TIDMTAM
RNS Number : 8887O
Tatton Asset Management PLC
15 June 2022
15 June 2022
Tatton Asset Management PLC
("TAM plc", the "Group" or the "Company")
AIM: TAM
AUDITED FINAL RESULTS
For the year ended 31 March 2022
TAM plc, the investment management and IFA support services
group, today announces its audited final results for the year ended
31 March 2022 ("FY22"), which show strong organic growth in line
with expectations .
FINANCIAL HIGHLIGHTS
-- Group revenue increased 25.7% to GBP29.356m (2021: GBP23.353m)
-- Adjusted operating profit(1) up 27.4% to GBP14.526m (2021: GBP11.402m)
-- Adjusted operating profit(1) margin 49.5% (2021: 48.8%)
-- Adjusted fully diluted EPS(2) increased 26.3% to 18.62p (2021: 14.74p)
-- Final dividend up 13.3% to 8.5p (2021: 7.5p), full year dividend of
12.5p (2021: 11.0p)
-- Strong financial liquidity position, with net cash of GBP21.710m (2021:
GBP16.934m)
-- Strong balance sheet - Net assets increased 27.3% to GBP31.044m (2021:
GBP24.446m)
1 Operating profit before exceptional items, share-based payment charges
and amortisation of acquired intangibles
2 Adjusted fully diluted earnings per share is calculated by dividing
the adjusted operating profit less cash interest and less tax on operating
activities by the weighted average number of ordinary shares in issue
during the year plus potentially dilutive ordinary shares.
OPERATIONAL HIGHLIGHTS
-- Assets Under Management ("AUM") increased GBP2.35bn or 26.2% to GBP11.341bn
(2021: GBP8.990bn). Current AUM at June 2022 c.GBP11.183bn
-- Organic net inflows were GBP1.277bn (2021: GBP0.755bn), an increase
of 14.2% of opening AUM with an average run rate of GBP106m per month
-- Acquisition of GBP650m Verbatim funds in September 2021 and a five-year
strategic distribution partnership with Fintel plc, providing access
to 3,800 firms and over 6,000 users
-- Recent acquisition of 8AM Global Limited (subject to regulatory approval)
adds a further c.GBP0.8bn of assets
-- Tatton's Ethical portfolios increased 84.1% GBP812m AUM (2021: GBP441m)
-- Tatton's non-Managed Portfolio Services ("MPS") propositions now account
for c.GBP1.2bn of AUM
-- Tatton's IFA firms increased by 11.7% to 746 (2021: 668) and the number
of accounts increased 23.9% to 89,780 (2021: 72,450)
-- Paradigm Mortgages completions up by 16.0% to GBP13.15bn (2021: GBP11.34bn).
Paradigm Mortgages member firms increased by 3.8% to 1,674 members
(2021: 1,612 members)
-- Paradigm Consulting increased its members by 3.4% to 421 (2021: 407)
Paul Hogarth, Chief Executive Officer, commented:
" I am delighted to report on yet another successful year for
the Group, as we continue to execute our stated strategy and
deliver strong organic and acquisitive growth for FY22. The
geo-political and financial market volatility of the past year has
highlighted that both our divisions are resilient and robust
businesses with an attractive outlook as they continue to benefit
from a consistent and sustainable business platform.
"Client outcomes remain and will always be our key focus. This
was the "raison d'être" for the creation of Tatton back in 2013 and
remains at the heart of our DNA as a business. Since inception, we
have built a strong track record of delivering value and consistent
investment returns at a market leading cost, through the IFA
community and exclusively on platform. We continue to go from
strength to strength, as we build on the strong organic net
inflows, which have been further enhanced by the recent
acquisitions. Paradigm is also well positioned to make further
progress and support Group ambitions.
"As we look forward to FY23, our strategic emphasis will be to
consolidate and build on the gains we have made to date whilst
further developing the business to drive growth and long-term value
creation. We continue to focus on and take a disciplined approach
to executing our strategy and I remain excited about the
opportunities that exist for the Group. While we remain conscious
that these are uncertain times, both from an economic and
geo-political standpoint, we are well positioned to make further
progress in the year ahead and better equipped than most to deal
with any prevailing market headwinds."
For further information please contact:
Tatton Asset Management plc
Paul Hogarth (Chief Executive Officer)
Paul Edwards (Chief Financial Officer)
Lothar Mentel (Chief Investment Officer) +44 (0) 161 486 3441
Zeus - Nomad and Broker
Martin Green/Dan Bate (Investment
Banking) +44 (0) 20 3829 5000
Singer Capital Markets - Joint Broker
Peter Steel (Investment Banking)
Rachel Hayes (Investment Banking) +44 (0) 20 7496 3000
Belvedere Communications - Financial
PR +44 (0) 7407 023147
John West / Llew Angus (media) + 44 (0) 7715 769078
Cat Valentine / Keeley Clarke (investors) tattonpr@belvederepr.com
Trade Media Enquiries
Roddi Vaughan Thomas +44 (0) 20 7139 1452
For more information, please visit:
www.tattonassetmanagement.com
CHAIRMAN'S STATEMENT
A challenging climate... A team to meet the challenge
DEAR SHAREHOLDER
Against the background of a further challenging period, both
nationally and globally, I am happy to report that 2021/2022 has
been another successful year for the Group. The management team has
remained focused on delivering the strategy - developing products
and services, through organic growth and Merger and Acquisition
("M&A") activity, directed at Independent Financial Advisers
("IFAs") - which has resulted in continued growth in Assets under
Management ("AUM"), further revenue growth, a strong underlying
profit performance, good cash generation and another lift in
adjusted earnings per share.
STRATEGY IN PROGRESS
The Group's strategic objectives have not changed. We retain our
focus on growth through the provision of products and services that
are designed to enable IFAs to better advise their clients. We are
committed to taking an increasing share of an expanding market, and
to be the investment manager, and partner of choice, for IFAs.
Looking in turn at products (largely Tatton Investment
Management ("Tatton" or "TIML")) and services ("Paradigm"), Tatton
announced last year a "Roadmap to Growth" with a three-year target
of increasing AUM from GBP9.0bn to GBP15.0bn through a combination
of organic new net inflows and strategically aligned acquisitions.
In this first year, a period during which the confidence of
investors and savers was tested by national and global events, we
have made good progress and ended the year with GBP11.3bn of AUM -
just over a third of the way there. This growth was achieved
following new organic net inflows of GBP1.3bn, to which the
acquisition of the Verbatim range of funds earlier this year added
GBP650m. We will continue to focus our efforts on delivering
against these targets and I am positively encouraged by the good
progress made to date.
Turning to Paradigm, against an uncertain backdrop in the year,
we enjoyed a very positive performance with involvement in record
mortgage completions of GBP13.15bn. While we continue to make good
progress, with a significant number of new firms and improved
market penetration, we are mindful that the government stimulus,
particularly in the first half the year, contributed to a strong
lending environment, which may well have had a positive influence
on the overall performance. Nevertheless, the business remains well
placed in its markets and strongly positioned to take advantage of
opportunities that lie ahead.
FINANCIAL HIGHLIGHTS
Against the background outlined above, the Group has performed
well. Group revenue increased by 25.7% to GBP29.4m (2021:
GBP23.4m), while adjusted operating profit(1) rose by 27.4% to
GBP14.5m (2021: GBP11.4m) and profit before tax, after incurring
exceptional costs and share-based payment charges, improved further
to GBP11.3m (2021: GBP7.3m). The impact of the above on fully
diluted adjusted earnings per share(1) was an increase of 26.3%
to
18.62p (2021: 14.74p) while basic earnings per share was 15.92p
(2021: 10.86p).
OUR PEOPLE
Recognising that the Group is essentially a people driven
business, the Board continues to position ethical values and
appropriate behaviours at the centre of our approach to HR, with a
view to sustaining a culture that attracts and retains the high
calibre of employee necessary to meet the challenging objectives
that we set ourselves.
The success of the Group in its ability to grow and create value
is totally dependent on the talents and efforts of our employees
working together towards a common purpose. Their combined
abilities, adaptability and resilience are the key resource behind
the results that we are now reporting. As ever, on behalf of the
Board, I would like to thank all the Group's employees for their
energy, commitment and dedication over the last financial year.
1. Alternative performance measures are detailed in note 23.
BOARD AND CORPORATE GOVERNANCE
TAM plc remains committed to the highest standards of corporate
governance. The Board understands that this commitment is necessary
for managing our business effectively and for maintaining investor
confidence. Good governance adds value and reduces risk, and in a
business which continues to grow and evolve, we look to sustain,
develop and improve our governance arrangements continually.
SECTION 172 STATEMENT
Section 172 of the Companies Act 2006 requires the Directors to
act in the way that they consider, in good faith, would be most
likely to promote the success of the Company for the benefit of its
members as a whole. In doing this s.172 requires a Director to have
regard, amongst other matters, to the likely consequences of any
decisions in the long term; the interests of the Company's
employees; the need to foster the Company's business relationships
with suppliers, customers and others; the impact of the Company's
operations on the community and environment; the desirability of
the Company maintaining a reputation for high standards of business
conduct; and the need to act fairly as between members of the
Company. Further information can be found on pages 42 to 45 of the
2022 Annual Report. The 2022 Annual Report is available at
www.tattonassetmanagement.com.
DIVIDS
This year's results reflect the steps being taken to deliver our
strategy and to create long term sustainable shareholder value.
Given the continued progress, the Board is proposing to increase
the final dividend by 13.3% to 8.5p per share (see note 9),
bringing the total ordinary dividend for the year to 12.5p per
share, an increase of 13.6%, which is 1.5 times covered by adjusted
earnings per share. Subject to shareholder approval at the
forthcoming Annual General Meeting, the dividend will be paid on 2
August 2022 to shareholders on the register on 24 June 2022. The
ex-dividend date will be 23 June 2022.
OUTLOOK
Over the year under review the Group has delivered further
progress, and we have taken the necessary steps strategically,
operationally and financially to ensure that the Group is well
positioned to continue to grow, and exploit both those
opportunities that already exist, and those that will arise. We are
clear at this point that, while we are immersed in a period of
economic and geopolitical uncertainty, we need to remain focused on
our strategic path and, notwithstanding the unpredictability of the
current economic outlook, we anticipate that in doing so we will
continue to make progress and deliver further value for our
shareholders.
Roger Cornick
Chairman
CHIEF EXECUTIVE'S REVIEW
Creating the environment for growth
I am delighted to report on another successful year for the
Group, as we continued to execute our stated strategy and deliver
strong organic and acquisitive growth for FY22 in line with
expectations.
The geo-political and financial market volatility of the past
year has highlighted that both our divisions are resilient and
robust businesses with an attractive outlook as they continue to
benefit from a consistent and sustainable business platform.
Tatton is at the forefront of a changing financial services and
investment landscape and our strategic aim remains to develop and
grow AUM, as we increasingly become the investment manager of
choice for IFAs and their clients.
Paradigm's Compliance, Mortgage and Protection propositions
serve and champion the Directly Authorised Financial Adviser ("DA")
and intermediary community. We continue to grow and improve both
the number and the quality of firms, by delivering a wider breadth
of compliance and aggregation support combined with excellent
customer service to all our IFAs and intermediaries.
The clarity of strategy and focused execution have enabled the
Group to build on the strong growth it has achieved every year
since flotation in 2017 and deliver another record performance this
financial year.
FINANCIAL AND OPERATIONAL PERFORMANCE
The Group continued to make excellent progress this year,
delivering record results as well as making excellent headway on
our "Roadmap to Growth" strategy set at the beginning of the year
under review.
Group revenue increased by 25.7% to GBP29.4m and Group adjusted
operating profit(1) increased by 27.4% to GBP14.5m, with margins
improving to 49.5%. Cash generation was slightly ahead of
expectations and we ended the year with GBP21.7m of cash on the
balance sheet.
Tatton revenue increased by 29.0% to GBP23.3m, underpinned by
record new net inflows of GBP1.277bn during the year, which
contributed to strong growth in AUM of 26.2% to GBP11.341bn at the
end of the financial year. The growth included a revenue
contribution of GBP1.1m from the Verbatim funds that were acquired
in September 2021. Excluding these, the organic revenue growth was
strong at 22.7%. Tatton adjusted operating profit(1) increased by
27.5% to GBP13.9m and margins were maintained at 60%, as investment
to drive the future growth of the business continued. Tatton income
now accounts for 79.5% of Group revenue and the majority, or 95.7%,
of the trading profits.
AUM Movement GBPbn
---------------------------------- ------
Opening AUM 1 April 2021 8.990
Organic net flows 1.277
Acquisition (Verbatim) 0.650
Market and investment performance 0.424
---------------------------------- ------
Total AUM 31 March 2022 11.341
---------------------------------- ------
Paradigm revenue increased by 14.4% to GBP6.0m, on the back of a
record year from the Mortgage business as its involvement in
mortgage completions exceeded GBP13.0bn for the first time. This
ultimately improved adjusted operating profit(1) by 20.0% to
GBP2.4m and with corresponding margin improvement up 1.9 points to
40.6%.
1. Alternative performance measures are detailed in note 23.
MARKET TRS, STRATEGY AND BUSINESS MODEL
Tatton
Our "Roadmap to Growth" strategy includes a three-year target of
increasing AUM by GBP6.0bn, from GBP9.0bn in FY21 to GBP15.0bn by
FY24. One year on, we have already delivered GBP2.3bn, or just
under 40%, of the GBP6.0bn target, with AUM at GBP11.34bn. This
growth has been delivered through a combination of strong organic
growth and the acquisition of GBP650m of the Verbatim range of
funds in September 2021. The key elements and market trends
underpinning this strategy remain unchanged and include the
following elements - Platforms, Ethical Investment Solutions,
Regulation and Distribution Footprint.
Platforms and Managed Portfolio Services ("MPS")
Client outcomes remain and will always be our key focus. This
was the "raison d'être" for the creation of Tatton back in 2013 and
remains at the heart of our DNA as a business. Since inception, we
have built a strong track record of delivering value and consistent
investment returns at a market leading cost, utilising MPS while
operating exclusively on Retail Investment Platforms
("Platforms").
As the use of Platforms by IFAs continues to increase, with over
GBP680bn of assets now held on Platforms, we continue to see
increased demand for MPS. The combination of utilising both
Platforms and MPS enables IFAs and their clients to bring together
their chosen technology platform and investment solution under a
single access point, which, in turn, is leading to an increasing
share of IFA/client assets being invested utilising these
solutions.
As a result of this, the MPS market continues to mature, with
the past 12 months bringing many new entrants but also seeing
long-standing traditional investment managers entering the MPS
market, as well as promoting their existing MPS propositions. This
both helps promote and further validates the broader MPS
opportunity and proposition.
Tatton remains at the forefront of the MPS market, as the leader
from a price, proposition and service delivery perspective. This
has enabled us to maintain our position, with over GBP10bn of our
total GBP11.3bn being MPS AUM, making us the largest provider of
MPS on-platform, nearly double the MPS AUM of our nearest
competitor.
Ethical investment solutions
Tatton operates a full range of risk-rated MPS solutions, all
with long, consistent investment track records. We consistently
respond to IFAs' feedback, evolving our proposition in line with
their changing needs. We launched our first Ethical models back in
2014, becoming a "first mover" in this space. While initially the
take-up was modest, sentiment has changed markedly and recent
investor interest and demand for Ethical solutions has
substantially increased, driving strong growth of inflows. In a
further move to satisfy this demand, we will launch our latest set
of Ethical investment solutions with a range of three risk-rated
"ETHOS" Ethical funds. This will leverage our proven track record
and significant expertise in this space.
Regulation
Regulation continues to evolve, with consumer duty at the
forefront of this change. MPS remains perfectly positioned to
respond to this by delivering low-cost and competitive investment
solutions for the client, whilst supporting the IFA in meeting
consumer duty obligations. As an MPS focused investment manager,
consumer duty plays to our strengths in placing the adviser at the
heart of the value chain and facilitating the delivery of improved
client outcomes.
Distribution footprint
Tatton has made great strides over the years in expanding its
distribution footprint. Initially, distribution was dependent on
Paradigm members, who remain important and loyal supporters of the
service. However, over time, we have developed our strategy by
diversifying our distribution footprint beyond Paradigm, winning
new firms but also through the addition of a number of new
strategic partnerships such as those with Tenet Group and Fintel
plc. This has significantly broadened our base and now accounts for
a significant portion of new flows.
The combination of all these factors - market trends and growth
in platforms; regulatory direction of travel; increased
distribution footprint; and a clear and focused acquisition
strategy - leaves the Group well placed to achieve the goals set
out in our "Roadmap to Growth" strategy.
