TIDMTAM
RNS Number : 6463F
Tatton Asset Management PLC
18 November 2020
18 November 2020
Tatton Asset Management PLC
("TAM plc", the "Group" or the "Company")
AIM: TAM
INTERIM RESULTS FOR THE SIX MONTH PERIODED 30 SEPTEMBER 2020
TAM plc, the investment management and IFA support services
group, today announces its interim results for the six-month period
ended 30 September 2020 (the "Period").
FINANCIAL HIGHLIGHTS
- Group revenue increased 12.6% to GBP10.956m (Sep 2019:
GBP9.729m)
- Adjusted operating profit(1) up 21.9% to GBP5.030m (Sep 2019:
GBP4.126m)
- Adjusted operating profit(1) margin 45.9% (Sep 2019:
42.4%)
- Reported profit before tax GBP3.074m (Sep 2019: GBP3.610m)
- Adjusted fully diluted EPS(2) increased 21.5% to 6.55p (Sep
2019: 5.39p)
- Interim dividend up 9.4% to 3.5p (Sep 2019: 3.2p)
- Strong financial liquidity position, with net cash of
GBP13.328m
- New banking facility, giving access to up to GBP30 million of
funds, to support growth
1. Adjusted for exceptional items, share-based payment costs and amortisation
2. Adjusted for exceptional items, share-based payment costs,
amortisation and potentially dilutive shares
OPERATIONAL HIGHLIGHTS
- Assets Under Management (AUM) increased 17.4% to GBP7.811bn
(31 March 2020: GBP6.651bn), an increase of GBP1.160bn for the
six-month period. Latest AUM mid-November 2020 is GBP8.134bn
- Net inflows for the six months to September 2020 were GBP328.1
million, an increase of 4.9% of AUM
- Tatton increased the number of firms utilising its
Discretionary Fund Management ("DFM") services by 4.9% to 624 (31
March 2020: 595) and the number of accounts increased 3.6% to
68,500 (31 March 2020: 66,100)
- Tatton's long-term business partnership with Tenet continues
to develop well with 93 IFA firms (31 March 2020: 81 IFA firms) and
AUM reaching GBP376.6m (31 March 2020: GBP225.9m)
- Paradigm Mortgage Services, the Group's mortgage distribution
and support services business, has seen an increase in member firms
for the period of 3.0% to 1,591 members (31 March 2020: 1,544
members)
- Paradigm Consulting, the Group's IFA support business,
increased its members by 2.5% to 404 (31 March 2020: 394)
Paul Hogarth, Chief Executive Officer, commented:
"I am pleased to report our interim results for the first half
of this financial year. I am delighted to confirm that despite the
exceptional circumstances of the last six months we have delivered
a resilient performance with strong growth in revenue, profits and
margins and remain on track to meet market expectations in FY
2021.
2020 has been a testing time for all businesses and I would like
to thank our colleagues for their incredible dedication and
contribution during this time and our IFAs for their continued
support and trust. Tatton is a proud advocate of IFAs; we place
them at the heart of our value chain and recognise how essential
the IFA remains to our distribution strategy. In response to
changing conditions, it has been necessary to adapt the way we
interact with our firms over the last six months. We have adjusted
our approach from a predominantly in-person contact model to
include web-based engagement, through a suite of online meetings
and interactions led by the IFA's own business model and
capability.
As we move into the second half of the financial year, we
recognise that there are headwinds in our industry but we remain
enthused by the exciting opportunities that exist for the business
and are optimistic regarding the prospects for the Group."
For further information please contact:
Tatton Asset Management plc
Paul Hogarth (Chief Executive Officer)
Paul Edwards (Chief Financial Officer)
Lothar Mentel (Chief Investment
Officer) +44 (0) 161 486 3441
Zeus Capital - Nomad and Broker
Martin Green (Corporate Finance)
Dan Bate (Corporate Finance and
QE) +44 (0) 20 3829 5000
N+1 Singer - Joint Broker
Peter Steel (Corporate Finance) +44 (0) 20 7496 3061
Rachel Hayes (Corporate Broking) +44 (0) 20 7496 3189
Belvedere Communications - Financial tattonpr@belvederepr.com
PR +44 (0) 7407 023147
John West / Llew Angus (media) + 44 (0) 7715 769078
Cat Valentine / Keeley Clarke (investors)
Trade Media Enquiries
Roddi Vaughan Thomas +44 (0) 20 7139 1452
For more information, please visit:
www.tattonassetmanagement.com
STRATEGIC REVIEW
GROUP RESULTS
The Group has delivered a resilient performance in the first
half of this financial year, continuing to grow AUM and
revenue.
We adapted seamlessly to the new trading environment and have
maintained face-to- face engagement with our IFAs where possible.
We have also redeployed resources to direct online engagement,
running multiple interactive virtual events and frequent video
investment updates, which have been well received and have proved
to be very successful. We continue to deliver increasing AUM and
reached GBP7.811 billion at the end of September 2020 (31 March
2020: GBP6.651 billion).
Group revenue for the period increased 12.6% to GBP10.956
million (2019: GBP9.729 million). Adjusted operating profit* for
the period increased 21.9% to GBP5.030 million (2019: GBP4.126
million) with adjusted operating profit margin* increasing to 45.9%
(2019: 42.4%).
Pre-tax profit after exceptional items, amortisation of customer
relationship intangibles, finance costs and share-based payment
charges decreased to GBP3.074 million (2019: GBP3.610 million) due
to the increase in share-based payment charges in the period
following the release of the provision at the March 2020 year end.
This release was solely related to the increased level of
uncertainty in the market due to the COVID-19 pandemic.
Taxation charges for the period were GBP0.414 million (2019:
GBP0.667 million). This gives an effective tax rate of 13.5% when
measured against profit before tax. This effective tax rate is low
due to tax credits on share-based payment charges. Adjusting for
exceptional costs and share-based payments the effective tax rate
is 19.2%.
The basic earnings per share was 4.77p ( 2019: 5 . 26 p). W hen
a djus t ed for ex c epti o nal items and share-based payment
charges, ea rnings per s h a re was 7.25p ( 2019: 5 . 9 2 p). The
decrease in basic and diluted earnings is due to the increase in
share-based payment charges from GBP0.413 million to GBP1.642
million. Adjusted earnings per share fully diluted for the impact
of share options was 6.55p ( 2019: 5 . 3 9 p ), an i n cre ase of
21 . 5 %.
TATTON
The last six months have been testing times for many businesses
and our business model has proved to be resilient and capable of
dealing with the challenges presented by the pandemic.
AUM at 30 September 2020 increased 17.4% to GBP7.811 billion
from GBP6.651 billion at 31 March 2020. New net inflows contributed
GBP328.1 million of the GBP1.160 billion increase with market
returns delivering the balance, driving an increase in AUM of
12.5%.
Tatton is a proud advocate of IFAs - we place them at the heart
of our value chain and recognise how essential the IFA remains to
our distribution strategy. In response to changing conditions it
has been necessary to adapt the way we interact with our firms over
the last six months, and we have adjusted our approach from a
predominantly in-person contact model to include web- based
engagement through a suite of online meetings and interactions led
by the IFA's own business model and capability.
This approach has helped increase our firms to 624 (Sep 2019:
522), an increase of 19.5%, and client accounts - increased to
68,500 (Sep 2019: 61,250), an increase of 11.8%.
Based on adviser feedback we continue to evolve our proposition.
The last six months have seen the launch of a suite of new global
models following the extension of our already popular Blended fund
range - widening access across a broader number of platforms.
Looking forward we will seek to enhance the current organic growth
of AUM through new and existing adviser relationships as well as
through strategically targeted acquisitions. In recent months we
have made further investment into our sales support and account
management resource - ensuring we are well placed to support our
current growth and future ambitions.
A year into our strategic partnership with Tenet Group we are
pleased with the progress made and are delighted to be working with
93 firms (Sep 2019: 40 firms) bringing GBP377 million (Sep 2019:
GBP25 million) of associated AUM. We look forward to continuing
this valued partnership.
Tatton's revenue, which accounts for 79% of Group revenue, grew
21.2% to GBP8.605 million (2019: GBP7.102 million) and adjusted
operating profit* grew 23.6% to GBP5.283 million (2019: GBP4.273
million) increasing the margin to 61.4% (2019: 60.2%).
PARADIGM
Paradigm's revenue, which accounts for 21% of Group revenue,
fell by GBP0.260 million or 10.0% to GBP2.343 million (2019:
GBP2.603 million) and adjusted operating profit fell by GBP0.153
million or 16.8% to GBP0.757 million (2019: GBP0.910 million).
