TIDMTAM
RNS Number : 4072H
Tatton Asset Management PLC
15 November 2018
15 November 2018
THE INFORMATION CONTAINED WITHIN THIS ANNOUNCEMENT IS DEEMED BY
THE COMPANY TO CONSTITUTE INSIDE INFORMATION STIPULATED UNDER THE
MARKET ABUSE REGULATION (EU) NO. 596/2014. UPON THE PUBLICATION OF
THIS ANNOUNCEMENT VIA THE REGULATORY INFORMATION SERVICE, THIS
INSIDE INFORMATION IS NOW CONSIDERED TO BE IN THE PUBLIC
DOMAIN.
Tatton Asset Management PLC
Interim Results for the six months ended 30 September 2018
"Strong growth of AUM"
Tatton Asset Management plc (the "Group") (AIM: TAM), the
on-platform discretionary fund management (DFM) and support
services business for independent financial advisers (IFAs), today
issues its interim results for the six-month period ended 30
September 2018.
Highlights
-- Tatton Investment Management's ("TIML") discretionary assets
under management ("AUM") increased 29.5% to GBP5.7bn (2017:
GBP4.4bn)
-- Average AUM inflows increased to GBP90m per month, up from
GBP80m per month at September 2017
-- Group Revenue increased 15.7% to GBP8.45m (2017: GBP7.30m)
-- Adjusted Operating profit(1) up 8.3% to GBP3.35m (2017: GBP3.09m)
-- Reported profit before tax increased to GBP3.08m (2017: GBP0.56m)
-- Interim dividend increased 27.3% to 2.80p (2017: 2.20p)
-- Adjusted F.Dil EPS(2) increased 8.6% to 4.57p (2017: 4.21p)
-- Strong financial position, with net cash of GBP11.6m (2017: GBP10.5m)
Business Highlights
-- TIML delivered strong organic growth and client portfolio
returns ahead of peer group averages
-- TIML increased its member firms by 41.6% to 405 (2017: 286)
and number of accounts by 21.5% to 53.5k (2017: 44.1k)
-- Further investment and strengthened business development team
-- Pipeline of new IFA businesses continues to grow, as more
IFAs that are not clients of Paradigm Partners (or "PPL") use TIML.
IFAs that use PPL account for 42% of the total number of TIML firms
and 79% of the assets under management
-- Paradigm Mortgages (or "PMS"), the Group's mortgage and
protection distribution business, performed strongly, with gross
lending via its channels during the period of GBP4.0bn (2017:
GBP3.2bn), an increase of 25.0%. PMS now has 1,290 mortgage firms
using its services (2017: 1,143)
-- Balance sheet remains healthy with net assets as at 30
September 2018 totalling GBP13.9m (2017: 12.5m)
1. Operating profit before exceptional items and IFRS2
share-based costs
2. Adjusted for exceptional items and share based payments and
the tax thereon
Paul Hogarth, Chief Executive Officer, commented:
"We have delivered a positive first half with continued growth
in revenue, profit and earnings underlining the strong demand by
independent financial advisers for our low-cost discretionary fund
management service for the mass affluent. This is particularly
reflected in the strong growth of our assets under management and
in the increasing number of IFAs and clients we are working with.
We are an investment manager of choice for IFAs, who are attracted
by our low-cost DFM proposition and consistent investment
performance, while maintaining the highest investment management
standards. Paradigm Mortgages performed very well and continues to
gain market share and we look forward to the re-branding of
Paradigm Partners in January 2019. We remain confident of achieving
further progress through the rest of the financial year."
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 Hamnett
Media Enquiries
Powerscourt +44 (0) 20 7250 1446
Mazar Masud
For more information, please visit:
www.tattonassetmanagement.com
Analyst presentation
An analyst briefing is being held at 9.30am on 15 November 2018
at the offices of Zeus Capital, 10 Old Burlington St, London, W1S
3AG.
Strategic priorities and business objectives
The Group has delivered a good start to its first full year as a
listed business with good growth in both revenue and profits. We
continue to deliver increasing assets under management, new
customer acquisition and improving financial results against the
back drop of a volatile market. We operate three distinct
businesses each with its own strategic goals and priorities.
-- TIML, as the leading provider of platform only managed
portfolio services, our goal is to make discretionary investment
management accessible and affordable to Financial Advisers and
their clients. We look to leverage demand by lowering the burden on
the Financial Adviser, while lowering the cost for the client,
providing consistent investment returns coupled with the highest
levels of service;
-- PPL strives to be the leading provider of compliance support
and advice services to directly authorised financial advisers in
the UK; and
-- PMS aims to be the leading Mortgage Distributor in the UK
providing intermediaries with access to lenders and a full range of
mortgage related support services.
As the Group continues to develop we will also look to
supplement our organic growth with acquisitions that fit the size
and strategic direction of the business.
Group Results
Group revenue for the period increased 15.7% to GBP8.45m (2017:
GBP7.30m). Adjusted operating profit for the period increased 8.3%
to GBP3.35m (2017: GBP3.09m) with margins decreasing to 39.6%
(2017: 42.5%) as a consequence of central costs in 2017 not
reflecting a full year of increased governance and compliance costs
associated with being a listed company.
Operating profit after accounting for share based charges and
exceptional items increased to GBP2.97m (2017: GBP0.57m). Pre-tax
profit after exceptional items and share based charges increased
454.4% to GBP3.08m (2017: GBP0.56m).
Taxation charges for the period were GBP0.68m (2017: GBP0.43m).
This gives an effective tax rate of 22.1% when measured against
profit before tax. Adjusting for exceptional costs and share based
payments the effective tax rate is 19.7%.
The basic earnings per share was 4.30p (2017: 0.21p). When
adjusted for exceptional items and share based charges earnings per
share was 4.97p (2017: 4.36p) and earnings per share fully diluted
for the impact of share options was 4.57p (2017: 4.21p) an increase
of 8.6%.
Tatton Investment Management
TIML has had a very positive start to the new financial year
with continuing momentum increasing assets under management by
GBP1.3bn or 29.5% to GBP5.7bn (2017: GBP4.4bn). The strategy for
TIML remains to be the DFM provider of choice for the IFA
community. The platform agnostic approach of our discretionary
portfolio management service as a centralised investment
proposition continues to resonate with Financial Advisers as they
seek to grow and expand their businesses. This coupled with
consistent investment performance has seen the number of firms who
use TIML increase to 405 (2017: 286) an increase of 41.6% year on
year, and the number of associated clients increased 21.5% to 53.5k
clients (2017: 44.1k) over the same period.
The pipeline of new IFA businesses continues to grow as we
attract more IFAs that are not clients of PPL. IFA's that use PPL
account for 42% of the total number of firms and 79% of the assets
under management. Growth in new assets from new firms over the last
calendar year has been 81.5% and now accounts for over GBP1.2bn of
assets under management.
Revenue for TIML grew 45.0% to 4.03m (2017: GBP2.78m) and
operating profit grew 60.2% to GBP2.05m (2017: GBP1.28m). Margins
increased to 50.9% (2017: 46.0%) reflecting the operational gearing
of the business, we anticipate that this will continue as the
business continues to grow.
