TIDMTAM
RNS Number : 6776S
Tatton Asset Management PLC
27 June 2018
27 June 2018
Tatton Asset Management PLC
Preliminary Results
For the year ended 31 March 2018
"Excellent debut - Strong growth across all businesses"
Tatton Asset Management plc ("TAM" or the "Company" and together
with its subsidiaries, the "Group") (AIM: TAM), the on-platform
discretionary fund management (DFM) and support services business
for independent financial advisers (IFAs), today issues its
Preliminary Results for the year ended 31 March 2018.
Financial Highlights
-- Tatton's discretionary assets under
management ("AUM") increased 25.6% to
GBP4.9bn (2017: GBP3.9bn)
-- Average AUM inflows of over GBP80m per
month maintained
-- Group Revenue increased 30.7% to GBP15.5m
(2017: GBP11.9m)
-- Adjusted Operating profit(1) up 44.7%
to GBP6.5m (2017: GBP4.5m)
-- Adjusted Operating profit(1) margin
increased to 42.1% (2017: 38.0%)
-- Reported profit before tax increased
to GBP3.6m (2017: GBP2.0m), after charging
exceptional items of GBP2.0m and share
option costs of GBP1.0m
-- Final dividend of 4.4p giving a full
year dividend of 6.6p
-- Adjusted EPS(2) increased 49.5% to 9.6p
(2017: 6.5p)
-- Strong financial position, with net
cash of GBP10.6m (2017: GBPnil)
Business Highlights
-- Successful IPO on AIM completed on 6
July 2017 raising GBP51.6m
-- TIML, the Group's investment management
business, has continued to expand, delivering
strong organic growth in AUM and introduced
three new blended funds
-- TIML increased its member firms to 341
(2017: 237) and number of accounts to
48.8k (2017: 39.6k)
-- PPL, the Group's compliance services
business, increased new members 4.5%
to 368 (2017: 352)
-- PMS, the Group's mortgage and protection
distribution business, performed strongly,
with gross lending via its channels
during the period of GBP6.8bn (2017:
GBP4.8bn), an increase of 41.7%. PMS
now has 1,220 mortgage firms using its
services (2017: 1,069), up 14.1%
1. Operating profit before exceptional items and IFRS2
share-based costs
2. Adjusted earnings per share is calculated by dividing the
adjusted operating profit less cash interest, less tax on operating
activities by the number of ordinary shares in issue during the
year
Paul Hogarth, Chief Executive Officer, commented:
"I am delighted to report our maiden results since our
successful IPO in July last year. We have continued the strong
growth we announced at the half year, delivering a valuable 25.6%
increase in discretionary assets under management and a strong
underlying performance across each of our three businesses. Post
the year-end, we have surpassed a significant milestone - GBP5
billion of discretionary AUM - which is a considerable achievement
for the team.
"There is unprecedented demand for a low cost DFM service to the
mass affluent served by the IFA sector, and we continue to
capitalise on this. We are challenging existing off platform,
traditional incumbents, and working closely with increasing numbers
of IFAs in providing the mass affluent with an investment portfolio
management service that is pushing the envelope. We are pleased
with the progress we are making and excited at the opportunities
ahead. The outlook for the Group remains positive and l look
forward to providing a further update in due course."
For further information please contact:
Tatton Asset Management plc +44 (0) 161 486 3441
Paul Hogarth (Chief Executive
Officer)
Paul Edwards (Chief Financial
Officer)
Lothar Mentel (Chief Investment
Officer)
Nomad and Broker
Zeus Capital +44 (0) 20 3829 5000
Martin Green
Dan Bate
Pippa Underwood
Media Enquiries
Powerscourt +44 (0) 20 7250 1446
Justin Griffiths
Mazar Masud
For more information, please visit:
www.tattonassetmanagement.com
Analyst presentation
An analyst briefing is being held at 10.30am on 27 June 2018 at
the offices of Powerscourt, 1 Tudor Street, London, EC4Y 0AH.
Chairman's Statement
Roger Cornick, Chairman
As an element of the process that preceded our IPO on 6 July
last year, I became Chairman of Tatton Asset Management plc (TAM)
having been attracted by the quality of the people involved, and
their achievements, up until that time. Happily, in reporting on
the year ended 31 March 2018, I'm able to highlight a performance
that has built on the pre-IPO success and delivered a strong set of
results for our first year of trading as a public listed
company.
Results
The Group has delivered results that have met the exacting
objectives set out for the first full year following the Company's
listing on the AIM - London Stock Exchange last year. Tatton
Investments continued to leverage its competitive position as an
on-platform discretionary asset management provider, increasing
assets under management by 25.6% to GBP4.9 billion (2017: GBP3.9
billion). Paradigm Partners, the Group's IFA trusted adviser and
support services business continues to grow and attract new members
with partner firms increasing by 4.5% to 368. Paradigm Mortgage
Services, the Group's mortgage distribution and support services
business, continues to grow with membership rising by 14.1% to
1,220. This has resulted in Group revenue for the year increasing
by 30.7% to GBP15.5m (2017: GBP11.9m) and underlying earnings
before interest and tax increasing by 44.7% to GBP6.5m (2017:
GBP4.5m). Profit before tax after incurring exceptional costs and
share based charges was GBP3.6m (2017: GBP2.0m). The resulting
impact on adjusted earnings per share is an increase of 49.5% to
9.6p (2017: 6.5p). Basic earnings per share was 4.1p (2017:
2.1p).
