TIDMTAM
RNS Number : 8806S
Tatton Asset Management PLC
11 November 2019
11 November 2019
Tatton Asset Management plc
Interim results for the six months ended 30 September 2019
"Continued good progress and reached GBP7.0bn AUM milestone"
Tatton Asset Management plc (the "Group") (AIM: TAM), the
on-platform discretionary fund management (DFM) and support
services business for independent financial advisers (IFAs), today
issues its interim results for the six-month period ended 30
September 2019.
FINANCIAL HIGHLIGHTS
- Discretionary assets under management ("AUM")
increased 22.8% to GBP7.0bn (2018: GBP5.7bn)
- Average AUM inflows over GBP73.0m per month
- Group revenue increased 15.2% to GBP9.73m
(2018: GBP8.45m)
- Adjusted operating profit(*) up 23.2% to
GBP4.13m (2018: GBP3.35m)
- Profit before tax increased to GBP3.61m (2018:
GBP3.08m)
- Return on capital employed increased by 1.1%
to 25.2% (2018: 24.1%)
- Adjusted fully diluted EPS(*) increased 17.9%
to 5.39p (2018: 4.57p)
- Proposed interim dividend increased 14.3%
to 3.20p (2018: 2.80p)
- Strong financial position, with net cash
of GBP9.2m
OPERATIONAL HIGHLIGHTS
- Acquired Sinfonia Asset Management Limited,
five Funds with AUM of GBP135m for a consideration
of up to GBP2.7m
- Tatton Investment Management (Tatton) increased
its number of firms to 522 (2018: 405) and
number of accounts to 61,250 (2018: 53,500)
- Strong start to Tenet Partnership since June
announcement - 40 new firms and GBP24.5m
of AUM
- Paradigm Mortgages Services, the Group's
mortgage and protection distribution business,
performed strongly, with gross lending via
its channels during the period of GBP4.8bn
(2018: GBP4.0bn), an increase of 20.0% and
with 1,466 mortgage firms using its services
(2018: 1,290)
- Amalgamation of Consulting and Mortgages
creating a simplified IFA support services
business, allowing the Group to better meet
the needs of IFAs through an integrated approach
* Alternative performance measures are detailed in note 18 of
this interim report
Paul Hogarth, Chief Executive, commented: "It is particularly
pleasing to have reached the important milestone of GBP7bn of AUM
with monthly net flows continuing to perform well from both
existing and new IFAs despite an uncertain and volatile market. We
have also reorganised our IFA support services businesses under the
existing Paradigm brand but with one simplified operational and
management structure from which we expect to see improved
efficiencies and opportunities in the future. While we are mindful
of the current political and macro-economic factors, the Group
continues to trade in line with the Board's full year expectations
and the Board remains optimistic regarding the prospects of the
Group."
For further information please contact:
+44 (0) 161 486
Tatton Asset Management plc 3441
Paul Hogarth (Chief Executive
Officer)
Paul Edwards (Chief Financial
Officer)
Lothar Mentel (Chief Investment
Officer)
Roddi Vaughan-Thomas (Head of
Communications)
Nomad and Broker
+44 (0) 20 3829
Zeus Capital 5000
Martin Green (Corporate Finance)
Dan Bate (Corporate Finance and
QE)
Pippa Hamnett (Corporate Finance)
Media Enquiries
+44 (0) 20 7250
Powerscourt 1446
Justin Griffiths
For more information, please visit:
www.tattonassetmanagement.com
Analyst presentation
An analyst briefing is being held at 9.30am on 11 November 2019
at the offices of Zeus Capital, 10 Old Burlington St, London, W1S
3AG.
GROUP RESULTS
The Group has delivered a solid first half performance driven by
continued growth in Tatton Investment Management (Tatton). We
continue to deliver increasing assets under management (AUM) and
reached the GBP7.0bn milestone at the end of September 2019.
Group revenue for the period increased 15.2% to GBP9.73m (2018:
GBP8.45m). Adjusted operating profit* for the period increased
23.2% to GBP4.13m (2018: GBP3.35m) with adjusted operating profit
margin* increasing to 42.4% (2018: 39.7%).
Pre-tax profit after exceptional items and share-based payment
charges increased 17.1% to GBP3.61m (2018: GBP3.08m). Taxation
charges for the period were GBP0.67m (2018: GBP0.68m). This gives
an effective tax rate of 18.5% when measured against profit before
tax. Adjusting for exceptional costs and share-based payments the
effective tax rate is 19.7%.
The basic earnings per share was 5.26p (2018: 4.30p). When
adjusted for exceptional items and share-based payment charges,
earnings per share was 5.92p (2018: 4.97p) and earnings per share
fully diluted for the impact of share options was 5.39p (2018:
4.57p), an increase of 17.9%.
STRATEGIC PRIORITIES AND BUSINESS OBJECTIVES
TATTON INVESTMENT MANAGEMENT
Against a backdrop of a global economic slowdown and the rising
investor hesitance due to Brexit uncertainty, Tatton has made a
solid start to the financial year.
Tatton completed its first acquisition, Sinfonia Asset
Management Limited (SAM), for a consideration of up to GBP2.7m. SAM
contributed GBP135m of assets to the total AUM of GBP7.0bn (2018:
GBP5.7bn). This represents an increase in AUM of 22.8% on the prior
year (organic 21.1%) and 14.8% since the last full year results at
the end of March 2019. Increasing AUM through new and existing
adviser relationships remains at the core of Tatton's strategy,
both organically and through acquisition. We will continue to
develop our market leading managed portfolio service and enhance
our other products to ensure they remain at the cutting edge of
centralised investment propositions (CIP) for financial advisers.
We continue to make good progress in adding new firms and
associated clients with firm numbers increasing to 522 (2018: 405),
an increase of 28.9%, and clients increasing to 61,250 (2018:
53,500), an increase of 14.5%. We are very pleased with the
progress we are making with the Tenet Group following the signing
of the strategic partnership agreement in June this year. Results
are already very positive with 40 new firms (included in the 522
above) and GBP24.5m of associated AUM added in the period to
September 2019. We look forward to making further progress in the
year ahead.
Revenue for Tatton (excluding wrap income, as previously
presented) grew 35.2% to GBP5.45m (2018: GBP4.03m) and adjusted
operating profit* grew 42.0% to GBP2.91m (2018: GBP2.05m). Margins
increased to 53.3% (2018: 50.9%) reflecting the operational gearing
of the business. We anticipate that this will continue as the
business continues to grow.
PARADIGM MORTGAGES
Paradigm Mortgages started the year well and continues to
deliver good growth through increasing market share despite the
headwinds in the mortgage market. New members in the period
increased the number of firms by 13.6% to 1,466 (2018: 1,290).
Paradigm Mortgages' strategy remains to assist Financial
Advisers and intermediaries in benefiting from economies of scale
in lending and insurance provision through access to lenders
covering the whole of market, together with a full range of
mortgage-related support services. The increase in new members
helps to drive applications which is a key indicator for future
performance and also benefits the general drive towards increased
customer retention with intermediaries taking an increasing share
of the channel which feeds through to increased completions and
associated revenue.
Revenue for Paradigm Mortgages grew 11.4% to GBP1.42m (2018:
GBP1.28m) and adjusted operating profit grew 11.3% to GBP0.80m
(2018: GBP0.72m) with margins remaining strong at 56.1% (2018:
56.2%).
PARADIGM CONSULTING
The business continues to provide regulatory compliance support
and bespoke consultancy to IFAs and acts as a channel for
intelligence and insight into the IFA community for the wider
Group. The number of Paradigm Consulting firms slightly increased
to 385 (2018: 382), while the market experiences transactional
activity and continues to consolidate. Revenue in the period
reduced 9.3% to GBP2.83m (2018: GBP3.12m) and adjusted operating
profit* reduced 3.8% to GBP1.48m (2018: GBP1.54m).
REORGANISATION
Since the IPO in July 2017 we have operated three distinct
businesses, each with its own strategic goals and priorities. As
the Group has evolved over the last two years, we have continued to
develop our approach to how the Group businesses operate in their
respective markets. As such the decision has been made to simplify
the business units to better reflect their offerings of investment
management and adviser support services. Therefore, the two
existing Paradigm businesses will amalgamate to operate under a
single operational and reporting control structure, resulting in a
change to the operating segment reporting. They will continue to
deliver financial adviser support services, consulting, pooled
protection and the mortgage club under the existing Paradigm brand.
