REG - AJ Bell PLC - Final Results
01/12/2022 07:00
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RNS Number : 1533I AJ Bell PLC 01 December 2022
1 December 2022
AJ Bell plc
Final results for the year ended 30 September 2022
AJ Bell plc ('AJ Bell' or the 'Company'), one of the UK's largest investment
platforms, today announces its final results for the year ended 30 September
2022.
Highlights
Financial performance
● Strong financial performance, with revenue up 12% to £163.8 million (FY21:
£145.8 million) and profit before tax (PBT) up 6% to £58.4 million (FY21:
£55.1 million)
● PBT margin of 35.6% (FY21: 37.8%), reflecting the planned investment in new
propositions, Dodl and Touch, and the impact of price reductions made in the
year to benefit customers
● Diluted earnings per share up 6% to 11.35 pence (FY21: 10.67 pence)
● Final dividend of 4.59 pence per share proposed, increasing the total ordinary
dividend for the year by 6% to 7.37 pence per share (FY21: 6.96 pence per
share), an 18(th) consecutive year of ordinary dividend growth
Platform business
● Another successful year, with customers increasing by 57,687 to 425,652 and
platform net inflows of £5.8 billion (FY21: £7.0 billion)
● Platform AUA closed the year at £64.1 billion, down 2% as the strong net
inflows in the year were offset by adverse market movements of 11%
● Customer retention rate increased to 95.5% (FY21: 95.0%)
● Development of new simplified propositions to increase our footprint in the
D2C and advised market segments, with Dodl launched in April 2022 and Touch to
follow in 2023
AJ Bell Investments
● Assets under management ("AUM") increased by 27% in the year to close at £2.8
billion (FY21: £2.2 billion)
● Underlying net inflows in the year of £1.05 billion (FY21: £922 million)
● Excellent investment performance with all of AJ Bell's multi-asset funds
outperforming their Investment Association sector average over one, three and
five years to 30 September 2022
Michael Summersgill, Chief Executive Officer at AJ Bell, commented:
"2022 has been another successful year for AJ Bell. Our trusted, dual-channel
platform, serving both the advised and D2C markets, drove organic customer
growth of 16% to over 425,000 and delivered £5.8 billion of net inflows
across the platform. Our customer retention rate also remained extremely high
at 95.5%, evidencing the quality of our propositions and the strong service
levels we provide to our customers.
"Our continued growth has underpinned another excellent set of financial
results in a challenging year for markets. Revenue was up 12%, profit before
tax up 6% and earnings per share up 6%. Our profitable, sustainable business
model and strong financial position has supported continued investment in our
customer propositions and our people whilst enabling us to again increase our
ordinary dividend to shareholders. The Board has proposed a final dividend of
4.59 pence per share, increasing the total ordinary dividend for the year by
6% to 7.37 pence per share.
"As we grow, the efficiency of our business model enables us to share the
benefits of our scale with customers whilst still delivering strong financial
returns for shareholders. Earlier this year we announced several pricing
reductions across our platform which delivered total annualised savings to
customers of around £5 million. We will look for further opportunities to cut
costs for customers in future as we continue to grow the business.
"Our investment in new simplified customer propositions supports our long-term
growth ambitions by increasing our footprint in both the advised and
direct-to-consumer markets. Dodl, our new commission-free investing app
complements AJ Bell, our full-service D2C proposition which has recently been
renamed from AJ Bell Youinvest, enabling us to capture more retail investors
earlier in their investing journey. Next year we will be launching Touch for
the advised market, a simplified platform proposition that complements our
full-service AJ Bell Investcentre proposition. This will broaden our offering
to financial advisers, helping them serve a wider base of clients.
"The success of AJ Bell would not be possible without our staff, who continue
to drive the business forward, delivering award-winning propositions and great
service to our customers. We continue to invest in our people and have
recently enhanced our pay and benefits package for all employees. In
particular I am delighted to have introduced a new annual free share award
worth £2,000 per year for all employees outside of the senior management
team, ensuring that everyone shares in the future success of the business.
This will further strengthen the sense of ownership amongst our people which
is already a hugely important part of our culture.
"This strong culture had been built over many years under the leadership of
our co-founder, Andy Bell. It was a huge privilege to take over as CEO from
Andy in October, having worked alongside him on the Board for 11 years. We
have also implemented our succession plans for other executive roles during
the year with a good blend of internal promotions and external recruits and I
am confident we have the right team in place to take the business forward.
"Looking ahead, whilst market volatility is likely to persist in the
short-term, our focus is very much on the long-term. The structural growth
drivers for the UK investment platform market remain strong, and with around
two-thirds of our estimated £3 trillion target market still held off
platform, we have a significant growth opportunity ahead of us. To ensure we
capitalise on this, we will be investing more in our brand to improve
awareness of AJ Bell and support our long-term growth ambitions. Our
diversified revenue streams and efficient operating model ensure we can
continue investing in our propositions, our people and our brand whilst
continuing to deliver strong financial performance, and we are well positioned
heading into 2023."
Financial highlights
Year ended Year ended Change
30 September 2022 30 September 2021
Revenue £163.8 million £145.8 million 12%
Revenue per £AUA* 22.6bps 22.2bps 0.4bps
PBT £58.4 million £55.1 million 6%
PBT margin 35.6% 37.8% (2.2ppts)
Diluted earnings per share 11.35 pence 10.67 pence 6%
Total ordinary dividend per share 7.37 pence 6.96 pence 6%
Total special dividend per share nil 5.00 pence n/a
Non-financial highlights
Year ended Year ended Change
30 September 2022 30 September 2021
Number of retail customers 440,589 382,754 15%
- Platform 425,652 367,965 16%
- Non-platform 14,937 14,789 1%
AUA* £69.2 billion £72.8 billion (5%)
- Platform £64.1 billion £65.3 billion (2%)
- Non-platform £5.1 billion £7.5 billion (32%)
AUM* £2.8 billion £2.2 billion 27%
Customer retention rate 95.5% 95.0% 0.5ppts
*see definitions
Contacts:
AJ Bell
● Shaun Yates, Investor Relations Director +44 (0) 7522 235 898
● Charlie Musson, Brand and PR Director +44 (0) 7834 499 554
Results presentation details
A pre-recorded video with Michael Summersgill (CEO) and Peter Birch (CFO)
discussing these results will be available on our website
(ajbell.co.uk/investor-relations (http://www.ajbell.co.uk/investor-relations)
) along with an accompanying investor presentation from 07.00 GMT today.
Management will be hosting a meeting for sell-side analysts at 09:00 GMT
today. Attendance is by invitation only.
Management will also be hosting a group call for investors at 15.30 GMT on 7
December. Please contact Camilla Crowe at c.crowe@numis.com for registration
details.
Forward-looking statements
The full year results contain forward-looking statements that involve
substantial risks and uncertainties, and actual results and developments may
differ materially from those expressed or implied by these statements. These
forward-looking statements are statements regarding AJ Bell's intentions,
beliefs or current expectations concerning, among other things, its results of
operations, financial condition, prospects, growth, strategies, and the
industry in which it operates. By their nature, forward-looking statements
involve risks and uncertainties because they relate to events and depend on
circumstances that may or may not occur in the future. These forward-looking
statements speak only as of the date of these full year results and AJ Bell
does not undertake any obligation to publicly release any revisions to these
forward-looking statements to reflect events or circumstances after the date
of these results.
Chair's statement
Dear shareholder
"I have long admired AJ Bell and its commitment to helping people to invest.
At AJ Bell we are a purpose-driven organisation who put our customers at the
heart of everything we do."
I am pleased to be writing to you as Chair, having joined the business in July
last year before taking over as Chair at the AGM in January.
I have spent a lot of time getting to know many people across the business,
which has been wonderful. I have been greatly impressed by the calibre of our
employees and the collegiate culture. I have also had the pleasure of engaging
with some of our shareholders and other key stakeholders, discussing both AJ
Bell's business and the wider platform market. It has been insightful to hear
the feedback and to understand what each stakeholder group believes our
priorities should be going forward.
During the year the Board's long-established succession plan came to fruition
with Andy stepping down on 30 September 2022 and our Deputy CEO, Michael
Summersgill, being appointed to the role. My priority as Chair has been to
ensure a smooth transition of responsibilities and this has been achieved.
As co-founder and CEO, Andy has been the heart and soul of AJ Bell for 27
years, shaping it into the successful listed business it is today. On behalf
of the Board I would like to thank Andy for the incredible legacy he has
created and strong culture that we shall build on going forward.
Uncertainties in the wider economy and the increasing pressures from the
rising cost of living are bringing many challenges to our customers, our
people and our wider stakeholders. As a Board we are particularly mindful of
this and so our focus continues to be on the wellbeing of our staff, while
maintaining a high-quality, value for money service to our customers and
delivering positive outcomes for all our stakeholders.
Overview
I am pleased to report that we have delivered a strong financial performance
during the year with PBT of £58.4 million. Over the past 12 months customer
numbers increased by 57,835 to 440,589 and we delivered £3.8 billion of net
inflows of AUA, ending the year with total AUA of £69.2 billion. This strong
performance demonstrates the resilience of our business model during a
turbulent year and continued uncertainties around the UK economy. The
Financial Review below contains further information on this year's
performance.
Our governance structure and cohesive culture provide a solid framework for
achieving our long-term strategic goals and the Board remains focused on
delivering AJ Bell's purpose which is simply to help people to invest.
Governance and culture
The Board remains focused on applying high standards of corporate governance
and ensuring these principles are embedded into our culture. We believe
effective stakeholder engagement is key to the long-term success of our
business and we aim to proactively engage with our key stakeholders and
understand what is most important to them.
We welcomed the opportunity to engage with our staff and shareholders in
person again this year as COVID restrictions lifted, providing invaluable
insight into the operation and culture of our business, particularly for those
Board members who joined us during 2021. I was delighted to be appointed as
the nominated employee engagement director in January this year, which has
given me an opportunity to refresh the Employee Voice Forum (EVF), increasing
the frequency of our gatherings and making it more inclusive.
We have been particularly mindful of the impact of cost-of-living pressures on
our people and the wider implications of a challenging labour market during
2022. With this in mind we have made a significant investment in pay and
benefits from 1 October 2022 and believe that the needs of our workforce as a
whole have been taken into account through a combination of higher pay rises,
enhanced benefits, increased bonus pool and a free share scheme for all
employees. To ensure we considered those areas most important to our staff for
our benefits review, we sought feedback through a staff survey which
highlighted that benefits associated with health and wellbeing, saving for the
future and share ownership were considered most important.
Consideration of our wider stakeholders in some of our key decisions in the
year are outlined in our Section 172 statement.
The Board continues to provide strong support and appropriate challenge to the
executive team to ensure the Group's strategy is appropriate, achievable and
ultimately delivered. During the year the Board worked closely with Michael
Summersgill, who led a key project to replace the current Executive Management
Board (EMB) structure with an enlarged Executive Committee (ExCo) and
sub-committees. The new ExCo structure will provide additional executive level
oversight and support the ongoing growth of the business.
Full details of the work of the Board, its Committees and the revised
executive structures are set out in the Corporate Governance report.
Responsible business
We have made good progress during the year to further embed our environmental,
social and governance (ESG) framework into our wider business strategy. Our
senior management team has been busy driving forward a number of key
objectives around diversity and inclusion (D&I), a new charitable
framework and our paperless ambition. In addition, we have also looked
carefully at our own climate impact and have produced our first Task Force on
Climate-related Financial Disclosures (TCFD) report. Peter Birch became the
lead Executive for ESG, following his appointment as Chief Financial Officer
(CFO), taking the reins from Michael Summersgill.
Particular focus has been given to establishing a D&I framework this year,
taking into account both demographic and cognitive diversity, which the Board
approved in July. Our primary focus has been on senior management and the
talent pipeline, although we are also looking more broadly at the wider
workforce. I am confident that the work this year has formed a solid basis for
the Group's continued development in this area.
I am also particularly pleased to report the formation of a Non-Executive
Director forum during the year to provide further oversight and challenge of
specific ESG initiatives. Our first meeting in July focused on a deep dive
into the D&I framework, reflecting its importance to the Board. Further
details on our ESG-related activities can be found in our Responsible Business
section.
Board changes and succession
This has been a year of change for the Board, welcoming new Executive members
and overseeing succession plans. I succeeded Les Platts as Chair at the 2022
AGM. Les provided excellent stewardship of the Group during his tenure and the
Board wishes him well for the future.
Andy stepped down as CEO from 30 September 2022, succeeded by Michael
Summersgill, our Deputy CEO. As a Board we would like to formally welcome
Michael in his new role and look forward to supporting him in driving the
growth of the business.
As a Board we were keen for Andy to remain involved in the business in a
Non-Executive capacity to ensure the business continues to benefit from his
deep experience of AJ Bell and the wider investment platform market.
Although we were unable to agree our preferred role for Andy with the
Financial Conduct Authority (FCA), we are delighted that he will continue to
support the business in a consultancy role, focusing on building the AJ Bell
brand and assisting AJ Bell's campaigning on behalf of retail investors and
financial advisers.
Following the conclusion of our dialogue with the FCA, I decided with great
regret that I should step down from the Board once a successor is found, so a
new Chair can take the Board forward. I will continue to work with the
business as a consultant, focusing on our Money Matters initiative to
encourage more women to consider investing and to also further the Company's
progress on diversity and inclusion.
Laura Carstensen also stepped down from the Board at the 2022 AGM and we thank
her for her valuable contribution to the Group during her tenure. As part of
the Board's succession plans, Evelyn Bourke was appointed Senior Independent
Director (SID) and Margaret Hassall Chair of the Remuneration Committee.
As previously announced, we welcomed Roger Stott to the Board on 1 October
2021 as Chief Operating Officer (COO), and more recently, Peter Birch as CFO
from 1 July 2022. The Board has overseen an orderly transition for the role of
CFO from Michael Summersgill who was appointed Deputy CEO at the start of the
year.
We continually monitor our Board composition and effectiveness through the
work of the Nomination Committee to ensure we have the right skillset and
breadth of experience with which to function as an effective Board. Following
the commencement of the recruitment of a new Chair, the Board has agreed to
pause the search for two new Non-Executive Directors until that process is
completed. Both the Board and I are extremely mindful of the importance of
having a diverse range of skills, experience and perspective around the Board
table and this will be uppermost in our minds throughout the recruitment
process.
Further details on Board changes can be found in the Nomination Committee
report.
Dividend
In line with our commitment to a progressive dividend policy, the Board is
pleased to announce a final ordinary dividend of 4.59p per share, reflecting
the financial strength of the business and strong capital position. The final
ordinary dividend will be paid, subject to shareholder approval at our AGM on
8 February 2023, to shareholders on the register at the close of business on
20 January 2023.
This brings the total ordinary dividend for the financial year to 7.37p per
share, representing an increase (excluding the special dividend in the prior
year) of 6% on the previous year.
Building on Andy's legacy as we look ahead
Andy's achievements in building AJ Bell cannot be overstated. From SIPP-only
offering in 1995 to today's dual-channel FTSE 250 listed platform business,
Andy has been the driving force. He has of course also created a great team to
take the business forward, motivated by the same purpose; to help people to
invest. While the difficult economic outlook may lessen the immediate
opportunity for growth, over the long term, it is clear that the fundamental
drivers of an expanding addressable market remain firmly in place. With a
focus on ease of use and value for money, and having also invested in our
simplified propositions, Dodl and Touch, AJ Bell is well-positioned to both
gain market share and to capitalise on an expanding universe of investors,
both direct and advised.
AJ Bell is financially strong with a well-capitalised and highly
cash-generative business model, and the Board remains confident in the
long-term prospects of the business.
Baroness Helena Morrissey DBE
Chair
30 November 2022
Additional Board focus areas
Culture:
AJ Bell has always prided itself on a strong collegiate culture; staff
recruited over the pandemic have obviously not had as many opportunities to
benefit from this. Particular efforts are being made to ensure that this is a
focus for managers as well as the Board.
Diversity and inclusion:
Having founded the 30% Club and now Chair of the Diversity Project, this is
clearly something that matters greatly to me. I have seen so often the
benefits yielded by improving diversity of thought and creating an inclusive
workplace. So, it has been great to see us push diversity and inclusion higher
onto the Board's agenda this year. We have established a framework within
which we can improve the current situation to ensure our talent is consistent
with AJ Bell's strategic ambitions. We are now also monitoring the data to
enable us to measure progress. Our D&I framework encompasses both
demographic and cognitive diversity; while the initial focus has been on
senior management and the talent pipeline, the commitment is there to widen
this to the broader workforce.
Money Matters - helping women invest:
There is not a single good reason why women should have less money than men.
Despite that, the fact remains that on average women have less than half the
levels of savings and investments than men. That gender investment gap is one
of the biggest challenges facing our society today. AJ Bell is determined to
help solve this.
I am proud to be championing AJ Bell Money Matters, which is designed to give
women the information and inspiration they need to become more confident
investors. It aims to get women talking about money and investing. We have a
range of articles on our website, a dedicated podcast series, a regular
newsletter, webinars and in-person live events.
Consumer Duty:
Over the long term, the Consumer Duty should improve trust in financial
services, which in turn should lead to more people making better decisions
about their short, medium and long-term savings and investments. AJ Bell
already places good consumer outcomes at the heart of everything we do, with
good value products, simple communications and strong processes to support
customers front-and-centre. We recognise however, the step change that the FCA
is expecting of firms to proactively evidence and review how they deliver good
consumer outcomes.
As a Board we are actively engaged in the Consumer Duty and will be overseeing
the delivery of the implementation plan ahead of the regulatory deadline of
July 2023.
Chair succession:
As announced on 27 September, I advised the Board that I will stand down from
the Board once a suitable replacement as Chair is found. Work has already
commenced on the formal recruitment process, which is being led by Evelyn
Bourke, the Senior Independent Director. My focus will be to ensure an
efficient handover of responsibilities to the successor in due course
Chief Executive Officer's review
Overview
"The foundations are firmly in place for us to deliver long-term growth in
both the advised and D2C segments of the platform market. My focus is on
continuing to evolve our platform products and service capabilities to meet
the ever-changing needs of advisers and customers."