Paradigm Partners
The number of new firms in PPL grew 7.3% to 382 (2017: 356) in
the period. New firm growth continues to give the Group reach into
the IFA community and creates deep longstanding relationships
through the quality of our proposition and level of service.
While the new firms have grown in the period revenue year on
year was down 10.3% to GBP3.12m (2017: GBP3.48m) and operating
profit reduced 14.4% to GBP1.54m (2017: GBP1.80m). The period has
been a transition post the IPO and following the rebrand of the
business in early 2019 it is expected to return to growth.
Paradigm Mortgages
PMS's strategy is to continue to assist Financial Advisers and
intermediaries in benefiting from economies of scale in lending and
insurance provision through access to lenders covering the whole of
market, together with a full range of mortgage related support
services delivered by a diverse range of commercial partners.
While data released by UK Finance (formerly Council of Mortgage
Lenders) shows that gross mortgage lending fell slightly year on
year, PMS's completion volume over the period under review grew
26.4%, with applications also up 24.1%. Our focus on member growth
is key to this outperformance with 147 new firms joining PMS year
on year with the number of firms increasing to 1,290 (2017: 1,143)
at the end of the period.
Revenue for PMS grew 24.3% to GBP1.28m (2017: GBP1.03m) and
operating profit grew 35.8% to GBP0.72m (2017:
GBP0.53m). Margins increased to 56.3% (2017: 51.5%) as costs are maintained.
Exceptional items
The exceptional items in the period and in the prior year relate
to costs incurred as a consequence of the IPO in July 2017.
Balance sheet
The balance sheet remains healthy with net asset at 30 September
2018 totalling GBP13.9m (2017: GBP12.5m) reflecting the improving
profitability of the Group. Fixed assets have increased to GBP0.3m
(2017: GBP0.1m) and predominantly reflect the investment in IT
systems to support the growth and development of the Group.
Cash resources
The Group continued to see healthy cash generation and closing
net cash was GBP11.6m (2017: GBP10.5m).
Net cash generated from operating operations was GBP4.4m (2017:
GBP1.0m). During the period net cash interest received was GBP0.1m
and relates to interest received on a GBP0.5m loan note which is
redeemable on 28 December 2018. Income tax of GBP0.69m (2017: nil)
was paid during the period and dividends paid in the period of
GBP2.46m related to the prior year final dividend.
At the time of the successful IPO last 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.
Dividend
The board is pleased to recommend an interim dividend of 2.8p
per share, an increase of 27.3% on the prior period interim
dividend. The interim dividend reflects both our cash performance
and our underlying confidence in the business. The interim dividend
of 2.8p per share will be paid on 14 December 2018 to shareholders
on the register at close of business on 23 November 2018 and will
have an ex-dividend date of 22 November 2018. In accordance with
IFRS, the interim dividend has not been included as a liability in
this interim statement.
Employee incentives
As the Group continues to grow the Board believe it is important
to align employee remuneration and incentives with the interests of
shareholders, principally by increasing the level of employee
ownership of Tatton Asset Management Plc shares. In July 2017 the
board approved an Enterprise Management Initiative (EMI) scheme for
key staff and executives, and an all-employee save as you earn
(SAYE) share save scheme. Both schemes allow staff to benefit from
the execution of appropriate long-term strategies and growth in
shareholder value over multi-year periods.
In August 2018 the board approved extensions of both schemes.
New awards made under the EMI scheme will be in the form of zero
cost options which give key staff and executives the opportunity to
own shares at the end of a three-year period. The SAYE scheme will
allow participating employees to acquire ordinary shares using
savings of up to GBP500 per month.
Business risk
The Board identified principle risks and uncertainties which may
have a material impact on the Group's performance in the Group's
2018 Annual Report and Accounts (pages 16 to 17) and believe that
the nature of these risks remains largely unchanged at the half
year. The board will continue to monitor and manage identified
principle risks throughout the second half of the year.
The Board continues to closely monitor and evaluate the
potential consequences of Brexit. It is the Boards assessment that
direct impacts will be manageable due to the Group's strategic
focus on UK markets, but remain conscious that the process may
result in unforeseen challenges to which the Board will remain
vigilant.
Going concern
The Directors are satisfied that the Group has sufficient
resources to continue in operation for the foreseeable future, a
period not less than 12 months from the date of this report.
Accordingly, they continue to adopt the going concern basis in
preparing these condensed financial statements.
Summary and outlook
The Group has delivered a good first half performance with
growth in revenue, profit and earnings. Growth is supported by
strong growth in asset under management and in partner firms and
clients as we continue to support the Financial Adviser community
and help to grow their businesses. We will continue to maintain a
disciplined approach to executing our strategy of organic growth
and are excited by the opportunities that exist in our chosen
markets in the Financial Service sector. The Board remains
optimistic regarding the prospects of the Group.
Consolidated Statement of Total Comprehensive Income
For the six months ended 30 September 2018
Unaudited Unaudited
six months six months Audited
ended ended year ended
30-Sep 30-Sep 31-Mar
2018 2017 2018
Note (GBP'000) (GBP'000) (GBP'000)
Revenue 8,445 7,298 15,507
Administrative expenses (5,095) (4,204) (8,981)
Adjusted operating profit (before
separately disclosed items)(1) 3,350 3,094 6,526
---- ----------------
- Share-based payment costs 16 (365) (892) (986)
- Exceptional items 5 (13) (1,632) (1,964)
Total administrative expenses (5,473) (6,728) (11,931)
Operating profit 2,972 570 3,576
Finance income/(costs) 6 112 (14) (26)
Profit before tax 3,084 556 3,550
Taxation charge 7 (681) (426) (1,110)
Profit for the year on continuing
operations 2,403 130 2,440
Loss related to disposal of discontinued
operations - (14) (164)
Profit attributable to shareholders 2,403 116 2,276
Earnings per share - Basic 8 4.30p 0.21p 4.07p
Earnings per share - Diluted 8 3.95p 0.20p 3.85p
Adjusted earnings per share - Basic2 8 4.97p 4.36p 9.64p
Adjusted earnings per share - Diluted2 8 4.57p 4.21p 9.12p
1 Adjusted for exceptional items and share based payments. See note 16.
2 Adjusted for exceptional items and share based payments and the tax thereon. See note 16.
There were no other recognised gains or losses other than those
recorded above in the current or prior period and therefore a
statement of other comprehensive income has not been presented.
