TIDMSNN
RNS Number : 7332L
Sanne Group PLC
10 September 2019
10 September 2019
Sanne Group plc
("the Company") together with its subsidiaries ("the Group" or
"SANNE")
Interim results for the six months ended 30 June 2019
Sanne Group plc is one of the leading providers of outsourced
alternative asset and corporate business services to the world's
leading fund managers and corporates.
6 months 6 months Change Constant
to 30 to 30 currency
June 2019 June 2018 change(2)
Revenue GBP78.7m GBP65.9m 19.5% 17.4%
----------- ----------- -------- -----------
Underlying(1)
----------- ----------- -------- -----------
Operating profit GBP20.8m GBP20.0m 3.7% (3.1%)
----------- ----------- -------- -----------
Profit before tax GBP19.2m GBP19.4m (1.3%) (9.4%)
----------- ----------- -------- -----------
Diluted earnings per share 10.4p 11.2p (7.1%) (17.6%)
----------- ----------- -------- -----------
Operating profit margin 26.4% 30.4%
----------- ----------- -------- -----------
Statutory
----------- ----------- -------- -----------
Operating profit GBP7.5m GBP11.5m (34.9%) (48.5%)
----------- ----------- -------- -----------
Profit before tax GBP5.4m GBP10.9m (50.3%) (62.2%)
----------- ----------- -------- -----------
Diluted earnings per share 2.4p 5.9p (60.2%) (74.0%)
----------- ----------- -------- -----------
Interim dividend per share 4.7p 4.6p
----------- ----------- -------- -----------
1. Underlying results for the year have been presented after the
exclusion of non--underlying items. Within operating profit and
profit before tax, these items include, amongst other costs,
acquisition and integration costs (2019: GBP0.3m), share based
payments where linked to acquisitions (2019: GBP1.1m), amortisation
of intangible assets (2019: GBP8.3m), earn-out accrual for AgenSynd
(2019: GBP1.2m) and the impairment of intangible assets (2019:
GBP1.9m). Further details can be found in note 4 of the
consolidated financial statements
(2. Constant currency represents the 2019 performance based on
2018 FX rates to eliminate movements due to FX)
Highlights:
-- H1 results (under IFRS 16):
o Constant currency revenue growth of 17.4% (2018: 19.5%)
o Continued very strong Alternatives revenue growth of 25.2%
(2018: 20.3%), especially in North America and Asia-Pacific
o Margin lower than previous expectations, as already announced
in July trading update
o Cash generation improved with underlying operating cash
conversion of 118% (2018: 67.9%)
o Statutory profits impacted by one-off costs in H1 of AgenSynd
earn-out accrual and South Africa intangibles impairment
-- Record levels of new business wins from both new and existing
customers with annualised fees of approximately GBP16.0 million won
in the first six months (H1 2018: GBP11.5 million)
-- Actions implemented to improve margin in H2
-- Committed to continued investment to support the Group's
growth ambitions in its core markets and products
-- Successful refinancing of Group facilities provides additional flexibility
-- Recently acquired businesses successfully integrated and already adding value to the group
-- Martin Schnaier took over as CEO on 16 May 2019
-- Interim dividend of 4.7p (2018: 4.6p) reaffirms the Board's
confidence in the future prospects of the Group
Strategic partnership and minority investment agreed with
Colmore AG ("Colmore"):
-- Minority shareholding in Colmore, with its award-winning
technology platform will enable SANNE to provide fund management
clients with real-time market leading analytics services
Outlook:
The continued outperformance from SANNE's core Alternatives
businesses gives the Board confidence in the Group's full year
revenue expectations, despite the challenges in the Corporate and
Private Client business areas.
Whilst the actions we are taking are improving underlying
operating margin, the items impacting profitability in the first
half are unlikely to be fully compensated for in the second half.
The Board therefore expects to report a full year underlying
operating profit margin in the region of 28% to 30% and EPS in line
with its revised expectations, as announced in the Group's trading
statement on 27 July 2019.
Martin Schnaier, Chief Executive Officer of Sanne Group plc
said:
"Our record new business wins demonstrate that SANNE's client
proposition remains very attractive and our increasing focus on
fast-growing Alternative asset classes is driving significant
revenue momentum. However it is clearly disappointing that the
first half profitability has come in materially below our original
expectations.
Looking at our strengths and market opportunity, I am as excited
about the future as I have ever been. As the new CEO, my
responsibility is to ensure that SANNE fulfils its significant
potential, and I am confident that the global platform we are
investing in will be essential to the long-term success of the
business. I have two immediate priorities: to focus on addressing
the issues that have impacted the Group's margins, and to generate
good returns from the Corporate and Private Client business. We are
already working hard on each of these, with some positive results
already coming through, and I look forward to reporting on our
progress in the months ahead."
Enquiries:
Sanne Group plc
Martin Schnaier, Chief Executive Officer
James Ireland, Chief Financial Officer +44 (0) 1534 722 787
Investec Bank plc
Chris Baird / David Flin
Edward Thomas / Neil Coleman +44 (0) 20 7597 5970
RBC Capital Markets
Darrell Uden
Daniel Werchola
Jonathan Hardy +44 (0) 20 7653 4000
Tulchan Communications LLP
Tom Murray / David Ison +44 (0) 20 7353 4200
The Company will be hosting an investor and analyst presentation
at 09:30am (BST) on 10(th) September 2019, at Haywood & Wren,
The Clubhouse, Holborn Circus - 20 St Andrew Street, EC4A 3AG
This presentation can be viewed live on the 'investor relations'
section of the SANNE website:
Participants can also dial into the presentation in listen-only
mode using the following details:
08003589473 (Toll Free)
+44 3333000804 (Toll)
Access Code: 62085336#
International dial-in numbers:
http://events.arkadin.com/ev/docs/NE_W2_TF_Events_International_Access_List.pdf
A copy of the 2019 Half Year results presentation will be
available on SANNE's Investor Relations pages at www.sannegroup.com
after the live webcast has ended.
Notes:
SANNE is a leading global provider of outsourced alternative
asset and corporate business services. Established for over 30
years and listed as a FTSE 250 company on the Main Market of the
London Stock Exchange, SANNE employs more than 1,600 people
worldwide and administers structures and funds that have in excess
of GBP250 billion of assets.
Key clients include leading alternative asset managers, global
financial institutions, family offices, UHNWIs and international
corporates
SANNE operates from a global network of offices located in
leading financial jurisdictions, which are spread across the
Americas, Europe, Africa and Asia-Pacific.
sannegroup.com
INTERIM MANAGEMENT STATEMENT
Chief Executive Officer's Report
Revenue
We have seen continued strong revenue growth across all of
SANNE's core alternatives businesses, as the Group improves market
penetration as well as benefiting from structural growth trends in
global alternatives markets. As a result of these growth drivers,
the Group saw overall constant currency revenue growth of 17.4%
(19.5% on an actual basis) compared to the same period in the prior
year, despite the Corporate and Private Client (CPC) businesses
performing below expectations.
The Group's performance was underpinned by good organic revenue
growth of 12.8% in constant currency (14.9% on an actual basis)
across the Group (organic revenue growth is reported revenue growth
adjusted to remove the 2019 H1 contribution from AgenSynd as well
as pro-rating the contribution from LIS down to five months,
comparable to H1 2018's contribution).
SANNE's Alternative Asset focused client services now represent
c.89% of SANNE's total revenues, compared to c.78% four years ago,
as the Group continues to build on its leading market position. The
Group's alternatives businesses saw constant currency growth in the
first half of 22.8% and 17.3% on a comparable organic basis. The
Group has also benefited from a full six months' contribution in H1
2019 from LIS in Luxembourg (H1 2018's result included only 5
months) as well as AgenSynd in Madrid, which was acquired during H2
2018. Both these acquisitions continue to perform well and in line
with the Group's expectations.
The Group's European Corporate and Private Client businesses,
previously the CPC segment (14.8% of 2018 Group revenues),
delivered disappointing first half financial performances. The
Corporate business was flat compared to the prior period whilst
Private Client declined compared to the first half of 2018. Overall
combined revenues for these businesses were down approximately
13.2% on the same period in 2018.
New business
In the first half of the year, the Group secured new business
from both new and existing clients totalling approximately GBP16.0
million on a projected annualised fee basis (H1 2018: GBP11.5
million). This is another record half year result and demonstrates
the attractiveness of our offering. Approximately 30% of this was
business won from clients new to the Group, with the balance from
SANNE's existing customer base. We are pleased to see clients from
across the global business placing increasing trust in SANNE as
their long term, strategic partner.
Costs and operating margin
Whilst the Group saw a good revenue performance for H1 2019, the
underlying operating profit margin was adversely affected by a
combination of items, as announced in July 2019. The underlying
operating profit margin in the first half fell to 26.4% from 30.4%
in H1 2018 and underlying operating profit for the period was
broadly flat on the prior year at GBP20.8 million.
There were a number of reasons for this margin decline. The
principal one was a fall in gross profit margins in the new Europe,
Middle East & Africa (EMEA) and Channel Islands (CI) reporting
segments, as investment in people in our client service teams, was
made ahead of being able to recognise revenues from new
clients.
Gross profit margins were also impacted by increased spend on
the dedicated Business Development team and the creation of the
Product Development team. In addition, the Group failed to deliver
operating efficiencies in the central operations teams that were
established in 2018, which would have largely mitigated this
increased spend. The total spend on the Business Development,
Product Development and centralised teams has grown to around 2.6%
of total revenues in the first half of 2019. Changes have been made
to the reporting and operating structure of the centralised teams
towards the end of the period and we are confident that these will
realise efficiencies in the second half and beyond.
The final item that has impacted the first half margin was
elevated overhead spend in relation to increased activity,
particularly in relation to recruitment spend and new office moves.
