REG - Impax Asset Mgmnt - Trading Statement
29/11/2023 07:00
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RNS Number : 9758U Impax Asset Management Group plc 29 November 2023
Impax Asset Management Group plc
Results for the year ended 30 September 2023
London, 29 November 2023 - Impax Asset Management Group plc ("Impax" or the
"Company"), the specialist investor focused on the transition to a more
sustainable global economy, today announces final audited results for the year
ending 30 September 2023 (the "Period").
Business highlights
· Further development of the transition to a more sustainable economy,
with significant growth in renewable power generation, electric vehicle fleets
and investment to adapt to more extreme weather
· High client retention despite challenging markets
· Targeted investment to support growth
· Strengthened distribution capabilities, including in North America,
Latin America, and Japan, with a new office in Tokyo
· Increased product pipeline, including launching an equities strategy
targeting Sustainable Infrastructure
· Additional investment to expand the Company's fixed income offering
· Increased operational resilience and improved efficiency through
investment in systems and infrastructure
· Launched Impax Sustainability Centre to facilitate the scaling of
resources in this key area
· Awards during and after the Period included: 'Investment Manager of
the Year' (European Pensions Awards 2023); 'Responsible Investor of the Year'
(Reuters Responsible Business Awards) and 'Listed Equites Manager of the Year'
(Environmental Finance Sustainable Investment Awards).
Financial highlights
· Assets under management ("AUM") increased by 4.8% to £37.4 billion
(2022: £35.7 billion)
· Revenue increased 1.7% to £178.4 million (2022: £175.4 million)
· Adjusted operating profit decreased by 13.8% to £58.1 million (2022:
£67.4 million)
· Profit before tax decreased by 28.2% to £52.1 million (2022: £72.6
million)
· Cash reserves of £87.7 million (2022: £107.0 million)
· Adjusted diluted earnings per share decreased by 16.4% to 35.2 pence
(2022: 42.1 pence)
· Proposed final dividend of 22.9 pence per share bringing total
dividend per share to 27.6 pence (2022: 27.6 pence)
Sally Bridgeland, Chair, commented:
"Despite the challenging macro environment that has faced the asset management
community, Impax has continued to deliver for its clients over the financial
year. The Company has been recognised for its sector leadership and its
commitment to investing in the transition to a more sustainable economy,
winning several industry awards.
"In 2019, the Company adopted a policy of paying an annual dividend of between
55% and 80% of adjusted profit after tax. In line with this, the Board now
recommends paying a final dividend for 2023 of 22.9p for a total for the year
of 27.6p, representing a flat total dividend relative to the 2022 payout.
"Lindsey Brace Martinez and I will step down from the Board on the ninth
anniversary of joining at the end of July 2024. I am delighted that Simon
O'Regan has agreed, subject to his re-election as a Director at the Company's
AGM in March 2024, to succeed me as independent Non-Executive Chair with
effect from 31 July 2024. I'm also very pleased to welcome Julia Bond as a
Non-Executive Director of the Company, effective 29 November 2023."
Ian Simm, Chief Executive, added:
"Impax has delivered creditable results during a year that has presented
challenging investment conditions. Over the Period, assets under management
increased by 4.8% to £37.4 billion, driven by investment returns and strong
client retention.
"The Company was able to expand revenue by £3.0 million to £178.4 million.
Nevertheless, operating costs also rose as we invested in our distribution and
investment capabilities, technology and operations to ensure that the business
is resilient and scalable, and hence adjusted operating profit decreased to
£58.1 million.
"We made good progress in developing and launching new products, including a
new sustainable infrastructure strategy and will soon launch a new social
thematic strategy. We have also identified a particular opportunity within
fixed income and have made strategic hires into that team. We are reviewing
opportunities to source additional fixed income capabilities and will provide
an update in due course.
"In a year where we have celebrated Impax's 25(th) anniversary, our conviction
in our investment thesis focused on the transition to a more sustainable
economy is stronger than ever. With valuations increasingly attractive, our
investment teams have identified several compelling themes that we believe
will play out over the medium to long term, for example the adoption of
renewable energy, the provision of climate resilient water supply and
infrastructure and the deployment of new technology to improve access to
healthy food and financial services worldwide."
Board Changes
Effective 29 November 2023, Julia Bond joins as a Non-Executive Director of
the Company. Julia will serve as a member of the Remuneration and Audit &
Risk Committees.
At the end of July 2024, in line with UK corporate governance best practice,
Lindsey Brace Martinez and Sally Bridgeland will step down from the Board on
the ninth anniversary of joining.
Simon O'Regan, subject to his re-election as a Director at the Company's AGM
in March 2024, will succeed Sally as independent Non-Executive Chair with
effect from 31 July 2024, upon which Simon will also cease to be a member of
the Audit & Risk Committee. Simon's appointment as Chair is subject to
regulatory approval.
Annette Wilson, who joined the Board in June 2022, will succeed Simon as
Senior Independent Director and Whistleblowing Champion, with effect from 31
July 2024.
It is contemplated that Julia Bond will become Chair of the Remuneration
Committee with effect from 31 July 2024 when Lindsey Brace Martinez departs.
The Company is currently interviewing US-based candidates with a view to
appointing a new US-based Non-Executive Director in due course.
Ends
Media Enquiries:
Impax Asset Management Group plc
Ian Simm, Chief
Executive
+44 (0)20 3912 3000
Paul French, Head of Corporate Communications +44 (0)20 3912
3032
p.french@impaxam.com (mailto:p.french@impaxam.com)
Montfort Communications
Gay
Collins
+44(0)77 9862 6282
Jack
Roddan
+44(0)78 2567 0695
impax@montfort.london (mailto:impax@montfort.london)
Peel Hunt LLP, Nominated Adviser and Joint Broker
John
Welch
+44 (0)20 7418 8900
Dan Webster
Berenberg, Joint Broker
James
Felix
+44 (0)20 3753 3153
Dan Gee-Summons
LEI number: 213800AJDNW4S2B7E680
Notes to Editors - About Impax Asset Management
Founded in 1998, Impax is a specialist asset manager, with approximately
£37.4 billion of 30 September 2023 in both listed and private markets
strategies, investing in the opportunities arising from the transition to a
more sustainable global economy.
Impax believes that capital markets will be shaped profoundly by global
sustainability challenges, including climate change, pollution and essential
investments in human capital, infrastructure and resource efficiency. These
trends will drive growth for well-positioned companies and create risks for
those unable or unwilling to adapt.
The company seeks to invest in higher quality companies with strong business
models that demonstrate sound management of risk. Impax offers a well-rounded
suite of investment solutions spanning multiple asset classes seeking superior
risk-adjusted returns over the medium to long term.
Impax has approximately 300 employees(1) across its offices in the United
Kingdom, the United States, Ireland, Hong Kong and Japan making it one of the
investment management sector's largest investment teams dedicated to
sustainable development.
www.impaxam.com (http://www.impaxam.com/)
(1) Full-time equivalent
Issued in the UK by Impax Asset Management Group plc, whose shares are quoted
on the Alternative Investment Market of the London Stock Exchange. Impax
Asset Management Group plc is registered in England & Wales, number
03262305. AUM relates to Impax Asset Management Limited, Impax Asset
Management (AIFM) Limited, Impax Asset Management Ireland Limited and Impax
Asset Management LLC. Impax Asset Management Limited and Impax Asset
Management (AIFM) Limited are authorised and regulated by the Financial
Conduct Authority and are wholly owned subsidiaries of Impax Asset Management
Group plc. Please note that the information provided on www.impaxam.com
(http://www.impaxam.com/) and links from it should not be relied upon for
investment purposes.
Chief Executive's Report
BUSINESS UPDATE
Impax has delivered creditable results during a year that presented
challenging investment conditions. Over the 12 months ending 30 September 2023
("the Period"), the Company's assets under discretionary and advisory
management ("AUM") increased by 4.8% to £37.4 billion, driven by investment
returns and strong client retention.
Despite a challenging external environment for the asset management industry,
the Company was able to expand revenue by £3.0 million to £178.4 million.
Nevertheless, operating costs also rose as we invested in our distribution and
investment capabilities, technology and operations to ensure that the business
is resilient and scalable, and hence adjusted operating profit decreased to
£58.1 million (2022: £67.4 million).
As set out below, we continue to build strong, long-term relationships with
clients and to expand our new capabilities, such as in fixed income. Our
long-term investment approach, which focuses on companies with robust business
models that are well placed to benefit from the transition to a more
sustainable economy, continues to appeal to a growing segment of the
investment community, and, when market sentiment improves, we believe that the
Company will be well positioned for further growth.
CHALLENGING EXTERNAL ENVIRONMENT
Global equities markets returned to positive territory over the Period,
following a torrid prior Period for investors. While the headline performance
of wider equities markets has been encouraging, continued challenges and
upheavals in the macroeconomic environment have created a volatile investment
backdrop, with higher inflation and interest rates impacting the real economy.
The public release of OpenAI's ChatGPT in November 2022 sparked huge public
excitement about the potential for artificial intelligence. This was
exemplified by the meteoric rise in the share price of chipmaker Nvidia, one
of a narrow range of technology stocks that has contributed significantly to
the rise in global equities indices over the Period.
