TIDMAJB
RNS Number : 5307N
AJ Bell PLC
21 May 2020
21 May 2020
AJ Bell plc
Interim results for the six months ended 31 March 2020
AJ Bell plc ("AJ Bell" or the "Company"), one of the UK's
largest investment platforms, today announces interim results for
the six-month period ended 31 March 2020.
Performance overview
Strong financial performance as the business responded quickly
to the COVID-19 pandemic, ensuring the safety of employees whilst
remaining fully operational and continuing to service
customers.
-- Revenue up 22% to GBP60.9 million (HY19: GBP50.1 million)
-- Profit before tax (PBT) up 28% to GBP22.7 million (HY19: GBP17.7 million)
-- PBT margin up 1.9 percentage points to 37.2% (HY19: 35.3%)
-- Balance sheet strengthened, with net assets up 8% in the period to GBP93.3 million
-- Interim dividend of 1.50 pence per share (HY19: 1.50 pence per share)
-- Total customers increased by a record 30,113 in the period to
262,179, up 22% over the last 12 months and 13% in the first half
of the current financial year
-- Total net inflows of GBP2.1 billion (HY19: GBP1.8 billion),
driven by platform net inflows of GBP2.5 billion (HY19: GBP2.1
billion)
-- Total assets under administration (AUA) increased by 1% over
the last year, closing at GBP48.3 billion. AUA fell by 8% in the
six-month period due to adverse market and other movements
-- Customer retention rate remained high at 95.4%
Andy Bell, Chief Executive Officer at AJ Bell, commented:
"This is a strong financial performance at a time when the
country faces one of its most significant challenges in decades.
Our focus has been to keep our people safe while continuing to
provide the vital services our customers need during times of
market volatility and being here to service their needs.
This unwavering attention on our customers' needs has helped us
deliver strong organic growth in revenue and profitability. Our
customer numbers increased by a record 30,113 during the period and
we saw net inflows of GBP2.5 billion to our core platform offering.
Revenue increased 22% to GBP60.9 million and profit before tax
increased 28% to GBP22.7 million. In light of this strong financial
performance, the Board has declared an interim dividend of 1.50
pence per share. The Board recognises the importance that our
investors place on AJ Bell's progressive dividend history and
reaffirms our ongoing commitment to this and our stated dividend
policy for future dividend distributions.
The effects of the COVID-19 crisis are likely to be felt for a
long time, although the precise impact it will have on markets,
investor sentiment and economic policy is hard to predict. However,
we have operated profitably during periods of market volatility and
low interest rates before and our business model has proved very
resilient. The long-term growth drivers of the platform market
remain in place and our strong capital position, coupled with a
buoyant trading performance mean the outlook for the future of the
business remains positive."
Financial highlights
Six months ended Six months ended
31 March 2020 31 March 2019 Change
Revenue GBP60.9 million GBP50.1 million 22%
----------------- ----------------- --------
Revenue per GBPAUA* 23.2bps 22.0bps 1.2bps
----------------- ----------------- --------
PBT GBP22.7 million GBP17.7 million 28%
----------------- ----------------- --------
PBT margin 37.2% 35.3% 1.9ppts
----------------- ----------------- --------
Diluted earnings per
share 4.36 pence 3.50 pence 25%
----------------- ----------------- --------
Interim dividend per 1.50 pence 1.50 pence -
share
----------------- ----------------- --------
Non-financial highlights
Year ended
Six months ended 30 September
31 March 2020 2019 Change
Number of retail customers 262,179 232,066 13%
----------------- ---------------- -------
- Platform 248,074 218,169 14%
----------------- ---------------- -------
- Non-platform 14,105 13,897 1%
----------------- ---------------- -------
AUA* GBP48.3 billion GBP52.3 billion (8%)
----------------- ---------------- -------
- Platform GBP42.0 billion GBP44.9 billion (6%)
----------------- ---------------- -------
- Non-platform GBP6.3 billion GBP7.4 billion (15%)
----------------- ---------------- -------
Customer retention rate 95.4% 95.4% -
----------------- ---------------- -------
*see Alternative Performance Measures
Contacts:
AJ Bell
-- Shaun Yates, Head of Investor Relations +44 (0) 7522 235 898
-- Charlie Musson, Head of PR +44 (0) 7834 499 554
Analyst presentation details
AJ Bell will be hosting an online analyst presentation at 10:00
on Thursday 21 May 2020 following the release of these results for
the six months ended 31 March 2020. Attendance is by invitation
only. Slides accompanying the analyst presentation will be made
available on the AJ Bell website after the presentation.
Forward-looking statements
The interim results contain forward-looking statements that
involve substantial risks and uncertainties, and actual results and
developments may differ materially from those expressed or implied
by these statements. These forward-looking statements are
statements regarding AJ Bell's intentions, beliefs or current
expectations concerning, among other things, its results of
operations, financial condition, prospects, growth, strategies and
the industry in which it operates. By their nature, forward-looking
statements involve risks and uncertainties because they relate to
events and depend on circumstances that may or may not occur in the
future. These forward-looking statements speak only as of the date
of these interim results and AJ Bell does not undertake any
obligation to publicly release any revisions to these
forward-looking statements to reflect events or circumstances after
the date of the interim results.
Chief Executive Officer's report
In the first half of the year we continued to attract high
levels of new customers and assets as we maintained our strategic
focus on being the easiest platform to use.
We have moved quickly to keep our people safe in response to the
COVID-19 pandemic and have successfully adapted to new and more
remote ways of working, with the vast majority of our people
working from home. During this unprecedented time, we have been
able to maintain our services, uphold our high customer service
levels and preserve our operational efficiency during a
particularly busy tax year end.
We delivered a strong financial performance in the first half of
the year and are pleased to announce that we will pay an interim
dividend of 1.50 pence per share.
A strong first half performance
We delivered a strong set of results for the six-month period to
31 March 2020, with revenue increasing by 22% to GBP60.9m (HY19:
GBP50.1m) and profit before tax (PBT) rising by 28% to GBP22.7m
(HY19: GBP17.7m).
Retail customers grew by 30,113 during the period to 262,179
(FY19: 232,066), an increase of 13%. The increase was driven by
significant growth in the platform business, with our retention
rate remaining high at 95.4%.
We recorded strong net AUA inflows of GBP2.1bn in the first half
of the year (HY19: GBP1.8bn), predominantly as a result of the
platform business, which included Defined Benefit (DB) pension
transfers of GBP0.4bn (HY19: GBP0.5bn). Market and other movements
reduced the AUA by GBP6.1bn in the period, with AUA closing at
GBP48.3bn (FY19: GBP52.3bn).
COVID-19
The unprecedented uncertainty arising as a result of the
COVID-19 pandemic presents a real and ongoing threat to the wider
economy, with most businesses experiencing a significant period of
disruption.
We have a clear set of guiding principles at AJ Bell that inform
everything we do. These principles come to the fore when there is
no rule-book, and there certainly is no rule-book guiding leaders
and businesses on how they should react to the COVID-19 crisis.
We have prioritised safeguarding our people whilst keeping
communication channels open, retaining all of our services and
maintaining service levels for the benefit of our customers.
We have successfully migrated the vast majority of our people to
work from home but, where this has not been possible, such measures
as increased social distancing and intensified cleaning regimes
have been implemented across the business in line with Public
Health England's social distancing and other guidelines.
We have taken the decision that none of our people would be
furloughed. Whilst we identified a number of staff who could have
been, we believe that the Government's Job Retention Scheme and
other financial support schemes should be preserved for those
businesses that need them the most.
As a financial services business, we provide an essential
service to our customers and recognise it is crucial for them to
have full access to their investments during this difficult time,
with many people relying on income from their savings, investments
and pensions.
Having a highly-engaged workforce and flexible IT infrastructure
has enabled us to respond quickly to the COVID-19 pandemic, as we
approached a particularly busy tax year end. We have remained fully
operational throughout the crisis, ensuring minimal disruption to
our customers and this resilience is reflected in our strong new
business figures.
