TIDMIHP
RNS Number : 8202V
IntegraFin Holdings plc
16 December 2021
IntegraFin Holdings plc - Full Year Results for the Year Ended
30 September 2021
IntegraFin Holdings plc is pleased to report its results for the
year to 30 September 2021.
Highlights
-- Profit after tax of GBP51.1m (+12%)
-- Funds under direction GBP52.11bn (+27%)
-- Gross inflows of GBP7.70bn in the year (+34%)
Alexander Scott, Chief Executive Officer, commented:
"Our investment platform, Transact, has had another very strong
year, with gross inflows at a record GBP7.70 billion. I am
especially pleased with our client retention rate of 96%, which
reflects our determination to maintain our delivery of high quality
value for money services. This is also evidenced in exceptional
annual net inflows of GBP4.95 billion.
Great customer service is front and centre in everything we do.
To achieve this, we continue to develop our systems and processes
and, most importantly, invest in our people. It is their commitment
to living up to the values we set for ourselves, and the Group
collectively, which keeps our service standards so high. I would
like to extend my thanks to all colleagues for their continued hard
work.
In January, we extended the excellence of systems and staff in
the Group with our acquisition of Time for Advice (T4A), a
specialist software provider for financial planning and wealth
management firms. We see a strong fit between our culture and
values and those of T4A. We will support the ongoing development of
their CURO system and further invest in their staff.
With increased revenues from business growth, plus controlled
expenses, I am pleased to report that profit before tax and
non-underlying expenses increased by 20% to GBP66.5 million.
The directors have declared an interim dividend of 7.0 pence per
ordinary share, taking the total dividend for the year to 10.0
pence per share (2020: 8.3 pence per ordinary share). The dividend
is payable on 21 January 2022 to ordinary shareholders on the
register on 24 December 2021. The ex-dividend date will be 23
December 2021."
Financial Highlights
Year ended 30 Year ended 30
September 2021 September
2020
GBPm GBPm
Funds under direction 52,112 41,093
Revenue 123.7 107.3
Profit before tax attributable to
shareholder returns 63.1 55.3
Operating profit attributable to
shareholder returns 63.2 55.3
Operating margin 51.1% 51.5%
Basic and diluted earnings per share 15.4p 13.7p
Contacts
Media - Lansons
Tony Langham +44 (0)7979 692287
Maddy Morgan-Williams +44 (0)7947 364578
Investors
Jane Isaac +44 (0)20 7608 4937
Analyst Presentation
IntegraFin Holdings plc will be hosting an analyst presentation
on Thursday 16 December 2021 following the release of these results
for the year ended 30 September 2021. Attendance is by invitation
only. Slides accompanying the analyst presentation will be
available on the IntegraFin Holdings plc website.
Annual General Meeting
The Annual General Meeting 2021 is scheduled to be held at 4pm
on 24 February 2022 at 29 Clement's Lane, London EC4N 7AE and by
telephone.
Cautionary Statement
These results have been prepared in accordance with the
requirements of English Company Law and the liabilities of the
directors in connection with these results shall be subject to the
limitations and restrictions provided by such law.
These results are prepared for and addressed only to the
company's shareholders as a whole and to no other person. The
company, its directors, employees, agents or advisers do not accept
or assume responsibility to any other person to whom these results
are shown or into whose hands it may come and any such
responsibility or liability is expressly disclaimed.
These results contain forward looking statements, which are
unavoidably subject to risk and uncertainty because they relate to
events and depend upon circumstances that will occur in the future.
It is believed that the expectations set out in these forward
looking statements are reasonable but they may be affected by a
wide range of variables which could cause future outcomes to differ
from those foreseen. All statements in these results are based upon
information known to the company at the date of this report. Except
as required by law, the company undertakes no obligation to
publicly update or revise any forward looking statement, whether as
a result of new information, future events or otherwise.
CEO Review
It has been another year of significant macro volatility. Our
first quarter was one of increased optimism, as lockdowns started
to ease and efficacious COVID-19 vaccines began to emerge. Then,
less than a fortnight after the first UK vaccination was
administered on 8 December 2020, the UK was forced back into full
lockdown, the Brexit transition period ended, with many loose ends,
and the US Capitol building was stormed.
It has been a little calmer since, but many things remain far
from normal. The time taken to administer vaccines across all age
groups has meant our staff have continued to predominantly work
from home, delivering our services remotely as effectively and
efficiently as they can, and I thank them sincerely for their
resilience, hard work and good humour throughout these trying
times.
Understandably, the confidence of our people about returning to
office working remains low, with concerns about travelling on
crowded public transport being the major anxiety. As long as the
threat of another UK lockdown remains a serious possibility, we
will retain our voluntary office attendance policy.
We have engaged with our staff when considering options for
returning to the office and we will continue to take account of
their concerns and remain agile, as we look to determine the
appropriate shape of new office environments and establish working
patterns that not only support the success of the business, but
also deliver positive outcomes for our people.
Headlines
The investment platform market has proven resilient throughout
recent uncertainty and Transact has grown strongly over the course
of the last financial year.
We have continued to bring new clients on board, increasing
clients on the investment platform by 9% over the year. This has
been achieved through maintaining the number of advisers that use
Transact and adding a further 5% through the period. At the end of
the year our clients exceeded 208k, with more than 6.5k advisers
actively using Transact.
Gross inflows* were 34% up on last year at GBP7.70 billion,
reflecting strong growth not just from the prior year, but also
from pre COVID-19 levels. In the early stages of the first release
from lockdown, outflows spiked slightly, but this did not last and
they quickly reverted to expected levels, resulting in very strong
net inflows of GBP4.95 billion, up 38% year-on-year.
The combination of very strong net inflows and positive market
movements helped increase FUD at the year-end to GBP52.11 billion,
an increase of 27% over the year.
Revenue in the year has increased to GBP123.7 million, (+15%).
This is predominantly generated by Transact, although t he purchase
of Time for Advice (T4A) has made a contribution since January.
Core expenses across the Group have been sensibly managed
throughout the year. T4A is loss making at this time, due to the
costs of system development and an expansion in the number of sales
and support staff. Additionally, non-underlying expenses* resulting
from acquisition processes have also been absorbed. After these
costs, the Group's profit before tax has increased by 14% to
GBP63.1 million.
Market background
Equity market performance was strong through the first half of
our financial year, with markets responding well to the US election
result and the approval for multiple versions of COVID-19
vaccinations. This positivity was reflected in the advised platform
market, with strong growth of gross inflows, which first returned
to pre-COVID-19 levels and then, from early 2021, exceeded them.
The timing of this recovery led to strong tax year end
performance.
The second half of the year continued in a similar vein, as a
relatively successful vaccine rollout programme in the UK brought
hope of a return to normality. The Christmas lockdown gradually
began to ease and businesses started to return to more usual
working practices.
There has also been considerable activity in the investment
platform market throughout the year, resulting in several changes
of platform ownership. It is too early yet to be clear how much of
this activity will result in true consolidation and a reduction in
the number of platforms, and how much will be rebranding and
ownership consolidation. Even with this activity, o ver the full
year, the retail advised platform market FUD grew by 20% from
GBP460.52 billion (September 2020) to GBP553.28 billion (September
2021).
Our activity
In January, we took the opportunity to broaden the services we
offer to advisers by completing the acquisition of T4A, a
specialist software provider for financial planning and wealth
management firms based in Norwich. This expands the Group's
offering of adviser services through T4A's CURO software, an
adviser back office system. The acquisition gives access to T4A's
existing base of adviser users, their system development expertise
and service support. Like Transact, T4A is focused on the delivery
of function rich systems, with high quality support and we believe
CURO will be complementary to Transact.
We also considered an opportunity for the non-organic growth of
the investment platform business, engaging in the acquisition
process for the Nucleus platform. Ultimately, due to the high
hurdles we set in order to proceed with any acquisition not being
satisfactorily cleared, we decided to withdraw from this
process.
Focusing on organic growth, we have continued delivering
incremental additions to the functionality of our investment
platform. Continuing states of lockdown have added to the impetus
to deliver increased online optionality. We have been able to
achieve this through changes to our development schedule,
refocussing our software developers on providing tools to remove
the need for paper documents and wet signatures. Successful
delivery of these developments has resulted in NextWealth revising
our rating upwards to Digital Process Champion in April 2021.
Whilst we will continue to extend the capability of our online
systems, we will also continue to provide support to those users
who are not yet ready to embrace these developments. With
significantly increased flows over the year, this has increased
pressure on our service teams to maintain the service standards we
set ourselves. Recruitment of experienced staff has proven more
difficult in recent months, as COVID-19 has led many people to
consider their priorities for the future and, globally, many are
opting to make permanent changes to their lifestyles. We have, and
will continue to, engage with our colleagues, asking for their
views on the shape of future office working.
We have again r educed the cost of Transact to clients,
following our process of responsible pricing. Reductions were made
to both ad valorem and buy transaction charges.
Transact has seen further small growth in market share of FUD.
As well as consistently ranking in the top three firms for gross
inflows each quarter, and also retaining top spot in annual
independent research studies, Investment Trends and CoreData.
We are a generally low-carbon business, but we are mindful of
our environmental responsibilities and we are developing our
climate strategy. To this end, we engaged Willis Towers Watson to
assess and help us enhance our alignment to the Task Force on
Climate-related Financial Disclosure (TCFD) recommendations, in
preparation for disclosure and to help boost our Environmental
Social and Governance (ESG) considerations. We were also keen to
gain insights into our current sustainability positioning. The
outputs from this work are being used to develop our ESG strategy,
and are expected to be finalised by June 2022. Implementation of
the strategy will commence after the strategy is finalised.
The outlook
The positivity from the last three months of the 2021 financial
year have continued in to the start of the new financial year.
However, much uncertainty persists, with COVID-19 and impacts of
the end of the Brexit transition still emerging.
From 1 January 2022, the new Investment Firms Prudential Regime,
setting out post-Brexit regulations for investment firms, will come
in to force. Among other impacts, these rules will result in higher
capital requirements for our investment firm. This has been planned
for, with sufficient capital having been built up and retained.
The advised platform market is expected to continue to grow 18%
in 2022. We aim to continue to grow our share, as we refine our
systems and processes, further developing and expanding the
financial infrastructure and associated services we offer.
We will help drive the development of CURO and grow the adviser
service team at T4A, ensuring that increasing sales volumes are
properly supported. However, we expect T4A to continue to be
loss-making next year, as it builds its capability to support a
larger adviser base. Additionally, t he acquisition of T4A will
result in an increase in non-underlying expenses for the next three
years, but we believe this acquisition and the development of the
CURO system will then deliver an independent profit stream, as well
as future strategic benefits derived from closer integration
between the Transact system, Transact Online and CURO.
We will continue investing in our staff. We will support them
and seek to ensure we arrive at an optimum work-life balance that
still achieves our strategic objectives. We realise our people are
front and centre of our success. We will improve our working
environment, as our main office lease draws to an end and we
consider new premises. We aim to use this opportunity to improve
the well-being of staff and to assist with managing our
environmental impact, a full plan for which is being developed and
acted on. We will do this whilst managing our cost base prudently,
and continue to deliver fair returns for all of our
stakeholders.
Alexander Scott
Chief Executive Officer
15 December 2021
FINANCIAL REVIEW
Strength in numbers
Our financial year 2020 was marked by global market turbulence
and worried investors, due to the speed at which the pandemic
ground the world to a locked down halt. Despite this, we produced a
resilient set of results.
Financial year 2021 started off in a similar vein, but then news
broke that an effective vaccine had been developed, followed by the
successful roll out of the British vaccination programmes. As
positive news emerged, pre-pandemic life began to slowly resume and
financial markets recovered, with the FTSE 100 growing 21%
year-on-year, to end September 2021 at 7,086 points (September
2020: 5,866 points). However, future impacts of Brexit on the
British economy remain on the horizon and the potential disruption,
as the pandemic ebbs and flows, is also an economic risk, possibly
for years to come.
FUD started the financial year at GBP41.09 billion and grew an
impressive 27%, to end the year at GBP52.11 billion. The increase
in FUD is not solely attributable to the financial markets and is
also due to record net flows onto the platform for the financial
year.
The first quarter of the year was impacted heavily by continuing
lockdowns and COVID-19 cases spiking, as the Delta variant took
hold, resulting in net flows for the quarter remaining subdued at
GBP840 million. However, from the second quarter of our financial
year onwards, and as the positive impact of the vaccine programme
emerged, net flows increased dramatically, with each quarter
exceeding GBP1.3 billion in net flows. The market recovery and
strong net flows has resulted in increased revenue and increased
profits.
FUD , inflows and outflows
For the financial year ended
30 September
2021 2020
GBPm GBPm
Opening FUD 41,093 37,799
Inflows 7,695 5,750
Outflows (2,744) (2,160)
-------------------- ------------------------------ -----------------------------
Net flows 4,951 3,590
Market movements 6,297 (224)
Other movements(1) (229) (72)
-------------------- ------------------------------ -----------------------------
Closing FUD 52,112 41,093
(1) Other movements includes dividends, interest, fees and tax
charges and rebates.
The year's g ross inflows were GBP7.70 billion (2020: GBP5.75
billion) and outflows remained within tolerance at GBP2.74 billion
(2020: GBP2.16 billion), resulting in increased net inflows of
GBP4.95 billion (2020 GBP3.59 billion), up 38% year-on-year. The
increase in net flows is one that we have focused on, as it
demonstrates the resilience of the platform and our impressive
retention rates, as our people have strived to maintain service
levels throughout a year of, for the most part, working
remotely.
This performance was achieved through continuing focus on doing
what we do well, and continuing to make it better and more
efficient for the future. We continued to develop the delivery of
our high quality service by investing in our people and our
proprietary technology. These developments allowed us to benefit
from ongoing process efficiencies, which are reflected in our
increased operating margin.
Strategic developments
On 11 January 2021, IntegraFin Holdings plc (IHP) completed the
acquisition of T4A, a specialist software provider for financial
planning and wealth management. The acquisition supports IHP's
strategy to provide platform and associated services to clients and
their advisers.
The acquisition provides IHP with ownership of T4A's CURO
software, which supports advisers through their advice process,
plus access to T4A's existing base of adviser users, their system
development expertise and service support. Ongoing support and
development of CURO will aid T4A in achieving profitability. Over
time, IHP's Transact platform will integrate with CURO in selected
areas, and this will further enhance service to advisers and
clients.
The acquisition cost comprised an up-front cash payment of
GBP8.6 million, plus GBP8.6 million of deferred consideration,
payable in tranches over the next four years. Additional
consideration of up to GBP8.6 million may also be payable in
January 2025, although this is contingent on T4A meeting certain
performance targets over each of the next four years.
The cash payments, plus GBP0.4 million of the deferred and
additional consideration, were considered part of the purchase
cost, whilst the remaining fair value of GBP12.5 million deferred
and additional consideration is required, under IFRS 3 - Business
Combinations, to be treated as post-combination remuneration over
the four years from January 2021 to December 2024. The expense
recognised by IHP in respect of the deferred and additional
consideration and included in staff costs, from January to
September 2021, was GBP2.2 million, this will rise to GBP3 million
in financial year 2022.
On acquisition, the Group recognised intangible assets of
GBP4.3m, relating to T4A's CURO software, the CURO brand and T4A's
customer relationships. These assets are being amortised over their
respective useful lives, resulting in GBP0.3m amortisation expenses
in this financial year. Further details can be found in note
13.
The fair value of identifiable assets and liabilities acquired,
including the intangibles recognised on acquisition and the
deferred tax liability arising upon recognition of the intangible
assets, was GBP3.6 million, leading to the recognition of GBP5.3
million goodwill. The main reason the goodwill has arisen is due to
the further potential value of the T4A software, CURO, after
further development, which is a complementary offering to Transact
and is expected to enhance the overall service that can be offered
to advisers and clients.
With effect from the date of acquisition on 11 January, T4A's
accounts have been consolidated into IHP's results, resulting in
the inclusion of GBP2.4m of revenue achieved from 11 January to 30
September 2021, and losses after tax of GBP1.0 million in the same
period.
T4A will require enhanced investment for the next two years, due
to the business investing in its software development through
recruitment of developers, and also through growing the sales and
support teams to ensure the growing customer base is fully
supported. T4A's loss in financial year 2021 was expected. T4A is
also expected to be loss-making throughout financial year 2022, and
is expected to start making a monthly profit towards the end of
financial year 2023.
Financial performance
Financial year 2021 saw the Group benefitting from the financial
markets recovering and the return of investor confidence, with new
highs generated in revenue and operating profit.
Strong positive net inflows of GBP4.95 billion, achieved through
our ability to attract new inflows and also retain business already
on the platform, coupled with market recovery adding GBP6.30
billion to the platform, resulted in a year-on-year increase in FUD
of GBP11.02 billion. This drove revenue growth and, together with
to a measured approach to our expense base, resulted in increased
profits .
For the financial year ended
30 September
2021 2020
GBPm GBPm
Revenue 123.7 107.3
Cost of sales (1.5) (0.8)
------------------------------------------------ ---------- --------
Gross profit 122.2 106.5
------------------------------------------------ ---------- --------
Expenses (55.5) (51.0)
Non-underlying expenses (3.3) -
Total administrative expenses (58.8) (51.0)
Credit loss allowance on financial
assets (0.2) (0.2)
------------------------------------------------ ---------- --------
Operating profit attributable to
shareholder returns 63.2 55.3
------------------------------------------------ ---------- --------
Change in investment contract liabilities (2,736.1) 82.9
Fee and commission expenses (204.1) (137.6)
Investment returns 2,940.2 54.7
Interest expense (0.2) (0.2)
Interest income 0.1 0.2
Profit before tax attributable to
shareholder returns 63.1 55.3
Net policyholder income/(loss) attributable
to policyholder returns 31.5 (3.1)
Policyholder tax (31.0) 3.1
Tax on ordinary activities (12.5) (9.8)
Profit after tax 51.1 45.5
------------------------------------------------ ---------- --------
Revenue increased by 15% to GBP123.7 million (2020: GBP107.3
million), this includes GBP2.4 million of T4A revenue for the
period January to September 2021.
Total gross profit in the financial year to 30 September 2021
increased by GBP15.8 million, or 15%, to GBP122.2 million from
GBP106.4 million. This increase was achieved after a reduction in
the annual commission income charge and a reduction in the
threshold at which we rebate buy commission, and reflects the
increases in the value of FUD, number of clients and number of tax
wrappers (on which we levy a quarterly charge) held on the
platform.
Components of revenue
For the financial year ended
30 September
2021 2020
GBPm GBPm
Investment platform - annual commission
income 107.7 94.5
Investment platform - wrapper fee
income 10.6 9.7
Investment platform - other income 3.0 3.1
----------------------------------------- --------------------- ---------------------
Total investment platform revenue 121.3 107.3
T4A revenue 2.4 -
----------------------------------------- --------------------- ---------------------
Total Group revenue 123.7 107.3
----------------------------------------- --------------------- ---------------------
The revenue from operating our award winning investment platform
comprises three elements. Two of these elements, annual commission
income (an annual, tiered fee on FUD) and wrapper fee income (
quarterly wrapper fees for each of the tax wrapper types clients
hold) constitute our recurring revenue. The third element is other
income and includes buy commission charged on asset purchases.