The first half has seen significant office moves in Luxembourg,
Hong Kong and Shanghai to support the future growth in headcount.
In addition, new offices have been established in Amsterdam, Tokyo,
Mumbai and San Diego as a direct result of client demand. These
small operations enable us to add more value to existing clients on
the ground and an ability to enhance our already strong client
relationship management.
The majority of office moves for 2019 have taken place in the
first half and actions have been taken, including changes to
reporting lines and oversight, to focus on managing cost control in
areas where spend has been unexpectedly elevated in the first half.
As such, overheads are expected to grow more slowly than revenues
in the second half.
Strategy for growth
SANNE's strategic focus remains to be one of the world's leading
providers of outsourced alternative asset and corporate business
services, supporting clients in fast growing markets through local
market knowledge and a deep understanding of the asset classes and
markets in which they operate.
We continue to see a trend towards clients requiring their
service provider to be able to support them across the spectrum of
administrative services and throughout all key international
finance centres. The Group remains focused on investing to build
out its platform capability and jurisdictional footprint to ensure
SANNE provides a quality one-stop-shop for local and international
alternative asset managers. The opening of four new offices and
locations during 2019 aligns with this strategic focus.
In addition to capability and jurisdictional footprint,
industry-leading client service is at the heart of SANNE's
strategy. Clients in the closed-ended alternatives sector demand
bespoke and high-touch services, underpinned by a deep
understanding of local markets that meet their ongoing needs. This
close partnership approach to client service has always been a
differentiator for SANNE and it remains critical to the continued
success of the business. The creation of the Product Development
team in 2019 provides the Group with experienced senior people who
are focused on the continuous development of our client service
offering, as well as ensuring that clients continue to benefit from
engagement with SANNE as a product and service specialist.
Over the last two years, SANNE has also stepped up its
investment in its people, processes and systems to ensure that the
Group's global platform is well invested to support long-term
growth. Areas of focus include information technology, risk and
compliance, management bandwidth and governance, as well as the
creation of the dedicated Business Development team to focus on new
clients wins and help the Group take advantage of more cross-sell
opportunities.
Group structure and management changes
The first half of 2019 saw a material change in the reporting
and operating structure of the Group as it shifted from a
divisional business reporting structure to a jurisdiction-oriented
structure. This change brings with it a number of significant
benefits. These include a more robust governance and control
framework at local levels, fostering local accountability, as well
as bringing an improved focus on local employee engagement across
our expanding jurisdictional footprint. The impact of these changes
is also outlined in the Operational Review below.
Following the AGM on 16(th) May 2019, and as previously
announced, Martin Schnaier became Chief Executive Officer,
succeeding Dean Godwin.
As a result of the CEO succession plan, Mark Law, previously
Managing Director of the Group's Asia-Pacific & Mauritius
business, was promoted to the Chief Commercial Officer role,
replacing Martin Schnaier, with responsibility for SANNE's Client
Service teams. Jing Jing Qian has been promoted to the Managing
Director position for Asia-Pacific, whilst Peter Nagle joined the
Group in 2018 as Managing Director for Mauritius. Michael Riley
joined the business as Head of Mergers and Acquisitions during
April 2019 and Malcolm Hassan joined as Managing Director for
Business Development and Marketing in May 2019.
Our people
As a people business, SANNE's employees are central to the
Group's success. The strong top line growth we continue to see
across our Group is testament to the hard work and commitment of
our employees across the globe and I would take this opportunity to
thank them for their efforts. Keeping our people at the centre of
our business and our client proposition is key and since the CEO
change there has been a renewed focus on our Group culture, and
ongoing investment in our people across the global business.
Operational Review
This is the first time SANNE has reported under its new
segmental structure. The new structure reflects the change made at
the start of the period to move to jurisdictional management and
reporting across all parts of the Group. The Group's four reporting
segments are now Europe, Middle East and Africa (EMEA); Channel
Islands (CI); North America (NA); and Asia-Pacific & Mauritius
(APM). The NA and APM segments remain unchanged from prior years.
The former EMEA Alternatives and Corporate & Private Client
(CPC) segments have been combined and then split between operations
in the Channel Islands and outside the Channel Islands. For
continuity we will continue to report the old CPC revenues
separately within EMEA and CI.
Europe, Middle East & Africa (EMEA)
SANNE's EMEA business includes our services to alternative asset
managers and financial institutions across Luxembourg, Dublin,
London, Madrid, Paris, Amsterdam, Malta and Cape Town. This segment
provides services across all core alternative closed-ended
investment strategies as well as the Group's open-ended Hedge
business and a small element of Corporate business located in
Ireland.
Under the new reporting structure, EMEA delivered constant
currency revenue growth of 21.6% on an organic basis and 34.6% on
an actual basis, factoring in the full 6 months of LIS and
AgenSynd. Separating out the CPC portion of this reporting segment
(approximately 3.2% of the segment's first half revenues) the EMEA
Alternatives business delivered 22.8% organic growth and 36.5%
actual in the period on a constant currency basis. EMEA has seen
very little impact from foreign exchange, albeit there has been a
very small headwind from the Sterling-Euro exchange rate.
H1 2019 H1 2018 % growth Constant 31 Dec
currency 2018
% growth (GBP'000)
(GBP'000) (GBP'000)
----------- ----------- --------- ---------- -----------
Revenue 31,341 23,420 33.8% 34.6% 53,427
- Alternatives 30,352 22,383
- CPC 989 1,037
Gross profit 17,404 13,921 25.0% 25.1% 31,846
Margin 55.5% 59.4% 59.6%
The organic revenue performance for EMEA has been the result of
continued buoyant markets, increased market penetration and strong
demand for SANNE's closed-ended alternative asset business
services. The strong trend in the domiciliation of funds and
managers to Luxembourg driven by a number of macro factors
including Brexit and the Anti-Tax Avoidance Directive (ATAD) in
Europe. Having a large, scaled capability across all key
jurisdictions (especially Luxembourg which provides a one-stop-shop
service across AIFMD mandates), SANNE is well placed to benefit
from this trend.
The Group's Hedge offering, which has traditionally been
exclusively focused on the South African market, has seen a subdued
performance in the period due to ongoing challenging market
conditions in South Africa. We are starting to see progress in
expanding the product offering internationally, with European
clients won and serviced on the platform during the period. The
business has also seen some legacy South African clients serve
notice in the period although positive new client wins already
signed are expected to mitigate this loss in both the second half
and in future periods.
The gross margin for the region has declined by 3.9% in the
first half which was partly a result of the business bearing a
larger proportional cost of the Business Development, Product
Development and centralised teams. Additionally, whilst the changes
from the new reporting structure, which are most significant across
EMEA, have been bedding in, the region has invested ahead of the
curve in resourcing levels. The division also suffered some delays
in recognising certain revenues, thus resulting in the cumulative
impact of diluting margins. Significant additional work has been
undertaken towards the end of the first half and into the second
half to manage capacity across regions to prevent this issue
recurring in the second half. SANNE continues to invest in the
capacity of the business to take on the growth in new
structures.
Channel Islands (CI)
SANNE's CI business consists of offices located in both Jersey
and Guernsey, servicing alternative asset managers, financial
institutions and structures for global corporates and
high-net-worth individuals.
Revenues from the new CI segment were slightly lower than the
prior year, reflecting the majority of the old CPC segment being
included, which materially diluted the overall growth rate. The CI
Alternatives business saw organic constant currency growth in the
period of 4.4% which reflects the industry backdrop driving much
new business to Luxembourg. The old CPC business however represents
approximately 41.2% of CI and was down circa 14.3% on the first
half of 2018. This was a result of a flat period on period
performance from Corporate whilst the Private Client business was
significantly down.
H1 2019 H1 2018 % growth Constant 31 Dec
currency 2018
% growth (GBP'000)
(GBP'000) (GBP'000)
----------- ----------- --------- ---------- -----------
Revenue 18,101 18,894 -4.2% -4.2% 37,510
- Alternatives 10,650 10,202
- CPC 7,451 8,692
Gross profit 11,089 11,882 -6.7% -6.6% 23,630
Margin 61.3% 62.9% 63.0%
Within CI Alternatives, growth has been weighted towards Private
Equity, where our high quality services and expertise continues to
attract new clients, along with new funds for existing clients. Our
Real Estate services business has also seen some growth in clients,
supported by a knowledgeable and experienced team providing good
practical and technical support to our clients. It is worth noting
that the performance of the Real Estate team would have been even
greater had it not been for Brexit concerns impacting some of the
transaction volume levels within the business. Our Debt business
performed in line with budget and growth expectations.
Shortly after the period end, SANNE announced that it had
reached a settlement with the Group's regulator in Jersey, the
Jersey Financial Services Commission (JFSC), in relation to one of
SANNE's local entities and a historical failure to remediate
certain issues in the Jersey business within an agreed timeframe.
Full details about this are available on the JFSC's website at
www.jerseyfsc.org .
The lack of growth in our Corporate Business in H1 2019 was
largely attributable to the loss of one large client in late 2018
and occurred due to a domiciliation requirement in a jurisdiction
in which we were not able to continue to support the service
offering. Efforts continue to replace this lost business with both
new clients and cross-selling our broader product offering across
the existing client base.
Our Private Client business performed particularly poorly during
the period, with revenue falling below 2018 H1 levels. We are well
advanced with a strategic review of this business line.
The gross margin for Channel Islands has declined by 1.6% in the
first half. As in the EMEA Segment, this has been partly due to CI
bearing a larger proportion of cost for the Business Development,
Product Development and centralised teams. EMEA and CI together
account for 62.8% of overall Group revenues. CI has also suffered
from the same issues resulting from the change to jurisdictional
reporting structure across the legacy EMEA Alternatives business
which has resulted in the segment diluting margins in H1.