In other areas of the economy sentiment has been more fragile, contributing to
a cyclical derating of Impax's major investment portfolios. Smaller and
mid-cap companies in particular have faced challenges in the form of the
higher costs of borrowing and supply chain issues.
Additionally, post-pandemic inventory destocking has temporarily disrupted the
demand for goods across several sectors that our investment strategies have
long-term exposure to, including nutritional ingredients, life sciences tools
and solar energy.
This uncertain backdrop and the impact of higher rates has led many investors
to delay investment decisions, preferring to benefit from the positive returns
currently available in cash.
Meanwhile, policy support has benefitted many of the companies held in our
portfolios. In the US the Inflation Reduction Act and the CHIPS and Science
Act have made available a combined US$420 billion via the provision of
subsidies and tax breaks into clean energy deployment and manufacturing. The
Infrastructure Investment and Jobs Act is set to provide a further US$550
billion over the next five years.
The US government's heavy skew towards encouraging domestic job creation and
its success in attracting multinationals to direct their investment into the
US, has led to equivalent climate-related initiatives, including the EU's
Green Deal Industrial Plan and similar measures in China and India.
In the UK the government's decision after the Period to wind back key net-zero
policies was disappointing. While it brings the UK in line with other
countries (for example, the shift to 2035 from 2030 for the ban of the sale of
new petrol and diesel cars), the announcement inevitably sends a negative
signal about the UK government's commitment to investing in the transition to
a low-carbon economy. The direct impact of this announcement on Impax is
limited. 78% of the Company's AUM is from outside the UK and approximately 93%
of our investment assets are outside the UK.
INVESTMENT PERFORMANCE
During the Period, the performance of MSCI ACWI, the benchmark index for many
of our listed equities strategies, was driven particularly by strong returns
from certain US-listed large-cap stocks, particularly the 'mega-cap'
technology stocks referred to above.
Many of our strategies, particularly in our thematic listed equities
Environmental Markets range, have a lower exposure to this sector, so while
our strategies on the whole saw positive absolute returns, the market cap and
sector bias meant that the majority underperformed their respective benchmarks
during the 12-month Period.
Longer term, nine out of twelve of our active strategies, accounting for a
combined 86% of AUM have outperformed their benchmarks over the five years to
30 September 2023, with three out of thirteen outperforming over three years.
Movements in the Company's AUM for the full year ended 30 September 2023
Listed equities Fixed income Private markets Total firm
£m £m £m £m
Total AUM at 30 September 2022 33,801 1,354 521 35,676
Net flows (144) 2 49 (92)
Market movement, FX and performance 1,896 (73) (6) 1,816
Total AUM at 30 September 2023 35,552 1,283 564 37,399
NET FLOWS
The Company experienced modest net outflows of £92 million over the Period,
demonstrating the benefits of our increasingly diversified distribution
strategy and product range and the strength of our existing client
relationships. Redemptions from our Environmental Markets strategies were
largely offset by inflows into our Sustainability Lens strategies.
Amid challenging market conditions, our Environmental Markets strategies saw
total net outflows of £1.7 billion. A high portion of the outflows came via
redemptions from our distribution partners, including from BNP Paribas Asset
Management ("BNPP AM"), our most significant channel for this range of
thematic strategies. Overall, the proportion of Impax's annual revenues from
the BNPP AM range of SICAV mutual funds fell to 28%, compared to 30% in the
previous financial year.
Overall, our Sustainability Lens strategies saw net inflows of £1.6bn over
the Period. Global Opportunities consolidated its position as our largest
strategy at £9.2bn, with net inflows of £1.0bn, including a large
contribution from UK-based St James's Place, and via Formuepleje in Denmark
and Desjardins in Canada. The US Large Cap strategy registered net inflows of
£700 million, supported by subscriptions via Lombard Odier and a significant
segregated mandate from a Japanese pension fund, awarded in October 2022.
CLIENT SERVICE AND BUSINESS DEVELOPMENT
We continued to expand our international footprint, strengthening our own
direct distribution capabilities and consolidating our partner relationships.
Highlights included expanding our distribution resources in Japan, Australia,
the Nordics, Latin America, the US and Canada.
Meanwhile we are focused on providing an outstanding service to our clients.
During the Period we engaged a third-party organisation to carry out our first
client survey, with 90% of clients reporting a positive view of Impax.
In March we opened a new office in Japan, following our selection by the Tokyo
Metropolitan Government to receive a Green Finance Subsidy. We have hired a
senior Country Head to lead our growth in Japan, which has a sophisticated
asset owner community with a considerable interest in the investable
opportunities relating to the transition to a more sustainable economy, and
where Impax has managed client money since 2008.
In Australia, after the Period end, we launched a second fund targeting the
wholesale market in collaboration with our local distributor, Fidante
Partners.
In June 2023 we signed a distribution agreement to bring our services to
clients in Latin America. São Paolo-based BTG Pactual, Latin America's
largest investment bank, will distribute our range of Irish-domiciled UCITS
funds, marking the first time that we have actively targeted clients in this
region.
In the US, we increased the availability of the Impax mutual fund range on
several of the largest wealth management platforms and are now able to offer
the investment strategies underlying these funds both as collective investment
trusts ("CITs") and separately managed accounts ("SMAs"). After the end of the
Period, we engaged a client-introducing representative in Canada, a market
where we have enjoyed considerable success for over a decade with support from
our US offices.
Our team investing in privately held companies operating in the renewable
power sector has continued to raise capital for our fourth fund, which at
final close in January 2024 will be Impax's largest private markets fund to
date. During the Period the team made nine new investments from this fund
across five technologies, including solar PV, energy efficiency and
decentralised generation, and completed two exits from the portfolio of our
third fund.
PRODUCT DEVELOPMENT
Over the Period we made good progress in developing and launching new
products, continuing to both diversify our range and provide additional
solutions in line with the needs of our clients.
We have identified a particular opportunity within fixed income. Since these
markets are earlier in their adoption of sustainability considerations than
listed equities, we believe that Impax is well placed to develop additional
strategies beyond our current offerings in US Investment Grade and US High
Yield. We have recently hired four professionals into our Fixed Income team,
and, last month, completed the recruitment of an experienced executive to head
up our investment work and business development in this asset class. In
addition, we are reviewing opportunities to source additional fixed income
capabilities, and will provide an update in due course.
Within Listed Equities, we launched a new Sustainable Infrastructure product
in October 2022, and we plan shortly to add our US Environmental Leaders
strategy to our Ireland-based UCITS range and will soon launch a strategy
targeting Social themes.
We plan to launch a Global Emerging Markets listed equities strategy using our
Sustainability Lens during 2024.
IMPAX SUSTAINABILITY CENTRE
Since the late 1990s, Impax has built up expertise across a range of topics
and activities linked to investing in the transition to a more sustainable
economy, for example long-term market assessment, engagement with investee
companies, impact reporting and policy advocacy.
In order to ensure that our resources in these areas add even greater value to
our clients, are efficiently managed, accessible to others and scalable, we
recently launched the Impax Sustainability Centre, which brings together our
Sustainability & Stewardship and Policy & Advocacy teams.
As an example of the synergies from this initiative, we have recently started
combining company engagement and our policy advocacy activities, seeking to
shape company practices through regulatory or policy change and focusing our
activities on four pillars: climate, nature, people and governance.
We have continued to advance our proprietary impact reporting. This includes
introducing a new metric this year for quantifying the positive impacts
associated with investee companies that supply consumers with healthy and
nutritious food. We are also developing metrics related to social impact
and biodiversity.
We continue to provide research and insights to our clients and partners. This
year we supported a report by researchers from Imperial College London to
identify corporate activity that has delivered positive outcomes for companies
and nature, and we produced a three-part series of articles examining the US
energy transition.
CLIMATE AND THE COMMUNITY
We are pleased again this year to include a report that describes how we
manage climate risks and opportunities. In the next few months we plan to
publish a separate Taskforce for Climate-related Financial Disclosures
("TCFD") Report for the calendar year 2023, including information about our
strategic approach and risk management in this area.
We also significantly expanded our community activity during 2023, focusing on
charities in education and skills development for the green economy. During
the Period we developed new community partnerships with Country Trust and
Groundwork UK, and launched the Pax Scholarship programme supporting students
in New Hampshire. Our colleagues once again voted that food scarcity should be
our 'Community Cause of the Year' and engaged in a wide range of volunteering
and fundraising activities in their local communities.
ATTRACTING AND DEVELOPING OUR TALENT
In our employee engagement survey this year, 97% of our colleagues told us
that they feel closely aligned to Impax's mission, culture and values, with
its clear focus on sustainable development.
Our overall engagement score, which reflects employee's satisfaction and
commitment, rose 1 point to 90%, with Impax once again being rated as a
'5-star employer' by WorkBuzz, the survey organiser. At 10%, our staff
turnover remains low relative to peers.
Over the Period we sharply reduced our headcount expansion, up 10% (compared
to 26% in 2022),¹ and, mindful of market conditions, have already slowed this
further in the new financial year.
We rolled out a new remuneration framework across the Company and now provide
clearer guidance and consistency around how we assess performance through
scorecards and performance evaluation in appraisals.
