.6m
(36.4%) from 2021.
The underlying EBITDA margin improved to 33.0% (2021: 32.8%) and
now sits at the beginning of our medium-term guidance range.
Despite a challenging global economic and political backdrop, the
business delivered on the anticipated margin improvement alongside
record revenue growth and the continued integration of
acquisitions.
Whilst we have been pleased with achieving an underlying EBITDA
margin within our guidance range, we have noted that this margin
has been impacted by inflationary cost increases and the continued
upfront investment in human capital that is required to deliver
record levels of growth.
This investment can inherently slow margin progression.
Experience tells us that it can take time and upfront costs before
we are delivering optimal margins on the new business that we win.
However, we believe that this initial investment is key to ensuring
the continuing longevity of our client relationships.
Management re-iterates its medium-term guidance range of 33% -
38%.
INSTITUTIONAL CLIENT SERVICES
Revenue increased by 47.4% when compared with 2021.
Net organic growth improved significantly to 14.6% (2021:
11.5%), with a rolling three year average of 11.0% and strong
growth in the US, UK and Luxembourg. Attrition for the Division was
lower at 7.5% (2021: 8.7%), 5.6% of which were end of life
losses.
Revenue growth, on a constant currency basis, is summarised
below.
The Division's underlying EBITDA margin increased from 30.2% in
2021 to 31.5% in 2022. This continued improvement is the result of
delivering the revised operating model alongside the ongoing, and
successful, integration of the businesses acquired in 2021.
The volume of acquisitions (11) in the last three years has
meant that the Division has required continuous investment and we
are pleased that margins have improved.
REVENUE GROWTH ICS
------------------------------------- ---------
2021 Revenue GBP94.2m
------------------------------------- ---------
Lost - JTC decision (GBP0.2m)
------------------------------------- ---------
Lost - Moved service provider (GBP1.2m)
------------------------------------- ---------
Lost - End of life/no longer required (GBP4.1m)
------------------------------------- ---------
Net more from existing clients GBP9.1m
------------------------------------- ---------
New clients GBP7.1m
------------------------------------- ---------
Acquisitions* GBP31.8m
------------------------------------- ---------
2022 Revenue GBP136.7m
------------------------------------- ---------
* Acquired clients contributed an additional GBP31.8m in 2022
and is broken down as follows: EFS GBP1.5m, SALI GBP13.3m,
Ballybunion GBP1.7m, perfORM GBP0.2m, Segue GBP1.3m, INDOS GBP1.5m,
and RBC cees GBP12.3m.
PRIVATE CLIENT SERVICES
Revenue increased by 15.7% from 2021.
Net organic growth was 8.7% (2021: 7.1%) with a rolling three
year average of 8.3% (2021: 7.8%). Attrition for the Division was
also lower at 4.8% (2021: 6.9%), 3.3% of which was for end of life
losses.
Organic growth for the Division had been lower than normal
whilst we onboarded the Amaro mandate. This was a complex mandate
to fulfil and the solution required 15 months of investment with
the client before we could recognise any revenue. The solution was
delivered on time and we started recognising revenues from 1
October 2022. This mandate will generate a minimum of $4m of annual
revenues.
Revenue growth, on a constant currency basis, is summarised
below.
The Division's underlying EBITDA margin decreased from 37.2% in
2021 to 36.3% in 2022. The Division continues to perform very well
and is comfortably within our medium-term guidance range. This
reduction in margin is explained in large part by the above upfront
investment required to deliver the Amaro solution.
REVENUE GROWTH PCS
------------------------------------- ---------
2021 Revenue GBP57.4m
------------------------------------- ---------
Lost - JTC decision (GBP0.1m)
------------------------------------- ---------
Lost - Moved service provider (GBP0.8m)
------------------------------------- ---------
Lost - End of life/no longer required (GBP1.9m)
------------------------------------- ---------
Net more from existing clients GBP4.4m
------------------------------------- ---------
New clients GBP3.3m
------------------------------------- ---------
Acquisitions* GBP1.0m
------------------------------------- ---------
2022 Revenue GBP63.4m
------------------------------------- ---------
* Acquired clients contributed an additional GBP1.0m in 2022 and
is broken down as follows: NYPTC GBP1.0m.
PROFIT BEFORE TAX
The reported profit before tax was GBP35.9m (2021:
GBP27.8m).
The depreciation and amortisation charge increased to GBP22.3m
in 2022 from GBP17.6m in 2021. GBP3.5m of this increase was as a
result of acquired intangible assets, GBP0.7m as a result of an
increased charge for right-of-use assets reflecting the increased
global footprint of the business, and GBP0.4m for the increased use
of software reflecting the increased importance of technology in
the business.
The increase in amortisation for acquired intangible assets
(GBP3.5m) is significant but the direct result of the acquisitions
we made in 2021.
Adjusting for non-underlying items, the underlying profit before
tax for 2022 was GBP34.1m (2021: GBP24.9m).
NON-UNDERLYING ITEMS
Non-underlying items incurred in the period totalled a GBP1.9m
credit (2021: GBP2.9m credit) and comprised the following:
2022 2021
GBPm GBPm
------------------------------------------------------- ------ ------
EBITDA
------------------------------------------------------- ------ ------
Employee Incentive Plan (EIP) 5.2 14.5
------------------------------------------------------- ------ ------
Acquisition and integration costs 3.4 6.6
------------------------------------------------------- ------ ------
Revision of ICS operating model 0.4 0.4
------------------------------------------------------- ------ ------
Office start-up costs 0.8 -
------------------------------------------------------- ------ ------
Other costs 0.2 0.3
------------------------------------------------------- ------ ------
Total non-underlying items within EBITDA 10.0 21.8
------------------------------------------------------- ------ ------
Profit before tax
------------------------------------------------------- ------ ------
Items impacting EBITDA 10.0 21.8
------------------------------------------------------- ------ ------
Loss/(gain) on revaluation of contingent consideration 0.1 (20.9)
------------------------------------------------------- ------ ------
Loss on settlement of contingent consideration - 0.7
------------------------------------------------------- ------ ------
(Gain) on bargain purchase of RBC cees - (5.4)
------------------------------------------------------- ------ ------
Foreign exchange (gains)/losses (11.9) 0.9
------------------------------------------------------- ------ ------
Total non-underlying items within profit before tax (1.9) (2.9)
------------------------------------------------------- ------ ------
We announced the distribution of the EIP awards in 2021 and the
GBP5.2m charge in the current period relates to the second tranche
of the awards that vested in July 2022.
Acquisition and integration costs were significantly lower
(GBP3.4m) than the prior period and this reflects the fact that
there were seven acquisitions in 2021 compared with one in
2022.
The business incurred GBP0.8m of non-underlying office start-up
costs in relation to pre-trading expenses incurred in order to
establish an additional fund administration offering in Ireland.
This included significant up-front investment in personnel in order
to meet regulatory requirements in advance of obtaining the licence
to trade and generate revenues.
The foreign exchange gain of GBP11.9m relates to the year end
revaluation of intercompany loans. Management considers these
foreign exchange movements to be non-underlying items and not
reflective of the underlying performance of the business.
TAX
The net tax charge in the year was GBP1.2m (2021: GBP1.1m). The
cash tax charge was GBP2.8m (2021: GBP2.6m), but this is reduced by
significant deferred tax credits of GBP1.5m (2021: GBP1.4m) as a
result of movements in relation to the value of acquired intangible
assets held on the balance sheet. Our effective tax rate decreased
from 9.4% to 7.8% in 2022. The decrease is the result of the
utilisation of US tax credits.
The Group regularly reviews its transfer pricing policy and is
fully committed to responsible tax practices. Given the evolving
nature and increasing complexity of the business, JTC performed a
detailed review in 2022 and our policy continues to be fully
compliant with OECD guidelines.
EARNINGS PER SHARE
Basic EPS increased by 16.7% to 23.92p. Adjusted underlying EPS
increased by 30.2% and was 33.27p (2021: 25.55p).
Adjusted underlying basic EPS reflects the profit for the year
adjusted to remove the impact of non-underlying items, amortisation
of acquired intangible assets and associated deferred tax,
amortisation of loan arrangement fees and unwinding of net present
value discounts in relation to contingent consideration.
Every year we issue 1% of our share capital to the JTC EBT. This
is equity that is allocated amongst all JTC staff and we believe
this promotes better client service, a higher staff retention rate
and cultivates our unique culture. Whilst this issuance dilutes
EPS, we firmly believe that the benefits greatly outweigh the
cost.
CASH FLOW AND DEBT
Underlying cash generated from operations was GBP60.3m (2021:
GBP38.4m) and the underlying cash conversion was 91% (2021: 87%).
It is extremely pleasing to deliver cash conversion better than our
medium-term guidance during a period of record high organic growth.
High levels of growth can come with short-term impacts to cash
collection, but the business continues to effectively manage its
working capital needs and management re-iterates its medium-term
guidance range of 85% - 90%. We were pleased to reduce our
pro-forma net investment days to 110 days at the end of the year
(2021: 115 days).
Underlying net debt at the period end was GBP104.8m compared
with GBP113.3m at 31 December 2021. We financed the acquisition of
NYPTC in November without recourse to our debt facilities and by
using cash we generated during the year. Leverage at the year end
was 1.59x underlying EBITDA, a decrease of 0.75x from the level on
31 December 2021 (2.34x). Including the pro-forma EBITDA impact of
the NYPTC acquisition, net leverage is 1.55x.
With no additional drawdowns in 2022, there continues to be
undrawn funds of GBP69.3m available out of the GBP225m banking
facilities secured in 2021.
dividend per share
We are pleased to propose a final dividend of 6.88p, resulting
in a 2022 dividend per share of 9.98p (2021: 7.67p) which was a
30.1% increase on prior year. This is consistent with our dividend
policy to declare at 30% of adjusted underlying EPS.
MARTIN FOTHERINGHAM
CHIEF FINANCIAL OFFICER
Appendix: Reconciliation of reported results to Alternative
Performance Measures (APM s )
In order to assist the reader's understanding of the financial
performance of the Group, APMs have been included to better reflect
the underlying activities of the Group excluding specific items as
set out in note 7 in the financial statements. The Group
appreciates that APMs are not considered to be a substitute for, or
superior to, IFRS measures but believes that the selected use of
these may provide stakeholders with additional information which
will assist in the understanding of the business.
An explanation of our key APMs and link to equivalent statutory
measure has been detailed below.
Alternative performance measure Closest equivalent statutory measure APM Definition
------------------------------- ------------------------------------ -----------------------------------------------
net Organic revenue growth % Revenue Definition: Revenue growth from clients not
acquired through business combinations and
reported
on a constant currency basis where the prior
year results are restated using current year
consolidated income statement exchange rates.
Acquired clients are defined as inorganic for
the first two years of JTC ownership.
Purpose and strategic link: Enables the
business to monitor growth excluding
acquisitions
and the impact of external exchange rate
factors. The current strategy is to double the
size
of the business by a mix of organic and
acquisition growth and the ability to monitor
and
set clear expectations on organic growth is
vital to the successful execution of its
business
strategy.
Management's medium-term guidance range is 8% -
10%.
------------------------------- ------------------------------------ -----------------------------------------------
Underlying EBITDA % Profit/(loss) Definition: Earnings before interest, tax,
depreciation and amortisation excluding
non-underlying
items (see note 7 of the financial statements).
Purpose and strategic link: An
industry-recognised alternative measure of
performance which
has been at the heart of the business since its
incorporation and therefore fundamental to
the performance management of all business
units.
The measure enables the business to measure the
relative profitability of servicing clients.
Management's medium-term guidance range is 33%
- 38%.
------------------------------- ------------------------------------ -----------------------------------------------
Underlying cash conversion % Net cash from operating activities Definition: The conversion of underlying EBITDA
into cash excluding
non-underlying items.
Purpose and strategic link: Measures how
effectively the business is managing its
operating
cash flows. It differs to net cash from
operating profits as it excludes non-underlying
items
and tax, the latter in order to better compare
operating profitability to cash from operating
activities.
Management's medium-term guidance range is 85%
- 90%.
------------------------------- ------------------------------------ -----------------------------------------------
Underlying leverage Cash and cash equivalents Definition: Leverage ratio showing the relative
amount of third party debt that we have in
the business in comparison to underlying
EBITDA.
Purpose and strategic link: Ensures Management
can measure and control exposure to reliance
on third party debt in support of its inorganic
growth.
Management's medium-term guidance range is 1.5x
- 2.0x.
------------------------------- ------------------------------------ -----------------------------------------------
Adjusted underlying EPS (p) Basic Earnings Per Share Definition: Reflects the profit for the year
adjusted to remove the impact of non-underlying
items. Additionally, a number of other items
relating to the Group's acquisition activities,
including amortisation of acquired intangible
assets and associated deferred tax,
amortisation
of loan arrangement fees and unwinding of NPV
discounts in relation to contingent
consideration,
are removed.
Purpose and strategic link: Presents an
adjusted underlying EPS which is used more
widely
by external investors and analysts, and is in
addition the basis upon which the dividend is
calculated.
------------------------------- ------------------------------------ -----------------------------------------------
A reconciliation of our APMs to their closest equivalent
statutory measure has been provided below.
1. ORGANIC GROWTH
2022 2021
GBPm GBPm
------------------------------------ ------ ------
Reported prior year revenue 147.5 115.1
------------------------------------ ------ ------
Impact of exchange rate restatement 4.1 (2.4)
------------------------------------ ------ ------
Acquisition revenues (21.2) (7.2)
------------------------------------ ------ ------
a. Prior year organic growth 130.4 105.5
------------------------------------ ------ ------
Reported revenue 200.0 147.5
------------------------------------ ------ ------
Less: acquisition revenues (54.0) (32.0)
------------------------------------ ------ ------
b. Current year organic growth 146.0 115.5
------------------------------------ ------ ------
Net organic growth % (b / a) -1 12.0% 9.6%
------------------------------------ ------ ------
2. UNDERLYING EBITDA
2022 2021
GBPm GBPm
------------------------------------ ------ ------
Reported profit 34.7 26.6
------------------------------------ ------ ------
Less:
------------------------------------ ------ ------
Income tax 1.2 1.1
------------------------------------ ------ ------
Finance cost 12.3 6.0
------------------------------------ ------ ------
Finance income (0.2) (0.1)
------------------------------------ ------ ------
Other (gains) (14.2) (24.7)
------------------------------------ ------ ------
Depreciation and amortisation 22.3 17.6
------------------------------------ ------ ------
Non-underlying items within EBITDA* 10.0 21.8
------------------------------------ ------ ------
Underlying EBITDA 66.0 48.4
------------------------------------ ------ ------
Underlying EBITDA % 33.0% 32.8%
------------------------------------ ------ ------
* As set out in note 7 in the financial statements
3. UNDERLYING CASH CONVERSION
2022 2021
GBPm GBPm
--------------------------------------------- ----- -----
Net cash generated from operating activities 53.3 28.9
--------------------------------------------- ----- -----
Less:
--------------------------------------------- ----- -----
Non-underlying cash items* 4.9 7.7
--------------------------------------------- ----- -----
Income taxes paid 2.1 1.8
--------------------------------------------- ----- -----
Acquisition normalisation** - 3.6
--------------------------------------------- ----- -----
a. Underlying cash generated from operations 60.3 42.0
--------------------------------------------- ----- -----
b. Underlying EBITDA 66.0 48.4
--------------------------------------------- ----- -----
Underlying cash conversion (a / b) 91% 87%
--------------------------------------------- ----- -----
* As set out in note 35.2 in the financial statements
** Acquisition normalisation refers to the following: In 2021,
GBP3.6m of RBC cees revenues were billed in advance and collected
by the previous owners in advance of JTC ownership.
4. UNDERLYING LEVERAGE
2022 2021
GBPm GBPm
-------------------------------------------------------------------- ------- -------
Cash and cash equivalents 48.9 39.3
-------------------------------------------------------------------- ------- -------
Bank debt (153.6) (152.6)
-------------------------------------------------------------------- ------- -------
Other debt - -
-------------------------------------------------------------------- ------- -------
a. Net debt - underlying (104.8) (113.3)
-------------------------------------------------------------------- ------- -------
b. Underlying EBITDA (see 2. for reconciliation to reported profit) 66.0 48.4
-------------------------------------------------------------------- ------- -------
Leverage (a / b) 1.59 2.34
-------------------------------------------------------------------- ------- -------
5. ADJUSTED UNDERLYING EPS
2022 2021
GBPm GBPm
----------------------------------------------------------------------------------------------- ----- -----
Profit for the year as per basic EPS 34.7 26.7
----------------------------------------------------------------------------------------------- ----- -----
Less:
----------------------------------------------------------------------------------------------- ----- -----
Non-underlying items* (1.9) (2.9)
----------------------------------------------------------------------------------------------- ----- -----
Amortisation of customer relationships, acquired software and brands 12.4 8.8
----------------------------------------------------------------------------------------------- ----- -----
Amortisation of loan arrangement fees 1.1 1.5
----------------------------------------------------------------------------------------------- ----- -----
Unwinding of NPV discounts for contingent consideration 3.5 0.6
----------------------------------------------------------------------------------------------- ----- -----
Temporary tax differences arising on amortisation of customer relationships, acquired software
and brands (1.5) (1.4)
----------------------------------------------------------------------------------------------- ----- -----
a. Adjusted underlying profit for the year 48.3 33.2
----------------------------------------------------------------------------------------------- ----- -----
b. Weighted average number of shares 145.1 130.0
----------------------------------------------------------------------------------------------- ----- -----
Adjusted underlying EPS (a / b) 33.27 25.55
----------------------------------------------------------------------------------------------- ----- -----
* As set out in note 7 in the financial statements
CONSOLIDATED INCOME STATEMENT
FOR THE YEARED 31 DECEMBER 2022
2022 2021
Note GBP'000 GBP'000
-------------------------------------------------------------------------- ---- --------- --------
Revenue 4 200,035 147,502
Staff expenses 5 (105,831) (89,540)
Other operating expenses 6 (35,570) (30,114)
Credit impairment losses 12 (3,092) (1,690)
Other operating income 44 61
Share of profit of equity-accounted investee 32 478 364
-------------------------------------------------------------------------- ---- --------- --------
Earnings before interest, taxes, depreciation and amortisation ("EBITDA") 56,064 26,583
-------------------------------------------------------------------------- ---- --------- --------
Comprising:
Underlying EBITDA 66,039 48,405
Non-underlying items 7 (9,975) (21,822)
-------------------------------------------------------------------------- ---- --------- --------
56,064 26,583
-------------------------------------------------------------------------- ---- --------- --------
Depreciation and amortisation 8 (22,261) (17,591)
-------------------------------------------------------------------------- ---- --------- --------
Profit from operating activities 33,803 8,992
-------------------------------------------------------------------------- ---- --------- --------
Other gains 9 14,201 24,707
Finance income 10 244 112
Finance cost 10 (12,313) (6,028)
-------------------------------------------------------------------------- ---- --------- --------
Profit before tax 35,935 27,783
-------------------------------------------------------------------------- ---- --------- --------
Comprising:
Underlying profit before tax 34,052 24,908
Non-underlying items 7 1,883 2,875
-------------------------------------------------------------------------- ---- --------- --------
35,935 27,783
-------------------------------------------------------------------------- ---- --------- --------
Income tax 11 (1,221) (1,135)
-------------------------------------------------------------------------- ---- --------- --------
Profit for the year 34,714 26,648
-------------------------------------------------------------------------- ---- --------- --------
Earnings per Ordinary share ("EPS") Pence Pence
-------------------------------------------------------------------------- ---- --------- --------
Basic EPS 34.1 23.92 20.49
Diluted EPS 34.2 23.60 20.21
-------------------------------------------------------------------------- ---- --------- --------
The notes are an integral part of these consolidated financial
statements.
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
FOR THE YEARED 31 DECEMBER 2022
2022 2021
Note GBP'000 GBP'000
------------------------------------------------------------------------- ---- -------- --------
Profit for the year 34,714 26,648
------------------------------------------------------------------------- ---- -------- --------
Other comprehensive income/(loss)
Items that may be reclassified to profit or loss
Exchange difference on translation of foreign operations (net of tax) 38 21,314 (2,476)
Items that will not be reclassified to profit or loss:
Remeasurements of post-employment benefit obligations 5 316 61
------------------------------------------------------------------------- ---- -------- --------
Total comprehensive income for the year 56,344 24,233
------------------------------------------------------------------------- ---- -------- --------
The notes are an integral part of these consolidated financial
statements.
