TIDMJUP
RNS Number : 4314Q
Jupiter Fund Management PLC
26 February 2021
Results for the year ended 31 December 2020
=============================================
26 February 2021
-- Strong investment performance with 70% of mutual fund assets
under management (AUM) above median over three years.
-- Acquisition of Merian Global Investors Limited ("Merian")
introduced GBP16.6 billion of AUM on 1 July 2020.
-- Ended the year with AUM at a record high of GBP58.7 billion.
-- Underlying profit before tax increased by 10% to GBP179.0
million. Statutory profits before tax decreased by 12% to GBP132.6
million, after exceptional costs mainly relating to the
acquisition.
-- Underlying EPS largely unchanged at 28.7 pence per share.
Statutory EPS was down from 27.5 pence per share to 21.3 pence per
share.
-- Ordinary dividend held at 17.1 pence per share and a special
dividend of 3.0 pence per share proposed. The total dividend for
the year was 20.1 pence per share, representing 70% of underlying
EPS.
Year ended Year ended % change
31 December 2020 31 December 2019
================================================= =================== =================== ==========
Assets under management (AUM) (GBPbn) 58.7 42.8 37%
================================================== =================== =================== ==========
Net outflows (GBPbn) (4.0) (4.5) (11)%
================================================== =================== =================== ==========
Net management fees(1) (GBPm) 384.0 370.0 4%
================================================== =================== =================== ==========
Statutory profit before tax (GBPm) 132.6 151.0 (12)%
Basic earnings per share (p) 21.3 27.5 (23)%
Underlying profit before tax(1) (GBPm) 179.0 162.7 10%
Underlying earnings per share(1) (p) 28.7 28.8 -
Total dividends per share (p) 20.1 17.1 18%
================================================== =================== =================== ==========
Operating margin (before exceptional items)(1) 41% 43%
================================================== =================== =================== ==========
(1) The Group's use of alternative performance measures (APMs)
is explained on pages 33 and 34.
Andrew Formica, Chief Executive, commented:
"This is a year where we made significant progress against our
strategic objectives and laid strong foundations for future growth,
despite the disruptive impact on financial markets and businesses
brought by Covid-19.
First and foremost, our priority has been to deliver for our
clients and support our people.
For clients we delivered strong investment performance with 70%
of our mutual fund AUM outperforming the median over three years to
31 December 2020.
In addition, we are acutely aware of the impact of the pandemic
on our people's mental and physical wellbeing. During the year, we
launched a number of initiatives to support colleagues, including
financial support to improve home working and broadening benefits
for those with caring responsibilities as well as a range of
training and support programs to help people manage and cope.
Throughout this period we also successfully completed the
acquisition of Merian on time. This transformational deal has
expanded our product and geographic offering while reinforcing our
position as a market leader in UK retail. Financially it has
exceeded our expectations, delivering greater than expected
synergies and already making a significant contribution to Group
profits. While more time is needed to stabilise flows from certain
products, these near-term challenges were well-anticipated and
factored into the terms of the deal, giving substantial protection
to our shareholders.
Market volatility weighed heavily on investor sentiment
resulting in net outflows for the year, gross inflows were robust
at GBP16.5 billion, and, pleasingly, Jupiter branded strategies
recorded three consecutive quarters of positive net flows. We have
selectively added to our product range and expanded our
environmental, social and governance (ESG) investment capabilities,
where we have a strong heritage. We have also made progress with
our international reach through developing our partnership with NZS
Capital in the US and building upon Merian's relationship with Ping
An in China, deepening our access to the largest and fastest
growing investment markets in the world.
Against a backdrop of strengthening investor sentiment and
improved momentum as we turn the corner in the battle against
Covid-19, I am confident that Jupiter is strongly positioned for
future growth."
Board changes
Jonathon Bond, the Senior Independent Director, has decided not
to seek re-election at the Company's 2021 AGM, and will retire from
the Board at the conclusion of the meeting. Roger Yates, a
Non-Executive Director and Chairman of the Remuneration Committee,
will be appointed Senior Independent Director with effect from the
same date.
Nichola Pease, Chairman of Jupiter, said:
"Jonathon was appointed in 2014 and became Senior Independent
Director in 2017. He has made a significant contribution to the
Company and I have greatly appreciated his support and counsel
since my appointment. On behalf of the Board and all of our
stakeholders I would like to extend our thanks and very best
wishes."
Analyst presentation
There will be an analyst presentation at 9:00am GMT on 26
February 2021.
The audio presentation will be held virtually. The presentation
may be joined by either telephone
https://secure.emincote.com/client/jupiter/jfm022/vip_connect or by
webcast https://secure.emincote.com/client/jupiter/jfm022 . Please
note that questions can be asked on either the webcast or the
conference line.
The Results Announcement and the presentation will be available
at https://www.jupiteram.com/investor-relations . Copies may also
be obtained from the registered office of the Company at The Zig
Zag Building, 70 Victoria Street, London, SW1E 6SQ. The Annual
Report will be published in March 2021 and will be available at
https://www.jupiteram.com/investor-relations .
For further information
please contact:
Investors Media
Jupiter Alex James Despina Constantinides
+44 (0)20 3817 1636 +44 (0)20 3817 1278
Powerscourt Justin Griffiths Victoria Palmer-Moore
+44 (0)20 7250 1446 +44 (0)20 7250 1446
Forward-looking statements
This announcement contains forward-looking statements with
respect to the financial condition, results of operations and
businesses of the Group. Such statements and forecasts involve risk
and uncertainty because they relate to events and depend upon
circumstances in the future. There are a number of factors that
could cause actual results or developments to differ materially
from those expressed or implied by forward-looking statements and
forecasts. Forward-looking statements and forecasts are based on
the Directors' current view and information known to them at the
date of this announcement. The Directors do not make any
undertaking to update or revise any forward-looking statements,
whether as a result of new information, future events or otherwise.
Nothing in this announcement should be construed as a profit
forecast.
Management statement
======================
Every year brings with it its set of challenges, but some years
can prove exceptional. 2020 was such a year, though it will also be
seen as one in which we took important steps to secure the future
prosperity of our company.
Despite the Covid-19 pandemic, we successfully acquired and
integrated Merian Global Investors Limited. We achieved this thanks
to the commitment and hard work of our employees, who rose to the
challenge of bringing these two businesses together in extremely
difficult circumstances. It also points to our agility as a firm
that we were able to adapt quickly to a global public health
crisis, supporting our employees, but also continuing to serve our
clients with little to no disruption.
Notwithstanding the many challenges, we ended the year on a much
more robust footing than when we came into it. Through the Merian
acquisition, we have broadened our product range and expanded our
client base to create a market-leading specialist, high conviction,
active asset manager in the UK retail channel while expanding our
international reach.
Our strategy remains focused on delivering superior and
sustainable investment performance for our clients. We will retain
our focus on specialist strategies where we believe we can really
add value for our clients and differentiate ourselves from our
peers. Our investment performance remained strong in 2020, with 70%
of our mutual fund assets under management being above median over
a three-year period (2019: 72%).
As an active asset manager, one of our key roles is delivering
sustainable returns through active engagement with the companies in
which we invest. We have broadened our approach on sustainable
investing this year, with specialist strategies, increased company
engagements and data-driven proprietary tools.
While our strong investment performance did not always translate
into net new business, we believe that there has been a shift in
momentum, which we hope will deliver a pick-up in net client flows
in the future. In turn, this should drive improvements in our
financial performance.
We are also aware that we cannot stand still if we are to
continue to drive future growth. As we pivot the business towards
growth areas, we have made difficult but important decisions around
our resourcing and have initiated a restructuring programme to make
sure our resources are focused on the areas that will drive the
future growth of the business.
Positioned for improved financial performance
Our strong investment performance through 2020 was not reflected
in our total net new business in what proved to be a challenging
year. Gross inflows remained robust at GBP16.5 billion (2019:
GBP13.4 billion) and Jupiter strategies generated positive net
inflows in the latter three quarters of the year, driven by client
demand for Fixed Income products. However, Merian strategies saw
outflows in the second half and retail investor sentiment remained
subdued throughout a year of market and economic uncertainty. We
saw total net outflows of GBP4.0 billion (2019: GBP4.5
billion).
There were redemptions from funds where, as part of the
integration, we have changed the manager and from others where
investment performance has fallen short. UK and European-centric
strategies have also been out of favour as concerns on Brexit
weighed heavily on sentiment, regardless of performance, although
we hope this will change as political risks diminish and more
certainty emerges.
We are confident that we will gradually see a shift in momentum
and hope to see an improved net flow performance in 2021. Net
outflows and lower markets for much of the year would have
negatively impacted the revenues generated by a standalone Jupiter
business. However, the addition of Merian meant we ended the year
with AUM at a record high of GBP58.7 billion, with a 4% increase in
net management fees to GBP384.0 million.
A number of strategies also generated significant net
performance fees this year of GBP73.6 million. Although underlying
profit before tax increased 10% to GBP179.0 million, statutory
profit before tax fell 12% to GBP132.6 million, principally due to
the integration and acquisition costs of Merian. More details on
our financial performance can be found in the Financial review
below.
Supporting our people and clients through Covid-19
We responded quickly to the Covid-19 crisis. Despite the
significant impact on stock markets in the early stages of the
pandemic and the necessary switch to remote working to keep our
people safe, we have been able to operate effectively for our
clients. Investment performance remained strong and client
engagement levels increased through the year.
Primarily, Covid-19 has been a public health crisis and the
wellbeing of our people and their families has been our key
priority. We have been immensely proud of how our people have
reacted throughout this period. In often challenging circumstances,
they have proved to be resilient and dedicated and have performed
exceptionally well.
Crises often stall progress, but Covid-19 has accelerated shifts
that were already well underway. Looking across how we now use
technology, how we interact with clients and how we have embraced
new ways of working, we have all seen many years' rapid progress
over the last twelve months. The pandemic has highlighted the power
of technology, not just in remote working and client engagement,
but in using tools to alert fund managers to changes in our
environment. We have been building our data science capability in
recent years and this will play an increasingly important role in
how we manage our clients' assets in the years ahead.
Our strong culture has helped us through this period but the
time we have spent apart has drawn on our cultural reserves and we
need to regularly replenish it. We therefore expect, when it is
safe and appropriate to do so, to shift towards a hybrid working
model, to benefit from teams working together face-to-face while
giving our people greater flexibility about how they work at other
times.
Integration of Merian
The acquisition of Merian completed on 1 July 2020 and, despite
the challenges that this year has presented, all of the strategic
benefits we laid out last year have borne out and we have made
excellent progress towards complete integration.
It has broadened our product range, building scale in some areas
(such as UK equities and Fixed Income) and expanded our investment
expertise in others (such as alternative strategies, private assets
investments and gold and silver). It has widened our Institutional
client base and extended our international footprint in a number of
key markets, including in China.
We have welcomed around 100 talented colleagues, largely in
Investment and Distribution, supporting our market-leading presence
in the UK retail channel.
Although we have seen outflows from Merian funds this year,
financially it has exceeded our expectations, delivering greater
levels of synergies than initially expected and already
contributing significantly to Group profits.
A strong product offering
We have strategically added to our product range in select areas
we believe we can add real value for our clients. We launched the
Jupiter European Smaller Companies fund in the UK and
internationally have strengthened our Fixed Income range.
We have also broadened our international offering. Our
partnership with NZS Capital in the US is growing strongly, having
already won three institutional mandates and ending the first year
of the partnership with more than $500 million of assets. We have
opened a US office in Denver to support NZS Capital and to offer
our own capabilities to the US institutional marketplace. We are
also working to develop our relationship, inherited through Merian,
with Ping An in China, one of the largest and fastest growing
markets in the world.
A commitment to sustainability
As a high conviction specialist asset manager, we are very aware
that we are stewards of our clients' capital. We have a
responsibility to actively engage with our investee companies
across environmental, social and governance issues. We have worked
this year to ensure that ESG processes are embedded throughout both
our investment strategies and our wider culture.
We have expanded our ESG investment capabilities and
restructured our sustainable product range, including Global
Sustainable Equities, under a single leadership. Our data science
team has played a key role in the development of the Jupiter ESG
Hub, a proprietary tool that enables us to take internal research
and external data and map it against portfolios or potential
investments.
We also believe that it is crucial that we hold ourselves to the
same high standards which we expect from the companies in which we
invest. We have made steps in improving our corporate
responsibility, including a commitment to achieving net zero
emissions by 2050 and alignment with the UN Global Compact.