Strategy
The Group's strategic objective remains focused on organic
growth through the provision of all major products and services
that an IFA requires to service its clients. We will continue to
develop the opportunities that exist in this space and, through
carefully selected acquisitions, seek to strengthen and deepen our
service proposition and expertise where appropriate.
Our people
We believe our strongest competitive advantage is our people and
our culture. Our strong business performance would not be achieved
without their hard work and commitment across the whole Group. We
have made good progress in our first year as an AIM listed business
and on behalf of the Board, I would like to thank all our employees
who have contributed to a successful year.
Board Changes
Following the retirement of Noel Stubley at the end of April
2018, we would like to welcome our new Chief Financial Officer
(CFO), Paul Edwards who has been in place since the beginning of
May 2018. Paul brings considerable listed public company experience
to the role which allied to his broad range of financial and
operational expertise will greatly strengthen the management
team.
Dividends
Given the strong financial performance and growth prospects of
the Group, the Board is recommending a final dividend of 4.4p per
share which will be payable on the 10 August 2018 to shareholders
who are on the register as at the 6 July 2018. The ex-dividend date
will be 5 July 2018. This when combined with the interim dividend
of 2.2p pence per share, gives a full year dividend of 6.6p (2017:
nil).
Outlook
As we look to the year ahead, each part of the Group is well
placed to continue to take advantage of the opportunities that
exist in their respective markets. The Board remains focused on
creating long-term value for stakeholders and we have been
encouraged by our business performance to date. We remain
optimistic regarding the future opportunities for the Group.
Chief Executive's Statement
Paul Hogarth, Chief Executive Report
I am very pleased to be able to report a very successful first
year as an AIM listed entity. All three divisions within the group
have performed well and indeed have benefited from the improved
profile afforded to a listed business. As a management team we are
energised by the success of our IPO and of the performance of the
group over our first year on AIM.
We remain committed to our group strategy of growing our
business as a service provider of choice to Directly Authorised
Financial Advisers across all of their major products and services.
We champion the Independent Financial Advice sector. Working
closely with advisers makes us very different to the majority of
our competitors. As a business, our ability to grow is largely
dependent on the success of the IFA sector we support which I am
delighted to report is in rude health. The IFA Community has
benefited from both the Retail Distribution Review and Treating
Customers Fairly. We support the IFA in the provision of financial
advice and wealth management services to their clients and in
particular the mass affluent.
Market overview
The cost of an ageing population has both forced companies to
close occupational pensions and the state to withdraw from
retirement and care support except for the most needy. The market
demand for financial advice and guidance of some form has grown and
will continue to grow, in particular for the mass affluent.
This demand is being met by the financial services industry
through technology adoption in broadly two ways: a near complete
reliance on the use of artificial intelligence decision making
through robo-advice or enhancing the benefits of face to face
intermediated financial advice.
Core to our strategy is to make it easier for Financial Advisers
to build better, bigger businesses. The use of technology and
infrastructure to support, not replace, financial advice is central
to that. This will help to improve Financial Advisers' business and
service and also create a carried benefit to the financial lives of
their clients.
The market demand for financial advice is growing, however the
ability of Financial Advisers to meet this demand has been
challenged due to widely acknowledged increase in business costs,
increased regulatory pressures and competitive forces on fees. Put
simply its more expensive in cost and time to provide the same
service.
The increased complication of managing and operating as a
Financial Adviser is further compounded by the complexity in the
provision of financial advice and Financial Advisers' ability to
provide their clients with an understanding of their investment
options based on their risk tolerance. This, in practical terms is
burdened, by the construction, monitoring and rebalancing of
investment portfolios - brought into focus by the regulatory
requirement of investors both large and small to achieve comparable
outcomes and received service.
Financial Advisers are increasingly seeing investment fulfilment
as non-core and expensive due to the cost, regulatory exposure and
professional commitment to offer their clients high levels of
holistic financial advice and service rather than investment
management.
Therefore, the key driver for Financial Advisers is to focus
where they can truly add value in the eyes of their clients which
is a personalised advice and financial planning service while
increasing their business' scalability through streamlining the
provision of the required financial instruments.
For Tatton, if we make it easier for IFAs to succeed and it
becomes a virtuous circle; the group benefits by supporting and
facilitating a better, more efficient supply of financial advice to
satisfy increasing consumer demand for professional financial
advice.
All of the group businesses adhere to this strategy of simply
improving IFA businesses efficiency by realising time and cost
benefits of delegating those tasks where scale and quality benefits
can be realised for both the adviser and their clients, the mass
affluent financial consumer.
Our services
Our first year as an AIM listed entity has consolidated our
strategy. As an independent, financially robust, profitable and
operationally transparent business we are able to develop deeper
and more strategic relationships with our Financial Adviser clients
across the group businesses. I am very pleased that all of the
group businesses can function as standalone operations but together
create a company ideally placed to benefit from developing the
professionalism and sophistication of financial advice within the
UK.