CONSOLIDATED BALANCE SHEET
AS AT 31 DECEMBER 2022
2022 2021
Note GBP'000 GBP'000
-------------------------------- ---- -------- --------
Assets
Property, plant and equipment 20 49,566 48,340
Goodwill 21 363,708 341,605
Other intangible assets 21 128,020 120,715
Investments 32 3,156 2,638
Other non-financial assets 22 2,369 558
Other receivables 15 535 988
Deferred tax assets 23 143 119
-------------------------------- ---- -------- --------
Total non-current assets 547,497 514,963
-------------------------------- ---- -------- --------
Trade receivables 12 33,290 28,870
Work in progress 13 12,525 12,834
Accrued income 14 23,911 19,587
Other non-financial assets 22 5,983 4,147
Other receivables 15 3,827 2,090
Cash and cash equivalents 16 48,861 39,326
-------------------------------- ---- -------- --------
Total current assets 128,397 106,854
-------------------------------- ---- -------- --------
Total assets 675,894 621,817
-------------------------------- ---- -------- --------
Equity
Share capital 26.1 1,491 1,476
Share premium 26.1 290,435 285,852
Own shares 26.2 (3,697) (3,366)
Capital reserve 26.3 24,361 17,536
Translation reserve 26.3 15,979 (5,335)
Retained earnings 26.3 71,648 48,462
-------------------------------- ---- -------- --------
Total equity 400,217 344,625
-------------------------------- ---- -------- --------
Liabilities
Trade and other payables 17 26,896 22,903
Loans and borrowings 18 153,622 152,578
Lease liabilities 19 40,602 37,916
Deferred tax liabilities 23 11,184 24,355
Other non-financial liabilities 24 788 956
Provisions 25 1,884 1,720
-------------------------------- ---- -------- --------
Total non-current liabilities 234,976 240,428
-------------------------------- ---- -------- --------
Trade and other payables 17 23,424 19,497
Lease liabilities 19 4,292 5,463
Other non-financial liabilities 24 8,628 8,579
Current tax liabilities 11 4,088 2,978
Provisions 25 269 247
-------------------------------- ---- -------- --------
Total current liabilities 40,701 36,764
-------------------------------- ---- -------- --------
Total equity and liabilities 675,894 621,817
-------------------------------- ---- -------- --------
The consolidated financial statements were approved by the Board
of Directors on 6 April 2023 and signed on its behalf by:
Nigel Le Quesne
CHIEF EXECUTIVE OFFICER
Martin Fotheringham
CHIEF FINANCIAL OFFICER
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
FOR THE YEARED 31 DECEMBER 2022
Share Share Own Capital Translation Retained Total
capital premium shares reserve reserve earnings equity
Note GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
-------------------------------------- ---- -------- -------- -------- -------- ----------- --------- --------
Balance at 1 January 2022 1,476 285,852 (3,366) 17,536 (5,335) 48,462 344,625
Profit for the year - - - - - 34,714 34,714
Other comprehensive income - - - - 21,314 316 21,630
-------------------------------------- ---- -------- -------- -------- -------- ----------- --------- --------
Total comprehensive income for the
year - - - - 21,314 35,030 56,344
-------------------------------------- ---- -------- -------- -------- -------- ----------- --------- --------
Issue of share capital 26.1 15 4,654 - - - - 4,669
Cost of share issuance 26.1 - (71) - - - - (71)
Share-based payment expense 36.2 - - - 2,045 - - 2,045
EIP share-based payment expense 36.2 - - - 4,780 - - 4,780
Movement of own shares 26.2 - - (331) - - - (331)
Dividends paid 27 - - - - - (11,844) (11,844)
-------------------------------------- ---- -------- -------- -------- -------- ----------- --------- --------
Total transactions with owners 15 4,583 (331) 6,825 - (11,844) (752)
-------------------------------------- ---- -------- -------- -------- -------- ----------- --------- --------
Balance at 31 December 2022 1,491 290,435 (3,697) 24,361 15,979 71,648 400,217
-------------------------------------- ---- -------- -------- -------- -------- ----------- --------- --------
Balance at 1 January 2021 1,225 130,823 (3,084) 1,456 (2,859) 30,844 158,405
Profit for the year - - - - - 26,648 26,648
Other comprehensive loss - - - - (2,476) 61 (2,415)
-------------------------------------- ---- -------- -------- -------- -------- ----------- --------- --------
Total comprehensive income for the
year - - - - (2,476) 26,709 24,233
-------------------------------------- ---- -------- -------- -------- -------- ----------- --------- --------
Issue of share capital 26.1 251 159,537 - - - - 159,788
Cost of share issuance 26.1 - (4,508) - - - - (4,508)
Share-based payment expense 36.2 - - - 2,164 - - 2,164
EIP share-based payment expense 36.1 - - - 13,916 - - 13,916
Movement of own shares 26.2 - - (282) - - - (282)
Dividends paid 27 - - - - - (9,091) (9,091)
-------------------------------------- ---- -------- -------- -------- -------- ----------- --------- --------
Total transactions with owners 251 155,029 (282) 16,080 - (9,091) 161,987
-------------------------------------- ---- -------- -------- -------- -------- ----------- --------- --------
Balance at 31 December 2021 1,476 285,852 (3,366) 17,536 (5,335) 48,462 344,625
-------------------------------------- ---- -------- -------- -------- -------- ----------- --------- --------
The notes are an integral part of these consolidated financial
statements.
CONSOLIDATED CASH FLOW STATEMENT
FOR THE YEARED 31 DECEMBER 2022
2022 2021
Note GBP'000 GBP'000
------------------------------------------------------- ---- -------- ---------
Cash generated from operations 35.1 55,366 30,697
------------------------------------------------------- ---- -------- ---------
Income taxes paid (2,053) (1,835)
------------------------------------------------------- ---- -------- ---------
Net movement in cash generated from operations 53,313 28,862
------------------------------------------------------- ---- -------- ---------
Comprising:
Underlying cash generated from operations 60,308 38,402
Non-underlying cash items 35.2 (4,942) (7,705)
------------------------------------------------------- ---- -------- ---------
55,366 30,697
------------------------------------------------------- ---- -------- ---------
Investing activities
Interest received 254 87
Property, plant and equipment 20 (2,979) (1,378)
Intangible assets 21 (5,491) (1,603)
Business combinations (net of cash acquired) 31 (15,113) (186,433)
Costs to obtain or fulfil a contract 22 (2,210) (1,017)
Loans to related parties - (415)
------------------------------------------------------- ---- -------- ---------
Net cash used in investing activities (25,539) (190,759)
------------------------------------------------------- ---- -------- ---------
Financing activities
Proceeds from issue of shares - 144,801
Share issuance costs (169) (4,409)
Purchase of own shares (320) (269)
Dividends paid 27 (11,844) (9,091)
Proceeds from repayment of employee loans - 2,028
Repayment of loans and borrowings - (125,099)
Proceeds from loans and borrowings - 176,662
Loan arrangement fees - (3,364)
Interest paid on loans and borrowings (6,173) (2,571)
Facility fees paid on loans and borrowings - (285)
Repayment of other loans - (2,684)
Principal paid on lease liabilities (4,907) (4,639)
Interest paid on lease liabilities (1,336) (1,183)
------------------------------------------------------- ---- -------- ---------
Net cash (used in)/generated from financing activities (24,749) 169,896
------------------------------------------------------- ---- -------- ---------
Net increase in cash and cash equivalents 3,025 7,999
------------------------------------------------------- ---- -------- ---------
Cash and cash equivalents at the beginning of the year 39,326 31,078
------------------------------------------------------- ---- -------- ---------
Effect of foreign exchange rate changes 6,510 249
------------------------------------------------------- ---- -------- ---------
Cash and cash equivalents at the end of the year 16 48,861 39,326
------------------------------------------------------- ---- -------- ---------
The notes are an integral part of these consolidated financial
statements.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARED 31 DECEMBER 2022
SECTION 1 - BASIS FOR REPORTING AND GENERAL INFORMATION
1. Reporting entity
2. Basis of preparation
3. Significant accounting policies and standards
SECTION 2 - RESULT FOR THE YEAR
4. Operating segments
5. Staff expenses
6. Other operating expenses
7. Non-underlying items
8. Depreciation and amortisation
9. Other gains
10. Finance income and finance cost
11. Income tax
SECTION 3 - FINANCIAL ASSETS AND FINANCIAL LIABILITIES
12. Trade receivables
13. Work in progress
14. Accrued income
15. Other receivables
16. Cash and cash equivalents
17. Trade and other payables
18. Loans and borrowings
19. Lease liabilities
SECTION 4 - NON-FINANCIAL ASSETS AND NON-FINANCIAL
LIABILITIES
20. Property, plant and equipment
21. Goodwill and other intangible assets
22. Other non-financial assets
23. Deferred taxation
24. Other non-financial liabilities
25. Provisions
SECTION 5 - EQUITY
26. Share capital and reserves
27. Dividends
SECTION 6 - RISK
28. Critical accounting estimates and judgements
29. Financial risk management
30. Capital management
SECTION 7 - GROUP STRUCTURE
31. Business combinations
32. Investments
33. Subsidiaries
SECTION 8 - OTHER DISCLOSURES
34. Earnings Per Share
35. Cash flow information
36. Share-based payments
37. Contingencies
38. Foreign currency
39. Related party transactions
40. Consideration of climate change
41. Events occurring after the reporting period
SECTION 1 - BASIS FOR REPORTING AND GENERAL INFORMATION
1. REPORTING ENTITY
JTC PLC (the "Company") was incorporated on 12 January 2018 and
is domiciled in Jersey, Channel Islands. The Company was admitted
to the London Stock Exchange on 14 March 2018 (the "IPO"). The
address of the Company's registered office is 28 Esplanade, St
Helier, Jersey.
The consolidated financial statements of the Company for the
year ended 31 December 2022 comprise the Company and its
subsidiaries (together the "Group" or "JTC") and the Group's
interest in an associate and investments.
The Group provides fund, corporate and private wealth services
to institutional and private clients.
2. BASIS OF PREPARATION
2.1. STATEMENT OF COMPLIANCE AND BASIS OF MEASUREMENT
The consolidated financial statements have been prepared in
accordance with International Financial Reporting Standards
("IFRS") as adopted by the European Union, the interpretations of
the IFRS Interpretations Committee ("IFRS IC") and Companies
(Jersey) Law 1991.
The consolidated financial statements are prepared on a going
concern basis and under the historical cost convention except for
the following:
-- Certain financial liabilities measured at fair value (see
note 29)
-- Defined benefit liabilities/(assets) recognised at the fair
value of plan assets less the present value of defined benefit
obligations (see note 5).
In assessing the going concern assumption, the Directors
considered the challenging global economic and political backdrop,
and increasing inflationary pressures, and noted that the Group
continued to experience revenue growth and generate positive cash
flows from its operating activities. Considering these factors as
part of the review of the Group's financial performance and
position, forecasts and expected liquidity, the Directors have a
reasonable expectation that the Group will have adequate resources
to continue in operational existence for the foreseeable future,
being at least 12 months from the date of approval of the
consolidated financial statements. They have concluded it is
appropriate to adopt the going concern basis of accounting in
preparing the consolidated financial statements.
2.2. FUNCTIONAL AND PRESENTATION CURRENCY
The consolidated financial statements are presented in pounds
sterling, which is the functional and reporting currency of the
Company and the presentation currency of the consolidated financial
statements. All amounts disclosed in the consolidated financial
statements and notes have been rounded to the nearest thousand
(GBP'000) unless otherwise stated.
3. SIGNIFICANT ACCOUNTING POLICIES AND STANDARDS
3.1. CHANGES IN ACCOUNTING POLICIES AND NEW STANDARDS
ADOPTED
The accounting policies set out in these consolidated financial
statements have been consistently applied to all the years
presented, and have been applied consistently by Group entities.
There have been no significant changes compared with the prior year
consolidated financial statements as at and for the year ended 31
December 2021.
To the extent relevant, all IFRS standards and interpretations,
including amendments that were in issue and effective from 1
January 2022, have been adopted by the Group from 1 January 2022.
These standards and interpretations had no material impact for the
Group.
New and amended standards adopted by the Group
The Group has applied the following amendments for the first
time for the annual reporting period commencing 1 January 2022:
-- Property, Plant and Equipment: Proceeds before Intended Use -
Amendments to IAS 16
-- Onerous Contracts - Cost of Fulfilling a Contract -
Amendments to IAS 37
-- Annual Improvement to IFRS Standards 2018-2020
-- Reference to the Conceptual Framework - Amendments to IFRS
3
The amendments listed above did not have any impact on the
amounts recognised in prior periods and are not expected to
significantly affect the current or future periods.
New standards and interpretations not yet adopted
Certain new accounting standards and interpretations have been
published that are not mandatory for 31 December 2022 reporting
periods and have not been early adopted by the Group. These
standards are not expected to have a material impact on the entity
in the current or future reporting periods or on foreseeable future
transactions.
3.2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The basis of consolidation is described below, otherwise
significant accounting policies related to specific items are
described under the relevant note. The description of the
accounting policy in the notes forms an integral part of the
accounting policies. Unless otherwise stated, these policies have
been consistently applied to all the years presented.
Basis of consolidation
The consolidated financial statements incorporate the financial
statements of the Company and entities controlled by the Company
(its "subsidiaries"). The Group controls an entity when it is
exposed to, or has rights to, variable returns from its involvement
with the entity and has the ability to affect those returns through
its power to direct the activities of the entity.
De-facto control exists where the Company has the practical
ability to direct the relevant activities of the investee without
holding the majority of the voting rights. In determining whether
de-facto control exists the Company considers the size of the
Company's voting rights relative to other parties, substantive
potential voting rights held by the Company and by other parties,
other contractual arrangements and historical patterns in voting
attendance.
Subsidiaries are fully consolidated from the date on which
control is transferred to the Group. They are deconsolidated from
the date that control ceases. When the Group loses control over a
subsidiary, it derecognises the assets and liabilities of the
subsidiary, and any related non-controlling interest and other
components of equity. Any resulting gain or loss is recognised in
the consolidated income statement.
Where necessary, adjustments are made to the financial
statements of subsidiaries to bring their accounting policies in
line with the Group. All inter-company transactions and balances,
including unrealised gains and losses, arising from transactions
between Group companies are eliminated on consolidation.
The acquisition method of accounting is used to account for
business combinations by the Group (see note 31). Associates and
investments in associates are accounted for via the equity method
of accounting (see note 32).
Company only financial statements
Under Article 105(11) of the Companies (Jersey) Law 1991, the
directors of a holding company need not prepare separate financial
statements (i.e. company only financial statements). Separate
financial statements for the Company are not prepared unless
required to do so by the members of the Company by ordinary
resolution. The members of the Company had not passed a resolution
requiring separate financial statements and, in the Directors'
opinion, the Company meets the definition of a holding company. As
permitted by law, the Directors have elected not to prepare
separate financial statements.
SECTION 2 - RESULT FOR THE YEAR
4. OPERATING SEGMENTS
Revenue recognition
Revenue is measured as the fair value of the consideration
received or receivable for satisfying performance obligations
contained in contracts with customers excluding discounts, VAT and
other sales-related taxes.
To recognise revenue in accordance with IFRS 15 "Revenue from
Contracts with Customers", the Group applies the five step
approach: identify the contract(s) with a customer, identify the
performance obligations in the contract, determine the transaction
price, allocate the transaction price to the performance
obligations and recognise revenue when, or as, performance
obligations are satisfied by the Group.
The Group enters into contractual agreements with institutional
and private clients for the provision of fund, corporate and
private client services. The agreements set out the services to be
provided and each component is distinct and can be performed and
delivered separately. For each of these performance obligations,
the transaction price can be either a pre-set (fixed) fee based on
the expected amount of work to be performed or a variable time
spent fee for the actual amount of work performed. For some
clients, the fee for agreed services is set at a percentage of the
net asset value ("NAV") of funds being administered or deposits
held. Where contracts include multiple performance obligations, the
transaction price is allocated to each performance obligation based
on its stand-alone selling price.
Revenue is recognised in the consolidated income statement when,
or as, the Group satisfies performance obligations by transferring
control of services to clients. This occurs as follows depending
upon the nature of the contract for services:
-- Variable fees are recognised over time as services are
provided at the agreed charge out rates in force at the work date
where there is an enforceable right to payment for performance
completed to date. Time recorded but not invoiced is shown in the
consolidated balance sheet as work in progress (see note 13). To
determine the transaction price, an assessment of the variable
consideration for services rendered is performed by estimating the
expected value, including any price concessions, of the unbilled
amount due from clients for the work performed to date (see note
28.2).
-- Pre-set (fixed), cash management and NAV based fees are
recognised over time; based on the actual service provided to the
end of the reporting period as a proportion of the total services
to be provided where there is an enforceable right to payment for
performance completed to date. This is determined based on the
actual inputs of time and expenses relative to the total expected
inputs. Where services have been rendered and performance
obligations have been met but clients have not been invoiced at the
reporting date, accrued income is recognised, this is recorded
based on agreed fees to be billed in arrears (see note 14). Where
fees are billed in advance in respect of services under contract
and give rise to a trade receivable when recognised, deferred
income is recognised and released to revenue on a time apportioned
basis in the appropriate reporting period (see note 24).
The Group does not adjust transaction prices for the time value
of money as it does not have any contracts where the period between
the transfer of the promised services to the client and the payment
by the client exceeds one year.
4.1. BASIS OF SEGMENTATION
The Group has a multi-jurisdictional footprint and the core
focus of operations is on providing services to its institutional
and private client base, with revenues from alternative asset
managers, financial institutions, corporates, HNW and UHNW
individuals and family office clients. Recognised revenue is
generated from external customers. Business activities include:
Fund services
Supporting a diverse range of asset classes, including real
estate, private equity, renewables, hedge, debt and alternative
asset classes providing a comprehensive set of fund administration
services (e.g. fund launch, NAV calculations, accounting,
compliance and risk monitoring, investor reporting, listing
services).
Corporate services
Includes clients spanning across small and medium entities,
public companies, multinationals, sovereign wealth funds, fund
managers, HNW and UHNW individuals and families requiring a
'corporate' service for business and investments. As well as entity
formation, administration and other company secretarial services,
the Group also services international and local pension plans,
employee share incentive plans, employee ownership plans and
deferred compensation plans.
Private client services
Supporting HNW and UHNW individuals and families, from 'emerging
entrepreneurs' to established single and multi-family offices.
Services include JTC's own comprehensive Private Office, a range of
cash management, foreign exchange and lending services, as well as
the formation and administration of trusts, companies,
partnerships, and other vehicles and structures across a range of
asset classes, including cash and investments.
The Chief Executive Officer and Chief Financial Officer are
together the Chief Operating Decision Makers of the Group and
determine the appropriate business segments to monitor financial
performance. Each segment is defined as a set of business
activities generating a revenue stream determined by divisional
responsibility and the management information reviewed by the
Board. They have determined that the Group has two reportable
segments: these are Institutional Client Services and Private
Client Services.
4.2. SEGMENTAL INFORMATION
The table below shows the segmental information provided to the
Board for the two reportable segments (ICS and PCS) on an
underlying basis:
ICS PCS Total
------------------ ------------------ ------------------
2022 2021 2022 2021 2022 2021
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
--------------------------------- -------- -------- -------- -------- -------- --------
Revenue 136,657 92,706 63,378 54,796 200,035 147,502
Direct staff costs (56,157) (39,256) (24,525) (20,025) (80,682) (59,281)
Other direct costs (2,499) (640) (1,874) (1,467) (4,373) (2,107)
Underlying gross profit 78,001 52,810 36,979 33,304 114,980 86,114
Underlying gross profit margin % 57.1% 57.0% 58.3% 60.8% 57.5% 58.4%
Indirect staff costs (12,091) (8,225) (6,414) (6,296) (18,505) (14,521)
Other operating expenses (22,886) (16,573) (8,072) (7,040) (30,958) (23,613)
Other income 9 18 513 407 522 425
Underlying EBITDA 43,033 28,030 23,006 20,375 66,039 48,405
Underlying EBITDA margin % 31.5% 30.2% 36.3% 37.2% 33.0% 32.8%
--------------------------------- -------- -------- -------- -------- -------- --------
The Board evaluates segmental performance based on revenue,
underlying EBITDA and underlying EBITDA margin. Profit before tax
is not used to measure the performance of the individual segments
as items such as depreciation, amortisation of intangibles, other
gains and finance costs are not allocated to individual segments.
Consistent with the aforementioned reasoning, segment assets and
liabilities are not reviewed regularly on a by-segment basis and
are therefore not included in segmental reporting.
4.3. GEOGRAPHICAL INFORMATION
The table below shows revenue generated by the geographical
location of the contracting Group entity.
Increase/(decrease)
---------------------
2022 2021
GBP'000 GBP'000 GBP'000 %
--------------------- -------- -------- ----------- --------
UK & Channel Islands 107,778 87,038 20,740 23.8%
US 38,039 15,661 22,378 142.9%
Rest of Europe 34,323 29,867 4,456 14.9%
Rest of the World 19,895 14,935 4,960 33.2%
200,035 147,501 52,534 35.6%
--------------------- -------- -------- ----------- --------
The geographical location is based on the jurisdiction in which
the legal entity is based and not on the location of the
client.
No single customer made up more than 10% of the Group's revenue
in the current or prior year.
5. STAFF EXPENSES
EMPLOYEE BENEFITS
Short-term benefits
Short-term employee benefits are expensed as the related service
is provided. A liability is recognised for the amount expected to
be paid if the Group has a present legal or constructive obligation
to pay this amount as a result of past service provided by the
employee, and the obligation can be estimated reliably.
Defined contribution pension plans
Under defined contribution pension plans, the Group pays
contributions to publicly or privately administered pension
insurance plans. The Group has no further payment obligation once
the contributions have been paid. The contributions are recognised
as an employee benefit expense when they are due.
Defined benefit pension plans
The liability or asset recognised in the consolidated balance
sheet in respect of defined benefit pension plans is the present
value of the defined benefit obligation at the end of the reporting
period less the fair value of plan assets. The calculation of
defined benefit obligations is performed annually by independent
qualified actuaries using the projected unit credit method.
The present value of the defined benefit obligation is
determined by discounting the estimated future cash outflows using
interest rates of high quality corporate bonds that are denominated
in the currency in which the benefits will be paid, and that have
terms approximating to the terms of the related obligation. In
countries where there is no established market in such bonds, the
market rates on local government bonds are used.
The net interest cost is calculated by applying the discount
rate to the net balance of the defined benefit obligation and the
fair value of plan assets. This cost is included as an employee
benefit expense in the consolidated income statement.
Remeasurement gains and losses arising from experience
adjustments and changes in actuarial assumptions are recognised in
the period in which they occur, directly in other comprehensive
income. They are included in retained earnings in the consolidated
statement of changes in equity and the consolidated balance
sheet.
Changes in the present value of the defined benefit obligation
resulting from plan amendments or curtailments are recognised
immediately in the consolidated income statement as past service
costs.
Termination benefits
Termination benefits are expensed at the earlier of when the
Group can no longer withdraw the offer of those benefits and when
the Group recognises costs for a restructuring that is within the
scope of IAS 37 and involves the payment of termination benefits.
If benefits are not expected to be settled wholly within one year
of the end of the reporting period, then they are discounted to
their present value using an appropriate discount rate.
2022 2021
Note GBP'000 GBP'000
----------------------------------------------------- ---- -------- --------
Salaries and Directors' fees 82,739 62,685
Employer-related taxes and other staff-related costs 8,841 6,141
Other short-term employee benefits 3,508 2,099
Pension employee benefits(1) 3,841 2,535
Share-based payments 36.2 2,122 2,164
Employee Incentive Plan ("EIP") share-based payments 36.2 4,780 13,916
----------------------------------------------------- ---- -------- --------
105,831 89,540
----------------------------------------------------- ---- -------- --------
1 Pension employee benefits include defined contributions of
GBP3.41m (2021: GBP2.39m) and defined benefits of GBP0.43m (2021:
GBP0.14m).
Defined benefit pension plans
The Group operates defined benefit pension plans in Switzerland
and Mauritius. Both plans are contribution based with guarantee of
a minimum interest credit and fixed conversion rates at retirement.
Disability and death benefits are defined as a percentage of the
insured salary.
At 31 December 2022, the Group net defined benefit obligation
recognised on the consolidated balance sheet in respect of amounts
that are expected to be paid out to employees was GBP0.6m (2021:
GBP0.8m). The Group does not expect a significant change in
contributions for the following years.
The Swiss plan must be fully funded in accordance with Swiss
Federal Law on Occupational Benefits (LPP/BVG) on a static basis at
all times. The subsidiary, JTC (Suisse) SA, is affiliated to the
collective foundation Swiss Life. The collective foundation is a
separate legal entity. The foundation is responsible for the
governance of the plan, the board is composed of an equal number of
representatives from the employers and the employees chosen from
all affiliated companies. The foundation has set up investment
guidelines, defining in particular the strategic allocation with
margins. Additionally, there is a pension committee responsible for
the set-up of the plan benefit, this is composed of an equal number
of representatives of JTC (Suisse) SA and its employees.