It is a huge privilege to take on the role of CEO from Andy, having worked
alongside him on the Board since 2011. During that time, we have built the
Company into one of the largest investment platforms in the UK, establishing a
track record of sustained organic growth and high-quality service to our
customers. Helena has covered Andy's many achievements in his time as CEO, so
I will not repeat them here, but I will take the opportunity to put on record
my thanks for the faith he has shown in me and the support he has given me
over the years.
I believe we are well placed to maintain our long-term growth and capitalise
on the opportunities in a fast-growing platform market. The addressable market
is estimated at £3 trillion, with two-thirds currently held off-platform.
Each year a significant proportion of our new business comes from assets
already in the financial system, where customers transfer assets from adjacent
markets to access the increased flexibility, investment choice and value that
a platform can offer. I expect this trend will continue and our dual-channel
offering puts us in a unique position to take advantage, maximising our growth
opportunity by serving both the advised and D2C segments of the market.
Our strategy remains focused on providing high-quality platform products to
meet the evolving needs of investors, emphasising user experience, excellent
service, and value for money. Our full-service D2C platform, now called AJ
Bell (formerly Youinvest), and our full-service advised platform Investcentre,
have been established for many years and continue to attract thousands of new
customers every year. They are complemented by our simplified platform
products, Dodl (which was brought to the market in April 2022), and Touch
(which is scheduled to launch in 2023), furthering our growth potential by
targeting a broader range of customers.
Integrated throughout our platform products is our range of in-house
investment solutions. These low-cost funds and managed portfolios have
delivered consistently strong performance and are well positioned to continue
their strong growth.
In 2022, we achieved another year of strong customer growth in challenging
market conditions. The macroeconomic outlook significantly changed during the
year, with UK inflation at levels not seen for 40 years, interest rates rising
to their highest level in 13 years and global asset values falling. In the
short term this has reduced both the appetite, and funds available, for
investing, however our dual-channel business model has a proven history of
delivering growth under different macroeconomic conditions, as demonstrated
again this year.
Our business model proved its strength
Our platform business delivered net AUA inflows of £5.8 billion over the
year, once again demonstrating the strength of our dual-channel model, with
both advised and D2C channels performing very well. Advised platform inflows
were strong throughout the year as advisers helped their clients to navigate
significant market volatility, whilst our D2C platform also delivered
substantial inflows and remained resilient during the traditionally quieter
summer months, with £0.3 billion of net inflows in the final quarter despite
a slowdown in new contributions from customers impacted by the rising cost of
living.
Testament to our high-quality products, we achieved organic growth in platform
customer numbers of 57,687, an increase of 16% in the year. Our excellent
customer service levels also ensured our customer retention rates remained
high, increasing to 95.5% (FY21: 95.0%).
Revenue margin on AUA climbed to 22.6bps (FY21: 22.2bps) as our diversified
revenue streams once again ensured we are well placed to succeed in different
macroeconomic environments. We delivered a 31% increase in recurring ad
valorem revenue due to higher average AUA in the year and the rise in the UK
base rate leading to increased interest income, providing protection from
inflationary pressures in our cost base. We continue to scale the business
effectively, which in combination with increasing interest rates, enabled us
to reduce our charges (representing annualised customer savings of
approximately £5 million), and increase the interest rates we pay to
customers on cash held on the platform.
Alongside delivering value for our customers, the operational efficiency of
our business model means we also continue to deliver strong returns for
shareholders, reflected in our record PBT of £58.4 million whilst also
investing in our brand, technology, people and products to ensure we take
advantage of the significant opportunities presented by the platform market.
Our strong financial performance is reflected in the 6% increase in basic
earnings per share to 11.39p (FY21: 10.71p) with our well-capitalised, highly
cash-generative business model meaning that the Board has yet again
recommended an increased ordinary dividend for the 18(th) successive year.
Advised
The advised market has remained resilient in the face of current market
headwinds, and the strength of our Investcentre platform has delivered growth
in customer numbers of 18,451 to 145,371 (FY21: 126,920), an increase of 15%.
Strong net AUA inflows of £3.3 billion were offset by £4.3 billion of
adverse market movements, resulting in closing AUA of £44.8 billion (FY21:
£45.8 billion). During the year the FTSE All-Share Index fell by 7%, whilst
the FTSE 250 Index fell by 25%, reflecting the weakened markets caused by high
inflation and geopolitical uncertainty.
It was pleasing to be recognised as the 'Best Platform', 'Best Retirement
Provider' and 'Provider of the Year' for the second consecutive year at the
2022 Money Marketing Awards. Judged by a panel of industry experts, these
awards are further evidence of the high-quality service we provide to advisers
and their clients.
We have continued to develop our Investcentre platform, making several
enhancements with a focus on ease of use. We regularly review our charges to
ensure they position us well to support advisers and their clients and were
pleased to share the benefits of our scale with our customers by removing our
frictional charges for establishing and transferring SIPPs on to our platform,
where the process is initiated online, whilst also removing some of our
dealing charges.
We continue to develop Touch ahead of its launch in 2023. Touch will further
expand our offering for advisers, helping them to cater for clients looking
for a digital service model.
As part of our high-quality customer service we have strong ongoing engagement
with advisers, highlighting the value they see in us as a trusted partner. We
host a range of events providing them with industry insights, contributing to
their continuing professional development. In November 2022, we again hosted
our flagship adviser conference, Investival, with over 300 finance
professionals attending. We have also continued to deliver numerous other
events including Luminary and our 'On the Road' seminars alongside monthly
'Off the Road' webinars due to strong demand.
D2C
Our D2C customer numbers grew by 39,236 in the year to 280,281 (FY21:
241,045), an increase of 16%. We delivered net AUA inflows of £2.5 billion,
offset by adverse market movements of £2.7 billion resulting in closing AUA
of £19.3 billion (FY21: £19.5 billion). We are pleased by the continued
growth of our full-service D2C platform through challenging market conditions,
with the strength of the product underpinned by an excellent 95.8% customer
retention rate (FY21: 94.8%). In the final quarter, which is typically
quieter, we experienced a slowdown in new contributions from customers as
disposable incomes were squeezed across UK households by the rising cost of
living.
Our full-service D2C platform is highly valued by customers, as evidenced by
the multitude of industry awards it has won during the year, including being
recognised as a Which? Recommended Investment Platform provider for the fourth
consecutive year.
We rebranded AJ Bell Youinvest to AJ Bell in October 2022. We have continued
to develop the AJ Bell platform during the year, rolling out multiple
enhancements focused on ease of use. In July we started beta-testing a new
pension finding service, simplifying the pension consolidation journey for our
customers - by providing us with some basic information, we will find their
previous pensions free of charge. During the coming year, we will continue to
trial and develop this service, enabling customers to combine their pensions
into their AJ Bell pension in just a few quick and simple steps. We also added
new pay by bank functionality: this feature utilises open banking to direct
customers to their online bank account before transferring funds via Faster
Payments, arriving in their account almost instantly and in just a few clicks.
Our efficient operating model and robust cost control allow us to simplify and
reduce charges for our customers to ensure we continue to provide excellent
value for money. We reviewed our trading model following the higher levels of
dealing activity experienced during the pandemic, in order to reduce the costs
for customers. As a result, we were pleased to reduce our FX commission
rates on 1 July, whilst also simplifying our dividend re-investment charge,
reducing the cap on custody charges for funds and removing charges for
in-specie transfers out. Our low prices position us well at a time where
customers are increasingly looking for value.
Dodl is a simplified investment app which we launched in April and sits
alongside our existing D2C platform product. Together they provide great value
investment platform options for retail investors, catering for all levels of
experience and investment needs. Dodl offers ISAs, LISAs, pensions and GIAs
with an annual charge of just 0.15% and no commission for buying or selling
investments. The simplified investment range offers customers 30 funds
catering for different themes and risk appetites. It also features 50 popular
shares in UK-listed companies for those who like to invest in their favourite
brands. Since its launch, we have added a selection of 30 US shares to its
investment universe and launched transfer functionality, allowing customers to
transfer cash and investments into Dodl's full range of accounts.
In the rising interest rate environment, our Cash savings hub is increasingly
relevant for our customers, providing access to a range of competitive notice
and fixed-term savings accounts from UK authorised banks.
Investments
Our investments business is delivering on its commitment to offer a choice of
simple, transparent investment solutions at a low cost. This range of
investment solutions continue to be a popular choice with investors, growing
strongly in the year with underlying net inflows of over £1 billion across
our multi-asset funds and managed portfolio service, excluding the impact of a
£0.2 billion one-off outflow. Total AUM closed at £2.8 billion (FY21: £2.2
billion).
Our asset allocation approach has delivered for our customers, with all our
multi-asset funds outperforming their Investment Association sector average
over the last one, three and five years. It was particularly pleasing to see
the resilient performance of our Cautious portfolio, protecting cautious
investors through difficult market conditions.
Since launching our first AJ Bell multi-asset funds in 2017 we have shared the
benefits of our increasing scale with customers, reducing the Ongoing Charges
Figure (OCF), by nearly half from 0.50% to 0.31% during that time. In February
we also implemented a new simplified pricing structure, setting a single OCF
for all of our multi-asset growth funds, making it easier for customers and
advisers to understand.
We are delighted to have won Best Medium Sized Company at the Citywire Wealth
Manager Investment Performance Awards 2022, further reflecting the strength of
our investment solutions and the progress that has been made since our first
funds were launched five years ago.
Customer services and technology
We have provided an excellent service to our customers through a year of
continued growth. This is reflected in our 4.6-star Trustpilot score, as rated
by our retail customers, and our 95.5% platform customer retention rate.
Our secure and scalable platform has been designed to facilitate growth and
drive operational gearing, utilising a hybrid technology model which allows us
to build adaptable, easy-to-use interfaces. Our platform is integral to our
business performance and we have consistently invested in its evolution to
provide great customer service.
The increased spend on our technology in the year reflects the development of
our new products, Dodl and Touch, alongside further enhancing our existing
technology infrastructure. Our developer modernisation journey has increased
our pace of change with improvements made across security, scale and
resilience. These improvements enable us to deliver change initiatives more
quickly to take advantage of our significant market opportunity. We also
continued to invest in information security as part of our ongoing commitment
to provide a safe, secure online experience for our customers.
We have embedded the FCA's new regulatory requirements for operational
resilience, effective from 31 March 2022, into our operating framework and
processes. These rules are designed to ensure regulated firms are better able
to prevent, adapt to, respond to, recover from and learn from operational
disruptions.
People and culture
Andy instilled a positive culture in the business from day one. He kept a
keen focus on it throughout his tenure as CEO, ensuring it remained a real
strength as the business grew. I see it as one of my key challenges to repeat
that achievement. As a management team, we will need to approach that
challenge differently as the business continues to evolve and grow, but
staying true to our Guiding Principles and maintaining high levels of staff
engagement will continue to be crucial.
It was very pleasing to achieve our highest ever score, and a place in the top
25 of the '100 Best UK Large Companies to work for' in 2022, maintaining our
status as a three-star company, which is the best standard of workplace
engagement, for the fifth consecutive year.
To ensure we remain an attractive employer and reward our committed employees,
we have strengthened our pay and benefits package for all employees effective
from 1 October 2022. The changes focused on protecting our employees from the
current inflationary environment, supporting their wellbeing and helping them
to strengthen their long-term finances. There are additional details of the
changes in our Responsible employer report, but the element that was most
important to me was the new share award for all employees. For those outside
of the senior management team, £2,000 worth of AJ Bell plc shares will be
awarded every year from FY23. This will help to keep share ownership and the
associated benefits at the heart of the business for years to come.
We are committed to being an inclusive workplace and ensuring the diversity of
our workforce represents the society we serve. As Helena has noted in her
Chair's statement, we have implemented a new D&I framework this year,
considering both demographic and cognitive diversity, to measure and drive our
development in this area.
We recently established our new charitable framework, the 'AJ Bell Futures
Foundation', to develop more deep-rooted, long-term partnerships in our
communities. We will work with charitable organisations to empower people to
take control of their future and their finances. We have committed to
contribute 0.5% of our PBT each year, which will be distributed to chosen
partner charities; we are delighted to have partnered with IntoUniversity and
SmartWorks for FY23.
Market developments
In the short-term, the rising cost of living is likely to lead to lower
investable income across the economy, with the UK household savings ratio
falling back towards pre-pandemic levels. We see this having a bigger impact
on the D2C market, as these customers typically have lower levels of
accumulated wealth and investable income than advised customers. Our low-cost
solutions in both segments of the platform market should be highly appealing
to investors who are increasingly looking for value.
However, over the longer-term, the structural drivers of growth in the UK
investment platform market remain strong, as detailed in our Market overview.
There are also a number of regulatory developments underway that will shape
the market over time.
We support the focus on positive customer outcomes in the FCA's new Consumer
Duty. Our ingrained customer focus, providing low-cost, easy-to-use products
and accessible investment content, positions us well to operate successfully
in the new regulatory environment but we are using it as an opportunity to
review everything we do through the new Consumer Duty lens to ensure our
products, communications and customer service functions continue to deliver
good customer outcomes.
As part of the FCA's Consumer Investments Strategy, they have announced a
review of the boundary between advice and guidance. We continue to push for a
guidance framework which we believe could provide an opportunity for
investment platforms to offer more personalised guidance to customers in the
D2C channel and help to deliver good customer outcomes. We aren't expecting
imminent change in this area, but look forward to working with the FCA on this
review.
The Pensions Dashboards proposal aims to enable people to see all of their
pension savings in one place. We will comply with all requirements and are
closely monitoring the initiative to assess what opportunities it may present.
Outlook
Whilst there are undoubtedly some short-term headwinds, the long-term growth
potential of the platform market is significant. We have put strong
foundations in place that will enable us to continue to grow the business. The
launch of Dodl during 2022 and Touch in 2023 reflects our aim to cater for
more investors and in doing so, further penetrates the platform market with
products that provide simplicity, ease of use and excellent service at a
compelling price.
Our diversified revenue model ensures we are well equipped to operate in
different macroeconomic conditions, as demonstrated by our track record of
continued growth. Whilst no business is immune to inflationary pressures, the
rise in UK base rates provides an opportunity to combat this, by rebuilding
our revenue margins that suffered in an exceptionally low interest rate
environment. Our PBT margins are expected to increase in FY23 as higher
revenue margins and the operational gearing inherent in our business model
outweigh the impact of inflationary pressures and our planned investment in
our brand and products.
Finally, I would like to thank all of my AJ Bell colleagues; without their
ongoing commitment and quality of work our continued success would not be
possible. I am incredibly excited about the future of the business as we seek
to deliver on the long-term growth opportunity in the platform market.
Michael Summersgill
Chief Executive Officer
30 November 2022
A message from Andy Bell
"It has been an honour to lead AJ Bell as CEO for over 27 years. I would
like to thank everyone involved for their support in helping to grow the
business into what it is today.
I am delighted to be handing over to Michael, who has proven himself an
outstanding leader during his 15 years in the business. His knowledge,
passion and integrity make him the right person to lead AJ Bell into what is
an exciting future."
Q&A with our new CEO
As incoming CEO, what is your focus on?
I believe that the foundations are firmly in place for us to deliver long-term
growth in both the advised and D2C markets. My focus is on continuing to
develop our platform products and service capabilities to meet the
ever-changing needs of advisers and customers, ensuring we deliver on the
significant market opportunity.
In the short term, I have also focused on increasing our brand awareness and
enhancing our employee offer at a time when the cost of living is rising.
How are you supporting staff through the cost-of-living squeeze?
We conducted a full review of our pay and benefits offering this year and I
was pleased to reward our team for their ongoing commitment by introducing
several changes with a focus on protecting them from the current inflationary
environment, supporting their wellbeing and helping them to strengthen their
long-term finances. These changes, effective from 1 October 2022, represent an
annualised increase of over 10% in total employee costs. The element that was
most important to me was the introduction of a new share award for all
employees.
Why have you introduced a new free share award?
Employee share ownership is ingrained in our culture with over 50% of our
workforce having share interests in the Company. I am passionate about
ensuring that all employees feel a sense of ownership and continue to share in
the success of the business, so one of my first acts as CEO has been to
implement an annual free share award worth £2,000 per year for all employees
outside of the senior management team.
What changes are you making to the brand?
Following the year end, we retired the AJ Bell Youinvest sub-brand with our
full-service D2C platform now rebranded to AJ Bell. This will improve the
effectiveness of our direct marketing activity by simplifying the journey for
new customers leading to better conversion rates. In addition to this, we are
evolving our brand strategy with a focus on communicating how we can help
people to feel good investing.
Why are you making these changes?
When customers entering the market are choosing a platform to invest with,
less than half research more than one provider. For most new customers, trust
and brand awareness are key drivers of their decision.
With over 27 years of experience, we have built a trusted brand through our
high-quality service and easy-to-use, award-winning platform products. We have
strong brand affinity but relatively low brand awareness. Given the lifetime
value of a customer and significant platform market opportunity, we are
increasing investment in our brand to deliver long-term growth. These brand
changes simplify our brand architecture and position us to maximise the
returns on this investment, ensuring we capture more of the new customers
coming into the market.
Financial review
Overview
"The advantages of our dual-channel model and diversified revenue streams
continue to help us deliver strong returns for shareholders whilst
simultaneously investing to deliver on our significant growth opportunity.
In an uncertain market environment, we achieved another excellent set of
financial results with revenue increasing by 12% to £163.8 million and PBT up
6% to £58.4 million."
During a year in which macro economic uncertainty impacted market values and
investor confidence, our dual-channel business model and diversified revenue
streams have combined to enable us to deliver another year of sustainable
growth. At the same time, we have been able to position ourselves to take
advantage of the future growth opportunity by reducing certain charges to
customers, developing our simplified propositions, and investing in our brand.
Our platform business delivered strong net AUA inflows of £5.8 billion (FY21:
£7.0 billion) and customer growth of 16% in a challenging operating
environment. Our ability to continue to grow at a good rate in these
circumstances is testament to the quality of our propositions.
We achieved another strong set of financial results with revenue increasing by
12% to £163.8 million (FY21: £145.8 million) and PBT up 6% to £58.4 million
(FY21: 55.1 million). The nature of our business model means we continue to
thrive in different macro economic conditions, enabling us to invest in
delivering on our significant growth opportunity whilst providing strong
returns for shareholders.