Having made good progress against our equity, diversity and inclusion
("E,D&I") strategy in recent years, we have refined our E,D&I goals
and will be monitoring our progress around this area as part of our
performance appraisal system.
SYSTEMS, INFRASTRUCTURE And Cost efficiency
To increase our operational resilience as the business expands, we have
continued to invest selectively in systems, infrastructure, risk management
and compliance capabilities.
During the Period we moved our customer relationship management system to
Salesforce in order to establish a scalable platform for client relations. We
have also extended our data management capabilities and automated some
processes within the middle office. Finally, we implemented a new HR system to
support recruitment, talent development and performance evaluation and to
assist in the management of personal data.
Given the sustained bearish sentiment in equities, we have been particularly
focused on the effectiveness of our operations, examining each area of our
work and launching a wide range of initiatives to improve efficiency. As well
as supporting Impax's current profitability, we believe that this work will
help significantly in positioning the Company for scalable growth over the
medium term.
AWARDS AND INDUSTRY RECOGNITION
Impax continues to be recognised for our leadership within the investment
management industry. During the Period we were named 'Investment Manager of
the Year', by European Pensions Awards; 'Listed Equites Manager of the Year',
in the Environmental Finance Sustainable Investment Awards; and 'ESG Manager
of the Year', by Financial News. We also received a Morningstar ESG Commitment
Level of 'Leader', the highest ranking for the 108 asset managers evaluated
this year. Impax was one of four to maintain this Level on each of the three
occasions this survey has been run.
After the end of the Period, we were named as 'Responsible Investor of the
Year', in the Reuters Responsible Business Awards and 'Boutique Manager of the
Year' by Financial News.
JOE Keefe
In January 2024, Joe Keefe will retire as President of Impax North America, to
be succeeded by Ed Farrington, who will also retain his position as our Head
of Distribution for North America. Joe has headed our US-based team since the
acquisition of Pax World Management in 2018 and previously led that business
since 2005. We have all benefited from Joe's expertise and his passion,
kindness and good nature will be much missed.
OUTLOOK: 25 YEARS ON
This year we have been celebrating 25 years since I founded Impax Asset
Management. The Company and the markets in which we invest have certainly come
a long way in that time. For example, in 1998, the largest wind turbines
generated 1MW (vs 16MW today), the price of solar panels was the equivalent of
around US$7 per watt (versus around US$0.16 per watt today), and the most
common electric vehicles were golf buggies!
Ever since we received our first mandate from the World Bank, Impax has argued
consistently that, on a finite planet with an expanding population seeking
ever higher standards of living, the transition to a more sustainable economy
is practically inevitable. It is our conviction that this transition will
continue to provide excellent investment opportunities for red-blooded
capitalists and ethically motivated investors alike.
Our belief in this investment thesis is stronger than ever and, with
valuations increasingly attractive, our investment teams have identified
several compelling themes that we believe will play out over the medium to
long term. For example, our recent launch of the new Social thematic strategy
underlines the opportunities that we have identified in addressing challenges
facing global society, including access to basic needs, financial inclusion
and healthcare innovation.
Meanwhile the increasing de-coupling of the global economy presents
opportunities for certain companies as those sectors that are identified by
national governments as strategic are reshored, but also the potential for
heightened risk, for example through business inefficiency.
As highlighted earlier, artificial intelligence ("AI") has attracted
excitement and valid concerns in equal measure. Many of our strategies'
holdings are already deploying AI to help deliver efficiencies in the context
of a more sustainable global economy, an area in which we see considerable
potential for the technology.
September 2023 saw the publication of the recommendations from the Taskforce
on Nature-related Financial Disclosures ("TNFD"). Impax has long considered
nature within our Environmental Markets strategies and we expect to assess the
risks and opportunities related to biodiversity loss over the coming months,
including through the work of the Impax Sustainability Centre.
Finally, in its first 'Synthesis Report' in nine years, in March 2023 the
Intergovernmental Panel on Climate Change ("IPCC") said that there is a more
than a 50% chance that global temperature rise will reach or surpass 1.5˚C
between 2021 and 2040. The need for accelerated investment in climate
solutions and addressing physical climate risks has never been more acute,
presenting considerable opportunities for investors. With a 25-year heritage
of specialising in investing in climate solutions, Impax is ideally placed to
support asset owners as they decide on how best to allocate to this meta-trend
reshaping society.
Notwithstanding the headwinds that we have experienced during 2023, I am
highly encouraged that our client retention has been excellent. Meanwhile, we
continue to develop new investment capabilities while enhancing our operating
model to ensure that the business is efficient and scalable, and, as a result,
we believe we're well positioned to continue to deliver value for
all stakeholders.
Ian Simm
Chief Executive
28 November 2023
Financial Review
I am pleased to present our results for the year which, in a time of
challenging market conditions, demonstrate the resilient nature of the Company
which has allowed for continued investment in our growth strategy.
Financial highlights for financial year 2023 versus financial year 2022
2023 2022
AUM(1) £37.4bn £35.7bn
Revenue £178.4m £175.4m
Adjusted operating costs £120.3m £108.0m
Adjusted operating profit(2) £58.1m £67.4m
Adjusted profit before tax(2) £60.0m £68.4m
Adjusted diluted earnings per share(2) 35.2p 42.1p
Cash reserves(2) £87.7m £107.0m
Seed investments £13.3m £7.3m
Dividend per share(3) 4.7p interim + 22.9 p final 4.7p interim + 22.9p final
2023 2022
IFRS operating profit £54.2m £65.2m
IFRS profit before tax £52.1m £72.6m
IFRS diluted earnings per share 29.8p 44.7p
As in previous periods, in order to facilitate comparison of performance with
previous time periods and to provide an appropriate comparison with our peers,
the Board encourages shareholders to focus on financial measures after
adjustment for accounting charges or credits arising from the acquisition of
Impax NH, adjustments arising from the accounting treatment of national
insurance costs on share-based payment awards and significant tax credits
related to prior periods.
Revenue
Revenue for the Period increased by £3.0 million to £178.4 million (2022:
£175.4 million) as a result of the growth in AUM driven by £1.8 billion of
market movements and investment performance during the Period.
At the end of the Period, the weighted average run rate revenue margin was 45
basis points (2022: 46 basis points) on the £37.4 billion of AUM. Our
run-rate revenue(1), also based on the Period end AUM, rose to £168.8 million
(2022: £166.2 million).
Operating costs
Adjusted operating costs increased to £120.3 million
(2022: £108.0 million) as we continued to invest strategically in the
business to support our long-term growth ambitions. Being mindful of the
challenging market conditions and economic uncertainty that remains, we have
focused our investment in the areas of people, technology and operations that
will ensure we build a scalable and resilient business that is well prepared
for future growth.
These costs also reflect a full year of costs from hires made in FY2022.
IFRS operating costs include additional charges and credits, principally the
amortisation of intangible assets and equity incentive scheme charges arising
on the acquisition of Impax NH as well as national insurance charges and
credits on share options and restricted shares which is payable based on the
share price when an option is exercised or restricted shares vest.
Profits and operating margins
Adjusted operating profit decreased to £58.1 million (2022: £67.4 million)
owing to the increased operating costs discussed above offset in part by the
increase in revenue. As a result, adjusted operating profit margin reduced to
32.6% (2022: 38.4%). Run-rate adjusted operating profit at the end of the
Period was £51.9 million (2022: £54.3 million) and run-rate adjusted
operating margin at the end of the Period was 30.8% (2022: 32.6%).
Adjusted profit before tax of £60.0 million (2022: £68.4 million) and
adjusted diluted earnings per share of 35.2 pence (2022: 42.1 pence) include
net finance income of £1.9 million (£0.9 million).
IFRS operating profit for the Period decreased to £54.2 million (2022: £65.2
million) reflecting the increased operating costs. IFRS profit before tax of
£52.1 million (2022: £72.6m) includes foreign exchange losses of £4.0
million (2022: foreign exchange gains of £6.4 million) on the retranslation
of monetary assets held in foreign currencies that are not linked to the
operating performance of the Group. £1.2 million of this loss relates to the
retranslation of a US Dollar denominated loan between the Parent Company and a
US subsidiary. A corresponding gain is recognised in equity in the exchange
translation reserve. IFRS diluted earnings per share decreased to 29.8 pence
(2022: 44.7 pence).
Tax
The effective tax rate has increased due to an increase in the main
corporation tax rate in the UK from 19% to 25% from 1 April 2023. As such, a
blended rate of 22% has been applied for the Period (2022: 19%).
Financial management
The Company continues to be a strongly cash generative business with high
levels of cash and no debt. At the Period end the Company held £87.7 million
of cash resources (2022: £107.0 million). The decrease of £19.3 million from
2022 is mainly attributable to further seed investments and share purchases
made during the Period.
During the Period, we made seed investments, net of redemptions, of £5.3
million in our listed equity and private equity funds (2022: net redemptions
of £0.3 million) and at the Period end these investments were valued at
£13.3 million (2022: £7.3 million).
Share management
The Board will consider purchasing the Company's shares from time to time
after due consideration of alternative uses of the Company's cash resources.