The Mauritius plan is administered by Swan Life Ltd. JTC
Fiduciary Services (Mauritius) Limited is required to contribute a
specific percentage of payroll costs to the retirement benefit
scheme. Employees under this pension plan are entitled to statutory
benefits prescribed under parts VIII and IX of the Workers' Rights
Act 2019.
The amounts recognised in the consolidated balance sheet are as
follows:
2022 2021
GBP'000 GBP'000
------------------------------------- -------- --------
Present value of funded obligations (3,344) (2,010)
Fair value of plan assets(1) 2,772 1,233
------------------------------------- -------- --------
Consolidated balance sheet liability (572) (777)
------------------------------------- -------- --------
1 All plan assets are held in insurance contracts.
The movement in the net defined benefit obligation recognised in
the consolidated balance sheet is as follows:
2022 2021
------------------------------------ ------------------------------------
Defined Fair value Net defined Defined Fair value Net defined
benefit of plan benefit benefit of plan benefit
obligation assets obligation obligation assets obligation
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
------------------------------------------ ----------- ---------- ----------- ----------- ---------- -----------
At 1 January 2,010 1,233 777 2,285 1,382 903
Included in the consolidated income
statement
Current service cost 233 - 233 207 - 207
Past service cost 18 - 18 (66) - (66)
Interest 13 4 9 5 1 4
------------------------------------------ ----------- ---------- ----------- ----------- ---------- -----------
Total 264 4 260 146 1 145
------------------------------------------ ----------- ---------- ----------- ----------- ---------- -----------
Included in other comprehensive
income/(loss)
Remeasurements loss/(gain):
* Change in financial assumptions (739) - (739) (42) - (42)
* Experience adjustment 432 - 432 (93) - (93)
* Return on plan assets - 9 (9) - (74) 74
------------------------------------------ ----------- ---------- ----------- ----------- ---------- -----------
Total (307) 9 (316) (135) (74) (61)
------------------------------------------ ----------- ---------- ----------- ----------- ---------- -----------
Other
Contributions:
* Employers - 214 (214) - 177 (177)
* Plan participants 105 105 - 87 87 -
Benefit payments 994 994 - (302) (302) -
Exchange differences 276 211 65 (71) (38) (33)
------------------------------------------ ----------- ---------- ----------- ----------- ---------- -----------
Total 1,375 1,524 (149) (286) (76) (210)
------------------------------------------ ----------- ---------- ----------- ----------- ---------- -----------
At 31 December 3,342 2,770 572 2,010 1,233 777
------------------------------------------ ----------- ---------- ----------- ----------- ---------- -----------
The plans are exposed to actuarial risks relating to discount
rate, interest rate for the projection of the savings capital,
salary increase and pension increase.
The principal annual actuarial assumptions used for the IAS 19
disclosures were as follows:
Switzerland Mauritius
-------------------------------------- ----------- ---------
Discount rate at 1 January 2022 0.3% 4.6%
Discount rate at 31 December 2022 2.4% 5.2%
Future salary increases 1.6% 4.0%
Rate of increase in deferred pensions 0.0% 0.0%
-------------------------------------- ----------- ---------
In Switzerland, longevity must be reflected in the defined
benefit liability. The mortality probabilities were determined
based on BVG 2020 Generational tables (CMI 1.25%) and the life
expectancy is as follows:
2022 2021
Years Years
-------------------------------------------------------------- ------ ------
Mortality probabilities for pensioners at age 65
* Males 21.84 21.70
* Females 23.58 23.41
Mortality probabilities at age 65 for current members aged 45
* Males 23.50 23.29
* Females 25.18 24.98
-------------------------------------------------------------- ------ ------
6. OTHER OPERATING EXPENSES
Other operating expenses are accounted for on an accruals
basis.
2022 2021
GBP'000 GBP'000
---------------------------------------------------- -------- --------
Third party administration fees 4,403 2,300
Legal and professional fees(1) 8,354 9,846
Auditor's remuneration for audit services 1,255 1,126
Auditor's remuneration for other assurance services 337 190
Establishment costs 3,618 2,611
Insurance 1,660 1,703
Travel and accommodation 1,772 433
Marketing 1,950 1,493
IT expenses 9,286 7,942
Telephone and postage 1,638 1,390
Other expenses 1,297 1,080
---------------------------------------------------- -------- --------
Other operating expenses 35,570 30,114
---------------------------------------------------- -------- --------
1 Included in legal and professional fees are GBP1.4m (2021: GBP5.2m) of non-underlying items.
7. NON-UNDERLYING ITEMS
Non-underlying items represent specific items of income or
expenditure that are not of a continuing operational nature or do
not represent the underlying operating results, and based on their
significance in size or nature are presented separately to provide
further understanding about the financial performance of the
Group.
2022 2021
Note GBP'000 GBP'000
---------------------------------------------------------- ---- -------- --------
EBITDA 56,064 26,583
---------------------------------------------------------- ---- -------- --------
Non-underlying items within EBITDA:
Acquisition and integration costs(1) 3,380 6,610
Revision of ICS operating model(2) 402 421
Office start-up costs(3) 768 -
Other(4) 228 263
EIP share-based payments(5) 5,197 14,528
---------------------------------------------------------- ---- -------- --------
Total non-underlying items within EBITDA 9,975 21,822
---------------------------------------------------------- ---- -------- --------
Underlying EBITDA 66,039 48,405
---------------------------------------------------------- ---- -------- --------
Profit before tax 35,935 27,783
---------------------------------------------------------- ---- -------- --------
Total non-underlying items within EBITDA 9,975 21,822
Gain on bargain purchase(6) 9 - (5,357)
Loss/(gain) on revaluation of contingent consideration(7) 9 78 (20,910)
Loss on settlement of contingent consideration(8) 9 - 701
Foreign exchange (gains)/losses(9) 9 (11,936) 869
---------------------------------------------------------- ---- -------- --------
Total non-underlying items within profit before tax (1,883) (2,875)
---------------------------------------------------------- ---- -------- --------
Underlying profit before tax 34,052 24,908
---------------------------------------------------------- ---- -------- --------
1 Acquisition and integration costs include deal and tax
advisory fees, legal and professional fees, any client-acquired
penalties, staff reorganisation costs and other integration costs.
This includes acquisition-related share-based payment awards
granted to act as retention tools for key management and/or to
recruit senior management to support various acquisitions. Most
acquisition and integration costs are incurred in the first two
years following acquisition, but this period can be longer
depending on the nature of the costs.
2 During 2022, the Group incurred costs to complete the
implementation of a revised operating model for the fund services
practice; the timing of delivery was initially impacted by
Covid-19.
3 Relates to pre-trading costs incurred by the Group in order to
establish an additional fund administration offering in Ireland.
This included significant up-front investment in personnel in order
to meet regulatory requirements in advance of obtaining the license
to trade and generate profits.
4 This includes further legal costs relating to a regulatory
action from the Dutch Central Bank and aborted project costs.
5 Following the conclusion of the Odyssey business plan era at
the end of 2020, share awards with a two year vesting period were
made to staff members under the EIP (see note 36.1); the expense
includes employer-related taxes relating to the share awards.
6 Gain on bargain purchase arising on the acquisition of RBC cees (see note 31.2).
7 Includes a loss on revaluation of contingent consideration for
Segue of GBP0.13m (see note 31.4) and a gain on revaluation of
liability-classified contingent consideration payable for perfORM
of GBP0.05m (see note 31.5). The prior year gain related to the
release of the NESF contingent consideration.
8 In the prior year, a loss was recognised on settlement of the
holdback fund share consideration for NESF.
9 Foreign exchange (gains)/losses that relate to the revaluation
of inter-company loans. Management consider these to be
non-underlying as they are unrealisable (gains)/losses as the loans
are eliminated upon consolidation.
8. DEPRECIATION AND AMORTISATION
2022 2021
Note GBP'000 GBP'000
---------------------------------------------------------------------------- ---- -------- --------
Depreciation of property, plant and equipment 20 7,883 7,157
Amortisation of intangible assets 21 13,562 9,776
Amortisation of assets recognised from costs to obtain or fulfil a contract 22 816 658
---------------------------------------------------------------------------- ---- -------- --------
Depreciation and amortisation 22,261 17,591
---------------------------------------------------------------------------- ---- -------- --------
9. OTHER GAINS
2022 2021
Note GBP'000 GBP'000
--------------------------------------------------------------- ---- -------- --------
Net (loss)/profit on disposal of property, plant and equipment (130) 2
Gain on bargain purchase - 5,357
(Loss)/gain on revaluation of contingent consideration (78) 20,910
(Loss) on settlement of contingent consideration - (701)
Foreign exchange gains/(losses)(1) 38 14,409 (861)
--------------------------------------------------------------- ---- -------- --------
Other gains 14,201 24,707
--------------------------------------------------------------- ---- -------- --------
1 This includes GBP11.9m of foreign exchange gains (2021:
GBP0.9m losses) that relate to the revaluation of inter-company
loans; these foreign exchange movements are considered by
Management to be non-underlying items.
10. FINANCE INCOME AND FINANCE COST
Finance income includes interest income from loan receivables
and bank deposits and is recognised when it is probable that the
economic benefits will flow to the Group and the amount of revenue
can be measured reliably.
Finance costs include interest expenses on loans and borrowings,
the unwinding of the discount on provisions, contingent
consideration and lease liabilities and the amortisation of
directly attributable transaction costs which have been capitalised
upon issuance of the financial instrument and released to the
consolidated income statement on a straight-line basis over the
contractual term.
2022 2021
Note GBP'000 GBP'000
---------------------------------------------------- ---- -------- --------
Bank interest 239 80
Loan interest 5 32
---------------------------------------------------- ---- -------- --------
Finance income 244 112
---------------------------------------------------- ---- -------- --------
Bank loan interest 5,112 1,772
Amortisation of loan arrangement fees 34.3 1,062 1,501
Unwinding of net present value ("NPV") discounts(1) 4,852 1,769
Other finance expense 1,287 986
---------------------------------------------------- ---- -------- --------
Finance cost 12,313 6,028
---------------------------------------------------- ---- -------- --------
1 Of the GBP4.85m total, GBP3.5m relates to unwinding of NPV
discounts on contingent consideration (see note 17); this is
excluded when calculating adjusted underlying basic EPS (see note
34.3). By acquisition this is as follows:
Acquisition 2022 2021
date Note GBP'000 GBP'000
------------ ------------------ ---- -------- --------
INDOS 1 June 2021 161 94
Segue 15 September 2021 342 79
perfORM 18 October 2021 472 84
Ballybunion 3 November 2021 214 43
SALI 12 November 2021 2,329 287
------------ ------------------ ---- -------- --------
34.3 3,518 587
------------------------------- ---- -------- --------
11. INCOME TAX
Income tax
Income tax includes current and deferred tax. Current and
deferred tax are recognised in the consolidated income statement,
except when they relate to items that are recognised in other
comprehensive income or directly in equity, in which case, the
current and deferred tax are also recognised in other comprehensive
income or directly in equity respectively. Where current tax or
deferred tax arises from the initial accounting for a business
combination, the tax effect is included in the accounting for the
business combination.
Current tax
Current tax is the expected tax payable or receivable on the
taxable income or loss for the year using tax laws enacted or
substantively enacted at the balance sheet date, and any adjustment
to tax payable in respect of previous years.
Deferred tax
Deferred tax is the tax expected to be payable or recoverable on
differences between the carrying amounts of assets and liabilities
in the financial statements and the corresponding tax bases used in
the computation of taxable profit.
Deferred tax liabilities are generally recognised for all
taxable temporary differences and deferred tax assets are
recognised to the extent that it is probable that taxable profits
will be available against which deductible temporary differences
can be utilised. Such assets and liabilities are not recognised if
the temporary difference arises from the initial recognition of
goodwill or from the initial recognition (other than in a business
combination) of other assets and liabilities in a transaction that
affects neither the taxable profit nor the accounting profit.
The carrying amount of deferred tax assets is reviewed at the
end of each reporting period and reduced to the extent that it is
no longer probable that sufficient taxable profits will be
available to allow all or part of the asset to be recovered.
Deferred tax is calculated using tax rates that are expected to
apply when the liability is settled or the asset realised using tax
rates enacted or substantively enacted at the balance sheet
date.
Deferred tax assets offset with deferred tax liabilities when
there is a legally enforceable right to set off tax assets against
current tax liabilities and when they relate to income taxes levied
by the same taxation authority and the Group intends to settle its
current tax assets and liabilities on a net basis.
2022 2021
Note GBP'000 GBP'000
------------------------------------------------------------------ ---- -------- --------
The tax charges comprises:
Jersey tax on current year profit 1,197 1,362
Foreign company taxes on current year profit 1,611 1,249
------------------------------------------------------------------ ---- -------- --------
Total current tax expense 2,808 2,611
Deferred tax: 23
Jersey origination and reversal of temporary differences (17) (15)
Temporary differences in relation to acquired intangible assets 34.3 (1,531) (1,446)
Foreign company origination and reversal of temporary differences (39) (15)
------------------------------------------------------------------ ---- -------- --------
Total deferred tax credit (1,587) (1,476)
------------------------------------------------------------------ ---- -------- --------
Total tax charge for the year 1,221 1,135
------------------------------------------------------------------ ---- -------- --------
The difference between the total current tax shown above and the
amount calculated by applying the standard rate of Jersey income
tax to the profit before tax is as follows:
2022 2021
GBP'000 GBP'000
------------------------------------------------------------------------------------------- -------- --------
Profit on ordinary activities before tax 35,935 27,783
------------------------------------------------------------------------------------------- -------- --------
Tax on profit on ordinary activities at standard Jersey income tax rate of 10% (2021: 10%) 3,594 2,778
Effects of:
Results from entities subject to tax at a rate of 0% (Jersey company) (1,040) (432)
Results from tax exempt entities (foreign company) (223) (120)
Foreign taxes not at Jersey rate (1,301) 664
Depreciation in excess of capital allowances (Jersey company) (17) (15)
Depreciation in excess of capital allowances (foreign company) (39) (15)
Temporary differences in relation to acquired intangible assets (1,531) (1,446)
Non-deductible expenses(1) 479 1,398
Consolidation adjustments(2) 1,304 (1,738)
Other differences (5) 61
------------------------------------------------------------------------------------------- -------- --------
Total tax charge for the year 1,221 1,135
------------------------------------------------------------------------------------------- -------- --------
1 The current year includes GBP4.6m of expenses relating to
share awards made under the EIP (2021: GBP13.9m), see note
36.1.
2 The current year includes a loss on revaluation of contingent
consideration for Segue of GBP0.13m (see note 31.4) and a gain on
revaluation of liability-classified contingent consideration
payable for perfORM of GBP0.05m (see note 31.5).
Income tax expense computations are based on the jurisdictions
in which profits were earned at prevailing rates in the respective
jurisdictions.
The Company is subject to Jersey income tax at the general rate
of 0%; however, the majority of the Group's profits are reported in
Jersey by Jersey financial services companies. JTC subsidiaries
located in Jersey are categorised as financial services companies
and are subject to an income tax rate of 10%. It is therefore
appropriate to use this rate for reconciliation purposes.
2022 2021
GBP'000 GBP'000
---------------------------------------------------------------------- -------- --------
Reconciliation of effective tax rates
Tax on profit on ordinary activities 10.00% 10.00%
Effect of:
Results from entities subject to tax at a rate of 0% (Jersey company) (2.89%) (1.55%)
Results from tax exempt entities (foreign company) (0.62%) (0.43%)
Foreign taxes not at Jersey rate (3.62%) 2.39%
Depreciation in excess of capital allowances (Jersey company) (0.05%) (0.05%)
Depreciation in excess of capital allowances (foreign company) (0.11%) (0.06%)
Temporary differences in relation to acquired intangible assets (4.26%) (5.20%)
Non-deductible expenses 1.33% 5.03%
Consolidation adjustments 3.63% (6.26%)
Other differences (0.01%) 0.22%
---------------------------------------------------------------------- -------- --------
Effective tax rate 3.40% 4.09%
---------------------------------------------------------------------- -------- --------
SECTION 3 - FINANCIAL ASSETS AND FINANCIAL LIABILITIES
This section provides information about the Group's financial
instruments, including; accounting policies; specific information
about each type of financial instrument; and, where applicable,
information about determining the fair value, including judgements
and estimation uncertainty involved.
Financial assets
The Group classifies its financial assets as either amortised
cost, fair value through profit or loss ("FVTPL") or fair value
through other comprehensive income ("FVOCI") depending on the
Group's business model objective for managing financial assets and
their contractual cash flow characteristics.
As the Group's financial assets arise principally from the
provision of services to clients (e.g. trade receivables), but also
incorporate other types of financial assets where the objective is
to hold these assets in order to collect contractual cash flows and
the contractual cash flows are solely payments of principal and
interest, they are classified at amortised cost.
Financial assets are recognised initially on the trade date,
which is the date that the Group became party to the contractual
provisions of the instrument and are derecognised when the
contractual rights to the cash flows from the asset expire, or the
rights to receive the contractual cash flows from the transaction
in which substantially all of the risks and rewards of ownership of
the financial asset have been transferred.
Financial assets are initially recognised at fair value plus
transaction costs that are directly attributable to their
acquisition or issue, and are subsequently carried at amortised
cost using the effective interest rate method, less provision for
impairment.
The Group assesses, on a forward-looking basis, the expected
credit losses ("ECL") associated with its financial assets carried
at amortised cost. The impairment methodology applied takes into
consideration whether there has been a significant increase in
credit risk.
Financial assets comprise trade receivables, work in progress,
accrued income, other receivables and cash and cash equivalents.
For further details on impairment for each, see notes 12 to 16.
Financial liabilities
The Group classifies its financial liabilities as either
amortised cost or FVTPL depending on the purpose for which the
liability was acquired.
As the Group does not have any financial liabilities held for
trading (derivatives), all other financial liabilities are
classified as measured at amortised cost unless otherwise noted.
Other financial liabilities include trade and other payables,
borrowings and lease liabilities.
Trade and other payables represent liabilities incurred for
goods and services provided to the Group prior to the end of the
financial year which are unpaid. They are recognised initially at
fair value and subsequently measured at amortised cost using the
effective interest method and are presented as current liabilities
unless payment is not due within 12 months after the reporting
period. The Group derecognises a financial liability when its
contractual obligations are discharged, cancelled or expired.
Borrowings are initially recognised at fair value, net of
transaction costs incurred. Borrowings are subsequently measured at
amortised cost. Any difference between the proceeds (net of
transaction costs) and the redemption amount is recognised in the
consolidated income statement over the period of the borrowings
using the effective interest rate method.
Borrowings are removed from the consolidated balance sheet when
the obligation specified in the contract is discharged, cancelled
or has expired. The difference between the carrying amount of a
financial liability that has been extinguished or transferred to
another party and the consideration paid, including any non-cash
assets transferred or liabilities assumed, is recognised in the
consolidated income statement as finance income or finance
cost.
Borrowings are classified as current liabilities unless the
Group has an unconditional right to defer settlement of the
liability for at least 12 months after the reporting period.
Lease liabilities are financial liabilities measured at
amortised cost. They are initially measured at the NPV of the
following lease payments:
-- fixed payments, less any lease incentives receivable;
-- variable lease payments that are based on an index or a
rate;
-- amounts expected to be payable by the lessee under residual
value guarantees;
-- the exercise price of a purchase option if the lessee is
reasonably certain to exercise that option; and
-- payments of penalties for terminating the lease, if the lease
term reflects the lessee exercising that option.
Lease payments to be made under reasonably certain extension
options are also included in the measurement of the liability.
The lease payments are discounted using the interest rate
implicit in the lease. If that rate cannot be determined, which is
generally the case for leases in the Group, the lessee's
incremental borrowing rate is used, being the rate that the lessee
would have to pay to borrow the funds necessary to obtain an asset
of similar value to the right-of-use asset in a similar economic
environment with similar terms, security and conditions.
The incremental borrowing rate applied to each lease was
determined considering the Group's borrowing rate and the risk-free
interest rate, adjusted for factors specific to the country,
currency and term of the lease.
The Group can be exposed to potential future increases in
variable lease payments based on an index or rate which are not
included in the lease liability until they take effect. When
adjustments to lease payments based on an index or rate take
effect, the lease liability is reassessed and adjusted against the
right-of-use asset.
Lease payments are allocated between principal and finance cost.
The finance cost is charged to the consolidated income statement
over the lease period so as to produce a constant periodic rate of
interest on the remaining balance of the liability for each
period.
Offsetting financial assets and liabilities
Financial assets and liabilities are offset and the net amount
is reported in the consolidated balance sheet where there is a
legally enforceable right to offset the recognised amounts, and
there is an intention to settle on a net basis or realise the asset
and settle the liability simultaneously.
12. TRADE RECEIVABLES
The ageing analysis of trade receivables with the loss allowance
is as follows:
Loss
Gross allowance Net
2022 GBP'000 GBP'000 GBP'000
--------------- -------- ---------- --------
<30 days 15,161 (125) 15,036
30 - 60 days 3,401 (114) 3,287
61 - 90 days 2,091 (111) 1,980
91 - 120 days 2,208 (101) 2,107
121 - 180 days 1,558 (165) 1,393
180> days 14,516 (5,029) 9,487
--------------- -------- ---------- --------
Total 38,935 (5,645) 33,290
--------------- -------- ---------- --------
Loss
Gross allowance Net
2021 GBP'000 GBP'000 GBP'000
--------------- -------- ---------- --------
<30 days 15,167 (164) 15,003
30 - 60 days 3,493 (100) 3,393
61 - 90 days 1,868 (136) 1,732
91 - 120 days 3,579 (203) 3,376
121 - 180 days 1,965 (412) 1,553
180> days 7,629 (3,816) 3,813
--------------- -------- ---------- --------
Total 33,701 (4,831) 28,870
--------------- -------- ---------- --------
The movement in the allowances for trade receivables is as
follows:
2022 2021
GBP'000 GBP'000
-------------------------------------------------------------- -------- --------
Balance at the beginning of the year (4,832) (4,892)
Credit impairment losses in the consolidated income statement (3,092) (1,690)
Amounts written off (including unused amounts reversed) 2,279 1,750
-------------------------------------------------------------- -------- --------
Total allowance for doubtful debts (5,645) (4,832)
-------------------------------------------------------------- -------- --------
The loss allowance includes both specific and ECL provisions. To
measure the ECL, trade receivables are grouped based on shared
credit risk characteristics and the days past due. The ECLs are
estimated collectively using a provision matrix based on the
Group's historical credit loss experience, adjusted for factors
that are specific to the debtor's financial position (this includes
unlikely to pay indicators such as liquidity issues, insolvency or
other financial difficulties) and an assessment of both the current
as well as the forecast direction of macroeconomic conditions at
the reporting date. Management have identified gross domestic
product and inflation in each country the Group provides services
in to be the most relevant macroeconomic factors.
