TIDMAJB
RNS Number : 1533I
AJ Bell PLC
01 December 2022
1 December 2022
AJ Bell plc
Final results for the year ended 30 September 2022
AJ Bell plc ('AJ Bell' or the 'Company'), one of the UK's
largest investment platforms, today announces its final results for
the year ended 30 September 2022.
Highlights
Financial performance
-- Strong financial performance, with revenue up 12% to GBP163.8
million (FY21: GBP145.8 million) and profit before tax (PBT)
up 6% to GBP58.4 million (FY21: GBP55.1 million)
-- PBT margin of 35.6% (FY21: 37.8%), reflecting the planned investment
in new propositions, Dodl and Touch, and the impact of price
reductions made in the year to benefit customers
-- Diluted earnings per share up 6% to 11.35 pence (FY21: 10.67
pence)
-- Final dividend of 4.59 pence per share proposed, increasing
the total ordinary dividend for the year by 6% to 7.37 pence
per share (FY21: 6.96 pence per share), an 18(th) consecutive
year of ordinary dividend growth
Platform business
-- Another successful year, with customers increasing by 57,687
to 425,652 and platform net inflows of GBP5.8 billion (FY21:
GBP7.0 billion)
-- Platform AUA closed the year at GBP64.1 billion, down 2% as
the strong net inflows in the year were offset by adverse market
movements of 11%
-- Customer retention rate increased to 95.5% (FY21: 95.0%)
-- Development of new simplified propositions to increase our footprint
in the D2C and advised market segments, with Dodl launched in
April 2022 and Touch to follow in 2023
AJ Bell Investments
-- Assets under management ("AUM") increased by 27% in the year
to close at GBP2.8 billion (FY21: GBP2.2 billion)
-- Underlying net inflows in the year of GBP1.05 billion (FY21:
GBP922 million)
-- Excellent investment performance with all of AJ Bell's multi-asset
funds outperforming their Investment Association sector average
over one, three and five years to 30 September 2022
Michael Summersgill, Chief Executive Officer at AJ Bell,
commented:
"2022 has been another successful year for AJ Bell. Our trusted,
dual-channel platform, serving both the advised and D2C markets,
drove organic customer growth of 16% to over 425,000 and delivered
GBP5.8 billion of net inflows across the platform. Our customer
retention rate also remained extremely high at 95.5%, evidencing
the quality of our propositions and the strong service levels we
provide to our customers.
"Our continued growth has underpinned another excellent set of
financial results in a challenging year for markets. Revenue was up
12%, profit before tax up 6% and earnings per share up 6%. Our
profitable, sustainable business model and strong financial
position has supported continued investment in our customer
propositions and our people whilst enabling us to again increase
our ordinary dividend to shareholders. The Board has proposed a
final dividend of 4.59 pence per share, increasing the total
ordinary dividend for the year by 6% to 7.37 pence per share.
"As we grow, the efficiency of our business model enables us to
share the benefits of our scale with customers whilst still
delivering strong financial returns for shareholders. Earlier this
year we announced several pricing reductions across our platform
which delivered total annualised savings to customers of around
GBP5 million. We will look for further opportunities to cut costs
for customers in future as we continue to grow the business.
"Our investment in new simplified customer propositions supports
our long-term growth ambitions by increasing our footprint in both
the advised and direct-to-consumer markets. Dodl, our new
commission-free investing app complements AJ Bell, our full-service
D2C proposition which has recently been renamed from AJ Bell
Youinvest, enabling us to capture more retail investors earlier in
their investing journey. Next year we will be launching Touch for
the advised market, a simplified platform proposition that
complements our full-service AJ Bell Investcentre proposition. This
will broaden our offering to financial advisers, helping them serve
a wider base of clients.
"The success of AJ Bell would not be possible without our staff,
who continue to drive the business forward, delivering
award-winning propositions and great service to our customers. We
continue to invest in our people and have recently enhanced our pay
and benefits package for all employees. In particular I am
delighted to have introduced a new annual free share award worth
GBP2,000 per year for all employees outside of the senior
management team, ensuring that everyone shares in the future
success of the business. This will further strengthen the sense of
ownership amongst our people which is already a hugely important
part of our culture.
"This strong culture had been built over many years under the
leadership of our co-founder, Andy Bell. It was a huge privilege to
take over as CEO from Andy in October, having worked alongside him
on the Board for 11 years. We have also implemented our succession
plans for other executive roles during the year with a good blend
of internal promotions and external recruits and I am confident we
have the right team in place to take the business forward.
"Looking ahead, whilst market volatility is likely to persist in
the short-term, our focus is very much on the long-term. The
structural growth drivers for the UK investment platform market
remain strong, and with around two-thirds of our estimated GBP3
trillion target market still held off platform, we have a
significant growth opportunity ahead of us. To ensure we capitalise
on this, we will be investing more in our brand to improve
awareness of AJ Bell and support our long-term growth ambitions.
Our diversified revenue streams and efficient operating model
ensure we can continue investing in our propositions, our people
and our brand whilst continuing to deliver strong financial
performance, and we are well positioned heading into 2023."
Financial highlights
Year ended Year ended
30 September 30 September
2022 2021 Change
Revenue GBP163.8 million GBP145.8 million 12%
----------------- ----------------- ----------
Revenue per GBPAUA* 22.6bps 22.2bps 0.4bps
----------------- ----------------- ----------
PBT GBP58.4 million GBP55.1 million 6%
----------------- ----------------- ----------
PBT margin 35.6% 37.8% (2.2ppts)
----------------- ----------------- ----------
Diluted earnings per share 11.35 pence 10.67 pence 6%
----------------- ----------------- ----------
Total ordinary dividend
per share 7.37 pence 6.96 pence 6%
----------------- ----------------- ----------
Total special dividend per nil 5.00 pence n/a
share
----------------- ----------------- ----------
Non-financial highlights
Year ended Year ended
30 September 30 September
2022 2021 Change
Number of retail customers 440,589 382,754 15%
---------------- ---------------- --------
- Platform 425,652 367,965 16%
---------------- ---------------- --------
- Non-platform 14,937 14,789 1%
---------------- ---------------- --------
AUA* GBP69.2 billion GBP72.8 billion (5%)
---------------- ---------------- --------
- Platform GBP64.1 billion GBP65.3 billion (2%)
---------------- ---------------- --------
- Non-platform GBP5.1 billion GBP7.5 billion (32%)
---------------- ---------------- --------
AUM* GBP2.8 billion GBP2.2 billion 27%
---------------- ---------------- --------
Customer retention rate 95.5% 95.0% 0.5ppts
---------------- ---------------- --------
*see definitions
Contacts:
AJ Bell
Shaun Yates, Investor Relations
-- Director +44 (0) 7522 235 898
Charlie Musson, Brand and PR
-- Director +44 (0) 7834 499 554
Results presentation details
A pre-recorded video with Michael Summersgill (CEO) and Peter
Birch (CFO) discussing these results will be available on our
website ( ajbell.co.uk/investor-relations ) along with an
accompanying investor presentation from 07.00 GMT today. Management
will be hosting a meeting for sell-side analysts at 09:00 GMT
today. Attendance is by invitation only.
Management will also be hosting a group call for investors at
15.30 GMT on 7 December. Please contact Camilla Crowe at
c.crowe@numis.com for registration details.
Forward-looking statements
The full year 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 full year 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 results.
Chair's statement
Dear shareholder
"I have long admired AJ Bell and its commitment to helping
people to invest. At AJ Bell we are a purpose-driven organisation
who put our customers at the heart of everything we do."
I am pleased to be writing to you as Chair, having joined the
business in July last year before taking over as Chair at the AGM
in January.
I have spent a lot of time getting to know many people across
the business, which has been wonderful. I have been greatly
impressed by the calibre of our employees and the collegiate
culture. I have also had the pleasure of engaging with some of our
shareholders and other key stakeholders, discussing both AJ Bell's
business and the wider platform market. It has been insightful to
hear the feedback and to understand what each stakeholder group
believes our priorities should be going forward.
During the year the Board's long-established succession plan
came to fruition with Andy stepping down on 30 September 2022 and
our Deputy CEO, Michael Summersgill, being appointed to the role.
My priority as Chair has been to ensure a smooth transition of
responsibilities and this has been achieved. As co-founder and CEO,
Andy has been the heart and soul of AJ Bell for 27 years, shaping
it into the successful listed business it is today. On behalf of
the Board I would like to thank Andy for the incredible legacy he
has created and strong culture that we shall build on going
forward.
Uncertainties in the wider economy and the increasing pressures
from the rising cost of living are bringing many challenges to our
customers, our people and our wider stakeholders. As a Board we are
particularly mindful of this and so our focus continues to be on
the wellbeing of our staff, while maintaining a high-quality, value
for money service to our customers and delivering positive outcomes
for all our stakeholders.
Overview
I am pleased to report that we have delivered a strong financial
performance during the year with PBT of GBP58.4 million. Over the
past 12 months customer numbers increased by 57,835 to 440,589 and
we delivered GBP3.8 billion of net inflows of AUA, ending the year
with total AUA of GBP69.2 billion. This strong performance
demonstrates the resilience of our business model during a
turbulent year and continued uncertainties around the UK economy.
The Financial Review below contains further information on this
year's performance.
Our governance structure and cohesive culture provide a solid
framework for achieving our long-term strategic goals and the Board
remains focused on delivering AJ Bell's purpose which is simply to
help people to invest.
Governance and culture
The Board remains focused on applying high standards of
corporate governance and ensuring these principles are embedded
into our culture. We believe effective stakeholder engagement is
key to the long-term success of our business and we aim to
proactively engage with our key stakeholders and understand what is
most important to them.
We welcomed the opportunity to engage with our staff and
shareholders in person again this year as COVID restrictions
lifted, providing invaluable insight into the operation and culture
of our business, particularly for those Board members who joined us
during 2021. I was delighted to be appointed as the nominated
employee engagement director in January this year, which has given
me an opportunity to refresh the Employee Voice Forum (EVF),
increasing the frequency of our gatherings and making it more
inclusive.
We have been particularly mindful of the impact of
cost-of-living pressures on our people and the wider implications
of a challenging labour market during 2022. With this in mind we
have made a significant investment in pay and benefits from 1
October 2022 and believe that the needs of our workforce as a whole
have been taken into account through a combination of higher pay
rises, enhanced benefits, increased bonus pool and a free share
scheme for all employees. To ensure we considered those areas most
important to our staff for our benefits review, we sought feedback
through a staff survey which highlighted that benefits associated
with health and wellbeing, saving for the future and share
ownership were considered most important.
Consideration of our wider stakeholders in some of our key
decisions in the year are outlined in our Section 172
statement.
The Board continues to provide strong support and appropriate
challenge to the executive team to ensure the Group's strategy is
appropriate, achievable and ultimately delivered. During the year
the Board worked closely with Michael Summersgill, who led a key
project to replace the current Executive Management Board (EMB)
structure with an enlarged Executive Committee (ExCo) and
sub-committees. The new ExCo structure will provide additional
executive level oversight and support the ongoing growth of the
business.
Full details of the work of the Board, its Committees and the
revised executive structures are set out in the Corporate
Governance report.
Responsible business
We have made good progress during the year to further embed our
environmental, social and governance (ESG) framework into our wider
business strategy. Our senior management team has been busy driving
forward a number of key objectives around diversity and inclusion
(D&I), a new charitable framework and our paperless ambition.
In addition, we have also looked carefully at our own climate
impact and have produced our first Task Force on Climate-related
Financial Disclosures (TCFD) report. Peter Birch became the lead
Executive for ESG, following his appointment as Chief Financial
Officer (CFO), taking the reins from Michael Summersgill.
Particular focus has been given to establishing a D&I
framework this year, taking into account both demographic and
cognitive diversity, which the Board approved in July. Our primary
focus has been on senior management and the talent pipeline,
although we are also looking more broadly at the wider workforce. I
am confident that the work this year has formed a solid basis for
the Group's continued development in this area.
I am also particularly pleased to report the formation of a
Non-Executive Director forum during the year to provide further
oversight and challenge of specific ESG initiatives. Our first
meeting in July focused on a deep dive into the D&I framework,
reflecting its importance to the Board. Further details on our
ESG-related activities can be found in our Responsible Business
section.
Board changes and succession
This has been a year of change for the Board, welcoming new
Executive members and overseeing succession plans. I succeeded Les
Platts as Chair at the 2022 AGM. Les provided excellent stewardship
of the Group during his tenure and the Board wishes him well for
the future.
Andy stepped down as CEO from 30 September 2022, succeeded by
Michael Summersgill, our Deputy CEO. As a Board we would like to
formally welcome Michael in his new role and look forward to
supporting him in driving the growth of the business.
As a Board we were keen for Andy to remain involved in the
business in a Non-Executive capacity to ensure the business
continues to benefit from his deep experience of AJ Bell and the
wider investment platform market. Although we were unable to agree
our preferred role for Andy with the Financial Conduct Authority
(FCA), we are delighted that he will continue to support the
business in a consultancy role, focusing on building the AJ Bell
brand and assisting AJ Bell's campaigning on behalf of retail
investors and financial advisers.
Following the conclusion of our dialogue with the FCA, I decided
with great regret that I should step down from the Board once a
successor is found, so a new Chair can take the Board forward. I
will continue to work with the business as a consultant, focusing
on our Money Matters initiative to encourage more women to consider
investing and to also further the Company's progress on diversity
and inclusion.
Laura Carstensen also stepped down from the Board at the 2022
AGM and we thank her for her valuable contribution to the Group
during her tenure. As part of the Board's succession plans, Evelyn
Bourke was appointed Senior Independent Director (SID) and Margaret
Hassall Chair of the Remuneration Committee.
As previously announced, we welcomed Roger Stott to the Board on
1 October 2021 as Chief Operating Officer (COO), and more recently,
Peter Birch as CFO from 1 July 2022. The Board has overseen an
orderly transition for the role of CFO from Michael Summersgill who
was appointed Deputy CEO at the start of the year.
We continually monitor our Board composition and effectiveness
through the work of the Nomination Committee to ensure we have the
right skillset and breadth of experience with which to function as
an effective Board. Following the commencement of the recruitment
of a new Chair, the Board has agreed to pause the search for two
new Non-Executive Directors until that process is completed. Both
the Board and I are extremely mindful of the importance of having a
diverse range of skills, experience and perspective around the
Board table and this will be uppermost in our minds throughout the
recruitment process.
Further details on Board changes can be found in the Nomination
Committee report.
Dividend
In line with our commitment to a progressive dividend policy,
the Board is pleased to announce a final ordinary dividend of 4.59p
per share, reflecting the financial strength of the business and
strong capital position. The final ordinary dividend will be paid,
subject to shareholder approval at our AGM on 8 February 2023, to
shareholders on the register at the close of business on 20 January
2023.
This brings the total ordinary dividend for the financial year
to 7.37p per share, representing an increase (excluding the special
dividend in the prior year) of 6% on the previous year.
Building on Andy's legacy as we look ahead
Andy's achievements in building AJ Bell cannot be overstated.
From SIPP-only offering in 1995 to today's dual-channel FTSE 250
listed platform business, Andy has been the driving force. He has
of course also created a great team to take the business forward,
motivated by the same purpose; to help people to invest. While the
difficult economic outlook may lessen the immediate opportunity for
growth, over the long term, it is clear that the fundamental
drivers of an expanding addressable market remain firmly in place.
With a focus on ease of use and value for money, and having also
invested in our simplified propositions, Dodl and Touch, AJ Bell is
well-positioned to both gain market share and to capitalise on an
expanding universe of investors, both direct and advised.
AJ Bell is financially strong with a well-capitalised and highly
cash-generative business model, and the Board remains confident in
the long-term prospects of the business.
Baroness Helena Morrissey DBE
Chair
30 November 2022
Additional Board focus areas
Culture:
AJ Bell has always prided itself on a strong collegiate culture;
staff recruited over the pandemic have obviously not had as many
opportunities to benefit from this. Particular efforts are being
made to ensure that this is a focus for managers as well as the
Board.
Diversity and inclusion:
Having founded the 30% Club and now Chair of the Diversity
Project, this is clearly something that matters greatly to me. I
have seen so often the benefits yielded by improving diversity of
thought and creating an inclusive workplace. So, it has been great
to see us push diversity and inclusion higher onto the Board's
agenda this year. We have established a framework within which we
can improve the current situation to ensure our talent is
consistent with AJ Bell's strategic ambitions. We are now also
monitoring the data to enable us to measure progress. Our D&I
framework encompasses both demographic and cognitive diversity;
while the initial focus has been on senior management and the
talent pipeline, the commitment is there to widen this to the
broader workforce.
Money Matters - helping women invest:
There is not a single good reason why women should have less
money than men. Despite that, the fact remains that on average
women have less than half the levels of savings and investments
than men. That gender investment gap is one of the biggest
challenges facing our society today. AJ Bell is determined to help
solve this.
I am proud to be championing AJ Bell Money Matters, which is
designed to give women the information and inspiration they need to
become more confident investors. It aims to get women talking about
money and investing. We have a range of articles on our website, a
dedicated podcast series, a regular newsletter, webinars and
in-person live events.
Consumer Duty:
Over the long term, the Consumer Duty should improve trust in
financial services, which in turn should lead to more people making
better decisions about their short, medium and long-term savings
and investments. AJ Bell already places good consumer outcomes at
the heart of everything we do, with good value products, simple
communications and strong processes to support customers
front-and-centre. We recognise however, the step change that the
FCA is expecting of firms to proactively evidence and review how
they deliver good consumer outcomes.
As a Board we are actively engaged in the Consumer Duty and will
be overseeing the delivery of the implementation plan ahead of the
regulatory deadline of July 2023.
Chair succession:
As announced on 27 September, I advised the Board that I will
stand down from the Board once a suitable replacement as Chair is
found. Work has already commenced on the formal recruitment
process, which is being led by Evelyn Bourke, the Senior
Independent Director. My focus will be to ensure an efficient
handover of responsibilities to the successor in due course
Chief Executive Officer's review
Overview
"The foundations are firmly in place for us to deliver long-term
growth in both the advised and D2C segments of the platform market.
My focus is on continuing to evolve our platform products and
service capabilities to meet the ever-changing needs of advisers
and customers."
It is a huge privilege to take on the role of CEO from Andy,
having worked alongside him on the Board since 2011. During that
time, we have built the Company into one of the largest investment
platforms in the UK, establishing a track record of sustained
organic growth and high-quality service to our customers. Helena
has covered Andy's many achievements in his time as CEO, so I will
not repeat them here, but I will take the opportunity to put on
record my thanks for the faith he has shown in me and the support
he has given me over the years.
I believe we are well placed to maintain our long-term growth
and capitalise on the opportunities in a fast-growing platform
market. The addressable market is estimated at GBP3 trillion, with
two-thirds currently held off-platform. Each year a significant
proportion of our new business comes from assets already in the
financial system, where customers transfer assets from adjacent
markets to access the increased flexibility, investment choice and
value that a platform can offer. I expect this trend will continue
and our dual-channel offering puts us in a unique position to take
advantage, maximising our growth opportunity by serving both the
advised and D2C segments of the market.
Our strategy remains focused on providing high-quality platform
products to meet the evolving needs of investors, emphasising user
experience, excellent service, and value for money. Our
full-service D2C platform, now called AJ Bell (formerly Youinvest),
and our full-service advised platform Investcentre, have been
established for many years and continue to attract thousands of new
customers every year. They are complemented by our simplified
platform products, Dodl (which was brought to the market in April
2022), and Touch (which is scheduled to launch in 2023), furthering
our growth potential by targeting a broader range of customers.