Paradigm
Paradigm has made good progress this year, following the
consolidation of the Consulting and Mortgage operations under one
"Paradigm" brand. The division has improved structurally through
integration and cross skill working. Personnel are now better
utilising their knowledge and experience to help the growth and
development of the broader proposition. Our aim is to make Paradigm
the number one choice for DAs seeking compliance and aggregation
support, while at the same time, making our service attractive and
compelling to Manufacturers (both lenders and providers) who seek
the distributor with the greatest ability to deliver their
propositions to key DA participants in the market.
This year has been very productive and we have continued to add
new firms, with Paradigm Consulting firms increasing to 421 (2021:
407) and Paradigm Mortgage firms increasing to 1,674 (2021: 1,612).
Additionally, Paradigm Mortgages participated in a record
GBP13.15bn (2021: GBP11.34bn) of mortgage completions, a 16.0%
increase on the previous year.
As the housing market continued to recover from the impact of
COVID-19 in 2021, mortgage activity also improved. This demand was
undoubtedly helped by the government stamp duty holiday/incentive,
as well as the underlying general strength of the housing market
continuing to improve. This has been driven by a number of factors,
with strong house price inflation increasing the average size of
mortgage coupled with the demand for new mortgages as consumers
look to either move or improve as a response to the new work from
home and flexible working trend, which appears to be a permanent
shift in the way we work.
As a result, UK gross mortgage lending up to the end of 2021
increased to GBP316bn (excluding product transfers). We finished
the year strongly and ultimately delivered GBP6.57bn in the second
half the year in comparison to the GBP6.58bn in the first.
As we look forward, there are undoubted headwinds to the
mortgage market, such as rising interest rates and the increased
cost of living impacting affordability. As a result, the level of
UK gross lending is forecast to be c.10% lower in 2022 at GBP281bn.
We continue to concentrate on increasing our market share through
growing the number and size of our intermediary firms who value the
access and range of services we have to offer.
STRATEGIC GOALS AND PRIORITIES
As we look forward to FY23, our strategic emphasis will be to
consolidate and build on the gains we have made to date and further
develop the business to drive growth and long-term value creation.
Specifically, we look to achieve the following:
- Continue with the strong organic growth of new net inflows,
utilising our increasing range of firm distribution platforms:
Paradigm, Tatton, Tenet and Fintel;
- Deliver the next phase of our three-year "Roadmap to Growth"
strategy, taking us from GBP9.0bn in FY21 to GBP15.0bn by FY24.
Building on the strong performance in FY22, where we delivered
GBP1.65bn through organic growth and GBP0.65bn through acquisition,
we need to add a minimum of GBP1.7bn in FY23 to remain on
track;
- Launch our new range of "ETHOS" Ethical funds in 2022 in
response to demand from the IFA community;
- Identify and execute on further acquisitions that contribute
to the "Roadmap to Growth" strategy but also, importantly, fulfil
our basic criteria of being complementary and earnings
enhancing;
- Build on our recent success by delivering further strategic
partnerships, joint ventures and collaborations with larger IFA
firms delivering enhanced client outcomes; and
- Continue to grow the number of firms utilising Paradigm,
specifically taking a greater share of the available mortgage
broker and intermediary market, and growing the level of mortgage
completions.
OUTLOOK AND SUMMARY
I am very pleased with the progress the Group has made this
year. We have continued on the path of strong growth across all our
key metrics of new net inflows, AUM, revenue, profits and improved
margins. Tatton continues to go from strength to strength, as it
builds on the strong organic net inflows, which have been further
enhanced by the recent acquisitions. Paradigm is also well
positioned to make further progress and support the Group's
ambitions.
We continue to focus on and take a disciplined approach to
executing our strategy and I am excited about the opportunities
that exist for the Group. While we remain conscious that these are
uncertain times, both from an economic and geo-political
standpoint, we are well positioned to make further progress in the
year ahead and better equipped than most to deal with any
prevailing market headwinds.
CHIEF INVESTMENT OFFICER'S REPORT
Meeting capital markets' challenge
Tatton's investment and business model emerged very well from
the "lockdown years" and has built on the adaptations and
enhancements we made during that time. Flexible working practices -
remote meetings and presentations - have become established, with a
welcome return of face-to-face meetings when it matters. A real
strength of Tatton's team is our ability to adapt quickly and
intuitively adopt new ways of working with advisers to suit their
business.
In a more dynamic and price-driven market, we have remained true
to the key elements of our success, working hard to develop
additions to our flagship MPS for Financial Advisers to offer their
clients - making it easy and cost effective to do business with us
and deliver strong investment outcomes. The operational resilience
we demonstrated during the lockdown years has evolved into
competitive advantage and resilience - we have enhanced our
proposition and services to improve our business scalability and
relevance to Financial Advisers by increasing access, adapting our
products and embedding assets under management gained through
acquisition.
PROPOSITION DEVELOPMENT
Tatton's pricing structure remains very competitive, and we
continually work to remove barriers for advice firms to access our
products. We operate on three additional investment platforms and
remain platform agnostic - working seamlessly with advisers to fit
into their business. Over the period, we made considerable
additions to the Tatton adviser portal - our proprietary online
client management system for advisers, which, at its heart, is a
bridging application between platforms, advisers and clients'
appointed discretionary investment manager - Tatton. It
incorporates client management and reporting functions for
advisers, making it straightforward for firms to do business with
Tatton, and also directly embeds Tatton into the business
operations of adviser firms, building operational resilience.
Maintaining scalability is a key driver of our business model
and we remain focused as an MPS provider. We recognised that many
advisers want the flexibility to develop their own branded
offerings and we have responded by developing more White Label
services, Appointed Investment Adviser ("AIA") relationships and
also joint ventures. Tatton's role is to facilitate client access
to sophisticated institutional-style Centralised Investment
Propositions, with Tatton becoming an integral part of an adviser
business and in turn making it more competitive.
Providing more investment choices for advisers has been
demonstrated with the successful transfer of the Verbatim Portfolio
Growth Funds to the Tatton stable of funds, enabling access to
Tatton's portfolio investment management through multi-asset funds,
alongside our discretionary portfolios. Many advisers want
investment flexibility for their clients and Tatton should be able
to help where discretionary portfolio investments are not suitable
or accessible.
Additional choice for adviser firms creates more touch points
with them, highly relevant with the expansion of our distribution
networks. New relationships with Fintel/SimplyBiz and Sesame
Bankhall are building on the success of our relationship with
Tenet, enhancing our visibility within the day to day business of
adviser firms that are yet to adopt an MPS solution for their
clients. This is further evidenced by the steady growth of our
Bespoke Portfolio Service ("BPS") that runs alongside our MPS,
creating access to additional client assets.
Our Ethical ("ESG") portfolios (launched in 2014) have continued
on the growth of the previous year, reflecting increased consumer
interest in investing to make a difference and our experience in
the sector. This provides a clear demonstration of our
long-standing commitment to giving the clients of financial
advisers genuine choice in how their discretionary assets are
allocated.
Tatton's investment process has been tested during benign and
volatile market environments, and we are proud of our portfolio
performance over the period. Ensuring investors understand how
global events impact or benefit their investments is vital, and we
have continued to deliver benchmark-setting communications through
video, webinar and the Tatton Weekly newsletter.
2021/2022 CAPITAL MARKETS AND RETURNS
The second year of managing global multi-asset investment
portfolios under a pandemic proved almost as littered with
opportunities for missteps as the first. While the first year
rattled markets with the economic uncertainty of a deep recession
created by the economic shutdowns, the second was characterised by
uncertainty over the course and shape of the post-pandemic recovery
- firstly, over how to wean off all-encompassing policy support and
then recalibrate the supply and demand balance of goods while large
amounts of surplus liquidity further clouded the usual
post-recession recovery path.
In capital market terms, the 12 months spanning TAM's financial
year turned into a period during which fast-changing concerns over
the direction of bond market yields dominated and determined market
action.
Q2 of 2021 started our financial year on a more equal footing
for returns between the main asset classes of equities and bonds
than had been the case in Q1. This was welcome after the start of
2021 had seen the first scare over the prospect of overheating
economic conditions pushing up bond yields too rapidly for comfort,
even before the post-pandemic rebound had even happened. Despite
much talk and excitement over another "roaring twenties" decade,
bond yields fell back again in Q2 as central banks repeatedly
pledged to maintain an accommodative policy stance and look through
rising inflation - viewed as only transitory until supply chains
had established a firm basis again. Tatton's overweight to equities
in portfolios with a specific short-term position in a global small
cap tracker at the expense of US large caps paid off for investors
as the cyclical recovery took hold.
Following the very rapid, and again unprecedented, rates of
change - albeit this time of economic growth - the recovery slowed
markedly over the summer, especially in the US and China. Yet, with
corporate earnings still expanding even faster than anticipated on
the back of impressive margin improvements, risk asset markets
continued their rise as bond markets remained stable and still
assured by soothing words from central bankers. On/off style
rotation from Growth to Value and from US tech safe havens to the
mid-cycle cyclical sectors of Europe and the UK characterised this
period, during which our Value tilt in portfolios added value as
did our UK large cap reorientation.
The relative bond market calm came to an end when China's
excessive residential property market growth claimed its first
large victim in property developer Evercore. Even though the
spectre of a global financial crisis was quickly dispelled by the
concerted action of the Chinese authorities, bond markets have
since then again dominated market action - firstly, when central
bankers changed their mind about their stance on inflation and
turned decidedly hawkish, and then when Russia's invasion of
Ukraine led to an extension of elevated energy prices, which put
downward pressure on corporate earnings projections. The equity
market correction in the first quarter of 2022 has been painful for
investors, as most of the previous 12 months' gains were reversed.
Towards the end of the first quarter, both equity and bond
valuations recovered from the shock of the Ukraine war. This came
despite an increase in the three major headwinds of a slowing
Chinese economy (Asia), central banks' monetary tightening (US) and
the cost of living pressures from elevated energy and food prices
(Europe). As a result, asset valuation felt once again elevated and
therefore vulnerable.
In a scenario of an as yet unresolved European armed conflict
paired with monetary tightening, the transition to an expansive
mid-cycle market environment is now much less certain and there is
the possibility of yet another short-term economic downturn before
the longer-term growth trend resumes.
OUTLOOK
Investor confidence for the remainder of the year depends not
only on the outcome of the war in Ukraine and the strength of its
ripples through the global economy, but also on the shape of the
inflationary pressures it is experiencing and if transitory does
indeed become systematic inflation. The impact of energy commodity
price increases will decline in the summer but has the potential
for greater consequence as the northern hemisphere approaches
winter.
Tatton's strength is based around the ability of its team to
understand and anticipate market developments. The scalability of
our model is maintained through our operational efficiency, our
flexibility and the strength of our team in implementing our
strategy. We have emerged from the pandemic years as a bigger and
better business, and despite the uncertainty of the new world
order, very well positioned to deliver for the clients of financial
advisers whatever economic environment develops through the
remainder of 2022.
INVESTMENT PORTFOLIO RETURNS
1 April 2021 - 31 March 2022
Tatton investment returns (%) - core MPS product set (after
discretionary fund management ("DFM") charge and fund costs)
Tatton Managed Tatton Tracker Tatton Blended Tatton Ethical ARC PCI(1)
-------------- -------------- -------------- -------------- -------------- ----------
Defensive 0.0 0.1 0.0 (0.2) 1.8
Cautious 3.2 3.2 3.2 2.0 3.6
Balanced 5.5 5.4 5.4 3.9 3.6/5.1(2)
Active 8.1 7.4 7.8 6.0 5.1
Aggressive 10.2 10.0 10.1 7.9 5.6
Global Equity 10.6 10.4 10.5 8.5 5.6
-------------- -------------- -------------- -------------- -------------- ----------
Five years, 1 April 2017 - 31 March 2022
Tatton investment returns (%) - core MPS product set
(annualised, after DFM charge and fund costs)
Tatton Managed Tatton Tracker Tatton Blended Tatton Ethical(3) ARC PCI(1)
-------------- -------------- -------------- -------------- ----------------- ----------
Defensive 2.6 2.6 2.6 - 2.6
Cautious 4.1 4.1 4.1 - 3.7
Balanced 5.1 5.0 5.1 6.6 3.7/5.0(2)
Active 6.4 6.1 6.2 - 5.0
Aggressive 7.4 7.2 7.3 - 6.1
Global Equity 10.2 10.0 10.1 - 6.1
-------------- -------------- -------------- -------------- ----------------- ----------
1. ARC PCI - Asset Risk Consultants Private Client Indices
("PCI").
2. Balanced portfolios are measured against both ARC Balanced
Asset PCI and ARC Steady Growth PCI as in risk terms, the Balanced
portfolios lie in the middle of these Indices.
3. Only Tatton Ethical Balanced has existed for five years.
CHIEF FINANCIAL OFFICER'S REPORT
Resilience and long-term value creation
OVERVIEW
At the end of the 2021/2022 financial year, the Group reached
the milestone of achieving a five-year track record as a publicly
listed business. Over that period, the Group has delivered
consistent and repeated growth across all the key performance
metrics. Revenue has grown at a compound annual growth rate of
19.8%, with adjusted operating profit(1) growing even more strongly
at a compound growth rate of 26.3%, as result of margins having
increased over the same period by an absolute 11.5% to 49.5% for
the Group as a whole. Over that period, Tatton, our asset
management division, has become the dominant division. AUM has
grown to GBP11.3bn, an annual compound rate of 23.9%.
Investment-related income now accounts for 79.5% of the total Group
revenue and 95.7% of the adjusted operating profit(1) and, as a
consequence of existing market trends and a focused strategy, this
dynamic is set to continue.
REVENUE AND PROFITS
Revenue - Group reported revenue increased by 25.7% to GBP29.4m
(2021: GBP23.4m). Tatton revenue increased by 29.0% to GBP23.3m
(2021: GBP18.1m). AUM increased by 26.2% to reach GBP11.3bn (2021:
GBP9.0bn). This increase in AUM includes record net inflows of
GBP1,277m, which reflects both the underlying market trends that
are driving the adoption of MPS and our expanding distribution
footprint. AUM was further improved by market returns which
contributed a further 4.7% or GBP424m, with a further GBP650m added
on the acquisition of the Verbatim range of funds in September
2021. Funds, or non-MPS, AUM now accounts for GBP1.2bn of AUM
(2021: GBP0.5bn) as we continue to further expand our propositions
beyond purely MPS.
Paradigm's revenue increased by 14.4% to GBP6.0m (2021:
GBP5.2m). The number of mortgage member firms increased to 1,674
(2021: 1,612) and Paradigm Consulting member firms increased to 421
(2021: 407). In addition to the growth in firms, the growth in
revenue this year has been delivered partly as a result of a soft
comparator, as 2020/2021 had a difficult start to the financial
year due to the impact of COVID-19; however, more pertinently,
mortgage completions reached a record level of GBP13.15bn (2021:
GBP11.34bn). The mix of mortgage products also improved, increasing
the rate of commission, and there has been continued growth in
other income streams such as protection premia.
Profit - The Group delivered adjusted operating profit(1) of
GBP14.5m (2021: GBP11.4m), an increase of 27.4%. Adjusted operating
profit margin(1) increased to 49.5% (2021: 48.8%). The prior year
margin benefitted by c.2.5%, or approximately GBP0.6m, of travel
and other costs which were either reduced or not incurred as a
consequence of the pandemic. As restrictions were relaxed, activity
increased and at least 50% of these costs were incurred again this
year, and it is anticipated that there will be a return to normal
historic activity and level of cost in the coming years.
As a response to the inflationary environment, the Group has
implemented an average 5% annual salary increase, materially ahead
of historical levels (excludes Executive Directors(2) ). We have
also experienced a more competitive marketplace for new recruits
driving starting salaries upwards and both have been reflected in
our plans this year. While personnel costs are c.60% of the Group
total cost base, we do not anticipate that these increases will be
margin dilutive.
Group operating profit was GBP11.6m (2021: GBP7.5m), which
includes the cost impact of separately disclosed items of GBP2.9m
(2021: GBP3.9m). Note 4 details the segmental information, showing
Tatton's adjusted operating profit(1) increasing by 27.5% to
GBP13.9m (2021: GBP10.9m) and its adjusted margin(1) was 59.6%
(2021: 60.2%). Paradigm's adjusted operating profit(1) contributed
GBP2.4m (2021: GBP2.0m), with adjusted margin(1) of 40.6% (2021:
38.7%).
ACQUISITIONS
During the year, the Group acquired the range of Verbatim funds,
which added GBP650m of AUM. At the same time, we entered a
five-year strategic distribution partnership with Fintel plc,
significantly enhancing our reach and distribution. The
consideration payable will be up to GBP5.8m, with GBP2.8m paid on
completion and the remaining GBP3.0m paid in three equal
instalments over years two, three and four. The payment of the
deferred consideration is dependent on the AUM remaining at or
above GBP650m. On acquisition, the Group has recognised goodwill of
GBP3.1m, intangible assets of GBP2.9m, an associated deferred tax
liability of GBP0.7m and discounted contingent consideration of
GBP2.5m, see note 21.