Annual commission income increased by GBP13.2 million, or 14%,
to GBP107.7 million (2020: GBP94.5 million). This growth was
achieved through growth in net inflows of 38% and growth in average
FUD of 27%, reflecting the uplift in financial markets from the
start of calendar year 2021.
Wrapper administration fee income increased by GBP0.9 million,
or 9%, to GBP10.6 million (2020: GBP9.7 million). This reflects the
steady net increase in the number of open tax wrappers on the
platform.
Recurring revenue streams constituted 98% (2020: 97%) of total
investment platform revenue.
Other income, mainly buy commission and dealing charges, reduced
by 3%, GBP0.1 million, to GBP3.0 million (2020: GBP3.1 million).
The primary reason for the decrease was a further annual reduction
in the buy commission rebate threshold. The portfolio value
required for clients to receive the rebate was reduced from GBP0.4
million to GBP0.3 million, with effect from March 2021.
Administrative expenses
Total administrative expenses increased by GBP7.7 million, or
15%, to GBP58.9 million (2020: GBP51.0 million). The increase was
mainly due to an increase in staff costs, as well as some
non-underlying expenses.
For the financial year ended
Administrative expenses 30 September
2021 2020
GBPm GBPm
Staff costs 41.6 36.9
Occupancy 1.4 2.0
Regulatory and professional fees 7.6 7.0
Other income - tax relief due to
shareholders (2.2) (1.1)
Non-underlying expenses 3.3 -
Other costs 3.9 3.6
---------------------------------- --------------------- --------------------
Total expenses 55.6 48.4
Depreciation and amortisation 3.1 2.6
---------------------------------- --------------------- --------------------
Total operating expenses 58.7 51.0
---------------------------------- --------------------- --------------------
Staff costs
Staff costs increased by GBP4.7 million, or 13%, to GBP41.6
million (2020: GBP36.9 million).
The costs of T4A's staff of GBP2.4 million are recognised for
the first time, and relate to the period from acquisition on 11
January 2021 to 30 September 2021. If we exclude the impact of
T4A's staff costs, in order to generate a more meaningful
comparison with the prior year, staff costs have risen by GBP2.3
million, or 6%.
Average staff numbers increased from 494 to 543, an increase of
10%. However, this includes the average number of staff employed by
T4A in the period from January to September 2021, which was 42. If
we exclude the impact of T4A, the average number of staff increased
from 492 to 501, an increase of 2%. This relatively modest rise in
staff numbers, in light of such strong inflows, was aided by
efficiency gains through software development.
The rise in staff costs in the period, excluding T4A, was
attributable to the net effects of general inflationary increases.
We maintained our annual staff payrise in June and our FY21
discretionary bonus has been accrued for in the year.
Staff share scheme costs, both the Share Incentive Plan (SIP)
for all staff and the Performance Share Plan (PSP) for management,
did not increase materially.
We operate a defined contribution pension scheme for our staff.
The Company-paid contribution has been 9% of annual salary since
FY19.
Occupancy
Occupancy costs decreased by GBP0.6 million, due to the receipt
of a backdated rates rebate in FY21 for the head office at
Clement's Lane. The rebate will be ongoing to the expiry of the
lease in 2023.
Regulatory and professional fees
Regulatory and professional fees increased by GBP0.6 million, or
9%, to GBP7.6 million. The most significant increase was in
professional fees and was mostly due to the inclusion of T4A's
professional fees for the relevant period of GBP0.4 million.
Other income - tax relief due to shareholders
Following the review of the tax provision methodology in FY20,
excess tax provisions that arise, due to the deduction of corporate
expenses in the policyholder tax calculation, are returned to
shareholders annually. This amounted to GBP2.2 million in FY21
(2020: GBP1.1 million) of which GBP1.1 million is not expected to
be recurring.
Non-underlying expenses*
Non-underlying expenses are those outside the normal course of
business, they therefore do not reflect the underlying performance
of IHP or the Group. The following non-underlying expenses were
incurred throughout the year:
-- GBP1.1 million relating to the acquisition of T4A and
consideration of the acquisition of Nucleus; and
-- GBP2.2 million post-combination remuneration paid to the
original shareholders of T4A. This is comprised of the deferred and
additional consideration payable in relation to the acquisition of
T4A and is recognised as remuneration over four years from January
2021 to December 2024. This non-underlying expense is expected to
be GBP3 million in financial years 2022 to 2024, before reducing to
GBP0.8 million in financial year 2025.
Depreciation and amortisation
Depreciation and amortisation charges increased by GBP0.5
million year-on-year and GBP0.3 million of this is attributable to
the amortisation of the intangible assets that have arisen due to
the acquisition of T4A.
The other GBP0.2 million is due to additional depreciation on
property, plant, and equipment acquired throughout the year.
Total capitalised expenditure for the financial year was GBP0.7
million compared with GBP0.9 million in the prior year. The main
reason for the fall in FY21 was the purchase of equipment in FY20
to facilitate the move to home working, as lockdowns were
introduced due to the pandemic.
Net income attributable to policyholder returns, and
policyholder tax
Net income attributable to policyholder returns increased by
GBP34.6 million, from an expense of GBP3.1 million in FY20 to
income of GBP31.5 million in FY21. Correspondingly, policyholder
tax increased by GBP34.6 million, from a tax credit of GBP3.1m in
FY20 to a tax charge of GBP31.5 million in FY21. Both of these
increases were due to large gains on investments held for the
benefit of policyholders, as a result of the recovery in financial
markets during FY21.
Profit before tax attributable to shareholder returns
In the financial year to 30 September 2021, our operating margin
decreased from 52% to 51%. The reduction was due to the
non-underlying expenses incurred in FY21. If these expenses are
excluded, the operating margin has increased year-on-year to
54%.
After including interest income on corporate cash, the interest
expense arising from the implementation of IFRS 16, and returns on
corporate gilt holdings, profit before tax in the financial year to
30 September 2021 was GBP63.1 million, an increase of 14% on the
prior year.
Tax
The Group has operations in three tax jurisdictions, being UK,
Australia and Isle of Man, resulting in profits being subject to
tax at three different rates. However, the vast majority of the
Group's income, 96%, is earned in the UK.
Tax on ordinary activities described below solely comprises the
Group's 'shareholder corporation tax', which is distinguished from
the 'policyholder tax' that the Group collects and remits to HMRC
in respect of ILUK, which is taxed under the 'I minus E' tax
regime.
Tax on ordinary activities for the year increased by GBP2.8
million, or 29%, to GBP12.5 million (2020: GBP9.8 million) due to
increased profits. Our effective rate of tax over the period
increased to 20% (2020: 18%). The increase in effective rates
compared to FY20 was due to the non-underlying expenses incurred in
FY21, which were disallowable for tax purposes.
Our tax strategy can be found at: https://
www.integrafin.co.uk/legal-and-regulatory-information/
Earnings per share
2021 2020
GBPm GBPm
Profit after tax for the period 51.1 45.5
Average number of shares - basic
EPS 331.0m 331.2m
Average number of shares - diluted
EPS 331.3m 331.3m
Earnings per share - basic and
diluted 15.4p 13.7p
Earnings per share, both basic and diluted, increased by 12.4%
on prior year.
Consolidated statement of financial position
In the consolidated statement of financial position, the
material items that merit comment include the following:
Intangible assets (note 13)
The Group's intangible assets as at 30 September 2021 have
increased by GBP9.3 million, or 72%, to end the financial year at
GBP22.3 million (2020: GBP13.0 million). The intangible assets
comprise goodwill of GBP13.0 million arising from the purchase of
Integrated Application Development Pty Ltd ( IAD) in July 2016,
plus goodwill of GBP5.3 million and intangible assets of GBP4.0
million, both arising from the acquisition of T4A in January 2021.
Goodwill is tested for impairment annually.
Right-of-use asset and corresponding lease liability (notes 15
and 26)
The right-of-use assets have been depreciated through the year
and end the year at GBP3.6 million (2020: GBP4.0 million). The
lease liabilities have also reduced from the net effect of rent
payments under the terms of the respective lease agreements and
interest charges, and end the year at GBP5.0 million (2020: GBP6.1
million). An additional right-of-use asset and lease liability was
recognised in FY21, as the lease on the office building in
Australia was renewed.
Deferred acquisition costs and deferred income liability (note
17)
Following a review of the terms of the agreements relating to
establishment charges paid to ILUK and ILInt policyholders'
financial advisers, management has concluded that the Group is
acting in an agency capacity between the policyholders and their
financial advisers, rather than as a principal. It therefore should
not recognise the deferred acquisition costs as contract costs, nor
does it have future service obligations in respect of the deferred
fees to justify the recognition of the corresponding deferred
income liability. The deferred acquisition costs and deferred
income liabilities have therefore been derecognised in the
financial year ended 30 September 2021, to bring accounts in line
with the accounting standards.
The impact is a reduction in both assets and liabilities of
GBP53.5m. The treatment has had no impact on the profit or loss or
net assets of the Group.
Investments and cash held for the benefit of policyholders and
liabilities for linked investment contracts (notes 19, 20 and
21)
ILUK and ILInt write only unit-linked insurance policies. They
match the assets and liabilities of their linked policies such
that, in their own individual statements of financial position,
these items always net off exactly. These line items are required
to be shown under IFRS in the consolidated statement of profit or
loss, the consolidated statement of financial position and the
consolidated statement of cash flows, but have zero net effect.
Investments held for the benefit of ILUK policyholders have
increased to GBP19.68 billion (2020: GBP15.19 billion) and to
GBP2.10 billion (2020: GBP1.53 billion) for the benefit of ILInt
policyholders. Cash held for the benefit of ILUK policyholders has
decreased to GBP1.17 billion (2020: GBP1.28 billion) and cash held
for the benefit of ILInt policyholders has decreased to GBP97.5
million (2020: GBP102.7 million). Liabilities for linked investment
contracts increased to GBP23.05 billion (2020: GBP18.11 billion).
This 27% year-on-year increase reflects the growth in the value of
FUD held in life insurance wrappers, which was attributable to the
net effect of growth in premiums, offset by claims, and the market
recovery in 2021.
Deferred tax liabilities (note 27)
Deferred tax liabilities increased by GBP20.5 million to GBP29.5
million (2020: GBP9.0 million). This increase was primarily due to
market gains on the assets held in ILUK's life tax wrappers during
the year. The unrealised gains are spread over the next seven
years, leading to a deferred tax liability. Sufficient cash is held
by ILUK to meet this liability. A deferred tax liability of GBP0.8m
has also been recognised in relation to the fair value adjustments
upon the acquisition of T4A. See note 13 for further details.
Provisions (note 29)
Provisions have decreased in FY21 by GBP7.4 million. This is
largely due to tax charges deducted from ILUK policyholders being
paid to HMRC in the period, due to the recovery in the financial
markets through the year.
Cash flows
Shareholder cash and cash equivalents (note 21)
Shareholder cash increased from GBP154.1 million at 30 September
2020 to GBP176.1 million at 30 September 2021. The increase of 14%
reflects the cash-generative nature of the business and the
continuing strength of liquidity within the Group. The main driver
of the increase was operating profit, and the most significant cash
outflows came in the form of our equity dividends paid in the year
of GBP27.7m (2020: GBP26.2m) and our acquisition of T4A, which
required a cash outflow of GBP7.9m (2020: GBPnil).
Policyholder cash and cash equivalents (note 21)
Cash held for the benefit of policyholders has decreased from
GBP1.39 billion to GBP1.27 billion. This is a result of the
improved market outlook in FY21, which has encouraged policyholders
to move their cash holdings into other investments.
Liquidity and capital management
At 30 September 2021 the Group held shareholder cash and cash
equivalents of GBP176.1 million (2020: GBP154.1 million). Cash
generated through trading also covered dividend payments totaling
GBP28.5 million. This comprised GBP18.6 million second interim
dividend in respect of the financial year 2020 (2019: GBP17.2
million), paid in January 2021 and GBP9.9 million first interim
dividend in respect of the first half of financial year 2021 (2020:
GBP8.9 million), paid in June 2021.
To enable the Group to offer a wide range of tax wrappers there
are three regulated entities within the Group; a UK investment
firm, a UK life insurance company and an Isle of Man life insurance
company. Each regulated entity maintains capital well above the
minimum level of regulatory capital required, ensuring sufficient
capital remains available to fund ongoing trading and future
growth. Cash and investments in short-dated gilts are held to cover
regulatory capital requirements and tax liabilities.
The regulatory capital requirements and resources in ILUK and
ILInt are calculated by reference to economic capital-based
regimes, and therefore do not directly equate to IFAL's
expense-based regulatory capital requirements. These bases are
determined by the appropriate regulations that apply for each of
the companies.
Regulatory Capital
For the financial year ended
30 September 2021
Regulatory Capital Regulatory Capital
requirements resources Regulatory Cover
GBPm GBPm %
IFAL 25.4 37.2 146.7
ILUK 214.1 268.7 125.5
ILInt 23.9 43.4 181.1
For the financial year ended
30 September 2020
Regulatory Capital Regulatory Capital
requirements resources Regulatory Cover
GBPm GBPm %
IFAL 24.0 34.1 141.8
ILUK 170.4 239.3 140.4
ILInt 18.5 33.4 180.7
The new investment firm capital regime will apply to IFAL from 1
January 2022. We have performed projections which indicate that
from this point we will continue to maintain capital in excess of
the new regulatory requirements.
All of the Company's regulated subsidiaries continue to hold
regulatory capital resources well in excess of their regulatory
capital requirements. We will maintain sufficient regulatory
capital and an appropriate level of working capital. We will use
retained capital to further invest in the delivery of our service
to clients, pay dividends to shareholders and provide fair rewards
to staff.
Capital
For the financial year ended
30 September 2021
GBPm
Total equity 163.3
Loans and receivables, intangible
assets and property, plant and
equipment (31.2)
----------------------------------- -----------------------------
Available capital pre dividend 132.1
Interim dividend declared (23.19)
Available capital post dividend 108.91
Additional risk appetite capital (58.4)
----------------------------------- -----------------------------
Surplus 50.51
Additional risk appetite capital is capital the board considers
to be appropriate for it to hold to ensure the smooth operation of
the business such that it is able to meet future risks to the
business plan and future changes to regulatory capital requirements
without recourse to additional capital.
The board considers the impact of regulatory capital
requirements and risk appetite levels on prospective dividends from
all of its regulated subsidiaries.
Our Group's Pillar 3 document contains further details and can
be found on our website at:
https://www.integrafin.co.uk/legal-and-regulatory-information/
Pillar 3 Disclosures.
As stated in the Chair's report, t he board has declared a
second interim dividend for the year of 7.0 pence per ordinary
share, taking the total dividend for the year to 10.0 pence per
ordinary share (2020: 8.3 pence per ordinary share)
Given the net cash, liquidity and capital coverage positions as
set out above, the Group is well-positioned to fund the GBP23.193
million dividend.
2021 2020
Dividend Type Share Class GBPm GBPm
--------------------------- ------------- ---------- ----------
Ordinary All 33.1 27.5
Per share
Ordinary - first interim All 3.0 pence 2.7 pence
Ordinary - second interim All 7.0 pence 5.6 pence
Given the net cash, liquidity and capital coverage positions as
set out above, the Group is well positioned to fund the GBP18.6
million dividend.
15 December 2021
Key risks
There are factors within and outside our control that may affect
the achievement of our strategic objectives. We aim to mitigate
exposures that are outside our risk appetite where possible. The
key risks associated with our strategic objectives are:
1. Stock market volatility : Financial year 2020 was
characterised by financial markets plunging, followed by daily
market swings, as the severity of the pandemic emerged. Financial
year 2021, however, has largely been one of recovery, as COVID-19
vaccines have been developed and rolled out worldwide and investor
confidence has returned. The real impact of Brexit and the UK's
deal with the EU is yet to fully emerge and it has been masked by
the economic shock of the pandemic. However, it is expected that
Brexit will impact stock markets for the foreseeable future. Stock
market volatility impacts the value of our investment platform FUD
and, therefore, revenue.
Risk management and control : The risk of stock market
volatility, and the impact on revenue, is mitigated through a wide
asset offering which ensures we are not wholly correlated with one
market, and which enables clients to switch assets in times of
uncertainty. In particular, clients are able to switch into cash
assets, which remain on our investment platform. Our wrapper fees
are not impacted by stock market volatility, as they are a fixed
quarterly charge. Due to the acquisition of T4A, we also now have
another revenue stream which is not affected by stock market
movements. We closely monitor and control expenses across the
Group, which assists in maintaining profit in turbulent times.
2. Service standards failure: Our high levels of client and
adviser retention are dependent upon our consistent and reliable
levels of service. Failure to maintain these service levels would
affect our ability to attract and retain business.
Risk management and control: We manage the risk of service
standards failure by ensuring our service standards do not
deteriorate. This is achieved by providing our client service teams
with extensive initial and ongoing training, supported by
experienced subject matter experts and managers. We strive to
ensure staffing levels remain appropriate, through forecasting and
tracking levels of business and analysing management information on
team performance. We recruit high calibre staff as necessary.
Service levels are monitored and quality checked and any deviation
from expected service levels is addressed. We also conduct
satisfaction surveys to ensure our service levels are still
perceived as excellent by our clients and their advisers. Service
standards are also dependent on resilient operations, both current
and forward looking, ensuring that risk management is in place.
3. Increased competition: We operate in competitive markets.
Increased levels of competition for adviser and their clients;
improvements in offerings from other investment platforms; and
consolidation in the adviser market may all make it more
challenging to attract and retain business.
Risk management and control: Competitor risk is mitigated by
focusing on providing exceptionally high levels of service,
developing new products and platform functionality and being
responsive to client and financial adviser demands whilst
maintaining an efficient expense base. This allows us to continue
to increase the value for money of our service by r educing client
charges, subject to profit and capital parameters, when deemed
appropriate.
4. Diversion of development resources: Maintaining our quality
and relevance requires ongoing investment. Any reduction in
investment due to diversion of resources to other non-discretionary
expenditure (for example, a change in the taxation regime, or other
regulatory developments) may affect our competitive position.
Risk management and control: The risk of reduced investment is
managed through a disciplined approach to expense management and
forecasting. We horizon scan for upcoming regulatory and taxation
regime changes and maintain contingency to allow for unexpected
expenses e.g. UK Financial Services Compensation Scheme (FSCS)
levies, which ensures we do not need to compromise on investment in
our platform to a degree that affects our offering.
5. Uncontrolled expenses: Higher expenses than expected and
budgeted for would adversely impact cash profits. The key
constituent of expenses is salary costs, but other expenses are
more likely to change unexpectedly, for example legal, compliance
or regulatory costs and levies.
Risk management and control: The most significant element of our
expense base is staff costs. These are controlled through modelling
staff requirements against forecast business volumes, factoring in
efficiencies that it is expected will emerge through platform
development. Any expenditure request that deviates from plan is
rigorously challenged and must be approved before it is
incurred.
6. Capital strain: Unexpected, additional capital requirements
imposed by regulators may negatively impact our solvency coverage
ratios.
Risk management and control: We actively monitor the current and
expected future regulatory environment and ensure that all
regulatory obligations are or will be met. By doing so, we ensure
we have a proactive control to mitigate the potential for capital
strain. Additionally, we carry out an assessment of our capital
requirements, which includes assessing the regulatory capital
required. We retain a capital buffer over and above the regulatory
minimum solvency capital requirements.