Integrated throughout our platform products is our range of
in-house investment solutions. These low-cost funds and managed
portfolios have delivered consistently strong performance and are
well positioned to continue their strong growth.
In 2022, we achieved another year of strong customer growth in
challenging market conditions. The macroeconomic outlook
significantly changed during the year, with UK inflation at levels
not seen for 40 years, interest rates rising to their highest level
in 13 years and global asset values falling. In the short term this
has reduced both the appetite, and funds available, for investing,
however our dual-channel business model has a proven history of
delivering growth under different macroeconomic conditions, as
demonstrated again this year.
Our business model proved its strength
Our platform business delivered net AUA inflows of GBP5.8
billion over the year, once again demonstrating the strength of our
dual-channel model, with both advised and D2C channels performing
very well. Advised platform inflows were strong throughout the year
as advisers helped their clients to navigate significant market
volatility, whilst our D2C platform also delivered substantial
inflows and remained resilient during the traditionally quieter
summer months, with GBP0.3 billion of net inflows in the final
quarter despite a slowdown in new contributions from customers
impacted by the rising cost of living.
Testament to our high-quality products, we achieved organic
growth in platform customer numbers of 57,687, an increase of 16%
in the year. Our excellent customer service levels also ensured our
customer retention rates remained high, increasing to 95.5% (FY21:
95.0%).
Revenue margin on AUA climbed to 22.6bps (FY21: 22.2bps) as our
diversified revenue streams once again ensured we are well placed
to succeed in different macroeconomic environments. We delivered a
31% increase in recurring ad valorem revenue due to higher average
AUA in the year and the rise in the UK base rate leading to
increased interest income, providing protection from inflationary
pressures in our cost base. We continue to scale the business
effectively, which in combination with increasing interest rates,
enabled us to reduce our charges (representing annualised customer
savings of approximately GBP5 million), and increase the interest
rates we pay to customers on cash held on the platform.
Alongside delivering value for our customers, the operational
efficiency of our business model means we also continue to deliver
strong returns for shareholders, reflected in our record PBT of
GBP58.4 million whilst also investing in our brand, technology,
people and products to ensure we take advantage of the significant
opportunities presented by the platform market.
Our strong financial performance is reflected in the 6% increase
in basic earnings per share to 11.39p (FY21: 10.71p) with our
well-capitalised, highly cash-generative business model meaning
that the Board has yet again recommended an increased ordinary
dividend for the 18(th) successive year.
Advised
The advised market has remained resilient in the face of current
market headwinds, and the strength of our Investcentre platform has
delivered growth in customer numbers of 18,451 to 145,371 (FY21:
126,920), an increase of 15%. Strong net AUA inflows of GBP3.3
billion were offset by GBP4.3 billion of adverse market movements,
resulting in closing AUA of GBP44.8 billion (FY21: GBP45.8
billion). During the year the FTSE All-Share Index fell by 7%,
whilst the FTSE 250 Index fell by 25%, reflecting the weakened
markets caused by high inflation and geopolitical uncertainty.
It was pleasing to be recognised as the 'Best Platform', 'Best
Retirement Provider' and 'Provider of the Year' for the second
consecutive year at the 2022 Money Marketing Awards. Judged by a
panel of industry experts, these awards are further evidence of the
high-quality service we provide to advisers and their clients.
We have continued to develop our Investcentre platform, making
several enhancements with a focus on ease of use. We regularly
review our charges to ensure they position us well to support
advisers and their clients and were pleased to share the benefits
of our scale with our customers by removing our frictional charges
for establishing and transferring SIPPs on to our platform, where
the process is initiated online, whilst also removing some of our
dealing charges.
We continue to develop Touch ahead of its launch in 2023. Touch
will further expand our offering for advisers, helping them to
cater for clients looking for a digital service model.
As part of our high-quality customer service we have strong
ongoing engagement with advisers, highlighting the value they see
in us as a trusted partner. We host a range of events providing
them with industry insights, contributing to their continuing
professional development. In November 2022, we again hosted our
flagship adviser conference, Investival, with over 300 finance
professionals attending. We have also continued to deliver numerous
other events including Luminary and our 'On the Road' seminars
alongside monthly 'Off the Road' webinars due to strong demand.
D2C
Our D2C customer numbers grew by 39,236 in the year to 280,281
(FY21: 241,045), an increase of 16%. We delivered net AUA inflows
of GBP2.5 billion, offset by adverse market movements of GBP2.7
billion resulting in closing AUA of GBP19.3 billion (FY21: GBP19.5
billion). We are pleased by the continued growth of our
full-service D2C platform through challenging market conditions,
with the strength of the product underpinned by an excellent 95.8%
customer retention rate (FY21: 94.8%). In the final quarter, which
is typically quieter, we experienced a slowdown in new
contributions from customers as disposable incomes were squeezed
across UK households by the rising cost of living.
Our full-service D2C platform is highly valued by customers, as
evidenced by the multitude of industry awards it has won during the
year, including being recognised as a Which? Recommended Investment
Platform provider for the fourth consecutive year.
We rebranded AJ Bell Youinvest to AJ Bell in October 2022. We
have continued to develop the AJ Bell platform during the year,
rolling out multiple enhancements focused on ease of use. In July
we started beta-testing a new pension finding service, simplifying
the pension consolidation journey for our customers - by providing
us with some basic information, we will find their previous
pensions free of charge. During the coming year, we will continue
to trial and develop this service, enabling customers to combine
their pensions into their AJ Bell pension in just a few quick and
simple steps. We also added new pay by bank functionality: this
feature utilises open banking to direct customers to their online
bank account before transferring funds via Faster Payments,
arriving in their account almost instantly and in just a few
clicks.
Our efficient operating model and robust cost control allow us
to simplify and reduce charges for our customers to ensure we
continue to provide excellent value for money. We reviewed our
trading model following the higher levels of dealing activity
experienced during the pandemic, in order to reduce the costs for
customers. As a result, we were pleased to reduce our FX commission
rates on 1 July, whilst also simplifying our dividend re-investment
charge, reducing the cap on custody charges for funds and removing
charges for in-specie transfers out. Our low prices position us
well at a time where customers are increasingly looking for
value.
Dodl is a simplified investment app which we launched in April
and sits alongside our existing D2C platform product. Together they
provide great value investment platform options for retail
investors, catering for all levels of experience and investment
needs. Dodl offers ISAs, LISAs, pensions and GIAs with an annual
charge of just 0.15% and no commission for buying or selling
investments. The simplified investment range offers customers 30
funds catering for different themes and risk appetites. It also
features 50 popular shares in UK-listed companies for those who
like to invest in their favourite brands. Since its launch, we have
added a selection of 30 US shares to its investment universe and
launched transfer functionality, allowing customers to transfer
cash and investments into Dodl's full range of accounts.
In the rising interest rate environment, our Cash savings hub is
increasingly relevant for our customers, providing access to a
range of competitive notice and fixed-term savings accounts from UK
authorised banks.
Investments
Our investments business is delivering on its commitment to
offer a choice of simple, transparent investment solutions at a low
cost. This range of investment solutions continue to be a popular
choice with investors, growing strongly in the year with underlying
net inflows of over GBP1 billion across our multi-asset funds and
managed portfolio service, excluding the impact of a GBP0.2 billion
one-off outflow. Total AUM closed at GBP2.8 billion (FY21: GBP2.2
billion).
Our asset allocation approach has delivered for our customers,
with all our multi-asset funds outperforming their Investment
Association sector average over the last one, three and five years.
It was particularly pleasing to see the resilient performance of
our Cautious portfolio, protecting cautious investors through
difficult market conditions.
Since launching our first AJ Bell multi-asset funds in 2017 we
have shared the benefits of our increasing scale with customers,
reducing the Ongoing Charges Figure (OCF), by nearly half from
0.50% to 0.31% during that time. In February we also implemented a
new simplified pricing structure, setting a single OCF for all of
our multi-asset growth funds, making it easier for customers and
advisers to understand.
We are delighted to have won Best Medium Sized Company at the
Citywire Wealth Manager Investment Performance Awards 2022, further
reflecting the strength of our investment solutions and the
progress that has been made since our first funds were launched
five years ago.
Customer services and technology
We have provided an excellent service to our customers through a
year of continued growth. This is reflected in our 4.6-star
Trustpilot score, as rated by our retail customers, and our 95.5%
platform customer retention rate.
Our secure and scalable platform has been designed to facilitate
growth and drive operational gearing, utilising a hybrid technology
model which allows us to build adaptable, easy-to-use interfaces.
Our platform is integral to our business performance and we have
consistently invested in its evolution to provide great customer
service.
The increased spend on our technology in the year reflects the
development of our new products, Dodl and Touch, alongside further
enhancing our existing technology infrastructure. Our developer
modernisation journey has increased our pace of change with
improvements made across security, scale and resilience. These
improvements enable us to deliver change initiatives more quickly
to take advantage of our significant market opportunity. We also
continued to invest in information security as part of our ongoing
commitment to provide a safe, secure online experience for our
customers.
We have embedded the FCA's new regulatory requirements for
operational resilience, effective from 31 March 2022, into our
operating framework and processes. These rules are designed to
ensure regulated firms are better able to prevent, adapt to,
respond to, recover from and learn from operational
disruptions.
People and culture
Andy instilled a positive culture in the business from day one.
He kept a keen focus on it throughout his tenure as CEO, ensuring
it remained a real strength as the business grew. I see it as one
of my key challenges to repeat that achievement. As a management
team, we will need to approach that challenge differently as the
business continues to evolve and grow, but staying true to our
Guiding Principles and maintaining high levels of staff engagement
will continue to be crucial.
It was very pleasing to achieve our highest ever score, and a
place in the top 25 of the '100 Best UK Large Companies to work
for' in 2022, maintaining our status as a three-star company, which
is the best standard of workplace engagement, for the fifth
consecutive year.
To ensure we remain an attractive employer and reward our
committed employees, we have strengthened our pay and benefits
package for all employees effective from 1 October 2022. The
changes focused on protecting our employees from the current
inflationary environment, supporting their wellbeing and helping
them to strengthen their long-term finances. There are additional
details of the changes in our Responsible employer report, but the
element that was most important to me was the new share award for
all employees. For those outside of the senior management team,
GBP2,000 worth of AJ Bell plc shares will be awarded every year
from FY23. This will help to keep share ownership and the
associated benefits at the heart of the business for years to
come.
We are committed to being an inclusive workplace and ensuring
the diversity of our workforce represents the society we serve. As
Helena has noted in her Chair's statement, we have implemented a
new D&I framework this year, considering both demographic and
cognitive diversity, to measure and drive our development in this
area.
We recently established our new charitable framework, the 'AJ
Bell Futures Foundation', to develop more deep-rooted, long-term
partnerships in our communities. We will work with charitable
organisations to empower people to take control of their future and
their finances. We have committed to contribute 0.5% of our PBT
each year, which will be distributed to chosen partner charities;
we are delighted to have partnered with IntoUniversity and
SmartWorks for FY23.
Market developments
In the short-term, the rising cost of living is likely to lead
to lower investable income across the economy, with the UK
household savings ratio falling back towards pre-pandemic levels.
We see this having a bigger impact on the D2C market, as these
customers typically have lower levels of accumulated wealth and
investable income than advised customers. Our low-cost solutions in
both segments of the platform market should be highly appealing to
investors who are increasingly looking for value.
However, over the longer-term, the structural drivers of growth
in the UK investment platform market remain strong, as detailed in
our Market overview.
There are also a number of regulatory developments underway that
will shape the market over time.
We support the focus on positive customer outcomes in the FCA's
new Consumer Duty. Our ingrained customer focus, providing
low-cost, easy-to-use products and accessible investment content,
positions us well to operate successfully in the new regulatory
environment but we are using it as an opportunity to review
everything we do through the new Consumer Duty lens to ensure our
products, communications and customer service functions continue to
deliver good customer outcomes.
As part of the FCA's Consumer Investments Strategy, they have
announced a review of the boundary between advice and guidance. We
continue to push for a guidance framework which we believe could
provide an opportunity for investment platforms to offer more
personalised guidance to customers in the D2C channel and help to
deliver good customer outcomes. We aren't expecting imminent change
in this area, but look forward to working with the FCA on this
review.
The Pensions Dashboards proposal aims to enable people to see
all of their pension savings in one place. We will comply with all
requirements and are closely monitoring the initiative to assess
what opportunities it may present.
Outlook
Whilst there are undoubtedly some short-term headwinds, the
long-term growth potential of the platform market is significant.
We have put strong foundations in place that will enable us to
continue to grow the business. The launch of Dodl during 2022 and
Touch in 2023 reflects our aim to cater for more investors and in
doing so, further penetrates the platform market with products that
provide simplicity, ease of use and excellent service at a
compelling price.
Our diversified revenue model ensures we are well equipped to
operate in different macroeconomic conditions, as demonstrated by
our track record of continued growth. Whilst no business is immune
to inflationary pressures, the rise in UK base rates provides an
opportunity to combat this, by rebuilding our revenue margins that
suffered in an exceptionally low interest rate environment. Our PBT
margins are expected to increase in FY23 as higher revenue margins
and the operational gearing inherent in our business model outweigh
the impact of inflationary pressures and our planned investment in
our brand and products.
Finally, I would like to thank all of my AJ Bell colleagues;
without their ongoing commitment and quality of work our continued
success would not be possible. I am incredibly excited about the
future of the business as we seek to deliver on the long-term
growth opportunity in the platform market.
Michael Summersgill
Chief Executive Officer
30 November 2022
A message from Andy Bell
"It has been an honour to lead AJ Bell as CEO for over 27 years.
I would like to thank everyone involved for their support in
helping to grow the business into what it is today.
I am delighted to be handing over to Michael, who has proven
himself an outstanding leader during his 15 years in the business.
His knowledge, passion and integrity make him the right person to
lead AJ Bell into what is an exciting future."
Q&A with our new CEO
As incoming CEO, what is your focus on?
I believe that the foundations are firmly in place for us to
deliver long-term growth in both the advised and D2C markets. My
focus is on continuing to develop our platform products and service
capabilities to meet the ever-changing needs of advisers and
customers, ensuring we deliver on the significant market
opportunity.
In the short term, I have also focused on increasing our brand
awareness and enhancing our employee offer at a time when the cost
of living is rising.
How are you supporting staff through the cost-of-living
squeeze?
We conducted a full review of our pay and benefits offering this
year and I was pleased to reward our team for their ongoing
commitment by introducing several changes with a focus on
protecting them from the current inflationary environment,
supporting their wellbeing and helping them to strengthen their
long-term finances. These changes, effective from 1 October 2022,
represent an annualised increase of over 10% in total employee
costs. The element that was most important to me was the
introduction of a new share award for all employees.
Why have you introduced a new free share award?
Employee share ownership is ingrained in our culture with over
50% of our workforce having share interests in the Company. I am
passionate about ensuring that all employees feel a sense of
ownership and continue to share in the success of the business, so
one of my first acts as CEO has been to implement an annual free
share award worth GBP2,000 per year for all employees outside of
the senior management team.
What changes are you making to the brand?
Following the year end, we retired the AJ Bell Youinvest
sub-brand with our full-service D2C platform now rebranded to AJ
Bell. This will improve the effectiveness of our direct marketing
activity by simplifying the journey for new customers leading to
better conversion rates. In addition to this, we are evolving our
brand strategy with a focus on communicating how we can help people
to feel good investing.
Why are you making these changes?
When customers entering the market are choosing a platform to
invest with, less than half research more than one provider. For
most new customers, trust and brand awareness are key drivers of
their decision.
With over 27 years of experience, we have built a trusted brand
through our high-quality service and easy-to-use, award-winning
platform products. We have strong brand affinity but relatively low
brand awareness. Given the lifetime value of a customer and
significant platform market opportunity, we are increasing
investment in our brand to deliver long-term growth. These brand
changes simplify our brand architecture and position us to maximise
the returns on this investment, ensuring we capture more of the new
customers coming into the market.
Financial review
Overview
"The advantages of our dual-channel model and diversified
revenue streams continue to help us deliver strong returns for
shareholders whilst simultaneously investing to deliver on our
significant growth opportunity.
In an uncertain market environment, we achieved another
excellent set of financial results with revenue increasing by 12%
to GBP163.8 million and PBT up 6% to GBP58.4 million."
During a year in which macro economic uncertainty impacted
market values and investor confidence, our dual-channel business
model and diversified revenue streams have combined to enable us to
deliver another year of sustainable growth. At the same time, we
have been able to position ourselves to take advantage of the
future growth opportunity by reducing certain charges to customers,
developing our simplified propositions, and investing in our
brand.
Our platform business delivered strong net AUA inflows of GBP5.8
billion (FY21: GBP7.0 billion) and customer growth of 16% in a
challenging operating environment. Our ability to continue to grow
at a good rate in these circumstances is testament to the quality
of our propositions.
We achieved another strong set of financial results with revenue
increasing by 12% to GBP163.8 million (FY21: GBP145.8 million) and
PBT up 6% to GBP58.4 million (FY21: 55.1 million). The nature of
our business model means we continue to thrive in different macro
economic conditions, enabling us to invest in delivering on our
significant growth opportunity whilst providing strong returns for
shareholders.
Business performance
Customers
Customer numbers increased by 57,835 during the year to a total
of 440,589 (FY21: 382,754). This growth has been driven by our
platform propositions, with our advised and D2C propositions
delivering growth of 15% and 16% respectively. In addition, our
platform customer retention rate remained high at 95.5% (FY21:
95.0%).
Year ended Year ended
30 September 30 September
2022 2021
No. No.
------------------ -------------- --------------
Advised platform 145,371 126,920
D2C platform 280,281 241,045
===================== ============== ==============
Total platform 425,652 367,965
Non-platform 14,937 14,789
===================== ============== ==============
Total 440,589 382,754
--------------------- -------------- --------------
Assets under administration
Year ended 30 September 2022
Advised Total
platform D2C platform platform Non-platform Total
GBPbn GBPbn GBPbn GBPbn GBPbn
-------------------------- ----------- ------------- ---------- ------------- -------
As at 1 October
2021 45.8 19.5 65.3 7.5 72.8
-------------------------- ----------- ------------- ---------- ------------- -------
Inflows 6.2 3.9 10.1 0.2 10.3
Outflows (2.9) (1.4) (4.3) (2.2) (6.5)
-------------------------- ----------- ------------- ---------- ------------- -------
Net inflows / (outflows) 3.3 2.5 5.8 (2.0) 3.8
-------------------------- ----------- ------------- ---------- ------------- -------
Market and other
movements (4.3) (2.7) (7.0) (0.4) (7.4)
========================== =========== ============= ========== ============= =======
As at 30 September
2022 44.8 19.3 64.1 5.1 69.2
-------------------------- ----------- ------------- ---------- ------------- -------
Year ended 30 September 2021
Advised Total
platform D2C platform platform Non-platform Total
GBPbn GBPbn GBPbn GBPbn GBPbn
-------------------------- ----------- ------------- ---------- ------------- -------
As at 1 October
2020 36.3 13.4 49.7 6.8 56.5
-------------------------- ----------- ------------- ---------- ------------- -------
Inflows 6.3 4.6 10.9 0.2 11.1
Outflows (2.5) (1.4) (3.9) (0.8) (4.7)
-------------------------- ----------- ------------- ---------- ------------- -------
Net inflows / (outflows) 3.8 3.2 7.0 (0.6) 6.4
-------------------------- ----------- ------------- ---------- ------------- -------
Market and other
movements 5.7 2.9 8.6 1.3 9.9
========================== =========== ============= ========== ============= =======
As at 30 September
2021 45.8 19.5 65.3 7.5 72.8
-------------------------- ----------- ------------- ---------- ------------- -------
We continued to see strong AUA inflows, driven by our platform
propositions. Gross inflows in the year were GBP10.3 billion (FY21:
GBP11.1 billion).