Management have given consideration to these factors as well as
climate-related changes on customers and are satisfied that any
impact is not material to the ultimate recovery of receivables,
such is the diversification across the book in industries and
geographies. The loss allowance at 31 December 2022 is in line with
previous trading and supports this conclusion. See note 29.2 for
further comment on credit risk management.
Provision rates are segregated according to geographical
location and by business line. The Group considers any specific
impairments on a by-client basis rather than on a collective basis.
The carrying amount of the asset is reduced through the use of an
allowance account and the amount of the loss is recognised in the
consolidated income statement as a credit impairment loss. When a
trade receivable is uncollectible, it is written off against the
allowance account. Subsequent recoveries of amounts previously
written off are credited against credit impairment losses.
13. WORK IN PROGRESS
2022 2021
GBP'000 GBP'000
--------------- -------- --------
Total 12,594 12,906
Loss allowance (69) (72)
--------------- -------- --------
Net 12,525 12,834
--------------- -------- --------
Work in progress ("WIP") relates to variable fee contracts and
represents the net unbilled amount expected to be collected from
clients for work performed to date. It is measured at the
chargeable rate agreed with the individual clients adjusted for
unrecoverable amounts less progress billed and ECL. As these
financial assets relate to unbilled work and have substantially the
same risk characteristics as trade receivables, the Group has
concluded that the expected loss rates for trade receivables <30
days is an appropriate estimation of the ECL.
Sensitivity analysis
The total carrying amount of WIP (before ECL allowances) is
GBP12.6m (2021: GBP12.9m). If Management's estimate of the
recoverability of the WIP (the amount expected to be billed and
collected from clients for work performed to date) is 10% lower
than expected on the total WIP balance due to adjustments for
unrecoverable amounts, revenue would be GBP1.3m lower (2021:
GBP1.3m lower).
14. ACCRUED INCOME
2022 2021
GBP'000 GBP'000
--------------- -------- --------
Total 23,936 19,621
Loss allowance (25) (34)
--------------- -------- --------
Net 23,911 19,587
--------------- -------- --------
Accrued income relates to fixed and NAV based fees across all
service lines and represents the billable amount relating to the
provision of services to clients which has not been invoiced at the
reporting date. Accrued income is recorded based on agreed fees
billed in arrears less ECL. As these financial assets relate to
unbilled work and have substantially the same risk characteristics
as trade receivables, the Group has concluded that the expected
loss rates for trade receivables <30 days is an appropriate
estimation of the ECL.
The GBP4.3m increase in accrued income is reflective of overall
revenue growth and that revenue from recently acquired businesses
is on a fixed or NAV based fee basis.
15. OTHER RECEIVABLES
2022 2021
GBP'000 GBP'000
---------------------------------------------- -------- --------
Non-current
Loans receivable from related undertakings(1) - 833
Loan receivable from third party(2) 535 155
---------------------------------------------- -------- --------
Total non-current 535 988
---------------------------------------------- -------- --------
Current
Other receivables(3) 2,804 1,884
Loans receivable from employees(4) 162 206
Loan receivable from related undertakings(1) 861 -
---------------------------------------------- -------- --------
Total current 3,827 2,090
---------------------------------------------- -------- --------
Total other receivables 4,362 3,078
---------------------------------------------- -------- --------
1 Includes loans receivable from Harmonate Corp. (see note 32)
of GBP0.86m current (2021: GBP0.77m non-current) and, in the prior
year, Northpoint Byala IC (GBP0.05m) and Northpoint Finance IC
(GBP0.01m); both of these balances were impaired to GBPnil at the
year end. The Harmonate loan is unsecured, interest bearing at 4%
per annum and repayable on demand at any time on or after 31
December 2023.
2 The loan receivable from a third party is interest bearing at
2.5% per annum and is repayable by 19 October 2024.
3 Other receivables includes mortgage-backed securities held at
fair value of GBP0.4m (2021: GBPnil) that were sold in January 2023
(see note 31.1(a)).
4 Includes GBP0.16m due from employees participating in Advance
to Buy ("A2B") programmes (2021: GBP0.2m). These are interest
bearing at 3% per annum and repayable two years after the
commencement date of each annual programme unless the employment
contract is terminated at an earlier date.
Other receivables are subject to the impairment requirements of
IFRS 9 but, as balances are primarily with related parties or part
of a business combination, they were assessed to have low credit
risk and no loss allowance is recognised.
16. CASH AND CASH EQUIVALENTS
2022 2021
GBP'000 GBP'000
------------------------------- -------- --------
Cash attributable to the Group 48,861 39,326
------------------------------- -------- --------
Total 48,861 39,326
------------------------------- -------- --------
For the purpose of presentation in the statement of cash flow,
cash and cash equivalents includes cash in hand, deposits held on
call with banks, other short-term highly liquid investments with
original maturities of three months or less and bank
overdrafts.
Cash and cash equivalents are subject to the impairment
requirements of IFRS 9 but, as balances are held with reputable
international banking institutions, they were assessed to have low
credit risk and no loss allowance is recognised.
17. TRADE AND OTHER PAYABLES
2022 2021
GBP'000 GBP'000
----------------------------------- -------- --------
Non-current
Other payables 72 382
Contingent consideration(1) 26,824 22,521
----------------------------------- -------- --------
Total non-current 26,896 22,903
----------------------------------- -------- --------
Current
Trade payables 2,728 2,091
Other taxation and social security 926 642
Other payables 4,391 3,803
Accruals 9,907 7,059
Contingent consideration(1) 5,472 5,902
----------------------------------- -------- --------
Total current 23,424 19,497
----------------------------------- -------- --------
Total trade and other payables 50,320 42,400
----------------------------------- -------- --------
1 Contingent consideration payables are discounted to NPV, split
between current and non-current, and are due as follows:
2022 2021
Acquisition Note GBP'000 GBP'000
------------------------------------------- ------- -------- --------
Segue - 773
perfORM 31.5 3,181 2,768
SALI 31.7 23,643 18,980
------------------------------------------- ------- -------- --------
Total non-current contingent consideration 26,824 22,521
------------------------------------------- ------- -------- --------
INDOS 31.3 1,483 1,322
Segue 31.4 2,163 917
Ballybunion - 1,607
SALI - 2,037
EFS - 19
Sterling 21.2(b) 1,826 -
------------------------------------------- ------- -------- --------
Total current contingent consideration 5,472 5,902
------------------------------------------- ------- -------- --------
For current trade and other payables, due to their short-term
nature, Management consider the carrying value of these financial
liabilities to approximate to their fair value.
18. LOANS AND BORROWINGS
This note provides information about the contractual term of the
Group's interest-bearing loans and borrowings, which are measured
at amortised cost. For more information about the Group's exposure
to interest rates, foreign currency and liquidity risk, see note
29.
2022 2021
GBP'000 GBP'000
--------------------------- -------- --------
Non-current
Bank loans 153,622 152,578
--------------------------- -------- --------
Total loans and borrowings 153,622 152,578
--------------------------- -------- --------
18.1. BANK LOANS
The terms and conditions of outstanding loan facilities are as
follows:
2022 2021
Facility Currency Termination date Interest rate GBP'000 GBP'000
-------------------------- --------- ----------------- --------------------- -------- --------
Term facility GBP 6 October 2025 SONIA + 1.65% margin 75,000 75,000
Revolving credit facility GBP 6 October 2025 SONIA + 1.65% margin 80,662 80,662
-------------------------- --------- ----------------- --------------------- -------- --------
Total principal value 155,662 155,662
------------------------------------------------------------------------------- -------- --------
Issue costs (2,040) (3,084)
------------------------------------------------------------------------------- -------- --------
Total bank loans 153,622 152,578
------------------------------------------------------------------------------- -------- --------
The interest rate applied to loan facilities is determined using
SONIA plus a margin based on net leverage calculations. At 1
January 2022, the margin was 1.9%; this changed to 1.65% effective
from 16 September 2022 and this is the margin as at 31 December
2022 (2021: 1.9%).
Under the terms of the facility, the debt is supported by
guarantees from JTC PLC and other applicable subsidiaries deemed to
be obligors, and in the event of default, demand could be placed on
these entities to settle outstanding liabilities.
Movement in loan facilities is as follows:
Effect of
At 1 January Amortisation foreign At 31 December
2022 Drawdowns Repayment release exchange 2022
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
---------------- ------------ --------- --------- ------------ --------- --------------
Principal value 155,662 - - - - 155,662
Issue costs (3,084) - - 1,044 - (2,040)
---------------- ------------ --------- --------- ------------ --------- --------------
Total 152,578 - - 1,044 - 153,622
---------------- ------------ --------- --------- ------------ --------- --------------
Effect of
At 1 January Amortisation foreign At 31 December
2021 Drawdowns Repayment release exchange 2021
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
---------------- ------------ --------- --------- ------------ --------- --------------
Principal value 105,594 176,662 (125,099) - (1,495) 155,662
Issue costs (1,218) (3,364) - 1,498 - (3,084)
---------------- ------------ --------- --------- ------------ --------- --------------
Total 104,376 173,298 (125,099) 1,498 (1,495) 152,578
---------------- ------------ --------- --------- ------------ --------- --------------
On 6 October 2021, the Group entered into a multicurrency loan
facility agreement (the "facilities agreement") with HSBC for a
total commitment of GBP225m consisting of a term loan of GBP75m and
a revolving credit facility ("RCF") of GBP150m. The initial
termination date is the third anniversary of the date of the
agreement, being 6 October 2024. The facilities agreement was
amended on 22 November 2021 and introduced Fifth Third Bank and
Citibank N.A. as incoming lenders, joining the syndicate that
includes existing lenders HSBC, Barclays Bank Plc, Santander UK Plc
and the Bank of Ireland. On 8 November 2022, the facilities
agreement was further amended to extend the termination date by one
year to 6 October 2025. All facilities are due to be repaid on or
before the termination date of 6 October 2025 unless the
termination date is extended for the available one year
extension.
The cost of the facility depends upon net leverage, being the
ratio of total net debt to underlying EBITDA (for LTM at average FX
rates and adjusted for pro-forma contributions from acquisitions)
for a relevant period as defined in the facilities agreement. At 31
December 2022, arrangement and legal fees amounting to GBP3.4m have
been capitalised for amortisation over the term of the loan (2021:
GBP3.4m).
At 31 December 2022, the Group had available GBP69.3m of
committed facilities currently undrawn (2021: GBP69.3m).
18.2. COMPLIANCE WITH LOAN COVENANTS
The Company has complied with the financial covenants of its
borrowing facilities during the 2022 and 2021 reporting periods
(see note 30).
18.3. FAIR VALUE
For the majority of the borrowings, the fair values are not
materially different from their carrying amounts, since the
interest payable on those borrowings is close to current market
rates or the borrowings are short term in nature.
19. LEASE LIABILITIES
Where the Group is a lessee its lease contracts are for the
rental of buildings for office space and also office furniture and
equipment. In accordance with IFRS 16 'Leases', the Group
recognises right-of-use assets which are shown with property, plant
and equipment (see note 20), and lease liabilities, which are shown
separately on the consolidated balance sheet.
2022 2021
GBP'000 GBP'000
------------------------ -------- --------
Non-current 40,602 37,916
Current 4,292 5,463
------------------------ -------- --------
Total lease liabilities 44,894 43,379
------------------------ -------- --------
The Group makes business decisions that affect its lease
contracts and those containing renewal and termination clauses are
reassessed to determine whether there is any change to the lease
term. Management have an ongoing programme of review and have not
identified any leases with an extension option that would have a
significant impact on the carrying amount of lease assets and
liabilities.
SECTION 4 - NON-FINANCIAL ASSETS AND NON-FINANCIAL
LIABILITIES
20. PROPERTY, PLANT AND EQUIPMENT
Items of property, plant and equipment are initially recorded at
cost and are stated at historical cost less depreciation and
impairment losses. Depreciation is recognised so as to write off
the cost or valuation of assets less their residual values over
their useful lives, using the straight-line method, on the
following bases:
-- Computer equipment - 4 years
-- Office furniture and equipment - 4 years
-- Leasehold improvements - over the period of the lease
The estimated useful lives, residual values and depreciation
methods are reviewed at the end of each reporting period with the
effect of any changes in estimate accounted for on a prospective
basis.
An asset's carrying amount is written down immediately to its
recoverable amount if the asset's carrying amount is greater than
its estimated recoverable amount.
An item of property, plant and equipment and any significant
part initially recognised is derecognised upon disposal or when no
future economic benefits are expected from its use or disposal. Any
gain or loss arising on derecognition of the asset (calculated as
the difference between the net disposal proceeds and the carrying
amount of the asset) is included in the consolidated income
statement when the asset is derecognised.
Assets under the course of construction are stated at cost.
These assets are not depreciated until they are available for
use.
For right-of-use assets, upon inception of a contract, the Group
assesses whether a contract conveys the right to control the use of
an identified asset for a period in exchange for consideration, in
which case it is classified as a lease. The Group recognises a
right-of-use asset and a lease liability at the lease commencement
date. Right-of-use assets are measured at cost comprising of the
following: the amount of the initial measurement of lease
liability; any lease payments made at or before the commencement
date less any lease incentives received; any initial direct costs;
and estimated restoration costs.
The right-of-use asset is subsequently depreciated using the
straight-line method from the commencement date to the end of the
useful life; this is considered to be the end of the lease term as
assessed by Management. The lease asset is periodically adjusted
for certain remeasurements of the lease liability and impairment
losses (if any).
The movements of all tangible assets are as follows:
Computer Office furniture Leasehold Right-of-use
equipment and equipment improvements assets Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
---------------------------------------- ---------- ---------------- ------------- ------------ --------
Cost
At 1 January 2021 4,162 2,398 8,441 48,810 63,811
Additions 114 299 1,092 4,037 5,542
Additions through business combinations 20 100 - 1,495 1,615
Disposals (6) - - (79) (85)
Exchange differences (102) (87) (76) (959) (1,224)
---------------------------------------- ---------- ---------------- ------------- ------------ --------
At 31 December 2021 4,188 2,710 9,457 53,304 69,659
---------------------------------------- ---------- ---------------- ------------- ------------ --------
Additions 633 1,249 1,076 4,592 7,550
Additions through business combinations 22 - - 471 493
Disposals (330) (977) (671) - (1,978)
Exchange differences 116 249 351 2,085 2,801
---------------------------------------- ---------- ---------------- ------------- ------------ --------
At 31 December 2022 4,629 3,231 10,213 60,452 78,525
---------------------------------------- ---------- ---------------- ------------- ------------ --------
Accumulated depreciation
At 1 January 2021 2,805 1,107 2,988 7,662 14,562
Charge for the year 471 449 687 5,500 7,107
Disposals (6) - - - (6)
Exchange differences (55) (45) (48) (196) (344)
---------------------------------------- ---------- ---------------- ------------- ------------ --------
At 31 December 2021 3,215 1,511 3,627 12,966 21,319
---------------------------------------- ---------- ---------------- ------------- ------------ --------
Charge for the year 524 516 759 6,346 8,145
Disposals (329) (842) (548) - (1,719)
Exchange differences 77 267 116 754 1,214
---------------------------------------- ---------- ---------------- ------------- ------------ --------
At 31 December 2022 3,487 1,452 3,954 20,066 28,959
---------------------------------------- ---------- ---------------- ------------- ------------ --------
Carrying amount
---------------------------------------- ---------- ---------------- ------------- ------------ --------
At 31 December 2022 1,142 1,779 6,259 40,386 49,566
---------------------------------------- ---------- ---------------- ------------- ------------ --------
At 31 December 2021 973 1,199 5,830 40,338 48,340
---------------------------------------- ---------- ---------------- ------------- ------------ --------
21. GOODWILL AND OTHER INTANGIBLE ASSETS
Goodwill
Goodwill that arises on the acquisition of subsidiaries is
considered an intangible asset. See note 31 for the measurement of
goodwill at initial recognition; subsequent to this, measurement is
at cost less accumulated impairment losses.
Intangible assets acquired in a business combination
Intangible assets acquired in a business combination and
recognised separately from goodwill are initially recognised at
their fair value at the acquisition date (which is regarded as
their cost). The initial valuation work is performed with support
from external valuation specialists. Subsequent to initial
recognition, these are measured at cost less accumulated
amortisation and accumulated impairment losses.
Amortisation is recognised in the consolidated income statement
on a straight-line basis over the estimated useful life of the
asset from the date of acquisition. The estimated useful lives are
as follows:
-- Customer relationships - 2 to 25 years
-- Software - 5 to 10 years
-- Brand - 5 to 10 years
The estimated useful lives and residual value are reviewed at
each reporting date and adjusted if appropriate, with the effect of
any change in estimate being accounted for on a prospective
basis.
Intangible assets acquired separately
Intangible assets that are acquired separately by the Group and
have finite useful lives are measured at cost less accumulated
amortisation and accumulated impairment losses.
Amortisation is recognised in the consolidated income statement
on a straight-line basis over the estimated useful life of the
asset from the date that they are available for use. The estimated
useful lives are as follows:
-- Customer relationships - 10 years
-- Software - 4 years
-- Regulatory licence - 12 years
The estimated useful lives and residual value are reviewed at
each reporting date and adjusted if appropriate, with the effect of
any change in estimate being accounted for on a prospective
basis.
Internally generated software intangible assets
Development costs that are directly attributable to the design
and testing of identifiable and unique software products controlled
by the Group are recognised as intangible assets where the
following criteria are met:
-- It is technically feasible to complete the software so that
it will be available for use
-- Management intend to complete the software and use or sell
it
-- There is an ability to use or sell the software
-- It can be demonstrated how the software will generate
probable future economic benefits
-- Adequate technical, financial and other resources to complete
the development and to use or sell the software are available
-- The expenditure attributable to the software during its
development stage can be reliably measured
Directly attributable costs that are capitalised as part of the
software include employee costs and an appropriate portion of
relevant overheads. Capitalised development costs are recorded as
intangible assets and amortisation is recognised in the
consolidated income statement on a straight-line basis over the
estimated useful life of the asset from the date at which the asset
is ready to use. The estimated useful life for internally generated
software intangible assets is 4 years.
The estimated useful lives and residual value are reviewed at
each reporting date and adjusted if appropriate, with the effect of
any change in estimate being accounted for on a prospective
basis.
Impairment of non-financial assets
Goodwill that arises on the acquisition of business combinations
and intangible assets that have an indefinite useful life are not
subject to amortisation and are tested annually for impairment, or
more frequently if events or changes in circumstances indicate that
they might be impaired. Other non-financial assets are tested for
impairment whenever events or changes in circumstances indicate
that the carrying amount might not be recoverable. An impairment
loss is recognised for the amount by which the asset's carrying
amount exceeds its recoverable amount. The recoverable amount is
the higher of an asset's fair value less costs of disposal and
value in use. For the purposes of assessing impairment, assets are
grouped at the lowest levels for which there are separately
identifiable cash inflows which are largely independent of the cash
inflows from other assets or groups of assets ("CGUs").
Non-financial assets other than goodwill that suffered an
impairment are reviewed for possible reversal of the impairment at
the end of each reporting period.
The movements in goodwill and other intangible assets are as
follows:
Customer Regulatory
Goodwill relationships licence Software Brands Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
---------------------------------------- -------- -------------- ---------- -------- -------- --------
Cost
At 1 January 2021 173,777 67,351 338 7,926 630 250,022
Additions - - - 1,771 - 1,771
Additions through business combinations 171,983 72,393 - 1,151 1,993 247,520
Exchange differences (4,155) (1,975) (24) 13 (10) (6,151)
---------------------------------------- -------- -------------- ---------- -------- -------- --------
At 31 December 2021 341,605 137,769 314 10,861 2,613 493,162
---------------------------------------- -------- -------------- ---------- -------- -------- --------
Additions - 4,288 - 3,018 - 7,306
Additions through business combinations 10,982 5,663 - - - 16,645
Measurement period adjustments (13,737) - - - - (13,737)
Disposals - - - (46) - (46)
Exchange differences 24,858 8,884 17 316 268 34,343
---------------------------------------- -------- -------------- ---------- -------- -------- --------
At 31 December 2022 363,708 156,604 331 14,149 2,881 537,673
---------------------------------------- -------- -------------- ---------- -------- -------- --------
Accumulated amortisation
At 1 January 2021 - 17,149 131 3,937 84 21,301
Charge for the year - 8,070 58 1,462 186 9,776
Exchange differences - (235) (11) 7 4 (235)
---------------------------------------- -------- -------------- ---------- -------- -------- --------
At 31 December 2021 - 24,984 178 5,406 274 30,842
---------------------------------------- -------- -------------- ---------- -------- -------- --------
Charge for the year(1) - 11,219 29 1,817 525 13,590
Disposals - - - (46) - (46)
Exchange differences - 1,374 11 130 44 1,559
---------------------------------------- -------- -------------- ---------- -------- -------- --------
At 31 December 2022 - 37,577 218 7,307 843 45,945
---------------------------------------- -------- -------------- ---------- -------- -------- --------
Carrying amount
---------------------------------------- -------- -------------- ---------- -------- -------- --------
At 31 December 2022 363,708 119,027 113 6,842 2,038 491,728
---------------------------------------- -------- -------------- ---------- -------- -------- --------
At 31 December 2021 341,605 112,785 136 5,455 2,339 462,320
---------------------------------------- -------- -------------- ---------- -------- -------- --------
1 Total amortisation charge includes GBP1.2m related to software
not acquired through business combinations; the balance of GBP12.4m
is excluded when calculating underlying basic EPS (see note
34.3).