Consolidated Balance Sheet
For the six months ended 30 September 2018
Unaudited Unaudited Audited
Period
Period ended ended Year ended
30-Sep 30-Sep 31-Mar
2018 2017 2018
Note (GBP'000) (GBP'000) (GBP'000)
Non-current assets
Goodwill 10 4,917 4,917 4,917
Property, plant and equipment 11 310 88 104
Investments in joint venture - (46) -
Total non-current assets 5,227 4,959 5,021
Current assets
Trade and other receivables 3,410 2,037 2,452
Cash and cash equivalents 11,622 10,520 10,630
Total current assets 15,032 12,557 13,082
Total assets 20,259 17,516 18,103
Current liabilities
Trade and other payables (5,775) (3,704) (3,922)
Corporation tax (600) (1,302) (605)
Total current liabilities (6,375) (5,006) (4,527)
Non-current liabilities
Deferred tax liabilities (15) - (15)
Total non-current liabilities (15) - (15)
Total liabilities (6,390) (5,006) (4,542)
Net assets 13,869 12,510 13,561
Equity attributable to equity holders
of the company
Share capital 15 11,182 11,182 11,182
Share premium account 8,718 8,718 8,718
Other reserve 2,041 2,014 2,041
Merger reserve (28,968) (8,968) (28,968)
Retained earnings 20,896 (436) 20,588
Total equity 13,869 12,510 13,561
Paul Edwards
Director
Company registration number: 10634323
Consolidated Statement of Changes in Equity
For the six months ended 30 September 2018
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 2017 11,182 8,718 2,133 (18,960) - 3,073
Profit and total
comprehensive
income - - 5981 - (482) 116
Dividends - - (1,564) - - (1,564)
Share based payments - - 846 - 46 892
Adjustments related
to merger
Accounting - - 1 (8) - (7)
Issue of share capital - - - 10,000 - 10,000
At 30 September 2017 11,182 8,718 2,014 (8,968) (436) 12,510
Profit and total
comprehensive
income - - - - 2,160 2,160
Dividends - - - - (1,230) (1,230)
Share based payments - - - - 94 94
Adjustments related
to merger
accounting - - 27 (20,000) 20,000 27
At 31 March 2018 11,182 8,718 2,041 (28,968) 20,588 13,561
Profit and total
comprehensive
income - - - - 2,403 2,403
Dividends - - - - (2,460) (2,460)
Share based payments - - - - 365 365
At 30 September 2018 11,182 8,718 2,041 (28,968) 20,896 13,869
1 Retained profits have been put into pre and post IPO reserves
for the purpose for identifying distributable reserves, both the
other reserve and the merger reserve are non-distributable.
Consolidated Statement of Cash Flows
For the six months ended 30 September 2018
Unaudited Unaudited Audited
six months six months year
ended ended ended
30-Sep 30-Sep 31-Mar
2018 2017 2018
Note (GBP'000) (GBP'000) (GBP'000)
Operating activities
Profit for the period 2,403 116 2,276
Adjustments:
Income tax expense 681 426 1,110
Depreciation of property, plant and
equipment 46 24 53
Share-based payment expense 365 892 986
Share of (profit)/loss from joint
venture 14 (31)
Finance (income)/cost (112) 14 26
Changes in:
Change in trade & other receivables (958) (71) (544)
Change in trade & other payables 1,853 (353) (188)
Cash generated from operations 4,278 1,062 3,688
Cash generated from operations before
exceptional costs 4,291 2,694 5,652
Exceptional costs 5 (13) (1,632) (1,964)
Cash generated from operations 4,278 1,062 3,688
Income Tax paid (687) (1,374)
Net cash from operating activities 3,591 1,062 2,314
Investing activities
Purchase of property, plant and equipment (251) (37) (82)
Net cash used in investing activities (251) (37) (82)
Financing activities
Proceeds from the issue of shares 10,000 10,000
Stamp duty paid on share transfer (10)
Finance (income)/cost 112 (14) (26)
Dividends paid (2,460) (481) (1,556)
Net cash used in financing activities (2,348) 9,505 8,408
Net increase in cash and cash equivalents 992 10,530 10,640
Cash and cash equivalents at beginning
of period 10,630 (10) (10)
Net cash and cash equivalents at
end of period 11,622 10,520 10,630
Notes to the Consolidated Financial Statements
1 General information
Tatton Asset Management plc ("the Company") is a public company
limited by shares. The address of the registered office is Paradigm
House, Brooke Court, Lower Meadow Road, Wilmslow, SK9 3ND, United
Kingdom. The registered number is 10634323.
The Group comprises of the Company and its subsidiaries. The
Group's principal activities are discretionary fund management, the
provision of compliance and support services to independent
financial advisers (IFAs), the provision of mortgage advisor
support services and the marketing and promotion of Tatton Oak
funds.
The condensed consolidated interim financial statements for the
six months ended 30 September 2018 do not constitute statutory
accounts as defined under Section 434 of the Companies Act 2006.
The Annual Report and Financial Statements (the 'Financial
Statements') for the year ended 31 March 2018 were approved by the
Board on 27 June 2018 and have been delivered to the Registrar of
Companies. The Auditor, Deloitte LLP, reported on these financial
statements; their report was unqualified, did not contain an
emphasis of matter paragraph and did not contain statements under
s498 (2) or (3) of the Companies Act 2006.
News updates, regulatory news, and financial statements can be
viewed and downloaded from the Group's website,
www.tattonassetmanagement.com. Copies can also be requested from:
The Company Secretary, Tatton Asset Management plc, Paradigm House,
Brooke Court, Lower Meadow Road, Wilmslow, SK9 3ND.
2 Accounting policies
The principal accounting policies applied in the presentation of
the annual financial statements are set out below.
2.1 Basis of preparation
The unaudited condensed consolidated interim financial
statements for the six months ended 30 September 2018 have been
prepared in accordance with IAS 34 'Interim Financial Reporting' as
adopted by the European Union. The condensed consolidated interim
financial statements should be read in conjunction with the
Financial Statements for the year ended 31 March 2018, which have
been prepared in accordance with International Financial Reporting
Standards (IFRSs) as adopted by the European Union. The condensed
consolidated interim financial statements were approved for release
on 15 November 2018.
The condensed consolidated interim financial statements have
been prepared on a going concern basis and prepared on the
historical cost basis.
The condensed consolidated interim 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.
IFRS 9 Financial Instruments and IFRS 15 Revenue from Contracts
with Customers became applicable from 1 January 2018. Neither
standard has had a significant impact on the Group's financial
statements. The key accounting policies set out below have, unless
otherwise stated, been applied consistently to all periods
presented in the consolidated financial statements.
2.2 Going Concern
These financial statements have been prepared on a going concern
basis. The Directors have prepared cash flow projections and are
satisfied that the Group has adequate resources to continue in
operational existence for the foreseeable future. The Group's
forecasts and projections, which take into account reasonably
possible changes in trading performance, show that the Group will
be able to operate within the level of its current facilities.
Accordingly, the Directors continue to adopt the going concern
basis in preparing these condensed consolidated interim financial
statements.
2.3 Basis of consolidation
On 23 February 2017, the Company was incorporated under the name
Tatton Asset Management Limited. On 19 June 2017, Tatton Asset
Management Limited acquired the entire share capital of Nadal Newco
Limited via a share for share exchange with the shareholders of
Nadal Newco Limited. On 19 June 2017, Tatton Asset Management
Limited was re-registered as a public company with the name Tatton
Asset Management plc. Following the share for share exchange
referred to above, Tatton Asset Management plc became the ultimate
legal parent of the Group.
