REG - Impax Asset Mngmnt - Final Results <Origin Href="QuoteRef">IPX.L</Origin> - Part 2
29/11/2017 07:07
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Remuneration report. Charges in respect of share-based payments are offset against the total cash bonus pool paid to employees.
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 the funds. Contributions totalling £34,000 (2016: £37,000) were payable to the funds at the year end and are included in trade and other payables.
Employees
The average number of persons (excluding Non-Executive Directors and including temporary staff), employed during the year was 73 (2016: 69).
2017 2016
No. No.
Listed Equity 24 23
Private Equity 12 12
Marketing 16 15
Group 21 19
73 69
4. SHARE-BASED PAYMENT CHARGES
The total expense recognised for the year arising from share-based payment
transactions was £1,130,000 (2016: £512,000). The charges arose in respect of
the Group's Restricted Share Scheme ("RSS") and the Group's Employee Share
Option Plan ("ESOP") which are described below. Options are also outstanding
in respect of the Group's Long-Term Incentive Plan ("LTIP") which fully vested
on 30 September 2012. Details of all outstanding options are provided at the
end of this note.
Restricted share scheme
Restricted shares have been granted to employees in prior years under the 2014
and 2015 plans and in the current year under the 2017 plans. In November
2017, the Board also approved the grant of a further 675,000 restricted shares
under the 2017 plan. Details of the awards granted along with their valuation
and the inputs used in the valuation are described in the table below. The
valuation was determined using the Black-Scholes-Merton model with an
adjustment to reflect that dividends are received during the vesting period.
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.
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.
2014 RSS 2015 RSS 2017 RSS
Award originally granted 1,250,000 3,140,000/1,000,000 2,550,000/500,000/675,000
In respect of services provided for period from 1 Oct 2013 1 Oct 2014/9 Feb 2016 14 Dec 2016/11 May 2017/1 Oct 2016
Award value 49.9p 42.1p/41.5p 52.2p/87.7p/142.3p
Weighted average share price on grant 52.5p 41.4p 74.0p
Expected volatility 32% 32%/31% 29%/29%/29%
Weighted average option life 5.3yrs 4.9yrs 4.1yrs
Expected dividend rate 3% 3%/4% 4%/2%/2%
Risk free interest rate 1.2% 1.2%/0.8% 0.6%/0.6%/0.6%
Restricted shares outstanding
2017
Outstanding at 1 October 2016 4,890,000
Granted during the year 3,050,000
Outstanding at 30 September 2017 7,940,000
Employee share option plan
Under this Plan options over the Company's shares were granted to employees
between 2011 and 2015. Details of the options granted along with their
valuation and the inputs used in the valuation are described below.
The strike price of these options was set at a 10 per cent premium to the
average market price of the Company's shares for the 30 business days (2015
ESOP: five days) following the announcement of the results for each of the
respective preceding financial years. The 2011 - 2013 ESOP options have
vested. The 2014 and 2015 options do not have performance conditions but do
have a time vesting condition such that they vest subject to continued
employment on 31 December 2017.
In November 2017, the Board also approved the grant of a further 1,300,000
options under the 2017 plan. The strike price of these options will be set at
a 10 per cent premium to the average market price of the Company's shares for
the five business days following the announcement of results for the current
year. The options do not have performance conditions but do have a time
vesting condition such that the options vest subject to continued employment
on 31 December 2020.
Options outstanding
An analysis of the options over the Company's shares is provided below:
Number Weighted average exercise pricepence
Options outstanding at 1 October 2016 17,409,500 35.5
Options granted 100,000 45.4
Options forfeited (200,000) 49.6
Options exercised (3,845,000) 28.1
Options expired - -
Options outstanding at 30 September 2017 13,464,500 37.5
Options exercisable at 30 September 2017 9,210,500 31.0
Exercise prices for the options outstanding at the end of the period were
49.6p for the ESOP 2011, 37.6p for the ESOP 2012, 47.9p/54.0p for the ESOP
2013, 56.9p for the ESOP 2014 and 45.4p for the ESOP 2015. The weighted
average remaining contractual life was 2.33 years.