SEPARATELY DISCLOSED ITEMS
Separately disclosed items include the cost of share-based
payments of GBP2.4m, amortisation of acquisition-related intangible
assets of GBP0.3m and GBP0.2m of acquisition-related fees, see note
6. Although some of these items may recur from one period to the
next, operating profit has been adjusted for these items to give
better clarity of the underlying performance of the Group. The
alternative performance measures ("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.
EARNINGS PER SHARE
Basic earnings per share increased to 15.92p (2021: 10.86p).
Adjusted earnings per share(1) increased by 23.2% to 19.87p (2021:
16.14p) and adjusted fully diluted earnings per share(1) increased
by 26.3% to 18.62p (2021: 14.74p), full details are shown in note
9.
STATEMENT OF FINANCIAL POSITION AND CASH
The consistent growth year on year continues to strengthen the
Group's balance sheet. Net assets have increased 27.0% to GBP31.0m
(2021: GBP24.4m) with cash on the balance sheet contributing
GBP21.7m (2021: GBP16.9m). Given the capital-light nature of the
Group's business model, Group net cash generated from operating
activities before exceptional items was GBP15.5m (2021: GBP10.9m)
or 106.6% of adjusted operating profit(1) . The Group has paid out
GBP2.8m in relation to acquisitions and GBP6.6m in dividends during
the year and, in addition, has received GBP1.3m from the issue of
new shares following the exercise of employee share options.
DIVIDS
The Board is recommending a final dividend of 8.5p. When added
to the interim dividend of 4.0p, this gives a full year dividend of
12.5p. This proposed dividend reflects both our cash performance in
the period and our underlying confidence in our business, and
maintains our policy of paying a dividend approximately 70% of the
adjusted earnings and split on a one third/two third basis between
the interim period and year end. If approved at the Annual General
Meeting, the final dividend will be paid on 2 August 2022 to
shareholders on the register on 24 June 2022. The ex-dividend date
will be 23 June 2022.
RISK MANAGEMENT
Risk is managed closely and is spread across our businesses and
managed to individual materiality. Our key risks have been
referenced primarily on pages 30 and 31 of the 2022 Annual Report.
We choose key performance indicators that reflect our strategic
priorities of investment, growth and profit, and these are detailed
on pages 26 and 27 of the 2022 Annual Report. The 2022 Annual
Report is available at www.tattonassetmanagement.com.
CHANGES IN REGULATORY REQUIREMENTS
In January 2022, the Investment Firms Prudential Regime ("IFPR")
came into effect and represents a significant change to risk
management, prudential capital rules, and revised remuneration and
governance standards for investment firms. IFPR applies to TIML,
the only regulated entity within the Group, and also as a result of
the requirement to look at the Group's consolidated position from a
regulatory perspective, applies to the TAM Group.
As a result of these new rules, both TIML and the Group have
reviewed their risk management processes, capital resource
requirements and liquidity requirements, which has resulted in an
increase of capital resources being required to be held on a
consolidated basis. This has in turn reduced the amount of free
cash available to the Group, as a larger amount of cash is required
to be held to meet the Group's capital requirements. The Group's
cash available for acquisitions is GBP8.2m out of total cash on the
balance sheet of GBP21.7m. This would be reduced by any interim
dividend declared in FY23. The impact of this is that, as the Group
pursues its acquisition strategy, it is likely to be restricted in
how these transactions are funded. Utilising cash to acquire
intangible investment assets reduces the Group's capital resources
available to apply to its capital requirements as defined by the
FCA. The Group must ensure that it utilises cash as consideration
for acquisitions only where it has appropriate capital headroom
available. Above this headroom, alternative funding will be
required, such as the issue of new shares. A reconciliation of free
cash available for acquisitions is analysed in the table below.
GBPm
------------------------------------- -----
Cash on the balance sheet 21.7
Cash required for:
Deferred consideration (2.5)
Working capital (2.4)
Full year dividend of 8.5p (5.0)
Capital requirement (3.6)
------------------------------------- -----
Free cash available for acquisitions 8.2
------------------------------------- -----
The Strategic Report has been approved and authorised for issue
by the Board of Directors and signed on their behalf on 14 June
2022 by:
Paul Edwards
Chief Financial Officer
1. Alternative performance measures are detailed in note 23.
2. Executive Directors' salaries remain unchanged.
CONSOLIDATED STATEMENT OF TOTAL COMPREHENSIVE INCOME
FOR THE YEARED 31 MARCH 2022
31-Mar 31-Mar
2022 2021
Note (GBP'000) (GBP'000)
----------------------------------------------------------------- ---- ----------- ----------
Revenue 29,356 23,353
Administrative expenses (17,726) (15,845)
----------------------------------------------------------------- ---- ----------- ----------
Operating profit 11,630 7,508
----------------------------------------------------------------- ---- ----------- ----------
- Share-based payment costs 6 2,399 3,740
- Amortisation of acquisition-related intangibles 6 266 120
- Exceptional items 6 231 34
----------------------------------------------------------------- ---- ----------- ----------
Adjusted operating profit (before separately disclosed items)(1) 14,526 11,402
----------------------------------------------------------------- ---- ----------- ----------
Finance costs 7 (355) (205)
----------------------------------------------------------------- ---- ----------- ----------
Profit before tax 11,275 7,303
Taxation charge 8 (2,033) (1,192)
----------------------------------------------------------------- ---- ----------- ----------
Profit attributable to shareholders 9,242 6,111
----------------------------------------------------------------- ---- ----------- ----------
Earnings per share - Basic 9 15.92p 10.86p
Earnings per share - Diluted 9 15.17p 10.31p
Adjusted earnings per share - Basic(2) 9 19.87p 16.14p
Adjusted earnings per share - Diluted(2) 9 18.62p 14.74p
----------------------------------------------------------------- ---- ----------- ----------
1. Adjusted for exceptional items, amortisation on
acquisition-related intangibles and share-based payments. See note
23.
2. Adjusted for exceptional items, amortisation on
acquisition-related intangibles and share-based payments and the
tax thereon. See note 23.
All revenue, profit and earnings are in respect of continuing
operations.
There were no other recognised gains 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 STATEMENT OF FINANCIAL POSITION
AS AT 31 MARCH 2022
31-Mar 31-Mar
2022 2021
Note (GBP'000) (GBP'000)
------------------------------------------------------ ---- ----------- ----------
Non-current assets
Goodwill 11 9,337 6,254
Intangible assets 12 4,047 1,436
Property, plant and equipment 13 749 992
Deferred tax assets 16 841 1,420
------------------------------------------------------ ---- ----------- ----------
Total non-current assets 14,974 10,102
------------------------------------------------------ ---- ----------- ----------
Current assets
Trade and other receivables 14 3,805 4,302
Financial assets at fair value through profit or loss 17 152 163
Corporation tax 706 48
Cash and cash equivalents 21,710 16,934
------------------------------------------------------ ---- ----------- ----------
Total current assets 26,373 21,447
------------------------------------------------------ ---- ----------- ----------
Total assets 41,347 31,549
------------------------------------------------------ ---- ----------- ----------
Current liabilities
Trade and other payables 15 (7,556) (6,587)
Total current liabilities (7,556) (6,587)
------------------------------------------------------ ---- ----------- ----------
Non-current liabilities
Other payables 15 (2,747) (516)
Total non-current liabilities (2,747) (516)
------------------------------------------------------ ---- ----------- ----------
Total liabilities (10,303) (7,103)
------------------------------------------------------ ---- ----------- ----------
Net assets 31,044 24,446
------------------------------------------------------ ---- ----------- ----------
Equity attributable to equity holders of the Company
Share capital 18 11,783 11,578
Share premium account 11,632 11,534
Own shares 19 - (1,969)
Other reserve 2,041 2,041
Merger reserve (28,968) (28,968)
Retained earnings 34,556 30,230
------------------------------------------------------ ---- ----------- ----------
Total equity 31,044 24,446
------------------------------------------------------ ---- ----------- ----------
The financial statements were approved by the Board of Directors
on 14 June 2022 and were signed on its behalf by
Paul Edwards
Director
Company registration number: 10634323
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
FOR THE YEARED 31 MARCH 2022
Share Share Own Other Merger Retained Total
Capital Premium Shares Reserve Reserve Earnings Equity
Note (GBP'000) (GBP'000) (GBP'000) (GBP'000) (GBP'000) (GBP'000) (GBP'000)
---------------------------- ---- ---------- ---------- ---------- ---------- ---------- ---------- ----------
At 1 April 2020 11,182 8,718 (996) 2,041 (28,968) 25,801 17,778
Profit and total
comprehensive income - - - - - 6,111 6,111
Dividends 9 - - - - - (5,551) (5,551)
Share-based payments - - - - - 2,954 2,954
Deferred tax on share-based
payments - - - - - 915 915
Issue of share capital on
exercise of employee share
options 396 2,816 - - - - 3,212
Own shares acquired in the
year 19 - - (973) - - - (973)
---------------------------- ---- ---------- ---------- ---------- ---------- ---------- ---------- ----------
At 31 March 2021 11,578 11,534 (1,969) 2,041 (28,968) 30,230 24,446
---------------------------- ---- ---------- ---------- ---------- ---------- ---------- ---------- ----------
Profit and total
comprehensive income - - - - - 9,242 9,242
Dividends 9 - - - - - (6,641) (6,641)
Share-based payments - - - - - 2,679 2,679
Deferred tax on share-based
payments - - - - - 157 157
Current tax on share-based
payments - - - - - 1,051 1,051
Issue of share capital on
exercise of employee share
options 205 98 - - - - 303
Own shares acquired in the
year 19 - - (193) - - - (193)
Own shares utilised on
exercise of options 19 - - 2,162 - - (2,162) -
---------------------------- ---- ---------- ---------- ---------- ---------- ---------- ---------- ----------
At 31 March 2022 11,783 11,632 - 2,041 (28,968) 34,556 31,044
---------------------------- ---- ---------- ---------- ---------- ---------- ---------- ---------- ----------
The other reserve and merger reserve were created on 19 June
2017 when the Group was formed, where the difference between the
Company's capital and the acquired Group's capital was recognised
as a component of equity being the merger reserve. Both the other
reserve and the merger reserve are non-distributable.
CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE YEARED 31 MARCH 2022
31-Mar 31-Mar
2022 2021
Note (GBP'000) (GBP'000)
---------------------------------------------------------------------------- ---- ----------- ----------
Operating activities
Profit for the year 9,242 6,111
Adjustments:
Income tax expense 2,033 1,192
Finance costs 7 355 205
Depreciation of property, plant and equipment 13 377 351
Amortisation of intangible assets 12 536 341
Share-based payment expense 20 1,492 3,740
Changes in:
Trade and other receivables 309 (537)
Trade and other payables 907 (531)
---------------------------------------------------------------------------- ---- ----------- ----------
Exceptional items 6 231 34
---------------------------------------------------------------------------- ---- ----------- ----------
Cash generated from operations before exceptional items 15,482 10,906
---------------------------------------------------------------------------- ---- ----------- ----------
Cash generated from operations 15,251 10,872
---------------------------------------------------------------------------- ---- ----------- ----------
Income tax paid (1,612) (2,051)
---------------------------------------------------------------------------- ---- ----------- ----------
Net cash from operating activities 13,639 8,821
---------------------------------------------------------------------------- ---- ----------- ----------
Investing activities
Payment for the acquisition of a business combination, net of cash acquired (2,825) (160)
Purchase of intangible assets (211) (282)
Purchase of property, plant and equipment (74) (67)
---------------------------------------------------------------------------- ---- ----------- ----------
Net cash used in investing activities (3,110) (509)
---------------------------------------------------------------------------- ---- ----------- ----------
Financing activities
Interest paid (144) (36)
Transaction costs related to borrowings - (613)
Dividends paid 9 (6,641) (5,551)
Proceeds from the issue of shares 111 3,212
Purchase of own shares 19 - (973)
Proceeds from the exercise of options 1,230 -
Repayment of lease liabilities (309) (174)
---------------------------------------------------------------------------- ---- ----------- ----------
Net cash used in financing activities (5,753) (4,135)
---------------------------------------------------------------------------- ---- ----------- ----------
Net increase in cash and cash equivalents 4,776 4,177
Cash and cash equivalents at beginning of period 16,934 12,757
---------------------------------------------------------------------------- ---- ----------- ----------
Net cash and cash equivalents at end of period 21,710 16,934
---------------------------------------------------------------------------- ---- ----------- ----------
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. The
registered number is 10634323.
The Group comprises 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 adviser
support services, and the marketing and promotion of multi-manager
funds.
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.
The Company has taken advantage of the exemption in section 408
of the Companies Act 2006 not to present its own income
statement.
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 consolidated financial statements of the Group have been
prepared in accordance with International Financial Reporting
Standards ("IFRSs") as adopted by the United Kingdom and
International Financial Reporting Interpretations Committee
("IFRIC") interpretations issued by the International Accounting
Standards Board ("IASB") and the Companies Act 2006. The financial
statements of the Company have been prepared in accordance with UK
Generally Accepted Accounting Practice, including Financial
Reporting Standard 101 "Reduced Disclosure Framework" ("FRS
101").
The consolidated financial statements have been prepared on a
going concern basis and prepared on the historical cost basis.
The consolidated financial statements are presented in sterling
and have been rounded to the nearest thousand (GBP'000). The
functional currency of the Company is sterling as this is the
currency of the jurisdiction where all of the Group's sales are
made.
The preparation of financial information in conformity with
IFRSs 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 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 financial statements.
2.3 Basis of consolidation
The Group's financial statements consolidate those of the Parent
Company and all of its subsidiaries as at 31 March 2022. The Parent
controls a subsidiary if it is exposed, or has rights, to variable
returns from its involvement with the subsidiary and has the
ability to affect those returns through its power over the
subsidiary. All subsidiaries have a reporting date of 31 March.
All transactions between Group companies are eliminated on
consolidation, including unrealised gains and losses on
transactions between Group companies. Where unrealised losses on
intra-group asset sales are reversed on consolidation, the
underlying asset is also tested for impairment from a Group
perspective. Amounts reported in the financial statements of
subsidiaries have been adjusted where necessary to ensure
consistency with the accounting policies adopted by the Group.
Profit or loss and other comprehensive income of subsidiaries
acquired or disposed of during the year are recognised from the
effective date of acquisition, up to the effective date of
disposal, as applicable.
2.4 Adoption of new and revised standards
NEW AND AMED IFRS STANDARDS THAT ARE EFFECTIVE FOR THE CURRENT
YEAR
There have been no revised standards and interpretations which
have had a material impact on the financial statements of the
Group.
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 yet effective. The Group
intends to adopt these Standards and Interpretations when they
become effective, rather than adopt them early.
EFFECTIVE DATE 1 JANUARY 2023
IFRS 17 "Insurance Contracts"
In addition, the following standards each have amendments which
will be effective for accounting periods beginning on or after 1
January 2022:
IFRS 10 "Consolidated Financial Statements" IAS 28 "Investments
in Associates and Joint Ventures", IAS 1 "Presentation of Financial
Statements", IFRS 3 "Business Combinations", IAS 8 "Accounting
Policies, Changes in Accounting Estimates and Errors", IAS 16
"Property, Plant and Equipment", IAS 37 "Provisions, Contingent
Liabilities and Contingent Assets".
The Directors do not expect that the adoption of the new or
revised Standards listed above will have a material impact on the
financial statements of the Group in future periods.
2.5 Revenue
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. Revenue is
recognised when control is transferred and the performance
obligations are considered to be met.
The Group's revenue is made up of the following principal
revenue streams:
- Fees for discretionary fund management services in relation to
on-platform investment assets under management ("AUM"). Revenue is
recognised daily based on the AUM.
- Fees charged to IFAs for compliance consultancy services,
which are recognised when performance obligations are met.
- Fees for providing investment platform services. Revenue is
recognised on a daily basis, in line with the satisfaction of
performance obligations, on the assets under administration held on
the relevant investment platform.
- Fees for mortgage-related services including commissions from
mortgage and other product providers and referral fees from
strategic partners. Commission is recognised when performance
obligations are met.
- Fees for marketing services provided to providers of mortgage
and investment products, which is recognised when performance
obligations are met.
2.6 Exceptional items
Exceptional items are disclosed and described separately in the
financial statements where it is necessary to do so to provide
further understanding of the underlying financial performance of
the Group. These include material items of income or expense that
are shown separately due to the significance of their nature and
amount.
2.7 Interest income and interest expense
Finance income is recognised as interest accrued (using the
effective interest method) on funds invested outside the Group.
Finance expense includes the cost of borrowing from third parties
and is recognised on an effective interest rate basis, resulting
from the financial liability being recognised on an amortised cost
basis.