In the absence of an IFRS which specifically deals with similar
transactions, management judge it appropriate to refer to other
similar accounting frameworks for guidance in developing an
accounting policy that is relevant and reliable. The Directors
consider the share for share exchange transaction to be a group
reconstruction rather than a business combination in the context of
IFRS 3 (revised), 'Business Combinations', which has been accounted
for using merger accounting principles. Therefore, although the
share for share exchange did not occur until 19 June 2017, the
consolidated financial statements of Tatton Asset Management plc
are presented as if the group of companies had always been part of
the same group.
Accordingly, the following treatment was applied in respect of
the share for share exchange:
-- The assets and liabilities of Tatton Asset Management Limited
and its subsidiaries were recognised in the consolidated financial
statements at the pre-combination carrying amounts, without
restatement to fair value; and
-- The retained losses and other equity balance recognised in
the consolidated financial statements for the year ended
31 March 2018 reflect the retained losses and other equity
balances of Tatton Asset Management plc and its subsidiaries
recorded before the share for share exchange. However, the equity
structure (share capital and share premium balances) shown in the
consolidated financial statements reflects the equity structure of
the legal parent (Tatton Asset Management plc), including the
equity instruments issued under the share for share exchange. The
resulting difference between the parent's capital and the acquired
Group's capital has been recognised as a component of equity being
the 'merger reserve'.
The Company had no significant assets, liabilities or contingent
liabilities of its own at the time of the share for share exchange
and no such consideration was paid.
2.4 Standards in issue not yet effective
The following IFRS and IFRIC Interpretations have been issued
but have not been applied by the Group in preparing the historical
financial information, as they are not as yet effective. The Group
intends to adopt these Standards and Interpretations when they
become effective, rather than adopt them early.
-- IFRS 16, 'Leases', effective date 1 January 2019.
-- Annual improvements to IFRS 2014 - 2016 cycle - Relating to
IFRS 1 First time adoption of IFRS and IAS 28 Investments in
associates and joint ventures.
A number of IFRS and IFRIC interpretations are also currently in
issue which are not relevant for the Group's activities and which
have not therefore been adopted in preparing the annual financial
statements.
The Directors do not expect that the adoption of the Standards
listed above will have a material impact on the financial
statements of the Group in future periods, with the possible
exception of IFRS 16.
IFRS 16 (effective for the year beginning 1 April 2019) will
require all leases to be recognised on the balance sheet.
Currently, IAS 17 - Leases only requires leases categorised as
finance leases to be recognised on the balance sheet.
Management will perform a detailed review of the impact of the
standard during the year ending 31 March 2019.
Notes to the Consolidated Financial Statements continued
2 Accounting policies continued
2.5 Revenue
IFRS 15 'Revenue from Contracts with Customers' was issued in
May 2014, is effective for accounting periods beginning on or after
1 January 2018 and was adopted by the Group on 1 April 2018.
IFRS 15 has not materially impacted the way revenue from
customer contracts is recognised. Revenue is measured at the fair
value of the consideration received or receivable and represents
amounts receivable for services provided in the normal course of
business, net of discounts, VAT and other sales related taxes.
Revenue is reduced for estimated rebates and other similar
allowances. Under IFRS 15 customer contracts are broken down in to
separate performance obligations, with contractual revenues being
allocated to each performance obligation and revenue recognised on
a basis consistent with the transfer of control of goods or
services. Additional disclosure requirements include the reporting
of disaggregated revenues, and the recognition of contract assets
and contract liabilities on the face of the statement of financial
position.
The Group's revenue is made up of the following principal
revenue streams:
-- Fees charged to IFAs for compliance consultancy services,
which is recognised at the point at which the service is
performed.
-- Fees for providing investment platform services. Revenue is
recognised daily based on the Assets under influence (AUI) held on
the relevant investment platform.
-- Fees for discretionary fund management services in relation
to on-platform investment Assets Under Management (AUM). Revenue
recognised daily based on the AUM.
-- Fees for mortgage related services including commissions from
mortgage and other product providers and referral fees from
strategic partners. Commission is recognised at the point at which
the service is performed.
-- Fees for marketing services provided to providers of mortgage
and investment products, which is recognised at the point at which
the service is performed.
Contracts for marketing services are fixed for twelve month
periods. Contracts for all other services are not fixed length and
can be terminated by the customer at any time, the Group does
therefore not expect to have material contract assets or
liabilities to recognise on the balance sheet. An assessment of the
impact of IFRS15 on the Group will be included as a disclosure in
the financial statements for the year ended 31 March 2019.
2.6 Business combinations
Goodwill is not amortised but is reviewed for impairment at
least annually. For the purpose of impairment testing, goodwill is
allocated to each of the Group's cash-generating units expected to
benefit from the synergies of the combination. Cash-generating
units to which goodwill has been allocated are tested for
impairment annually, or more frequently when there is an indication
that the unit may be impaired. If the recoverable amount of the
cash-generating unit is less than the carrying amount of the unit,
the impairment loss is allocated first to reduce the carrying
amount of any goodwill allocated to the unit and then to the other
assets of the unit pro-rata on the basis of the carrying amount of
each asset in the unit. An impairment loss recognised for goodwill
is not reversed in a subsequent period.
Acquisitions of subsidiaries and businesses are accounted for
using the acquisition method. The consideration transferred in a
business combination is measured at fair value, which is calculated
as the sum of the acquisition-date fair values of assets
transferred to the Group, liabilities incurred by the Group to the
former owners of the acquiree and the equity interest issued by the
group in exchange for control of the acquiree. Acquisition-related
costs are recognised in profit or loss as incurred.
At the acquisition date, the identifiable assets acquired and
the liabilities assumed are recognised at their fair value at the
acquisition date, except that: - deferred tax assets or liabilities
and assets or liabilities related to employee benefit arrangements
are recognised and measured in accordance with IAS 12 Income Taxes
and IAS 19 Employee Benefits respectively; and assets (or disposal
groups) that are classified as held for sale in accordance with
IFRS 5 Non-current Assets Held for Sale and Discontinued Operations
are measured in accordance with that Standard.
Goodwill is measured as the excess of the sum of the
consideration transferred, the amount of any non-controlling
interests in the acquired, and the fair value of the acquirer's
previously held equity interest in the acquiree (if any) over the
net of the acquisition-date amounts of the identifiable assets and
liabilities assumed. If, after reassessment, the net of the
acquisition-date amounts of the identifiable assets acquired and
liabilities assumed exceeds the sum of the consideration
transferred, the amount of any non-controlling interests in the
acquiree and the fair value of the acquirer's previously held
interest in the acquiree (if any), the excess is recognised
immediately in profit or loss as a bargain purchase gain.
Notes to the Consolidated Financial Statements continued
2 Accounting policies continued
When the consideration transferred by the Group in a business
combination includes assets or liabilities resulting from a
contingent consideration arrangement, the contingent consideration
is measured at its acquisition-date fair value and included as part
of the consideration transferred in a business combination. Changes
in fair value of the contingent consideration that qualify as
measurement period adjustments are adjusted retrospectively, with
corresponding adjustments against goodwill. Measurement period
adjustments are adjustments that arise from additional information
obtained during the 'measurement period' (which cannot exceed one
year from the acquisition date) about facts and circumstances that
existed at the acquisition date.