Total advised platform inflows were GBP6.2 billion (FY21: GBP6.3
billion). Our existing customer base continued to invest at a
similar rate to the prior year, whilst average inflows from new
customers were lower, impacted by a reduction in defined benefit
pension inflows which are typically higher in value.
Total D2C platform inflows were GBP3.9 billion (FY21: GBP4.6
billion). Whilst the rate of new customer growth slowed in the face
of market headwinds, we continued to attract good quality business
with increased average inflows per new customer.
Outflows increased by GBP1.8 billion to GBP6.5 billion (FY21:
GBP4.7 billion). Non-platform outflows of GBP2.2 billion reflect
the final outflows in relation to the previously announced closure
of our institutional stockbroking service. Outflows were also
impacted by an exceptional bulk annuity purchase by an adviser firm
which resulted in a one-off outflow of GBP0.2 billion from both
advised platform AUA and AJ Bell Investments AUM.
The uncertainty across global markets driven by high inflation,
geopolitical uncertainty and the rising cost-of-living contributed
to a GBP7.4 billion adverse market movement on asset values. This
compares to favourable market movements of GBP9.9 billion last
year, resulting in AUA closing down 5% at GBP69.2 billion (FY21:
GBP72.8 billion).
Assets under management
Our award-winning investment solutions continue to perform
strongly and are highly valued by financial advisers, their clients
and our retail customers. This is evidenced by strong underlying
net inflows of GBP1.05 billion and increase of 14% versus the prior
year (FY21: GBP0.92 billion). Total AUM closed at GBP2.8 billion
(FY21: GBP2.2 billion), representing a 27% increase in the
year.
Year ended Year ended
30 September 30 September
2022 2021
GBPbn GBPbn
-------------- -------------- --------------
Advised 1.7 1.3
D2C 1.0 0.8
Non-platform 0.1 0.1
================= ============== ==============
Total 2.8 2.2
----------------- -------------- --------------
Financial performance
Revenue
Year ended Year ended
30 September 30 September
2022 2021
GBP000 GBP000
---------------------- -------------- --------------
Recurring fixed 29,787 28,598
Recurring ad valorem 102,184 77,955
Transactional 31,876 39,273
======================= ============== ==============
Total 163,847 145,826
------------------------- -------------- --------------
Revenue increased by 12% to GBP163.8 million (FY21: GBP145.8
million).
Revenue from recurring fixed fees increased by 4% to GBP29.8
million (FY21: GBP28.6 million), primarily due to higher pension
administration revenue from our advised platform customers.
Recurring ad valorem revenue grew by 31% to GBP102.2 million
(FY21: GBP78.0 million). The key drivers of this growth were higher
average platform AUA compared to the prior year, and an increase in
the average interest rate earned on customer cash balances, as the
Bank of England base rate increased from 0.10% to 2.25% over the
year.
Revenue from transactional fees decreased by 19% to GBP31.9
million (FY21: GBP39.3 million). This decrease was due to lower
dealing activity levels in the current year, impacted by lower
investor confidence, and compares to the significantly elevated
levels of activity seen in the first half of the prior year.
Our overall revenue margin increased by 0.4bps to 22.6bps (FY21:
22.2bps), reflecting the higher average interest rate earned on
cash, partially offset by the reduced dealing activity.
Administrative expenses
Year ended Year ended
30 September 30 September
2022 2021
GBP000 GBP000
------------------------- -------------- --------------
Distribution 14,998 11,095
Technology 32,706 25,765
Operational and support 57,162 53,115
========================== ============== ==============
Total 104,866 89,975
---------------------------- -------------- --------------
Administrative expenses increased by 17% to GBP104.9 million
(FY21: GBP90.0 million).
Distribution costs increased by 35% to GBP15.0 million (FY21:
GBP11.1 million) as we continued to invest in our brand to help
deliver long-term growth. We increased D2C marketing activity over
a range of channels in the year, including for the launch of our
new Dodl proposition. In February we launched a new national TV
advertising campaign whilst once again sponsoring events such as
the AJ Bell Tour of Britain and AJ Bell World Triathlon Leeds. The
year-on-year increase is also partly reflective of lower than
planned spend in the prior year when both advertising and
sponsorship opportunities were impacted by COVID-19
restrictions.
Technology costs increased by 27% to GBP32.7 million (FY21:
GBP25.8 million). This increase was driven by an increase in
headcount and our investment in the scalability and resilience of
our platform, to support our continued growth, alongside the
development of our new propositions, Dodl and Touch.
Operational and support costs increased by 8% to GBP57.2 million
(FY21: GBP53.1 million) as the business continued to scale
efficiently. The higher costs were driven by an increase in the
average number of employees to support our continued growth, as
well the acceleration of share-based payment charges relating to
Andy Bell and Charles Galbraith's Executive Incentive Plan (EIP)
awards, following their departure from the business as good leavers
at the end of September 2022. These increased costs were partially
offset by expenses relating to the reduced customer dealing
activity during the year.
Profitability and earnings
PBT increased by 6% to GBP58.4 million (FY21: GBP55.1 million)
whilst PBT margin decreased to 35.6% (FY21: 37.8%). The lower
margin versus the prior year reflects our planned investment in
brand and technology to drive long-term growth.
The effective rate of tax for the year was 20.0% (FY21: 20.4%),
slightly higher than the standard rate of UK Corporation Tax of
19.0%, as a result of disallowable charges relating to the Touch
earn-out arrangement.
Basic earnings per share rose by 6% to 11.39p (FY21: 10.71p) in
line with the increase to PBT. Diluted earnings per share (DEPS),
which accounts for the dilutive impact of outstanding share awards,
also increased by 6% to 11.35p (FY21: 10.67p).
Financial position
The Group's balance sheet remains strong, with net assets
totalling GBP133.4 million (FY21: GBP130.7 million) as at 30
September 2022 and a return on assets of 35% (FY21: 34%).
Financial resources and regulatory capital position
Our financial resources are kept under continual review,
incorporating comprehensive stress and scenario testing which is
formally reviewed and agreed at least annually.
Year ended Year ended
30 September 30 September
2022 2021
GBP000 GBP000
---------------------------------------- -------------- --------------
Total shareholder funds 133,394 130,708
Less: unregulated business capital (3,718) (4,722)
=========================================== ============== ==============
Regulatory Group shareholder funds 129,676 125,986
Less: foreseeable dividends (18,843) (38,912)
Less: non-qualifying assets (14,233) (11,469)
------------------------------------------- -------------- --------------
Total qualifying capital resources 96,600 75,605
Less: capital requirement (49,252) (40,525)
------------------------------------------- -------------- --------------
Surplus capital 47,348 35,080
------------------------------------------- -------------- --------------
% of capital resource requirement held 196% 187%
=========================================== ============== ==============
We have continued to maintain a healthy surplus over our
regulatory capital requirement throughout the year. The Investment
Firm Prudential Regime (IFPR) came into effect on 1 January 2022,
focusing prudential requirements on the potential harm the firm
itself can pose to consumers and markets whilst introducing a basic
liquidity requirement for all investment firms.
We held a significant surplus over our basic liquid asset
requirement during the year. Our year-end balance sheet included
cash balances of GBP84.0 million (FY21: GBP94.0 million), with the
reduction reflecting the higher dividends returned to shareholders
in the year following the declaration of a special dividend in
2021. We operate a highly cash-generative business, with a short
working-capital cycle that ensures profits are quickly converted
into cash. We generated cash from operations of GBP57.2 million in
the year at a cash conversion rate of 97%.
Dividend
As noted in the CEO's review above, we adopt a progressive
dividend policy and the Board has recommended a final dividend of
4.59p per share (FY21: 4.50p per share), resulting in a total
ordinary dividend of 7.37p (FY21: 6.96p) and equating to a dividend
pay-out ratio of 65% of statutory profit after tax.
Peter Birch
Chief Financial Officer
30 November 2022
Principal risks and uncertainties
The Board is committed to a continual process of improving and
embedding the risk management framework within the Group. This
ensures that the business identifies both existing and emerging
risks and continues to develop appropriate mitigation
strategies.
The Board believes that there are a number of potential risks to
the Group that could hinder the successful implementation of its
strategy. These risks may arise from internal and external events,
acts and omissions. The Board is proactive in identifying,
assessing and managing all risks facing the business, including the
likelihood of each risk materialising in the short or longer
term.
The Group has reviewed the impact of the war on Ukraine and
concluded that whilst the level of inherent risk for some of
Group's principal risks and uncertainties has increased, e.g.
information security / cyber-attacks, the Group's controls continue
to mitigate this increase in risk. The Group will continue to
monitor and respond to any new developments from the war in Ukraine
that may impact the Group.
The principal risks and uncertainties facing the Group are
detailed below, along with potential impacts and mitigating
actions.
Risk Potential impact Mitigations
1. Strategic risk
Competitor or market The Group regularly reviews its products
risk * Loss of competitive advantage, such that AUA and against competitors, in relation to
customer number targets are adversely impacted. This pricing, functionality
The risk that the would have a negative impact on profitability. and service, and actively seeks to make
Group fails to remain enhancements where necessary to maintain or
competitive in its improve
peer group, due to * Reputational damage as a result of underperformance its competitive position in line with the
lack of innovative and/or regulatory scrutiny. Group's strategic objectives.
products and services,
increased competitor The Group remains closely aligned with
activity, regulatory trade and industry bodies, and other policy
expectations, and lack makers
of across our market. The use of ongoing
marketing focus and competitor analysis provides insight and an
spend to keep pace opportunity
with competitors. to adapt strategic direction in response to
market conditions.
------------------------------------------------------------- --------------------------------------------
2. Operational risk
Regulatory, compliance The Group maintains a strong compliance
and legal risk * Regulatory censure and/or fines, including fines from culture geared towards positive customer
The risk that the the FCA and ICO. outcomes
Group fails to comply and regulatory compliance.
with regulatory and
legal standards. * Related negative publicity could reduce customer
confidence and affect ability to generate new The Group performs regular horizon scanning
inflows. to ensure all regulatory change is detected
and
highlighted to the Group for consideration.
* Poor conduct could have a negative impact on customer
outcomes, impacting the Group's ability to achieve The Group maintains an open dialogue with
strategic objectives. the FCA and actively engages with them on
relevant
proposed regulatory change.
The Compliance function is responsible for
ensuring all standards of the regulatory
system
are being met by the Group. This is
achieved by implementing policies and
procedures across
the business, raising awareness and
developing an effective control environment
through providing
comprehensive training. Where appropriate,
the Compliance Monitoring Team conducts
reviews
to ensure a high standard of compliance has
been embedded into the business.
------------------------------------------------------------- --------------------------------------------
Information security The Group continually reviews its cyber
and data risk * Related negative publicity could damage customer and security position to ensure that it
market confidence in the business, affecting our protects the confidentiality,
The risk of a ability to attract and retain customers. integrity and availability of its network
vulnerability in the and the data that it holds.
Group's infrastructure
being exploited or * Information security breaches could adversely impact A defence in depth approach is in place
user misuse individuals' data rights and freedoms and could with firewalls, web gateway, email gateway
that causes harm to result in fines/censure from regulators, such as the and anti-virus
service, data and/or ICO and FCA. amongst the technologies deployed. Staff
an asset causing awareness is seen as being a key component
material business of the
impact. layered defences, with regular updates,
training and mock phishing exercises.
Data risk is defined
as the risk of the Our security readiness is subject to
Group failing to independent assessment by a penetration
effectively govern, testing partner
manage and control that considers both production systems and
its data (including development activities. This is
data processed by supplemented by
third-party running a programme of weekly vulnerability
suppliers). scans to identify configuration issues and
assess
the effectiveness of the software patching
schedule.
The Group regularly assesses its maturity
against an acknowledged security framework,
which
includes an ongoing programme of staff
training and assessment through mock
security exercises.
The Group monitors the adequacy of its data
governance framework via the Data Steering
Group.
------------------------------------------------------------- --------------------------------------------
Fraud and financial Extensive controls are in place to minimise
crime risk * The Group may be adversely affected, including the risk of financial crime.
regulatory censure or enforcement, if we fail to Policies and procedures include:
The risk of failure to mitigate the risk of being used to facilitate any mandatory financial crime training in
protect the Group and form of financial crime. This includes money anti-money laundering and counter terrorist
its customers from all laundering and counter terrorist financing, market financing,
aspects of fraud and abuse, fraud, cyber-crime and the facilitation of tax fraud, market abuse and the Criminal
financial crime evasion. Finances Act for all employees to aid the
(anti-money laundering detection,
and counter terrorist prevention and reporting of financial
financing, market * Potential customer detriment as customers are at risk crime. The Group has an extensive
abuse, fraud, of losing funds or personal data, which can subject recruitment process
cyber-crime and the them to further loss via other organisations. in place to screen potential employees.
facilitation of tax
evasion). The Group actively maintains defences
* Fraudulent activity leading to identity fraud and/or against a broad range of likely attacks by
loss of customer holdings to fraudulent activity. global actors,
bringing together tools from well-known
providers, external consultancy and
internal expertise
to create multiple layers of defence. The
latter includes intelligence shared through
participation
in regulatory, industry and national cyber
security networks.
------------------------------------------------------------- --------------------------------------------
Third-party IT failure To mitigate the risk posed by third-party
risk * Loss of service from a third-party technology software suppliers, the Group conducts
provider could have a negative impact on customer onboarding
The risk that a outcomes due to website unavailability, delays in due diligence and monitors performance
third-party provider receiving and/or processing customer transactions or against documented service standards to
materially fails to interruptions to settlement and reconciliation ensure their
deliver the contracted processes. continued commitment to service, financial
services. stability and viability. Performance
metrics are
* Financial impact through increased operational discussed monthly with documented actions
losses. for any identified improvements.
This is supplemented by attendance at
* Regulatory fine and/or censure. formal user groups with other clients of
the key suppliers,
sharing experience and leveraging the
strength of the user base. Where relevant
and appropriate,
annual financial due diligence on critical
IT suppliers and on-site audits are also
undertaken.
------------------------------------------------------------- --------------------------------------------
IT system performance, The Group continues to implement a
capacity and * The reliance on evolving technology remains crucial programme of increasing annual investment
resilience risk to the Group's effort to develop its services and in the technology
enhance products. Prolonged underinvestment in platform. This is informed by
The risk that the technology will affect our ability to serve our recommendations that result from regular
design, implementation customers and meet their needs. architectural reviews
and management of of applications and of the underpinning
applications, infrastructure and services.
infrastructure and * Failing to deliver and manage a fit-for-purpose
services fail to meet technology platform could have an adverse impact on Daily monitoring routines provide oversight
current and future customer outcomes and affect our ability to attract of performance and capacity.
business requirements. new customers.
Our rolling programme of both business
continuity planning and testing, and single
* IT failures may lead to financial or regulatory point
penalties, and reputational damage. of failure management, maintains our focus
on the resilience of key systems in the
event of
an interruption to service.
------------------------------------------------------------- --------------------------------------------
Operational resilience The Group has developed a comprehensive
risk * Failure to maintain or quickly recover operations operational resilience framework, under the
could lead to intolerable harm to customers and the direction
The risk that the Group. of the Operational Resilience Forum, a
Group does not have an sub-committee of the Operational Committee.
adequate operational
resilience framework * Operational resilience disruptions may lead to The Group implemented the operational
to prevent, financial or regulatory penalties, and reputational resilience regulatory requirements set out
adapt to, respond to, damage. in the FCA
recover from and learn policy statement (PS) 21/3 in March 2022,
from operational which are:
disruptions.
* Identify important business services.
* Undertake core mapping.
* Set impact tolerances.
* Undertake scenario testing.
* Board sign-off on a self-assessment.
------------------------------------------------------------- --------------------------------------------
Operational capability The Group focuses on increasing the
risk * A decline in the quality of work will have a effectiveness of its operational procedures
financial impact through increased operational and, through
The risk that, due to losses. its business improvement function,
unexpectedly high aims to improve and automate more of its
volumes and or levels processes. This reduces the need for manual
of change activity, * Unexpectedly high volumes coupled with staff intervention
the Group recruitment and retention issues could lead to poor and the potential for errors.
is unable to process customer outcomes and reputational damage.
work within agreed There is an ongoing programme to train
service levels and/or staff on multiple operational functions.
to an acceptable Diversifying
quality for the workforce enables the business to
a sustained period. deploy staff when high work volumes are
experienced.
Causes of increased volumes of work, for
example competitor behaviour, are closely
monitored
in order to plan resource effectively.
------------------------------------------------------------- --------------------------------------------
Financial control The Group's financial control and fraud
environment risk * Reputational damage with regulators, leading to prevention policies and procedures are
increased capital requirement. designed to
The risk that the ensure that the risk of fraudulent access
financial control to customer or corporate accounts is
environment is weak. * Potential customer detriment resulting from minimised.
This includes the risk inadequate protection of customer assets.
of loss to Anti-fraud training is provided to all
the business, or its members of staff who act as first line of
customers, because of * Increased expenditure in order to compensate defence
either the actions of customers for losses incurred. to facilitate early detection of
an associated potentially fraudulent activity.
third-party
or the misconduct of Strong technology controls are in place to
an employee. identify potential money laundering
activity or
market abuse.
------------------------------------------------------------- --------------------------------------------
Retail conflicts / The Group's customer focus is founded on
conduct risk * Poor conduct could have a negative effect on customer our guiding principles, which drive the
outcomes. culture of
The risk that the fair the business and ensure customers remain at
treatment of customers the heart of everything we do. Training on
is not central to the * Reputational damage resulting from poor levels of the
Group's corporate customer service. importance and awareness of the delivery of
culture. good customer outcomes is provided to all
staff
* Additional regulatory scrutiny and financial loss. on a regular basis.
The Group continues to focus on
enhancements to its risk management
framework, in relation
to the identification, monitoring and
mitigation of risks of poor customer
outcomes, and to
its product management process to reduce
the potential for customer detriment.
All developments are assessed for potential
poor customer outcomes, and mitigating
actions
are delivered alongside the developments as
appropriate.
The business is currently implementing the
requirements of the FCA's New Consumer
Duty, which
further evidences how customers are at the
centre of the business.
------------------------------------------------------------- --------------------------------------------
ESG risk The Group has established an ESG Working
* Environmental, physical and transition risks Group to manage all ESG- related matters,
The risk that resulting from climate change, which may impact the including
environmental, social Group and our customers' assets people and social-related matters, as well
and governance factors as the Group's Task Force for
could negatively Climate-related Financial
impact the Group, * Social risks, including employee wellbeing and Disclosures (TCFD). ESG-related strategic
its customers, diversity and inclusion objectives are incorporated in the Group's
investors and the BPP process.
wider community
* Governance risks, including the risks related to the The Group is committed to creating an
Group's governance structures being ineffective, inclusive workplace and prioritising
which could manifest in governance-related employee wellbeing,
reputational and conduct risks. to establish an environment where all
employees feel valued and supported.