Capital management and dividend
The Board remains focused on maintaining the Group's capital
strength, including a robust surplus over regulatory capital
requirements, while balancing making investments for long-term
growth with distribution to Jupiter shareholders. The Group's
indicative surplus over regulatory requirements was GBP112.2
million (2019: GBP147.0 million) after allowing for declared
dividends.
In accordance with our policy of a progressive dividend in line
with the trend in profitability, the Board has proposed an
unchanged full-year ordinary dividend for the year of 9.2 pence per
share. This results in a total ordinary dividend for the year of
17.1 pence, unchanged from 2019, representing an ordinary dividend
pay-out ratio of 60% of underlying EPS.
Following the recognition of high levels of performance fee in
the second half of the year, the Board are pleased to announce a
special dividend of 3.0 pence per share, bringing the total pay-out
for the year to 70% of underlying EPS.
In previous years, the Board has declared interim dividends
only, which do not require a shareholder vote. In a change to that
approach, in order to promote accountability to our shareholders,
the Board has proposed the full-year dividend as a final dividend
and seeks approval for this payment at the AGM on 6 May 2021.
Positioned for future growth
As we move into 2021, we will continue the work that we started
this year and look forward to realising the benefits of the actions
we have taken. We will complete the integration of Merian and
continue to support our people through the ongoing Covid crisis. We
will retain focus on cost discipline, but selectively invest where
we see opportunities for organic growth. But above all, we will
continue our focus on delivering for our clients.
With the completion of the acquisition, a number of key funds
reaching their three-year track records and an unwavering focus on
delivering superior investment performance for our clients, the
foundations are in place for strong performance going forward.
I would like to thank our colleagues across the whole group for
all of their hard work this year. In unusual and very challenging
circumstances, they have shown remarkable commitment and
dedication, without which none of the successes we have achieved
this year would have been possible. I look forward to working with
my colleagues to drive this future growth and deliver positive
outcomes for our clients, our people and our shareholders.
Business review
=================
Assets under management (AUM) and flows
Movement in AUM by product across
the period
========================================== ========= ========= ======== ============== ========= ==========
Full
31 Q1 Q4 net year Acquisition 31
December net Q2 net Q3 net flows net 1 July Market December
2019 flows flows flows GBPbn flows GBPbn returns 2020
GBPbn GBPbn GBPbn GBPbn GBPbn GBPbn GBPbn
=========== ======== ======== ========= ========= ========= ======== ============== ========= ==========
Mutual
funds 37.6 (2.9) 0.2 (0.8) (1.3) (4.8) 13.9 3.2 49.9
=========== ======== ======== ========= ========= ========= ======== ============== ========= ==========
Segregated
mandates 4.8 0.6 0.1 (0.2) 0.2 0.7 2.4 - 7.9
=========== ======== ======== ========= ========= ========= ======== ============== ========= ==========
Investment
trusts 0.4 - - - 0.1 0.1 0.3 0.1 0.9
=========== ======== ======== ========= ========= ========= ======== ============== ========= ==========
Total 42.8 (2.3) 0.3 (1.0) (1.0) (4.0) 16.6 3.3 58.7
=========== ======== ======== ========= ========= ========= ======== ============== ========= ==========
Assets under management (AUM) increased by 37% to end the year
at GBP58.7 billion (2019: GBP42.8 billion).
We acquired GBP16.6 billion of AUM through Merian on 1 July 2020
which, despite net outflows of GBP2.2 billion, had increased to
GBP17.0 billion at the end of the year.
Gross flows remained strong through the year at GBP16.5 billion.
After a demand for liquidity led to outflows in the first quarter,
Jupiter products stabilised and generated net inflows in each of
the latter three quarters. However, with depressed levels of retail
investment sentiment, we saw total net outflows of GBP4.0 billion
across the business, with Merian outflows of GBP2.2 billion
included from 1 July 2020. These were partially offset by GBP3.3
billion of investment returns for clients.
Client demand was largely through the Fixed Income strategy,
which saw GBP0.6 billion of net inflows, driven by inflows into
Dynamic Bond. These were partially offset by redemptions from lower
margin Merian Fixed Income strategies following changes in the fund
managers.
NZS Capital also performed well during the year, winning three
Institutional mandates and generating over $500 million of AUM. We
experienced net outflows in the Systematic strategy, including the
Global Equity Absolute Return fund which we acquired through
Merian. We continue to see good gross inflows into these products
and are working towards stabilising this business and returning to
overall growth in the future. We also experienced net outflows
across our other strategies, which were all impacted by investor
demand during a period of global uncertainty. Average AUM was
GBP47.8 billion, an increase of 8% on 2019.
Investment performance
At 31 December 2020, 70% of our mutual fund AUM had delivered
above-median performance against peer group funds over three years
(31 December 2019: 72% of mutual fund AUM), of which 42% of mutual
fund AUM had delivered first quartile performance (31 December
2019: 38% of mutual fund AUM).
Measured over one year, 63% of mutual fund AUM (31 December
2019: 55% of mutual fund AUM) delivered above-median performance.
Over five years, 69% of mutual fund AUM (31 December 2019: 86% of
mutual fund AUM) had delivered above-median performance.
Segregated mandates and investment trusts make up GBP8.8 billion
or 15% of our AUM. At the year end, 25% of AUM in segregated
mandates and investment trusts were above their benchmarks over
three years (31 December 2019: 14%). The majority of these assets
are in value-focused strategies, which have faced challenges over
recent years. We compare performance to benchmark for these funds
as there is no industry-wide data to allow comparison against
peers.
Financial review
==================
Despite the challenging backdrop we delivered resilient
financial results in 2020. Underlying profit before tax and
exceptional items was GBP179.0 million, 10% higher than in 2019, of
which the Merian business contributed GBP59.2 million. This
increase was driven largely by the significant levels of
performance fee income, partially offset by a higher cost base
relating to performance fees and the acquisition of Merian.
Statutory profit before tax was GBP132.6 million (2019: GBP151.0
million), after the deduction of exceptional items of GBP46.4
million (2019: GBP11.7 million), almost all of which related to the
acquisition.
We issued 95.4 million new ordinary shares in July as
consideration for the acquisition of Merian. Underlying earnings
per share was largely unchanged compared with 2019 at 28.7 pence
(2019: 28.8 pence), including a contribution of 7.5 pence from the
Merian business after dilution from shares issued. Statutory
earnings per share were 21.3 pence (2019: 27.5 pence).
Net revenue
Net revenue
======================================= =============== ===============
(GBPm) 2020 2019
======================================= =============== ===============
Net management fees 384.0 370.0
======================================= =============== ===============
Net initial charges 0.2 1.2
======================================= =============== ===============
Peformance fees (1) 73.6 7.9
======================================= =============== ===============
Net revenue(1) 457.8 379.1
======================================= =============== ===============
Reclassified revenue (10.0) -
======================================= =============== ===============
Adjusted net revenue 447.8 379.1
======================================= =============== ===============
Revenue(1) 500.5 419.3
======================================= =============== ===============
1 Includes performance fees of GBP10.0 million (2019 GBPnil) that
have been used to reduce an exceptional cost (see APMs on page 33).
=========================================================================
Revenue in the year was GBP500.5 million (2019: GBP419.3
million), with net revenues of GBP457.8 million (2019: GBP379.1
million), of which Merian contributed GBP129.1 million. Over the
year, Jupiter average AUM, excluding the Merian business, was 11%
lower than in the prior year which, along with reductions in
management fee margins, led to a corresponding decrease in
management fees.
Performance fees of GBP73.6 million (2019: GBP7.9 million)
crystallised in the year, principally related to Merian UK equities
and alternatives funds that delivered strong performance in the
period.
We have reclassified GBP10.0 million of the performance fees
received as exceptional items in order to avoid a mismatch between
this revenue and an exceptional acquisition-related cost.
The Group's net management fee margin for the period was 79
basis points, five points lower than in 2019. This was driven
primarily by changes in business mix, including the impact of
Merian's lower margin product mix, the continuing strength of flows
into the Group's Fixed Income strategy and some important
segregated mandate wins. The net result of higher overall average
AUM at a lower average margin was an increase in net management
fees of 4%.
Administrative expenses
Administrative expenses
======================================== ======== ========
(GBPm) 2020 2019
======================================== ======== ========
Fixed staff costs (1) 76.1 59.4
======================================== ======== ========
Variable staff costs (1) 85.8 70.7
======================================== ======== ========
Other expenses (1) 103.2 86.7
======================================== ======== ========
Administrative expenses (1) 265.1 216.8
======================================== ======== ========
Exceptional items 47.0 11.7
======================================== ======== ========
Administrative expenses 312.1 228.5
======================================== ======== ========
Variable compensation ratio (1) 31% 30%
======================================== ======== ========
Total compensation ratio (1) 35% 34%
======================================== ======== ========
Operating margin (1) 41% 43%
======================================== ======== ========
1 Stated before exceptional items (see
APMs on page 33).
======================================== ======== ========
Administrative expenses (before exceptional items) of GBP265.1
million (2019: GBP216.8 million) were 22% higher than in 2019, of
which GBP56.6 million or 26% of the increase represented costs
taken on through the Merian acquisition.
Fixed staff costs increased by 28%, of which 15% was due to the
acquisition of Merian. Average headcount for the Group increased
from 529 to 593, including former Merian employees. However,
alongside the increase in headcount, the increase in fixed staff
costs reflects changes to the structure of our teams across 2019
and 2020.
Other expenses of GBP103.2 million (2019: GBP86.7 million)
increased 19%, which was mainly due to operating costs taken on
through the Merian acquisition.
The Group's total compensation ratio increased from 34% to 35%,
including payments to fund managers relating to performance fees
generated. The Group's operating margin (before exceptional items)
decreased to 41% (2019: 43%), but remained in line with our
long-term expectation.
Variable staff costs
======================================== ======== ========
(GBPm) 2020 2019
======================================== ======== ========
Cash bonus (1) 32.9 24.3
======================================== ======== ========
Other variable compensation (1) 53.8 49.4
======================================== ======== ========
Net gains on instruments held to hedge
fund fund awards (0.9) (3.0)
======================================== ======== ========
Variable staff costs before exceptional
items 85.8 70.7
======================================== ======== ========
Exceptional items 4.1 9.3
======================================== ======== ========
Variable staff costs 89.9 80.0
======================================== ======== ========
1 Stated before exceptional items (see
APMs on page 33).
======================================== ======== ========
Variable staff costs before exceptional items increased by 21%
to GBP85.8 million (2019: GBP70.7 million). This was largely driven
by additional payments due to fund managers as a result of
performance fees earned.
Exceptional items
Exceptional items were GBP46.4 million in 2020 (2019: GBP11.7
million) and relate mainly to the acquisition of Merian, including
acquisition and integration costs and certain other costs.
Exceptional items
============================================ ======== ========
(GBPm) 2020 2019
============================================ ======== ========
Acquisition related
============================================ ======== ========
Transaction costs 12.7 -
============================================ ======== ========
Integration and related costs 26.6 -
============================================ ======== ========
Transaction and integration costs 39.3 -
============================================ ======== ========
Amortisation of acquired intangible assets 9.4 -
============================================ ======== ========
Deferred compensation costs related to
the acquisition 3.7 -
============================================ ======== ========
Performance fees attributed to the seller's
obligation (10.0) -
============================================ ======== ========
42.4 -
============================================ ======== ========
Non-acquisition related
============================================ ======== ========
Redundancy and other compensation costs 4.0 11.7
============================================ ======== ========
Exceptional items 46.4 11.7
============================================ ======== ========
Acquisition-related exceptional net costs mainly comprise
acquisition and integration related costs of GBP39.3 million. The
majority of the operational integration took place in 2020. We do
not expect to recognise any significant further expenditure
relating to the acquisition in 2021.
The Group incurred certain acquisition costs in the form of
deferred earn out awards to certain former shareholders. These are
required to be treated as compensation costs as they include
employment criteria and will be charged over a period of between
three and five years.
Up to GBP10.0 million of this award would be funded by TA
Associates (the DEO obligation) in the absence of the equivalent
amount of performance fee profits. The Group recognised performance
fee profits in excess of this amount in 2020 and, as a result,
GBP10.0 million of performance fees have been recorded as
exceptional items to reflect that they are expected to fund this
cost. Due to accounting recognition requirements, GBP6.7 million of
the DEO obligation cost will be charged in future years.
