TIDMIHP
RNS Number : 6123J
IntegraFin Holdings plc
14 December 2022
LEI Number: 213800CYIZKXK9PQYE87
14 December 2022
Announcement of annual results for IntegraFin Holdings plc ("IHP
Group") for the year ended 30 September 2022
Continued commercial momentum in spite of volatile markets
Headlines
-- Group revenue increase of 8% to GBP133.6m (2021: GBP123.7m)
-- Underlying Group profit before tax increase of 1% to GBP65.8m (2021: GBP65.2m)
-- Underlying Group earnings per share increase of 2% to 16.3
pence (2021: 16.0 pence). The underlying result is after adjusting
for non-underlying expenses including, in particular, the payment
to HMRC of prior year VAT and interest on software services of
GBP8.8m.
-- IFRS profit before tax GBP54.3m (2021: GBP63.6m)
-- IFRS profit after tax GBP44.0m (2021: GBP51.1m)
-- We remain on schedule with the planned, and pre-announced, IT
and software development recruitment, which we target to complete
by the end of FY23. We reiterate that after this IT investment is
completed we then do not expect material recruitment in these areas
in the period to FY27.
-- The detailed cost guidance, which we disclosed in July 2022,
for financial years ending 30 September 2023 and 30 September 2024
remains unchanged.
-- Proposed final dividend of 7.0 pence per share (2021: 7.0
pps), resulting in a full year dividend of 10.2 pence per share, a
2% increase on prior year (2021: 10.0 pps). The proposed dividend
has been calculated by reference to underlying profit, excluding,
in particular, the expense adjustment for prior years' VAT on
software services.
-- The Transact platform business continues to grow:
o Gross inflows on to the Transact platform for FY22 of
GBP7.3bn
o Net inflows on to the Transact platform for FY22 of
GBP4.4bn
o A 5% increase in the Transact platform's adviser base to
c.7.5k advisers registered on the Transact platform (30 September
2021: 7.2k)
o An 8% increase in the number of clients using the Transact
platform to c.225k (30 September 2021: 209k)
o Launched the Transact-BlackRock Model Portfolio Service
-- The Time4Advice business plan remains on schedule:
o Time4Advice's next generation CURO software is now live with
an adviser firm for beta testing
o The roll out to adviser firms of the next generation CURO
software will commence during the second half of FY23
Financial highlights
IHP Group
Year to Year to 30 Change
30 September September (%)
2022 2021
Total Group revenue GBP133.6m GBP123.7m +8%
------------------------- ----------------------- ------------------
Underlying profit before
tax GBP65.8m GBP65.2m +1%
------------------------- ----------------------- ------------------
IFRS profit before tax GBP54.3m GBP63.6m -15%
------------------------- ----------------------- ------------------
Underlying earnings per share 16.3p 16.0p +2%
------------------------- ----------------------- ------------------
Total dividend per share 10.2p 10.0p +2%
------------------------- ----------------------- ------------------
Transact net inflows and FUD
Year to Year to 30 Change
30 September September (%)
2022 2021
Net new business inflows GBP4.4bn GBP4.9bn -11%
-------------------------- ------------------------ ------------------
Closing funds under direction
('FUD') GBP50.1bn GBP52.1bn -4%
-------------------------- ------------------------ ------------------
Average daily FUD for the
year GBP52.5bn GBP47.2bn +11%
-------------------------- ------------------------ ------------------
Alex Scott, IHP Group Chief Executive Officer, commented:
"I am very pleased with the resilience shown by the IHP Group
during the past financial year.
During a period of significant volatility in asset markets, we
have grown Group revenue, and recorded substantial net flows on to
the Transact platform. This is thanks largely to the continued hard
work and commitment to clients, from our staff, and the advisers we
work with.
We have delivered a resilient financial outcome for the
financial year ended 30 September 2022, with an underlying profit
after tax result of GBP54.1m, being 2% higher than the prior year
(2021: GBP53.0m).
In line with our dividend policy of paying out c.60-65% of
earnings as a dividend, we propose a final dividend of 7.0 pence,
thereby increasing the dividend for the year to 10.2 pence, a 2%
increase on prior year (2021: 10.0 pence).
Looking ahead, I believe that the outlook remains positive for
the Group, with demand for independent financial advice expected to
remain strong. Prior experience has shown that during periods of
economic uncertainty new clients will continue to seek independent
financial advice to facilitate the setup and implementation of
their financial plans. In respect of our current clients, we expect
they will continue to rely on the support and knowledge provided by
their financial adviser.
We are mindful of the difficult economic environment. However,
we expect the performance of the IHP Group to remain resilient
during financial year 2023, with new clients and advisers joining,
continued robust flows onto the Transact platform, and the
commencement of the rollout of the next generation CURO
software."
Enquiries
Investors
Luke Carrivick, IHP Head of Investor
Relations +44 020 7608 5463
Media
Lansons: Tony Langham +44 (0)7979692287
Lansons: Maddy Morgan-Williams +44 (0)7947364578
2022 Full year results presentation
IHP will be hosting a virtual analyst audio presentation at
09:30am on 14 December 2022. This will be available at
https://brrmedia.news/IntegraFin_FY . A recording of the
presentation will be available for playback after the event at
https://www.integrafin.co.uk/ . Slides accompanying the analyst
presentation will also be available this morning at
https://www.integrafin.co.uk/annual-reports/ .
Chief Executive Officer's statement
Overview
The business has remained resilient throughout the year, with
robust net flows and strong adviser and client growth. This is an
achievement in a financial year that has seen a serious downturn in
investor sentiment. Any positivity from the lifting of COVID
restrictions has been eroded by increasing levels of g eopolitical
tension, inflation levels not experienced in 30 years, industrial
unrest and political turmoil.
At such times of economic uncertainty, clients rely even more on
the support and knowledge of their financial adviser. Our business
model is centred on providing long-term support for our clients and
financial advisers, enabling them to stay on track with their
long-term financial plans, helping retain business on our
investment platform.
For the delivery of that support to clients and advisers we
combine our leading proprietary technology with high quality client
service. Our employees, who deliver that service, have been
impacted by the current economic climate, especially the effects
high interest rates are having on mortgage and rent payments,
coupled with the significant rise in the general cost of living. We
have managed these concerns by assessing and reshaping our
remuneration packages to provide greater certainty of income for
employees, whilst adding modest additional cost to the Group. Our
focus has been on retention of key employees and on recruitment
into roles that drive efficiency.
Headlines
With our consistent approach, we have continued to grow
Transact, with the platform's adviser base increasing by 5% over
the period, leading to over 7.5k advisers being registered on the
Transact platform at the end of the year. Advisers have brought a
further 17k clients to the platform, an increase of 8% over the
year, with 224.7k clients now using Transact to manage their
financial plans.
Gross inflows eased over the year, falling back from the
previous year's record high of GBP7.70 billion to GBP7.28 billion.
The first quarter of this year continued to benefit from the
positive market sentiment seen in FY21, but there was a gradual
slowing from the second quarter onwards as economic and political
impacts took effect. T he Transact platform is utilised by clients
and advisers for long-term financial planning and this long-term
view has helped outflows remain relatively stable during the course
of the year. This resulted in robust net inflows to the Transact
platform for the financial year ended 30 September 2022 of GBP4.40
billion, relative to the prior year GBP4.95 billion.
Even with strong positive net inflows, the impact of negative
market movements resulted in a decrease of 4% in FUD at the
year-end, finishing at GBP50.07 billion.
Revenue in the year has increased to GBP133.6 million (+8%). The
Group's revenue is predominantly generated by the value of funds
under direction (FUD) held on Transact. The average daily FUD on
the Transact platform during the financial year was GBP52.5
billion, compared with an average during the prior financial year
of GBP47.2 billion. This has helped drive revenues up, despite the
year end FUD being below the level at the prior year end, as
markets fell sharply from mid-August through to our year end.
Core expenses have increased, mainly due to employee costs,
driven by growth in employee numbers to support and develop the
business and inflationary pressure on salary levels required to
recruit and retain high quality employees. Additionally, HMRC
upholding its original decision, at second review, of our VAT
dispute has added GBP1.8 million to our core expenses this
year.
The VAT decision has also had a significant impact on
non-underlying expenses, as we have paid all prior year contested
VAT and interest, GBP8.8 million in total, in order to allow us to
formally appeal the findings to the First-tier Tribunal (Tax
Chamber) .
After these costs, the Group's profit before tax has decreased
by 15%, to GBP54.3 million. Removing non-underlying VAT and T4A
expenses, in both 2021 and 2022, shows a modest increase in
underlying profit from GBP65.2 million in FY21 to GBP65.8 million
in FY22.
Market background
Equity market performance was strong in the first quarter of our
financial year and this was reflected in the advised platform
market, with strong year-on-year growth of gross inflows in the
quarter. There was a gradual slowdown in the second quarter, which
resulted in tax year end flows falling below prior year levels
across the sector.
The second half of the year deteriorated more rapidly, as the
combined economic effects of Russia's invasion of Ukraine, trade
tensions between the US and China and the longer-term costs of
COVID lockdowns took hold. Interest rate increases, made globally
in an attempt to quell persistent inflation, have further added to
negative sentiment among investors.
Activity in the investment platform market slowed considerably
in the second half of the year, following several changes of
platform ownership in the first half. O ver the full year, the
retail advised platform market FUD fell by 7% from GBP553.28
billion (September 2021) to GBP516.65 billion (September 2022).
Our activity
Our focus through the year has been on organic platform growth,
service quality and the addition of incremental platform
functionality. We have also been working to enhance our platform
operating efficiencies in a hybrid working model. Amongst many
enhancements to our platform were further additions to our online
Guided Applications capabilities, accelerated portfolio creation
and anti-money laundering checking, which has allowed us to switch
off the use of paper forms in line with our environmental
strategy.
The employment market has continued to be buoyant, with an
excess of jobs over available quality recruits. We have been able
to leverage our reputation to continue to attract quality
employees, but we are not immune to the salaries being offered to
attract our employees away. Money isn't enough by itself to retain
good employees, for whom job fulfilment and feeling they are
accepted as themselves, are both valued highly, even more so
following COVID lockdowns. We foster a culture of belonging, where
everyone's views are important and listened to. Expanding our
employee engagement programme, to better demonstrate this on issues
such as flexible working, performance structures and office
environment, has proven beneficial in retaining employees.
We have increased the breadth of our services for Transact
clients, with the September launch of the Transact - BlackRock
Model Portfolio Servicer (MPS). Available exclusively to investment
platform clients, this will extend the choice of Discretionary
Investment Managers available on our platform even further. The
Transact - BlackRock MPS will use BlackRock's market leading
investment process, at a highly competitive ongoing cost for
investments. We expect this to contribute both to the retention of
our current clients and financial advisers, as well as being
attractive to new clients and financial advisers.
We have again been able to r educe the cost of Transact to
clients. Reductions were made to both ad valorem and buy
transaction charges, further increasing the value of the offering
to clients.
Development of T4A's next generation CURO software has
progressed well, with a beta client live by the end of the year. A
live testing period will then follow, before rollout to pipeline
clients commences later in 2023. In the meantime, the current CURO3
product has been selling well, with a good flow of new clients
opting to implement this system ahead of the new release.
Throughout the financial year, we have been continuing work with
our external consultants, Willis Towers Watson, to help the Group
establish a prioritised and thoughtful environmental plan. This
will be aligned to our ambitions, supports a low carbon-emissions
economy and remains flexible enough to accommodate changes in
regulation. With these criteria in mind, we have set out a phased
approach. The first phase, in which we are making progress,
clarifies the best opportunities across the IHP Group over the
short, medium and longer-term to directly influence and shape the
scope 1, 2 and relevant elements of scope 3 carbon emissions
arising from our business.
The outlook
We are mindful of the difficult economic environment, with
inflation and interest rate stresses expected to persist, leading
to continued volatility in asset markets. However, given the
strength of our proposition and its careful management, we expect
the performance of the Transact platform to remain robust during
the forthcoming financial year, with new clients and advisers
joining and continued resilient flows onto the Transact platform.
Despite the adverse headwinds, the advised platform market is
expected to grow in 2023, and we aim to carry on growing our share
of it.
In 2023, we will continue to execute on our priorities,
investing in the development of our proprietary software, we will
train users in how to best use the extensive functionality now
available to deliver operational excellence efficiently. All of
this will enable our clients, with their advisers, to stay on track
with their long-term financial plans.
Once T4A's next generation CURO software has been proven with
the beta client, we will begin the implementation process with the
adviser firms in the current pipeline. The focus will be on
ensuring that new users are properly supported throughout the
process, building the foundations of enduring relationships.
July 2023 brings the primary implementation deadline for the
FCA's Consumer Duty regulations, with all reviews necessary to meet
the consumer outcome rules being complete before the end of April.
As the business has always been focused on consumer outcomes, we
feel well-positioned for these new rules, but undoubtedly there
will be additional costs incurred in demonstrating compliance. We
have factored this in to our development plans and costs.
We will take a measured approach to our appeal to the First-tier
Tribunal (Tax Chamber) on the VAT ruling, ensuring both legal costs
and management time are kept to a minimum.
We do not underestimate the uncertainty of our environment,
however, we focus on what we can control. Continuing to invest in
our people and our infrastructure, whilst managing our societal
impact, will ensure we are well positioned to face the challenges
ahead, enabling us to continue to deliver for all of our
stakeholders.
Ian Taylor
I cannot close without a few words about my long-time friend and
colleague, who sadly passed away in October. Ian was an incredible
individual who, with Mike Howard, set out to completely transform
the delivery of financial plans in the UK market.
Ian's focus was always to deliver the best outcome for "Mrs
Miggins". This focus built a principled business, years ahead of
the RDR curve and the forthcoming Consumer Duty rules.
Ian was always happy to share his thoughts and experience and
equally willing to listen to others, but never diverted from his
principles. We continue to drive the business on those principles:
"Do the right thing" and "Stick to our knitting".
Alexander Scott
CEO
13 December 2022
Financial review
In a fundamentally solid year for core operations, Group revenue
increased by 8% to GBP133.6 million.
There was steady growth in investment platform clients (+8%),
investment platform advisers (+5%) and T4A licence users (+
46%).
Profit before tax was GBP54.3 million (-15%). The year on year
reduction is due to investment in people, recognition of current
year VAT on software fees and an increase in non-underlying
expenses of GBP8.2 million to GBP11.5 million, as we recognised and
settled backdated VAT and interest thereon.
Underlying PBT is GBP65.8 million (FY21: GBP65.2 million), an
increase of 1% on underlying PBT for FY21, after VAT of GBP1.7
million is included in FY21.
EPS is 13.3p (FY21: 15.4p). After removing all non-underlying
expenses in FY22, underlying EPS is 16.3p and it was 16.0p in
FY21.
Transact platform operational performance
YE 2022 YE 2021
GBPm GBPm
Opening FUD 52,112 41,093
Inflows 7,275 7,695
Outflows (2,873) (2,744)
-------------------- -------- --------
Net flows 4,402 4,951
Market movements (6,248) 6,297
Other movements(1) (196) (229)
-------------------- -------- --------
Closing FUD 50,070 52,112
(1) Other movements includes fees, tax charges and rebates,
dividends and interest.
Transact's gross inflows for 2022 financial year were GBP7.28
billion and outflows were GBP2.87 billion, leading to net flows of
GBP4.40 billion, which is a year on year decrease of 11%. FUD has
ended the year down 4% at GBP50.07 billion, impacted by GBP6.25
billion of negative market movements.
Inflows for the majority of the first half of the year were
strong, at GBP4.07 billion (FY21: GBP3.73 billion), and contributed
56% of the full year inflows. However, as markets fell and
inflation took hold, inflows were impacted and each month
subsequent to February 2022 was lower than the same month in the
year before. This was due to client sentiment weakening and the
value of asset transfers onto the platform falling, resulting in a
full year inflow reduction of GBP420.0 million (5%), when compared
against FY21.
The year-on-year reduction in net flows is due to the fall in
inflows, and the annualised rate of platform outflows remains
within the range we expect at 6% (FY21 7%). The steadiness of the
outflow rate is supported by the continuing strength in client
numbers and advisers using the platform.