We recently launched our AJ Bell Wage War on COVID Fund under
the umbrella of the AJ Bell Trust, a UK registered charity, which
will benefit those charities supporting the COVID-19 efforts or
those directly in need as a result of the virus. The AJ Bell Trust
has kick started the fund raising by allocating GBP50,000 of its
charitable reserves to the fund and through the Payroll Giving
Scheme, I, along with other board directors and senior management,
have committed to donate our April, May and June salaries to the
fund. I am immensely proud that a large number of our staff have
also joined us in donating to the fund.
I have been truly impressed by the pace of change and
flexibility our people have shown in adapting to the situation and
would like to thank everyone for their dedication during this
time.
Strategic update
At the heart of our business is a clear and succinct purpose; we
help people to invest and our core strategic objective is to strive
to be the easiest to use investment platform in the UK. Our
day-to-day focus remains on providing a cost-effective and
high-quality service to our customers. Despite the changing times,
our strategy remains unchanged.
During the period, we have continued to implement our organic
growth strategy in both the advised and D2C platform market through
our flagship platform propositions, AJ Bell Investcentre and AJ
Bell Youinvest.
AJ Bell Investcentre platform proposition
Customer numbers grew by 5,918 during the period to 103,974
(FY19: 98,056), an increase of 6%.
We have seen both advisers and customers react to the current
situation through their increased use of technology, with a shift
towards remote working, virtual meetings and online processes. We
have continued to support advisers as they adapt to a new way of
working. We have replaced our 'On the Road' seminars with our
enormously popular weekly 'Off the Road' webinars, giving advisers
the chance to engage remotely with our technical and market-related
experts and content.
We launched our Retirement Investment Account (RIA) in January,
which has already gained traction with advisers. The RIA is a
simple pension proposition with a competitive, all-in custody fee
of 25bps.
As a low-cost investment solution, the RIA offers a wide range
of investment options, making it ideal for advisers looking to use
our Funds & Shares Service, Managed Portfolio Service or
multi-asset funds as a simple, packaged solution for a target group
of customers with pensions worth sub GBP250,000.
In the second half of 2020 we plan to open up our advised
platform to a select group of Third Party Discretionary Fund
Managers (TPDFM). We will provide the tax wrapper, custody, dealing
and settlement service whilst the adviser appoints a TPDFM to
manage the funds.
AJ Bell Youinvest platform proposition
AJ Bell Youinvest enjoyed the most successful six months of new
business in its history. Customer numbers grew by 23,987 during the
period to 144,100 (FY19: 120,113), an increase of 20%. Our
customers have been more engaged than ever, particularly so during
the lockdown.
We have seen increased demand for investment guidance and use of
our three online investment solutions, namely the AJ Bell Funds,
Ready-made portfolios and Favourite funds.
During the period, we further enhanced our website with the
launch of an investment trust 'select list', a list of investment
trusts, with supporting information and analysis, selected by our
investment specialists based on a range of factors including price,
performance and size.
Our award-winning service, simple investment solutions and
excellent value for money has helped us to attract an increasingly
diversified customer base. It is particularly pleasing that we are
attracting younger customers than ever before, with the average age
of a new AJ Bell Youinvest customer falling from 44 to 38 years old
over the past 18 months.
Operational resilience
Our hybrid technology solution has proven to be both flexible
and resilient. We have experienced record trading days over the
past few months, demonstrating the robustness and stability of our
platform. This, coupled with the hard work and dedication of our
staff, ensured our high quality service was maintained whilst
adapting to a more remote working environment.
Our customers want low-cost, easy-to-use products and a secure
investment platform that they can trust with their investments over
the long term. Our focus for the second half of the year will be
the ongoing evolution of the platform and continued investment to
further enhance our platform propositions.
People and culture
An engaged workforce is vital to the ongoing success of our
business and it is pleasing to have achieved a three-star
accreditation, representing the highest standard of workplace
engagement, in the 'S unday Times 100 Best Companies to Work For',
for the second consecutive year.
Our people have responded magnificently to the current
challenges and in particular to the new way of working during the
Government's lockdown. We are mindful of our employees' mental
health, as well as their physical wellbeing during this difficult
time. We have a number of trained mental health first aiders within
the business and an Employee Assistance Programme open to all
staff, which includes a confidential helpline run by an external
provider of counselling services to support staff in both their
work and home life.
Our CSR policy at AJ Bell is underpinned by our guiding
principles and as a business we recognise we have a responsibility
to make a positive contribution to the communities and environment
in which we operate.
We introduced a long-term CSR initiative which was announced
alongside our annual results in December. The initiative has been
designed to ensure we are making a positive contribution to society
by sharing some of our future success with people in our community
who need help and support. We granted a number of share options to
the AJ Bell Trust which will be exercisable should we exceed our
ambitious growth plans and our shareholders benefit from enhanced
earnings per share. The Board has no intention to review or change
the vesting conditions of these options.
Regulatory developments
It is our continued belief that increased stability, simplicity
and clarity in the UK savings and investments industry has
long-term benefits for our customers, the wider industry and
society.
As a result of the COVID-19 situation, the FCA announced the
delay to a number of its publications and planned regulatory
changes, including delaying the publication of its paper on exit
fees until Q2 2020 and pushing back the introduction of investment
pathways from August 2020 to February 2021.
Although we are well progressed towards the introduction of
investment pathways, we hope that the pause in proceedings will
give the FCA time to reflect on what we strongly believe is a
well-intentioned but flawed regulatory initiative.
Dividends
We operate a profitable, resilient business model within a
growing market and the outlook remains positive. The strength of
our balance sheet and robust liquidity position supports both
ongoing investment in the business and continuing returns to
shareholders. The Board recommends an interim dividend of 1.50
pence per share, in line with the previous year, recognising that
some prudence is required given the current circumstances. The
Board recognises the importance that our investors place on AJ
Bell's progressive dividend history and reaffirms our ongoing
commitment to this and our stated dividend policy for future
dividend distributions.
Outlook
It is difficult to predict the full and long-term impact of the
COVID-19 pandemic, and how it will influence market volatility,
investor sentiment and policy decision-making, with the Bank of
England having already reduced interest rates twice in March.
Although such factors will clearly have an impact, we have operated
successfully in periods of high market volatility and low interest
rates before. We have been profitable during such periods in the
past, and our balanced revenue model has proved very resilient.
We delivered a strong first half performance, whilst maintaining
service levels to existing customers and remaining open to new
customers including those wishing to transfer in their portfolios
from other platforms. We recognise that businesses, behaviours,
working environments, and products will need to adapt as a result
of the pandemic and we will continue to put our customers at the
heart of everything we do.
We are a profitable business, with a strong capital position and
robust business model. Our award-winning, competitively priced
platform propositions, supported by an ever-increasing awareness of
the AJ Bell brand, ensures that the outlook for the future of the
business remains positive.
Andy Bell BSc, FIA
Chief Executive Officer
Financial review
We have delivered a strong performance in the first half of the
year, achieving significant growth in both revenue and PBT. Revenue
increased by 22% from GBP50.1m to GBP60.9m and PBT increased by
GBP5.0m to GBP22.7m, representing a 28% year-on-year growth
rate.
Business performance
Customers
Customer numbers increased by 30,113 during the period to a
total of 262,179. This growth has been driven by our platform
propositions, with particularly strong customer acquisition
delivered by our D2C platform. In addition, our platform customer
retention rate remained high at 95.4% (FY19: 95.4%).