Part of the purchase consideration is required to be allocated
to acquired intangible assets which represents value attributable
to the client book excluding gross inflows. This asset of GBP75.0
million is amortised over four years.
In December 2020, the Group incurred redundancy and other
compensation costs of GBP4.0 million as part of an ongoing
restructuring programme. These costs related to actions taken in
the final quarter of the year as the Group embarked on a
post-integration review of its structures, systems and processes.
The programme will complete in the first half of 2021, with related
costs being recognised in 2021. Exceptional items in 2019 of
GBP11.7 million related to certain variable compensation awards, of
which GBP9.3 million related to accelerated accounting charges for
deferred employee awards and GBP2.4 million to a separate
redundancy programme.
The treatment of redundancy costs as exceptional items is kept
under close review and, following the completion of the current
programme, no further redundancy costs are expected to be reported
as exceptional in the foreseeable future.
Other income statement movements
Other gains of GBP3.3 million (2019: gains of GBP4.1 million)
principally comprised a GBP3.7 million gain (2019: GBPnil) on a
forward contract taken out to hedge share-based compensation awards
to staff and losses of GBP0.4 million (2019: gains of GBP3.1
million) on seed investments, net of hedges and including dividend
income. Seed investments are hedged for beta risk where it is
possible to do so. Gains and losses therefore generally arise from
under or overperformance against a fund's benchmark. In 2020, we
recognised gains across a range of seeded funds, particularly in
respect of our Flexible Macro and Pan European Smaller Companies
funds. Gains and losses relating to the hedging of fund-based
awards are reported within staff costs.
Finance costs
Finance costs of GBP5.1 million (2019: GBP2.0 million) have
increased by GBP3.1 million principally as a result of the issue of
GBP50 million subordinated debt in April bearing an interest rate
of 8.875%.
Tax expense
The effective tax rate for 2020 was 20.6% (2019: 18.7%),
marginally above the headline UK corporation tax rate of 19.0%
(2019: 19.0%). The difference is due to increases in disallowable
exceptional costs related to the Merian acquisition.
Earnings per share (EPS) and underlying EPS
2020 2019
(GBPm) (GBPm)
====================================== ========== ===========
Statutory profit before tax 132.6 151.0
========================================== ========== ===========
Exceptional items 46.4 11.7
========================================== ========== ===========
Underlying profit before tax 179.0 162.7
========================================== ========== ===========
Tax at average statutory rate of 19% (34.0) (30.9)
========================================== ========== ===========
Underlying profit after tax 145.0 131.8
========================================== ========== ===========
Weighted average issued share capital 505.4 457.7
========================================== ========== ===========
Underlying EPS 28.7p 28.8p
========================================== ========== ===========
Basic EPS 21.3p 27.5p
========================================== ========== ===========
The Group's basic and diluted statutory EPS measures were 21.3
pence and 20.8 pence respectively in 2020, compared with 27.5 pence
and 26.8 pence in 2019. Underlying EPS, defined as underlying
profit after tax divided by the weighted average number of shares
in issue (see page 33), was broadly flat at 28.7 pence (2019: 28.8
pence).
Section 1: Results for the year
=================================
Consolidated income statement for the year ended 31 December 2020
===================================================================
Notes 2020 2019
GBPm GBPm
Revenue 1.1, 1.2 500.5 419.3
Fee and commission
expenses 1.1 (42.7) (40.2)
Net revenue 1.1 457.8 379.1
Administrative
expenses 1.3 (312.1) (228.5)
Other gains 1.4 3.3 4.1
Amortisation of
intangible
assets 3.2 (11.3) (1.8)
Operating profit 137.7 152.9
Finance income - 0.1
Finance costs 1.5 (5.1) (2.0)
Profit before
taxation 132.6 151.0
Income tax expense 1.6 (27.3) (28.2)
Profit for the year 105.3 122.8
====================================== ==================================
Earnings per share
Basic 1.7 21.3p 27.5p
Diluted 1.7 20.8p 26.8p
Consolidated statement of comprehensive income for the year ended 31
December 2020
======================================================================
Notes 2020 2019
GBPm GBPm
Profit for the year 105.3 122.8
--------------------------------- -----------------------------------
Items that may be reclassified
subsequently to profit or loss
Exchange movements on
translation
of subsidiary undertakings 4.2 0.7 (0.8)
Other comprehensive
income/(loss)
for the year net of tax 0.7 (0.8)
Total comprehensive income
for the year net of tax 106.0 122.0
================================= ===================================
Notes to the Group financial statements - Income statement
============================================================
INTRODUCTION
Jupiter Fund Management plc (the Company) and its subsidiaries
(together, the Group) offer a range of asset management products.
Through its subsidiaries, the Group acts as an investment manager
to authorised unit trusts, SICAVs, ICAVs, ICVCs, OEICs, investment
trust companies, pension funds and other specialist funds. At 31
December 2020, the Group had offices in the United Kingdom,
Ireland, Jersey, Austria, Germany, Hong Kong, Italy, Luxembourg,
Singapore, Spain, Sweden and Switzerland. In addition, the
strategic partnership with NZS Capital LLP, which completed in
February 2020, gives the Group access to the US Institutional
market.
Following the acquisition of Merian Global Investors Limited
(Merian) on 1 July 2020 (see Note 5.4), the principal activities of
the Group are unchanged, but the business combination has resulted
in an expansion in the range of asset management products offered
and in the number of markets in which the Group operates, including
an office in Dublin.
The Group's financial statements have been split into sections
to assist with their navigation and align with the Financial
review. The basis of preparation, accounting policies and principal
risks and mitigations are within Section 5.
THE IMPACT OF EXCEPTIONAL ITEMS ON THE FINANCIAL STATEMENTS
The Group has presented certain items as exceptional in 2019 and
2020. In 2020, these items principally relate to the Merian
acquisition which has resulted in additional disclosures, including
explanations of new areas of accounting estimates, judgements and
assumptions. Further details of all items that are deemed
exceptional in 2019 and 2020 are explained below, as well as within
the relevant notes to the accounts and in the Financial review.
The use of exceptional items and underlying profit measures
In the Financial review of this document, the Group makes use of
a number of APMs, including 'Underlying profit before tax'. The use
of such measures means that financial results referred to in that
section of this document may not be equal to the statutory results
reported in the financial statements. Guidelines issued by the
European Securities and Markets Authority require such differences
to be reconciled. As a result of the Merian acquisition, the
difference between 'Underlying profit before tax' and the statutory
profit before tax is larger than in 2019, due to the recognition of
material acquisition and integration costs.
'Underlying profit before tax', which is defined on page 33, is
equal to the statutory profit before tax less exceptional items.
Exceptional items are also defined on page 33. The financial
statements do not refer to or use such measures, but the table
below provides a reconciliation, indicating in which note or notes
to the statutory accounts the exceptional items are recorded.
Further detail on these items can be found in the relevant
notes.
Notes 2020 2019
GBPm GBPm
Underlying profit before tax
(page 8) 179.0 162.7
Exceptional items, included
within the following notes:
Net revenue 1.1 10.0 -
Administrative expenses 1.3 (47.0) (11.7)
Intangible assets 3.2 (9.4) -
------------------- ---------------------------
Statutory profit before tax 132.6 151.0
=================== ===========================
1.1 REVENUE
The Group's primary source of revenue is management fees.
Management fees are charged for investment management or
administrative services and are normally based on an agreed
percentage of the assets under management (AUM). Initial charges
and commissions are for additional administrative services at the
beginning of a client relationship, as well as ongoing
administrative costs. Performance fees may be earned from some
funds when agreed performance conditions are met. Net revenue is
stated after fee and commission expenses to intermediaries for
ongoing services under distribution agreements.
2020 2019
GBPm GBPm
Management fees 426.6 410.0
Initial charges and commissions 0.3 1.4
Performance fees 73.6 7.9
------------------- ----------------------------
Revenue 500.5 419.3
Fee and commission expenses relating to management
fees (42.6) (40.0)
Fee and commission expenses relating to initial
charges and commissions (0.1) (0.2)
------------------- ----------------------------
Net revenue 457.8 379.1
=================== ============================
The Financial review refers to exceptional items of GBP10.0m
within revenue. This exceptional item is included within
performance fees of GBP73.6m in the table above. This performance
fee revenue of GBP10.0m is related to the indemnification by TA
Associates under the sale and purchase agreement of certain
deferred awards to former shareholders of Merian who were also fund
managers.
The performance fees have been earned in the normal course of
business, but they have been disclosed as exceptional items to
offset the exceptional cost of the deferred earn-out awards that
would not have been recorded as a cost to the Group if the
indemnification by TA Associates were required to be fulfilled (see
Note 5.4).
Disaggregation of revenue
The Group disaggregates revenue from contracts with customers on
the basis of product type and geographical region, as this best
depicts how the nature, amount, timing and uncertainty of the
Group's revenue and cash flows are affected by economic
factors.
The Group's product types can be broadly categorised into pooled
funds and segregated mandates. Pooled funds, which include both
mutual funds and investment trusts, are established by the Group,
with the risks, exposures and investment approach defined via a
prospectus which is provided to potential investors. In contrast,
segregated mandates are generally established in accordance with
the requirements of a specific institutional
investor.
2020 2019
GBPm GBPm
Revenue by product type
Pooled funds 462.2 399.0
Segregated mandates 38.3 20.3
Revenue 500.5 419.3
=================== ============================
1.2 SEGMENTAL REPORTING
The Group offers a range of products and services through
different distribution channels. All financial, business and
strategic decisions are made centrally by the Board of Directors
(the Board), which determines the key performance indicators of the
Group. Information is reported to the chief operating decision
maker, the Board, on a single-segment basis. While the Group has
the ability to analyse its underlying information in different
ways, for example by product type, this information is only used to
allocate resources and assess performance for the Group as a whole.
On this basis, the Group considers itself to be a single-segment
investment management business.
Management monitors operating profit for the purpose of making
decisions about resource allocation and performance assessment.
Geographical information
2020 2019
GBPm GBPm
Revenue by location of clients
UK 374.9 322.5
Continental Europe 77.3 65.2
Asia 20.6 19.4
Rest of the world 27.7 12.2
Revenue by location 500.5 419.3
=========================== ============================
The location of clients is based on management information
received from distribution partners. Where management information
is not available, the location of the distribution partner is used
as a proxy for the location of the client.
Non-current assets for the Group (excluding financial
instruments and deferred tax assets) are domiciled in the UK,
continental Europe and Asia, as set out below:
2020 2019
GBPm GBPm
Non-current assets for the Group
UK 686.2 395.4
Continental Europe 1.9 2.1
Asia 0.8 1.4
Non-current assets by location 688.9 398.9
=========================== ===========================
1.3 ADMINISTRATIVE EXPENSES
Administrative expenses of GBP312.1m (2019: GBP228.5m) include
staff costs of GBP181.9m (2019: GBP141.8m). Staff costs consist
of:
2020 2019
GBPm GBPm
Wages and salaries 127.3 95.3
Share-based payments 19.8 24.5
Social security costs 16.6 17.6
Pension costs 6.2 5.0
Redundancy costs 12.9 2.4
---------------------------- ----------------------------
Staff costs before gains arising from the
economic hedging of fund units 182.8 144.8
---------------------------- ----------------------------
Net gains on instruments held to provide an
economic hedge for fund awards (0.9) (3.0)
---------------------------- ----------------------------
Staff costs 181.9 141.8
============================ ============================
The Financial review provides details of exceptional items of
GBP47.0m (2019: GBP11.7m) within administrative expenses. Of this,
GBP20.0m (2019: GBP11.7m) is in respect of staff costs and GBP27.0m
(2019: GBPnil) relates to other administrative expenses. The staff
costs comprise GBP16.0m relating to the acquisition of Merian and
GBP4.0m relating to a redundancy programme. In 2020, these chiefly
comprise cash and share-based DEO awards and redundancy costs which
relate to both the Merian acquisition and to restructuring of the
Jupiter business post-integration. In 2019, exceptional items
related mainly to the acceleration of share and fund-based
compensation awards and redundancy costs. Other administrative
expenses classified as being exceptional principally comprise legal
and professional fees associated with the Merian acquisition and
consultancy fees relating to the post-acquisition integration
process of the Merian business.
1.4 OTHER GAINS
Other gains in 2020 relate principally to gains made on a
hedging instrument purchased to mitigate the Group's exposure to
pricing
movements in its own shares in respect of share-based awards it
has granted and on the Group's seed investment portfolio and
derivative
instruments held to provide economic hedges against that
portfolio. The portfolio and derivatives are held at fair value
through profit or loss
(see Note 3.4). Gain and losses on these investments comprise
both realised and unrealised amounts.