Paradigm Mortgage Services, the Group's mortgage distribution
and support services business, encountered a very challenging
environment, specifically in Q1, as a direct consequence of the
coronavirus lockdown halting all on-site survey work. This
effectively closed the mortgaged purchase market and impacted
valuation income. While mainstream lenders moved quickly to
establish robust homeworking support structures, mortgage supply
and available products fell dramatically as lenders sought to cope
with Government led actions supporting consumer protections. At the
same time specialist mortgage funding came under severe pressure,
in effect temporarily curtailing special or more complex
lending.
During the second quarter, lenders have seen case count and
volumes return to more normal levels, however productivity and
operational resilience remain weak. Despite the very limited
availability of high loan to value products, driven by a
combination of those operational constraints and risk concerns, the
need for robust financial advice remains strong. While there
remains a level of uncertainty, the market continues to adapt to a
new normal and is functioning well. Paradigm and its broker members
continue to demonstrate considerable resilience and the ability to
adapt quickly to change, maximising opportunities, for example in
growing their channel share and volume of retention business or
exploiting protection cross-sale opportunities.
The Government's reduction in Stamp Duty rates, available until
the end of our financial year, has certainly proved a worthwhile
incentive, bolstering the purchase market. While we remain cautious
about the sector as a whole, intermediaries now control over 75% of
all new mortgage business and as independent advice is increasingly
sought we are well positioned to grow this further when the market
returns to some level of normality.
Notwithstanding the above, the business has managed to increase
its member firms in the period by 3.0% to 1,591 members (31 March
2020: 1,544 members) and lending in the period was GBP5.00 billion
(2019: GBP4.78 billion).
Paradigm Consulting, the Group's IFA support business, has been
largely unaffected by the ongoing pandemic. It has taken
initiatives to market its services more widely and has increased
new members by 2.5% to 404 (31 March 2020: 394 members).
EXCEPTIONAL ITEMS
Exceptional items, along with share-based payment charges and
amortisation of customer relationship intangible assets, are
reported separately to give better clarity of the underlying
performance of the Group. The alternative performance measures
("APMs") are consistent with how the business performance is
planned and reported within the internal management reporting to
the Board. Some of these measures are also used for the purpose of
setting remuneration targets.
During the period, the Group pursued a potential acquisition of
a business which fitted the strategic direction of the Group and
would have been both material and complementary to Tatton's
portfolio of products.
The Group was invited to the final stage of the sale process but
was unsuccessful in its bid. Professional fees of GBP0.2 million
were incurred in the process, which have been treated as
exceptional items. We were disappointed but remain disciplined in
our approach and view of valuation.
LING FACILITY
To support the Group's ambition to grow, both organically and
through acquisition, the Group has put in place a new facility
during the period, giving access to up to GBP30 million of funds.
The new facility is split between a GBP10 million three-year
committed revolving credit facility with an accordion option of
GBP20 million. The accordion feature remains uncommitted at this
stage but accessible on short notice and provides financial
flexibility for future corporate transactions.
BALANCE SHEET
The Group's balance sheet remains healthy with net assets at 30
September 2020 totalling GBP20.0 million (2019: GBP15.3 million)
reflecting the continued growth and profitability of the Group.
Property, plant and equipment has remained at GBP1.1 million (2019:
GBP1.1 million). Intangible assets of GBP1.4 million have been
recognised (2019: GBP1.8 million), of which GBP1.1 million relates
to the customer relationship intangibles acquired on the
acquisition of Sinfonia Asset Management on 30 September 2019.
CASH RESOURCES
Cash generated from operations was GBP4.2 million, GBP4.4
million before exceptional items (2019: GBP3.9 million) and was
134% of operating profit. The Group remains debt free with closing
net cash at the end of the period of GBP13.3 million (2019: GBP9.2
million). The cash resources are after the payment of corporation
tax of GBP1.0 million and dividend payments of GBP3.6 million
relating to the final dividend for the year ended 31 March
2020.
NEW SHARES ISSUES
In the period, the Group issued 852,813 shares to employees who
have elected to exercise their options pursuant to the Company's
EMI Scheme and Save As You Earn ("SAYE") employee share scheme.
DIVID
The Board is pleased to recommend an interim dividend of 3.5p
per share, an increase of 9.4% on the prior period interim
dividend.
The interim dividend reflects both our cash performance and our
underlying confidence in the business. The interim dividend of 3.5p
per share, totalling GBP2.0 million, will be paid on 18 December
2020 to shareholders on the register at close of business on 27
November 2020 and will have an ex-dividend date of 26 November
2020. In accordance with IFRS, the interim dividend has not been
included as a liability in this interim statement.
BUSINESS RISK
The Board identified principal risks and uncertainties which may
have a material impact on the Group's performance in the Group's
2020 Annual Report and Accounts (pages 30-31) and believes that the
nature of these risks remains largely unchanged at the half year.
The Board will continue to monitor and manage identified principal
risks throughout the second half of the year.
POST BALANCE SHEET EVENTS
The Group has continued to monitor the impact that the COVID-19
pandemic has on the wider market and on our business. We have also
continued to review the implications of the result of the UK
referendum to leave the EU on our business model. As the Group has
no direct exposure to cross-border trading and has no overseas
operations, the direct impact of Brexit will be limited. However,
we remain mindful of the uncertainty Brexit has created and its
potential to impact markets and the wider consumer sentiment. The
Board will continue to assess the implications of these events as
they emerge.
GOING CONCERN
As stated in note 2.2 of these condensed financial statements,
the Directors are satisfied that the Group has sufficient resources
to continue in operation for the foreseeable future, a period not
less than 12 months from the date of this report. To form this
view, the Directors have also considered the impact of the current
COVID-19 pandemic and the resulting economic uncertainty.
Accordingly, they continue to adopt the going concern basis in
preparing these condensed financial statements.
SUMMARY AND OUTLOOK
The Group has again delivered a solid first half performance
with strong growth in revenue, profits and margins, against the
backdrop of a challenging trading environment.
The second half of the year brings a second period of lockdown
and with it a degree of uncertainty. However, we now have the
benefit of the last six months experience, and the operational
changes that we made to address the challenges of the first
lockdown, and are confident that we will be able to meet the
similar challenges implicit in this development.
While we acknowledge that as long as the restrictions remain in
place it will be more difficult to engage with our adviser firms,
as it will be for firms with their clients, we will respond by
remaining accessible, providing practical support and effective
communication, based on change and innovation already in place
following the previous lockdown. This should better equip our firms
to meet their client needs in what is an uncertain period.
As we look forward, we continue to trade in line with the
Board's full year expectations and we remain excited about the
opportunities that exist for the business and remain optimistic
regarding the prospects of the Group.
*Alternative performance measures are detailed in note 17 of the
condensed consolidated interim financial statements.
CONSOLIDATED STATEMENT OF TOTAL COMPREHENSIVE INCOME
FOR THE SIX MONTHSED 30 SEPTEMBER 2020
Audited
Unaudited
six months
ended year end
Unaudited
six months
ended 30-Sep
2020 30-Sep 2019 31-Mar 2020
Note (GBP'000) (GBP'000) (GBP'000)
--------------------------------------------- ---- ------------- ------------ ------------
Revenue 10,956 9,729 21,369
Other exceptional income - - 1,588
Administrative expenses (7,847) (6,118) (12,655)
--------------------------------------------- ---- ------------- ------------ ------------
Operating profit 4 3,109 3,611 10,302
--------------------------------------------- ---- ------------- ------------ ------------
Share-based payment costs 5 1,642 413 108
Amortisation of intangibles - customer
relationships 5 60 - 60
Exceptional items 5 219 102 (1,394)
--------------------------------------------- ---- ------------- ------------ ------------
Adjusted operating profit (before separately
disclosed items)(1) 5,030 4,126 9,076
--------------------------------------------- ---- ------------- ------------ ------------
Finance (costs)/income 6 (35) (1) (6)
--------------------------------------------- ---- ------------- ------------ ------------
Profit before tax 3,074 3,610 10,296
Taxation charge 7 (414) (667) (1,933)
--------------------------------------------- ---- ------------- ------------ ------------
Profit attributable to shareholders 2,660 2,943 8,363
--------------------------------------------- ---- ------------- ------------ ------------
Earnings per share - Basic 8 4.77p 5.26p 14.98p
Earnings per share - Diluted 8 4.58p 4.79p 14.54p
Adjusted earnings per share - Basic(2) 8 7.25p 5.92p 13.13p
Adjusted earnings per share - Diluted(2) 8 6.55p 5.39p 12.00p
--------------------------------------------- ---- ------------- ------------ ------------
1 Adjusted for exceptional items, amortisation of customer
relationship intangibles and share-based payment costs. See note
17.