Six months ended Six months ended
31 March 31 March
2020 2019
Platform 248,074 200,922
Non-platform 14,105 13,931
-------------- ---------------- ----------------
Total 262,179 214,853
-------------- ---------------- ----------------
Assets Under Administration ('AUA')
Six months ended 31 March 2020
Advised D2C Total
platform platform platform Non-platform Total
GBPbn GBPbn GBPbn GBPbn GBPbn
---------------------------------- -------- -------- -------- ------------ -----
As at 1 October 2019 33.8 11.1 44.9 7.4 52.3
---------------------------------- -------- -------- -------- ------------ -----
Underlying inflows 2.0 1.4 3.4 - 3.4
Outflows (0.9) (0.4) (1.3) (0.4) (1.7)
---------------------------------- -------- -------- -------- ------------ -----
Underlying net inflows/(outflows) 1.1 1.0 2.1 (0.4) 1.7
---------------------------------- -------- -------- -------- ------------ -----
Defined benefit inflows 0.4 - 0.4 - 0.4
Bulk migration inflows - - - - -
---------------------------------- -------- -------- -------- ------------ -----
Total net inflows/(outflows) 1.5 1.0 2.5 (0.4) 2.1
---------------------------------- -------- -------- -------- ------------ -----
Market and other movements (3.9) (1.5) (5.4) (0.7) (6.1)
---------------------------------- -------- -------- -------- ------------ -----
As at 31 March 2020 31.4 10.6 42.0 6.3 48.3
---------------------------------- -------- -------- -------- ------------ -----
Six months ended 31 March 2019
Advised D2C Total
platform platform platform Non-platform Total
GBPbn GBPbn GBPbn GBPbn GBPbn
---------------------------------- -------- -------- -------- ------------ -----
As at 1 October 2018 29.9 8.7 38.6 7.5 46.1
---------------------------------- -------- -------- -------- ------------ -----
Underlying inflows 1.6 0.9 2.5 0.1 2.6
Outflows (0.8) (0.3) (1.1) (0.4) (1.5)
---------------------------------- -------- -------- -------- ------------ -----
Underlying net inflows/(outflows) 0.8 0.6 1.4 (0.3) 1.1
---------------------------------- -------- -------- -------- ------------ -----
Defined benefit inflows 0.5 - 0.5 - 0.5
Bulk migration inflows - 0.2 0.2 - 0.2
---------------------------------- -------- -------- -------- ------------ -----
Total net inflows/(outflows) 1.3 0.8 2.1 (0.3) 1.8
---------------------------------- -------- -------- -------- ------------ -----
Market and other movements (0.3) 0.2 (0.1) (0.1) (0.2)
---------------------------------- -------- -------- -------- ------------ -----
As at 31 March 2019 30.9 9.7 40.6 7.1 47.7
---------------------------------- -------- -------- -------- ------------ -----
During the period we saw significant growth in the level of
underlying inflows as a result of the strong growth of our platform
propositions. Both our advised and D2C platforms contributed to the
36% increase in underlying inflows seen across our platform
propositions, which totalled GBP3.4bn as compared to GBP2.5bn in
the same period last year.
Advised platform inflows from defined benefit transfers
continued to decline, in line with expectations, contributing
GBP0.4bn to inflows during the year compared with GBP0.5bn in the
prior period.
Non-platform net outflows in the period were primarily due to
the loss of an institutional stockbroking client. As was the case
with the decline in inflows from defined benefit transfers, this
performance was in line with our expectations for the period.
Despite the strong growth in underlying inflows in the period,
the sharp decline in global markets in March as a result of the
COVID-19 outbreak had a significant adverse impact on asset values,
with AUA closing at GBP48.3bn at 31 March 2020, GBP4.0bn below the
level recorded at the start of the period.
Financial performance
Revenue
Unaudited Unaudited Audited
Six months ended Six months ended Year ended
31 March 31 March 30 September
2020 2019 2019
GBP000 GBP000 GBP000
--------------------- ----------------- ----------------- ------------
Recurring fixed 13,395 12,750 25,395
Recurring ad valorem 35,978 29,385 63,095
Transactional 11,503 7,949 16,412
--------------------- ----------------- ----------------- ------------
Total 60,876 50,084 104,902
--------------------- ----------------- ----------------- ------------
Revenue increased by 22% to GBP60.9m (HY19: GBP50.1m). We have
three categories of revenue, these being: recurring fixed fees,
recurring ad valorem fees and transactional fees.
Revenue from recurring fixed fees (which includes recurring
pension administration fees and media revenue) saw an increase of
5% to GBP13.4m (HY19: GBP12.8m), primarily driven by increased
pension administration revenue from our advised platform
customers.
Revenue from recurring ad valorem fees (comprising custody fees,
retained interest income, and investment management fees) grew by
22% to GBP36.0m (HY19: GBP29.4m). The key driver of the growth in
ad valorem revenue was the increase in average AUA in the six-month
period.
Revenue from transactional fees (comprising dealing fees and
pension scheme activity fees) grew by 45% to GBP11.5m (HY19:
GBP8.0m). This increase was driven by higher levels of customer
dealing, particularly towards the end of the period, as market
volatility resulted in more investors trading on our platform.
Revenue margin increased by 1.2bps from 22.0bps to 23.2bps in
the six-month period, an increase of 5%, primarily caused by
increased transactional revenues.
Administrative expenses
Unaudited Unaudited Audited
Six months ended Six months ended Year ended
31 March 31 March 30 September
2020 2019 2019
GBP000 GBP000 GBP000
------------------------ ----------------- ----------------- ------------
Distribution 5,517 5,176 9,228
Technology 9,784 8,223 17,789
Operational and support 21,115 18,174 39,528
IPO - 946 948
CSR initiative 1,595 - -
------------------------ ----------------- ----------------- ------------
Total 38,011 32,519 67,493
------------------------ ----------------- ----------------- ------------
Administrative expenses increased by 17% to GBP38.0m (HY19:
GBP32.5m). We have three core categories of administrative
expenses: distribution, technology, and operational and support
.
Distribution costs increased by 7% from GBP5.2m to GBP5.5m.
Whilst the increase appears modest when compared to the significant
increase in customer numbers, this is a result of GBP0.5m being
included in the comparative period figure as part of a temporary
increase in marketing activity at that time.
Technology costs increased by 19% to GBP9.8m (HY19: GBP8.2m).
This increase reflects the continued investment in this area of the
business. Headcount increased from 134 to 162 at the end of March
2020, which will allow us to deliver change at a faster rate, to
further enhance our platform propositions.
Operational and support costs increased by 16% to GBP21.1m
(HY19: GBP18.2m). Although the majority of the cost increase was
caused by increased headcount to support the growth in the number
of customers served, there were two other contributory factors,
namely the supplementary levy for the Financial Services
Compensation Scheme (FSCS) in January 2020 and an increase in costs
associated with the elevated dealing activity referenced in the
revenue section.
Our share-based payment expense includes a one-off charge of
GBP1.6m relating to the CSR initiative announced in December 2019,
which granted market value share options to the AJ Bell Trust (a
registered charity) conditional on the achievement of DEPS targets
for the financial years 2022, 2023 and 2024. Further details can be
found within note 14.
Profit before tax (PBT)
PBT rose to GBP22.7m (HY19: GBP17.7m), an increase of 28%
compared with the prior period, and our PBT margin increased to
37.2% (HY19: 35.3%). This was due to the continued growth in the
business and higher revenue margins.
Tax
The effective rate of tax for the year was 21.2% (HY19: 20.3%),
slightly higher than the standard rate of UK Corporation Tax of
19.0%, as a result of the disallowable one-off charge of GBP1.6m
relating to the CSR initiative.
Earnings per share
Basic earnings per share increased by 24% to 4.38p. Diluted
earnings per share (DEPS) increased by 25% to 4.36p.
New accounting standard - IFRS 16
The Group implemented IFRS 16 Leases with effect from 1 October
2019, the details and impact of which are set out in note 3:
Changes in accounting policies to these interim financial
statements. On adoption of IFRS 16, we recognised right-of-use
assets and the associated lease liabilities on the balance sheet in
relation to leases of office space and office equipment, which had
previously been classified as operating leases under IAS 17. There
has been no significant impact on net assets. Lease costs are now
replaced by depreciation and finance costs within the income
statement, the impact of which is not material.
Financial position
Capital and liquidity
Our balance sheet remains strong, with net assets totalling
GBP93.3m (HY19: GBP73.8m) at 31 March 2020 and a return on assets
of 19% (HY19: 19%). We have no significant borrowing with the
exception of the lease liability that arose on adoption of IFRS 16
noted above.
We operate a highly cash-generative business, with our short
working-capital cycle ensuring that PBT is quickly converted into
cash. Our period end balance sheet included cash balances of
GBP60.8m.
Our regulatory capital requirements are continually kept under
review, incorporating comprehensive stress and scenario testing,
and are formally reviewed at least annually. We have maintained a
healthy surplus over our regulatory capital requirement throughout
the period.