Paradigm Partners
I can announce that Paradigm Partners is being rebranded to
Paradigm Consulting a name that reflects the nature of the business
in the provision of compliance advice and audit, business strategy
consultancy and a new academy to help our advisers cope with the
increased demand for advice.
Paradigm Partners, the foundation firm of Tatton Asset
Management continually develops its service taking advantage of
opportunities whilst creating deeper relationships with Financial
Adviser businesses and indeed extending the general reach of the
group.
The impact and benefits of our service is reflected in the
incredibly hard work undertaken by our compliance consultants in
order to prepare our IFA firms for MiFID 2 and latterly GDPR.
Paradigm Mortgages
For most of the UK population, the home they own is their
largest single asset and assisting in its purchase and protection
is an essential service of Financial Advisers and therefore clearly
an area of opportunity for Tatton Asset Management. In aggregating
mortgage lending and life insurance, Paradigm Mortgages enables
Financial Advisers to benefit from the economies of scale in
lending and insurance provision, evidence of the carried benefit to
private clients of the Financial Adviser using our services.
The effect is that we have grown our membership by over 14% in
the last 12 months, showing that there is a greater awareness of
the collective strengths of working in partnership with the IFA
community.
Tatton Investment Management
The quality of investment performance delivered across our
assets under management has demonstrated that we have been able to
successfully combine a business that significantly lowers the cost
of investing and adheres to the highest investment management
standards to deliver against given investment objectives.
The adoption of our size and platform agnostic discretionary
portfolio management service as a centralised investment
proposition for Financial Advisers has increased access to
discretionary asset management to more investors and delivered on
our strategy of helping to create scalable advice businesses. We
now have over 341 adviser firms (2017: 237) and over 48,800 client
accounts (2017: 39,610) with an average portfolio size of
GBP100,000.
I am very pleased to report that over the last year we have been
able to launch the Tatton Blended Funds investment range to allow
non-platform access to our investment approach that utilise the
same cost model resulting in some of the lowest charging multi
asset, multi manager funds in the market. Due to increasing popular
demand, we have also extended our Ethical/ESG range of portfolios
across all the main UK investor risk profiles.
Our pipeline of potential new IFA businesses looking to utilise
Tatton Investment Management's services continues to grow, as they
look to benefit from our enhanced investment proposition and our
greater understanding of their needs.
Outlook
The outlook for the group is positive. We are uniquely able to
develop our offering because of the knowledge base created though
Paradigm Partners, as evidenced by the success of Tatton Investment
Management. Being able to anticipate and accommodate the future
business environment of the UK's financial advice sector is a key
element to ensure continued organic growth, future product
development and potential strategic relationships and
acquisitions.
As we have shown across the three businesses within the group
what we have done and will continue to do is improve and increase
the day to day business of a Financial Adviser.
Chief Financial Officer Statement
Paul Edwards, Chief Financial Officer
Overview
The 2017/18 financial year was an excellent year for the Group.
Following the successful IPO on the 6 July 2017 the Group has
continued to make good progress and deliver a set of strong results
for its first year as a public company. We have seen strong growth
in revenue, profits and margins in each of our three markets. Good
underlying cash generation supports our increased dividend and the
Group's financial position remains strong.
Record revenue and profits
Group revenue increased by 30.7% to GBP15.5m (2017: GBP11.9m);
Tatton Investment Management revenue increased by 46.5% to GBP6.3m
(2017: GBP4.3m) as assets under management increased over the year
and totalled GBP4.9bn at the year end (2017: GBP3.9bn), Paradigm
Partners continued to attract new clients and revenue was GBP6.8m
(2017: GBP5.8m), an increase of 17.9%. Paradigm Mortgages revenue
grew by 31.9% to GBP2.4m (2017: GBP1.8m).
The Group delivered a record year for Adjusted Operating
Profit*, which increased by 44.7% to GBP6.5m (2017: GBP4.5m) and
Adjusted Operating Profit* margin improved to 42.1% (2017: 38.0%).
Tatton Investment Management contributed GBP3.0m (2017: GBP1.2m)
improving its margin to 47.8% (2017: 28.3%). Paradigm Partners
contributed Adjusted Operating Profit* of GBP3.6m (2017: GBP2.9m)
with an improved margin of 52.7% (2017: 50.1%), and Paradigm
Mortgages Adjusted Operating Profit* contributed GBP1.4m (2017:
GBP0.8m) improving the margin to 57.9% (2017: 46.2%).
Total Group operating profit was GBP3.6m (2017: GBP2.0m) after
charging IPO exceptional costs of GBP2.0m and share based payments
of GBP1.0m of which GBP0.8m related to exceptional share-based
charges incurred as a consequence of the IPO. Operating profit has
been adjusted for these items to give better clarity of the
underlying performance of the Group.
Net finance costs
The Group generates strong cash flow and has net cash on its
balance sheet. The Group does however have access to a small
short-term overdraft facility. The net finance costs relating to
this facility were GBP26k (2017: GBP36k) a small decrease in the
year. The facility extends to 30 September 2018 however it is the
intention of the Group to review the ongoing facility arrangements
in the new financial year.