7. Staff retention: Inability to retain staff and attract new
staff, due to changing cultural expectations, unrealistic salary
expectations and competitor pressure.
Risk management and control: We ask all leavers to complete a
questionnaire which details their reasons for leaving the Group. We
can then monitor and proactively seek to act should clear trends
emerge. We perform salary benchmarking exercises to ensure we do
not fall behind the prevailing market rate and we ensure our total
compensation package is attractive. This is coupled with
comprehensive training for new starters and opportunities for
career development within the Group. We are also implementing a
hybrid working model to accommodate shifting cultural expectations
around office working.
STATEMENT OF DIRECTORS' RESPONSIBILITIES
The directors are responsible for preparing the Annual Report
and the financial statements in accordance with the Companies Act
2006 and for being satisfied that the Annual Report and financial
statements, taken as a whole, give a fair, balanced and
understandable view which provides the information necessary for
shareholders to assess the Company's position and performance,
business model and strategy.
Company law requires the directors to prepare financial
statements for each financial year.
Under that law the directors are required to prepare the Group
financial statements and have elected to prepare the Company
financial statements in accordance with international accounting
standards in conformity with the requirements of the Companies Act
2006 and in accordance with international financial reporting
standards adopted pursuant to Regulation (EC) No 1606/2002 as it
applies in the European Union.
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 Company and of the
profit or loss for the Group and Company for that period.
In preparing the financial statements, the directors are
required to:
-- select suitable accounting policies and then apply them consistently;
-- make judgements and estimates that are reasonable and prudent;
-- state whether they have been prepared in accordance with
international accounting standards in conformity with the
requirements of the Companies Act 2006 and in accordance with
international financial reporting standards adopted pursuant to
Regulation (EC) No 1606/2002 as it applies in the European Union, ,
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 Company and Group
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 show and explain the Group's transactions, disclose
with reasonable accuracy at any time the financial position of the
Company and enable them to ensure that the financial statements
comply with the Companies Act 2006 and, as regards the Group
financial statements, Article 4 of the IAS Regulation.
They are also responsible for safeguarding the assets of the
Company and 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.
Directors' responsibilities pursuant to DTR4
The directors confirm to the best of their knowledge:
-- The Group financial statements have been in accordance with
international financial reporting standards adopted pursuant to
Regulation (EC) No 1606/2002 as it applies in the European Union
and Article 4 of the IAS Regulation 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 the parent company, together with a description of the
principal risks and uncertainties that they face.
The current directors, at the date of approval of this report,
confirm that:
-- they have taken all of the steps that they ought to have
taken as directors to make themselves aware of any information
needed by the Company's auditor for the purposes of the audit, and
to establish that the auditor is aware of that information;
-- they are not aware of any relevant audit information of which the auditor is unaware;
-- to the best of their knowledge, the financial statements,
prepared in accordance with the applicable set of accounting
standards, give a true and fair view of the assets, liabilities,
financial position and profit or loss of the issuer and the
undertakings included in the consolidation taken as a whole;
-- the management report includes a fair review of the
development and performance of the business and the position of the
issuer and the undertakings included in the consolidation taken as
a whole, together with a description of the principal risks and
uncertainties that they face; and
-- 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 performance, strategy and
business model of the Company and Group.
The directors consider it appropriate to adopt the going concern
basis of accounting in preparing the consolidated financial
statements as they believe the Group will continue to be in
business, and meet any liabilities as they fall due, for a period
of at least twelve months from the date of approval of the
financial statements.
By order of the board,
Helen Wakeford
Company Secretary
15 December 2021
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
Note 2021 2020
GBP'000 GBP'000
Revenue
Fee income 5 123,670 107,320
Cost of sales (1,490) (865)
Gross profit 122,180 106,455
Administrative expenses 8 (58,738) (51,016)
Credit loss allowance on financial
assets 23 (230) (176)
Net income/(loss) attributable
to policyholder returns 12 31,526 (3,066)
------------------------------------------- ----- ------------ -----------
Operating profit 94,738 52,197
------------------------------------------- ----- ------------ -----------
Operating profit/(loss) attributable
to policyholder returns 12 31,526 (3,066)
Operating profit attributable
to shareholder returns 63,212 55,263
Change in investment contract
liabilities (2,736,063) 82,895
Fee and commission expenses 20 (204,123) (137,536)
Investment returns 10 2,940,167 54,677
Interest expense 26 (167) (233)
Interest income 9 94 256
------------------------------------------- ----- ------------ -----------
Profit on ordinary activities
before taxation 94,646 52,256
------------------------------------------- ----- ------------ -----------
Profit/(loss) on ordinary activities
before taxation attributable
to policyholder returns 12 31,526 (3,066)
Profit on ordinary activities
before taxation attributable
to shareholder returns 63,120 55,322
Policyholder tax 12 (31,015) 3,066
Tax on profit on ordinary activities 11 (12,525) (9,838)
Profit for the financial year 51,106 45,484
Other comprehensive (loss)/income
Exchange (losses)/gains arising
on translation of foreign operations (72) 22
Total other comprehensive (losses)/income
for the financial year (72) 22
Total comprehensive income for
the financial year 51,034 45,506
------------------------------------------- ----- ------------ -----------
Earnings per share
Earnings per share - basic and
diluted 7 15.4p 13.7p
All activities of the Group are classed as continuing.
Notes 1 to 37 form part of these Financial Statements.
COMPANY STATEMENT OF COMPREHENSIVE INCOME
Note 2021 2020
GBP'000 GBP'000
Revenue - -
Cost of sales - -
--------
Gross profit - -
Administrative expenses 8 (4,739) (1,208)
Credit loss allowance on financial
assets (32) (85)
--------
Operating loss (4,771) (1,293)
Dividend income 37 42,103 32,326
Interest expense (235) -
Interest income 9 76 91
--------
Profit on ordinary activities
before taxation 37,173 31,124
Tax on profit on ordinary activities 11 - -
--------
Profit for the financial year 37,173 31,124
Other comprehensive income - -
Total comprehensive income for
the financial year 37,173 31,124
-------------------------------------- ----- -------- -----------------
All activities of the Company are classed as continuing.
Notes 1 to 37 form part of these Financial Statements.
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
Note 2021 2020
GBP'000 GBP'000
Non-current assets
Loans 18 3,420 2,647
Intangible assets 13 22,286 12,951
Property, plant and equipment 14 1,827 2,313
Right-of-use assets 15 3,632 3,961
Deferred tax asset 27 716 489
Deferred acquisition costs 17 - 53,482
31,881 75,843
Current assets
Financial assets at fair
value through profit
or loss 22 5,134 5,051
Other prepayments and accrued
income 23 15,951 14,412
Trade and other receivables 24 3,719 3,556
Investments held for the
benefit of policyholders 19 21,787,106 16,727,208
Cash and cash equivalents 21 1,442,362 1,539,843
Current tax asset 1,122 53
23,255,394 18,290,123
Current liabilities
Trade and other payables 25 17,466 18,366
Provisions 29 11,624 -
Lease liabilities 26 2,362 2,375
Liabilities for linked investment
contracts 20 23,053,390 18,112,935
23,084,842 18,133,676
Non-current liabilities
Provisions 29 6,180 25,208
Contingent consideration 30 791 -
Lease liabilities 26 2,675 3,712
Deferred income liability 17 - 53,482
Deferred tax liabilities 27 29,518 8,968
----------------------------------- ----- ----------- -----------
39,164 91,370
Net assets 163,269 140,920
----------------------------------- ----- ----------- -----------
Capital and reserves
Called up equity share capital 3,313 3,313
Capital redemption reserve 31 2 2
Share-based payment reserve 32 2,404 1,698
Employee Benefit Trust reserve 33 (2,055) (1,103)
Foreign exchange reserve 34 (94) (22)
Non-distributable reserves 34 5,722 5,722
Non-distributable insurance
reserves 34 501 501
Profit or loss account 153,476 130,809
----------------------------------- ----- ----------- -----------
Total equity 163,269 140,920
----------------------------------- ----- ----------- -----------
These Financial Statements were approved by the Board of
Directors on 15 December 2021 and are signed on their behalf
by:
Alexander Scott
Director
Company Registration Number: 08860879
Notes 1 to 37 form part of these Financial Statements.
COMPANY STATEMENT OF FINANCIAL POSITION
Note 2021 2020
GBP'000 GBP'000
Non-current assets
Investment in subsidiaries 16 31,563 16,832
Loans receivable 18 3,420 2,647
34,983 19,479
Current assets
Prepayments 23 45 56
Other receivables 24 133 342
Cash and cash equivalents 30,962 26,090
-------------------------------- ----- -------- --------
31,140 26,488
Current liabilities
Trade and other payables 25 2,420 491
Loans payable 18 1,000 -
-------------------------------- ----- -------- --------
3,420 491
Non-current liabilities
Contingent consideration 30 791 -
Loans payable 18 8,000 -
-------------------------------- ----- -------- --------
8,791 -
Net assets 53,912 45,476
-------------------------------- ----- -------- --------
Capital and reserves
Called up equity share capital 3,313 3,313
Profit or loss account 50,673 41,962
Share-based payment reserve 32 1,715 1,070
Employee Benefit Trust reserve 33 (1,789) (869)
-------------------------------- ----- -------- --------
Total equity 53,912 45,476
-------------------------------- ----- -------- --------
These Financial Statements were approved by the Board of
Directors on 15 December 2021 and are signed on their behalf
by:
Alexander Scott
Director
Company Registration Number: 08860879
Notes 1 to 37 form part of these Financial Statements.
CONSOLIDATED STATEMENT OF CASH FLOWS
Note 2021 2020
GBP'000 GBP'000
Cash flows from operating activities
Profit before tax 94,646 52,256
Adjustments for :
Amortisation and depreciation 3,077 2,571
Share-based payment charge 1,879 1,776
Interest on cash held (94) (256)
Interest charged on lease 167 234
Investment returns 18 (36)
Decrease in policyholder tax recoverable (11,692) (1,515)
(Increase)/decrease in current asset
investments (83) 15
------------------------------------------ ----- ------------ ------------------
87,918 55,045
(Increase)/decrease in trade and other
receivables (1,306) 2,305
(Decrease)/increase in trade and other
payables (2,130) 3,858
(Decrease)/increase in provisions (7,405) 6,978
Increase in contingent consideration 676 -
Decrease in share-based payment reserve (1,166) (1,126)
Increase in investments held for the
benefit of policyholders (5,059,898) (1,272,440)
Increase in liabilities for linked
investment contracts 4,940,454 1,447,887
Cash generated (used in)/generated
from operations (42,857) 242,507
Income taxes paid (13,396) (13,803)
Interest paid on lease liabilities (167) (234)
------------------------------------------ ----- ------------ ------------------
Net cash flows (used in)/generated
from operating activities (56,420) 228,470
Investing activities
Acquisition of tangible assets (660) (859)
Acquisition of subsidiary, net of cash
acquired 13 (7,903) -
Increase in loans (773) (1,462)
Interest on cash held 94 256
Investment returns (18) 36
------------------------------------------ ----- ------------ ------------------
Net cash used in investing activities (9,260) (2,029)
Financing activities
Purchase of own shares in Employee
Benefit Trust (951) (828)
Equity dividends paid (28,452) (26,158)
Repayment of lease liabilities (2,326) (2,244)
------------------------------------------ ----- ------------ ------------------
Net cash used in financing activities (31,729) (29,230)
Net (decrease)/increase in cash and
cash equivalents (97,409) 197,211
Cash and cash equivalents at beginning
of year 1,539,843 1,342,619
Exchange (losses)/gains on cash and
cash equivalents (72) 13
Cash and cash equivalents at end of
year 1,442,362 1,539,843
------------------------------------------ ----- ------------ ------------------
Notes 1 to 37 form part of these Financial Statements.
COMPANY STATEMENT OF CASH FLOWS
Note 2021 2020
GBP'000 GBP'000
Cash flows from operating activities
Loss before interest and dividends (4,771) (1,293)
Adjustments for:
(4,771) (1,293)
Decrease/(increase) in trade
and other receivables 220 (306)
Increase/(decrease) in trade
and other payables 1,688 (4)
Increase in contingent consideration 676 -
Settlement of share-based payment
reserve (1,131) -
Net cash flows (used in)/generate
from operating activities (3,318) (1,603)
Investing activities
Acquisition of subsidiary, net
of cash acquired 13 (8,600) -
Purchase of subsidiary share
capital 13 (4,000) -
Dividends received 42,103 32,326
Interest received 76 91
(Increase) in loans receivable (773) (1,462)
-------------------------------------- ----- --------- -------------------------------------
Net cash generated from investing
activities 28,806 30,955
Financing activities
Purchase of own shares in Employee
Benefit Trust (920) (594)
Settlement of share-based payment
reserve - (843)
Increase in loans payable 10,000 -
Repayment of loans (1,000) -
Interest expense on loans (234) -
Equity dividends paid (28,462) (26,167)
---------
Net cash used in financing
activities (20,616) (27,604)
Net increase in cash and cash
equivalents 4,872 1,748
Cash and cash equivalents at
beginning of year 26,090 24,342
Cash and cash equivalents at
end of year 30,962 26,090
-------------------------------------- ----- --------- -------------------------------------
Notes 1 to 37 form part of these Financial Statements.
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
Share-based Non-distributable Employee
Share Non-distributable Other payment insurance Benefit Retained Total
capital reserves reserves reserve reserves Trust earnings equity
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Balance
at 1 October
2019 3,313 5,722 (42) 1,008 501 (275) 111,450 121,677
Comprehensive
income for
the year:
Profit for
the year - - - - - - 45,484 45,484
Movement
in currency
translation - - 22 - - - - 22
Total
comprehensive
income for
the year - - 22 - - - 45,484 45,506
Distributions
to owners:
Share-based
payment
expense - - - 1,776 - - - 1,776
Settlement
of share
based payment - - - (1,126) - - - (1,126)
Purchase
of own shares
in EBT - - - - - (828) - (828)
Excess tax
relief
charged
to equity - - - 73 - - - 73
Other movement - - - (33) - - 33 -
Dividends
paid - - - - - - (26,158) (26,158)
--------------- -------- ------------------ ---------- ------------ ------------------ --------- --------- ---------
Total
distributions
to owners - - - 690 - (828) (26,125) (26,263)
--------------- -------- ------------------ ---------- ------------ ------------------ --------- --------- ---------
Balance
at 1 October
2020 3,313 5,722 (20) 1,698 501 (1,103) 130,809 140,920
Comprehensive
income for
the year:
Profit for
the year - - - - - - 51,106 51,106
Movement
in currency
translation - - (72) - - - - (72)
--------------- -------- ------------------ ---------- ------------ ------------------ --------- --------- ---------
Total
comprehensive
income for
the year - - (72) - - - 51,106 51,034
Distributions
to owners:
Share-based
payment
expense - - - 1,878 - - - 1,878
Settlement
of share
based payment - - - (1,166) - - - (1,166)
Purchase
of own shares
in EBT - - - - - (952) - (952)
Excess tax
relief
charged
to equity - - - 20 - - - 19
Other movement - - - (26) - - 26 -
Dividends
paid - - - - - - (28,465) (28,465)
--------------- -------- ------------------ ---------- ------------ ------------------ --------- --------- ---------
Total
distributions
to owners - - - 706 - (952) (28,439) (28,685)
--------------- -------- ------------------ ---------- ------------ ------------------ --------- --------- ---------
Balance
at 30
September
2021 3,313 5,722 (92) 2,404 501 (2,055) 153,476 163,269
--------------- -------- ------------------ ---------- ------------ ------------------ --------- --------- ---------
Notes 1 to 37 form part of these Financial Statements.
COMPANY STATEMENT OF CHANGES IN EQUITY
Share-based Employee
Share payment Benefit Retained Total
capital reserve Trust earnings equity
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Balance at 1 October 2019 3,313 880 (275) 37,006 40,924
Comprehensive income for
the year:
Profit for the year - - - 31,124 31,124
Total comprehensive income
for the year - - - 31,124 31,124
Distributions to owners:
Dividends - - - (26,167) (26,167)
Share-based payment expense - 1,032 - - 1,032
Settlement of share-based
payments - (843) - - (843)
Purchase of own shares in
EBT - - (594) - (594)
------------------------------- --------- ------------ --------- ---------- ---------
Total distributions to owners - 189 (594) (26,167) (26,572)
------------------------------- --------- ------------ --------- ---------- ---------
Balance at 1 October 2020 3,313 1,069 (869) 41,963 45,476
Comprehensive income for
the year:
Profit for the year - - - 37,173 37,173
------------------------------- --------- ------------ --------- ---------- ---------
Total comprehensive income
for the year - - - 37,173 37,173
Distributions to owners:
Dividends - - - (28,463) (28,463)
Share-based payment expense - - - - -
Settlement of share-based
payments - 646 - - 646
Purchase of own shares in
EBT - - (920) - (920)
------------------------------- --------- ------------ --------- ---------- ---------
Total distributions to owners - 646 (920) (28,463) (28,737)
------------------------------- --------- ------------ --------- ---------- ---------
Balance at 30 September 2021 3,313 1,715 (1,789) 50,673 53,912
------------------------------- --------- ------------ --------- ---------- ---------
Notes 1 to 37 form part of these Financial Statements.
NOTES TO THE FINANCIAL STATEMENTS
1. Basis of preparation and significant accounting policies
General information
IntegraFin Holdings plc (the "Company"), a public limited
Company incorporated and domiciled in the United Kingdom ("UK"),
along with its subsidiaries (collectively the "Group"), offers a
market leading investment platform which enables advisers to
implement financial plans as simply and efficiently as
possible.
The registered office address, and principle place of business,
is 29 Clement's Lane, London, EC4N 7AE.
a) Basis of preparation
The Financial Statements have been prepared and approved by the
directors in accordance with International Accounting Standards in
conformity with the requirements of the Companies Act 2006 and in
accordance with International Financial Reporting Standards adopted
pursuant to Regulation (EC) No 1606/2002 as it applies in the
European Union.
The Financial Statements have been prepared on the historical
cost basis, except for the revaluation of certain financial
instruments, which are stated at their fair value, have been
prepared in pound sterling, which is the functional currency of the
Company and are rounded to the nearest thousand.
Going concern
The financial statements have been prepared on a going concern
basis, following an assessment by the board.
Going concern is assessed over the 12 month period from when the
Annual Report is approved, and the board has concluded that the
Group has adequate resources to continue in operational existence
for the next 12 months. This is supported by:
-- the current financial position of the Group:
o the Group maintains a conservative balance sheet and manages
and monitors solvency and liquidity on an ongoing basis, ensuring
that it always has sufficient financial resources for the
foreseeable future.
o as at 30 September 2021, the Group had GBP176 million of
shareholder cash on the statement of financial position,
demonstrating that liquidity remains strong.
-- detailed cash flow and working capital projections; and
-- stress-testing of liquidity, profitability and regulatory
capital, taking account of possible adverse changes in trading
performance, including the impact of COVID-19.