The Group has reviewed and strengthened its
governance framework during FY22, with a
refreshed
governance framework.
------------------------------------------------------------- --------------------------------------------
People risk The Group has improved its recruitment
* Difficulties in recruiting the right people to work processes to attract the best people
The risk that the for the Group. possible to join
Group fails to the Group.
attract, retain,
develop and motivate * Existing employees who aren't motivated, don't The Group undertakes a staff engagement
employees who are perform well and may leave the Group. survey at least annually and uses this
aligned feedback to
to the Group's Guiding address any areas for improvement to ensure
Principles. * Talented employees who are not appropriately staff engagement remains high.
developed and / or have limited opportunities to
progress are likely to leave the Group. The Group conducts regular reviews of its
employee benefits package to ensure it is
competitive.
The Group operates a talent development
programme.
------------------------------------------------------------- --------------------------------------------
Investment risk The Group maintains robust Investment
* Outflows or loss of assets under management as a Governance arrangements for decision-making
Risk of failures result of underperformance or reputational damage. in relation
surrounding the to the AJBI products and services. The
investment activities performance of AJBI products and services
carried out by AJ Bell * Compensation required to cover operational losses, are monitored
Investments such as trading errors. on an ongoing basis for alignment with
(AJBI). The risks customer expectations and mandates,
specific to the AJBI including through
entity include * Potential customer detriment resulting from dedicated committees and by the independent
operational, inadequate governance arrangements. 2(nd) line of defence Investment Risk
reputational and function.
conduct
risks. Operational risks are reviewed and
monitored through AJBI's Department Risk
Committee. Any
trading undertaken on the AJ Bell Funds is
subject to a number of internal controls to
minimise
the risk of any operational losses.
------------------------------------------------------------- --------------------------------------------
3. Financial risk
Economic and capital The Group's products are targeted at UK
markets fluctuation * Adverse effect on customer transactional activity or residents. We do not do business in any
risk ad valorem fees generated from assets under other countries
administration from which the Group derives revenue. and have relatively few customers outside
The risk that a Sensitivities for interest rate and market movements the UK. However, in the event that the
significant and are shown in note 25 to the consolidated financial economy falls
prolonged capital statements. back into a prolonged recession, this may
market or economic impact contribution levels and confidence
downturn has an generally
adverse in the savings and investment markets. The
effect on customer Directors believe that the Group's overall
confidence, asset income
values and interest levels and in particular the balance
rates. between the different types of assets and
transactions
from which that income is derived, provide
a robust defensive position against a
sustained
economic downturn.
Revenue from retained interest income is
derived from the pooling of customer cash
balances.
The Group has a variety of transactional
and recurring revenue streams, some of
which are
monetary amounts while others are ad
valorem. This mix of revenue types helps to
limit the
Group's exposure to interest rate
fluctuations and capital market
fluctuations.
------------------------------------------------------------- --------------------------------------------
Counterparty credit The Group's credit risk extends principally
risk * Unintended market exposure. to its financial assets, cash balances held
with
The risk of potential banks and trade and other receivables. The
failure of clients, * Customer detriment. Group carries out initial and ongoing due
market counterparties diligence
or banks used by the on the market counterparties and banks that
Group * Increased future capital requirements. it uses, and regularly monitors the level
to fulfil contractual of exposure.
obligations.
The Group continues to diversify across a
range of approved banking counterparties,
reducing
the concentration of credit risk as
exposure is spread over a larger number of
counterparties.
The banks currently used by the Group are
detailed in note 25 to the consolidated
financial
statements.
With regard to trade receivables, the Group
has implemented procedures that require
appropriate
credit or alternative checks on potential
customers before business is undertaken.
This has
minimised credit risk in this area.
The Group will maintain its existing
strategy of diversification to ensure
acceptable exposure
across a wide range of well-capitalised
banks with appropriate credit ratings.
It will continue to regularly monitor its
level of exposure and to assess the
financial strength
of its banking counterparties.
------------------------------------------------------------- --------------------------------------------
Liquidity risk The Group has robust systems and controls
* Reputational damage. and monitors all legal entities to ensure
The risk that the they have
Group suffers sufficient funds to meet their liabilities
significant settlement * Potential customer detriment. as they fall due.
default or otherwise
suffers major The Group continues to monitor trade
liquidity problems or * Financial loss. settlement on both an intra-day and daily
issues of liquidity basis.
deficiency which
severely impact on the * Unable to meet obligations as they fall due. The Group continues to be a highly
Group's cash-generative business and maintains
reputation in the sufficient cash
markets. alongside standby banking facilities to
fund its foreseeable trading requirements.
The risk that the
Group does not have
available
readily-realisable
financial resources to
enable it to meet its
obligations as they
fall due or can only
secure such resources
at excessive
cost.
------------------------------------------------------------- --------------------------------------------
Viability statement
In accordance with provision 31 of the UK Corporate Governance
Code 2018, the Board has assessed the viability of the Group,
considering a four-year period to September 2026. The Board
considers a four-year horizon to be an appropriate period to assess
the Group's strategy and its capital requirements, considering the
investment needs of the business and the potential risks that could
impact the Group's ability to meet its strategic objectives.
This assessment has been made considering the Group's financial
position and regulatory capital and liquidity requirements in the
context of its business model, strategy and four-year financial
forecasts and in consideration of the principal risks and
uncertainties, as detailed in the Strategic report. The principal
risks and uncertainties are those that may adversely impact the
Group based on its business model and strategy and are derived from
both the Group's business activities and the wider macroeconomic
environment in which the Group operates but does not control.
As an FCA-regulated entity, as part of its Internal Capital and
Risk Assessment (ICARA) the Group is required to use stress testing
of the business model and strategy to identify whether it holds
sufficient own funds and liquid assets. Forward-looking
hypothetical stress testing scenarios have been determined by
considering potential macroeconomic and idiosyncratic events that
would have a significant adverse impact on the Group's ability to
generate profits, and therefore maintain the existing levels of own
funds and liquid assets, over the business planning period.
The Board-approved four-year financial forecast assumes the
business continues to grow customer numbers and AUA through
investment in our brand, product propositions, technology and
people. Further Bank of England base rate interest rises are
expected to combat the high levels of inflation in the UK, during
the period of the financial forecasts it is assumed that the Bank
of England base interest rate continues to increase and peaks
during FY23, before falling back to 2.50% in FY25. There are no
significant market movements in underlying asset values based on
the position at the point the projections were approved by the
Board.
The Board has considered the potential impact of three
stress-test scenarios, which cumulatively represent a severe,
remote but plausible scenario:
1) Macroeconomic (Economic and capital markets fluctuation risk)
- a significant reduction in equity market values, based on the
2008-09 global financial crisis. Asset values fall by 40% in year
1, recovering to 20% below the level they were prior to the fall in
year 2, and remain flat in years 3 and 4.
2) Macroeconomic (Economic and capital markets fluctuation risk)
- Bank of England base interest rate reduced to 0.50% throughout
the assessment period, leading to a lower interest rate retained on
customer cash balances.
3) Idiosyncratic (IT system performance, capacity and resilience
risk, Third-party IT failure risk) - prolonged IT issues with key
operating software suppliers cause significant damage to AJ Bell's
service and reputation; which results in a reduction in customers.
Following year 1 the Group incurs development and license costs to
upgrade or replace key components of the platform software, with
service levels and net inflows returning to normal in year 3.
The Board would consider raising prices as a possible management
action that could be taken in the event that the modelled scenarios
crystallise. The Board considers this approach reasonable in light
of the industry-wide impact of the scenario, and the firm's
profitability and price positioning relative to its
competitors.
The results have confirmed that the Group would be able to
withstand the adverse financial impact of these three scenarios
occurring simultaneously over the four-year assessment period. This
assumes that dividends are paid in line with the recommendation
made in the 30 September 2022 Annual Report and with the Group
dividend policy on a forward-looking basis. During the period, the
Group continues to retain surplus financial resources over and
above its regulatory capital and liquidity requirements, with or
without any management remediation actions.
The Group's strategy and four-year financial forecasts were
approved by the Board in September 2022. The Directors confirm that
they have a reasonable expectation that the Group will be able to
continue in operation and meet its liabilities as they fall due
over the four-year period ending September 2026.
The Strategic report was approved by the Board of Directors and
signed on its behalf by:
Michael Summersgill
Chief Executive Officer
30 November 2022
Statement of Directors' responsibilities
The Directors are responsible for preparing the Annual Report
and the Financial Statements in accordance with UK-adopted
international accounting standards and applicable law and
regulations.
Company law requires the Directors to prepare Group and Parent
Company financial statements for each financial year. Under that
law the Directors are required to prepare the Group financial
statements in accordance with UK-adopted international accounting
standards and have elected to prepare the Parent Company financial
statements in accordance with UK accounting standards and
applicable law including FRS 101 Reduced Disclosure Framework.
Under company law the Directors must not approve the financial
statements unless they are satisfied that they give a true and fair
view of the state of affairs of the Group and Parent Company and of
the profit or loss for the Group for that period. The Directors are
also required to prepare the Group financial statements in
accordance with international financial reporting standards as
adopted by the UK.
In preparing these financial statements, the Directors are
required to:
-- select suitable accounting policies and then apply them consistently;
-- make judgements and accounting estimates that are reasonable
and prudent;
-- for the Group financial statements, state whether they have
been prepared in accordance with UK-adopted international accounting
standards, subject to any material departures disclosed and
explained in the financial statements;
-- for the Parent Company financial statements, state whether applicable
UK accounting standards have been followed, subject to any material
departures disclosed and explained in the financial statements;
-- prepare the financial statements on the going concern basis
unless it is inappropriate to presume that the Group or Parent
Company will continue in business; and
-- prepare a Directors' report, a Strategic report and Directors'
Remuneration Report which comply with the requirements of the
Companies Act 2006.
The Directors are responsible for keeping adequate accounting
records that are sufficient to show and explain the Parent
Company's transactions and disclose with reasonable accuracy at any
time the financial position of the Parent Company and enable them
to ensure that the financial statements comply with the Companies
Act 2006.
They are also responsible for safeguarding the assets of the
Group and hence for taking reasonable steps for the prevention and
detection of fraud and other irregularities.
The Directors are responsible for ensuring the Annual Report and
the Financial Statements are made available on a website. Financial
statements are published on the Company's website in accordance
with legislation in the United Kingdom governing the preparation
and dissemination of financial statements, which may vary from
legislation in other jurisdictions. The maintenance and integrity
of the Company's website is the responsibility of the Directors.
The Directors' responsibility also extends to the ongoing integrity
of the financial statements contained therein.
Each of the Directors, whose names and responsibilities are
listed in the Corporate Governance report, confirms that, to the
best of their knowledge:
-- The financial statements have been prepared in accordance with
the applicable set of accounting standards and give a true and
fair view of the assets, liabilities, financial position and
profit and loss of the Group.
-- The Annual Report includes a fair review of the development
and performance of the business and the financial position of
the Group and Parent Company, together with a description of
the principal risks and uncertainties that they face.
We consider that the Annual Report and Financial Statements,
taken as a whole, is fair, balanced and understandable and provides
the information necessary for shareholders to assess the Group's
position and performance, business model and strategy.
Approved by the Board on 30 November 2022 and signed on its
behalf by:
Christopher Bruce Robinson
Company Secretary
4 Exchange Quay
Salford Quays
Manchester
M5 3EE
Consolidated income statement
for the year ended 30 September 2022
2022 2021
Note GBP 000 GBP 000
------------------------------------------- ---- --------- --------
Revenue 5 163,847 145,826
Administrative expenses (104,866) (89,975)
------------------------------------------- ---- --------- --------
Operating profit 6 58,981 55,851
Investment income 8 198 23
Finance costs 9 (768) (790)
------------------------------------------- ---- --------- --------
Profit before tax 58,411 55,084
Tax expense 10 (11,672) (11,262)
------------------------------------------- ---- --------- --------
Profit for the financial year attributable
to:
Equity holders of the Parent Company 46,739 43,822
------------------------------------------- ---- --------- --------
Earnings per share:
Basic (pence) 12 11.39 10.71
Diluted (pence) 12 11.35 10.67
------------------------------------------- ---- --------- --------
All revenue, profit and earnings are in respect of continuing
operations.
There were no other components of recognised income or expense
in either period and, consequently, no statement of other
comprehensive income has been presented.
Consolidated statement of financial position
as at 30 September 2022
2022
2021
(Restated)(1)
Note GBP 000 GBP 000
------------------------------ ----- --------- ---------------
Assets
Non-current assets
Goodwill 13 6,991 6,991
Other intangible assets 14 8,779 6,014
Property, plant and equipment 15 3,325 3,351
Right-of-use assets 16 12,273 13,325
Deferred tax asset 18 610 940
------------------------------ ----- --------- ---------------
31,978 30,621
------------------------------ ----- --------- ---------------
Current assets
Trade and other receivables 19 49,436 37,462
Current tax receivable 38 51
Cash and cash equivalents 20 84,030 94,008
--------- ---------------
133,504 131,521
------------------------------ ----- --------- ---------------
Total assets 165,482 162,142
------------------------------ ----- --------- ---------------
Liabilities
Current liabilities
Trade and other payables 21 (15,604) (12,765)
Lease liabilities 16 (1,566) (1,708)
Provisions 22 (519) (1,526)
------------------------------ ----- --------- ---------------
(17,689) (15,999)
------------------------------ ----- --------- ---------------
Non-current liabilities
Lease liabilities 16 (12,395) (13,886)
Provisions 22 (2,004) (1,549)
------------------------------ ----- --------- ---------------
(14,399) (15,435)
------------------------------ ----- --------- ---------------
Total liabilities (32,088) (31,434)
------------------------------ ----- --------- ---------------
Net assets 133,394 130,708
============================== ===== ========= ===============
Equity
Share capital 23 51 51
Share premium 8,930 8,658
Own shares (473) (740)
Retained earnings 124,886 122,739
------------------------------ ----- --------- ---------------
Total equity 133,394 130,708
============================== ===== ========= ===============
(1. See note 2 for details of a change in accounting policy and
the resulting restatement of prior year.)
The financial statements were approved by the Board of Directors
and authorised for issue on 30 November 2022 and signed on its
behalf by:
............................
Peter Birch
Chief Financial Officer
AJ Bell plc
Company registered number: 04503206
Consolidated statement of changes in equity
for the year ended 30 September 2022
Retained
Share capital Share premium earnings Own shares Total equity
GBP 000 GBP 000 GBP 000 GBP 000 GBP 000
------------------------------------------------ ------------- ------------- --------- ---------- ------------
Balance at 1 October 2021 51 8,658 122,739 (740) 130,708
------------------------------------------------ ------------- ------------- --------- ---------- ------------
Total comprehensive income for the year:
Profit for the year - - 46,739 - 46,739
Transactions with owners, recorded directly
in equity:
Issue of shares - 272 - - 272
Dividends paid - - (50,383) - (50,383)
Equity settled share-based payment transactions - - 6,162 - 6,162
Deferred tax effect of share-based payment
transactions - - (275) - (275)
Tax relief on exercise of share options - - 171 - 171
Share transfer relating to EIP (note 23) - - (267) 267 -
Total transactions with owners - 272 (44,592) 267 (44,053)
------------------------------------------------ ------------- ------------- --------- ---------- ------------
Balance at 30 September 2022 51 8,930 124,886 (473) 133,394
================================================ ============= ============= ========= ========== ============
Retained
Share capital Share premium earnings Own shares Total equity
GBP 000 GBP 000 GBP 000 GBP 000 GBP 000
------------------------------------------------ ------------- ------------- --------- ---------- ------------
Balance at 1 October 2020 51 8,459 102,103 (1,147) 109,466
------------------------------------------------ ------------- ------------- --------- ---------- ------------
Total comprehensive income for the year:
Profit for the year - - 43,822 - 43,822
Transactions with owners, recorded directly
in equity:
Issue of shares - 199 - - 199
Dividends paid - - (29,138) - (29,138)
Equity settled share-based payment transactions - - 6,330 - 6,330
Deferred tax effect of share-based payment
transactions - - (202) - (202)
Tax relief on exercise of share options - - 231 - 231
Share transfer relating to EIP - - (110) 110 -
Share transfer relating to earn-out arrangement - - (297) 297 -
Total transactions with owners - 199 (23,186) 407 (22,580)
------------------------------------------------ ------------- ------------- --------- ---------- ------------
Balance at 30 September 2021 51 8,658 122,739 (740) 130,708
================================================ ============= ============= ========= ========== ============
Consolidated statement of cash flows
for the year ended 30 September 2022
2021
2022 (Restated)(1)
Note GBP 000 GBP 000
-------------------------------------------- ----- --------- ---------------
Cash flows from operating activities
Profit for the financial year 46,739 43,822
Adjustments for:
Investment income (198) (23)
Finance costs 768 790
Income tax expense 11,672 11,262
Depreciation and amortisation 3,643 3,623
Share-based payment expense 24 4,728 4,952
Decrease in provisions and other payables (1,007) (69)
Loss on disposal of property, plant
and equipment 21 13
Profit on disposal of right-of-use
assets - (3)
Increase in trade and other receivables (11,974) (6,889)
Increase / (decrease) in trade and
other payables 2,839 (1,347)
-------------------------------------------- ----- --------- ---------------
Cash generated from operations 57,231 56,131
Income tax paid (11,433) (11,455)
Interest expense paid - (1)
-------------------------------------------- ----- --------- ---------------
Net cash flows from operating activities 45,798 44,675
-------------------------------------------- ----- --------- ---------------
Cash flows from investing activities
Purchase of other intangible assets 14 (2,365) (2,370)
Purchase of property, plant and equipment 15 (1,014) (1,174)
Acquisition of subsidiary, net of cash
acquired - (2,561)
Interest received 198 23
-------------------------------------------- ----- --------- ---------------
Net cash flows used in investing activities (3,181) (6,082)
-------------------------------------------- ----- --------- ---------------
Cash flows from financing activities
Payments of principal in relation to
lease liabilities 16 (1,716) (1,241)
Payments of interest on lease liabilities 16 (768) (789)
Proceeds from issue of share capital 23 272 199
Dividends paid 11 (50,383) (29,138)
-------------------------------------------- ----- --------- ---------------
Net cash flows used in financing activities (52,595) (30,969)
-------------------------------------------- ----- --------- ---------------
Net (decrease) / increase in cash
and cash equivalents (9,978) 7,624
Cash and cash equivalents at beginning
of year 20 94,008 86,384
-------------------------------------------- ----- --------- ---------------
Total cash and cash equivalents at
end of year 20 84,030 94,008
============================================ ===== ========= ===============
(1. See note 2 for details of a change in accounting policy and
the resulting restatement of prior year.)
Notes to the consolidated financial statements
for the year ended 30 September 2022
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 nature
of the Group's operations and its principal activities are set out
in the Strategic report and the Directors' report.
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. A list of investments in subsidiaries,
including the name, country of incorporation, registered office,
and proportion of ownership is given in note 6 of the Company's
separate financial statements.
The consolidated financial statements were approved by the Board
on 30 November 2022.