2 Adjusted for exceptional items, amortisation of client
relationship intangibles and share-based payment costs and the tax
thereon. See note 17.
There were no other recognised gains or losses other than those
recorded above in the current or prior period and therefore a
statement of other comprehensive income has not been presented.
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
FOR THE SIX MONTHSED 30 SEPTEMBER 2020
Audited
Unaudited
six months
ended year end
Unaudited
six months
ended 30-Sep
2020 30-Sep 2019 31-Mar 2020
Note (GBP'000) (GBP'000) (GBP'000)
-------------------------------------- ---- ------------- ------------ ------------
Non-current assets
Goodwill 10 6,254 6,060 6,254
Intangible assets 11 1,439 1,750 1,495
Property, plant and equipment 12 1,133 1,094 1,034
Deferred income tax asset 614 101 -
-------------------------------------- ---- ------------- ------------ ------------
Total non-current assets 9,440 9,005 8,783
-------------------------------------- ---- ------------- ------------ ------------
Current assets
Trade and other receivables 4,635 2,639 3,431
Corporation tax asset 3 118 -
Cash and cash equivalents 13,328 9,174 12,757
-------------------------------------- ---- ------------- ------------ ------------
Total current assets 17,966 11,931 16,188
-------------------------------------- ---- ------------- ------------ ------------
Total assets 27,406 20,936 24,971
-------------------------------------- ---- ------------- ------------ ------------
Current liabilities
Trade and other payables (6,571) (4,579) (6,186)
Corporation tax - - (199)
-------------------------------------- ---- ------------- ------------ ------------
Total current liabilities (6,571) (4,579) (6,385)
-------------------------------------- ---- ------------- ------------ ------------
Non-current liabilities
Deferred tax liabilities - - (106)
Other payables (802) (1,008) (702)
-------------------------------------- ---- ------------- ------------ ------------
Total non-current liabilities (802) (1,008) (808)
-------------------------------------- ---- ------------- ------------ ------------
Total liabilities (7,373) (5,587) (7,193)
-------------------------------------- ---- ------------- ------------ ------------
Net assets 20,033 15,349 17,778
-------------------------------------- ---- ------------- ------------ ------------
Equity attributable to equity holders
of the entity
Share capital 11,352 11,182 11,182
Share premium account 9,997 8,718 8,718
Own shares (996) - (996)
Other reserve 2,041 2,041 2,041
Merger reserve (28,968) (28,968) (28,968)
Retained earnings 26,607 22,376 25,801
-------------------------------------- ---- ------------- ------------ ------------
Total equity 20,033 15,349 17,778
-------------------------------------- ---- ------------- ------------ ------------
The financial statements were approved by the Board of Directors
on 18 November 2020 and were signed on its behalf by:
Paul Edwards
Director
Compa n y r e g i s t r ati on n u mbe r: 10 6 3 4 3 23
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
FOR THE SIX MONTHSED 30 SEPTEMBER 2020
Share Share Own Other Merger Retained Total
capital premium shares reserve reserve earnings equity
(GBP'000) (GBP'000) (GBP'000) (GBP'000) (GBP'000) (GBP'000) (GBP'000)
---------------------------------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
At 1 April 2019 11,182 8,718 - 2,041 (28,968) 22,315 15,288
---------------------------------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
Profit and total comprehensive
income - - - - - 2,943 2,943
Dividends - - - - - (3,131) (3,131)
Share-based payments - - - - - 379 379
Deferred tax on share-based
payments - - - - - (130 (130)
---------------------------------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
At 30 September 2019 11,182 8,718 - 2,041 (28,968) 22,376 15,349
---------------------------------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
Profit and total comprehensive
income - - - - - 5,420 5,420
Dividends - - - - - (1,789) (1,789)
Share-based payments - - - - - (293) (293)
Deferred tax on share-based
payments - - - - - 87 87
Own shares acquired in the year - - (996) - - - (996)
---------------------------------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
At 31 March 2020 11,182 8,718 (996) 2,041 (28,968) 25,801 17,778
---------------------------------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
Profit and total comprehensive
income - - - - - 2,660 2,660
Dividends - - - - - (3,579) (3,579)
Share-based payments - - - - - 1,374 1,374
Deferred tax on share-based
payments - - - - - 313 313
Current tax on share-based
payments - - - - - 38 38
Issue of share capital on exercise
of employee share options 170 1,279 - - - - 1,449
---------------------------------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
At 30 September 2020 11,352 9,997 (996) 2,041 (28,968) 26,607 20,033
---------------------------------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE SIX MONTHSED 30 SEPTEMBER 2020
Audited
Unaudited
six months
ended year end
Unaudited
six months
ended 30-Sep
2020 30-Sep 2019 31-Mar 2020
Note (GBP'000) (GBP'000) (GBP'000)
------------------------------------------- ---- ------------- ------------ ------------
Operating activities
Profit for the period 2,660 2,943 8,363
Adjustments:
Income tax expense 7 414 667 1,933
Depreciation of property, plant and
equipment 12 165 145 298
Amortisation of intangible assets 11 161 57 195
Share-based payment expense 15 1,642 413 108
Finance costs 6 35 1 6
Changes in:
Trade and other receivables (659) (79) (1,016)
Trade and other payables (240) (357) 1,338
------------------------------------------- ---- ------------- ------------ ------------
Exceptional costs 5 219 102 (1,394)
------------------------------------------- ---- ------------- ------------ ------------
Cash generated from operations before
exceptional items 4,397 3,892 9,831
------------------------------------------- ---- ------------- ------------ ------------
Cash generated from operations 4,178 3,790 11,225
Income tax paid (985) (1,396) (2,278)
------------------------------------------- ---- ------------- ------------ ------------
Net cash from operating activities 3,193 2,394 8,947
------------------------------------------- ---- ------------- ------------ ------------
Investing activities
Payment for the acquisition of subsidiary,
net of cash acquired - (1,960) (2,002)
Purchase of intangible assets (105) (115) (271)
Purchase of property, plant and equipment (22) (202) (294)
------------------------------------------- ---- ------------- ------------ ------------
Net cash used in investing activities (127) (2,277) (2,567)
------------------------------------------- ---- ------------- ------------ ------------
Financing activities
Interest received 1 10 162
Transaction costs related to borrowings (316) - -
Dividends paid (3,579) (3,131) (4,920)
Proceeds from the issue of shares 1,449 - -
Purchase of own shares - - (996)
Repayment of the lease liabilities (50) (14) (61)
------------------------------------------- ---- ------------- ------------ ------------
Net cash used in financing activities (2,495) (3,135) (5,815)
------------------------------------------- ---- ------------- ------------ ------------
Net increase/(decrease) in cash and
cash equivalents 571 (3,018) 565
Cash and cash equivalents at beginning
of period 12,757 12,192 12,192
Net cash and cash equivalents at end
of period 13,328 9,174 12,757
------------------------------------------- ---- ------------- ------------ ------------
The accompanying notes are an integral part of the interim
financial statements.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
1. GENERAL INFORMATION
Tatton Asset Management plc ("the Company") is a public company
limited by shares.
The address of the registered office is Paradigm House, Brooke
Court, Lower Meadow Road, Wilmslow, SK9 3ND, United Kingdom. The
registered number is 10634323.
The Group comprises the Company and its subsidiaries. The
Group's principal activities are discretionary fund management, the
provision of compliance and support services to independent
financial advisers ("IFAs"), the provision of mortgage adviser
support services and the marketing and promotion of the funds run
by the companies under Tatton Capital Limited.
The condensed consolidated interim financial statements for the
six months ended 30 September 2020 do not constitute statutory
accounts as defined under Section 434 of the Companies Act 2006.
The Annual Report and Financial Statements ("the financial
statements") for the year ended 31 March 2020 were approved by the
Board on 15 June 2020 and have been delivered to the Registrar of
Companies. The Auditor, Deloitte LLP, reported on these Financial
Statements; its report was unqualified, did not contain an emphasis
of matter paragraph and did not contain statements under section
498 (2) or (3) of the Companies Act 2006.
News updates, regulatory news and financial statements can be
viewed and downloaded from the Group's website,
www.tattonassetmanagement.com. Copies can also be requested from:
The Company Secretary, Tatton Asset Management plc, Paradigm House,
Brooke Court, Lower Meadow Road, Wilmslow, SK9 3ND.
2. ACCOUNTING POLICIES
The principal accounting policies applied in the presentation of
the interim financial statements are set out below.
2.1 BASIS OF PREPARATION
The unaudited condensed consolidated interim financial
statements for the six months ended 30 September 2020 have been
prepared in accordance with IAS 34 'Interim Financial Reporting' as
adopted by the European Union. The condensed consolidated interim
financial statements should be read in conjunction with the
Financial Statements for the year ended 31 March 2020, which have
been prepared in accordance with International Financial Reporting
Standards ("IFRS") as adopted by the European Union. The condensed
consolidated interim financial statements were approved for release
on 18 November 2020.