2.8 Impairment
Assets which have an indefinite useful life are not subject to
amortisation and are tested for impairment at each Statement of
Financial Position date. Assets subject to depreciation and
amortisation are reviewed for impairment whenever events or
circumstances indicate that the carrying amount may not be
recoverable. Impairment losses on previously revalued assets are
recognised against the revaluation reserve as far as this reserve
relates to previous revaluations of the same assets. Other
impairment losses are recognised in the Statement of Total
Comprehensive Income based on the amount by which the carrying
value exceeds the recoverable amount. The recoverable amount is the
higher of the fair value less the costs to sell and the value in
use.
Impairment losses recognised in respect of cash-generating units
("CGUs") are allocated first to reduce the carrying amount of any
goodwill allocated to CGUs and then to reduce the carrying amount
of other assets in the unit on a pro rata basis.
2.9 Goodwill and intangible assets
Goodwill is initially recognised and measured as set out in note
2.11.
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 CGUs (or groups of CGUs) expected
to benefit from the synergies of the combination. CGUs 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 CGU 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.
On disposal of a CGU, the attributable amount of goodwill is
included in the determination of the profit or loss on
disposal.
Following initial recognition, intangible assets are held at
cost less any accumulated amortisation and any provision for
impairment. Assets that are subject to amortisation are reviewed
for impairment whenever events or changes in circumstances indicate
that the carrying amount may not be recoverable. An impairment loss
is recognised for the amount by which the asset's carrying amount
exceeds its recoverable amount. The recoverable amount is the
higher of an asset's fair value less costs to sell and value in
use. For the purpose of assessing impairment, assets are grouped at
the lowest levels for which there are separately identifiable cash
flows (CGUs).
Intangible assets acquired separately are measured on initial
recognition at cost.
Computer software licences acquired are capitalised at the cost
incurred to bring the software into use and are amortised on a
straight-line basis over their estimated useful lives, which are
estimated as being three years. Costs associated with developing or
maintaining computer software programs that do not meet the
capitalisation criteria under IAS 38 are recognised as an expense
as incurred.
Intangible assets acquired in a business combination and
recognised separately from goodwill are recognised initially at
their fair value at the acquisition date (which is regarded as
their cost). Subsequent to initial recognition, the client
relationship intangible assets and brand intangible assets have a
finite useful life and are carried at cost less accumulated
amortisation and accumulated impairment losses. Amortisation is
calculated using the straight-line method over their useful lives,
estimated for both asset classes at ten years.
Gains and losses arising from derecognition of an intangible
asset are measured as the difference between the net disposal
proceeds and the carrying value of the asset. The difference is
then recognised in the income statement.
An assessment is made at each reporting date as to whether there
is any indication that an asset in use may be impaired. If any such
indication exists and the carrying values exceed the estimated
recoverable amount at that time, the assets are written down to
their recoverable amount. The recoverable amount is measured as the
greater of fair value less costs to sell and value in use. Non -
financial assets that have suffered impairment are reviewed for
possible reversal of the impairment at each reporting date.
The Directors have reviewed the intangible assets as at 31 March
2022 and as a result of the review, it was determined that none of
the assets are impaired (2021: none).
2.10 Property, plant and equipment
Property, plant and equipment assets are stated at cost net of
accumulated depreciation and accumulated provision for impairment.
Depreciation is charged to the income statement on a straight-line
basis over the estimated useful lives of each part of an item of
property, plant and equipment. Principal annual rates are as
follows:
- Computer, office equipment and motor vehicles - 20-33%
straight-line.
- Fixtures and fittings - 20% straight-line.
The estimated useful lives, residual values and depreciation
method are reviewed at the end of each reporting period, with the
effect of any changes in estimate accounted for on a prospective
basis.
An item of property, plant and equipment is derecognised upon
disposal or when no future economic benefits are expected to arise
from the continued use of the asset. The gain or loss arising on
disposal or scrappage of an asset is determined as the difference
between the sales proceeds and the carrying amount of the asset and
is recognised in income.
2.11 Business combinations
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 acquiree, 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
acquired and the 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.
When the consideration transferred by the Group in a business
combination includes 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 the 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. Other contingent
consideration is remeasured to fair value at subsequent reporting
dates with changes in fair value recognised in profit or loss.
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
at the acquisition date that, if known, would have affected the
amounts recognised as of that date.
2.12 Leases
At inception of a contract, the Group assesses whether a
contract is, or contains, a lease. A contract is, or contains, a
lease if the contract conveys the right to control the use of an
identified asset for a period of time in exchange for
consideration. To assess whether a contract conveys the right to
control the use of an identified asset, the Group uses the
definition of a lease in IFRS 16.
The Group recognises a right-of-use ("ROU") asset and a lease
liability at the inception date of the lease. The ROU asset is
initially measured at cost, which comprises the initial amount of
the lease liability adjusted for any lease payments made at or
before the commencement date, plus any initial direct costs
incurred and an estimate of costs to dismantle and remove the
underlying asset or to restore the underlying asset or the site on
which it is located, less any lease incentives received.
The ROU assets are subsequently depreciated on a straight-line
basis over the shorter of the expected life of the asset and the
lease term, adjusted for any remeasurements of the lease liability.
At the end of each reporting period, the ROU assets are assessed
for indicators of impairment in accordance with IAS 36.
The lease liability is initially measured at the present value
of the lease payments that are not paid at the commencement date,
discounted using the interest rate implicit in the lease or, if
that rate cannot be readily determined, the Group's incremental
borrowing rate. The Group uses its incremental borrowing rate as
the discount rate.
Lease payments included in the measurement of the lease
liability comprise the following:
- fixed payments, including in-substance fixed payments;
- variable lease payments that depend on an index or a rate,
initially measured using the index or rate as at the commencement
date;
- amounts expected to be payable under a residual value
guarantee; and
- the exercise price under a purchase option that the Group is
reasonably certain to exercise, lease payments in an optional
renewal period if the Group is reasonably certain to exercise an
extension option, and penalties for early termination of a lease
unless the Group is reasonably certain not to terminate early.
The lease liability is subsequently measured by adjusting the
carrying amount to reflect the interest charge, the lease payments
made and any reassessment or lease modifications. The lease
liability is remeasured if the Group changes its assessment of
whether it will exercise a purchase, extension or termination
option.
When the lease liability is remeasured in this way, a
corresponding adjustment is made to the carrying amount of the ROU
asset, or is recorded in profit or loss if the carrying amount of
the ROU asset has been reduced to zero.
Where the Group is an intermediate lessor in a sub-lease, it
accounts for its interests in the head lease and the sub-lease
separately. It assesses the lease classification of a sub-lease
with reference to the ROU asset arising from the head lease, not
with reference to the underlying asset.
2.13 Cash and cash equivalents
Cash and cash equivalents comprise cash at bank and call
deposits. Bank overdrafts that are repayable on demand and form an
integral part of the Group's cash management are included as a
component of cash and bank balances for the purpose only of the
Consolidated Statement of Cash Flows.
2.14 Financial instruments
Financial assets and financial liabilities are recognised in the
Statement of Financial Position when the Group becomes a party to
the contractual provisions of the instrument.
Financial assets and financial liabilities are initially
measured at fair value. Transaction costs that are directly
attributable to the acquisition or issue of financial assets and
financial liabilities (other than financial assets and financial
liabilities at fair value through profit or loss) are added to or
deducted from the fair value of the financial assets or financial
liabilities, as appropriate, on initial recognition. Transaction
costs directly attributable to the acquisition of financial assets
or financial liabilities at fair value through profit or loss are
recognised immediately in profit or loss.
All financial assets are recognised and derecognised on a trade
date where the purchase or sale of a financial asset is under a
contract whose terms require delivery of the financial asset within
the timeframe established by the market concerned, and are
initially measured at fair value, plus transaction costs, except
for those financial assets classified as at fair value through
profit or loss. Transaction costs directly attributable to the
acquisition of financial assets classified as at fair value through
profit or loss are recognised immediately in profit or loss.
Non-derivative financial instruments comprise investments in
equity and debt securities, trade and other receivables, cash and
bank balances, loans and borrowings, and trade and other
payables.
FINANCIAL INVESTMENTS
Financial investments are classified as fair value through
profit or loss if they are either held for trading or specifically
designated in this category on initial recognition. Assets in this
category are initially recognised at fair value and subsequently
remeasured, with gains or losses arising from changes in fair value
being recognised in the Statement of Comprehensive Income.
Financial assets at fair value through profit or loss include
investments in a regulated open-ended investment company and an
investment portfolio, which are managed and evaluated on a fair
value basis in line with the market value.
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 lifetime credit losses
from initial recognition and are determined using an expected
credit loss approach.
TRADE AND OTHER PAYABLES
Trade and other payables are recognised initially at fair value
and subsequently measured at amortised cost using the effective
interest method, where applicable or required. These amounts
represent liabilities for goods and services provided to the Group
prior to the end of the financial period, which are unpaid.
FINANCIAL LIABILITIES AT FAIR VALUE THROUGH PROFIT OR LOSS
("FVTPL")
Financial liabilities are classified as at FVTPL when the
financial liability is (i) contingent consideration of an acquirer
in a business combination, (ii) held for trading or (iii)
designated as at FVTPL. Financial liabilities at FVTPL are measured
at fair value, with any gains or losses arising on changes in fair
value recognised in profit or loss.
INTEREST-BEARING BORROWINGS
Borrowings are recognised initially at fair value, net of
transaction costs incurred. Borrowings are subsequently stated at
amortised cost; any difference between the proceeds (net of
transaction costs) and the redemption value is recognised in profit
or loss over the period of the borrowings using the effective
interest method.
2.15 Taxation
CURRENT TAX
The tax currently payable is based on taxable profit for the
year. Taxable profit differs from net profit as reported in the
income statement because it excludes items of income or expense
that are taxable or deductible in other years and it further
excludes items that are never taxable or deductible. The Group's
liability for current tax is calculated using tax rates that have
been enacted or substantively enacted by the Statement of Financial
Position date.
DEFERRED TAX
Deferred tax is the tax expected to be payable or recoverable on
differences between the carrying amounts of assets and liabilities
in the financial statements and the corresponding tax bases used in
the computation of taxable profit, and is accounted for using the
balance sheet liability method. Deferred tax liabilities are
generally recognised for all taxable temporary differences and
deferred tax assets are recognised to the extent that it is
probable that taxable profits will be available against which
deductible temporary differences can be utilised. Such assets and
liabilities are not recognised if the temporary difference arises
from the initial recognition of goodwill or from the initial
recognition (other than in a business combination) of other assets
and liabilities in a transaction that affects neither the taxable
profit nor the accounting profit.
Deferred tax liabilities are recognised for taxable temporary
differences where it is probable that the temporary difference will
not reverse in the foreseeable future. Deferred tax assets arising
from deductible temporary differences associated with such
investments and interests are only recognised to the extent that it
is probable that there will be sufficient taxable profits against
which to utilise the benefits of the temporary difference and they
are expected to reverse in the foreseeable future.
The carrying amount of deferred tax assets is reviewed at each
Statement of Financial Position date and reduced to the extent that
it is no longer probable that sufficient taxable profits will be
available to allow all or part of the asset to be recovered.
Deferred tax is calculated at the tax rates that are expected to
apply in the period when the liability is settled or the asset is
realised based on tax laws and rates that have been enacted or
substantively enacted at the Statement of Financial Position date.
Deferred tax is charged or credited in the income statement, except
when it relates to items charged or credited in other comprehensive
income, in which case the deferred tax is also dealt with in other
comprehensive income.
The measurement of deferred tax liabilities and assets reflects
the tax consequences that would follow from the manner in which the
Group expects, at the end of the reporting period, to recover or
settle the carrying amount of its assets and liabilities.
Deferred tax assets and liabilities are offset when there is a
legally enforceable right to set off the current tax assets against
current tax liabilities and when they relate to income taxes levied
by the same taxation authority and the Group intends to settle its
current tax assets and liabilities on a net basis.
CURRENT AND DEFERRED TAX FOR THE YEAR
Current and deferred tax are recognised in profit or loss,
except when they relate to items that are recognised in other
comprehensive income or directly in equity, in which case the
current and deferred tax are also recognised in other comprehensive
income or directly in equity respectively. Where current tax or
deferred tax arises from the initial accounting for a business
combination, the tax effect is included in the accounting for the
business combination.
2.16 Retirement benefit costs
The Group pays into personal pension plans for which the amount
charged to income in respect of pension costs and other
post-retirement benefits is the amount of the contributions payable
in the year. Payments to defined contribution retirement benefit
scheme are recognised as an expense when employees have rendered
service entitling them to the contributions. Differences between
contributions payable and paid are accrued or prepaid. The assets
of the plans are invested and managed independently of the finances
of the Group.
2.17 Provisions
Provisions are recognised when the Group has a present
obligation (legal or constructive) as a result of a past event, it
is probable that the Group will be required to settle that
obligation and a reliable estimate can be made of the amount of the
obligation.
The amount recognised as a provision is the best estimate of the
consideration required to settle the present obligation at the
Statement of Financial Position date, taking into account the risks
and uncertainties surrounding the obligation. Where a provision is
measured using the cash flows estimated to settle the present
obligation, its carrying amount is the present value of those cash
flows (when the effect of the time value of money is material).
When some or all of the economic benefits required to settle a
provision are expected to be recovered from a third party, a
receivable is recognised as an asset if it is virtually certain
that reimbursement will be received and the amount of the
receivable can be measured reliably.
2.18 Equity, reserves and dividend payments
Share capital represents the nominal value of shares that have
been issued. Retained earnings include all current and prior period
retained profits or losses.
Dividend distributions payable to equity shareholders are
included in other liabilities when the dividends have been approved
in a general meeting prior to the reporting date.
2.19 Employee benefit trust
The Company provides finance to the EBT to purchase the
Company's shares on the open market in order to meet its obligation
to provide shares when an employee exercises awards made under the
Group's share-based payment schemes. Administration costs connected
with the EBT are charged to the Statement of Comprehensive Income.
The cost of shares purchased and held by the EBT is deducted from
equity. The assets held by the EBT are consolidated into the
Group's financial statements.
2.20 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.
2.21 Climate change
The Group is continually developing its assessment of the impact
that climate change has on the assets and liabilities recognised
and presented in its financial statements. The impact of climate
change has been considered in the preparation of these financial
statements; however, as the Group does not hold significant levels
of property, plant and equipment and does not own its own land and
buildings, there is currently no material impact of climate change
on the results or values of assets and liabilities recognised and
presented in these financial statements.
2.22 Operating segments
The Group comprises the following two operating segments which
are defined by trading activity:
- Tatton - investment management services
- Paradigm - the provision of compliance and support services to
IFAs and mortgage advisers
The Board is considered to be the chief operating decision
maker.
2.23 Critical accounting judgements and key sources of
estimation uncertainty
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 an 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 or in
the period of the revision and future periods if the revision
affects both current and future periods. Changes for accounting
estimates would be accounted for prospectively under IAS 8.
GOODWILL, CLIENT RELATIONSHIP AND BRAND INTANGIBLES
ESTIMATION UNCERTAINTY
Impairment of goodwill and client relationship and brand
intangibles
Impairment exists when the carrying value of an asset or
cash-generating unit ("CGU") exceeds its recoverable amount. The
recoverable amount is the higher of an asset's fair value less
costs to sell and value in use. For the purposes of impairment
testing, the recoverable amount of goodwill is determined using a
discounted cash flow model, as detailed in note 11. The results of
the calculation indicate that goodwill, client relationship and
brand intangibles are not impaired.
BUSINESS COMBINATIONS
CRITICAL JUDGEMENT
Client relationship and brand intangibles purchased through
corporate transactions
When the Group purchases client relationships and brands through
transactions with other corporate entities, a judgement is made as
to whether the transaction should be accounted for as a business
combination or as a separate purchase of intangible assets. In
making this judgement, the Group assesses the assets, liabilities,
operations and processes that were the subject of the transaction
against the definition of a business combination in IFRS 3. In
particular, consideration is given to the scale of the operations
subject to the transaction and whether ownership of a corporate
entity has been acquired, among other factors.
TREATMENT AND FAIR VALUE OF CONSIDERATION TRANSFERRED
CRITICAL JUDGEMENT AND ESTIMATION UNCERTAINTY
On 14 September 2021, the group acquired the Verbatim funds
business ("Verbatim") and the group accounted for the transaction
as a business combination. Business combinations and acquisitions
require a fair value exercise to be undertaken to allocate the
purchase price to the fair value of the identifiable assets
acquired and the liabilities assumed. The determination of the fair
value of the asset and liabilities is based, to a considerable
extent, on management's judgement. The amount of goodwill initially
recognised as a result of a business combination is dependent on
the allocation of this purchase price to the identifiable assets
and liabilities, with any unallocated portion being recorded as
goodwill. As described in note 21 to the financial statements, the
purchase price payable for the acquisition is split into a number
of different parts. The payment of certain elements has been
deferred.