T4A operational performance
T4A was acquired by IHP in January 2021 and, therefore, this is
the first full financial year of T4A being part of the IHP
Group.
In the 12 months to September 2022, T4A has increased CURO
licence users by 44%, from 1,566 at 30 September 2021, to 2,253 at
September 2022. These numbers exclude a large user that had
commenced the process of terminating their CURO licences at the
point T4A was acquired by IHP.
Group financial performance
Revenue
Following the acquisition of T4A in January 2021, there have
been two streams of Group revenue: investment platform revenue (97%
of total revenue) and T4A revenue (3% of total revenue).
Investment platform revenue
Investment platform revenue has increased by 7% year-on-year to
GBP129.7 million and comprises three elements, 98% (FY21: 98%) of
which is from a recurring source.
Annual commission income (an annual, ad valorem tiered fee on
FUD) and wrapper administration fee income (quarterly fixed wrapper
fees for each of the tax wrapper types available) are recurring.
Other income is composed of buy commission and dealing charges.
YE 2022 YE 2021
Investment platform GBPm GBPm
revenue
Annual commission income
(recurring) 115.9 107.7
Wrapper fee income (recurring) 11.6 10.6
Other income 2.2 3.0
-------------------------------- -------- --------
Total platform revenue 129.7 121.3
Annual commission income increased by GBP8.2 million (8%) versus
the prior financial year. Annual commission revenue was impacted
by: financial markets weakening from February onwards, demonstrated
by daily average FUD of GBP53.04 billion for the first half of the
financial year reducing to GBP52.05 billion for the second half of
the financial year; and, we reduced the annual commission rate from
0.27% to 0.26%, with effect from 1 July 2022.
Recurring wrapper administration fee income increased by GBP1.0
million (9%) year-on-year (FY21: 9%), reflecting the increase in
the number of open tax wrappers and broadly in line with the
increase in client numbers.
Buy commission, included in other income, reduces as a component
of revenue each year and was GBP1.5 million (FY21: GBP2.3 million)
in FY22. We reduced the threshold at which clients receive a rebate
of buy commission with effect from 1 March 2022, from GBP0.3
million which effected on 1 March 2021, to GBP0.2 million from 1
March 2022.
T4A revenue
T4A's revenue was GBP3.9 million for FY22, compared with GBP2.4
million from 11 January 2021 to 30 September 2021.
Operating expenses
YE 2022 YE 2021
GBPm GBPm
Employee costs 47.1 41.6
Occupancy 2.3 1.4
Regulatory and professional
fees 9.8 7.6
Other income - tax relief
due to shareholders (2.4) (2.2)
Current year VAT 3.2 1.2
Other costs 3.2 2.8
Non-underlying expenses 8.8 -
- backdated VAT and interest
Non-underlying expenses
- other 2.7 3.3
------------------------------- -------- --------
Total expenses 74.7 55.7
Depreciation and amortisation 3.0 3.1
------------------------------- -------- --------
Total operating expenses 77.7 58.8
Operating expenses have increased by GBP18.7 million, or 32%.
This is attributable to the following notable increases in expense
categories. Note that FY22 includes a full year of T4A expenses of
GBP5.3 million, versus GBP3.4 million for nine months in FY21.
Non-underlying expenses - backdated VAT (GBP8.0 million) and
interest (GBP0.8 million)
Other non-underlying expenses - GBP2.7 million
In our FY20 and FY21 Annual Report, we disclosed a contingent
liability in respect of potential reverse charge VAT payable on
services provided by our wholly owned Australian software
development Company, Integrated Application Development Pty
(IAD).
The contingent liability arose because HMRC had notified us in
January 2020 that the inclusion of IAD in our VAT Group was
terminated with effect from July 2016.
We have been unsuccessful in two stages of requesting HMRC
review their original decision to exclude IAD Pty from our VAT
Group, as detailed in a Regulatory News Announcement released on 20
September 2022, and as a result we have had to settle backdated VAT
of GBP8.0 million for the period to September 2021. We have also
paid non-recurring interest on the VAT due of GBP800k.
We are appealing the original decision to the First-tier
Tribunal (Tax Chamber), however, we will be required to recognise
and pay VAT on software fees going forward whilst our appeal
progresses, as such we have also recognised an ongoing VAT
liability in the current year of GBP1.8 million,
Other non-underlying expenses of GBP2.7 million comprise a
credit of GBP0.3 million upon the release of a dilapidations
accrual for the Clement's Lane office, which has now been confirmed
as not required, and GBP3.0 million of ongoing expenses due to the
IFRS requirement that we recognise the post combination deferred
and additional consideration payable to the original T4A
shareholders in relation to the acquisition of T4A as remuneration
over the four years from January 2021 to December 2024. The
remuneration cost is expected to be GBP3.0 million in both FY23 and
FY24, and will reduce to GBP760k in FY25.
Employee costs GBP47.1 million (+GBP5.5 million (+13%))
Employee costs have increased from GBP41.6 million to GBP47.1
million (+13%), including T4A employee costs of GBP4.1 million
(FY21 nine months: GBP2.5 million). Average monthly employee costs
have risen 8% from GBP3.6 million to GBP3.9 million and average
Group employee numbers through the year have also increased by 8%
(FY21: 2%) from 543 in FY21 to 594 in FY22.
Notable headcount additions are 15 roles across the Group in
software development and information technology areas, with more
roles being recruited over the coming months, in line with our
intent to significantly increase system development capacity across
the Group which will drive efficiencies.
We have also added eight roles in order to better support
advisers using our investment platform software, in order to
increase self-service, which again increases efficiencies.
We awarded our people, excluding T4A, an average pay rise of
7.5% (FY21: 5%) in June 2022, in recognition of the increase in the
cost of living in 2022, which also increased employer National
Insurance, already impacted by the 1.25% social care levy
introduced in April, and contractual enrolment costs.
Regulatory and professional fees GBP9.8 million (+GBP2.2 million
(+29%))
Regulatory fees and FSCS costs have increased by GBP700k (19%),
from GBP3.5 million in FY21 to GBP4.2 million in FY22. This is due
to an increase in fees levied on two of the regulated entities in
the Group: Integrated Financial Arrangements Ltd (IFAL) and
IntegraLife UK Ltd (ILUK). The uplift in these costs arises due to
increasing business volumes and impacts the financial services
industry as a whole.
Professional fees have increased year-on-year by GBP1.5 million
(37%), from GBP4.1 million in FY21 to GBP5.6 million in FY22. The
uplift in professional fees relates to one-off consultancy and
advisory engagements, which have been necessary in order to
progress Corporate projects, such as the Group restructure.
Occupancy GBP2.3 million (+GBP0.9 million (+64%))
Occupancy costs have increased by GBP0.9 million in FY22, due to
a reduction in the rates rebate for the Clement's Lane Head Office
of GBP0.5 million to GBP0.2 million in FY22. There has also been a
very sharp inflationary increase in energy costs from December 2021
onwards, resulting in an increase in FY22 of GBP0.4 million. These
inflated energy costs are projected to continue for the foreseeable
future.
Current year VAT (GBP3.2 million (+GBP2.0 million (+167%))
Current year VAT has increased by GBP2.0 million, largely due to
recognition of VAT on software fees in FY22. This cost will be
ongoing, whilst the next stage appeal process progresses.
Tax
The Group has operations in three tax jurisdictions: UK,
Australia and Isle of Man. This results 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.
Shareholder tax on ordinary activities for the year decreased by
GBP2.2 million, or 18%, to GBP10.3 million (FY21: GBP12.5 million)
due to the reduction in taxable profit. Our effective rate of tax
over the period was 18% (FY21: 20%). The decrease in effective
rates compared to FY21 was due to the increase in allowable
non-underlying expenses incurred in FY22, as the backdated,
non-recurring VAT was tax deductible.
Our tax strategy can be found at: https://
www.integrafin.co.uk/legal-and-regulatory-information/
Profit
Group gross profit for the year to September 2022 rose by GBP9.3
million to GBP131.5 million, from GBP122.2 million, an increase of
8%.
Group profit before tax (PBT) has reduced by 15% to GBP54.3
million. Excluding all non-underlying expenses, Group PBT has risen
by 1%, or GBP0.6 million, year on year, to GBP65.8 million,
including a full year of T4A losses of GBP1.9 million (FY21 nine
months: GBP1.2 million).
Group profit after tax has reduced by GBP7.1 million (14%) year
on year, from GBP51.1 million to GBP44.0 million.
Earnings per share
YE 2022 YE 2021
GBPm GBPm
Profit after tax for the period 44.0 51.1
Average number of shares -
basic EPS 331.0m 331.0m
Average number of shares -
diluted EPS 331.3m 331.3m
Earnings per share - basic
and diluted 13.3p 15.4p
Earnings per share have fallen by 2.1p per share to 13.3p, a
fall of 14%.
Consolidated statement of financial position
Net assets have grown 17%, or GBP8.9 million, in the year, and
the material movements on the consolidated statement of financial
position are as follows:
Cash and significant cash flows
Shareholder cash has increased by GBP6.9 million year on year to
GBP183.0 million (FY21: GBP176.1 million). Growth of 4% (FY21: 14%)
reflects the cash generative nature of the business and ongoing
Group liquidity, but is offset by dividends paid in the year of
GBP33.8 million (FY21: GBP28.5 million) and the one off payment of
GBP8.8 million of backdated VAT and interest, plus GBP1.4 million
paid in respect of VAT due for ten months of FY22.
Deferred tax asset, non-current provisions and non-current
deferred tax liability
The large increases in the deferred tax asset of GBP5.3 million
to GBP6.0 million (FY21: GBP0.7 million), the non-current
provisions of GBP34.9 million to GBP41.9 million (FY21: GBP7.0
million) offset by the reduction of the non-current deferred tax
liabilities of GBP28.6 million to GBP0.9 million (FY21: 29.5
million) are all a function of the realised and unrealised losses
that have arisen on policyholder assets, as the value of linked
funds has fallen year on year.
ILUK holds tax charges deducted from ILUK policyholders in
reserve to meet future tax liabilities and the tax reserve may be
paid back to policyholders if asset values do not recover such that
the tax liability unwinds.
Investments and cash held for the benefit of policyholders and
liabilities for linked investment contracts (notes 17, 18 and
20)
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
comprehensive income, the consolidated statement of financial
position and the consolidated statement of cash flows, but have
zero net effect.
Cash and investments held for the benefit of ILUK and ILInt
policyholders have fallen to GBP22.17 billion (FY21: GBP23.05
billion). This fall of 4% is entirely consistent with the fall in
total FUD on the investment platform.
Capital resources and capital management
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.
IFAL, from the 1 January 2022, has been subject to new
regulatory capital and liquidity rules with the implementation in
the UK of the MIFIDPRU rule book. The new prudential rules
introduce revised approach for the calculation of capital
requirements reflecting new 'K' factor requirements that cover
potential harms arising from business activities. The K factors are
calculated on formulas for assets and cash under administration
Regulatory Capital as at 30 September 2022
Regulatory Regulatory Regulatory
Capital requirements Capital resources cover
GBPm GBPm %
IFAL 32.2 39.7 123.2
ILUK 193.5 245.7 127.0
ILInt 25.1 44.0 175.3
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 employee.
Capital as at 30 September 2022
GBPm
Total equity 173.2
Loans and receivables, intangible assets and property,
plant and equipment (30.6)
Available capital pre dividend 142.6
Interim dividend declared (23.2)
Available capital post dividend 119.4
Additional risk appetite capital (76.2)
Surplus 43.2
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 10.2 pence per
share (2021: 10.0p)
Dividends
During the year to 30 September 2022, IHP (the Company) paid a
second interim dividend of GBP23.2 million to shareholders in
respect of financial year 2021 and a first interim dividend of
GBP10.6 million in respect of financial year 2022.
In respect of the second interim dividend for financial year
2022, the board has declared a dividend of 7.0 pence per ordinary
share (FY21: 7.0p).
The financial year 2022 total dividends paid and declared of
GBP33.8 million compares with full year interim dividends of
GBP33.1 million in respect of financial year 2021.
Principal risks and uncertainties
The directors, in conjunction with the board and ARC, have
undertaken a review of the potential risks to the Group that could
undermine the successful achievement of its strategic objectives,
threaten its business model or future performance and considered
non-financial risks that might present operational disruption.
The tables below set out the Group's principal risks and
uncertainties, the risk trend for 2022 together with a summary of
how we manage and mitigate the risks.
Business and strategic risks
---------------------------------------------------------------------------------------------------
Principal risk and Management and controls 2022 risk trend:
uncertainty
-------------------------------------- ------------------------------- --------------------------
Service standard failure We manage the risk of Increase
(including unexpected service standards failure
outflow risk) - Our by ensuring our service
high levels of client standards do not deteriorate.
and adviser retention This is achieved by
are dependent upon our providing our client We remain a recognised
consistent and reliable service teams with extensive top platform service
levels of service. Failure initial and ongoing provider by the
to maintain these service training, supported industry, with
levels would affect by experienced subject steady increases
our ability to attract matter experts and managers. in the number
and retain business. Service levels are monitored of advisers and
There is a potential and quality checked clients on our
risk for a net outflow and any deviation from core platform
(i.e. greater level expected service levels system. The challenges
of withdrawals or transfers) is addressed. We also facing the business
than expected impacting conduct satisfaction and the wider
profitability. surveys to ensure our industry, have
service levels are still increased during
Aligned to strategic perceived as excellent the year, however
objectives by our clients and their monitoring service
1. Drive Growth advisers. Service standards metrics has allowed
2. Grow Earnings are also dependent on us to identify
resilient operations, the areas where
both current and forward processing backlogs
looking, ensuring that have arisen and
risk management is in to deliver targeted
place. remediation plans
to ensure customer
outcomes and service
standards are
maintained.
T4A continues
to develop the
delivery of NEXT
GENERATION CURO
and the team has
grown to meet
client demand.
------------------------------- --------------------------
Diversion of platform The risk of reduced Stable
development resources investment in the platform
- is managed through a
Maintaining our quality disciplined approach
and relevance requires to expense management
ongoing investment. and forecasting. We The risk has remained
Any reduction in investment horizon scan for upcoming broadly unchanged
due to diversion of regulatory and taxation over the year.
resources to other non-discretionary regime changes and maintain We remain proactive
expenditure (for example, contingency to allow in embedding regulatory
regulatory developments) for unexpected expenses changes (e.g.
may affect our competitive e.g. UK Financial Services IFPR, Operational
position. Compensation Scheme Resilience) through
(FSCS) levies, which our business as
ensures we do not need usual model. Our
Aligned to strategic to compromise on investment platform developers
objectives in our platform to a remain responsive
1. Drive growth degree that affects to the business
2. Invest in the business our offering. and have increased
3. Grow earnings developer resources
over the year.
We are responsive
to tax rate changes
relevant to our
products without
lengthy Platform
development lead
times.
------------------------------- --------------------------
Increased competition Competitor risk is mitigated Increase
- We operate in a competitive by focusing on providing
market. Increased levels exceptionally high levels
of competition for clients of service and being
and advisers; improvements responsive to client
in offerings from other and financial adviser The market remains
investment platforms; demands through an efficient competitive with
and consolidation in process and operational an increasing
the adviser market base. We continue to number of on-line
may all make it more develop our digital application based
challenging to attract strategy expanding our products available
and retain business. Transact on-line interface to individuals.
allowing advisers direct In addition the
processing onto the FCA undertake
Aligned to strategic platform. This is more ongoing reviews
objectives cost effective and allows on the delivery
1. Drive growth us to continue to increase of the "Investment
3. Grow earnings the value-for-money platforms market
of our service by reducing study" from 2019
client charges, subject which encourages
to profit and capital the transparency
parameters when deemed of communication
appropriate. to clients and
advisers on pricing
The Group continues and charging structures.
to review its business The new FCA Consumer
strategy and growth Duty rules further
potential. In this regard, raise expectations
it primarily considers for platform providers
organic opportunities to test and assess
that will enhance or value-for-money
complement its current products, services
service offerings to and fee advice.
the adviser market. The advised market
remains our key
target and our
platform service
and developments
remain award winning.