The condensed consolidated interim financial statements have
been prepared on a going concern basis and prepared on the
historical cost basis.
The condensed consolidated interim financial statements are
presented in sterling and have been rounded to the nearest thousand
(GBP'000). The functional currency of the Company is sterling.
The preparation of financial information in conformity with IFRS
requires management to make estimates and assumptions that affect
the reported amounts of assets and liabilities at the date of the
financial statements and the reported amounts of revenues and
expenses during the reporting period. Although these estimates are
based on management's best knowledge of the amount, event or
actions, actual events may ultimately differ from those
estimates.
The key accounting policies set out below have, unless otherwise
stated, been applied consistently to all periods presented in the
consolidated financial statements. The accounting policies adopted
by the Group in these interim financial statements are consistent
with those applied by the Group in its consolidated financial
statements for the year ended 31 March 2020.
2.2 GOING CONCERN
These financial statements have been prepared on a going concern
basis. The Directors have prepared cash flow projections and are
satisfied that the Group has adequate resources to continue in
operational existence for the foreseeable future. To form the view
that the consolidated financial statements should continue to be
prepared on an ongoing basis in light of t he curre nt C O V I D-19
pande mic and t he re s u lting e c ono mic u n c e r tai n t y, t
he D irec t o rs h a ve assessed the outlook of the Group by
considering various market scenarios and management actions. This
review has allowed management to assess the potential impact on
income, costs, cash flow and capital and the ability to implement
effective management actions that may be taken to mitigate the
impact. The Directors have also considered the risks associated
with Brexit, including considering the effect on clients' wealth,
attitude towards savings and investment and changes in government
policy. The Directors do not consider that the impact of Brexit
will affect the Group continuing as a going concern. Accordingly,
the Directors continue to adopt the going concern basis in
preparing these financial statements.
2.3 NEW ACCOUNTING STANDARDS
There have been a number of amendments to standards which have
been adopted in the period but these have not had a significant
impact on the Group's financial results or position. The amendments
effective from 1 April 2020 are:
- Amendments to References to Conceptual Framework in IFRS Standards
- Definition of Material (Amendments to IAS 1 and IAS 8)
- Interest Rate Benchmark Reform (Amendments to IFRS 9, IAS 39 and IFRS 7)
A number of new standards are effective for annual periods
beginning after 1 April 2020 and earlier application is permitted,
however the Group has not early adopted the new or amended
standards in preparing these condensed consolidated financial
statements.
None of the standards not yet effective are expected to have a
material impact on the Group's financial statements.
2.4 OPERATING SEGMENTS
The Group comprises the following two operating segments which
are defined by trading activity:
- Tatton - investment management services
- Paradigm - the provision of compliance and support services to IFAs and mortgage advisers
The Board is considered to be the chief operating decision
maker.
2.5 SIGNIFICANT JUDGEMENTS, KEY ASSUMPTIONS AND ESTIMATES
In the process of applying the Group's accounting policies,
which are described in the consolidated financial statements for
the year ended 31 March 2020, management have made judgements and
estimations about the future that have an effect on the amounts
recognised in the financial statements. The estimates and
underlying assumptions are reviewed on an ongoing basis. Revisions
to accounting estimates are recognised in the period in which the
estimate is revised if the revision affects only that period. If
the revision affects both current and future periods, it is revised
in the period of the revision and in future periods. Changes for
accounting estimates would be accounted for prospectively under IAS
8.
The judgements, estimates and assumptions applied in the interim
financial statements, including the key sources of estimation
uncertainty, were the same as those applied in the Group's last
annual financial statements for the year ended 31 March 2020. The
only exceptions are the estimated average annual effective income
tax rate applied to the pre-tax income of the interim period.
Due to the COVID-19 pandemic, management have reviewed the
estimates for the satisfaction of the performance obligations
attached to certain awards in the share-based payment schemes.
Under the terms of the agreements, if it was considered that 100%
of the options would vest, the charge for the period would increase
by GBP708,000.
2.6 ALTERNATIVE PERFORMANCE MEASURES
In reporting financial information, the Group presents
alternative performance measures ("APMs") which are not defined or
specified under the requirements of IFRS. The Group believes that
these APMs provide users with additional helpful information on the
performance of the business. The APMs are consistent with how the
business performance is planned and reported within the internal
management reporting to the Board. Some of these measures are also
used for the purpose of setting remuneration targets. Each of the
APMs used by the Group are set out in note 17 including
explanations of how they are calculated and how they can be
reconciled to a statutory measure where relevant.
3 SEGMENT REPORTING
Information reported to the Board of Directors as the chief
operating decision maker for the purposes of resource allocation
and assessment of segmental performance is focused on the type of
revenue. The principal types of revenue are discretionary fund
management and the marketing and promotion of the funds run by the
companies under Tatton Capital Limited ("Tatton") and the provision
of compliance and support services to IFAs and mortgage advisers
("Paradigm").
The Group's reportable segments under IFRS 8 are therefore
Tatton, Paradigm, and "Central", which contains the Operating
Group's central overhead costs.
The principal activity of Tatton is that of discretionary fund
management ("DFM") of investments on-platform and the provision of
investment wrap services.
The principal activity of Paradigm is that of provision of
support services to IFAs and mortgage advisers.
For management purposes, the Group uses the same measurement
policies used in its financial statements.
The following is an analysis of the Group's revenue and results
by reportable segment:
Tatton Paradigm Central Group
Period ended 30 September 2020 (GBP'000) (GBP'000) (GBP'000) (GBP'000)
------------------------------------- ---------- ---------- ---------- ----------
Revenue 8,605 2,343 8 10,956
Administrative expenses (3,322) (1,586) (2,939) (7,847)
------------------------------------- ---------- ---------- ---------- ----------
Operating profit/(loss) 5,283 757 (2,931) 3,109
------------------------------------- ---------- ---------- ---------- ----------
Share-based payment costs - - 1,642 1,642
Amortisation of client relationship
intangible assets - - 60 60
Exceptional items - - 219 219
------------------------------------- ---------- ---------- ---------- ----------
Adjusted operating profit/(loss)
(before separately disclosed items) 5,283 757 (1,010) 5,030
------------------------------------- ---------- ---------- ---------- ----------
Finance (costs)/income (10) - (25) (35)
------------------------------------- ---------- ---------- ---------- ----------
Profit/(loss) before tax 5,273 757 (2,956) 3,074
------------------------------------- ---------- ---------- ---------- ----------
Tatton Paradigm Central Group
Period ended 30 September 2019 (GBP'000) (GBP'000) (GBP'000) (GBP'000)
------------------------------------- ---------- ---------- ---------- ----------
Revenue 7,102 2,603 24 9,729
Administrative expenses (2,956) (1,693) (1,469) (6,118)
------------------------------------- ---------- ---------- ---------- ----------
Operating profit/(loss) 4,146 910 (1,445) 3,611
------------------------------------- ---------- ---------- ---------- ----------
Share-based payment costs 25 - 388 413
Exceptional items 102 - - 102
------------------------------------- ---------- ---------- ---------- ----------
Adjusted operating profit/(loss)
(before separately disclosed items) 4,273 910 (1,057) 4,126
------------------------------------- ---------- ---------- ---------- ----------
Finance (costs)/income (8) 8 (1) (1)
------------------------------------- ---------- ---------- ---------- ----------
Profit/(loss) before tax 4,138 918 (1,446) 3,610
------------------------------------- ---------- ---------- ---------- ----------
Tatton Paradigm Central Group
Year ended 31 March 2020 (GBP'000) (GBP'000) (GBP'000) (GBP'000)
----------------------------------------- ---------- ---------- ---------- ----------
Revenue 15,924 5,426 19 21,369
Other exceptional income 1,588 - - 1,588
Administrative expenses (7,204) (3,362) (2,089) (12,655)
----------------------------------------- ---------- ---------- ---------- ----------
Operating profit/(loss) 10,308 2,064 (2,070) 10,302
----------------------------------------- ---------- ---------- ---------- ----------
Share-based payment costs - - 108 108
Amortisation of client relationship
intangible assets 60 - - 60
Exceptional items (1,458) 64 - (1,394)
----------------------------------------- ---------- ---------- ---------- ----------
Adjusted operating profit/(loss) (before
separately disclosed items) 8,910 2,128 (1,962) 9,076
----------------------------------------- ---------- ---------- ---------- ----------
Finance (costs)/income (20) 13 1 (6)
----------------------------------------- ---------- ---------- ---------- ----------
Profit/(loss) before tax 10,288 2,077 (2,069) 10,296
----------------------------------------- ---------- ---------- ---------- ----------
All turnover arose in the United Kingdom.