When making this assessment, the board has taken into
consideration both the Group's current performance and the future
outlook, including the impact of the COVID-19 pandemic. Market
volatility and uncertainty is expected to continue for some time,
due to the pandemic and the effect of measures taken to combat it,
but the Group's fundamentals remain strong.
Stress and scenario testing has been carried out, in order to
understand the potential financial impacts of severe, yet
plausible, scenarios on the Group. This assessment incorporated a
number of stress tests covering a broad range of scenarios,
including external market shocks, internal system and security
failures, and the worsening of the COVID-19 pandemic.
Having conducted detailed cash flow and working capital
projections, and stress-tested liquidity, profitability and
regulatory capital, taking account of the impact of the COVID-19
pandemic and further possible adverse changes in trading
performance, the board is satisfied that the Group is well placed
to manage its business risks.
The board is also satisfied that it will be able to operate
within the regulatory capital limits imposed by the Financial
Conduct Authority (FCA), Prudential Regulation Authority (PRA), and
Isle Man Financial Services Authority (IoM FSA). Accordingly, the
board does not believe a material uncertainty exists that would
have an effect on the going concern of the Group and have prepared
the financial statements on a going concern basis.
Basis of consolidation
The consolidated Financial Statements incorporate the Financial
Statements of the Company and its subsidiaries. Where the Company
has control over an investee, it is classified as a subsidiary. The
Company controls an investee if all three of the following elements
are present: power over the investee, exposure to variable returns
from the investee, and the ability of the investor to use its power
to affect those variable returns. Control is reassessed whenever
facts and circumstances indicate that there may be a change in any
of these elements of control.
Subsidiaries are fully consolidated from the date on which
control is obtained by the Company and are deconsolidated from the
date that control ceases. Acquisitions are accounted for under the
acquisition method. Intercompany transactions, balances, income and
expenses, and profits and losses are eliminated.
The Financial Statements of all of the wholly owned subsidiary
companies are incorporated into the consolidated Financial
Statements. Two of these subsidiaries, IntegraLife International
LTD (ILInt) and IntegraLife UK Limited (ILUK) issue contracts with
the legal form of insurance contracts, but which do not transfer
significant insurance risk from the policyholder to the Company,
and which are therefore accounted for as investment contracts.
In accordance with IFRS 9, the contracts concerned are therefore
reflected in the consolidated statement of financial position as
investments held for the benefit of policyholders, and a
corresponding liability to policyholders.
Changes in accounting policies
i) There have been no new standards, amendments to standards or
interpretations adopted from 1 October 2020 that had a material
effect.
ii) Future standards, amendments to standards, and
interpretations not yet effective are noted below.
The following amendments are effective for the period beginning
1 October 2023:
IFRS 17 Insurance Contracts
In June 2022, the IASB issued amendments to IFRS 17 which will
replace IFRS 4 Insurance Contracts. IFRS 17 establishes the
principles for the recognition, measurement, presentation and
disclosure of insurance contracts within the scope of the Standard.
The Group would be required to provide information that faithfully
represents those contracts, such that users of the financial
statements can assess the effect insurance contracts have on the
entity's financial position, financial performance and cash
flows.
The Group has performed a preliminary assessment regarding the
impact of IFRS 17 on the Financial Statements and, due to the vast
majority of contracts written by the business being investment
contracts, it is expected such impact will be negligible.
Classification of Liabilities as Current or Non-Current
(Amendments to IAS 1)
In January 2020, the IASB issued amendments to IAS 1 regarding
the presentation of liabilities in the statement of financial
position. Presentation between current and non-current liabilities
is to be based on rights in existence at year end to defer
settlement. The standard now explains that settlement includes the
transfer of cash, goods, services, or equity instruments unless the
obligation to transfer equity instruments arises from a conversion
feature classified as an equity instrument, separate from the
liability component the instrument. The surrounding wording is
expected to reflect any right to defer the settlement by at least
12 months. Classifications are not expected to be impacted by
expectations on whether the right to defer settlement will be
exercised or not.
The Group is assessing the impact of this amendment, however it
does not anticipate any significant change to the current
classifications of liabilities.
Disclosure of Accounting Policies (Amendments to IAS 1 and IFRS
Practice Statement 2)
In February 2021, the IASB issued amendments to IAS 1 to assist
in determining which accounting policies to disclose, with
reference to materiality and how to determine which policies fall
into this category. IFRS Practice Statement 2 includes guidance to
support this.
The Group is assessing the impact of this amendment, however it
does not anticipate any significant change to the current
assessment of significant accounting policies.
Definition of Accounting Estimates (Amendments to IAS 8)
In February 2021, the IASB issued amendments to IAS 8 to clarify
how to distinguish changes in accounting policies from changes in
accounting estimates. That distinction being that changes in
accounting estimates are applied prospectively to future
transactions and events, but changes in accounting policies are
applied retrospectively to past transactions and events.
The Group is assessing the impact of this amendment, however it
does not anticipate any significant change to the current
assessment of accounting estimates and accounting policies.
Deferred Tax Related to Assets and Liabilities arising from a
Single Transaction
(Amendments to IAS 12)
In May 2021, the ISAB issued amendments to IAS 12 which will
require recognition of deferred taxes on particular transactions
which, on initial recognition, give rise to equal amounts of
taxable and deductible temporary differences.
The Group is assessing the impact of this amendment, however it
does not anticipate any significant impact.
No other f uture standards, amendments to standards, or
interpretations are expected to have a material effect on the
financial statements.
b) Principal accounting policies
Revenue from contracts with customers
Revenue represents the fair value of services supplied by the
Company. All fee income is recognised as revenue in line with the
provision of the services.
Fee income comprises:
Annual commission income
Annual commission is charged for the administration of products
on the Transact platform, and is levied monthly in arrears on the
average value of assets and cash held on the platform in the
month.
Wrapper fee income
Wrapper fees are charged for each of the tax wrappers held by
clients, and are levied quarterly in arrears based on fixed fees
for each wrapper type.
Annual commission and wrapper fees relate to services provided
on an on-going basis, and revenue is therefore recognised on an
on-going basis to reflect the nature of the performance obligations
being discharged.
Accrued income on both annual commission and wrapper fees is
recognised as a trade receivable on the statement of financial
position, as the Group's right to consideration is conditional on
nothing other than the passage of time.
Other income
This comprises buy commission and dealing charges. These are
charges levied on the acquisition of assets, due upon completion of
the transaction. Revenue is recorded on the date of completion of
the transaction, as this is the date the services are provided to
the customer.
Deferred acquisition costs and deferred income liabilities
In prior years, i ncremental costs directly attributable to
securing investment contracts were deferred. These costs consist of
fees paid to policyholders' financial advisers. The costs, relating
to Pension, Onshore Life and Offshore Life contracts, were
capitalised as deferred acquisition costs and amortised over the
directors' best estimates of the lives of the contracts which were
deemed to be fourteen, sixteen and eighteen years respectively
(2020: fourteen, sixteen and eighteen years), over which the
services are provided.
A corresponding deferred income liability was recognised in
respect of charges taken from customers of the Company at the
contract's inception to meet obligations to financial advisers.
Deferred income liabilities were also amortised over the directors'
best estimates of the lives of the contract, which were again
deemed to be fourteen, sixteen and eighteen years.
Following a review of the terms of the agreements relating to
establishment charges paid to policyholders' financial advisers,
management has concluded that the Group is acting in an agency
capacity between the policyholders and their financial advisers,
rather than as a principal. It therefore should not recognise the
deferred acquisition costs as contract costs, nor does it have
future service obligations in respect of the deferred fees to
justify the recognition of the corresponding deferred income
liability. The deferred acquisition costs and deferred income
liabilities have therefore been derecognised in the financial year
ended 30 September 2021, to bring the accounts in line with the
accounting standards.
Further details of this change can be seen in note 17.
Investment income
Interest on cash and coupon on shareholder gilts are the two
sources of investment income received. Interest income is accrued
on a time basis, by reference to the principal outstanding and at
the effective interest rate applicable, which is the rate that
exactly discounts estimated future cash receipts through the
expected life of the financial asset to that financial asset's
carrying amount.
Fee and commission expenses
Fee and commission expenses are paid by ILUK and ILInt
policyholders to their financial advisers. Expenses comprise annual
commission which is levied monthly in arrears on the average value
of assets and cash held on the platform in the month and upfront
fees charged on new premiums on the platform.
Investments
Fixed asset investments in subsidiaries are stated at cost less
any provision for impairment.
Other investments comprise UK Government fixed interest
securities backing insurance contracts or held as shareholder
investments. These investments are mandatorily held at 'fair value
through profit or loss' at initial recognition and are stated at
quoted bid prices which equates to fair value, with any resultant
gain or loss recognised in profit or loss. Purchases and sales of
securities are recognised on the trade date.
Investment contracts - investments held for the benefit of
policyholders
Investment contracts are comprised of unit-linked contracts in
ILInt and ILUK. Investment contracts result in financial
liabilities whose fair value is dependent on the fair value of
underlying financial assets. They are designated at inception as
financial liabilities at 'fair value through profit or loss' in
order to reduce an accounting mismatch with the underlying
financial assets.
Valuation techniques are used to establish the fair value at
inception and each reporting date. The Company's main valuation
techniques incorporate all factors that market participants would
consider and are based on observable market data. The financial
liability is measured both initially and subsequently at fair
value. The fair value of a unit-linked financial liability is
determined using the fair value of the financial assets contained
within the funds linked to the financial liability.
Dividends
Equity dividends are recognised in the accounting period in
which the dividends are declared.
Intangible non-current assets
Intangible non-current assets, excluding goodwill, are stated at
cost less accumulated amortisation and comprise intellectual
property software rights. The software rights were amortised over
seven years on a straight line basis, as it was estimated that the
code would be replaced every seven years, and therefore have a
finite useful life. The software rights are now fully amortised,
but due to ongoing system development and coding updates no
replacement is required. Goodwill is held at cost and, in
accordance with IFRS, is not amortised but is subject to annual
impairment reviews.
Property, plant and equipment
Property, plant and equipment are stated at cost less
accumulated depreciation and accumulated impairment losses. Cost
includes expenditures that are directly attributable to the
acquisition of the asset. Subsequent costs are included in the
asset's carrying amount or recognised as a separate asset, as
appropriate, only when it is probable that future economic benefits
associated with the item will flow to the Company and the cost can
be measured reliably. Repairs and maintenance costs are charged to
the profit and loss and other comprehensive income statement during
the period in which they are incurred.
The major categories of property, plant, equipment and motor
vehicles are depreciated as follows:
Asset class All UK and Isle of Man Australian entity
entities
Leasehold improvements Straight line over the Straight line over
life of the lease 40 years
Fixtures & Fittings Straight line over 10 Reducing balance over
years 2 to 8 years
Equipment Straight line over 3 to Reducing balance over
10 years 3 to 10 years
Motor vehicles N/A Reducing balance over
2 to 8 years
Residual values, method of depreciation and useful lives of the
assets are reviewed annually and adjusted if appropriate.
Business combinations
The acquisition method of accounting is used to account for all
business combinations, regardless of whether equity instruments or
other assets are acquired. The consideration transferred for the
acquisition of a subsidiary comprises the:
-- fair values of the assets transferred;
-- liabilities incurred to the former owners of the acquired business;
-- equity interests issued by the Group;
-- fair value of any asset or liability resulting from a
contingent consideration arrangement; and
-- fair value of any pre-existing equity interest in the subsidiary.
Identifiable assets acquired and liabilities and contingent
liabilities assumed in a business combination are measured
initially at their fair values at the acquisition date.
Acquisition-related costs are expensed as incurred.
The excess of the consideration transferred over the fair value
of the net identifiable assets acquired is recorded as goodwill. If
those amounts are less than the fair value of the net identifiable
assets of the business acquired, the difference is recognised
directly in the statement of comprehensive income.
Where settlement of any part of cash consideration is deferred,
the amounts payable in the future are discounted to their present
value as at the date of exchange. The discount rate used is the
entity's incremental borrowing rate, being the rate at which a
similar borrowing could be obtained from an independent financier
under comparable terms and conditions.
Contingent consideration is classified either as equity or a
financial liability. Amounts classified as a financial liability
are subsequently remeasured to fair value, with changes in fair
value recognised in the statement of comprehensive income.
Contingent arrangements payable to selling shareholders that
continue providing services are assessed to determine if there is
an element of payment for post-combination services. The element
that is determined to relate to post-combination services is
recognised in in the statement of comprehensive income across the
periods to which the services relate.
Goodwill and goodwill impairment
Goodwill represents the excess of the cost of an acquisition
over the fair value of the Group's share of the identifiable net
assets of the acquired entity at the date of acquisition. Goodwill
is recognised as an asset at cost at the date when control is
achieved and is subsequently measured at cost less any accumulated
impairment losses.
Goodwill is allocated to one or more cash generating units
(CGUs) expected to benefit from the synergies of the combination,
where the CGU represents the smallest identifiable group of assets
that generates cash inflows that are largely independent of the
cash inflows from other assets or group of assets. Goodwill is
reviewed for impairment at least once annually, and also whenever
circumstances or events indicate there may be uncertainty over this
value. The impairment assessment compares the carrying value of
goodwill to the recoverable amount, which is the higher of value in
use and the fair value less costs of disposal. Any impairment loss
is recognised immediately in profit or loss and is not subsequently
reversed.
Intangible assets acquired as part of a business combination
Intangible assets acquired as part of a business combination are
recognised where they are separately identifiable and can be
measured reliably.
Acquired intangible assets consist of contractual customer
relationships, software and brand. These items are capitalised at
their fair value, which are based on either the 'Relief from
Royalty' valuation methodology or the 'Multi-period Excess Earnings
Method', as appropriate for each asset. Subsequent to initial
recognition, acquired intangible assets are measured at cost less
accumulated amortisation and any recognised impairment losses.
Amortisation is recognised on a straight line basis over the
estimated useful lives of the assets, which are as follows:
Asset class Useful life
Customer relationships 15 years
Software 7 years
Brand 10 years
The method of amortisation and useful lives of the assets are
reviewed annually and adjusted if appropriate.
Impairment of non-financial assets
Property, plant and equipment, right-of-use assets and
intangible assets are tested for impairment when events or changes
in circumstances indicate that the carrying amount may not be
recoverable. Recoverable amount is the higher of an asset's fair
value less costs to sell and value in use (being the present value
of the expected future cash flows of the relevant asset).
The Group evaluates impairment losses for potential reversals
when events or circumstances warrant such consideration.
Goodwill is tested for impairment annually, and once an
impairment is recognised this cannot be reversed. For more detailed
information in relation to this, please see note 13.
Pensions
The Group makes defined contributions to the personal pension
schemes of its employees. These are chargeable to profit or loss in
the year in which they become payable.
Foreign currencies
Transactions in foreign currencies are translated into the
functional currency at the exchange rate in effect at the date of
the transaction. Foreign currency monetary assets and liabilities
are translated to sterling at the year end closing rate.
Non-monetary assets denominated in a foreign currency that are
measured in terms of historical cost are translated using the
exchange rate in effect at the date when the fair value was
determined. Foreign exchange rate differences that arise are
reported net in profit or loss as foreign exchange
gains/losses.
The assets and liabilities of foreign operations are translated
to sterling using the year end closing exchange rate. The revenues
and expenses of foreign operations are translated to sterling at
rates approximating the foreign exchange rates ruling at the
relevant month of the transactions. Foreign exchange differences
arising on retranslation are recognised directly in the
reserves.
Taxation
The taxation charge is based on the taxable result for the year.
The taxable result for the year is determined in accordance with
enacted legislation and taxation authority practice for calculating
the amount of corporation tax payable.
Deferred tax assets and liabilities are recognised where the
carrying amount of an asset or liability in the statement of
financial position differs from its tax base. Recognition of
deferred tax assets is restricted to those instances where it is
probable that taxable profit will be available against which the
difference can be utilised.
The amount of the asset or liability is determined using tax
rates that have been enacted or substantively enacted by the
reporting date and are expected to apply when the deferred tax
assets/liabilities are recovered/settled.
Policyholder Tax
This is based on the "Income minus Expenses plus Gains" (I-E)
tax regime and enables HMRC to collect basic rate income tax from
ILUK on its life insurance policies without having to contact the
policyholders. Policyholder profits are calculated as total I-E
profits less shareholder profits multiplied by the current
policyholder tax rate of 20% (2020: 20%).
Policyholder tax is recorded as an expense in the statement of
comprehensive income, with a corresponding liability recognised on
the statement of financial position (under IAS12).
Segmental reporting
Operating segments are reported in a manner consistent with the
internal reporting provided to the chief operating decision-maker.
The chief operating decision-maker is responsible for allocating
resources and assessing performance of the operating segments and
has been identified as the chief executive officer of the
Company.
For the year ended 30 September 2021, the business of ILUK and
ILInt was the direct insurance of investment linked pensions
business, written by single premium in the United Kingdom, single
premium life assurance linked bonds and linked qualifying
investment plans written in the United Kingdom. Insurance risk is
minimal as all contracts have been classed as investment
contracts.
ILInt and ILUK policyholder assets and liabilities
Investments held for the benefit of policyholders are stated at
fair value and reported on a separate line in the statement of
financial position. They are designated as financial assets at
'fair value through profit or loss' in order to reduce an
accounting mismatch option with the equivalent financial
liabilities. Gains and losses arising from changes in fair value
are presented in the consolidated profit and loss and other
comprehensive income statement within "investment returns" .
Investment inflows received from policyholders are invested in
funds selected by the policyholders. The resulting liabilities for
linked investment contracts are accounted for under the 'fair value
through profit or loss' option, in line with the corresponding
assets as permitted by IFRS 9.
As all investments held for the benefit of policyholders are
matched entirely by corresponding linked liabilities, any gain or
loss on assets recognised through the consolidated profit and loss
and other comprehensive income statement are offset entirely by the
gains and losses on linked liabilities, which are recognised within
the "change in investment contract liabilities" line. The overall
net impact on profit is therefore GBPnil.
Client assets and client monies
IFAL client assets and client monies are not recognised in the
parent and consolidated statements of financial position (see note
28) as they are owned by the clients of IFAL.
Lease assets and lease liabilities
IFRS 16 leases accounting policy applied from 1 October
2019.
Right-of-use assets
The Group recognises right-of-use assets on the date the leased
asset is made available for use by the Group. These assets relate
to rental leases for the office of the Group, which have varying
terms clauses and renewal rights. 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.
Depreciation is applied in accordance with IAS16: Property,
Plant and Equipment. Right-of-use assets are depreciated over the
lease term. See note 14 and 15.
Lease liabilities
The Group measures lease liabilities in line with IFRS 16 on the
balance sheet as the present value of all future lease payments,
discounted using the incremental borrowing rate of 3.2% at the date
of commencement. After the commencement date, the amount of lease
liabilities is increased to reflect the addition of interest and
reduced for the lease payments made. The Group's incremental
borrowing rate is the rate at which a similar borrowing could be
obtained from an independent creditor under comparable terms and
conditions. See note 26.
Short-term leases
The Group defines short-term leases as those with a lease term
of 12 months or less and leases of low value assets. For these
leases, the Group recognises the lease payments as an operating
expenses on a straight line basis over the term of lease.
Cash and cash equivalents
Cash and cash equivalents comprise cash balances from instant
access and notice accounts, call deposits, and other short-term
deposits with an original maturity of three months or less. The
carrying amount of these assets approximates to their fair
value.