Further, all end client-related investment income to the Group will
now be presented under Tatton Investment Management (Tatton),
meaning the investment and wrap income of GBP1.6m including
associated costs of GBP0.3m, which were historically presented
under Paradigm Consulting, will now be presented under Tatton to
better reflect its nature and the operational activity which
supports it. A summary of the segmental results for the period
(together with prior period comparatives) for the Tatton and
Paradigm businesses, on both the new and old basis of presentation,
is set out in the Divisional Results section below and in Note 2.2
to these condensed financial statements.
As we look to the future, we will leverage the closer
relationship in the Paradigm businesses through improved
cross-fertilisation and co-operation and see this as a logical step
to a more cohesive proposition to the markets in which we operate.
We have shown both the new and historical presentation for clarity
and understanding on the following pages. Any additional costs
incurred in the second half of the year in relation to the
reorganisation will be separately disclosed in the income
statement.
DIVISIONAL RESULTS
The impact of the change in the Group's operating divisions as
detailed above is illustrated in note 2.6 of these condensed
financial statements.
HISTORICAL PRESENTATION
Tatton Paradigm Paradigm
Investment Consulting Mortgages Central Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
30 September 2019
Revenue 5,453 2,828 1,424 24 9,729
Adjusted operating
profit* 2,906 1,478 799 (1,057) 4,126
Adjusted operating
profit margin* 53.3% 52.3% 56.1% - 42.4%
30 September 2018
Revenue 4,025 3,118 1,278 24 8,445
Adjusted operating
profit* 2,050 1,537 718 (955) 3,350
Adjusted operating
profit margin* 50.9% 49.3% 56.2% - 39.7%
NEW PRESENTATION
Tatton Paradigm Central Total
GBP'000 GBP'000 GBP'000 GBP'000
30 September 2019
Revenue 7,102 2,603 24 9,729
Adjusted operating
profit* 4,273 910 (1,057) 4,126
Adjusted operating
profit margin* 60.2% 35.0% - 42.4%
30 September 2018
Revenue 5,987 2,434 24 8,445
Adjusted operating
profit* 3,482 823 (955) 3,350
Adjusted operating
profit margin* 58.2% 33.8% - 39.7%
ACQUISITION
A key part of the Group's strategy is to make acquisitions that
fit the business model and fulfil the key strategic aims of the
business. On 30 September 2019 the Group acquired the entire issued
share capital of Sinfonia Asset Management Limited (SAM), a wholly
owned subsidiary of the Tenet Group for a consideration of up to
GBP2.7m. SAM comprises five risk-targeted funds with a total AUM of
GBP135m. These five additional funds will complement Tatton's
existing fund range and expand the access IFAs' clients have to a
range of diversified investments portfolios on investment platforms
that cannot yet accommodate discretionary portfolio services.
Of the consideration of up to GBP2.7m, GBP2.0m was payable on
completion with the remaining balance becoming payable in two equal
instalments subject to meeting specific AUM targets at the end of
years one and two post completion as set out in note 16 to these
condensed financial statements.
EXCEPTIONAL ITEMS
The exceptional items totalling GBP0.1m in the period relate to
the acquisition of Sinfonia Asset Management Limited. Exceptional
items along with share-based payment charge are both reported
separately to give a better understanding of the Company's
underlying performance.
BALANCE SHEET
The balance sheet remains healthy with net assets at 30
September 2019 totalling GBP15.3m (2018: GBP13.9m) reflecting the
continued growth and profitability of the Group. Property, plant
and equipment has increased to GBP1.1m (2018: GBP0.3m), with
GBP0.6m of the increase relating to the recognition of right-of-use
assets following the adoption of IFRS 16 'Leases' from 1 April
2019. Lease liabilities of GBP0.7m have also been recognised at the
period end resulting in a net decrease to net assets of
GBP0.1m.
Intangible assets of GBP1.8m have been recognised (2018:
GBPnil), of which GBP1.5m relates to the preliminary valuation of
customer relationship intangibles recognised on the acquisition of
SAM. This business combination has also resulted in an increase to
goodwill of GBP1.1m.
CASH RESOURCES
The Group continues to generate strong cash flows. Net cash
generated from operations was GBP3.8m, GBP3.9m before exceptional
items (2018: GBP4.3m) and was 105% of operating profit. The Group
remains debt free with closing net cash at the end of the period of
GBP9.2m (2018: GBP11.6m or GBP9.4m excluding non-shareholder cash).
The cash resources are after the acquisition of Sinfonia of
GBP2.0m, corporation tax of GBP1.4m and dividend payments of
GBP3.1m relating to the final dividend for the year ended 31 March
2019.
DIVID
The Board is pleased to recommend an interim dividend of 3.2p
per share, an increase of 14.3% on the prior period interim
dividend. The interim dividend reflects both our cash performance
and our underlying confidence in the business. The interim dividend
of 3.2p per share, totalling GBP1.8m, will be paid on 13 December
2019 to shareholders on the register at close of business on 22
November 2019 and will have an ex-dividend date of 21 November
2019. In accordance with IFRS, the interim dividend has not been
included as a liability in this interim statement.
BUSINESS RISK
The Board identified principal risks and uncertainties which may
have a material impact on the Group's performance in the Group's
2019 Annual Report and Accounts (pages 24 to 25) and believes that
the nature of these risks remains largely unchanged at the half
year. The Board will continue to monitor and manage identified
principal risks throughout the second half of the year.
BREXIT
The Group has continued to review the implications of the result
of the UK referendum to leave the EU on our business model. As the
Group has no direct exposure to cross-border trading and has no
overseas operations, the direct impact of Brexit will be limited.
However, we remain mindful of the uncertainty Brexit has created
and its potential to impact markets and the wider consumer
sentiment. The Board will continue to assess the implications of
the changes as they emerge.
GOING CONCERN
As stated in note 2.2 of these condensed financial statements,
the Directors are satisfied that the Group has sufficient resources
to continue in operation for the foreseeable future, a period not
less than 12 months from the date of this report. Accordingly, they
continue to adopt the going concern basis in preparing these
condensed financial statements.
SUMMARY AND OUTLOOK
The Group continues to make good progress against its stated
strategy. We continue to see net new inflows supporting an
increasing AUM. The Group has delivered a solid first half
performance with increasing revenues, profit and margins. As in
prior periods we will continue to maintain a disciplined approach
to executing our strategy and we remain excited by the
opportunities that exist in the markets in which we operate. While
we are mindful of the current political and macro-economic factors,
the Group continues to trade in line with the Board's full year
expectations and the Board remains optimistic regarding the
prospects of the Group.
* Alternative performance measures are detailed in note 18 of
this interim report
FINANCIAL STATEMENTS
CONSOLIDATED STATEMENT OF TOTAL COMPREHENSIVE INCOME
FOR THE SIX MONTHSED 30 SEPTEMBER 2019
Unaudited Unaudited
six six Audited
months months year
ended ended ended
30-Sep 30-Sep 31-Mar
2019 2018 2019
Note (GBP'000) (GBP'000) (GBP'000)
Revenue 9,729 8,445 17,518
Administrative expenses (6,118) (5,473) (11,593)
================================ ==== ========= ========= =========
Operating profit 4 3,611 2,972 5,925
Share-based payment costs 5 413 365 874
Exceptional items 5 102 13 509
Adjusted operating profit
(before
========= ========= =========
separately disclosed items)(1) 4,126 3,350 7,308
=============================== ==== ========= ========= =========
Finance (costs)/income 6 (1) 112 187
=============================== ==== ========= --------- ---------
Profit before tax 3,610 3,084 6,112
Taxation charge 7 (667) (681) (1,255)
=============================== ==== ========= ========= =========
Profit attributable to
shareholders 2,943 2,403 4,857
=============================== ==== ========= ========= =========
Earnings per share - Basic 8 5.26p 4.30p 8.69p
Earnings per share - Diluted 8 4.79p 3.95p 7.92p
Adjusted earnings per share
- Basic(2) 8 5.92p 4.97p 10.99p
Adjusted earnings per share
- Diluted(2) 8 5.39p 4.57p 10.02p
1 Adjusted for exceptional items and share-based
payment costs. See note 18.
2 Adjusted for exceptional items and share-based
payment costs and the tax thereon. See note
18.
There were no other recognised gains or losses other than those
recorded above in the current or prior period and therefore a
statement of other comprehensive income has not been presented.