Business performance
Customers
Customer numbers increased by 57,835 during the year to a total of 440,589
(FY21: 382,754). This growth has been driven by our platform propositions,
with our advised and D2C propositions delivering growth of 15% and 16%
respectively. In addition, our platform customer retention rate remained high
at 95.5% (FY21: 95.0%).
Year ended 30 September 2022 Year ended 30 September 2021
No. No.
Advised platform 145,371 126,920
D2C platform 280,281 241,045
Total platform 425,652 367,965
Non-platform 14,937 14,789
Total 440,589 382,754
Assets under administration
Year ended 30 September 2022
Advised platform D2C platform Total platform Non-platform Total
£bn £bn £bn £bn £bn
As at 1 October 2021 45.8 19.5 65.3 7.5 72.8
Inflows 6.2 3.9 10.1 0.2 10.3
Outflows (2.9) (1.4) (4.3) (2.2) (6.5)
Net inflows / (outflows) 3.3 2.5 5.8 (2.0) 3.8
Market and other movements (4.3) (2.7) (7.0) (0.4) (7.4)
As at 30 September 2022 44.8 19.3 64.1 5.1 69.2
Year ended 30 September 2021
Advised platform D2C platform Total platform Non-platform Total
£bn £bn £bn £bn £bn
As at 1 October 2020 36.3 13.4 49.7 6.8 56.5
Inflows 6.3 4.6 10.9 0.2 11.1
Outflows (2.5) (1.4) (3.9) (0.8) (4.7)
Net inflows / (outflows) 3.8 3.2 7.0 (0.6) 6.4
Market and other movements 5.7 2.9 8.6 1.3 9.9
As at 30 September 2021 45.8 19.5 65.3 7.5 72.8
We continued to see strong AUA inflows, driven by our platform propositions.
Gross inflows in the year were £10.3 billion (FY21: £11.1 billion).
Total advised platform inflows were £6.2 billion (FY21: £6.3 billion). Our
existing customer base continued to invest at a similar rate to the prior
year, whilst average inflows from new customers were lower, impacted by a
reduction in defined benefit pension inflows which are typically higher in
value.
Total D2C platform inflows were £3.9 billion (FY21: £4.6 billion). Whilst
the rate of new customer growth slowed in the face of market headwinds, we
continued to attract good quality business with increased average inflows per
new customer.
Outflows increased by £1.8 billion to £6.5 billion (FY21: £4.7 billion).
Non-platform outflows of £2.2 billion reflect the final outflows in relation
to the previously announced closure of our institutional stockbroking service.
Outflows were also impacted by an exceptional bulk annuity purchase by an
adviser firm which resulted in a one-off outflow of £0.2 billion from both
advised platform AUA and AJ Bell Investments AUM.
The uncertainty across global markets driven by high inflation, geopolitical
uncertainty and the rising cost-of-living contributed to a £7.4 billion
adverse market movement on asset values. This compares to favourable market
movements of £9.9 billion last year, resulting in AUA closing down 5% at
£69.2 billion (FY21: £72.8 billion).
Assets under management
Our award-winning investment solutions continue to perform strongly and are
highly valued by financial advisers, their clients and our retail customers.
This is evidenced by strong underlying net inflows of £1.05 billion and
increase of 14% versus the prior year (FY21: £0.92 billion). Total AUM closed
at £2.8 billion (FY21: £2.2 billion), representing a 27% increase in the
year.
Year ended 30 September 2022 Year ended 30 September 2021
£bn £bn
Advised 1.7 1.3
D2C 1.0 0.8
Non-platform 0.1 0.1
Total 2.8 2.2
Financial performance
Revenue
Year ended 30 September 2022 Year ended 30 September 2021
£000 £000
Recurring fixed 29,787 28,598
Recurring ad valorem 102,184 77,955
Transactional 31,876 39,273
Total 163,847 145,826
Revenue increased by 12% to £163.8 million (FY21: £145.8 million).
Revenue from recurring fixed fees increased by 4% to £29.8 million (FY21:
£28.6 million), primarily due to higher pension administration revenue from
our advised platform customers.
Recurring ad valorem revenue grew by 31% to £102.2 million (FY21: £78.0
million). The key drivers of this growth were higher average platform AUA
compared to the prior year, and an increase in the average interest rate
earned on customer cash balances, as the Bank of England base rate increased
from 0.10% to 2.25% over the year.
Revenue from transactional fees decreased by 19% to £31.9 million (FY21:
£39.3 million). This decrease was due to lower dealing activity levels in the
current year, impacted by lower investor confidence, and compares to the
significantly elevated levels of activity seen in the first half of the prior
year.
Our overall revenue margin increased by 0.4bps to 22.6bps (FY21: 22.2bps),
reflecting the higher average interest rate earned on cash, partially offset
by the reduced dealing activity.
Administrative expenses
Year ended 30 September 2022 Year ended 30 September 2021
£000 £000
Distribution 14,998 11,095
Technology 32,706 25,765
Operational and support 57,162 53,115
Total 104,866 89,975
Administrative expenses increased by 17% to £104.9 million (FY21: £90.0
million).
Distribution costs increased by 35% to £15.0 million (FY21: £11.1 million)
as we continued to invest in our brand to help deliver long-term growth. We
increased D2C marketing activity over a range of channels in the year,
including for the launch of our new Dodl proposition. In February we launched
a new national TV advertising campaign whilst once again sponsoring events
such as the AJ Bell Tour of Britain and AJ Bell World Triathlon Leeds. The
year-on-year increase is also partly reflective of lower than planned spend in
the prior year when both advertising and sponsorship opportunities were
impacted by COVID-19 restrictions.
Technology costs increased by 27% to £32.7 million (FY21: £25.8 million).
This increase was driven by an increase in headcount and our investment in the
scalability and resilience of our platform, to support our continued growth,
alongside the development of our new propositions, Dodl and Touch.
Operational and support costs increased by 8% to £57.2 million (FY21: £53.1
million) as the business continued to scale efficiently. The higher costs were
driven by an increase in the average number of employees to support our
continued growth, as well the acceleration of share-based payment charges
relating to Andy Bell and Charles Galbraith's Executive Incentive Plan (EIP)
awards, following their departure from the business as good leavers at the end
of September 2022. These increased costs were partially offset by expenses
relating to the reduced customer dealing activity during the year.
Profitability and earnings
PBT increased by 6% to £58.4 million (FY21: £55.1 million) whilst PBT margin
decreased to 35.6% (FY21: 37.8%). The lower margin versus the prior year
reflects our planned investment in brand and technology to drive long-term
growth.
The effective rate of tax for the year was 20.0% (FY21: 20.4%), slightly
higher than the standard rate of UK Corporation Tax of 19.0%, as a result of
disallowable charges relating to the Touch earn-out arrangement.
Basic earnings per share rose by 6% to 11.39p (FY21: 10.71p) in line with the
increase to PBT. Diluted earnings per share (DEPS), which accounts for the
dilutive impact of outstanding share awards, also increased by 6% to 11.35p
(FY21: 10.67p).
Financial position
The Group's balance sheet remains strong, with net assets totalling £133.4
million (FY21: £130.7 million) as at 30 September 2022 and a return on assets
of 35% (FY21: 34%).
Financial resources and regulatory capital position
Our financial resources are kept under continual review, incorporating
comprehensive stress and scenario testing which is formally reviewed and
agreed at least annually.
Year ended 30 September 2022 Year ended 30 September 2021
£000 £000
Total shareholder funds 133,394 130,708
Less: unregulated business capital (3,718) (4,722)
Regulatory Group shareholder funds 129,676 125,986
Less: foreseeable dividends (18,843) (38,912)
Less: non-qualifying assets (14,233) (11,469)
Total qualifying capital resources 96,600 75,605
Less: capital requirement (49,252) (40,525)
Surplus capital 47,348 35,080
% of capital resource requirement held 196% 187%
We have continued to maintain a healthy surplus over our regulatory capital
requirement throughout the year. The Investment Firm Prudential Regime (IFPR)
came into effect on 1 January 2022, focusing prudential requirements on the
potential harm the firm itself can pose to consumers and markets whilst
introducing a basic liquidity requirement for all investment firms.
We held a significant surplus over our basic liquid asset requirement during
the year. Our year-end balance sheet included cash balances of £84.0 million
(FY21: £94.0 million), with the reduction reflecting the higher dividends
returned to shareholders in the year following the declaration of a special
dividend in 2021. We operate a highly cash-generative business, with a short
working-capital cycle that ensures profits are quickly converted into cash. We
generated cash from operations of £57.2 million in the year at a cash
conversion rate of 97%.
Dividend
As noted in the CEO's review above, we adopt a progressive dividend policy and
the Board has recommended a final dividend of 4.59p per share (FY21: 4.50p per
share), resulting in a total ordinary dividend of 7.37p (FY21: 6.96p) and
equating to a dividend pay-out ratio of 65% of statutory profit after tax.
Peter Birch
Chief Financial Officer
30 November 2022
Principal risks and uncertainties
The Board is committed to a continual process of improving and embedding the
risk management framework within the Group. This ensures that the business
identifies both existing and emerging risks and continues to develop
appropriate mitigation strategies.
The Board believes that there are a number of potential risks to the Group
that could hinder the successful implementation of its strategy. These risks
may arise from internal and external events, acts and omissions. The Board is
proactive in identifying, assessing and managing all risks facing the
business, including the likelihood of each risk materialising in the short or
longer term.
The Group has reviewed the impact of the war on Ukraine and concluded that
whilst the level of inherent risk for some of Group's principal risks and
uncertainties has increased, e.g. information security / cyber-attacks, the
Group's controls continue to mitigate this increase in risk. The Group will
continue to monitor and respond to any new developments from the war in
Ukraine that may impact the Group.
The principal risks and uncertainties facing the Group are detailed below,
along with potential impacts and mitigating actions.
Risk Potential impact Mitigations
1. Strategic risk
Competitor or market risk · Loss of competitive advantage, such that AUA and customer number targets The Group regularly reviews its products against competitors, in relation to
are adversely impacted. This would have a negative impact on profitability. pricing, functionality and service, and actively seeks to make enhancements
The risk that the Group fails to remain competitive in its peer group, due to
where necessary to maintain or improve its competitive position in line with
lack of innovative products and services, increased competitor activity, · Reputational damage as a result of underperformance and/or regulatory the Group's strategic objectives.
regulatory expectations, and lack of marketing focus and spend to keep pace scrutiny.
with competitors.
The Group remains closely aligned with trade and industry bodies, and other
policy makers across our market. The use of ongoing competitor analysis
provides insight and an opportunity to adapt strategic direction in response
to market conditions.
2. Operational risk
Regulatory, compliance and legal risk · Regulatory censure and/or fines, including fines from the FCA and ICO. The Group maintains a strong compliance culture geared towards positive
The risk that the Group fails to comply with regulatory and legal standards.
customer outcomes and regulatory compliance.
· Related negative publicity could reduce customer confidence and affect
ability to generate new inflows. The Group performs regular horizon scanning to ensure all regulatory change is
detected and highlighted to the Group for consideration.
· Poor conduct could have a negative impact on customer outcomes, impacting
the Group's ability to achieve strategic objectives.
The Group maintains an open dialogue with the FCA and actively engages with
them on relevant proposed regulatory change.
The Compliance function is responsible for ensuring all standards of the
regulatory system are being met by the Group. This is achieved by implementing
policies and procedures across the business, raising awareness and developing
an effective control environment through providing comprehensive training.
Where appropriate, the Compliance Monitoring Team conducts reviews to ensure a
high standard of compliance has been embedded into the business.
Information security and data risk · Related negative publicity could damage customer and market confidence in The Group continually reviews its cyber security position to ensure that it
the business, affecting our ability to attract and retain customers. protects the confidentiality, integrity and availability of its network and
The risk of a vulnerability in the Group's infrastructure being exploited or
the data that it holds.
user misuse that causes harm to service, data and/or an asset causing material · Information security breaches could adversely impact individuals' data
business impact. rights and freedoms and could result in fines/censure from regulators, such as
the ICO and FCA.
A defence in depth approach is in place with firewalls, web gateway, email
gateway and anti-virus amongst the technologies deployed. Staff awareness is
Data risk is defined as the risk of the Group failing to effectively govern, seen as being a key component of the layered defences, with regular updates,
manage and control its data (including data processed by third-party training and mock phishing exercises.
suppliers).
Our security readiness is subject to independent assessment by a penetration
testing partner that considers both production systems and development
activities. This is supplemented by running a programme of weekly
vulnerability scans to identify configuration issues and assess the
effectiveness of the software patching schedule.
The Group regularly assesses its maturity against an acknowledged security
framework, which includes an ongoing programme of staff training and
assessment through mock security exercises.
The Group monitors the adequacy of its data governance framework via the Data
Steering Group.
Fraud and financial crime risk · The Group may be adversely affected, including regulatory censure or Extensive controls are in place to minimise the risk of financial crime.
enforcement, if we fail to mitigate the risk of being used to facilitate any
The risk of failure to protect the Group and its customers from all aspects of form of financial crime. This includes money laundering and counter terrorist Policies and procedures include:
fraud and financial crime (anti-money laundering and counter terrorist financing, market abuse, fraud, cyber-crime and the facilitation of tax
financing, market abuse, fraud, cyber-crime and the facilitation of tax evasion. mandatory financial crime training in anti-money laundering and counter
evasion).
terrorist financing, fraud, market abuse and the Criminal Finances Act for all
· Potential customer detriment as customers are at risk of losing funds or employees to aid the detection, prevention and reporting of financial crime.
personal data, which can subject them to further loss via other organisations. The Group has an extensive recruitment process in place to screen potential
employees.
· Fraudulent activity leading to identity fraud and/or loss of customer
holdings to fraudulent activity.
The Group actively maintains defences against a broad range of likely attacks
by global actors, bringing together tools from well-known providers, external
consultancy and internal expertise to create multiple layers of defence. The
latter includes intelligence shared through participation in regulatory,
industry and national cyber security networks.
Third-party IT failure risk · Loss of service from a third-party technology provider could have a To mitigate the risk posed by third-party software suppliers, the Group
negative impact on customer outcomes due to website unavailability, delays in conducts onboarding due diligence and monitors performance against documented
The risk that a third-party provider materially fails to deliver the receiving and/or processing customer transactions or interruptions to service standards to ensure their continued commitment to service, financial
contracted services. settlement and reconciliation processes. stability and viability. Performance metrics are discussed monthly with
documented actions for any identified improvements.
· Financial impact through increased operational losses.
This is supplemented by attendance at formal user groups with other clients of
· Regulatory fine and/or censure. the key suppliers, sharing experience and leveraging the strength of the user
base. Where relevant and appropriate, annual financial due diligence on
critical IT suppliers and on-site audits are also undertaken.
IT system performance, capacity and resilience risk · The reliance on evolving technology remains crucial to the Group's effort The Group continues to implement a programme of increasing annual investment
to develop its services and enhance products. Prolonged underinvestment in in the technology platform. This is informed by recommendations that result
The risk that the design, implementation and management of applications, technology will affect our ability to serve our customers and meet their from regular architectural reviews of applications and of the underpinning
infrastructure and services fail to meet current and future business needs. infrastructure and services.
requirements.
· Failing to deliver and manage a fit-for-purpose technology platform could
have an adverse impact on customer outcomes and affect our ability to attract
new customers. Daily monitoring routines provide oversight of performance and capacity.
· IT failures may lead to financial or regulatory penalties, and reputational Our rolling programme of both business continuity planning and testing, and
damage. single point of failure management, maintains our focus on the resilience of
key systems in the event of an interruption to service.
Operational resilience risk · Failure to maintain or quickly recover operations could lead to intolerable The Group has developed a comprehensive operational resilience framework,
harm to customers and the Group. under the direction of the Operational Resilience Forum, a sub-committee of
The risk that the Group does not have an adequate operational resilience
the Operational Committee.
framework to prevent, adapt to, respond to, recover from and learn from · Operational resilience disruptions may lead to financial or regulatory
operational disruptions. penalties, and reputational damage.
The Group implemented the operational resilience regulatory requirements set
out in the FCA policy statement (PS) 21/3 in March 2022, which are:
· Identify important business services.
· Undertake core mapping.
· Set impact tolerances.
· Undertake scenario testing.
· Board sign-off on a self-assessment.
Operational capability risk · A decline in the quality of work will have a financial impact through The Group focuses on increasing the effectiveness of its operational
increased operational losses. procedures and, through its business improvement function,
The risk that, due to unexpectedly high volumes and or levels of change
activity, the Group is unable to process work within agreed service levels · Unexpectedly high volumes coupled with staff recruitment and retention aims to improve and automate more of its processes. This reduces the need for
and/or to an acceptable quality for a sustained period. issues could lead to poor customer outcomes and reputational damage. manual intervention and the potential for errors.
There is an ongoing programme to train staff on multiple operational
functions. Diversifying the workforce enables the business to deploy staff
when high work volumes are experienced. Causes of increased volumes of work,
for example competitor behaviour, are closely monitored in order to plan
resource effectively.
Financial control environment risk · Reputational damage with regulators, leading to increased capital The Group's financial control and fraud prevention policies and procedures are
requirement. designed to ensure that the risk of fraudulent access to customer or corporate
The risk that the financial control environment is weak. This includes the
accounts is minimised.
risk of loss to the business, or its customers, because of either the actions · Potential customer detriment resulting from inadequate protection of
of an associated third-party or the misconduct of an employee. customer assets.
Anti-fraud training is provided to all members of staff who act as first line
of defence to facilitate early detection of potentially fraudulent activity.
· Increased expenditure in order to compensate customers for losses incurred.
Strong technology controls are in place to identify potential money laundering
activity or market abuse.
Retail conflicts / conduct risk · Poor conduct could have a negative effect on customer outcomes. The Group's customer focus is founded on our guiding principles, which drive
the culture of the business and ensure customers remain at the heart of
The risk that the fair treatment of customers is not central to the Group's · Reputational damage resulting from poor levels of customer service. everything we do. Training on the importance and awareness of the delivery of
corporate culture.
good customer outcomes is provided to all staff on a regular basis.
· Additional regulatory scrutiny and financial loss.
The Group continues to focus on enhancements to its risk management framework,
in relation to the identification, monitoring and mitigation of risks of poor
customer outcomes, and to its product management process to reduce the
potential for customer detriment.