Share purchases are usually made by the Group's Employee Benefit Trusts
("EBTs") (subject to the trustees' discretion), using funding provided by the
Company.
During the Period, the EBT purchased 2.1 million ordinary shares. The EBT
holds shares for Restricted Share awards until they vest or to satisfy share
option exercises.
At the Period end the EBTs held a total of 4.3 million shares, 2.7 million of
which were held for Restricted Share awards leaving up to 1.6 million
available for option exercises and future share awards. There were 2.0 million
options outstanding at the Period end, of which none were exercisable.
Dividends
The Company paid an interim dividend of 4.7 pence per share in July 2023. Our
dividend policy is to pay, in normal circumstances, an annual dividend between
55% and 80% of adjusted profit after tax. As described above, despite
uncertain markets, business performance was stable during the Period and the
Company remains in good financial health. The Board has therefore decided to
recommend a final dividend of 22.9 pence (2022: 22.9 pence) taking the total
dividend for 2023 to 27.6 pence (2022: 27.6 pence). The total dividend for the
year represents 78% of our adjusted profit.
This dividend proposal will be submitted for formal approval by shareholders
at the Annual General Meeting on 12 March 2024. If approved, the dividend will
be paid on or around 22 March 2024. The record date for the payment of the
proposed dividend will be 9 February 2024 and the ex-dividend date will be
8 February 2024.
The Company operates a dividend reinvestment plan ("DRIP"). The final date for
receipt of elections under the DRIP will be 23 February 2024. For further
information and to register and elect for this facility, please visit
www.signalshares.com and search for information related to the Company.
Going concern
The Financial Reporting Council requires all companies to perform a rigorous
assessment of all the factors affecting the business when deciding to adopt a
'going concern' basis for the preparation of the accounts.
The Board has made an assessment covering a period of at least 12 months from
the date of approval of this report which indicates that, taking account of a
reasonably possible downside in relation to asset inflows, market performance
and costs, the Group will have sufficient funds to meet its liabilities as
they fall due for that period. The Group has high cash balances and no debt
and, at the Period end market levels, is profitable. A significant part of the
Group's cost basis is variable as bonuses are linked to profitability. The
Group can also preserve cash through dividend reduction and through issuance
of shares to cover share option exercises/restricted share awards (rather than
purchasing shares). The Directors therefore have a reasonable expectation that
the Group has adequate resources to remain in operational existence for the
foreseeable future and have continued to adopt the going concern basis in
preparing the financial statements.
Karen Cockburn
Chief Financial Officer
28 November 2023
Consolidated Income Statement
For the year ended 30 September 2023
Notes 2023 2022
£000 £000
Revenue 6 178,367 175,396
Operating costs 7 (124,120) (110,213)
Finance income 10 3,130 7,950
Finance expense 11 (5,271) (574)
Profit before taxation 52,106 72,559
Taxation 12 (12,884) (13,077)
Profit after taxation 39,222 59,482
Earnings per share
Basic 13 30.5p 46.0p
Diluted 13 29.8p 44.7p
Dividends per share
Interim dividend paid and final dividend declared for the year 14 27.6p 27.6p
Adjusted results are provided in note 4.
Consolidated Statement of Comprehensive Income
For the year ended 30 September 2023
2023 2022
£000 £000
Profit for the year 39,222 59,482
Exchange differences on translation of foreign operations (119) 2,685
Total other comprehensive income (119) 2,685
Total comprehensive income for the year attributable to equity holders of the 39,103 62,167
Company
All amounts in other comprehensive income may be reclassified to income in the
future.
The statement has been prepared on the basis that all operations are
continuing operations.
Consolidated Statement of Financial Position
As at 30 September 2023
2023 2022
Notes £000 £000 £000 £000
Assets
Goodwill 15 12,883 13,932
Intangible assets 16 14,185 18,340
Property, plant and equipment 17 8,820 9,279
Deferred tax assets 12 3,665 4,781
Total non-current assets 39,553 46,332
Trade and other receivables 18 42,543 38,769
Investments 19 13,270 7,255
Current tax asset 1,645 176
Cash invested in money market funds 21 53,542 58,687
Cash and cash equivalents 21 37,963 52,232
Total current assets 148,963 157,119
Total assets 188,516 203,451
Equity and liabilities
Ordinary shares 24 1,326 1,326
Share premium 9,291 9,291
Merger reserve 1,533 1,533
Exchange translation reserve 2,940 3,059
Retained earnings 118,868 122,969
Total equity 133,958 138,178
Trade and other payables 22 44,809 53,624
Lease liabilities 17 1,524 1,488
Current tax liability 1,007 2,202
Total current liabilities 47,340 57,314
Lease liabilities 17 7,218 7,590
Deferred tax liability 12 - 369
Total non-current liabilities 7,218 7,959
Total equity and liabilities 188,516 203,451
Consolidated Statement of Changes in Equity
For the year ended 30 September 2023
Notes Share capital Share premium Merger reserve Exchange translation reserve Retained earnings Total equity
£000 £000 £000 £000 £000 £000
1 October 2021 1,326 9,291 1,533 374 97,998 110,522
Transactions with owners of the Company:
Dividends paid 14 - - - - (28,665) (28,665)
Cash received on option exercises - - - - 540 540
Tax charge on long-term incentive schemes - - - - (3,756) (3,756)
Share-based payment charges 9 - - - - 6,151 6,151
Acquisition of own shares - - - - (8,781) (8,781)
Total transactions with owners - - - - (34,511) (34,511)
of the Company
Profit for the year - - - 59,482 59,482
Other comprehensive income:
Exchange differences on translation of foreign operations - - - 2,685 - 2,685
Total other comprehensive Income - - - 2,685 - 2,685
30 September 2022 1,326 9,291 1,533 3,059 122,969 138,178
Notes Share capital Share premium Merger reserve Exchange translation reserve Retained earnings Total equity
£000 £000 £000 £000 £000 £000
30 September 2022 1,326 9,291 1,533 3,059 122,969 138,178
Transactions with owners of the Company:
Dividends paid 14 - - - - (36,376) (36,376)
Cash received on option exercises - - - - 1,261 1,261
Tax credit on long-term incentive schemes - - - - 371 371
Share-based payment charges 9 - - - - 6,535 6,535
Acquisition of own shares - - - - (15,114) (15,114)
Total transactions with owners - - - - (43,323) (43,323)
of the Company
Profit for the year - - - 39,222 39,222
Other comprehensive income:
Exchange differences on translation of foreign operations - - - (119) - (119)
Total other comprehensive Income - - - (119) - (119)
30 September 2023 1,326 9,291 1,533 2,940 118,868 133,958
Consolidated Cash Flow Statement
For the year ended 30 September 2023
Notes 2023 2022
£000 £000
Operating activities
Cash generated from operations 27 53,218 80,321
Corporation tax paid (14,562) (9,046)
Net cash generated from operating activities 38,656 71,275
Investing activities
Net acquisition of property, plant & equipment and intangible assets (824) (796)
Net (investments)/redemptions from unconsolidated Impax funds (5,281) 355
(Expenditure)/income from settlement of investment related hedges (390) 69
Investment income received 2,865 586
Decrease/(increase) in cash held in money market funds 5,145 (19,091)
Net cash generated from/(used by) investing activities 1,515 (18,877)
Financing activities
Acquisition of non-controlling interest - (182)
Finance costs paid on a loan facility (86) (141)
Payment of lease liabilities (1,979) (1,729)
Acquisition of own shares (15,114) (8,781)
Cash received on exercise of Impax staff share options 1,261 540
Dividends paid (36,376) (28,665)
Net cash used by financing activities (52,294) (38,958)
Net (decrease)/increase in cash and cash equivalents (12,123) 13,440
Cash and cash equivalents at beginning of year 52,232 36,172
Effect of foreign exchange rate changes (2,146) 2,620
Cash and cash equivalents at end of year 21 37,963 52,232
Cash and cash equivalents under IFRS does not include cash held in money
market funds. The Group however considers its total cash reserves to include
these amounts. Cash held in Research Payment Accounts ("RPAs") are not
included in cash reserves (see note 21). There are no significant changes to
liabilities arising from financing activities.
Movements on cash reserves are shown in the table below:
At the beginning of the Period Cash flow Foreign exchange At the end
of the Period
£000 £000 £000
£000
Cash and cash equivalents 52,232 (12,123) (2,146) 37,963
Cash invested in money market funds 58,687 (5,145) - 53,542
Cash in RPAs (3,951) 138 - (3,813)
Total Group cash reserves 106,968 (17,130) (2,146) 87,692
Notes to the Financial Statements
For the year ended 30 September 2023
1 REPORTING ENTITY
Impax Asset Management Group plc (the "Company") is incorporated and domiciled
in the UK and is listed on the Alternative Investment Market ("AIM"). These
consolidated financial statements comprise the Company and its subsidiaries
(together referred to as the "Group").
2 BASIS OF PREPARATION
These financial statements have been prepared in accordance with international
accounting standards in conformity with the requirements of the Companies Act
2006 ("IFRS") and applicable law.
The financial statements have been prepared under the historical cost
convention, with the exception of the revaluation of certain investments and
derivatives being measured at fair value.