The subsequent accounting for changes in fair value of the
contingent consideration that do not qualify as measurement period
adjustments depends on how the contingent consideration is
classified. Contingent consideration that is classified as equity
is not remeasured at subsequent reporting dates and its subsequent
settlement is accounted for within equity. Contingent consideration
that is classified as an asset or a liability is remeasured at
subsequent reporting dates at fair value with the corresponding
gain or loss being recognised in profit or loss.
When a business combination is achieved in stages, the Group's
previously-held interest in the acquired entity is remeasured to
its acquisition date fair value and the resulting gain or loss, if
any, is recognised in profit or loss. Amounts arising from
interests in the acquiree prior to the acquisition date that have
previously been recognised
in other comprehensive income are reclassified to profit or
loss, where such treatment would be appropriate if that interest
were disposed of.
If the initial accounting for a business combination is
incomplete by the end of the reporting period in which the
combination occurs, the Group reports provisional amounts for the
items for which the accounting is incomplete. Those provisional
amounts are adjusted during the measurement period (see above), or
additional assets or liabilities are recognised, to reflect new
information obtained about facts and circumstances that existed as
of the acquisition date that, if known, would have affected the
amounts recognised as of that date.
2.7 Share-based payments
The Group issues equity-settled share-based payments to certain
employees. Equity-settled share-based payments are measured at fair
value at the date of grant. The fair value determined at the grant
date of the equity-settled share-based payments is expensed on a
straight-line basis over the vesting period, based on the Group's
estimate of shares that will eventually vest. Fair value is
measured by use of the Black-Scholes model or Monte Carlo model as
appropriate.
2.8 Operating segments
The Group comprises the following three operating segments which
are defined by trading activity:
-- TIML - investment management services.
-- PPL - the provision of compliance and support services to
IFAs.
-- PMS - the provision of mortgage advisor support services.
The Board is considered to be the chief operating decision
maker.
2.9 Significant judgements, key assumptions and estimates
In the process of applying the Group's accounting policies,
which are described above, management have made judgements and
estimations about the future that have the most significant effect
on the amounts recognised in the financial statements. The
estimates and underlying assumptions are reviewed on an ongoing
basis. Revisions to accounting estimates are recognised in the
period in which the estimate is revised if the revision affects
only that period. If the revision affects both current and future
periods it is revised in the period of the revision and in future
periods. Changes for accounting estimates would be accounted for
prospectively under IAS10. There are no critical accounting
estimates based on sources of estimation uncertainty.
The following judgements have the most significant effect on the
financial statements.
Merger accounting
When applying the judgement in relation to applying merger
accounting or acquisition accounting there were a
number of elements taken into consideration. Key elements were
that it is typically the preferred option, but also merger
accounting will usually present more useful information for the
users of the financial statements by presenting the results of a
continuing business.
Notes to the Consolidated Financial Statements continued
2.10 Trade receivables
Trade receivables do not carry interest and are stated at
amortised cost as reduced by appropriate allowances for estimated
irrecoverable amounts. They are recognised when the Group's right
to consideration is only conditional on the passage of time.
Allowances incorporate an expectation of life-time credit losses
from initial recognition and are determined using an expected
credit loss approach.
2.11 Impairment
IFRS 9 mandates the use of an expected credit loss model to
calculate impairment losses rather than an incurred loss model, and
therefore it is not necessary for a credit event to have occurred
before credit losses are recognised. The Group has elected to
measure loss allowances utilising probability-weighted estimates of
credit losses for trade receivables at an amount equal to lifetime
expected credit losses. As the Group's financial assets primarily
comprise its portfolio of trade receivables which have a consistent
history of low levels of impairment, the inclusion of specific
expected credit loss considerations did not have a material impact
on transition.
2.12 Alternative performance measures
In reporting financial information, the Group presents
alternative performance measures, 'APMs' which are not defined or
specified under the requirements of IFRS. The Group believes that
these APMs provide users with additional helpful information on the
performance of the business. The APMs are consistent with how the
business performance is planned and reported within the internal
management reporting to the Board. Some of these measures are also
used for the purpose of setting remuneration targets. Each of the
APMs, used by the Group are set out on page 27 including
explanations of how they are calculated and how they can be
reconciled to a statutory measure where relevant.
3 Segment reporting
Information reported to the Board of Directors as the chief
operating decision maker for the purposes of resource allocation
and assessment of segmental performance is focused on the type of
revenue. The principal types of revenue are discretionary fund
management through Tatton Investment Management (or "TIML"), the
provision of compliance and support services to independent
financial advisors, Paradigm Partners (or "PPL"), the provision of
mortgage advisor support services through Paradigm Mortgages
Services (or "PMS").
The Group's reportable segments under IFRS 8 are therefore TIML,
PPL, PMS, and "Central" which contains the Operating Group's
central overhead costs.
The principal activity of TIML is that of Discretionary Fund
Management ("DFM") of investments on-platform.
The principal activity of PPL is that of provision of support
services to Independent IFAs.
The principal activity of PMS is that of a mortgage and
protection distributor.
For management purposes, the Group uses the same measurement
policies used in its financial statements.
The following is an analysis of the Group's revenue and results
by reportable segment:
TIML PPL PMS Central Group
============================
Period ended 30 September
2018 (GBP'000) (GBP'000) (GBP'000) (GBP'000) (GBP'000)
============================ ========= ========= ========= ========= =========
Revenue 4,025 3,118 1,278 24 8,445
Administrative expenses (1,975) (1,581) (560) (979) (5,095)
Adjusted Operating profit 2,050 1,537 718 (955) 3,350
IFRS2 share based payments (95) - - (270) (365)
Exceptional charges - (13) - - (13)
Operational profit 1,955 1,524 718 (1,225) 2,972
Finance (costs)/income - 117 (6) 1 112
Profit/loss before tax 1,955 1,641 712 (1,224) 3,084
Notes to the Consolidated Financial Statements
continued
3 Segment reporting continued
TIML PPL PMS Central Group
Period ended 30 September
2017 (GBP'000) (GBP'000) (GBP'000) (GBP'000) (GBP'000)
------------------------------ --------- --------- --------- --------- ---------
Revenue 2,779 3,475 1,032 12 7,298
Administrative expenses (1,499) (1,680) (501) (524) (4,204)
Adjusted Operating Profit 1,280 1,795 531 (512) 3,094
IFRS2 share based payments - (845) - (47) (892)
(45) 245 - (1,832) (1,632)
Exceptional charges
1,235 1,195 531 (2,391) 570
Operating profit
Finance costs - (10) (4) - (14)
Profit before tax 1,235 1,185 527 (2,391) 556
TIML PPL PMS Central Group
============================
Year ended 31 March
2018 (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
All turnover arose in the United Kingdom.