Asia-Pacific & Mauritius (APM)
SANNE's APM business includes our services across Hong Kong,
Singapore, Shanghai, Tokyo, Mumbai and Mauritius. This segment
provides services across all core alternative closed-ended
investment products.
The segment saw strong growth in the period of 18.5%. This
result benefited from a currency tailwind in the period with much
of the revenue recognised in US dollars. Excluding this benefit the
constant currency growth was 12.7%.
H1 2019 H1 2018 % growth Constant 31 Dec
currency 2018
% growth (GBP'000)
(GBP'000) (GBP'000)
----------- ----------- --------- ---------- -----------
Revenue 16,382 13,829 18.5% 12.7% 30,457
Gross profit 11,314 9,894 14.4% 5.4% 22,102
Margin 69.1% 71.5% 72.6%
The performance reflects two differing market dynamics as
between Asia-Pacific and Mauritius. Across Asia-Pacific, we have a
smaller but very high growth platform benefiting from positive
market dynamics and strong client wins. This performance is driven
by a high win rate of business from new, high profile asset
management clients as well as significant large wins from
longer-term clients of the Group.
Our Mauritius business is a market leader in the more mature
Mauritian administration industry and prior to SANNE's ownership
had not been a growth platform. Whilst we have successfully started
generating growth in the Mauritian business compared with the
pre-acquisition revenue levels, the local Mauritian market due to
its maturity is inherently lower growth than Asia-Pacific. As such
the first half of 2019 has seen a broadly flat performance on the
first half of 2018 before currency tailwinds are accounted for as
the business works through expected end-of-life attrition from the
legacy book.
APM also expanded its regional footprint into Tokyo following
the office opening in January 2019. This is in direct response to
client demand and will serve to further add to our already
well-established Asian office network and market expertise. In June
2019, the region obtained its new book-keeping license in China,
complementing SANNE's existing fund service offering into the local
Chinese registered entity level. The licence allows SANNE to offer
a full suite of fund solutions to cater for institutional managers,
positioning us well as we seek to further grow our fund servicing
business in Asia. The period also saw the opening of a new
representative sales office in Mumbai. The majority of the market
opportunity through Mauritius today is investment flowing into the
Indian market and we see a lot of exciting opportunities to grow in
line with the investment flows into the Indian funds industry. Our
new sales capability onshore will be critical in capturing more of
this opportunity.
During the first half of 2019, we have also created Centre of
Excellence in Mauritius focusing on the preparation of financial
statements for the wider Group and for external clients. To date we
have recruited 27 staff into this outsourcing hub and expect to
increase the number of people substantially during the second half
of the year, as this initiative is already making a positive
contribution to the Group.
Gross margin in the period has remained broadly in line with the
prior year. We have seen a small amount of dilution from the
increased spend on growth initiatives. However, the main driver for
the reported drop has been mix effect as the faster growing
Asia-Pacific region becomes a larger proportion of the segment and
averages down the margin percentage.
North America (NA)
SANNE's NA Alternatives business primarily services Private
Equity and Real Estate clients in North America. We continued
making progress during the first half of 2019 in expanding our
coverage of our local client base across various closed-ended fund
strategies.
NA experienced strong organic growth for the first half of 2019.
The constant currency organic revenue growth was 24.9%, increasing
to 32.9% when the beneficial currency tailwind is factored in. The
increase in the half-year growth rates reflect the aforementioned
expansion across our client base, including the introduction of new
clients locally through other jurisdictional relationships.
H1 2019 H1 2018 % growth Constant 31 Dec
currency 2018
% growth (GBP'000)
(GBP'000) (GBP'000)
----------- ----------- --------- ---------- -----------
Revenue 12,896 9,707 32.9% 24.9% 21,609
Gross profit 6,455 4,712 37.0% 38.8% 10,770
Margin 50.1% 48.5% 49.8%
The majority of growth in the first half of the year was driven
by continued strong demand from the existing client base that
continued expanding both domestically and internationally across
different asset products. We continue to see a lower level of
administration outsourcing in North America compared with other
regions around the globe. However, we do see an increasing trend
from asset managers seeking a third-party administrator to increase
internal efficiencies and demonstrating receipt of independent
servicing to their investor base. There also continues to be
positive momentum in new funds coming to market across all asset
classes.
Gross margins for the first half of the year are broadly flat
compared to the prior period. Margins in our NA segment have always
been lower than other regions in the Group largely reflecting
structurally different market conditions in North America where the
penetration of outsourcing of fund administration with closed-ended
fund managers is notably lower.
Strategic partnership with, and minority investment in
Colmore
SANNE has entered into a strategic partnership with Colmore, a
leading technology solutions business during Q3 2019. This has
involved Sanne making a minority investment in Colmore. This
partnership will bring leading new technology solutions into our
service offering that provides fund management clients with
real-time dynamic access to insight reports, analysis and data.
This is an important partnership for SANNE as we continue to see
technology taking an increasingly important role in how we deliver
our services to clients.
M&A
SANNE continues to review various M&A opportunities across a
number of the Group's fastest growing jurisdictions in North
America, EMEA and Asia-Pacific and our new head of M&A has now
been in place for four months. We are currently presented with a
very strong pipeline of high quality opportunities. We will
continue to be highly selective and undertake a disciplined
approach to M&A.
Financial review
Group Income Statement
H1 2019 H1 2018 % change Constant
(GBP'000) currency
% change
(GBP'000)
------------ ----------- --------- ----------
Revenue 78,720 65,850 19.5% 17.4%
Direct cost (32,458) (25,441)
Gross profit 46,262 40,409 14.5% 11.2%
Underlying operating expenses (25,467) (20,364)
Underlying operating profit 20,795 20,045 3.7% (3.1%)
Non underlying operating
expenses (13,309) (8,547)
Operating profit 7,486 11,498 (34.9%) (48.5%)
Underlying interest cost
and other gains and losses (1,621) (615)
Underlying profit before
tax 19,174 19,430 (1.3%) (9.4%)
Non-underlying interest
cost and other gains and
losses (457) -
Profit before tax 5,408 10,883 (50.3%) (62.2%)
Underlying tax (4,023) (3,314)
Underlying profit after
tax 15,151 16,116
Non-underlying tax 2,076 997
Profit for the half year 3,461 8,566
Earnings per ordinary share
("EPS") (expressed in pence
per ordinary share)
Basic 2.4 6.1
Diluted 2.4 5.9 (60.2%) (74.0%)
Underlying basic 10.5 11.5
Underlying diluted 10.4 11.2 (7.1%) (17.6%)
Revenue
Group revenue increased by 19.5% in the year to GBP78.7 million
(H1 2018: GBP65.8m) which reflected a constant currency growth rate
of 17.4%. Organic revenue growth in the period was 14.9% on an
actual basis and 12.8% on a constant currency basis. Organic
revenue growth is reported revenue growth adjusted for acquisitions
on a like-for-like basis. In order to calculate this growth rate,
we have stripped out the 2019 H1 contribution from AgenSynd as well
as pro-rating the contribution from LIS down to 5 months,
comparable to H1 2018's contribution. The impact of these
adjustments is shown below:
H1 2019 H1 2018 % growth Constant currency
(GBP'000) (GBP'000) % growth
----------- ----------- --------- ------------------
Revenue 78,720 65,850 19.5% 17.4%
- Inorganic 3,060 -
- Organic 75,660 65,850 14.9% 12.8%
Foreign Exchange
The Group's results are exposed to translation risk from the
movement in currencies. The Group's major exposure is to Euro and
US dollar being translated back into Sterling. These currencies
have moved as shown in the table below:
Average At 30 June
Per GBP Sterling 2019 2018 % 2019 2018 %
----------------- ------ ------ ---- ---- ---- -----
Euro 1.1228 1.1367 1.2% 1.12 1.13 0.09%
US Dollar 1.2672 1.3755 7.9% 1.27 1.32 3.8%
Operating profit
Underlying operating profit for the period was marginally ahead
by 3.7% on the prior year at GBP20.8 million (H1 2018: GBP20.0m)
reflecting the balance of strong top line growth as well as the
decline in first half underlying operating profit margins.
Statutory operating profit in the period was GBP7.5m, down from
GBP11.5m in 2018. This is largely a result in significantly higher
non-underlying items in H1. In particular the one-off accrual for
the AgenSynd earn-out that is linked to on-going employment and
therefore recognised through the Group's Income Statement as well
as the intangible impairment in South Africa.
Underlying net finance cost
Underlying group net finance costs increased to GBP1.6 million
in the period (H1 2018: GBP0.6m). Of this increase, GBP0.4 million
was driven by higher interest costs on the Group's loan facilities
as a result of the higher debt balance. The remaining GBP0.6
million related to the recognition of lease interest under IFRS 16
(see below for more detail on IFRS 16).
Non-underlying items
Non-underlying items within operating profit include share-based
payments where they relate to acquisitions, acquisition and
integration costs, amortisation and impairment of intangible assets
and one-off costs related to the refinancing of the Group's banking
facilities undertaken in the year and the regulatory fine the Group
settled shortly after the period end. Non-underlying costs in the
first half were GBP13.3 million (H1 2018: GBP8.5m). Included within
this amount was GBP1.9 million related to the impairment of
intangible assets recognised with the acquisition in South Africa
(see Note 10). Also included was a provision for GBP0.4m relating
to the settlement reached with the JFSC shortly after the period
end and associated fees (see Note 4). Further details on
non-underlying items is given in Note 4 in the Notes to the
Consolidated Results. There is also a non-underlying interest
expense in the period of GBP0.5 million that is the write-off of
previously capitalised arrangement fees in relation to the Group's
old banking facilities.
Taxation
The Group's underlying effective tax rate for the period was 21%
(H1 2018: 17.1%). The increase in the underlying effective tax rate
in the period is a result of a greater proportion of the Group's
profits being made in higher corporate tax rate jurisdictions.