Details of the significant accounting policies adopted by the Group are shown
in note 31.
The financial statements are presented in sterling. All amounts have been
rounded to the nearest thousand unless otherwise indicated.
Going concern
The financial statements have been prepared on a going concern basis which the
Directors consider to be appropriate for the following reasons. Cash flow
forecasts covering a period of 12 months from the date of approval of these
financial statements indicate that, taking account of reasonably possible
downside assumptions in relation to asset inflows, market performance and
costs, the Group will have sufficient funds to meet its liabilities as they
fall due and regulatory capital requirements for that period. The Group has
sufficient cash balances and no debt and, at the Period-end market levels, is
profitable. A significant part of the Group's cost basis is variable as
bonuses are linked to profitability. The Group can also preserve cash through
dividend reduction and through issuance of shares to cover share option
exercises/restricted share awards (rather than purchasing shares).
Consequently, the Directors are confident that the Group will have sufficient
funds to continue to meet its liabilities as they fall due for at least 12
months from the date of approval of the financial statements and therefore
have prepared the financial statements on a going concern basis.
3 USE OF JUDGEMENTS AND ESTIMATES
In preparing these financial statements management has made estimates that
affect the reported amounts of assets, liabilities, income and expenses.
Actual results may differ from estimates. Revisions to estimates are
recognised prospectively.
The Group has not identified any significant judgements and estimates at the
end of the reporting period. However the key areas that include judgement
and/or estimates are set out in notes 9, 15 and 16.
4 ADJUSTED PROFITS AND EARNINGS
The reported operating earnings, profit before tax and earnings per share are
substantially affected by business combination affects and other items. The
Directors have therefore decided to report an adjusted operating profit,
adjusted profit before tax and adjusted earnings per share which exclude these
items in order to enable comparison with peers and provide consistent measures
of performance over time. A reconciliation of the adjusted amounts to the IFRS
reported amounts is shown below.
Year ended 30 September 2023
Reported Adjustments Adjusted
- IFRS
£000 £000
Business combination effects Other
£000 £000
Revenue 178,367 178,367
Operating costs (124,120) (120,264)
Amortisation of intangibles arising on acquisition 2,813
Acquisition equity incentive scheme charges 1,318
Mark to market credit on equity awards (275)
Operating Profit 54,247 4,131 (275) 58,103
Finance income 3,130 3,130
Finance costs (5,271) 3,994 (1,277)
Profit before taxation 52,106 4,131 3,719 59,956
Taxation (12,884) (13,591)
Tax on adjustments (707)
Profit after taxation 39,222 4,131 3,012 46,365
Diluted earnings per share 29.8 3.1 2.3 35.2
Year ended 30 September 2022
Reported Adjustments Adjusted
- IFRS
£000
£000
Business combination effects Other
£000 £000
Revenue 175,396 175,396
Operating Costs (110,213) (107,980)
Amortisation of intangibles arising on acquisition 2,420
Acquisition equity incentive scheme charges 1,340
Mark to market credit on equity awards (1,527)
Operating Profit 65,183 3,760 (1,527) 67,416
Finance income 7,950 (6,440) 1,510
Finance costs (574) (574)
Profit before taxation 72,559 3,760 (7,967) 68,352
Taxation (13,077) (12,293)
Adjustment re historical tax charges (730)
Tax on adjustments 1,514
Profit after taxation 59,482 3,760 (7,183) 56,059
Diluted earnings per share 44.7 2.8 (5.4) 42.1
The diluted number of shares is the same as used for the IFRS calculation of
earnings per share (see note 13).
Amortisation of intangibles
Management contracts, which are classified as intangible assets, were acquired
as part of the acquisition of Impax NH (the "Acquisition") and are amortised
over their 11-year life. This charge is not linked to the operating
performance of the Impax NH business and so is excluded from adjusted profit.
Acquisition equity incentive scheme charges
Impax NH staff have been awarded share-based payments in respect of the
Acquisition. Charges in respect of these relate to the Acquisition rather than
the operating performance of the Group and are therefore excluded from
adjusted profit.
Mark to market charge on equity incentive awards
The Group has in prior years and the current period awarded employees options
over the Group's shares, some of which are either unvested or unexercised at
the balance sheet date. The Group has also made awards of restricted shares
("RSS awards") which have not vested at the balance sheet date. Employers
national insurance contributions ("NIC") are payable on the options when they
are exercised and on the RSS awards when they vest, based on the valuation of
the underlying shares at that point. A charge is accrued for the NIC within
IFRS operating profit based on the share price at the balance sheet date. The
Group also receive a corporation tax credit equal to the value of the awards
at the date they are exercised (options) or vest (RSS awards). The tax credit
in excess of the cumulative share-based payment expense is recognised directly
in equity.
These two charges/credits vary based on the Group's share price (together
referred to as mark to market charge on equity incentive schemes) and are not
linked to the operating performance of the Group. They are therefore
eliminated when reporting adjusted profit.
Finance income and expense
Finance expense for the Period has been adjusted for foreign exchange gains
and losses on monetary assets that are not linked to the operating performance
of the Group. £1,200,000 of the current Period foreign exchange loss relates
to the retranslation of a US Dollar denominated loan between the Parent
Company and a US subsidiary. A corresponding gain is recognised in equity in
the exchange translation reserve
5 SEGMENTAL REPORTING
(a) Operating segments
The Group is managed on an integrated basis and there is one reportable
segment.
Segment information is presented on the same basis as that provided for
internal reporting purposes to the Group's chief operating decision maker, the
Chief Executive.
(b) Geographical analysis
An analysis of revenue by the location of client is presented below:
Revenue
2023 2022
£000 £000
North America 54,183 61,890
Luxembourg 49,383 43,362
UK 30,712 34,069
Ireland 13,323 13,175
France 11,085 12,261
Canada 6,363 954
Australia 3,821 2,796
Netherlands 3,641 3,012
Denmark 3,378 2,129
Other 2,478 1,748
178,367 175,396
The following non-current assets: property, plant and equipment, goodwill and
intangible assets are located in the countries listed below:
Non-current assets
2023 2022
£000 £000
UK 5,753 6,427
United States 29,738 34,907
Hong Kong 6 140
Ireland 391 77
35,888 41,551
6 REVENUE
See accounting policy at note 31 (D).
The Group's main source of revenue is investment management and advisory fees.
The Group may also earn carried interest from its private equity funds.
Management and advisory fees are generally based on an agreed percentage of
the valuation of assets under management ("AUM") for listed equity and fixed
income funds. For private equity funds they are generally based on an agreed
percentage of commitments made to the fund by investors during the fund's
investment period and thereafter on the cost price of investments made and not
exited. Carried interest is earned from private equity funds if the cash
returned to investors exceeds an agreed return. Carried interest of £35,600
was received in the Period (2022: none).
The Group determines the investment management and advisory fees to be a
single revenue stream as they are all determined through a consistent
performance obligation. Should AUM reduce as a result of equity market
downturns, foreign exchange or allocation of capital away from equity markets
then the revenue would reduce.
None of the Group's funds individually represented more than 10% of Group
revenue in the current or prior year.
Revenue includes £172,373,446 (2022: £170,840,243) from related parties.
7 OPERATING COSTS
The Group's largest operating cost is staff costs. Other significant costs
include IT and communication costs, direct fund expenses, professional fees,
premises costs (depreciation on office building leases, rates and service
charge) and placement fees.
2023 2022
£000 £000
Staff costs (note 8) 86,078 81,766
IT and communications 7,850 5,805
Direct fund expenses 7,441 6,388
Professional fees 5,094 4,006
Depreciation and amortisation 5,073 4,257
Placement fees 2,815 1,783
Premises costs 1,639 1,333
Research costs 1,167 980
Mark to market credit on share awards (275) (1,527)
Other costs 7,238 5,422
Total 124,120 110,213
Operating costs include £1,237,000 (2022: £1,183,000) in respect of
placement fees paid to related parties.
Other costs include £297,000 (2022: £295,000) paid to the Group's auditors
which is analysed below. Audit-related assurance services in the Period relate
to the auditor's review of the Group's half-yearly report.
2023 2022
£000 £000
Audit of the Group's Parent Company and consolidated financial statements 122 91
Audit of subsidiary undertakings 143 124
Audit-related assurance services 32 80
297 295
8 STAFF COSTS AND EMPLOYEES
Staff costs include salaries, variable bonuses, social security costs
(principally employers' NIC on salary, bonus and share awards), the cost of
contributions made to employees' pension schemes and share-based payment
charges. Further details of the Group's remuneration policies are provided in
the Remuneration Committee Report. Share-based payment charges are offset
against the total cash bonus pool paid to employees. NIC charges on
share-based payments are accrued based on the share price at the balance sheet
date and the proportion vested.
2023 2022
£000 £000
Salaries and variable bonuses 63,936 62,393
Social security costs 6,188 6,356
Pensions 1,955 1,635
Share-based payment charge (see note 9) 6,535 6,152
Other staff costs 7,464 5,230
86,078 81,766
The Group contributes to private pension schemes. The assets of the schemes
are held separately from those of the Group in independently administered
funds. The pension cost represents contributions payable by the Group to these
funds. Contributions totalling £140,000 (2022: £105,000) were payable to the
funds at the year end and are included in trade and other payables.