4 Operating profit
The operating profit and the profit before taxation are stated
after:
30-Sep 30-Sep 31-Mar
2018 2017 2018
(GBP'000) (GBP'000) (GBP'000)
Operating lease rentals - land and buildings 126 96 210
Operating lease rentals - equipment and
vehicles - 5 9
Depreciation: property, plant and equipment 46 24 53
Separately disclosed items (note 5) 378 2,524 2,950
Services provided to the Group's auditor
Audit of the statutory consolidated and
company financial statements of Tatton
Asset
Management PLC 17 15 31
Audit of subsidiaries 20 18 37
Other fees payable to auditor:
Tax services 20 225 225
Non-audit services 15 443 443
Total audit fees in the six months to September 2018 were
GBP37,000 (2017: GBP33,000) Total non-audit fees payable to the
auditor were GBP20,000 (2017: GBP668,000).
Non audit services relate mainly to the IPO in July 2017.
5 Separately disclosed items
30-Sep 30-Sep 31-Mar
2018 2017 2018
(GBP'000) (GBP'000) (GBP'000)
IPO costs 13 1,882 1,964
Release of unused deferred income provision - (250) -
Total exceptional items 13 1,632 1,964
Share based payments 365 892 986
Total separately disclosed items 378 2,524 2,950
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 Consolidated
Statement of total comprehensive income.
6 Finance costs
30-Sep 30-Sep 31-Mar
2018 2017 2018
(GBP'000) (GBP'000) (GBP'000)
Bank interest (paid)/income 126 2 (1)
Bank charges (14) (16) (25)
112 (14) (26)
7 Taxation
30-Sep 30-Sep 31-Mar
2018 2017 2018
(GBP'000) (GBP'000) (GBP'000)
Current tax expense
Current tax on profits for the period 681 426 1,107
681 426 1,107
Deferred tax expense
Origination and reversal of temporary
differences - - 3
Total tax expense 681 426 1,110
The reasons for the difference between the actual tax charge for
the year and the standard rate of corporation tax in the
UK applied to profit for the year as follows:
30-Sep 30-Sep 31-Mar
2018 2017 2018
(GBP'000) (GBP'000) (GBP'000)
Profit before taxation 3,084 542 3,550
Tax at UK corporation tax rate of 19% 586 103 675
Expenses not deductible for tax purposes 115 321 279
Capital allowances in excess of deprecation (20) 2 (5)
Chargeable gains - - 161
Total tax expense 681 426 1,110
The UK corporation tax rate 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.
8 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
Sep-2018 Sep-2017 Mar-2018
Basic
Weighted average number of shares in
issue 55,907,513 55,907,513 55,907,513
Diluted
Share options 6,192,450 4,394,259 4,394,259
Weighted average number of shares (diluted) 60,822,560 57,948,562 59,121,943
Notes to the Consolidated Financial Statements continued
8 Earnings per share and dividends continued
30-Sep 30-Sep 31-Mar
2018 2017 2018
(GBP'000) (GBP'000) (GBP'000)
Earnings attributable to ordinary shareholders
Basic and diluted profit for the period 2,403 116 2,276
Share based payments - IFRS2 option
charges 365 892 986
Exceptional costs - see note 5 13 1,632 1,964
Tax impact of adjustments - (201) -
Adjusted basic and diluted profits
for the period and attributable earnings 2,781 2,439 5,226
Earnings per share (pence) (basic) 4.30 0.21 4.07
Earnings per share (pence) (diluted) 3.95 0.20 3.85
Adjusted earnings per share (pence)
(basic) 4.97 4.36 9.64
Adjusted earnings per share (pence)
(diluted) 4.57 4.21 9.12
Dividends
In January 2018 Tatton Asset Management plc paid an interim
dividend of GBP1,229,965 (2017: GBPnil) and in August 2018 paid a
final dividend of GBP2,459,931 (2017: GBPnil) to its equity
shareholders.
This represents a total dividend payment of 6.6p per share.
In the prior period dividends of GBP1,563,575 relating to the
Group's pre-IPO activity were paid prior to the IPO, which occurred
in July 2017.
9 Staff costs
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 IAS 24 Related Party
Disclosures.
30-Sep 30-Sep 31-Mar
2018 2017 2018
(GBP'000) (GBP'000) (GBP'000)
Wages, salaries and bonuses 434 429 875
Social security costs 59 58 111
Pension costs 13 10 20
Benefits in kind 1 1 3
507 498 1,009
In addition to the remuneration above, the non-executive
Chairman and non-executive directors have submitted invoices for
their fees as follows:
30-Sep 30-Sep 31-Mar
2018 2017 2018
(GBP'000) (GBP'000) (GBP'000)
Total fees 80 39 118
----------- --------- --------- ---------
10 Goodwill and intangibles
Goodwill
(GBP'000)
Cost
Balance at 31 March 2017 4,917
Adjustment for provisional fair value
of consideration -
Balance at 30 September 2017 4,917
Adjustment for provisional fair value
of consideration -
Balance at 31 March 2018 4,917
Adjustment for provisional fair value
of consideration -
Additions -
Balance at 30 September 2018 4,917
Carrying value
Balance at 31 March 2018 4,917
Balance at 30 September 2017 4,917
Balance at 30 September 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 consisting 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 Total
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 30
September 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 number of comparable businesses.
Notes to the Consolidated Financial Statements continued
10 Goodwill and intangibles continued
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 30
September 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.
11 Property, plant and equipment
Computer, office
Fixtures
equipment and and
motor vehicles fittings Total
(GBP'000) (GBP'000) (GBP'000)
Cost
Balance at 1 April 2017 353 214 567
Additions 37 - 37
---------------------------------------- ---------------- --------- ---------
Balance at 30 September 2017 390 214 604
Additions 45 - 45
Balance at 31 March 2018 435 214 649
Additions 133 119 252
Balance at 30 September 2018 568 333 901
Accumulated depreciation and impairment
Balance at 1 April 2017 (278) (214) (492)
Charge for the period (24) - (24)
Balance at 30 September 2017 (302) (214) (516)
Charge for the period (29) - (29)
---------------------------------------- ---------------- --------- ---------
Balance at 31 March 2018 (331) (214) (545)
Charge for the period (42) (4) (46)
Balance at 30 September 2018 (373) (218) (591)
Carrying amount
As at 1 April 2017 75 - 75
As at 30 September 2017 88 - 88
As at 31 March 2018 104 - 104
As at 30 September 2018 195 115 310
All depreciation charges are included within administrative
expenses in the Consolidated Statement of Total Comprehensive
Income.
Notes to the Consolidated Financial Statements continued
12 Provisions
At 31 March 2017, Paradigm Mortgage Services LLP made 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 ("PPL") 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 30 September 2018 was
GBP1,601,000. (2017: GBP1,601,000) There has been no movement in
the carrying value during the period. A write-off equal to the
amount of the provision is expected to be incurred in the second
half of the year ended 31 March 2019.
13 Financial instruments
The Group finances its operations through a combination of cash
resource and other borrowings. Short term flexibility is satisfied
by overdraft facilities in PPL which are repayable on demand.
Fair value estimation IFRS 7 requires disclosure of fair value
measurements of financial instruments by level of the following
fair value measurement hierarchy:
-- Quoted prices (unadjusted) in active markets for identical
assets or liabilities (level 1).