Earnings per share
Diluted underlying earnings per share were 10.36 pence (H1 2018:
11.18p) and reported diluted earnings per share were 2.37 pence (H1
2018: 5.94p).
IFRS 16
The Group has applied IFRS 16 for the first time to the period
beginning 1 January 2019 and has transitioned by adopting the
modified retrospective approach which does not require restatement
of the comparatives. In order to provide like-for-like comparators,
the table below shows the 2019 financials had IFRS 16 not been
adopted:
Current IAS17 Difference
H1 2019 H1 2019 (GBP'000)
(GBP'000) (GBP'000)
------------------------------ ----------- ----------- -----------
Gross profit 46,262 46,262 -
Underlying operating expense (25,467) (25,872) 405
- Rental cost - (3,014) 3,014
- IFRS16 Depreciation (2,609) - (2,609)
- Other underlying operating
expenses (22,858) (22,858) -
Underlying operating profit 20,795 20,390 405
Net underlying finance
and other cost (1,621) (941) (680)
- IFRS16 Interest cost (680) - (680)
- Other net finance cost (941) (941) -
Underlying profit before
tax 19,174 19,449 (275)
Working capital and cash flow
Working capital at 30 June 2019 as a percentage of annualised
revenue was 22.6% (H1 2018: 20.4%). Underlying operating cash flow
conversion for the first half was 118% (H1 2018: 68%). The business
continues to enjoy an attractive cash flow profile. The strong cash
conversion performance in the first half is, in part, a result of
normalisation in working capital following a lower conversion rate
in the prior year.
Capital expenditure in the first half of the year was GBP2.9
million (H1 2018: GBP0.6m). This reflected a large number of office
moves that took place in the first half due to continued expansion.
Most notable was the consolidation of all the Group's Luxembourg
operations into a single location, a doubling of office space in
Shanghai, a new, larger premises for the Group's Hong Kong
operation, a relocation of the Group's Netherlands office from
Rotterdam to Amsterdam as well as new office space in Tokyo and
Mumbai.
Indebtedness and refinancing
The Group's net debt position at 30 June 2019 was GBP64.0
million (H1 2018: GBP49.3m) reflecting the acquisition of AgenSynd
in the second half of 2018 and the capital expenditure seen in the
first half. The Group also successfully refinanced its debt
facilities in the first half. The new debt facility is a
multi-currency committed GBP150 million revolving credit facility
with an uncommitted accordion facility of GBP70 million. The
Group's net debt position includes cash and bank balances held for
regulatory capital. Cash held for regulatory capital is GBP9.1
million (30 June 2018: GBP11.1m) which would increase the Group's
net debt position if excluded.
Dividend
The Board has declared an interim dividend of 4.7 pence per
share (H1 2018: 4.6p). The dividend will be paid on 18 October 2019
to shareholders on the register as at the close of business on the
record date of 20 September 2019.
Risk
The principal risks facing the Group are reviewed regularly and
represented by those set out in the Annual Report 2018. These are
categorised as Acquisition Due Diligence Risk; Strategy Risk;
Competitor Risk; Business Change Risk; Cyber Security Risk; Process
Risk; Staff Resourcing Risk; Data Management Risk; Regulatory
Change Risk; Compliance Risk; Financial Crime Risk and Impairment
Risk.
STATEMENT OF DIRECTORS' RESPONSIBILITIES IN RESPECT OF THE
INTERIM STATEMENT
We confirm to the best of our knowledge that:
- The condensed set of financial statements have been prepared
in accordance with IAS 34 Interim Financial Reporting as adopted by
the EU; and
- The interim management report includes a fair review of the information required by:
A. DTR 4.2.7R of the Disclosure Guidance and Transparency Rules,
being an indication of important events that have occurred during
the first six months of the financial year and their impact on the
condensed set of financial statements; and a description of the
principal risks and uncertainties for the remaining six months of
the year; and
B. DTR 4.2.8R of the Disclosure Guidance and Transparency Rules,
being related party transactions that have taken place in the first
six months of the current financial year and that have materially
affected the financial position or performance of the entity during
that period; and any changes in the related party transactions
described in the last annual report that could do so.
The interim statement contains certain forward looking
statements which are made by the directors in good faith based on
the information available to them at the time of their approval of
this interim statement. Forward looking statements contained within
the interim statement should be treated with some caution due to
the inherent uncertainties, including economic, regulatory and
business risk factors, underlying any such forward looking
statements.
We undertake no obligation to update any forward looking
statements whether as a result of new information, future events or
otherwise. The interim statement has been prepared by Sanne Group
plc to provide information to its shareholders and should not be
relied upon by any other party or for any other purpose.
Martin Schnaier
Chief Executive Officer
9 September 2019
Independent review report to Sanne Group plc
Report on the condensed consolidated financial statements
Our conclusion
We have reviewed Sanne Group plc's condensed consolidated
financial statements (the "interim financial statements") in the
Half-year report of Sanne Group plc for the 6 month period ended 30
June 2019. Based on our review, nothing has come to our attention
that causes us to believe that the interim financial statements are
not prepared, in all material respects, in accordance with
International Accounting Standard 34, 'Interim Financial
Reporting', as adopted by the European Union and the Disclosure
Guidance and Transparency Rules sourcebook of the United Kingdom's
Financial Conduct Authority.
What we have reviewed
The interim financial statements comprise:
-- the consolidated balance sheet as at 30 June 2019;
-- the consolidated income statement and consolidated statement
of comprehensive income for the period then ended;
-- the consolidated cash flow statement for the period then ended;
-- the consolidated statement of changes in equity for the period then ended; and
-- the explanatory notes to the interim financial statements.
The interim financial statements included in the Half-year
report have been prepared in accordance with International
Accounting Standard 34, 'Interim Financial Reporting', as adopted
by the European Union and the Disclosure Guidance and Transparency
Rules sourcebook of the United Kingdom's Financial Conduct
Authority.
As disclosed in note 1 to the interim financial statements, the
financial reporting framework that has been applied in the
preparation of the full annual financial statements of the Group is
applicable law and International Financial Reporting Standards
(IFRSs) as adopted by the European Union.
Responsibilities for the interim financial statements and the
review
Our responsibilities and those of the directors
The Half-year report, including the interim financial
statements, is the responsibility of, and has been approved by, the
directors. The directors are responsible for preparing the
Half-year report in accordance with the Disclosure Guidance and
Transparency Rules sourcebook of the United Kingdom's Financial
Conduct Authority.
Our responsibility is to express a conclusion on the interim
financial statements in the Half-year report based on our review.
This report, including the conclusion, has been prepared for and
only for the company for the purpose of complying with the
Disclosure Guidance and Transparency Rules sourcebook of the United
Kingdom's Financial Conduct Authority and for no other purpose. We
do not, in giving this conclusion, accept or assume responsibility
for any other purpose or to any other person to whom this report is
shown or into whose hands it may come save where expressly agreed
by our prior consent in writing.
What a review of interim financial statements involves
We conducted our review in accordance with International
Standard on Review Engagements (UK and Ireland) 2410, 'Review of
Interim Financial Information Performed by the Independent Auditor
of the Entity' issued by the Auditing Practices Board for use in
the United Kingdom. A review of interim financial information
consists of making enquiries, primarily of persons responsible for
financial and accounting matters, and applying analytical and other
review procedures.
A review is substantially less in scope than an audit conducted
in accordance with International Standards on Auditing (UK) and,
consequently, does not enable us to obtain assurance that we would
become aware of all significant matters that might be identified in
an audit. Accordingly, we do not express an audit opinion.
We have read the other information contained in the Half-year
report and considered whether it contains any apparent
misstatements or material inconsistencies with the information in
the interim financial statements.
PricewaterhouseCoopers LLP
Chartered Accountants
London
9 September 2019
Sanne Group plc
Consolidated Income Statement
For the period from 1 January
2019 to 30 June 2019
Unaudited Unaudited(1) Audited
6 Months 6 Months 12 Months
to to to
30 Jun 30 Jun 31 Dec
2019 2018 2018
Notes GBP'000 GBP'000 GBP'000
Revenue 78,720 65,850 143,003
Direct costs (32,458) (25,441) (54,655)
Gross profit 3 46,262 40,409 88,348
-------------------------------- ------ ---------- ------------- ----------
Other operating income 121 94 158
Operating expenses (38,897) (29,005) (62,941)
Operating profit 7,486 11,498 25,565
-------------------------------- ------ ---------- ------------- ----------
Comprising:
Underlying operating profit 4 20,795 20,045 44,447
Non-underlying items within
operating expenses 4 (13,309) (8,547) (18,882)
7,486 11,498 25,565
-------------------------------- ------ ---------- -------------
Other gains and losses 186 126 (132)
Finance costs (2,340) (816) (1,909)
Finance income 76 75 156
Profit before tax 5,408 10,883 23,680
-------------------------------- ------ ---------- ------------- ----------
Comprising:
Underlying profit before tax 4 19,174 19,430 42,562
Non-underlying items 4 (13,766) (8,547) (18,882)
5,408 10,883 23,680
-------------------------------- ------ ---------- -------------
Tax 5 (1,947) (2,317) (5,506)
Profit for the period/year 3,461 8,566 18,174
-------------------------------- ------ ---------- ------------- ----------
Earnings per ordinary share ("EPS") (expressed
in pence per ordinary share)
Basic 6 2.4 6.1 12.9
Diluted 6 2.4 5.9 12.6
Underlying basic 6 10.5 11.5 24.7
Underlying diluted 6 10.4 11.2 24.1
All profits in the current and preceding periods and
year are derived from continuing operations.
(1.) Refer to note 8 for details
of prior year restatement.