Positioning and
delivering our
digital TOL services
forms a key part
to our business
strategy improving
both functionality
and service efficiency.
T4A continues
to broaden our
service offering
to advisers. We
also continue
to support the
diversification
of the adviser
market through
the Vertus scheme
which continues
to be successful.
------------------------------- --------------------------
Financial risks
Principal risk and Management and controls Change over the
uncertainty year
--------------------------------- --------------------------
Stock and bond market The risk of stock and Increase
volatility (Market Risk) bond market volatility,
- our core business and the impact on revenue,
revenue is derived from is mitigated through The risk to FUD
our platform business a wide asset offering from stock and
which has a fee structure which ensures we are bond market volatility
based upon a percentage not wholly correlated remains high.
of our FUD. Sustained with one market, and External factors
equity and bond volatility which enables clients continue to influence
has an impact on the to switch assets in equity markets
revenue streams of the times of uncertainty. in 2022 which
platform business. In particular, clients have significantly
are able to switch into unwound much of
Aligned to strategic cash assets, which remain the post COVID
objectives on our platform. Our 2021 re-bound.
1. Drive growth wrapper fees are not The Ukraine/Russia
3. Grow earnings impacted by market volatility war has set inflationary
4. Maintain cash generation as they are based on and economic shockwaves
5. Maintain strong balance a fixed quarterly charge. globally, impacting
sheet We retain a good insight energy prices
6. Deliver on dividend of our business processes and supply chains.
policy in order to ensure efficiencies The changes in
are captured which coupled Prime Ministers
with further online in the UK has
processing allows us seen a shift in
to closely monitor and policy on tax
control expenses. A and fiscal support
strong investment platform at a macro-economic
service and sales and level as well
marketing activity ensures as for individuals
we attract new advisers and businesses.
and clients. Sustaining A significant
positive net inflows level of uncertainty
during turbulent times remains in the
presents the potential success the measures
for longer term profitability. taken by Governments
and Central Banks,
Our average daily FUD who are facing
for the financial year decade highs in
has increased at GBP52.5bn interest rates
(2021: GBP47.2bn). The in their attempts
Transact platform is to tackle inflation,
utilised by clients will have. Stock
and advisers for long-term and bond market
financial planning and volatility is
outflows have remained expected to continue
relatively stable during for the foreseeable
the course of the year. future with a
However, the closing consequential
value of FUD year on impact on the
year has reduced by value of our FUD.
3.9% which is a direct
reflection of the downward
market movements in
the first six months
of 2022. Net inflows
onto the platform remained
robust throughout the
year and represents
a strong pipeline for
future platform growth.
--------------------------------- --------------------------
Uncontrolled expense The most significant Increase
risk - Higher expenses element of our expense
than expected and budgeted base is employee costs.
for would adversely These are controlled The risk has increased
impact cash profits. through modelling employee over the year
Economic drivers e.g. requirements against as a direct result
sustained levels of forecast business volumes. of inflationary
high inflation can impact Planned investment in pressures on the
the cost base of the IT and software development UK and Global
business irrespective deliver enhancements economy. The Group
of business volumes to our proprietary platform has made supportive
e.g. through salary enabling us to implement cost of living
rises, premises, utility enhanced straight through salary increases
bills and external levies processing of operational to employees,
and legal fees. The activities. A robust and actively recruited
suppliers are also wrestling multi-year costing plan IT and developers
with the requirements is produced which reflects to support the
of climate initiatives the strategic initiatives business. Occupancy
with unit costs for of the business. This and utility costs
sustainable or green captures planned investment as a result of
energy and supplies expenditure which build inflation and
likely to attract a our operational capability employees returning
premium as organisations and cost effective scalability to the office
stride toward a net of the business. Cost have increased.
zero carbon footprint. base variance analysis Regulatory fees
Such costs are difficult is completed with any and professional
to control directly expenditure that deviates fees have also
and also unexpectedly unexpectedly from plan increased during
impact the base case being rigorously reviewed the year as a
budget. to assess the likely result of the
trend with reforecasts broad regulatory
Aligned to strategic completed accordingly. agenda. Slower
objectives rates of increase
4. Maintain cash generation are expected in
6. Deliver on dividend 2023.
policy
--------------------------------- --------------------------
Capital strain (including We continuously monitor Stable
Liquidity) - Unexpected, the current and expected
additional capital or future regulatory environment
liquidity requirements and ensure that all The expectation
imposed by regulators regulatory obligations for capital and
may negatively impact are or will be met. liquidity requirements
our solvency coverage This provides a proactive meets regulatory
ratio. control to mitigate expectation.
this risk. Additionally,
Aligned to strategic we carry out an assessment
objectives of our capital requirements,
5. Maintain strong balance which includes assessing
sheet the regulatory capital
6. Deliver on dividend required. We retain
policy a capital buffer over
and above the regulatory
minimum solvency capital
requirements.
--------------------------------- --------------------------
Credit risk - loss The Group seeks to invest Stable
due to defaults from its shareholder assets
holdings of cash and in high quality, highly
cash equivalents, deposits, liquid, short-dated No change.
formal loans and reinsurance investments. Maximum
treaties with banks counterparty limits
and financial institutions. are set for banks and
minimum credit quality
Aligned to strategic steps are also set.
objectives The Vertus loan scheme
5. Maintain strong balance has an agreed commitment
sheet level and the value
of the drawn and undrawn
balances are monitored
regularly. Loans are
made on approved business
cases.
--------------------------------- --------------------------
Non-financial risks
Principal risk and Management and controls Change over the
uncertainty year
-------------------------------- ----------------------------
Reputational risk - The Risk Management Stable
the risk that current Framework provides the
and potential clients' monitoring mechanisms
desire to do business to ensure that reputational Unchanged for
with the Group reduces damage controls operate the year.
due to a lower perception effectively and reputational
in the market place risk is mitigated, to
of the Group's offered some extent, by internal
services covering the operational risk controls,
Transact platform and error management and
T4A adviser support complaints handling
software. processes as well as
root cause analysis
Aligned to strategic investigations.
objectives
1. Drive growth
----------------------------------- -------------------------------- ----------------------------
Operational risk (including People Increase
operational resilience We are very aware of
and the environment, our need to retain and
social and governance attract experienced The "great resignation"
(ESG) agenda) - the and competent people from mid-2021
risk of loss arising within the business. into the early
from inadequate or failed The business announced part of 2022 presented
internal processes, a new performance management some initial difficulties
people and systems, and talent recognition with the retention
or from external events. programme which seeks of employees and
to reward high performing the ability to
People employee members and attract new recruits
The inability to attract, identify future leaders in our UK and
retain and motivate and talent within the Australian operations.
employees within the business. We maintain Through a strong
business. Significant a comprehensive career group engagement
attrition rates of experienced and training development process we have
employees or an inability programme and provide been able to identify
to attract new employees a flexible working environment and address the
can have a detrimental that meets our employee gaps.
impact on the service and business needs.
provided as well as These are supported
poor adherence to regulatory by robust Group HR policies
procedures and requirements and practices.
resulting in reputational
damage and potential
compliance breaches.
Initiatives that
include, a supportive
cost of living
pay increase;
implementation
IT Infrastructure and IT Infrastructure and of a new performance
software software management approach;
An aging and underinvested The continuous and evolving defined future
IT infrastructure and sophistication of the talent mapping
software has the potential cyber threat to our with a focus on
for causing the Company IT infrastructure and training and career
disruption through systems maintaining business development; the
outages, a failure to resilience remain high adoption of flexible
plan and maintain operational on the operational risk working arrangements
capacity and create agenda. Cyber detection between the office
vulnerabilities to operational tools are deployed, and home, have
resilience and loss penetration testing collectively managed
of a competitive market and the assessment of the risk position.
share as newer technology controls to NIST standards
emerges. is regularly undertaken. Key developments
Awareness training is in our IT infrastructure
provided to ensure employee are due to complete
understand and recognise at the end of
IT Resiliency and Information threats to our business 2022 with the
Security systems. full commissioning
The nature of the business of new datacenters
requires the Group to IT Resiliency and Information giving more capacity
store and retrieve significant Security and operational
volumes of information The Group aims to minimise resilience.
some of which is highly its operational risks
sensitive. at all times through Continued investment
a strong and well-resourced in IT and software
Regulatory risk control and operational development will
The regulated entities structure. In particular, deliver enhancements
within the Group have the Group has in place to our proprietary
a full and stretching a dedicated financial investment platform
agenda. A range of pronouncements crime team and an on-going and back office
made during the last fraud and cyber risk software - with
18 months need transitioning awareness programme. enhanced functionality
effectively into business Additionally, the Group for UK clients
as usual, including carries out regular and their advisers.
FCA PS22/9 Consumer IT system maintenance, Furthermore, this
Duty and FCA PS21/3 and system vulnerability investment will
Operational Resilience. testing. The Crisis enable us to implement
It is imperative that Management Team (CMT) enhanced straight
these activities remain reviews the Group's through processing
on plan and meet the business continuity of our operational
high standards expected. plans during the course activities, meaning
of the year. that we improve
our operational
Aligned to Strategic Beyond IT and cyber efficiencies and
Objectives security, the Company the cost effective
1. Drive growth also has a function scalability of
2. Invest in the business lead by the Company's our investment
3. Grow earnings data protection officer platform. This
4. Maintain cash generation to manage information will reduce the
security risk and compliance additional operational
with UK GDPR. employees required
to service additional
Regulatory focus clients and advisers
The Group has established over the next
a series of projects 3 years.
to deliver against the
regulatory requirements Meeting the regulatory
it faces. We use our agenda is primary
subject matter experts to our operations
to interpret and business for our core platform
lines to implement policies business. The
and procedures aligned agenda remains
to expectations. In challenging but
addition, Group Internal we remain on track
Audit undertake thematic to deliver in
reviews of the regulatory line with required
projects throughout target dates.
the course of delivery
to ensure scoping, gap
analysis and delivery
plans and actions are
adequately covered.
This review also reflects
on our internal governance
ensuring the board retain
ownership receiving
effective communication
and updates.
Operations form an integral
part of the ESG agenda
and we are embracing
the developments by
continuing to work towards
understanding the impact
of climate change on
the business operations
and ensuring diversity
and inclusion is actively
embedded across all
areas of the business.
A consistent application
of the risk management
framework, has supported
the Group allowing management
to make effective and
informed risk based
operational decisions.
----------------------------------- -------------------------------- ----------------------------
Increase
Geopolitical risk - Geopolitical risk cannot
the risk of changes be directly mitigated
in the political landscape by the Group. However, The external geo-political
disrupting the operations through close monitoring environment in
of the business or resulting of developments through 2022 has become
in significant development its risk horizon scanning increasingly uncertain
costs. process, potential impacts through a series
are taken into consideration of significant
Aligned to strategic as part of the business global events
objectives planning process. including the
1. Drive growth Ukraine/Russia
2. Invest in the business war, trade tensions
3. Grow earnings between USA and
4. Maintain cash generation China, global
5. Maintain strong balance energy crisis
sheet and supply chain
6. Deliver on dividend issues. Within
policy the UK, political
events are causing
disruption to
markets and macroeconomics
with a direct
impact on FUD
for the Group.
-------------------------------- ----------------------------
Emerging risk focus
The management approach to risk ensures that we identify and
monitor a series of emerging risks. These have a degree of
uncertainty around the likelihood and impact on the business. The
more significant emerging risks in the near, medium and longer term
are set out below and are regularly reported and assessed through
the governance Committees.
We have classified the profile of these risks as follows;
Near-term is considered to represent the next 12 months;
Medium-term between 1 and 3 years and longer-term is 3 years and
beyond.
Near-term
risks * Prolonged poor economic outlook for the UK * A sustained level of UK economic disruption with high
inflation and interest rates, volatile bond and
equity markets and potential house price slumps is
expected to impact investing clients' confidence.
Investors might seek to withdraw funds to meet their
cost of living increase which would impact the value
of our FUD and future income streams.
* Geopolitical risk * The potential for further geopolitical global shocks
is increasing. In addition to the humanitarian impact
of the Ukraine/Russia war, a severe energy crisis has
emerged impacting European countries which is
impacting the post COVID economic recovery and cost
of living. The potential for a further deterioration
in USA and China trading arrangements may well impact
supply chains especially the computer chip market.
Sanctions reprisals with Russia might lead to
technology reprisals through cyber threats on the
financial services sector.
------------------------------------------------------- -------------------------------------------------------------
* Financial Crime Fraud * The emergence of more sophisticated instances of
financial crime impacting our security and reputation
across the client base.
------------------------------------------------------- -------------------------------------------------------------
The independent adviser model is
* Disruptive market influences dramatically impacted as a result
of prolonged economic factors,
new technological entrants and
a more aggressive acquisition by
vertically integrated firms reducing
our adviser/client base.
------------------------------------------------------- -------------------------------------------------------------
Medium-term
risks * Climate change * A disorderly transition towards a low carbon economy
might lead to additional and burdensome regulation
and policies being imposed on companies. This has the
potential to have two impacts, firstly on the value
of other companies and, hence, our FUD with the
consequence of impacting our revenues; secondly on
the cost base from our suppliers imposing a premium
as we strive to deliver our operational climate
strategies in terms of premises, workforce travel,
energy suppliers and the supply and disposal of
consumables, e.g. IT equipment, paper, water.
------------------------------------------------------- -------------------------------------------------------------
* Regulatory changes and a shifting focus * Changing expectations of the UK and Isle of Man
regulators. Increasing regulatory scrutiny or focus
impacting our platform business model.
* Shift in tax regime which may alter the tax benefits
of pensions and ISAs. The shift in the tax treatment
of savings commonly referenced as EET and TEE [1] .
* Changes in international tax rules and the impact on
the Group's Isle of Man Company, ILInt, with the
potential for IOM corporate profits to be taxed at
15%.
------------------------------------------------------- -------------------------------------------------------------
Longer-term
risks * Generational shift in customers and expectations * The aging population is shifting the longer term
savings habits and expectations. The cost of an aging
demographic population suggests that higher taxes may
be required of a smaller working population creating
less savings opportunities. Surveys suggest that
Gen-X and Millennials are more conservative investors
with many indicating a preference to hold cash. The
further advancement of technology may well impact the
employment markets and our target markets in the
longer term.
------------------------------------------------------- -------------------------------------------------------------
The directors have carried out a robust assessment of the
principal and emerging risks facing the Group, including those that
would threaten its business model, future performance, solvency or
liquidity, and have concluded that the Group is well positioned to
manage these risks.
Statement of directors' responsibilities
The directors are responsible for preparing the Annual Report
and the financial statements in accordance with applicable United
Kingdom law and regulations.
Company law requires the directors to prepare financial
statements for each financial year. Under that law the directors
have elected to prepare the Group and parent Company financial
statements in accordance with UK-adopted international accounting
standards ("IFRSs"). 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 the Company and of the profit or loss of the Group and the
Company for that period.
In preparing these financial statements the directors are
required to:
-- select suitable accounting policies in accordance with IAS 8
Accounting Policies, Changes in Accounting Estimates and Errors and
then apply them consistently;
-- make judgements and accounting estimates that are reasonable and prudent;
-- present information, including accounting policies, in a
manner that provides relevant, reliable, comparable and
understandable information;
-- provide additional disclosures when compliance with the
specific requirements in IFRSs is insufficient to enable users to
understand the impact of particular transactions, other events and
conditions on the Group and Company financial position and
financial performance;
-- in respect of the Group financial statements, state whether
UK-adopted international accounting standards have been followed,
subject to any material departures disclosed and explained in the
financial statements;
-- in respect of the parent Company financial statements, state
whether UK-adopted international accounting standards, have been
followed, subject to any material departures disclosed and
explained in the financial statements; and
-- prepare the financial statements on the going concern basis
unless it is inappropriate to presume that the Company and/ or the
Group will continue in business.
The directors are responsible for keeping adequate accounting
records that are sufficient to show and explain the Company's and
Group's transactions and disclose with reasonable accuracy, at any
time, the financial position of the Company and the Group and
enable them to ensure that the Company and the Group financial
statements comply with the Companies Act 2006. They are also
responsible for safeguarding the assets of the Group and parent
Company and hence for taking reasonable steps for the prevention
and detection of fraud and other irregularities.