All developments are assessed for potential poor customer outcomes, and
mitigating actions are delivered alongside the developments as appropriate.
The business is currently implementing the requirements of the FCA's New
Consumer Duty, which further evidences how customers are at the centre of the
business.
ESG risk · Environmental, physical and transition risks resulting from climate change, The Group has established an ESG Working Group to manage all ESG- related
which may impact the Group and our customers' assets matters, including people and social-related matters, as well as the Group's
Task Force for Climate-related Financial Disclosures (TCFD). ESG-related
· Social risks, including employee wellbeing and diversity and inclusion strategic objectives are incorporated in the Group's BPP process.
The risk that environmental, social and governance factors could negatively
impact the Group, its customers, investors and the wider community · Governance risks, including the risks related to the Group's governance
structures being ineffective, which could manifest in governance-related
reputational and conduct risks. The Group is committed to creating an inclusive workplace and prioritising
employee wellbeing, to establish an environment where all employees feel
valued and supported.
The Group has reviewed and strengthened its governance framework during FY22,
with a refreshed governance framework.
People risk · Difficulties in recruiting the right people to work for the Group. The Group has improved its recruitment processes to attract the best people
possible to join the Group.
· Existing employees who aren't motivated, don't perform well and may leave
the Group.
The risk that the Group fails to attract, retain, develop and motivate
employees who are aligned to the Group's Guiding Principles. · Talented employees who are not appropriately developed and / or have The Group undertakes a staff engagement survey at least annually and uses this
limited opportunities to progress are likely to leave the Group. feedback to address any areas for improvement to ensure staff engagement
remains high.
The Group conducts regular reviews of its employee benefits package to ensure
it is competitive.
The Group operates a talent development programme.
Investment risk · Outflows or loss of assets under management as a result of underperformance The Group maintains robust Investment Governance arrangements for
or reputational damage. decision-making in relation to the AJBI products and services. The performance
of AJBI products and services are monitored on an ongoing basis for alignment
· Compensation required to cover operational losses, such as trading errors. with customer expectations and mandates, including through dedicated
Risk of failures surrounding the investment activities carried out by AJ Bell
committees and by the independent 2(nd) line of defence Investment Risk
Investments (AJBI). The risks specific to the AJBI entity include operational, · Potential customer detriment resulting from inadequate governance function.
reputational and conduct risks. arrangements.
Operational risks are reviewed and monitored through AJBI's Department Risk
Committee. Any trading undertaken on the AJ Bell Funds is subject to a number
of internal controls to minimise the risk of any operational losses.
3. Financial risk
Economic and capital markets fluctuation risk · Adverse effect on customer transactional activity or ad valorem fees The Group's products are targeted at UK residents. We do not do business in
generated from assets under administration from which the Group derives any other countries and have relatively few customers outside the UK. However,
The risk that a significant and prolonged capital market or economic downturn revenue. Sensitivities for interest rate and market movements are shown in in the event that the economy falls back into a prolonged recession, this may
has an adverse effect on customer confidence, asset values and interest rates. note 25 to the consolidated financial statements. impact contribution levels and confidence generally in the savings and
investment markets. The Directors believe that the Group's overall income
levels and in particular the balance between the different types of assets and
transactions from which that income is derived, provide a robust defensive
position against a sustained economic downturn.
Revenue from retained interest income is derived from the pooling of customer
cash balances.
The Group has a variety of transactional and recurring revenue streams, some
of which are monetary amounts while others are ad valorem. This mix of revenue
types helps to limit the Group's exposure to interest rate fluctuations and
capital market fluctuations.
Counterparty credit risk · Unintended market exposure. The Group's credit risk extends principally to its financial assets, cash
balances held with banks and trade and other receivables. The Group carries
The risk of potential failure of clients, market counterparties or banks used · Customer detriment. out initial and ongoing due diligence on the market counterparties and banks
by the Group to fulfil contractual obligations.
that it uses, and regularly monitors the level of exposure.
· Increased future capital requirements.
The Group continues to diversify across a range of approved banking
counterparties, reducing the concentration of credit risk as exposure is
spread over a larger number of counterparties. The banks currently used by the
Group are detailed in note 25 to the consolidated financial statements.
With regard to trade receivables, the Group has implemented procedures that
require appropriate credit or alternative checks on potential customers before
business is undertaken. This has minimised credit risk in this area.
The Group will maintain its existing strategy of diversification to ensure
acceptable exposure across a wide range of well-capitalised banks with
appropriate credit ratings.
It will continue to regularly monitor its level of exposure and to assess the
financial strength of its banking counterparties.
Liquidity risk · Reputational damage. The Group has robust systems and controls and monitors all legal entities to
ensure they have sufficient funds to meet their liabilities as they fall due.
The risk that the Group suffers significant settlement default or otherwise · Potential customer detriment.
suffers major liquidity problems or issues of liquidity deficiency which
severely impact on the Group's reputation in the markets. · Financial loss.
The Group continues to monitor trade settlement on both an intra-day and daily
The risk that the Group does not have available readily-realisable financial · Unable to meet obligations as they fall due. basis.
resources to enable it to meet its obligations as they fall due or can only
secure such resources at excessive cost.
The Group continues to be a highly cash-generative business and maintains
sufficient cash alongside standby banking facilities to fund its foreseeable
trading requirements.
Viability statement
In accordance with provision 31 of the UK Corporate Governance Code 2018, the
Board has assessed the viability of the Group, considering a four-year period
to September 2026. The Board considers a four-year horizon to be an
appropriate period to assess the Group's strategy and its capital
requirements, considering the investment needs of the business and the
potential risks that could impact the Group's ability to meet its strategic
objectives.
This assessment has been made considering the Group's financial position and
regulatory capital and liquidity requirements in the context of its business
model, strategy and four-year financial forecasts and in consideration of the
principal risks and uncertainties, as detailed in the Strategic report. The
principal risks and uncertainties are those that may adversely impact the
Group based on its business model and strategy and are derived from both the
Group's business activities and the wider macroeconomic environment in which
the Group operates but does not control.
As an FCA-regulated entity, as part of its Internal Capital and Risk
Assessment (ICARA) the Group is required to use stress testing of the business
model and strategy to identify whether it holds sufficient own funds and
liquid assets. Forward-looking hypothetical stress testing scenarios have been
determined by considering potential macroeconomic and idiosyncratic events
that would have a significant adverse impact on the Group's ability to
generate profits, and therefore maintain the existing levels of own funds and
liquid assets, over the business planning period.
The Board-approved four-year financial forecast assumes the business continues
to grow customer numbers and AUA through investment in our brand, product
propositions, technology and people. Further Bank of England base rate
interest rises are expected to combat the high levels of inflation in the UK,
during the period of the financial forecasts it is assumed that the Bank of
England base interest rate continues to increase and peaks during FY23, before
falling back to 2.50% in FY25. There are no significant market movements in
underlying asset values based on the position at the point the projections
were approved by the Board.
The Board has considered the potential impact of three stress-test scenarios,
which cumulatively represent a severe, remote but plausible scenario:
1) Macroeconomic (Economic and capital markets fluctuation risk) - a
significant reduction in equity market values, based on the 2008-09 global
financial crisis. Asset values fall by 40% in year 1, recovering to 20% below
the level they were prior to the fall in year 2, and remain flat in years 3
and 4.
2) Macroeconomic (Economic and capital markets fluctuation risk) - Bank of
England base interest rate reduced to 0.50% throughout the assessment period,
leading to a lower interest rate retained on customer cash balances.
3) Idiosyncratic (IT system performance, capacity and resilience risk,
Third-party IT failure risk) - prolonged IT issues with key operating software
suppliers cause significant damage to AJ Bell's service and reputation; which
results in a reduction in customers. Following year 1 the Group incurs
development and license costs to upgrade or replace key components of the
platform software, with service levels and net inflows returning to normal in
year 3.
The Board would consider raising prices as a possible management action that
could be taken in the event that the modelled scenarios crystallise. The Board
considers this approach reasonable in light of the industry-wide impact of the
scenario, and the firm's profitability and price positioning relative to its
competitors.
The results have confirmed that the Group would be able to withstand the
adverse financial impact of these three scenarios occurring simultaneously
over the four-year assessment period. This assumes that dividends are paid in
line with the recommendation made in the 30 September 2022 Annual Report and
with the Group dividend policy on a forward-looking basis. During the period,
the Group continues to retain surplus financial resources over and above its
regulatory capital and liquidity requirements, with or without any management
remediation actions.
The Group's strategy and four-year financial forecasts were approved by the
Board in September 2022. The Directors confirm that they have a reasonable
expectation that the Group will be able to continue in operation and meet its
liabilities as they fall due over the four-year period ending September 2026.
The Strategic report was approved by the Board of Directors and signed on its
behalf by:
Michael Summersgill
Chief Executive Officer
30 November 2022
Statement of Directors' responsibilities
The Directors are responsible for preparing the Annual Report and the
Financial Statements in accordance with UK-adopted international accounting
standards and applicable law and regulations.
Company law requires the Directors to prepare Group and Parent Company
financial statements for each financial year. Under that law the Directors
are required to prepare the Group financial statements in accordance with
UK-adopted international accounting standards and have elected to prepare the
Parent Company financial statements in accordance with UK accounting standards
and applicable law including FRS 101 Reduced Disclosure Framework.
Under company law the Directors must not approve the financial statements
unless they are satisfied that they give a true and fair view of the state of
affairs of the Group and Parent Company and of the profit or loss for the
Group for that period. The Directors are also required to prepare the Group
financial statements in accordance with international financial reporting
standards as adopted by the UK.
In preparing these financial statements, the Directors are required to:
● select suitable accounting policies and then apply them consistently;
● make judgements and accounting estimates that are reasonable and prudent;
● for the Group financial statements, state whether they have been prepared in
accordance with UK-adopted international accounting standards, subject to any
material departures disclosed and explained in the financial statements;
● for the Parent Company financial statements, state whether applicable UK
accounting standards have been followed, subject to any material departures
disclosed and explained in the financial statements;
● prepare the financial statements on the going concern basis unless it is
inappropriate to presume that the Group or Parent Company will continue in
business; and
● prepare a Directors' report, a Strategic report and Directors' Remuneration
Report which comply with the requirements of the Companies Act 2006.
The Directors are responsible for keeping adequate accounting records that are
sufficient to show and explain the Parent Company's transactions and disclose
with reasonable accuracy at any time the financial position of the Parent
Company and enable them to ensure that the financial statements comply with
the Companies Act 2006.
They are also responsible for safeguarding the assets of the Group and hence
for taking reasonable steps for the prevention and detection of fraud and
other irregularities.
The Directors are responsible for ensuring the Annual Report and the Financial
Statements are made available on a website. Financial statements are published
on the Company's website in accordance with legislation in the United Kingdom
governing the preparation and dissemination of financial statements, which may
vary from legislation in other jurisdictions. The maintenance and integrity of
the Company's website is the responsibility of the Directors. The Directors'
responsibility also extends to the ongoing integrity of the financial
statements contained therein.
Each of the Directors, whose names and responsibilities are listed in the
Corporate Governance report, confirms that, to the best of their knowledge:
● The financial statements have been prepared in accordance with the applicable
set of accounting standards and give a true and fair view of the assets,
liabilities, financial position and profit and loss of the Group.
● The Annual Report includes a fair review of the development and performance of
the business and the financial position of the Group and Parent Company,
together with a description of the principal risks and uncertainties that they
face.
We consider that the Annual Report and Financial Statements, taken as a whole,
is fair, balanced and understandable and provides the information necessary
for shareholders to assess the Group's position and performance, business
model and strategy.
Approved by the Board on 30 November 2022 and signed on its behalf by:
Christopher Bruce Robinson
Company Secretary
4 Exchange Quay
Salford Quays
Manchester
M5 3EE
Consolidated income statement
for the year ended 30 September 2022
Note 2022 2021
£ 000
£ 000
Revenue 5 163,847 145,826
Administrative expenses (104,866) (89,975)
Operating profit 6 58,981 55,851
Investment income 8 198 23
Finance costs 9 (768) (790)
Profit before tax 58,411 55,084
Tax expense 10 (11,672) (11,262)
Profit for the financial year attributable to: 46,739 43,822
Equity holders of the Parent Company
Earnings per share:
Basic (pence) 12 11.39 10.71
Diluted (pence) 12 11.35 10.67
All revenue, profit and earnings are in respect of continuing operations.
There were no other components of recognised income or expense in either
period and, consequently, no statement of other comprehensive income has been
presented.
Consolidated statement of financial position
as at 30 September 2022
Note 2022 2021
£ 000 (Restated)(1)
£ 000
Assets
Non-current assets
Goodwill 13 6,991 6,991
Other intangible assets 14 8,779 6,014
Property, plant and equipment 15 3,325 3,351
Right-of-use assets 16 12,273 13,325
Deferred tax asset 18 610 940
31,978 30,621
Current assets
Trade and other receivables 19 49,436 37,462
Current tax receivable 38 51
Cash and cash equivalents 20 84,030 94,008
133,504 131,521
Total assets 165,482 162,142
Liabilities
Current liabilities
Trade and other payables 21 (15,604) (12,765)
Lease liabilities 16 (1,566) (1,708)
Provisions 22 (519) (1,526)
(17,689) (15,999)
Non-current liabilities
Lease liabilities 16 (12,395) (13,886)
Provisions 22 (2,004) (1,549)
(14,399) (15,435)
Total liabilities (32,088) (31,434)
Net assets 133,394 130,708
Equity
Share capital 23 51 51
Share premium 8,930 8,658
Own shares (473) (740)
Retained earnings 124,886 122,739
Total equity 133,394 130,708
(1. See note 2 for details of a change in accounting policy
and the resulting restatement of prior year.)
The financial statements were approved by the Board of Directors and
authorised for issue on 30 November 2022 and signed on its behalf by:
............................
Peter Birch
Chief Financial Officer
AJ Bell plc
Company registered number: 04503206
Consolidated statement of changes in equity
for the year ended 30 September 2022
Share capital Share premium Retained earnings Own shares Total equity
£ 000
£ 000
£ 000
£ 000
£ 000
Balance at 1 October 2021 51 8,658 122,739 (740) 130,708
Total comprehensive income for the year:
Profit for the year - - 46,739 - 46,739
Transactions with owners, recorded directly in equity:
Issue of shares - 272 - - 272
Dividends paid - - (50,383) - (50,383)
Equity settled share-based payment transactions - - 6,162 - 6,162
Deferred tax effect of share-based payment transactions - - (275) - (275)
Tax relief on exercise of share options - - 171 - 171
Share transfer relating to EIP (note 23) - - (267) 267 -
Total transactions with owners - 272 (44,592) 267 (44,053)
Balance at 30 September 2022 51 8,930 124,886 (473) 133,394
Share capital Share premium Retained earnings Own shares Total equity
£ 000
£ 000
£ 000
£ 000
£ 000
Balance at 1 October 2020 51 8,459 102,103 (1,147) 109,466
Total comprehensive income for the year:
Profit for the year - - 43,822 - 43,822
Transactions with owners, recorded directly in equity:
Issue of shares - 199 - - 199
Dividends paid - - (29,138) - (29,138)
Equity settled share-based payment transactions - - 6,330 - 6,330
Deferred tax effect of share-based payment transactions - - (202) - (202)
Tax relief on exercise of share options - - 231 - 231
Share transfer relating to EIP - - (110) 110 -
Share transfer relating to earn-out arrangement - - (297) 297 -
Total transactions with owners - 199 (23,186) 407 (22,580)
Balance at 30 September 2021 51 8,658 122,739 (740) 130,708
Consolidated statement of cash flows
for the year ended 30 September 2022
Note 2022 2021
£ 000
(Restated)(1)
£ 000
Cash flows from operating activities
Profit for the financial year 46,739 43,822
Adjustments for:
Investment income (198) (23)
Finance costs 768 790
Income tax expense 11,672 11,262
Depreciation and amortisation 3,643 3,623
Share-based payment expense 24 4,728 4,952
Decrease in provisions and other payables (1,007) (69)
Loss on disposal of property, plant and equipment 21 13
Profit on disposal of right-of-use assets - (3)
Increase in trade and other receivables (11,974) (6,889)
Increase / (decrease) in trade and other payables 2,839 (1,347)
Cash generated from operations 57,231 56,131
Income tax paid (11,433) (11,455)
Interest expense paid - (1)
Net cash flows from operating activities 45,798 44,675
Cash flows from investing activities
Purchase of other intangible assets 14 (2,365) (2,370)
Purchase of property, plant and equipment 15 (1,014) (1,174)
Acquisition of subsidiary, net of cash acquired - (2,561)
Interest received 198 23
Net cash flows used in investing activities (3,181) (6,082)
Cash flows from financing activities
Payments of principal in relation to lease liabilities 16 (1,716) (1,241)
Payments of interest on lease liabilities 16 (768) (789)
Proceeds from issue of share capital 23 272 199
Dividends paid 11 (50,383) (29,138)
Net cash flows used in financing activities (52,595) (30,969)
Net (decrease) / increase in cash and cash equivalents (9,978) 7,624
Cash and cash equivalents at beginning of year 20 94,008 86,384
Total cash and cash equivalents at end of year 20 84,030 94,008
(1. See note 2 for details of a change in accounting policy
and the resulting restatement of prior year.)
( )
Notes to the consolidated financial statements
for the year ended 30 September 2022
1 General information
AJ Bell plc (the 'Company') is the Parent Company of the AJ Bell group of
companies (together the 'Group'). The Group provides investment
administration, dealing and custody services. The nature of the Group's
operations and its principal activities are set out in the Strategic report
and the Directors' report.
The Company is a public limited company which is listed on the Main Market of
the London Stock Exchange and incorporated and domiciled in the United
Kingdom. The Company's number is 04503206 and the registered office is 4
Exchange Quay, Salford Quays, Manchester, M5 3EE. A list of investments in
subsidiaries, including the name, country of incorporation, registered office,
and proportion of ownership is given in note 6 of the Company's separate
financial statements.
The consolidated financial statements were approved by the Board on 30
November 2022.