*Alternative performance measures are detailed in note 17 of the
condensed consolidated interim financial statements.
4 OPERATING PROFIT
The operating profit and the profit before taxation are stated
after:
30-Sep 2020 30-Sep 2019 31-Mar 2020
(GBP'000) (GBP'000) (GBP'000)
---------------------------------------------- ----------- ----------- -----------
Amortisation of intangible assets 161 57 135
Depreciation of property, plant and equipment 86 76 160
Depreciation of right-of-use assets 79 69 138
Separately disclosed items (note 5) 1,921 515 (1,226)
Services provided to the Group's auditor
Audit of the statutory consolidated and
Company financial statements of Tatton
Asset Management plc 19 17 34
Audit of subsidiaries 24 21 58
Other fees payable to auditor:
Non-audit services 10 67 86
---------------------------------------------- ----------- ----------- -----------
5 SEPARATELY DISCLOSED ITEMS
30-Sep 2020 30-Sep 2019 31-Mar 2020
(GBP'000) (GBP'000) (GBP'000)
----------------------------------------------- ----------- ----------- -----------
Restructuring costs - - 97
Acquisition-related expenses 219 102 97
VAT reclaim - - (1,588)
----------------------------------------------- ----------- ----------- -----------
Total exceptional items 219 102 (1,394)
Share-based payment charges 1,642 413 108
Amortisation of client relationship intangible
assets 60 - 60
----------------------------------------------- ----------- ----------- -----------
Total separately disclosed items 1,921 515 (1,226)
----------------------------------------------- ----------- ----------- -----------
Separately disclosed items shown separately on the face of the
Consolidated Statement of Total Comprehensive Income or included
within administrative expenses reflect costs and income that do not
relate to the Group's normal business operations and that are
considered material individually, or in aggregate if of a similar
type, due to their size or frequency.
EXCEPTIONAL ITEMS
During the period, the Group pursued a potential acquisition of
a business which fitted the strategic direction of the Group and
would have been both material and complementary to the Tatton
portfolio of products. The Group incurred professional fees of
GBP219,000 during the process which have been treated as
exceptional items.
Acquisition-related expenses during the financial year ended 31
March 2020 related to the acquisition of the share capital of
Sinfonia Asset Management Limited, incurring acquisition- related
costs of GBP97,000. These costs are part of separately disclosed
items within administrative expenses in the Consolidated Statement
of Total Comprehensive Income.
During the financial year ended 31 March 2020, the Group
incurred a restructuring charge relating to the rationalisation and
restructuring of various departments and functions.
The headcount reduction resulted in redundancy costs, payment in
lieu of notice, settlement and other restructuring-related costs.
These have been excluded from underlying earnings in view of their
one-off nature.
In addition, during the financial year ended 31 March 2020, the
Group has agreed with HMRC that Tatton's supplies of discretionary
fund management services in respect of model investment portfolios
are exempt from VAT. As a result, the Group recognised income of
GBP1,756,000 relating to the four-year period ended 31 March 2019,
GBP1,675,000 of which has been received from HMRC as a VAT refund.
This is offset by GBP168,000 of professional fees. The Group
reflected this change in treatment of revenue and the level of
irrecoverable input VAT in revenue and administrative expenses from
1 April 2019.
SHARE-BASED PAYMENT CHARGES
Share-based payments is a recurring item, though the value will
change depending on the estimation of the satisfaction of
performance obligations attached to certain awards. It has been
excluded from the core business operating profit since it is a
significant non-cash item. Underlying profit, being adjusted
operating profit, represents largely cash-based earnings and more
directly relates to the financial reporting period.
AMORTISATION OF CLIENT RELATIONSHIP INTANGIBLE ASSETS
Payments made for the introduction of customer relationships
that are deemed to be intangible assets are capitalised and
amortised over their useful life, which has been assessed to be ten
years. This amortisation charge is recurring over the life of the
intangible asset, though has been excluded from the core business
operating profit since it is a significant non-cash item.
Underlying profit, being adjusted operating profit, represents
largely cash- based earnings and more directly relates to the
financial reporting period.
6 FINANCE (COSTS)/INCOME
30-Sep 2020 30-Sep 2019 31-Mar 2020
(GBP'000) (GBP'000) (GBP'000)
----------------------------------------- ----------- ----------- -----------
Bank interest income 1 2 3
Other interest income - 8 13
Interest payable in servicing of banking
facilities (25) - -
Interest payable on lease liabilities (11) (11) (22)
----------------------------------------- ----------- ----------- -----------
(35) (1) (6)
----------------------------------------- ----------- ----------- -----------
7 TAXATION
30-Sep 2020 30-Sep 2019 31-Mar 2020
(GBP'000) (GBP'000) (GBP'000)
---------------------------------------- ----------- ----------- -----------
Current tax expense
Current tax on profits for the period 821 779 1,986
Adjustment for under-provision in prior
periods - - 7
---------------------------------------- ----------- ----------- -----------
821 779 1,993
Deferred tax expense
Share-based payments (386) (9) (12)
Origination and reversal of temporary
differences (21) 15 57
Adjustment in respect of previous years - (118) (95)
Effect of rate changes - - (10)
---------------------------------------- ----------- ----------- -----------
(407) (112) (60)
---------------------------------------- ----------- ----------- -----------
Total tax expense 414 667 1,933
---------------------------------------- ----------- ----------- -----------
The reasons for the difference between the actual tax charge for
the period and the standard rate of corporation tax in the UK
applied to profit for the period are as follows:
30-Sep 2020 30-Sep 2019 31-Mar 2020
(GBP'000) (GBP'000) (GBP'000)
----------------------------------------- ----------- ----------- -----------
Profit before taxation 3,074 3,610 10,296
Tax at UK corporation tax rate of 19%
(2019: 19%) 584 686 1,956
Expenses not deductible for tax purposes 50 37 87
Adjustments in respect of previous years - (117) (88)
Differences in tax rates - - (10)
Share-based payments charges (220) 61 (12)
----------------------------------------- ----------- ----------- -----------
Total tax expense 414 667 1,933
----------------------------------------- ----------- ----------- -----------
Deferred tax is calculated using the rate expected to apply when
the relevant timing differences are forecast to unwind.
8 EARNINGS PER SHARE AND DIVIDS
Basic earnings per share is calculated by dividing the earnings
attributable to ordinary shareholders by the weighted average
number of ordinary shares during the period.
NUMBER OF SHARES
30-Sep 2020 30-Sep 2019 31-Mar 2020
(GBP'000) (GBP'000) (GBP'000)
----------------------------------------------- ----------- ----------- -----------
Basic
Weighted average number of shares in
issue 56,126,791 55,907,513 55,907,513
Effect of own shares held by an EBT (413,411) - (72,355)
----------------------------------------------- ----------- ----------- -----------
55,713,380 55,907,513 55,835,158
Diluted
Weighted average number of shares (diluted)(1) 58,020,716 61,379,751 57,529,989
Adjusted diluted
Adjusted diluted weighted average number
of options and shares for the year(2) 61,599,917 61,379,751 61,075,935
----------------------------------------------- ----------- ----------- -----------
1 The weighted average number of shares is diluted due to the
effect of potentially dilutive contingent issuable shares from
share option schemes.
2 The dilutive shares used for this measure differ from that
used for statutory dilutive earnings per share; the future value of
service costs attributable to employee share options is ignored and
contingently issuable shares for Long-Term Incentive Plan ("LTIP")
options are assumed to fully vest. The Directors have selected this
measure as it represents the underlying effective dilution by
offsetting the impact to the calculation of basic shares of the
purchase of shares by the EBT to satisfy options.
Own shares held by an EBT represents the Company's own shares
purchased and held by the Employee Benefit Trust ("EBT"), shown at
cost. The EBT has not bought any of the Company's o wn s h ares in
t he six mo nth pe ri od to 30 Sept ember 2 0 20 (2019: non e). In
t he y ear ended 31 March 2020 the EBT purchased 413,411 of the
Company's own shares.