The financial information contained in this report does not
constitute statutory accounts within the meaning of Section 434 of
the Companies Act 2006. The financial information set out in this
report has been extracted from the Group's 2022 Annual Report and
Financial Statements, which have been approved by the Board of
Directors on 30 November 2022. The Auditors have reported on the
2021 and 2022 accounts, their reports were (i) unqualified; (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 sections 498(2) or (3)
of the Companies Act 2006.
2 Significant accounting policies
Basis of accounting
The consolidated financial statements of AJ Bell plc have been
prepared in accordance with UK-adopted International Financial
Reporting Standards.
The financial statements are prepared on the historical cost
basis and prepared on a going concern basis. They are presented in
sterling, which is the currency of the primary economic environment
in which the Group operates, rounded to the nearest thousand.
The accounting policies have been applied consistently to all
periods presented in these financial statements and by all Group
entities, unless otherwise stated.
Change in accounting policy
Due to a change in the Group's accounting policy to recognise
electronic payments at the settlement date, rather than when they
are initiated, to more appropriately reflect the nature of these
transactions, the comparative amounts have been restated.
The impact on the 30 September 2021 balance sheet is an increase
to trade and other receivables of GBP3.1m and a decrease to cash
and cash equivalents of GBP3.1m. Net cash outflow from operating
activities in 2021 has decreased by GBP3.1m. There is no impact on
the income statement, earnings per share or net assets.
Changes to International Reporting Standards
Interpretations and standards which became effective during the
year:
The following amendments and interpretations became effective
during the year. Their adoption has not had any significant impact
on the Group.
Effective
from
IFRS 9, IAS Interest Rate Benchmark Reform - 1 January 2021
39, IFRS 7, Phase 2 (Amendments)
IFRS 4 and
IFRS 16
IFRS 16 Covid-19-Related Rent Concessions 1 April 2021
beyond 30 June 2021 (Amendments)
Changes to International Reporting Standards
Interpretations and standards in issue but not yet effective
The Group has not early adopted any other standard,
interpretation or amendment that has been issued but is not yet
effective.
Basis of consolidation
The consolidated financial statements incorporate the financial
statements of the Company and entities controlled by the Company
(its subsidiaries) made up to 30 September each year. The Group
controls an entity when it is exposed to, or it has rights to
variable returns from its involvement with the entity and has the
ability to affect those returns through its power over the entity.
The Group reassesses whether it controls an entity if facts and
circumstances indicate there are changes to one or more elements of
control. The results of a subsidiary undertaking are included in
the consolidated financial statements from the date the control
commences until the date that control ceases.
All intercompany transactions, balances, income and expenses are
eliminated on consolidation.
2.1 Going concern
The Group's business activities, together with its financial
position and the factors likely to affect its future development
and performance are set out in the Strategic report and the
Directors' report. Note 25 includes the Group's policies and
processes for managing exposure to credit and liquidity risk.
The Group's forecasts and objectives, considering a number of
potential changes in trading conditions, show that the Group should
be able to operate at adequate levels of both liquidity and capital
for at least 12 months from the date of signing this report. The
Directors have performed a number of stress tests, covering a
significant reduction in equity market values, a fall in the Bank
of England base interest rate leading to a lower interest rate
retained on customer cash balances, and a further Group-specific
idiosyncratic stress relating to a scenario whereby prolonged IT
issues cause a reduction in customers. Further detail of the
forecasts and stress test scenarios are set out in the Viability
statement above. These scenarios provide assurance that the Group
has sufficient capital and liquidity to operate under stressed
conditions.
Consequently, after making reasonable enquiries, the Directors
are satisfied that the Group has sufficient financial resources to
continue in business for at least 12 months from the date of
signing the report and therefore have continued to adopt the going
concern basis in preparing the financial statements.
2.2 Business combinations
A business combination is recognised where separate entities or
businesses have been acquired by the Group. The acquisition method
of accounting is used to account for the business combinations made
by the Group. The cost of a business combination is measured at the
aggregate of the fair values (at the date of exchange), of assets
given, liabilities incurred or assumed and equity instruments
issued by the Group in exchange for control of the acquired entity.
Where the consideration includes a contingent consideration
arrangement, the contingent consideration is measured at its
acquisition date fair value and included as part of the cost of the
acquisition. Subsequent changes in such fair values are adjusted
against the cost of acquisition where they qualify as measurement
period adjustments. All other subsequent changes in the fair value
of contingent consideration are charged to the income statement,
except for obligations that are classified as equity, which are not
re-measured. Where consideration is dependent on continued
employment within the business this is treated as a separate
transaction as post-acquisition remuneration.
Acquisition related costs are expensed as incurred in the income
statement, except if related to the issue of debt or equity
securities. Identifiable assets acquired and liabilities and
contingent liabilities assumed in the business combination are
measured initially at their fair values at the acquisition date.
The excess of the cost of acquisition over the fair value of the
Group's share of the identifiable net assets acquired is recorded
as goodwill. If this is less than the fair value of the Group's
share of the identifiable net assets of the subsidiary acquired,
the difference is taken immediately to the income statement.
2.3 Segmental reporting
The Group determines and presents operating segments based on
the information that is provided internally to the Board, which is
the Group's Chief Operating Decision Maker (CODM). In assessing the
Group's operating segments the Directors have considered the nature
of the services provided, product offerings, customer bases,
operating model and distribution channels amongst other factors.
The Directors concluded there is a single segment as it operates
with a single operating model; operations, support and technology
costs are managed and reported centrally to the CODM. A description
of the services provided is given within note 4.
2.4 Revenue recognition
Revenue represents fees receivable from investment
administration and dealing and custody services for both client
assets and client money. Revenue is measured based on the
consideration specified in a contract with a customer. The Group
recognises revenue when it transfers control over a good or service
to a customer.
Recurring fixed
Recurring fixed revenue comprises recurring administration fees
and media revenue.
Administration fees include fees charged in relation to the
administration services provided by the Group and are recognised
over time as the related service is provided.
Included within administration fees are annual pension
administration fees. The Group recognises revenue from such fees
over time, using an input method to measure progress towards
complete satisfaction of a single performance obligation. The Group
determined that the input method is the best method in measuring
progress of the services relating to these fees because there is a
direct relationship between the Group's effort (i.e. labour hours
incurred) and the transfer of service to the customer.
The Group recognises revenue on the basis of the labour hours
expended relative to the total expected labour hours to complete
the service.
Certain pension administration fees are received in arrears or
in advance. Where revenue is received in arrears for an ongoing
service, the proportion of the income relating to services provided
but not yet received is accrued. This is recognised as accrued
income until the revenue is received. Where revenue is received in
advance for an ongoing service, the proportion of the income
relating to services that have not yet been provided is deferred.
This is recognised as deferred income until the services have been
provided.
Media revenue includes advertising, subscriptions, events and
award ceremony and corporate solutions contracts. Subscriptions and
corporate solutions revenue is recognised evenly over the period in
which the related service is provided. Advertising, event and award
ceremony revenue is recognised in the period in which the
publication is made available to customers or the event or award
ceremony takes place.
Recurring ad valorem
Recurring ad valorem revenue comprises custody fees, retained
interest income and investment management fees provided by the
Group and is recognised evenly over the period in which the related
service is provided.
Ad valorem fees include custody fees charged in relation to the
holding of client assets and interest received on client money
balances. Custody fees and investment management fees are accrued
on a time basis by reference to the AUA.
Transactional fees
Transactional revenue comprises dealing fees and pension scheme
activity fees.
Transaction-based fees are recognised when received in
accordance with the date of settlement of the underlying
transaction.
Other non-recurring fees are recognised in the period to which
the service is rendered.
Customer incentives
Customer incentives paid to new retail customers are considered
to be a reduction in revenue under IFRS 15. In line with IFRS 15,
customer incentives to acquire new customers are offset against
recurring ad valorem revenue and spread over the period which the
customer is required to remain a customer in order to be eligible
for the incentive. Customer incentives comprise cash.
2.5 Share-based payments
The Group operates a number of share-based payment arrangements
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-based payment arrangements have conditions attached
before the beneficiary becomes entitled to the award. These can be
performance and/or service conditions.
The total cost is recognised, together with a corresponding
increase in the equity reserves, over the period in which the
performance and/or service conditions are fulfilled. Costs relating
to the development of internally generated intangible assets are
capitalised in accordance with IAS 38. The cumulative cost
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 cost 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.
The cost of equity-settled awards is determined by the fair
value at the date when the grant is made using an appropriate
valuation model or the market value discounted to its net present
value, further details of which are given in note 24. 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.
2.6 Investment income
Investment income comprises the returns generated on corporate
cash at banks and short-term highly-liquid investments. Investment
income is recognised in the income statement as it accrues, using
the effective interest rate method.
2.7 Finance costs
Finance costs comprise interest incurred on lease liabilities
recognised under IFRS 16. Finance costs are recognised in the
income statement using the effective interest rate method.
2.8 Taxation
The tax expense represents the sum of the current tax payable
and deferred tax. Tax is recognised in the income statement except
to the extent that it relates to items recognised directly in
equity, in which case it is recognised in equity.
Current tax is the expected tax payable or receivable on the
taxable income or loss for the year and any adjustment to tax
payable or receivable in respect of previous years, using tax rates
enacted or substantively enacted at the reporting date.
Deferred tax is provided on temporary differences between the
carrying amounts of assets and liabilities for financial reporting
purposes and the amounts used for taxation purposes. Deferred tax
is not recognised if the temporary difference arises from:
-- the initial recognition of goodwill; or
-- investments in subsidiaries to the extent that the Group is
able to control the timing of the reversal of the temporary
differences and it is probable they will not reverse in the
foreseeable future; or
-- the initial recognition of an asset and liability in a
transaction other than a business combination that, at the time of
the transaction, affects neither the accounting nor taxable profit
or loss.
Deferred tax assets are recognised for unused tax losses, unused
tax credits and deductible temporary differences to the extent that
it is probable that taxable profits will be available in the
future, against which deductible temporary differences can be
utilised. Recognised and unrecognised deferred tax assets are
reassessed at each reporting date.
The principal temporary differences arise from accelerated
capital allowances, provisions for share-based payments and
unutilised losses.
Deferred tax is measured at the tax rates that are expected to
be applied to temporary differences when they reverse, using tax
rates enacted or substantively enacted at the reporting date.
Deferred tax assets and liabilities are offset when there is a
legally enforceable right to set off current tax assets against
current tax liabilities and when they relate to income taxes levied
by the same taxation authority and the Group intends to settle its
current tax assets and liabilities on a net basis.
2.9 Dividends
Dividend distributions to the Company's shareholders are
recognised in the period in which the dividends are declared and
paid. The final dividend is approved by the Company's shareholders
at the Annual General Meeting.
2.10 Goodwill
Goodwill arising on consolidation represents the difference
between the consideration transferred and the fair value of net
assets acquired of the subsidiary at the date of acquisition.
Goodwill is not amortised, but is reviewed at least annually for
impairment. Any impairment is recognised immediately through the
income statement and is not subsequently reversed.
For the purposes of impairment testing goodwill acquired in a
business combination is allocated to the cash generating unit (CGU)
expecting to benefit from the synergies of the combination. CGUs to
which goodwill has been allocated are reviewed annually or more
frequently when there is an indication that the goodwill relating
to that CGU may have been impaired. If the recoverable amount from
the CGU is less than the carrying amount of the assets present on
the consolidated statement of financial position forming that CGU,
the impairment loss is allocated first to reduce the carrying
amount of any goodwill allocated to the assets forming that CGU and
then to the assets of the CGU pro-rata on the basis of the carrying
amount of each asset in the CGU.
On disposal of a subsidiary, the attributable amount of goodwill
is included in the determination of the profit or loss on
disposal.
2.11 Intangible assets (excluding goodwill)
Intangible assets comprise computer software and mobile
applications, and the Group's Key Operating Systems (KOS). These
are stated at cost less amortisation and any recognised impairment
loss. Amortisation is charged on all intangible assets excluding
goodwill and assets under construction at rates to write off the
cost or valuation, less estimated residual value, of each asset
evenly using a straight-line method over its estimated useful
economic life as follows:
Computer software and mobile applications - 3 - 4 years
KOS - 15 years
KOS enhancements - Over the remaining life of the KOS
The assets' estimated useful lives, amortisation rates and
residual values are reviewed, and adjusted if appropriate at the
end of each reporting period. An asset's carrying value is written
down immediately to its recoverable amount if its carrying value is
greater than the recoverable amount.
The gain or loss arising on the disposal or retirement of an
asset is determined as the difference between the sales proceeds
and the carrying amount of the asset and is recognised in the
income statement immediately.
2.12 Internally-generated intangible assets
An internally-generated asset arising from work performed by the
Group is recognised only when the following criteria can be
demonstrated:
-- the technical feasibility of completing the intangible
asset so that it will be available for use or sale;
-- the intention to complete the intangible asset and use
or sell it;
-- the ability to use or sell the intangible asset;
-- how the intangible asset will generate probable future
economic benefits;
-- the availability of adequate technical, financial and other
resources to complete the development and to use or sell
the intangible asset; and
-- the ability to measure reliably the expenditure attributable
to the intangible asset during its development.
The amount initially recognised for internally-generated
intangible assets is the sum of expenditure incurred from the date
when the asset first meets the recognition criteria listed above.
Development expenditure that does not meet the criteria is
recognised as an expense in the period which it is incurred.
Subsequent to initial recognition, internally-generated
intangible assets are reported at cost less accumulated
amortisation and accumulated impairment losses, on the same basis
as intangible assets that are acquired separately. Assets under
construction are not amortised until the asset is operational and
available for use.
Expenditure on research activities is recognised as an expense
in the period in which it is incurred.
2.13 Property, plant and equipment
All property, plant and equipment is stated at cost, which
includes directly attributable acquisition costs, less accumulated
depreciation and any recognised impairment losses. Depreciation is
charged on all property, plant and equipment, except assets under
construction, at rates to write off the cost, less estimated
residual value, of each asset evenly using a straight-line method
over its estimated useful economic life as follows:
Leasehold improvements - Over the life of the lease
Office equipment - 4 years
Computer equipment - 3 - 5 years
The assets' estimated useful lives, depreciation rates and
residual values are reviewed, and adjusted if appropriate at the
end of each reporting period. An asset's carrying value is written
down immediately to its recoverable amount if its carrying value is
greater than the recoverable amount.
Assets under construction relate to capital expenditure on
assets not yet in use by the Group and are therefore not
depreciated.
The gain or loss arising on the disposal or retirement of an
asset is determined as the difference between the sales proceeds
and the carrying amount of the asset and is recognised in the
income statement immediately.
2.14 Leased assets and lease liabilities
Leases
(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 applied in accordance with IAS 16: Property,
Plant and Equipment. Right-of-use assets are 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.
2.15 Impairment of intangible assets (excluding goodwill),
property, plant and equipment and leased assets
At each reporting date the Group reviews the carrying amount of
its intangible assets, property, plant and equipment and leased
assets to determine whether there is any indication that those
assets have suffered impairment. If such an indication exists then
the recoverable amount of that particular asset is estimated.
An impairment test is performed for an individual asset unless
it belongs to a CGU, in which case the present value of the net
future cash flows generated by the CGU is tested. A CGU is the
smallest group of assets that generates cash inflows from
continuing use that are largely independent of the cash inflows of
other assets or of groups of other assets. An intangible asset with
an indefinite useful life is tested for impairment annually and
whenever there is an indication that the asset may be impaired.
The recoverable amount is the higher of its fair value less
costs to sell and its value-in-use. In assessing its value-in-use,
the estimated net future pre-tax cash flows are discounted to their
present value using a pre-tax discount rate that reflects current
market assessments of the time value of money and the risks
specific to the asset for which the estimates of future cash flows
have not been adjusted.
If the recoverable amount of an asset or CGU in which the asset
sits is estimated to be lower than the carrying value, then the
carrying amount is reduced to the recoverable amount. An impairment
loss is recognised immediately in the income statement as an
expense.
An impairment loss is reversed only if subsequent external
events reverse the effect of the original event which caused the
recognition of the impairment. An impairment loss is reversed only
to the extent that the asset's carrying amount does not exceed the
carrying amount that would have been determined, net of
depreciation or amortisation, if no impairment loss had been
recognised. An impairment reversal is recognised in the income
statement immediately.
2.16 Retirement benefit costs
The Group makes payments into the personal pension schemes of
certain employees as part of their overall remuneration package.
Contributions are recognised in the income statement as they are
payable.
The Group also contributes to employees' stakeholder pension
schemes. The assets of the scheme are held separately from those of
the Group in independently-administered funds. Any amount charged
to the income statement represents the contribution payable to the
scheme in respect of the period to which it relates.
2.17 Provisions
Provisions are recognised when the Group has a present
obligation (legal or constructive) as a result of a past event and
it is probable that the Group will be required to settle that
obligation.
The amount recognised as a provision is the Directors' best
estimate of the consideration required to settle that obligation at
the reporting date and is discounted to present value where the
effect is material.
2.18 Levies
The Group applies the guidance provided in IFRIC 21 to levies
issued under the Financial Services Compensation Scheme. The
interpretation clarifies that an entity should recognise a
liability when it conducts the activity that triggers the payment
of the levy under law or regulation.
2.19 Financial instruments
Financial assets and liabilities are recognised in the statement
of financial position when a member of the Group becomes party to
the contractual provisions of the instrument.
Financial assets
Financial assets are classified according to the business model
within which the asset is held and the contractual cash-flow
characteristics of the asset. All financial assets are classified
as at amortised cost.
Financial assets at amortised cost
The Group's financial assets at amortised cost comprise trade
receivables, loans, other receivables and cash and cash
equivalents.
Financial assets at amortised cost are initially recognised at
fair value including any directly attributable costs. They are
subsequently measured at amortised cost using the effective
interest method, less any impairment. No interest income is
recognised on financial assets measured at amortised cost, with the
exception of cash and cash equivalents, as all financial assets at
amortised cost are short-term receivables and the recognition of
interest would be immaterial. Financial assets are derecognised
when the contractual right to the cash flows from the asset
expire.
Trade and other receivables
Trade and other receivables are initially recorded at the fair
value of the amount receivable and subsequently measured at
amortised cost using the effective interest method, less any
provision for impairment. Other receivables also represent client
money required to meet settlement obligations.
Cash and cash equivalents
Cash and cash equivalents include cash in hand, on demand
deposits with banks and other short-term highly-liquid investments
with original maturities of three months or less, or those over
which the Group has an immediate right of recall. Where
appropriate, bank overdrafts are shown within borrowings in current
liabilities in the consolidated statement of financial
position.
Impairment of financial assets
The Group applies the IFRS 9 simplified approach to measuring
expected credit losses which uses a lifetime expected loss
allowance for all trade receivables and contract assets. To measure
the expected credit losses, trade receivables have been grouped
based on shared credit risk characteristics and number of days past
due. The Group considers a trade receivable to be in default when
it is past due by more than 90 days, or when the value of a
client's receivable balance exceeds the value of the assets they
hold with AJ Bell.
The expected loss rates are based on the payment profiles of
sales over a period of 12 months before 30 September 2022 and the
corresponding historical credit losses experienced within this
period.
The carrying amount of the financial assets is reduced by the
use of a provision. When a trade receivable is considered
uncollectable, it is written off against the provision. Subsequent
recoveries of amounts previously written off are credited against
the provision. Changes in the carrying amount of the provision are
recognised in the income statement.
Financial liabilities
Financial liabilities are classified according to the substance
of the contractual arrangements entered into.
Lease liabilities
Lease liabilities consist of amounts payable by the Group
measured at the present value of lease payments to be made over the
lease term.