COVID-19
Whilst it is difficult to predict the full extent of the impact
of COVID-19, the Directors have performed a number of new stress
tests in view of the recent changes in the macroeconomic
environment. The tests consider the impact of a further immediate
cut in UK base rate from the current level to zero percent and a
further immediate fall in global markets, with the declines being
sustained for the full period assessed.
The results of this modelling show that the Group would continue
to operate profitably whilst maintaining sufficient resources to
satisfy its regulatory capital, even in the event that these
macroeconomic stresses occurred simultaneously and without allowing
for any management action by way of price increases or cost
reductions.
Dividends
We are a financially strong business as evidenced by a
well-capitalised, profitable and highly cash-generative business
model. The strength of our balance sheet and robust liquidity
position supports ongoing investment in the business and continuing
returns to shareholders. The Board has recommended an interim
dividend of 1.50 pence per share (HY19: 1.50 pence per share), in
line with the previous year.
Michael Summersgill
Chief Financial Officer
Responsibility statement
Directors' responsibility statement
We confirm that to the best of our knowledge:
(a) the condensed set of financial statements has been prepared
in accordance with International Accounting Standard 34 Interim
Financial Reporting (IAS 34) as adopted by the European Union (EU);
and
(b) the Interim management report includes a fair review of the information required by:
(i) DTR 4.2.7R of the Disclosure Guidance and Transparency
Rules, being an indication of important events that have occurred
during the first six months of the financial year and their impact
on the condensed set of financial statements; and a description of
the principal risks and uncertainties facing the Group for the
remaining six months of the financial year; and
(ii) DTR 4.2.8R of the Disclosure Guidance and Transparency
Rules, being related-party transactions that have taken place in
the first six months of the current financial year and that have
materially affected the financial position or performance of the
Group during that period; and any changes in the related-party
transactions described in the last annual report that could do
so.
By order of the Board:
Christopher Bruce Robinson
Company Secretary
20 May 2020
Independent review report to AJ Bell plc
Introduction
We have been engaged by the Company to review the condensed set
of financial statements in the half-yearly financial report for the
six months ended 31 March 2020, which comprises the condensed
consolidated income statement, the condensed consolidated statement
of financial position, the condensed consolidated statement of
changes in equity, the condensed consolidated statement of cash
flows and the related explanatory notes.
We have read the other information contained in the half-yearly
financial report and considered whether it contains any apparent
misstatements or material inconsistencies with the information in
the condensed set of financial statements.
Directors' responsibilities
The half-yearly financial report is the responsibility of and
has been approved by the directors. The Directors are responsible
for preparing the half-yearly financial report in accordance with
the Disclosure Guidance and Transparency Rules of the United
Kingdom's Financial Conduct Authority.
As disclosed in note 2, the annual financial statements of the
group are prepared in accordance with International Financial
Reporting Standards (IFRSs) as adopted by the European Union. The
condensed set of financial statements included in this half-yearly
financial report has been prepared in accordance with International
Accounting Standard 34, "Interim Financial Reporting", as adopted
by the European Union.
Our responsibility
Our responsibility is to express to the Company a conclusion on
the condensed set of financial statements in the half-yearly
financial report based on our review.
Scope of review
We conducted our review in accordance with International
Standard on Review Engagements (UK and Ireland) 2410, "Review of
Interim Financial Information Performed by the Independent Auditor
of the Entity", issued by the Financial Reporting Council for use
in the United Kingdom. A review of interim financial information
consists of making enquiries, primarily of persons responsible for
financial and accounting matters, and applying analytical and other
review procedures. A review is substantially less in scope than an
audit conducted in accordance with International Standards on
Auditing (UK) and consequently does not enable us to obtain
assurance that we would become aware of all significant matters
that might be identified in an audit. Accordingly, we do not
express an audit opinion.
Conclusion
Based on our review, nothing has come to our attention that
causes us to believe that the condensed set of financial statements
in the half-yearly financial report for the six months ended 31
March 2020 is not prepared, in all material respects, in accordance
with International Accounting Standard 34, as adopted by the
European Union, and the Disclosure Guidance and Transparency Rules
of the United Kingdom's Financial Conduct Authority.
Use of our report
Our report has been prepared in accordance with the terms of our
engagement to assist the Company in meeting its responsibilities in
respect of half-yearly financial reporting in accordance with the
Disclosure Guidance and Transparency Rules of the United Kingdom's
Financial Conduct Authority and for no other purpose. No person is
entitled to rely on this report unless such a person is a person
entitled to rely upon this report by virtue of and for the purpose
of our terms of engagement or has been expressly authorised to do
so by our prior written consent. Save as above, we do not accept
responsibility for this report to any other person or for any other
purpose and we hereby expressly disclaim any and all such
liability.
BDO LLP
Chartered Accountants
London, UK
20 May 2020
BDO LLP is a limited liability partnership registered in England
and Wales (with registered number OC305127).
Condensed consolidated income
statement
for the six months ended
31 March 2020
Unaudited Unaudited
Six months Six months Audited
ended ended Year ended
31 March 31 March 30 September
2020 2019 2019
Notes GBP000 GBP000 GBP000
Revenue 60,876 50,084 104,902
Administrative expenses (38,011) (32,519) (67,493)
---------- ---------- ------------
Operating profit 22,865 17,565 37,409
Investment income 219 148 328
Finance costs (433) (33) (42)
---------- ---------- ------------
Profit before tax 22,651 17,680 37,695
========== ========== ============
Tax expense 8 (4,794) (3,594) (7,342)
---------- ---------- ------------
Profit for the period attributable
to:
Equity holders of the parent
company 17,857 14,086 30,353
========== ========== ============
Earnings per ordinary share:
Basic (pence) 9 4.38 3.52 7.51
Diluted (pence) 9 4.36 3.50 7.47
All revenue, profit and earnings are in respect of continuing
operations.
There were no other components of recognised income or expense
in any of the periods presented and consequently no statement of
other comprehensive income has been presented.