Taxation
Our tax arrangements are driven by commercial transactions,
managed in a responsible manner based on compliance, transparency
and co-operation with tax authorities.
The Group's tax charge of GBP1.1m (2017: GBP0.8m) includes a
GBP0.7m charge (2017: GBP0.4m) on trading activities. The effective
tax rate excluding adjusted items and the change in rate of UK
corporation tax has decreased to 18.4% (2017: 18.6%). The Group's
cash tax payment in the year was GBP1.4m (2017: GBP0.1m), or 19.2%
of underlying profit before tax.
Improvement in underlying earnings per share
Basic earnings per share increased to 4.1p (2017: 2.1p).
Adjusted earnings per share* increased by 49.5% to 9.6p (2017:
6.5p).
Cash flow
The Group continued to see healthy cash generation and closing
net cash was GBP10.6m (2017: GBPnil).
*Adjusted for separately disclosed items of exceptional costs
and share based charges.
Net cash generated from operating activities before exceptional
costs was GBP5.6m (2017: GBP6.2m). Exceptional costs totalled
GBP2.0m and in the main related to the IPO. Net cash generated from
operating activities was GBP2.3m (2017: GBP3.6m).
Net cash interest paid in the year was GBP26k (2017: GBP36k) and
relates to the short-term overdraft facility in place. Income tax
paid was GBP1.4m (2017: GBP0.1m) with the increase being as a
consequence of enhanced profits in the year, and dividends paid in
the year included both the interim dividend and a pre-IPO dividend
which in total was GBP1.6m.
At the time of the successful IPO earlier in the year the Group
raised an additional GBP10.0m. This cash remains in place and will
be utilised for future capital investments to support growth and
any potential acquisitions that fit the profile and strategic
direction of the Group.
Dividends and capital allocation
The Board is recommending a final dividend of 4.4p. When added
to the interim dividend of 2.2p gives a full year dividend of 6.6p.
This proposed dividend reflects both our cash performance in the
period and our underlying confidence in our business. Dividend
cover (being the ratio of earnings per share before exceptional
items and share based charges), is 1.4 times. If approved at the
Annual General Meeting the final dividend will be paid on 10 August
2018 to shareholders on the register on 6 July 2018. The ex-
dividend will be. Our objective is to maximise long-term
shareholder returns through a disciplined deployment of cash. To
support this, we have adopted a cash allocation policy that allows
for: investment in capital projects that support growth, regular
returns to shareholders from our free cash flow, acquisitions to
supplement our existing portfolio of business and an efficient
Balance Sheet appropriate to the Company's investment
requirements.
Risk management and the year ahead
Risk is managed closely and is spread across our businesses and
managed to individual materiality. Our key risks have been
referenced in the annual report. We choose key performance
indicators that reflect our strategic priorities of investment,
growth and profit. These KPIs are part of our day-to-day management
of the business and in the year ahead we will focus on growth and
value creation. In this way we aim to deliver continued value to
shareholders.
Availability of the Report and Accounts
A copy of the report and accounts for the year ended 31 March
2018 will be available on the company's website
(www.tattonassetmanagement.com) on 27 June 2018 and will be sent to
the Company's shareholders on the 9 July 2018.
Annual General Meeting
The Company's Annual General Meeting will be held at DWF LLP
offices in Manchester on 31 July 2018.
Consolidated statement of
total comprehensive income
31-Mar 31-Mar
2018 2017
Note GBP'000 GBP'000
--------- --------
Revenue 15,507 11,864
Administrative expenses (8,981) (7,354)
--------- --------
Adjusted operating profit
(before separately disclosed
items)(1) 6,526 4,510
- Share-based payment costs 4 (986) (75)
- Exceptional items 4 (1,964) (2,412)
Total administrative expenses (11,931) (9,841)
Operating profit 3,576 2,023
Finance costs 5 (26) (36)
--------- --------
Profit before tax 3,550 1,987
Taxation charge 6 (1,110) (834)
--------- --------
Profit for the year on continuing
operations 2,440 1,153
========= ========
Loss related to disposal (164) -
of discontinued operations
Profit attributable to shareholders 2,276 1,153
Earnings per share - Basic 7 4.07p 2.06p
--------- --------
Earnings per share - Diluted 7 3.85p 2.06p
--------- --------
Adjusted earnings per share
- Basic(2) 7 9.64p 6.45p
--------- --------
Adjusted earnings per share
- Diluted(2) 7 9.12p 6.45p
--------- --------
(1) Adjusted for exceptional items and share
based payments.
(2) Adjusted for exceptional items and share
based payments and the tax thereon.
There were no other recognised gained or losses
other than those recorded above in the current
or prior year and therefore a statement of other
comprehensive income has not been presented.