5. (CHARGES)/CREDITS RELATED TO LEGACY LONG-TERM INCENTIVE SCHEMES
2017 2016
£000 £000
LTIP NIC credit/(charge) (421) (3)
LTIP additional payments credit (232) 55
Advisory fees incurred on EBT settlement - (25)
(653) 27
LTIP NIC CHARGE
The Group made option awards under its LTIP plan in 2011. These awards vested
in 2012 but 2,969,500 remained outstanding at 30 September 2017. The Group
pays an Employers NIC charge when individuals exercise their options and
accordingly accrues for the estimated amount that would be payable on exercise
using the year end share price. The amount accrued therefore varies from
period to period in line with the Company's share price with any adjustment
recorded through the income statement.
LTIP ADDITIONAL PAYMENTS
Individuals who received LTIP options have earnt a retention payment which is
payable after the end of the financial year in which each employee exercises
his or her LTIP options. The payments are equal to the corporation tax
benefit realised by the Group on the exercise of the LTIP options minus the
amount of the Employers NIC suffered by the Group on the exercise of the LTIP
options. No payments were made during the year leaving £413,000 accrued at the
year end.
6. TAXATION
The Group is subject to taxation in the countries in which it operates (the
UK, the US and Hong Kong) at the rates applicable in those countries. The
total tax charge includes taxes payable for the reporting period (current tax)
and 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
2017 2016
£000 £000
Current tax (credit)/expense:
UK corporation tax - 2,226
Foreign taxes 432 108
Adjustment in respect of prior years (2,038) 347
Total current tax (1,606) 2,681
Deferred tax (credit)/expense:
Charge for the year 167 (1,253)
Adjustment in respect of prior years (375) (406)
Total deferred tax (208) (1,659)
Total income tax (credit)/expense (1,814) 1,022
A tax credit of £2,540,000 is also recorded in equity in relation to tax
deductions on share awards arising due to the share price increase.
(b) Factors affecting the tax charge for the year
The weighted average tax rate for the year is 19.5%. The tax assessment for
the period is lower than this rate (2016: lower). The differences are
explained below:
2017 2016
£000 £000
Profit before tax 5,853 5,199
Tax charge at 19.5% (2016: 20%) 1,141 1,040
Effects of:
Increase in tax deductions re: share awards from share price increases (462) -
Non-taxable income (475) -
Non-deductible expenses and charges 200 24
Adjustment in respect of prior years (2,413) (59)
Effect of higher tax rates in foreign jurisdictions 183 59
Change in UK tax rates 12 (42)
Total income tax (credit)/expense (1,814) 1,022
(c) Deferred tax
The deferred tax asset/(liability) included in the consolidated statement of
financial position is as follows:
Accelerated capital allowances Income not yet taxable Share-based payment scheme Other temporary differences Total
£000 £000 £000 £000 £000
As at 1 October 2015 41 (2,936) 584 74 (2,237)
Credit to equity - - - 38 38
Exchange differences on consolidation - (216) - - (216)
Credit/(charge) to the income statement 3 2,112 77 (533) 1,659
As at 30 September 2016 44 (1,040) 661 (421) (756)
Credit/(charge) to equity - - 2,540 (26) 2,514
Exchange differences on consolidation - (19) - - (19)
Credit/(charge) to the income statement (35) (601) 386 458 208
As at 30 September 2017 9 (1,660) 3,587 11 1,947
A reduction in the UK corporation tax rate to 17% (effective 1 April 2020) was
substantively enacted on 6 September 2016. The deferred tax liability at 30
September 2017 has been calculated using this rate.
7. 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 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 option
awards and restricted share plan awards.
Earnings for the year Shares Earnings per share
£000 000 pence
2017
Basic 7,206 111,251 6.48p
Diluted 7,206 111,251 6.24p
2016
Basic 4,043 111,794 3.62p
Diluted 4,177 114,399 3.62p
Earnings are reduced by £461,000 for the year ended 30 September 2017 to
reflect the profit attributable to holders of restricted shares, which are
treated as contingently returnable shares.