Cash and cash equivalents held for the benefit of the
policyholders are held to cover the liabilities for unit linked
investment contracts. These amounts are 100% matched to
corresponding liabilities.
Financial instruments
Financial assets and liabilities are recognised when the Company
becomes a party to the contractual provisions of the instrument.
Financial assets are derecognised when the rights to receive cash
flows from the assets have expired or have been transferred and the
Company has transferred substantially all risks and rewards of
ownership. Financial liabilities are derecognised when the
obligation specified in the contract is discharged, cancelled or
expires.
At initial recognition, the Company classifies its financial
instruments in the following categories, based on the business
model in which the assets are managed and their cash flow
characteristics:
(i) Financial assets and liabilities at fair value through profit or loss
This category includes financial assets and liabilities acquired
principally for the purpose of selling or repurchasing in the
short-term, comprising of listed shares and securities and
investments in quoted debt instruments.
Financial instruments in this category are recognised on the
trade settlement date, and subsequently, at fair value. Purchases
and sales of securities are recognised on the trade date.
Transaction costs are expensed in the consolidated profit and loss
and other comprehensive income statement. Gains and losses arising
from changes in fair value are presented in the consolidated profit
and loss and other comprehensive income statement within
"investment returns" for corporate assets and "n et income
attributable to policyholder returns" for policyholder assets in
the period in which they arise. Financial assets and liabilities at
fair value through profit or loss are classified as current except
for the portion expected to be realised or paid beyond twelve
months of the balance sheet date, which are classified as
long-term.
(ii) Financial assets at amortised cost
This category includes non-derivative financial assets with
fixed or determinable payments that are not quoted in an active
market. This is comprised of accrued fees, trade and other
receivables, loans, and cash and cash equivalents. These are
included in current assets due to their short-term nature, except
for loans which are included in non-current assets.
Assets held at amortised cost are initially recognised at fair
value. Subsequent measurement is at amortised cost using the
effective interest method less any expected credit losses.
(iii) Financial liabilities at amortised cost
Financial liabilities at amortised cost comprise trade and other
payables and loans. These are initially recognised at fair value.
Subsequent measurement is at amortised cost using the effective
interest method. Trade and other payables are classified as current
liabilities due to their short-term nature. The loan is split
between current and non-current liabilities, based on the repayment
terms.
Impairment of financial assets
Expected credit losses are required to be measured through a
loss allowance at an amount equal to:
-- the 12-month expected credit losses (expected credit losses
from possible default events within 12 months after the reporting
date); or
-- full lifetime expected credit losses (expected credit losses
from all possible default events over the life of the financial
instrument).
A loss allowance for full lifetime expected credit losses is
required for a financial instrument if the credit risk of that
financial instrument has increased significantly since initial
recognition, as well as to contract assets or trade receivables
that do not constitute a financing transaction.
For all other financial instruments, expected credit losses are
measured at an amount equal to the 12-month expected credit
losses.
Impairment losses on financial assets carried at amortised cost
are reversed in subsequent periods if the expected credit losses
decrease.
Provisions
Provisions are recognised when the Company has an obligation,
legal or constructive, as a result of a past event, and it is
probable that the Company will be required to settle that
obligation. Provisions are estimated at the directors' best
estimate of the expenditure required to settle the obligation at
the reporting date, and are discounted to present values where the
effect is material.
The ILUK tax provision, which is part of the provisions balance,
arises from tax reserve charges collected from life insurance
policyholders, which are held to cover possible future tax
liabilities. If no tax liability arises the charges are refunded to
policyholders, where possible. As these liabilities are of
uncertain timing or amounts, they are recognised as provisions on
the statement of financial position.
Trade and other payables
Other payables are short-term, not interest-bearing and are
stated at their amortised cost which is not materially different to
cost and approximates to fair value.
Share-based payments
Equity-settled share-based payment awards granted to employees
are measured at fair value at the date of grant. The awards are
recognised as an expense, with a corresponding increase in equity,
spread over the vesting period of the awards, which accords with
the period for which related services are provided.
The total amount expensed is determined by reference to the fair
value of the awards as follows:
(i) SIP shares
The fair value is the market price on the grant date. There are
no vesting conditions, as the employees receive the shares
immediately upon grant.
(ii) PSP share options
The fair value of share options is determined by applying a
valuation technique, usually an option pricing model, such as Black
Scholes. This takes into account factors such as the exercise
price, the share price, volatility, interest rates, and
dividends.
At each reporting date, the estimate of the number of share
options expected to vest based on the non-market vesting conditions
is assessed. Any change to original estimates is recognised in the
statement of comprehensive income , with a corresponding adjustment
to equity reserves.
2. Critical accounting estimates and judgements
Critical accounting estimates are those where there is a
significant risk of material adjustment in the next 12 months, and
critical judgements are those that have the most significant effect
on amounts recognised in the accounts.
In preparing these Financial Statements, management has made
judgements, estimates and assumptions about the future that affect
the application of the Group's accounting policies and the reported
amounts of assets, liabilities, income and expenses. Management
uses its knowledge of current facts and applies estimation and
assumption techniques that are aligned with relevant accounting
policies to make predictions about the future. Actual results may
differ from these estimates.
Estimates and judgements are reviewed on an ongoing basis and
revisions are recognised in the period in which the estimate is
revised. In the prior year financial statements the Group disclosed
that the tax provision for its subsidiary, ILUK, was an area where
judgements and estimates had the most significant effect. During
the year the Group has obtained data which allows us to eliminate
the need for material judgements and assumptions in our
calculations of amounts payable to HMRC and policyholder. The tax
provision is therefore no longer considered a critical accounting
estimate.
There are no assumptions made about the future, or 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.
3. Financial instruments
(i) Principal financial instruments
The principal financial instruments, from which financial
instrument risk arises, are as follows:
-- Trade and other receivables
-- Accrued fees
-- Cash and cash equivalents
-- Investments in quoted debt instruments
-- Listed shares and securities
-- Trade and other payables
-- Loans
(ii) Financial instruments by category
As explained in note 1, financial assets and liabilities have
been classified into categories that determine their basis of
measurement and, for items measured at fair value, whether changes
in fair value are recognised in the statement of comprehensive
income . The following tables show the carrying values of assets
and liabilities for each of these categories for the Group:
Financial assets:
Fair value through
profit or loss Amortised cost
2021 2020 2021 2020
GBP'000 GBP'000 GBP'000 GBP'000
Cash and cash equivalents - - 1,442,362 1,539,843
Listed shares and securities 165 92 - -
Loans - - 3,420 2,647
Investments in quoted
debt instruments 4,969 4,959 - -
Accrued income - - 12,030 10,244
Trade and other receivables - - 934 786
Investments held for
the policyholders 21,787,106 16,727,208 - -
Total financial assets 21,792,240 16,732,259 1,458,746 1,553,520
------------------------------ ----------- ----------- ---------- ----------
Financial liabilities:
Fair value through
profit or loss Amortised cost
2021 2020 2021 2020
GBP'000 GBP'000 GBP'000 GBP'000
Trade and other payables - - 7,056 8,660
Accruals - - 7,906 7,792
Lease liabilities - - 5,037 6,087
Deferred consideration - - 1,741 -
Contingent consideration 791 - - -
Liabilities for linked
investments contracts 23,053,390 18,112,935 - -
----------------------------- ----------- ----------- -------- --------
Total financial liabilities 23,054,181 18,112,935 21,740 22,539
----------------------------- ----------- ----------- -------- --------
The following tables show the carrying values of assets and
liabilities for each of these categories for the Company:
Financial assets:
Fair value through
profit or loss Amortised cost
2021 2020 2021 2020
GBP'000 GBP'000 GBP'000 GBP'000
Cash and cash equivalents - - 30,962 26,090
Loans - - 3,420 2,647
Total financial assets - - 34,382 28,737
--------------------------- ----------- ---------- -------- --------
Financial liabilities:
Fair value through
profit or loss Amortised cost
2021 2020 2021 2020
GBP'000 GBP'000 GBP'000 GBP'000
Trade and other payables - - 22 56
Loans - - 9,000 -
Deferred consideration - - 2,533 -
Contingent consideration 791 - - -
Accruals - - 359 311
Total financial liabilities 791 - 11,914 367
----------------------------- ---------- --------- -------- --------
(iii) Financial instruments not measured at fair value
Financial instruments not measured at fair value include cash
and cash equivalents, accrued fees, loans, trade and other
receivables, and trade and other payables. Due to their short-term
nature and/or expected credit losses recognised, the carrying value
of these financial instruments approximates their fair value.
(iv) Financial instruments measured at fair value - fair value hierarchy
The table below classifies financial assets that are recognised
on the statement of financial position at fair value in a hierarchy
that is based on significance of the inputs used in making the
measurements. The levels of hierarchy are disclosed in the table
below.
Investments held for the benefit of policyholders are stated at
fair value and reported on a separate line in the statement of
financial position. The assets are classified using the 'fair value
through profit or loss' option with any resultant gain or loss
recognised through the statement of comprehensive income .
Assets held at fair value also comprises investments held in
gilts, and these are held at fair value through profit and
loss.
The following table shows the three levels of the fair value
hierarchy:
Fair value Types of investments classified
hierarchy Description of hierarchy at each level
Level 1 Quoted prices (unadjusted) Cash equivalents, listed
in active markets for identical equity securities, gilts,
assets. actively traded pooled
investments such as OEICS
and unit trusts.
--------------------------------- ---------------------------------
Level 2 Inputs other than quoted Actively traded unlisted
prices included within Level equity securities where
1 that are observable for there is no significant
the asset either directly unobservable inputs, structured
(i.e. as prices) or indirectly products and regularly
(i.e. derived from prices). priced but not actively
traded instruments.
--------------------------------- ---------------------------------
Level 3 Inputs that are not based Unlisted equity securities
on observable market data with significant unobservable
(unobservable inputs). inputs, inactive pooled
investments.
--------------------------------- ---------------------------------
For the purposes of identifying level 3 assets, unobservable
inputs means that current observable market information is no
longer available. Where these assets arise management will value
them based on the last known observable market price. No other
valuation techniques are applied.
The following table shows the Group's assets measured at fair
value and split into the three levels:
2021 Level 1 Level 2 Level 3 Total
GBP'000 GBP'000 GBP'000 GBP'000
Investments and assets
held for the benefit
of policyholders
Investments and securities 633,602 163,940 440 797,982
Bonds and other fixed-income
securities 14,846 589 - 15,435
Holdings in collective
investment schemes 20,858,948 113,265 1,476 20,973,689
------------------------------ -------------- -------------- -------------- --------------
21,507,396 277,794 1,916 21,787,106
Other investments 4,964 - - 4,964
Total 21,512,360 277,794 1,916 21,792,070
------------------------------ -------------- -------------- -------------- --------------
2020 Level 1 Level 2 Level 3 Total
GBP'000 GBP'000 GBP'000 GBP'000
Investments and assets
held for the benefit of
policyholders
Investments and securities 506,286 154,810 751 661,847
Bonds and other fixed-income
securities 12,404 1,891 15 14,310
Holdings in collective
investment schemes 15,930,106 120,026 910 16,051,042
------------------------------ -------------- -------------- -------------- --------------
16,448,796 276,727 1,676 16,727,199
Other investments 4,959 - - 4,959
------------------------------ -------------- -------------- -------------- --------------
Total 16,453,755 276,727 1,676 16,732,158
------------------------------ -------------- -------------- -------------- --------------
Level 1 valuation methodology
Financial assets included in Level 1 are measured at fair value
using quoted mid prices that are available at the reporting date
and are traded in active markets. These financial assets are mainly
collective investment schemes and listed equity instruments.
Level 2 and Level 3 valuation methodology
The Group regularly reviews whether a market is active, based on
available market data and the specific circumstances of each
market. Where the Group assesses that a market is not active, then
it applies one or more valuation methodologies to the specific
financial asset. These valuation methodologies use quoted market
prices where available, and may in certain circumstances require
the Group to exercise judgement to determine fair value.
Financial assets included in Level 2 are measured at fair value
using observable mid prices traded in markets that have been
assessed as not active enough to be included in Level 1.
Otherwise, financial assets are included in Level 3. These are
assets where one or more inputs to the valuation methodology are
not based on observable market data. The key unobservable input is
the pre-tax operating margin needed to price asset holdings.
Level 3 sensitivity to changes in unobservable measurements
For financial assets assessed as Level 3, based on its review of
the prices used, the Company believes that any change to the
unobservable inputs used to measure fair value would not result in
a significantly higher or lower fair value measurement at year end,
and therefore would not have a material impact on its reported
results.
Changes to valuation methodology
There have been no changes in valuation methodology during the
year under review.
Transfers between Levels
The Company's policy is to assess each financial asset it holds
at the current financial year end, based on the last known price
and market information, and assign it to a Level.
The Company recognises transfers between Levels of the fair
value hierarchy at the end of the reporting period in which the
changes have occurred. Changes occur due to the availability of (or
lack thereof) quoted prices, whether a market is now active or not,
and whether there are indications of impairment.
Transfers between Levels between 30 September 2021 and 30
September 2020 are presented in the table below at their valuation
at 30 September 2021:
Transfers from Transfers to GBP'000
Level 1 Level 2 524
Level 2 Level 1 7,613
The reconciliation between opening and closing balances of Level
3 assets are presented in the table below:
2021 2020
GBP'000 GBP'000
Opening balance 1,676 11,529
Unrealised gains or losses in the
year ended 30 September 2021 (236) (57)
Transfers in to Level 3 at 30 September
2021 valuation 1,114 224
Transfers out of Level 3 at 30 September
2021 valuation (578) (8,280)
Purchases, sales, issues and settlement (60) (1,740)
------------------------------------------ --------- --------------
Closing balance 1,916 1,676
------------------------------------------ --------- --------------
Any resultant gains or losses on financial assets held for the
benefit of policyholders are offset by a reciprocal movement in the
linked liability.
The Group regularly assesses assets to ensure they are
categorised correctly and FVH levels adjusted accordingly. The
Group monitors situations that may impact liquidity such as
suspensions and liquidations while also actively collecting
observable market prices from relevant exchanges and asset
managers. Should an asset price become observable following the
resumption of trading the FVH level will be updated to reflect
this.
(v) Capital maintenance
The regulated companies in IntegraFin Group are subject to
capital requirements imposed by the relevant regulators. As
detailed in the Financial Review, Group capital requirements for
2021 were GBP263.4 million (2020: GBP212.9 million).
The Group has complied with the requirements set by the
regulators during the year. The Group's policy for managing capital
is to ensure each regulated entity maintains capital well above the
minimum requirement.
4. Risk and risk management
Risk assessment
The board has overall responsibility for the determination of
the Group's risk management
objectives and policies and, whilst retaining ultimate
responsibility for them, it has delegated
the authority for designing and operating processes that ensure
the effective implementation
of the objectives and policies to the Group's risk function.
Risk assessment is the determination of quantitative values
and/or qualitative judgements of risk related to a concrete
situation and a recognised threat. Quantitative risk assessment
requires calculations of two components of risk, the magnitude of
the potential impact, and the likelihood that the risk
materialises. Qualitative aspects of risk, despite being more
difficult to express quantitatively, are also taken into account in
order to fully evaluate the impact of the risk on the
organisation.
(1) Market risk
Description of risk
Market risk is the risk of loss arising either directly or
indirectly from fluctuations in the level and in the volatility of
market prices of assets, liabilities and other financial
instruments.
(a) Price risk
Market price risk from reduced income
The Company's dividend income from its regulated subsidiary IFAL
is exposed to market risk. The Group's main source of income is
derived from annual management fees and transaction fees which are
linked to the value of the clients' portfolios, which are
determined by the market prices of the underlying assets. The
Group's revenue is therefore affected by the value of assets on the
platform, and consequently it has exposure to equity market levels
and economic conditions.
The Group mitigates the second order market price risk by
applying fixed charges per tax wrapper in addition to income
derived from the charges based on clients' linked portfolio values.
This approach of fixed and variable charging offers an element of
diversification to its income stream. The risk of stock market
volatility, and the impact on revenue, is also mitigated through a
wide asset offering which ensures the Group is not wholly
correlated with one market, and which enables clients to switch
assets, including into cash on the platform, in times of
uncertainty.
Sensitivity testing has been performed to assess the impact of
market movements on the Group's Profit for the year. The
sensitivity is applied as an instantaneous shock at the start of
the year, and shows the impact of a 10% change in values across all
assets held on the platform.
Impact on profit for the
year
2021 2020
GBP'000 GBP'000
10% increase in asset values 7,869 6,931
10% decrease in asset values (7,869) (6,931)
Market risk from direct asset holdings
The Group and the Company have limited exposure to primary
market risk as capital is invested in high quality, highly liquid,
short-dated investments.
(b) Interest rate risk
The Group and the Company's balance sheet and capital
requirements are relatively insensitive to first order impacts from
movements in interest rates.
(c) Currency risk
The Company is not directly exposed to significant currency
risk. The table below shows a breakdown of the material foreign
currency exposures for the unit-linked policies within the
Group:
2021 2021 2020 2020
Currency GBP'000 % GBP'000 %
GBP 22,914,615 99.4 17,983,651 99.3
USD 111,003 0.5 106,532 0.6
EUR 18,074 0.1 13,862 0.1
Others 9,698 0.0 8,890 0.0
Total 23,053,390 100.0 18,112,935 100.0
99.4% of investments and cash held for the benefit of
policyholders are denominated in GBP, its base currency. Remaining
currency holdings greater than 0.1% of the total are shown
separately in the table. A significant rise or fall in sterling
exchange rates would not have a significant first order impact on
its results since any adverse or favourable movement in
policyholder assets is entirely offset by a corresponding movement
in the linked liability.
(2) Credit (counterparty default) risk
Credit risk is the risk that the Group or Company is exposed to
a loss if another party fails to meet its financial obligations.
For the Company, the exposure to counterparty default risk arises
primarily from loans directly held by the Company.
Assets held at amortised cost
(a) Accrued income
This comprises fees owed by clients. These are held at amortised
cost, less expected credit losses ("ECLs").
Under IFRS 9, a forward-looking approach is required to assess
ECLs, so that losses are recognised before the occurrence of any
credit event. The Group estimates that pending fees three months or
more past due are unlikely to be collected and are written off.
Based on management's experience, pending fees one or two months
past due are generally expected to be collected. However,
consideration is also given to potential losses on these fees.
Historical loss rates have been used to estimate expected future
losses, while consideration is also given to underlying economic
conditions, in order to ensure that expected losses are recognised
on a forward-looking basis. This has led to the additional
recognition of an immaterial amount of ECLs.
Details of the ECLs recognised in relation to accrued income can
be seen in note 23.
(b) Loans
Loans subject to the 12 month ECL are GBP3.6million (2020:
GBP2.7million). While there remains a level of economic uncertainty
in the current climate, leading to potentially higher credit risk,
there is not considered to be a significant increase in credit
risk, as all of the loans are currently performing to schedule, and
there are no concerns regarding the borrowers. There is therefore
no need to move from the 12 month ECL model to the lifetime ECL
model. Expected losses are recognised on a forward-looking basis,
which has led to the additional recognition of an immaterial amount
of ECLs.