Other staff costs include the cost of providing health and other insurances
for staff, Non-Executive Directors' fees, contractor fees, recruitment fees
and termination costs.
Directors and key management personnel
Key management personnel are related parties and are defined as members of the
Board and/or the Executive Committee. The remuneration of key management
personnel, including pension contributions, during the year was £12,049,310
with £2,457,318 of share-based payments (2022: £14,525,298 plus £2,239,493
of share-based payments). No Board members received pension contributions
during the year (2022: nil).
Employees
The average number of persons (excluding Non-Executive Directors and including
temporary staff) employed during the year was 290 (2022: 240).
2023 2022
No. No.
Portfolio Management 105 86
Private Equity 15 13
Client Service and Business Development 101 82
Group 69 59
290 240
9 SHARE-BASED PAYMENT CHARGES
The total expense recognised for the year arising from share-based payment
transactions was £6,535,000 (2022: £6,151,000). The charges arose in respect
of the Group's Restricted Share Scheme ("RSS") and the Group's Long Term
Option Plan ("LTOP") which are described below. Details of all outstanding
options are provided at the end of this note. The charges for each scheme are:
2023 2022
£000 £000
RSS 5,861 5,231
LTOP 674 920
6,535 6,151
Restricted Share Scheme
Restricted shares are awarded to some employees as part of their year end
remuneration. These awards are made post year end but part of the charge is
recorded in the Period based on an estimated value at the year end date.
729,750 restricted shares were granted during the Period under the 2022 plan.
Awards can also be issued to new employees and during the Period, 42,630 RSS
awards were granted to employees joining ("RSS 2023 A"). Post year end, the
Board approved the grant of a further 1,519,750 restricted shares under the
2023 plan ("RSS 2023 Final"). Following grant, the shares are held by a
nominee for employees, who are then immediately entitled to receive dividends.
After a period of three years' continuous employment, the employees will
receive unfettered access to one third of the shares, after four years a
further third and after five years the final third. The employees are not
required to make any payment for the shares on grant or when the restrictions
lapse other than personal taxes.
Full details of the awards granted during the year along with their valuation
and the inputs used in the valuation are described in the tables below. The
valuation was determined using the Black-Scholes-Merton model with an
adjustment to reflect that dividends are received during the vesting period.
2023 2022
RSS 2023 (estimate) RSS 2023 A RSS 2022 Final RSS 2022 A RSS 2021
Final
Awards originally granted 1,519,750 42,630 729,750 397,889 413,750
Weighted average award value £4.30 £7.51 £8.42 £7.32 £13.82
Weighted average share price on grant £4.40 £7.61 £8.52 £7.32 £13.94
Weighted average expected volatility 36.3% 35.8% 35.5% 34.6% 34.0%
Weighted average award life on grant 5.3 years 4.0 years 5.3 years 2.6 years 5.2 years
Weighted average expected dividend yield 6.3% 3.6% 3.2% 3.0% 1.5%
Weighted average risk free interest rate 4.2% 3.6% 4.6% 1.6% 1.0%
The expected volatility was determined by reviewing the historical volatility
of the Company and that of comparator companies. The expected dividend rate is
determined using the Company share price and most recent full year dividend to
grant date.
The fair value of the RSS 2023 Final awards has initially been estimated using
the average share price over the period of five days preceding the final
Remuneration Committee and other inputs as at this date. This will be adjusted
for using the share price and other inputs at the grant date.
Restricted shares outstanding
Outstanding at 1 October 2022 2,494,006
Granted during the year 772,380
Vested during the year (383,618)
Forfeited during the year (187,086)
Outstanding at 30 September 2023 2,695,682
Employee share option plans
Employee Share Option Plan
Awards were granted to employees in 2017 under the Group's Employee Share
Option Plan ("ESOP"). The strike price of these options was set at a 10%
premium to the average market price of the Company's shares for the five
business days following the announcement of the results for the preceding
financial year. The 2017 options did not have performance conditions but did
have a time vesting condition such that they vested subject to continued
employment on 31 December 2020. All remaining options outstanding under the
ESOP were exercised during the Period.
Long Term Option Plan
Awards have been granted to employees under the Group's LTOP between 2018 and
2022. The strike prices of these options were £1 (2018 and 2019), £3 (2020),
£9 (2021) and £7.50 (2022). These options do not have performance conditions
but do have a time vesting condition such that the options vest subject to
continued employment on five years following grant. Vested shares are
restricted from being sold until after a further five-year period (other than
to settle any resulting tax liability).
Post year end the Board approved the grant of 1,012,000 options under the 2023
LTOP plan with a £4.40 strike price and with the other conditions the same as
the 2018-2022 plans.
The valuation was determined using the binomial model. Full details of the
awards granted during the year along with their valuation and the inputs used
in the valuation are described in the table below.
Share options are equity settled.
2023 LTOP (estimated) 2023 2022
2022 LTOP 2021 LTOP
Awards originally granted 1,012,000 300,000 339,575
Exercise price £4.40 £7.50 £9.00
Weighted average award value £0.80 £2.14 £4.87
Weighted average share price on grant £4.40 £8.12 £13.90
Weighted average expected volatility 36.3% 35.6% 34.2%
Weighted average award life on grant 6 years 6 years 6 years
Weighted average expected dividend yield 6.3% 3.4% 1.5%
Weighted average risk free interest rate 4.2% 4.6% 0.8%
The expected volatility was determined by reviewing the historical volatility
of the Company and that of comparator companies. The expected dividend rate is
determined using the Company share price and most recent full year dividend to
grant date.
The fair value of the 2023 LTOP awards has initially been estimated using the
average share price over the period of five days preceding the final
Remuneration Committee and other inputs as at this date. This will be
adjusted for using the share price and other inputs at the grant date.
Options outstanding
An analysis of the outstanding options arising from the Group's LTOP is
provided below:
Number Weighted average exercise price p
Options outstanding at 1 October 2022 2,693,575 265.2
Options granted 300,000 750.0
Options forfeited (311,000) 246.6
Options exercised (725,000) 184.3
Options outstanding at 30 September 2023 1,957,575 372.4
Options exercisable at 30 September 2023 - -
The weighted average remaining contractual life was 7.1 years.
During the Period, 15,750 options, with a £0.01 exercise price, were also
granted to employees (2022: 6,000). These options vest in three equal tranches
between 2026 and 2028. Post year-end, the Board approved the grant of a
further 22,000 of these options with the same conditions which vest between
2027 and 2029.
10 FINANCE INCOME
2023 2022
£000 £000
Fair value gains 265 148
Interest income 2,865 520
Other investment income - 33
Foreign exchange gains - 7,249
3,130 7,950
Fair value gains represent those arising on the revaluation of listed and
unlisted investments held by the Group (see note 19) and any gains or losses
arising on related hedge instruments held by the Group.
Fair value gains comprise unrealised gains of £756,000 offset by realised
losses of £491,000 (2022: £46,000 of unrealised gains and £102,000 of
realised gains).
Foreign exchange gains in the prior Period mainly arose on the retranslation
of monetary assets held in US Dollars.
11 FINANCE EXPENSE
2023 2022
£000 £000
Interest on lease liabilities 411 433
Finance costs on a loan facility 86 141
Foreign exchange losses 4,774 -
5,271 574
Foreign exchange losses in the current Period mainly arose on the
retranslation of monetary assets held in US Dollars. £1.2 million of this
loss relates to the retranslation of a US Dollar denominated loan between the
Parent Company and a US subsidiary. A corresponding gain is recognised in
equity in the exchange translation reserve.
12 TAXATION
The Group is subject to taxation in the countries in which it operates (the
UK, the US, Hong Kong, Ireland and Japan) at the rates applicable in those
countries. The total tax charge includes taxes payable for the reporting
period (current tax) and also charges relating to taxes that will be payable
in future years due to income or expenses being recognised in different
periods for tax and accounting periods (deferred tax).
(a) Analysis of charge for the year
2023 2022
£000 £000
Current tax expense:
UK corporation tax 9,542 13,400
Foreign taxes 3,639 472
Adjustment in respect of prior years (53) (1,606)
Total current tax expense 13,128 12,266
Deferred tax (credit)/expense:
Credit for the year (821) 133
Adjustment in respect of prior years 577 678
Total deferred tax (credit)/expense (244) 811
Total income tax expense 12,884 13,077
A tax credit of £371,000 (deferred tax charges of £859,000 net of current
tax credits of £1,230,000) is also recorded in equity in respect of changes
in estimates of the tax deductions on share awards arising from changes in the
share price (2022: charges of £3,756,000 (deferred tax charges of £6,739,000
net of current tax credits of £2,983,000)).
The deferred tax adjustment in respect of prior years in the Period arises
from the utilisation of tax losses following the finalisation of intra-group
profits.
An increase in the main rate of UK corporation tax from 19% to 25% with effect
from 1 April 2023 was enacted in the Finance Act 2021. This rate increase has
been taken into account in the calculation of the Group's UK deferred tax
assets and liabilities as at 30 September 2023, to the extent that they are
expected to reverse after the rate increase comes into effect.