The weighted average number of shares is calculated as shown in the table
below:
2017 2016
£000 £000
Issued share capital 127,749 127,749
Less own shares held not allocated to vested LTIP options (16,498) (15,955)
Weighted average number of ordinary shares used in the calculation of basic EPS 111,251 111,794
Additional dilutive shares re share schemes 10,495 10,690
Adjustment to reflect option exercise proceeds and future service from employees receiving awards (6,349) (8,085)
Weighted average number of ordinary shares used in the calculation of diluted EPS 115,397 114,399
The basic and diluted EPS includes vested LTIP option shares on the basis that
these have an inconsequential exercise price (1p or 0p).
8. 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 year therefore comprises the
prior year final dividend and the current year interim dividend.
Dividends declared/proposed in respect of the year
2017 2016
pence pence
Interim dividend declared per share 0.7 0.5
Final dividend proposed per share 2.2 1.6
Total 2.9 2.1
The proposed final dividend of 2.2p will be submitted for formal approval at
the Annual General Meeting to be held on 2 March 2018. No special dividend is
proposed for payment in respect of the current year. 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 £2,676,000.
Dividends paid in the year
2017 2016
£000 £000
Prior year final dividend - 1.6p, 1.2p 1,856 1,344
Prior year special dividend - 0p, 0.5p - 561
Interim dividend - 0.7p, 0.5p 816 557
2,672 2,462
9. CURRENT ASSET INVESTMENTS
The Group makes seed investments into its own Listed Equity funds and invests
in its Private Equity funds. Where the funds are consolidated the underlying
investments are shown in the table below as part of Listed Investments.
Investments made in unconsolidated funds are shown as part of Unlisted
investments.
Unlisted investments Listed investments Total
£000 £000 £000
At 1 October 2015 3,329 4,090 7,419
Additions 116 7,216 7,332
Fair value movements 566 2,604 3,170
Repayments/disposals (2,443) (2,667) (5,110)
At 30 September 2016 1,568 11,243 12,811
Additions 14 4,977 4,991
Fair value movements (57) 1,358 1,301
Repayments/disposals (458) (5,635) (6,093)
At 30 September 2017 1,067 11,943 13,010
Listed investments
Impax Environmental Leaders Fund (consolidated)
On 11 January 2016, the Group launched the Impax Environmental Leaders
(Ireland) Fund ("IEL") and invested from its own resources £3,000,000 in the
fund. IEL invests in listed equities using the Group's Leaders Strategy. The
Group has consolidated this fund throughout this period with its underlying
investments included in listed investment in the table above.
Impax Global Equity Opportunities Fund (consolidated)
On 23 December 2014, the Group launched the Impax Global Equity Opportunities
Fund ("IGEO") and invested from its own resources £2,000,000 in the fund.
IGEO invests in listed equities using the Group's Global Equity Strategy. The
Group's investment represented more than 50 per cent of IGEO's Net Asset Value
from the date of launch to 30 September 2017 and the fund has been
consolidated throughout this period with its underlying investments included
in listed investments in the table above.
Impax Food and Agriculture Fund (consolidated)
On 1 December 2012, the Group launched the Impax Food and Agriculture Fund
("IFAF") and invested £2,000,000 from its own resources into the fund. The
Group redeemed its investment in the Fund in 2017 for £3,380,000.
Unlisted investments
Private equity funds (not consolidated)
The Group has invested in its private equity funds, Impax New Energy Investors
LP, Impax New Energy Investors II LP and Impax New Energy Investors III LP
("INEI", "INEI II" and "INEI III"). The investments represent 3.76 per cent,
1.14 per cent and 1.83 per cent respectively of these funds.
The INEI investment is recorded at a fair value of £nil. The fund held
investments in Spanish solar assets which were adversely affected by the
Spanish government's changes to tariffs earnt by these investments. A claim
for compensation from the Spanish government is currently being considered by
the European Court of Arbitration. In the event that the claims for
compensation are successful the Group would receive its share of the
compensation.