In addition to the above, the Company has committed a further
GBP7.8m in undrawn loans.
Details of the ECLs recognised in relation to loans can be seen
in note 18. No ECLs have been recognised on the undrawn loan
commitments, as they not considered to be material.
(c) Cash and equivalents
The Group has a low risk appetite for credit risk, which is
limited to exposures to credit institutions for its bank deposits.
A range of major regulated UK high street banks is used. A rigorous
annual due diligence exercise is undertaken to assess the financial
strength of these banks with those used having a minimum credit
rating of A (Fitch). In order to actively manage the credit and
concentration risks, the board has agreed risk appetite limits for
the regulated entities of the amount of corporate and client funds
that may be deposited with any one bank; which is represented by a
set percentage of the respective bank's total customer deposits.
Monthly monitoring of these positions along with movements in Fitch
ratings is undertaken, with reports presented to the directors for
review. Collectively these measures ensure that the Group
diligently manages the exposures and provide the mitigation scope
to be able to manage credit and concentration exposures on behalf
of itself and its customers.
Counterparty default risk exposure to loans
The Company has loans of GBP3.4million (2020: GBP2.6million).
There are no other loans held by the Group.
Counterparty default risk exposure to Group companies
As well as inconvenience and operational issues arising from the
failure of the other Group companies, there is also a risk of a
loss of assets. The Company is due GBP130k (2020: GBP342k) from
other Group companies.
Counterparty default risk exposure to other receivables
The Company has no other receivables arising, due to the nature
of its business, and the structure of the Group.
Across the Group, there is exposure to counterparty default risk
arising primarily from:
-- corporate assets directly held by the Group;
-- exposure to clients; and
-- exposure to other receivables.
The other exposures to counterparty default risk include a
credit default event which affects funds held on behalf of clients
and occurs at one or more of the following entities:
-- a bank where cash is held on behalf of clients;
-- a custodian where the assets are held on behalf of clients; and
-- Transact Nominees Limited (TNL), which is the legal owner of
the assets held on behalf of clients.
There is no first order impact on the Group from one of the
events in the preceding paragraph. This is because any credit
default event in respect of these holdings will be borne by
clients, both in terms of loss of value and loss of liquidity.
Terms and conditions have been reviewed by external lawyers to
ensure that these have been drafted appropriately. However, there
is a second order impact where future profits for the Group are
reduced in the event of a credit default which affects funds held
on behalf of clients.
There are robust controls in place to mitigate credit risk, for
example, holding corporate and client cash across a range of banks
in order to minimise the risk of a single point of counterparty
default failure. Additionally, maximum counterparty limits and
minimum credit quality steps are set for banks.
Corporate assets and funds held on behalf of clients
There is no significant risk exposure to any one UK clearing
bank.
Counterparty default risk exposure to clients
The Group is due GBP12.0 million (2020: GBP10.2 million) fee
income, owed by clients.
Impact of credit risk on fair value
Due to the limited direct exposure that the Group and the
Company have to credit risk, credit risk does not have a material
impact on the fair value movement of financial instruments for the
year under review. The fair value movements on these instruments
are predominantly due to changes in market conditions.
(3) Liquidity risk
Liquidity risk is the risk that funds are not accessible such
that the Company, although solvent, does not have sufficient liquid
financial resources to meet obligations as they fall due, or can
secure such resources only at excessive cost.
As a holding Company, the Company's main liquidity risk is
related to paying out shareholder dividends and operating expenses
it may incur.
Additionally, the Company has made short-term commitments, in
the form of a capped facility arrangement, to Vertus Capital SPV1
Limited ('Vertus') (as one of Vertus' sources of funding) to assist
Vertus in developing its business, which is to provide tailored
niche debt facilities to adviser firms to fund acquisitions,
management buy-outs and other similar transactions. This does not
represent a financial liability for the Company, but an increase in
the amount of the loan that is drawn down would lead to a reduction
in the cash available to meet the Company's financial
liabilities.
Across the Group, the following key drivers of liquidity risk
have been identified:
-- liquidity risk arising due to failure of one or more of the
Group's banks;
-- liquidity risk arising due to the bank's system failure which
prevents access to Group funds; and
-- liquidity risk arising from clients holding insufficient cash
to settle fees when they become due.
The Group's liquidity risk arises from a lack of readily
realisable cash to meet debts as they become due. This takes a
number of forms - clients' liabilities coming due, other
liabilities (e.g. expenses) coming due, insufficient liquid assets
to meet loan repayments to subsidiary companies and future payment
commitments over the next four years following the acquisition of
T4A.
The first of these, clients' liabilities is primarily covered
through the terms and conditions with clients' taking their own
liquidity risk, if their funds cannot be immediately surrendered
for cash.
Payment of other liabilities depends on the Group having
sufficient liquidity at all times to meet obligations as they fall
due. This requires access to liquid funds, i.e. working banks and
it also requires that the Group's main source of liquidity, charges
on its clients' assets, can also be converted into cash.
The payment of loan obligations is covered by the upward
dividends from subsidiary entities which were assessed against the
financial plans and capital projections of the regulated entity to
ensure the level of affordability of the future dividends.
The purchase price for T4A comprised three elements, a fixed sum
payable on deal completion which has been settled, a further fixed
sum to be paid in equal instalments over the next four years and a
variable amount by reference to T4A's performance over that four
year period. The payment of these future obligations is expected to
be met from the Company's own reserves and dividends it expects to
receive from its subsidiaries.
The Company has set out two key liquidity requirements: first,
to ensure that clients maintain a percentage of liquidity in their
funds at all times, and second, to maintain access to cash through
a spread of cash holdings in bank accounts.
There are robust controls in place to mitigate liquidity risk,
for example, through regular monitoring of expenditure, closely
managing expenses in line with the business plan, and, in the case
of the Vertus facility, capping the value of loans. Additionally,
the Group holds corporate and client cash across a range of banks
in order to mitigate the risk of a single point of counterparty
default failure.
Maturity schedule
The following tables show an analysis of the financial assets
and financial liabilities by remaining expected maturities as at 30
September 2020 and 30 September 2021.
In addition to the financial assets and financial liabilities
shown in the tables below, the Company committed a further GBP7.8m
in undrawn loans. These are available to be drawn down
immediately.
Financial assets:
1-5 Over 5
2020 Up to 3 months 3-12 months years years Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Investments
held for the
policyholders 16,727,208 - - - 16,727,208
Investments 92 - 4,959 - 5,051
Accrued income 10,244 - - - 10,244
Trade and other
receivables 614 165 7 - 786
Loans - - 2,647 - 2,647
Cash 1,539,843 - - - 1,539,843
Total 18,278,001 165 7,613 - 18,285,779
1-5 Over 5
2021 Up to 3 months 3-12 months years years Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Investments
held for the
policyholders 21,787,106 - - - 21,787,106
Investments 165 - 4,969 - 5,134
Accrued income 12,030 - - - 12,030
Trade and other
receivables 762 165 7 - 934
Loans - - 3,420 - 3,420
Cash 1,442,362 - - - 1,442,362
Total 23,242,425 165 8,396 - 23,250,986
Financial liabilities:
1-5 Over 5
2020 Up to 3 months 3-12 months years years Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Liabilities
for linked investment
contracts 18,112,935 - - - 18,112,935
Trade and other
payables 16,257 195 - - 16,452
Lease liabilities 614 1,761 3,712 - 6,087
Total 18,129,806 1,956 3,712 - 18,135,474
1-5 Over 5
2021 Up to 3 months 3-12 months years years Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Liabilities
for linked investment
contracts 23,053,389 - - - 23,053,389
Trade and other
payables 9,871 5,090 - - 14,961
Lease liabilities 622 1,867 2,766 - 5,255
Deferred consideration - 1,568 193 - 1,761
Contingent consideration - - 791 - 791
Total 23,063,882 8,525 3,750 - 23,076,157
(4) Outflow risk
Outflows occur when funds are withdrawn from the platform for
any reason. Outflows typically occur where clients' circumstances
and requirements change.
However, these outflows can also be triggered by operational
failure, competitor actions or external events such as regulatory
or economic changes.
Outflow risk is mitigated by focusing on providing exceptionally
high levels of service. Outflow rates are closely monitored and
unexpected experience is investigated. Despite the current
challenging and uncertain economic and geopolitical environment,
outflow rates remain stable and within historical norms.
(5) Expense risk
Expense risk arises where costs increase faster than expected or
from one-off expense "shocks".
The Group and the Company has exposure related to expense
inflation risk, where actual inflation deviates from expectations.
As a significant percentage of the Group's expenses are staff
related the key inflationary risk arises from salary inflation. The
Group and the Company have no exposures to defined benefit staff
pension schemes or client related index linked liabilities.
The Group's expenses are governed at a high level by the Group's
Expense Policy. The monthly management accounts are reviewed
against projected future expenses by the board and by senior
management and action is taken where appropriate.
5. Disaggregation of revenue
The Group has disaggregated revenue into the four categories
below to enable the users to better understand the relationship
with the segmental information provided in note 6.
For the financial year ended
30 September
2021 2020
GBP'000 GBP'000
Annual commission income 107,658 94,468
Wrapper fee income 10,626 9,743
Other income 3,015 3,109
Adviser back-office technology 2,371 -
Total fee income 123,670 107,320
Total fee income relates to both classes of business (see note 6
for details).
6. Segmental reporting
The revenue and profit before tax are attributable to activities
carried out in the UK.
The Group have three classes of business as follows:
- provision of investment administration services;
- transaction of ordinary long-term insurance and underwriting life assurance; and
- Adviser back-office technology.
Adviser back-office technology relates to the acquisition of T4A
during the financial period.
Analysis by class of business is given below.
Statement of comprehensive income - segmental information for
the year ended 30 September 2021:
Investment Insurance Adviser Consolidation Total
administration and life back-office adjustments
services assurance technology
business
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Revenue
Annual commission
income 58,896 48,762 - - 107,658
Wrapper fee
income 2,571 8,055 - - 10,626
Adviser back-office
technology - - 2,371 - 2,371
Other income 1,757 1,258 - - 3,015
Total fee income 63,224 58,075 2,371 - 123,670
Cost of sales (708) (480) (302) - (1,490)
Expenses
Admin expenses (64,776) (49,616) (4,502) 60,156 (58,738)
Impairment losses (200) (30) - - (230)
Net income attributable
to policyholders - 31,526 - - 31,526
Change in investment
contract liabilities - (2,736,063) - - (2,736,063)
Fee and commission
expenses - (204,123) - - (204,123)
Investment returns - 2,940,167 - - 2,940,167
Interest expense (209) (193) - 235 (167)
Interest income 45 283 - (235) 94
Profit/(loss)
before tax (3,219) 39,001 (1,293) 60,157 94,646
Policyholder
tax - (31,015) - - (31,015)
Tax on profit
on ordinary
activities (5,776) (7,061) 312 - (12,525)
Profit/(loss)
for the financial
year 44,089 49,605 (164) (42,424) 51,106
Statement of comprehensive income - segmental information for
the year ended 30 September 2020:
Insurance
Investment and life
administration assurance Other Consolidated
services business income adjustments Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Revenue
Annual commission
income 51,873 42,595 - - 94,468
Wrapper fee
income 2,337 7,406 - - 9,743
Other income 1,713 1,354 42 - 3,109
--------
Total fee income 55,923 51,355 42 - 107,320
Cost of sales (543) (323) - - (865)
Expenses
Admin expenses (61,170) (55,760) - 65,914 (51,016)
Amortisation
of deferred
acquisition
costs - (7,576) - - (7,576)
Impairment losses (109) (67) - - (176)
Net income attributable
to policyholders - (3,066) - - (3,066)
Change in investment
contract liabilities - 82,895 - - 82,895
Fee and commission
expenses - (137,536) - - (137,536)
Investment returns - 54,677 - - 54,677
Interest expense (120) (113) - - (233)
Interest income 121 135 - - 256
Profit before
tax 41,402 43,180 - (32,326) 52,256
Policyholder
tax - 3,066 - - 3,066
Tax on profit
on ordinary
activities (4,641) (5,197) - - (9,838)
Profit for the
financial year 36,761 41,048 - (32,326) 45,484
The figures above comprise the results of the companies that
fall directly into each segment, as well as a proportion of the
results from the other Group companies that only provide services
to the revenue-generating companies. This therefore has no effect
on revenue, but has an effect on the profit before tax.
Statement of financial position - segmental information for the
year ended 30 September 2021:
Insurance
Investment and life Adviser
administration assurance back-office
services business technology Total
GBP'000 GBP'000 GBP'000 GBP'000
Assets
Non-current assets 11,884 19,967 30 31,881
Current assets 67,309 23,184,219 3,866 23,255,394
Total assets 79,193 23,204,186 3,896 23,287,275
Liabilities
Current liabilities 8,163 23,075,931 748 23,084,842
Non-current liabilities 2,616 36,548 - 39,164
Total liabilities 10,779 23,112,479 748 23,124,006
Net assets 68,414 91,707 3,148 163,269
Non-current assets additions 329 304 26 660
Statement of financial position - segmental information for the
year ended 30 September 2020:
Insurance and
Investment administration life assurance
services business Total
GBP'000 GBP'000 GBP'000
Assets
Non-current assets 11,611 64,232 75,843
Current assets 60,597 18,229,525 18,290,123
Total assets 72,209 18,293,757 18,365,966
Liabilities
Current liabilities 7,763 18,125,913 18,133,676
Non-current liabilities 2,208 89,162 91,370
Total liabilities 9,971 18,215,075 18,225,046
Net assets 62,237 78,682 140,920
Non-current assets additions 438 421 859
Segmental information: Split by geographical location
2021 2020
GBP'000 GBP'000
Revenue
United Kingdom 118,893 103,089
Isle of Man 4,763 4,231
Australia 14 -
Total 123,670 107,320
2021 2020
GBP'000 GBP'000
Non-current assets
United Kingdom 26,873 19,128
Isle of Man 51 97
Total 26,924 19,225
The non-current assets excludes the deferred acquisition costs,
loans and deferred tax assets.
7. Earnings per share
2021 2020
Profit
Profit for the year and earnings
used in basic and diluted earnings
per share GBP51.1m GBP45.5m
Weighted average number of shares
Weighted average number of Ordinary
shares 331.3m 331.3m
Weighted average numbers of Ordinary
Shares held by Employee Benefit
Trust (0.3m) (0.1m)
Weighted average number of Ordinary
Shares for the purposes of basic
EPS 331.0m 331.2m
Adjustment for dilutive share option
awards 0.3m 0.1m
Weighted average number of Ordinary
Shares for the purposes of diluted
EPS 331.3m 331.3m
Earnings per share
Earnings per share - basic and diluted 15.4p 13.7p
Earnings per share ("EPS") is calculated based on the share
capital of IntegraFin Holdings plc and the earnings of the
consolidated Group.
Basic EPS is calculated by dividing profit after tax
attributable to ordinary equity shareholders of the Company by the
weighted average number of Ordinary Shares outstanding during the
year. The weighted average number of shares excludes shares held
within the Employee Benefit Trust to satisfy the Group's
obligations under employee share awards.
Diluted EPS is calculated by adjusting the weighted average
number of Ordinary Shares outstanding to assume conversion of all
potentially dilutive Ordinary Shares.
8. Expenses by nature
The following expenses are included within administrative
expenses:
Group
2021 2020
GBP'000 GBP'000
Depreciation 2,755 2,561
Amortisation 321 -
Wages and employee benefits expense 41,018 36,732
Other staff costs 2,840 200
Auditor's remuneration:
* auditing of the Financial Statements of the Company
pursuant to the legislation 164 78
* auditing of the Financial Statements of subsidiaries 202 99
* other assurance services 149 118
Other Auditor's remuneration:
* auditing of the Financial Statements of subsidiaries 184 154
* other assurance services 138 97
Other professional fees 4,326 2,808
Regulatory fees 3,531 3,643
Short-term lease payments:
* land and buildings 141 4
* equipment 2 3
Other occupancy costs 1,234 2,001
Other costs 3,980 3,589
Other income - tax relief due to
shareholders (2,208) (1,071)
Total administrative expenses 58,738 51,016
"Other income - tax relief due to shareholders" relates to the
release of policyholder tax provisions to the statement of
comprehensive income.
Company
2021 2020
GBP'000 GBP'000
Wages and employee benefits expense 424 475
Other staff costs 2,227 24
Auditor's remuneration:
* auditing of the Financial Statements of the Company
pursuant to the legislation 319 78
* other assurance services 18 18
Other professional fees 1,228 422
Regulatory fees 34 30
Other costs 489 161
Total administrative expenses 4,739 1,208
Wages and employee benefits expense
The average number of staff (including executive directors)
employed by the Group during the financial year amounted to:
2021 2020
No. No.
CEO 2 1
Client services staff 231 213
Finance staff 61 60
Legal and compliance staff 33 31
Sales, marketing and product development
staff 45 40
Software development staff 122 104
Technical and support staff 49 45
543 494
The Company has no employees (2020: nil).
Wages and employee (including executive directors) benefits
expenses during the year, included within administrative expenses,
were as follows:
2021 2020
GBP'000 GBP'000
Wages and salaries 32,908 29,307
Social security costs 3,400 3,085
Other pension costs 2,815 2,714
Share-based payment costs 1,895 1,626
41,018 36,732
Compensation of key management personnel
Key management personnel are defined as those persons having
authority and responsibility for planning, directing and
controlling the activities of the entity and as such, only
directors are considered to meet this definition.
2021 2020
GBP'000 GBP'000
Short-term employee benefits* 2,880 2,622
Post employment benefits 139 40
Share based payment 414 522
Other benefits 4 33
Social security costs 447 211
3,884 3,428
Highest paid director:
Short-term employee benefits* 555 491
Other benefits 143 140
Post employment benefits 4 7
Number of directors for whom pension
contributions are paid 2 2
*Short-term employee benefits comprise salary and cash
bonus.