Condensed consolidated statement of financial position
as at 31 March 2020
Unaudited Unaudited Audited
31 March 31 March 30 September
2020 2019 2019
Notes GBP000 GBP000 GBP000
Assets
Non-current assets
Goodwill 3,660 3,660 3,660
Other intangible assets 10 2,189 2,782 2,453
Property, plant and equipment 10 3,387 4,284 4,062
Right-of-use assets 10 15,421 - -
Deferred tax asset 551 1,321 1,094
------------------ ------------------ -----------------
25,208 12,047 11,269
------------------ ------------------ -----------------
Current assets
Trade and other receivables 37,172 23,242 22,954
Cash and cash equivalents 60,816 55,769 69,067
------------------ ------------------ -----------------
97,988 79,011 92,021
------------------ ------------------ -----------------
Total assets 123,196 91,058 103,290
------------------ ------------------ -----------------
Liabilities
Current liabilities
Trade and other payables (10,178) (10,230) (9,965)
Current tax liabilities (32) (3,359) (2,804)
Lease liabilities (1,416) (316) (338)
Provisions 11 (1,095) (1,095) (1,095)
------------------ ------------------ -----------------
(12,721) (15,000) (14,202)
------------------ ------------------ -----------------
Non-current liabilities
Trade and other payables - (1,021) (1,241)
Lease liabilities (15,674) (427) (234)
Provisions 11 (1,550) (818) (1,550)
------------------ ------------------ -----------------
(17,224) (2,266) (3,025)
------------------ ------------------ -----------------
Total liabilities (29,945) (17,266) (17,227)
------------------ ------------------ -----------------
Net assets 93,251 73,792 86,063
================== ================== =================
Equity
Share capital 12 51 51 51
Share premium 8,383 7,026 7,667
Own shares (1,147) (1,147) (1,147)
Retained earnings 85,964 67,862 79,492
------------------ ------------------ -----------------
Total equity 93,251 73,792 86,063
================== ================== =================
The condensed consolidated financial statements were approved by
the Board of Directors and authorised for issue on 20 May 2020 and
signed on its behalf by:
Michael Summersgill
Chief Financial Officer
AJ Bell plc
Company registered number: 04503206
Condensed consolidated statement of changes in equity
for the six months ended 31 March 2020
Share capital Share premium Own shares Retained Total equity
earnings
GBP000 GBP000 GBP000 GBP000 GBP000
Balance at 1 October 2018 42 4,410 (1,364) 61,198 64,286
Total comprehensive income for the period:
Profit for the period - - - 14,086 14,086
Transactions with owners, recorded directly
in equity:
Issue of shares - 440 - - 440
Settlement of part-paid shares 1 2,185 - - 2,186
Dividends paid - - - (8,827) (8,827)
Bonus issue 9 (9) - - -
Purchase of own share capital (1) - - - (1)
Own shares acquired - - (50) - (50)
Equity-settled share-based payment
transactions - - - 510 510
Tax relief on exercise of share options - - - 357 357
Deferred tax effect of share-based payment
transactions - - - 805 805
Employee share transfer - - 267 (267) -
------------- ------------- ---------- --------- ------------
Total transactions with owners 9 2,616 217 (7,422) (4,580)
------------- ------------- ---------- --------- ------------
Balance at 31 March 2019 51 7,026 (1,147) 67,862 73,792
============= ============= ========== ========= ============
Share capital Share premium Own shares Retained Total equity
earnings
GBP000 GBP000 GBP000 GBP000 GBP000
Balance at 1 October 2019 51 7,667 (1,147) 79,492 86,063
Adjustment on initial application of IFRS
16 (note 3) - - - (356) (356)
------------- ------------- ---------- --------- ------------
Balance at 1 October 2019 - as restated 51 7,667 (1,147) 79,136 85,707
Total comprehensive income for the period:
Profit for the period - - - 17,857 17,857
Transactions with owners, recorded directly
in equity:
Issue of shares - 716 - - 716
Dividends paid - - - (13,601) (13,601)
Equity-settled share-based payment
transactions - - - 2,352 2,352
Tax relief on exercise of share options - - - 843 843
Deferred tax effect of share-based payment
transactions - - - (623) (623)
------------- ------------- ---------- --------- ------------
Total transactions with owners - 716 - (11,029) (10,313)
------------- ------------- ---------- --------- ------------
Balance at 31 March 2020 51 8,383 (1,147) 85,964 93,251
============= ============= ========== ========= ============
Condensed consolidated statement of cash flows
for the six months ended 31 March 2020
Unaudited Unaudited Audited
Six months Six months Year ended
ended 31 ended 30
March 31 March September
2020 2019 2019
Note GBP000 GBP000 GBP000
Cash flows from operating activities
Profit for the period 17,857 14,086 30,353
Adjustments for:
Investment income (219) (148) (328)
Finance costs 433 33 42
Income Tax expense 4,794 3,594 7,342
Depreciation and amortisation 1,807 1,039 2,110
Share-based payment expense
Increase in provisions and non-current
other 2,352 510 1,100
payables
Loss on disposal of property,
plant and - 271 1,223
equipment 1 1 4
Increase in trade and other receivables (14,236) (2,917) (2,626)
Increase/(decrease) in trade
and other payables 295 (1,208) (1,473)
------------------- ------------------- ----------------
Cash generated from operations 13,084 15,261 37,747
Income tax paid (6,720) (2,512) (5,704)
Interest paid (433) (33) (42)
------------------- ------------------- ----------------
Net cash flows from operating
activities 5,931 12,716 32,001
------------------- ------------------- ----------------
Cash flows from investing activities
Purchase of other intangible
assets (63) - -
Purchase of property, plant and
equipment (489) (394) (858)
Purchase of right-of-use assets
Proceeds from sale of property,
plant and (9) - -
equipment 2 - -
Interest received 218 148 324
------------------- ------------------- ----------------
Net cash used in investing activities (341) (246) (534)
------------------- ------------------- ----------------
Cash flows from financing activities
Payments of principal in relation
to lease
liabilities (956) (144) (373)
Proceeds from issue of shares 716 440 1,081
Proceeds from settlement of part-paid
shares - 2,186 2,186
Payments for purchase of own
shares
Purchase of own shares for employee
share - (1) (1)
schemes - (50) (50)
Dividends paid 13 (13,601) (8,827) (14,938)
------------------- ------------------- ----------------
Net cash used in financing activities (13,841) (6,396) (12,095)
------------------- ------------------- ----------------
Net (decrease)/increase in cash
and cash
equivalents (8,251) 6,074 19,372
Cash and cash equivalents at
beginning of period 69,067 49,695 49,695
------------------- ------------------- ----------------
Cash and cash equivalents at
end of period 60,816 55,769 69,067
=================== =================== ================
Notes to the condensed consolidated financial statements
for the six months ended 31 March 2020
1 General information
AJ Bell plc ('the Company') is the Parent Company of the AJ Bell
group of companies (together 'the Group'). The Group provides
investment administration, dealing and custody services. The
Company is a public limited company which is listed on the Main
Market of the London Stock Exchange and incorporated and domiciled
in the United Kingdom. The Company's number is 04503206 and the
registered office is 4 Exchange Quay, Salford Quays, Manchester, M5
3EE.
2 Basis of preparation
The condensed consolidated interim financial statements
('interim financial statements') have been prepared in accordance
with International Accounting Standard 34 'Interim Financial
Reporting' (IAS 34) as adopted by the European Union (EU). They do
not include all of the information and disclosures required for
full annual financial statements and therefore should be read in
conjunction with the AJ Bell plc Annual Report and financial
statements for the year ended 30 September 2019, which were
prepared under International Financial Reporting Standards (IFRSs)
as adopted by the EU and the Companies Act 2006.
The interim financial statements have been prepared on the
historical cost basis and are presented in pounds sterling, which
is the currency of the primary economic environment in which the
Group operates. All amounts have been rounded to the nearest
thousand, unless otherwise stated.
The financial information contained in the interim financial
statements does not constitute statutory accounts within the
meaning of section 434 of the Companies Act 2006. The financial
information for the year ended 30 September 2019 has been derived
from the audited financial statements of AJ Bell plc for that year,
which have been reported on by the Company's auditor and delivered
to the registrar of companies. The report of the auditor was:
(i) unqualified, and
(ii) did not include a reference to any matters to which the
auditors drew attention by way of emphasis without qualifying their
report, and
(iii) did not contain a statement under section 498 (2) or (3)
of the Companies Act 2006.
The consolidated financial statements of the Group for the year
ended 30 September 2019 are available to view online at
ajbell.co.uk/investor-relations.
Going concern
The Group is subject to macroeconomic risks, including interest
rate and market fluctuation risk and the Directors' assessment
considers that these risks have partially crystallised as a result
of the COVID-19 pandemic. The Directors have performed a number of
new stress tests in view of the recent changes in the macroeconomic
environment, considering the impact of a further immediate cut in
UK base rate to zero percent and a further immediate and sustained
50% fall in global markets for the period assessed.
The Group continues to operate profitably whilst maintaining
sufficient resources to satisfy its regulatory capital in the event
that these macroeconomic stresses occurred and without any further
management remediation action.
As a consequence, the Directors believe that the Group has
sufficient resources to continue in operation for a period of at
least 12 months from the date of approval of these interim
financial statements. Accordingly, they have continued to adopt the
going concern basis in preparing the interim financial
statements.
Significant accounting policies
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 30
September 2019, except for:
-- the adoption of new standards effective as of 1 October 2019; and
-- an update to the share-based payment accounting policy.
The Group applies IFRS 16 Leases as a new standard for the first
time. The impact of the adoption of this standard is disclosed in
note 3 below.
Several other amendments and interpretations apply for the first
time on 1 October 2019 but do not have an impact on the interim
financial statements of the Group.
The share-based payment policy has been updated to include a new
equity-settled share-based payment scheme introduced during the
period, as described in note 14. The accounting policy has been
updated to incorporate the new scheme as follows:
Share-based payments
The Group operates a number of share incentive plans for its
employees and non-employees. These generally involve an award of
share options (equity-settled share-based payments) which are
measured at the fair value of the equity instrument at the date of
grant.
The share incentive plans have conditions attached before the
option holder becomes entitled to the award. These can be
performance and/or service conditions.