Under applicable law and regulations, the directors are also
responsible for preparing a strategic report, directors' report,
directors' remuneration report and corporate governance statement
that comply with that law and those regulations. The directors are
responsible for the maintenance and integrity of the corporate and
financial information included on the Company's website.
Directors' responsibilities pursuant to DTR4
The directors confirm, to the best of their knowledge:
-- that the consolidated financial statements, prepared in
accordance with UK-adopted international accounting standards give
a true and fair view of the assets, liabilities, financial position
and profit of the parent Company and undertakings included in the
consolidation taken as a whole;
-- that the annual report, including the strategic report,
includes a fair review of the development and performance of the
business and the position of the Company and undertakings included
in the consolidation taken as a whole, together with a description
of the principal risks and uncertainties that they face; and
-- that they consider the annual report, taken as a whole, is
fair, balanced and understandable and provides the information
necessary for shareholders to assess the Company's position,
performance, business model and strategy.
By order of the board,
Helen Wakeford
Company Secretary
13 December 2022
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
Note 2022 2021
GBP'm GBP'm
Revenue
Fee income 5 133.6 123.7
Cost of sales (2.1) (1.5)
Gross profit 131.5 122.2
Expenses
Administrative expenses 8 (77.7) (58.8)
Credit loss allowance on financial assets 22 (0.2) (0.2)
Operating profit 53.6 63.2
------------------------------------------------ ----- ------------------------ ----------
Interest expense 25 (0.1) (0.2)
Interest income 9 0.8 0.1
Net policyholder returns(1)
Net income/(loss) attributable to policyholder
returns (38.5) 31.5
Change in investment contract liabilities 2,770.3 (2,736.1)
Fee and commission expenses 18 (192.6) (204.1)
Policyholder investment returns 10 (2,577.7) 2,940.2
------------------------------------------------ ----- ------------------------ ----------
Net policyholder returns (38.5) 31.5
Profit on ordinary activities before taxation
attributable to policyholders and shareholders 15.8 94.6
Policyholder tax credit/(charge) 38.5 (31.0)
Profit on ordinary activities before taxation
attributable to shareholders 54.3 63.6
Total tax attributable to shareholder
and policyholder returns 11 28.2 (43.5)
Less: tax attributable to policyholder
returns (38.5) 31.0
------------------------------------------------ ----- ------------------------ ----------
Shareholder tax on profit on ordinary
activities (10.3) (12.5)
Profit for the financial year 44.0 51.1
Other comprehensive (loss)/income
Exchange (losses)/gains arising on translation
of foreign operations 0.1 (0.1)
Total other comprehensive (losses)/income
for the financial year 0.1 (0.1)
Total comprehensive income for the financial
year 44.1 51.0
------------------------------------------------ ----- ------------------------ ----------
Earnings per share
------------------------------------------------ ----- ------------------------ ----------
Earnings per share - basic and diluted 7 13.3p 15.4p
(1) See note 1 for details on the presentational changes to
policyholder balances.
All activities of the Group are classed as continuing.
Notes 1 to 35 form part of these Financial Statements.
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
Note 2022 2021
GBP'm GBP'm
Non-current assets
Loans 16 5.5 3.4
Intangible assets 12 21.8 22.3
Property, plant and equipment 13 1.2 1.8
Right-of-use assets 14 2.1 3.6
Deferred tax asset 26 6.0 0.7
36.6 31.8
Current assets
Financial assets at fair
value through profit or loss 21 3.1 5.1
Other prepayments and accrued
income 22 17.2 16.0
Trade and other receivables 23 2.0 3.7
Cash and cash equivalents 19 183.0 176.1
Current tax asset 15.0 1.1
220.3 202.0
Current liabilities
Trade and other payables 24 21.5 17.4
Provisions 28 10.7 11.6
Lease liabilities 25 1.9 2.3
34.1 31.3
Non-current liabilities
Provisions 28 46.1 6.2
Contingent consideration 29 1.7 0.8
Lease liabilities 25 0.9 2.7
Deferred tax liabilities 26 0.9 29.5
----------------------------------- ----- ------------- -------------
49.6 39.2
Policyholder assets and
liabilities (1)
Cash held for the benefit
of policyholders 20 1,458.6 1,266.3
Investments held for the
benefit of policyholders 17 20,715.8 21,787.1
Liabilities for linked investment
contracts 18 (22,174.4) (23,053.4)
- -
Net assets 173.2 163.3
----------------------------------- ----- ------------- -------------
Equity
Called up equity share capital 3.3 3.3
Share-based payment reserve 30 2.6 2.4
Employee Benefit Trust reserve 31 (2.4) (2.1)
Foreign exchange reserve 32 - (0.1)
Non-distributable reserves 32 5.7 5.7
Non-distributable insurance
reserves 32 - 0.5
Retained earnings 164.0 153.6
----------------------------------- ----- ------------- -------------
Total equity 173.2 163.3
----------------------------------- ----- ------------- -------------
(1) See note 1 for details on the presentational changes to
policyholder balances.
These Financial Statements were approved by the Board of
Directors on 13 December 2022 and are signed on their behalf
by:
Alexander Scott
Director
Company Registration Number: 08860879
Notes 1 to 35 form part of these Financial Statements
COMPANY STATEMENT OF FINANCIAL POSITION
Note 2022 2021
GBP'm GBP'm
Non-current assets
Investment in subsidiaries 15 33.3 31.6
Loans receivable 16 5.5 3.4
38.8 35.0
Current assets
Prepayments 22 0.1 -
Other receivables 23 0.2 0.1
Cash and cash equivalents 33.1 31.0
----------------------------------- ----- ------- -------
33.4 31.1
Current liabilities
Trade and other payables 24 2.4 2.4
Loans payable 16 1.0 1.0
----------------------------------- ----- ------- -------
3.4 3.4
Non-current liabilities
Contingent consideration 29 1.7 0.8
Loans payable 16 7.0 8.0
----------------------------------- ----- ------- -------
8.7 8.8
Net assets 60.1 53.9
----------------------------------- ----- ------- -------
Equity
Called up equity share capital 3.3 3.3
Share-based payment reserve 30 2.2 1.7
Employee Benefit Trust reserve 31 (2.1) (1.8)
Profit or loss account
Brought forward retained earnings 50.7 42.0
Profit for the year 39.8 37.2
Dividends paid in the year (33.8) (28.5)
----------------------------------- ----- ------- -------
Profit or loss account 56.7 50.7
Total equity 60.1 53.9
----------------------------------- ----- ------- -------
The Company has taken advantage of the exemption in section 408
(3) of the Companies Act 2006 not to present its own income
statement in these financial statements.
These Financial Statements were approved by the Board of
Directors on 13 December 2022 and are signed on their behalf
by:
Alexander Scott
Director
Company Registration Number: 08860879
Notes 1 to 35 form part of these Financial Statements.
CONSOLIDATED STATEMENT OF CASH FLOWS
Note 2022 2021
GBP'm GBP'm
Cash flows from operating activities
Profit on ordinary activities before
taxation 54.3 63.6
Adjustments for income statement non-cash
movements:
Amortisation and depreciation 3.0 3.1
Share-based payment charge 2.0 1.9
Release of actuarial provision (0.5) -
Adjustments for cash effecting investing
activities:
Interest on cash and loans (0.8) (0.1)
Interest charged on lease 0.1 0.2
Decrease/(increase) in current asset
investments 2.0 (0.1)
Adjustments for statement of financial
position movements:
Decrease / (increase) in trade and
other receivables 0.5 (1.3)
Increase / (decrease) in trade and
other payables 4.0 (2.1)
Increase in contingent consideration 0.9 0.7
Decrease in share-based payment reserve (1.3) (1.2)
Increase / (decrease) in provisions 39.0 (7.4)
Adjustments for policyholder balances:
(Decrease)/ increase in investments
held for the benefit of policyholders 1,071.3 (5,059.9)
Increase in liabilities for linked
investment contracts (879.0) 4,940.5
(Decrease)/increase in policyholder
tax recoverable (44.5) 19.4
Cash generated (used in)/generated
from operations 251.0 (42.7)
Income taxes paid (13.5) (13.3)
Interest paid on lease liabilities (0.1) (0.2)
----------------------------------------------------------- -------------- --------------
Net cash flows (used in)/generated
from operating activities 237.5 (56.2)
Investing activities
Acquisition of tangible assets (0.4) (0.7)
Acquisition of subsidiary, net of cash
acquired - (7.9)
Increase in loans (2.1) (0.8)
Interest on cash held 0.8 0.1
----------------------------------------------------------- -------------- --------------
Net cash used in investing activities (1.7) (9.3)
Financing activities
Purchase of own shares in Employee
Benefit Trust (0.5) (1.0)
Equity dividends paid (33.7) (28.5)
Repayment of lease liabilities (2.4) (2.3)
-------------- --------------
Net cash used in financing activities (36.6) (31.8)
CONSOLIDATED STATEMENT OF CASH FLOWS (continued)
Net (decrease)/increase in cash and
cash equivalents 199.2 (97.3)
Cash and cash equivalents at beginning
of year 1,442.4 1,539.8
Exchange (losses)/gains on cash and
cash equivalents - (0.1)
Cash and cash equivalents at end of
year 1,641.6 1,442.4
----------------------------------------------------------- -------------- --------------
Cash and cash equivalents consist
of:
----------------------------------------------------------- -------------- --------------
Cash and cash equivalents 183.0 176.1
----------------------------------------------------------- -------------- --------------
Cash held for the benefit of policyholders 1,458.6 1,266.3
----------------------------------------------------------- -------------- --------------
Cash and cash equivalents 1,641.6 1,442.4
----------------------------------------------------------- -------------- --------------
Notes 1 to 35 form part of these Financial Statements.
COMPANY STATEMENT OF CASH FLOWS
Note 2022 2021
GBP'000 GBP'000
Cash flows from operating activities
Loss before interest and dividends (4.9) (4.8)
Adjustment for statement of financial
position movements:
Decrease/(increase) in trade and other
receivables (0.2) 0.2
Increase/(decrease) in trade and other
payables - 1.7
Increase in contingent consideration 0.9 0.7
Settlement of share-based payment
reserve (1.3) (1.1)
Net cash flows used in operating
activities (5.5) (3.3)
Investing activities
Acquisition of subsidiary - (8.6)
Purchase of subsidiary share capital - (4.0)
Dividends received 45.0 42.1
Interest received 0.2 0.1
Increase in loans receivable (2.0) (0.8)
------------------------------------------------------ --------------------- ---------------------
Net cash generated from investing
activities 43.3 28.8
Financing activities
Purchase of own shares in Employee
Benefit Trust (0.5) (0.9)
Increase in loans payable - 10.0
Repayment of loans (1.0) (1.0)
Interest expense on loans (0.2) (0.2)
Equity dividends paid (33.8) (28.5)
---------------------
Net cash used in financing activities (35.5) (20.6)
Net increase in cash and cash equivalents 2.2 4.9
Cash and cash equivalents at beginning
of year 31.0 26.1
Cash and cash equivalents at end
of year 33.2 31.0
------------------------------------------------------ --------------------- ---------------------
Notes 1 to 35 form part of these Financial Statements.
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
Non-distributable
insurance Share-based Employee
Share and other payment Benefit Retained
capital reserves reserve Trust earnings Total equity
GBP'm GBP'm GBPm GBP'm GBP'm GBP'm
Balance at
1 October 2020 3.3 6.2 1.7 (1.1) 130.8 140.9
Comprehensive
income for
the year:
Profit for
the year - - - - 51.1 51.1
Movement in
currency translation - (0.1) - - - (0.1)
----------------------- ---------- ------------------ ------------ --------- ---------- -------------
Total comprehensive
income for
the year - (0.1) - - 51.1 51.0
Share-based
payment expense - - 1.9 - - 1.9
Settlement
of share based
payment - - (1.2) - - (1.2)
Purchase of
own shares
in EBT - - - (1.0) - (1.0)
Excess tax
relief charged
to equity - - 0.1 - - 0.1
Other movement - - (0.1) - 0.1 -
Distributions
to owners -
Dividends paid - - - - (28.5) (28.5)
Balance at
30 September
2021 3.3 6.2 2.4 (2.1) 153.5 163.3
----------------------- ---------- ------------------ ------------ --------- ---------- -------------
Balance at
1 October 2021
Comprehensive
income for
the year:
Profit for
the year - - - - 44.0 44.0
Movement in
currency translation - 0.1 - - - 0.1
----------------------- ---------- ------------------ ------------ --------- ---------- -------------
Total comprehensive
income for
the year - 0.1 - - 44.0 44.1
Share-based
payment expense - - 2.0 - - 2.0
Settlement
of share based
payment - - (1.5) - - (1.5)
Purchase of
own shares
in EBT - - - (0.5) - (0.5)
Excess tax
relief charged
to equity - - (0.3) - - (0.3)
Exercised share
options - - - 0.2 (0.2) -
Release of
actuarial reserve - (0.5) - 0.5 -
Other movement - - - - - -
Distributions
to owners -
Dividends paid - - - - (33.9) (33.9)
Balance at
30 September
2022 3.3 5.7 2.6 (2.4) 164.0 173.2
----------------------- ---------- ------------------ ------------ --------- ---------- -------------
Notes 1 to 35 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'm GBP'm GBP'm GBP'm GBP'm
Balance at 1 October
2020
Comprehensive income
for the year: 3.3 1.1 (0.9) 42.0 45.5
Profit for the year - - - 37.2 37.2
---------------------------- --------- ------------ --------- ---------- --------
Total comprehensive income
for the year - - - 37.2 37.2
Settlement of share-based
payments - 0.6 - - 0.6
Purchase of own shares
in EBT - - (0.9) - (0.9)
Distributions to owners
- dividends - - - (28.5) (28.5)
Balance at 30 September
2021 3.3 1.7 (1.8) 50.7 53.9
Comprehensive income
for the year:
Profit for the year - - - 40.0 40.0
---------------------------- --------- ------------ --------- ---------- --------
Total comprehensive income
for the year - - - 40.0 40.0
Settlement of share-based
payments - 0.5 - - 0.5
Purchase of own shares
in EBT - - (0.5) - (0.5)
Distributions to owners
- dividends - - - (33.8) (33.8)
Balance at 30 September
2022 3.3 2.2 (2.3) 56.9 60.1
---------------------------- --------- ------------ --------- ---------- --------
Notes 1 to 35 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
range of services which are designed to help financial advisers and
their clients to manage financial plans in a simple, effective and
tax efficient way.
The registered office address, and principle place of business,
is 29 Clement's Lane, London, EC4N 7AE.
a) Basis of preparation
The consolidated Financial Statements have been prepared and
approved by the directors in accordance with UK-adopted
International Accounting Standards.
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.
Climate risks have been considered where appropriate in the
preparation of these Financial Statements, with particular
consideration given to the impact of climate risk on the fair value
calculations and impairment assessments. This has concluded that
the impact of climate risk on the financial statements is not
material.
The effects of the Ukraine/Russia war has been considered in the
preparation of these Financial Statements, and the impact is not
material.
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, liquidity and capital 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 2022, the Group had GBP183.0 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.
1. Basis of preparation and significant accounting policies (continued)
When making this assessment, the board has taken into
consideration both the Group's current performance and the future
outlook, including the impact of events in Ukraine and rising
inflation rates. Market volatility and uncertainty is expected to
continue for some time, due to these evolving world events 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 pandemic.
Having conducted detailed cash flow and working capital
projections, and stress-tested liquidity, profitability and
regulatory capital, 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 presumed to exist
where the Group owns the majority of the voting rights of an
entity. 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 on
consolidation.
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.
1. Basis of preparation and significant accounting policies (continued)
Presentational changes to Policyholder items
Presentational changes have been made to the consolidated
statement of comprehensive income and the consolidated statement of
financial position in order to provide information that is more
relevant to users of the financial statements, by splitting out the
policyholder and shareholder values. This revised structure is
likely to continue going forward and prior year comparative
information has also been reclassified.