9. I nterest income
Group Company Group Company
2021 2021 2020 2020
GBP'000 GBP'000 GBP'000 GBP'000
Interest income on bank
deposits 19 2 194 29
Interest income on loans 75 74 62 62
94 76 256 91
10. Investment returns
2021 2020
GBP'000 GBP'000
Interest on fixed-interest securities 16 80
Realised losses on fixed-interest
securities (7) -
Unrealised losses on fixed-interest
securities (27) (44)
Change in fair value of underlying
assets 2,810,061 (73,093)
Investment income 130,124 127,734
Total investment returns 2,940,167 54,677
11. Tax on profit on ordinary activities
Group
a) Analysis of charge in year
The income tax expense comprises:
2021 2020
GBP'000 GBP'000
Corporation tax
Current year - corporation tax 12,185 9,879
Adjustment in respect of prior
years 418 125
12,603 10,004
Deferred tax
Current year (232) (38)
Adjustment in respect of prior
years (113)
Change in deferred tax charge/(credit)
as a result of higher tax rate 154 (15)
Total tax charge for the year 12,525 9,838
b) Factors affecting tax charge for the year
The tax on the Group's profit before tax differs from the amount
that would arise using the weighted average tax rate applicable to
profits of the consolidated entities as follows:
2021 2020
GBP'000 GBP'000
Profit on ordinary activities before
tax 94,646 52,256
Policyholder tax (31,015) 3,066
63,631 55,322
Profit on ordinary activities multiplied
by effective rate of Corporation
Tax 19% (2020: 19%) 12,090 10,511
Effects of:
Non-taxable dividends (76) (187)
Income / expenses not taxable /
deductible for tax purposes multiplied
by effective rate of corporation
tax 691 (17)
Adjustments in respect of prior
years (92) (356)
Effect of change in tax rate 155 (15)
Rate differences (38) 30
Other adjustments (205) (128)
12,525 9,838
Company
a) Analysis of charge in year
2021 2020
GBP'000 GBP'000
Deferred tax charge/(credit) (see
note 27) - -
Total - -
b) Factors affecting tax charge for the year
2021 2020
GBP'000 GBP'000
Profit on ordinary activities before
tax 37,173 31,124
Profit on ordinary activities multiplied
by effective rate of Corporation
Tax 19% (2020: 19%) 7,063 5,914
Effects of:
Non-taxable dividends (8,000) (6,142)
Income / expenses not taxable / deductible
for tax purposes multiplied by effective
rate of Corporation Tax 614 9
Group loss relief to ISL 323 219
- -
12. Policyholder income and expenses - Group
2021 2020
GBP'000 GBP'000
Net income attributable to policyholder
returns 31,526 (3,066)
Policyholder tax (31,015) 3,066
This relates to income and expenses, and the associated tax
charges, on policyholder assets and liabilities.
13. Intangible assets - Group
Software
and IP Customer
rights Goodwill relationships Software Brand Total
Cost GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
At 1 October
2020 12,505 12,951 - - - 25,456
Acquisitions
through business
combinations - 5,335 2,086 1,975 260 9,656
At 30 September
2021 12,505 18,286 2,086 1,975 260 35,112
Amortisation
At 1 October
2020 12,505 - - - - 12,505
Charge for the
year - - 100 203 18 321
At 30 September
2021 12,505 - 100 203 18 12,826
Net Book Value
At 30 September
2020 - 12,951 - - - 12,951
At 30 September
2021 - 18,286 1,986 1,772 242 22,286
Cost GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
At 1 October
2019 12,505 12,951 - - - 25,456
At 30 September
2020 12,505 12,951 - - - 25,456
Amortisation
At 1 October
2019 12,505 - - - - 12,505
Charge for the - - -
year - - -
At 30 September
2020 12,505 - - - - 12,505
Net Book Value
At 30 September
2019 - 12,951 - - - 12,951
At 30 September
2020 - 12,951 - - - 12,951
Business combinations - acquisition of Time for Advice Limited
(T4A)
On 11 January 2021, the Company acquired 100% of the voting
equity instruments of T4A, a specialist software provider for
financial planning and wealth management. The principal reason for
the acquisition was to support IHP's strategy of providing platform
and associated services to clients and their advisers.
With effect from the date of acquisition, T4A's accounts have
been consolidated into the Group's consolidated results, resulting
in the inclusion of GBP2,371k of revenue achieved from that date to
30 September 2021, and losses after tax of GBP968k in the same
period.
Had the acquisition of T4A taken place at the beginning of the
reporting period, the consolidated revenue of the Group for the
year to 30 September 2021 would have been GBP124.7 million, and the
consolidated profit after tax would have been GBP49.9 million.
T4A generates cash inflows that are independent of the cash
inflows from the rest of the Group, and it is therefore considered
to be a separate cash generating unit.
Details of the fair value of identifiable assets and liabilities
acquired, purchase consideration and goodwill are as follows:
Book value Fair value Fair value
adjustments
GBP'000 GBP'000 GBP'000
Cash and cash equivalents 697 - 697
Trade and other receivables 391 - 391
Property, plant and equipment 22 - 22
Current liabilities (990) - (990)
Customer relationships - 2,086 2,086
Software - 1,975 1,975
Brand - 260 260
Deferred tax liability - (821) (821)
Total net assets 120 3,500 3,620
Fair value of consideration 8,955
Goodwill 5,335
All contractual cash flows are expected to be received, and the
gross contractual amounts receivable therefore equal the fair value
of receivables shown above.
The intangibles assets recognised relate to T4A's CURO software,
the CURO brand and T4A's customer relationships obtained through
the acquisition, all of which meet the requirement to be separately
identifiable under IFRS 3. A deferred tax liability of GBP821k has
been recognised in relation to these fair value adjustments.
The acquisition cost comprised up-front cash payments of GBP8.6
million, plus GBP8.6 million of deferred consideration, payable in
phases over the next four years. Additional consideration between
GBP0 and GBP8.6 million is also payable in January 2025. The amount
is contingent on T4A meeting certain performance targets over the
next four years, and management have estimated the fair value as
GBP3,882k.
The allocation of the above costs between consideration and
post-combination remuneration can be seen below:
Consideration Remuneration
GBP'000 GBP'000
Up-front cash consideration 8,600 -
Deferred consideration 239 8,342
Additional consideration 116 3,766
Total 8,955 12,108
An assessment has been performed by management regarding the
deferred and contingent arrangements payable to selling
shareholders that continue providing services, and it has been
determined that these relate to payment for post-combination
services and should therefore be treated as remuneration across the
four year period to which the services relate, from January 2021 to
December 2024. The deferred and additional arrangements that have
been treated as consideration relate to amounts payable to a
selling shareholder who does not provide services to T4A.
The overall cash outflow upon acquisition of T4A can be seen
below:
GBP'000
Up-front cash consideration 8,600
T4A cash and cash equivalents at acquisition
date (697)
Total cash outflow 7,903
The main factors leading to the recognition of goodwill are:
-- The presence of certain intangible assets, such as the
assembled workforce of T4A, which do not qualify for separate
recognition.
-- The fact that the investment supports the Group's strategy of
delivering the highest quality financial services infrastructure
and associated services to advisers and clients. Management sees
the T4A offering, CURO, as complementary to Transact. Whilst still
undergoing further development CURO has already proven to be highly
capable and, with the Company's support, providing the necessary
investment and direction, it is believed that T4A will be a great
long-term fit that will deliver positive outcomes for all.
The goodwill will be tested for impairment annually going
forward.
Goodwill impairment assessment
In accordance with IFRS, goodwill is not amortised, but is
assessed for impairment on an annual basis. The impairment
assessment compares the carrying value of goodwill to the
recoverable amount, which is the higher of value in use and the
fair value less costs of disposal. The recoverable amount is
determined based on value in use calculations. The use of this
method requires the estimation of future cash flows and the
determination of a discount rate in order to calculate the present
value of the cash flows.
The goodwill relates to the acquisition of IAD Pty in July 2016
and T4A in January 2021.
The carrying amount of goodwill is allocated to the two cash
generating units ("CGUs") that are benefitting from the acquisition
as follows:
IAD Pty
2021 2020
GBP'000 GBP'000
Investment administration services 7,217 7,256
Insurance and life assurance business 5,734 5,695
Total 12,951 12,951
T4A
2021 2020
GBP'000 GBP'000
Adviser back-office technology 5,335 -
Other assumptions are as follows:
2021 2020
Discount rate 10.0% 8.8%
Period on which detailed forecasts
are based 5 years 5 years
Long-term growth rate 1.0% 1.0%
The recoverable amounts of the above CGUs have been determined
from value in use calculations based on cash flow projections from
formally approved budgets covering a five year period to 30
September 2026. Post the five year business plan, the growth rate
used to determine the terminal value of the cash generating units
was based on a long-term growth rate of 1.0%.
Based on management's experience, the key assumptions on which
management has calculated its projections are net inflows, market
growth and expense inflation.
The annual impairment tests relating to both acquisitions
indicated that there is significant headroom in the recoverable
amount over the carrying value of the CGUs. There is therefore no
indication of impairment.
A sensitivity analysis has been performed, which showed that
there were no reasonable foreseeable changes in the assumptions
which would result in the recoverable amount falling below the
carrying amount.
14. Property, plant and equipment - Group
Leasehold Fixtures
improvements Equipment and Fittings Motor Vehicles Total
Cost GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
At 1 October 2020 1,732 3,314 186 103 5,335
Acquisition of
subsidiary - 12 6 - 18
Additions - 642 - 18 660
Disposals - (325) (12) (38) (375)
Foreign exchange (12) (19) - (4) (35)
At 30 September
2021 1,720 3,624 180 79 5,603
Depreciation
At 1 October 2020 1,157 1,634 145 86 3,022
Reclassification 2 32 - (34) -
Charge in the
year 146 960 16 14 1,136
Disposals - (325) (12) (26) (363)
Foreign exchange (2) (12) - (5) (19)
At 30 September
2021 1,303 2,289 149 35 3,776
Net Book Value
At 30 September
2020 575 1,680 41 17 2,313
At 30 September
2021 417 1,335 31 44 1,827
Cost GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
At 1 October 2019 1,728 2,607 186 111 4,632
Additions - 852 - - 852
Disposals - (152) - (9) (161)
Foreign exchange 4 7 - 1 12
At 30 September
2020 1,732 3,314 186 103 5,335
Depreciation
At 1 October 2019 1,008 1,020 127 72 2,227
Charge in the
year 148 758 18 22 946
Disposals - (149) - (9) (158)
Foreign exchange 1 5 - 1 7
At 30 September
2020 1,157 1,634 145 86 3,022
Net Book Value
At 30 September
2019 720 1,587 59 39 2,405
At 30 September
2020 575 1,680 41 17 2,313
The Company holds no property, plant and equipment.
15. Right-of-use assets - Property - Group
Cost GBP'000
Additions on adoption of IFRS 16 - 1 October
2019 5,581
Australian dollar foreign exchange adjustment 5
At 30 September 2020 5,586
Depreciation
Charge in the year 1,615
Foreign exchange adjustment 10
At 30 September 2020 1,625
Net Book Value
At 30 September 2019 -
At 30 September 2020 3,961
Cost GBP'000
At 1 October 2020 5,586
Additions 1,301
Disposals (412)
Foreign exchange (15)
At 30 September 2021 6,460
Depreciation GBP'000
At 1 October 2020 1,625
Charge in the year 1,623
Disposals (412)
Foreign exchange (8)
At 30 September 2021 2,828
Net Book Value
At 30 September 2020 3,961
At 30 September 2021 3,632
Depreciation is calculated on a straight line basis over the
term of the lease.
16. Investment in subsidiaries
2021 2020
GBP'000 GBP'000
Carrying value at 1 October 16,832 15,799
Additions 12,955 -
Share-based payments 1,776 1,033
Carrying value at 30 September 31,563 16,832
The Company has investments in the ordinary share capital of the
following subsidiaries at 30 September 2021:
Incorporation
and significant
Name of Company Holding % Held place of business Business
Direct holdings
Integrated Financial Investment
Arrangements Ltd Ordinary Shares 100% United Kingdom Administration
IntegraFin Services
Limited Ordinary Shares 100% United Kingdom Services Company
Software provision
Transact IP Limited Ordinary Shares 100% United Kingdom & development
Integrated Application
Development Pty
Ltd Ordinary Shares 100% Australia Software maintenance
Objective Asset
Management Limited Ordinary Shares 100% United Kingdom Dormant
Indirect holdings
IntegraFin Limited Ordinary Shares 100% United Kingdom Non-trading
Transact Nominees
Limited Ordinary Shares 100% United Kingdom Non-trading
IntegraLife UK Limited Ordinary Shares 100% United Kingdom Life Insurance
IntegraLife International
Limited Ordinary Shares 100% Isle of Man Life Assurance
ObjectMastery (UK)
Limited Ordinary Shares 100% United Kingdom Consultancy
Objective Funds
Limited Ordinary Shares 100% United Kingdom Dormant
Objective Wealth
Management Limited Ordinary Shares 100% United Kingdom Dormant
IntegraFin (Australia)
Pty Limited Ordinary Shares 100% Australia Non-trading
Transact Trustees
Limited Ordinary Shares 100% United Kingdom Non-trading
Time For Advice Financial
Limited Ordinary Shares 100% United Kingdom planning software
The Group has 100% voting rights on shares held in each of the
subsidiary undertakings.
All the UK subsidiaries have their registered office address at
29 Clement's Lane, London, EC4N 7AE. ILInt's registered office
address is at 18-20 North Quay, Douglas, Isle of Man, IM1 4LE.
IntegraFin (Australia) Pty's registered office address is at Level
4, 854 Glenferrie Road, Hawthorn, Victoria, Australia 3122.
Integrated Application Development Pty Ltd's registered office
address is 19-25 Camberwell Road, Melbourne, Australia.
The above subsidiaries have all been included in the
consolidated Financial Statements. The results of ILInt and ILUK
are included as described in the basis of consolidation accounting
policy in note 1.
Integrated Financial Arrangements Ltd is authorised and
regulated by the Financial Conduct Authority. The principal
activity of the Company and its subsidiaries is the provision of
'Transact', a wrap service that arranges and executes transactions
between clients, their financial advisers and financial product
providers including investment managers and stockbrokers.
IntegraFin Services Limited (ISL), is the Group services
company. All intra-group service contracts are held by this
services company.
Integrated Application Development Pty Ltd (IAD Pty) provides
software maintenance services to the Group.
IntegraFin Limited is the trustee of the IntegraSIP Share
Incentive Plan, which was set up to allocate Class C Shares in the
capital of the Company to staff. IntegraFin Limited undertakes no
other activities.
Transact Nominees Limited holds customer assets as a nominee
company on behalf of Integrated Financial Arrangements Ltd.
IntegraFin (Australia) Pty Limited is currently non-trading.
Transact IP Limited licenses its proprietary software to other
members of the IntegraFin Group.
IntegraLife UK Limited is authorised by the Prudential
Regulation Authority and regulated by the Financial Conduct
Authority and the Prudential Regulation Authority. Its principal
activity is the transaction of ordinary long-term insurance
business within the United Kingdom.
IntegraLife International Limited is authorised and regulated by
the Isle of Man Financial Services Authority and its principal
activity is the transaction of ordinary long-term insurance
business within the United Kingdom through the Transact Offshore
Bond.
Time For Advice Limited is a specialist software provider for
financial planning and wealth management.
17. Deferred acquisition costs and deferred income liability
2021 2020
GBP'000 GBP'000
Opening balance 53,482 50,443
Capitalisation of deferred
acquisition costs and deferred
income liabilities - 10,615
Amortisation of deferred acquisition
costs and deferred income liabilities - (7,576)
Derecognition of deferred acquisition
costs and deferred income liabilities (53,482) -
Change in deferred acquisition
costs and deferred income liabilities (53,482) 3,039
Closing balance - 53,482
Following a review of the terms of the agreements relating to
establishment charges paid to ILUK and ILInt policyholders'
financial advisers, management has concluded that the Group is
acting in an agency capacity between the policyholders and their
financial advisers, rather than as a principal. It therefore should
not recognise the deferred acquisition costs as contract costs, nor
does it have future service obligations in respect of the deferred
fees to justify the recognition of the corresponding deferred
income liability. The deferred acquisition costs and deferred
income liabilities have therefore been derecognised in the
financial year ended 30 September 2021, to bring the accounts in
line with the accounting standards.
The impact is a reduction in both assets and liabilities of
GBP53.5million. The treatment has had no impact on the profit or
loss or net assets of the Group.
Management has considered the qualitative and quantitative
impact of the above change, and has concluded that this does not
have a material effect on the prior year financial statements, and
a prior year adjustment is therefore not required. This is due to
the fact that:
-- The net impact on the statement of comprehensive income and on net assets is nil;
-- all balances being derecognised on the statement of financial
position are equal and opposite;
-- the total balances are not material in the context of total
policyholder assets and linked liabilities; and
-- the users would not reasonably have any expectations
regarding the measurement or disclosure of these items, as it
fundamentally does not relate to them.
18. Loans
This note analyses the loans payable by and receivable to the
Company. The carrying amounts of loans are as follows:
Loans receivable
2021 2020
GBP'000 GBP'000
Loans receivable from third parties 3,540 2,716
Interest receivable on loans 21 16
--------
Total gross loans 3,561 2,732
Credit loss allowance (141) (85)
--------
Total net loans 3,420 2,647
--------
The loans receivable are measured at amortised cost with the
credit loss allowance charged straight to the statement of
comprehensive income. The total movement in the credit loss
allowance can be seen in note 23.
Loans payable
2021 2020
GBP'000 GBP'000
Loan payable to subsidiary 9,000 -
To be settled within 12 months 1,000 -
To be settled after 12 months 8,000 -
--------
Total loan payable 9,000 -
--------
The loans payable are initially recognised at fair value.
Subsequent measurement is at amortised cost using the effective
interest method. The interest charge is recognised on the statement
of comprehensive income.
Interest on the loan is paid quarterly, whilst the remaining
capital repayments are annual over the next 9 years.
19. Investments held for the benefit of policyholders
2021 2021 2020 2020
Cost Fair value Cost Fair value
ILInt GBP'000 GBP'000 GBP'000 GBP'000
Investments held
for the benefit
of policyholders 1,737,512 2,102,209 1,346,990 1,534,080
1,737,512 2,102,209 1,346,990 1,534,080
ILUK
Investments held
for the benefit
of policyholders 16,146,376 19,684,897 13,482,294 15,193,128
16,146,376 19,684,897 13,482,294 15,193,128
Total 21,787,106 16,727,208
All amounts are current as customers are able to make same-day
withdrawal of available funds and transfers to third-party
providers are generally performed within a month.
These assets are held to cover the liabilities for unit linked
investment contracts. All contracts with customers are deemed to be
investment contracts and, accordingly, assets are 100% matched to
corresponding liabilities.
20. Liabilities for linked investment contracts
2021 2020
Fair value Fair value
ILInt GBP'000 GBP'000
Unit linked liabilities 2,199,700 1,636,781
2,199,700 1,636,781
ILUK
Unit linked liabilities 20,853,690 16,476,154
20,853,690 16,476,154
Total 23,053,390 18,112,935
Analysis of change in liabilities for linked investment
contracts
2021 2020
GBP'000 GBP'000
Opening balance 18,112,935 16,665,048
Investment inflows 3,391,318 2,415,445
Investment outflows (1,130,468) (834,454)
Compensation 163 47
Changes in fair value
of underlying assets 2,940,185 (72,990)
Investment income - 127,735
Other fees and charges
- Transact (56,620) (50,360)
Other fees and charges
- third parties (204,123) (137,536)
Closing balance 23,053,390 18,112,935
The benefits offered under the unit-linked investment contracts
are based on the risk appetite of policyholders and the return on
their selected collective fund investments, whose underlying
investments include equities, debt securities, property and
derivatives. This investment mix is unique to individual
policyholders. When the diversified portfolio of all policyholder
investments is considered, there is a clear correlation with the
FTSE 100 index and other major world indices, providing a
meaningful comparison with the return on the investments.
The maturity value of these financial liabilities is determined
by the fair value of the linked assets at maturity date. There will
be no difference between the carrying amount and the maturity
amount at maturity date.