The financial information contained in this report does not constitute
statutory accounts within the meaning of Section 434 of the Companies Act
2006. The financial information set out in this report has been extracted from
the Group's 2022 Annual Report and Financial Statements, which have been
approved by the Board of Directors on 30 November 2022. The Auditors have
reported on the 2021 and 2022 accounts, their reports were (i) unqualified;
(ii) did not include a reference to any matters to which the Auditors drew
attention by way of emphasis without qualifying their report and (iii) did not
contain a statement under sections 498(2) or (3) of the Companies Act 2006.
2 Significant accounting policies
Basis of accounting
The consolidated financial statements of AJ Bell plc have been prepared in
accordance with UK-adopted International Financial Reporting Standards.
The financial statements are prepared on the historical cost basis and
prepared on a going concern basis. They are presented in sterling, which is
the currency of the primary economic environment in which the Group operates,
rounded to the nearest thousand.
The accounting policies have been applied consistently to all periods
presented in these financial statements and by all Group entities, unless
otherwise stated.
Change in accounting policy
Due to a change in the Group's accounting policy to recognise electronic
payments at the settlement date, rather than when they are initiated, to more
appropriately reflect the nature of these transactions, the comparative
amounts have been restated.
The impact on the 30 September 2021 balance sheet is an increase to trade and
other receivables of £3.1m and a decrease to cash and cash equivalents of
£3.1m. Net cash outflow from operating activities in 2021 has decreased by
£3.1m. There is no impact on the income statement, earnings per share or net
assets.
Changes to International Reporting Standards
Interpretations and standards which became effective during the year:
The following amendments and interpretations became effective during the year.
Their adoption has not had any significant impact on the Group.
Effective from
IFRS 9, IAS 39, IFRS 7, IFRS 4 and IFRS 16 Interest Rate Benchmark Reform - Phase 2 (Amendments) 1 January 2021
IFRS 16 Covid-19-Related Rent Concessions beyond 30 June 2021 (Amendments) 1 April 2021
Changes to International Reporting Standards
Interpretations and standards in issue but not yet effective
The Group has not early adopted any other standard, interpretation or
amendment that has been issued but is not yet effective.
Basis of consolidation
The consolidated financial statements incorporate the financial statements of
the Company and entities controlled by the Company (its subsidiaries) made up
to 30 September each year. The Group controls an entity when it is exposed to,
or it has rights to variable returns from its involvement with the entity and
has the ability to affect those returns through its power over the entity. The
Group reassesses whether it controls an entity if facts and circumstances
indicate there are changes to one or more elements of control. The results of
a subsidiary undertaking are included in the consolidated financial statements
from the date the control commences until the date that control ceases.
All intercompany transactions, balances, income and expenses are eliminated on
consolidation.
2.1 Going concern
The Group's business activities, together with its financial position and the
factors likely to affect its future development and performance are set out in
the Strategic report and the Directors' report. Note 25 includes the Group's
policies and processes for managing exposure to credit and liquidity risk.
The Group's forecasts and objectives, considering a number of potential
changes in trading conditions, show that the Group should be able to operate
at adequate levels of both liquidity and capital for at least 12 months from
the date of signing this report. The Directors have performed a number of
stress tests, covering a significant reduction in equity market values, a fall
in the Bank of England base interest rate leading to a lower interest rate
retained on customer cash balances, and a further Group-specific idiosyncratic
stress relating to a scenario whereby prolonged IT issues cause a reduction in
customers. Further detail of the forecasts and stress test scenarios are set
out in the Viability statement above. These scenarios provide assurance that
the Group has sufficient capital and liquidity to operate under stressed
conditions.
Consequently, after making reasonable enquiries, the Directors are satisfied
that the Group has sufficient financial resources to continue in business for
at least 12 months from the date of signing the report and therefore have
continued to adopt the going concern basis in preparing the financial
statements.
2.2 Business combinations
A business combination is recognised where separate entities or businesses
have been acquired by the Group. The acquisition method of accounting is used
to account for the business combinations made by the Group. The cost of a
business combination is measured at the aggregate of the fair values (at the
date of exchange), of assets given, liabilities incurred or assumed and equity
instruments issued by the Group in exchange for control of the acquired
entity. Where the consideration includes a contingent consideration
arrangement, the contingent consideration is measured at its acquisition date
fair value and included as part of the cost of the acquisition. Subsequent
changes in such fair values are adjusted against the cost of acquisition where
they qualify as measurement period adjustments. All other subsequent changes
in the fair value of contingent consideration are charged to the income
statement, except for obligations that are classified as equity, which are not
re-measured. Where consideration is dependent on continued employment within
the business this is treated as a separate transaction as post-acquisition
remuneration.
Acquisition related costs are expensed as incurred in the income statement,
except if related to the issue of debt or equity securities. Identifiable
assets acquired and liabilities and contingent liabilities assumed in the
business combination are measured initially at their fair values at the
acquisition date. The excess of the cost of acquisition over the fair value of
the Group's share of the identifiable net assets acquired is recorded as
goodwill. If this is less than the fair value of the Group's share of the
identifiable net assets of the subsidiary acquired, the difference is taken
immediately to the income statement.
2.3 Segmental reporting
The Group determines and presents operating segments based on the information
that is provided internally to the Board, which is the Group's Chief Operating
Decision Maker (CODM). In assessing the Group's operating segments the
Directors have considered the nature of the services provided, product
offerings, customer bases, operating model and distribution channels amongst
other factors. The Directors concluded there is a single segment as it
operates with a single operating model; operations, support and technology
costs are managed and reported centrally to the CODM. A description of the
services provided is given within note 4.
2.4 Revenue recognition
Revenue represents fees receivable from investment administration and dealing
and custody services for both client assets and client money. Revenue is
measured based on the consideration specified in a contract with a customer.
The Group recognises revenue when it transfers control over a good or service
to a customer.
Recurring fixed
Recurring fixed revenue comprises recurring administration fees and media
revenue.
Administration fees include fees charged in relation to the administration
services provided by the Group and are recognised over time as the related
service is provided.
Included within administration fees are annual pension administration fees.
The Group recognises revenue from such fees over time, using an input method
to measure progress towards complete satisfaction of a single performance
obligation. The Group determined that the input method is the best method in
measuring progress of the services relating to these fees because there is a
direct relationship between the Group's effort (i.e. labour hours incurred)
and the transfer of service to the customer.
The Group recognises revenue on the basis of the labour hours expended
relative to the total expected labour hours to complete the service.
Certain pension administration fees are received in arrears or in advance.
Where revenue is received in arrears for an ongoing service, the proportion of
the income relating to services provided but not yet received is accrued. This
is recognised as accrued income until the revenue is received. Where revenue
is received in advance for an ongoing service, the proportion of the income
relating to services that have not yet been provided is deferred. This is
recognised as deferred income until the services have been provided.
Media revenue includes advertising, subscriptions, events and award ceremony
and corporate solutions contracts. Subscriptions and corporate solutions
revenue is recognised evenly over the period in which the related service is
provided. Advertising, event and award ceremony revenue is recognised in the
period in which the publication is made available to customers or the event or
award ceremony takes place.
Recurring ad valorem
Recurring ad valorem revenue comprises custody fees, retained interest income
and investment management fees provided by the Group and is recognised evenly
over the period in which the related service is provided.
Ad valorem fees include custody fees charged in relation to the holding of
client assets and interest received on client money balances. Custody fees and
investment management fees are accrued on a time basis by reference to the
AUA.
Transactional fees
Transactional revenue comprises dealing fees and pension scheme activity fees.
Transaction-based fees are recognised when received in accordance with the
date of settlement of the underlying transaction.
Other non-recurring fees are recognised in the period to which the service is
rendered.
Customer incentives
Customer incentives paid to new retail customers are considered to be a
reduction in revenue under IFRS 15. In line with IFRS 15, customer incentives
to acquire new customers are offset against recurring ad valorem revenue and
spread over the period which the customer is required to remain a customer in
order to be eligible for the incentive. Customer incentives comprise cash.
2.5 Share-based payments
The Group operates a number of share-based payment arrangements for its
employees and non-employees. These generally involve an award of share options
(equity-settled share-based payments) which are measured at the fair value of
the equity instrument at the date of grant.
The share-based payment arrangements have conditions attached before the
beneficiary becomes entitled to the award. These can be performance and/or
service conditions.
The total cost is recognised, together with a corresponding increase in the
equity reserves, over the period in which the performance and/or service
conditions are fulfilled. Costs relating to the development of internally
generated intangible assets are capitalised in accordance with IAS 38. The
cumulative cost recognised for equity-settled transactions at each reporting
date until the vesting date reflects the extent to which the vesting period
has expired and management's estimate of shares that will eventually vest. At
the end of each reporting period, the entity revises its estimates of the
number of share options expected to vest based on the non-market vesting
conditions. It recognises any revision to original estimates in the income
statement, with a corresponding adjustment to equity reserves.
No cost is recognised for awards that do not ultimately vest, except for
equity-settled transactions for which vesting is conditional upon a market or
non-vesting condition. These are treated as vested irrespective of whether or
not the market or non-vesting condition is satisfied, provided that all other
performance and/or service conditions are satisfied.
The cost of equity-settled awards is determined by the fair value at the date
when the grant is made using an appropriate valuation model or the market
value discounted to its net present value, further details of which are given
in note 24. The expected life applied in the model has been adjusted based on
management's best estimate for the effects of non-transferability, exercise
restrictions and behavioural considerations.
2.6 Investment income
Investment income comprises the returns generated on corporate cash at banks
and short-term highly-liquid investments. Investment income is recognised in
the income statement as it accrues, using the effective interest rate method.
2.7 Finance costs
Finance costs comprise interest incurred on lease liabilities recognised under
IFRS 16. Finance costs are recognised in the income statement using the
effective interest rate method.
2.8 Taxation
The tax expense represents the sum of the current tax payable and deferred
tax. Tax is recognised in the income statement except to the extent that it
relates to items recognised directly in equity, in which case it is recognised
in equity.
Current tax is the expected tax payable or receivable on the taxable income or
loss for the year and any adjustment to tax payable or receivable in respect
of previous years, using tax rates enacted or substantively enacted at the
reporting date.
Deferred tax is provided on temporary differences between the carrying amounts
of assets and liabilities for financial reporting purposes and the amounts
used for taxation purposes. Deferred tax is not recognised if the temporary
difference arises from:
• the initial recognition of goodwill; or
• investments in subsidiaries to the extent that the Group is able to
control the timing of the reversal of the temporary differences and it is
probable they will not reverse in the foreseeable future; or
• the initial recognition of an asset and liability in a transaction other
than a business combination that, at the time of the transaction, affects
neither the accounting nor taxable profit or loss.
Deferred tax assets are recognised for unused tax losses, unused tax credits
and deductible temporary differences to the extent that it is probable that
taxable profits will be available in the future, against which deductible
temporary differences can be utilised. Recognised and unrecognised deferred
tax assets are reassessed at each reporting date.
The principal temporary differences arise from accelerated capital allowances,
provisions for share-based payments and unutilised losses.
Deferred tax is measured at the tax rates that are expected to be applied to
temporary differences when they reverse, using tax rates enacted or
substantively enacted at the reporting date.
Deferred tax assets and liabilities are offset when there is a legally
enforceable right to set off current tax assets against current tax
liabilities and when they relate to income taxes levied by the same taxation
authority and the Group intends to settle its current tax assets and
liabilities on a net basis.
2.9 Dividends
Dividend distributions to the Company's shareholders are recognised in the
period in which the dividends are declared and paid. The final dividend is
approved by the Company's shareholders at the Annual General Meeting.
2.10 Goodwill
Goodwill arising on consolidation represents the difference between the
consideration transferred and the fair value of net assets acquired of the
subsidiary at the date of acquisition. Goodwill is not amortised, but is
reviewed at least annually for impairment. Any impairment is recognised
immediately through the income statement and is not subsequently reversed.
For the purposes of impairment testing goodwill acquired in a business
combination is allocated to the cash generating unit (CGU) expecting to
benefit from the synergies of the combination. CGUs to which goodwill has been
allocated are reviewed annually or more frequently when there is an indication
that the goodwill relating to that CGU may have been impaired. If the
recoverable amount from the CGU is less than the carrying amount of the assets
present on the consolidated statement of financial position forming that CGU,
the impairment loss is allocated first to reduce the carrying amount of any
goodwill allocated to the assets forming that CGU and then to the assets of
the CGU pro-rata on the basis of the carrying amount of each asset in the CGU.
On disposal of a subsidiary, the attributable amount of goodwill is included
in the determination of the profit or loss on disposal.
2.11 Intangible assets (excluding goodwill)
Intangible assets comprise computer software and mobile applications, and the
Group's Key Operating Systems (KOS). These are stated at cost less
amortisation and any recognised impairment loss. Amortisation is charged on
all intangible assets excluding goodwill and assets under construction at
rates to write off the cost or valuation, less estimated residual value, of
each asset evenly using a straight-line method over its estimated useful
economic life as follows:
Computer software and mobile applications - 3 - 4 years
KOS - 15 years
KOS enhancements - Over the remaining life of the KOS
The assets' estimated useful lives, amortisation rates and residual values are
reviewed, and adjusted if appropriate at the end of each reporting period. An
asset's carrying value is written down immediately to its recoverable amount
if its carrying value is greater than the recoverable amount.
The gain or loss arising on the disposal or retirement of an asset is
determined as the difference between the sales proceeds and the carrying
amount of the asset and is recognised in the income statement immediately.
2.12 Internally-generated intangible assets
An internally-generated asset arising from work performed by the Group is
recognised only when the following criteria can be demonstrated:
• the technical feasibility of completing the intangible asset so that it will
be available for use or sale;
• the intention to complete the intangible asset and use or sell it;
• the ability to use or sell the intangible asset;
• how the intangible asset will generate probable future economic benefits;
• the availability of adequate technical, financial and other resources to
complete the development and to use or sell the intangible asset; and
• the ability to measure reliably the expenditure attributable to the intangible
asset during its development.
The amount initially recognised for internally-generated intangible assets is
the sum of expenditure incurred from the date when the asset first meets the
recognition criteria listed above. Development expenditure that does not meet
the criteria is recognised as an expense in the period which it is incurred.
Subsequent to initial recognition, internally-generated intangible assets are
reported at cost less accumulated amortisation and accumulated impairment
losses, on the same basis as intangible assets that are acquired separately.
Assets under construction are not amortised until the asset is operational and
available for use.
Expenditure on research activities is recognised as an expense in the period
in which it is incurred.
2.13 Property, plant and equipment
All property, plant and equipment is stated at cost, which includes directly
attributable acquisition costs, less accumulated depreciation and any
recognised impairment losses. Depreciation is charged on all property, plant
and equipment, except assets under construction, at rates to write off the
cost, less estimated residual value, of each asset evenly using a
straight-line method over its estimated useful economic life as follows:
Leasehold improvements - Over the life of the lease
Office equipment - 4 years
Computer equipment - 3 - 5 years
The assets' estimated useful lives, depreciation rates and residual values are
reviewed, and adjusted if appropriate at the end of each reporting period. An
asset's carrying value is written down immediately to its recoverable amount
if its carrying value is greater than the recoverable amount.
Assets under construction relate to capital expenditure on assets not yet in
use by the Group and are therefore not depreciated.
The gain or loss arising on the disposal or retirement of an asset is
determined as the difference between the sales proceeds and the carrying
amount of the asset and is recognised in the income statement immediately.
2.14 Leased assets and lease liabilities
Leases
(i) Right-of-use assets
The Group recognises right-of-use assets at the commencement date of the
leases. Right-of-use assets are measured at cost, less any accumulated
depreciation and impairment losses, and adjusted for any re-measurement of
lease liabilities. The cost of right-of-use assets includes the amount of
lease liabilities recognised, initial direct costs incurred, and lease
payments made at or before the commencement date less any lease incentives
received.
Depreciation is applied in accordance with IAS 16: Property, Plant and
Equipment. Right-of-use assets are depreciated over the lease term.
Right-of-use assets are subject to impairment.
(ii) Lease liabilities
At the commencement date of the lease, the Group recognises lease liabilities
measured at the present value of lease payments to be made over the lease
term. The lease payments include fixed payments less any lease incentives
receivable.
In calculating the present value of lease payments, the Group uses the
incremental borrowing rate at the lease commencement date if the interest rate
implicit in the lease is not readily determinable. After the commencement
date, the amount of lease liabilities is increased to reflect the addition of
interest and reduced for the lease payments made. In addition, the carrying
amount of lease liabilities is re-measured if there is a modification, a
change in the lease term, a change in the fixed lease payments or a change in
the assessment to purchase the underlying asset.
2.15 Impairment of intangible assets (excluding goodwill), property, plant and
equipment and leased assets
At each reporting date the Group reviews the carrying amount of its intangible
assets, property, plant and equipment and leased assets to determine whether
there is any indication that those assets have suffered impairment. If such an
indication exists then the recoverable amount of that particular asset is
estimated.
An impairment test is performed for an individual asset unless it belongs to a
CGU, in which case the present value of the net future cash flows generated by
the CGU is tested. A CGU is the smallest group of assets that generates cash
inflows from continuing use that are largely independent of the cash inflows
of other assets or of groups of other assets. An intangible asset with an
indefinite useful life is tested for impairment annually and whenever there is
an indication that the asset may be impaired.
The recoverable amount is the higher of its fair value less costs to sell and
its value-in-use. In assessing its value-in-use, the estimated net future
pre-tax cash flows are discounted to their present value using a pre-tax
discount rate that reflects current market assessments of the time value of
money and the risks specific to the asset for which the estimates of future
cash flows have not been adjusted.
If the recoverable amount of an asset or CGU in which the asset sits is
estimated to be lower than the carrying value, then the carrying amount is
reduced to the recoverable amount. An impairment loss is recognised
immediately in the income statement as an expense.
An impairment loss is reversed only if subsequent external events reverse the
effect of the original event which caused the recognition of the impairment.
An impairment loss is reversed only to the extent that the asset's carrying
amount does not exceed the carrying amount that would have been determined,
net of depreciation or amortisation, if no impairment loss had been
recognised. An impairment reversal is recognised in the income statement
immediately.
2.16 Retirement benefit costs
The Group makes payments into the personal pension schemes of certain
employees as part of their overall remuneration package. Contributions are
recognised in the income statement as they are payable.