The total expense is recognised, together with a corresponding
increase in the equity reserves, over the period in which the
performance and/or service conditions are fulfilled. The cumulative
expense recognised for equity-settled transactions at each
reporting date until the vesting date reflects the extent to which
the vesting period has expired and management's estimate of shares
that will eventually vest. At the end of each reporting period, the
entity revises its estimates of the number of share options
expected to vest based on the non-market vesting conditions. It
recognises any revision to original estimates in the income
statement, with a corresponding adjustment to equity reserves.
No expense is recognised for awards that do not ultimately vest,
except for equity-settled transactions for which vesting is
conditional upon a market or non-vesting condition. These are
treated as vested irrespective of whether or not the market or
non-vesting condition is satisfied, provided that all other
performance and/or service conditions are satisfied.
Fair value is measured using the Black-Scholes option pricing
model or the Monte-Carlo simulation model. The expected life
applied in the model has been adjusted based on management's best
estimate for the effects of non-transferability, exercise
restrictions and behavioural considerations. Due to the recent
listing of AJ Bell plc in December 2018, share price volatility has
been estimated as the average volatility applying to a comparable
group of listed companies.
3 Changes in accounting policies
IFRS 16 Leases
The Group has applied IFRS 16 Leases (IFRS 16) and the related
amendments in the current period. IFRS 16 replaces IAS 17 Leases
and IFRIC 4 Determining whether an Arrangement Contains a Lease for
annual periods beginning on or after 1 January 2019.
IFRS 16 provides a single lessee accounting model, requiring the
recognition of assets and liabilities for all leases, together with
options to exclude leases where the lease term is 12 months or
less, or where the underlying asset is of low value. IFRS 16
substantially carries forward the lessor accounting in IAS 17, with
the distinction between operating leases and finance leases being
retained. The Group does not have significant leasing activities
acting as a lessor.
Adoption of IFRS 16
The Group has lease contracts for various items of property,
plant and other equipment.
Prior to the adoption of IFRS 16, the Group classified each of
its leases at the inception date as either a finance lease or an
operating lease. A lease was classified as a finance lease if it
transferred substantially all of the risks and rewards incidental
to ownership of the leased asset to the Group; otherwise it was
classified as an operating lease.
Finance leases
Assets held under finance leases were capitalised at the
commencement of the lease at the fair value of the asset or, if
lower, at the present value of the minimum lease payments. Lease
payments were apportioned between interest, (recognised as finance
costs) depreciation of the leased asset and reduction of the lease
liability.
Operating leases
For leases classified as an operating lease, the asset was not
capitalised and the lease payments were recognised as an expense in
the income statement on a straight-line basis over the lease
term.
Upon adoption of IFRS 16, the Group applied a single recognition
and measurement approach for all leases that it is the lessee. The
Group recognised lease liabilities to make future lease payments
and right-of-use assets representing the right to use the
underlying assets.
From 1 October 2019, the accounting policies of the Group are as
follows:
(i) Right-of-use assets
The Group recognises right-of-use assets at the commencement
date of the leases. Right-of-use assets are measured at cost, less
any accumulated depreciation and impairment losses, and adjusted
for any re-measurement of lease liabilities. The cost of
right-of-use assets includes the amount of lease liabilities
recognised, initial direct costs incurred, and lease payments made
at or before the commencement date less any lease incentives
received.
Depreciation is to be applied in accordance with IAS16:
Property, Plant and Equipment. The right-of-use asset will be
depreciated over the lease term.
Right-of-use assets are subject to impairment.
(ii) Lease liabilities
At the commencement date of the lease, the Group recognises
lease liabilities measured at the present value of lease payments
to be made over the lease term. The lease payments include fixed
payments less any lease incentives receivable.
In calculating the present value of lease payments, the Group
uses the incremental borrowing rate at the lease commencement date
if the interest rate implicit in the lease is not readily
determinable. After the commencement date, the amount of lease
liabilities is increased to reflect the addition of interest and
reduced for the lease payments made. In addition, the carrying
amount of lease liabilities is re-measured if there is a
modification, a change in the lease term, a change in the fixed
lease payments or a change in the assessment to purchase the
underlying asset.
Transition impact
The Group has adopted IFRS 16 using the modified retrospective
approach with the effect of initially applying this standard
recognised at the date of the initial application, i.e. 1 October
2019. The Group has elected not to restate comparatives, and to
recognise the impact of the new accounting requirements in opening
retained earnings on the date of adoption in accordance with the
transitional provisions in IFRS 16.C5(b).
On adoption of IFRS 16, the Group recognised right-of-use assets
and liabilities in relation to leases of office spaces and office
equipment, which had previously been classified as operating leases
under IAS 17. The Group has recognised right-of-use assets in
accordance with the transition provisions in IFRS 16.C8 (b)(i).
Practical expedients applied
The Group applied the following practical expedients when
applying IFRS 16 to leases previously classified as operating
leases under IAS 17:
-- applied to grandfather the assessment of which contracts are
leases and applied IFRS 16 only to those that were previously
identified as leases; contracts not identified as leases under IAS
17 and IFRIC 4 were not reassessed for whether there is a
lease;
-- applied a single discount rate to a portfolio of leases with
reasonably similar characteristics.
Measurement
The Group's property lease liabilities were measured at the
present value of the remaining lease payments, discounted using the
Group's incremental borrowing rate as at 1 October 2019. The
Group's incremental borrowing rate is the rate at which similar
borrowing could be obtained from an independent creditor under
comparable terms and conditions and has been calculated at 5%.
Assets classified as finance leases under IAS 17 have been
measured using the rate implicit in the lease.
The Group is required to identify the difference between the
present value of its operating lease commitments disclosed at 30
September 2019 under IAS 17, discounted by using the Group's
incremental borrowing rate, and its lease liabilities recognised at
the date of initial application to IFRS 16.
The operating lease commitments disclosed at 30 September 2019
related to the rental of office space.
GBP000
-------------------------------------------------- -------
Operating lease commitment at 30 September 2019 22,838
Effect of discounting using incremental borrowing
rate at 1 October 2019 (5,378)
-------------------------------------------------- -------
Lease liabilities recognised on adoption 17,460
-------------------------------------------------- -------
Impact on the statement of financial position
The following adjustments were recognised in the consolidated
statement of financial position on 1 October 2019:
As reported As restated
30 September 1 October
2019 Adjustment 2019
Extract from statement of financial
position GBP000 GBP000 GBP000
------------------------------------ ------------- ---------- -----------
Non-current assets:
Property, plant and equipment 4,062 (578) 3,484
Right-of-use assets - 16,310 16,310
Deferred tax asset 1,094 83 1,177
Current assets:
Trade and other receivables 22,954 (19) 22,935
Current liabilities:
Trade and other payables (9,965) 82 (9,883)
Other financial liabilities/lease
liabilities (338) (1,174) (1,512)
Non-current liabilities:
Trade and other payables (1,241) 1,241 -
Other financial liabilities/lease
liabilities (234) (16,301) (16,535)
------------------------------------ ------------- ---------- -----------
Retained earnings 79,492 (356) 79,136
------------------------------------ ------------- ---------- -----------
Impact on income statement
The impact on the consolidated income statement for the
six-month period ended 31 March 2020 was as follows:
Extract from income statement Difference
(increase)
/ decrease
GBP000
----------------------------------------------------------- -----------
Depreciation expense (included in administrative expenses) (730)
Lease rental expense (included in administrative expenses) 1,071
Finance costs (418)
Tax expense 19
----------------------------------------------------------- -----------
Impact on profit for the year (58)
----------------------------------------------------------- -----------
4 Accounting judgements and estimates
The Directors have considered the impact of the COVID-19
pandemic when reviewing the underlying judgements and estimates
within the interim financial statements. The judgements, estimates
and assumptions made 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 30 September
2019.
5 Seasonality of operations
There is a peak in the Group's operational activity around the
tax year end. This impacts the financial results primarily in March
and April, either side of the interim period-end. As such, no
significant seasonal fluctuations affect the first or second half
of the Group's financial year in isolation.
6 Segmental reporting
It is the view of the Directors that the Group has a single
operating segment: investment services in the advised and D2C space
administering investments in SIPPs, ISAs and General
Investment/Dealing Accounts. Details of the Group's revenue,
results and assets and liabilities for the reportable segment are
shown within the condensed consolidated income statement and
condensed consolidated statement of financial position.