The carrying value of the investments in INEI II is recorded at a fair value
of £614,000. The majority of these investments held by this fund are subject
to sales processes. The fair value is set at a discount to the bids received
as part of these processes.
The Group has a 1.83 per cent partnership share in Impax New Energy Investors
III LP, a private equity partnership managed by the Group. The Group has made
an investment of £14,000 at the reporting date. The Group has a commitment to
invest up to E4,000,000 into this partnership.
Ensyn Corporation (not consolidated)
The Group has an investment in the Ensyn Corporation which is recorded at a
fair market value of £439,000. The valuation is determined on the price of the
latest fair market transaction in this entity.
The unlisted investments include £628,000 in related parties of the Group
(2016: £1,114,000).
10. CASH AND CASH EQUIVALENTS, CASH INVESTED IN MONEY MARKET FUNDS AND
LONG-TERM DEPOSITS
Cash and cash equivalents under IFRS does not include deposits in money market
funds or cash held in deposits with an original maturity of more than three
months. However, the Group considers its total cash reserves to include these
amounts. Cash held by consolidated funds is not available to the Group so is
not included in cash reserves. A reconciliation is shown below:
2017 2016
£000 £000
Cash and cash equivalents 12,932 2,804
Cash invested in money market funds and long-term deposit accounts 7,780 12,891
Less cash and cash equivalents held by consolidated funds (348) (292)
20,364 15,403
11. ORDINARY SHARES
2017 2016
£000 £000
Issued and fully paid
127,749,098 ordinary shares of 1p each 1,277 1,277
1,277 1,277
12. OWN SHARES
Own shares Own shares
Number £000
At 1 October 2015 18,292,620 5,791
Satisfaction of option exercises (503,000) (207)
EBT 2012 purchases 3,598,219 1,547
At 30 September 2016 21,387,839 7,131
Satisfaction of option exercises (3,845,000) (1,448)
EBT 2012 purchases 1,466,493 950
At 30 September 2017 19,009,332 6,633
13. ACQUISITION OF PAX WORLD MANAGEMENT LLC
On 18 September 2017, the Group announced its intention to acquire 100% of Pax
World Management LLC ("Pax"), a US-based investment manager. The proposed
acquisition is subject to certain closing conditions, including approval by
the shareholders of the mutual funds managed by Pax and receipt of a capital
waiver from the FCA.
Pax is headquartered in Portsmouth, New Hampshire USA and has AUM of £3.4
billion (US$4.5 billion) at 30 September 2017.
The Group will acquire 100% of Pax at an initial valuation of US$52.5m, with
additional contingent payments of up to US$37.5m payable in 2021, subject to
Pax's performance.
The proposed acquisition is to buy:
(1) exiting shareholders' interest (which represents approximately 83.3 per
cent of Pax's issued capital) for US$44.2 million in cash and Impax equity at
closing, plus contingent payments of up to US$31.3 million and
(2) management shareholders' interest (which represents approximately 16.7 per
cent of Pax's issued capital) in exchange for Impax shares in 2021 valued at a
minimum of US$8.3 million, plus contingent payments up to US$6.3 million
The initial consideration will be funded through a US$26m debt facility
provided by RBS, the issuance of equity to a value of US$6.1 and through use
of Impax cash reserves.
The transaction is expected to complete by the end of February 2018.
The Group incurred £999,000 of costs on the acquisition of Pax in the period.
These costs have been classified as exceptional and are shown separately on
the face of the income statement. Further costs are contingent on completion
of the acquisition and will be recorded in the year ended 30 September 2018.
14. ACCOUNTING POLICIES
Basis of preparation
These financial statements have been prepared in accordance with International
Financial Reporting Standards ("IFRSs") adopted for use by the European Union.
At the time of approving the financial statements, the Directors have a
reasonable expectation that the Group has adequate resources to continue in
operational existence for the foreseeable future and have concluded that it is
appropriate to adopt the going concern basis in preparing the financial
statements of the Group.
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.
The financial statements are presented in Sterling. All amounts have been
rounded to the nearest thousand unless otherwise indicated.
This information is provided by RNS
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