Changes in accounting policies
i) There have been no new standards, amendments to standards or
interpretations adopted during the financial year 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 January 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 an assessment regarding the impact of
IFRS 17 on the Financial Statements and, while the insurance
companies in the Group do administer insurance business and hold
capital relating to the risks associated with this, the vast
majority of contracts written by the insurance companies are
investment contracts under IFRS 9, and the impact of IFRS 17 will
therefore 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 has assessed the impact of this amendment and does not
note any significant impact.
1. Basis of preparation and significant accounting policies (continued)
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 has assessed the impact of this amendment and does not
note any significant impact.
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 has assessed the impact of this amendment and does not
note any significant impact.
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 has assessed the impact of this amendment and does not
note 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 on an accruals
basis and 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.
1. Basis of preparation and significant accounting policies (continued)
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.
Licence income
Licence income is the rental charge for use of access to T4A's
CRM software. The rental charge is billed monthly in advance, based
on the number of users. Revenue is recognised in line with the
provision of the service.
Consultancy income
Consultancy income relates to consultancy services provided by
T4A on an as-needs basis. Revenue is recognised when the services
are provided.
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.
Investment income
Interest on shareholder cash, policyholder cash and coupon on
shareholder gilts are the three sources of investment income
received. These are recognised in the Consolidated Statement of
Comprehensive Income in interest income and within policy holder
returns. Interest income is recognised using the effective interest
method.
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.
1. Basis of preparation and significant accounting policies (continued)
Investment contracts - investments held for the benefit of
policyholders
Investment contracts held for the benefit of policy holders are
comprised of unit-linked contracts. Investments held for the
benefit of policyholders are stated at fair value and reported on a
separate line in the statement of financial position, see
accounting policy on financial instruments for fair value
determination. 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.
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.
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
Dividends are usually announced with the Group's interim and
annual results. Equity dividends paid are recognised in the
accounting period in which the dividends are declared and approved.
The reduction in equity in the year therefore comprises the prior
year final dividend and the current year interim dividend.
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.
1. Basis of preparation and significant accounting policies
(continued)
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.
1. Basis of preparation and significant accounting policies (continued)
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 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 in the consolidated statement of
comprehensive income within administration expenses 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
----------------
1. Basis of preparation and significant accounting policies (continued)
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 12.
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 yearend closing rate. 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 retranslated 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.
1. Basis of preparation and significant accounting policies (continued)
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
HMRC requires ILUK to charge basic rate income tax on its life
insurance policies (FA 2012, s102). ILUK collects this tax
quarterly, by charging 20% tax (2021: 20%) on gains from assets
held in the policies, based on the policyholder's acquisition costs
and market value at each quarter end. Additional charges are
applied on any increases
in the previously charged gain. The charge is adjusted by the
fourth financial year quarter so that the total charge for the year
is based on the gain at the end of the financial year. When assets
are sold at a loss, or reduce in market value by the financial year
end, a refund of the charges may be applied. 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 IAS 12).
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 2022, the business of ILUK and
ILInt was the direct insurance of investment linked pensions
business written by single premium in the United Kingdom, and
single premium life assurance linked bonds and linked qualifying
investment plans written in the United Kingdom and Isle of Man.
Insurance risk is minimal as all contracts have been classed as
investment contracts.
Client assets and client monies
Integrated Financial Arrangements Ltd (IFAL) client assets and
client monies are not recognised in the parent and consolidated
statements of financial position (see note 27) as they are owned by
the clients of IFAL.
Lease assets and lease liabilities
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 IAS 16: Property,
Plant and Equipment. Right-of-use assets are depreciated over the
lease term. See note 13 and 14.
1. Basis of preparation and significant accounting policies (continued)
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 25.
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 date, and subsequently measured 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.
1. Basis of preparation and significant accounting policies (continued)
(ii) Financial assets at amortised cost
These assets 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 the element of the loan payable to subsidiary which is to be
settled after 12 months, which is included in non-current
assets.
Financial assets are measured at amortised cost when they are
held within the business model whose objective is to hold assets to
collect contractual cash flows and their contractual cash flows
represent solely payments of principal and interest.
The carrying value of assets held at amortised cost are adjusted
for impairment arising from expected credit losses.
(iii) Financial liabilities at amortised cost
Financial liabilities at amortised cost comprise trade and other
payables and loans payable. 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,
where the simplified approach is applied to assets that do not
contain a significant financing component.
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.
1. Basis of preparation and significant accounting policies (continued)
The ILUK policyholder reserves, which are 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.
Balances due to HMRC are considered under IAS 12 Income Taxes,
whereas balances due to policyholders are considered under IAS 37
Provisions, Contingent Liabilities and Contingent Assets.
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) Share Incentive Plan (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) Performance share plan (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. 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.
2. C ritical accounting estimates and judgements (continued)
Judgements which do not involve estimates
The assessment to recognise the ILUK policyholder provision
comes from an evaluation of the likelihood of a constructive or
legal obligation, and whether that obligation can be estimated
reliably. The provision required has been calculated based on an
assessment of tax payable to HM Revenue & Customs (HMRC) and
refunds payable back to policyholders.
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
-- 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
2022 2021 2022 2021
GBP'm GBP'm GBP'm GBP'm
Cash and cash equivalents - - 183.0 176.1
Cash and cash equivalents
policyholder - - 1,458.6 1,266.3
Listed shares and securities 0.1 0.1 - -
Loans - - 5.5 3.4
Investments in quoted
debt instruments 3.0 5.0 - -
Accrued income - - 12.1 12.0
Trade and other receivables - - 0.6 0.9
Investments held for
the policyholders 20,715.8 21,787.1 - -
Total financial assets 20,718.9 21,792.2 1,659.8 1,458.7
------------------------------ ---------- --------- -------- --------
Financial liabilities:
Fair value through
profit or loss Amortised cost
2022 2021 2022 2021
GBP'm GBP'm GBP'm GBP'm
Trade and other payables - - 7.4 7.1
Accruals - - 3.0 7.9
Lease liabilities - - 2.8 5.0
Deferred consideration - - 1.7 1.7
Contingent consideration 1.7 0.8 - -
Liabilities for linked
investments contracts 22,174.4 23,053.4 - -
----------------------------- ---------- --------- -------- -------
Total financial liabilities 22,176.1 23,054.2 14.9 21.7
----------------------------- ---------- --------- -------- -------
3. F inancial instruments (continued)
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
2022 2021 2022 2021
GBP'm GBP'm GBP'm GBP'm
Cash and cash equivalents - - 33.1 31.0
Trade and other receivables - - 0.2 -
Loans - - 5.5 3.4
Total financial assets - - 38.8 34.4
----------------------------- ---------- --------- -------- -------
Financial liabilities:
Fair value through
profit or loss Amortised cost
2022 2021 2022 2021
GBP'm GBP'm GBP'm GBP'm
Trade and other payables - - 0.4 -
Loans - - 8.0 9.0
Deferred consideration - - 1.7 2.5
Contingent consideration 1.7 0.8 - -
Accruals - - 0.2 0.4
Total financial liabilities 1.7 0.8 10.3 11.9
----------------------------- ---------- --------- -------- -------
(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 on the next
page.
Investments held for the benefit of policyholders are recorded
at fair value through the profit or loss and reported on a separate
line in the statement of financial position.
Assets held at fair value also comprises investments held in
gilts, and these are held at fair value through profit and
loss.
3. F inancial instruments (continued)
The following table shows the three levels of the fair value
hierarchy:
Fair value Description of hierarchy Types of investments classified
hierarchy at each level
Level 1 Quoted prices (unadjusted) Listed equity securities,
in active markets for gilts, actively traded pooled
identical assets. investments such as OEICS
and unit trusts.
----------------------------- ---------------------------------
Level 2 Inputs other than quoted Actively traded unlisted
prices included within equity securities where
Level 1 that are observable there is no significant
for the asset either unobservable inputs, structured
directly (i.e. as prices) products and regularly priced
or indirectly (i.e. but not actively traded
derived from prices). instruments.
----------------------------- ---------------------------------
Level 3 Inputs that are not Unlisted equity securities
based on observable with significant unobservable
market data (unobservable inputs, inactive pooled
inputs). 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:
2022 Level 1 Level 2 Level 3 Total
GBP'm GBP'm GBP'm GBP'm
Investments and assets
held for the benefit
of policyholders
Term deposit 63.9 - - 63.9
Investments and securities 631.9 137.9 0.3 770.1
Bonds and other fixed-income
securities 10.9 1.2 - 12.1
Holdings in collective
investment schemes 19,730.4 137.7 1.6 19,869.7
------------------------------ ----------------- ----------------- ----------------- -------------
20,437.1 276.8 1.9 20,715.8
Other investments 3.0 - - 3.0
Total 20,440.1 276.8 1.9 20,718.8
------------------------------ ----------------- ----------------- ----------------- -------------
Level
2021 1 Level 2 Level 3 Total
GBP'm GBP'm GBP'm GBP'm
Investments and assets
held for the benefit of
policyholders
Investments and securities 633.6 163.9 0.4 797.9
Bonds and other fixed-income
securities 14.8 0.6 - 15.4
Holdings in collective
investment schemes 20,859.0 113.3 1.5 20,973.8
------------------------------------ --------------- ----------------- -------------- ------------
21,507.4 277.8 1.9 21,787.1
Other investments 5.0 - - 5.0
------------------------------------ --------------- ----------------- -------------- ------------
Total 21,512.4 277.8 1.9 21,792.1
------------------------------------ --------------- ----------------- -------------- ------------
The Group regularly reviews whether a market is active or not,
based on available market data and the specific circumstances of
each market.
3. F inancial instruments (continued)
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
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
assets have unobservable inputs as the 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.
Level 3 sensitivity to changes in unobservable measurements
For financial assets assessed as Level 3, based on its review of
the prices used, the Group 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 and whether a market is now active or
not.
Transfers between Levels between 01 October 2021 and 30
September 2022 are presented in the table below at their valuation
at 30 September 2022:
Transfers from Transfers to GBP'm
Level 1 Level 2 18.8
Level 2 Level 1 1.3
3. F inancial instruments (continued)
The reconciliation between opening and closing balances of Level
3 assets are presented in the table below:
2022 2021
GBP'm GBP'm
Opening balance 1.9 1.7
Unrealised gains or losses in the
year ended 30 September 2022 (0.4) (0.2)
Transfers in to Level 3 at 30 September
2022 valuation 0.4 1.1
Transfers out of Level 3 at 30 September
2022 valuation - (0.7)
Closing balance 1.9 1.9
------------------------------------------ ------- -------
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 Fair Value Hierarchy (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 the Group are subject to capital
requirements imposed by the relevant regulators as detailed
below:
Legal entity Regulatory regime
------------- -----------------------
IFAL IFRP
ILUK Solvency II
ILInt Isle of Man risk based
capital regime
Group capital requirements for 2022 are driven by the regulated
entities, whose capital resources and requirements as detailed
below:
IFAL ILUK ILInt
30 September 30 September 30 September
2022 2021 2022 2021 2022 2021
GBP'm GBP'm GBP'm GBP'm GBP'm GBP'm
--------------------- ------- ------- ------- ------- ------- -------
Capital
resource 39.7 37.2 244.0 268.7 42.0 43.4
Capital requirement 32.6 25.4 186.9 214.1 23.7 23.9
Coverage
ratio 122% 147% 131% 125% 177% 181%
3. F inancial instruments (continued)
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
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 subsidiaries,
IFAL, ILUK and ILInt, 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.
These are recorded in note 5 as wrapper fee income and annual
commission income, respectively. 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.
4. R isk and risk management (continued)
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
2022 2021
GBP'm GBP'm
10% increase in asset values 8.5 7.9
10% decrease in asset values (8.5) (7.9)
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.
Market risk from unit-linked assets
The Group and the Company have limited exposure to primary
market risk from the value of unit-linked assets as fluctuations
are borne by the policyholders.
(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:
2022 2022 2021 2021
---------------- --------- ------ --------- ---------
Currency GBP'm % GBP'm %
GBP 22,021.1 99.3 22,914.6 99.4
USD 127.0 0.6 111.0 0.5
EUR 16.4 0.1 18.1 0.1
Others 9.8 0.0 9.7 0.0
---------------- --------- ------ --------- ---------
Total 22,174.3 100.0 23,053.4 100.0
---------------- --------- ------ --------- ---------
99.3% 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. However, it is recognised that the
majority of investments held for the benefit of policyholders are
in collective investment schemes and some of their underlying
assets are denominated in currencies other than GBP, which
increases the funds under direction currency risk exposure. A
significant rise or fall in sterling exchange rates would not have
a significant first order impact on the Group's results since any
adverse or favourable movement in policyholder assets is entirely
offset by a corresponding movement in the linked liability.
4. R isk and risk management (continued)
(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, while for the
Group this risk also arises from fees owed by clients.
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, but 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 22.
(b) Loans
Loans subject to the 12 month ECL are GBP5.5m (2021: GBP3.6m).
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
significant 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
GBP5.6m in undrawn loans.
Details of the ECLs recognised in relation to loans can be seen
in note 16. No ECLs have been recognised on the undrawn loan
commitments, as any ECLs would not be considered to be
material.
(c) Cash and equivalents
The Group has a low risk appetite for credit risk, which is
mainly 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).
4. R isk and risk management (continued)
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 GBP5.5m (2021: GBP3.4m). 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 GBP160k (2021: GBP130k) 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.
4. R isk and risk management (continued)
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 GBP11.8m (2021: GBP12.0m) from 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.
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 three 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 entities
to ensure the level of affordability of the future dividends.
4. R isk and risk management (continued)
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 four equal annual instalments 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 table shows an analysis of the financial assets
and financial liabilities by remaining expected maturities as at 30
September 2022 and 30 September 2021.
In addition to the financial assets and financial liabilities
shown in the tables below, the Company committed a further GBP5.6m
in undrawn loans. These are available to be drawn down
immediately.
Financial assets:
Up to 3 3-12 1-5 Over
2022 months months years 5 years Total
GBP'm GBP'm GBP'm GBP'm GBP'm
Investments
held for the
policyholders 20,715.8 - - - 20,715.8
Investments 124.2 - 3.1 - 127.3
Accruals and deferred
income 12.1 - - - 12.1
Trade and other
receivables 2.0 0.2 - - 2.2
Loans - - 5.5 - 5.5
Cash and cash equivalents 183.0 - - - 183.0
Cash held for the
benefit of policyholders 1,458.6 - - - 1,458.6
------------------------------ ---------- -------- ------- --------- ---------
Total 22,495.7 0.2 8.6 - 22,504.5
---------------------- ------------------ -------- ------- --------- ---------
Up to 3 3-12 1-5 Over
2021 months months years 5 years Total
GBP'm GBP'm GBP'm GBP'm GBP'm
Investments
held for the
policyholders 21,787.1 - - - 21,787.1
Investments 0.2 - 5.0 - 5.2
Accruals and deferred
income 12.0 - - - 12.0
Trade and other
receivables 0.8 0.2 - - 1.0
Loans - - 3.4 - 3.4
Cash and cash equivalents 176.1 - - - 176.1
Cash held for the
benefit of policyholders 1,266.3 - - - 1,266.3
----------------------------- ---------- -------- -------- --------- ---------
Total 23,242.5 0.2 8.4 - 23,251.1
---------------------- ----------------- -------- -------- --------- ---------
Financial liabilities:
Up to 3 3-12 1-5 Over
2022 months months years 5 years Total
GBP'm GBP'm GBP'm GBP'm GBP'm
Liabilities
for linked investment
contracts 22,174.4 - - - 22,174.4
Trade and other
payables 11.8 3.7 - - 15.5
Lease liabilities 0.6 1.3 0.9 - 2.8
Deferred consideration - 1.5 0.2 - 1.7
Contingent consideration - - 1.7 - 1.7
Total 22,186.8 6.5 2.8 - 22,196.1
-------------------------- --------- -------- ------- --------- ---------
Up to 3 3-12 1-5 Over
2021 months months years 5 years Total
GBP'm GBP'm GBP'm GBP'm GBP'm
Liabilities
for linked investment
contracts 23,053.4 - - - 23,053.4
Trade and other
payables 9.9 5.1 - - 15.0
Lease liabilities 0.6 1.9 2.8 - 5.3
Deferred consideration - 1.6 0.2 - 1.8
Contingent consideration - - 0.8 - 0.8
Total 23,063.9 8.6 3.8 - 23,076.3
-------------------------- --------- -------- ------- --------- ---------
(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 the following categories of revenue:
-- Annual commission - based on a fixed percentage applied to
the value of the client's portfolio each month.