The Group operates in one geographical segment, being the
UK.
Due to the nature of its activities, the Group is not reliant on
any one customer or group of customers for the generation of
revenues.
7 Revenue
The analysis of the consolidated revenue is disclosed within the
Financial Review. The total revenue for the Group has been derived
from its principal activities undertaken in the UK.
8 Taxation
Tax recognised in the condensed consolidated income
statement:
Unaudited Unaudited
Six months Six months Audited Year
ended 31 ended 31 March ended 30 September
March
2020 2019 2019
GBP000 GBP000 GBP000
Current taxation
UK Corporation Tax 4,793 3,737 7,478
Adjustment in respect
of prior periods - - (78)
---------------- --------------------------- ------------------------------
4,793 3,737 7,400
---------------- --------------------------- ------------------------------
Deferred taxation
Origination and reversal
of temporary
differences (14) (145) (59)
Adjustment in respect
of prior periods 21 - (5)
Effect of changes in tax
rates (6) 2 6
---------------- --------------------------- ------------------------------
1 (143) (58)
---------------- --------------------------- ------------------------------
Total tax expense 4,794 3,594 7,342
================ =========================== ==============================
Corporation Tax for the six months ended 31 March 2020 has been
calculated at 19% (six months ended 31 March 2019: 19%; year ended
30 September 2019: 19%), representing the average annual effective
tax rate expected for the full year, applied to the estimated
assessable profit for the six-month period.
In addition to the amount charged to the income statement,
certain tax amounts have been recognised directly in equity as
follows:
Unaudited Six Unaudited Six
months months Audited Year
ended 31 March ended 31 March ended 30
September
2020 2019 2019
GBP000 GBP000 GBP000
Deferred tax relating to
share-based payments 623 (805) (663)
Current tax relief on
exercise
of share options (843) (357) (1,383)
---------------------- ---------------------------- ---------------------------
(220) (1,162) (2,046)
====================== ============================ ===========================
The charge for the period can be reconciled to the profit per
the condensed consolidated income statement as follows:
Unaudited Unaudited
Six months Six months Audited
ended ended Year ended
31 March 31 March 30 September
2020 2019 2019
GBP000 GBP000 GBP000
Profit before tax 22,651 17,680 37,695
========== ========== ============
UK Corporation Tax at 19% (six
months ended
31 March 2019: 19%; year ended
30
September 2019: 19%): 4,304 3,359 7,162
Tax effects of:
Expenses not deductible for tax
purposes Change in recognised
deductible temporary 471 233 257
differences 4 - -
Effect of tax rate changes to
deferred tax (6) 2 6
Adjustments in respect of prior
periods 21 - (83)
---------- ---------- ------------
Total tax expense 4,794 3,594 7,342
========== ========== ============
Effective tax rate 21.2% 20.3% 19.5%
Deferred tax has been recognised at 19% (six months ended 31
March 2019: 17%; year ended 30 September 2019: 17%), being the rate
at which the deferred tax assets are expected to reverse.
9 Earnings per share
Basic earnings per share is calculated by dividing the profit
attributable to the owners of the parent company by the weighted
average number of ordinary shares, excluding own shares, in issue
during the period.
Diluted earnings per share is calculated by adjusting the
weighted average number of shares to assume exercise of all
potentially dilutive share options.
The calculation of basic and diluted earnings per share is based
on the following data:
Unaudited Unaudited
Six months Six months Audited
ended 31 March ended 31 Year ended
March 30 September
2020 2019 2019
GBP000 GBP000 GBP000
Earnings
Earnings for the purposes of
basic and diluted
EPS being profit attributable
to equity holders of the parent
company 17,857 14,086 30,353
============================= ====================== ===================
Number Number Number
Number of shares
Weighted average number of ordinary
shares for
the purposes of basic EPS in issue
during the
period 407,943,894 399,918,952 404,203,556
Effect of potentially dilutive
share options 1,664,706 3,025,687 2,296,539
-------------- ------------- -------------
Weighted average number of ordinary
shares for the purposes of fully
diluted EPS 409,608,600 402,944,639 406,500,095
============== ============= =============
Unaudited Unaudited
Six months Six months Audited
ended 31 ended 31 Year ended
March March 30 September
2020 2019 2019
Earnings per share Pence Pence Pence
Basic 4.38 3.52 7.51
======================= ======================= ========================
Diluted 4.36 3.50 7.47
======================= ======================= ========================
10 Changes in capital expenditure
During the six months ended 31 March 2020, the Group acquired
plant, equipment and software assets with a cost of GBP552,000 (six
months ended 31 March 2019: GBP394,000; year ended 30 September
2019: GBP858,000).
During the six months ended 31 March 2020, the Group recognised
GBP16,310,000 as right-of-use assets, GBP15,735,000 of property and
GBP575,000 of computer and office equipment following the adoption
of IFRS 16. Further details can be found in note 3. A further
addition of office equipment with a cost of GBP9,000 has been
recognised as a right-of-use asset during the period.
11 Provisions
Office Other Restructuring
dilapidations provisions costs Total
GBP000 GBP000 GBP000 GBP000
As at 1 October 2018 795 1,095 170 2,060
Additional provisions 40 - - 40
Provisions used (17) - (117) (134)
Unused provision reversed - - (53) (53)
---------------------------- ---------------------------- --------------- -------
As at 31 March 2019 818 1,095 - 1,913
---------------------------- ---------------------------- --------------- -------
Additional provisions 732 - - 732
---------------------------- ---------------------------- --------------- -------
As at 1 October 2019 1,550 1,095 - 2,645
---------------------------- ---------------------------- --------------- -------
As at 31 March 2020 1,550 1,095 - 2,645
============================ ============================ =============== =======
Current liabilities - 1,095 - 1,095
Non-current liabilities 1,550 - - 1,550
Office dilapidations
The Group is contractually obliged to reinstate its leased
properties to their original state and layout at the end of the
lease terms. The office dilapidations provision represents
management's best estimate of the present value of costs which will
ultimately be incurred in settling these obligations.
Other provisions
The other provision recognised is to cover the settlement of a
one-off tax liability. There is some uncertainty regarding the
amount and timing of the outflow required to settle the obligation,
therefore a best estimate has been made by assessing a number of
different outcomes considering the potential areas and time periods
at risk and any associated interest. The timings of the outflows
are uncertain but the Group expects that settlement will be within
the next 12 months.
Restructuring costs
The restructuring provision represented the estimated costs
associated with the closure of the Tunbridge Wells office.
12 Share capital and share premium
Unaudited Six Unaudited Six Audited Year
months ended months ended ended 30 September
31 31
March 2020 March 2019 2019
Issued, fully-called and Number Number Number
paid:
Ordinary shares of 0.0125p
each 410,003,449 407,336,653 408,730,211
====================== ====================== =========================
All ordinary shares have full voting and dividend rights.
The following share transactions have taken place during the
period:
Transaction type Share class Number of Share premium
shares GBP000
Ordinary shares 0.0125p
Exercise of CSOP options each 650,054 348
Ordinary shares 0.0125p
BAYE share purchase each 190,235 368
Ordinary shares 0.0125p
Exercise of EIP options each 432,949 -
--------- -------------
1,273,238 716
========= =============
Own shares
As at 31 March 2020, the Group held 1,369,428 own shares in the
AJ Bell Employee Benefit Trust (31 March 2019: 1,369,896; 30
September 2019: 1,369,896).
13 Dividends
The following dividends were declared and paid by the Company
during the period:
Unaudited Unaudited
Six Six months Audited Year
months ended 31 March ended 30
ended 31 September
March
2020 2019 2019
GBP000 GBP000 GBP000
Final dividend for the
year ended 30
September 2018 of 21.50p
per share - 8,827 8,827
Interim dividend for the
year ended 30
September 2019 of 1.50p
per share - - 6,111
Final dividend for the
year ended 30 September 13,601 - -
2019 of 3.33p per share
---------------------------- ---------------------------- ---------------------------
Ordinary dividends paid
on equity shares 13,601 8,827 14,938
============================ ============================ ===========================
An interim dividend of 1.50 pence per share was approved by the
Board on 20 May 2020 and is payable on 26 June 2020 to shareholders
on the register at the close of business on 5 June 2020. The
ex-dividend date will be 4 June 2020. This dividend has not been
included as a liability as at 31 March 2020.