Other financial liabilities
The Group's other financial liabilities comprised borrowings and
trade and other payables. Other financial liabilities are initially
measured at fair value, net of transaction costs. They are
subsequently carried at amortised cost using the effective interest
rate method. A financial liability is derecognised when, and only
when, the Group's obligations are discharged, cancelled or they
expire.
Trade and other payables
Trade and other payables consist of amounts payable to clients
and other counterparties and obligations to pay suppliers for goods
and services in the ordinary course of business, including amounts
recognised as accruals. Trade and other payables are measured at
amortised cost using the effective interest method.
2.20 Employee benefit trust
The Group has an employee benefit trust, the AJ Bell Employee
Benefit Trust, used for the granting of shares to certain
employees. AJ Bell plc is considered to be the sponsoring employer
and so the assets and liabilities of the Trust are recognised as
those of AJ Bell plc.
Shares of AJ Bell plc held by the Trust are treated as 'own
shares' held and shown as a deduction from equity. Subsequent
consideration received for the sale of such shares is also
recognised in equity, with any difference between the sales
proceeds and original cost being taken to equity.
3 Critical accounting adjustments and key sources of estimation
uncertainty
In the application of the Group's accounting policies, which are
described in note 2, the Directors are required to make judgements,
estimates and assumptions to determine the carrying amounts of
certain assets and liabilities. The estimates and associated
assumptions are based on the Group's historical experience and
other relevant factors. Actual results may differ from the
estimates applied.
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, or in the period of the revision and future
periods if the revision affects both current and future
periods.
There are no judgements made, in applying the accounting
policies, about the future, or any other major sources of
estimation uncertainty at the end of the reporting period, that
have a significant risk of resulting in a material adjustment to
the carrying amounts of assets and liabilities within the next
financial year.
4 Segmental reporting
It is the view of the Directors that the Group has a single
operating segment being 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 consolidated income statement and consolidated
statement of financial position above.
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 generation of
revenues.
5 Revenue
The analysis of the consolidated revenue is as follows:
2022 2021
GBP 000 GBP 000
--------------------- -------- --------
Recurring fixed 29,787 28,598
Recurring ad valorem 102,184 77,955
Transactional 31,876 39,273
--------------------- -------- --------
163,847 145,826
--------------------- -------- --------
Recurring ad valorem fees include custody fees. These recurring
charges are derived from the market value of retail customer
assets, based on asset mix and portfolio size, and are therefore
subject to market and economic risks. The rate charged is variable
dependent on the product, portfolio size and asset mix within the
portfolio. The risks associated with this revenue stream in terms
of its nature and uncertainty is discussed further within the
Financial instruments and risk management note below.
Recurring ad valorem fees also include retained interest income
earned on the level of customer cash balances, which are based on
product type, customers' asset mix and portfolio size and are
therefore subject to market and economic risks. The risks
associated with this revenue stream in terms of its nature and
uncertainty is discussed further within the Financial instruments
and risk management note below.
The total revenue for the Group has been derived from its
principal activities undertaken in the United Kingdom.
6 Operating profit
Profit for the financial year has been arrived at after
charging:
2022 2021
GBP 000 GBP 000
---------------------------------------------- -------- --------
Amortisation of intangible assets 1,034 862
Depreciation of property, plant and equipment 1,019 1,071
Depreciation of right-of-use assets 1,590 1,690
Loss on the disposal of property, plant
and equipment 21 13
Profit on the disposal of right-of-use
assets - (3)
Auditor's remuneration (see below) 496 368
Staff costs (note 7) 54,887 47,654
---------------------------------------------- -------- --------
During the year there was no expenditure in relation to research
and development expensed to the income statement (2021:
GBPnil).
Auditor's remuneration
The analysis of auditor's remuneration is as follows:
2022 2021
GBP 000 GBP 000
-------------------------------------------- -------- --------
Fees payable to the Company's auditor for
the audit of the Company's annual accounts 155 116
Fees payable to the Company's auditor for
the audit of the Company's subsidiaries'
accounts, pursuant to legislation 204 151
Audit-related assurance services 89 62
Other assurance services 48 39
-------------------------------------------- -------- --------
496 368
-------------------------------------------- -------- --------
Of the above, audit-related services for the year totalled
GBP473,000 (2021: GBP349,000).
7 Staff costs
The average monthly number of employees (including Executive
Directors) of the Group was:
2022 2021
No. No.
------------------------ ----- ----
Operational and support 761 709
Technology 225 181
Distribution 109 99
------------------------ ----- ----
1,095 989
------------------------ ----- ----
Employee benefit expense for the Group during the year:
2022 2021
GBP 000 GBP 000
------------------------------- -------- --------
Wages and salaries 41,427 35,516
Social security costs 4,808 3,918
Retirement benefit costs 3,857 3,202
Termination benefits 67 66
Share-based payments (note 24) 4,728 4,952
------------------------------- -------- --------
54,887 47,654
------------------------------- -------- --------
In addition to the above, GBP1,315,000 staff costs and
GBP1,434,000 share-based payment expenses (2021: GBP454,000 staff
costs and GBP1,378,000 share-based payment expenses) have been
capitalised as an internally generated intangible asset (see note
14).
8 Investment income
2022 2021
GBP 000 GBP 000
--------------------------------- -------- --------
Interest income on cash balances 198 23
--------------------------------- -------- --------
9 Finance costs
2022 2021
GBP 000 GBP 000
---------------------------------------- -------- --------
Interest on lease liabilities 768 789
Interest on other financial liabilities - 1
---------------------------------------- -------- --------
768 790
---------------------------------------- -------- --------
10 Taxation
Tax charged in the income statement:
2022 2021
GBP 000 GBP 000
-------------------------------------------------- -------- --------
Current taxation
UK Corporation Tax 11,855 11,629
Adjustment to current tax in respect of
prior periods (238) (11)
-------------------------------------------------- -------- --------
11,617 11,618
-------------------------------------------------- -------- --------
Deferred taxation
Origination and reversal of temporary differences 62 (328)
Adjustment to deferred tax in respect of
prior periods 45 12
Effect of changes in tax rates (52) (40)
-------------------------------------------------- -------- --------
55 (356)
-------------------------------------------------- -------- --------
Total tax expense 11,672 11,262
-------------------------------------------------- -------- --------
Corporation Tax is calculated at 19% of the estimated assessable
profit for the year to 30 September 2022 (2021: 19%).
In addition to the amount charged to the income statement,
certain tax amounts have been credited directly to equity as
follows:
2022 2021
GBP 000 GBP 000
---------------------------------------------- -------- --------
Deferred tax relating to share-based payments
(note 18) 275 202
Current tax relief on exercise of share
options (171) (231)
---------------------------------------------- -------- --------
104 (29)
---------------------------------------------- -------- --------
The charge for the year can be reconciled to the profit per the
income statement as follows:
2022 2021
GBP 000 GBP 000
------------------------------------------ -------- --------
Profit before tax 58,411 55,084
------------------------------------------ -------- --------
UK Corporation Tax at 19% (2021: 19%) 11,098 10,466
Effects of:
Expenses not deductible for tax purposes 669 709
Income not taxable in determining taxable
profit (86) -
Amounts not recognised 236 126
Effect of rate changes to deferred tax (52) (40)
Adjustments to current and deferred tax
in respect of prior periods (193) 1
------------------------------------------ -------- --------
11,672 11,262
------------------------------------------ -------- --------
Effective tax rate 20.0% 20.4%
Following the enactment of the Finance Act 2021 the standard UK
Corporation Tax rate will remain at 19% before increasing to 25%
from 1 April 2023. Accordingly, the Group's profits for this
accounting year are taxed at 19%.
Deferred tax has been recognised at either 19% or 25% being the
rate expected to be in force at the time of the reversal of the
temporary difference (2021: 19% or 25%). A deferred tax asset in
respect of future share option deductions has been recognised based
on the Company's share price at 30 September 2022.
11 Dividends
2022 2021
GBP 000 GBP 000
----------------------------------------------- -------- --------
Amounts recognised as distributions to
equity holders during the year:
Final dividend for the year ended 30 September
2021 of 4.50p (2020: 4.66p) per share 18,460 19,070
Special dividend for the year ended 30
September 2021 of 5.00p (2020: nil) per
share 20,511 -
Interim dividend for the year ended 30
September 2022 of 2.78p (2021: 2.46p) per
share 11,412 10,068
----------------------------------------------- -------- --------
Total dividends paid on equity shares 50,383 29,138
----------------------------------------------- -------- --------
Proposed final dividend for the year ended
30 September 2022 of 4.59p (2021: 4.50p)
per share 18,843 18,471
Proposed special dividend for the year
ended 30 September 2022 of nil (2021: 5.00p)
per share - 20,523
----------------------------------------------- -------- --------
A final dividend declared of 4.59p per share is payable on 17
February 2023 to shareholders on the register on 20 January 2023.
The ex-dividend date will be 19 January 2023. The final dividend is
subject to approval by the shareholders at the Annual General
Meeting on 8 February 2023 and has not been included as a liability
within these financial statements.
Dividends are payable on all ordinary shares as disclosed in
note 23.
AJ Bell Employee Benefit Trust, which held 567,100 ordinary
shares (2021: 885,701) in AJ Bell plc at 30 September 2022, has
agreed to waive all dividends. This represented 0.1% (2021: 0.2%)
of the Company's called-up share capital. The maximum amount held
by the Trust during the year was 885,701.
12 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 year.
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:
2022 2021
GBP 000 GBP 000
---------------------------------------------- -------- --------
Earnings
Earnings for the purposes of basic and
diluted earnings per share being profit
attributable to equity holders of the Parent
Company 46,739 43,822
---------------------------------------------- -------- --------
2022 2021
No. No.
--------------------------------------------- ----------- -----------
Number of shares
Weighted average number of ordinary shares
for the purposes of basic EPS in issue
during the year 410,248,095 409,249,186
Effect of potentially dilutive share options 1,485,721 1,643,911
--------------------------------------------- ----------- -----------
Weighted average number of ordinary shares
for the purposes of fully diluted EPS 411,733,816 410,893,097
--------------------------------------------- ----------- -----------
2022 2021
------------------------- ----- -----
Earnings per share (EPS)
Basic (pence) 11.39 10.71
Diluted (pence) 11.35 10.67
------------------------- ----- -----
13 Goodwill
2022 2021
GBP 000 GBP 000
--------------------------------------- -------- --------
Cost
At 1 October 7,103 3,772
Acquired through business combinations - 3,331
--------------------------------------- -------- --------
At 30 September 7,103 7,103
--------------------------------------- -------- --------
Impairment
At 1 October and 30 September (112) (112)
--------------------------------------- -------- --------
Carrying value at 30 September 6,991 6,991
--------------------------------------- -------- --------
Goodwill relates to acquisitions allocated to the Group's single
cash generating unit (CGU).
The Group tests goodwill annually for impairment or more
frequently if there are indications that goodwill might be
impaired.
The recoverable amount of the assets within the CGU is
determined using value-in-use calculations. In assessing the
value-in-use the estimated future cash flows of the CGU are
discounted to their present value using a pre-tax discount rate.
Cash flows are based upon the most recent forecasts, approved by
the Board, covering a three-year period representing the remaining
useful economic life of the asset.
The key assumptions for value-in-use calculations are those
regarding discount rate, growth rates and expected changes to
revenues and costs in the period, as follows:
- a compound rate of 20% (2021: 17%) has been used to assess the
expected growth in revenue for the three-year forecast period. This
is based on a combination of historical and expected future
performance;
- economies of scale are expected to be gained in the medium to
long-term, although there are not expected to be any significant
changes to the nature of administrative expenses; and
- modest ongoing maintenance expenditure is required on the
assets within the CGU in order to generate the expected level of
cash flows.
The Directors have made these assumptions based upon past
experience and future expectations in the light of anticipated
market conditions and the results of streamlining processes through
implementation of the target operating model for customer
services.
Cash flows have been discounted using a pre-tax discount rate of
8.1% (2021: 14.52%).
The pre-tax discount rate has been calculated using an
independent external source, and decreased during the year due to a
change in methodology in the calculation of the Group's weighted
average cost of capital (WACC). The Directors have performed
sensitivity analysis on their calculations, with key assumptions
being revised adversely to reflect the potential for future
performance being below expected levels. Changes to revenue are the
most sensitive as they would have the greatest impact on future
cash flows. However, even with nil growth in revenue, there would
still be sufficient headroom to support the carrying value of the
assets under the CGU.
Based upon the review above the estimated value-in-use of the
CGU comfortably supports the carrying value of the assets held
within it, and so the Directors are satisfied that for the period
ended 30 September 2022 goodwill is not impaired.
14 Other intangible assets
Computer
Key operating Contractual software and
system customer relationships mobile applications Total
GBP 000 GBP 000 GBP 000 GBP 000
-------------------------------- ------------- ------------------------- ---------------------- -----------
Cost
At 1 October 2020 8,707 2,135 5,385 16,227
Additions 1,832 - 1,916 3,748
Disposals - - (832) (832)
Arising on acquisition 1,142 - - 1,142
-------------------------------- ------------- ------------------------- ---------------------- -----------
At 30 September 2021 11,681 2,135 6,469 20,285
-------------------------------- ------------- ------------------------- ---------------------- -----------
Additions 2,749 - 1,050 3,799
Disposals - (2,135) (483) (2,618)
-------------------------------- ------------- ------------------------- ---------------------- -----------
At 30 September 2022 14,430 - 7,036 21,466
-------------------------------- ------------- ------------------------- ---------------------- -----------
Amortisation
At 1 October 2020 6,854 2,135 5,252 14,241
Amortisation charge 337 - 525 862
Eliminated on disposal - - (832) (832)
-------------------------------- ------------- ------------------------- ---------------------- -----------
At 30 September 2021 7,191 2,135 4,945 14,271
-------------------------------- ------------- ------------------------- ---------------------- -----------
Amortisation charge 337 - 697 1,034
Eliminated on disposal - (2,135) (483) (2,618)
-------------------------------- ------------- ------------------------- ---------------------- -----------
At 30 September 2022 7,528 - 5,159 12,687
-------------------------------- ------------- ------------------------- ---------------------- -----------
Carrying amount
At 30 September 2022 6,902 - 1,877 8,779
-------------------------------- ------------- ------------------------- ---------------------- -----------
At 30 September 2021 4,490 - 1,524 6,014
-------------------------------- ------------- ------------------------- ---------------------- -----------
At 30 September 2020 1,853 - 133 1,986
-------------------------------- ------------- ------------------------- ---------------------- -----------
Average remaining 3 years 1 year
amortisation period
The amortisation charge above is included within administrative
expenses in the income statement.
Additions include an amount of GBP3,556,000 relating to
internally generated assets for the year ended 30 September 2022
(2021: GBP2,289,000), of which GBP1,434,000 (2021: GBP1,378,000)
relates to capitalised share-based payment expenses (see note
24).
The net carrying amount of key operating systems, and computer
software and mobile applications include GBP5,724,000 and GBPnil
respectively (2021: GBP2,974,000 and GBP457,000), relating to
assets in development which are currently not amortised.
At the year end, the Group had entered into contractual
commitments for the acquisition of computer software amounting to
GBP103,000 (2021: GBPnil).
The disposal of contractual customer relationships held at nil
net book value relates to customer relationships acquired in 2007
and 2012 that no longer exist.
15 Property, plant and equipment
Leasehold Computer
improvements Office equipment equipment Total
GBP 000 GBP 000 GBP 000 GBP 000
----------------------------- ------------- ---------------- ---------- --------
Cost
At 1 October 2020 2,144 942 4,709 7,795
Arising on acquisition - 11 52 63
Additions 48 27 1,099 1,174
Disposals - (26) (643) (669)
Transfers from right-of-use
assets - - 393 393
----------------------------- ------------- ---------------- ---------- --------
At 30 September 2021 2,192 954 5,610 8,756
----------------------------- ------------- ---------------- ---------- --------
Additions 9 22 983 1,014
Disposals - (1) (324) (325)
----------------------------- ------------- ---------------- ---------- --------
At 30 September 2022 2,201 975 6,269 9,445
----------------------------- ------------- ---------------- ---------- --------
Depreciation
At 1 October 2020 471 645 3,455 4,571
Arising on acquisition - 5 21 26
Charge for the year 184 169 718 1,071
Eliminated on disposal - (22) (634) (656)
Transfers from right-of-use
assets - - 393 393
----------------------------- ------------- ---------------- ---------- --------
At 30 September 2021 655 797 3,953 5,405
----------------------------- ------------- ---------------- ---------- --------
Charge for the year 167 72 780 1,019
Eliminated on disposal - (1) (303) (304)
----------------------------- ------------- ---------------- ---------- --------
At 30 September 2022 822 868 4,430 6,120
----------------------------- ------------- ---------------- ---------- --------
Carrying amount
At 30 September 2022 1,379 107 1,839 3,325
----------------------------- ------------- ---------------- ---------- --------
At 30 September 2021 1,537 157 1,657 3,351
----------------------------- ------------- ---------------- ---------- --------
At 30 September 2020 1,673 297 1,254 3,224
----------------------------- ------------- ---------------- ---------- --------
The depreciation charge above is included within administrative
expenses in the income statement.
At the year end, the Group had entered into contractual
commitments for the acquisition of property, plant and equipment
amounting to GBP471,000 (2021: GBPnil).
Computer equipment includes assets under construction of
GBP37,000 (2021: GBP71,000) which are currently not
depreciated.
16 Leases
i) Right-of-use assets
Computer
and office
Property equipment Total
GBP 000 GBP 000 GBP 000
---------------------------------- ----------- ----------- --------------
Cost
At 1 October 2020 15,734 582 16,316
Additions 424 36 460
Disposals - (15) (15)
Effect of modification to leases - 42 42
Transfer to property, plant
and equipment - (393) (393)
---------------------------------- ----------- ----------- --------------
At 30 September 2021 16,158 252 16,410
---------------------------------- ----------- ----------- --------------
Additions 538 - 538
---------------------------------- ----------- ----------- --------------
At 30 September 2022 16,696 252 16,948
---------------------------------- ----------- ----------- --------------
Depreciation
At 1 October 2020 1,455 339 1,794
Charge for the year 1,485 205 1,690
Eliminated on disposal - (6) (6)
Transfer to property, plant
and equipment - (393) (393)
----------- ----------- --------------
At 30 September 2021 2,940 145 3,085
---------------------------------- ----------- ----------- --------------
Charge for the year 1,541 49 1,590
---------------------------------- ----------- ----------- --------------
At 30 September 2022 4,481 194 4,675
---------------------------------- ----------- ----------- --------------
Carrying amount
At 30 September 2022 12,215 58 12,273
---------------------------------- ----------- ----------- --------------
At 30 September 2021 13,218 107 13,325
---------------------------------- ----------- ----------- --------------
At 30 September 2020 14,279 243 14,522
---------------------------------- ----------- ----------- --------------
The depreciation charge above is included within administrative
expenses in the income statement.
The Group has entered into various leases in respect of property
and computer and office equipment as a lessee. Lease terms are
negotiated on an individual basis and contain a range of different
terms and conditions. Property leases typically run for a period
of six to fifteen years and computer and office equipment for
a period of one to six years.
Additions include GBP455,000 relating to the increase in the
Group's dilapidation provision (2021: GBPnil) (see note 22).