21.1. GOODWILL
Goodwill impairment
Goodwill is not amortised but is tested for impairment annually,
or more frequently if events or changes in circumstances indicate
that the carrying amount may not be recoverable. With the exception
of US, goodwill is monitored at a jurisdictional level by
Management. Goodwill is allocated to CGUs for the purpose of
impairment testing and this allocation is made to those CGUs that
are expected to benefit from the business combination in which the
goodwill arose. The aggregate carrying amounts of goodwill
allocated to each CGU is as follows:
In the current year: Balance at Business Measurement period Exchange Balance at
1 Jan 2022 combinations adjustments differences 31 Dec 2022
CGU Note GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
--------------------- ---- ----------- ------------- ------------------ ------------ ------------
Jersey 66,104 - - - 66,104
Guernsey 10,761 - - - 10,761
BVI 752 - - - 752
Switzerland 2,366 - - 138 2,504
Cayman 224 - - 27 251
Luxembourg 27,809 - - 1,377 29,186
Netherlands 14,220 - - 772 14,992
Dubai 1,763 - - 212 1,975
Mauritius 2,379 - - 277 2,656
US - NESF 44,387 - - 5,317 49,704
US - SALI 31.7 139,573 2,598 (13,437) 15,537 144,271
US - Other 31.8 10,603 - (426) 1,269 11,446
US - NYPTC 31.1 - 8,384 - (322) 8,062
Ireland 8,688 - 108 255 9,051
UK 11,976 - 18 (1) 11,993
--------------------- ---- ----------- ------------- ------------------ ------------ ------------
Total 341,605 10,982 (13,737) 24,858 363,708
--------------------- ---- ----------- ------------- ------------------ ------------ ------------
In the prior year: Balance at Business Measurement period Exchange Balance at
1 Jan 2021 combinations adjustments differences 31 Dec 2021
CGU GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
------------------- ----------- ------------- ------------------ ------------ ------------
Jersey 66,569 - (465) - 66,104
Guernsey 10,761 - - - 10,761
BVI 752 - - - 752
Switzerland 2,400 - - (34) 2,366
Cayman 222 - - 2 224
Luxembourg 29,721 - - (1,912) 27,809
Netherlands 15,292 - - (1,072) 14,220
Dubai 1,746 - - 17 1,763
Mauritius 2,357 - - 22 2,379
US - NESF 43,957 - - 430 44,387
US - Other - 151,724 - (1,548) 150,176
Ireland - 8,748 - (60) 8,688
UK - 11,976 - - 11,976
------------------- ----------- ------------- ------------------ ------------ ------------
Total 173,777 172,448 (465) (4,155) 341,605
------------------- ----------- ------------- ------------------ ------------ ------------
Key assumptions used to calculate the recoverable amount for
each CGU
The recoverable amount of all CGUs has been determined based on
the higher of the value in use calculation and fair value less cost
to sell. Projected cash flows are calculated with reference to each
CGU's latest budget and business plan which are subject to a
rigorous review and challenge process. Management prepare the
budgets through an assessment of historical revenues from existing
clients, the pipeline of new projects, historical pricing, and the
required resource base needed to service new and existing clients,
coupled with their knowledge of wider industry trends and the
economic environment.
The year 1 cash flow projections are based on the latest
approved budget and years 2 to 5 on detailed outlooks prepared by
Management, except for the recently acquired US - SALI CGU, which
covers a 10 year period due to the significantly longer useful
economic life of its customer relationships.
Previously, the terminal growth rate was based on expected
long-term inflation. This has been updated to also consider the
long-term average growth rate for the jurisdiction and services
provided.
Management estimate discount rates using pre-tax rates that
reflect current market assessments of the time value of money. In
assessing the discount rate applicable to the Group, the following
factors have been considered:
-- Long-term treasury bond rate for the relevant
jurisdiction
-- The cost of equity based on an adjusted Beta for the relevant
jurisdiction
-- The risk premium to reflect the increased risk of investing
in equities
Management have given due consideration to climate change and
any potential impact on projected cash flows. Such is the nature of
JTC's business and the diversification of customer relationships
that Management have concluded the impact to be immaterial to each
CGU's recoverable amount.
A summary of the values assigned to the key assumptions used in
the value in use calculations are as follows:
-- Revenue growth rate: up to 56.1%
-- Terminal value growth rate: between 0.5% and 4.0%
-- Discount rate: between 10.5% and 15.3%
The key assumptions used for CGUs where the carrying amount is a
significant proportion of the total carrying value of goodwill is
as follows:
Average annual revenue growth rate Terminal value growth rate Discount rate
------------------------------------ ---------------------------- ---------------
% of total carrying
CGU value of goodwill 2022 2021 2022 2021 2022 2021
----------- -------------------- ----------------- ----------------- ------------- ------------- ------- ------
Jersey 18.2% 7.6% 2.7% 2.5% 0.0% 11.2% 10.6%
Luxembourg 8.0% 10.9% 7.9% 2.0% 1.5% 11.4% 12.4%
US - NESF 13.7% 17.1% 19.0% 3.0% 3.0% 11.3% 11.4%
US - SALI 39.7% 17.2% - 4.0% - 10.5% -
----------- -------------------- ----------------- ----------------- ------------- ------------- ------- ------
Conclusion
The recoverable amount of goodwill determined for each CGU as at
31 December 2022 was found to be higher than its carrying
amount.
Sensitivity to changes in assumptions
Management believe that any reasonable changes to the key
assumptions on which recoverable amounts are based would not cause
the aggregate carrying amount to exceed the recoverable amount of
the CGUs, except for US - NESF and US - SALI where the sensitivity
of key assumptions have been detailed below.
US - SALI
The following would cause the carrying amount to exceed the
recoverable amount:
-- A reduction of 4.1% in the average annual revenue growth rate
would result in a GBP3.0m impairment
-- An increase of 2.0% in the discount rate would result in a
GBP2.8m impairment
For the recoverable amount to equal the carrying amount, there
would need to be a reduction of GBP63.6m. This may be caused by
either of the following:
-- A reduction of 3.9% in the average annual revenue growth rate
from 17.2% to 13.3%
-- An increase of 1.9% in the discount rate from 10.5% to
12.4%
US - NESF
The following would cause the carrying amount to exceed the
recoverable amount:
-- A reduction of 2.0% in the average annual revenue growth rate
would result in a GBP2.7m impairment
-- An increase of 2.5% in discount rate would result in a
GBP3.2m impairment
For the recoverable amount to equal the carrying amount, there
would need to be a reduction of GBP11.7m. This may be caused by
either of the following:
-- A reduction of 1.6% in the average annual revenue growth rate
from 17.1% to 15.4%
-- An increase of 1.9% in the discount rate from 11.3% to
13.2%
21.2. CUSTOMER RELATIONSHIP INTANGIBLE ASSETS
The carrying amount of identifiable customer relationship
intangible assets acquired separately and through business
combinations are as follows:
Carrying amount
------------------------------------- ------- --------------------------- -------------- ------------------
Useful
Amortisation economic 2022 2021
Acquisitions Note period end life ("UEL") GBP'000 GBP'000
------------------------------------- ------- --------------------------- -------------- -------- --------
Previous financial reporting periods
Signes 30 April 2025 10 years 699 928
KB Group 30 June 2027 12 years 1,570 1,918
S&GFA 30 September 2025 10 years 1,143 1,392
BAML 30 September 2029 12 years 6,016 6,168
NACT 31 July 2027 10 years 957 1,146
Van Doorn 28 February 2030 11.4 years 4,724 5,114
Minerva 30 May 2027-30 July 2030 8.7-11.8 years 8,762 9,759
Exequtive 31 March 2029 10 years 6,373 7,012
Aufisco 30 June 2029 10 years 1,365 1,494
Sackville 28 February 2029 10 years 681 703
NESF 30 April 2022-30 April 2028 2-8 years 1,256 1,555
Sanne Private Clients 30 June 2030 10 years 4,794 5,433
Anson Registrars 28 February 2030 10 years 22 25
RBC cees 31.2 31 March 2033 12 years 19,105 20,969
INDOS 31.3 31 May 2031 10 years 1,138 1,273
Segue 31.4 30 September 2031 10 years 1,016 1,036
perfORM 31.5 30 September 2031 10 years 23 26
Ballybunion 31.6 31 October 2031 10 years 2,362 2,494
SALI 31.7 31 October 2046 25 years 46,215 42,999
EFS 31.8 30 November 2031 10 years 1,351 1,341
For the year ended 31 December 2022
NYPTC 31.1 31 October 2032 10 years 5,356 -
Sterling 21.2(b) 30 June 2032 10 years 4,099 -
------------------------------------- ------- --------------------------- -------------- -------- --------
Total 119,027 112,785
------------------------------------- ------- --------------------------- -------------- -------- --------
(a) Customer relationships acquired in a business
combination
Customer relationship intangible assets acquired in a business
combination and recognised separately from goodwill are initially
recognised at their fair value at the acquisition date. In 2022,
the Group recognised customer relationship intangible assets for
NYPTC of GBP5.7m ($6.6m). The UEL and carrying amounts at 31
December 2022 are shown in the table above.
Key assumptions in determining fair value
The fair value at acquisition was derived using the multi-period
excess earnings method ("MEEM") financial valuation model.
Management consider the following key assumptions to be significant
for the valuation of new customer relationships:
-- Year on year revenue growth
-- The discount rate applied to free cash flow
-- Year on year client attrition rate
Sensitivity analysis
Management carried out a sensitivity analysis on the key
assumptions used in the valuation of new customer relationship
intangible assets for NYPTC. Management concluded that any
reasonable change to the key assumptions for the new customer
relationship intangible assets recognised in the year would not
result in a significant change to fair value.
(b) Customer relationships acquired separately
On 17 June 2022, JTC entered into a facilitation and referral
agreement ("F&R agreement") and an outsourcing agreement with
Sterling Trust (Cayman) Limited ("Sterling"), whereby Sterling
will, on an exclusive basis, refer, introduce and recommend its
clients to JTC as a replacement provider of services. Such services
include initial onboarding and client due diligence services, and
subsequent provision of trust, custody, director, company
management and administration services.
The fair value of the customer relationships acquired is the
consideration due; this is based on a percentage of revenue
attributable to each client successfully introduced. The assets are
being amortised over their estimated useful economic life of 10
years.
JTC made an initial payment of GBP2.2m ($3.0m) following the
signing of the F&R agreement and a final payment of GBP1.8m
($2.2m) will become due on 17 June 2023 subject to the successful
onboarding of at least 75% of the client revenue. Management are
confident that the contingent consideration will be settled in
full, see note 17.
(c) Customer relationship intangibles impairment
Management review customer relationship intangible assets for
indicators of impairment at each reporting date. Whilst significant
consideration was given to the challenging global political and
economic backdrop, including increasing inflationary pressures,
Management did not consider this to be an indicator of impairment.
Management concluded that no indicators of impairment were present
as at 31 December 2022.
22. OTHER NON-FINANCIAL ASSETS
Assets recognised from costs to obtain or fulfil a contract
Incremental costs of obtaining a contract (i.e. costs that would
not have been incurred if the contract had not been obtained) and
the costs incurred to fulfil a contract are recognised as assets
within non-financial assets if the costs are expected to be
recovered. The capitalised costs are amortised on a straight-line
basis over the estimated useful economic life of the contract. The
carrying amount of the asset is tested for impairment in accordance
with the policy described in note 21.
2022 2021
GBP'000 GBP'000
------------------------------------------------------------ -------- --------
Non-current
Prepayments 361 42
Assets recognised from costs to obtain or fulfil a contract 2,008 516
------------------------------------------------------------ -------- --------
Total non-current 2,369 558
------------------------------------------------------------ -------- --------
Current
Prepayments 4,660 3,468
Assets recognised from costs to obtain or fulfil a contract 549 247
Current tax receivables 774 432
------------------------------------------------------------ -------- --------
Total current 5,983 4,147
------------------------------------------------------------ -------- --------
Total other non-financial assets 8,352 4,705
------------------------------------------------------------ -------- --------
Current and non-current assets recognised from costs to obtain
or fulfil a contract include GBP1.2m for costs to obtain a contract
(2021: GBP0.6m) and GBP1.4m for costs incurred to fulfil a contract
(2021: GBP0.2m). The amortisation charge for the year was GBP0.8m
(2021: GBP0.7m). Management review assets recognised from costs to
obtain or fulfil a contract for indicators of impairment at each
reporting date and have concluded that no indicators were present
as at 31 December 2022.
23. DEFERRED TAXATION
For the accounting policy on deferred income tax, see note
11.
The deferred taxation (assets) and liabilities recognised in the
consolidated financial statements are set out below:
2022 2021
GBP'000 GBP'000
-------------------------------------------------------- -------- --------
Deferred tax assets (143) (119)
Deferred tax liabilities 11,184 24,355
-------------------------------------------------------- -------- --------
11,041 24,236
-------------------------------------------------------- -------- --------
Intangible assets 11,097 24,238
Other origination and reversal of temporary differences (56) (2)
-------------------------------------------------------- -------- --------
11,041 24,236
-------------------------------------------------------- -------- --------
The movement in the year is analysed as follows:
2022 2021
Intangible assets Note GBP'000 GBP'000
-------------------------------------------------------- ---- -------- --------
Balance at the beginning of the year 24,238 8,784
Measurement period adjustments (13,863) -
Recognised through business combinations (1) 31 1,682 17,349
Recognised in the consolidated income statement 11 (1,531) (1,446)
Foreign exchange (to other comprehensive income) 571 (449)
-------------------------------------------------------- ---- -------- --------
Balance at 31 December 11,097 24,238
-------------------------------------------------------- ---- -------- --------
Other origination and reversal of temporary differences
Balance at the beginning of the year (2) 14
Acquired through acquisitions - 14
Recognised in the consolidated income statement (54) (30)
-------------------------------------------------------- ---- -------- --------
Balance at 31 December (56) (2)
-------------------------------------------------------- ---- -------- --------
1 Deferred tax liabilities have been recognised in relation to
identified intangible assets, the amortisation of which is
non-deductible against Corporation Tax in the jurisdictions in
which the business operates and therefore creates temporary
differences between the accounting and taxable profits. See note
31.
24. OTHER NON-FINANCIAL LIABILITIES
Deferred income
Fixed fees received in advance across all the service lines and
up-front fees in respect of services due under contract are time
apportioned to respective accounting periods, and those billed but
not yet earned are included in deferred income in the consolidated
balance sheet. As such liabilities are associated with future
services, they do not give rise to a contractual obligation to pay
cash or another financial asset.
Contract liabilities
Commissions expected to be paid over the term of a customer
contract are discounted and recognised at the NPV. The finance cost
is charged to the consolidated income statement over the contract
life so as to produce a constant periodic rate of interest on the
remaining balance of the liability for each period.
Employee benefit obligations
For the accounting policy on employee benefit obligations, see
note 5.
2022 2021
Note GBP'000 GBP'000
-------------------------------------- ---- -------- --------
Non-current
Contract liabilities 216 179
Employee benefit obligations 5 572 777
-------------------------------------- ---- -------- --------
Total non-current 788 956
-------------------------------------- ---- -------- --------
Current
Deferred income (1) 7,856 8,205
Contract liabilities 772 374
-------------------------------------- ---- -------- --------
Total current 8,628 8,579
-------------------------------------- ---- -------- --------
Total other non-financial liabilities 9,416 9,535
-------------------------------------- ---- -------- --------
1 Of the GBP8.2m of deferred income at 31 December 2021, GBP8.1m
was recognised as revenue in the 2022 consolidated income
statement.
25. PROVISIONS
Provisions are recognised when the Group has a present
obligation (legal or constructive) as a result of a past event, it
is probable that an outflow of resources will be required to settle
the obligation, and a reliable estimate can be made of the amount
of the obligation. Provisions are not recognised for future
operating losses.
The amount recognised as a provision is the best estimate of the
consideration required to settle the present obligation at the end
of the reporting period, taking into account the risks and
uncertainties surrounding the obligation. If the impact of the time
value of money is material, provisions are determined by
discounting the expected future cash flows at a pre-tax rate that
reflects current market assessments of the time value of money and
the risks specific to the liability. The unwinding of the discount
is recognised as a finance cost in the consolidated income
statement.
Dilapidations
The Group has entered into lease agreements for the rental of
office space in different countries. There are a number of leases
which include an obligation to remove any leasehold improvements
(thus returning the premises to an agreed condition at the end of
the respective lease terms) and to restore wear and tear by
repairing and repainting (this is known as "dilapidations"). The
estimated cost of the dilapidations payable at the end of each
tenancy, unless specified, is generally estimated by reference to
the square footage of the building and in consultation with local
property agents, landlords and prior experience. Having estimated
the likely amount due, a country specific discount rate is applied
to calculate the present value of the expected outflow. The
provisions are expected to be utilised when the leases expire or
upon exit. The discounted dilapidation cost has been capitalised
against the leasehold improvement asset in accordance with IFRS
16.
Dilapidation
provisions
GBP'000
---------------------------------------- ------------
At 1 January 2021 1,640
Additions 178
Additions through business combinations 116
Unwind of discount 60
Amounts utilised (31)
Impact of foreign exchange 4
---------------------------------------- ------------
At 31 December 2021 1,967
---------------------------------------- ------------
Additions 219
Additions through business combinations 56
Disposals (181)
Unwind of discount 22
Amounts utilised (21)
Impact of foreign exchange 91
---------------------------------------- ------------
At 31 December 2022 2,153
---------------------------------------- ------------
2022 2021
Analysis of total provisions: GBP'000 GBP'000
------------------------------ -------- --------
Non-current 1,884 1,720
Current 269 247
------------------------------ -------- --------
Total 2,153 1,967
------------------------------ -------- --------
SECTION 5 - EQUITY
26. SHARE CAPITAL AND RESERVES
26.1. SHARE CAPITAL AND SHARE PREMIUM
The Group's Ordinary shares are classified as equity.
Incremental costs directly attributable to the issue of Ordinary
shares are recognised as a deduction from equity, net of any tax
effects.
2022 2021
GBP'000 GBP'000
---------------------------------------------------------------- -------- --------
Authorised
300,000,000 Ordinary shares (2021: 300,000,000 Ordinary shares) 3,000 3,000
---------------------------------------------------------------- -------- --------
Called up, issued and fully paid
149,061,113 Ordinary shares (2021: 147,585,261 Ordinary shares) 1,491 1,476
---------------------------------------------------------------- -------- --------
Ordinary shares have a par value of GBP0.01 each. All shares are
equally eligible to receive dividends and the repayment of capital,
and represent one vote at Shareholders' meetings of JTC PLC.
No. of shares Par value Share premium
Movements in Ordinary shares Note (thousands) GBP'000 GBP'000
------------------------------------------------------------------ ---- ------------- --------- -------------
At 1 January 2021 122,522 1,225 130,823
Shares issued for equity raises 21,618 216 144,585
PLC EBT issue 1,333 13 -
Acquisition of INDOS 177 2 1,078
Acquisition of Segue 110 1 802
Acquisition of Ballybunion 77 1 664
Acquisition of SALI 1,260 13 8,570
Acquisition of EFS 85 1 706
Acquisition of NESF 404 4 3,132
Less: Cost of share issuance - - (4,508)
------------------------------------------------------------------ ---- ------------- --------- -------------
Movement in the year 25,064 251 155,029
------------------------------------------------------------------ ---- ------------- --------- -------------
At 31 December 2021 147,586 1,476 285,852
------------------------------------------------------------------ ---- ------------- --------- -------------
PLC EBT issue (1) 1,150 12 -
Acquisition of SALI - EBT contribution (1) 31.7 325 3 2,056
Acquisition of SALI - adjust fair value of equity instruments (2) 31.7 - - 2,598
Less: Cost of share issuance - - (71)
------------------------------------------------------------------ ---- ------------- --------- -------------
Movement in the year 1,475 15 4,583
------------------------------------------------------------------ ---- ------------- --------- -------------
At 31 December 2022 149,061 1,491 290,435
------------------------------------------------------------------ ---- ------------- --------- -------------
1 On 14 June 2022, the Company issued an additional 1,475,852
Ordinary shares to the Company's Employee Benefit Trust ("PLC
EBT"), see note 26.2. Of this amount, 325,272 Ordinary shares
settled an element of consideration for the SALI acquisition; the
remaining 1,150,580 Ordinary shares were issued in order for PLC
EBT to satisfy anticipated future exercises of awards granted to
beneficiaries.
2 Following a review by the FRC, an adjustment was made to the
fair value of equity instruments issued as initial consideration
(see note 31.7(a)).
26.2. OWN SHARES
Own shares represent the shares of the Company that are
unallocated and currently held by PLC EBT. They are recorded at
cost and deducted from equity. When shares vest unconditionally,
are cancelled or are reissued, they are transferred from the own
shares reserve at their cost. Any consideration paid or received
for the purchase or sale of the Company's own shares is shown as a
movement in Shareholders' equity.
No. of shares PLC EBT
Note (thousands) GBP'000
--------------------------- ------- ------------- --------
At 1 January 2021 3,317 3,084
EIP awards 36.1(a) (1,545) -
PSP awards 36.1(b) (153) -
DBSP awards 36.1(c) (42) -
Other awards 36.1(d) (57) -
PLC EBT issue 1,333 13
Acquisition of Segue 26 -
Acquisition of Ballybunion 30 -
Acquisition of SALI 215 -
Purchase of own shares 47 269
--------------------------- ------- ------------- --------
Movement in year (146) 282
--------------------------- ------- ------------- --------
At 31 December 2021 3,171 3,366
--------------------------- ------- ------------- --------
EIP awards 36.1(a) (1,411) -
PSP awards 36.1(b) (188) -
DBSP awards 36.1(c) (62) -
Other awards 36.1(d) (70) -
PLC EBT issue 26.1 1,475 12
Purchase of own shares (1) 42 319
--------------------------- ------- ------------- --------
Movement in year (214) 331
--------------------------- ------- ------------- --------
At 31 December 2022 2,957 3,697
--------------------------- ------- ------------- --------
1 Shares were purchased for PLC EBT using its surplus cash held as a result of dividend income.
26.3. OTHER RESERVES
Capital reserve
This reserve is used to record the gains or losses recognised on
the purchase, sale, issue or cancellation of the Company's own
shares, which may arise from capital transactions by the Group's
employee benefit trusts as well as any movements in share-based
awards to employees (see note 36).
Translation reserve
The translation reserve comprises all foreign currency
differences arising from the translation of the financial
statements of foreign operations.
Retained earnings
Retained earnings includes accumulated profits and losses.
27. DIVIDS
Provision is made for the amount of any dividend declared, being
appropriately authorised and no longer at the discretion of the
entity, on or before the end of the reporting period but not
distributed at the end of the reporting period. Interim dividends
are recognised when paid.
The following dividends were declared and paid by the Company
for the year:
2022 2021
GBP'000 GBP'000
---------------------------------------------------------------- -------- --------
Final dividend for 2020 of 4.35p per qualifying Ordinary share - 5,670
Interim dividend for 2021 of 2.6p per qualifying Ordinary share - 3,421
Final dividend for 2021 of 5.07p per qualifying Ordinary share 7,322 -
Interim dividend for 2022 of 3.1p per qualifying Ordinary share 4,522 -
---------------------------------------------------------------- -------- --------
Total dividend declared and paid 11,844 9,091
---------------------------------------------------------------- -------- --------
SECTION 6 - RISK
28. CRITICAL ACCOUNTING ESTIMATES AND JUDGEMENTS
In the application of the Group's accounting policies,
Management are required to make judgements, estimates and
assumptions about the carrying amounts of assets and liabilities
that are not readily apparent from other sources. The estimates and
associated assumptions are regularly evaluated based on historical
experience, current circumstances, expectation of future events and
other factors that are considered to be relevant. Actual results
may differ from these estimates. In preparing the financial
statements, Management have ensured that they have assessed any
direct and indirect impacts of rising inflation and interest rates
when applying IFRS.