Consolidated Balance Sheet
31-Mar 31-Mar
2018 2017
Note GBP'000 GBP'000
Non-current assets
Goodwill 9 4,917 4,917
Property, plant and equipment 10 104 75
Investments in joint venture 11 - (31)
Total non-current assets 5,021 4,961
--------- ---------
Current assets
Trade and other receivables 12 2,452 3,148
Cash and cash equivalents 10,630 687
--------- ---------
Total current assets 13,082 3,835
Total assets 18,103 8,796
--------- ---------
Current liabilities
Trade and other payables 13 (3,922) (4,154)
Corporation tax (605) (860)
Borrowings 15 - (697)
--------- ---------
Total current liabilities (4,527) (5,711)
--------- ---------
Non-current liabilities
Deferred tax liabilities 16 (15) (12)
--------- ---------
Total non-current liabilities (15) (12)
Total liabilities (4,542) (5,723)
Net assets 13,561 3,073
Equity attributable to equity
holders of the company
Share capital 18 11,182 11,182
Share premium account 8,718 8,718
Other reserve 2,041 2,133
Merger reserve (28,968) (18,960)
Retained earnings 20,588 -
--------- ---------
Total equity 13,561 3,073
========= =========
Consolidated statement of changes
in equity
Share Share Other Merger Retained Total
capital premium reserve reserve earnings equity
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
At 1 April
2016 11,182 8,718 3,578 (17,112) - 6,366
-------- -------- -------- --------- --------- --------
Profit and total
comprehensive income - - 1,152 - - 1,152
Dividends - - (2,672) - - (2,672)
Share based
payments - - 75 - - 75
Adjustments related
to merger accounting - - - (1,848) - (1,848)
At 31 March
2017 11,182 8,718 2,133 (18,960) - 3,073
-------- -------- -------- --------- --------- --------
Profit and total
comprehensive income - - 598 - 1,678 2,276
Dividends - - (1,564) - (1,230) (2,794)
Share based
payments - - 846 - 140 986
Adjustments related
to merger accounting - - 28 (20,008) 20,000 20
Issue of share
capital - - - 10,000 - 10,000
At 31 March
2018 11,182 8,718 2,041 (28,968) 20,588 13,561
-------- -------- -------- --------- --------- --------
Consolidated statement of
cash flows
31 Mar 31 Mar
Note 2018 2017
GBP'000 GBP'000
Operating activities
Profit for the year 2,276 1,153
Adjustments:
Income tax expense 1,110 834
Depreciation of property,
plant and equipment 53 43
Share-based payment expense 986 75
Share of (profit)/loss from
joint venture (31) 24
Changes in:
Change in trade & other receivables (544) 1,471
Change in trade & other payables (188) 180
--------
Cash generated from operations 3,662 3,780
-------- --------
Cash generated from operations
before exceptional costs 5,626 6.192
Exceptional costs 4 (1,964) (2,412)
-------- --------
Cash generated from operations 3,662 3,780
-------- --------
Income tax paid (1,374) (131)
-------- --------
Net cash from operating activities 2,288 3,649
-------- --------
Investing activities
Purchase of property, plant
and equipment (82) (51)
--------
Net cash used in investing
activities (82) (51)
-------- --------
Financing activities
Proceeds from the issue of 10,000 -
shares
Stamp duty paid on share
transfer (10)
Dividends paid (1,556) (2,672)
Net cash used in financing
activities 8,434 (2,672)
-------- --------
Net increase in cash and
cash equivalents 10,640 926
Cash and cash equivalents
at beginning of period (10) (936)
-------- --------
Cash and cash equivalents
at end of period 10,630 (10)
-------- --------
The accompanying notes are an integral part of the annual
financial statements.
1 Accounting policies
The principal accounting policies applied in the presentation of
the annual financial statements are set out below.
1.2. Basis of preparation
The preliminary announcement has been prepared in accordance
with the Listing Rules of the FCA and is based on the consolidated
financial statements for the year ended 31 March 2018 which have
been prepared under IFRS as adopted by the European Union and those
parts of the Companies Act 2006 applicable to companies under
IFRS.
The accounting policies applied in preparing the preliminary
announcement are consistent with those used in preparing the
statutory financial statements for the year ended 31 March
2018.
The consolidated financial statements have been prepared on a
going concern basis and prepared on the historical cost basis.
The preliminary announcement does not constitute the statutory
financial statements of the group within the meaning of section 434
of the Companies Act 2006.
The preliminary announcement has been agreed with the company's
auditor for release.
The consolidated financial statements are presented in sterling
and have been rounded to the nearest thousand (GBP000). The
functional currency of the company is sterling.
The preparation of financial information in conformity with IFRS
requires management to make estimates and assumptions that affect
the reported amounts of assets and liabilities at the date of the
financial statements and the reported amounts of revenues and
expenses during the reporting period. Although these estimates are
based on management's best knowledge of the amount, event or
actions, actual events may ultimately differ from those
estimates.
The Group has not previously prepared annual consolidated
financial statements in accordance with EU endorsed IFRSs. However,
three years of consolidated financial statements prepared under
IFRS 1 "First time adoption of International Financial Reporting
Standards" are presented in the Group's AIM Admission document
dated 6 July 2017. Reconciliations of how the Group's transition
from UK GAAP to IFRS affected its reported financial position,
financial performance and cash flows are presented in that
document.