2020 2019
GBPm GBPm
Dividend income 0.8 1.0
Gains on financial instruments designated
at fair value through profit or loss upon
initial recognition 14.3 8.2
Losses on financial instruments at fair value
through profit or loss (11.8) (5.1)
---------------------------- ----------------------------
Other gains 3.3 4.1
---------------------------- ----------------------------
Add: Net gains on instruments held to provide
an economic hedge for fund awards (reported
within Note 1.3) 0.9 3.0
Total other gains 4.2 7.1
============================ ============================
1.5 FINANCE COSTS
Finance costs principally relate to interest payable on Tier 2
subordinated debt notes (see Note 3.6 for further details) and the
unwinding of the discount applied to lease liabilities. Finance
costs also include ancillary charges for commitment fees and
arrangement fees associated with the revolving credit facility.
Interest payable is charged on an accrual basis using the effective
interest method.
2020 2019
GBPm GBPm
Interest on subordinated debt 3.1 -
Interest on lease liabilities 1.8 1.8
Finance cost on the revolving credit facility 0.2 0.2
---------------------------- ----------------------------
5.1 2.0
============================ ============================
1.6 INCOME TAX EXPENSE
Analysis of charge in the year:
2020 2019
GBPm GBPm
Current tax
Tax on profits for the year 27.7 31.9
Adjustments in respect of prior years (0.3) (0.6)
27.4 31.3
Deferred tax
Origination and reversal of temporary differences (0.5) (2.9)
Adjustments in respect of prior years 0.4 (0.2)
(0.1) (3.1)
Income tax expense 27.3 28.2
=========================== ===========================
The corporation tax rate for 2020 was 19% (2019: 19%). The tax
charge in the year is higher (2019: lower) than the standard rate
of corporation tax in the UK and the differences are explained
below:
2020 2019
Factors affecting tax expense for the year GBPm GBPm
Profit before taxation 132.6 151.0
------- -------
Taxation at the standard corporation tax rate
(19%) 25.2 28.7
Non-taxable expenditure 1.6 0.2
Other permanent differences 0.3 (0.6)
Adjustments in respect of prior years 0.1 (0.8)
Effect of differences in overseas tax rates 0.1 0.7
Total tax expense 27.3 28.2
======= =======
1.7 EARNINGS PER SHARE
Basic earnings per share (EPS) is calculated by dividing the
profit for the year by the weighted average number of ordinary
shares outstanding during the year less the weighted average number
of own shares held. Own shares are shares held in an Employee
Benefit Trust (EBT) for the benefit of employees under the vesting,
lock-in and other incentive arrangements in place.
Diluted EPS is calculated by dividing the profit for the year by
the weighted average number of ordinary shares outstanding during
the year for the purpose of basic EPS plus the weighted average
number of ordinary shares that would be issued on the conversion of
all the dilutive potential ordinary shares into ordinary
shares.
For the purposes of calculating EPS, the share capital of the
parent is calculated as the weighted average number of ordinary
shares in issue.
The weighted average number of ordinary shares used in the
calculation of EPS is as follows:
2020 2019
Number Number
Weighted average number of shares m m
Issued share capital 505.4 457.7
Less time apportioned own shares held (10.5) (11.1)
Weighted average number of ordinary shares
for the purpose of basic EPS 494.9 446.6
Add back weighted average number of dilutive
potential shares 10.6 10.9
Weighted average number of ordinary shares
for the purpose of diluted EPS 505.5 457.5
============================== ==============================
2020 2019
Earnings per share p p
Basic 21.3 27.5
Diluted 20.8 26.8
Section 2: Consolidated statement of cash flows
=================================================
Consolidated statement of cash flows for the year ended 31 December
2020
=====================================================================
Notes 2020 2019
GBPm GBPm
Cash flows from operating activities
Cash generated from operations 2.1 131.8 184.0
Income tax paid (27.2) (34.2)
----------------------------- --------------------------------
Net cash inflows from operating
activities 104.6 149.8
Cash flows from investing activities
Purchase of property, plant and
equipment 3.3 (1.3) (1.9)
Purchase of intangible assets 3.2 (1.3) (1.7)
Purchase of financial assets at fair
value through profit or loss (FVTPL) (251.5) (454.4)
Proceeds from disposals of financial
assets at FVTPL 249.0 418.0
Cash movement from funds no longer
consolidated - (3.0)
Net cash received from acquisitions 68.2 -
Dividend income received 0.8 1.0
Finance income received - 0.1
Net cash inflows/(outflows) from
investing activities 63.9 (41.9)
Cash flow from financing activities
Proceeds from debt issued 3.6 49.0 -
Repayment of borrowing 3.6 (111.0) -
Dividends paid 4.3 (83.9) (127.2)
Purchase of shares by EBT (10.7) (32.4)
Finance costs paid (0.6) (0.2)
Cash paid in respect of lease
arrangements (6.7) (5.1)
Third-party subscriptions into
consolidated funds 53.2 54.2
Third-party redemptions from
consolidated funds (47.5) (16.7)
Distributions paid by consolidated
funds (1.6) (2.8)
Net cash outflows from financing
activities (159.8) (130.2)
Net increase/(decrease) in cash and
cash equivalents 8.7 (22.3)
Cash and cash equivalents at
beginning of year 179.4 201.7
Cash and cash equivalents at end of
year 3.5 188.1 179.4
============================= ================================
Notes to the Group financial statements - Consolidated statement of
cash flows
=====================================================================
2.1 CASH FLOWS FROM OPERATING ACTIVITIES
Notes 2020 2019
GBPm GBPm
Operating profit 137.7 152.9
Adjustments for:
Amortisation of intangible assets 3.2 11.3 1.8
Depreciation of property, plant and equipment 6.0 5.8
Other gains (7.0) (4.9)
Fund unit hedges (0.9) (3.0)
Share-based payments 19.8 24.5
Cash inflows on exercise of share options 0.2 0.6
Increase in trade and other receivables (53.2) (12.1)
Increase in trade and other payables 17.9 18.4
Cash generated from operations 131.8 184.0
======= =======
2.2 CHANGES IN LIABILITIES ARISING FROM FINANCING ACTIVITIES
Notes
2020 2019
GBPm GBPm
Brought forward at 1 January 74.9 74.0
Changes from financing cash flows 5.7 37.5
Changes arising from obtaining or losing control of consolidated funds - (41.5)
Changes in fair values 8.6 4.9
-------- --------
Changes in financial liabilities at FVTPL 89.2 74.9
-------- --------
Issue of subordinated debt 3.6 49.2 -
-------- --------
Liabilities arising from financing activities carried forward at 31 December 138.4 74.9
======== ========
Section 3: Assets and liabilities
===================================
Consolidated balance sheet at 31 December 2020
================================================
Notes 2020 2019
GBPm GBPm
NON-CURRENT ASSETS
Goodwill 3.1 570.6 341.2
Intangible assets 3.2 70.8 5.8
Property, plant and equipment 3.3 47.4 51.7
Deferred tax assets 20.0 16.7
Trade and other receivables 0.5 0.5
-------- -----------------------
709.3 415.9
CURRENT ASSETS
Financial assets at fair value through profit or loss 261.1 224.3
Trade and other receivables 187.3 109.1
Cash and cash equivalents 3.5 188.1 179.4
-------- -----------------------
636.5 512.8
-------- -----------------------
TOTAL ASSETS 1,345.8 928.7
======== =======================
EQUITY ATTRIBUTABLE TO SHAREHOLDERS
Share capital 4.1 11.1 9.2
Share premium 4.1 242.1 -
Own share reserve 4.2 (0.2) (0.3)
Other reserve 4.2 8.0 8.0
Foreign currency translation reserve 4.2 2.8 2.1
Retained earnings 4.2 622.5 592.7
-------- ----------------------
Capital and reserves attributable to owners of Jupiter Fund
Management plc 886.3 611.7
-------- ----------------------
Non-controlling interests (0.2) -
-------- ----------------------
TOTAL EQUITY 886.1 611.7
======== ======================
NON-CURRENT LIABILITIES
Loans and borrowings 3.6 49.2 -
Trade and other payables 87.4 77.2
Deferred tax liabilities 12.5 -
-------- -----------------------
149.1 77.2
CURRENT LIABILITIES
Financial liabilities at fair value through profit or loss 89.4 74.9
Trade and other payables 212.8 158.4
Current income tax liability 8.4 6.5
--------
310.6 239.8
TOTAL LIABILITIES 459.7 317.0
======== =======================
TOTAL EQUITY AND LIABILITIES 1,345.8 928.7
======== =======================
Notes to the Group financial statements - Assets and liabilities
==================================================================
3.1 GOODWILL
Goodwill relates to the 2007 acquisition of Knightsbridge Asset
Management Limited (GBP341.2m) and the acquisition of Merian in the
current year (GBP229.4m), as disclosed in Note 5.4.
2020 2019
GBPm GBPm
Goodwill 570.6 341.2
570.6 341.2
======================= =======================
The Group has determined that it has a single cash generating
unit (CGU) for the purpose of assessing the carrying value of
goodwill. In performing the impairment test, management prepares a
calculation of the recoverable amount of the goodwill, using the
value in use approach, and compares this to the carrying value.
The recoverable amount for the goodwill asset was based on the
net present value of the Group's future earnings. The net present
value was calculated using a discounted cash flow model, with
reference to the Group's projected cash flows over a period of five
years, long-term growth rates of 4% (2019: 6%) based on dividend
history and forecasts, and a cost of capital of 10% (2019: cost of
equity of 12%), which is based on the Group's weighted average cost
of capital. A significant headroom was noted, and therefore no
impairment was implied. Applying stressed scenarios, such as
increasing the cost of capital to 20% and/or reducing growth
projections to nil would not result in the recognition of
impairment losses.
No impairment losses have been recognised in the current or
preceding years.
3.2 INTANGIBLE ASSETS
The cost of intangible assets acquired in the business
combination is the fair value as at the date of acquisition. In
relation to the investment management contracts, the useful lives
were assessed as being finite and will be amortised over their
useful economic lives. The useful economic lives of the investment
management contracts acquired were assessed as a maximum of four
years. The amortisation expense on intangible assets with finite
lives has been recognised in the consolidated income statement on a
straight-line basis.
The other intangible assets recognised are computer
software.
The Directors have reviewed the intangible assets as at 31
December 2020 and have concluded there are no indicators of
impairment (2019: same).
2020 2019
GBPm GBPm
Intangible assets 70.8 5.8
------------------------ -----------------------
70.8 5.8
======================== =======================
During the year, the Group acquired intangible assets on the
acquisition of Merian in relation to investment management
contracts of GBP75.0m (2019: GBPnil) and software with a value of
GBP 1.3 m (2019: GBP1.7m). The amortisation charge for the year was
GBP 11.3 m (2019: GBP1.8m), of which GBP9.4m (2019: GBPnil) related
to the Merian acquisition and has been recorded as an exceptional
item in the Financial review.
3.3 PROPERTY, PLANT AND EQUIPMENT
The net book value of property, plant and equipment at 31
December 2020 was GBP47.4m (2019: GBP51.7m). Additions to the
right-of-use assets during the 2020 financial year (including
right-of-use assets acquired as part of the business combination)
were GBP15.9m (2019: GBP1.4m). The Group purchased other items of
property, plant and equipment of GBP1.3m during the 2020 financial
year (2019: GBP1.9m).
Right-of-use assets of GBP15.5m were acquired on 1 July 2020 as
part of the business combination (see Note 5.4). On the same date,
the right-of-use asset acquired was modified and the lease
liability was remeasured as the Group did not expect to gain any
further economic benefits from the
asset. The difference between the remeasurement and the
reduction in the liability due to reassignment of the lease has
been recognised within
administrative expenses.