AJ Bell Employee Benefit Trust, which held 1,369,428 ordinary
shares (31 March 2019: 1,369,896; 30 September 2019: 1,369,896) in
AJ Bell plc at 31 March 2020, has agreed to waive all
dividends.
14 Share-based payments
The Group operates the same equity-settled share-based payment
arrangements as reported at 30 September 2019 with the exception of
the below new scheme introduced during the period.
CSR initiative
A CSR initiative was introduced during the period with the
intention of giving an additional contribution to charity through
the donation of share options should a number of stretching targets
be met by the Group. The awards made during the period are
equity-settled awards and involve the grant of market value options
to the AJ Bell Trust conditional on the achievement of DEPS targets
for the financial years 2022, 2023 and 2024 ('Performance
Period').
The exercise of each tranche will be conditional upon the DEPS
having increased in relation to the 7.47 pence DEPS for the year
ended 30 September 2019, by more than:
-- 90% for 30 September 2022;
-- 115% for 30 September 2023; and
-- 140% for 30 September 2024.
These are considered to be the lower DEPS targets. The upper
DEPS target for each performance period is 10% above the lower DEPS
target.
The percentage of shares granted that will vest in each
performance period is determined as follows:
-- if actual DEPS is below the lower DEPS target, the vesting percentage is equal to zero;
-- if actual DEPS is above the upper DEPS target, the vesting percentage is equal to 100%;
-- if actual DEPS is between the lower and upper target, then
the vesting percentage is determined by linear interpolation on a
straight-line basis and rounded down to the nearest 10%.
As no service is provided by the AJ Bell Trust, all conditions
involved in the arrangement are considered to be non-vesting
conditions. Non-vesting conditions are taken into account when
estimating the fair value of the equity instrument granted. The
fair value has been estimated using the Monte-Carlo simulation
model. During the period, the full charge of GBP1,595,000 for the
CSR initiative has been recognised.
During the period, the Group recognised total share-based
payment expenses of GBP2,352,000 (six months ended 31 March 2019:
GBP510,000; year ended 30 September 2019: GBP1,100,000).
15 Principal risks and uncertainties
We continually review the principal risks and uncertainties
facing the Group that could pose a threat to the delivery of our
strategic objectives. The Board believes that the nature of the
principal risks and uncertainties that may have a material effect
on the Group's performance over the remainder of the financial year
remain unchanged from those presented within the 2019 annual report
and accounts.
The Group has reviewed the impact of COVID-19 on the principal
risks and uncertainties facing the Group and concluded that no new
principal risks and uncertainties have materialised. Whilst the
level of inherent risk for some of the Group's principal risks and
uncertainties has increased, the Group's controls continue to
mitigate this increase in risk. The Group will continue to monitor
and respond to the impact of COVID-19 and allocate resources as
appropriate to deal with any new challenges posed by COVID-19.
16 Related-party transactions
The Group has a related-party relationship with its Directors
and members of the Executive Management Board ('the key management
personnel'). There were no changes to the related-party
relationships or significant transactions during the financial
period that would materially affect the financial position or
performance of the Group, other than the CSR initiative in respect
of the AJ Bell Trust as disclosed in note 14. The AJ Bell Trust is
a registered charity in which Mr A J Bell is a trustee. All other
transactions are consistent in nature with the disclosure in note
28 of the consolidated financial statements for the year ended 30
September 2019.
17 Subsequent events
There have been no material events occurring between the
reporting date and the date of approval of these interim financial
statements.
18 Cautionary statement
The interim results for the six months ended 31 March 2020
contain forward-looking statements that involve substantial risks
and uncertainties, and actual results and developments may differ
materially from those expressed or implied by these statements.
These forward-looking statements are statements regarding AJ Bell's
intentions, beliefs or current expectations concerning, among other
things, its results of operations, financial condition, prospects,
growth, strategies and the industry in which it operates. By their
nature, forward-looking statements involve risks and uncertainties
because they relate to events and depend on circumstances that may
or may not occur in the future. These forward-looking statements
speak only as of the date of these interim results and AJ Bell does
not undertake any obligation to publicly release any revisions to
these forward-looking statements to reflect events or circumstances
after the date of these interim results.
Alternative performance measures
Within the interim report and condensed financial statements,
various Alternative Financial Performance Measures (APM) are
referred to. APMs are not defined by International Financial
Reporting Standards and should be considered together with the
Group's IFRS measurements of performance. We believe APMs assist in
providing greater insight into the underlying performance of the
Group and enhance comparability of information between reporting
periods. The table below states those which have been used, how
they have been calculated and why they have been used.
APMs How they have been calculated Why they have been used
Assets Under AUA is the value of assets AUA is a measurement of
Administration for which AJ Bell provides the growth of the business
(AUA) either an administration, and is the primary driver
custodian or transactional of ad valorem revenue, which
service. is the largest component
of Group revenue.
Revenue per Revenue per GBPAUA is Revenue per GBPAUA provides
GBPAUA the total revenue generated a simple measurement to
during the year expressed facilitate comparison of
as a percentage of the our charges with our competitors.
average AUA in the year.
Definitions
AUA Assets Under Administration
BAYE Buy As You Earn Plan
--------------------------------------------
Board, Directors The Board of Directors of AJ Bell plc
--------------------------------------------
BPS Basis points
--------------------------------------------
Company AJ Bell plc
--------------------------------------------
CSOP Company Share Option Plan
--------------------------------------------
CSR Corporate Social Responsibility
--------------------------------------------
Customer retention Relates to platform customers
rate
--------------------------------------------
DEPS Diluted Earnings per Share
--------------------------------------------
D2C Direct-to-Consumer
--------------------------------------------
EIP Executive Incentive Plan
--------------------------------------------
EMB Executive Management Board
--------------------------------------------
EPS Earnings per Share
--------------------------------------------
FCA Financial Conduct Authority
--------------------------------------------
FTSE Financial Times Stock Exchange
--------------------------------------------
GIA General Investment Account
--------------------------------------------
HMRC Her Majesty's Revenue and Customs
--------------------------------------------
IAS International Accounting Standard
--------------------------------------------
IFRS International Financial Reporting Standards
--------------------------------------------
IPO Initial Public Offering
--------------------------------------------
ISA Individual Savings Account
--------------------------------------------
Own shares Shares held by the Group to satisfy future
incentive plans
--------------------------------------------
PBT Profit before tax
--------------------------------------------
Plc Public Limited Company
--------------------------------------------
PPTS Percentage Points
--------------------------------------------
RIA Retirement Investment Account
--------------------------------------------
SIPP Self-Invested Personal Pension
--------------------------------------------
TPDFM Third Party Discretionary Fund Managers
--------------------------------------------
UK United Kingdom
--------------------------------------------
VAT Value Added Tax
--------------------------------------------
Company information
Executive Directors Andy Bell
Michael Summersgill
---------------------------
Non-Executive Directors Les Platts
---------------------------
Simon Turner
---------------------------
Laura Carstensen
---------------------------
Eamonn Flanagan
---------------------------
Company Secretary Christopher Bruce Robinson
---------------------------
Company number 04503206
---------------------------
Registered office 4 Exchange Quay
---------------------------
Salford Quays
---------------------------
Manchester
---------------------------
M5 3EE
---------------------------
Auditor BDO LLP
---------------------------
150 Aldersgate Street
---------------------------
London
---------------------------
EC1A 4AB
---------------------------
Principal banker Bank of Scotland plc
---------------------------
1 Lochrin Square
---------------------------
92-98 Fountainbridge
---------------------------
Edinburgh
---------------------------
EH3 9QA
---------------------------
This information is provided by RNS, the news service of the
London Stock Exchange. RNS is approved by the Financial Conduct
Authority to act as a Primary Information Provider in the United
Kingdom. Terms and conditions relating to the use and distribution
of this information may apply. For further information, please
contact rns@lseg.com or visit www.rns.com.
END
IR BUGDUUUDDGGG
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May 21, 2020 02:00 ET (06:00 GMT)
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