2 Segment reporting
The following is an analysis of the Group's revenue and results
by reportable segment:
Period ended
31 March 2018
Paradigm
Paradigm Mortgage
Tatton Partners Services Central Group
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Revenue 6,325 6,780 2,366 36 15,507
Administrative
expenses (3,302) (3,207) (996) (1,476) (8,981)
-------- ---------- ---------- -------- --------
Adjusted operating
profit 3,023 3,573 1,370 (1,440) 6,526
IFRS2 share based
payments - (846) - (140) (986)
Exceptional charges - - - (1,964) (1,964)
-------- ---------- ---------- -------- --------
Operational profit 3,023 2,727 1,370 (3,544) 3,576
Finance (costs)/income - (19) (9) 2 (26)
Profit/(loss)
before tax 3,023 2,708 1,361 (3,542) 3,550
======== ========== ========== ======== ========
Period ended
31 March 2017
Paradigm
Paradigm Mortgage
Tatton Partners Services Central Group
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Revenue 4,317 5,753 1,794 - 11,864
Administrative
expenses (3,095) (2,870) (966) (423) (7,354)
-------- ---------- ---------- -------- --------
Adjusted operating
profit 1,222 2,883 828 (423) 4,510
IFRS2 share based
payments - (75) - - (75)
Exceptional charges (233) (373) (1,251) (555) (2,412)
-------- ---------- ---------- -------- --------
Operating profit 989 2,435 (423) (978) 2,023
Finance costs - (33) (3) - (36)
Profit before
tax 989 2,402 (426) (978) 1,987
-------- ---------- ---------- -------- --------
All turnover arose in the United Kingdom.
3 Operating profit
The operating loss and the loss before taxation are stated
after:
31-Mar 31-Mar
2018 2017
GBP'000 GBP'000
-------- --------
Operating lease rentals - land
and buildings 210 179
Operating lease rentals - equipment
and vehicles 9 11
Depreciation: property, plant
and equipment 53 43
Separately disclosed items (note
4) 2,950 2,487
Services provided to the Group's
auditor
Audit of the statutory consolidated
and company financial statements
of Tatton Asset Management PLC 31 -
Audit of subsidiaries 37 49
Other fees payable to auditor:
Tax services 225 10
Non-audit services 443 -
Total audit fees were GBP68,000 (2017: GBP49,000) Total
non-audit fees payable to the auditor were GBP668,000 (2017:
GBP10,000). Non-audit services relate mainly to IPO in 2017.
4 Separately disclosed items
31-Mar 31-Mar
2018 2017
GBP'000 GBP'000
-------- --------
Non-recurring costs
relating to corporate
transactions - 9
Product launch
costs - 143
IPO
costs 1,964 625
Provisions against
related entity loans - 1,635
Total exceptional
costs 1,964 2,412
Share based payments 986 75
Total separately disclosed
items 2,950 2,487
-------- --------
Separately disclosed items included within administrative
expenses reflects costs and income that do not relate to the
Group's normal business operations and that they are considered
material (individually or in aggregate if of a similar type) due to
their size of frequency.
Various legal and professional costs incurred in relation to the
IPO of the Group in July 2017 are shown as part of separately
disclosed items within administrative expenses in the Combined
Income Statement.
5 Finance costs
31-Mar 31-Mar
2018 2017
GBP'000 GBP'000
-------- --------
Bank interest (paid) / income (1) 2
Bank charges (25) (38)
(26) (36)
======== ========
6 Taxation
31-Mar 31-Mar
2018 2017
GBP'000 GBP'000
-------- --------
Current tax expense
Current tax on profits for the
period 1,107 829
Adjustment for under provision - -
in prior periods
-------- --------
1,107 829
-------- --------
Deferred tax expense
Origination and reversal of temporary
differences 3 5
Total tax expense 1,110 834
======== ========
The reasons for the difference
between the actual tax charge
for the year and the standard
rate of corporation tax in the
United Kingdom applied to profit
for the year as follows:
31-Mar 31-Mar
2018 2017
GBP'000 GBP'000
Profit before taxation 3,550 1,987
Tax at UK corporation tax rate
of 19% (2017: 20%) 675 397
Expenses not deductible for tax
purposes 279 506
Capital allowances in excess of
deprecation (5) (2)
Chargeable gains 161 -
LLP members of group not subject
to corporation tax - (67)
Total tax expense 1,110 834
======== ========
The UK corporation tax rate was 20% between the period 1 April
2015 to 31 March 2017. The rate reduced to 19% with effect from 1
April 2017 and will reduce to 17% with effect from 1 April 2020.
This will reduce the Company's future current tax credit/charge
accordingly. The deferred tax liability as at 31 March 2018 has
been calculated based on a rate of 17% based on when the Company
expects the deferred tax liability to reverse.
7 Earnings per share and dividends
Basic earnings per share is calculated by dividing the earnings
attributable to ordinary Shareholder by the weighted average number
of ordinary shares during the year.
For diluted earnings per share the weighted average number of
ordinary shares in issue is adjusted to assume conversion of all
dilutive potential ordinary shares. The dilutive shares are those
share options granted to employees where the exercise price is less
than the average market price of the Company's ordinary shares
during the year.