3.4 FINANCIAL INSTRUMENTS
Financial instruments by category
The carrying value of the financial instruments of the Group at
31 December is shown below:
As at 31 Financial
December 2020 Financial assets at Financial Total
assets at amortised liabilities Other financial financial Non-financial
FVTPL cost at FVTPL liabilities instruments instruments Total
GBPm GBPm GBPm GBPm GBPm GBPm GBPm
Goodwill - - - - - 570.6 570.6
Intangible
assets - - - - - 70.8 70.8
Property, plant
and equipment - - - - - 47.4 47.4
Deferred tax
assets - - - - - 20.0 20.0
Non-current
trade and other
receivables(1) - 0.4 - - 0.4 0.1 0.5
Financial assets
at FVTPL 261.1 - - - 261.1 - 261.1
Current trade
and other
receivables(1) - 175.9 - - 175.9 11.4 187.3
Cash and cash
equivalents - 188.1 - - 188.1 - 188.1
Non-current
loans and
borrowings - - - (49.2) (49.2) - (49.2)
Non-current
trade and other
payables(1) - - - (80.1) (80.1) (7.3) (87.4)
Deferred tax
liabilities - - - - - (12.5) (12.5)
Current trade
and other
payables(1) - - - (195.6) (195.6) (17.2) (212.8)
Current income
tax liability - - - - - (8.4) (8.4)
Financial
liabilities at
FVTPL - - (89.4) - (89.4) - (89.4)
Total 261.1 364.4 (89.4) (324.9) 211.2 674.9 886.1
=========== =========== ============= ================= ============= =============== ===============
As at 31 Financial
December 2019 Financial assets at Financial Total
assets at amortised liabilities Other financial financial Non-financial
FVTPL cost at FVTPL liabilities instruments instruments Total
GBPm GBPm GBPm GBPm GBPm GBPm GBPm
Goodwill - - - - - 341.2 341.2
Intangible
assets - - - - - 5.8 5.8
Property, plant
and equipment - - - - - 51.7 51.7
Deferred tax
assets - - - - - 16.7 16.7
Non-current
trade and other
receivables(1) - 0.3 - - 0.3 0.2 0.5
Financial assets
at FVTPL 224.3 - - - 224.3 - 224.3
Current trade
and other
receivables(1) - 101.2 - - 101.2 7.9 109.1
Cash and cash
equivalents - 179.4 - - 179.4 - 179.4
Non-current
trade and other
payables(1) - - - (70.0) (70.0) (7.2) (77.2)
Current trade
and other
payables(1) - - - (145.8) (145.8) (12.6) (158.4)
Current income
tax liability - - - - - (6.5) (6.5)
Financial
liabilities at
FVTPL - - (74.9) - (74.9) - (74.9)
Total 224.3 280.9 (74.9) (215.8) 214.5 397.2 611.7
=========== =========== ============= ================= ============= =============== ===============
(1) Prepayments, contract liabilities, deferred acquisition and
commission costs and social security and other taxes do not meet
the definition of financial instruments.
For financial instruments held at 31 December 2020, issued
subordinated debt, recorded within non-current loans and borrowings
above, had a fair value of GBP54.0m, less unamortised expenses of
GBP0.4m. At 31 December 2019, there were no material differences
between the carrying value and fair value of any financial
instruments.
3.5 CASH AND CASH EQUIVALENTS
2020 2019
GBPm GBPm
Cash at bank and in hand 179.7 166.7
Cash held by the EBT and seed investment subsidiaries 8.4 12.7
Total cash and cash equivalents 188.1 179.4
======== ========
Cash and cash equivalents have an original maturity of three
months or less.
Cash at bank earns interest at the current prevailing daily bank
rates. Short-term deposits are made for varying periods of between
one and 33 days, depending on the forecast cash requirements of the
Group, and earn interest at the respective short-term deposit
rates.
Cash held by the EBT and seed investment subsidiaries are not
available for use by the Group.
3.6 LOANS AND BORROWINGS
On 27 April 2020 the Group issued GBP50.0m of Tier 2
subordinated debt notes at a discount of GBP0.5m. Issue costs were
GBP0.5m and the net proceeds were therefore GBP49.0m. These notes
will mature on 27 July 2030 and bear interest at a rate of 8.875%
per annum to 27 July 2025, and at a reset rate thereafter. The
Group has the option to redeem all of the notes from 27 April 2025
onwards. The fair value of the notes as at 31 December 2020 was
GBP54.0m.
As part of the Merian Global Investors Limited acquisition on 1
July 2020, the Group acquired GBP111.0m of bank loans. These loans
were repaid in full on 1 July 2020.
2020 2019
GBPm GBPm
Non-current subordinated debt in issue 49.2 -
=============================== ===============================
Section 4: Equity
===================
Consolidated statement of changes in equity for the year ended 31 December
2020
============================================================================
Foreign
Own currency
Share Share share Other translation Retained Non-controlling Total
capital premium reserve reserve reserve earnings Total interest Equity
GBPm GBPm GBPm GBPm GBPm GBPm
At 1 January
2019 9.2 - (0.2) 8.0 2.9 603.5 623.4 - 623.4
---------- --------- ---------- ---------- -------------- ----------- --------- ----------------- ---------
Profit for the
year - - - - - 122.8 122.8 - 122.8
Exchange
movements on
translation
of subsidiary
undertakings - - - - (0.8) - (0.8) - (0.8)
---------- --------- ---------- ---------- -------------- ----------- --------- ----------------- ---------
Other
comprehensive
loss - - - - (0.8) - (0.8) - (0.8)
---------- --------- ---------- ---------- -------------- ----------- --------- ----------------- ---------
Total
comprehensive
income - - - - (0.8) 122.8 122.0 - 122.0
---------- --------- ---------- ---------- -------------- ----------- --------- ----------------- ---------
Vesting of
ordinary
shares
and options - - 0.1 - - 0.5 0.6 - 0.6
Dividends paid - - - - - (127.2) (127.2) - (127.2)
Purchase of ( 32.2
shares by EBT - - (0.2) - - ) (32.4) - (32.4)
Share-based
payments - - - - - 24.0 24.0 - 24.0
Current tax - - - - - 0.2 0.2 - 0.2
Deferred tax - - - - - 1.1 1.1 - 1.1
---------- --------- ---------- ---------- -------------- ----------- --------- ----------------- ---------
Total
transactions
with ( 133.6
owners - - (0.1) - - ) (133.7) - (133.7)
---------- --------- ---------- ---------- -------------- ----------- --------- ----------------- ---------
At 31 December
2019 9.2 - (0.3) 8.0 2.1 592.7 611.7 - 611.7
========== ========= ========== ========== ============== =========== ========= ================= =========
Profit for the
year - - - - - 105.5 105.5 (0.2) 105.3
Exchange
movements on
translation
of subsidiary
undertakings - - - - 0.7 - 0.7 - 0.7
---------- --------- ---------- ---------- -------------- ----------- --------- ----------------- ---------
Other
comprehensive
gain - - - - 0.7 - 0.7 - 0.7
---------- --------- ---------- ---------- -------------- ----------- --------- ----------------- ---------
Total
comprehensive
income - - - - 0.7 105.5 106.2 (0.2) 106.0
---------- --------- ---------- ---------- -------------- ----------- --------- ----------------- ---------
Issuance of
ordinary
shares
as
consideration
for a
business
combination,
net
of transaction
costs and
tax 1.9 242.1 - - - - 244.0 - 244.0
Vesting of
ordinary
shares
and options - - 0.2 - - - 0.2 - 0.2
Dividends paid - - - - - (83.9) (83.9) - (83.9)
Purchase of
shares by EBT - - (0.1) - - (10.6) (10.7) - (10.7)
Share-based
payments - - - - - 19.8 19.8 - 19.8
Deferred tax - - - - - (1.0) (1.0) - (1.0)
---------- --------- ---------- ---------- -------------- ----------- --------- ----------------- ---------
Total
transactions
with
owners 1.9 242.1 0.1 - - (75.7) 168.4 - 168.4
---------- --------- ---------- ---------- -------------- ----------- --------- ----------------- ---------
At 31 December
2020 11.1 242.1 (0.2) 8.0 2.8 622.5 886.3 (0.2) 886.1
========== ========= ========== ========== ============== =========== ========= ================= =========
Notes 4.1 4.1 4.2 4.2 4.2 4.2
Notes to the Group financial statements - Equity
==================================================
4.1 SHARE CAPITAL AND SHARE PREMIUM
2020 2019 2020 2019
Shares Shares GBPm GBPm
Share capital and share premium m m
Ordinary shares of 2p each 553.1 457.7 253.2 9.2
553.1 457.7 253.2 9.2
========= ========= ======= =======
Number
of ordinary Par Share
shares Value premium
Movements in ordinary shares m GBPm GBPm
At 1 January 2020 457.7 9.2 -
Shares issued relating to acquisition
of subsidiary 95.4 1.9 242.1
At 31 December 2020 553.1 11.1 242.1
============== ======== ==========
There were no movements in issued share capital or share premium
in 2019.
4.2 RESERVES
(i) Own share reserve
The Group operates an EBT for the purpose of satisfying certain
retention awards to employees. The holdings of this trust, which is
funded by the Group, include shares that have not vested
unconditionally to employees of the Group. These shares are
recorded at cost and are classified as own shares. The shares are
used to settle obligations that arise from the granting of
share-based awards.
At 31 December 2020, 7.2m ordinary shares (2019: 13.3m), with a
par value of GBP0.2m (2019: GBP0.3m), were held as own shares
within the Group's EBT for the purpose of satisfying share option
obligations to employees.
(ii) Other reserve
The other reserve of GBP8.0m (2019: GBP8.0m) relates to the
conversion of Tier 2 preference shares in 2010.
(iii) Foreign currency translation reserve
The foreign currency translation reserve of GBP2.8m (2019:
GBP2.1m) is used to record exchange differences arising from the
translation of the financial statements of foreign
subsidiaries.
(iv) Retained earnings
Retained earnings of GBP622.5m (2019: GBP592.7m) are the amount
of earnings that are retained within the Group after dividend
payments and other transactions with owners.
4.3 DIVIDS
2020 2019
GBPm GBPm
Full-year dividend (9.2p per ordinary share)
(2019: 9.2p per ordinary share) 40.8 41.0
Interim dividend (7.9p per ordinary share)
(2019: 7.9p per ordinary share) 43.1 35.4
Special dividend (nil per ordinary share)
(2019: 11.4p per ordinary share) - 50.8
---------------------------- ----------------------------
83.9 127.2
============================ ============================
Full-year and special dividends are paid out of profits
recognised in the year prior to the year in which the dividends are
declared and reported.
The EBT has waived its right to receive future dividends on
shares held in the trust. Dividends waived on shares held in the
EBT in 2020 were GBP1.9m (2019: GBP3.3m).
A full-year dividend for 2020 of 9.2p per share (2019: 9.2p) and
a special dividend of 3.0p (2019: nil) have been declared by the
Directors. These dividends amount to GBP50.9m and GBP16.6m
respectively (before adjusting for any dividends waived on shares
in the EBT) and will be accounted for in 2021. Including the
interim dividend for 2020 of 7.9p per share (2019: 7.9p), this
gives a total dividend per share of 20.1p (2019: 17.1p).
Section 5: Other Notes
========================
Notes to the Group financial statements - Other
=================================================
5.1 BASIS OF PREPARATION AND OTHER ACCOUNTING POLICIES
The financial information set out does not constitute the
Company's statutory accounts for the years ended 31 December 2020
or 2019, but is derived from those accounts. The Auditors have
reported on the 2020 accounts; their report was unqualified,
unmodified and did not contain statements under section 498(2) or
498(3) of the Companies Act 2006. Statutory accounts for 2019 have
been delivered to the Registrar of Companies and those for 2020
will be delivered in due course.
The Group financial statements have been prepared in accordance
with International Accounting Standards in conformity with the
requirements of the Companies Act 2006 and International Financial
Reporting Standards adopted pursuant to Regulation (EC) No
1606/2002 as it applies in the European Union .
The financial statements have been prepared on a going concern
basis using the historical cost convention modified by the
revaluation of certain financial assets and financial liabilities
(including derivatives) that have been measured at fair value.
After reviewing the Group's current plans and forecasts and
financing arrangements, as well as the current trading activities
of the Group, the Directors consider that the Group has adequate
resources to continue operating for a period of at least 12 months
from the date of signing.
Changes in the composition of the Group
In February 2020, as part of a strategic partnership announced
in December 2019, the Group acquired 25% of the share capital of
NZS Capital LLC, and is considered to be a subsidiary undertaking
of the Group on account of the extent of the power the Group has
over the operations and financing of the entity as well as the
revenue and profit sharing arrangements to which it is entitled
through its investment in the entity.
On 1 July 2020, the Group acquired 100% of the issued share
capital of Merian Global Investors Limited, an investment
management company registered in Jersey.