This note provides an overview of the areas that involved a
higher degree of judgement or complexity, and of items which are
more likely to be materially adjusted due to estimates and
assumptions turning out to be wrong.
The following are the critical judgements and estimates that
Management have made in the process of applying the Group's
accounting policies and that have the most significant effect on
the amounts recognised in the consolidated financial
statements.
28.1. CRITICAL JUDGEMENTS IN APPLYING THE GROUP'S ACCOUNTING
POLICIES
Recognition of separately identifiable intangibles
In 2022, the Group acquired New York Private Trust Company (see
Note 31.1). IFRS 3 'Business Combinations' requires Management to
identify assets and liabilities purchased including intangible
assets. Following their assessment, Management concluded that the
only intangible asset meeting the recognition criteria was customer
relationships. The fair value at acquisition date was GBP5.7m
($6.6m).
28.2. CRITICAL ACCOUNTING ESTIMATES AND ASSUMPTIONS
Recoverability of WIP
To assess the fair value of consideration received for services
rendered, Management are required to make an assessment of the net
unbilled amount expected to be collected from clients for work
performed to date. To make this assessment, WIP balances are
reviewed regularly on a by-client basis and the following factors
are taken into account: the ageing profile of the WIP, the agreed
billing arrangements, value added and status of the client
relationship. See note 13 for the sensitivity analysis.
Goodwill impairment - key assumptions used to calculate the
recoverable amount for each CGU
Goodwill is tested annually for impairment and the recoverable
amount of CGUs is determined based on a value in use calculation
using cash flow projections containing key assumptions. See note
21.1 for further detail on key assumptions and sensitivity
analysis.
Fair value of customer relationship intangibles
The customer relationship intangible assets are valued using the
MEEM financial valuation model. Cash flow forecasts and projections
are produced by Management and form the basis of the valuation
analysis. Other key estimates and assumptions used in the modelling
to derive the fair values include: year on year growth rates,
client attrition rates, EBIT margins and the discount rate applied
to free cash flow. See note 21.2(a) for the sensitivity
analysis.
Fair value of earn-out consideration for SALI
To derive the fair value of the earn-out contingent
consideration, Management assessed the likelihood of achieving
pre-defined revenue targets to determine the value of contingent
consideration. Management considers the forecast revenue to be the
key assumption in the calculation of the fair value. See note 31.7
for the sensitivity analysis.
29. FINANCIAL RISK MANAGEMENT
The Group is exposed through its operations to the following
financial risks: market risk (including foreign currency risk and
interest rate risk), credit risk and liquidity risk.
The Group is exposed to risks that arise from the use of its
financial instruments. This note describes the Group's objectives,
policies and processes for managing those risks and the methods
used to measure them.
There have been no substantive changes in the Group's exposure
to financial instrument risks, its objectives, policies and
processes for managing those risks or the methods used to measure
them from previous periods unless otherwise stated in this
note.
Principal financial instruments
The principal financial instruments used by the Group, from
which financial instrument risk arises, are as follows. All are
classified as measured at amortised cost:
2022 2021
Note GBP'000 GBP'000
--------------------------------------------------- ---- -------- --------
Financial assets - measured at amortised cost
Trade receivables 12 33,290 28,870
Work in progress 13 12,525 12,834
Accrued income 14 23,911 19,587
Other receivables 15 3,991 3,078
Cash and cash equivalents 16 48,861 39,326
--------------------------------------------------- ---- -------- --------
122,578 103,695
--------------------------------------------------- ---- -------- --------
Financial assets - measured at fair value
Other receivables(1) 15 371 -
--------------------------------------------------- ---- -------- --------
371 -
--------------------------------------------------- ---- -------- --------
Financial liabilities - measured at amortised cost
Trade and other payables 17 48,722 41,058
Loans and borrowings 18 153,622 152,578
Lease Liabilities 19 44,894 43,379
--------------------------------------------------- ---- -------- --------
247,238 237,015
--------------------------------------------------- ---- -------- --------
Financial liabilities - measured at fair value
Trade and other payables(1) 17 1,598 1,342
--------------------------------------------------- ---- -------- --------
1,598 1,342
--------------------------------------------------- ---- -------- --------
1 All financial assets and liabilities are measured at amortised
cost which is deemed to be representative of fair value. The
exception to this is liability-classified contingent consideration
of GBP1.6m for perfORM (2021: GBP1.3m) (see note 31.5) and
mortgage-backed securities included in other receivables of GBP0.4m
(2021: GBPnil) (see note 31.1).
Management considered the following fair value hierarchy levels
in line with IFRS 13:
-- Level 1 - Inputs are quoted prices (unadjusted) in active
markets for identical assets and liabilities
-- Level 2 - Inputs other than quoted prices included within
Level 1 that are observable for the asset and liability, either
directly or indirectly
-- Level 3 - Inputs are unobservable inputs for the asset or
liability
Management concluded that contingent consideration was
classified under Level 3 inputs and mortgage-backed securities
under Level 1 inputs.
General objectives, policies and processes
The Board has overall responsibility for determining the Group's
financial risk management objectives and policies and, whilst
retaining ultimate responsibility for them, it delegates the
authority for designing and operating processes that ensure
effective implementation of the objectives and policies to
Management, in conjunction with the Group's finance department.
The financial risk management policies are considered on a
regular basis to ensure that these are in line with the overall
business strategies and the Board's risk management philosophy. The
overall objective is to set policies to minimise risk as far as
possible without adversely affecting the Group's financial
performance, competitiveness and flexibility.
29.1. MARKET RISK
Market risk arises from the Group's use of interest-bearing,
tradable and foreign currency financial instruments. It is the risk
that changes in interest rates (interest rate risk) or foreign
exchange rates (currency risk) will affect the Group's future cash
flows or the fair value of the financial instruments held. The
objective of market risk management is to manage and control market
risk exposures within acceptable parameters, while optimising the
return.
Foreign currency risk management
Foreign currency risk arises when individual Group entities
enter into transactions denominated in a currency other than their
functional currency. The Group's policy is, where possible, to
allow Group entities to settle liabilities denominated in their
functional currency with the cash generated from their own
operations in that currency. Where Group entities have liabilities
denominated in a currency other than their functional currency (and
have insufficient reserves of that currency to settle them), cash
already denominated in the required currency will, where possible
and ensuring no adverse impact on local regulatory capital adequacy
requirements (see note 30), be transferred from elsewhere in the
Group.
The Group's exposure to the risk of changes in exchange rates
relates primarily to the Group's operating activities when the
revenue or expenses are denominated in a different currency from
the Group's functional and presentation currency of pounds sterling
("GBP"). For trading entities that principally affect the profit or
net assets of the Group, the exposure is mainly from Euro and US
dollar. The Group's bank loans are denominated in GBP, although the
facility is multicurrency.
As at 31 December 2022, the Group's exposure to the Group's
material foreign currency denominated financial assets and
liabilities are as follows:
GBP Euro US dollar
-------------------- ------------------ ------------------
2022 2021 2022 2021 2022 2021
Net foreign currency assets/(liabilities) GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
------------------------------------------ --------- --------- -------- -------- -------- --------
Trade receivables 17,612 18,048 3,502 1,712 12,031 5,031
Work in progress 9,628 10,327 1,625 1,518 743 1,062
Accrued income 12,802 9,499 1,704 1,243 9,395 8,207
Other receivables 1,693 1,141 374 317 2,053 1,487
Cash and cash equivalents 9,811 11,361 10,192 7,418 27,114 19,178
Trade and other payables (10,435) (11,665) (6,236) (4,070) (32,695) (25,840)
Loans and borrowings (153,622) (152,578) - - - -
Lease liabilities (26,621) (28,149) (10,863) (9,387) (5,603) (3,986)
------------------------------------------ --------- --------- -------- -------- -------- --------
Total net exposure (139,132) (142,016) 298 (1,249) 13,038 5,139
------------------------------------------ --------- --------- -------- -------- -------- --------
In order to implement and monitor this policy, on an ongoing
basis Management periodically analyse cash reserves by individual
Group entities and in major currencies together with information on
expected liabilities due for settlement. The effectiveness of this
policy is measured by the number of resulting cash transfers made
between entities and any necessary foreign exchange trades.
Management consider this policy to be working effectively but
continues to regularly assess if foreign currency hedging is
appropriate.
Foreign currency risk sensitivity
The following table illustrates the possible effect on
comprehensive income for the year and net assets arising from a 20%
strengthening or weakening of pounds sterling against other
currencies.
Effect on comprehensive income and net assets
-----------------------------------------------
Strengthening/
(weakening) of 2022 2021
pound sterling (1) GBP'000 GBP'000
---------- ------------------- ----------------------- ----------------------
Euro +20% (50) 208
US dollar +20% (2,173) (857)
---------- ------------------- ----------------------- ----------------------
Total (2,223) (649)
---------- ------------------- ----------------------- ----------------------
Euro (20%) 74 (312)
US dollar (20%) 3,259 1,285
---------- ------------------- ----------------------- ----------------------
Total 3,333 973
---------- ------------------- ----------------------- ----------------------
1 Holding all other variables constant.
Interest rate risk management and sensitivity
Bank loans
The Group is exposed to interest rate risk as it borrows all
funds at floating interest rates. The interest rate applied to loan
facilities is determined using SONIA plus a margin based on net
leverage calculations. The interest rate risk is managed by the
Group maintaining an appropriate leverage ratio and through this
ensuring that the interest rate is kept as low as possible.
Interest rates have been low in recent history, but the current
economic environment has resulted in higher interest rates and
costs. Management continue to assess the cost versus benefit of
taking hedging instruments to manage this exposure based on their
expectation of future interest rate movements.
Sensitivity analysis for variable rate instruments
An increase/decrease of 100 basis points in interest rates on
loans and borrowing with floating interest rates would have
decreased/increased the profit and loss before tax by GBP1.6m
(2021: increase by 50 basis points, GBP0.8m). This analysis assumes
that all other variables remain constant.
The Group's exposures to interest rates on financial assets and
financial liabilities are detailed in the liquidity risk management
section of this note.
29.2. CREDIT RISK MANAGEMENT
Credit risk is the risk of financial loss to the Group should a
customer or counterparty to a financial instrument fail to meet its
contractual obligations. The Group's principal exposure to credit
risk arises from contracts with customers and therefore the
following financial assets: trade receivables, work in progress and
accrued income (together "customer receivables").
The Group manages credit risk for each new customer by giving
consideration to the risk of insolvency or closure of the
customer's business, current or forecast liquidity issues and
general creditworthiness (including past default experience of the
customer or customer type).
Subsequently, customer credit risk is managed by each of the
Group entities subject to the Group's policy, procedures and
control relating to customer credit risk management. Outstanding
customer receivables are monitored and followed up continuously.
Specific provisions incremental to ECL are made when there is
objective forward-looking evidence that the Group will not be able
to bill the customer in line with the contract or collect the debts
arising from previous invoices. This evidence can include the
following: indication that the customer is experiencing significant
financial difficulty or default, probability of bankruptcy,
problems in contacting the customer, disputes with a customer, or
similar factors.
Given the current economic environment of rising inflation and
interest rates, and climate-related risks, Management have ensured
close and regular consideration of these factors and the impact to
customer behaviours and ability to pay. This analysis is performed
on a customer-by-customer basis. Such is the diversification across
the book in industries and geographies that any impact is not
considered to be material to the recoverability of customer
receivables. For more commentary on this, the ageing of trade
receivables and the provisions thereon at the year end, including
the movement in the provision, see note 12.
Credit risk in relation to other receivables is considered for
each separate contractual arrangement by Management. As these are
primarily with related parties the risk of the counterparty
defaulting is considered to be low.
Credit risk also arises from cash and cash equivalents and
deposits with banks and financial institutions. Cash and cash
equivalents are held mainly with banks which are rated 'A-' or
higher by Standard & Poor's Rating Services or Fitch Ratings
Ltd for long-term credit rating.
The financial assets are subject to the impairment requirements
of IFRS 9; for further detail of how this is assessed and measured,
see notes 12 to 16.
Credit risk exposure
Trade receivables, work in progress and accrued income result
from the provision of services to a large number of customers
(individuals and corporate), spread across different industries and
geographies. The gross carrying amount of financial assets
represents the maximum credit exposure and as at the reporting date
this can be summarised as follows:
Loss Loss
Total allowance Net Total allowance Net
2022 2022 2022 2021 2021 2021
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
-------------------------- -------- ---------- -------- -------- ---------- --------
Trade receivables 38,935 (5,645) 33,290 33,701 (4,831) 28,870
Work in progress 12,594 (69) 12,525 12,906 (72) 12,834
Accrued income 23,936 (25) 23,911 19,621 (34) 19,587
Other receivables 4,362 - 4,362 3,078 - 3,078
Cash and cash equivalents 48,861 - 48,861 39,326 - 39,326
-------------------------- -------- ---------- -------- -------- ---------- --------
128,688 (5,739) 122,949 108,632 (4,937) 103,695
-------------------------- -------- ---------- -------- -------- ---------- --------
29.3. LIQUIDITY RISK MANAGEMENT
Liquidity risk is the risk that the Group will not be able to
meet its financial obligations as they fall due. The Group manages
liquidity risk to maintain adequate reserves by regular review
around the working capital cycle using information on forecast and
actual cash flows. Management have considered the impact of rising
inflation and interest rates, and do not consider there to be a
significant negative impact.
The Board is responsible for liquidity risk management and they
have established an appropriate liquidity risk management framework
for the management of the Group's short, medium and long-term
funding and liquidity management requirements. Regulation in most
jurisdictions also requires the Group to maintain a level of
liquidity in order that the Group does not become exposed.
Liquidity tables
The tables detail the Group's remaining contractual maturity for
its financial liabilities with agreed repayment years. The tables
have been drawn up based on the undiscounted cash flows of
financial liabilities based on the earliest date on which the Group
can be required to pay. The table includes both interest and
principal cash flows. To the extent that interest flows are
floating rate, the undiscounted amount is derived from interest
rates at the balance sheet date. The contractual maturity is based
on the earliest date on which the Group may be required to pay.
The total contractual cash flows are as follows:
<6 6 - 12 1 - 3 3 - 5 5 - 10 >10
months months years years years years Total contractual cash flow
2022 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
---------------------------- -------- -------- -------- -------- -------- -------- ---------------------------
Loans and borrowings (1) 4,221 4,344 170,020 - - - 178,585
Trade payables and accruals - - - - - - -
Contingent consideration 2,734 - 29,358 - - - 32,092
Lease liabilities 3,537 3,511 13,225 10,346 14,812 7,806 53,237
---------------------------- -------- -------- -------- -------- -------- -------- ---------------------------
Total 10,492 7,855 212,603 10,346 14,812 7,806 263,914
---------------------------- -------- -------- -------- -------- -------- -------- ---------------------------
Total
<6 6 - 12 1 - 3 3 - 5 5 - 10 >10 contractual
months months years years years years cash flow
2021 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
---------------------------- -------- -------- -------- -------- -------- -------- ------------
Loans and borrowings (1) 1,019 2,038 3,210 157,802 - - 164,069
Trade payables and accruals 13,483 - 1,047 - - - 14,530
Contingent consideration 177 4,271 619 20,363 - - 25,430
Lease liabilities 3,305 3,270 11,522 9,597 15,375 9,682 52,751
---------------------------- -------- -------- -------- -------- -------- -------- ------------
Total 17,984 9,579 16,398 187,762 15,375 9,682 256,780
---------------------------- -------- -------- -------- -------- -------- -------- ------------
1 This includes the future interest payments not yet accrued and
the repayment of capital upon maturity.
30. CAPITAL MANAGEMENT
Risk management
The Group's objective for managing capital is to safeguard the
ability to continue as a going concern, while maximising the return
to Shareholders through the optimisation of the debt and equity
balance, and to ensure that capital adequacy requirements are met
for local regulatory requirements at entity level.
The managed capital refers to the Group's debt and equity
balances; for quantitative disclosures, see note 18 for loans and
borrowings and note 26 for share capital.
Loan covenants
The Group has bank loans which require it to meet leverage and
interest cover covenants. In order to achieve the Group's capital
risk management objective, the Group aims to ensure that it meets
financial covenants attached to bank borrowings. Breaches in
meeting the financial covenants would permit the lender to
immediately recall the loan. In line with the loan agreement the
Group tests compliance with the financial covenants on a bi-annual
basis.
Under the terms of the loan facility, the Group is required to
comply with the following financial covenants:
-- Leverage (being the ratio of total net debt to underlying
EBITDA (for LTM at average FX rates and adjusted for pro-forma
contributions from acquisitions) for a relevant period) must not be
more than 3:1
-- Interest cover (being the ratio of EBITDA to net finance
charges) must not be less than 4:1
The Group has complied with all financial covenants throughout
the reporting period and is satisfied that there is sufficient
headroom should rising inflation and interest rates adversely
affect trading going forward.
Capital adequacy
Individual regulated entities within the Group are subject to
regulatory requirements to ensure adequate capital and liquidity to
meet local requirements in Jersey, Guernsey, Ireland, the Isle of
Man, the UK, the US, Switzerland, the Netherlands, Luxembourg,
Mauritius, South Africa and the Caribbean; all are monitored
regularly to ensure compliance. There have been no breaches of
applicable regulatory requirements during the reporting period.
SECTION 7 - GROUP STRUCTURE
31. BUSINESS COMBINATIONS
A business combination is defined as a transaction or other
event in which an acquirer obtains control of one or more
businesses. Where the business combination does not include the
purchase of a legal entity but the transaction includes acquired
inputs and processes applied to those inputs in order to generate
outputs, the transaction is also considered a business
combination.
The Group applies the acquisition method to account for business
combinations. The consideration transferred in an acquisition
comprises the fair value of assets transferred, the liabilities
incurred to the former owners of the acquiree and the equity
interests issued by the Group in exchange for control of the
acquiree. The identifiable assets acquired and liabilities assumed
in a business combination are measured at their fair values at the
acquisition date. Acquisition-related costs are recognised in the
consolidated income statement as non-underlying items within
operating expenses.
The excess of the consideration transferred, the amount of any
non-controlling interest in the acquiree and the acquisition date
fair value of any previous equity interest in the acquiree over the
fair value of the identifiable net assets acquired is recorded as
goodwill. If those amounts are less than the fair value of the net
identifiable assets of the business acquired, the difference is
recognised directly in the consolidated income statement as a gain
on bargain purchase.
When the consideration transferred includes an asset or
liability resulting from a contingent consideration arrangement,
this is measured at its acquisition-date fair value. Changes in
fair value of the contingent consideration that qualify as
measurement period adjustments are adjusted retrospectively, with
corresponding adjustments against goodwill.
Measurement period adjustments are adjustments that arise from
additional information obtained during the measurement period
(which cannot exceed one year from the acquisition date) about
facts and circumstances that existed at the acquisition date.
The subsequent accounting for changes in the fair value of the
contingent consideration that do not qualify as measurement period
adjustments depend on how the contingent consideration is
classified. Contingent consideration that is classified as equity
is not remeasured at subsequent reporting dates and its subsequent
settlement is accounted for within equity. Contingent consideration
that is classified as an asset or liability is remeasured at
subsequent reporting dates at fair value with the corresponding
gain or loss being recognised in the consolidated income
statement.
31.1. NEW YORK PRIVATE TRUST COMPANY ("NYPTC")
On 27 April 2022, JTC entered into an agreement to acquire 100%
of the share capital of NYPTC, a Delaware non-deposit trust
company. NYPTC offers a broad range of fiduciary services,
including trust services, estate administration services and white
label trust services to HNW and UHNW individuals, families and
corporate clients. The acquisition supports JTC's strategy to
further develop its presence in the high growth US market and in
particular to develop a US domestic trust services offering and is
highly complementary to JTC's existing private client operations in
the US in Miami, New York and South Dakota.
Following regulatory approval for the transaction, 100% of the
cash consideration was transferred on 28 October 2022 in advance of
completion on 31 October 2022. The results of the acquired business
have been consolidated from 31 October 2022 as Management concluded
this was the date control was obtained by the Group.
The acquired business contributed revenues of GBP1.0m and
underlying profit before tax (before central costs have been
applied) of GBP0.3m to the Group for the period from 31 October
2022 to 31 December 2022. If the business had been acquired on 1
January 2022, the consolidated pro-forma revenue and underlying
profit before tax for the period would have been GBP204.1m and
GBP37.2m respectively.
(a) Identifiable assets acquired and liabilities assumed on
acquisition
The following table shows, at fair value, the recognised assets
acquired and liabilities assumed at the acquisition date:
Book value at acquisition Adjustments Fair value Fair value
GBP'000 GBP'000 GBP'000 $'000
----------------------------------------------- ------------------------- ----------- ---------- ----------
Property, plant and equipment (1,3) 22 471 493 573
Intangible assets - customer relationships (2) 1,334 4,328 5,662 6,566
Trade receivables 514 - 514 595
Other receivables (4) 371 - 371 431
Cash and cash equivalents 3,997 - 3,997 4,634
----------------------------------------------- ------------------------- ----------- ---------- ----------
Assets 6,238 4,799 11,037 12,799
----------------------------------------------- ------------------------- ----------- ---------- ----------
Trade and other payables 275 (14) 261 302
Lease liabilities (1) - 413 413 479
Deferred tax liabilities (2) - 1,682 1,682 1,950
Deferred income 24 - 24 27
Provisions (3) - 58 58 68
----------------------------------------------- ------------------------- ----------- ---------- ----------
Liabilities 299 2,139 2,438 2,826
----------------------------------------------- ------------------------- ----------- ---------- ----------
Total identifiable net assets 5,939 2,660 8,599 9,973
----------------------------------------------- ------------------------- ----------- ---------- ----------
1 The acquired business leases office premises; a lease
liability of GBP0.4m ($0.5m) is measured at the present value of
the remaining lease payments with an equal right-of-use asset.
2 Acquisition-related intangible assets of GBP5.7m ($6.6m) relate to the valuation of customer relationships; these were valued with the assistance of an expert using the MEEM financial valuation model (see note 21.2(a) for key assumptions and sensitivity analysis). The useful economic life of 10 years was based on the historical length of relationships as well as observed attrition rates for companies operating in the wealth management and fund administration sector. Deferred tax liabilities of GBP1.7m ($1.95m) have been recognised in relation to the identified intangible assets, the amortisation of which is non-deductible against US Corporation taxes and therefore creates temporary differences between the accounting and taxable profits.