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
FOR THE SIX MONTHSED 30 SEPTEMBER 2019
Unaudited Unaudited
six six Audited
months ended months ended year ended
31-Mar
30-Sep 2019 30-Sep 2018 2019
Note
============ ============ ==========
(GBP'000) (GBP'000) (GBP'000)
========================== ==== ============ ============ ==========
Non-current assets
Goodwill 10 6,060 4,917 4,917
Intangible assets 11 1,750 - 223
Property, plant
and equipment 12 1,094 310 349
Deferred income
tax asset 101 - 104
========================== ==== ============ ============ ==========
Total non-current
assets 9,005 5,227 5,593
========================== ==== ============ ============ ==========
Current assets
Trade and other
receivables 2,639 3,410 2,508
Corporation tax
asset 118 - -
Cash and cash equivalents 9,174 11,622 12,192
========================== ==== ============ ============ ==========
Total current assets 11,931 15,032 14,700
-------------------------- ---- ============ ============ ==========
Total assets 20,936 20,259 20,293
========================== ==== ============ ============ ==========
Current liabilities
Trade and other
payables (4,579) (5,775) (4,521)
Corporation tax - (600) (484)
========================== ==== ============ ============ ==========
Total current liabilities (4,579) (6,375) (5,005)
========================== ==== ------------ ------------ ----------
Non-current liabilities
Deferred tax liabilities - (15) -
Other payables (1,008) - -
========================== ==== ============ ============ ==========
Total non-current
liabilities (1,008) (15) -
-------------------------- ---- ============ ============ ==========
Total liabilities (5,587) (6,390) (5,005)
-------------------------- ---- ============ ============ ==========
Net assets 15,349 13,869 15,288
========================== ==== ============ ============ ==========
Equity attributable
to equity
holders of the entity
Share capital 11,182 11,182 11,182
Share premium account 8,718 8,718 8,718
Other reserve 2,041 2,041 2,041
Merger reserve (28,968) (28,968) (28,968)
Retained earnings 22,376 20,896 22,315
========================== ==== ============ ============ ==========
Total equity 15,349 13,869 15,288
========================== ==== ============ ============ ==========
The financial statements were approved by the Board of Directors
on 11 November 2019 and were signed on its behalf by:
PAUL EDWARDS
Director
Company registration number: 10634323
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
FOR THE SIX MONTHSED 30 SEPTEMBER 2019
Share Share Other Merger Retained Total
capital premium reserve reserve earnings equity
(GBP'000) (GBP'000) (GBP'000) (GBP'000) (GBP'000) (GBP'000)
At 1 April 2018 11,182 8,718 2,041 (28,968) 20,588 13,561
Profit and total
comprehensive
income - - - - 2,403 2,403
Dividends - - - - (2,460) (2,460)
Share-based payments - - - - 365 365
At 30 September
2018 11,182 8,718 2,041 (28,968) 20,896 13,869
Profit and total
comprehensive
income - - - - 2,454 2,454
Dividends - - - - (1,565) (1,565)
Share-based payments - - - - 400 400
Deferred tax on
share-based
payments - - - - 130 130
At 31 March 2019 11,182 8,718 2,041 (28,968) 22,315 15,288
Profit and total
comprehensive
income - - - - 2,943 2,943
Dividends - - - - (3,131) (3,131)
Share-based payments - - - - 379 379
Deferred tax on
share-based
payments - - - - (130) (130)
At 30 September
2019 11,182 8,718 2,041 (28,968) 22,376 15,349
CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE SIX MONTHSED 30 SEPTEMBER 2019
Unaudited Unaudited
six months six months Audited
year
ended ended ended
30-Sep 30-Sep 31-Mar
2019 2018 2019
Note (GBP'000) (GBP'000) (GBP'000)
Operating activities
Profit for the period 2,943 2,403 4,857
Adjustments:
Income tax expense 7 667 681 1,255
Depreciation of property,
plant and equipment 12 145 46 91
Amortisation of intangible
assets 11 57 - 43
Share-based payment expense 15 413 365 874
Finance costs/(income) 6 1 (112) (187)
Changes in:
Trade & other receivables (79) (958) 78
Trade & other payables (357) 1,853 491
Exceptional costs 5 102 13 509
Cash generated from operations
before exceptional costs 3,892 4,291 8,011
Cash generated from operations 3,790 4,278 7,502
Income tax paid (1,396) (687) (1,366)
Net cash from operating
activities 2,394 3,591 6,136
Investing activities
Payment for the acquisition
of subsidiary, net of
cash acquired 16 (1,960) - -
Purchase of intangible assets (115) - (266)
Purchase of property, plant
and equipment (202) (251) (336)
Net cash used in investing
activities (2,277) (251) (602)
Financing activities
Interest received 10 112 53
Dividends paid (3,131) (2,460) (4,025)
Repayment of the lease liabilities (14) - -
Net cash used in financing
activities (3,135) (2,348) (3,972)
Net (decrease)/increase
in cash and cash equivalents (3,018) 992 1,562
Cash and cash equivalents
at beginning of period 12,192 10,630 10,630
Net cash and cash equivalents
at end of period 9,174 11,622 12,192
The accompanying notes are an integral part of the interim
financial statements.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
1 GENERAL INFORMATION
Tatton Asset Management plc ("the Company") is a public company
limited by shares. The address of the registered office is Paradigm
House, Brooke Court, Lower Meadow Road, Wilmslow, SK9 3ND, United
Kingdom. The registered number is 10634323.
The Group comprises 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 the funds run
by the companies under Tatton Capital Limited.
The condensed consolidated interim financial statements for the
six months ended 30 September 2019 do not constitute statutory
accounts as defined under Section 434 of the Companies Act 2006.
The Annual Report and Financial Statements (the 'Financial
Statements') for the year ended 31 March 2019 were approved by the
Board on 3 June 2019 and have been delivered to the Registrar of
Companies. The Auditor, Deloitte LLP, reported on these financial
statements; its report was unqualified, did not contain an emphasis
of matter paragraph and did not contain statements under s498 (2)
or (3) of the Companies Act 2006.
News updates, regulatory news, and financial statements can be
viewed and downloaded from the Group's website,
www.tattonassetmanagement.com. Copies can also be requested from:
The Company Secretary, Tatton Asset Management plc, Paradigm House,
Brooke Court, Lower Meadow Road, Wilmslow, SK9 3ND.
2 ACCOUNTING POLICIES
The principal accounting policies applied in the presentation of
the interim financial statements are set out below.
2.1 BASIS OF PREPARATION
The unaudited condensed consolidated interim financial
statements for the six months ended 30 September 2019 have been
prepared in accordance with IAS 34 'Interim Financial Reporting' as
adopted by the European Union. The condensed consolidated interim
financial statements should be read in conjunction with the
Financial Statements for the year ended 31 March 2019, which have
been prepared in accordance with International Financial Reporting
Standards (IFRSs) as adopted by the European Union. The condensed
consolidated interim financial statements were approved for release
on 11 November 2019.
The condensed consolidated interim financial statements have
been prepared on a going concern basis and prepared on the
historical cost basis.
The condensed consolidated interim financial statements are
presented in sterling and have been rounded to the nearest thousand
(GBP'000). The functional currency of the Company is sterling.
The preparation of financial information in conformity with IFRS
requires management to make estimates and assumptions that affect
the reported amounts of assets and liabilities at the date of the
financial statements and the reported amounts of revenues and
expenses during the reporting period. Although these estimates are
based on management's best knowledge of the amount, event or
actions, actual events may ultimately differ from those
estimates.
The key accounting policies set out below have, unless otherwise
stated, been applied consistently to all periods presented in the
consolidated financial statements. The accounting policies adopted
by the Group in these interim financial statements are consistent
with those applied by the Group in its consolidated financial
statements for the year ended 31 March 2019, except for the
adoption of new standards effective as of 1 April 2019.
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. The
Directors have considered the risks associated with Brexit,
including considering the effect on clients' wealth, attitude
towards savings and investment, and changes in government policy.
The Directors do not consider that the impact of Brexit will affect
the Group continuing as a going concern. Accordingly, the Directors
continue to adopt the going concern basis in preparing these
condensed consolidated interim financial statements.
2.3 BASIS OF CONSOLIDATION
On 23 February 2017 the Company was incorporated under the name
Tatton Asset Management Limited. On 19 June 2017 Tatton Asset
Management Limited acquired the entire share capital of Nadal Newco
Limited via a share for share exchange with the shareholders of
Nadal Newco Limited. On 19 June 2017 Tatton Asset Management
Limited was re-registered as a public company with the name Tatton
Asset Management plc. Following the share for share exchange
referred to above, Tatton Asset Management plc became the ultimate
legal parent of the Group.
2.4 STANDARDS IN ISSUE NOT YET EFFECTIVE
The following IFRS and IFRIC Interpretations have been issued
but have not been applied by the Group in preparing the historical
financial information, as they are not yet effective. The Group
intends to adopt these Standards and Interpretations when they
become effective, rather than adopt them early.