Sanne Group plc
Consolidated Statement of Comprehensive
Income
For the period from 1 January
2019 to 30 June 2019
Unaudited Unaudited(1) Audited
6 Months 6 Months 12 Months
to to to
30 Jun 30 Jun 31 Dec
2019 2018 2018
GBP'000 GBP'000 GBP'000
Profit for the period/year 3,461 8,566 18,174
------------------------------------------ ---------- ------------- ----------
Other comprehensive income
Items that will not be reclassified
subsequently to the profit and loss:
Actuarial gain / (loss) on
retirement benefit
Obligation 44 (44) 70
Income tax relating to items
not reclassified (6) 6 (11)
Items that may be reclassified
subsequently to the profit and
loss:
Correction of prior period
error(1) - (46) -
Exchange differences on translation
of foreign
Operations 270 2,315 8,756
Total comprehensive income for
the period/year 3,769 10,797 26,989
------------------------------------------ ---------- ------------- ----------
(1.) Refer to note 8 for details
of prior year restatement.
Sanne Group plc
Consolidated Balance Sheet
As at 30 June 2019
Unaudited Unaudited(1) Audited
30 Jun 30 Jun 31 Dec
2019 2018 2018
Notes GBP'000 GBP'000 GBP'000
Assets
Non-current assets
Goodwill 9 189,226 157,905 188,928
Other intangible assets 10 56,019 69,720 66,122
Equipment 10,537 3,831 9,973
Deferred tax asset 8,787 1,549 2,082
Right-of-use asset 14 34,491 - -
Total non-current assets 299,060 233,005 267,105
------------------------------- ------ ---------- ------------- ---------
Current assets
Trade and other receivables 46,846 33,959 47,251
Cash and bank balances 44,228 32,527 32,411
Contract assets 8,354 7,964 6,637
Total current assets 99,428 74,450 86,299
------------------------------- ------ ---------- ------------- ---------
Total assets 398,488 307,455 353,404
------------------------------- ------ ---------- ------------- ---------
Equity
Share capital 11 1,460 1,436 1,460
Share premium 200,270 185,012 200,270
Own shares (1,102) (1,307) (1,470)
Shares to be issued 10,178 22,731 12,278
Retranslation reserve (2,201) (8,958) (2,471)
Retained losses (24,549) (20,871) (17,399)
Total equity 184,056 178,043 192,668
------------------------------- ------ ---------- ------------- ---------
Non-current liabilities
Borrowings 13 99,275 70,720 85,364
Deferred tax liabilities 18,219 12,911 13,395
Retirement gratuity liability 568 721 701
Other liabilities - - 4,914
Lease liability 14 35,104 - -
Total non-current liabilities 153,166 84,352 104,374
------------------------------- ------ ---------- ------------- ---------
Current liabilities
Trade and other payables 37,412 29,374 34,467
Current tax liabilities 2,666 4,265 3,910
Provisions 2,110 503 1,650
Contract liabilities 14,246 10,918 16,335
Lease liability 14 4,832 - -
Total current liabilities 61,266 45,060 56,362
------------------------------- ------ ---------- ------------- ---------
Total equity and liabilities 398,488 307,455 353,404
------------------------------- ------ ---------- ------------- ---------
(1.) Refer to note 8 for details of
prior year restatement.
Sanne Group plc
Consolidated Statement of Changes in
Equity
For the period from 1 January 2019
to 30 June 2019
Shares
Share Share Own to be Retrans-lation Retained Total
Capital Premium shares issued reserve Losses Equity
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Balance at 1 January 2018
(as previously reported) 1,416 171,850 (1,141) 13,373 (11,280) (16,437) 157,781
------------------------------ --------- --------- -------- --------- --------------- --------- ---------
Correction of prior period
error(1) - - - - 53 (1,146) (1,093)
Balance at 1 January 2018
as restated 1,416 171,850 (1,141) 13,373 (11,227) (17,583) 156,688
------------------------------ --------- --------- -------- --------- --------------- --------- ---------
Profit for the period
as previously reported - - - - - 9,026 9,026
Correction of prior period
error(1) - - - - (46) (460) (506)
Other comprehensive income
for the period - - - - 2,315 (38) 2,277
Total comprehensive income
for the period - - - - 2,269 8,528 10,797
------------------------------ --------- --------- -------- --------- --------------- --------- ---------
Issue of share capital 18 12,344 - - - - 12,362
Net buyback of own shares - - (166) - - - (166)
Dividend payments - - - - - (11,816) (11,816)
Share based payment -
acquisitions - - - 8,558 - - 8,558
Share based payment -
employees - - - 1,620 - - 1,620
Deferred consideration
- acquisitions 2 818 - (820) - - -
Balance at 30 June 2018
as restated 1,436 185,012 (1,307) 22,731 (8,958) (20,871) 178,043
------------------------------ --------- --------- -------- --------- --------------- --------- ---------
Profit for the period - - - - - 9,608 9,608
Other comprehensive income
for the period - - - - 6,487 97 6,584
Total comprehensive income
for the period - - - - 6,487 9,705 16,192
------------------------------ --------- --------- -------- --------- --------------- --------- ---------
Issue of share capital 18 12,042 - - - - 12,060
Dividend payments - - - - - (6,560) (6,560)
Share based payment -
employees - - - 1,328 - 327 1,655
Net buyback of own shares - - (163) - - - (163)
Deferred consideration
- acquisitions 6 3,216 - (11,781) - - (8,559)
Balance at 31 December 2018 1,460 200,270 (1,470) 12,278 (2,471) (17,399) 192,668
------------------------------ --------- --------- -------- --------- --------------- --------- ---------
Change in accounting policy
(2) - - - - - (556) (556)
Restated total equity at
1 January 2019 1,460 200,270 (1,470) 12,278 (2,471) (17,955) 192,112
------------------------------ --------- --------- -------- --------- --------------- --------- ---------
Profit for the period - - - - - 3,461 3,461
Other comprehensive income
for the period - - - - 270 38 308
Total comprehensive income
for the period - - - - 270 3,499 3,769
------------------------------ --------- --------- -------- --------- --------------- --------- ---------
Dividend payments - - - - - (13,254) (13,254)
Shares vesting - - 559 (3,491) - 3,161 229
Share Based Transactions - - (191) 1,391 - - 1,200
Balance at 30 June 2019 1,460 200,270 (1,102) 10,178 (2,201) (24,549) 184,056
------------------------------ --------- --------- -------- --------- --------------- --------- ---------
(1.) Refer to note 8 for details of the prior year
restatement
(2.) Refer to note 14 for details relating to the change in
accounting policy
Sanne Group plc
Consolidated Cash Flow Statement
For the period from 1 January 2019
to 30 June 2019
Unaudited Unaudited Audited
30 Jun 30 Jun 31 Dec
2019 2018 2018
GBP'000 GBP'000 GBP'000
Operating profit 7,486 11,498 25,565
Adjustments for:
Depreciation of equipment 3,962 961 1,915
Amortisation of intangible assets 8,266 7,492 15,730
Impairment of intangible assets 1,879 - 55
Share-based payment expense 1,475 1,678 3,376
Disposal of equipment - - 257
Retirement gratuity reserve movement (100) (32) 11
Lease incentives received - - 1,267
Increase/(Decrease) in provisions (400) (3) 1,144
Operating cash flows before movements
in working capital 22,568 21,594 49,320
----------------------------------------- ---------- ---------- ---------
Increase in receivables (1,312) (4,396) (16,241)
Decrease/(Increase) in deferred
revenue (2,089) (1,998) 2,552
Increase/(Decrease) in payables 3,350 (1,693) (701)
Cash generated by operations 22,517 13,507 34,930
----------------------------------------- ---------- ---------- ---------
Income taxes paid (4,563) (2,243) (7,312)
Net cash from operating activities 17,954 11,264 27,618
----------------------------------------- ---------- ---------- ---------
Investing activities
Interest received 76 75 156
Purchases of equipment (2,891) (584) (4,221)
Payment of deferred consideration - - (14,407)
Acquisition of subsidiaries - (22,990) (29,279)
Net cash used in investing activities (2,815) (23,499) (47,751)
----------------------------------------- ---------- ---------- ---------
Financing activities
Dividends paid (13,254) (11,816) (18,376)
Interest on bank loan (945) (629) (1,732)
Buyback of own shares (191) (166) (329)
Capitalised loan cost (1,255) - -
Redemption of bank loans (85,850) (4,000) (4,000)
New bank loans raised 100,800 10,300 24,850
Lease liability interest (680) - -
Lease liability payments (2,202) - -
Net cash used in financing activities (3,577) (6,311) 413
----------------------------------------- ---------- ---------- ---------
Net increase/(decrease) in cash
and cash equivalents 11,562 (18,546) (19,720)
----------------------------------------- ---------- ---------- ---------
Cash and cash equivalents at beginning
of period/year 32,411 50,803 50,803
Effect of foreign exchange rate
changes 255 270 1,328
Cash and cash equivalents at end
of period/year 44,228 32,527 32,411
----------------------------------------- ---------- ---------- ---------
Sanne Group plc
Notes to the consolidated results
For the period from 1 January 2019 to 30 June 2019
1. Basis of preparation
Sanne Group plc ("the Company") is a company incorporated in
Jersey, Channel Islands. The unaudited, condensed and consolidated
financial statements for the six months ended 30 June 2019 comprise
of the Company and its subsidiaries (collectively the "Group").
The consolidated results have been prepared in accordance with
International Accounting Standard 34 'Interim Financial Reporting',
as adopted by the European Union ("EU"). The financial statements
are therefore presented on a condensed basis as permitted and do
not include all disclosures that would otherwise be required in a
full set of financial statements and should be read in conjunction
with the Annual Report for the year ended 31 December 2018,
available at www.sannegroup.com. Deloitte was the external auditors
for the 2018 results. PwC has been appointed as auditors from
2019.