(b) Factors affecting the tax charge for the year
The blended UK tax rate for the year is 22% due to the increase in the
corporation tax rate from 19% to 25% from 1 April 2023. The tax assessment for
the Period is higher than this rate (2022: lower). The differences are
explained below:
2023 2022
£000 £000
Profit before tax 52,106 72,559
Tax charge at 22% (2022: 19%) 11,463 13,786
Effects of:
Non-taxable income (231) (506)
Non-deductible expenses and charges 1,256 617
Adjustment in respect of historical tax charges 559 (928)
Effect of higher tax rates in foreign jurisdictions (29) 31
Tax losses not recognised 9 77
Recognition of prior year tax losses (143) -
Total income tax expense 12,884 13,077
(c) Deferred tax
The deferred tax asset included in the consolidated statement of financial
position is as follows:
Share-based payment scheme Tax losses carried forward Other assets Income not yet taxable Other liabilities Total
£000 £000 £000 £000 £000 £000
As at 1 October 2021 10,593 681 621 (161) (210) 11,524
(Charge)/credit to equity (7,848) 1,109 - - - (6,739)
Exchange differences on consolidation 311 127 - - - 438
Credit/(charge) to the income statement 267 (1,304) 224 161 (159) (811)
As at 30 September 2022 3,323 611 847 - (369) 4,412
(Charge)/credit to equity (859) - - - - (859)
Exchange differences on consolidation (70) - (62) - - (132)
Credit/(charge) to the income statement 729 - (979) - 494 244
As at 30 September 2023 3,123 611 (194) - 125 3,665
A deferred tax asset of £952,000 (2022: £1,600,000) relating to £4.4
million of losses in one of the Group's subsidiaries has not been recognised
as there is insufficient evidence that there will be sufficient taxable
profits in the future against which these deferred tax assets could be
utilised.
13 EARNINGS PER SHARE
Basic earnings per share ("EPS") is calculated by dividing the profit for the
year attributable to ordinary equity holders of the Parent Company (the
"Earnings") by the weighted average number of ordinary shares outstanding
during the year, less the weighted average number of own shares held. Own
shares are held in Employee Benefit Trusts ("EBTs").
Diluted EPS includes an adjustment to reflect the dilutive impact of share
awards.
Earnings for the year Shares Earnings
£000
per share
000's
2023
Basic 39,222 128,769 30.5p
Diluted 39,222 131,572 29.8p
2022
Basic 59,482 129,409 46.0p
Diluted 59,482 133,168 44.7p
The weighted average number of shares is calculated as shown in the table
below:
2023 2022
000's 000's
Weighted average number of ordinary shares held 132,597 132,597
Less weighted average number of own shares held (3,828) (3,188)
Weighted average number of ordinary shares used in the calculation of basic 128,769 129,409
EPS
Additional dilutive shares regarding share schemes 2,803 3,759
Weighted average number of ordinary shares used in the calculation of diluted 131,572 133,168
EPS
14 DIVIDENDS
Dividends are recognised as a reduction in equity in the period in which they
are paid or in the case of final dividends when they are approved by
shareholders. The reduction in equity in the Period therefore comprises the
prior Period final dividend and the current Period interim.
Dividends declared/proposed in respect of the year
2023 2022
pence pence
Interim dividend declared per share 4.7 4.7
Final dividend proposed per share 22.9 22.9
Total 27.6 27.6
The proposed final dividend of 22.9p will be submitted for formal approval at
the Annual General Meeting to be held on 12 March 2024. Based on the number of
shares in issue at the date of this report and excluding own shares held the
total amount payable for the final dividend would be £30,003,000.
Dividends paid in the year
2023 2022
£000 £000
Prior year final dividend - 22.9p, 17.0p 30,216 22,475
Interim dividend - 4.7p, 4.7p 6,160 6,190
36,376 28,665
15 GOODWILL
The goodwill balance within the Group at 30 September 2023 arose from the
acquisition of Impax Capital Limited on 18 June 2001 and the acquisition of
Impax NH in January 2018.
Goodwill
£000
Cost
At 1 October 2021 11,816
Foreign exchange 2,116
At 1 October 2022 13,932
Foreign exchange (1,049)
At 30 September 2023 12,883
Impax NH consists of only one cash-generating unit ("CGU"). Goodwill is
allocated between CGUs at 30 September 2023 as follows - £11,254,000 to
Impax NH and £1,629,000 to the listed equity and private equity CGUs.
The Group has determined the recoverable amount of its CGUs by calculating
their value in use using a discounted cash flow model over a period of 10
years. The cash flow forecasts were derived taking into account the budget for
the year ended 30 September 2024, which was approved by the Board of Directors
in September 2023. The discount rate was derived from the Group's weighted
average cost of capital, adjusted for market specific risks associated with
the estimated cash flows, and takes into account the weighted average cost of
capital of other market participants.
The goodwill on the listed equity and private equity CGUs arose over 20 years
ago and the business has grown significantly in size and profitability since
that date. There is accordingly significant headroom before an impairment is
required. The main assumptions used to calculate the cash flows in the
impairment test for these CGUs were that assets under management and margins
would continue at current levels, that fund performance for the listed equity
business would be 5% per year (2022: 5%) and a discount rate of 12.5% (2022:
12.5%). There has been no impairment of goodwill related to this segment to
date and there would have to be significant asset outflows over a sustained
period before any impairment was required. If the discount rate increased by
1% there would no impairment and if fund performance reduced to zero there
would be no impairment (2022: 1% increase in discount rate, no impairment).
The impairment test for the Impax NH CGU showed no impairment (2022: no
impairment) was required and used the following key assumptions - average fund
inflows of US$0.56 billion (2022: US$0.38 billion), fund
performance of 5% (2022: 5%), an average operating margin of 29% (2022: 17%)
and a discount rate of 12.5% (2022: 12.5%). The following plausible changes in
assumptions would individually not give rise to an impairment: a consistent
10% decrease in inflows (2022: 10% decrease); a 100 basis point annual
reduction in performance each year (2022: 100 basis point reduction); a 1%
annual reduction in operating margin (2022: 1% reduction) and a 1% increase in
discount rate (2022: 1% increase).
16 INTANGIBLE ASSETS
Intangible assets mainly represents the value of the management contracts
acquired as part of the acquisition of Impax NH.
Management contracts Software Total
£000 £000
£000
Cost
As at 1 October 2021 26,441 529 26,970
Additions - 81 81
Disposals - (309) (309)
Foreign exchange 5,469 - 5,469
As at 30 September 2022 31,910 301 32,211
Additions - 299 299
Foreign exchange (2,710) - (2,710)
As at 30 September 2023 29,200 600 29,800
Accumulated amortisation
As at 1 October 2021 8,988 509 9,497
Charge for the year 2,459 26 2,485
Disposals - (310) (310)
Foreign exchange 2,199 - 2,199
As at 30 September 2022 13,646 225 13,871
Charge for the year 2,813 62 2,875
Foreign exchange (1,131) - (1,131)
As at 30 September 2023 15,328 287 15,615
Net book value
As at 30 September 2023 13,872 313 14,185
As at 30 September 2022 18,264 76 18,340
As at 30 September 2021 17,453 20 17,473
The management contracts were acquired with the acquisition of Impax NH in
January 2018 and are amortised over an 11-year life.
Assets under management, forecast asset inflows and operation margin are all
the same or in excess of the assumptions when the management contracts were
first valued. The discounted cost of capital is the same as when the
management contracts were first valued. As such, there are no indicators of
impairment.
17 PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment mainly represents the costs of fitting out the
Group's leased London office (leasehold improvements), office furniture and
computers (fixtures, fitting and equipment) and the capitalised value of the
Group's leases on its office buildings (right-of-use assets).
Right-of-use assets Leasehold improvements Fixtures, fittings and equipment Total
£000 £000 £000 £000
Cost
As at 1 October 2021 10,527 2,074 2,090 14,691
Additions 139 274 441 854
Disposals - (6) (22) (28)
Foreign exchange 951 1 105 1,057
As at 30 September 2022 11,617 2,343 2,614 16,574
Additions 1,607 82 443 2,132
Disposals - - (37) (37)
Foreign exchange (468) (1) (53) (522)
As at 30 September 2023 12,756 2,424 2,967 18,147
Accumulated depreciation
As at 1 October 2021 2,462 1,253 1,541 5,256
Charge for the year 1,273 181 318 1,772
Disposals - (6) (22) (28)
Foreign exchange 235 1 59 295
As at 30 September 2022 3,970 1,429 1,896 7,295
Charge for the year 1,659 214 325 2,198
Disposals - - (6) (6)
Foreign exchange (127) (1) (32) (160)
As at 30 September 2023 5,502 1,642 2,183 9,327
Net book value
As at 30 September 2023 7,254 782 784 8,820
At 30 September 2022 7,647 914 718 9,279
As at 30 September 2021 8,065 821 549 9,435
Lease arrangements
Property, plant and equipment includes right-of-use assets in relation to
leases for the Group's office buildings.