- Amendments to IFRS 3, IAS 1, IAS 8, IFRS 9, IAS 39 and IFRS 7
A number of IFRS and IFRIC interpretations are also currently in
issue which are not relevant for the Group's activities and which
have not therefore been adopted in preparing the interim financial
statements.
The Directors do not expect that the adoption of the Standards
listed above will have a material impact on the financial
statements of the Group in future periods.
2.5 LEASES
In the current period, the Group, for the first time, has
applied IFRS 16 Leases (as issued by the IASB in January 2016)
which became effective for accounting periods beginning on or after
1 January 2019. The date of initial application of IFRS 16 for the
Group was 1 April 2019.
IFRS 16 introduces new or amended requirements with respect to
lease accounting. It introduces significant changes to the lessee
accounting by removing the distinction between operating and
finance lease and requiring the recognition of a right-of-use asset
and a lease liability at commencement for all leases, except for
short-term leases and leases of low value assets. In contrast to
lessee accounting, the requirements for lessor accounting have
remained largely unchanged. The impact of the adoption of IFRS 16
on the Group's consolidated financial statements is described
below.
The Group has applied IFRS 16 using the modified retrospective
approach. Under this approach, comparative information is not
restated and the cumulative effect of internally applying IFRS 16
is recognised in retained earnings at the date of initial
application, however there is no impact on the net assets and
retained earnings of the Group at 1 April 2019.
Impact on the new definition of a lease
The Group has made use of the practical expedient available on
transition to IFRS 16 not to reassess whether a contract is or
contains a lease. Accordingly, the definition of a lease in
accordance with IAS 17 and IFRIC 4 will continue to be applied to
those leases entered or modified before 1 April 2019. The change in
definition of a lease mainly relates to the concept of control.
IFRS 16 determines whether a contract contains a lease on the basis
of whether the customer has the right to control the use of an
identified asset for a period of time in exchange for
consideration.
The Group applies the definition of a lease and related guidance
set out in IFRS 16 to all lease contracts entered into or modified
on or after 1 April 2019 (whether it is a lessor or a lessee in the
lease contract). In preparation for the first-time application of
IFRS 16, the Group has carried out an implementation project. The
project has shown that the new definition in IFRS 16 will not
change significantly the scope of contracts that meet the
definition of a lease for the Group.
Impact on Lessee Accounting
Former operating leases
IFRS 16 changes how the Group accounts for leases previously
classified as operating leases under IAS 17, which were off-balance
sheet.
Applying IFRS 16, for all leases (except as noted below), the
Group:
- recognises right-of-use assets and lease liabilities
in the Consolidated Statement of Financial
Position, initially measured at the present
value of the future lease payments;
- recognises depreciation of right-of-use assets
and interest on lease liabilities in the Consolidated
Statement of Total Comprehensive Income;
- separates the total amount of cash paid into
a principal portion (presented within financing
activities) and interest (presented within
operating activities) in the Consolidated
Statement of Total Comprehensive Income.
Lease incentives (e.g. rent-free period) are recognised as part
of the measurement of the right-of-use assets and lease liabilities
whereas under IAS 17 they resulted in the recognition of a lease
liability incentive, amortised as a reduction of rental expenses on
a straight-line basis.
Under IFRS 16, right-of-use assets will be tested for impairment
in accordance with IAS 36 Impairment of Assets. This replaces the
previous requirement to recognise a provision for onerous lease
contracts.
For short-term leases (lease term of 12 months or less) and
leases of low-value assets (such as personal computers and office
furniture), the Group has opted to recognise a lease expense on a
straight-line basis as permitted by IFRS 16. This expense is
presented within Other operating expenses in the Consolidated
Statement of Total Comprehensive Income.
Financial impact of initial application of IFRS 16
The tables below show the amount of adjustment for each
financial statement line item affected by the application of IFRS
16 for the current period.
Impact on profit or loss in the period GBP'000
======================================== =======
Increase in depreciation(1) (69)
Increase in finance costs(1) (11)
Decrease in other operating expenses(1) 77
Decrease in profit for the period (3)
Impact on earnings per share p
======================================== =======
Increase in earnings per share from
continuing operations
Basic 0.01p
Diluted 0.01p
As if IAS
17 still IFRS 16
Impact on assets, liabilities
and equity as at applied adjustments As presented
30 September 2019 GBP'000 GBP'000 GBP'000
================================ ========= =========== ============
Right-of-use asset(1) - 620 620
Net impact on total assets - 620 620
Trade and other payables (63) 63 -
Lease liabilities(1) - (686) (686)
Net impact on total liabilities (63) (623) (686)
Retained earnings (63) (3) (66)
1 The application of IFRS 16 to leases previously classified as
operating leases under IAS 17 resulted in the recognition of
right-of-use assets and lease liabilities. It resulted in a
decrease in Other operating expenses and an increase in
depreciation and interest expense.
GBP'000
Operating lease commitments disclosed
as at 31 March 2019 778
(Less): short-term leases recognised
on a straight-line basis as expense (28)
750
Lease liability recognised as at 1 April
2019 discounted using the lessee's
incremental borrowing rate at the date
of initial application 689
Of which are:
Current lease liabilities 40
Non-current lease liabilities 649
689
The application of IFRS 16 has an impact on the consolidated
cash flows of the Group. Under IFRS 16, lessees must present:
- short-term lease payments and payments for
leases of low-value assets as part of operating
activities (the Group has included these
payments as part of payments to suppliers
and employees);
- cash paid for the interest portion of lease
liability as either operating activities
or financing activities, as permitted by
IAS 7 (the Group has opted to include interest
paid as part of operating activities); and
- cash payments for the principal portion for
lease liability, as part of financing activities.
Under IAS 17, all lease payments on operating leases were
presented as part of cash flows from operating activities. At the
reporting date there is no impact on net cash generated by
operating activities as no payments have been made against the
relevant lease in the period. The adoption of IFRS 16 did not have
an impact on net cash flows.
The Group as lessee
The Group assesses whether a contract is or contains a lease, at
inception of the contract.
The Group recognises a right-of-use asset and a corresponding
lease liability with respect to all lease arrangements in which it
is the lessee, except for short-term leases (defined as leases with
a lease term of 12 months or less) and leases of low value assets.
For these leases, the Group recognises the lease payments as an
operating expense on a straight-line basis over the term of the
lease unless another systematic basis is more representative of the
time pattern in which economic benefits from the leased assets are
consumed.
The lease liability is initially measured at the present value
of the lease payments that are not paid at the commencement date,
discounted by using the rate implicit in the lease. If this rate
cannot be readily determined, the Group uses its incremental
borrowing rate.
Lease payments included in the measurement of the lease
liability comprise:
- fixed lease payments (including in substance
fixed payments), less any lease incentives;
- the amount expected to be payable by the lessee
under residual value guarantees;
- the exercise price of purchase options, if
the lessee is reasonably certain to exercise
the options; and
- payments of penalties for terminating the
lease, if the lease term reflects the exercise
of an option to terminate the lease.
The lease liability is presented within Trade and other payables
in the Consolidated Statement of Financial Position.
The lease liability is subsequently measured by increasing the
carrying amount to reflect interest on the lease liability (using
the effective interest method) and by reducing the carrying amount
to reflect the lease payments made.
The Group remeasures the lease liability (and makes a
corresponding adjustment to the related right-of-use asset)
whenever:
- the lease term has changed or there is a change
in the assessment of exercise of a purchase
option, in which case the lease liability
is remeasured by discounting the revised lease
payments using a revised discount rate;
- the lease payments change due to changes in
an index or rate or a change in expected payment
under a guaranteed residual value, in which
cases the lease liability is remeasured by
discounting the revised lease payments using
the initial discount rate (unless the lease
payments change is due to a change in a floating
interest rate, in which case a revised discount
rate is used); and
- a lease contract is modified and the lease
modification is not accounted for as a separate
lease, in which case the lease liability is
remeasured by discounting the revised lease
payments using a revised discount rate.
The Group did not make any such adjustments during the periods
presented.
The right-of-use assets comprise the initial measurement of the
corresponding lease liability, lease payments made at or before the
commencement day and any initial direct costs. They are
subsequently measured at cost less accumulated depreciation and
impairment losses.
Whenever the Group incurs an obligation for costs to dismantle
and remove a leased asset, restore the site on which it is located
or restore the underlying asset to the condition required by the
terms and conditions of the lease, a provision is recognised and
measured under IAS 37. The costs are included in the related
right-of-use asset, unless those costs are incurred to produce
inventories.