The Group also contributes to employees' stakeholder pension schemes. The
assets of the scheme are held separately from those of the Group in
independently-administered funds. Any amount charged to the income statement
represents the contribution payable to the scheme in respect of the period to
which it relates.
2.17 Provisions
Provisions are recognised when the Group has a present obligation (legal or
constructive) as a result of a past event and it is probable that the Group
will be required to settle that obligation.
The amount recognised as a provision is the Directors' best estimate of the
consideration required to settle that obligation at the reporting date and is
discounted to present value where the effect is material.
2.18 Levies
The Group applies the guidance provided in IFRIC 21 to levies issued under the
Financial Services Compensation Scheme. The interpretation clarifies that an
entity should recognise a liability when it conducts the activity that
triggers the payment of the levy under law or regulation.
2.19 Financial instruments
Financial assets and liabilities are recognised in the statement of financial
position when a member of the Group becomes party to the contractual
provisions of the instrument.
Financial assets
Financial assets are classified according to the business model within which
the asset is held and the contractual cash-flow characteristics of the asset.
All financial assets are classified as at amortised cost.
Financial assets at amortised cost
The Group's financial assets at amortised cost comprise trade receivables,
loans, other receivables and cash and cash equivalents.
Financial assets at amortised cost are initially recognised at fair value
including any directly attributable costs. They are subsequently measured at
amortised cost using the effective interest method, less any impairment. No
interest income is recognised on financial assets measured at amortised cost,
with the exception of cash and cash equivalents, as all financial assets at
amortised cost are short-term receivables and the recognition of interest
would be immaterial. Financial assets are derecognised when the contractual
right to the cash flows from the asset expire.
Trade and other receivables
Trade and other receivables are initially recorded at the fair value of the
amount receivable and subsequently measured at amortised cost using the
effective interest method, less any provision for impairment. Other
receivables also represent client money required to meet settlement
obligations.
Cash and cash equivalents
Cash and cash equivalents include cash in hand, on demand deposits with banks
and other short-term highly-liquid investments with original maturities of
three months or less, or those over which the Group has an immediate right of
recall. Where appropriate, bank overdrafts are shown within borrowings in
current liabilities in the consolidated statement of financial position.
Impairment of financial assets
The Group applies the IFRS 9 simplified approach to measuring expected credit
losses which uses a lifetime expected loss allowance for all trade receivables
and contract assets. To measure the expected credit losses, trade receivables
have been grouped based on shared credit risk characteristics and number of
days past due. The Group considers a trade receivable to be in default when it
is past due by more than 90 days, or when the value of a client's receivable
balance exceeds the value of the assets they hold with AJ Bell.
The expected loss rates are based on the payment profiles of sales over a
period of 12 months before 30 September 2022 and the corresponding historical
credit losses experienced within this period.
The carrying amount of the financial assets is reduced by the use of a
provision. When a trade receivable is considered uncollectable, it is written
off against the provision. Subsequent recoveries of amounts previously written
off are credited against the provision. Changes in the carrying amount of the
provision are recognised in the income statement.
Financial liabilities
Financial liabilities are classified according to the substance of the
contractual arrangements entered into.
Lease liabilities
Lease liabilities consist of amounts payable by the Group measured at the
present value of lease payments to be made over the lease term.
Other financial liabilities
The Group's other financial liabilities comprised borrowings and trade and
other payables. Other financial liabilities are initially measured at fair
value, net of transaction costs. They are subsequently carried at amortised
cost using the effective interest rate method. A financial liability is
derecognised when, and only when, the Group's obligations are discharged,
cancelled or they expire.
Trade and other payables
Trade and other payables consist of amounts payable to clients and other
counterparties and obligations to pay suppliers for goods and services in the
ordinary course of business, including amounts recognised as accruals. Trade
and other payables are measured at amortised cost using the effective interest
method.
2.20 Employee benefit trust
The Group has an employee benefit trust, the AJ Bell Employee Benefit Trust,
used for the granting of shares to certain employees. AJ Bell plc is
considered to be the sponsoring employer and so the assets and liabilities of
the Trust are recognised as those of AJ Bell plc.
Shares of AJ Bell plc held by the Trust are treated as 'own shares' held and
shown as a deduction from equity. Subsequent consideration received for the
sale of such shares is also recognised in equity, with any difference between
the sales proceeds and original cost being taken to equity.
3 Critical accounting adjustments and key sources of estimation uncertainty
In the application of the Group's accounting policies, which are described in
note 2, the Directors are required to make judgements, estimates and
assumptions to determine the carrying amounts of certain assets and
liabilities. The estimates and associated assumptions are based on the Group's
historical experience and other relevant factors. Actual results may differ
from the estimates applied.
Estimates and underlying assumptions are reviewed on an ongoing basis.
Revisions to accounting estimates are recognised in the period in which the
estimate is revised if the revision affects only that period, or in the period
of the revision and future periods if the revision affects both current and
future periods.
There are no judgements made, in applying the accounting policies, about the
future, or any other major sources of estimation uncertainty at the end of the
reporting period, that have a significant risk of resulting in a material
adjustment to the carrying amounts of assets and liabilities within the next
financial year.
4 Segmental reporting
It is the view of the Directors that the Group has a single operating segment
being investment services in the advised and D2C space administering
investments in SIPPs, ISAs and General Investment/Dealing accounts. Details of
the Group's revenue, results and assets and liabilities for the reportable
segment are shown within the consolidated income statement and consolidated
statement of financial position above.
The Group operates in one geographical segment, being the UK.
Due to the nature of its activities, the Group is not reliant on any one
customer or group of customers for generation of revenues.
5 Revenue
The analysis of the consolidated revenue is as follows:
2022 2021
£ 000
£ 000
Recurring fixed 29,787 28,598
Recurring ad valorem 102,184 77,955
Transactional 31,876 39,273
163,847 145,826
Recurring ad valorem fees include custody fees. These recurring charges are
derived from the market value of retail customer assets, based on asset mix
and portfolio size, and are therefore subject to market and economic risks.
The rate charged is variable dependent on the product, portfolio size and
asset mix within the portfolio. The risks associated with this revenue stream
in terms of its nature and uncertainty is discussed further within the
Financial instruments and risk management note below.
Recurring ad valorem fees also include retained interest income earned on the
level of customer cash balances, which are based on product type, customers'
asset mix and portfolio size and are therefore subject to market and economic
risks. The risks associated with this revenue stream in terms of its nature
and uncertainty is discussed further within the Financial instruments and risk
management note below.
The total revenue for the Group has been derived from its principal activities
undertaken in the United Kingdom.
6 Operating profit
Profit for the financial year has been arrived at after charging:
2022 2021
£ 000
£ 000
Amortisation of intangible assets 1,034 862
Depreciation of property, plant and equipment 1,019 1,071
Depreciation of right-of-use assets 1,590 1,690
Loss on the disposal of property, plant and equipment 21 13
Profit on the disposal of right-of-use assets - (3)
Auditor's remuneration (see below) 496 368
Staff costs (note 7) 54,887 47,654
During the year there was no expenditure in relation to research and
development expensed to the income statement (2021: £nil).
Auditor's remuneration
The analysis of auditor's remuneration is as follows:
2022 2021
£ 000
£ 000
Fees payable to the Company's auditor for the audit of the Company's annual 155 116
accounts
Fees payable to the Company's auditor for the audit of the Company's 204 151
subsidiaries' accounts, pursuant to legislation
Audit-related assurance services 89 62
Other assurance services 48 39
496 368
Of the above, audit-related services for the year totalled £473,000 (2021:
£349,000).
7 Staff costs
The average monthly number of employees (including Executive Directors) of the
Group was:
2022 2021
No.
No.
Operational and support 761 709
Technology 225 181
Distribution 109 99
1,095 989
Employee benefit expense for the Group during the year:
2022 2021
£ 000
£ 000
Wages and salaries 41,427 35,516
Social security costs 4,808 3,918
Retirement benefit costs 3,857 3,202
Termination benefits 67 66
Share-based payments (note 24) 4,728 4,952
54,887 47,654
In addition to the above, £1,315,000 staff costs and £1,434,000 share-based
payment expenses (2021: £454,000 staff costs and £1,378,000 share-based
payment expenses) have been capitalised as an internally generated intangible
asset (see note 14).
8 Investment income
2022 2021
£ 000
£ 000
Interest income on cash balances 198 23
9 Finance costs
2022 2021
£ 000
£ 000
Interest on lease liabilities 768 789
Interest on other financial liabilities - 1
768 790
10 Taxation
Tax charged in the income statement:
2022 2021
£ 000
£ 000
Current taxation
UK Corporation Tax 11,855 11,629
Adjustment to current tax in respect of prior periods (238) (11)
11,617 11,618
Deferred taxation
Origination and reversal of temporary differences 62 (328)
Adjustment to deferred tax in respect of prior periods 45 12
Effect of changes in tax rates (52) (40)
55 (356)
Total tax expense 11,672 11,262
Corporation Tax is calculated at 19% of the estimated assessable profit for
the year to 30 September 2022 (2021: 19%).
In addition to the amount charged to the income statement, certain tax amounts
have been credited directly to equity as follows:
2022 2021
£ 000
£ 000
Deferred tax relating to share-based payments (note 18) 275 202
Current tax relief on exercise of share options (171) (231)
104 (29)
The charge for the year can be reconciled to the profit per the income
statement as follows:
2022 2021
£ 000
£ 000
Profit before tax 58,411 55,084
UK Corporation Tax at 19% (2021: 19%) 11,098 10,466
Effects of:
Expenses not deductible for tax purposes 669 709
Income not taxable in determining taxable profit (86) -
Amounts not recognised 236 126
Effect of rate changes to deferred tax (52) (40)
Adjustments to current and deferred tax in respect of prior periods (193) 1
11,672 11,262
Effective tax rate 20.0% 20.4%
Following the enactment of the Finance Act 2021 the standard UK Corporation
Tax rate will remain at 19% before increasing to 25% from 1 April 2023.
Accordingly, the Group's profits for this accounting year are taxed at 19%.
Deferred tax has been recognised at either 19% or 25% being the rate expected
to be in force at the time of the reversal of the temporary difference (2021:
19% or 25%). A deferred tax asset in respect of future share option deductions
has been recognised based on the Company's share price at 30 September 2022.
11 Dividends
2022 2021
£ 000
£ 000
Amounts recognised as distributions to equity holders during the year:
Final dividend for the year ended 30 September 2021 of 4.50p (2020: 4.66p) per 18,460 19,070
share
Special dividend for the year ended 30 September 2021 of 5.00p (2020: nil) per 20,511 -
share
Interim dividend for the year ended 30 September 2022 of 2.78p (2021: 2.46p) 11,412 10,068
per share
Total dividends paid on equity shares 50,383 29,138
18,843 18,471
Proposed final dividend for the year ended 30 September 2022 of 4.59p (2021:
4.50p) per share
- 20,523
Proposed special dividend for the year ended 30 September 2022 of nil (2021:
5.00p) per share
A final dividend declared of 4.59p per share is payable on 17 February 2023 to
shareholders on the register on 20 January 2023. The ex-dividend date will be
19 January 2023. The final dividend is subject to approval by the shareholders
at the Annual General Meeting on 8 February 2023 and has not been included as
a liability within these financial statements.
Dividends are payable on all ordinary shares as disclosed in note 23.
AJ Bell Employee Benefit Trust, which held 567,100 ordinary shares (2021:
885,701) in AJ Bell plc at 30 September 2022, has agreed to waive all
dividends. This represented 0.1% (2021: 0.2%) of the Company's called-up share
capital. The maximum amount held by the Trust during the year was 885,701.
12 Earnings per share
Basic earnings per share is calculated by dividing the profit attributable to
the owners of the Parent Company by the weighted average number of ordinary
shares, excluding own shares, in issue during the year.
Diluted earnings per share is calculated by adjusting the weighted average
number of shares to assume exercise of all potentially dilutive share options.
The calculation of basic and diluted earnings per share is based on the
following data:
2022 2021
£ 000
£ 000
Earnings
Earnings for the purposes of basic and diluted earnings per share being profit 46,739 43,822
attributable to equity holders of the Parent Company
2022 2021
No.
No.
Number of shares
Weighted average number of ordinary shares for the purposes of basic EPS in 410,248,095 409,249,186
issue during the year
Effect of potentially dilutive share options 1,485,721 1,643,911
Weighted average number of ordinary shares for the purposes of fully diluted 411,733,816 410,893,097
EPS
2022 2021
Earnings per share (EPS)
Basic (pence) 11.39 10.71
Diluted (pence) 11.35 10.67
13 Goodwill
2022 2021
£ 000
£ 000
Cost
At 1 October 7,103 3,772
Acquired through business combinations - 3,331
At 30 September 7,103 7,103
Impairment
At 1 October and 30 September (112) (112)
Carrying value at 30 September 6,991 6,991
Goodwill relates to acquisitions allocated to the Group's single cash
generating unit (CGU).
The Group tests goodwill annually for impairment or more frequently if there
are indications that goodwill might be impaired.
The recoverable amount of the assets within the CGU is determined using
value-in-use calculations. In assessing the value-in-use the estimated future
cash flows of the CGU are discounted to their present value using a pre-tax
discount rate. Cash flows are based upon the most recent forecasts, approved
by the Board, covering a three-year period representing the remaining useful
economic life of the asset.
The key assumptions for value-in-use calculations are those regarding discount
rate, growth rates and expected changes to revenues and costs in the period,
as follows:
- a compound rate of 20% (2021: 17%) has been used to assess the expected
growth in revenue for the three-year forecast period. This is based on a
combination of historical and expected future performance;
- economies of scale are expected to be gained in the medium to long-term,
although there are not expected to be any significant changes to the nature of
administrative expenses; and
- modest ongoing maintenance expenditure is required on the assets within the
CGU in order to generate the expected level of cash flows.
The Directors have made these assumptions based upon past experience and
future expectations in the light of anticipated market conditions and the
results of streamlining processes through implementation of the target
operating model for customer services.
Cash flows have been discounted using a pre-tax discount rate of 8.1% (2021:
14.52%).
The pre-tax discount rate has been calculated using an independent external
source, and decreased during the year due to a change in methodology in the
calculation of the Group's weighted average cost of capital (WACC). The
Directors have performed sensitivity analysis on their calculations, with key
assumptions being revised adversely to reflect the potential for future
performance being below expected levels. Changes to revenue are the most
sensitive as they would have the greatest impact on future cash flows.
However, even with nil growth in revenue, there would still be sufficient
headroom to support the carrying value of the assets under the CGU.
Based upon the review above the estimated value-in-use of the CGU comfortably
supports the carrying value of the assets held within it, and so the Directors
are satisfied that for the period ended 30 September 2022 goodwill is not
impaired.
14 Other intangible assets
Key operating system Contractual customer relationships Computer software and mobile applications
£ 000
£ 000
£ 000
Total
£ 000
Cost
At 1 October 2020 8,707 2,135 5,385 16,227
Additions 1,832 - 1,916 3,748
Disposals - - (832) (832)
Arising on acquisition 1,142 - - 1,142
At 30 September 2021 11,681 2,135 6,469 20,285
Additions 2,749 - 1,050 3,799
Disposals - (2,135) (483) (2,618)
At 30 September 2022 14,430 - 7,036 21,466
Amortisation
At 1 October 2020 6,854 2,135 5,252 14,241
Amortisation charge 337 - 525 862
Eliminated on disposal - - (832) (832)
At 30 September 2021 7,191 2,135 4,945 14,271
Amortisation charge 337 - 697 1,034
Eliminated on disposal - (2,135) (483) (2,618)
At 30 September 2022 7,528 - 5,159 12,687
Carrying amount
At 30 September 2022 6,902 - 1,877 8,779
At 30 September 2021 4,490 - 1,524 6,014
At 30 September 2020 1,853 - 133 1,986
Average remaining amortisation period 3 years 1 year
The amortisation charge above is included within administrative expenses in
the income statement.
Additions include an amount of £3,556,000 relating to internally generated
assets for the year ended 30 September 2022 (2021: £2,289,000), of which
£1,434,000 (2021: £1,378,000) relates to capitalised share-based payment
expenses (see note 24).
The net carrying amount of key operating systems, and computer software and
mobile applications include £5,724,000 and £nil respectively (2021:
£2,974,000 and £457,000), relating to assets in development which are
currently not amortised.
At the year end, the Group had entered into contractual commitments for the
acquisition of computer software amounting to £103,000 (2021: £nil).
The disposal of contractual customer relationships held at nil net book value
relates to customer relationships acquired in 2007 and 2012 that no longer
exist.
15 Property, plant and equipment
Leasehold improvements Office equipment Computer equipment Total
£ 000
£ 000
£ 000
£ 000
Cost
At 1 October 2020 2,144 942 4,709 7,795
Arising on acquisition - 11 52 63
Additions 48 27 1,099 1,174
Disposals - (26) (643) (669)
Transfers from right-of-use assets - - 393 393
At 30 September 2021 2,192 954 5,610 8,756
Additions 9 22 983 1,014
Disposals - (1) (324) (325)
At 30 September 2022 2,201 975 6,269 9,445
Depreciation
At 1 October 2020 471 645 3,455 4,571
Arising on acquisition - 5 21 26
Charge for the year 184 169 718 1,071
Eliminated on disposal - (22) (634) (656)
Transfers from right-of-use assets - - 393 393
At 30 September 2021 655 797 3,953 5,405
Charge for the year 167 72 780 1,019
Eliminated on disposal - (1) (303) (304)
At 30 September 2022 822 868 4,430 6,120
Carrying amount
At 30 September 2022 1,379 107 1,839 3,325
At 30 September 2021 1,537 157 1,657 3,351
At 30 September 2020 1,673 297 1,254 3,224
The depreciation charge above is included within administrative expenses in
the income statement.
At the year end, the Group had entered into contractual commitments for the
acquisition of property, plant and equipment amounting to £471,000 (2021:
£nil).
Computer equipment includes assets under construction of £37,000 (2021:
£71,000) which are currently not depreciated.