-- Wrapper fee income - based on a fixed quarterly charge per wrapper.
-- Other income - buy commission is based on a set percentage
charge applied to each transaction. Dealing charges are charged
based on a fixed fee for each type of transaction.
-- Adviser back-office technology - licence income based on a
fixed monthly charge per number of users. Consultancy income is
charged based on the services provided.
For the financial year ended
30 September
2022 2021
GBP'm GBP'm
Annual commission income 115.8 107.7
Wrapper fee income 11.6 10.6
Other income 2.2 3.0
Adviser back-office technology 4.0 2.4
Total fee income 133.6 123.7
-------------------------------- --------------- --------------
6. Segmental reporting
The revenue and profit before tax are attributable to activities
carried out in the UK and the Isle of Man.
The Group has three classes of business, which have been
organised primarily based on the products they offer, as detailed
below:
-- Investment administration services - this relates to services
performed by IFAL, which is the provider of the Transact wrap
service. It is the provider of the General Investment Account
(GIA), is a Self-Invested Personal Pension (SIPP) operator, an ISA
manager and is the custodian for all assets held on the platform
(except for those held by third party custodians).
--
-- Insurance and life assurance business - this relates to ILUK
and ILInt, insurance companies which provide the Transact Personal
Pension, Executive Pension, Section 32 Buy-Out Bond, Transact
Onshore and Offshore Bonds, and Qualifying Savings Plan on the
Transact platform.
--
-- Adviser back-office technology - this relates to T4A,
provider of financial planning technology to adviser and wealth
management firms via the CURO adviser support system. T4A was
acquired during the financial period ending 30 September 2021.
Other Group entities relates to the rest of the Group, which
provide services to support the Group's core operating
segments.
Analysis by class of business is given below.
6. Segmental reporting (continued)
Statement of comprehensive income - segmental information for
the year ended 30 September 2022:
Investment Insurance and Adviser Other Group Consolidation Total
administration life assurance back-office entities adjustments
services business technology
GBPm GBPm GBPm GBPm GBPm GBPm
Revenue
Annual
commission
income 63.4 52.6 - - - 116.0
Wrapper fee
income 2.8 8.7 - - - 11.5
Adviser
back-office
technology - - 3.9 - - 3.9
Other income 1.3 0.9 - 64.4 (64.4) 2.2
----------------- ---------------- --------------- ---------------- ---------------- ---------------- ----------
Gross
profit/(loss) 67.5 62.2 3.9 64.4 (64.4) 133.6
Cost of sales (0.7) (0.4) (0.5) (0.5) - (2.1)
Expenses
Admin expenses (43.0) (28.8) (5.3) (64.6) 64.0 (77.7)
Credit loss
allowance on
financial
assets (0.1) - - (0.1) - (0.2)
----------------- ---------------- --------------- ---------------- ---------------- ---------------- ----------
Operating
profit/(loss) 23.7 33.0 (1.9) (0.8) (0.4) 53.6
Interest expense - - - (0.4) 0.3 (0.1)
Interest income 0.1 1.0 - - (0.3) 0.8
Net policyholder
returns
Net
income/(loss)
attributable to
policyholder
returns (38.5) - - - (38.5)
Change in
investment
contract
liabilities - 2,770.3 - - - 2,770.3
Fee and
commission
expenses - (192.6) - - - (192.6)
Policyholder
investment
returns - (2,577.7) - - - (2,577.7)
----------------- ---------------- --------------- ---------------- ---------------- ---------------- ----------
Net policyholder
returns - (38.5) - - - (38.5)
Profit on
ordinary
activities
before taxation
attributable to
policyholders
and
shareholders 23.8 (4.5) (1.9) (1.2) (0.4) 15.8
Policyholder tax
credit/(charge) - 38.5 - - - 38.5
Profit on
ordinary
activities
before
taxation
attributable
to
shareholders 23.8 34.0 (1.9) (1.2) (0.4) 54.3
Total tax
attributable to
shareholder and
policyholder
returns (4.4) 32.6 0.3 (0.4) 0.1 28.2
Less: tax
attributable to
policyholder
returns - (38.5) - - - (38.5)
----------------- ---------------- --------------- ---------------- ---------------- ---------------- ----------
Shareholder tax
on profit on
ordinary
activities (4.4) (5.9) 0.3 (0.4) 0.1 (10.3)
Profit/(loss)
for the
financial year 19.4 28.1 (1.6) (1.6) (0.3) 44.0
----------------- ---------------- --------------- ---------------- ---------------- ---------------- ----------
6. Segmental reporting (continued)
Statement of comprehensive income - segmental information for
the year ended 30 September 2021:
Investment Insurance and Adviser Other Group Consolidation Total
administration life assurance back-office entities adjustments
services business technology
GBPm GBPm GBPm GBPm GBPm GBPm
Revenue
Annual
commission
income 58.9 45.3 - - - 104.2
Wrapper fee
income 2.6 8.1 - - - 10.7
Adviser
back-office
technology - - 2.4 - - 2.4
Other income 1.8 4.6 - 60.4 (60.4) 6.4
----------------- ---------------- --------------- ---------------- ---------------- ---------------- ----------
Gross
profit/(loss) 63.3 58.0 2.4 60.4 (60.4) 123.7
Cost of sales (0.6) (0.4) (0.3) (0.2) - (1.5)
Expenses
Admin expenses (34.5) (21.8) (3.4) (59.2) 60.2 (58.8)
Credit loss
allowance on
financial
assets (0.2) - - - - (0.2)
----------------- ---------------- --------------- ---------------- ---------------- ---------------- ----------
Operating
profit/(loss) 28.0 35.8 (1.3) 0.9 (0.2) 63.2
Interest expense - - - (0.4) 0.2 (0.2)
Interest income - 0.2 - 0.1 (0.2) 0.1
Net policyholder
returns
Net
income/(loss)
attributable to
policyholder
returns 31.5 - - - 31.5
Change in
investment
contract
liabilities - (2,736.1) - - - (2,736.1)
Fee and
commission
expenses - (204.1) - - - (204.1)
Policyholder
investment
returns - 2,940.2 - - - 2,940.2
----------------- ---------------- --------------- ---------------- ---------------- ---------------- ----------
Net policyholder
returns - 31.5 - - - 0.5
Profit on
ordinary
activities
before taxation
attributable to
policyholders
and
shareholders 28.0 36.5 (1.3) 0.6 (0.2) 63.6
Policyholder tax
credit/(charge) - (31.0) - - - (31.0)
Profit on
ordinary
activities
before taxation
attributable to
shareholders 28.0 36.5 (1.3) 0.6 (0.2) 63.6
Total tax
attributable to
shareholder and
policyholder
returns (5.3) (37.6) 0.3 (0.7) (0.2) (43.5)
Less: tax
attributable to
policyholder
returns - 31.0 - - - 31.0
----------------- ---------------- --------------- ---------------- ---------------- ---------------- ----------
Shareholder tax
on profit on
ordinary
activities (5.3) (6.6) 0.3 (0.7) (0.2) (12.5)
Profit/(loss)
for the
financial year 22.7 29.9 (1.0) (0.1) (0.4) 51.1
----------------- ---------------- --------------- ---------------- ---------------- ---------------- ----------
The comparative table has been restated to correct arithmetic
errors and to include the 'Other Operating Entities' segment. These
errors related only to the segmental reporting table and did not
impact any financial statement line items. See further details
below.
6. Segmental reporting (continued)
Line Line Segment Amount Amount Change Explanation of
in current in prior in CY in PY (GBPm) change
year year (GBPm) (GBPm)
--------------- --------------- ----------------- -------- -------- -------- -------------------------
Reclass amount
Annual Annual of 3.4m from Annual
Commission Commission commissions to
Income Income Insurance 45.3 48.7 (3.4) other income
--------------- --------------- ----------------- -------- -------- -------- -------------------------
Reclass amount
of 3.4m from Annual
Other Other commissions to
Income Income Insurance 4.6 1.2 3.4 other income
--------------- --------------- ----------------- -------- -------- -------- -------------------------
Recharged services
of GBP60.4m to
ISL that are eliminated
Other Other on consolidation
Income Income that hadn't been
Total Total Other Group included in PY
fee income fee income Entities 60.4 - 60.4 disclosure
--------------- --------------- ----------------- -------- -------- -------- -------------------------
Recharged services
of GBP60.4m to
Other Other ISL that are eliminated
Income Income on consolidation
Total Total Consolidated not included in
fee income fee income adjustments (60.4) - (60.4) PY disclosure
--------------- --------------- ----------------- -------- -------- -------- -------------------------
Reclass the amount
of admin expense
that should be
included in other
group entities
Investment of total 59.2m
administration from IAS (30.3m),
Admin Admin services Insurance (27.8m)
expenses expense (IAS) (34.5) (64.8) (30.3) and T4A (1.1m)
--------------- --------------- ----------------- -------- -------- -------- -------------------------
Reclass the amount
of admin expense
that should be
included in other
group entities
of total 59.2m
from IAS (30.3m),
Admin Admin Insurance (27.8m)
expenses expense Insurance (21.8) (49.6) (27.8) and T4A (1.1m)
--------------- --------------- ----------------- -------- -------- -------- -------------------------
Reclass the amount
of admin expense
that should be
included in other
group entities
of total 59.2m
from IAS (30.3m),
Admin Admin Other Group Insurance (27.8m)
expenses expense Entities (59.2) - 59.2 and T4A (1.1m)
--------------- --------------- ----------------- -------- -------- -------- -------------------------
Number changed
to correctly sum
Profit/(loss) Profit/(loss) the revenue -
before before expenses for the
tax tax IAS 28.0 3.2 24.8 segment
--------------- --------------- ----------------- -------- -------- -------- -------------------------
Number changed
to correctly sum
Profit/(loss) Profit/(loss) the revenue -
before before expenses for the
tax tax Insurance 36.5 39.0 (2.5) segment
--------------- --------------- ----------------- -------- -------- -------- -------------------------
Number changed
to correctly sum
Profit/(loss) Profit/(loss) the revenue -
before before Consolidation expenses for the
tax tax adjustments (0.2) 60.2 (60.4) segment
--------------- --------------- ----------------- -------- -------- -------- -------------------------
Profit Profit
for the for the Correctly casting
financial financial the segmental
year year IAS 22.7 44.1 (21.4) column
--------------- --------------- ----------------- -------- -------- -------- -------------------------
Profit Profit
for the for the Correctly casting
financial financial the segmental
year year Insurance 29.9 49.6 (19.7) column
--------------- --------------- ----------------- -------- -------- -------- -------------------------
Profit Profit
for the for the Correctly casting
financial financial Other Group the segmental
year year Entities (0.1) - (0.1) column
--------------- --------------- ----------------- -------- -------- -------- -------------------------
Profit Profit
for the for the Correctly casting
financial financial Consolidation the segmental
year year adjustments (0.4) (42.4) 42.0 column
--------------- --------------- ----------------- -------- -------- -------- -------------------------
Statement of financial position - segmental information for the
year ended 30 September 2022:
Investment Insurance and Adviser
administration life assurance back-office
services business technology Total
GBP'm GBP'm GBP'm GBP'm
Assets
Non-current assets 10.4 30.6 0.8 41.8
Current assets 71.8 144.7 3.8 220.3
Total assets 82.2 175.3 4.6 262.1
Liabilities
Current liabilities 10.5 22.5 1.1 34.1
Non-current liabilities 1.9 52.8 0.1 54.8
Total liabilities 12.4 75.3 1.2 88.9
Policyholder assets and
liabilities
Cash held for the benefit
of policyholder - 1,458.6 - 1,458.6
Investments held for the
benefit of policyholders - 20,715.8 - 20,715.8
Liabilities for linked
investment contracts - (22,174.4) - (22,174.4)
Total policyholder assets - - -
and liabilities -
Net assets 69.8 100.0 3.4 173.2
Non-current
asset additions 0.2 0.1 0.0 0.3
6. Segmental reporting (continued)
Statement of financial position - segmental information for the
year ended 30 September 2021:
Investment administration Insurance Total
services and life assurance
business Adviser
back-office
technology
GBP'm GBP'm GBP'm GBP'm
Assets
Non-current
assets 11.8 20.0 - 31.8
Current assets 67.3 130.8 3.9 202.0
Total assets 79.1 150.8 3.9 233.8
Liabilities
Current liabilities 8.1 22.5 0.7 31.3
Non-current liabilities 2.6 36.6 - 39.2
Total liabilities 10.7 59.1 0.7 70.5
Policyholder assets
and liabilities
Cash held for the
benefit of policyholder - 1,266.3 - 1,266.3
Investments held
for the benefit
of policyholders - 21,787.1 - 21,787.1
Liabilities for
linked investment
contracts - (23,053.4) - (23,053.4)
Total policyholder - - - -
assets and liabilities
Net assets 68.4 91.7 3.2 163.3
Non-current asset additions 0.3 0.3 - 0.6
Segmental information: Split by geographical location
2022 2021
GBP'm GBP'm
Revenue
United Kingdom 128.3 118.9
Isle of Man 5.3 4.8
Total 133.6 123.7
2022 2021
GBP'm GBP'm
Non-current assets
United Kingdom 25.1 26.8
Isle of Man - 0.1
Total 25.1 26.9
7. Earnings per share
2022 2021
Profit
Profit for the year and earnings
used in basic and diluted earnings
per share GBP44.0m GBP51.1m
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 (0.4m) (0.3m)
Weighted average number of Ordinary
Shares for the purposes of basic
EPS 330.9m 331.0m
Adjustment for dilutive share option
awards 0.4m 0.3m
Weighted average number of Ordinary
Shares for the purposes of diluted
EPS 331.3m 331.3m
Earnings per share
Basic and diluted 13.3p 15.4p
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
2022 2021
GBP'm GBP'm
Depreciation 2.6 2.8
Amortisation 0.4 0.3
Wages and employee benefits expense 46.1 41.0
Other staff costs 1.0 0.6
Auditor's remuneration:
* auditing of the Financial Statements of the Company
pursuant to the legislation 0.1 0.2
* auditing of the Financial Statements of subsidiaries 0.4 0.2
* other assurance services 0.3 0.1
Other Auditor's remuneration:
* auditing of the Financial Statements of subsidiaries - 0.2
* other assurance services - 0.1
Other professional fees 4.7 3.5
Regulatory fees 4.2 3.5
* Non-underlying expenses - backdated VAT 8.0 -
* Non-underlying expenses - interest on backdated VAT 0.8 -
* Other non-underlying expenses 2.7 3.3
Short-term lease payments:
* land and buildings 0.1 0.1
Other occupancy costs 2.3 1.2
Other costs 6.4 3.9
Other income - tax relief due to
shareholders (2.4) (2.2)
Total administrative expenses 77.7 58.8
"Other income - tax relief due to shareholders" relates to the
release of policyholder reserves to the statement of comprehensive
income.
Non-underlying expenses relate to back dated VAT and interest
being due to HMRC after their review concluded that the inclusion
of IAD in our VAT group was terminated with effect from July 2016,
and reverse charge VAT is therefore payable on services provided by
IAD since that date. We have been unsuccessful in two stages of
appealing the decision, which resulted in non-underlying expenses
of backdated VAT of GBP8.0 million for the period to September 2021
and non-recurring interest on the VAT due of GBP0.8m. For further
details see the Financial Review.
8. E xpenses by nature (continued)
Other non-underlying expenses relate professional fees and stamp
duty in relation to acquisitions, and post-combination
remuneration. The post-combination remuneration payment to the
original shareholders of T4A 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 will continue in
subsequent years and is expected to be GBP3 million in financial
years 2022 to 2024, before reducing to GBP0.8 million in financial
year 2025.