3 The discounted dilapidation cost in relation to leased office
premises is recognised as a provision (see note 25) and capitalised
against leasehold improvements.
4 Other receivables includes mortgage-backed securities held at
fair value that were sold in January 2023.
(b) Consideration
Consideration for the acquisition was cash of GBP16.98m
($19.69m) with GBP17.0m ($19.71m) paid on 28 October 2022 in
advance of completion and GBP0.16m ($0.19m) received subsequently
for purchase price adjustments.
(c) Goodwill
GBP'000 $'000
-------------------------------------------- ------- -------
Total consideration 16,983 19,691
Less: Fair value of identifiable net assets (8,599) (9,973)
-------------------------------------------- ------- -------
Goodwill 8,384 9,718
-------------------------------------------- ------- -------
Goodwill is represented by assets that do not qualify for
separate recognition or other factors. The acquisition adds scale
and is transformative to JTC PCS's offering in the large and
growing US trust market, including new customer relationships and
the effects of an assembled workforce.
(d) Impact on cash flow
GBP'000 $'000
---------------------------------- ------- -------
Cash consideration 17,043 19,710
Less: cash balances acquired (3,997) (4,634)
---------------------------------- ------- -------
Net cash outflow from acquisition 13,046 15,076
---------------------------------- ------- -------
(e) Acquisition-related costs
The Group incurred acquisition-related costs of GBP0.5m for
legal, professional, advisory and other operating expenses. These
costs have been recognised in other operating expenses in the
Group's consolidated income statement (see note 6) and are treated
as non-underlying items to calculate underlying EBITDA (see note
7).
31.2. RBC CEES LIMITED ("RBC CEES")
On 6 April 2021, JTC acquired RBC cees, the provider of a
market-leading employee benefits platform for an internationally
diverse blue-chip corporate client base. The acquisition was
complementary to JTC's existing corporate and trustee services, and
significantly enhanced the Group's employee benefits offering.
At the acquisition date, the fair value of consideration was
GBP20.2m for acquired identifiable net assets of GBP25.5m,
resulting in negative goodwill of GBP5.3m, which was recognised as
a gain on bargain purchase in the prior year (see note 9).
Within the acquired identifiable net assets were customer
relationship intangibles of GBP22.4m with a UEL of 12 years.
Deferred tax liabilities of GBP2.2m were recognised in relation to
identified intangible assets, the amortisation of which is
non-deductible against Jersey and Guernsey Corporation Tax and
therefore creates temporary differences between the accounting and
taxable profits.
31.3. INDOS FINANCIAL LIMITED ("INDOS")
On 1 June 2021, JTC acquired INDOS, a privately owned UK and
Irish based, specialist provider of depositary and other high value
services for alternative investment funds. This acquisition added
further technical expertise for fund services within the ICS
division and directly added scale in the UK and Ireland, two growth
jurisdictions.
At the acquisition date, the fair value of consideration was
GBP12.3m for acquired identifiable net assets of GBP3.0m, resulting
in goodwill of GBP9.3m. This included contingent consideration of
GBP1.5m (discounted to GBP1.2m) which is payable subject to JTC PLC
meeting an underlying EPS target for the period ending 31 December
2022. Management anticipate this will be paid in full following the
release of their results in April 2023; the NPV at 31 December 2022
is GBP1.5m (2021: GBP1.3m), see note 17. The consideration is
payable in equity and is subject to a one year lock in period which
expires on 31 December 2023.
Within the acquired identifiable net assets were customer
relationship intangibles of GBP1.4m, a brand intangible of GBP0.4m
and an internally generated software intangible of GBP1.2m; all
have a UEL of 10 years. Deferred tax liabilities of GBP0.2m were
recognised in relation to identified intangible assets, the
amortisation of which is non-deductible against UK and Irish
Corporation Tax, and therefore creates temporary differences
between the accounting and taxable profits.
31.4. SEGUE PARTNERS LLC ("SEGUE")
On 15 September 2021, JTC acquired Segue, an innovative fund
services provider headquartered in St. Louis, Missouri, US. The
business provides a range of sophisticated fund solutions to meet
the needs of private equity, venture capital, debt funds and family
offices, and also delivers accounting services specifically
designed to meet the needs of entrepreneurs, portfolio companies
and start-ups.
At the acquisition date, the fair value of consideration was
GBP6.3m ($8.4m) for acquired identifiable net assets of GBP1.0m
($1.3m), resulting in goodwill of GBP5.3m ($7.1m). This included
contingent consideration of GBP2.2m ($3.0m) (discounted to GBP1.6m
($2.2m)) which was subject to Segue meeting adjusted EBITDA targets
over the calendar years 2022 and 2023. The contingent consideration
is to be paid in a 80%/20% ratio of cash and JTC PLC Ordinary
shares. During 2022, Management determined that the maximum
earn-out of $3.0m would be settled and a part-payment of GBP0.2m
($0.3m) in cash. The remaining cash and the issuance of JTC PLC
Ordinary shares equal to 20% is anticipated in April 2023. The NPV
of contingent consideration at 31 December 2022 is now GBP2.2m
($2.6m) (see note 17) and as the settlement is earlier than
initially anticipated, it resulted in a loss on revaluation of
contingent consideration of GBP0.13m to accelerate the discount
(see note 9).
Within the acquired identifiable net assets were customer
relationship intangibles of GBP1.1m ($1.4m) with a UEL of 10 years.
Deferred tax liabilities of GBP0.3m ($0.4m) were recognised in
relation to identified intangible assets, the amortisation of which
is non-deductible against US Corporation Taxes and therefore
creates temporary differences between the accounting and taxable
profits.
31.5. PERFORM DUE DILIGENCE SERVICES LIMITED ("PERFORM")
On 18 October 2021, JTC acquired perfORM, a London based,
technology-led provider of due diligence services for a diverse
base of UK and international investment managers and
allocators.
At the acquisition date, the fair value of consideration was
GBP2.74m, including a total estimated earn-out contingent
consideration due of GBP4.48m (discounted to GBP2.69m) for acquired
identifiable net assets of GBP0.05m, resulting in goodwill of
GBP2.69m.
The earn-out for perfORM is calculated based on a multiple of
underlying EBITDA for the year ended 31 December 2024 (up to a
maximum of GBP6.0m) and payable in an equal split of cash and JTC
PLC Ordinary shares; the 50% payable in shares is
liability-classified contingent consideration. In accordance with
IAS 32, Management are required to update the fair value at each
reporting date.
Management therefore reassessed the forecast EBITDA and
identified no evidence to indicate an adjustment was required to
the GBP4.48m estimated as due. The Monte Carlo simulation was
updated, decreasing the share price applied to the 282,854 JTC PLC
Ordinary shares to GBP7.92 (31.12.2021: GBP7.99).
The simulation is based on JTC's share price at 31 December
2022, factoring in historical volatility and projected dividend
payments and is then discounted using an appropriate risk-free
rate.
The updated share price resulted in a gain on revaluation of
GBP0.05m (see note 9) as the fair value of the contingent
consideration payable in JTC Ordinary shares decreased to GBP2.24m
(2021: GBP2.26m).
The revalued earn-out contingent consideration of GBP4.46m (cash
GBP2.22m/JTC PLC Ordinary shares GBP2.24m) has then been discounted
to a present value of GBP3.18m (see note 17).
Within the acquired identifiable net assets were customer
relationship intangibles of GBP0.03m with a UEL of 10 years.
Deferred tax liabilities of GBP0.01m were recognised in relation to
identified intangible assets, the amortisation of which is
non-deductible against UK Corporation Tax and therefore creates
temporary differences between the accounting and taxable
profits.
31.6. BALLYBUNION CAPITAL LIMITED ("BALLYBUNION")
On 3 November 2021, JTC acquired Ballybunion, a boutique asset
manager based in Dublin that provides management and regulatory
oversight services to investment funds.
At the acquisition date, the fair value of consideration was
GBP11.9m (EUR14.1m) for acquired identifiable net assets of GBP3.1m
(EUR3.7m), resulting in goodwill of GBP8.8m ($10.4m). This included
contingent consideration payable in cash subject to meeting an
underlying EBITDA target for the period ended 30 June 2022 and a
put/call option agreement to acquire the remaining 5% of equity in
Ballybunion. As the business performed successfully, exceeding the
EBITDA target for 30 June 2022 and JTC exercised its option,
GBP1.85m (EUR2.05m) was paid in during the year.
On 21 March 2023, Ballybunion changed its name to JTC Global
AIFM Solutions (Ireland) Limited.
31.7. SALI FUND MANAGEMENT LLC AND SALI GP HOLDINGS LLC
("SALI")
On 12 November 2021, JTC acquired SALI, a US based and
market-leading provider of fund services to the Insurance Dedicated
Fund ("IDF") and Separately Managed Account ("SMA") market.
The fair value of consideration at acquisition recorded in the
31 December 2021 financial statements was GBP174.3m ($233.0m) for
acquired identifiable net assets of GBP33.4m ($44.6m), resulting in
goodwill of GBP140.9m ($188.4m).
Within the acquired identifiable net assets were customer
relationship intangibles of GBP43.6m ($58.3m) with a UEL of 25
years and a brand intangible of GBP1.6m ($2.2m) with a UEL of 5
years. Deferred tax liabilities of GBP13.4m ($18.0m) were
recognised in relation to identified intangible assets, the
amortisation of which is non-deductible against US Corporation
Taxes and therefore creates temporary differences between the
accounting and taxable profits.
(a) Consideration
Total consideration was satisfied by the following:
GBP'000 $'000
-------------------------------------------------------------------------------- ------- -------
Cash consideration 144,791 193,593
Equity instruments (1,260,457 Ordinary shares) (1) 8,583 11,471
Contingent consideration - EBT contribution (2) 1,871 2,500
Contingent consideration - Closing payment 159 212
Contingent consideration - Earn-out (3) 18,899 25,258
-------------------------------------------------------------------------------- ------- -------
Fair value of total consideration at acquisition date 174,303 233,034
-------------------------------------------------------------------------------- ------- -------
Adjustment to fair value of shares issued as consideration following FRC review
-------------------------------------------------------------------------------- ------- -------
Equity instruments valued at acquisition date 2,020 2,701
Removal of discount for lack of marketability 578 772
-------------------------------------------------------------------------------- ------- -------
Total adjustment to fair value of equity instruments 2,598 3,473
-------------------------------------------------------------------------------- ------- -------
Adjusted fair value of total consideration at acquisition date 176,901 236,507
-------------------------------------------------------------------------------- ------- -------
1 FRC review
Following a review of the JTC Annual Report and Accounts 2021 by
the FRC in accordance with Part 2 of the FRC Corporate Reporting
Review Operating Procedures, further information was requested in
respect of the valuation of shares issued as consideration. Upon
investigation by Management, it was understood that our approach
where equity instruments are issued as consideration did not adhere
to the strict interpretation of IFRS 3 'Business Combinations',
paragraph 37 ("IFRS 3 p37"), which requires consideration
transferred in a business combination to be measured at the
acquisition-date fair value.
On 19 November 2021, the Company issued and admitted 1,260,457
Ordinary shares to satisfy the equity element of initial
consideration. At 31 December 2021, the fair value of the shares
was derived using a share price of GBP7.18 on 6 October 2021, the
date of the Share Purchase Agreement ("SPA"), rather than the share
price of GBP8.87, the end of day share price on the acquisition
date of 12 November 2022 as required by IFRS 3 p37. As a result,
the fair value of consideration at the date of the acquisition was
understated by GBP2.02m.
In addition, it was identified that a discount for lack of
marketability had been applied to the equity instruments in the 31
December 2021 financial statements. On review, it was concluded
that this had been incorrectly applied, as the restriction applies
to the holders of the shares and not the Company. This resulted in
an understatement of the fair value of consideration at the date of
the acquisition of GBP0.58m.
The fair value of equity instruments should have been GBP11.2m
($14.9m) rather than GBP8.6m ($11.5m); the result was a total
adjustment to the fair value of equity instruments of GBP2.6m
($3.5m). This was adjusted during 2022, increasing both goodwill
(see (c) and note 21) and share premium (see note 26.1).
2 Contingent consideration - EBT contribution
On 14 June 2022, the Company issued 325,272 Ordinary shares to
PLC EBT to settle this element of consideration (see note
26.1).
3 Contingent consideration - Earn-out
A total of up to GBP26.1m ($31.5m) is payable in cash subject to
meeting revenue targets for the two year period following
acquisition. Based on Management's assessment of the performance to
date and the budgeted forecast for the remaining period, it is
estimated that the earn-out will be paid in full. At 31 December
2022, the total amount due has been discounted to its present value
GBP23.6m ($28.5m) (2021: GBP18.9m ($25.3m)), see note 17.
Sensitivity analysis on fair value of earn-out consideration
Management carried out a sensitivity analysis on the output of
the key assumptions and estimates used to calculate the fair value
of the earn-out contingent consideration. Management consider the
key assumption and estimate to be forecast revenue for the two year
period. A decrease in the forecast revenue of 10% would decrease
the earn-out contingent consideration by GBP2.6m ($3.5m).
Discounted to its present value, this would be equal to a GBP2.4m
($3.2m) decrease.
(b) Identifiable assets acquired and liabilities assumed
At acquisition, deferred tax liabilities of GBP13.44m ($17.96m)
were recognised in relation to acquired intangible assets where it
was anticipated that the amortisation would be non-deductible
against US Corporation taxes and therefore give rise to temporary
differences between the accounting and taxable profits. Subsequent
information received identified that the purchase consideration
would be tax deductible.
Management have therefore recognised a measurement period
adjustment to the initial accounting for the business combination.
The deferred tax liability has been derecognised resulting in a
GBP13.44m ($17.96m) decrease to acquired goodwill and an adjustment
of GBP0.07m ($0.09m) to income tax for the previous unwinding of
the deferred tax liability.
(c) Goodwill
GBP'000 $'000
----------------------------------------------------- -------- --------
Goodwill at acquisition date 140,903 188,396
Exchange differences at 31 December 2021 (1,330) -
----------------------------------------------------- -------- --------
Goodwill at 1 January 2022 139,573 188,396
Total adjustment to fair value of equity instruments 2,598 3,473
----------------------------------------------------- -------- --------
Adjusted goodwill at acquisition date 142,171 191,869
Measurement period adjustment (13,437) (17,964)
Exchange differences at 31 December 2022 15,537 -
----------------------------------------------------- -------- --------
Goodwill at 31 December 2022 144,271 173,905
----------------------------------------------------- -------- --------
31.8. ESSENTIAL FUND SERVICES, LLC ("EFS")
On 15 December 2021, JTC acquired EFS, a fund services provider
headquartered in New York, US. The business provides a broad range
of services in the alternative assets space, including accounting,
reporting and administrative services to investment partnerships
and their investment managers.
The fair value of consideration was GBP6.5m ($8.5m) for acquired
identifiable net assets of GBP1m ($1.3m), resulting in goodwill of
GBP5.5m ($7.2m). Contingent consideration of GBP0.02m ($0.03m) was
paid during the year following the reconciliation of the closing
cash reserve.
At acquisition, deferred tax liabilities of GBP0.4m ($0.5m) were
recognised in relation to acquired intangible assets where it was
anticipated that the amortisation would be non-deductible against
US Corporation taxes and therefore give rise to temporary
differences between the accounting and taxable profits. Subsequent
information received identified that the purchase consideration
would be tax deductible.
Management have therefore recognised a measurement period
adjustment to the initial accounting for the business combination.
The deferred tax liability has been derecognised resulting in a
GBP0.4m ($0.5m) decrease to acquired goodwill.
32. INVESTMENTS
The Group's interest in other entities includes an associate and
an investment held at cost.
An associate is an entity in which the Group has significant
influence, but not control or joint control, over the financial and
operating policies. The Group's interest in an equity-accounted
investee solely comprises of an interest in an associate.
Investments in associates are accounted for using the equity
method. Under the equity method, the investment in an associate is
initially recognised at cost, which includes transaction costs.
Subsequent to initial recognition, the carrying amount of the
investment is adjusted to recognise the Group's share of
post-acquisition profits or losses in the consolidated income
statement within EBITDA, and the Group's share of movements in
other comprehensive income of the investee in other comprehensive
income. Unrealised gains and losses resulting from transactions
between the Group and the associate are eliminated to the extent of
the interest in the associate.
The carrying amount of equity-accounted investments is tested
for impairment in accordance with the policy described in note
21.
Where the Group has an interest in an entity but does not have
significant influence, the investment is held at cost.
The following table details the associate and an investment the
Group holds as at 31 December 2022. The entities listed have share
capital consisting solely of Ordinary shares, which are held
directly by the Group. The country of incorporation is also their
principal place of business, and the proportion of ownership
interest is the same as the proportion of voting rights held.
% of ownership interest Carrying amount
------------------------- ------------------
Country of Nature of Measurement 2022 2021 2022 2021
Name of entity incorporation relationship method % % GBP'000 GBP'000
--------------------- --------------- --------------- -------------- ------------ ----------- -------- --------
Kensington
International Group
Pte. Ltd Singapore Associate (1) Equity method 42 42 2,325 1,847
Harmonate Corp. US Investment (2) Cost method 11.2 16 831 791
--------------------- --------------- --------------- -------------- ------------ ----------- -------- --------
Total investments 3,156 2,638
----------------------------------------------------------------------- ------------ ----------- -------- --------
1 Kensington International Group Pte. Ltd ("KIG") provides
corporate, fiduciary, trust and accounting services, and is a
strategic partner of the Group, providing access to new clients and
markets in the Far East.
2 Harmonate Corp. ("Harmonate") provides fund operation and data
management solutions to clients in the financial services
industry.
The summarised financial information for KIG, which is accounted
for using the equity method, is as follows:
2022 2021
Summarised income statement GBP'000 GBP'000
---------------------------- -------- --------
Revenue 7,253 6,184
---------------------------- -------- --------
Gross profit 6,133 5,217
---------------------------- -------- --------
Profit for the year 668 654
---------------------------- -------- --------
2022 2021
Summarised balance sheet GBP'000 GBP'000
------------------------------------ -------- --------
Total non-current assets 600 637
Total current assets 10,805 6,043
------------------------------------ -------- --------
Total assets 11,405 6,680
------------------------------------ -------- --------
Total current liabilities 7,141 3,547
------------------------------------ -------- --------
Net assets less current liabilities 4,264 3,133
------------------------------------ -------- --------
2022 2021
Reconciliation of summarised financial information GBP'000 GBP'000
--------------------------------------------------- -------- --------
Opening net assets 3,133 2,272
Profit for the year 668 654
Foreign exchange differences 463 207
--------------------------------------------------- -------- --------
Closing net assets 4,264 3,133
--------------------------------------------------- -------- --------
Group's share of closing net assets 1,803 1,325
Goodwill 522 522
--------------------------------------------------- -------- --------
Carrying value of investment in associate 2,325 1,847
--------------------------------------------------- -------- --------
2022 2021
Impact on consolidated income statement Note GBP'000 GBP'000
--------------------------------------------- ---- -------- --------
Balance at 1 January 1,847 1,483
Share of profit of equity-accounted investee 35.1 478 364
--------------------------------------------- ---- -------- --------
Balance at 31 December 2,325 1,847
--------------------------------------------- ---- -------- --------
33. SUBSIDIARIES
In the opinion of Management, the Group's subsidiaries which
principally affect the profit or the net assets of the Group at 31
December 2022 are listed below. Unless otherwise stated, the
Company owns 100% of share capital consisting solely of Ordinary
shares, and the proportion of ownership interests held equals the
voting rights held by the Group. The country of incorporation is
also their principal place of business.
Where shareholding and voting rights are less than 100%,
Management have considered the circumstances of each subsidiary
shareholding and any specific agreements in support, and have
concluded that the subsidiaries should be consolidated (as per the
accounting policy in note 3.2), the interest attributed in full to
the Company and no minority interest recognised. Please see
specific comments below the table.
Country of incorporation and place of %
Name of subsidiary business Activity holding
----------------------------------------- ------------------------------------------ --------------------- --------
JTC Group Holdings Limited Jersey Holding 100
JTC Group Limited Jersey Head office services 100
JTC (Jersey) Limited Jersey Trading 100
JTC Employer Solutions Limited Jersey Trading 100
JTC Fund Solutions (Jersey) Limited Jersey Trading 100
JTC (BVI) Limited British Virgin Islands Trading 100
JTC (Cayman) Limited Cayman Islands Trading 100
JTC Fund Services (Cayman) Ltd Cayman Islands Trading 100
JTC Corporate Services (DIFC) Limited Dubai Trading 100
JTC Fund Solutions (Guernsey) Limited Guernsey Trading 100
JTC Global AIFM Solutions Limited Guernsey Trading 100
JTC Registrars Limited Guernsey Trading 100
JTC Employer Solutions (Guernsey) Limited Guernsey Trading 100
JTC Corporate Services (Ireland) Limited Ireland Trading 100
JTC Fund Solutions (Ireland) Limited Ireland Trading 100
JTC Global AIFM Solutions (Ireland)
Limited (formerly Ballybunion Capital
Limited) (1) Ireland Trading 100
INDOS Financial (Ireland) Limited Ireland Trading 100
JTC Trustees (IOM) Limited Isle of Man Trading 100
JTC Luxembourg Holdings S.à r.l. Luxembourg Holding 100
JTC (Luxembourg) S.A. Luxembourg Trading 100
JTC Global AIFM Solutions SA Luxembourg Trading 100
JTC Corporate Services (Luxembourg) SARL Luxembourg Trading 100
JTC Signes Services SA Luxembourg Trading 100
Exequtive Services S.à r.l. Luxembourg Trading 100
JTC Fiduciary Services (Mauritius)
Limited Mauritius Trading 100
JTC (Netherlands) B.V. Netherlands Trading 100
JTC Holdings (Netherlands) B.V. Netherlands Holding 100
JTC Institutional Services Netherlands
B.V. Netherlands Trading 100
Global Tax Support B.V. (2) Netherlands Trading -
JTC Fund and Corporate Services
(Singapore) Pte. Limited (formerly JTC
Fiduciary Services
(Singapore) Pte. Limited) Singapore Trading 100
JTC Fund Solutions RSA (Pty) Ltd South Africa Trading 100
JTC (Suisse) SA Switzerland Trading 100
JTC Trustees (Suisse) Sàrl Switzerland Trading 100
JTC Group Holdings (UK) Limited UK Holding 100
INDOS Financial Limited UK Trading 100
JTC Fund Services (UK) Limited UK Trading 100
JTC Trust Company (UK) Limited UK Trading 100
JTC (UK) Limited UK Trading 100
JTC UK (Amsterdam) Limited UK Holding 100
JTC Registrars (UK) Limited UK Trading 100
perfORM Due Diligence Services Limited UK Trading 100
JTC USA Holdings, Inc. US Trading 100
JTC Miami Corporation (3) US Trading 50
JTC Trust Company (South Dakota) Ltd
(formerly JTC Trustees (USA) Ltd) US Trading 100
Essential Fund Services, LLC US Trading 100
SALI Fund Management, LLC US Trading 100
JTC Americas Holdings, LLC US Holding 100
Segue Partners, LLC US Trading 100
JTC Trust Company (Delaware) Limited US Trading 100
----------------------------------------- ------------------------------------------ --------------------- --------
1 During the year, JTC paid GBP0.6m to exercise a call option to
purchase the remaining 5% of share capital to increase to a 100%
holding.