16 Leases
i) Right-of-use assets
Property Computer and office equipment Total
£ 000
£ 000
£ 000
Cost
At 1 October 2020 15,734 582 16,316
Additions 424 36 460
Disposals - (15) (15)
Effect of modification to leases - 42 42
Transfer to property, plant and equipment - (393) (393)
At 30 September 2021 16,158 252 16,410
Additions 538 - 538
At 30 September 2022 16,696 252 16,948
Depreciation
At 1 October 2020 1,455 339 1,794
Charge for the year 1,485 205 1,690
Eliminated on disposal - (6) (6)
Transfer to property, plant and equipment - (393) (393)
At 30 September 2021 2,940 145 3,085
Charge for the year 1,541 49 1,590
At 30 September 2022 4,481 194 4,675
Carrying amount
At 30 September 2022 12,215 58 12,273
At 30 September 2021 13,218 107 13,325
At 30 September 2020 14,279 243 14,522
The depreciation charge above is included within administrative expenses in
the income statement.
The Group has entered into various leases in respect of property and computer
and office equipment as a lessee. Lease terms are negotiated on an individual
basis and contain a range of different terms and conditions. Property leases
typically run for a period of six to fifteen years and computer and office
equipment for a period of one to six years.
Additions include £455,000 relating to the increase in the Group's
dilapidation provision (2021: £nil) (see note 22).
Other than property and computer and office equipment there are no further
classes of assets leased by the Group.
ii) Lease liabilities
2022 2021
£ 000
£ 000
Current 1,566 1,708
Non-current 12,395 13,886
13,961 15,594
The undiscounted maturity analysis of lease liabilities is shown below:
2022 2021
£ 000
£ 000
Within one year 2,517 2,450
In the second to fifth years inclusive 8,579 8,333
After five years 7,533 8,678
Total minimum lease payments 18,629 19,461
The total lease interest expense for the year ended 30 September 2022 was
£768,000 (2021: £789,000). Principal cash outflow for leases accounted for
under IFRS 16 for the year ended 30 September 2022 was £1,716,000 (2021:
£1,241,000).
17 Subsidiaries
The Group consists of a Parent Company, AJ Bell plc incorporated within the
UK, and a number of subsidiaries held directly and indirectly by AJ Bell plc
which operate and are incorporated in the UK. Note 6 to the Company's separate
financial statements lists details of the interests in subsidiaries.
18 Deferred tax asset
2022 2021
£ 000
£ 000
Deferred tax asset 906 1,139
Deferred tax liability (296) (199)
610 940
The movement on the deferred tax account and movement between deferred tax
assets and liabilities is as follows:
Accelerated capital allowances Share-based payments Short-term timing differences Losses Total
£ 000
£ 000
£ 000
£ 000
£ 000
At 1 October 2020 (47) 940 102 8 1,003
(Charge) / credit to the income statement 65 252 47 (8) 356
Charge to equity - (202) - - (202)
Acquired through business combination (217) - - - (217)
At 30 September 2021 (199) 990 149 - 940
(Charge) / credit to the income statement (97) 31 11 - (55)
Charge to equity - (275) - - (275)
At 30 September 2022 (296) 746 160 - 610
The current year deferred tax adjustment relating to share-based payments
reflects the estimated total future tax relief associated with the cumulative
share-based payment benefit arising in respect of share options granted but
unexercised as at 30 September 2022.
Deferred tax assets have been recognised in respect of other temporary
differences giving rise to deferred tax assets where it is probable that these
assets will be recovered. As at 30 September 2022, deferred tax assets have
not been recognised on trading losses of £4,051,000 (2021: £2,809,000).
19 Trade and other receivables
2022 2021
£ 000 (Restated)(1)
£ 000
Trade receivables 2,207 2,321
Prepayments 6,824 5,379
Accrued income 21,960 14,699
Other receivables 18,445 15,063
49,436 37,462
1 See note 2 for details of a change in accounting policy and the resulting
restatement of prior year.
The Directors consider that the carrying amount of trade and other receivables
approximates their fair value. Included within other receivables is client
money required to meet settlement obligations and are payable on demand.
Included within accrued income is £984,000 (2021: £978,000) relating to
contract assets, a movement of £6,000 (2021: £59,000) during the year due to
increased revenues.
The ageing profile of trade receivables was as follows:
2022 2021
£ 000
£ 000
Current - not past due 747 882
Past due:
0 to 30 days 886 798
31 to 60 days 116 159
61 to 90 days 39 125
91 days and over 1,024 881
2,812 2,845
Provision for impairment (605) (524)
2,207 2,321
The movement in the provision for impairment of trade receivables is as
follows:
2022 2021
£ 000
£ 000
Opening loss allowance as at 1 October 524 415
Loss allowance recognised 174 196
Receivables written off during the year as uncollectable (21) (58)
Unused amount reversed (72) (29)
Balance at end of year 605 524
In determining the recoverability of trade receivables, the Directors
considered any change in the credit quality of the trade receivable from the
date credit was initially granted up to the reporting date.
20 Cash and cash equivalents
2022 2021
£ 000 (Restated)(1)
£ 000
Group cash and cash equivalent balances 84,030 94,008
1 See note 2 for details of a change in accounting policy and the resulting
restatement of prior year.
Cash and cash equivalents at 30 September 2022 and 30 September 2021 are
considered to be holdings of less than one month, or those over which the
Group has an immediate right of recall.
21 Trade and other payables
2022 2021
£ 000
£ 000
Trade payables 138 580
Social security and other taxes 2,151 2,111
Other payables 678 582
Accruals 10,428 7,473
Deferred income 2,209 2,019
15,604 12,765
Trade payables, accruals and deferred income principally comprise amounts
outstanding for trade purposes and ongoing costs. The Directors consider that
the carrying amount of trade payables approximates their fair value.
Deferred income in the current and prior year relates to contract liabilities.
The prior year deferred revenue balance has now all been recognised as revenue
and the current year balance all relates to cash received in the current
period. Total deferred income as at 30 September 2022 is expected to be
recognised as revenue in the coming year.
22 Provisions
Office dilapidations Other provisions Total
£ 000
£ 000
£ 000
At 1 October 2021 1,549 1,526 3,075
Additional provisions 455 - 455
Provisions used - (257) (257)
Unused provision reversed - (750) (750)
At 30 September 2022 2,004 519 2,523
Included in current liabilities - 519 519
Included in non-current liabilities 2,004 - 2,004
Office dilapidations:
The Group is contractually obliged to reinstate its leased properties to their
original state and layout at the end of the lease terms. During the year,
management reviewed the Group's dilapidation provision and the assumptions on
which the provision is based. The estimate is based upon property location,
size of property and an estimate of the charge per square foot. A further
charge of £455,000 has been recognised in relation to an increase in the
estimated charge per square foot. The office dilapidations provision
represents management's best estimate of the costs which will ultimately be
incurred in settling these obligations.
Other provisions:
The other provisions relate to the settlement of an operational tax dispute
and the costs associated with defending a legal case. The provision relating
to the operational tax dispute has been updated at 30 September 2022 to
reflect the ongoing discussions with HMRC, with full settlement of payments
expected to be completed within the next 12 months.
23 Share capital
2022 2021 2022 2021
Issued, fully-called and paid: Number Number £ £
Ordinary shares of 0.0125p each 411,091,634 410,491,708 51,386 51,311
All ordinary shares have full voting and dividend rights.
The following transactions have taken place during the year:
Transaction type Share class Number of shares Share premium
£ 000
Exercise of CSOP options Ordinary shares of 0.0125p each 267,003 272
Exercise of EIP options Ordinary shares of 0.0125p each 176,949 -
Earn-out issue Ordinary shares of 0.0125p each 155,974 -
599,926 272
The holders of ordinary shares are entitled to receive dividends as declared
from time to time and are entitled to one vote per share at general meetings
of the Company. They are entitled to share in the proceeds on the return of
capital, or upon the winding up of the Company in proportion to the number of
and amounts paid on shares held. The shares are non-redeemable.
Own shares
The Group has an employee benefit trust in order to acquire own shares in the
Company to satisfy future share incentive plans. Shares held by the Trust are
held at £473,000 (2021: £740,000) being the price paid to repurchase, and
the carrying value is shown as a reduction within shareholders' equity.
During the year, 318,601 EIP options were exercised and issued from the AJ
Bell Employee Benefit Trust.
The costs of operating the Trust are borne by the Group but are not material.
The Trust waived the right to receive dividends on these shares.
24 Share-based payments
Company Share Option Plan (CSOP)
The CSOP is a HMRC approved scheme in which the Board, at their discretion,
grant options to employees to purchase ordinary shares. Each participating
employee can be granted options up to the value of £30,000. Options granted
under the CSOP can be exercised between the third and tenth anniversary after
the date of grant and are usually forfeited if the employee leaves the Group
before the option expires. The expense for share-based payments under the CSOP
is recognised over the respective vesting period of these options.
Option To Buy Scheme (OTB) - Growth shares
The OTB scheme is a historical award scheme whereby the Board at its
discretion granted growth shares to employees. Growth shares entitled the
holder to participate in the growth value of the Group above a certain
threshold level, set above the current market value of the Group at the time
the shares were issued. Growth shares granted under the OTB scheme had
different vesting conditions. The vesting condition attached to all growth
shares granted is that the threshold level needs to be met and an exit event
needs to have occurred. As part of the AJ Bell listing process all awards were
converted into ordinary shares and those awards granted with an additional
employment condition of four or six years after the date of grant, continue to
be recognised as a share-based payment. Awards that were issued subject to
employment conditions are subject to buy back options under which the Group
can buy back the shares for their issue price if the employee leaves the Group
before the expiry of the employment condition period.
Buy As You Earn plan (BAYE)
The BAYE plan is an all-employee share plan under which shares can be issued
to employees as either free shares or partnership shares.
The Company may grant free shares up to a maximum of £3,600 per employee in a
tax year. During the year, no free shares have been issued (2021: nil).
Employees have been offered the opportunity to participate in the partnership
plan to enable such employees to use part of their pre-tax salary to acquire
shares. The limit to the pre-tax salary deduction is £1,800 or, if lower, 10%
of salary each year. The initial plan was an accumulation plan where employees
were required to save an amount of their gross salary for a 12 month period.
The accumulation plan ended on 6 December 2019 and employees still in the plan
at that date were entitled to purchase shares using the funds saved based on
the IPO price of £1.60.
From January 2020, the plan entitles employees to use this deduction to buy
shares in the Company on a monthly basis at the current market value.
Employees are able to withdraw their shares from the plan at any time but may
be subject to income tax and national insurance charges if withdrawn within
three years of purchasing the shares. Therefore the monthly partnership plan
does not give rise to a share-based payment charge.
Executive Incentive Plan (EIP)
The EIP is a performance share plan that involves the award of nominal cost
options to participants conditional on the achievement of specified
performance targets and continuous employment over a certain period of time.
Individual grants will be dependent on the assessment of performance against a
range of financial and non-financial targets set at the beginning of the
financial year.
CSR initiative
A CSR initiative was introduced in December 2019 with the intention of giving
an additional contribution to charity through the donation of share options
should a number of stretching targets be met by the Group. The awards made are
equity-settled awards and involved the grant of market value options to the AJ
Bell Trust conditional on the achievement of diluted earnings per share (DEPS)
targets for the financial years 2022, 2023 and 2024 (Performance Period).
The exercise of each tranche will be conditional upon the DEPS having
increased in relation to the 7.47 pence DEPS for the year ended 30 September
2019, by more than:
- 90% for September 2022;
- 115% for September 2023; and
- 140% for 30 September 2024.
These are considered to be the lower DEPS targets. The upper DEPS target for
each performance period is 10% above the lower DEPS target.
The percentage of shares granted that will vest in each performance period is
determined as follows:
- If actual DEPS is below the lower DEPS target, the vesting
percentage is equal to zero;
- If actual DEPS is above the upper DEPS target, the vesting
percentage is equal to 100%; and
- If actual DEPS is between the lower and upper target, then the
vesting percentage is determined by linear interpolation on a straight-line
basis and rounded down to the nearest 10%.
As no service is being provided by the AJ Bell Trust, all conditions involved
in the arrangement are considered to be non-vesting conditions. Non-vesting
conditions should be taken into account when estimating the fair value of the
equity instrument granted. The fair value has been estimated using the Monte
Carlo simulation model.
Earn-out arrangement
The acquisition of Adalpha in the previous year gave rise to an earn-out
arrangement whereby share awards will be made should a number of operational
and financial milestones, relating to AUA targets and the development of a
simplified proposition for financial advisers, be met. The awards will be
equity-settled and will vest in several tranches in line with the agreed
milestones.
Under the terms of the acquisition agreement, shares will be awarded to
eligible employees conditional upon the successful completion of certain
performance milestones and their continued employment with the Group during
the vesting period. There is no exercise price attached to the share award.
The fair value of the earn-out arrangement is estimated as at the date of
grant calculated by reference to the quantum of the earn-out payment for each
performance milestone and an estimated time to proposition completion,
discounted to net present value. The performance condition included within the
arrangement is not considered a market condition and therefore the expected
vesting will be reviewed at each reporting date.
Movements during the year
The tables below summarise the outstanding options for each share-based
payment scheme.
CSOP
2022 2021
Number Weighted average exercise price Number Weighted average exercise price
£ £
Outstanding at beginning of the year 1,015,763 3.23 1,003,968 1.90
Granted during the year 461,744 3.73 392,371 4.34
Forfeited during the year (108,611) 4.05 (57,198) 2.23
Exercised during the year (267,003) 1.02 (323,378) 0.61
Outstanding at the end of the year 1,101,893 3.90 1,015,763 3.23
Exercisable at the end of the year 31,462 1.04 10,000 0.52
The lowest exercise price for share options outstanding at the end of the
period was 104p (2021: 52p) and the highest exercise price was 434p (2021:
434p). The weighted average remaining contractual life of share options
outstanding at the end of the period was 8.3 years (2021: 8.3 years).
OTB - Growth shares
2022 2021
Number Weighted average exercise price Weighted average exercise price
£ Number £
Outstanding at beginning of the year 3,192,268 0.63 3,212,675 0.63
Vested (2,026,137) 0.63 (20,407) 0.63
Outstanding at the end of the year 1,166,131 0.63 3,192,268 0.63
Upon listing to the London Stock Exchange, all growth shares were converted to
ordinary shares and therefore no exercise price exists for growth shares
outstanding at the end of the period. During the year 2,026,137 ordinary
shares under a call option agreement vested and were released. The weighted
average remaining contractual life of growth shares converted to ordinary
shares under a call option agreement at the end of the period was 1.2 years
(2021: 0.9 years).
BAYE - Free shares
2022 2021
Number
Number
Outstanding at beginning of the year 240,112 263,106
Forfeited during the year (4,680) (22,994)
Vested (235,432) -
Outstanding at the end of the year - 240,112
Free shares are issued to employees for free and therefore do not have an
exercise price. During the year 235,432 free shares vested and were released.
There are no free shares outstanding at the end of the period.
EIP
2022 2021
Number Weighted average exercise price Number Weighted average exercise price
£ £
Outstanding at beginning of the year 1,487,313 0.000125 1,208,693 0.000125
Granted during the year 736,015 0.000125 580,146 0.000125
Exercised during the year (495,550) 0.000125 (130,695) 0.000125
Lapsed during the year (111,910) 0.000125 (145,632) 0.000125
Forfeited during the year - - (25,199) 0.000125
Outstanding during the year 1,615,868 0.000125 1,487,313 0.000125
Exercisable at the end of the year 565,636 0.000125 191,509 0.000125
The weighted average remaining contractual life of EIP shares outstanding at
the end of the period was 8 years (2021: 8.2 years).
CSR initiative
2022 2021
Number Weighted average exercise price Number Weighted average exercise price
£ £
Outstanding at beginning of the year 2,493,766 4.01 2,493,766 4.01
Granted during the year - - - -
Forfeited during the year (831,256) 4.01 - -
Outstanding during the year 1,662,510 4.01 2,493,766 4.01
Exercisable at the end of the year - - - -
The weighted average remaining contractual life of CSR options outstanding at
the end of the period was 7.2 years (2021: 8.2 years).
The first tranche of options were forfeited due to the DEPS for the year,
11.31, being below the lower DEPS target of 14.19 pence at the end of the
performance period.
Weighted average share price of options exercised
The weighted average share price of all options exercised during the year was
£3.67 (2021: £4.32).
Earn-out arrangement
2022 2021
Number Weighted average share price Number Weighted average share price
£ £
Shares granted during the year 155,974 3.15 353,032 4.25
Measurement
The fair value of equity-settled share options granted is estimated as at the
date of grant using the Black-Scholes model, taking into account the terms
upon which the options and awards were granted.
The inputs into the Black-Scholes model and assumptions used in the
calculations are as follows:
EIP
Grant date
09/12/2021 09/12/2021 09/12/2021
Number of shares under option 344,727 100,644 290,644
Fair value of share option from generally accepted business model (£) 3.76 3.62 3.56
Share price (£) 3.83 3.83 3.83
Exercise price of an option (£) 0.000125 0.000125 0.000125
Expected volatility 27.60% 31.01% 31.01%
Expected dividend yield 1.82% 1.82% 1.82%
Risk-free interest rate 0.24% 0.50% 0.47%
Expected option life to exercise (months) 12 36 48
CSOP
Grant date 10/01/2022 20/04/2022
09/12/2021
Number of shares under option 443,766 7,936 10,042
Fair value of share option from generally accepted business model (£) 0.74 0.58 0.49
Share price (£) 3.83 3.68 2.91
Exercise price of an option (£) 3.75 3.78 2.98
Expected volatility 31.01% 27.65% 29.29%
Expected dividend yield 1.82% 1.89% 2.39%
Risk-free interest rate 0.50% 0.92% 1.62%
Expected option life to exercise (months) 36 36 36
Expected volatility is estimated by considering historic average share price
volatility at the grant date.
The expected life of the options is based on the minimum period between the
grant of the option, the earliest possible exercise date and an analysis of
the historical exercise data that is not necessarily indicative of exercise
patterns that may occur. The expected volatility reflects the assumption that
historical volatility is indicative of future trends, which may also not
necessarily be the case.
During the year, the Group recognised a share-based payment expense of
£4,728,000 (2021: £4,952,000), £1,840,000 (2021: £2,764,000) of which
relates to the earn-out arrangement.
The Group capitalised share-based payment costs of £1,434,000 (2021:
£1,378,000).