Number of shares
2018 2017
----------- -----------
Basic
Weighted average number of shares
in issue 55,907,513 55,907,513
Diluted 4,394,259 -
Share options
Weighted average number of shares
(diluted) 59,121,943 55,907,513
31-Mar 31-Mar
2018 2017
GBP'000 GBP'000
----------- -----------
Earnings attributable to ordinary
shareholders
Basic and diluted profit for the
period 2,276 1,153
Share based payments - IFRS2 option
charges 986 75
Exceptional costs - see note 4 1,964 2,412
Tax impact of adjustments - (35)
Adjusted basic and diluted profits
for the period and attributable
earnings 5,226 3,605
=========== ===========
Earnings per share (pence) (basic) 4.07p 2.06p
=========== ===========
Earnings per share (pence) (diluted) 3.85p 2.06p
=========== ===========
Adjusted earnings per share (pence)
(basic) 9.64p 6.45p
=========== ===========
Adjusted earnings per share (pence)
(diluted) 9,12p 6.45p
=========== ===========
Dividends
During the year, Tatton Asset Management PLC paid an interim
dividend of GBP1,229,965 (2017: GBPnil) to its equity
shareholders.
This represents a payment of 2.2p per share.
Dividends of GBP1,563,575 (2017: GBP2,671,867) were relating to
the Groups pre-IPO activity were paid prior to the IPO, which
occurred on 7 July 2017.
8 Staff costs
31-Mar 31-Mar
2018 2017
GBP'000 GBP'000
Wages, salaries
and bonuses 3,788 3,001
Social security
costs 510 270
Pension costs 86 82
Share-based payments 986 75
-------- --------
5,370 3,428
======== ========
31-Mar 31-Mar
2018 2017
Administration 72 62
Key management 3 3
-------- --------
75 65
======== ========
Key management
compensation
The remuneration of the statutory directors who are the key
management of the Group is set out below in aggregate for each of
the key categories specified in IAR 24 Related Party
Disclosures.
31-Mar 31-Mar
2018 2017
GBP'000 GBP'000
Wages, salaries and bonuses 875 344
Social security costs 111 39
Pension costs 20 7
Benefits in kind 3 4
-------- --------
1,009 394
======== ========
In addition to the remuneration above, the
non-executive Chairman and non-executive director
have submitted invoices for their fees as follows:
31-Mar 31-Mar
2018 2017
GBP'000 GBP'000
-------- --------
Total fees 118 -
======== ========
The remuneration of the highest
paid director was:
31-Mar 31-Mar
2018 2017
GBP'000 GBP'000
-------- --------
Total 474 257
======== ========
9 Goodwill and intangibles
Goodwill
GBP'000
Cost
Balance at 1
April 2016 4,917
Adjustment for provisional
fair value of consideration -
---------
Balance at 31
March 2017 4,917
Adjustment for provisional
fair value of consideration -
Balance at 31
March 2018 4,917
---------
Carrying value
Balance at 1
April 2016 4,917
---------
Balance at 31
March 2017 4,917
---------
Balance at 31
March 2018 4,917
---------
The goodwill of GBP4.9 million relates to GBP2.9m arising from
the acquisition in 2014 of an interest in Tatton Oak Limited by
Tatton Capital Limited consists of the future synergies and
forecast profits of the Tatton Oak business and GBP2.0m arising
from the acquisition in 2017 of an interest in Tatton Capital Group
Limited. None of the goodwill is expected to be deductible for
income tax purposes.
Impairment loss and subsequent reversal
Goodwill is subject to an annual impairment review based on an
assessment of the recoverable amount from future trading. Where, in
the opinion of the Directors, the recoverable amount from future
trading does not support the carrying value of the goodwill
relating to a subsidiary company an impairment charge is made. Such
impairment is charged to the Combined Statement of Comprehensive
Income.
Impairment testing
For the purpose of impairment testing, goodwill is allocated to
the Group's operating companies which represents the lowest level
within the Group at which the goodwill is monitored for internal
management accounts purposes.
Goodwill acquired in a business combination is allocated, at
acquisition, to the cash generating units (CGUs) or group of units
that are expected to benefit from that business combination. The
Directors test goodwill annually for impairment, or more frequently
if there are indicators that goodwill might be impaired. The
Directors have considered the carrying value of goodwill at 31
March 2018 and do not consider that it is impaired.
Growth rates
The value in use is calculated from cash flow projections based
on the Group's forecasts for the year ending 31 March 2019 which
are extrapolated for a further 4 years. The Group's latest
financial forecasts which cover a 3 year period, are reviewed by
the board.
Discount rates
The pre-tax discount rate used to calculate value is 8.3% (2017:
4%). The discount rate is derived from a benchmark calculated from
a basket of comparable businesses.
Cash flow assumptions
The key assumptions used for the value in use calculations are
those regarding discount rate, growth rates and expected changes in
margins. Changes in prices and direct costs are based on past
experience and expectations of future changes in the market. The
growth rate used in the calculation reflects the average growth
rate experienced by the Group for the industry.
The headroom compared to the carrying value of goodwill as at 31
March 2018 is GBP223m. Increasing the discount rate to 177% and
leaving all other factors the same would lead to the recoverable
amount being equal to the carrying value of the goodwill attributed
to the cash generating unit.