30-Sep 2020 30-Sep 2019 31-Mar 2020
(GBP'000) (GBP'000) (GBP'000)
----------------------------------------------- ----------- ----------- -----------
Earnings attributable to ordinary shareholders
Basic and diluted profit for the period 2,660 2,943 8,363
Share-based payment charges 1,642 413 108
Amortisation of intangible assets -
customer relationships 60 - 60
Exceptional costs (note 5) 219 102 (1,394)
Tax impact of adjustments (544) (146) 194
----------------------------------------------- ----------- ----------- -----------
Adjusted basic and diluted profits for
the period and attributable earnings 4,037 3,312 7,331
----------------------------------------------- ----------- ----------- -----------
Earnings per share (pence) (basic) 4.77 5.26 14.98
----------------------------------------------- ----------- ----------- -----------
Earnings per share (pence) (diluted) 4.58 4.79 14.54
----------------------------------------------- ----------- ----------- -----------
Adjusted earnings per share (pence)
(basic) 7.25 5.92 13.13
----------------------------------------------- ----------- ----------- -----------
Adjusted earnings per share (pence)
(diluted) 6.55 5.39 12.00
----------------------------------------------- ----------- ----------- -----------
DIVIDS
The Directors consider the Group's capital structure and
dividend policy at least twice a year ahead of announcing results
and do so in the context of its ability to continue as a going
concern, to execute the strategy and to invest in opportunities to
grow the business and enhance shareholder value.
In August 2020, Tatton Asset Management plc paid the final
dividend related to the year ended 31 March 2020 of GBP3,579,000
representing a payment of 6.4p per share.
In the year ended 31 March 2020, Tatton Asset Management plc
paid the final dividend related to t he y ear ended 31 M a r ch
2019 of GBP3,131, 000 r epre s e nting a p a y me nt of 5 . 6p per
s h are.
I n ad diti o n, t he Compa ny p aid an i n t e rim d iv i dend
of GBP1 , 7 8 9, 000 (2019: GBP1 , 5 6 5 , 00 0) to its eq uity s h
areh ol de r s. Th is repre s e n ts a p a y me nt of 3 . 2p per s
h are (2019: 2 . 8p per s h are).
At 30 September 2020 the Company's distributable reserves were
GBP26.6 million (2019: GBP22.4 million).
9 STAFF COSTS
KEY MANAGEMENT COMPENSATION
The remuneration of the statutory Directors who are the key
management of the Group is set out below in aggregate for each of
the key categories specified in IAS 24 'Related Party
Disclosures'.
30-Sep 2020 30-Sep 2019 31-Mar 2020
(GBP'000) (GBP'000) (GBP'000)
----------------------------- ----------- ----------- -----------
Short-term employee benefits 517 515 940
Post-employment benefits - - 11
Other long-term benefits - - 3
Share-based payments 1,241 244 (15)
1,758 759 939
----------------------------- ----------- ----------- -----------
In addition to the remuneration above, the Non-Executive
Chairman and Non-Executive Directors have submitted invoices for
their fees as follows:
30-Sep 2020 30-Sep 2019 31-Mar 2020
(GBP'000) (GBP'000) (GBP'000)
----------- ----------- ----------- -----------
Total fees 80 80 160
----------- ----------- ----------- -----------
10 GOODWILL
Goodwill
(GBP'000)
----------------------------------------------------------- ----------------
Cost and carrying amount
Balance at 1 April 2019 4,917
Recognised on acquisition of subsidiary 1,143
----------------------------------------------------------- ----------------
Balance at 30 September 2019 6,060
----------------------------------------------------------- ----------------
Measurement period adjustment to goodwill recognised
on acquisition of subsidiary 194
----------------------------------------------------------- ----------------
Balance at 31 March 2020 6,254
----------------------------------------------------------- ----------------
Balance at 30 September 2020 6,254
----------------------------------------------------------- ----------------
The carrying value of goodwill includes GBP5.9 million allocated
to the Tatton operating segment and cash-generating unit ("CGU").
This is made up of GBP2.5 million arising from the acquisition in 2
0 14 of an i n t ere st in T a t t on O ak Limit ed by T a t t on C
a pital Limit ed c o n si sting of t he f ut ure synergies and
forecast profits of the Tatton Oak business, GBP2.0 million arising
from the a c q u isiti on in 2 017 of an i n t ere st in T a t t on
C a pital G r o up Limit ed and GBP1 .3 m ill i on of goo dwill
gene r a t ed in 2019 on t he a c q u isiti on of Si nfo ni a. T he
c a r r y ing val ue of goo dwill a l so i n c l udes GBP0.4
million allocated to the Paradigm operating segment and CGU
relating to the acquisition of Paradigm Mortgage Services LLP.
None of the goodwill is expected to be deductible for income tax
purposes.
IMPAIRMENT LOSS AND SUBSEQUENT REVERSAL
Goodwill is subject to an annual impairment review based on an
assessment of the recoverable amount from future trading. Where, in
the opinion of the Directors, the recoverable amount from future
trading does not support the carrying value of the goodwill
relating to a subsidiary company then an impairment charge is made.
Such impairment is charged to the Statement of Total Comprehensive
Income.
IMPAIRMENT TESTING
For the purpose of impairment testing, goodwill is allocated to
the Group's operating companies which represents the lowest level
within the Group at which the goodwill is monitored for internal
management accounts purposes.
Goodwill acquired in a business combination is allocated, at
acquisition, to the CGUs or group of units that are expected to
benefit from that business combination. The Directors test goodwill
annually for impairment, or more frequently if there are indicators
that goodwill might be impaired. The Directors have considered the
carrying value of goodwill at 30 September 2020 and do not consider
that it is impaired.
GROWTH RATES
The value in use is calculated from cash flow projections based
on the Group's forecasts for the year ending 31 March 2021 which
are extrapolated for a further four years. The Group's latest
financial forecasts, which cover a three-year period, are reviewed
by the Board.
DISCOUNT RATES
The pre-tax discount rate used to calculate value is 7.7% (2019:
8.3%). The discount rate is derived from a benchmark calculated
from a number of comparable businesses.
CASH FLOW ASSUMPTIONS
The key assumptions used for the value in use calculations are
those regarding discount rate, growth rates and expected changes in
margins. Changes in prices and direct costs are based on past
experience and expectations of future changes in the market. The
growth rate used in the calculation reflects the average growth
rate experienced by the Group for the industry.
From the assessment performed, there are no reasonable
sensitivities that result in the recoverable amount being equal to
the carrying value of the goodwill attributed to the CGU.
11 INTANGIBLES
Computer Total
Customer relationships software
(GBP'000) (GBP'000) (GBP'000)
---------------------------------------- ---------------------- ---------- ----------
Cost
Balance at 1 April 2019 - 266 266
Acquired on acquisition of a subsidiary 1,469 - 1,469
Additions - 115 115
---------------------------------------- ---------------------- ---------- ----------
Balance at 30 September 2019 1,469 381 1,850
Additions - 156 156
Remeasurement of intangibles acquired
on acquisition of a subsidiary (273) - (273)
---------------------------------------- ---------------------- ---------- ----------
Balance at 31 March 2020 1,196 537 1,733
Additions - 105 105
---------------------------------------- ---------------------- ---------- ----------
Balance at 30 September 2020 1,196 642 1,838
---------------------------------------- ---------------------- ---------- ----------
Accumulated depreciation and impairment
Balance at 1 April 2019 - (43) (43)
Charge for the period - (57) (57)
---------------------------------------- ---------------------- ---------- ----------
Balance at 30 September 2019 - (100) (100)
Charge for the period (60) (78) (138)
---------------------------------------- ---------------------- ---------- ----------
Balance at 31 March 2020 (60) (178) (238)
Charge for the period (60) (101) (161)
---------------------------------------- ---------------------- ---------- ----------
Balance at 30 September 2020 (120) (279) (399)
Carrying amount
As at 30 September 2019 1,469 281 1,750
As at 31 March 2020 1,136 359 1,495
---------------------------------------- ---------------------- ---------- ----------
As at 30 September 2020 1,076 363 1,439
---------------------------------------- ---------------------- ---------- ----------
All amortisation charges are included within administrative
expenses in the Consolidated Statement of Total Comprehensive
Income.