At 31 March 2022, there remained three elements of deferred
consideration unvested and subject to ongoing vesting conditions.
The value of earn-out consideration is variable, dependent on
performance by the acquired business against certain operational
targets at the second, third and fourth anniversaries of
completion. The estimated discounted value of earn-out
consideration that will be payable at these dates is GBP2,486,000,
based on projections of the level of funds under management over
that period.
Under the terms of the agreements, the maximum possible payment
under the remaining earn-out is capped at GBP3,000,000, which
represents qualifying funds under management of at least GBP650
million at each anniversary date, subject to certain
conditions.
SHARE-BASED PAYMENTS
ESTIMATION UNCERTAINTY
Given the significance of share-based payments as a form of
employee remuneration for the Group, share-based payments have been
included as a significant accounting estimate. The principal
estimations relate to:
- forfeitures (where awardees leave the Group as "bad" leavers
and therefore forfeit unvested awards); and
- the satisfaction of performance obligations attached to
certain awards.
These estimates are reviewed regularly and the charge to the
Statement of Total Comprehensive Income is adjusted accordingly (at
the end of the relevant scheme as a minimum). Based on the current
forecasts of the Group, the charge for the year is based on 100% of
the options vesting for the element relating to non-market-based
performance conditions. A decrease of 10% in the vesting
assumptions would reduce the charge in the year by GBP129,000. In
considering the level of satisfaction of performance obligations,
the Group's forecast has been reviewed and updated for the expected
impact of the various market scenarios and management actions. This
forecast has been used to estimate the relevant vesting assumptions
for the Enterprise Management Incentive ("EMI") schemes in
place.
There are no other judgements or assumptions made about the
future, or any other major sources of estimation uncertainty at the
end of the reporting period, that have a significant risk of
resulting in a material adjustment to the carrying amounts of
assets and liabilities within the next financial year.
2.24 Alternative performance measures
In reporting financial information, the Group presents
alternative performance measures ("APMs") which are not defined or
specified under the requirements of IFRSs. 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. The APMs used
by the Group are set out in note 23 including explanations of how
they are calculated and how they can be reconciled to a statutory
measure where relevant. There is also further information on
separately disclosed items in note 6.
3 CAPITAL MANAGEMENT
The Group's objectives when managing capital are (i) to
safeguard the Group's ability to continue as a going concern so
that it can continue to provide returns for shareholders and
benefits for other stakeholders; (ii) to maintain a strong capital
base and utilise it efficiently to support the development of its
business; and (iii) to comply with the regulatory capital
requirements set by the FCA. Capital adequacy and the use of
regulatory capital are monitored by the Group's management and
Board. There is one active regulated entity in the Group: Tatton
Investment Management Limited, regulated by the FCA.
Regulatory capital is determined in accordance with the
requirements of the FCA's Investment Firms Prudential Regime which
became effective on 1 January 2022 and the Capital Requirements
Directive IV prescribed in the UK by the FCA. The Directive
requires continual assessment of the Group's risks which is
underpinned by the Group's Internal capital adequacy and risk
assessment ("ICARA"). The ICARA considers the relevant current and
future risks to the business and the capital considered necessary
to support these risks. The Group actively monitors its capital
base to ensure it maintains sufficient and appropriate capital
resources to cover the relevant risks to the business and to meet
consolidated and individual regulated entity regulatory and
liquidity requirements.
The FCA requires the Group to hold more regulatory capital
resources than the total capital resource requirement. The total
capital requirement for the Group is the higher of the Group's Own
Funds Requirement, its Own Harm requirement and Wind-down
requirement. The total capital requirement for the Group is GBP3.59
million (unaudited). As at 31 March 2022, the Group has regulatory
capital resources of GBP7.6 million (unaudited), significantly in
excess of the Group's total capital requirement. During the period,
the Group and its regulated subsidiary entities complied with all
regulatory capital requirements.
4 Segment Reporting
Information reported to the Board of Directors as the chief
operating decision maker ("CODM") 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 and the marketing and promotion of
the funds run by the companies under Tatton Capital Limited
("Tatton") and the provision of compliance and support services to
IFAs and mortgage advisers ("Paradigm").
The Group's reportable segments under IFRS 8 are therefore
Tatton, Paradigm, and "Central" which contains the Operating
Group's central overhead costs. During the financial year, it was
decided that centrally incurred overhead costs should be allocated
to the Tatton and Paradigm divisions on an appropriate pro rata
basis and this is how financial information is presented to the
Group's CODM.
The principal activity of Tatton is that of discretionary fund
management ("DFM") of investments on-platform and the provision of
investment wrap services.
The principal activity of Paradigm is that of provision of
support services to IFAs and mortgage advisers.
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:
Tatton Paradigm Central Group
Year ended 31 March 2022 (GBP'000) (GBP'000) (GBP'000) (GBP'000)
---------------------------------------------------------------------- ---------- ---------- ---------- ----------
Revenue 23,345 5,995 16 29,356
Administrative expenses (9,939) (3,561) (4,226) (17,726)
---------------------------------------------------------------------- ---------- ---------- ---------- ----------
Operating profit/(loss) 13,406 2,434 (4,210) 11,630
---------------------------------------------------------------------- ---------- ---------- ---------- ----------
Share-based payments - - 2,399 2,399
Exceptional items 231 - - 231
Amortisation of acquisition-related intangible assets 266 - - 266
---------------------------------------------------------------------- ---------- ---------- ---------- ----------
Adjusted operating profit/(loss) (before separately disclosed
items)(1) 13,903 2,434 (1,811) 14,526
---------------------------------------------------------------------- ---------- ---------- ---------- ----------
Finance costs (18) - (337) (355)
---------------------------------------------------------------------- ---------- ---------- ---------- ----------
Profit/(loss) before tax 13,388 2,434 (4,547) 11,275
---------------------------------------------------------------------- ---------- ---------- ---------- ----------
Tatton Paradigm Central Group
Year ended 31 March 2021 (GBP'000) (GBP'000) (GBP'000) (GBP'000)
---------------------------------------------------------------------- ---------- ---------- ---------- ----------
Revenue 18,097 5,240 16 23,353
Administrative expenses (7,132) (3,212) (5,501) (15,845)
---------------------------------------------------------------------- ---------- ---------- ---------- ----------
Operating profit/(loss) 10,965 2,028 (5,485) 7,508
---------------------------------------------------------------------- ---------- ---------- ---------- ----------
Share-based payments - - 3,740 3,740
Exceptional items (184) - 218 34
Amortisation of acquisition-related intangible assets 120 - - 120
---------------------------------------------------------------------- ---------- ---------- ---------- ----------
Adjusted operating profit/(loss) (before separately disclosed
items)(1) 10,901 2,028 (1,527) 11,402
---------------------------------------------------------------------- ---------- ---------- ---------- ----------
Finance costs (21) (4) (180) (205)
---------------------------------------------------------------------- ---------- ---------- ---------- ----------
Profit/(loss) before tax 10,944 2,024 (5,665) 7,303
---------------------------------------------------------------------- ---------- ---------- ---------- ----------
All turnover arose in the United Kingdom.
1. Alternative performance measures are detailed in note 23.
5 OPERATING PROFIT
The operating profit and the profit before taxation are stated
after charging/(crediting):
31-Mar 31-Mar
2022 2021
(GBP'000) (GBP'000)
------------------------------------------------------------------------- ----------- ----------
Amortisation of software 270 221
Depreciation of property, plant and equipment 168 175
Depreciation of right-of-use assets 209 176
Loss/(gain) arising on financial assets designated as FVTPL 11 (35)
Separately disclosed items (note 6) 2,896 3,894
Services provided by the Group's auditor:
Audit of the statutory consolidated and Company financial statements of:
Tatton Asset Management plc 72 69
Audit of subsidiaries 70 66
Other fees payable to auditor:
Non-audit services 21 25
------------------------------------------------------------------------- ----------- ----------
Total audit fees were GBP142,000 (2021: GBP135,000). Total
non-audit fees payable to the auditor were GBP21,000 (2021:
GBP25,000).
6 SEPARATELY DISCLOSED ITEMS
31-Mar 31-Mar
2022 2021
(GBP'000) (GBP'000)
------------------------------------------------------------------------- ----------- ----------
Acquisition-related expenses 231 218
(Gain)/loss arising on changes in fair value of contingent consideration - (184)
------------------------------------------------------------------------- ----------- ----------
Total exceptional costs 231 34
------------------------------------------------------------------------- ----------- ----------
Share-based payment charges 2,399 3,740
Amortisation of acquisition-related intangible assets 266 120
------------------------------------------------------------------------- ----------- ----------
Total separately disclosed items 2,896 3,894
------------------------------------------------------------------------- ----------- ----------
Separately disclosed items shown separately on the face of the
Statement of Total Comprehensive Income or included within
administrative expenses reflect costs and income that do not relate
to the Group's normal business operations and that are considered
material (individually or in aggregate if of a similar type) due to
their size or frequency.
Exceptional items
During the period, the Group acquired GBP650 million of assets
under management in the Verbatim funds and entered into a long-term
strategic distribution partnership. The Group incurred professional
fees of GBP231,000 during the process, which have been treated as
exceptional items.
Acquisition-related expenses in the prior year relate to
professional fees incurred as a result of the process whereby the
Group pursued a potential acquisition of a business. The Group
incurred professional fees of GBP218,000 during the process, which
have been treated as exceptional items.
During the prior financial year, the Group revalued its
financial liability at fair value through profit or loss relating
to the deferred consideration on the acquisition of Sinfonia. This
has resulted in a credit from the change in fair value of
GBP184,000 being recognised in the prior year.
Share-based payments
Share-based payments is a recurring item, though the value will
change depending on the estimation of the satisfaction of
performance obligations attached to certain awards. It has been
excluded from the core business operating profit since it is a
significant non-cash item. Underlying profit, being adjusted
operating profit, represents largely cash-based earnings and more
directly relates to the financial reporting period.
Amortisation of acquisition-related intangible assets
Payments made for the introduction of client relationships and
brands that are deemed to be intangible assets are capitalised and
amortised over their useful life, which has been assessed to be ten
years. This amortisation charge is recurring over the life of the
intangible asset, though it has been excluded from the core
business operating profit since it is a significant non-cash item.
Underlying profit, being adjusted operating profit, represents
largely cash-based earnings and more directly relates to the
financial reporting period.
7 FINANCE COSTS
31-Mar 31-Mar
2022 2021
(GBP'000) (GBP'000)
---------------------------------------------------- ----------- ----------
Bank interest income - 1
Interest expense on lease liabilities (23) (25)
Interest payable in servicing of banking facilities (332) (181)
---------------------------------------------------- ----------- ----------
(355) (205)
---------------------------------------------------- ----------- ----------
8 TAXATION
31-Mar 31-Mar
2022 2021
(GBP'000) (GBP'000)
------------------------------------------------------- ----------- ----------
Current tax expense
Current tax on profits for the period 2,010 1,790
Adjustment for (over)/under-provision in prior periods (52) 13
------------------------------------------------------- ----------- ----------
1,958 1,803
------------------------------------------------------- ----------- ----------
Deferred tax expense
Current year charge/(credit) 261 (563)
Origination and reversal of temporary differences - 7
Adjustment in respect of previous years (30) (55)
Effect of changes in tax rates (156) -
------------------------------------------------------- ----------- ----------
Total tax expense 2,033 1,192
------------------------------------------------------- ----------- ----------
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 are as follows:
31-Mar 31-Mar
2022 2021
(GBP'000) (GBP'000)
-------------------------------------------------- ----------- ----------
Profit before taxation 11,275 7,303
-------------------------------------------------- ----------- ----------
Tax at UK corporation tax rate of 19% (2021: 19%) 2,142 1,388
Expenses not deductible for tax purposes 45 63
Income not taxable 1 (34)
Adjustments in respect of previous years (82) (42)
Effect of changes in tax rates (94) -
Capital allowances in excess of depreciation 1 6
Share-based payments 20 (189)
-------------------------------------------------- ----------- ----------
Total tax expense 2,033 1,192
-------------------------------------------------- ----------- ----------
An increase in the UK corporation tax rate from 19% to 25%
(effective 1 April 2023) was substantively enacted on 24 May 2021.
This will increase the company's future current tax charge
accordingly. The deferred tax asset at 31 March 2022 has been
calculated based on these rates, reflecting the expected timing of
reversal of the related temporary differences (31 March 2021:
19%).
9 EARNINGS PER SHARE AND DIVIDS
Basic earnings per share is calculated by dividing the earnings
attributable to ordinary shareholders by the weighted average
number of ordinary shares during the year.
Number of shares
31-Mar 31-Mar
2022 2021
------------------------------------------------------------------------------------------ ---------- ----------
Basic
Weighted average number of shares in issue 58,424,150 56,835,807
Effect of own shares held by an EBT (373,774) (551,954)
------------------------------------------------------------------------------------------ ---------- ----------
58,050,376 56,283,853
Diluted
Effect of weighted average number of options outstanding for the year 2,875,504 2,966,507
------------------------------------------------------------------------------------------ ---------- ----------
Weighted average number of shares (diluted)(1) 60,925,880 59,250,360
Adjusted diluted
Effect of full dilution of employee share options which are contingently issuable or have
future attributable service costs 1,042,011 2,370,976
------------------------------------------------------------------------------------------ ---------- ----------
Adjusted diluted weighted average number of options and shares for the year(2) 61,967,891 61,621,336
------------------------------------------------------------------------------------------ ---------- ----------
1. The weighted average number of shares is diluted due to the
effect of potentially dilutive contingent issuable shares from
share option schemes.
2. The dilutive shares used for this measure differ from that
used for statutory dilutive earnings per share; the future value of
service costs attributable to employee share options is ignored and
contingently issuable shares for long-term incentive plan options
are assumed to fully vest. The Directors have selected this measure
as it represents the underlying effective dilution by offsetting
the impact to the calculation of basic shares of the purchase of
shares by the EBT to satisfy options.
Own shares held by an EBT represents the Company's own shares
purchased and held by the Employee Benefit Trust ("EBT"), shown at
cost. In the year ended 31 March 2022, the EBT purchased 966,546
(2021: 361,746) of the Company's own shares. The shares held by the
EBT were fully used during the year to satisfy the exercise of
employee share options.
31-Mar 31-Mar
2022 2021
(GBP'000) (GBP'000)
---------------------------------------------------------------------------- ----------- ----------
Earnings attributable to ordinary shareholders
Basic and diluted profit for the period 9,242 6,111
Share-based payments - IFRS 2 option charges 2,399 3,740
Amortisation of acquisition-related intangible assets 266 120
Exceptional costs - see note 6 231 34
Tax impact of adjustments (602) (923)
---------------------------------------------------------------------------- ----------- ----------
Adjusted basic and diluted profits for the period and attributable earnings 11,536 9,082
---------------------------------------------------------------------------- ----------- ----------
Earnings per share (pence) - Basic 15.92 10.86
---------------------------------------------------------------------------- ----------- ----------
Earnings per share (pence) - Diluted 15.17 10.31
---------------------------------------------------------------------------- ----------- ----------
Adjusted earnings per share (pence) - Basic 19.87 16.14
---------------------------------------------------------------------------- ----------- ----------
Adjusted earnings per share (pence) - Diluted 18.62 14.74
---------------------------------------------------------------------------- ----------- ----------
Dividends
The Directors consider the Group's capital structure and
dividend policy at least twice a year ahead of announcing results
and do so in the context of its ability to continue as a going
concern, to execute its strategy and to invest in opportunities to
grow the business and enhance shareholder value.
During the year, Tatton Asset Management plc paid the final
dividend related to the year ended 31 March 2021 of GBP4,284,000,
representing a payment of 7.5p per share. In addition, the Company
paid an interim dividend of GBP2,357,000 (2021: GBP1,999,000) to
its equity shareholders. This represents a payment of 4.0p per
share (2021: 3.5p per share).
The Company's dividend policy is described in the Directors'
Report on page 58 of the 2022 Annual Report. At 31 March 2022, the
Company's distributable reserves were GBP32.8 million (2021:
GBP28.6 million). The 2022 Annual Report is available at
www.tattonassetmanagement.com.
10 STAFF COSTS
The staff costs shown below exclude key management compensation,
which is shown separately below.
31-Mar 31-Mar
2022 2021
(GBP'000) (GBP'000)
---------------------------- ----------- ----------
Wages, salaries and bonuses 5,676 4,971
Social security costs 671 619
Pension costs 250 200
Termination benefits - 54
Share-based payments 956 1,257
---------------------------- ----------- ----------
7,553 7,101
---------------------------- ----------- ----------
The average monthly number of employees during the year was as
follows:
31-Mar 31-Mar
2022 2021
--------------- ------ ------
Administration 86 82
Key management 3 3
--------------- ------ ------
89 85
--------------- ------ ------
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".