-- Inputs other than quoted prices included within level 1 that
are observable for the asset or liability, either directly (that
is, as prices) or indirectly (that is, derived from prices) (level
2).
-- Inputs for the asset or liability that are not based on
observable market data (that is, unobservable inputs) (level
3).
The Group holds loan notes due from Perspective Financial Group
Limited (see note 17). Due to the short term nature of the Loan
notes, the carrying value is a reasonable approximation of their
fair value.
The loan notes are repayable on demand, carry an interest rate
of 6%, and are classified as level 2.
Interest rate risk
The Group finances its operations through a combination of
retained profits and bank overdrafts. The Group has an exposure to
interest rate risk, as the overdraft facility is at an interest
rate of 3.2 % above the base rate. At 30 September 2018 total
borrowings were GBPnil.
Notes to the Consolidated Financial Statements continued
14 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
borrowings borrowings Total
('GBP000) (GBP'000) (GBP'000)
At 1 April 2017 - 697 697
Cash flows:
Repayment - (697) (697)
Proceeds - - -
Non-cash:
Reclassification - - -
At 30 September 2017 - - -
At 31 March 2018 - - -
At 30 September 2018 - - -
15 Equity
30-Sep 30-Sep 31-Mar
2018 2017 2018
(number) (number) (number)
Authorised, called up and fully paid
GBP0.20 Ordinary shares 55,907,513 55,907,513 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 prior period. See note 2.3 for an explanation of merger
accounting treatment relating to earlier periods.
16 Share based payment
During the year, a number of share based payment schemes and
share options schemes have been utilised by the company, all but
two of which ceased as a result of the IPO in July 2017. The
remaining live schemes are described under
(a) current schemes, below, while those schemes ceasing as a
result of the IPO are described under (b) schemes closed prior to
the IPO of Tatton Asset Management plc on pages 24 and 25.
(a) Current Schemes
(i) Tatton Asset Management plc EMI Scheme ("TAM EMI
Scheme")
On 7 July 2017 the Group launched an EMI share option scheme
relating to shares in Tatton Asset Management plc to enable senior
management to participate in the equity of the Company. A total of
3,022,733 options with a weighted average exercise price of GBP1.83
were granted during the prior period, each exercisable in July
2020. A total of 111,815 options were forfeited in the period.
The scheme was extended on 8 August 2018 and a total of
1,720,138 zero cost options were granted during the period, each
exercisable in August 2021. No options were exercised or forfeited
or expired in the period. A total of 4,631,056 options remain
outstanding at 30 September 2018, none of which are currently
exercisable.
The options vest in July 2020 or August 2021 provided certain
performance conditions and targets, set prior to grant, have been
met.
If the performance conditions are not met, the options
lapse.
Within the accounts of the Company, the fair value at grant date
is estimated using the appropriate models including both Black
Scholes methodology and Monte Carlo modelling methodologies.
Number of Weighted
share options average
granted price
=================================
(number) (GBP)
================================= ============= ========
Outstanding at 1 April 2017 - -
Granted during the period 3,022,733 1.83
Forfeited during the period - -
Exercised during the period - -
Outstanding at 30 September 2017 3,022,733 1.83
Exercisable at 30 September 2017 - -
--------------------------------- ------------- --------
Outstanding at 1 October 2017 3,022,733 1.83
Granted during the period - -
Forfeited during the period - -
Exercised during the period - -
Outstanding at 31 March 2018 3,022,733 1.83
Exercisable at 31 March 2018 - -
Outstanding at 1 April 2018 3,022,733 1.83
Granted during the period 1,720,138 -
Forfeited during the period (111,815) 1.83
Exercised during the period - -
Outstanding at 30 September 2018 4,631,056 1.15
Exercisable at 30 September 2018 - -
--------------------------------- ============= ========
(ii) Tatton Asset Management plc Sharesave Scheme ("TAM
Sharesave Scheme")
On 7 July 2017 the Group launched an all employee sharesave
scheme for options over shares in Tatton Asset Management plc,
administered by Yorkshire Building Society. Employees are able to
save between GBP10 and GBP500 per month over a three-year life of
the scheme to August 2020 at which point they each have the option
to either acquire shares in the Company, or receive the cash
saved.
During the period 9,132 options were forfeited. Over the life of
the Sharesave scheme it is estimated that, based on current saving
rates, 216,847 share options will be exercisable at an exercise
price of GBP1.70.
On 8 August the Sharesave scheme was extended over a three year
period to September 2021. It is estimated, based on current saving
rates, 78,053 share options will be exercisable at an exercise
price of GBP1.90. No options have been exercised, forfeited or
expired in the period.
Within the accounts of the Company, the fair value at grant date
is estimated using the Black Scholes methodology for 100% of the
options. Key valuation assumptions and the costs recognised in the
accounts during the period are noted in (c) and (d) overleaf
respectively.
Number of Weighted
share options average
granted price
=================================
(number) (GBP)
================================= ============= ========
Outstanding at 1 April 2017 - -
Granted during the period 14,076 1.70
Forfeited during the period - -
Exercised during the period - -
Outstanding at 30 September 2017 14,076 1.70
Exercisable at 30 September 2017 - -
--------------------------------- ------------- --------
Outstanding at 1 October 2017 14,076 1.70
Granted during the period 49,268 1.70
Forfeited during the period - -
Exercised during the period - -
Outstanding at 31 March 2018 63,344 1.70
Exercisable at 31 March 2018 - -
Outstanding at 1 April 2018 63,344 1.70
Granted during the period 40,502 1.72
Forfeited during the period (9,132) 1.70
Exercised during the period - -
Outstanding at 30 September 2018 94,714 1.71
Exercisable at 30 September 2018 - -
--------------------------------- ============= ========
(b) Schemes Closed prior to the IPO of Tatton Asset Management
plc
As a direct result of the corporate restructure that culminated
in the IPO of Tatton Asset Management plc in July 2017, the
following share based schemes were finalised and options exercised
where relevant:
(i) Tatton Capital Group Limited EMI Scheme ("TCGL EMI
Scheme")
In October 2015, Tatton Capital Group Limited (TCGL), a
subsidiary of the Company, launched an EMI share option scheme to
enable senior management to participate in the equity of TCGL. A
total of 1,580 options over F shares in TCGL with a weighted
average exercise price of GBP1 were granted in October 2015, each
exercisable upon sale of the company. Upon acquisition of TCGL
during the restructuring ahead of the IPO in July 2017, all 1,580
options were exercised, and none remain outstanding.
Within the accounts of the Company, the fair value at grant date
was estimated using the Black Scholes methodology for 100% of the
options. Key valuation assumptions and the costs recognised in the
accounts during the period are noted in (c) and (d) overleaf
respectively.