Company
2022 2021
GBP'm GBP'm
Wages and employee benefits expense 0.6 0.4
Non underlying expenses:
* Remuneration 3.0 2.2
Auditor's remuneration:
* auditing of the Financial Statements of the Company
pursuant to the legislation 0.2 0.3
Other professional fees 0.8 1.2
Other costs 0.2 0.6
Total administrative expenses 4.8 4.7
Wages and employee benefits expense
The average number of staff (including executive directors)
employed by the Group during the financial year amounted to:
2022 2021
No. No.
CEO 2 2
Client services staff 223 231
Finance staff 69 61
Legal and compliance staff 38 33
Sales, marketing and product development
staff 64 45
Software development staff 131 122
Technical and support staff 67 49
594 543
The Company has no employees (2021: nil).
Wages and employee (including executive directors) benefits
expenses during the year, included within administrative expenses,
were as follows:
2022 2021
GBP'm GBP'm
Wages and salaries 36.3 32.9
Social security costs 4.2 3.4
Other pension costs 3.6 2.8
Share-based payment costs 2.0 1.9
46.1 41.0
8. E xpenses by nature (continued)
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.
2022 2021
GBP'm GBP'm
Short-term employee benefits* 2.9 2.9
Post-employment benefits 0.2 0.1
Share based payment 0.4 0.4
Social security costs 0.4 0.4
4.1 3.8
Highest paid director: 0.6
Short-term employee benefits* 0.2 0.6
Other benefits - 0.1
No. No.
Number of directors for whom pension
contributions are paid 8 8
*Short-term employee benefits comprise salary and cash
bonus.
9. I nterest income
Group Company Group Company
2022 2022 2021 2021
GBP'm GBP'm GBP'm GBP'm
Interest income on bank
deposits 0.6 - - -
Interest income on loans 0.2 0.2 0.1 0.1
0.8 0.2 0.1 0.1
10. Policyholder investment returns
2022 2021
GBP'm GBP'm
Change in fair value of underlying
assets (2,729.2) 2,810.1
Investment income 151.5 130.1
Total investment returns (2,577.7) 2,940.2
11. Tax on profit on ordinary activities
Group
a) Analysis of charge in year
The income tax expense comprises:
2022 2021
GBP'm GBP'm
Corporation tax
Current year - corporation tax 10.0 12.2
Adjustment in respect of prior
years 0.7 0.4
10.7 12.6
Deferred tax
Current year (0.4) (0.2)
Change in deferred tax charge/(credit)
as a result of higher tax rate - 0.1
Total shareholder tax charge for
the year 10.3 12.5
Policyholder taxation
UK policyholder tax at 20% (2021:
20%) - 11.5
Deferred tax at 20% (2021: 20%) (33.8) 19.6
Prior year adjustments (4.9) (0.3)
Tax deducted on overseas dividends 0.2 0.2
Total policyholder taxation (38.5) 31.0
Total tax attributable to shareholder
and policyholder returns (28.2) 43.5
11. T ax on profit on ordinary activities (continued)
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:
2022 2021
GBP'm GBP'm
Profit on ordinary activities before
taxation attributable to shareholders 54.3 63.6
Profit on ordinary activities multiplied
by effective rate of Corporation
Tax 19% (2021: 19%) 10.3 12.1
Effects of:
Non-taxable dividends - (0.1)
Income / expenses not taxable / deductible
for tax purposes multiplied by effective
rate of corporation tax (0.2) 0.7
Adjustments in respect of prior years 0.7 (0.1)
Effect of change in tax rate - 0.1
Effect of lower tax rate jurisdiction (0.5) -
Other adjustments - (0.2)
10.3 12.5
Add policyholder tax (38.5) 31.0
(28.2) 43.5
Company
a) Analysis of charge in year
2022 2021
GBP'm GBP'm
Deferred tax charge/(credit) (see
note 26) - -
Total - -
b) Factors affecting tax charge for the year
2022 2021
GBP'm GBP'm
Profit on ordinary activities before
tax 39.9 37.2
Profit on ordinary activities multiplied
by effective rate of Corporation
Tax 19% (2021: 19%) 7.6 7.1
Effects of:
Non-taxable dividends (8.5) (8.0)
Income / expenses not taxable / deductible
for tax purposes multiplied by effective
rate of Corporation Tax 0.6 0.6
Group loss relief to ISL 0.3 0.3
- -
12. Intangible assets - Group
Software
and IP Customer
rights Goodwill relationships Software Brand Total
Cost GBP'm GBP'm GBP'm GBP'm GBP'm GBP'm
At 1 October
2021 12.5 18.3 2.1 2.0 0.3 35.2
At 30 September
2022 12.5 18.3 2.1 2.0 0.3 35.2
Amortisation
At 1 October
2021 12.5 - 0.1 0.2 0.1 12.9
Charge for the
year - - 0.2 0.3 - 0.5
At 30 September
2022 12.5 - 0.3 0.5 0.1 13.4
Net Book Value
At 30 September
2021 - 18.3 2.0 1.8 0.2 22.3
At 30 September 2022 - 18.3 1.7 1.5 0.2 21.8
Cost
At 1 October
2020 12.5 13.0 - - - 25.5
Acquisitions
through business
combinations - 5.3 2.1 2.0 0.3 9.7
At 30 September
2021 12.5 18.3 2.1 2.0 0.3 35.2
Amortisation
At 1 October
2020 12.5 - - - - 12.5
Charge for the
year - - 0.1 0.2 0.1 0.4
At 30 September
2021 12.5 - 0.1 0.2 0.1 12.9
Net Book Value
At 30 September
2020 - 13.0 - - - 13.0
At 30 September
2021 - 18.3 2.0 1.8 0.2 22.3
All intangible assets are externally generated.
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 the IAD Pty goodwill is allocated to the
two cash generating units ("CGUs") that relate to the Transact
platform, as these are benefitting from the IAD PTY acquisition.
The carrying amount of the goodwill for T4A is allocated to the CGU
that relates to the CURO software as this is the source of revenue
for T4A.
IAD Pty
2022 2021
GBP'm GBP'm
Investment administration services 7.2 7.2
Insurance and life assurance business 5.7 5.7
Total 12.9 12.9
12. I ntangible assets - Group (continued)
The carrying amount of the T4A goodwill is all allocated to the
below CGU:
T4A
2022 2021
GBP'm GBP'm
Adviser back-office technology 5.3 5.3
Other assumptions are as follows:
2022 2021
Discount rate 11.6% 10.0%
Period on which detailed forecasts
are based 5 years 5 years
Long-term growth rate 2.0% 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 2027. 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 2.0%. The discount rate is
assessed on an annual basis and has been calculated using the
weighted average cost of capital.
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.
Projected cash flows are impacted by movements in underlying
assumptions, including equity market levels, number of CURO users,
employee numbers and cost inflation. The Group considers that
projected cash flows of the investment administration services and
insurance and life assurance business CGUs are most sensitive to
movements in equity markets, because they have a direct impact on
the level of the Group's fee income, while the adviser back-office
technology CGU is most sensitive to the number of CURO users, as
this forms the basis of its licence income.
A sensitivity analysis has been performed, with key assumptions
being revised adversely to reflect the potential for future
performance being below expected levels. This estimated that a fall
in equity markets of approximately 45%, or a reduction of CURO
users of 25% compared to expectations, would be required before the
carrying value of any CGU would exceed the recoverable amount.
13. Property, plant and equipment - Group
Leasehold Fixtures Motor
improvements Equipment and Fittings Vehicles Total
Cost GBP'm GBP'm GBP'm GBP'm GBP'm
At 1 October 2021 1.7 3.6 0.2 - 5.5
Additions - 0.3 - - 0.3
Disposals - (0.2) - - (0.2)
Foreign exchange - - - - -
At 30 September
2022 1.7 3.7 0.2 - 5.6
Depreciation
At 1 October 2021 1.3 2.3 0.1 - 3.7
Charge in the
year 0.1 0.8 - - 0.9
Disposals - (0.2) - - (0.2)
Foreign exchange - - - - -
At 30 September
2022 1.4 2.9 0.1 - 4.4
Net Book Value
At 30 September
2021 0.4 1.3 0.1 - 1.8
At 30 September
2022 0.3 0.8 0.1 - 1.2
Cost GBP'm GBP'm GBP'm GBP'm GBP'm
At 1 October 2020 1.7 3.3 0.2 0.1 5.3
Additions - 0.6 - - 0.6
Disposals - (0.3) - (0.1) (0.4)
At 30 September
2021 1.7 3.6 0.2 - 5.5
Depreciation
At 1 October 2020 1.2 1.6 0.1 0.1 3.0
Charge in the
year 0.1 1.0 - 1.1
Disposals - (0.3) - (0.1) (0.4)
At 30 September
2021 1.3 2.3 0.1 - 3.7
Net Book Value
At 30 September
2020 0.6 1.7 - - 2.3
At 30 September
2021 0.4 1.3 0.1 - 1.8
The Company holds no property, plant and equipment.
14. Right-of-use assets - Property - Group
Cost GBP'000
At 1 October 2021 6.5
Additions -
Disposals -
Foreign exchange 0.1
At 30 September 2022 6.6
Depreciation GBP'000
At 1 October 2021 2.8
Charge in the year 1.7
Disposals -
Foreign exchange -
At 30 September 2022 4.5
Net Book Value
At 30 September 2021 3.6
At 30 September 2022 2.1
Cost GBP'm
At 1 October 2020 5.6
Additions 1.3
Disposals (0.4)
At 30 September 2021 6.5
Depreciation GBP'000
At 1 October 2020 1.6
Charge in the year 1.6
Disposals (0.4)
At 30 September 2021 2.8
Net Book Value
At 30 September 2020 4.0
At 30 September 2021 3.6
Depreciation is calculated on a straight line basis over the
term of the lease.
15. Investment in subsidiaries
2022 2021
GBP'm GBP'm
Carrying value at 1 October 31.6 16.8
Additions - 13.0
Share-based payments 1.7 1.8
Carrying value at 30 September 33.3 31.6
15. I nvestment in subsidiaries (continued)
The Company has investments in the ordinary share capital of the
following subsidiaries at 30 September 2022:
Incorporation
and significant
Name of Company Holding % Held place of business Business
Direct holdings
Integrated Financial Ordinary Shares 100% United Kingdom Investment
Arrangements Ltd Administration
IntegraFin Services Ordinary Shares 100% United Kingdom Services
Limited Company
Transact IP Limited Ordinary Shares 100% United Kingdom Software
provision
& development
Integrated Application Ordinary Shares 100% Australia Software
Development Pty maintenance
Ltd
Transact Nominees Ordinary Shares 100% United Kingdom Non-trading
Limited
IntegraLife UK Limited Ordinary Shares 100% United Kingdom Life Insurance
IntegraLife International Ordinary Shares 100% Isle of Man Life Assurance
Limited
Transact Trustees Ordinary Shares 100% United Kingdom Non-trading
Limited
Objective Funds Ordinary Shares 100% United Kingdom Dormant
Limited
Objective Wealth Ordinary Shares 100% United Kingdom Dormant
Management Limited
Time For Advice Ordinary Shares 100% United Kingdom Financial
Limited planning
software
Indirect holdings
IntegraFin Limited Ordinary Shares 100% United Kingdom Non-trading
ObjectMastery (UK) Ordinary Shares 100% United Kingdom Dormant
Limited
IntegraFin (Australia) Ordinary Shares 100% Australia Non-trading
Pty Limited
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.
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.
15. I nvestment in subsidiaries (continued)
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.
Group restructure
On 1 July 2022 IFAL transferred the entire issued share capital
of six subsidiaries to the Company. These transfers were made for
nil consideration, and each of the transfers constituted a
distribution in kind by IFAL. The amount of each distribution was
taken to be the book value of the relevant shares, being:
-- GBP1.7m for ILUK
-- GBP1.0m for ILInt
-- GBP1 for each of Transact Nominees Limited, Transact Trustees
Limited TTL, Objective Funds Limited and Objective Wealth
Management Limited
The investments in the Company accounts are valued at cost,
which in this case is nil.
16. Loans
This note analyses the loans payable by and receivable to the
Company. The carrying amounts of loans are as follows:
Loans receivable
2022 2021
GBP'm GBP'm
Loans receivable from third parties 5.7 3.5
Interest receivable on loans - 0.1
Total gross loans 5.7 3.6
Credit loss allowance (0.2) (0.2)
Total net loans 5.5 3.4
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 22.
Loans payable
2022 2021
GBP'm GBP'm
Loan payable to subsidiary 8.0 9.0
To be settled within 12 months 1.0 1.0
To be settled after 12 months 7.0 8.0
Total loan payable 8.0 9.0
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 8 years.
17. Investments held for the benefit of policyholders
2022 2022 2021 2021
Cost Fair value Cost Fair value
ILInt GBP'm GBP'm GBP'm GBP'm
Investments held
for the benefit
of policyholders 1,988.9 2,057.2 1,737.5 2,102.2
1,998.9 2,057.2 1,737.5 2,102.2
ILUK
Investments held
for the benefit
of policyholders 19,215.4 18,658.6 16,146.4 19,684.9
19,215.4 18,658.6 16,146.4 19,684.9
Total 21,214.3 20,715.8 17,883.9 21,787.1
17. I nvestments held for the benefit of policyholders
(continued)
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.
18. Liabilities for linked investment contracts
2022 2021
Fair value Fair value
ILInt GBP'm GBP'm
Unit linked liabilities 2,201.4 2,199.7
2,201.4 2,199.7
ILUK
Unit linked liabilities 19,973.0 20,853.7
19,973.0 20,853.7
Total 22,174.4 23,053.4
Analysis of change in liabilities for linked investment
contracts
2022 2021
GBP'm GBP'm
Opening balance 23,053.4 18,112.9
Investment inflows 3,113.9 3,391.3
Investment outflows (1,163.1) (1,130.5)
Compensation - 0.2
Changes in fair value
of underlying assets (2,729) 2,940.2
Investment income 151.5 -
Other fees and charges
- Transact (59.7) (56.6)
Other fees and charges
- third parties (192.6) (204.1)
Closing balance 22,174.4 23,053.4
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.
19. Cash and cash equivalents
2022 2021
GBP'm GBP'm
Bank balances - instant access 173.5 169.6
Bank balances - notice accounts 9.5 6.5
Total 183.0 176.1
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.
20. Cash held for the benefit of policyholders
2022 2021
GBP'm GBP'm
Cash and cash equivalents held
for the benefit of the policyholders
- instant access - ILUK 1,314.3 1,131.6
Cash and cash equivalents held
for the benefit of the policyholders
- term deposits - ILUK - 37.2
Cash and cash equivalents held
for the benefit of the policyholders
- instant access - ILINT 144.2 96.5
Cash and cash equivalents held
for the benefit of the policyholders
- term deposits - ILINT 1.0
Total 1,458.5 1,266.3
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.
21. Financial assets at fair value through profit or loss
Group Group
2022 2020
GBP'm GBP'm
Listed shares and securities 0.1 0.1
Gilts 3.0 5.0
Total 3.1 5.1
Investments are all UK and sterling based and held at fair
value.
22. Other prepayments and accrued income
Group Company Group Company
2022 2022 2021 2021
GBP'm GBP'm GBP'm GBP'm
Accrued income 13.1 - 12.8 -
Less: credit loss
allowance (1.0) - (0.8) -
Accrued income
- net 12.1 - 12.0 -
Prepayments 5.1 0.1 4.0 -
Total 17.2 0.1 16.0 -
22. O ther prepayments and accrued income (continued)
Movement in the credit loss allowance (for accrued income, loans
receivable and trade and other receivables) is as follows:
2022 2021
GBP'm GBP'm
Opening credit loss allowance (0.8) (0.6)
Reduction in credit loss allowance - -
Decrease / (Increase) during the year (0.2) (0.2)
Balance at 30 September (1.0) (0.8)
23. Trade and other receivables
Group Company Group Company
2022 2022 2021 2021
GBP'm GBP'm GBP'm GBP'm
Other receivables 2.1 - 0.9 -
Less: credit loss
allowance (0.1) - (0.1) -
Other receivables
net 2.0 - 0.8 -
Amounts owed by
Group undertakings - 0.2 - 0.1
Amounts due from
HMRC - - 1.8 -
Amount due from
policyholders to
meet current tax
liability - - 1.1 -
Total 2.0 0.2 3.7 0.1
Amount due from HMRC is in respect of tax claimed on behalf of
policyholders for tax deducted at source.