Going concern
The Directors have a reasonable expectation that the Group has
adequate resources to continue in operational existence for the
foreseeable future. The Directors have reviewed the Group's
financial projections and cash flow forecasts and believe, based on
those projections and forecasts, that it is appropriate to prepare
the consolidated financial statements of the Group on a going
concern basis. Accordingly, they have adopted the going concern
basis of accounting in preparing the consolidated financial
statements.
Accounting policies
The accounting policies adopted in the preparation of the
condensed consolidated financial statements are consistent with
those followed in the preparation of the Group's financial
statements for the year ended 31 December 2018, except as disclosed
below.
Impact of standards issued and applied from 1 January 2019
IFRS 16 'Leases' is effective for periods beginning on or after
1 January 2019, and is therefore applicable to the current period.
This standard replaces accounting treatment for leases previously
depicted in IAS 17. It introduced a single lessee accounting model
whereby a lessee is required to recognise a right-of-use asset and
a lease liability for all leases with a term of more than 12 months
and the group assessed the impact of this recognition to have a
significant disclosure impact. The depreciation on the right-of-use
asset will be accounted for separately from the interest expense
incurred on the lease liability in the income statement. The Group
elected to make use of the modified retrospective approach for
transition and have not restated comparative amounts. The lease
liability is measured at the present value of the remaining lease
payments, discounted using the incremental borrowing rate at
transition date. Right-of-use assets will be measured as if the
standard has always been applied. There is no significant impact on
the net profit after implementing the new standard. Please refer to
note 14.
The following changes to accounting standards have been issued
and applied from 1 January 2019, however none of these standards
had an effect on the preparation of the financial statements.
(a) Annual improvements 2015-2017 Cycle
(b) IFRIC 23 Uncertainty over Income Tax Treatments
(c) Prepayment Features with Negative Compensation - Amendments
to IFRS 9
(d) Long-term Interests in Associates and Joint Ventures -
Amendments to IAS 28, and
(e) Plan Amendment, Curtailment or Settlement - Amendments to
IAS 19
2. Estimates, critical accounting judgements and key sources of
estimation uncertainty
In the application of the Group's accounting policies, the
Directors are required to make judgements, estimates and
assumptions about the carrying amounts of assets and liabilities
that are not readily apparent from other sources. The estimates and
associated assumptions are based on historical experience and other
factors that are considered to be relevant. Actual results may
differ from these estimates.
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.
The Annual Report for the year ended 31 December 2018 set out
the critical judgements and estimations of uncertainty, made by the
Directors during the application of the Group's accounting
policies, at the balance sheet date, that have the most significant
effect on the amounts recognised in the financial statements.
Seasonality
Given the makeup of the Group's customers and contracts,
seasonality is not expected to have a significant bearing on the
financial performance of the Group.
3. Segmental Reporting
The reporting segments engage in corporate, fund and private
client administration, reporting and fiduciary services. Declared
revenue is generated from external customers.
The Group's consolidated financial statements for the year ended
31 December 2018 had four reportable segments under IFRS 8, namely
EMEA Alternatives, Asia-Pacific & Mauritius Alternatives, North
American Alternatives and Corporate & Private Client. Given the
continuing growth of the Group, these segments have been
reorganised from 1 January 2019. The four new segments are EMEA,
Asia-Pacific & Mauritius, Channel Islands and North America.
This change has been in operation outside of the European regions
in the Group for some time, however the scale of operations across
the old EMEA Alternatives and CPC businesses meant it was necessary
to change and split the European business between the Channel
Islands (CI) and the rest of EMEA. This change brings with it a
number of significant benefits, including a more robust governance
and control framework at local levels, fostering local
accountability, as well as bringing an improved focus on local
employee requirements across our expanding jurisdictional
footprint.
The comparative numbers for the segmental reporting have been
restated to reflect the four segments created in the current
reporting period.
The chief operating decision-maker is the Board of Directors of
Sanne Group plc. Each segment is defined as a set of business
activities generating a revenue stream determined by segmental
responsibility and the management information reviewed by the Board
of Directors. The Board evaluates segmental performance on the
basis of gross profit, after the deduction of the direct costs of
staff, marketing and travel. No inter-segment sales are made and,
as such, no revenue disclosed within a segment needs removing on
consolidation.
Unaudited 6 Months to Direct Gross
30 Jun 2019 Revenue costs profit
GBP'000 GBP'000 GBP'000
Segments
EMEA 31,341 (13,937) 17,404
Asia-Pacific & Mauritius 16,382 (5,068) 11,314
North America 12,896 (6,441) 6,455
Channel Islands 18,101 (7,012) 11,089
Total 78,720 (32,458) 46,262
------------------------------- -------- --------- ---------
Other operating income 121
Operating expenses (38,897)
Operating profit 7,486
------------------------------- -------- --------- ---------
Unaudited 6 Months to Direct Gross
30 Jun 2018 Revenue costs profit
GBP'000 GBP'000 GBP'000
Segments
EMEA 23,420 (9,499) 13,921
Asia-Pacific & Mauritius 13,829 (3,935) 9,894
North America 9,707 (4,995) 4,712
Channel Islands 18,894 (7,012) 11,882
Total 65,850 (25,441) 40,409
------------------------------- -------- --------- ---------
Other operating income 94
Operating expenses (29,005)
Operating profit 11,498
------------------------------- -------- --------- ---------
Unaudited 12 Months to Direct Gross
31 Dec 2018 Revenue costs profit
GBP'000 GBP'000 GBP'000
Segments
EMEA 53,427 (21,581) 31,846
Asia/Pacific & Mauritius 30,457 (8,355) 22,102
North America 21,609 (10,839) 10,770
Channel Islands 37,510 (13,880) 23,630
Total 143,003 (54,655) 88,348
------------------------------- -------- --------- ---------
Other operating income 158
Operating expenses (62,941)
Operating profit 25,565
------------------------------- -------- --------- ---------
Geographical information
The Group's revenue from external customers by geographical
location of the relevant contracting Group entity is detailed
below. The jurisdiction of the contracting entity can differ from
the jurisdiction for segmental reporting purposes.
Unaudited Unaudited Audited
6 Months 6 Months 12 Months
to to to
30 Jun 30 Jun 31 Dec
2019 2018 2018
GBP'000 GBP'000 GBP'000
Jersey and Guernsey 20,747 21,300 42,629
Rest of Europe 28,371 20,038 47,016
Mauritius 11,096 10,318 22,198
Americas 12,726 9,621 21,374
South Africa 2,617 2,889 5,461
Asia-Pacific 3,163 1,684 4,325
Total Revenue 78,720 65,850 143,003
-------------------------------------------------- ---------- ------------ ----------
4. Non-underlying items
Restated(1)
Unaudited Unaudited Audited
6 Months 6 Months 12 Months
to to to
30 Jun 30 Jun 31 Dec
2019 2018 2018
GBP'000 GBP'000 GBP'000
Operating profit 7,486 11,498 25,565
Non-underlying items within operating
expenses:
Share based payments (i) 1,048 953 1,791
Acquisition and integration
expense (ii) 1,561 102 1,193
Amortisation of intangible (ii
assets i) 8,266 7,492 15,730
Impairment of intangible 1,879 - -
assets (iv)
Regulatory fine and fees (v) 433 - -
Other items 122 - 168
13,309 8,547 18,882
Underlying operating profit 20,795 20,045 44,447
Profit before tax 5,408 10,883 23,680
Non-underlying items within
other costs:
Refinancing (vi) 457 - -
Total non-underlying items 13,766 8,547 18,882
-------------------------------------------------- ---------- ------------ ----------
Underlying profit before
tax 19,174 19,430 42,562
-------------------------------------------------- ---------- ------------ ----------
(1.) Refer to note 8 for details of prior year restatement.
The above reflect expenses which management do not consider to
be representative of underlying performance.
(i) Share based payments are detailed in note 12. All
acquisition related share based payments are shares issued in the
course of acquisition consideration that have retained employment
conditions and are therefore required to be expensed through the
Income Statement. These are all related to acquisitions rather than
the normal, ongoing cost of doing business and as such are shown as
non-underlying expenses.
(ii) The Group has completed various acquisitions in the past
two years. Acquisition and integration costs included deal advisory
fees, one off cost of integrating companies and accruals for cash
earn-out payments. Integration and deal costs relating to
acquisitions for the period ending 30 June 2019 were GBP318k. Also
included was GBP1,243k relating to the AgendSynd acquisition
earn-out accrual which is expensed per IFRS due to settlement being
linked to continued employment. With acquisitions being outside the
day-to-day activities of the ongoing business of the Group, these
costs are disclosed as non-underlying to enable Shareholders to
assess the core ongoing performance of the Group. The majority of
acquisition and integration cost will be incurred in the first 2
years after acquisition, however this could be longer depending on
the nature of the costs.
(iii) The amortisation charge relates to the amortisation of
intangible assets acquired through acquisitions. The amortisation
of intangibles are directly linked to the acquisitions and excluded
from underlying cost because these charges are based on judgements
about the value and economic life of assets that, in the case of
items such as customer relationships, would not be capitalised in
normal operating practice.
(iv) The Group's South African hedge fund business, acquired in
2016, suffered a one-off loss of clients in the period. As a result
the contract intangibles were impaired by GBP1,879k. As with the
amortisation of intangible assets this cost was excluded from
underlying cost as it does not form part of the core business of
the Group.
(v) Regulatory fine and fees relates to a settlement and related
costs with the Jersey Financial Services Commission. This expense
is excluded from underlying cost as it is one off in nature. The
fine amounted to GBP381k, with the additional costs of GBP52k being
the legal fees incurred during the settlement process. The fine was
fully settled after 30 June 2019.
(vi) On 1 March 2019 the Group refinanced its loan facility. The
balance of the unamortised loan costs were written off and
classified as non-underlying because the refinancing was done to
support future acquisitions and is not part of the day to day
operations of the Group.