2 JTC has a call option to purchase Global Tax Support B.V. for
EUR1 from its parent company, therefore Management consider it has
control of this entity and no minority interest is recognised.
3 JTC Miami Corporation is 50% owned by an employee as part of
their residential status in the US. The employee has signed a
declaration of trust to confirm they hold the shares in trust for
JTC, would vote as directed nor seek to benefit from dividends or
profit. Management therefore consider it appropriate to attribute
100% of the interest to JTC and no minority interest is
recognised.
JTC PLC has the following dormant UK subsidiaries that are
exempt from filing individual accounts with the registrar in
accordance with s448A of Companies Act 2006: PTC Securities
Limited, Stratford Securities Limited, St James's Securities
Limited, JTC Fiduciary Services (UK) Limited, JTC Trustees (UK)
Limited, PTC Investments Limited, Castle Directors (UK) Limited,
JTC Securities (UK) Limited, JTC Corporate Services (UK) Limited,
JTC Trustees Services (UK) Limited and JTC Directors (UK)
Limited.
SECTION 8 - OTHER DISCLOSURES
34. EARNINGS PER SHARE
Basic Earnings Per Share
The calculation of basic Earnings Per Share is based on the
profit for the year divided by the weighted average number of
Ordinary shares for the same year.
Diluted Earnings Per Share
The calculation of diluted Earnings Per Share is based on basic
Earnings Per Share after adjusting for the potentially dilutive
effect of Ordinary shares that have been granted.
Adjusted underlying basic Earnings Per Share
The calculation of underlying basic Earnings Per Share is based
on basic Earnings Per Share after adjusting profit for the year for
non-underlying items and to remove the amortisation of acquired
intangible assets and associated deferred tax, amortisation of loan
arrangement fees and unwinding of NPV discounts in relation to
contingent consideration.
The Group calculates basic, diluted and adjusted underlying
basic Earnings Per Share. The results can be summarised as
follows:
2022 2021
Note Pence Pence
------------------------------ ---- ------ ------
Basic EPS 34.1 23.92 20.49
Diluted EPS 34.2 23.60 20.21
Adjusted underlying basic EPS 34.3 33.27 25.55
------------------------------ ---- ------ ------
34.1. BASIC EARNINGS PER SHARE
2022 2021
GBP'000 GBP'000
-------------------- -------- --------
Profit for the year 34,714 26,648
-------------------- -------- --------
No. of shares No. of shares
(thousands) (thousands)
--------------------------------------------------------- ------------- -------------
Issued Ordinary shares at 1 January 144,326 119,097
Effect of shares issued to acquire business combinations - 362
Effect of movement in treasury shares held 811 850
Effect of placing - 9,735
--------------------------------------------------------- ------------- -------------
Weighted average number of Ordinary shares (basic): 145,137 130,044
--------------------------------------------------------- ------------- -------------
Basic EPS (pence) 23.92 20.49
--------------------------------------------------------- ------------- -------------
34.2. DILUTED EARNINGS PER SHARE
2022 2021
GBP'000 GBP'000
-------------------- -------- --------
Profit for the year 34,714 26,648
-------------------- -------- --------
No. of shares No. of shares
Note (thousands) (thousands)
------------------------------------------------------ ---- ------------- -------------
Weighted average number of Ordinary shares (basic) 34.1 145,137 130,044
Effect of share-based payments issued 1,930 1,796
------------------------------------------------------ ---- ------------- -------------
Weighted average number of Ordinary shares (diluted): 147,067 131,840
------------------------------------------------------ ---- ------------- -------------
Diluted EPS (pence) 23.60 20.21
------------------------------------------------------ ---- ------------- -------------
34.3. ADJUSTED UNDERLYING BASIC EARNINGS PER SHARE
2022 2021
Note GBP'000 GBP'000
-------------------------------------------------------------------------------------------- ---- -------- --------
Profit for the year 34,714 26,648
-------------------------------------------------------------------------------------------- ---- -------- --------
Non-underlying items 7 (1,883) (2,875)
Amortisation of customer relationships, acquired software and brands 21 12,400 8,809
Amortisation of loan arrangement fees 10 1,062 1,501
Unwinding of NPV discounts for contingent consideration 10 3,518 586
Temporary tax differences arising on amortisation of customer relationships, acquired
software
and brands 11 (1,531) (1,446)
-------------------------------------------------------------------------------------------- ---- -------- --------
Adjusted underlying profit for the year 48,280 33,223
-------------------------------------------------------------------------------------------- ---- -------- --------
No. of shares No. of shares
Note (thousands) (thousands)
--------------------------------------------------- ---- ------------- -------------
Weighted average number of Ordinary shares (basic) 34.1 145,137 130,044
--------------------------------------------------- ---- ------------- -------------
Adjusted underlying basic EPS (pence) 33.27 25.55
--------------------------------------------------- ---- ------------- -------------
Adjusted underlying basic EPS is an alternative performance
measure which reflects the underlying activities of the Group. The
following definition is not consistent with the requirements of IAS
33.
The Group's definition of underlying basic EPS reflects the
profit for the year adjusted to remove the impact of non-underlying
items (see note 7). Additionally, a number of other items relating
to the Group's acquisition activities including amortisation of
acquired intangible assets and associated deferred tax,
amortisation of loan arrangement fees and unwinding of NPV
discounts in relation to contingent consideration are removed to
present an adjusted underlying basic EPS which is used more widely
by external investors and analysts.
35. CASH FLOW INFORMATION
35.1. CASH GENERATED FROM OPERATIONS
2022 2021
Note GBP'000 GBP'000
--------------------------------------------------------- ---- -------- --------
Operating profit 33,803 8,992
Adjustments:
Depreciation of property, plant and equipment 7,883 7,157
Amortisation of intangible assets 14,378 10,434
Equity-settled share-based payment expense 2,045 1,708
EIP share-based payment expense 4,780 13,778
Share of profit of equity-accounted investee 32 (478) (364)
--------------------------------------------------------- ---- -------- --------
Operating cash flows before movements in working capital 62,411 41,705
--------------------------------------------------------- ---- -------- --------
Net changes in working capital:
Increase in receivables (10,247) (9,972)
Decrease in payables 3,202 (1,036)
--------------------------------------------------------- ---- -------- --------
Cash generated from operations 55,366 30,697
--------------------------------------------------------- ---- -------- --------
35.2. NON-UNDERLYING ITEMS WITHIN CASH GENERATED FROM
OPERATIONS
2022 2021
GBP'000 GBP'000
----------------------------------------------------------------- -------- --------
Cash generated from operations 55,366 30,697
Non-underlying items:
Capital distribution from EBT 417 581
Acquisition and integration 3,127 6,440
Office start ups 768 -
Revision of ICS operating model 402 421
Other 228 263
----------------------------------------------------------------- -------- --------
Total non-underlying items within cash generated from operations 4,942 7,705
----------------------------------------------------------------- -------- --------
Underlying cash generated from operations 60,308 38,402
----------------------------------------------------------------- -------- --------
35.3. FINANCING ACTIVITIES
Changes in liabilities arising from financing activities:
Lease Lease
liabilities liabilities Borrowings Borrowings
due within due after due within due after
one year one year one year one year Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
----------------------------- ------------ ------------ ----------- ---------- ---------
At 1 January 2021 4,215 39,155 2,456 104,376 150,202
Cash flows:
Acquired on acquisition 324 1,018 - - 1,342
Drawdowns - - - 176,662 176,662
Repayments (74) (5,748) (2,434) (125,099) (133,355)
Other non-cash movements (1) 998 3,491 (22) (3,361) 1,106
----------------------------- ------------ ------------ ----------- ---------- ---------
At 31 December 2021 5,463 37,916 - 152,578 195,957
----------------------------- ------------ ------------ ----------- ---------- ---------
Cash flows:
Acquired on acquisition 216 101 - - 317
Repayments (41) (6,202) - - (6,243)
Other non-cash movements (1) (1,346) 8,787 - - 7,441
----------------------------- ------------ ------------ ----------- ---------- ---------
At 31 December 2022 4,292 40,602 - 152,578 197,472
----------------------------- ------------ ------------ ----------- ---------- ---------
1 Other non-cash movements include the capitalisation and
amortisation of loan arrangement fees, foreign exchange movements,
additions and disposals of lease liabilities relating to
right-of-use assets and the unwinding of NPV discounts.
35.4. NET DEBT
2022 2021
Notes GBP'000 GBP'000
-------------------------------- ----- --------- ---------
Bank loans 18 (153,622) (152,578)
Trapped cash (1) (15,673) (3,903)
Loans receivable from employees 15 16 3
Less: cash and cash equivalents 48,861 39,326
-------------------------------- ----- --------- ---------
Total net debt (120,418) (117,152)
-------------------------------- ----- --------- ---------
1 Trapped cash represents the minimum cash balance to be held to
meet regulatory capital requirements.
36. SHARE-BASED PAYMENTS
The Company operates equity-settled share-based payment
arrangements under which services are received from eligible
employees as consideration for equity instruments. The total amount
to be expensed for services received is determined by reference to
the fair value at grant date of the share-based payment awards
made, including the impact of any non-vesting and market
conditions.
The fair value determined at the grant date is expensed on a
straight-line basis over the vesting period, based on Management's
estimate of equity instruments that will eventually vest. At each
balance sheet date, Management revise its estimate of the number of
equity instruments expected to vest as a result of the effect of
non-market based vesting conditions. The impact of the revision of
the original estimates, if any, is recognised in the consolidated
income statement such that the cumulative expense reflects the
revised estimate, with a corresponding adjustment to equity
reserves.
36.1. DESCRIPTION OF SHARE-BASED PAYMENT ARRANGEMENTS
The Group has implemented and made awards to eligible employees
under three equity-settled share-based payment plans; it also
continues to make awards when employees join the business, for the
retention of key employees following acquisition and to incentivise
key employees (see 'Other awards'). Details of the share plans are
as follows:
(a) Employee Incentive Plan
JTC has an ongoing commitment to the concept of shared ownership
and adopted the EIP upon listing on the London Stock Exchange in
March 2018. The EIP is designed to recognise and reward long-term
performance across the whole Group and its alignment of employees'
and Shareholders' interests is linked to multi-year business plans.
All permanent employees of the Group (excluding all Executive
Directors of JTC PLC) are eligible to be granted an award under the
EIP at the discretion of the Remuneration Committee.
On 22 July 2021, following the conclusion of the Odyssey
business plan (which ran from the IPO until the end of 2020), JTC
PLC granted 3,104,007 shares to employees of the Group. Each award
was separated into two tranches: 50% vested at the grant date
("Tranche one") and 50% was a deferred award in the form of a
conditional right to receive shares on the first anniversary of
grant, subject to the achievement of the applicable performance
conditions ("Tranche two"). Tranche one was expensed in full upon
grant and Tranche two was expensed over the one year vesting
period.
On 22 July 2021, 1,544,950 Ordinary shares were exercised and on
22 July 2022, tranche two vested and 1,411,248 Ordinary shares were
exercised by employees of the Group.
Details of movements in the number of shares are as follows:
No. of shares 2022 No. of shares 2021
Note (thousands) GBP'000 (thousands) GBP'000
----------------------------------------- ---- ------------- -------- ------------- --------
Outstanding at the beginning of the year 1,479 9,240 - -
Granted - - 3,104 19,372
Exercised 26.1 (1,411) (8,813) (1,545) (9,652)
Forfeited (68) (427) (80) (480)
----------------------------------------- ---- ------------- -------- ------------- --------
Outstanding at the end of the year - - 1,479 9,240
----------------------------------------- ---- ------------- -------- ------------- --------
(b) Performance share plan ("PSP")
Executive Directors and senior managers may receive awards of
shares, which may be granted annually under the PSP. The maximum
policy opportunity award size under the PSP for an Executive
Director is 150% of annual base salary; however, the plan rules
allow the Remuneration Committee the discretion to award up to 250%
of annual base salary in exceptional circumstances. The
Remuneration Committee determines the appropriate performance
measures, weightings and targets prior to granting any awards.
Performance conditions include Total Shareholder Return relative to
a relevant comparator group and the Company's absolute adjusted
underlying EPS performance.
The following table provides details for each PSP award:
Fixed amount
No. of shares at fair value
Plan name Performance period Grant date Vest date (thousands) GBP'000
---------- ----------------------------------- ------------------ ------------- ------------- --------------
PSP 2018 14 March 2018 to 31 December 2020 18 September 2018 15 April 2021 157 534
PSP 2019 1 January 2019 to 31 December 2021 3 April 2019 19 April 2022 254 614
PSP 2020 1 January 2020 to 31 December 2022 23 April 2020 (1) 213 825
PSP 2021 1 January 2021 to 31 December 2023 20 May 2021 (1) 283 1,507
PSP 2022 1 January 2022 to 31 December 2024 19 April 2022 (1) 246 1,384
---------- ----------------------------------- ------------------ ------------- ------------- --------------
1 The vesting of awards is subject to continued employment and
achievement of performance conditions over the specified period.
The awards will vest for each PSP when the conditions have been
measured for the relevant performance period.
Details of movements in the number of shares are as follows:
No. of shares 2022 No. of shares 2021
(thousands) GBP'000 (thousands) GBP'000
----------------------------------------- ------------- -------- ------------- --------
Outstanding at the beginning of the year 733 2,903 607 1,930
Awarded 246 1,384 283 1,507
Exercised (188) (425) (153) (519)
Forfeited (118) (516) (4) (15)
----------------------------------------- ------------- -------- ------------- --------
Outstanding at the end of the year 673 3,346 733 2,903
----------------------------------------- ------------- -------- ------------- --------
(c) Deferred bonus share plan ("DBSP")
Certain employees at director level may be eligible for an
annual bonus designed to incentivise high performance based on
financial and non-financial performance measures. In line with
market practice, a portion of the bonus due, as determined by the
Remuneration Committee, may be deferred into shares before it is
paid.
Depending on the performance of the Group, consideration is
given annually by the Remuneration Committee to the granting of
share awards under DBSP to eligible Directors as part of the annual
bonus award for performance during the preceding financial year
end.
The following table provides details for each DBSP award:
Fixed amount
No. of shares at fair value
Plan name Performance period Grant date Vest date (1) (thousands) GBP'000
---------- ---------------------------- ------------- -------------- ------------- --------------
DBSP 1 Year ended 31 December 2018 3 April 2019 3 April 2021 50 149
DBSP 2 Year ended 31 December 2019 23 April 2020 23 April 2022 73 313
DBSP 3 Year ended 31 December 2020 14 April 2021 1 January 2023 56 364
DBSP 4 Year ended 31 December 2021 19 April 2022 1 January 2024 67 476
DBSP 5 Year ended 31 December 2022 (2) 1 January 2025 (2) 679
---------- ---------------------------- ------------- -------------- ------------- --------------
1 The vesting of awards is subject to continued employment up to the vest date.
2 The date of grant will be determined following the release of
the Annual Report for the relevant performance period, upon which
the no. of shares will be determined.
No. of shares 2022 No. of shares 2021
(thousands) GBP'000 (thousands) GBP'000
----------------------------------------- ------------- -------- ------------- --------
Outstanding at the beginning of the year 114 614 108 411
Awarded 67 476 56 364
Exercised (62) (267) (42) (127)
Forfeited (10) (67) (8) (34)
----------------------------------------- ------------- -------- ------------- --------
Outstanding at the end of the year 109 756 114 614
----------------------------------------- ------------- -------- ------------- --------
(d) Other awards
The Group has continued to make awards to employees joining the
business. The grant date of each award is the start date of
employment with the fair value being a fixed amount stated in an
employee's offer letter. The number of shares awarded is determined
by the market value at the grant date. The awards will vest on the
second anniversary of the grant date subject to continued
employment.
Details of movements in the number of shares are as follows:
No. of shares 2022 No. of shares 2021
(thousands) GBP'000 (thousands) GBP'000
----------------------------------------- ------------- -------- ------------- --------
Outstanding at the beginning of the year 260 2,102 102 398
Awarded (1) 86 683 217 1,933
Exercised (70) (451) (57) (219)
Forfeited (22) (230) (2) (10)
----------------------------------------- ------------- -------- ------------- --------
Outstanding at the end of the year 254 2,104 260 2,102
----------------------------------------- ------------- -------- ------------- --------
1 In the prior year, as part of the RBC cees acquisition, the
Group inherited historic share awards for the eligible Directors of
the acquired entities. These awards are settled in cash or a
combination of 50% cash and 50% equity, as such, they are recorded
as a liability, on the basis that this is at the discretion of the
holder, with the fair value being remeasured at each reporting
period end. At the date of acquisition, 141,875 shares with a fair
value of GBP0.88m were awarded. During the year, 52,622 shares
vested; the fair value of the outstanding awards as at 31 December
2022 is GBP0.5m.
36.2. EXPENSES RECOGNISED DURING THE YEAR
The equity-settled share-based payment expenses recognised
during the year, per plan and in total, are as follows:
2022 2021
GBP'000 GBP'000
----------------------------------- -------- --------
PSP awards 879 988
DBSP awards 455 334
Other awards 788 842
----------------------------------- -------- --------
Share-based payments (1) 2,122 2,164
EIP share-based payments (2) 4,780 13,778
----------------------------------- -------- --------
Total share-based payments expense 6,902 15,942
----------------------------------- -------- --------
1 The share-based expense in the capital reserve is GBP2.04m as
other awards includes cash settled or 50% cash and 50% equity
settled awards of GBP0.08m (2021: GBP0.46m).
2 The prior year EIP expense of GBP13.92m as disclosed in note
5, included GBP0.14m of cash awards.
37. CONTINGENCIES
The Group operates in a number of jurisdictions and enjoys a
close working relationship with all of its regulators. It is not
unusual for the Group to find itself in discussion with regulators
in relation to past events. With any such discussions there is
inherent uncertainty in the ultimate outcome but the Board
currently does not believe that any such current discussions are
likely to result in an outcome that would have a material impact
upon the Group.
38. FOREIGN CURRENCY
The individual financial statements of each Group company are
presented in the currency of the primary economic environment in
which it operates (its functional currency). For the purpose of the
consolidated financial statements, the results and financial
position of each Group company are expressed in pounds sterling,
which is the functional currency of the Company and the
presentation currency for the consolidated financial
statements.
In preparing the financial statements of the individual
companies, transactions in currencies other than the entity's
functional currency (foreign currencies) are recognised at the
rates of exchange prevailing on the dates of the transactions.
At each balance sheet date, monetary assets and liabilities that
are denominated in foreign currencies are retranslated at the rates
prevailing at that date. Exchange differences are recognised in the
consolidated income statement in the year in which they arise.
For the purpose of presenting consolidated financial statements,
the assets and liabilities of the Group's operations with a
functional currency other than pounds sterling are translated at
exchange rates prevailing on the balance sheet date.
Income and expense items are translated at the average exchange
rates for the year, unless exchange rates fluctuate significantly
during that year, in which case the exchange rates at the date of
transactions are used. Goodwill and other intangible assets arising
on the acquisition of a foreign operation are treated as assets of
the foreign operation and are translated at the closing rate.
Exchange differences arising, if any, are recognised in other
comprehensive income and accumulated in equity in the translation
reserve.
For the year ended 31 December 2022, mainly due to the Euro and
US dollar foreign currency exchange rate movements, we have
recognised the following:
-- A foreign exchange gain of GBP21.3m in other comprehensive
income (2021: GBP2.5m loss) upon translating our foreign operations
to our functional currency.
-- A foreign exchange gain of GBP14.4m (2021: GBP0.9m loss) in
the consolidated income statement upon the retranslation of
monetary assets and liabilities denominated in foreign currencies
(see note 9).
39. RELATED PARTY TRANSACTIONS
Balances and transactions between the Company and its
subsidiaries, which are related parties, have been eliminated on
consolidation and are not disclosed in this note.
39.1. KEY MANAGEMENT PERSONNEL
The Group has defined key management personnel as Directors and
members of senior management who have the authority and
responsibility to plan, direct and control the activities of the
Group. The remuneration of key management personnel in aggregate
for each of the specified categories is as follows:
2022 2021
GBP'000 GBP'000
------------------------------------------------ -------- --------
Salaries and other short-term employee benefits 2,716 2,723
Post-employment and other long-term benefits 145 133
Share-based payments 979 1,066
EIP share-based payments 115 418
------------------------------------------------ -------- --------
Total payments 3,955 4,340
------------------------------------------------ -------- --------
39.2. OTHER RELATED PARTY TRANSACTIONS
Loans receivable from employees, associates and other related
undertakings are disclosed in note 15.
The Group's associate, KIG (see note 32), has provided GBP0.94m
of services to Group entities during the year (2021: GBP0.80).
The Group has an interest in Harmonate (see note 32). During the
year, the Group has not provided any services (2021: GBP0.08m) but
received GBP0.15m of services (2021: GBP0.16m).
39.3. ULTIMATE CONTROLLING PARTY
JTC PLC is the ultimate controlling party of the Group.
40. CONSIDERATION OF CLIMATE CHANGE
As set out in the TCFD disclosures in the Annual Report, climate
change has the potential to give rise to a number of transition
risks, physical risks and opportunities.
In preparing the consolidated financial statements, Management
have considered the impacts and areas that could potentially be
affected by climate-related changes and initiatives. No material
impact was identified on the key areas of judgement or sources of
estimation uncertainty for the year ended 31 December 2022. Items
that may be impacted by climate-related risks and were considered
by Management were the recoverability of trade receivables (see
note 12) and the cash flow forecasts used in the impairment
assessments of goodwill (see note 21.1).
Whilst Management consider there is no material medium-term
impact expected from climate change, they are aware of the
ever-changing risks related to climate change and will ensure
regular assessment of risks against judgements and estimates when
preparing the consolidated financial statements.
41. EVENTS OCCURRING AFTER THE REPORTING PERIOD
There are no material subsequent events to disclose other than
those already noted in the consolidated financial statements.
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END
FR FZGGDGNZGFZM
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