12 PROPERTY, PLANT AND EQUIPMENT
Computer,
office equipment
and motor Fixtures and Right-of-use
vehicles fittings assets - buildings Total
(GBP'000) (GBP'000) (GBP'000) (GBP'000)
---------------------------- ----------------------- ------------------ ------------------------- ----------------
Cost
Balance at 1 April
2019 507 478 - 985
Additions 42 159 - 201
Increase attributable
to change
in accounting
standards - - 689 689
---------------------------- ----------------------- ------------------ ------------------------- ----------------
Balance at 30
September 2019 549 637 689 1,875
Additions 39 54 - 93
---------------------------- ----------------------- ------------------ ------------------------- ----------------
Balance at 31 March
2020 588 691 689 1,968
Additions 22 - 242 264
---------------------------- ----------------------- ------------------ ------------------------- ----------------
Balance at 30
September 2020 610 691 931 2,232
---------------------------- ----------------------- ------------------ ------------------------- ----------------
Accumulated
depreciation and
impairment
Balance at 1 April
2019 (397) (239) - (636)
Charge for the period (36) (40) (69) (145)
---------------------------- ----------------------- ------------------ ------------------------- ----------------
Balance at 30
September 2019 (433) (279) (69) (781)
Charge for the period (37) (47) (60) (153)
---------------------------- ----------------------- ------------------ ------------------------- ----------------
Balance at 31 March
2020 (470) (326) (138) (934)
Charge for the period (38) (48) (79) (165)
---------------------------- ----------------------- ------------------ ------------------------- ----------------
Balance at 30
September 2020 (508) (374) (217) (1,099)
---------------------------- ----------------------- ------------------ ------------------------- ----------------
Carrying amount
As at 30 September
2019 116 358 620 1,094
---------------------------- ----------------------- ------------------ ------------------------- ----------------
As at 31 March 2020 118 365 551 1,034
---------------------------- ----------------------- ------------------ ------------------------- ----------------
As at 30 September
2020 102 317 714 1,133
---------------------------- ----------------------- ------------------ ------------------------- ----------------
All depreciation charges are included within administrative
expenses in the Consolidated Statement of Total Comprehensive
Income.
The Group leases buildings and IT equipment. The Group has
applied the practical expedient for low value assets and so has not
recognised IT equipment within right-of-use assets.
The average lease term is five years. No leases have expired in
the current financial period.
RIGHT OF USE ASSETS
30-Sep 2020 30-Sep 2019 31-Mar 2020
(GBP'000) (GBP'000) (GBP'000)
-------------------------------------- ----------- ----------- -----------
Amounts recognised in profit and loss
Depreciation on right-of-use assets (79) (69) (138)
Interest expense on lease liabilities (11) (11) (22)
Expense relating to short-term leases (36) (87) (94)
Expense relating to low value assets (1) (3) (1)
(127) (170) (255)
-------------------------------------- ----------- ----------- -----------
At 30 September 2020, the Group is committed to GBPnil for
short-term leases. The total cash outflow for leases amounts to
GBP87,000.
13 FINANCIAL INSTRUMENTS
The Group finances its operations through a combination of cash
resource and other borrowings. Short-term flexibility is satisfied
by overdraft facilities in Paradigm Partners Limited which are
repayable on demand.
FAIR VALUE ESTIMATION
IFRS 7 requires disclosure of fair value measurements of
financial instruments by level of the following fair value
measurement hierarchy:
- Quoted prices (unadjusted) in active markets for identical assets or liabilities (level 1)
- Inputs other than quoted prices included within level 1 that
are observable for the asset or liability, either directly (that
is, as prices) or indirectly (that is, derived from prices) (level
2)
- Inputs for the asset or liability that are not based on
observable market data (that is, unobservable inputs) (level 3)
All financial assets are categorised as Loans and receivables
and are classified as level 1. All financial liabilities except for
contingent consideration are categorised as Financial liabilities
measured at amortised cost and are also classified as level 1. The
only financial liabilities measured subsequently at fair value on
level 3 fair value measurement represent contingent consideration
relating to a business combination. No gain or loss for the year
relating to this contingent consideration has been recognised in
profit or loss.
INTEREST RATE RISK
The Group finances its operations through a combination of
retained profits and has access to a committed and an uncommitted
banking facility. Interest on the Group's deposits/banking facility
is credited/charged on a daily basis based on LIBOR plus a
commercial margin.
The Directors consider that there is no material exposure to
interest rate risk on the Group's financial instruments at the
balance sheet date. At 30 September 2020 total borrowings were
GBPnil (2019: GBPni l).
14 EQUITY
Number
------------------------------------------------------------------- ----------------
Authorised, called up and fully paid
At 1 April 2019 55,907,513
------------------------------------------------------------------- ----------------
At 30 September 2019 55,907,513
------------------------------------------------------------------- ----------------
At 31 March 2020 55,907,513
------------------------------------------------------------------- ----------------
Issue of share capital on exercise of employee share options
(note 15) 852,813
------------------------------------------------------------------- ----------------
At 30 September 2020 56,760,326
------------------------------------------------------------------- ----------------
15 SHARE-BASED PAYMENTS
During the period, a number of share-based payment schemes and
share options schemes have been utilised by the Company.
(A) SCHEMES
(I) Tatton Asset Management plc EMI Scheme ("TAM EMI Scheme")
O n 7 J u ly 2 017 t he G r o up l a u n c hed an E MI s h are
opti on sc heme re l ating to s h ares in T a t t on Asset
Management plc to enable senior management to participate in the
equity of the Company. A total of 3,022,733 options with a weighted
average exercise price of GBP1.89 were granted and these became
exercisable in July 2020.
T h e sc he me w as e x t end ed on 8 Au g u st 2018 and a tot
al of 1 , 7 20,1 38 z e ro cost o pt i o ns w e re g r ant ed d uri
ng the y ear end ed 31 M a r ch 2019, ea ch e x e rcisa ble in Au g
u st 2 0 2 1. T he sc he me w as f u rther e x t end ed on 1 Au g u
st 2019 and a tot al of 193 , 000 z e ro cost o pt i o ns w e re g
r ant ed, each exercisable in August 2022. There was a further
extension on 28 July 2020 and a total of 1 , 00 0 , 000 z e ro cost
o pt i o ns w e re g r ant ed, e x e rcisa ble in J uly 2 02 3. A
tot al of 5 , 0 82,1 69 options remain outstanding at 30 September
2020, 1,522,617 of which are currently exercisable.
There have been 673,568 options exercised during the period. No
options were forfeited in the period (23,288 options were forfeited
in the prior year).
T h e opti o ns v e st in Au g ust 2 0 2 1, Au g ust 2 0 22 or J
u ly 2 0 23 p ro v i ded c e r tain pe rfo r man ce conditions and
targets, set prior to grant, have been met. If the performance
conditions are not met, the options lapse.
Within the accounts of the Company, the fair value at grant date
is estimated using the appropriate models including both
Black-Scholes and Monte Carlo modelling methodologies.
Number of share Weighted average
options granted price
(number) (GBP)
--------------------------------- ---------------- ----------------
Outstanding at 1 April 2019 4,631,056 1.19
Granted during the period 193,000 -
Forfeited during the period (23,288) -
--------------------------------- ---------------- ----------------
Outstanding at 30 September 2019 4,800,768 1.15
--------------------------------- ---------------- ----------------
Exercisable at 30 September 2019 - -
--------------------------------- ---------------- ----------------
Outstanding at 1 October 2019 4,800,768 1.15
Forfeited during the period (45,031) 0.78
--------------------------------- ---------------- ----------------
Outstanding at 31 March 2020 4,755,737 1.15
--------------------------------- ---------------- ----------------
Exercisable at 31 March 2020 - -
--------------------------------- ---------------- ----------------
Outstanding at 1 April 2020 4,755,737 1.15
Granted during the period 1,000,000 -
Exercised during the period (673,568) 1.70
--------------------------------- ---------------- ----------------
Outstanding at 30 September 2020 5,082,169 0.85
--------------------------------- ---------------- ----------------
Exercisable at 30 September 2020 1,522,617 1.89
--------------------------------- ---------------- ----------------
(ii) Tatton Asset Management plc Sharesave Scheme ("TAM Sharesave Scheme")
On 7 July 2017, 5 July 2018, 3 July 2019 and 6 July 2020 the
Group launched all employee Sharesave schemes for options over
shares in Tatton Asset Management plc, administered by Yorkshire
Building Society. Employees are able to save between GBP10 and
GBP500 per month over a three-year life of each scheme, at which
point they each have the option to either acquire shares in the
Company or receive the cash saved.
O v e r t he life of t he 2 0 18 T AM S h ares a ve S c heme it
is e sti m a t e d, b as ed on curre nt s a v ing r a t e s, 48 , 6
88 s h are opti o ns will be ex e r ci sa ble at an ex e r ci se p
ri ce of GBP1 . 9 0. O v er t he life of t he 2019 T AM S h ares a
ve S c heme it is e sti m a t ed t h a t, b as ed on curre nt s a v
ings r a t e s, 7 5 , 610 s h are options will be exercisable at an
exercise price of GBP1.79. Over the life of the 2020 TAM Sharesave
Scheme it is estimated that, based on current savings rates,
134,656 share options will be exercisable at an exercise price of
GBP2.29. During the period, 179,245 options have been exercised and
1,412 options have been forfeited.
Within the accounts of the Company, the fair value at grant date
is estimated using the Black-Scholes methodology for 100% of the
options. Share price volatility has been estimated using the
historical share price volatility of the Company, the expected
volatility of the Company's share price over the life of the
options and the average volatility applying to a comparable group
of listed companies. Key valuation assumptions and the costs
recognised in the accounts during the period are noted in (b) and
(c).