31-Mar 31-Mar
2022 2021
(GBP'000) (GBP'000)
----------------------------- ----------- ----------
Short-term employee benefits 1,758 1,730
Post-employment benefits 4 5
Other long-term benefits - 4
Share-based payments 1,460 2,483
----------------------------- ----------- ----------
3,222 4,222
----------------------------- ----------- ----------
In addition to the remuneration above, the Non-Executive
Chairman and Non-Executive Directors have submitted invoices for
their fees as follows:
31-Mar 31-Mar
2022 2021
(GBP'000) (GBP'000)
----------- ----------- ----------
Total fees 270 160
----------- ----------- ----------
The Group incurred social security costs of GBP277,000 (2021:
GBP235,000) on the remuneration of the Directors and Non-Executive
Directors.
The remuneration of the highest paid Director was:
31-Mar 31-Mar
2022 2021
(GBP'000) (GBP'000)
------ ----------- ----------
Total 644 794
------ ----------- ----------
The highest paid Director exercised 553,078 (2021: nil) share
options in the period. There were 25,000 (2021: 174,758) share
options granted to the highest paid Director in the year.
11 GOODWILL
Goodwill
(GBP'000)
--------------------------------------------- ----------
Cost and carrying value at 31 March 2021 6,254
Recognised as part of a business combination 3,083
--------------------------------------------- ----------
Cost and carrying value at 31 March 2022 9,337
--------------------------------------------- ----------
The carrying value of goodwill includes GBP9.0 million allocated
to the Tatton operating segment and CGU. This is made up of GBP2.5
million 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,
GBP2.0 million arising from the acquisition in 2017 of an interest
in Tatton Capital Group Limited, GBP1.4 million of goodwill
generated on the acquisition of Sinfonia and GBP3.1m of goodwill
generated on the acquisition of the Verbatim funds. The carrying
value of goodwill also includes GBP0.4 million allocated to the
Paradigm operating segment and CGU relating to the acquisition of
Paradigm Mortgage Services LLP.
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 then an impairment charge is made.
Such impairment is charged to the Statement of Total Comprehensive
Income.
Impairment testing
For the purpose of impairment testing, goodwill is allocated to
the Group's operating companies which represent 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 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 reviewed the
carrying value of goodwill at 31 March 2022 and do not consider it
to be 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 2023, which
are extrapolated for a further four years. The Group's latest
financial forecasts, which cover a three-year period, are reviewed
by the Board. A terminal growth rate has been applied to year five
cash flows.
Discount rates
The pre-tax discount rate used to calculate value is 11.5%
(2021: 10.8%). The discount rate is derived from a benchmark
calculated from a number 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 and its industry.
The headroom compared to the carrying value of goodwill as at 31
March 2022 is GBP380 million (2021: GBP245 million). From the
assessment performed, there are no reasonable sensitivities that
result in the recoverable amount being equal to the carrying value
of the goodwill attributed to the CGU.
12 INTANGIBLE ASSETS
Computer Client
Software Relationships Brand Total
(GBP'000) (GBP'000) (GBP'000) (GBP'000)
------------------------------------------- ---------- -------------- ---------- ----------
Cost
Balance at 31 March 2020 537 1,196 - 1,733
Additions 282 - - 282
------------------------------------------- ---------- -------------- ---------- ----------
Balance at 31 March 2021 819 1,196 - 2,015
Additions 211 - - 211
Acquired as part of a business combination - 2,838 98 2,936
Disposals (24) - - (24)
------------------------------------------- ---------- -------------- ---------- ----------
Balance at 31 March 2022 1,006 4,034 98 5,138
------------------------------------------- ---------- -------------- ---------- ----------
Accumulated amortisation and impairment
Balance at 31 March 2020 (178) (60) - (238)
Charge for the period (221) (120) - (341)
------------------------------------------- ---------- -------------- ---------- ----------
Balance at 31 March 2021 (399) (180) - (579)
Charge for the period (270) (261) (5) (536)
Disposals 24 - - 24
------------------------------------------- ---------- -------------- ---------- ----------
Balance at 31 March 2022 (645) (441) (5) (1,091)
------------------------------------------- ---------- -------------- ---------- ----------
Net book value
As at 31 March 2020 359 1,136 - 1,495
------------------------------------------- ---------- -------------- ---------- ----------
As at 31 March 2021 420 1,016 - 1,436
------------------------------------------- ---------- -------------- ---------- ----------
As at 31 March 2022 361 3,593 93 4,047
------------------------------------------- ---------- -------------- ---------- ----------
All amortisation charges are included within administrative
expenses in the Statement of Total Comprehensive Income.
13 PROPERTY, PLANT AND EQUIPMENT
Right-of-use
Computer, office assets -
equipment and Fixtures and buildings and
motor vehicles Fittings motor vehicles Total
(GBP'000) (GBP'000) (GBP'000) (GBP'000)
---------------------------------------- ---------------- ------------ --------------- ----------
Cost
Balance at 31 March 2020 588 691 689 1,968
Additions 67 - 242 309
Disposals (223) (214) - (437)
---------------------------------------- ---------------- ------------ --------------- ----------
Balance at 31 March 2021 432 477 931 1,840
Additions 74 - 60 134
Disposals (161) - - (161)
---------------------------------------- ---------------- ------------ --------------- ----------
Balance at 31 March 2022 345 477 991 1,813
---------------------------------------- ---------------- ------------ --------------- ----------
Accumulated depreciation and impairment
Balance at 31 March 2020 (470) (326) (138) (934)
Charge for the period (80) (95) (176) (351)
Disposals 223 214 - 437
---------------------------------------- ---------------- ------------ --------------- ----------
Balance at 31 March 2021 (327) (207) (314) (848)
Charge for the period (73) (95) (209) (377)
Disposals 161 - - 161
---------------------------------------- ---------------- ------------ --------------- ----------
Balance at 31 March 2022 (239) (302) (523) (1,064)
---------------------------------------- ---------------- ------------ --------------- ----------
Net book value
As at 31 March 2020 118 365 551 1,034
---------------------------------------- ---------------- ------------ --------------- ----------
As at 31 March 2021 105 270 617 992
---------------------------------------- ---------------- ------------ --------------- ----------
As at 31 March 2022 106 175 468 749
---------------------------------------- ---------------- ------------ --------------- ----------
All depreciation charges are included within administrative
expenses in the Statement of Total Comprehensive Income.
The Group leases buildings, motor vehicles and IT equipment. The
Group has applied the practical expedient for low value assets and
so has not recognised IT equipment within ROU assets. The average
lease term is five years. No leases have expired in the current
financial period.
All depreciation charges are included within administrative
expenses in the Statement of Total Comprehensive Income.
Right-of-use assets
31-Mar 31-Mar
2022 2021
(GBP'000) (GBP'000)
-------------------------------------- ----------- ----------
Amounts recognised in profit and loss
Depreciation on right-of-use assets (209) (176)
Interest expense on lease liabilities (23) (25)
Expense relating to short-term leases (30) (44)
Expense relating to low value assets - (1)
-------------------------------------- ----------- ----------
(262) (246)
-------------------------------------- ----------- ----------
At 31 March 2022, the Group is committed to GBP62,000 for
short-term leases (2021: GBPnil).
The total cash outflow for leases amounts to GBP339,000 (2021:
GBP220,000).
14 TRADE AND OTHER RECEIVABLES
31-Mar 31-Mar
2022 2021
(GBP'000) (GBP'000)
--------------------------------- ----------- ----------
Trade receivables 329 172
Amounts due from related parties - 29
Prepayments and accrued income 3,442 3,060
Other receivables 34 1,041
--------------------------------- ----------- ----------
3,805 4,302
--------------------------------- ----------- ----------
All trade receivable amounts are short term. The carrying value
is considered a fair approximation of their fair value. The Group
applies the IFRS 9 simplified approach to measuring expected credit
losses ("ECLs") for trade receivables at an amount equal to
lifetime ECLs. In line with the Group's historical experience, and
after consideration of current credit exposures, the Group does not
expect to incur any credit losses and has not recognised any ECLs
in the current year (2021: GBPnil).
The amounts due from related parties are net of provisions. At
31 March 2022, the Group holds provisions with a carrying value of
GBP1,311,000 (2021: GBP1,311,000) against the recoverability of
amounts due from Jargonfree Benefits LLP.
Trade receivable amounts are all held in sterling.
15 TRADE AND OTHER PAYABLES
31-Mar 31-Mar
2022 2021
(GBP'000) (GBP'000)
------------------------------------------- ----------- ----------
Trade payables 855 294
Amounts due to related parties 235 236
Accruals 3,468 3,330
Deferred income 98 132
Contingent consideration 2,486 -
Other payables 3,161 3,111
------------------------------------------- ----------- ----------
10,303 7,103
------------------------------------------- ----------- ----------
Less non-current portion:
Contingent consideration (2,486) -
Other payables (261) (516)
------------------------------------------- ----------- ----------
Total non-current trade and other payables (2,747) (516)
------------------------------------------- ----------- ----------
Total current trade and other payables 7,556 6,587
------------------------------------------- ----------- ----------
The carrying values of trade payables, amounts due to related
parties, accruals and deferred income are considered reasonable
approximation of fair value.
Trade payable amounts are all held in sterling.
16 DEFERRED TAXATION
Deferred capital Share-based Acquisition
Allowances Payments Intangibles Total
(GBP'000) (GBP'000) (GBP'000) (GBP'000)
---------------------------------------------- ---------------- ----------- ------------ ----------
(Liability)/asset at 31 March 2020 (126) 236 (216) (106)
Income statement credit 25 563 23 611
Equity credit - 915 - 915
---------------------------------------------- ---------------- ----------- ------------ ----------
Asset/(liability) at 31 March 2021 (101) 1,714 (193) 1,420
---------------------------------------------- ---------------- ----------- ------------ ----------
Recognition as part of a business combination - - (708) (708)
Income statement (charge)/credit 38 (70) 5 (27)
Equity credit - 156 - 156
---------------------------------------------- ---------------- ----------- ------------ ----------
Asset/(liability) at 31 March 2022 (63) 1,800 (896) 841
---------------------------------------------- ---------------- ----------- ------------ ----------
17 FINANCIAL INSTRUMENTS
The Group's treasury activities are designed to provide
suitable, flexible funding arrangements to satisfy the Group's
requirements. The Group uses financial instruments comprising
borrowings, cash and items such as trade receivables and payables
that arise directly from its operations. The main risks arising
from the Group's financial instruments are interest rate risks,
credit risks and liquidity risks. The Board reviews policies for
managing each of these risks and they are summarised below.
The Group finances its operations through a combination of cash
resource and other borrowings.
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).
All financial assets, except for financial investments, are
categorised as loans and receivables and are classified as level 1.
Financial investments are categorised as financial assets at fair
value through profit or loss and are classified as level 1 and the
fair value is determined directly by reference to published prices
in an active market.
Financial assets at fair value through profit or loss (level
1)
31-Mar 31-Mar
2022 2021
(GBP'000) (GBP'000)
------------------------------------------------------------- ----------- ----------
Financial investments in regulated funds or model portfolios 152 163
------------------------------------------------------------- ----------- ----------
All financial liabilities except for contingent consideration
are categorised as financial liabilities measured at amortised cost
and are also classified as level 1. The only financial liabilities
measured subsequently at fair value on level 3 fair value
measurement represent contingent consideration relating to a
business combination.
Financial liabilities at fair value through profit or loss
(level 3)
Contingent consideration GBP'000
-------------------------------------------------------------------------- -------
Balance at 1 April 2021 -
Recognition of contingent consideration as part of a business combination 2,486
-------------------------------------------------------------------------- -------
Balance at 31 March 2022 2,486
-------------------------------------------------------------------------- -------
Interest rate risk
The Group finances its operations through a combination of
retained profits and a bank facility which currently remains
undrawn. The Group would have an exposure to interest rate risk
should this facility be drawn as it has a floating rate above the
base rate. The Group's cash and cash equivalents balance of
GBP21,710,000 was its only financial instrument subject to variable
interest rate risk. The impact of a 0.1% increase or decrease in
interest rate on the post-tax profit is not material to the Group.
At 31 March 2022, total borrowings were GBPnil (2021: GBPnil).
Credit risk
Credit risk is the risk that a counterparty will cause a
financial loss to the Group by failing to discharge its obligation
to the Group. The financial instruments are considered to have a
low credit risk due to the mitigating procedures in place. The
Group manages its exposure to this risk by applying Board-approved
limits to the amount of credit exposure to any one counterparty,
and employs strict minimum creditworthiness criteria as to the
choice of counterparty, thereby ensuring that there are no
significant concentrations. The Group does not have any significant
credit risk exposure to any single counterparty or any group of
counterparties having similar characteristics. The maximum exposure
to credit risk for receivables and other financial assets is
represented by their carrying amount.
The Group's maximum exposure to credit risk is limited to the
carrying amount of financial assets recognised at 31 March, as
summarised below:
31-Mar 31-Mar
2022 2021
Classes of financial assets - carrying amounts: (GBP'000) (GBP'000)
------------------------------------------------ ----------- ----------
Cash and cash equivalents 21,710 16,934
Trade and other receivables 3,016 3,808
------------------------------------------------ ----------- ----------
24,726 20,742
------------------------------------------------ ----------- ----------
The Group continuously monitors defaults of customers and other
counterparties, identified either individually or by the Group, and
incorporates this information into its credit risk controls. The
Group's policy is to deal only with credit worthy
counterparties.
The Group's management consider that all of the above financial
assets that are not impaired or past due for each of the 31 March
reporting dates under review are of good credit quality.
At 31 March, the Group had certain trade receivables that had
not been settled by the contractual date but were not considered to
be impaired. The amounts at 31 March, analysed by the length of
time past due, are:
31-Mar 31-Mar
2022 2021
(GBP'000) (GBP'000)
---------------------------------------------- ----------- ----------
Not more than 3 months 267 147
More than 3 months but not more than 6 months 5 16
More than 6 months but not more than 1 year 27 5
More than 1 year 5 4
---------------------------------------------- ----------- ----------
Total 304 172
---------------------------------------------- ----------- ----------
Trade receivables consist of a large number of customers within
the UK. Based on historical information about customer default
rates, management consider the credit quality of trade receivables
that are not past due or impaired to be good. The Group has
rebutted the presumption in paragraph 5.5.11 of IFRS 9 that credit
risk increases significantly when contractual payments are more
than 30 days past due.
The credit risk for cash and cash equivalents is considered
negligible, since the counterparties are reputable banks with high
quality external credit ratings.
Liquidity risk
Liquidity risk is the risk that companies within the Group will
encounter difficulty in meeting obligations associated with
financial liabilities. To counter this risk, the Group operates
with a high level of interest cover relative to its net asset value
and no debt. In addition, it benefits from strong cash flow from
its normal trading activities. The Group manages its liquidity
needs by monitoring scheduled debt servicing payments for long-term
financial liabilities as well as forecast cash inflows and outflows
due in day to day business. The data used for analysing these cash
flows is consistent with that used in the contractual maturity
analysis below.
The totals for each category of financial instruments, measured
in accordance with IFRS 9 and IFRS 7 as detailed in the accounting
policies to this historical financial information, are as
follows:
At 31 March 2022, the Group's non-derivative financial
liabilities have contractual maturities (including interest
payments where applicable) as summarised below:
Current Non-current
------------------------- ---------------------- ----------------------
Within 6 6 to 12 1 to 5 Later than
Months Months Years 5 years
At 31 March 2022 (GBP'000) (GBP'000) (GBP'000) (GBP'000)
------------------------- ---------- ---------- ---------- ----------
Trade and other payables 7,203 - - -
Lease liabilities 135 135 269 -
Contingent consideration - - 2,856 -
------------------------- ---------- ---------- ---------- ----------
Total 7,338 135 3,125 -
------------------------- ---------- ---------- ---------- ----------
This compares with the maturity of the Group's non-derivative
financial liabilities in the previous reporting period as
follows:
Current Non-current
------------------------- ---------------------- ----------------------
Within 6 to 12 1 to 5 Later than
6 months Months Years 5 years
At 31 March 2021 (GBP'000) (GBP'000) (GBP'000) (GBP'000)
------------------------- ---------- ---------- ---------- ----------
Trade and other payables 6,228 - - -
Lease liabilities 113 114 516 -
------------------------- ---------- ---------- ---------- ----------
Total 6,341 114 516 -
------------------------- ---------- ---------- ---------- ----------
The above amounts reflect the contractual undiscounted cash
flows, which may differ from the carrying values of the liabilities
at the reporting date.
Market risk
The Group has made investments in its own managed funds and
portfolios and the value of these investments is subject to equity
market risk, being the risk that changes in equity prices will
affect the Group's income or the value of its holdings of financial
instruments. If equity prices had been 5% higher/lower, the impact
on the Group's Statement of Comprehensive Income would be GBP8,000
higher/lower due to changes in the fair value of financial assets
at fair value through profit or loss.