21. Cash and cash equivalents
2021 2020
GBP'000 GBP'000
Bank balances - Instant access 169,578 148,617
Bank balances - Notice accounts 6,502 5,500
Cash and cash equivalents held
for the benefit of the policyholders
- instant access - ILUK 1,131,567 1,231,043
Cash and cash equivalents held
for the benefit of the policyholders
- term deposits - ILUK 37,225 51,982
Cash and cash equivalents held
for the benefit of the policyholders
- instant access - ILINT 96,458 100,716
Cash and cash equivalents held
for the benefit of the policyholders
- term deposits - ILINT 1,032 1,985
Total 1,442,362 1,539,843
Bank balances held in instant access accounts are current and
available for use by the Group.
All of the bank balances held in notice accounts require less
than 35 days' notice before they are available for use by the
Group.
The cash and cash equivalents held for the benefit of the
policyholders are held to cover the liabilities for unit linked
investment contracts. These amounts are 100% matched to
corresponding liabilities.
22. Financial assets at fair value through profit or loss
Group Group
2021 2020
GBP'000 GBP'000
Listed shares and securities 165 92
Gilts 4,969 4,959
Total 5,134 5,051
Investments are all UK and sterling based and held at fair
value.
23. Other prepayments and accrued income
Group Company Group Company
2021 2021 2020 2020
GBP'000 GBP'000 GBP'000 GBP'000
Accrued income 12,819 - 10,956 -
Less: credit loss
allowance (789) - (712) -
Accrued income -
net 12,030 - 10,244 -
Prepayments 3,921 45 4,168 56
Total 15,951 45 14,412 56
Movement in the credit loss allowance (for accrued income, loans
receivable and trade and other receivables) is as follows:
2021 2020
GBP'000 GBP'000
Opening credit loss allowance (822) (646)
Reduction in credit loss allowance - -
(Increase) during the year (230) (176)
Balance at 30 September (1,052) (822)
24. Trade and other receivables
Group Company Group Company
2021 2021 2020 2020
GBP'000 GBP'000 GBP'000 GBP'000
Other receivables 935 3 1,329 -
Less: credit loss
allowance (123) - - -
Other receivables
net 812 3 1,329 -
Amounts owed by Group
undertakings - 130 - 342
Amounts due from
HMRC 1,800 - 2,227 -
Amount due from policyholders
to meet current tax
liability 1,107 - - -
Total 3,719 133 3,556 342
Amount due from HMRC is in respect of tax claimed on behalf of
policyholders for tax deducted at source.
25. Trade and other payables
Group Company Group Company
2021 2021 2020 2020
GBP'000 GBP'000 GBP'000 GBP'000
Trade payables 437 27 1,716 7
PAYE and other taxation 1,610 61 1,420 67
Due to Group undertakings - 22 - 56
Other payables 5,460 210 7,436 49
Accruals and deferred
income 8,216 359 7,794 312
Deferred consideration 1,741 1,741 - -
Tota l 17,466 2,420 18,366 491
Other payables mainly comprises GBP4.2million (2020:
GBP6.2million) in relation to bonds awaiting approval.
26. Lease liabilities
Lease liabilities - Property:
2021 2020
GBP'000 GBP'000
Opening balance 6,087 8,336
Additions 1,283 -
Lease payments (2,491) (2,477)
Interest expense 167 233
Foreign exchange adjustment (9) (5)
Balance at 30 September 5,037 6,087
Amounts falling due within one year 2,362 2,375
Amounts falling due after one year 2,675 3,712
The above table provides a reconciliation of the financial
liabilities arising from financing activities.
The Group has various leases in respect of property as a lessee.
Lease terms are negotiated on an individual basis and run for a
period of one to five years.
27. Deferred tax
Deferred tax is calculated in full on temporary differences
under the liability method using a tax rate of 25% (2020: 19%). The
increase in the UK corporation tax rate to 25% was substantively
enacted in May 2021. This new rate has been applied to deferred tax
balances which are expected to reverse after 1 April 2023, the date
on which that new rate becomes effective.
Deferred Tax Asset Share based Other deductible
payments temporary differences Total
GBP'000 GBP'000 GBP'000
At 1 October 2019 110 47 157
Adjustment in respect
of prior year 108 18 126
Adjustment to opening
balances - 32 32
Excess tax relief charged
to equity 60 - 60
Charge to income 124 (10) 114
At 30 September 2020 402 87 489
Charge to income 192 16 208
Excess tax relief charged
to equity 19 - 19
Charge to income 192 16 208
At 30 September 2021 613 103 716
Deferred Tax Liability Accelerated Policyholder Other deductible
capital allowances tax differences Total
GBP'000 GBP'000 GBP'000 GBP'000
At 1 October 2019 60 13,188 - 13,248
Charge to income 61 (4,341) - (4,280)
At 30 September
2020 121 8,847 - 8,968
Charge to income (49) 19,599 179 19,729
Deferred tax acquired
through business combination - - 821 821
At 30 September 2021 72 28,446 1,000 29,518
The Company has no deferred tax assets or liabilities.
28. Client monies and client assets
2021 GBP'000 GBP'000
Amounts due to
Client monies 2,901,487 clients 2,901,487
Corresponding
Client assets 49,210,125 liability 49,210,125
2020 GBP'000 GBP'000
Amounts due to
Client monies 3,106,978 clients 3,106,978
Corresponding
Client assets 37,985,921 liability 37,985,921
The above client monies are held separately (off balance sheet)
in client bank and the above client assets are held on behalf of
Integrated Financial Arrangements Ltd by Transact Nominees
Limited.
29. Provisions - Group
2021 2020
GBP'000 GBP'000
Balance brought forward 25,208 18,230
Increase in dilapidations provision 52 52
Increase in ILInt non-linked unit provision 13 2
(Decrease)/increase in ILUK tax provision (7,469) 6,924
Balance carried forward 17,804 25,208
Amounts falling due within one year 11,624 -
Amounts falling due after one year 6,180 25,208
Dilapidations provisions 516 464
ILInt non-linked unit provision 54 41
Current ILUK tax provision 11,626 -
Non-current ILUK tax provision 5,608 24,703
Total 17,804 25,208
The dilapidation provisions relate to the current leasehold
premises at 29 Clement's Lane, and the current ILInt leasehold
premises at 18/20 North Quay, on the Isle of Man. The Group is
committed to restoring the premises to their original state at the
end of the lease term. Whilst it is probable that payments will be
required for dilapidations, uncertainty exists with regard to the
amount and timing of these payments, and the amounts provided
represent management's best estimate of the Group's liability.
ILUK tax provision comprises claims received from HMRC that are
yet to be returned to policyholders, charges taken from unit-linked
funds and claims received from HMRC to meet current and future
policyholder tax obligations. These are expected to be paid to
policyholders over the course of the next seven years.
30. Contingent consideration - Group and company
2021 2020
GBP'000 GBP'000
Contingent consideration 791 -
As explained in note 13, the T4A acquisition cost included
additional consideration between GBP0 and GBP8.6 million, which is
payable in January 2025 and contingent on T4A meeting certain
performance targets over the next four years.
Management have estimated the fair value as GBP3.9 million, and
this is being recognised across the four year period from January
2021 to December 2024. The contingent consideration balance relates
to the element of the additional consideration that has been
recognised up to 30 September 2021.
31. Capital redemption reserve - Group
2021 2020
GBP'000 GBP'000
Balance brought forward 2 2
Balance carried forward 2 2
On 12 December 2013 IFAL was granted authority by shareholders
to repurchase GBP4,500,000 worth of ordinary shares from
shareholders. IFAL purchased 45,917 shares, and they were then
cancelled, giving rise to a capital redemption reserve of
GBP2,271.
32. Share-based payments
Share-based payment reserve
Group Company Group Company
2021 2021 2020 2020
GBP'000 GBP'000 GBP'000 GBP'000
Balance brought forward 1,698 1,070 1,008 880
Movement in the year 732 645 723 190
Transfer to profit and
loss reserve (26) - (33) -
Balance carried forward 2,404 1,715 1,698 1,070
The reduction in reserves of GBP26k (2020: GBP33k) is due to
former members of staff leaving the SIP 2005 scheme.
Share schemes
(i) SIP 2005
IFAL implemented a SIP trust scheme for its staff in October
2005. The SIP is an approved scheme under Schedule 2 of the Income
Tax (Earnings & Pensions) Act 2003.
This scheme entitled all the staff who were employed in October
2005 to Class C shares in IFAL, subject to their remaining in
employment with the Company until certain future dates.
The Trustee for this scheme is IntegraFin Limited, a wholly
owned non-trading subsidiary of IFAL.
Shares issued under the SIP may not be sold until the earlier of
three years after issue or cessation of employment by the Group. If
the shares are held for five years they may be sold free of income
tax or capital gains tax. There are no other vesting
conditions.
The cost to the Group in the financial year to 30 September 2021
was GBPnil (2020: GBPnil). There have been no new share options
granted.
(ii) SIP 2018
The Company implemented an annual SIP awards scheme in January
2019. This is an approved scheme under Schedule 2 of the Income Tax
(Earnings & Pensions) Act 2003, and entitles all eligible
employees to ordinary shares in the Company. The shares are held in
a UK Trust.
The scheme includes the following awards:
Free Shares
The Company may give Free Shares up to a maximum value,
calculated at the date of the award of such Free Shares, of
GBP3,600 per employee in a tax year.
The share awards are made by the Company each year, dependent on
12 months continuous service at 30 September. The cost to the Group
in the financial year to 30 September 2021 was GBP669k (2020:
GBP649k).
Partnership and Matching Shares
The Company provides employees with the opportunity to enter
into an agreement with the Company to enable such employees to use
part of their pre-tax salary to acquire Partnership Shares. If
employees acquire Partnership Shares, the board grants relevant
Matching Shares at a ratio of 2:1.
The cost to the Group in the financial year to 30 September 2021
was GBP539k (2020: GBP555k).
(iii) Performance Share Plan
The Company implemented an annual PSP scheme in December 2018.
Awards granted under the PSP take the form of options to acquire
Ordinary Shares for nil consideration. These are awarded to
Executive Directors, Senior Managers and other employees of any
Group Company, as determined by the Remuneration Committee.
The exercise of the PSP awards is conditional upon the
achievement of a performance condition set at the time of grant and
measured over a three year performance period.
The cost to the Group in the financial year to 30 September 2021
was GBP687k (2020: GBP423k). This is based on the fair value of the
share options at grant date, rather than on the purchase cost of
shares held in the Employee Benefit Trust reserve, in line with
IFRS 2 Share-based Payment.
Details of the share awards outstanding are as follows:
2021 2020
Shares Shares
(number) (number)
SIP 2018
Shares in the plan at start of the
year 473,683 251,541
Granted 295,210 275,249
Shares withdrawn from the plan (76,210) (53,107)
Shares in the plan at end of year 692,683 473,683
Available to withdraw from the plan
at end of year 148,543 83,569
Details of the movements in the share scheme during the year are
as follows:
2021 2021 2020 2020
Weighted Shares Weighted Shares
average average
exercise exercise
price price
(pence) (number) (pence) (number)
SIP 2005
Outstanding
at start
of the year 0.00 1,201,223 0.00 1,630,190
Shares
withdrawn
from
the plan 0.00 (328,514) 0.00 (428,967)
Shares in
the plan at
end of year 0.00 872,709 0.00 1,201,223
Available to
withdraw
from the
plan at end
of year 0.00 872,709 0.00 1,201,223
The weighted average share price at the date of withdrawal for
shares withdrawn from the plan during the year was 507.35pence
(2020: 487.76pence).
At 30 September 2021 the exercise price was GBPnil as they were
all nil cost options.
2021 2021 2020 2020
Weighted Share Weighted Share
average options average options
exercise exercise
price price
(pence) (number) (pence) (number)
PSP
Outstanding
at start
of the year 0.00 434,643 0.00 269,511
Granted 0.00 141,445 0.00 165,132
Forfeited 0.00 - 0.00 -
Outstanding
at end
of year 0.00 576,088 0.00 434,643
Exercisable
at end
of year 0.00 - 0.00 -
The fair value of options granted during the year has been
estimated using the Black-Scholes model. The principal assumptions
used in the calculation were as follows:
2021 2020
PSP
Share price at date of grant 555.0 454.5
Exercise price Nil Nil
Expected life 3 years 3 years
Risk free rate 0.00% 0.52%
Dividend yield 1.50% 1.7%
Weighted average fair value per option 530.7p 431.7 p
33. Employee Benefit Trust reserve
Group:
2021 2020
GBP'000 GBP'000
Balance brought forward (1,103) (275)
Purchase of own shares (952) (828)
Balance carried forward (2,055) (1,103)
Company:
2021 2020
GBP'000 GBP'000
Balance brought forward (869) (275)
Purchase of own shares (920) (594)
Balance carried forward (1,789) (869)
The Employee Benefit Trust ("EBT") was settled by the Company
pursuant to a trust deed entered into between the Company and
Intertrust Employee Benefit Trustee Limited ("Trustee"). The
Company has the power to remove the Trustee and appoint a new
trustee. The EBT is a discretionary settlement and is used to
satisfy awards made under the PSP.
The Trustee purchases existing Ordinary Shares in the market,
and the amount held in the EBT reserve represents the purchase cost
of IHP shares held to satisfy options awarded under the PSP scheme.
IHP is considered to be the sponsoring entity of the EBT, and the
assets and liabilities of the EBT are therefore recognised as those
of IHP. Shares held in the trust are treated as own shares and
shown as a deduction from equity.
34. Other reserves - Group
2021 2020
GBP'000 GBP'000
Foreign exchange reserves (94) (22)
Non-distributable reserves 5,722 5,722
Non-distributable insurance reserves 501 501
Foreign exchange reserves are gains/losses arising on
retranslating the net assets of
IAD Pty into sterling.
Non-distributable reserves relate to share premium held by one
of the Company's subsidiaries, IFAL, which is classified within
other reserves on a Group level .
Non-distributable insurance reserves arose due to the transition
from UK GAAP to IFRS in financial year 2015, whereupon actuarial
reserving required under the old standards became impermissible
under new standards.
35. Related parties
During the year the Company did not render nor receive any
services with related parties within the Group, and at the year end
the Company had the following intra-Group receivables:
Amounts owed by/
(to) related parties
Company 2021 2020
GBP'000 GBP'000
Integrated Financial Arrangements
Ltd 95 8
IntegraFin Services Limited 17 277
IntegraFin Limited (9) (9)
IntegraLife UK Limited 4 4
Integrated Application Development
Pty Limited 1 6
During the year, a loan of GBP10million was issued to the
Company by IntegraLife UK Limited. This is an arm's length
transaction as interest is charged at a commercial rate. IHP will
pay the loan off over ten years and made the first payment of GBP1
million, plus accrued interest, prior to 30 September 2021. The
current loan balance is GBP9 million.
The Group has not recognised any expected credit losses in
respect of related party receivables, nor has it been given or
received any guarantee during 2021 or 2020 regarding related party
transactions.
Payments to key management personnel, defined as members of the
board, are shown in the Remuneration Report. Directors of the
Company received a total of GBP3.3million (2020: GBP4.3million) in
dividends during the year and benefitted from staff discounts for
using the platform of GBP2k (2020: GBP2k). The number of IHP shares
held at the end of the year by key management personnel was
35,206,751, a decrease of 16,050,145 from last year.
All of the above transactions are commercial transactions
undertaken in the normal course of business.
36. Contingent liabilities
In January 2020 the Group received notice from HMRC that the
inclusion of Integrated Application Development Pty Ltd (IAD) in
the UK VAT Group was terminated with effect from 16 July 2016. The
Group included IAD in the UK VAT Group having taken specialist
advice to ensure its actions were in accordance with the relevant
laws. The consequence of the exclusion of IAD from the UK VAT Group
is that the services provided from Australia would now be subject
to reverse-charge VAT.
The Group has challenged this notification and opened a
discussion with HMRC about its intention to exclude IAD from the UK
VAT Group, therefore the financial implications of this notice ,
including the timing of any potential payment, remain uncertain,
pending the outcome of the reconsideration of the exclusion.
HMRC's notice states that the VAT due since July 2016 until
October 2019 will be approximately GBP4.3m and that going forward
there would be an additional annual VAT charge of approximately
GBP1.4m. The Group does not yet know whether HMRC will charge
interest and/or a penalty if the appeal to the notification is
unsuccessful.
Due to the ongoing uncertainty around the additional VAT
charges, pending the outcome of the dialogue with HMRC, the
directors do not believe it would be appropriate to recognise a
provision in these financial statements. Payment of the additional
VAT charges is considered to be less than probable and this is
supported by both the original VAT advice received from specialists
when the VAT Group was created, and subsequent specialist advice
following HMRC's challenge in January 2020.
37. Events after the reporting date
A second interim dividend of 7.0 pence per share was declared on
15 December 2021. This dividend has not been accrued in the
consolidated statement of financial position.
38. Dividends
During the year to 30 September 2021 the Company paid interim
dividends of GBP28.5million (2020: GBP26.2million) to shareholders.
The Company received dividends from subsidiaries of GBP42.1million
(2020: GBP32.3million).
DIRECTORS, COMPANY DETAILS, ADVISERS
Executive Directors
Ian Taylor (resigned 26 February 2021)
Michael Howard
Alexander Scott
Jonathan Gunby
Non-Executive Directors
Richard Cranfield
Christopher Munro
Neil Holden (resigned on 1 September 2021)
Caroline Banszky
Victoria Cochrane
Robert Lister
Rita Dhut (appointed 22 September 2021)
Company Secretary
Helen Wakeford
Independent Auditors
BDO LLP, 55 Baker Street, London, W1U 7EU
Solicitors
Eversheds Sutherland, One Wood Street, London, EC2V 7WS
Corporate Advisers
Peel Hunt LLP, 7(th) Floor 100 Liverpool Street, London,
England, EC2M 2AT
Barclays Bank PLC, 5 The North Colonnade, Canary Wharf, London,
E14 4BB
Principal Bankers
NatWest Bank Plc, 135 Bishopsgate, London, EC2M 3UR
Registrars
Equiniti Group plc, Sutherland House, Russell Way, Crawley, RH10
1UH
Registered Office
29 Clement's Lane, London, EC4N 7AE
Investor Relations
Jane Isaac 020 7608 4900
Website
www.integrafin.co.uk
Company number
8860879
LEI number
213800CYIZKXK9PQYE87
IntegraFin Holdings plc, 29 Clement's Lane, London, EC4N 7AE
Tel: (020) 7608 4900 Fax: (020) 7608 5300
(Registered office: as above; Registered in England and Wales
under number: 8860879)
The holding company of the Integrated Financial Arrangements Ltd
group of companies.
This information is provided by RNS, the news service of the
London Stock Exchange. RNS is approved by the Financial Conduct
Authority to act as a Primary Information Provider in the United
Kingdom. Terms and conditions relating to the use and distribution
of this information may apply. For further information, please
contact rns@lseg.com or visit www.rns.com.
RNS may use your IP address to confirm compliance with the terms
and conditions, to analyse how you engage with the information
contained in this communication, and to share such analysis on an
anonymised basis with others as part of our commercial services.
For further information about how RNS and the London Stock Exchange
use the personal data you provide us, please see our Privacy
Policy.
END
FR DKPBDNBDBKBD
(END) Dow Jones Newswires
December 16, 2021 02:00 ET (07:00 GMT)
Integrafin (LSE:IHP)
Historical Stock Chart
From Jun 2024 to Jul 2024
Integrafin (LSE:IHP)
Historical Stock Chart
From Jul 2023 to Jul 2024