25 Financial instruments and risk management
The Group's activities expose it to a variety of financial instrument risks;
market risk (including interest rate and foreign exchange), credit risk and
liquidity risk. Information is presented below regarding the exposure to each
of these risks, including the procedures for measuring and managing them.
Financial instruments include both financial assets and financial liabilities.
Financial assets principally comprise trade and other receivables and cash and
cash equivalents. Financial liabilities comprise trade and other payables,
accruals and obligations under leases. The Group does not have any derivative
financial instruments.
Risk management objectives
The Group has identified the financial, business and operational risks arising
from its activities and has established policies and procedures to manage
these items in accordance with its risk appetite. The Board of Directors has
overall responsibility for establishing and overseeing the Group's risk
management framework and risk appetite.
The Group's financial risk management policies are intended to ensure that
risks are identified, evaluated and subject to ongoing monitoring and
mitigation (where appropriate). These policies also serve to set the
appropriate control framework and promote a robust risk culture within the
business. The Group regularly reviews its financial risk management policies
and systems to reflect changes in the business, counterparties, markets and
range of financial instruments that it uses.
The Group's Treasury Committee has principal responsibility for monitoring
exposure to the risks associated with cash and cash equivalents. Policies and
procedures are in place to ensure the management and monitoring of each type
of risk. The primary objective of the Group's treasury policy is to manage
short-term liquidity requirements whilst maintaining an appropriate level of
exposure to other financial risks in accordance with the Group's risk
appetite.
Significant accounting policies
Details of the significant accounting policies, including the criteria for
recognition, the basis of measurement and the basis on which income and
expenses are recognised, in respect of each financial asset and financial
liability, are disclosed within note 2 to the financial statements.
Categories of financial instrument
The financial assets and liabilities of the Group are detailed below:
2022 2021 (Restated)(1)
Amortised cost Financial liabilities Carrying value Amortised cost Financial liabilities Carrying value
£ 000
£ 000
£ 000
£ 000
£ 000
£ 000
Financial assets
Trade receivables 2,207 - 2,207 2,321 - 2,321
Accrued income 21,960 - 21,960 14,699 - 14,699
Other receivables 18,445 - 18,445 15,063 - 15,063
Cash and cash equivalents 84,030 - 84,030 94,008 - 94,008
126,642 - 126,642 126,091 - 126,091
Financial liabilities
Trade and other payables - 10,598 10,598 - 8,095 8,095
Lease liabilities - 13,961 13,961 - 15,594 15,594
- 24,559 24,559 - 23,689 23,689
1 See note 2 for details of a change in accounting policy and the resulting
restatement of prior year.
The carrying amount of all financial assets and liabilities is approximate to
their fair value due to their short-term nature.
Market risk
Interest rate
risk
The Group holds interest bearing assets in the form of cash and cash deposits.
Cash at bank earns interest at floating rates based on daily bank deposit
rates. Term deposits can also be made for varying periods depending on the
immediate cash requirements of the Group, and interest is earned at the
respective fixed-term rate. Based on the cash balances shown in the Group's
statement of financial position at the reporting date, if interest rates were
to move by 25bps it would change profit before tax by approximately:
2022 2021
£ 000 £ 000
+ 25bps (0.25%) 191 246
- 25bps (0.25%) (154) (23)
As at the year end the Group had no borrowings, and therefore was not exposed
to a material interest rate risk related to debt as the interest rate is fixed
at the inception of the lease.
The Group retains a proportion of the interest income generated from the
pooling of customer cash balances and as a result, the Group revenue has an
indirect exposure to interest rate risk. The cash balances are held with a
variety of banks and are placed in a range of fixed-term, notice and call
deposit accounts with due regard for counterparty credit risk, capacity risk,
concentration risk and liquidity risk requirements. The spread of rate
retained by the Group is variable dependent on rates received by banks
(disclosed to customers at between 0.10% below and 0.60% above the prevailing
base rate) and amounts paid away to customers.
The impact of a 25bps increase or decrease in UK base interest rates on the
Group's revenue has been calculated and shown below. This has been modelled on
a historical basis for each year separately assuming that the UK base rate was
25bps higher or lower than the actual position at the time. We assume a
minimum rate of return on call cash of 0bps.
2022 2021
£ 000 £ 000
+ 25bps (0.25%) 6,654 5,324
- 25bps (0.25%) (6,823) (4,901)
Customer cash balances are not a financial asset of the Group and so are not
included in the statement of financial position.
Market movement sensitivity
The Group's custody fees are derived from the market value of the underlying
assets held by the retail customer in their account, based on product type,
mix and portfolio size which are charged on an ad valorem basis. As a result,
the Group has an indirect exposure to market risks, as the value of the
underlying customers' assets may rise or fall. The impact of a 10% increase
or reduction in the value of the customers underlying assets subject to the
custody fees on the Group's revenue has been calculated and shown below. This
has been modelled on a historical basis for each year separately assuming that
the value of the customers' assets were 10% higher or lower than the actual
position at the time.
2022 2021
£ 000 £ 000
+ 10% higher 5,846 4,850
- 10% lower (5,846) (4,850)
Foreign exchange risk
The Group is not exposed to significant foreign exchange translation or
transaction risk as the Group's activities are primarily within the UK.
Foreign exchange risk is therefore not considered material.
Credit risk
The Group's exposure to credit risk, which is the risk that a counterparty
will be unable to pay amounts in full when due, arises principally from its
cash balances held with banks and trade and other receivables.
Trade receivables are presented net of expected credit losses within the
statement of financial position. The Group applies the IFRS 9 simplified
approach to measuring expected credit losses which uses a lifetime expected
loss allowance for all trade receivables. To measure the expected credit
losses, trade receivables have been grouped based on shared credit risk
characteristics and number of days past due. Details of those trade
receivables that are past due are shown within note 19.
The Group has implemented procedures that require appropriate credit or
alternative checks on potential customers before business is undertaken. This
minimises credit risk in this area.
The credit and concentration risk on liquid funds, cash and cash equivalents
is limited as deposits are held across a number of major banks. The Directors
continue to monitor the strength of the banks used by the Group. The principal
banks currently used by the Group are Bank of Scotland plc, Barclays Bank plc,
Lloyds Bank plc, Lloyds Bank Corporate Markets plc, HSBC Bank plc, HSBC Global
Asset Management, NatWest Markets plc, Santander UK plc, Santander Financial
Services plc, Clearstream Banking SA and Qatar National Bank (Q.P.S.C). Bank
of Scotland plc, the Group's principal banker, is substantial and is 100%
owned by Lloyds Banking Group plc. All these banks currently have long-term
credit ratings of at least A- (Fitch). Where the services of other banks are
used, the Group follows a rigorous due diligence process prior to selection.
This results in the Group retaining the ability to further mitigate the
counterparty risk on its own behalf and that of its customers.
The Group has no significant concentration of credit risk as exposure is
spread over a large number of counterparties and customers. The maximum
exposure to credit risk is represented by the carrying amount of each
financial asset at the reporting date. In relation to dealing services, the
Group operates as agent on behalf of its underlying customers and in
accordance with London Stock Exchange Rules.
Any settlement risk during the period between trade date and the ultimate
settlement date is substantially mitigated as a result of the Group's agency
status, its settlement terms and the delivery versus payment mechanism whereby
if a counterparty fails to make payment, the securities would not be delivered
to the counterparty. Therefore any risk exposure is to an adverse movement in
market prices between the time of trade and settlement. Conversely, if a
counterparty fails to deliver securities, no payment would be made.
There has been no material change to the Group's exposure to credit risk
during the year.
Liquidity risk
This is the risk that the Group may be unable to meet its liabilities as and
when they fall due. These liabilities arise from the day-to-day activities of
the Group and from its obligations to customers. The Group is a highly
cash-generative business and maintains sufficient cash and standby banking
facilities to fund its foreseeable trading requirements.
There has been no change to the Group's exposure to liquidity risk or the
manner in which it manages and measures the risk during the year.
The following table shows the undiscounted cash flows relating to
non-derivative financial liabilities of the Group based upon the remaining
period to the contractual maturity date at the end of the reporting period.
Due within 1 year 1 to 5 After 5 years Total
£ 000
years
£ 000
£ 000 £ 000
2022
Trade and other payables 10,598 - - 10,598
Lease liabilities 2,517 8,579 7,533 18,629
13,115 8,579 7,533 29,227
2021
Trade and other payables 8,095 - - 8,095
Lease liabilities 2,450 8,333 8,678 19,461
10,545 8,333 8,678 27,556
Capital management
The Group's objectives in managing capital are to:
- safeguard the Group's ability to continue as a going concern so that it can
continue to provide returns for shareholders, security for our customers and
benefits for other stakeholders;
- maintain a strong capital base to support the development of its business;
and
- comply with regulatory requirements at all times.
The capital structure of the Group consists of share capital, share premium
and retained earnings. As at the reporting date the Group had capital of
£133,394,000 (2021: £130,708,000).
Capital generated from the business is both reinvested in the business to
generate future growth and returned to shareholders principally in the form of
dividends. The capital adequacy of the business is monitored on an ongoing
basis and as part of the business planning process by the Board. It is also
reviewed before any distributions are made to shareholders to ensure it does
not fall below the agreed surplus as outlined in the Group's capital
management policy. The liquidity of the business is monitored by management on
a daily basis to ensure sufficient funding exists to meet the Group's
liabilities as they fall due. The Group is highly cash-generative and
maintains sufficient cash and standby banking facilities to fund its
foreseeable trading requirements.
The Group conducts an ICARA, as required by the FCA to assess the appropriate
amount of regulatory capital and liquid resources to be held by the Group.
Regulatory capital and liquid resources for ICARA are calculated in accordance
with published rules.
The ICARA compares the Group's financial resources against regulatory capital
and liquidity requirements as specified by the relevant regulatory
authorities. Our current financial resources, regulatory capital and liquidity
requirements can be found in the Financial Review above.
The Group maintained a surplus of regulatory capital and liquid resources
throughout the year. The disclosures required under MIFIDPRU 8 of the
Investment Firms Prudential Regime are available on the Group's website at
ajbell.co.uk.
26 Interests in unconsolidated structure entities
The Group manages a number of investment funds (open-ended investments) acting
as agent of the Authorised Corporate Director. The dominant factor in deciding
who controls these entities is the contractual arrangement in place between
the Authorised Corporate Director and the Group, rather than voting or similar
rights. As the Group directs the investing activities through its investment
management agreement with the Authorised Corporate Director, the investment
funds are deemed to be structured entities. The investment funds are not
consolidated into the Group's financial statements as the Group is judged to
act as an agent rather than having control under IFRS 10.
The purpose of the investment funds is to invest capital received from
investors in a portfolio of assets in order to generate a return in the form
of capital appreciation, income from the assets, or both. The Group's interest
in the investment funds is in the form of management fees received for its
role as investment manager. These fees are variable depending on the value of
the assets under management.
The funds do not have any debt or borrowings and are financed through the
issue of units to investors.
The following table shows the details of unconsolidated structured entities in
which the Group has an interest at the reporting date:
Number of funds Net AUM of funds Annual management charge Management charge receivable at 30 September
Year Type £m £ 000 £ 000
2022 OEIC 9 1,465.5 1,816 369
2021 OEIC 9 1,073.2 1,138 266
The annual management charge is included within recurring ad valorem fees
within revenue in the consolidated income statement.
The annual management charge receivable is included within accrued income and
trade receivables in the consolidated statement of financial position.
The maximum exposure to loss relates to a reduction in future management fees
should the market value of the investment funds decrease.
27 Reconciliation of liabilities arising from financing activities
2022 1 October 2021 Cash flows Change in lease liability 30 September 2022
£ 000
£ 000
£ 000
£ 000
Lease liabilities 15,594 (1,716) 83 13,961
Total liabilities from financing activities 15,594 (1,716) 13,961
83
2021 1 October 2020 Cash flows Change in lease liability Additions Disposal 30 September 2021
£ 000
£ 000
£ 000
£ 000
£ 000 £000
Lease liabilities 16,345 (1,241) 42 460 (12) 15,594
Total liabilities from financing activities 16,345 (1,241) 42 460 (12) 15,594
28 Related party transactions
Transactions between the Parent Company and its subsidiaries, which are
related parties, have been eliminated on consolidation and are not disclosed.
Transactions with key management personnel:
Key management personnel is represented by the Board of Directors and the ExCo
(previously EMB).
The remuneration expense of key management personnel is as follows:
2022 2021
£ 000
£ 000
Short-term employee benefits (excluding NI) 2,779 2,108
Retirement benefits 114 35
Share-based payment 2,389 1,256
5,282 3,399
During the year there were no material transactions or balances between the
Group and its key management personnel or members of their close families,
other than noted below.
Transactions with directors:
The remuneration of individual directors is provided in the Directors'
Remuneration Report.
Dividends totalling £11,743,000 (2021: £6,766,000) were paid in the year in
respect of ordinary shares held by the Company's directors.
The aggregate gains made by the Directors on the exercise of share options
during the year were £772,000 (2021: £nil).
During the year Directors and their families received beneficial staff rates
in relation to personal portfolios. The discount is not material to the
Directors or to AJ Bell.
Other related party transactions:
Charitable donations
During the year the Group made donations of £298,000 (2021: £272,000) to the
AJ Bell Trust, a registered charity of which Mr A J Bell is a trustee.
EQ Property Services Limited
The Group is party to three leases with EQ Property Services Limited for
rental of the Head Office premises, 4 Exchange Quay, Salford Quays,
Manchester, M5 3EE. Mr A J Bell, Mr M T Summersgill and Mr R Stott are
directors and shareholders of both AJ Bell plc and EQ Property Services
Limited. Mr C Galbraith was a member of key management personnel in the year
and shareholder of AJ Bell plc, and is a director and shareholder of EQ
Property Services Limited. The leases for the rental of the building were
entered into on 17 August 2016 for terms which expire on 30 September 2031, at
an aggregate market rent of £1,826,000 (2021: £1,825,000) per annum.
At the reporting date, there is no payable outstanding (2021: £nil) with EQ
Property Services Limited.
Any amounts outstanding with related parties are unsecured and will be settled
in cash. No guarantees have been given or received. No provision has been made
for doubtful debts in respect of amounts owed by related parties.
29 Subsequent events
There have been no material events occurring between the reporting date and
the date of approval of these consolidated financial statements.
Glossary
Adalpha AJ Bell Touch Limited and its wholly-owned subsidiaries
AGM Annual General Meeting
AJBIC AJ Bell Investcentre
BAYE Buy as you earn
Board, Directors The Board of Directors of AJ Bell plc
BPS Basis points
CASS Client Assets Sourcebook
CGU Cash Generating Unit
CODM Chief Operating Decision Maker
CSOP Company Share Option Plan
CSR Corporate Social Responsibility
D&I Diversity and Inclusion
DEPS Diluted Earnings Per Share
DTR Disclosure Guidance and Transparency Rules
DWP Department for Work and Pensions
D2C Direct to Consumer
EIP Executive Incentive Plan
EMB Executive Management Board
ERC Executive Risk Committee
ESG Environmental, Social and Governance
EVF Employee Voice Forum
ExCo Executive Committee (formerly EMB)
FCA Financial Conduct Authority
FRC Financial Reporting Council
FRS Financial Reporting Standards
FTSE The Financial Times Stock Exchange
FX Foreign Exchange
GHG Greenhouse Gas
GIA General Investment Account
HMRC His Majesty's Revenue and Customs
HR Human Resources
IAS International Accounting Standard
ICAAP Internal Capital Adequacy Assessment Process
ICARA Internal Capital and Risk Assessment
ICO Information Commissioner's Office
IFA Independent Financial Adviser
IFRIC International Financial Reporting Interpretations Committee
IFPR Investment Firm Prudential Regime
IFRS International Financial Reporting Standards
IPO Initial Public Offering
ISA Individual Savings Account
IT Information Technology
KOS Key Operating System
KPI Key Performance Indicator
KRI Key Risk Indicator
KYC Know Your Customer
LISA Lifetime ISA
MiFID II Markets in Financial Instruments Directive II
MPS Managed Portfolio Service
MSCI Morgan Stanley Capital International
OCF Ongoing Charges Figure
OEIC Open-Ended Investment Company
OTB Option To Buy
PBT Profit Before Tax
PLC Public Limited Company
PR&U Principal Risks and Uncertainties
R&CC Risk and Compliance Committee
RMF Risk Management Framework
SID Senior Independent Director
SIPP Self-Invested Personal Pension
SMIP Senior Management Incentive Plan
SREP Supervisory Review and Evaluation Process
SSAS Small Self-Administered Scheme
TCFD Task Force on Climate-related Financial Disclosures
TPDFM Third-Party Discretionary Fund Managers
TPR The Pensions Regulator
WACI Weighted Average Carbon Intensity
Definitions
Ad valorem According to value
AUA Assets Under Administration
AUM Assets Under Management
Customer retention rate Relates to platform customers
Fintech Refers to a business that uses technology to enhance or automate financial
services and processes
Lang Cat An insight, marketing and communications consultancy business specialising in
Financial Services
Lifetime value The total amount of revenue a business expects to generate over the lifetime
of a customer
Listing rules Regulations subject to the oversight of the FCA applicable to companies listed
on a UK stock exchange
MSCI ESG rating MSCI's assessment of a Company's resilience to long-term, industry material
ESG risks and how well they manage those risks relative to peers.
Own shares Shares held by the Group to satisfy future incentive plans
Platforum The advisory and research business specialising in investment platforms
Recurring ad valorem revenue Includes custody fees, retained interest income and investment management fees
Recurring fixed revenue Includes recurring pension administration fees and media revenue
Revenue per £ AUA Represents revenue as a percentage of the average AUA in the year. Average AUA
is calculated as the average of the opening and closing AUA in each quarter
averaged for the year
Transactional revenue Includes dealing fees and pension scheme activity fees
UK Corporate Governance Code A code which sets out standards for best boardroom practice with a focus on
Board leadership and effectiveness, remuneration, accountability and relations
with shareholders
Company information
Company number
04503206
Company Secretary
Mr Christopher Bruce Robinson
Registered office
4 Exchange Quay
Salford Quays
Manchester
M5 3EE
Auditor
BDO LLP
55 Baker Street
London
W1U 7EU
Banker
Bank of Scotland plc
1 Lochrin Square
92 - 98 Fountainbridge
Edinburgh
EH3 9QA
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