5. Tax
Restated(1)
Unaudited Unaudited Audited
6 Months 6 Months 12 Months
to to to
30 Jun 30 Jun 31 Dec
2019 2018 2018
GBP'000 GBP'000 GBP'000
Current income tax 3,293 3,260 7,540
Deferred income tax (1,346) (943) (2,034)
Total income tax 1,947 2,317 5,506
------------------------ ---------- ------------ ----------
(1.) Refer to note 8 for details of prior year restatement.
Income tax is calculated across the Group based on the
prevailing income tax rates in the jurisdictions in which profits
are earned.
Unaudited Unaudited Audited
6 Months 6 Months 12 Months
to to to
30 Jun 30 Jun 31 Dec
2019 2018 2018
GBP'000 GBP'000 GBP'000
Reconciliation of effective
tax rates
As per Consolidated income
statement:
Tax charge 1,947 2,317 5,506
Profit before tax 5,408 10,883 23,680
----------------------------------------- ------------ --------------------- ------------
Effective tax rate 36.0% 21.3% 23.3%
Tax charge 1,947 2,317 5,506
Adjusted for:
Non-underlying tax 2,076 997 2,227
Underlying tax charge 4,023 3,314 7,733
----------------------------------------- ------------ --------------------- ------------
Profit before tax 5,408 10,883 23,680
Non-underlying items 13,766 8,547 18,882
Profit before tax and non-underlying
items 19,174 19,430 42,562
---------------------------------------- ------------ --------------------- ------------
Underlying effective tax
rate 21.0% 17.1% 18.2%
6. Earnings per share
Restated(1)
Unaudited Unaudited Audited
6 Months 6 Months 12 Months
to to to
30 Jun 30 Jun 31 Dec
2019 2018 2018
GBP'000 GBP'000 GBP'000
Profit for the period/year 3,461 8,566 18,174
Non-underlying items within:
Operating expenses 13,309 8,547 18,882
Other costs 457 - -
Tax effect of non-underlying
items (2,076) (997) (2,227)
Underlying earnings 15,151 16,116 34,829
----------------------------------------- ------------ --------------------- ------------
Weighted average number of ordinary
shares in issue 143,677,970 140,333,180 141,269,560
Effect of dilutive potential
ordinary shares:
Deferred consideration
shares 1,273,308 1,909,964 1,273,308
Restricted Stock Awards 1,241,272 1,307,550 1,288,585
Performance share plan 64,364 627,264 619,862
Weighted average number of ordinary
shares for the purposes of diluted
earnings per share 146,256,914 144,177,958 144,451,315
----------------------------------------- ------------ --------------------- ------------
Restated(1)
Unaudited Unaudited Audited
6 Months 6 Months 12 Months
to to to
30 Jun 30 Jun 31 Dec
2019 2018 2018
GBP'000 GBP'000 GBP'000
Basic earnings per share
(pence) 2.4 6.1 12.9
----------------------------------------- ------------ --------------------- ------------
Diluted earnings per share
(pence) 2.4 5.9 12.6
----------------------------------------- ------------ --------------------- ------------
Underlying basic earnings
per share (pence) 10.5 11.5 24.7
---------------------------------------- ------------ --------------------- ------------
Underlying diluted earnings per
share (pence) 10.4 11.2 24.1
----------------------------------------- ------------ --------------------- ------------
(1.) Refer to note 9 for details of prior year restatement.
The Group presents basic and diluted earnings per share ("EPS")
data for its ordinary shares.
Basic EPS is calculated by dividing the profit attributable to
ordinary shareholders by the weighted average number of ordinary
shares in issue during the period.
Diluted EPS takes into consideration the Company's dilutive,
contingently issuable shares as disclosed above. These arrangements
have no impact on the earnings or underlying earnings figures used
to calculate diluted EPS. The weighted average number of ordinary
shares used in the diluted calculation is inclusive of the number
of shares which are expected to be issued to satisfy the awards
when they become due and where the performance criteria, if any,
have been deemed to have been met as at the respective period
end.
Underlying basic EPS and Underlying diluted EPS are calculated
in the same way as Basic EPS and Diluted EPS with the only
exception being that the earnings used are the underlying earnings,
being the profit for the year adjusted for non-underlying items and
the tax impact of non-underlying items. This is a change in
approach from the prior year where profit for the year was just
adjusted for non-underlying items, the comparative numbers were
also updated to reflect this approach.
7. Dividends
An interim dividend of 4.7p pence per ordinary share (2018: 4.6
pence) was declared by the Directors on 9 September 2019 and will
be payable on 18 October 2019 to shareholders on the record on 20
September 2019. The 2018 final dividend of 9.2 pence was paid on 21
May 2019.
8. Correction of prior period error
On 1 November 2016 the Group acquired FLSV Fund Administration
Services, LLC, in the United States of America ("US"). Goodwill was
recognised at acquisition and the business was consolidated into
the 2016 Group accounts. Goodwill is amortised for tax purposes in
the US and in line with IFRS the goodwill on the balance sheet is
not amortised. This difference in tax and accounting treatment was
incorrectly identified as a permanent difference and accordingly
there was no deferred tax impact reflected in the periods following
the acquisition. On subsequent review it was identified that under
IAS 12 the difference must be classified as temporary and a
deferred tax liability needs to be recognised over the 15 year
period during which the Group benefits from the tax deductibility
of the goodwill. The impact of correcting this error is to
recognise a deferred tax liability, a corresponding increase of
deferred tax charge through the Group's reported tax charge and
exchange differences arising on translation of foreign
operations.
The correction was made in the Annual Report ending 31 December
2018. This note addresses the restatement of the 30 June 2018
interim reporting figures.
The error has been corrected by restating each of the affected
financial statement line items for the prior period as follows:
(Unaudited)
(Unaudited) (Restated)
6 Months Adjustment 6 Months
to to
30 Jun Increase/ 30 Jun
2018 (Decrease) 2018
GBP'000 GBP'000 GBP'000
Consolidated Income Statement
(extract)
Tax 1,857 460 2,317
Basic EPS 6.4 (0.3) 6.1
Diluted EPS 6.3 (0.4) 5.9
Underlying basic EPS(1) 12.5 (1.0) 11.5
Underlying basic diluted
EPS(1) 12.2 (1.0) 11.2
Consolidated Balance Sheet
(extract)
Deferred tax liabilities (11,312) (1,599) (12,911)
Retranslation reserve 8,965 (7) 8,958
Retained Losses 19,265 1,606 20,871
(1) The reported tax impact of the prior period error is 0.3
pence on basic EPS and 0.4 pence on Diluted EPS. As a result of the
change of approach with regards to the tax impact of non-underlying
items, as highlighted in Note 6, the underlying basic EPS and
underlying diluted basic EPS have decreased by 1 penny. The prior
period error had no impact on the underlying basic EPS and
underlying diluted EPS because the prior period error solely
relates to non-underlying deferred tax.
9. Goodwill
Goodwill represents the excess of the cost of the acquisition
over the fair value of the Group's share of the net identifiable
assets of the acquired subsidiary at the date of acquisition.
Unaudited Unaudited Audited
30 Jun 30 Jun 31 Dec
2019 2018 2018
GBP'000 GBP'000 GBP'000
Opening balance 188,928 107,271 107,271
Acquired during the period/year - 49,065 75,976
Exchange difference 298 1,569 5,681
Closing balance 189,226 157,905 188,928
------------------------------------ ---------- ---------- --------
Shortly after 30 June 2019 Sanne South Africa experienced a loss
of clients. This event was considered to be an indicator for
impairment and a value in use calculation was performed to
determine if an impairment loss should be recognised. Sanne South
Africa serves a number of intergroup entities and has aided the
group in its back office functions which contributed to no
impairment charge identified on goodwill. Management estimated
discount rates using pre-tax rates that reflect current market
assessments of the time value of money. The same factors impacting
the discount rate at the end of December 2018, were considered in
the interim period. These assumptions resulted in a weighted
average cost of capital of 21% for Sanne South Africa
Projected revenue and costs are calculated using the prior
period actual result, excluding the lost client revenue and,
compounding these results by the budgeted numbers. Growth rates
used are specific to the cash generating units and varies between
3% to 10%. The terminal growth rate applied after five years was
based on the forecasted nominal GDP of the operating
jurisdiction.
Management believes that any reasonably possible change in the
key assumptions, on which recoverable amount per Cash Generating
Unit ("CGU") is based, would not cause the aggregate carrying
amount to materially exceed the recoverable amount on the CGUs.
10. Other intangible assets
Unaudited Unaudited Audited
30 Jun 30 Jun 31 Dec
2019 2018 2018
GBP'000 GBP'000 GBP'000
Opening balance 66,122 59,998 59,998
Acquired during the period - 16,751 19,797
Amortisation charge for
the period/year (8,266) (7,492) (15,730)
Impairments (1,879) - (55)
Exchange difference 42 463 2,112
Closing balance 56,019 69,720 66,122
-------------------------------- ---------- ---------- ---------
At 30 June 2019 all intangible assets were tested for indicators
of impairment. The Delorean intangibles are nearing the end of
their useful life and had an indicator for impairment. The Delorean
intangibles relate to the acquisition of a client book from State
Street in 2013. A value in use assessment was performed to
determine the recoverable amount. The recoverable amount on
Delorean exceeded its carrying value and no impairment was
recognised thereon. Due to a one off loss of clients in Sanne South
Africa, an indicator for impairment was triggered. Sanne's South
African contract intangibles were impaired by GBP1,879k. The value
in use calculations were performed using a Multi-period Excess
Earnings Method (MEEM) model, requiring the following inputs:
post-tax weighted average cost of capital to discount the cash
flows, a general attrition rate, a direct cost and an overhead cost
margin and lastly the corporate tax rate. The discount rate was
identified as being the most sensitive to change. Should the WACC
rate increase by 1%, the impairment would have been GBP39,000
higher. Sanne does not consider this to be a material increase.