24. Trade and other payables
Group Company Group Company
2022 2022 2021 2021
GBP'm GBP'm GBP'm GBP'm
Trade payables 1.6 - 0.4 -
PAYE and other taxation 2.2 0.1 1.7 0.1
Other payables 7.7 0.3 5.5 0.2
Accruals and deferred
income 8.3 0.3 8.1 0.4
Deferred consideration 1.7 1.7 1.7 1.7
Tota l 21.5 2.4 17.4 2.4
Other payables mainly comprises GBP4.8 million (2021: GBP4.2
million) in relation to bonds awaiting approval.
25. Lease liabilities
Lease liabilities - Property:
2022 2021
GBP'm GBP'm
Opening balance 5.1 6.1
Additions - 1.3
Lease payments (2.4) (2.5)
Interest expense 0.1 0.2
Balance at 30 September 2.8 5.1
Amounts falling due within one year 1.9 2.4
Amounts falling due after one year 0.9 2.7
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.
26. Deferred tax
Deferred tax is calculated in full on temporary differences
under the liability method using a tax rate of 20% (2021: 20%) on
policyholder assets and liabilities and 25% (2021: 25%) on
non-policyholder items. The increase in the UK corporation tax rate
from the current rate of 19% 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 Policyholder
Asset Excess
Policyholder management Policyholder
Unrealised expenses and Unrealised Other
Accelerated losses/(unrealised deferred losses on deductible
Capital Share based gains) acquisition investment temporary
Allowances payments costs trusts differences Total
GBP'm GBP'm GBP'm GBP'm GBP'm GBP'm GBP'm
At 1 October
2020 - 0.4 - - - 0.1 0.5
Charge to
income - 0.2 - - - - 0.2
At 30
September
2021 - 0.6 - - - 0.1 0.7
Excess tax
relief
charged to
equity - (0.3) - - - - (0.3)
Charge to
income 0.1 0.2 8.1 2.2 0.2 - 10.8
Offset
Deferred Tax
Liability (5.2) (5.2)
At 30
September
2022 0.1 0.5 2.9 2.2 0.2 0.1 6.0
26. D eferred tax (continued)
Deferred Tax Liability Accelerated Policyholder
capital allowances tax on unrealised Other taxable
gains differences Total
GBP'm GBP'm GBP'm GBP'm
At 1 October 2020 0.1 8.8 - 8.9
Charge to income - 19.6 0.2 19.8
Deferred tax acquired
through business
combination - - 0.8 0.8
At 30 September
2021 0.1 28.4 1.0 29.5
Charge to income (0.1) (23.2) (0.1) (23.4)
Offset against Deferred
Tax asset (5.2) (5.2)
At 30 September 2022 - - 0.9 0.9
The Company has no deferred tax assets or liabilities.
The deferred tax movement in 2022 arises due to significant
falls in the value of equity and bond markets resulting in losses
on investments held for the benefit of policyholders (GBP184.4m),
as well as excess management charges (GBP3.7m). To support the
recognition of the policyholder net deferred tax asset of GBP5.4m,
modelling has been carried out to review the likely recovery period
for the deferred tax asset. The modelling is based on management
forecasts and concludes that the deferred tax asset on losses is
expected to be recovered by financial year 2024. An extreme
downside case was also modelled based on PRA Solvency II guidance
to include a fall in type 1 equity stock markets, and a mass lapse
of life insurance products, neither of which impacted the
anticipated recovery.
27. Client monies and client assets
2022 GBP'm GBP'm
Client monies 3,346.8 Amounts due to clients 3,346.8
Client assets 46,723.7 Corresponding liability 46,723.7
2021 GBP'm GBP'm
Client monies 2,901.5 Amounts due to clients 2,901.5
Client assets 49,210.1 Corresponding liability 49,210.1
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.
28. Provisions - Group
2022 2021
GBP'm GBP'm
Balance brought forward 17.8 25.2
(Decrease)/increase in dilapidations provision (0.3) 0.1
Decrease in ILInt non-linked unit provision (0.1) -
(Decrease)/increase in ILUK policyholder
reserves 45.0 (7.5)
Decrease in other provisions (5.6) -
Balance carried forward 56.8 17.8
Amounts falling due within one year 10.7 11.6
Amounts falling due after one year 46.1 6.2
Dilapidations provisions 0.2 0.5
ILInt non-linked unit provision - 0.1
Current ILUK policyholder reserves 56.6 11.6
Non-current ILUK policyholder reserves - 5.6
Total 56.8 17.8
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 policyholder reserve 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.
29. Contingent consideration - Group and company
2022 2021
GBP'm GBP'm
Contingent consideration 1.7 0.8
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.
The fair value of the contingent consideration is remeasured at
each reporting date. Management have estimated the fair value at 30
September 2022 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 2022.
30. Share-based payments
Share-based payment reserve
Group Company Group Company
2022 2022 2021 2021
GBP'm GBP'm GBP'm GBP'm
Balance brought forward 2.4 1.7 1.7 1.1
Movement in the year 0.2 0.5 0.7 0.6
Balance carried forward 2.6 2.2 2.4 1.7
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 2022
was GBPnil (2021: 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 2022 was GBP0.6m (2021:
GBP0.7m).
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.
30. Share-based payments (continued)
The cost to the Group in the financial year to 30 September 2022
was GBP0.5m (2021: GBP0.5m).
(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 2022
was GBP0.8m (2021: GBP0.7m). 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:
2022 2021
Shares Shares
(number) (number)
SIP 2018
Shares in the plan at start of the
year 692,683 473,683
Granted 292,318 295,210
Shares withdrawn from the plan (130,754) (76,210)
Shares in the plan at end of year 854,247 692,683
Available to withdraw from the plan
at end of year 314,161 148,543
Details of the movements in the share scheme during the year are
as follows:
2022 2022 2021 2021
Weighted Shares Weighted Shares
average average
exercise exercise
price price
(pence) (number) (pence) (number)
SIP 2005
Outstanding at
start
of the year 0.00 872,709 0.00 1,201,223
Shares
withdrawn from
the plan 0.00 (67,200) 0.00 (328,514)
Shares in the
plan
at end of year 0.00 805,509 0.00 872,709
Available to
withdraw
from the plan
at end
of year 0.00 805,509 0.00 872,709
The weighted average share price at the date of withdrawal for
shares withdrawn from the plan during the year was 425.47 pence
(2021: 507.35 pence).
30. Share-based payments (continued)
At 30 September 2022 the exercise price was GBPnil as they were
all nil cost options.
2022 2022 2021 2021
Weighted Share Weighted Share
average options average options
exercise exercise
price price
(pence) (number) (pence) (number)
PSP
Outstanding
at start
of the year 0.00 576,088 0.00 434,643
Granted 0.00 184,772 0.00 141,445
Forfeited 0.00 - 0.00 -
Exercised 0.00 (85,553)
Outstanding
at
end of year 0.00 675,307 0.00 576,088
Exercisable
at
end of year 0.00 183,958 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:
2022 2021
PSP
Share price at date of grant 522.5 555.0
Exercise price Nil Nil
Expected life 3 years 3 years
Risk free rate 0.69% 0.00%
Dividend yield 1.91% 1.50%
Weighted average fair value per option 493.3p 530.7p
31. Employee Benefit Trust reserve
Group:
2022 2021
GBP'm GBP'm
Balance brought forward (2.1) (1.1)
Purchase of own shares (0.3) (1.0)
Balance carried forward (2.4) (2.1)
Company:
2022 2021
GBP'm GBP'm
Balance brought forward (1.8) (0.9)
Purchase of own shares (0.3) (0.9)
Balance carried forward (2.1) (1.8)
31. E mployee Benefit Trust reserve (continued)
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.
32. Other reserves - Group
2022 2021
GBP'm GBP'm
Foreign exchange reserves - (0.1)
Non-distributable merger reserve 5.7 5.7
Non-distributable insurance reserves - 0.5
Foreign exchange reserves are gains/losses arising on
retranslating the net assets of
IAD Pty into sterling.
Non-distributable reserves relate to the non-distributable
merger reserve held by one of the Company's subsidiaries, IFAL,
which is classified within other reserves on a Group level .
33. 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
related parties
Company 2022 2021
GBP'm GBP'm
Integrated Financial Arrangements
Ltd 0.1 0.1
A loan of GBP10 million was issued to the Company by IntegraLife
UK Limited in FY21. This is an arm's length transaction as interest
is charged at a commercial rate. IHP is paying the loan off over
ten years and made the second payment of GBP1 million, plus accrued
interest, during the year. The current loan balance is GBP8
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 2022 or 2021 regarding related party
transactions.
33. Related parties (continued)
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 GBP3.6million (2021: GBP3.3million) in
dividends during the year and benefitted from staff discounts for
using the platform of GBP2k (2021: GBP2k). The number of IHP shares
held at the end of the year by key management personnel was
35,207,874, a increase of 1,123 from last year.
All of the above transactions are commercial transactions
undertaken in the normal course of business.
34. Events after the reporting date
A second interim dividend of 7.0 pence per share was declared on
13 December 2022. This dividend has not been accrued in the
consolidated statement of financial position.
35. Dividends
During the year to 30 September 2022 the Company paid interim
dividends of GBP33.8million (2021: GBP28.5million) to shareholders.
The Company received dividends from subsidiaries of GBP45.0million
(2021: GBP42.1million).
DIRECTORS, COMPANY DETAILS, ADVISERS
Executive Directors
Michael Howard
Alexander Scott
Jonathan Gunby
Non-Executive Directors
Richard Cranfield
Christopher Munro
Rita Dhut
Caroline Banszky
Victoria Cochrane
Robert Lister
Company Secretary
Helen Wakeford
Independent Auditors
Ernst & Young LLP, 25 Churchill Place, Canary Wharf, London,
E14 5EY
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
Luke Carrivick 020 7608 4900
Website
www.integrafin.co.uk
Company number
8860879
Glossary of Alternative Performance Measures ("APMs")
Various alternative performance measures are referred to in the
Annual Report, which are not defined by IFRS. They are used in
order to provide better insight into the performance of the Group.
Further details are provided below.
APM Definition and purpose
Operational performance measures
Funds under Calculated as the total market value of all cash
direction and assets on the platform, valued as at the
("FUD") respective year end.
Year end 2022 2021
GBPbn GBPbn
Cash 3.51 2.91
Assets 46.56 49.20
FUD 50.07 52.11
% change on the previous
year -4% 27%
Average daily FUD 2022 2021
GBPbn GBPbn
Cash 3.23 2.91
Assets 49.27 44.33
FUD 52.50 47.24
% change on the previous
year 11% 22%
The measurement of FUD is the primary driver
of the largest component of the Group's revenue.
FUD is used to derive the annual commissions
due to the Group.
These values are not reported within the financial
statements or the accompanying notes.
Gross inflows Calculated as gross inflows onto the platform
and net less outflows leaving the platform by clients
inflows during the respective financial year.
Inflows and outflows are measured as the total
market value of assets and cash joining or leaving
the platform. 2022 2021
GBPbn GBPbn
Gross inflows 4.73 7.70
Outflows 2.53 2.74
Net inflows 2.19 4.95
% change on the previous
year -56% 38%
The measurement of net inflows onto the platform
shows the net movement of cash and assets on
the platform during the year. This directly contributes
to FUD and therefore revenue.
These values are not reported within the financial
statements or the accompanying notes.
Adviser and Calculated as the total number of advisers or
client numbers clients as at the financial year end.
Advisers are calculated as the number of advisers
with over GBP1k of client FUD on the platform.
Clients are calculated as the total number of
clients on the platform.
T4A licence users calculated as the total number
of core licence users active on the CURO platform. 2022 2021
GBP'000 GBP'000
Advisers 6.9 6.5
% increase 5% 5%
Clients 224.7 208.6
% increase 8% 9%
T4A licence users 2.2 1.5
% increase 44%
This measurement is an indicator of our presence
in the market.
These values are not reported within the financial
statements or the accompanying notes.
Income statement measures
Non-underlying Calculated as costs which have been incurred
expenses outside of the ordinary course of the business.
Non-underlying expenses 2022 2021
GBPm GBPm
Backdated VAT 8.0 -
Interest on backdated
VAT 0.8 -
Other 2.7 3.3
Non-underlying expenses 11.5 3.3
Our non-underlying expenses represent costs which
do not relate to our recurring business operations
and hence should be separated from operating
expenses in the income statement.
Non-underlying expenses relate to back dated
VAT and interest being due to HMRC after their
review concluded that the inclusion of IAD in
our VAT group was terminated with effect from
July 2016, and reverse charge VAT is therefore
payable on services provided by IAD since that
date. We have been unsuccessful in two stages
of appealing the decision, which resulted in
non-underlying expenses of backdated VAT of GBP8.0
million for the period to September 2021 and
non-recurring interest on the VAT due of GBP0.8m.
For further details see the Financial Review.
Other costs consist of professional fees and
stamp duty in relation to acquisitions (FY21
only), and post-combination remuneration. Post-combination
remuneration relates to the payment 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 will continue in subsequent years and
is expected to be GBP3 million in financial years
2022 to 2024, before reducing to GBP0.8 million
in financial year 2025. Other costs in FY22 also
include a credit of GBP0.3 million in relation
to the dilapidations provision on the Group's
Clement's Lane office, as it has been established
that this is no longer required.
Underlying Calculated as profit after tax net of non-underlying
earnings per expenses, divided by called up equity share capital. 2022 2021
share GBPm GBPm
Profit after tax 44.0 51.1
Non-underlying expenses 11.5 1.6*
Tax allowable element
of costs (1.4) 0.3
Underlying profit after
tax 54.1 53.0
Divide by: Called up equity
share capital 3.3 3.3
Underlying earnings per
share 16.3p 16.0p
* Includes VAT on IAD costs of GBP1.7 million
for FY21, though the actual costs were
recorded in FY22
Underlying Calculated as profit before tax net of non-underlying
profit before expenses.
tax 2022 2021
GBPm GBPm
Profit before tax 54.3 63.6
Add: Non-underlying expenses 11.5 1.6*
Underlying profit before
tax 65.8 65.2
* Includes VAT on IAD costs of GBP1.7 million
for FY21, though the actual costs were recorded
in FY22.
Cash flow measures
Dividend per Calculated as dividend per share paid to shareholders,
share which relate to the respective financial years.
2022 2021
1(st) interim dividend 3.2 pence 3.0 pence
2(nd) interim dividend 7.0 pence 7.0 pence
Shareholder returns 10.2 pence 10.0 pence
% increase on previous
financial year 2.0% 20.5%
There are generally two dividend payments made
relating to each financial year. Shareholder
returns is a measurement of the total cash dividend
received by each shareholder for each indvidual
share held by them.
Dividend Calculated as total cash dividends paid in relation
policy to the respective financial year, divided by
the post-tax profit relating to that same financial
year.
2022 2021
GBPm GBPm
Total cash dividends paid 33.8 33.1
Profit for the financial
year 44.0 51.1
Dividends as a % of profit 77% 65%
Our policy is to pay 60% to 65% of full year
profit after tax as two interim dividends. For
FY22 the total dividend is 77% of IFRS reported
profit for the financial year, but is 62% after
excluding non-underlying expenses.
Delivery on dividend policy is a measurement
of our performance against the policy and the
businesses ability to generate distributable
profits.
[1] Investments made under EET indicates that the initial
investment is made exempt of tax first E, the second E denotes that
income and gains on the investment is also exempt whilst in the
wrapper. The T in this case represents that the withdrawal is taxed
in line with the individual's personal tax rate. E.g. Pensions. In
contrast TEE denotes that the investment is made from taxed income
but income and gains on the investment and withdrawals are exempt
represented by the second and third E. e.g. ISAs.
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END
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December 14, 2022 02:00 ET (07:00 GMT)
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