18 EQUITY
Number
------------------------------------------------------------- ----------
Authorised, called-up and fully paid GBP0.20 ordinary shares
At 1 April 2021 57,889,065
Issue of share capital on exercise of employee share options 1,025,822
------------------------------------------------------------- ----------
At 31 March 2022 58,914,887
------------------------------------------------------------- ----------
Each share in Tatton Asset Management plc carries one vote and
the right to a dividend.
19 OWN SHARES
The following movements in own shares occurred during the
year:
Number
of shares GBP'000
----------------------------------------------- ----------- -------
At 1 April 2021 775,157 1,969
Acquired in the year 966,546 193
Utilised on exercise of employee share options (1,741,703) (2,162)
----------------------------------------------- ----------- -------
At 31 March 2022 - -
----------------------------------------------- ----------- -------
Own shares represent the cost of the Company's own shares,
either purchased in the market or issued by the Company, that are
held by an EBT to satisfy future awards under the Group's
share-based payment schemes (note 20). Following the exercise of
employee share options during the year, there are no shares held in
the EBT at 31 March 2022 (2021: 775,157).
20 SHARE-BASED PAYMENTS
During the year, a number of share-based payment schemes and
share options schemes have been utilised by the Company, described
under 20.1 Current schemes, below.
20.1 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. 3,022,733
options with a weighted average exercise price of GBP1.89 were
granted, exercisable in July 2020. There have been 650,933 options
exercised during the period from this scheme.
The scheme was extended on 8 August 2018 with 1,720,138 zero
cost options granted. This scheme vested in August 2021 and
1,090,770 options were exercised in the period. The scheme was
extended again on 1 August 2019, 28 July 2020 and 15 July 2021 with
193,000, 1,000,000 and 279,858 zero cost options granted in each
respective year. These options are exercisable on the third
anniversary of the grant date. The options vest in August 2022,
July 2023 or July 2024 provided certain performance conditions and
targets, set prior to grant, have been met. If the performance
conditions are not met, the options lapse.
A total of 2,726,026 options remains outstanding at 31 March
2022, 1,294,668 of which are currently exercisable. 30,000 options
were forfeited in the period (2021: none).
Within the accounts of the Company, the fair value at grant date
is estimated using the appropriate models including both the
Black-Scholes and Monte Carlo modelling methodologies.
Number of share Weighted
options granted average price
(number) (GBP)
----------------------------- ---------------- --------------
Outstanding at 1 April 2020 4,755,737 1.15
Granted during the period 1,000,000 -
Exercised during the period (673,568) 1.70
Lapsed during the period (696,099) 1.83
----------------------------- ---------------- --------------
Outstanding at 31 March 2021 4,386,070 0.66
----------------------------- ---------------- --------------
Exercisable at 31 March 2021 1,522,617 1.89
----------------------------- ---------------- --------------
Outstanding at 1 April 2021 4,386,070 0.66
Granted during the period 279,858 -
Exercised during the period (1,741,703) 0.71
Forfeited during the period (30,000) -
Lapsed during the period (168,199) -
----------------------------- ---------------- --------------
Outstanding at 31 March 2022 2,726,026 0.60
----------------------------- ---------------- --------------
Exercisable at 31 March 2022 1,294,668 1.27
----------------------------- ---------------- --------------
(II) TATTON ASSET MANAGEMENT PLC SHARESAVE SCHEME ("TAM
SHARESAVE SCHEME")
On 7 July 2017, 5 July 2018, 3 July 2019, 6 July 2020 and 2
August 2021, the Group launched all employee Sharesave schemes 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 each scheme,
at which point they each have the option to either acquire shares
in the Company or receive the cash saved.
Over the life of the 2019 TAM Sharesave scheme, it is estimated
that, based on current savings rates, 73,609 share options will be
exercisable at an exercise price of GBP1.79. Over the life of 2020
TAM Sharesave scheme, it is estimated that, based on current
savings rates, 115,797 share options will be exercisable at an
exercise price of GBP2.29. Over the life of 2021 TAM Sharesave
scheme, it is estimated that, based on current savings rates,
46,380 share options will be exercisable at an exercise price of
GBP3.60. During the period, 59,276 options have been exercised and
5,924 options have been forfeited.
Within the accounts of the Company, the fair value at grant date
is estimated using the Black-Scholes methodology for 100% of the
options. Share price volatility has been estimated using the
historical share price volatility of the Company, the expected
volatility of the Company's share price over the life of the
options and the average volatility applying to a comparable group
of listed companies. Key valuation assumptions and the costs
recognised in the accounts during the period are noted in 20.2 and
20.3 below respectively.
Number of share Weighted
options granted average price
(number) (GBP)
----------------------------- ---------------- --------------
Outstanding at 1 April 2020 223,728 1.73
Granted during the period 70,894 2.08
Exercised during the period (189,833) 1.70
Forfeited during the period (2,940) 2.01
----------------------------- ---------------- --------------
Outstanding at 31 March 2021 101,849 1.81
----------------------------- ---------------- --------------
Exercisable at 31 March 2021 10,588 1.70
----------------------------- ---------------- --------------
Outstanding at 1 April 2021 101,849 1.81
Granted during the period 77,868 2.28
Forfeited during the period (5,924) 2.22
Exercised during the period (59,276) 1.86
----------------------------- ---------------- --------------
Outstanding at 31 March 2022 114,517 2.14
----------------------------- ---------------- --------------
Exercisable at 31 March 2022 - -
----------------------------- ---------------- --------------
20.2 Valuation assumptions
Assumptions used in the option valuation models to determine the
fair value of options at the date of grant were as follows:
EMI Sharesave
Scheme Scheme
2021 2020 2019 2018 2021 2020 2019 2018
---------------------------- ------- ------ ----- ----- --------- ------ ----- -----
Share price at grant (GBP) 4.60 2.84 2.12 2.40 4.80 2.85 2.14 2.34
Exercise price (GBP) - - - - 3.60 2.29 1.79 1.90
Expected volatility (%) 33.76 34.80 30.44 28.48 33.76 34.80 30.44 28.48
Expected life (years) 3.00 3.00 3.00 3.00 3.00 3.00 3.00 3.00
Risk free rate (%) 0.24 (0.06) 0.35 0.81 0.12 (0.06) 0.35 0.81
Expected dividend yield (%) 2.39 3.38 3.96 2.75 2.39 3.38 3.96 2.75
---------------------------- ------- ------ ----- ----- --------- ------ ----- -----
20.3 IFRS 2 share-based option costs
31-Mar 31-Mar
2022 2021
(GBP'000) (GBP'000)
--------------------- ----------- ----------
TAM EMI scheme 2,347 3,716
TAM Sharesave scheme 52 24
--------------------- ----------- ----------
2,399 3,740
--------------------- ----------- ----------
The Consolidated Statement of Cash Flows shows an adjustment to
Net cash from operating activities relating to share based payments
of GBP1,492,000. This is a charge in the year of GBP2,399,000
adjusted for cash paid relating to national insurance contributions
on the exercise of share options of GBP907,000.
21 BUSINESS COMBINATION
On 14 September 2021, the Group acquired the Verbatim funds and
the acquisition has been treated as a business combination. The
Verbatim funds include six multi-asset and four multi-index funds,
along with model portfolios, and at acquisition included GBP650
million of AUM. The Verbatim funds were acquired in order to
complement Tatton's existing fund range and give IFAs' clients
further access to a range of investments balanced to reflect a
particular risk profile.
The amounts recognised in respect of the identifiable assets
acquired and liabilities assumed upon acquisition of Verbatim are
set out in the table below:
GBP'000
---------------------------------------- -------
Identifiable intangible assets 2,936
Deferred tax liability (708)
---------------------------------------- -------
Total identifiable assets 2,228
Goodwill 3,083
---------------------------------------- -------
Total consideration 5,311
---------------------------------------- -------
Satisfied by:
Cash 2,825
Contingent consideration arrangement 2,486
---------------------------------------- -------
Total consideration transferred 5,311
---------------------------------------- -------
Net cash outflow arising on acquisition 2,825
---------------------------------------- -------
There were no financial assets or financial liabilities acquired
with the business.
The fair value of Verbatim's client relationship intangible
assets and brand have been measured using a multi-period excess
earnings method or relief from royalty valuation methodology, as
appropriate for each asset. The model uses estimates of client
longevity and the level of activity driving commission income to
derive a forecast series of cash flows, which are discounted to a
present value to determine the fair value of the client
relationships and brand acquired. The useful economic life of the
client relationships and the brand has been determined to be ten
years.
The goodwill of GBP3,083,000 arising from the acquisition
consists of future synergies and future income expected to be
generated from the funds. None of the goodwill is expected to be
deductible for income tax purposes.
The contingent consideration arrangement requires the value of
assets held in the funds to meet specific criteria agreed between
the parties. The potential undiscounted amount of all future
payments that the Group could be required to make under the
contingent consideration arrangement is between GBPnil and
GBP3,000,000.
The fair value of the contingent consideration arrangement of
GBP2,486,000 was estimated by calculating the expected future value
of assets held in the Verbatim funds and discounted to net present
value. The liability of GBP2,486,000 has been recognised in Other
payables in the Consolidated Statement of Financial Position.
Acquisition-related costs (included in administrative expenses
and separately disclosed in the Consolidated Statement of Total
Comprehensive Income) amount to GBP231,000.
Verbatim contributed GBP1,158,000 to revenue and GBP927,000 to
the Group's profit for the period between the date of acquisition
and the reporting date.
22 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
---------------------------------- ----------------------------------------
Paradigm Investment Management LLP The Group incurs finance charges.
---------------------------------- ----------------------------------------
Suffolk Life Pensions Limited The Group pays lease rental payments
on an office building held in a pension
fund by Paul Hogarth.
---------------------------------- ----------------------------------------
Related party balances
2022 2021
------------------------------------- ---------------------
Value of Balance Balance
income/ receivable/ Value of receivable/
(cost) (payable) income/(cost) (payable)
Terms and conditions (GBP'000) (GBP'000) (GBP'000) (GBP'000)
------------------------------------- --------------------- ----------- ------------- -------------- ------------
Paradigm Investment Management LLP Repayment on demand - (235) (2) (235)
Suffolk Life Pensions Limited Payable in advance (60) - (76) (1)
Hermitage Holdings (Wilmslow) Limited Repayment on demand (13) - (18) -
------------------------------------- --------------------- ----------- ------------- -------------- ------------
Balances with related parties are non-interest bearing.
Key management personnel remuneration
Key management includes Executive and Non-Executive Directors.
The compensation paid or payable to key management personnel is as
disclosed in note 10.
23 ALTERNATIVE PERFORMANCE MEASURES ("APMs")
Reconciling items to their
APM Closest equivalent measure statutory measure Definition and purpose
---------------------------- ---------------------------- ---------------------------- ----------------------------
Adjusted operating profit Operating profit Exceptional items, An important measure where
before separately disclosed share-based payments and exceptional items distort
items amortisation of the understanding of the
acquisition-related operating performance
intangibles. of the business. Allows
See note 6. comparability between
periods. See also note
2.24.
---------------------------- ---------------------------- ---------------------------- ----------------------------
Adjusted profit before tax Profit before tax Exceptional items, An important measure where
before separately disclosed share-based payments and exceptional items distort
items amortisation of the understanding of the
acquisition-related operating performance
intangibles. of the business. Allows
See note 6. comparability between
periods. See also note
2.24.
---------------------------- ---------------------------- ---------------------------- ----------------------------
Adjusted earnings per share Earnings per share - Basic Exceptional items, An important measure where
- Basic share-based payments and exceptional items distort
amortisation of the understanding of the
acquisition-related operating performance
intangibles of the business. Allows
and the tax thereon. comparability between
See note 9. periods. See also note
2.24.
---------------------------- ---------------------------- ---------------------------- ----------------------------
Adjusted earnings per share Earnings per share - Exceptional items, An important measure where
- Diluted Diluted share-based payments and exceptional items distort
amortisation of the understanding of the
acquisition-related operating performance
intangibles of the business. Allows
and the tax thereon. The comparability between
dilutive shares for this periods. See also note
measure assume that all 2.24.
contingently issuable
shares will fully vest.
See note 9.
---------------------------- ---------------------------- ---------------------------- ----------------------------
Net cash generated from Net cash generated from Exceptional items, Net cash generated from
operations before separately operations share-based payments and operations before
disclosed items amortisation of exceptional costs. To show
acquisition-related underlying cash
intangibles. performance.
See note 6. See also note 2.24.
---------------------------- ---------------------------- ---------------------------- ----------------------------
Other measures
Reconciling items to their
APM Closest equivalent measure statutory measure Definition and purpose
---------------------------- --------------------------- ----------------------------- ----------------------------
Tatton - assets under None Not applicable AUM is representative of
management ("AUM") and net the customer assets and is
inflows a measure of the value of
the customer
base. Movements in this
base are an indication of
performance in the year and
growth of the
business to generate
revenues going forward. Net
inflows measure the net of
inflows and outflows
of customers assets in the
year.
---------------------------- --------------------------- ----------------------------- ----------------------------
Paradigm Consulting members None Not applicable Alternative growth measure
and growth to revenue, giving an
operational view of growth.
---------------------------- --------------------------- ----------------------------- ----------------------------
Paradigm Mortgages lending, None Not applicable Alternative growth measure
member firms and growth to revenue, giving an
operational view of growth.
---------------------------- --------------------------- ----------------------------- ----------------------------
Dividend cover None Not applicable Dividend cover (being the
ratio of the proposed final
dividend against diluted
earnings per
share before exceptional
items and share-based
charges) demonstrates the
Group's ability to
pay the proposed dividend.
---------------------------- --------------------------- ----------------------------- ----------------------------
Dividend yield None Not applicable Dividend yield represents
the percentage of the
Company's share price at
the financial year
end paid out as dividends
for the relevant financial
year.
---------------------------- --------------------------- ----------------------------- ----------------------------
CAGR in AUM and CAGR in None Not applicable The Cumulative Annual
Tatton firm numbers Growth Rate in AUM and
Tatton firm numbers since
the Group listed on
the AIM Stock exchange in
July 2017.
---------------------------- --------------------------- ----------------------------- ----------------------------
Average annual net inflows None Not applicable The average annual net
inflows since the Group
listed on the AIM stock
exchange in July 2017.
---------------------------- --------------------------- ----------------------------- ----------------------------
24 POST BALANCE SHEET EVENTS
On 20 April 2022, TAM plc has entered into a sale and purchase
agreement to purchase 50% of the issued share capital of 8AM Global
Limited. This transaction has not yet completed as it remains
subject to regulatory approval.
25 CAPITAL COMMITMENTS
At 31 March 2022, the Directors confirmed there were no capital
commitments (2021: none) for capital improvements.
26 CONTINGENT LIABILITIES
At 31 March 2022, the Directors confirmed there were no
contingent liabilities (2021: none).
COMPANY STATEMENT OF FINANCIAL POSITION
AS AT 31 MARCH 2022
31-Mar 31-Mar
2022 2021
Note (GBP'000) (GBP'000)
----------------------------------------------------- ---- ----------- ----------
Non-current assets
Investments in subsidiaries 5 77,216 77,216
Property, plant and equipment 11 13
----------------------------------------------------- ---- ----------- ----------
Total non-current assets 77,227 77,229
----------------------------------------------------- ---- ----------- ----------
Current assets
Trade and other receivables 11 12,214 9,397
Cash and cash equivalents 12 10,204 8,182
----------------------------------------------------- ---- ----------- ----------
Total current assets 22,418 17,579
----------------------------------------------------- ---- ----------- ----------
Total assets 99,645 94,808
----------------------------------------------------- ---- ----------- ----------
Current liabilities
Trade and other payables 13 (2,461) (1,791)
----------------------------------------------------- ---- ----------- ----------
Total current liabilities (2,461) (1,791)
----------------------------------------------------- ---- ----------- ----------
Non-current liabilities
Deferred tax liability 15 (2) -
----------------------------------------------------- ---- ----------- ----------
Total non-current liabilities (2) -
----------------------------------------------------- ---- ----------- ----------
Total liabilities (2,463) (1,791)
----------------------------------------------------- ---- ----------- ----------
Net assets 97,182 93,017
----------------------------------------------------- ---- ----------- ----------
Equity attributable to equity holders of the Company
Share capital 14 11,783 11,578
Share premium account 11,632 11,534
Own shares 10 - (1,969)
Merger reserve 67,316 67,316
Retained earnings 6,451 4,558
----------------------------------------------------- ---- ----------- ----------
Total equity 97,182 93,017
----------------------------------------------------- ---- ----------- ----------
The Company generated a profit of GBP8,017,000 during the
financial year (2021: profit of GBP1,017,000).