Right-of-use assets are depreciated over the shorter period of
lease term and useful life of the underlying asset. If a lease
transfers ownership of the underlying asset or the cost of the
right-of-use asset reflects that the Group expects to exercise a
purchase option, the related right-of-use asset is depreciated over
the useful life of the underlying asset. The depreciation starts at
the commencement date of the lease.
The right-of-use assets are within Property, plant and equipment
in the Consolidated Statement of Financial Position. The Group
applies IAS 36 Impairment of Assets to determine whether a
right-of-use asset is impaired and accounts for any identified
impairment loss as described in the Property, plant and equipment
policy.
As a practical expedient, IFRS 16 permits a lessee not to
separate non-lease components, and instead account for any lease
and associated non-lease components as a single arrangement. The
Group has not used this practical expedient.
2.6 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.
Following changes to the structure of the Group's internal
organisation, and subsequent changes to the way in which financial
and management information is presented to both the Board and the
Executive Committee, the composition of the Group's Reportable
Segments changed in the financial period ended 30 September
2019.
The change to the Group's organisation structure was the
establishment of the Paradigm division in order to bring together
the activities of Paradigm Consulting and Paradigm Mortgages under
single leadership. The change allows the needs of IFAs and
mortgages advisers to be better met through an integrated approach.
The services being provided to these customers include compliance
and support services. In addition, the Tatton division now includes
wrap-related revenue which was previously included in the Paradigm
Consulting division.
This change brings the management and responsibility for all
asset-related management and services into one division.
As a result of these changes, activities previously reported
under Paradigm Consulting have been split between Tatton and
Paradigm, with Paradigm Mortgages being reported under
Paradigm.
The Revenue by segment disclosure note for the period to
September 2018 and the year to March 2019 has been amended as
follows:
(i) Revenue by segment
Period ended 30 September
2018
As reported Adjustment Restated
GBP'000 GBP'000 GBP'000
Tatton 4,025 1,962 5,987
Paradigm - 2,434 2,434
Paradigm Consulting 3,118 (3,118) -
Paradigm Mortgages 1,278 (1,278) -
Central 24 - 24
Total 8,445 - 8,445
Year ended 31 March
2019
As reported Adjustment Restated
GBP'000 GBP'000 GBP'000
Tatton 8,732 3,789 12,521
Paradigm - 4,949 4,949
Paradigm Consulting 6,049 (6,049) -
Paradigm Mortgages 2,689 (2,689) -
Central 48 - 48
Total 17,518 - 17,518
(ii) Operating profit by
segment
Period ended 30 September
2018
As reported Adjustment Restated
GBP'000 GBP'000 GBP'000
Tatton 1,955 1,432 3,387
Paradigm - 810 810
Paradigm Consulting 1,524 (1,524) -
Paradigm Mortgages 718 (718) -
Central (1,225) - (1,225)
Total 2,972 - 2,972
Year ended 31 March
2019
As reported Adjustment Restated
GBP'000 GBP'000 GBP'000
Tatton 4,098 2,743 6,841
Paradigm - 1,805 1,805
Paradigm Consulting 2,983 (2,983) -
Paradigm Mortgages 1,565 (1,565) -
Central (2,721) - (2,721)
Total 5,925 - 5,925
(iii) Adjusted operating
profit* by segment
Period ended 30 September
2018
As reported Adjustment Restated
GBP'000 GBP'000 GBP'000
Tatton 2,050 1,432 3,482
Paradigm - 823 823
Paradigm Consulting 1,537 (1,537) -
Paradigm Mortgages 718 (718) -
Central (955) - (955)
Total 3,350 - 3,350
Year ended 31 March
2019
As reported Adjustment Restated
GBP'000 GBP'000 GBP'000
Tatton 4,628 2,743 7,371
Paradigm - 1,818 1,818
Paradigm Consulting 2,996 (2,996) -
Paradigm Mortgages 1,565 (1,565) -
Central (1,881) - (1,881)
Total 7,308 - 7,308
* Alternative performance measures are detailed in note 18 of
this interim report
2.7 SIGNIFICANT JUDGEMENTS, KEY ASSUMPTIONS AND ESTIMATES
In the process of applying the Group's accounting policies,
which are described above, management have made judgements and
estimations about the future that have the most significant effect
on the amounts recognised in the financial statements. The
estimates and underlying assumptions are reviewed on an ongoing
basis. Revisions to accounting estimates are recognised in the
period in which the estimate is revised if the revision affects
only that period. If the revision affects both current and future
periods, it is revised in the period of the revision and in future
periods. Changes for accounting estimates would be accounted for
prospectively under IAS 8.
Share-based payments
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
income statement is adjusted appropriately (at the end of the
relevant scheme as a minimum). The sensitivity analysis carried out
shows that if it was considered that 100% of the options would
vest, the charge for the period would increase by GBP389,000.
Business combinations and acquisitions
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 assets 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. Business
combinations are disclosed in note 16.
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.
2.8 ALTERNATIVE PERFORMANCE MEASURES
In reporting financial information, the Group presents
alternative performance measures "APMs" which are not defined or
specified under the requirements of IFRS. The Group believes that
these APMs provide users with additional helpful information on the
performance of the business. The APMs are consistent with how the
business performance is planned and reported within the internal
management reporting to the Board. Some of these measures are also
used for the purpose of setting remuneration targets. Each of the
APMs used by the Group are set out in note 18 including
explanations of how they are calculated and how they can be
reconciled to a statutory measure where relevant.
3 SEGMENT REPORTING
Information reported to the Board of Directors as the chief
operating decision maker for the purposes of resource allocation
and assessment of segmental performance is focused on the type of
revenue. The principal types of revenue are discretionary fund
management 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 independent financial
advisers and mortgage advisers ("Paradigm").
The Group's reportable segments under IFRS 8 are therefore
Tatton, Paradigm, and "Central" which contains the Group's central
overhead costs. The operating segments disclosed have changed
during the reporting period, see note 2.6.
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
Period ended 30 September
2019 (GBP'000) (GBP'000) (GBP'000) (GBP'000)
Revenue 7,102 2,603 24 9,729
Administrative expenses (2,956) (1,693) (1,469) (6,118)
Operating profit/(loss) 4,146 910 (1,445) 3,611
Share-based payments costs 25 - 388 413
Exceptional charges 102 - - 102
Adjusted operational profit/(loss)
(before
separately disclosed items)* 4,273 910 (1,057) 4,126
Finance (costs)/income (8) 8 (1) (1)
Profit/(loss) before tax 4,138 918 (1,446) 3,610
Tatton Paradigm Central Group
Period ended 30 September
2018 restated (note 2.6) (GBP'000) (GBP'000) (GBP'000) (GBP'000)
Revenue 5,987 2,434 24 8,445
Administrative expenses (2,600) (1,624) (1,249) (5,473)
Operating profit/(loss) 3,387 810 (1,225) 2,972
Share-based payments 95 - 270 365
Exceptional charges - 13 - 13
Adjusted operating profit/(loss)
(before separately
disclosed items)* 3,482 823 (955) 3,350
Finance income - 111 1 112
Profit/(loss) before tax 3,387 921 (1,224) 3,084
Tatton Paradigm Central Group
Year ended 31 March 2019
restated (note 2.6) (GBP'000) (GBP'000) (GBP'000) (GBP'000)
Revenue 12,521 4,949 48 17,518
Administrative expenses (5,680) (3,144) (2,769) (11,593)
Operating profit/(loss) 6,841 1,805 (2,721) 5,925
Share-based payments 34 - 840 874
Exceptional charges 496 13 - 509
Adjusted operating profit/(loss)
(before separately
disclosed items)* 7,371 1,818 (1,881) 7,308
Finance income - 185 2 187
Profit/(loss) before tax 6,841 1,990 (2,719) 6,112
All turnover arose in the United Kingdom.
* Alternative performance measures are detailed in note 18 of
this interim report
4 OPERATING PROFIT
The operating profit and the profit before taxation are stated
after:
30-Sep 30-Sep 31-Mar
2019 2018 2019
(GBP'000) (GBP'000) (GBP'000)
Amortisation of intangible
assets 57 - 43
Depreciation of property,
plant and equipment 76 46 91
Depreciation of right-of-use
assets 69 - -
Separately disclosed items
(note 5) 515 378 1,383
Services provided to the
Group's auditor
Audit of the statutory
consolidated and
Company financial statements
of Tatton Asset
Management plc 17 17 33
Audit of subsidiaries 21 20 40
Other fees payable to auditor:
Other taxation advisory
services - 20 38
Non-audit services 67 15 10
=============================== ========= ========= =========
5 SEPARATELY DISCLOSED
ITEMS
30-Sep 30-Sep 31-Mar
2019 2018 2019
(GBP'000) (GBP'000) (GBP'000)
IPO costs - 13 13
Project set-up costs related
to transferring
Authorised Corporate Director - - 293
New fund set-up costs - - 203
Acquisition-related expenses 102 - -
=============================== ========= ========= =========
Total exceptional items 102 13 509
=============================== ========= ========= =========
Share-based payments 413 365 874
=============================== ========= ========= =========
Total separately disclosed
items 515 378 1,383
=============================== ========= ========= =========
Separately disclosed items included within administrative
expenses reflect costs and income that do not relate to the Group's
normal business operations and are considered material
(individually or in aggregate if of a similar type) due to their
size or frequency.