Other than property and computer and office equipment there
are no further classes of assets leased by the Group.
ii) Lease liabilities
2022 2021
GBP 000 GBP 000
------------ -------- --------
Current 1,566 1,708
Non-current 12,395 13,886
------------- -------- --------
13,961 15,594
------------ -------- --------
The undiscounted maturity analysis of lease liabilities is shown
below:
2022 2021
GBP 000 GBP 000
--------------------------------------- -------- --------
Within one year 2,517 2,450
In the second to fifth years inclusive 8,579 8,333
After five years 7,533 8,678
--------------------------------------- -------- --------
Total minimum lease payments 18,629 19,461
--------------------------------------- -------- --------
The total lease interest expense for the year ended 30 September
2022 was GBP768,000 (2021: GBP789,000). Principal cash outflow for
leases accounted for under IFRS 16 for the year ended 30 September
2022 was GBP1,716,000 (2021: GBP1,241,000).
17 Subsidiaries
The Group consists of a Parent Company, AJ Bell plc incorporated
within the UK, and a number of subsidiaries held directly and
indirectly by AJ Bell plc which operate and are incorporated in the
UK. Note 6 to the Company's separate financial statements lists
details of the interests in subsidiaries.
18 Deferred tax asset
2022 2021
GBP 000 GBP 000
----------------------- -------- --------
Deferred tax asset 906 1,139
Deferred tax liability (296) (199)
----------------------- -------- --------
610 940
----------------------- -------- --------
The movement on the deferred tax account and movement between
deferred tax assets and liabilities is as follows:
Accelerated Short-term
capital Share-based timing
allowances payments differences Losses Total
GBP 000 GBP 000 GBP 000 GBP 000 GBP 000
-------------------------- ----------- ----------- ------------ -------- ------------
At 1 October 2020 (47) 940 102 8 1,003
-------------------------- -----------
(Charge) / credit to the
income statement 65 252 47 (8) 356
Charge to equity - (202) - - (202)
Acquired through business
combination (217) - - - (217)
-------------------------- ----------- ----------- ------------ -------- ------------
At 30 September 2021 (199) 990 149 - 940
-------------------------- ----------- ----------- ------------ -------- ------------
(Charge) / credit to the
income statement (97) 31 11 - (55)
Charge to equity - (275) - - (275)
At 30 September 2022 (296) 746 160 - 610
-------------------------- ----------- ----------- ------------ -------- ------------
The current year deferred tax adjustment relating to share-based
payments reflects the estimated total future tax relief associated
with the cumulative share-based payment benefit arising in respect
of share options granted but unexercised as at 30 September
2022.
Deferred tax assets have been recognised in respect of other
temporary differences giving rise to deferred tax assets where it
is probable that these assets will be recovered. As at 30 September
2022, deferred tax assets have not been recognised on trading
losses of GBP4,051,000 (2021: GBP2,809,000).
19 Trade and other receivables
2022 2021
(Restated)(1)
GBP 000 GBP 000
------------------ --------- ---------------
Trade receivables 2,207 2,321
Prepayments 6,824 5,379
Accrued income 21,960 14,699
Other receivables 18,445 15,063
------------------ --------- ---------------
49,436 37,462
------------------ --------- ---------------
1 See note 2 for details of a change in accounting policy and
the resulting restatement of prior year.
The Directors consider that the carrying amount of trade and
other receivables approximates their fair value. Included within
other receivables is client money required to meet settlement
obligations and are payable on demand.
Included within accrued income is GBP984,000 (2021: GBP978,000)
relating to contract assets, a movement of GBP6,000 (2021:
GBP59,000) during the year due to increased revenues.
The ageing profile of trade receivables was as follows:
2022 2021
GBP 000 GBP 000
------------------------- -------- --------
Current - not past due 747 882
Past due:
0 to 30 days 886 798
31 to 60 days 116 159
61 to 90 days 39 125
91 days and over 1,024 881
------------------------- -------- --------
2,812 2,845
------------------------- -------- --------
Provision for impairment (605) (524)
------------------------- -------- --------
2,207 2,321
------------------------- -------- --------
The movement in the provision for impairment of trade
receivables is as follows:
2022 2021
GBP 000 GBP 000
---------------------------------------- -------- --------
Opening loss allowance as at 1 October 524 415
Loss allowance recognised 174 196
Receivables written off during the year
as uncollectable (21) (58)
Unused amount reversed (72) (29)
---------------------------------------- -------- --------
Balance at end of year 605 524
---------------------------------------- -------- --------
In determining the recoverability of trade receivables, the
Directors considered any change in the credit quality of the trade
receivable from the date credit was initially granted up to the
reporting date.
20 Cash and cash equivalents
2022
2021
(Restated)(1)
GBP 000 GBP 000
---------------------------------------- --------- ---------------
Group cash and cash equivalent balances 84,030 94,008
---------------------------------------- --------- ---------------
1 See note 2 for details of a change in accounting policy and
the resulting restatement of prior year.
Cash and cash equivalents at 30 September 2022 and 30 September
2021 are considered to be holdings of less than one month, or those
over which the Group has an immediate right of recall.
21 Trade and other payables
2022 2021
GBP 000 GBP 000
-------------------------------- -------- --------
Trade payables 138 580
Social security and other taxes 2,151 2,111
Other payables 678 582
Accruals 10,428 7,473
Deferred income 2,209 2,019
-------------------------------- -------- --------
15,604 12,765
-------------------------------- -------- --------
Trade payables, accruals and deferred income principally
comprise amounts outstanding for trade purposes and ongoing costs.
The Directors consider that the carrying amount of trade payables
approximates their fair value.
Deferred income in the current and prior year relates to
contract liabilities. The prior year deferred revenue balance has
now all been recognised as revenue and the current year balance all
relates to cash received in the current period. Total deferred
income as at 30 September 2022 is expected to be recognised as
revenue in the coming year.
22 Provisions
Office dilapidations Other provisions Total
GBP 000 GBP 000 GBP 000
------------------------------------ -------------------- ---------------- --------
At 1 October 2021 1,549 1,526 3,075
Additional provisions 455 - 455
Provisions used - (257) (257)
Unused provision reversed - (750) (750)
--------
At 30 September 2022 2,004 519 2,523
------------------------------------ -------------------- ---------------- --------
Included in current liabilities - 519 519
------------------------------------ -------------------- ---------------- ----------
Included in non-current liabilities 2,004 - 2,004
------------------------------------ -------------------- ---------------- ----------
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. During the year, management reviewed the Group's
dilapidation provision and the assumptions on which the provision
is based. The estimate is based upon property location, size of
property and an estimate of the charge per square foot. A further
charge of GBP455,000 has been recognised in relation to an increase
in the estimated charge per square foot. The office dilapidations
provision represents management's best estimate of the costs which
will ultimately be incurred in settling these obligations.
Other provisions:
The other provisions relate to the settlement of an operational
tax dispute and the costs associated with defending a legal case.
The provision relating to the operational tax dispute has been
updated at 30 September 2022 to reflect the ongoing discussions
with HMRC, with full settlement of payments expected to be
completed within the next 12 months.
23 Share capital
2022 2021 2022 2021
Issued, fully-called and Number Number GBP GBP
paid:
--------------------------- ----------- ----------- ------ ------
Ordinary shares of 0.0125p
each 411,091,634 410,491,708 51,386 51,311
--------------------------- ----------- ----------- ------ ------
All ordinary shares have full voting and dividend rights.
The following transactions have taken place during the year:
Transaction type Share class Number of shares Share premium
GBP 000
------------------ ------------------ ----------------- --------------
Exercise of CSOP Ordinary shares
options of 0.0125p each 267,003 272
Exercise of EIP Ordinary shares 176,949 -
options of 0.0125p each
Earn-out issue Ordinary shares 155,974 -
of 0.0125p each
------------------ ------------------ ----------------- --------------
599,926 272
------------------------------------- ----------------- --------------
The holders of ordinary shares are entitled to receive dividends
as declared from time to time and are entitled to one vote per
share at general meetings of the Company. They are entitled to
share in the proceeds on the return of capital, or upon the winding
up of the Company in proportion to the number of and amounts paid
on shares held. The shares are non-redeemable.
Own shares
The Group has an employee benefit trust in order to acquire own
shares in the Company to satisfy future share incentive plans.
Shares held by the Trust are held at GBP473,000 (2021: GBP740,000)
being the price paid to repurchase, and the carrying value is shown
as a reduction within shareholders' equity.
During the year, 318,601 EIP options were exercised and issued
from the AJ Bell Employee Benefit Trust.
The costs of operating the Trust are borne by the Group but are
not material. The Trust waived the right to receive dividends on
these shares.
24 Share-based payments
Company Share Option Plan (CSOP)
The CSOP is a HMRC approved scheme in which the Board, at their
discretion, grant options to employees to purchase ordinary shares.
Each participating employee can be granted options up to the value
of GBP30,000. Options granted under the CSOP can be exercised
between the third and tenth anniversary after the date of grant and
are usually forfeited if the employee leaves the Group before the
option expires. The expense for share-based payments under the CSOP
is recognised over the respective vesting period of these
options.
Option To Buy Scheme (OTB) - Growth shares
The OTB scheme is a historical award scheme whereby the Board at
its discretion granted growth shares to employees. Growth shares
entitled the holder to participate in the growth value of the Group
above a certain threshold level, set above the current market value
of the Group at the time the shares were issued. Growth shares
granted under the OTB scheme had different vesting conditions. The
vesting condition attached to all growth shares granted is that the
threshold level needs to be met and an exit event needs to have
occurred. As part of the AJ Bell listing process all awards were
converted into ordinary shares and those awards granted with an
additional employment condition of four or six years after the date
of grant, continue to be recognised as a share-based payment.
Awards that were issued subject to employment conditions are
subject to buy back options under which the Group can buy back the
shares for their issue price if the employee leaves the Group
before the expiry of the employment condition period.
Buy As You Earn plan (BAYE)
The BAYE plan is an all-employee share plan under which shares
can be issued to employees as either free shares or partnership
shares.
The Company may grant free shares up to a maximum of GBP3,600
per employee in a tax year. During the year, no free shares have
been issued (2021: nil).
Employees have been offered the opportunity to participate in
the partnership plan to enable such employees to use part of their
pre-tax salary to acquire shares. The limit to the pre-tax salary
deduction is GBP1,800 or, if lower, 10% of salary each year. The
initial plan was an accumulation plan where employees were required
to save an amount of their gross salary for a 12 month period. The
accumulation plan ended on 6 December 2019 and employees still in
the plan at that date were entitled to purchase shares using the
funds saved based on the IPO price of GBP1.60.
From January 2020, the plan entitles employees to use this
deduction to buy shares in the Company on a monthly basis at the
current market value. Employees are able to withdraw their shares
from the plan at any time but may be subject to income tax and
national insurance charges if withdrawn within three years of
purchasing the shares. Therefore the monthly partnership plan does
not give rise to a share-based payment charge.
Executive Incentive Plan (EIP)
The EIP is a performance share plan that involves the award of
nominal cost options to participants conditional on the achievement
of specified performance targets and continuous employment over a
certain period of time. Individual grants will be dependent on the
assessment of performance against a range of financial and
non-financial targets set at the beginning of the financial
year.
CSR initiative
A CSR initiative was introduced in December 2019 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 are equity-settled awards and
involved the grant of market value options to the AJ Bell Trust
conditional on the achievement of diluted earnings per share (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 September 2022;
- 115% for 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%; and
- 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 being provided by the AJ Bell Trust, all
conditions involved in the arrangement are considered to be
non-vesting conditions. Non-vesting conditions should be 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.
Earn-out arrangement
The acquisition of Adalpha in the previous year gave rise to an
earn-out arrangement whereby share awards will be made should a
number of operational and financial milestones, relating to AUA
targets and the development of a simplified proposition for
financial advisers, be met. The awards will be equity-settled and
will vest in several tranches in line with the agreed
milestones.
Under the terms of the acquisition agreement, shares will be
awarded to eligible employees conditional upon the successful
completion of certain performance milestones and their continued
employment with the Group during the vesting period. There is no
exercise price attached to the share award.
The fair value of the earn-out arrangement is estimated as at
the date of grant calculated by reference to the quantum of the
earn-out payment for each performance milestone and an estimated
time to proposition completion, discounted to net present value.
The performance condition included within the arrangement is not
considered a market condition and therefore the expected vesting
will be reviewed at each reporting date.
Movements during the year
The tables below summarise the outstanding options for each
share-based payment scheme.
CSOP
2022 2021
Weighted Weighted
Number average exercise Number average exercise
price price
GBP GBP
---------------------------- --------- ----------------- --------- -----------------
Outstanding at beginning of
the year 1,015,763 3.23 1,003,968 1.90
Granted during the year 461,744 3.73 392,371 4.34
Forfeited during the year (108,611) 4.05 (57,198) 2.23
Exercised during the year (267,003) 1.02 (323,378) 0.61
---------------------------- --------- ----------------- --------- -----------------
Outstanding at the end of
the year 1,101,893 3.90 1,015,763 3.23
---------------------------- --------- ----------------- --------- -----------------
Exercisable at the end of
the year 31,462 1.04 10,000 0.52
The lowest exercise price for share options outstanding at the
end of the period was 104p (2021: 52p) and the highest exercise
price was 434p (2021: 434p). The weighted average remaining
contractual life of share options outstanding at the end of the
period was 8.3 years (2021: 8.3 years).
OTB - Growth shares
2022 2021
Weighted Weighted
Number average exercise Number average exercise
price price
GBP GBP
------------------------- ----------- ----------------- --------- -----------------
Outstanding at beginning
of the year 3,192,268 0.63 3,212,675 0.63
Vested (2,026,137) 0.63 (20,407) 0.63
------------------------- ----------- ----------------- --------- -----------------
Outstanding at the end
of the year 1,166,131 0.63 3,192,268 0.63
------------------------- ----------- ----------------- --------- -----------------
Upon listing to the London Stock Exchange, all growth shares
were converted to ordinary shares and therefore no exercise price
exists for growth shares outstanding at the end of the period.
During the year 2,026,137 ordinary shares under a call option
agreement vested and were released. The weighted average remaining
contractual life of growth shares converted to ordinary shares
under a call option agreement at the end of the period was 1.2
years (2021: 0.9 years).
BAYE - Free shares
2022 2021
Number Number
------------------------------------- --------- --------
Outstanding at beginning of the year 240,112 263,106
Forfeited during the year (4,680) (22,994)
Vested (235,432) -
------------------------------------- --------- --------
Outstanding at the end of the year - 240,112
------------------------------------- --------- --------
Free shares are issued to employees for free and therefore do
not have an exercise price. During the year 235,432 free shares
vested and were released. There are no free shares outstanding at
the end of the period.
EIP
2022 2021
Weighted Weighted
average exercise average exercise
price price
Number GBP Number GBP
-------------------------- --------- ----------------- --------- -----------------
Outstanding at beginning
of the year 1,487,313 0.000125 1,208,693 0.000125
Granted during the year 736,015 0.000125 580,146 0.000125
Exercised during the year (495,550) 0.000125 (130,695) 0.000125
Lapsed during the year (111,910) 0.000125 (145,632) 0.000125
Forfeited during the year - - (25,199) 0.000125
-------------------------- --------- ----------------- --------- -----------------
Outstanding during the
year 1,615,868 0.000125 1,487,313 0.000125
-------------------------- --------- ----------------- --------- -----------------
Exercisable at the end
of the year 565,636 0.000125 191,509 0.000125
The weighted average remaining contractual life of EIP shares
outstanding at the end of the period was 8 years (2021: 8.2
years).
CSR initiative
2022 2021
Weighted Weighted
average exercise average exercise
price price
Number GBP Number GBP
-------------------------- --------- ----------------- --------- -----------------
Outstanding at beginning
of the year 2,493,766 4.01 2,493,766 4.01
Granted during the year - - - -
Forfeited during the year (831,256) 4.01 - -
Outstanding during the
year 1,662,510 4.01 2,493,766 4.01
-------------------------- --------- ----------------- --------- -----------------
Exercisable at the end
of the year - - - -
The weighted average remaining contractual life of CSR options
outstanding at the end of the period was 7.2 years (2021: 8.2
years).
The first tranche of options were forfeited due to the DEPS for
the year, 11.31, being below the lower DEPS target of 14.19 pence
at the end of the performance period.
Weighted average share price of options exercised
The weighted average share price of all options exercised during
the year was GBP3.67 (2021: GBP4.32).
Earn-out arrangement
2022 2021
Weighted Weighted
average share average share
price price
Number GBP Number GBP
---------------------- ------- -------------- ------- --------------
Shares granted during
the year 155,974 3.15 353,032 4.25
---------------------- ------- -------------- ------- --------------
Measurement
The fair value of equity-settled share options granted is
estimated as at the date of grant using the Black-Scholes model,
taking into account the terms upon which the options and awards
were granted.
The inputs into the Black-Scholes model and assumptions used in
the calculations are as follows:
EIP
Grant date 09/12/2021 09/12/2021 09/12/2021
---------------------------- ------------ ------------ ------------
Number of shares under
option 344,727 100,644 290,644
Fair value of share option
from generally accepted
business model (GBP) 3.76 3.62 3.56
Share price (GBP) 3.83 3.83 3.83
Exercise price of an option
(GBP) 0.000125 0.000125 0.000125
Expected volatility 27.60% 31.01% 31.01%
Expected dividend yield 1.82% 1.82% 1.82%
Risk-free interest rate 0.24% 0.50% 0.47%
Expected option life to
exercise (months) 12 36 48
---------------------------- ------------ ------------ ------------
CSOP
Grant date 09/12/2021 10/01/2022 20/04/2022
---------------------------- ------------ ---------- ----------
Number of shares under
option 443,766 7,936 10,042
Fair value of share option
from generally accepted
business model (GBP) 0.74 0.58 0.49
Share price (GBP) 3.83 3.68 2.91
Exercise price of an option
(GBP) 3.75 3.78 2.98
Expected volatility 31.01% 27.65% 29.29%
Expected dividend yield 1.82% 1.89% 2.39%
Risk-free interest rate 0.50% 0.92% 1.62%
Expected option life to
exercise (months) 36 36 36
---------------------------- ------------ ---------- ----------
Expected volatility is estimated by considering historic average
share price volatility at the grant date.
The expected life of the options is based on the minimum period
between the grant of the option, the earliest possible exercise
date and an analysis of the historical exercise data that is not
necessarily indicative of exercise patterns that may occur. The
expected volatility reflects the assumption that historical
volatility is indicative of future trends, which may also not
necessarily be the case.
During the year, the Group recognised a share-based payment
expense of GBP4,728,000 (2021: GBP4,952,000), GBP1,840,000 (2021:
GBP2,764,000) of which relates to the earn-out arrangement.
The Group capitalised share-based payment costs of GBP1,434,000
(2021: GBP1,378,000).
25 Financial instruments and risk management
The Group's activities expose it to a variety of financial
instrument risks; market risk (including interest rate and foreign
exchange), credit risk and liquidity risk. Information is presented
below regarding the exposure to each of these risks, including the
procedures for measuring and managing them.
Financial instruments include both financial assets and
financial liabilities. Financial assets principally comprise trade
and other receivables and cash and cash equivalents. Financial
liabilities comprise trade and other payables, accruals and
obligations under leases. The Group does not have any derivative
financial instruments.