11. Share capital
Unaudited Unaudited Audited
6 Months 6 Months 12 Months
to to to
30 Jun 30 Jun 31 Dec
2019 2018 2018
GBP'000 GBP'000 GBP'000
Opening balance 1,460 1,416 1,416
Issue of shares (i) - 20 44
Closing balance 1,460 1,436 1,460
---------------------------- ---------- ---------- ----------
(i) The Company issued 1,786,173 shares on 6 February 2018 as
part consideration in the acquisition of LIS. The Company also
issued 159,095 shares on 25 May 2018 in relation to the Company's
acquisition of FLSV Fund Administration Services LLC which
completed on 1 November 2016. The shares issued represent an
element of the deferred share consideration.
12. Share based payments Unaudited Unaudited Audited
30 Jun 30 Jun 31 Dec
2019 2018 2018
GBP'000 GBP'000 GBP'000
Sanne Group plc
Performance Share Plan (i) 129 503 1,192
Restricted Stock Awards (ii) 1,346 1,175 2,184
Total share based payments 1,475 1,678 3,376
-------------------------------------- ---------- ---------- --------
(i) During the current and prior year periods, the Group granted
awards over its ordinary shares under the terms of its Performance
Share Plan ("PSP"). The exercise of awards under the PSP is
conditional upon the achievement of one or more challenging
performance targets set at the time of the grant and measured over
a three-year performance period from grant date. All the awards
were granted for a nil consideration. Further awards were made
through the year. The Group estimates the number of shares to be
vested based on the performance targets set to be achieved and the
current performance of the Group, this is then grown by an assumed
rate in line with Group forecast as per market expectation to
determine the probable performance at vesting date. The vesting
periods of the grants are not more than 3 years.
(ii) During the current and prior periods, the Group granted
awards over its ordinary shares in the form of Restrictive Stock
Awards ("RSA"). The awards are granted as part of the mechanics of
an acquisition to act as a retention incentive for staff, they are
also used as Annual Performance Bonuses for senior management. The
vesting of the awards is subject to continued employment over an
agreed period. All the awards were granted for a nil consideration.
RSA's awarded as part of Annual Performance Bonuses are considered
to be an underlying cost of the business. RSA's granted in relation
to acquisitions or the recruitment of senior management, are deemed
to be non-underlying costs of the business.
13. Borrowings and contingencies
On 1 March 2019, the Group refinanced the loan facility and
repaid the existing loan in full. The balance of the unamortised
loan costs was also written off.
The new loan facility is for GBP150m plus an accordion option of
GBP70m with a consortium of five banks namely HSBC, Bank of
Ireland, LIoyds, Royal Bank of Canada and Santander. The new loan
is now structured solely as a revolving credit facility that can be
drawn down and repaid by the Group at any time.
Covenants attached to the loan relate to interest cover and
leverage. Undrawn funds in the revolving credit facility are
charged at 40% of the interest margin whilst the accordion facility
attracts no interest.
The balances available and drawn are as follows:
Unaudited Unaudited Audited
as at as at as at
30 Jun 30 Jun 31 Dec
2019 2018 2018
GBP'000 GBP'000 GBP'000
Available
Term loan - 46,000 46,000
Revolving credit facility 150,000 44,000 44,000
Accordion 70,000 10,000 10,000
220,000 100,000 100,000
---------- ---------- --------
Drawn
Term loan - 46,000 46,000
Revolving credit facility 100,800 25,300 39,850
Accordion - - -
100,800 71,300 85,850
---------- ---------- --------
Capitalised loan fees 1,525 580 486
Total borrowings 99,275 70,720 85,364
---------- ---------- --------
During the 6 months ending 30 June 2019, the Group drew down
from the revolving credit facility a net total of GBP100.8 million
with GBP88 million used to repay the previous facility.
Please refer to the 2018 Annual Report for the details relating
to the prior period facilities.
In the ordinary course of business, the Group could be subject
to legal claims and/or proceedings. Should such an event arise, the
Board would consider its best estimate of the amount required to
settle the obligation and, where appropriate, establish a
provision. While there can be no assurances that circumstances will
not change, based upon information currently available, the
Directors do not believe there is any such claim or proceeding that
could have a material adverse effect on the Group's financial
position.
14. Changes in accounting policies
On adoption of IFRS 16, the group recognised lease liabilities
in relation to leases which had previously been classified as
'operating leases' under the principles of IAS 17 Leases. These
liabilities were measured at the present value of the remaining
lease payments, discounted using the lessee's incremental borrowing
rate as of 1 January 2019. The weighted average lessee's
incremental borrowing rate applied to the lease liabilities on 1
January 2019 was 4.21%
The Group made use of the practical expedient on transition
whereby leases with a remaining lease term of less than 12 months,
as at 1 January 2019, will be accounted for as a short-term lease.
Consequently, no lease liability or right-of-use asset was
calculated thereon. Initial direct costs were also excluded for the
measurement of the right-of-use asset at initial application of the
new standard.
The group has also elected not to reassess whether a contract
is, or contains, a lease at the date of initial application.
Instead, for contracts entered into before the transition date the
group relied on its assessment made applying IAS 17 and IFRIC 4
Determining whether an Arrangement contains a Lease.
The group defines low value assets as those assets with a
purchase price, for a new and unused asset, of GBP5,000 or
lower.
The discounted remaining lease payments are reconciled to the
lease liability recognised on initial application as follows:
1 Jan
2019
GBP'000
Operating lease commitments disclosed
as at 31 December 2018 60,265
Discounted using the average incremental
borrowing rate 40,243
Less: short-term leases recognised as an expense
on a straight-line basis (67)
Less: low value assets recognised as an expense
on a straight-line basis (15)
Plus: adjustment due to jurisdictional incremental
borrowing rate used 327
Leases committed to in 2018 with a 1 January
2019 commencement date (4,660)
Lease liability recognised as at
1 January 2019 35,828
--------
Of which are:
Current lease liabilities 3,902
Non-current lease liabilities 31,926
35,828
--------
The associated right-of-use assets for property leases were
measured on a retrospective basis as if the new rules had always
been applied. Using the practical expedient, the group only
recognised a right-of-use-asset on property. The impact on 1
January 2019 is set out below. There were no onerous lease
contracts that would have required an adjustment to the
right-of-use assets at the date of initial application.
Right-of-use assets were only recognised on
the rental properties.
30 Jun 1 Jan
2019 2019
GBP'000 GBP'000
Right-of-use assets 34,491 30,828
Lease liabilities (39,936) (35,828)
--------- ---------
The change in accounting policy affected the following items in
the balance sheet on 1 January 2019:
Increase
Right-of-use assets by 30,828
Increase
Lease liabilities by 35,828
Increase
Deferred tax liabilities by 4,426
Increase
Deferred tax assets by 4,976
Decrease
Trade and other payables by 5,403
Decrease
Property, plant and equipment by 1,109
Decrease
Retained earnings by 556
Increase
Provisions by 400
The lease liability disclosed in the 31 December 2018 annual
report included two leases with a 1 January 2019 commencement date.
The two leases amounted to GBP 4.7 million and were included in the
reporting to be prudent.
The group leases office space in various jurisdictions. Leases
are negotiated for a variety of terms over which rentals are fixed
with break clauses and options to extend for a further period at
the then prevailing market rate. Rental agreements to which IFRS 16
was applied, spans anywhere from 14 months to 24 years.
The group accounts for lease payments by allocating it between
finance costs and the lease liability. The finance cost is charged
to profit or loss over the lease period. The right-of-use asset is
depreciated over the shorter of the asset's useful life and the
lease term on a straight-line basis.
On initial recognition of a new lease, the lease liability is
recognised as the present value of future payments, discounted
using the incremental borrowing rate (unless the interest implicit
to the lease is available for use).
The right-of-use asset for lease agreements entered into after
transition date is measured on initial recognition as the amount
equal to the lease liability on initial measurement, less any lease
incentives and lease payments made before the commencement date,
plus any initial direct costs and dilapidation costs.
15. Related party transactions
Balances and transactions between the Company and its
subsidiaries, which are related parties, have been eliminated on
consolidation and are not disclosed in this note.
The Group's only other significant related parties are key
management personnel, comprising all members of the plc Board of
Directors and the Executive Committee who are responsible for
planning and controlling the activities of the Group.
The remuneration of any employee who met the definition of key
management personnel of the Group during the period is set out
below in aggregate for each of the categories specified in IAS 24
Related Party Disclosures.
Unaudited Unaudited Audited
as at as at as at
30 Jun 30 Jun 31 Dec
2019 2018 2018
GBP'000 GBP'000 GBP'000
Short term payments
Short-term employee benefits 1,882 1,778 2,789
Share Based Payments (see
note 12) 245 306 573
Total short term payments 2,127 2,084 3,362
----------------------------------- ---------- ---------- --------
Other than the items listed above, the Group has not entered
into any material transactions with related parties since the last
annual report.
16. Post balance sheet events
On 31 July 2019, the Group entered into an agreement to purchase
a minority shareholding in Colmore AG which is a leading technology
and software enabled fund administration business focused on the
Limited Partner Market. The new partnership will increase the key
differentiating factors for the Group when responding to tenders
for new client mandates. The GBP9 million consideration was paid in
cash and will have a limited impact on the Group results.
The accounting for this transaction is incomplete at issuance of
these financial statements.
This information is provided by RNS, the news service of the
London Stock Exchange. RNS is approved by the Financial Conduct
Authority to act as a Primary Information Provider in the United
Kingdom. Terms and conditions relating to the use and distribution
of this information may apply. For further information, please
contact rns@lseg.com or visit www.rns.com.
END
IR UKSWRKRAKRAR
(END) Dow Jones Newswires
September 10, 2019 02:01 ET (06:01 GMT)
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