On 30 September 2019 the Group acquired the share capital of
Sinfonia Asset Management Limited (see note 16) and incurred
acquisition related costs of GBP102,000. These costs are part of
separately disclosed items within administrative expenses in the
Consolidated Statement of Total Comprehensive Income.
During the financial year ended 31 March 2019, the Group
incurred exceptional one-off costs of GBP496,000 which related to
the funds in Tatton Investment Management Limited ("Tatton").
Tatton transferred its Authorised Corporate Director who acts on
behalf of the Company to administer the funds and this transfer
incurred significant project management charges. In addition,
Tatton launched new funds in the year and incurred material set-up
costs as part of the process; both are included within exceptional
items and separately disclosed items within administrative expenses
in the Consolidated Statement of Total Comprehensive Income.
Various legal and professional costs incurred in relation to the
IPO of the Group in July 2017 are shown as part of separately
disclosed items within administrative expenses in the Consolidated
Statement of Total Comprehensive Income in the prior year.
6 FINANCE (COSTS)/INCOME
30-Sep 30-Sep 31-Mar
2019 2018 2019
(GBP'000) (GBP'000) (GBP'000)
Bank interest income 2 2 2
Other interest income 8 124 214
Interest expense on lease
liabilities (11) - -
Bank charges - (14) (29)
=============================== ========= ========= =========
(1) 112 187
=============================== ========= ========= =========
7 TAXATION
30-Sep 30-Sep 31-Mar
2019 2018 2019
(GBP'000) (GBP'000) (GBP'000)
Current tax expense
Current tax on profits for
the period 779 681 1,318
Adjustment for under-provision
in prior periods - - (74)
=============================== ========= ========= =========
779 681 1,244
Deferred tax expense
Share-based payments (9) - (19)
Origination and reversal
of temporary differences 15 - 30
Adjustment for under-provision
in prior periods (118) - -
=============================== ========= ========= =========
(112) - 11
=============================== ========= ========= =========
Total tax expense 667 681 1,255
=============================== ========= ========= =========
The reasons for the difference between the actual tax charge for
the period and the standard rate of corporation tax in the UK
applied to profit for the period are as follows:
30-Sep 30-Sep 31-Mar
2019 2018 2019
(GBP'000) (GBP'000) (GBP'000)
Profit before taxation 3,610 3,084 6,112
Tax at UK corporation tax
rate of 19% (2018: 19%) 686 586 1,161
Expenses not deductible
for tax purposes 37 115 25
Capital allowances in excess
of deprecation - (20) -
Adjustments in respect of
previous years (117) - (74)
Differences in tax rates - - (2)
Share-based payments 61 - 145
============================= ========= ========= =========
Total tax expense 667 681 1,255
============================= ========= ========= =========
The UK corporation tax rate will reduce to 17% with effect from
1 April 2020. This will reduce the Company's future current tax
credit/charge accordingly. The deferred tax asset as at 30
September 2019 has been calculated based on a rate of 17% based on
when the Company expects the deferred tax liability to reverse.
8 EARNINGS PER SHARE AND 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 period.
For diluted earnings per share the weighted average number of
ordinary shares in issue is adjusted to assume conversion of all
dilutive potential ordinary shares. The dilutive shares are those
share options granted to employees where the exercise price is less
than the average market price of the Company's ordinary shares
during the period.
NUMBER OF SHARES
30-Sep 31-Mar
30-Sep 2019 2018 2019
Basic
Weighted average number
of shares in issue 55,907,513 55,907,513 55,907,513
Diluted
Share options 5,472,238 4,915,047 5,406,199
Weighted average number
of shares (diluted) 61,379,751 60,822,560 61,313,712
======================== =========== ========== ==========
30-Sep 30-Sep 31-Mar
2019 2018 2019
(GBP'000) (GBP'000) (GBP'000)
Earnings attributable
to ordinary shareholders
Basic and diluted profit
for the period 2,943 2,403 4,857
Share-based payments 413 365 874
Exceptional costs - see
note 5 102 13 509
Tax impact of adjustments (146) - (97)
=========================== ========= ========= =========
Adjusted basic and diluted
profits for the period
=========
and attributable earnings 3,312 2,781 6,143
=========================== ========= ========= =========
Earnings per share (pence)
(basic) 5.26 4.30 8.69
=========================== ========= ========= =========
Earnings per share (pence)
(diluted) 4.79 3.95 7.92
=========================== ========= ========= =========
Adjusted earnings per
share (pence) (basic) 5.92 4.97 10.99
=========================== ========= ========= =========
Adjusted earnings per
share (pence) (diluted) 5.39 4.57 10.02
=========================== ========= ========= =========
DIVIDS
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 the strategy and to invest in opportunities to
grow the business and enhance shareholder value.
In July 2019, Tatton Asset Management plc paid the final
dividend related to the year ended 31 March 2019 of GBP3,131,000
representing a payment of 5.6p per share.
In the year ended 31 March 2019, Tatton Asset Management plc
paid the final dividend related to the year ended 31 March 2018 of
GBP2,460,000, representing a payment of 4.4p per share. In
addition, the Company paid an interim dividend of GBP1,565,000
(2018 GBP1,230,000) to its equity shareholders. This represents a
payment of 2.8p per share (2018: 2.2p per share).
At 30 September 2019 the Company's distributable reserves were
GBP22.4 million (2018: GBP20.9 million).
9 STAFF COSTS
KEY MANAGEMENT COMPENSATION
The remuneration of the statutory Directors who are the key
management of the Group is set out below in aggregate for each of
the key categories specified in IAS 24 Related Party
Disclosures.
30-Sep 30-Sep 31-Mar
2019 2018 2019
(GBP'000) (GBP'000) (GBP'000)
Short-term employee
benefits 515 493 884
Post-employment benefits - 13 14
Other long-term benefits - 1 3
Share-based payments 244 294 587
========================= ========= ========= =========
759 801 1,488
========================= ========= ========= =========
In addition to the remuneration above, the Non-Executive
Chairman and Non-Executive Directors have submitted invoices for
their fees as follows:
30-Sep 30-Sep 31-Mar
2019 2018 2019
(GBP'000) (GBP'000) (GBP'000)
Total fees 80 80 160
============================ ========== ========= =========
10 GOODWILL
Goodwill
(GBP'000)
Cost
Balance at 1 April 2018, 30 September
2018 and 31 March 2019 4,917
Additions 1,143
Balance at 30 September
2019 6,060
Carrying amount
Balance at 1 April 2018, 30 September
2018 and 31 March 2019 4,917
Balance at 30 September
2019 6,060
============================ ========== ========= =========
The goodwill of GBP4.9 million at 31 March 2019 relates to
GBP2.9m arising from the acquisition in 2014 of an interest in
Tatton Oak Limited by Tatton Capital Limited consisting of the
future synergies and forecast profits of the Tatton Oak business
and GBP2.0 million arising from the acquisition in 2017 of an
interest in Tatton Capital Group Limited.
On 30 September 2019 the Group acquired the share capital of
Sinfonia Asset Management Limited (note 16) which generated a
provisional goodwill value of GBP1.1 million. This goodwill
consists of future synergies and forecast profits of the Sinfonia
business.
None of the goodwill is expected to be deductible for income tax
purposes.
IMPAIRMENT LOSS AND SUBSEQUENT REVERSAL
Goodwill is subject to an annual impairment review based on an
assessment of the recoverable amount from future trading. Where, in
the opinion of the Directors, the recoverable amount from future
trading does not support the carrying value of the goodwill
relating to a subsidiary company an impairment charge is made. Such
impairment is charged to the Combined Statement of Total
Comprehensive Income.
IMPAIRMENT TESTING
For the purpose of impairment testing, goodwill is allocated to
the Group's operating companies which represents the lowest level
within the Group at which the goodwill is monitored for internal
management accounts purposes.