Number of share Weighted average
options granted price
(number) (GBP)
--------------------------------- ---------------- ----------------
Outstanding at 1 April 2019 131,976 1.70
Granted during the period 49,721 1.75
Forfeited during the period (10,183) 1.86
--------------------------------- ---------------- ----------------
Outstanding at 30 September 2019 171,514 1.71
--------------------------------- ---------------- ----------------
Exercisable at 30 September 2019 - -
--------------------------------- ---------------- ----------------
Outstanding at 1 October 2019 171,514 1.71
Granted during the period 52,772 1.76
Forfeited during the period (558) 1.72
--------------------------------- ---------------- ----------------
Outstanding at 31 March 2020 223,728 1.73
--------------------------------- ---------------- ----------------
Exercisable at 31 March 2020 - -
--------------------------------- ---------------- ----------------
Outstanding at 1 April 2020 223,728 1.73
Granted during the period 48,727 1.85
Forfeited during the period (1,412) 1.70
Exercised during the period (179,245) 1.70
--------------------------------- ---------------- ----------------
Outstanding at 30 September 2020 91,798 1.75
--------------------------------- ---------------- ----------------
Exercisable at 30 September 2020 21,176 1.70
--------------------------------- ---------------- ----------------
(B) VALUATION ASSUMPTIONS
Assumptions used in the option valuation models to determine the
fair value of options at the date of grant were as follows:
TAM EMI Scheme TAM Sharesave Scheme
---------------------------- --------------------------- ---------------------------
2020 2019 2018 2017 2020 2019 2018 2017
---------------------------- ------ ----- ----- ----- ------ ----- ----- -----
Share price at grant (GBP) 2.84 2.12 2.40 1.89 2.85 2.14 2.34 1.89
Exercise price (GBP) - - - 1.70 2.29 1.79 1.90 1.70
Expected volatility (%) 34.80 30.44 28.48 26.00 34.80 30.44 28.48 26.00
Expected life (years) 3.00 3.00 3.00 3.00 3.00 3.00 3.00 3.00
Risk free rate (%) (0.14) 0.35 0.81 0.66 (0.57) 0.35 0.81 0.66
Expected dividend yield (%) 3.38 3.96 2.75 4.50 3.38 3.96 2.75 4.50
---------------------------- ------ ----- ----- ----- ------ ----- ----- -----
(C) IFRS 2 SHARE-BASED OPTION COSTS
30-Sep 2020 30-Sep 2019 31-Mar 2020
(GBP'000) (GBP'000) (GBP'000)
--------------------- ----------- ----------- -----------
TAM EMI Scheme 1,620 402 84
TAM Sharesave Scheme 22 11 24
1,642 413 108
--------------------- ----------- ----------- -----------
16 RELATED PARTY TRANSACTIONS
ULTIMATE CONTROLLING PARTY
The Directors consider there to be no ultimate controlling
party.
RELATIONSHIPS
The Group has trading relationships with the following entities
in which Paul Hogarth, a Director, has a beneficial interest:
Entity Nature of transactions
----------------------------------- ------------------------------------------------
Amber Financial Investments Limited The Group provides discretionary fund
management services, as well as accounting
and administration services.
Jargonfree Benefits LLP The Group provides accounting and administration
services.
Paradigm Investment Management The Group incurs finance charges.
LLP
Suffolk Life Pensions Limited The Group pays lease rental payments
on an office building held in a pension
fund by Paul Hogarth
----------------------------------- ------------------------------------------------
Perspective Financial Group Limited ("Perspective") is no longer
a related party as from 20 December 2019. The transactions shown
below for the year ended 31 March 2020 are those which took place
in the prior financial period during which Perspective was a
related party.
The balance receivable/payable on 31 March 2020 is the balance
held at that date.
RELATED PARTY BALANCES
30-Sep 30-Sep 30-Sep 30-Sep 31-Mar 31-Mar
2020 2020 2019 2019 2020 2020
Value of Balance Value of Balance Value of Balance
income/ receivable/ income/ receivable/ income/ receivable/
(cost) (payable) (cost) (payable) (cost) (payable)
(GBP'000) (GBP'000) (GBP'000) (GBP'000) (GBP'000) (GBP'000)
------------------------------- ---------- ------------ ---------- ------------ ---------- ------------
Amber Financial Investments
Limited 173 37 146 - 297 25
Hermitage Holdings (Wilmslow)
Limited - 3 4 4 4 4
Jargonfree Benefits LLP - 76 12 58 15 66
Paradigm Management Partners
LLP - 5 - 5 1 5
Paradigm Investment Management
LLP (4) (278) (8) (284) (5) (234)
Perspective Financial Group
Limited - - 191 73 243 11
Suffolk Life Pensions Limited (18) 9 (29) 5 (57) 9
------------------------------- ---------- ------------ ---------- ------------ ---------- ------------
KEY MANAGEMENT PERSONNEL REMUNERATION
Key management includes Executive and Non-Executive Directors.
The compensation paid or payable to key management personnel is as
disclosed in note 9.
17 ALTERNATIVE PERFORMANCE MEASURES ("APMS")
INCOME STATEMENT MEASURES
APM Closest Reconciling items Definition and purpose
equivalent to their statutory
measure measure
--------------------- ---------------- ----------------------------- -------------------------------
Adjusted operating Operating Exceptional items, An important measure where
profit before profit share-based payments exceptional items distort the
separately disclosed and amortisation of understanding of the operating
items client relationship performance of the business.
intangibles. See note Allows comparability between
5. periods. See also note 2.6.
--------------------- ---------------- ----------------------------- -------------------------------
Adjusted operating Operating Exceptional items, An important measure where
profit margin profit share-based payments exceptional items distort the
before separately and amortisation of understanding of the operating
disclosed items client relationship performance of the business.
intangibles. See note Allows comparability between
5. periods. See also note 2.6.
--------------------- ---------------- ----------------------------- -------------------------------
Adjusted profit Profit before Exceptional items, An important measure where
before tax before tax share-based payments exceptional items distort the
separately disclosed and amortisation of understanding of the operating
items client relationship performance of the business.
intangibles. See note Allows comparability between
5. periods. See also note 2.6.
--------------------- ---------------- ----------------------------- -------------------------------
Adjusted earnings Earnings Exceptional items, An important measure where
per share - per share share-based payments exceptional items distort the
basic - basic and amortisation of understanding of the operating
client relationship performance of the business.
intangibles and the Allows comparability between
tax thereon. See note periods. See also note 2.6.
8.
--------------------- ---------------- ----------------------------- -------------------------------
Adjusted earnings Earnings Exceptional items, An important measure where
per share - per share share-based payments exceptional items distort the
diluted - diluted and amortisation of understanding of the operating
client relationship performance of the business.
intangibles and the Allows comparability between
tax thereon. The dilutive periods. See also note 2.6.
shares for this measure
assume that all contingently
issuable shares will
fully vest. See note
8.
--------------------- ---------------- ----------------------------- -------------------------------
Net cash generated Net cash Exceptional items, An important measure where
from operations generated share-based payments exceptional items distort the
before separately from operations and amortisation of understanding of the operating
disclosed items client relationship performance of the business.
intangibles. See note Allows comparability between
5. periods. See also note 2.6.
--------------------- ---------------- ----------------------------- -------------------------------
OTHER MEASURES
APM Closest Reconciling items Definition and purpose
equivalent to their statutory
measure measure
------------------- ----------- ------------------- ----------------------------------
Tatton - Assets None Not applicable AUM is representative of the
Under management customer assets and is a measure
("AUM") of the value of the customer
base. Movements in this base
are an indication of performance
in the period and growth of
the business to generate revenues
going forward.
------------------- ----------- ------------------- ----------------------------------
Paradigm Consulting None Not applicable Alternative growth measure
members and to revenue, giving an operational
growth view of growth.
------------------- ----------- ------------------- ----------------------------------
Paradigm Mortgages None Not applicable Alternative growth measure
lending, member to revenue, giving an operational
firms and growth view of growth.
------------------- ----------- ------------------- ----------------------------------
Dividend cover None Not applicable Dividend cover, being the ratio
of diluted adjusted earnings
per share, demonstrating ability
to pay.
------------------- ----------- ------------------- ----------------------------------
18 EVENTS AFTER THE REPORTING PERIOD
A s t he o u t c ome of t he Brexit negoti ati o ns and t he i
mpact t h at t he C O V I D-19 pande mic will have on the wider
market remain unknown, the Members will continue to monitor the
impact that these events have on the business.
19 CONTINGENT LIABILITIES
At 30 September 2020, the Directors confirmed there were
contingent liabilities of GBPnil (2019: GBPnil).
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IR BRBLTMTMBBFM
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