Notes to the Consolidated Financial Statements continued
16 Share based payment continued
Number of share Weighted
average
options granted price
(number) (GBP)
================================= =============== ========
Outstanding at 1 April 2017 1,580 1.00
Granted during the period - -
Forfeited during the period - -
Exercised during the period (1,580) 1.00
Outstanding at 30 September 2017 - -
Exercisable at 30 September 2017 - -
Outstanding at 31 March 2018 - -
Exercisable at 31 March 2018 - -
Outstanding at 30 September 2018 - -
Exercisable at 30 September 2018 - -
================================= =============== ========
(ii) Paradigm Partners Limited Employee Shareholder Scheme ("PPL
ESS")
In March 2016, PPL issued employee shareholder status shares to
enable senior management to participate in the equity of that
business. A total of 14,350 C shares in PPL, with a weighted
average exercise price of GBP0.01 were granted in March 2016, each
exercisable upon sale of the company. Upon acquisition of PPL
during the restructuring ahead of the IPO in July 2017, all 14,350
shares were sold, and none remain outstanding.
Within the accounts of the Company, the fair value at grant date
was estimated using the Black Scholes methodology for 100% of the
shares, which for accounting purposes were treated as options under
IFRS2. Key valuation assumptions and the costs recognised in the
accounts during the period are noted in (c) and (d) below
respectively.
(iii) Paradigm Partners Limited D Share Options ("PPL D
Options")
In June 2017, PPL issued to certain senior management options to
acquire 2,500 D shares in Tatton Capital Group Limited (TCGL) to
enable them to participate in the equity of that business. A total
of 2,500 options over D shares in TCGL, with a weighted average
exercise price of GBP1 were granted in June 2017, each exercisable
upon sale of the company. Upon acquisition of PPL and TCGL during
the restructuring ahead of the IPO in July 2017, all 2,500 options
were exercised, and none remain outstanding.
Within the accounts of the Company, the fair value at grant date
was estimated using the actual price paid for the shares of
GBP826,728.
Number of share Weighted
average
options granted price
(number) (GBP)
================================= =============== ========
Outstanding at 1 April 2017 - -
Granted during the period 2,500 1.00
Forfeited during the period - -
Exercised during the period (2,500) 1.00
Outstanding at 31 March 2018 - -
Exercisable at 30 September 2017 - -
Outstanding at 30 September 2017 - -
Exercisable at 31 March 2018 - -
Outstanding at 30 September 2018 - -
Exercisable at 30 September 2018 - -
================================= =============== ========
Assumptions used in the option valuation models to determine the
fair value of options at the date of grant were as follows:
(c) Valuation Assumptions
Assumptions used in the option valuation models to determine the
fair value of options at the date of grant were as follows:
TCGL
TAM EMI TAM Sharesave EMI
Scheme Scheme Scheme PPL ESS
2018 2017 2018 2017 2017 2017
Share price at grant (GBP) 2.40 1.89 2.40 1.89 1.56 55.00
Exercise price (GBP) 0.00 1.89 1.90 1.70 0.00 55.00
Expected volatility (%) 28.48 26.00 28.48 26.00 10.00 26.00
Expected life (years) 2.70 6.50 3.25 3.25 1.75 1.25
Risk free rate (%) 0.81 0.41 0.81 0.66 0.92 0.60
Expected dividend yield (%) 2.75 4.50 2.75 4.50 0.00 0.00
(d) IFRS2 Share based option
costs
30 September 30 September 31 March
2018 2017 2018
(GBP'000) (GBP'000) (GBP'000)
TAM EMI Scheme 355 42 124
TAM Sharesave Scheme 10 4 16
PPL ESS - 19 19
PPL D Options - 827 827
365 892 986
17 Related party transactions
Ultimate controlling party
The Directors consider there to be no ultimate controlling
party.
Relationships
The Group has trading relationships with the following entities
in which Paul Hogarth, a Director, has a beneficial interest:
Entity Nature of transactions
Amber Financial Investments The Group provides discretionary fund management
Limited services, as well as
accounting and administration services.
Jargon Free Benefits The Group provides accounting and administration
LLP services.
Perspective Financial The Group provides discretionary fund management
Group Limited services and compliance
advisory services.
Suffolk Life Pensions The Group pays lease rental payments on
Limited an office building held in a pension
fund by Paul Hogarth.
Notes to the Consolidated Financial Statements
continued
17 Related party transactions
continued
Related parties balances 30-Sep 30-Sep 30-Sep 30-Sep 31-Mar 31-Mar
2018 2018 2017 2017 2018 2018
Value Value Value
of Balance of Balance of Balance
income/ receivable/ income/ receivable/ income/ receivable/
(cost) (payable) (cost) (payable) (cost) (payable)
(GBP'000) (GBP'000) (GBP'000) (GBP'000) (GBP'000) (GBP'000)
Advisor Cloud Limited - - - 94 - 4
Amber Financial Investments
Limited 160 6 - 21 523 27
Jargon Free Benefits LLP 24 28 - - 20 19
Paradigm Management Partners
LLP - 4 - 1 - -
Paradigm Investment Management
LLP - (315) - (1,282) - (363)
Perspective Financial
Group Limited 204 560 (418) 433 401 423
Suffolk Life Pensions
Limited (29) (5) (29) - (55) -
Key management personnel remuneration
Key management includes Executive and Non-Executive Director.
The compensation paid or payable to key management personnel is as
disclosed in note 9 on page 18.
18 Alternative performance measures
Income statement measures
Reconciling items
Closest equivalent to their
APM measure statutory measure Definition and purpose
Operating Exceptional costs Adjusted operating profit
Adjusted Operating profit and share before
profit; before based payments. separately disclosed items.
separately See note 3 This is
considered to be an important
disclosed items measure
where exceptional items
distort the
operating performance
of the business.
Adjusted earnings per Earnings per share Exceptional costs and
share Adjusted earnings per share - Basic. This is considered
to
share - Basic - basic based payments, and the considered to be an important measure where exceptional
tax thereon. See note 8 items distort the operating performance of the business.
Adjusted earnings per Earnings per share Exceptional costs and
share Adjusted earnings per share fully diluted. This is considered
to
share - fully diluted - fully diluted based payments, and the be
an important measure where exceptional items distort
tax thereon. See note 8 the operating performance of the business.
Net cash generated from
Net cash generated Net cash generated Exceptional costs operations
from operations before exceptional costs.
before from operations To show
exceptional
costs underlying cash performance.
Other measures
Reconciling items
Closest equivalent to their
APM measure statutory measure Definition and purpose
TIML - Assets AUM is representative
under None Not applicable of the customer
assets and is a measure
management of the value of the
customer base. Movements
in this base are
indication of performance
in the year and
growth of the business
to generate
revenues going forward.
Alternative growth measure
PPL None Not applicable to revenue,
members and giving an operational
growth view of growth.
Alternative growth measure
PMS None Not applicable to revenue,
giving an operational
member firms view of growth.
and growth
Dividend cover (being
Dividend cover None Not applicable ratio of earnings per
share before exceptional
items and share
based charges) is 1.4
times demonstrating
ability to pay.
19 Post balance sheet event
There were no material post balance sheet events.
20 Contingent Liabilities
At 30 September 2018, the directors confirmed there were
contingent liabilities of GBPnil (2017: GBPnil).
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
IR EAEFLFDLPFAF
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