Goodwill acquired in a business combination is allocated, at
acquisition, to the cash-generating units (CGUs) or group of units
that are expected to benefit from that business combination. The
Directors test goodwill annually for impairment, or more frequently
if there are indicators that goodwill might be impaired. The
Directors have considered the carrying value of goodwill at 30
September 2019 and do not consider that it is impaired.
GROWTH RATES
The value in use is calculated from cash flow projections based
on the Group's forecasts for the year ending 31 March 2020 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.
DISCOUNT RATES
The pre-tax discount rate used to calculate value is 8.3% (2018:
8.3%). 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 for the industry.
The headroom compared to the carrying value of goodwill as at 30
September 2019 is GBP214 million. Increasing the discount rate to
171% and leaving all other factors the same would lead to the
recoverable amount being equal to the carrying value of the
goodwill attributed to the cash-generating unit.
11 INTANGIBLES
Customer Computer
relationships software Total
(GBP'000) (GBP'000) (GBP'000)
Cost
Balance at 1 April 2018
and 30 September 2018 - - -
Reclassifications from
property, plant and
equipment - 109 109
Additions - 157 157
Balance at 31 March 2019 - 266 266
Additions 1,469 115 1,584
Balance at 30 September
2019 1,469 381 1,850
========================= ============= ========= =========
Accumulated depreciation
and impairment
At 1 April 2018 and 30
September 2018 - - -
Reclassifications from
property, plant and
equipment (10) (10)
Charge for the period - (33) (33)
Balance at 31 March 2019 - (43) (43)
Charge for the period - (57) (57)
Balance at 30 September
2019 - (100) (100)
========================= ============= ========= =========
Carrying amount
As at 1 April 2018 and
30 September 2018 - - -
As at 31 March 2019 - 223 223
As at 30 September 2019 1,469 281 1,750
========================= ============= ========= =========
All amortisation charges are included within administrative
expenses in the Consolidated Statement of Total Comprehensive
Income.
The valuation of the customer relationships intangible asset is
provisional, see note 16.
12 PROPERTY, PLANT AND EQUIPMENT
Computer,
office Right-of-use
equipment Fixtures
and and assets -
motor vehicles fittings buildings Total
(GBP'000) (GBP'000) (GBP'000) (GBP'000)
Cost
Balance at 1 April
2018 435 214 - 649
Additions 133 119 - 252
Balance at 30 September
2018 568 333 - 901
Additions 48 144 - 192
Reclassifications
to intangible
assets (109) - - (109)
Balance at 31 March
2019 507 477 - 984
Additions 42 160 - 202
Increase attributable
to change in
accounting standards
(note 2.5) - - 689 689
Balance at 30 September
2019 549 637 689 1,875
========================= ============== ========= ============ =========
Accumulated depreciation
and impairment
Balance at 1 April
2018 (331) (214) - (545)
Charge for the
period (42) (4) - (46)
Balance at 30 September
2018 (373) (218) - (591)
Reclassifications
to intangible
assets 10 - - 10
Charge for the
period (34) (21) - (55)
Balance at 31 March
2019 (397) (239) - (636)
Charge for the
period (36) (40) (69) (145)
Balance at 30 September
2019 (433) (279) (69) (781)
========================= ============== ========= ============ =========
Carrying amount
As at 1 April 2018 104 - - 104
As at 30 September
2018 195 115 - 310
As at 31 March
2019 110 238 - 348
As at 30 September
2019 116 358 620 1,094
========================= ============== ========= ============ =========
All depreciation charges are included within administrative
expenses in the Consolidated Statement of Total Comprehensive
Income.
The Group leases buildings and IT equipment. 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 Consolidated Statement of Total Comprehensive
Income.
RIGHT-OF-USE ASSETS
Unaudited six
months ended
30-Sep 2019
(GBP'000)
Amounts recognised in profit
and loss
Depreciation on right-of-use
assets (69)
Interest expense on lease liabilities (11)
Expense relating to short-term
leases (87)
Expense relating to low value
assets (3)
-------------------------------------- -------------
(170)
-------------------------------------- -------------
At 30 September 2019, the Group is committed to GBPnil for
short-term leases.
The total cash outflow for leases amounts to GBP104,000.
13 FINANCIAL INSTRUMENTS
The Group finances its operations through a combination of cash
resource and other borrowings. Short-term flexibility is satisfied
by overdraft facilities in Paradigm Partners Limited which are
repayable on demand.
Fair value estimation IFRS 7 requires disclosure of fair value
measurements of financial instruments by level of the following
fair value measurement hierarchy:
- Quoted prices (unadjusted) in active markets
for identical assets or liabilities (level
1).
- Inputs other than quoted prices included within
level 1 that are observable for the asset
or liability, either directly (that is, as
prices) or indirectly (that is, derived from
prices) (level 2).
- Inputs for the asset or liability that are
not based on observable market data (that
is, unobservable inputs) (level 3).
The Group holds loan notes due from Perspective Financial Group
Limited (see note 17). Due to the short-term nature of the Loan
notes, the carrying value is a reasonable approximation of their
fair value. The loan notes are repayable on demand, carry an
interest rate of 6%, and are classified as level 2.
INTEREST RATE RISK
The Group finances its operations through a combination of
retained profits and bank overdrafts. The Group has an exposure to
interest rate risk, as the overdraft facility is at an interest
rate of 3.2% above the base rate. At 30 September 2019 total
borrowings were GBPnil.
14 EQUITY
30-Sep 30-Sep 31-Mar
2019 2018 2019
(number) (number) (number)
Authorised, called
up and fully paid
GBP0.20 Ordinary shares 55,907,513 55,907,513 55,907,513
55,907,513 55,907,513 55,907,513
==========
15 SHARE-BASED PAYMENTS
During the period, a number of share-based payment schemes and
share options schemes have been utilised by the Company,
(A) SCHEMES
(i) Tatton Asset Management plc EMI Scheme ("TAM EMI
Scheme")
On 7 July 2017 the Group launched an EMI share option scheme
relating to shares in Tatton Asset Management plc to enable senior
management to participate in the equity of the Company. A total of
3,022,733 options with a weighted average exercise price of GBP1.89
were granted during the prior period, each exercisable in July
2020.
The scheme was extended on 8 August 2018 and a total of
1,720,138 zero cost options were granted during the year ended 31
March 2019, each exercisable in August 2021. The scheme was further
extended on 1 August 2019 and a total of 193,000 zero cost options
were granted, each exercisable in August 2022. A total of 4,800,768
options remain outstanding at 30 September 2019, none of which are
currently exercisable.
No options were exercised during the period. A total of 23,288
options were forfeited in the period (111,815 options were
forfeited in the prior year).
The options vest in July 2020, August 2021 or August 2022
provided certain performance conditions and targets, set prior to
grant, have been met. If the performance conditions are not met,
the options lapse.
Within the accounts of the Company, the fair value at grant date
is estimated using the appropriate models including both Black
Scholes and Monte Carlo modelling methodologies.
Number of Weighted
share options average
granted price
(number) (GBP)
Outstanding at 1 April 2018 3,022,733 1.89
Granted during the period 1,720,138 -
Forfeited during the period (111,815) 1.89
Outstanding at 30 September 2018 4,631,056 1.19
Exercisable at 30 September 2018 - -
========
Outstanding at 1 October 2018 4,631,056 1.19
Outstanding at 31 March 2019 4,631,056 1.19
Exercisable at 31 March 2019 - -
========
Outstanding at 1 April 2019 4,631,056 1.19
Granted during the period 193,000 -
Forfeited during the period (23,288) -
Outstanding at 30 September 2019 4,800,768 1.15
Exercisable at 30 September 2019 - -
========
(ii) Tatton Asset Management plc Sharesave Scheme ("TAM
Sharesave Scheme")
On 7 July 2017, 5 July 2018 and 3 July 2019 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 2017 Sharesave scheme it is estimated that,
based on current saving rates, 204,671 share options will be
exercisable at an exercise price of GBP1.70. Over the life of the
2018 Sharesave scheme it is estimated, based on current saving
rates, 48,695 share options will be exercisable at an exercise
price of GBP1.90. Over the life of the 2019 Sharesave scheme it is
estimated that, based on current savings rates, 87,687 share
options will be exercisable at an exercise price of GBP1.79. No
options have been exercised or expired in the period and 10,183
options have been forfeited in the period.
Within the accounts of the Company, the fair value at grant date
is estimated using the Black Scholes methodology for 100% of the
options. 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 (b) and
(c) overleaf respectively.