The Group is required to consolidate seed capital investments if
it is deemed to control them. The following changes have been made
to the consolidation of the Group since 31 December 2019:
Included in consolidation (as Excluded from consolidation
a result of additional investments)
Jupiter European Smaller Companies Jupiter Enhanced Distribution
Fund
Included and subsequently excluded
from consolidation in the period
(as a result of additional investments,
and subsequently as a result
of other investors diluting control)
Jupiter Global Fund SICAV: Jupiter
Pan-European Smaller Companies
5.2 ACCOUNTING POLICIES
The accounting policies applied are consistent with those
applied in the Group's annual financial statements for the year
ended 31 December 2019. Due to acquisitions that occurred during
the year, IFRS 3 Business Combinations was applicable for the year
ended 31 December 2020.
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, with limited
exceptions, measured
initially at their fair values at the acquisition date. The
group recognises any non-controlling interest in the acquired
entity on an acquisition-by
acquisition basis either at fair value or at the non-controlling
interest's proportionate share of the acquired entity's net
identifiable assets.
Acquisition-related costs are expensed as incurred.
The excess of the:
-- consideration transferred,
-- amount of any non-controlling interest in the acquired entity, and
-- acquisition-date fair value of any previous equity interest in the acquired entity
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 profit or loss as a bargain
purchase.
Where settlement of any part of cash consideration is deferred,
the amounts payable in the future are discounted to their present
value as at the date of exchange. The discount rate used is the
entity's incremental borrowing rate, being the rate at which a
similar borrowing could be obtained from an independent financier
under comparable terms and conditions.
Contingent consideration is classified either as equity or a
financial liability. Amounts classified as a financial liability
are subsequently remeasured to fair value, with changes in fair
value recognised in profit or loss.
If the business combination is achieved in stages, the
acquisition date carrying value of the acquirer's previously held
equity interest in the acquiree is remeasured to fair value at the
acquisition date. Any gains or losses arising from such
remeasurement are recognised in profit or loss.
5.3 FINANCIAL INSTRUMENTS
The fair value of financial instruments that are actively traded
in organised financial markets is determined by reference to quoted
market bid prices on the balance sheet date. Derivatives held at
fair value are carried at a value which represents the price to
exit the instruments at the balance sheet date.
The Group used the following hierarchy for determining and
disclosing the fair value of financial instruments:
-- Level 1: quoted prices (unadjusted) in active markets for
identical assets or liabilities.
-- Level 2: other techniques, for which all inputs which have a
significant effect on the recorded fair value are observable,
either directly or indirectly.
-- Level 3: techniques which use inputs which have a significant
effect on the recorded fair value that are not based on observable
market data (unobservable inputs).
Where funds are consolidated, we look through to the underlying
instruments and assign a level in accordance with the definitions
above. Where funds are not consolidated, we do not apply a look
through and these funds are classified as level 1 as the prices of
these funds are quoted in active markets.
As at 31 December 2020, the Group held the following financial
instruments measured at fair value:
Level 1 Level Level 3 Total
2
GBPm GBPm GBPm GBPm
Financial assets at
FVTPL - funds 183.2 74.2 - 257.4
Financial assets at
FVTPL - derivatives - 3.7 - 3.7
Financial liabilities
at FVTPL (89.2) - - (89.2)
Financial liabilities
at FVTPL - derivatives - (0.2) - (0.2)
--------- ----------------------- --------- -------------------------
94.0 77.7 - 171.7
========= ======================= ========= =========================
As at 31 December 2019, the Group held the following financial
instruments measured at fair value:
Level 1 Level Level 3 Total
2
GBPm GBPm GBPm GBPm
Financial assets at
FVTPL - funds 145.9 76.9 - 222.8
Financial assets at
FVTPL - derivatives - 1.5 - 1.5
Financial liabilities
at FVTPL (74.9) - - (74.9)
-------
71.0 78.4 - 149.4
========= ======= ========= =========================
5.4 BUSINESS COMBINATIONS
(i) Merian Global Investors Limited
On 1 July 2020, the Group acquired 100% of the issued share
capital of Merian Global Investors Limited (Merian), an investment
management company registered in Jersey. The principal reasons for
the acquisition are to enhance Jupiter's position as one of the
UK's leading active asset managers through the reinforcement of
Jupiter's core UK franchise and the extension of its capabilities
into attractive product gaps. Further, Jupiter's existing business
and investment culture, built on a high-conviction active approach,
will benefit from the complementary and diversifying nature of the
acquisition.
Details of the purchase consideration, the net liabilities
acquired and goodwill are as follows:
GBPm
Purchase consideration
Ordinary shares issued 244.3
Net assets adjustment (8.5)
Total purchase consideration 235.8
==================================
The fair value of the 95.4m shares issued as part of the
consideration paid for Merian (GBP244.3m) was based on the
published opening share price on 1 July 2020 of 256.2p per share.
Issue costs of GBP0.3m which were directly attributable to the
issue of the shares have been netted against the deemed
proceeds.
The assets and liabilities recognised as a result of the acquisition
are as follows:
Fair value
recognised on
acquisition
GBPm
Cash and cash equivalents 61.5
Investments in collective investment schemes 17.6
Trade and other receivables 24.0
Property, plant and equipment 15.5
Deferred tax asset 2.1
Trade and other payables (64.0)
Interest-bearing loans and borrowings (111.0)
----------
Net identifiable liabilities acquired (54.3)
Goodwill arising on acquisition 229.4
Intangible assets arising on acquisition 75.0
Deferred tax liabilities arising on acquisition (14.3)
----------
Net assets acquired 235.8
==========
Goodwill of GBP229.4m was recognised as part of this
acquisition, which results from the expected synergies from
combining the operations of Merian with the Group's operations.
None of the goodwill recognised is deductible for tax purposes.
There were no acquisitions in the year ending 31 December
2019.
Contingent consideration
In the event that the assets under management in respect of
certain Merian funds fall below a specified level due to net flows
between 21 May
2020 and 31 December 2021, an amount would become payable by TA
Associates, as set out in the sale and purchase agreement.
Revenue and profit contribution
The acquired business contributed revenues of GBP129.1m and net
profit of GBP11.3m to the Group for the period from 1 July to 31
December 2020. If the acquisition had occurred on 1 January 2020,
consolidated pro-forma revenue and profit for the year ended 31
December 2020 would have been
GBP549.9m and GBP96.0m respectively. These amounts have been
calculated by aggregating the consolidated result for the combined
Group, as reported within these financial statements, with the
results of the pre-acquisition Merian group from 1 January 2020 to
30 June 2020 and adjusting for:
-- additional amortisation of the acquired intangible asset that
would have been applied from 1 January 2020;
-- additional charges for compensation awards that formed part
of the sale and purchase agreement; and
-- consequential tax effects of the above.
Acquisition-related costs
Acquisition-related costs of GBP43.0m that were not directly
attributable to the issue of shares are included in administrative
expenses in the income statement and in operating cash flows in the
statement of cash flows.
(ii) Other acquisitions
On 27 February 2020, the Group acquired 25% of the equity
interests of NZS Capital, LLC, an investment management company
based in Delaware in the United States of America, for an initial
consideration of GBP0.8m.
Estimates and judgements
The fair value of certain items of consideration, assets
acquired and liabilities assumed requires some estimation. For
intangible assets, this estimation required assumptions regarding
the level of future management fees that will be earned over the
relevant period. In respect of contingent consideration,
estimations of future AUM flows and net performance fees were
required to determine the amount of any expected amounts
receivable. The sale and purchase agreement also contains an
indemnification of certain deferred costs, also subject to the
receipt of future levels of net performance fee.
The net impact of changes to these assumptions would be to
change the carrying value of individual assets and liabilities with
a corresponding change to goodwill.
5.5 RELATED PARTIES
The Group consolidated Jupiter Pan-European Smaller Companies
and Jupiter European Smaller Companies (as set out in Note 5.1
above) in the period, and then subsequently removed the former as
the reduction in the percentage held by the Group did not enable it
to exercise control over the fund. Jupiter Enhanced Distribution
Fund was closed in the period, and therefore is no longer
consolidated. As discussed above, the Group purchased 100% of
Merian and 25% of the issued capital of NZS Capital LLC in the
period.
The Group manages a number of investment trusts, unit trusts,
OEICs, SICAVs, ICVCs, an ICAV and a hedge fund and receives
management and,
in some instances, performance fees for providing this service.
The precise fee arrangements are disclosed within the financial
statements of
each investment management subsidiary of the Group or within
other publicly available information. By virtue of the investment
management
agreements in place between the Group and the collective
investment vehicles it manages, such funds may be considered to be
related parties.
Investment management and performance fees are disclosed in Note
1.1.
The Group acts as manager for 38 (2019: 39) authorised unit
trusts and 12 (2019: nil) OEICs. Each unit trust is jointly
administered with the
trustees, Northern Trust Global Services SE (the trustees
changed from National Westminster Bank plc in June 2019). The
aggregate total value of
transactions for the year was GBP2,360m (2019: GBP2,132m) for
unit trust creations and GBP5,295m (2019: GBP5,355m) for unit trust
redemptions. The actual
aggregate amount due to (2019: from) the trustees at the end of
the accounting year in respect of transactions awaiting settlement
was GBP1.5m (2019: GBP19.5m). The Group also acts as the management
company for the Jupiter Global Fund and Jupiter Merlin Fund SICAVs,
made up of 18 sub-funds (2019: 23) and four sub-funds (2019: four)
respectively as well as Jupiter Investment Management Series II
(previously known as the Merian Investment Fund Series II), the
Jupiter Asset Management Series plc (previously known as the Merian
Global Investors Series plc) and the Jupiter Investment Funds
Series II (previously known as the Merian Global Investors Series
II), made up of 12, 21 and one sub-funds respectively.
The amounts received in respect of gross management,
registration and performance fee charges were GBP274.9m (2019:
GBP317.1m) for unit trusts,
GBP42.0m (2019: GBPnil) for OEICs, GBP110.5m (2019: GBP109.8m)
for SICAVs, GBP56.7m (2019: GBPnil) for ICVCs, GBP0.3m (2019:
GBPnil) for the ICAV, GBP38.3m (2019: GBP17.3m) for investment
trusts and GBP25.0m (2019: GBP20.3m) for segregated mandates. At
the end of the year, there was GBP32.9m (2019: GBP20.6m) accrued
for annual management fees, GBP3.1m (2019: GBP3.3m) in respect of
registration fees and GBP72.9m (2019: GBPnil) in respect of
performance fees.
Included within financial instruments (see Note 3.4) are seed
investments and hedges of awards in fund units in mutual funds and
investment trusts managed by the Group. At 31 December 2020, the
Group had a total net investment in such funds of GBP168.2m (2019:
GBP147.9m) and received distributions of GBP0.8m (2019: GBP1.0m).
During 2020, it invested GBP46.7m (2019: GBP70.6m) in these funds
and made disposals of GBP51.1m (2019: GBP57.4m).
During the period, three members of key management personnel
invested in the Group's subordinated debt issued on 27 April 2020
in the sum of GBP1.6m. These were made on terms equivalent to those
that prevail in arms' length transactions.
Key management compensation
Transactions with key management personnel also constitute
related party transactions. Key management personnel are defined as
the Directors, together with other members of the Executive
Committee. The aggregate compensation paid or payable to key
management for employee services is shown below:
2020 2019
GBPm GBPm
Short-term employee benefits 5.6 4.1
Share-based payments 5.4 4.0
Post-employment benefits 0.4 0.3
Other long-term benefits 0.4 -
11.8 8.4
======= =======
Section 6: Statement of Directors' responsibilities
=====================================================
The Directors are responsible for preparing the Annual Report
and the Financial Statements in accordance with applicable law and
regulations.
Company law requires the Directors to prepare Financial
Statements for each financial year. Under that law the Directors
have prepared the Group and Company Financial Statements in
accordance with International Accounting Standards in conformity
with the requirements of the Companies Act 2006. Additionally, the
Financial Conduct Authority's Disclosure Guidance and Transparency
Rules require the Directors to prepare the Group Financial
Statements in accordance with International Financial Reporting
Standards adopted pursuant to Regulation (EC) No 1606/2002 as it
applies in the European Union.
Under company law, Directors must not approve the Financial
Statements unless they are satisfied that they give a true and fair
view of the state of affairs of the Group and Company and of the
profit or loss of the Group for that period. In preparing the
Financial Statements, the Directors are required to:
-- select suitable accounting policies and then apply them consistently;
-- state whether, for the Group and Company, International
Accounting Standards in conformity with the requirements of the
Companies Act 2006 and, for the Group, International Financial
Reporting Standards adopted pursuant to Regulation (EC) No
1606/2002 as it applies in the European Union have been followed,
subject to any material departures disclosed and explained in the
Financial Statements;
-- make judgements and accounting estimates that are reasonable and prudent; and
-- prepare the Financial Statements on the going concern basis
unless it is inappropriate to presume that the Group and Company
will continue in business.