10 Property, Plant and Equipment
Computer, Fixtures Total
office and fittings
equipment
and motor
vehicles
GBP'000 GBP'000 GBP'000
Cost
Balance at 1 April 2016 303 214 517
Additions 50 - 50
----------- -------------- --------
Balance at 31 March
2017 and 1 April 2017 353 214 567
Additions 82 - 82
Balance at 31 March
2018 435 214 649
=========== ============== ========
Accumulated depreciation
and impairment
Balance at 1 April 2016 (235) (214) (449)
Charge for the period (43) - (43)
----------- -------------- --------
Balance at 31 March
2017 and 1 April 2017 (278) (214) (492)
Charge for the period (53) - (53)
----------- -------------- --------
Balance at 31 March
2018 (331) (214) (545)
=========== ============== ========
Carrying amount
As at 1 April 2016 68 - 68
----------- -------------- --------
As at 31 March 2017 75 - 75
----------- -------------- --------
As at 31 March 2018 104 - 104
----------- -------------- --------
All depreciation charges are included within administrative
expenses in the consolidated statement of comprehensive income.
11 Investments in Joint Ventures
The Group held the following investments
in Joint Ventures during the period:
Business Country
Name Activity of Incorporation Holding
Software England
Adviser Cloud Limited Company & Wales 50%
Carrying value as at:
31-Mar 31-Mar
2018 2017
GBP'000 GBP'000
At beginning of year (31) (7)
Share of retained (loss)
for the year 31 (24)
------------------ ----------
At end of year - (31)
================== ==========
The historical cost of the joint venture was
GBP1, when it was acquired in December 2015,
and has not changed since.
12 Trade and other receivables
31-Mar 31-Mar
2018 2017
GBP'000 GBP'000
Trade receivables 172 170
Amounts due
from related
parties 50 100
Prepayments
and accrued
income 1,602 1,289
Other receivables 227 1,188
Loan notes 401 401
2,452 3,148
======== ========
All trade receivable amounts are short term. All of the Group's
trade and other receivables have been reviewed for indicators of
impairment and where necessary, a provision for impairment
provided. The carrying value is considered a fair approximation of
their fair value. The value of the impairment charged to the income
statement is GBPnil: (2017: GBP1,601,000).
Trade receivable amounts are all held in Sterling.
13 Trade and other payables
Group Group
31-Mar 31-Mar
2018 2017
GBP'000 GBP'000
Trade payables 277 222
Amounts due to
related parties 32 -
Accruals 1,261 1,326
Deferred
income 216 158
Other payables 2,136 2,448
-------- --------
3,922 4,154
======== ========
The carrying values to trade payables, amounts due to related
parties, accruals and deferred income are considered reasonable
approximation of fair value.
14 Provisions
At 31 March 2017, Paradigm Mortgage Services LLP made a full
provision of GBP1,251,000 against the recoverability of amounts due
from Jargon Free Benefits LLP. Also as at 31 March 2017, Paradigm
Partners Limited made full provision of GBP350,000 against the
recoverability of amounts due from Amber Financial Investments
Limited, an entity controlled by Paul Hogarth.
The carrying value of the provision as at 31 March 2018 was
GBP1,601,000. (2017: GBP1,601,000) There has been no movement in
the carrying value during the year.
15 Borrowings
Group Group
31-Mar 31-Mar
2018 2017
GBP'000 GBP'000
Borrowings within
one year
Bank overdrafts - 697
----- --------
- 697
============================= ========
Bank overdrafts are repayable on demand. The bank overdrafts are
secured by a fixed and floating charge over all property and assets
present and future.
The average effective interest rate on bank overdrafts
approximates nil per cent per annum (2017: 3.2 per cent; 2016: 3.2
per cent). The Group is not subject to covenants under the terms of
its debt agreements.
16 Deferred taxation
GBP'000
At 1 April 2017 12
Recognised in profit or loss 3
At 31 March 2018 15
--------
At 1 April 2016 7
Recognised in profit or loss 5
At 31 March 2017 12
--------
17 Reconciliation of liabilities arising from financing activities
The changes in the Group's liabilities arising from financing
activities can be classified as follows:
Long-term Short-term Total
borrowings borrowings GBP000's
GBP000's GBP000's
At 1 April 2017 - 697 697
Cash flows:
* Repayment - (697) (697)
- - -
* Proceeds
Non-cash:
- - -
* Reclassification
At 31 March 2018 - - -
18 Equity
31-Mar 31-Mar
2018 2017
Number Number
Authorised, called up and fully
paid
GBP0.20
Ordinary
shares 55,907,513 55,907,513
55,907,513 55,907,513
=========== ===========
Each share in Tatton Asset Management PLC carries 1 vote and the
right to a dividend. Of the shares in issue, 49,497, 257 were
issued in June 2017 prior to the IPO in order to acquire the three
trading divisions and the remaining 6,410,256 were issued at the
IPO in July 2017.
As noted above, the 55,907,513 Ordinary shares were issued in
the current period.
This information is provided by RNS, the news service of the
London Stock Exchange. RNS is approved by the Financial Conduct
Authority to act as a Primary Information Provider in the United
Kingdom. Terms and conditions relating to the use and distribution
of this information may apply. For further information, please
contact rns@lseg.com or visit www.rns.com.
END
FR FFMPTMBBTBLP
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