The financial statements were approved by the Board of Directors
on 14 June 2022 and were signed on its behalf by:
Paul Edwards
Director
Company registration number: 10634323
COMPANY STATEMENT OF CHANGES IN EQUITY
FOR THE YEARED 31 MARCH 2022
Share Share Own Merger Retained Total
Capital Premium Shares Reserve Earnings Equity
(GBP'000) (GBP'000) (GBP'000) (GBP'000) (GBP'000) (GBP'000)
---------------------------------------------- ---------- ---------- ---------- ---------- ---------- ----------
At 1 April 2020 11,182 8,718 (996) 67,316 6,225 92,445
---------------------------------------------- ---------- ---------- ---------- ---------- ---------- ----------
Profit and total comprehensive income - - - - 1,017 1,017
Dividends - - - - (5,551) (5,551)
Share-based payments - - - - 2,953 2,953
Deferred tax on share-based payments - - - - (86) (86)
Issue of share capital on exercise of employee
share options 396 2,816 - - - 3,212
Own shares acquired in the year - - (973) - - (973)
---------------------------------------------- ---------- ---------- ---------- ---------- ---------- ----------
At 31 March 2021 11,578 11,534 (1,969) 67,316 4,558 93,017
---------------------------------------------- ---------- ---------- ---------- ---------- ---------- ----------
Profit and total comprehensive income - - - - 8,017 8,017
Dividends - - - - (6,641) (6,641)
Share-based payments - - - - 2,679 2,679
Deferred tax on share-based payments - - - - - -
Issue of share capital on exercise of employee
share options 205 98 - - - 303
Own shares acquired in the year - - (193) - - (193)
Own shares utilised on exercise of options - - 2,162 - (2,162) -
---------------------------------------------- ---------- ---------- ---------- ---------- ---------- ----------
At 31 March 2022 11,783 11,632 - 67,316 6,451 97,182
---------------------------------------------- ---------- ---------- ---------- ---------- ---------- ----------
The merger reserve was created on 19 June 2017 when the Group
was formed, where the difference between the Company's capital and
the acquired Group's capital has been recognised as a component of
equity being the merger reserve. The merger reserve is
non-distributable.
NOTES TO THE COMPANY FINANCIAL STATEMENTS
1 AUTHORISATION OF FINANCIAL STATEMENTS AND STATEMENT OF
COMPLIANCE WITH FRS 101
The financial statements of Tatton Asset Management plc for the
year ended 31 March 2022 were authorised for issue by the Board of
Directors on 14 June 2022. Tatton Asset Management plc is
incorporated and domiciled in England and Wales.
These financial statements were prepared in accordance with
Financial Reporting Standard 101 "Reduced Disclosure Framework"
("FRS 101") and in accordance with applicable accounting standards.
The Company's financial statements are presented in sterling.
These financial statements have been prepared on a going concern
basis and on the historical cost basis. The principal accounting
policies adopted by the Company are set out in note 2.
2 ACCOUNTING POLICIES
2.1 Accounting policies
The accounting policies which follow set out those policies
which apply in preparing the financial statements for the year
ended 31 March 2022.
The Company has taken advantage of the following disclosure
exemptions under FRS 101:
a) the requirement in paragraph 38 of IAS 1 "Presentation of
Financial Statements" to present comparative information in respect
of:
1) Paragraph 79(a)(IV) of IAS 1;
2) Paragraph 73(e) of IAS 16 "Property, Plant and
Equipment";
b) the requirements of paragraphs 10(d), and 134-136 of IAS 1
"Presentation of Financial Statements" and the requirements of IAS
7 "Statement of Cash Flows";
c) the requirements of paragraphs 30 and 31 of IAS 8 "Accounting
Policies, Changes in Accounting Estimates and Errors";
d) the requirements of paragraph 17 of IAS 24 "Related Party
Disclosures";
e) the requirements in IAS 24 "Related Party Disclosures" to
disclose related party transactions entered into between two or
more members of a group, provided that any subsidiary which is a
party to the transaction is wholly owned by such a member; and
f) the disclosure requirements of IFRS 7 "Financial Instruments:
Disclosures".
2.2 Investments
All investments are initially recorded at cost, being the fair
value of consideration given including the acquisition costs
associated with the investment. Subsequently, they are reviewed for
impairment on an individual basis if events or changes in
circumstances indicate the carrying value may not be fully
recoverable.
2.3 Financial instruments
Non-derivative financial instruments comprise trade and other
receivables, cash and cash equivalents, and trade and other
payables.
2.4 Trade and other receivables
Trade and other receivables are recognised initially at fair
value. Subsequent to initial recognition they are measured at
amortised cost using the effective interest method.
2.5 Trade and other payables
Trade and other payables are recognised initially at fair value
and subsequently measured at amortised cost using the effective
interest method, where applicable or required. These amounts
represent liabilities for goods and services provided to the Group
prior to the end of the financial period, which are unpaid.
2.6 Cash and cash equivalents
Cash and cash equivalents comprise long-and short-term deposits
held with banks by the Company, and are subject to insignificant
risk of changes in value.
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 Interest income and interest expense
Finance income is recognised as interest accrued (using the
effective interest method) on funds invested outside the Company.
Finance expense includes the cost of borrowing from third parties
and is recognised on an effective interest rate basis, resulting
from the financial liability being recognised on an amortised cost
basis.
2.9 Taxation
CURRENT TAX
The tax currently payable is based on taxable profit for the
year. Taxable profit differs from net profit as reported in the
Statement of Total Comprehensive Income because it excludes items
of income or expense that are taxable or deductible in other years
and it further excludes items that are never taxable or deductible.
The Company's liability for current tax is calculated using tax
rates that have been enacted or substantively enacted by the
Statement of Financial Position date.
DEFERRED TAX
Deferred tax is the tax expected to be payable or recoverable on
differences between the carrying amounts of assets and liabilities
in the financial statements and the corresponding tax bases used in
the computation of taxable profit, and is accounted for using the
balance sheet liability method. Deferred tax liabilities are
generally recognised for all taxable temporary differences and
deferred tax assets are recognised to the extent that it is
probable that taxable profits will be available against which
deductible temporary differences can be utilised. Such assets and
liabilities are not recognised if the temporary difference arises
from the initial recognition of goodwill or from the initial
recognition (other than in a business combination) of other assets
and liabilities in a transaction that affects neither the taxable
profit nor the accounting profit.
Deferred tax liabilities are recognised for taxable temporary
differences where it is probable that the temporary difference will
not reverse in the foreseeable future. Deferred tax assets arising
from deductible temporary differences associated with such
investments and interests are only recognised to the extent that it
is probable that there will be sufficient taxable profits against
which to utilise the benefits of the temporary difference and they
are expected to reverse in the foreseeable future.
The carrying amount of deferred tax assets is reviewed at each
Statement of Financial Position date and reduced to the extent that
it is no longer probable that sufficient taxable profits will be
available to allow all or part of the asset to be recovered.
Deferred tax is calculated at the tax rates that are expected to
apply in the period when the liability is settled or the asset is
realised based on tax laws and rates that have been enacted or
substantively enacted at the Statement of Financial Position date.
Deferred tax is charged or credited in the Statement of Total
Comprehensive Income, except when it relates to items charged or
credited in other comprehensive income, in which case the deferred
tax is also dealt with in other comprehensive income.
The measurement of deferred tax liabilities and assets reflects
the tax consequences that would follow from the manner in which the
Company expects, at the end of the reporting period, to recover or
settle the carrying amount of its assets and liabilities.
Deferred tax assets and liabilities are offset when there is a
legally enforceable right to set off the current tax assets against
current tax liabilities and when they relate to income taxes levied
by the same taxation authority and the Company intends to settle
its current tax assets and liabilities on a net basis.
CURRENT AND DEFERRED TAX FOR THE YEAR
Current and deferred tax are recognised in profit or loss,
except when they relate to items that are recognised in other
comprehensive income or directly in equity, in which case the
current and deferred tax are also recognised in other comprehensive
income or directly in equity respectively. Where current tax or
deferred tax arises from the initial accounting for a business
combination, the tax effect is included in the accounting for the
business combination.
2.10 Dividends
Dividend distributions payable to equity shareholders are
included in other liabilities when the dividends have been approved
in a Board meeting prior to the reporting date.
2.11 Retirement benefit costs
The Company pays into a personal pension plan for which the
amount charged to income in respect of pension costs and other
post-retirement benefits is the amount of the contributions payable
in the year. Payments to the defined contribution retirement
benefit scheme are recognised as an expense when employees have
rendered service entitling them to the contributions. Differences
between contributions payable and paid are accrued or prepaid. The
assets of the plans are invested and managed independently of the
finances of the Company.
3 OPERATING PROFIT
The following items have been included in arriving at the
operating profit for continuing operations:
31-Mar 31-Mar
2022 2021
(GBP'000) (GBP'000)
------------------------------------- ----------- ----------
Share-based payment charges (note 9) 2,399 3,740
------------------------------------- ----------- ----------
Share-based payment charges relate to the provision made in
accordance with IFRS 2 "Share-based Payment" following the issue of
share options to employees.
4 SERVICES PROVIDED BY THE COMPANY'S AUDITOR
During the period, the Company obtained the following services
provided by the Company's auditor at the costs detailed below:
31-Mar 31-Mar
2022 2021
(GBP'000) (GBP'000)
------------------------------------------------------- ----------- ----------
Audit of the statutory financial statements of TAM plc 72 69
Services provided by the Company's auditor:
Non-audit services 13 18
------------------------------------------------------- ----------- ----------
5 INVESTMENTS
GBP'000
------------------------------------------------------------------------- -------
Cost and net book value at 1 April 2020, 31 March 2021 and 31 March 2022 77,216
------------------------------------------------------------------------- -------
The principal investments comprise shares at cost in the
following companies:
Name of subsidiary Country of incorporation Holding Direct/Indirect
------------------------------------ ------------------------ ------- ---------------
Nadal Newco Limited United Kingdom 100% Direct
------------------------------------ ------------------------ ------- ---------------
Paradigm Partners Limited United Kingdom 100% Indirect
------------------------------------ ------------------------ ------- ---------------
Paradigm Mortgage Services LLP United Kingdom 100% Indirect
------------------------------------ ------------------------ ------- ---------------
Tatton Capital Group Limited* United Kingdom 100% Indirect
------------------------------------ ------------------------ ------- ---------------
Tatton Capital Limited United Kingdom 100% Indirect
------------------------------------ ------------------------ ------- ---------------
Tatton Investment Management Limited United Kingdom 100% Indirect
------------------------------------ ------------------------ ------- ---------------
Tatton Oak Limited* United Kingdom 100% Indirect
------------------------------------ ------------------------ ------- ---------------
Tatton Crown Investments Limited* United Kingdom 100% Indirect
------------------------------------ ------------------------ ------- ---------------
Sinfonia Asset Management Limited* United Kingdom 100% Indirect
------------------------------------ ------------------------ ------- ---------------
* Indicates that this subsidiary is entitled to exemption from
audit under section 479A of the Companies Act 2006 for the year
ending 31 March 2022.
All entities above are included within the consolidated
financial statements for TAM plc and all have the same registered
address as the Company.
6 DIRECTORS AND EMPLOYEES
The average number of persons employed by the Company (including
Directors) during each year was as follows:
31-Mar 31-Mar
2022 2021
Number Number
--------------- ------- -------
Administration 13 11
--------------- ------- -------
31-Mar 31-Mar
2022 2021
(GBP'000) (GBP'000)
---------------------------- ----------- ----------
Wages, salaries and bonuses 1,708 1,521
Social security costs 228 188
Pension costs 19 10
Share-based payment charges 2,399 3,740
---------------------------- ----------- ----------
4,354 5,459
---------------------------- ----------- ----------
The remuneration of the highest paid Director was:
31-Mar 31-Mar
2022 2021
(GBP'000) (GBP'000)
------ ----------- ----------
Total 644 794
------ ----------- ----------
7 ULTIMATE CONTROLLING PARTY
The Directors consider that there is no ultimate controlling
party.
8 DIVID PAID AND PROPOSED
During the year, Tatton Asset Management plc paid the final
dividend related to the year ended 31 March 2021 of GBP4,284,000
representing a payment of 7.5p per share. In addition, the Company
paid an interim dividend of GBP2,357,000 (2021: GBP1,999,000) to
its equity shareholders. This represents a payment of 4.0p per
share (2021: 3.5p per share).
In addition, the Directors are proposing a final dividend in
respect of the financial year ended 31 March 2022 of 8.5p (2021:
7.5p) per share which will absorb an estimated GBP5.0 million
(2021: GBP4.3 million) of shareholders' funds. It will be paid on 2
August 2022 to shareholders who are on the register of members on
24 June 2022.
9 SHARE-BASED PAYMENTS
Details of share-based payments are shown in note 20 to the
consolidated financial statements.
10 OWN SHARES
Details of own shares are shown in note 19 to the consolidated
financial statements.
11 TRADE AND OTHER RECEIVABLES
31-Mar 31-Mar
2022 2021
(GBP'000) (GBP'000)
--------------------------------- ----------- ----------
Amounts due from related parties 11,420 8,821
Prepayments and accrued income 690 553
Other debtors 104 23
--------------------------------- ----------- ----------
12,214 9,397
--------------------------------- ----------- ----------
All trade receivable amounts are short term. All of the
Company's trade and other receivables have been reviewed for
indicators of impairment and, where necessary, a provision for
impairment made. The carrying value is considered a fair
approximation of their fair value. At 31 March 2021, Tatton Asset
Management plc made full provision of GBP60,000 against the
recoverability of amounts due from a related party, Jargonfree
Benefits LLP. There has been no other provision made for impairment
of receivable balances (2021: GBPnil).
Trade receivable amounts are all held in sterling.
12 CASH AND CASH EQUIVALENTS
31-Mar 31-Mar
2022 2021
(GBP'000) (GBP'000)
------------- ----------- ----------
Cash at bank 10,204 8,182
------------- ----------- ----------
13 TRADE AND OTHER PAYABLES
31-Mar 31-Mar
2022 2021
(GBP'000) (GBP'000)
------------------------------- ----------- ----------
Trade payables 505 55
Amounts due to related parties 122 110
Accruals 1,834 1,626
------------------------------- ----------- ----------
2,461 1,791
------------------------------- ----------- ----------
The carrying values of trade payables, amounts due to related
parties, accruals and deferred income are considered reasonable
approximation of fair value.
Trade payable amounts are all held in sterling.
14 EQUITY
Number
------------------------------------------------------------- ----------
Authorised, called-up and fully paid GBP0.20 ordinary shares
At 1 April 2021 57,889,065
Issue of share capital on exercise of employee share options 1,025,822
------------------------------------------------------------- ----------
At 31 March 2022 58,914,887
------------------------------------------------------------- ----------
Each share in Tatton Asset Management plc carries one vote and
the right to a dividend.
15 DEFERRED TAXATION
Deferred capital Share-based
Allowances Payments Total
(GBP'000) (GBP'000) (GBP'000)
--------------------------- ---------------- ----------- ----------
Asset at 31 March 2020 - 235 235
Income statement charge - (149) (149)
Equity charge - (86) (86)
--------------------------- ---------------- ----------- ----------
Asset at 31 March 2021 - - -
--------------------------- ---------------- ----------- ----------
Income statement charge (2) - (2)
--------------------------- ---------------- ----------- ----------
Liability at 31 March 2022 (2) - (2)
--------------------------- ---------------- ----------- ----------
16 CONTINGENT LIABILITIES
At 31 March 2022, the Directors confirmed there were no
contingent liabilities (2021: none).
17 CAPITAL COMMITMENTS
At 31 March 2022, the Directors confirmed there were no capital
commitments (2021: none) for capital improvements.
18 OPERATING LEASE COMMITMENTS
The Company as lessee had minimum lease payments under
non-cancellable operating leases as set out below:
31-Mar 31-Mar
2022 2021
(GBP'000) (GBP'000)
---------------------------------------------- ----------- ----------
Not later than one year 60 60
Later than one year not later than five years 101 161
Later than five years - -
---------------------------------------------- ----------- ----------
161 221
---------------------------------------------- ----------- ----------
21 RELATED PARTY TRANSACTIONS
The Company has taken advantage of the exemption under paragraph
8(K) of FRS 101 not to disclose transactions with entities that are
wholly owned subsidiaries of TAM plc. There are no other related
party transactions other than those that have been disclosed in
note 22 to the consolidated financial statements.
21.1 Transactions with key management personnel
Other than the Directors and Officers of the Group (see note 22
to the consolidated financial statements), no other key management
personnel have been identified.
22 EVENTS AFTER THE REPORTING PERIOD
On 20 April 2022, TAM plc has entered into a sale and purchase
agreement to purchase 50% of the issued share capital of 8AM Global
Limited. This transaction has not yet completed as it remains
subject to regulatory approval.
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END
FR GPUCUQUPPGBC
(END) Dow Jones Newswires
June 15, 2022 02:00 ET (06:00 GMT)
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