Risk management objectives
The Group has identified the financial, business and operational
risks arising from its activities and has established policies and
procedures to manage these items in accordance with its risk
appetite. The Board of Directors has overall responsibility for
establishing and overseeing the Group's risk management framework
and risk appetite.
The Group's financial risk management policies are intended to
ensure that risks are identified, evaluated and subject to ongoing
monitoring and mitigation (where appropriate). These policies also
serve to set the appropriate control framework and promote a robust
risk culture within the business. The Group regularly reviews its
financial risk management policies and systems to reflect changes
in the business, counterparties, markets and range of financial
instruments that it uses.
The Group's Treasury Committee has principal responsibility for
monitoring exposure to the risks associated with cash and cash
equivalents. Policies and procedures are in place to ensure the
management and monitoring of each type of risk. The primary
objective of the Group's treasury policy is to manage short-term
liquidity requirements whilst maintaining an appropriate level of
exposure to other financial risks in accordance with the Group's
risk appetite.
Significant accounting policies
Details of the significant accounting policies, including the
criteria for recognition, the basis of measurement and the basis on
which income and expenses are recognised, in respect of each
financial asset and financial liability, are disclosed within note
2 to the financial statements.
Categories of financial instrument
The financial assets and liabilities of the Group are detailed
below:
2022 2021 (Restated)(1)
Amortised Financial Carrying Amortised Financial Carrying
cost liabilities value cost liabilities value
GBP 000 GBP 000 GBP 000 GBP 000 GBP 000 GBP 000
------------------ --------- ------------ -------- --------- ------------ --------
Financial assets
Trade receivables 2,207 - 2,207 2,321 - 2,321
Accrued income 21,960 - 21,960 14,699 - 14,699
Other receivables 18,445 - 18,445 15,063 - 15,063
Cash and cash
equivalents 84,030 - 84,030 94,008 - 94,008
------------------ --------- ------------ -------- --------- ------------ --------
126,642 - 126,642 126,091 - 126,091
------------------ --------- ------------ -------- --------- ------------ --------
Financial liabilities
Trade and other
payables - 10,598 10,598 - 8,095 8,095
Lease liabilities - 13,961 13,961 - 15,594 15,594
------------------ --------- ------------ -------- --------- ------------ --------
- 24,559 24,559 - 23,689 23,689
------------------ --------- ------------ -------- --------- ------------ --------
1 See note 2 for details of a change in accounting policy and
the resulting restatement of prior year.
The carrying amount of all financial assets and liabilities is
approximate to their fair value due to their short-term nature.
Market risk
Interest rate risk
The Group holds interest bearing assets in the form of cash and
cash deposits. Cash at bank earns interest at floating rates based
on daily bank deposit rates. Term deposits can also be made for
varying periods depending on the immediate cash requirements of the
Group, and interest is earned at the respective fixed-term rate.
Based on the cash balances shown in the Group's statement of
financial position at the reporting date, if interest rates were to
move by 25bps it would change profit before tax by
approximately:
2022 2021
GBP 000 GBP 000
---------------- ------- -------
+ 25bps (0.25%) 191 246
- 25bps (0.25%) (154) (23)
---------------- ------- -------
As at the year end the Group had no borrowings, and therefore
was not exposed to a material interest rate risk related to debt as
the interest rate is fixed at the inception of the lease.
The Group retains a proportion of the interest income generated
from the pooling of customer cash balances and as a result, the
Group revenue has an indirect exposure to interest rate risk. The
cash balances are held with a variety of banks and are placed in a
range of fixed-term, notice and call deposit accounts with due
regard for counterparty credit risk, capacity risk, concentration
risk and liquidity risk requirements. The spread of rate retained
by the Group is variable dependent on rates received by banks
(disclosed to customers at between 0.10% below and 0.60% above the
prevailing base rate) and amounts paid away to customers.
The impact of a 25bps increase or decrease in UK base interest
rates on the Group's revenue has been calculated and shown below.
This has been modelled on a historical basis for each year
separately assuming that the UK base rate was 25bps higher or lower
than the actual position at the time. We assume a minimum rate of
return on call cash of 0bps.
2022 2021
GBP 000 GBP 000
---------------- ------- -------
+ 25bps (0.25%) 6,654 5,324
- 25bps (0.25%) (6,823) (4,901)
---------------- ------- -------
Customer cash balances are not a financial asset of the Group
and so are not included in the statement of financial position.
Market movement sensitivity
The Group's custody fees are derived from the market value of
the underlying assets held by the retail customer in their account,
based on product type, mix and portfolio size which are charged on
an ad valorem basis. As a result, the Group has an indirect
exposure to market risks, as the value of the underlying customers'
assets may rise or fall. The impact of a 10% increase or reduction
in the value of the customers underlying assets subject to the
custody fees on the Group's revenue has been calculated and shown
below. This has been modelled on a historical basis for each year
separately assuming that the value of the customers' assets were
10% higher or lower than the actual position at the time.
2022 2021
GBP 000 GBP 000
------------- ------- -------
+ 10% higher 5,846 4,850
- 10% lower (5,846) (4,850)
------------- ------- -------
Foreign exchange risk
The Group is not exposed to significant foreign exchange
translation or transaction risk as the Group's activities are
primarily within the UK. Foreign exchange risk is therefore not
considered material.
Credit risk
The Group's exposure to credit risk, which is the risk that a
counterparty will be unable to pay amounts in full when due, arises
principally from its cash balances held with banks and trade and
other receivables.
Trade receivables are presented net of expected credit losses
within the statement of financial position. The Group applies the
IFRS 9 simplified approach to measuring expected credit losses
which uses a lifetime expected loss allowance for all trade
receivables. To measure the expected credit losses, trade
receivables have been grouped based on shared credit risk
characteristics and number of days past due. Details of those trade
receivables that are past due are shown within note 19.
The Group has implemented procedures that require appropriate
credit or alternative checks on potential customers before business
is undertaken. This minimises credit risk in this area.
The credit and concentration risk on liquid funds, cash and cash
equivalents is limited as deposits are held across a number of
major banks. The Directors continue to monitor the strength of the
banks used by the Group. The principal banks currently used by the
Group are Bank of Scotland plc, Barclays Bank plc, Lloyds Bank plc,
Lloyds Bank Corporate Markets plc, HSBC Bank plc, HSBC Global Asset
Management, NatWest Markets plc, Santander UK plc, Santander
Financial Services plc, Clearstream Banking SA and Qatar National
Bank (Q.P.S.C). Bank of Scotland plc, the Group's principal banker,
is substantial and is 100% owned by Lloyds Banking Group plc. All
these banks currently have long-term credit ratings of at least A-
(Fitch). Where the services of other banks are used, the Group
follows a rigorous due diligence process prior to selection. This
results in the Group retaining the ability to further mitigate the
counterparty risk on its own behalf and that of its customers.
The Group has no significant concentration of credit risk as
exposure is spread over a large number of counterparties and
customers. The maximum exposure to credit risk is represented by
the carrying amount of each financial asset at the reporting date.
In relation to dealing services, the Group operates as agent on
behalf of its underlying customers and in accordance with London
Stock Exchange Rules.
Any settlement risk during the period between trade date and the
ultimate settlement date is substantially mitigated as a result of
the Group's agency status, its settlement terms and the delivery
versus payment mechanism whereby if a counterparty fails to make
payment, the securities would not be delivered to the counterparty.
Therefore any risk exposure is to an adverse movement in market
prices between the time of trade and settlement. Conversely, if a
counterparty fails to deliver securities, no payment would be
made.
There has been no material change to the Group's exposure to
credit risk during the year.
Liquidity risk
This is the risk that the Group may be unable to meet its
liabilities as and when they fall due. These liabilities arise from
the day-to-day activities of the Group and from its obligations to
customers. The Group is a highly cash-generative business and
maintains sufficient cash and standby banking facilities to fund
its foreseeable trading requirements.
There has been no change to the Group's exposure to liquidity
risk or the manner in which it manages and measures the risk during
the year.
The following table shows the undiscounted cash flows relating
to non-derivative financial liabilities of the Group based upon the
remaining period to the contractual maturity date at the end of the
reporting period.
Due within 1 to 5 After
1 year years 5 years Total
GBP 000 GBP 000 GBP 000 GBP 000
------------------------- ------- ---------- --------- -------- --------
2022
Trade and other payables 10,598 - - 10,598
Lease liabilities 2,517 8,579 7,533 18,629
------------------------- ------- ---------- --------- -------- --------
13,115 8,579 7,533 29,227
------------------------- ------- ---------- --------- -------- --------
2021
Trade and other payables 8,095 - - 8,095
Lease liabilities 2,450 8,333 8,678 19,461
------------------------- ------- ---------- --------- -------- --------
10,545 8,333 8,678 27,556
------------------------- ------- ---------- --------- -------- --------
Capital management
The Group's objectives in managing capital are to:
- safeguard the Group's ability to continue as a going concern
so that it can continue to provide returns for shareholders,
security for our customers and benefits for other stakeholders;
- maintain a strong capital base to support the development of
its business; and
- comply with regulatory requirements at all times.
The capital structure of the Group consists of share capital,
share premium and retained earnings. As at the reporting date the
Group had capital of GBP133,394,000 (2021: GBP130,708,000).
Capital generated from the business is both reinvested in the
business to generate future growth and returned to shareholders
principally in the form of dividends. The capital adequacy of the
business is monitored on an ongoing basis and as part of the
business planning process by the Board. It is also reviewed before
any distributions are made to shareholders to ensure it does not
fall below the agreed surplus as outlined in the Group's capital
management policy. The liquidity of the business is monitored by
management on a daily basis to ensure sufficient funding exists to
meet the Group's liabilities as they fall due. The Group is highly
cash-generative and maintains sufficient cash and standby banking
facilities to fund its foreseeable trading requirements.
The Group conducts an ICARA, as required by the FCA to assess
the appropriate amount of regulatory capital and liquid resources
to be held by the Group. Regulatory capital and liquid resources
for ICARA are calculated in accordance with published rules.
The ICARA compares the Group's financial resources against
regulatory capital and liquidity requirements as specified by the
relevant regulatory authorities. Our current financial resources,
regulatory capital and liquidity requirements can be found in the
Financial Review above.
The Group maintained a surplus of regulatory capital and liquid
resources throughout the year. The disclosures required under
MIFIDPRU 8 of the Investment Firms Prudential Regime are available
on the Group's website at ajbell.co.uk.
26 Interests in unconsolidated structure entities
The Group manages a number of investment funds (open-ended
investments) acting as agent of the Authorised Corporate Director.
The dominant factor in deciding who controls these entities is the
contractual arrangement in place between the Authorised Corporate
Director and the Group, rather than voting or similar rights. As
the Group directs the investing activities through its investment
management agreement with the Authorised Corporate Director, the
investment funds are deemed to be structured entities. The
investment funds are not consolidated into the Group's financial
statements as the Group is judged to act as an agent rather than
having control under IFRS 10.
The purpose of the investment funds is to invest capital
received from investors in a portfolio of assets in order to
generate a return in the form of capital appreciation, income from
the assets, or both. The Group's interest in the investment funds
is in the form of management fees received for its role as
investment manager. These fees are variable depending on the value
of the assets under management.
The funds do not have any debt or borrowings and are financed
through the issue of units to investors.
The following table shows the details of unconsolidated
structured entities in which the Group has an interest at the
reporting date:
Annual management Management charge
Number Net AUM of charge receivable at 30
of funds funds September
Year Type GBPm GBP 000 GBP 000
----- ----- --------- ---------- ----------------- -----------------
2022 OEIC 9 1,465.5 1,816 369
2021 OEIC 9 1,073.2 1,138 266
----- ----- --------- ---------- ----------------- -----------------
The annual management charge is included within recurring ad
valorem fees within revenue in the consolidated income
statement.
The annual management charge receivable is included within
accrued income and trade receivables in the consolidated statement
of financial position.
The maximum exposure to loss relates to a reduction in future
management fees should the market value of the investment funds
decrease.
27 Reconciliation of liabilities arising from financing
activities
1 October Change in lease 30 September
2021 Cash flows liability 2022
2022 GBP 000 GBP 000 GBP 000 GBP 000
------------------ --------- -------------------- ------------------ ------------------
Lease liabilities 15,594 (1,716) 83 13,961
------------------ --------- -------------------- ------------------ ------------------
Total liabilities
from financing
activities 15,594 (1,716) 83 13,961
------------------ --------- -------------------- ------------------ ------------------
Change
1 October Cash in lease 30 September
2020 flows liability Additions Disposal 2021
2021 GBP 000 GBP 000 GBP 000 GBP 000 GBP000 GBP 000
------------------ --------- -------- ---------- --------- ----------- ------------
Lease liabilities 16,345 (1,241) 42 460 (12) 15,594
------------------ --------- -------- ---------- --------- ----------- ------------
Total liabilities
from financing
activities 16,345 (1,241) 42 460 (12) 15,594
------------------ --------- -------- ---------- --------- ----------- ------------
28 Related party transactions
Transactions between the Parent Company and its subsidiaries,
which are related parties, have been eliminated on consolidation
and are not disclosed.
Transactions with key management personnel:
Key management personnel is represented by the Board of
Directors and the ExCo (previously EMB).
The remuneration expense of key management personnel is as
follows:
2022 2021
GBP 000 GBP 000
---------------------------------------- -------- --------
Short-term employee benefits (excluding
NI) 2,779 2,108
Retirement benefits 114 35
Share-based payment 2,389 1,256
5,282 3,399
---------------------------------------- -------- --------
During the year there were no material transactions or balances
between the Group and its key management personnel or members of
their close families, other than noted below.
Transactions with directors:
The remuneration of individual directors is provided in the
Directors' Remuneration Report.
Dividends totalling GBP11,743,000 (2021: GBP6,766,000) were paid
in the year in respect of ordinary shares held by the Company's
directors.
The aggregate gains made by the Directors on the exercise of
share options during the year were GBP772,000 (2021: GBPnil).
During the year Directors and their families received beneficial
staff rates in relation to personal portfolios. The discount is not
material to the Directors or to AJ Bell.
Other related party transactions:
Charitable donations
During the year the Group made donations of GBP298,000 (2021:
GBP272,000) to the AJ Bell Trust, a registered charity of which Mr
A J Bell is a trustee.
EQ Property Services Limited
The Group is party to three leases with EQ Property Services
Limited for rental of the Head Office premises, 4 Exchange Quay,
Salford Quays, Manchester, M5 3EE. Mr A J Bell, Mr M T Summersgill
and Mr R Stott are directors and shareholders of both AJ Bell plc
and EQ Property Services Limited. Mr C Galbraith was a member of
key management personnel in the year and shareholder of AJ Bell
plc, and is a director and shareholder of EQ Property Services
Limited. The leases for the rental of the building were entered
into on 17 August 2016 for terms which expire on 30 September 2031,
at an aggregate market rent of GBP1,826,000 (2021: GBP1,825,000)
per annum.
At the reporting date, there is no payable outstanding (2021:
GBPnil) with EQ Property Services Limited.
Any amounts outstanding with related parties are unsecured and
will be settled in cash. No guarantees have been given or received.
No provision has been made for doubtful debts in respect of amounts
owed by related parties.
29 Subsequent events
There have been no material events occurring between the
reporting date and the date of approval of these consolidated
financial statements.
Glossary
Adalpha AJ Bell Touch Limited and its wholly-owned
subsidiaries
AGM Annual General Meeting
AJBIC AJ Bell Investcentre
BAYE Buy as you earn
Board, Directors The Board of Directors of AJ Bell plc
BPS Basis points
CASS Client Assets Sourcebook
CGU Cash Generating Unit
CODM Chief Operating Decision Maker
CSOP Company Share Option Plan
CSR Corporate Social Responsibility
D&I Diversity and Inclusion
DEPS Diluted Earnings Per Share
DTR Disclosure Guidance and Transparency Rules
DWP Department for Work and Pensions
D2C Direct to Consumer
EIP Executive Incentive Plan
EMB Executive Management Board
ERC Executive Risk Committee
ESG Environmental, Social and Governance
EVF Employee Voice Forum
ExCo Executive Committee (formerly EMB)
FCA Financial Conduct Authority
FRC Financial Reporting Council
FRS Financial Reporting Standards
FTSE The Financial Times Stock Exchange
FX Foreign Exchange
GHG Greenhouse Gas
GIA General Investment Account
HMRC His Majesty's Revenue and Customs
HR Human Resources
IAS International Accounting Standard
ICAAP Internal Capital Adequacy Assessment Process
ICARA Internal Capital and Risk Assessment
ICO Information Commissioner's Office
IFA Independent Financial Adviser
IFRIC International Financial Reporting Interpretations
Committee
IFPR Investment Firm Prudential Regime
IFRS International Financial Reporting Standards
IPO Initial Public Offering
ISA Individual Savings Account
IT Information Technology
KOS Key Operating System
KPI Key Performance Indicator
KRI Key Risk Indicator
KYC Know Your Customer
LISA Lifetime ISA
MiFID II Markets in Financial Instruments Directive
II
MPS Managed Portfolio Service
MSCI Morgan Stanley Capital International
OCF Ongoing Charges Figure
OEIC Open-Ended Investment Company
OTB Option To Buy
PBT Profit Before Tax
PLC Public Limited Company
PR&U Principal Risks and Uncertainties
R&CC Risk and Compliance Committee
RMF Risk Management Framework
SID Senior Independent Director
SIPP Self-Invested Personal Pension
SMIP Senior Management Incentive Plan
SREP Supervisory Review and Evaluation Process
SSAS Small Self-Administered Scheme
TCFD Task Force on Climate-related Financial Disclosures
TPDFM Third-Party Discretionary Fund Managers
TPR The Pensions Regulator
WACI Weighted Average Carbon Intensity
Definitions
Ad valorem According to value
AUA Assets Under Administration
AUM Assets Under Management
Customer retention Relates to platform customers
rate
Fintech Refers to a business that uses technology
to enhance or automate financial services
and processes
Lang Cat An insight, marketing and communications
consultancy business specialising in Financial
Services
Lifetime value The total amount of revenue a business expects
to generate over the lifetime of a customer
Listing rules Regulations subject to the oversight of the
FCA applicable to companies listed on a UK
stock exchange
MSCI ESG rating MSCI's assessment of a Company's resilience
to long-term, industry material ESG risks
and how well they manage those risks relative
to peers.
Own shares Shares held by the Group to satisfy future
incentive plans
Platforum The advisory and research business specialising
in investment platforms
Recurring ad valorem Includes custody fees, retained interest
revenue income and investment management fees
Recurring fixed Includes recurring pension administration
revenue fees and media revenue
Revenue per GBP Represents revenue as a percentage of the
AUA average AUA in the year. Average AUA is calculated
as the average of the opening and closing
AUA in each quarter averaged for the year
Transactional revenue Includes dealing fees and pension scheme
activity fees
UK Corporate Governance A code which sets out standards for best
Code boardroom practice with a focus on Board
leadership and effectiveness, remuneration,
accountability and relations with shareholders
Company information
Company number
04503206
Company Secretary
Mr Christopher Bruce Robinson
Registered office
4 Exchange Quay
Salford Quays
Manchester
M5 3EE
Auditor
BDO LLP
55 Baker Street
London
W1U 7EU
Banker
Bank of Scotland plc
1 Lochrin Square
92 - 98 Fountainbridge
Edinburgh
EH3 9QA
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END
FR FLFLALSLIVIF
(END) Dow Jones Newswires
December 01, 2022 02:00 ET (07:00 GMT)
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