The Directors are also responsible for safeguarding the assets
of the Group and Company and hence for taking reasonable steps for
the prevention and detection of fraud and other irregularities.
The Directors are responsible for keeping adequate accounting
records that are sufficient to show and explain the Group's and
Company's transactions and disclose with reasonable accuracy at any
time the financial position of the Group and Company and enable
them to ensure that the Financial Statements and the Directors'
Remuneration Report comply with the Companies Act 2006.
The Directors are responsible for the maintenance and integrity
of the Company's website. Legislation in the United Kingdom
governing the preparation and dissemination of financial statements
may differ from legislation in other jurisdictions.
Directors' confirmations
The Directors consider that the Annual Report and Accounts,
taken as a whole, is fair, balanced and understandable and provides
the information necessary for shareholders to assess the Group's
and Company's position and performance, business model and
strategy.
Each of the Directors, whose names and functions are listed in
in the Directors' profile on pages 62 and 63 of the Annual Report
and Accounts confirm that, to the best of their knowledge:
-- the Group and Company Financial Statements, which have been
prepared in accordance with International Accounting Standards in
conformity with the requirements of the Companies Act 2006, give a
true and fair view of the assets, liabilities, financial position
and profit of the Group and profit of the Company; and
-- the Directors' report contained in the Annual Report and
Accounts includes a fair review of the development and performance
of the business and the position of the Group and Company, together
with a description of the principal risks and uncertainties that it
faces.
In the case of each Director in office at the date the
Directors' report is approved:
-- so far as the Director is aware, there is no relevant audit
information of which the Group's and Company's auditors are
unaware; and
-- they have taken all the steps that they ought to have taken
as a Director in order to make themselves aware of any relevant
audit information and to establish that the Group's and Company's
auditors are aware of that information.
On behalf of the Board
Wayne Mepham
Chief Financial Officer
25 February 2021
Section 7: Principal risks and mitigations
============================================
The Board is responsible for managing the Group's risk profile
and determining an appropriate risk appetite within which it must
operate. In defining this, the Board ensures that it is aware of
and, where appropriate, has taken steps to mitigate the risks that
may have a material impact on the Group as it pursues its strategic
objectives.
Approach to risk management
To help the Board discharge its responsibilities, the Group has
a comprehensive approach to identifying, monitoring, managing and
mitigating risk.
Our Risk Management framework clearly defines the roles and
responsibilities for risk management and provides a process for
escalation through our governance structure, which enables ongoing
and robust oversight by the Risk & Finance Committee (RFC),
Audit & Risk Committee (ARC) and the Board.
The Group is exposed to various risk types in pursuing its
business objectives which can be driven by internal and external
factors. Understanding and managing these risks is both a business
imperative and a regulatory requirement. Some risks are
deliberately assumed to support the business plan, such as market
risk relating to seed investment in funds. Other risks are inherent
in routine business activities, such as the risk of fraud. The
differing risks faced by the Group are managed through the Group's
control framework in line with risk appetite. The type and severity
of the risks we face can change quickly in a complex and
competitive environment, therefore the framework for managing these
risks is dynamic and forward looking to ensure it considers both
current and emerging risks which could potentially impact the
Group.
As an asset management firm, Jupiter's most material risk
exposures are in the strategic, investment, and operational
(including regulatory risk) categories. However, our exposure to
capital adequacy, liquidity, market and credit/counterparty risks
are also monitored to ensure they are managed on a prudent basis
and remain within regulatory requirements and Group risk
appetite.
In addition, the Group is also exposed to both conduct and
reputational risks.
Conduct risks are risks which result in customer detriment,
negative impact to market stability or restrict effective
competition. Conduct risk is not considered to be a separate risk
category. Risks in the strategic, investment and operational risk
categories may result in conduct risk impacts.
Reputational risks can result in a loss or other adverse impact
arising from the unfavourable perception of the Group on the part
of clients, counterparties, employees, regulators, shareholders,
other stakeholders, the media or the general public. The Group
treats reputational risk as a potential impact that may arise from
operational risks and operational risk incidents.
Risk responsibilities
The Group operates a three-tier risk governance framework,
generally known as the Lines of Defence model, which distinguishes
between risk management and oversight. This approach provides clear
and concise separation of duties, roles and responsibilities. The
Board delegates responsibility for certain aspects of risk
management and control activities to the Executive Committee (ExCo)
and to the ARC.
Risk management framework
Our risk management processes enable us to identify the most
significant risks that we face. The risk assessment process is the
foundation of our risk framework and is conducted across the Group
by department heads, senior managers, Executives and the Board.
In 2020, a number of initiatives have been undertaken to enhance
our risk management framework and the way we manage risk. These
include:
-- Combining the Risk and Compliance functions under the
leadership of the Chief Risk Officer;
-- Developing our internal Operational Risk taxonomy;
-- Enhancing our Risk and Control Self Assessments (RCSA) process;
-- Enhancing our Operational Risk Scenario Analysis process;
-- Increasing our liquidity stress testing capability;
-- Improving the process and delivery of the 2020 AAF assurance reports; and
-- Continuing to develop our use of climate risk data to enable
us to further assess risks across our funds and better understand
our exposure to climate-related risks and opportunities.
Top-down risk assessment
The Board's consideration of risks is informed by proposals and
commentary from the Risk and Compliance function, the RFC, the ARC
and the ExCo and also other risk management information such as the
output from the bottom up Risk and Control Self Assessment
(RCSA).
Each principal risk has a named owner, which is either a member
of the ExCo or, for a small number of risks, the ExCo as a whole.
We monitor each principal risk using key risk indicators (KRIs). We
set thresholds for each KRI and use them to keep the Board informed
about the Group's position in relation to its risk appetite. This
enables us to identify trends and take action if it seems likely we
will exceed this appetite.
Risk appetite
The Group's risk appetite defines the level and type of risk
that the Group is prepared to accept in pursuit of its strategic
objectives and business strategy, taking into account the interests
of its clients and shareholders, as well as capital and other
regulatory requirements. As a business, we have a relatively low
appetite for risk, particularly for those risks that could lead to
negative conduct or reputational outcomes. An important part of the
Board's remit is to determine the Group's risk appetite, taking
into account our strategic plans, the business environment and the
current and likely future condition of our business and
operations.
Bottom-up risk assessment
The detailed, bottom-up identification and assessment of
operational risk is performed by individual organisational units
via an RCSA. The assessment identifies and monitors material risks
and associated key controls by considering the operating
environment, processes, roles and
responsibilities, as well as risk incidents that have occurred.
Risks are assessed on both an inherent and residual basis with
ratings determined for potential impact and likelihood.
Where processes or controls are seen to be insufficiently
robust, line management is required to take appropriate action and
define improvements to the operating environment to ensure they
pose a minimal (or acceptable) level of risk to the Group. Risks
that exceed risk appetite are escalated through our governance
structure.
Operational risk scenario analysis
Operational risk scenario analysis is a forward-looking
assessment of exposures to severe but plausible operational risk
events. It is used by the Group to identify and quantify the
material risks that have the potential to impact Jupiter, based on
the experience and opinions of internal
SMEs. These are collated via a series of workshops and are
further supported by internal and external event histories. A
variety of scenarios differing in nature, severity and duration are
used to estimate the impacts of events on capital requirements. The
Group also uses scenario analysis
to ensure that we understand our exposure to high-severity
events and implement mitigating actions, in line with our risk
appetite.
Incidents
Incidents including near misses are reported and investigated to
determine root causes, potential impacts (e.g. financial losses,
regulatory/legal breaches, etc.) and ensure appropriate remediation
work is completed to enhance the process, improve the control
environment, and also make
good any negative outcomes that have resulted from the failure.
Incidents are monitored and captured across the business on an
ongoing basis and independently reviewed to ensure completeness and
accuracy of the details. Analysis of the information is undertaken,
the results of which are used to support the development of RCSAs
and Operational risk scenarios and introduction or improvement of
appropriate controls.
Emerging risk
The Group defines emerging risk as a condition, situation or
trend that could significantly affect the Group's financial
strength, competitive position or reputation. These risks are
raised by the business and challenged by executive risk owners to
consider likelihood, impact and action required.
Risk reporting
Risks that we believe could have a material impact on the Group,
our principal risks, are reflected in our top down risk assessment.
The view of the risk profile of the Group is included in our
regular reporting to ensure it receives an appropriately high level
of senior management and Board attention. The Board takes action
where these risks are deemed to be outside of risk appetite.
Risk profile
We regularly assess the principal risks faced by our business.
Risks across the strategic, investment and operational risk
categories, as shown in the heat map, are seen as the most material
due to the potential impact and likelihood of them crystallising.
In addition to these risks we also monitor risks associated with
capital adequacy, liquidity, market and credit/counterparty through
our risk framework.
During 2020 a number of our principal risks reflected a decrease
in both the impact and likelihood of them crystallising when
compared to the 2019 position. The assessment considers the impact
of our strategic activities which have brought greater
diversification and breadth to our offering and our operating
environment which has remained stable despite the impact of
Covid-19 and Merian integration activity and in which we continue
to invest.
Our people continue to be our most significant asset and are
critical to our success. During challenging times they have
continued to deliver for our clients.
Our assessment as to the likelihood of cyber crime and failure
of a critical outsourcing partner has increased from 2019. This is
in part due to the impact of Covid-19 in placing additional strain
on our providers to continue to provide a consistent and stable
standard of service and an increase to what was already an evolving
cyber threat.
The risk of regulatory and legal change is stable, remaining one
of our most material risks. The firm's regulatory footprint
continues to evolve in line with our strategic activity, increasing
in both complexity and geography.
STRATEGIC RISK
The risk that the Group is unable to meet its strategic
objectives, as a result of matters inherent in the nature of its
business or the markets in which it operates.
Failure to deliver strategy
Risk
-- The risk of failure to achieve our strategic objectives,
through internal or external factors, which could impair our
ability to deliver value to our stakeholders.
Mitigation
-- The Board sets the strategy and is responsible for ensuring
the Group has the right structure, leadership and culture to
execute it.
-- The Board and the ExCo regularly review the strategic
options, opportunities and threats.
-- Plans, budgets and targets are set to be aligned with delivery of the strategic goals.
-- Progress is monitored and, where necessary, corrective action is taken.
2020 update
-- In line with the wider asset management industry, challenging
market conditions, largely due to the Covid-19 pandemic, brought
significant negative effects to the global economy and global
financial markets and, as a result, a negative impact on our AUM
during the early part of 2020. However, as financial markets began
to stabilise through the second half of 2020 and the Merian
acquisition was completed, strong investment performance has
remained a feature of our business with 70% of mutual fund AUM
above median over three years.
-- The acquisition and operational integration of Merian,
strategic partnership with NZS Capital and newly opened entity in
the US will enhance our investment capabilities and further
contribute to our wider client and geographic diversification as we
move into 2021.
Ability to attract and retain critical staff
Risk
-- The risk of failure to attract or retain the people critical
to successfully delivering investment outperformance to our clients
and all other aspects of our strategy.
Mitigation
-- Our culture is a key differentiator for us, enabling us to
attract, motivate and retain talented individuals, which in turn
drives outperformance.
-- We give autonomy coupled with personal accountability, and
encourage independence of thought and challenge.
-- Our investment function is arranged around our strategies,
providing a framework for repeatable performance, but the teams
themselves are small and nimble.
-- This culture and structure gives us clarity of purpose and
helps us to attract and retain the best active fund managers.
-- We actively manage succession and transition.
2020 update
-- Through the Merian acquisition and strategic partnership with
NZS Capital, we have a broader bench of fund managers and greater
diversification in our strategies which we feel will be
advantageous in both retaining and attracting staff.
-- Covid-19 has brought challenges for our staff but the
transition to remote working has been smooth and well managed and
with a number of initiatives in place to support them.
Ineffective product, client and geographic diversification
Risk
-- The risk that our product range, distribution partnerships, client type or geographic diversification are ineffective at growing AUM, particularly in light of continued change and disruption in the competitive landscape.
Mitigation
-- We continually analyse our markets to ensure we maintain a
diverse product suite that appeals to existing and potential
clients.
-- In response to the rising demand and supply of passive
investment products, we focus on the clear differentiation of our
active strategies and routes to markets where active solutions are
in strong demand.