Number of Weighted
share options average
granted price
(number) (GBP)
Outstanding at 1 April 2018 63,344 1.70
Granted during the period 41,331 1.72
Forfeited during the period (8,353) 1.70
Outstanding at 30 September 2018 96,322 1.71
Exercisable at 30 September 2018 - -
Outstanding at 1 October 2018 96,322 1.71
Granted during the period 40,991 1.76
Forfeited during the period (5,337) 1.72
Outstanding at 31 March 2019 131,976 1.72
Exercisable at 31 March 2019 - -
Outstanding at 1 April 2019 131,976 1.72
Granted during the period 49,721 1.75
Forfeited during the period (10,183) 1.86
Outstanding at 30 September 2019 171,514 1.73
Exercisable at 30 September 2019 - -
(B) 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 Scheme Sharesave Scheme
2019 2018 2017 2019 2018 2017
Share price
at grant (GBP) 2.12 2.40 1.89 2.14 2.34 1.89
Exercise price
(GBP) 0.00 0.00 1.70 1.79 1.90 1.70
Expected volatility
(%) 30.44 28.48 26.00 30.44 28.48 26.00
Expected life
(years) 3.00 3.00 3.00 3.00 3.00 3.00
Risk free rate
(%) 0.35 0.81 0.66 0.35 0.81 0.66
Expected dividend
yield (%) 3.96 2.75 4.50 3.96 2.75 4.50
(C) IFRS2 SHARE-BASED OPTION COSTS
30-Sep 30-Sep 31-Mar
2019 2018 2019
(GBP'000) (GBP'000) (GBP'000)
TAM EMI Scheme 402 355 839
TAM Sharesave Scheme 11 10 35
413 365 874
16 BUSINESS COMBINATION
On 30 September 2019, the Group acquired 100 per cent of the
issued share capital of Sinfonia Asset Management Limited
("Sinfonia"), obtaining control of Sinfonia. Sinfonia is an
administration services company which facilitates the sale of
investment products. Sinfonia holds funds within the IFSL Sinfonia
Open-Ended Investment Companies. Sinfonia was 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 provisional amounts recognised in respect of the
identifiable assets acquired and liabilities assumed upon
acquisition of Sinfonia are set out in the table below:
GBP'000
Identifiable intangible assets 1,469
Financial assets 51
Financial liabilities (12)
Total identifiable assets 1,508
Goodwill 1,143
Total consideration 2,651
Satisfied by:
Cash 1,961
Contingent consideration arrangement 690
Total consideration transferred 2,651
Net cash outflow arising on acquisition:
Cash consideration 1,961
Less: cash and cash equivalent balance
acquired (1)
Net cash outflow 1,960
The fair value of the financial assets includes accrued income
and prepayments with a fair value of GBP51,000. The best estimate
at acquisition date of the contractual cash flows not to be
collected is GBPnil.
The fair value of Sinfonia's client relationship intangible
assets has been measured using a multi-period excess earnings
method. 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 acquired. The useful
economic life of the client relationships has been determined to be
ten years.
The goodwill of GBP1,143,000 arising from the acquisition
consists of 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
GBP690,000.
The fair value of the contingent consideration arrangement of
GBP690,000 was estimated by calculating the expected future value
of assets held in the Sinfonia funds. The liability of GBP690,000
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 GBP102,000.
As Sinfonia was acquired on the last day of the reporting
period, it contributed GBPnil to revenue and to the Group's profit
for the period between the date of acquisition and the reporting
date.
The Group has not completed its assessment or valuation of
certain assets acquired and liabilities assumed in connection with
the acquisition. Therefore, the information disclosed above for
identifiable intangible assets, financial assets and financial
liabilities is completed on a provisional basis and is subject to
change based on further review of assumptions and if any new
information is obtained about facts and circumstances that existed
as of the acquisition date. No deferred tax on intangible assets
has yet been recognised. This will be recognised once the valuation
assessment has been completed.
17 RELATED PARTY TRANSACTIONS
ULTIMATE CONTROLLING PARTY
The Directors consider there to be no ultimate controlling
party.
RELATIONSHIPS
The Group has trading relationships with the following entities
in which Paul Hogarth, a Director, has a beneficial interest:
Entity Nature of transactions
Amber Financial Investments The Group provides discretionary
Limited fund management services,
as well as accounting and
administration services.
Jargonfree Benefits The Group provides accounting
LLP and administration services.
Paradigm Investment The Group incurs finance
Management LLP charges.
Perspective Financial The Group provides discretionary
Group Limited fund management
services and compliance advisory
services.
Suffolk Life Pensions The Group pays lease rental
Limited payments on an office building
held in a pension fund by
Paul Hogarth.
RELATED PARTY BALANCES
30-Sep 30-Sep 30-Sep 30-Sep 31-Mar 31-Mar
2019 2019 2018 2018 2019 2019
Value Value Value
of Balance of Balance of Balance
income/ receivable/ income/ receivable/ income/ receivable/
(cost) (payable) (cost) (payable) (cost) (payable)
(GBP'000) (GBP'000) (GBP'000) (GBP'000) (GBP'000) (GBP'000)
Amber Financial
Investments Limited 146 - 160 6 239 (42)
Jargon Free Benefits
LLP 12 58 24 28 24 43
Paradigm Management
Partners LLP - 5 - 4 - 4
Paradigm Investment
Management LLP (8) (285) - (315) (11) (304)
Perspective Financial
Group Limited 191 73 204 560 369 72
Suffolk Life
Pensions
Limited (29) 5 (29) (5) (56) 9
There is a loan note receivable from Perspective Financial Group
Limited which at 30 September 2019 has a balance of GBP144,000
(September 2018: GBP526,000 and March 2019: GBP134,000).
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 9.
18 ALTERNATIVE PERFORMANCE MEASURES
INCOME STATEMENT MEASURES
Reconciling
Closest equivalent items to
their statutory Definition and
APM measure measure purpose
Operating Exceptional This is considered
Adjusted operating profit costs to be an
important measure
profit before and share-based where
exceptional items
Separately payments. distort the
disclosed understanding of
items See note 5. the operating
performance of
the business
and allow comparability
between periods.
See also
note 2.8.
Operating Exceptional This is considered
Adjusted operating profit costs to be an
profit margin important measure
before and share-based where
separately exceptional items
disclosed payments. distort the
understanding of
items See note 5. the operating
performance of
the business
and allow comparability
between periods.
See also
note 2.8.
Profit before Exceptional This is considered
Adjusted profit tax costs to be an
before tax; important measure
before and share-based where
separately exceptional items
disclosed payments. distort the
understanding of
items See note 5. the operating
performance of
the business
and allow comparability
between periods.
See also
note 2.8.
Earnings Exceptional This is considered
Adjusted earnings per costs to be an
per share important measure
- basic share - basic and share-based where
payments, exceptional items
and the distort the
tax thereon. understanding of
See the operating
performance of
note 8. the business
and allow comparability
between periods.
See also
note 2.8.
Earnings Exceptional This is considered
Adjusted earnings per costs to be an
per share share - fully important measure
- fully diluted and share-based where
payments, exceptional items
diluted and the distort the
tax thereon. understanding of
See the operating
performance of
note 8. the business
and allow comparability
between periods.
See also
note 2.8.
Exceptional Net cash generated
Net cash generated Net cash costs. from
generated
from operations from See note 5. operations before
exceptional costs.
before exceptional operations To show
underlying cash
costs performance.
See also note 2.8.
OTHER MEASURES
Reconciling
Closest equivalent items to
their statutory Definition and
APM measure measure purpose
AUM is representative
Tatton - Assets None Not applicable of the
customer assets
under management and is a
measure of the
("AUM") value of the
customer base.
Movements in
this base are
an indication
of
performance in
the period and
growth of the
business to
generate revenues
going
forward.
Alternative growth
Paradigm None Not applicable measure to
Consulting revenue, giving
members an operational
and growth view of growth.
Alternative growth
Paradigm None Not applicable measure to
Mortgages revenue, giving
member an operational
firms and
growth view of growth.
Dividend cover
Dividend cover None Not applicable (being the
ratio of diluted
earnings per
share before exceptional
items
and share-based
charges) is
1.7 times, demonstrating
ability
to pay.
19 EVENTS AFTER THE REPORTING PERIOD
There were no material events after the reporting period.
20 CONTINGENT LIABILITIES
At 30 September 2019, the Directors confirmed there were
contingent liabilities of GBPnil (2018: GBPnil).
This information is provided by RNS, the news service of the
London Stock Exchange. RNS is approved by the Financial Conduct
Authority to act as a Primary Information Provider in the United
Kingdom. Terms and conditions relating to the use and distribution
of this information may apply. For further information, please
contact rns@lseg.com or visit www.rns.com.
END
IR BBBDBBBGBGCC
(END) Dow Jones Newswires
November 11, 2019 02:00 ET (07:00 GMT)
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