The carrying value of the Group's right-of-use assets, associated lease
liabilities and the movements during the period are set out below:
Right-of-use assets Lease liabilities
£m £m
At 1 October 2022 7,647 9,078
New leases 1,607 1,607
Lease payments - (1,979)
Interest expense - 410
Depreciation charge (1,659) -
Foreign exchange movement (341) (374)
At 30 September 2023 7,254 8,742
Current 1,524
Non-current 7,218
8,742
The contractual maturities on the undiscounted minimum lease payments under
lease liabilities are provided below:
2023 2022
£000 £000
Within 1 year 1,942 2,937
Between 1 and 5 years 6,489 6,339
Later than 5 years 1,702 2,447
Total undiscounted lease liabilities 10,133 11,723
The Company's London office lease has an extension option of a further five
years from June 2027, subject to a rent review, which is not included in the
above numbers on the basis that it is not yet reasonably certain that it will
be exercised.
18 TRADE AND OTHER RECEIVABLES
2023 2022
£000 £000
Trade receivables 8,803 10,196
Other receivables 2,282 1,205
Prepayments and accrued income 31,458 27,368
42,543 38,769
Accrued income relates to accrued management fees and arises where invoices
are raised in arrears.
An analysis of the ageing of trade receivables is provided below:
2023 2022
£000 £000
0-30 days 7,488 9,069
Past due but not impaired:
31-60 days 1,098 382
61-90 days 6 557
Over 90 days 211 188
8,803 10,196
At the date of this report, substantially all of the trade receivables above
have been received. As at 30 September 2023, the assessed provision under the
IFRS 9 expected credit loss model for trade receivables and prepayments and
accrued income was immaterial (2022: immaterial).
£33,660,000 of trade and other receivables were due from related parties
(2022: £32,954,000).
19 CURRENT ASSET INVESTMENTS
The Group makes seed investments into its own listed equity funds and also
invests in its private equity funds. Where the funds are consolidated the
underlying current asset investments are shown in the table below. Investments
made in unconsolidated funds are also included.
Total
£000
At 1 October 2021 7,564
Additions 256
Fair value movements 46
Repayments/disposals (611)
At 30 September 2022 7,255
Additions 8,073
Fair value movements 734
Repayments/disposals (2,792)
At 30 September 2023 13,270
The investments include £4,647,000 in related parties of the Group (2022:
£3,534,000).
Hierarchical classification of investments
The hierarchical classification of the investments as considered by IFRS 13
Financial Instruments: Disclosures is shown below:
Level 1 Level 2 Level 3 Total
£000 £000 £000 £000
At 1 October 2022 3,721 - 3,534 7,255
Additions 7,175 - 898 8,073
Repayments/disposals (2,315) - (477) (2,792)
Fair value movements 42 - 692 734
At 30 September 2023 8,623 - 4,647 13,270
There were no movements between any of the levels in the Period.
The Level 3 investments are in the Group's private equity funds. The net asset
value of these funds is reported in the NAV statements represents the fair
value at the end of the reporting period and as such a range of unobservable
inputs is not reported. If the NAV of those funds changed by +/- 10% then the
valuation of those investments would change by +/- £465,000.
Market risk and investment hedges
Investments made are subject to market risk. Where appropriate the Group has
attempted to hedge against the risk of market falls by the use of derivative
contracts. The derivative contracts consist of short positions against a
global equity index and are arranged through BNP Paribas, a related party. Any
outstanding amounts on the short positions are settled daily.
20 INTERESTS IN UNCONSOLIDATED STRUCTURED ENTITIES
The Group's interest in structured entities is reflected in the Group's AUM.
The Group is exposed to movements in AUM of structured entities through
potential loss of fee income as a result of client withdrawals or market
falls. Outflows from funds are dependent on market sentiment, asset
performance and investor considerations. Further information on these risks
can be found in the Strategic Review. Considering the potential for changes in
AUM of structured entities, management has determined that the Group's
unconsolidated structured entities include segregated mandates and pooled
funds vehicles. Disclosure of the Group's exposure to unconsolidated
structured entities has been made on this basis.
At 30 September 2023, AUM managed within unconsolidated structured entities
was £37.40 billion (2022: £35.68 billion) and within consolidated structured
entities was nil (2022: £nil).
£178,367,000 (2022: £175,396,000) in revenue was earned from unconsolidated
structured entities.
The total exposure to unconsolidated structured entities in the statement of
financial position is shown in the table below:
2023 2022
£000 £000
Management fees receivable (including accrued income) 37,159 35,069
Investments 13,270 3,534
50,429 38,603
The main risk the Group faces from its interest in unconsolidated structured
entities are decreases in the value of seed capital investments.
21 CASH AND CASH EQUIVALENTS, CASH INVESTED IN MONEY MARKET FUNDS
Cash and cash equivalents under IFRS does not include cash invested in money
market funds which is exposed to market variability. However the Group
considers its total cash reserves to include these amounts. Cash held by
consolidated funds is not considered to be available to the Group so it is not
included in cash reserves. Cash held in RPAs is collected from funds managed
by the Group and can only be used towards the cost of researching stocks. A
liability of an equal amount is included in trade and other payables. This
cash is excluded from cash reserves. A reconciliation is shown below:
2023 2022
£000 £000
Cash and cash equivalents 37,963 52,232
Cash invested in money market funds 53,542 58,687
Less: cash held in RPAs (3,813) (3,951)
Cash reserves 87,692 106,968
The Group is exposed to interest rate risk on the above balances as interest
income fluctuates according to the prevailing interest rates. The average
interest rate on the cash balances during the year was 3.0% (2022: 0.6%).
Given current interest rate levels a sensitivity rate of 1% is considered
appropriate. A 1% increase in interest rates would have increased Group profit
after tax by £713,000. An equal change in the opposite direction would have
decreased profit after tax by £627,000.
The credit risk relating to cash reserves held by the Group is spread over
several counterparties. The Group holds cash balances with RBS International
and Bank of Ireland (both with Standard & Poor's credit rating A-2) and
the Bank of New Hampshire, SMBC and Hang Seng (unrated). The remainder of the
Group's cash reserves is invested in money market funds managed by BlackRock
and Goldman Sachs, with a Standard & Poor's credit rating of A, and
Santander, with a Standard & Poor's credit rating of A-1.
22 TRADE AND OTHER PAYABLES
See accounting policy at note 31 (S).
2023 2022
£000 £000
Trade payables 730 1,078
Taxation and other social security 1,166 1,981
Other payables 4,833 4,738
Accruals and deferred income 38,080 45,827
44,809 53,624
The most significant accrual at the year end relates to variable staff
remuneration.
23 LOANS
The Group had retained a US$13 million revolving credit facility ("RCF") with
RBS International which expired in January 2023. No amounts were drawn down or
repaid in the current or prior periods.
24 ORDINARY SHARES
Issued and fully paid 2023 2022 2023 2022
No. of shares No. of shares £000 £000
000s 000s
At 1 October and 30 September 132,597 132,597 1,326 1,326
Ordinary shares have a par value of £0.01 per share. Each ordinary share
carries the right to attend and vote at general meetings of the Company.
Holders of these shares are entitled to dividends as declared from time to
time.
25 OWN SHARES
No. of shares £000
At 1 October 2021 4,103,395 4,117
Issuance of shares to EBT 2012 1,078,000 8,781
Satisfaction of option exercises and RSS vesting (1,916,286) (4,770)
At 30 September 2022 3,265,109 8,128
Purchase of shares by EBT 2012 2,074,454 15,114
Satisfaction of option exercises and RSS vesting (1,065,287) (4,637)
At 30 September 2023 4,274,276 18,605
The EBT hold shares for RSS awards until they vest or to satisfy share option
exercises. Included within Own Shares are 2,695,682 shares held in a nominee
account in respect of the Restricted Share Scheme as described in note 9.
26 FINANCIAL COMMITMENTS
At 30 September 2023 the Group has outstanding commitments to invest up to the
following amounts into private equity funds that it manages:
· €1,105,516 into Impax New Energy Investors III LP (2022:
€1,276,000); this amount could be called on in the period to 31 December
2026; and
· €952,658 into Impax New Energy Investors IV SCSp Luxembourg (2022:
€1,446,977); this amount is called on in the period to 31 October 2031.
The fund life for Impax New Energy Investors II LP ended during the Period and
all remaining uncalled capital commitments were cancelled (2022: outstanding
commitments of €57,499).
27 RECONCILIATION OF PROFIT BEFORE TAX TO CASH GENERATED FROM OPERATIONS
This note should be read in conjunction with the consolidated cash flow
statement. It provides a reconciliation to show how profit before tax, which
is based on accounting rules, translates to cash flows.
2023 2022
£000 £000
Profit before taxation 52,106 72,559
Adjustments for income statement non-cash charges/income:
Depreciation of property, plant & equipment and amortisation of intangible 5,073 4,257
assets
Finance income (3,130) (7,950)
Finance expense 5,271 574
Share-based payment charges 6,535 6,151
Loss on disposals of property, plant and equipment 31 -
Adjustment for statement of financial position movements:
(Increase)/decrease in trade and other receivables (3,774) 1,031
(Decrease)/increase in trade and other payables (8,894) 3,699
Cash generated from operations 53,218 80,321
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