-- Our well-defined product development process enables us to
deliver new products or enhancements, so we can target client
groups in a timely and efficient way.
2020 update
-- The Merian acquisition has brought a broader product range
and added significant depth to our distribution.
-- We continued to diversify the business by product in 2020,
with the launch of funds in the UK and internationally and a Global
Sovereign Fund, which has provided a new offer in Fixed Income
which has historically been an advantageous product during times of
stress.
-- Strong growth prospects for a number of our products are
expected in 2021 which are in areas of client demand, have strong
performance and, in many cases, are approaching the key three year
track record.
Failure to effectively integrate Merian business
Risk
-- The risk that we fail to integrate the Merian business from a
legal and operational perspective.
Mitigation
-- Cultural alignment has been an advantage, mitigating some of
the challenges of integrating in a largely remote working
environment.
-- Prior to completion, we maintained a productive relationship
with Merian allowing for positive engagement so we could prioritise
client needs.
-- A number of Merian staff were retained either permanently or
for a fixed period helping to provide stability while operating
model changes were made and knowledge transferred to permanent
teams.
2020 update
-- The most significant activity undertaken by Jupiter in 2020
was the acquisition of the Merian business.
-- Legal completion was achieved in July and operational
integration successfully delivered in September.
-- Activity to create further synergies and efficiencies remains
both from a processing and structural perspective, but this is in
plan, being well managed and is currently on track to deliver in
2021.
INVESTMENT RISK
The risk of underperformance of funds managed by the Group
relative to benchmarks, objectives or competition or in other ways
failing to meet investors' objectives.
Sustained market decline
Risk
-- The risk of a severe market and economic downturn which
affects all fund managers and all asset types across all geographic
markets.
Mitigation
-- Our investment philosophy allows our fund managers to pursue
their own investment styles and the flexibility to adjust
strategies as far as possible to retain value during unfavourable
market conditions.
-- We have a broad range of investment strategies which enables
us to offer products suitable for different market conditions.
-- We regularly review our discretionary expenditure and cost
base to ensure sustainability.
-- Our strong capital position and relatively low cost base
means we are well placed to cope with this risk.
2020 update
-- Greater diversification brought about by the acquisition of
Merian and the NZS Capital investment will ensure that our
portfolios are less sensitive to market volatility.
-- We have an increased exposure to Fixed Income assets which
have historically been an advantageous product during times of
stress.
-- The uncertainty around Brexit has been largely resolved and
we need to ensure we stay agile to market movements.
Sustained fund underperformance
Risk
-- There is a risk that our clients will not meet their
investment objectives, due to poor relative performance by one or
more of our funds over a prolonged period.
Mitigation
-- Jupiter maintains a diversified range of flexible investment
products, and aims to deliver long-term value to our clients across
different market conditions.
-- Our investment process seeks to meet investment objectives
within clearly stated risk parameters.
-- Our Investment Risk team works closely with fund managers to
challenge fund risk profiles, assess the risks across the
portfolios and further develop our capabilities.
2020 update
-- The Merian acquisition further diversifies our product range
with new asset classes and additional investment styles and
processes. This has diluted the dependency on flagship
strategies.
-- The additional strategies and the flexible range have
provided management with the opportunity to explore and utilise a
number of solutions if prolonged underperformance is evidenced
through our formal governance structure.
Challenges presented by major or local market shocks
Risk
-- Uncertainty regarding the UK's future Risk relationship with
the EU following the UK's withdrawal from the EU, as well as
resulting legal and regulatory changes following the end of the
transition period, could have an adverse effect on the business.
The impact on markets of the Covid-19 pandemic has also been
considered through this risk.
Mitigation
-- Throughout the current period of uncertainty, we have been
closely monitoring communications from and developments with
respect to the UK and EU governments and regulators to ensure we
remain aware of and responsive to the latest industry guidance with
the support of specialist experts.
2020 update
-- Global markets were impacted by Covid-19. While markets are
now less volatile, uncertainty remains.
-- Greater diversification brought about by the acquisition of
Merian and the NZS Capital investment will ensure that our
portfolios are less sensitive to market volatility.
OPERATIONAL RISK
The risk of loss caused by weaknesses or failures in the Group's
systems and controls, related to people, systems or processes.
These include risks arising from failing to properly manage key
outsourced relationships and cyber security. Regulatory (failure to
comply with regulatory obligations) and legal risk is included in
this definition.
Firmwide operational control environment
Risk
-- We could suffer a material error executing a key business
process, or from our systems or business premises being
unavailable.
Mitigation
-- We have efficient and well controlled processes and maintain
a comprehensive risk management framework which enables the
business to focus its efforts on key activities.
-- We have continuity and business resumption planning in place
to support our critical activities.
-- We have implemented remote working for all of our staff if
they cannot travel to our offices. If our normal business systems
or premises become unavailable, we have alternative premises
including a dedicated office suite equipped with all of our
critical business systems.
2020 update
-- The transition to a full remote working model in 2020 due to
Covid-19 was well managed with minimal disruption and control
changes required, resulting in increased confidence in our
abilities to operate in this manner.
-- The operating environment has remained stable and the
integration of Merian onto the Jupiter framework has been conducted
efficiently and effectively with minimal impact on delivery of
service or heightened risk.
-- We have made enhancements to the oversight of our control
environment and continue to invest in enhancing our controls.
-- We have seen a reduction in losses arising from incidents.
Failure of a critical outsource partner
Risk
-- The failure or non-performance of a third-party provider who
we rely on for business processing may lead to us failing to
deliver the required service to our clients and/or regulatory
noncompliance.
Mitigation
-- We subject all third parties who provide us with critical
services to a high level of ongoing oversight, through our
established Supplier Management framework, giving us assurance that
they meet our required standards.
-- Jupiter has formal guidelines for managing and overseeing all
third-party relationships, ensuring they receive a level of
scrutiny that reflects their potential risk to our business.
2020 update
-- We continue to enhance our oversight of our critical
outsource providers based on key risk principles defined within our
supplier management framework. This ensures an appropriate level of
scrutiny is given to those suppliers and services that are critical
to the Group.
-- Each of our critical suppliers have continued to provide a
consistent and stable service during the Covid-19 pandemic with no
material disruptions seen. However, we are aware of the additional
strain that has been placed on providers to maintain performance
brought about by Covid-19 on what is an increased suite of
suppliers which have come onboard as part of the Merian
acquisition.
Cyber crime
Risk
-- The risk that a successful cyber attack or fraud attempt
could result in the loss of clients' assets or data or cause
significant disruption to key systems.
Mitigation
-- We commit considerable human and technological resources to
preventing a cyber security incident. Our server environments are
housed in two data centres provided by a specialist third party and
offer fully resilient and secure facilities.
-- We have established a security awareness programme to extend
knowledge and understanding within the business. Jupiter applies
best practices from the ISO 27001 controls framework with
additional reference to SANS Critical Security Controls in order to
prioritise our technology defences.
-- We have produced an extensive Cyber Security Incident
Response plan to ensure departmental heads can adequately respond
to the growing threat of cyber crime.
2020 update
-- We have continued to invest in our IT infrastructure and
employee training and awareness initiatives to ensure our
resilience to a potential cyber attack remains robust. This is
complemented by the use of external cyber security specialists and
our participation in industry and regulatory-led forums so that we
are aware and able to respond to the latest threats and industry
trends.
-- The Covid-19 situation has provided an opportunity for
criminals to target individuals and firms to exploit
vulnerabilities using phishing and cold calls in an attempt to
extract sensitive information for financial gain. Jupiter
recognised this increased threat early on and has taken appropriate
steps to address it. Despite this, we are aware that the threat of
a cyber attack continues to grow.
Regulatory & legal change
Risk
-- The risk that changes in regulation or legislation restrict
or impact our ability to do business or that we fail to implement
changes required to meet new regulatory requirements.
Mitigation
-- We continually monitor regulatory developments to assess
potential business implications. We invest in the expertise,
systems and process change necessary to enable compliance with
regulatory requirements by the required dates.
-- We maintain a robust compliance culture and require all
relevant employees to undertake training on regulatory matters.
-- Our Risk & Compliance function supports the business in
implementing and maintaining appropriate regulatory controls.
2020 update
-- The regulatory environment continues to develop with
increased focus on areas such as ESG.
-- There continues to be a high volume of regulatory change activity across the industry.
-- Our regulatory footprint has evolved through the Merian
acquisition and investment in NZS Capital, increasing in complexity
and geography, resulting in enhanced regulatory interest.
Alternative Performance Measures
==================================
The use of alternative performance measures (APMs)
The Group uses the following APMs alongside statutory reporting
measures as part of its financial reporting:
APM Definition Reconciliation Reason
for
use
Adjusted net revenue Net revenue after the deduction of Page 6 A
net revenue classified as exceptional
items
Exceptional items Items of income or expenditure that Page 7 B
are significant in size and which
are not expected to repeat over the
short to medium term
Fixed staff costs Staff costs (excluding variable items Page 6 B
before exceptional such as bonus awards, LTIP, SAYE and
items SIP) before redundancy costs
Net management Net management fees divided by average Page 6 A
fee margin AUM
Net management Management fees less fee expenses Page 6 A
fees
Net revenue Revenue less fee and commission expenses Page 6 A
Operating expenses Administrative expenses (before exceptional Page 6 B
(before exceptional items) less Variable staff costs before
items) exceptional items
Operating margin Operating profit (before exceptional Page 6 B, C
(before exceptional items) divided by Adjusted net revenue
items)
Operating profit Underlying profit before tax before Page 8 B
(before exceptional Finance income and Finance costs
items)
Ordinary dividends Interim and full-year dividends (does N/A B
per share not include any special dividends)
Total compensation Fixed staff costs before exceptional Page 6 C
ratio items plus Variable staff costs before
exceptional items as a proportion
of Net revenue
Underlying EPS Underlying profit after tax divided Page 8 B, D
by issued share capital
Underlying profit Underlying profit before tax less Page 8 B
after tax tax at the weighted average UK corporation
tax rate
Underlying profit Profit before tax less Exceptional Page 8 B
before tax items
Variable compensation Variable staff costs before exceptional Page 6 B, C
ratio items as a proportion of Net revenue
less Operating expenses before exceptional
items
Variable staff Variable staff costs, excluding Exceptional Page 7 B
costs before exceptional items
items
Alternative Performance Measures
==================================
Changes in the use of APMs
1. In 2020, but not in the prior year, exceptional items include
an item of revenue. As a result, in order to show revenue both
before and after this item, we have introduced a new APM for
Adjusted net revenue. Two financial ratios use this measure (Total
and Variable compensation ratios), we have amended their
definitions accordingly.
Our reasons for using APMs
A. To draw out meaningful subtotals of revenues and earnings,
together with ratios derived from such measures, commonly used by
asset managers after taking into account items such as fee
expenses, including commissions payable, without which a proportion
of the revenues would not have been earned, and administrative
expenses which often have a direct link to revenues through the use
of compensation ratios to set remuneration.
B. To present users of the accounts with a clear view of what
the Group considers to be the results of/distributions from its
underlying operations, enabling consistent period-on-period
comparisons and making it easier for users of the accounts to
identify trends.
C. To provide additional information not required for disclosure
under accounting standards. The information is given to assist
users of the accounts in gauging the level of operational gearing
and efficiency in the Group.
D. Used by the Board to determine the Group's ordinary dividend and as a consistent measure of profitability. Also used in the measurement of one of the criteria for share-based awards to senior staff with performance conditions.
All APMs relate to past performance.
This information is provided by RNS, the news service of the
London Stock Exchange. RNS is approved by the Financial Conduct
Authority to act as a Primary Information Provider in the United
Kingdom. Terms and conditions relating to the use and distribution
of this information may apply. For further information, please
contact rns@lseg.com or visit www.rns.com.
RNS may use your IP address to confirm compliance with the terms
and conditions, to analyse how you engage with the information
contained in this communication, and to share such analysis on an
anonymised basis with others as part of our commercial services.
For further information about how RNS and the London Stock Exchange
use the personal data you provide us, please see our Privacy
Policy.
END
FR TAMJTMTITTBB
(END) Dow Jones Newswires
February 26, 2021 02:00 ET (07:00 GMT)
Jupiter Fund Management (LSE:JUP)
Historical Stock Chart
From Apr 2024 to May 2024
Jupiter Fund Management (LSE:JUP)
Historical Stock Chart
From May 2023 to May 2024