REG - Impax Asset Mgmnt - Final Results
30/11/2022 07:00
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RNS Number : 9991H Impax Asset Management Group plc 30 November 2022
Impax Asset Management Group plc
Results for the year ended 30 September 2022
London, 30 November 2022 - Impax Asset Management Group plc ("Impax" or the
"Company"), the specialist investor focused on the transition to a more
sustainable global economy, today announces final audited results for the year
ending 30 September 2022 (the "Period").
Business highlights
· Net inflows of £2.9 billion, well diversified by sales channel and
by geography (2021: £10.7 billion)
· Assets under management ("AUM") decreased by 4.1% to £35.7 billion
(2021: £37.2 billion). As of 31 October AUM had recovered to £37.4 billion
· 79% of AUM from clients outside the UK, reflecting global
diversification
· Largest investment strategies by AUM continue to outperform
benchmarks over three and five years(1)
· Employee headcount(2) grew by 26% to 272
· Karen Cockburn to become Chief Financial Officer, succeeding Charlie
Ridge, in January 2023
Financial highlights
· Revenue increased 22.6% to £175.4 million (2021: £143.1 million)
· Adjusted operating profit grew by 20.8% to £67.4 million (2021:
£55.8 million)
· Profit before tax grew by 58.6% to £72.6 million (2021: £45.7
million)
· Shareholders' equity increased 25.0% to £138.2 million (2021:
£110.5 million)
· Adjusted diluted earnings per share increased by 22.4% to 42.1 pence
(2021: 34.4 pence - restated)
· Proposed final dividend of 22.9 pence per share bringing total
dividend per share to 27.6 pence (2021: 20.6 pence) up 34.0%.
· Cash reserves up 52.6% to £107.0 million (2021: £70.1 million)
Sally Bridgeland, Chair, commented:
"Impax has shown the value of its authentic, long-held investment philosophy
focused on the transition to a more sustainable economy. The management team
has successfully led the business through difficult market conditions, with
strong performance against the majority of its key performance indicators. As
the team continues to expand, Impax remains committed to preserving its
culture, conscious of the challenges of growing quickly in a hybrid working
environment.
"In 2019, the Company adopted a policy of paying an annual dividend of between
55% and 80% of adjusted profit after tax. In line with this, the Board now
recommends paying a final dividend for 2022 of 22.9p a total for the year of
27.6p, an increase in the total dividend of 34% on 2021."
Ian Simm, Chief Executive, added:
"Impax has delivered commendable results during a year that started strongly
but rapidly developed considerable external headwinds. Despite weak market
sentiment, fuelled by rising inflation and geopolitical instability, we
continued to attract new business, with total net inflows of £2.9 billion
over the year and positive flows in both halves.
"For more than two decades we have built a robust and well-diversified global
client base of institutional and intermediary investors and served both
through our own channels and via trusted distribution partners. The Company's
performance during the Period demonstrates the benefit of this diversified
strategy as asset owners continued to show their shared conviction in the
medium to long-term opportunities presented by the transition to a more
sustainable economy.
"It is a pleasure to welcome Karen Cockburn, who in January 2023 will become
Chief Financial Officer, succeeding Charlie Ridge. Karen is a highly
experienced professional, whose career includes spells in banking, insurance,
wealth management and digital platforms. On behalf of my colleagues, I would
like to extend my sincere thanks to Charlie for his outstanding leadership
over the past 14 years.
"Looking ahead to 2023, for companies exposed to the transition to a more
sustainable economy, the current environment is providing positive tailwinds.
Over the longer term, we expect the rise in input prices to drive an increased
focus on energy- and resource-efficiency and to accelerate the shift to
diversify energy supplies and decarbonise economies. At a policy level, energy
security concerns are likely to remain high, further prioritising the shift
away from fossil fuels, while pressure on investors to demonstrate climate
resilience and protect ecosystems are also likely to grow in prominence.
Although market volatility is likely to remain elevated, robust companies with
correctly designed business strategies should continue to out-perform."
Board Changes
Following 13 years on the Board, Vince O'Brien has notified the Board of his
intention to retire as a Director, effective at the AGM in March 2023. He has
retired as Senior Independent Director, Chair and member of the Audit &
Risk Committee, and member of the Remuneration Committee, effective 30
November 2022. Annette Wilson will succeed Vince as Chair of the Audit &
Risk Committee and will assume his role as Board Sponsor of the employee-led
Environment Group. Simon O'Regan will succeed Vince as the Senior Independent
Director and as the Board's Whistleblowing Champion.
Karen Cockburn will become Chief Financial Officer, succeeding Charlie Ridge,
in January 2023. In due course it is anticipated that Karen will join the
Impax Board as an Executive Director. This is expected to be following the
conclusion of the Company's AGM, subject to receipt of regulatory approval in
relation to her appointment as a director of the Company's FCA regulated
subsidiaries.
LEI number: 213800AJDNW4S2B7E680
Media Enquiries:
Impax Asset Management Group plc
Ian Simm, Chief Executive
+44 (0)20 3912 3000
Paul French, Head of Corporate Communications +44 (0)20 3912 3032
p.french@impaxam.com (mailto:p.french@impaxam.com)
Montfort Communications
Gay Collins
+44(0)77 9862 6282
Lesley Wang
+44(0)77 5232 9851
impax@montfort.london (mailto:impax@montfort.london)
Peel Hunt LLP, Nominated Adviser and Joint Broker
Paul Shackleton
+44 (0)20 7418 8900
John Welch
Berenberg, Joint Broker
Alex Reynolds
+44 (0)20 3207 7800
About Impax Asset Management
Founded in 1998, Impax is a specialist asset manager, with approximately
£37.4 billion/$42.9 billion as of 31 October 2022, in both listed and private
markets strategies, investing in the opportunities arising from the transition
to a more sustainable global economy.
Impax believes that capital markets will be shaped profoundly by global
sustainability challenges, including climate change, pollution and essential
investments in human capital, infrastructure and resource efficiency. These
trends will drive growth for companies that Impax believes are well positioned
and create risks for those unable or unwilling to adapt.
The Company seeks to invest in higher quality companies with strong business
models that demonstrate sound management of risk. Impax offers a well-rounded
suite of investment solutions spanning multiple asset classes seeking superior
risk-adjusted returns over the medium to long term.
Impax has approximately 270 staff across its offices in the United Kingdom,
the United States, Ireland and Hong Kong, making it one of the investment
management sector's largest investment teams dedicated to sustainable
development.
www.impaxam.com (http://www.impaxam.com)
Issued in the UK by Impax Asset Management Group plc, whose shares are quoted
on the AIM market of the London Stock Exchange. Impax Asset Management Group
plc is registered in England & Wales, number 03262305. AUM relates to
Impax Asset Management Limited, Impax Asset Management (AIFM) Limited, Impax
Asset Management Ireland Limited and Impax Asset Management LLC. Impax Asset
Management Limited and Impax Asset Management (AIFM) Limited are authorised
and regulated by the Financial Conduct Authority and are wholly owned
subsidiaries of Impax Asset Management Group plc. Please note that the
information provided and links from it should not be relied upon for
investment purposes.
(1)Eight out of 10 largest strategies outperformed benchmarks over three
years. Seven out of nine with five-year track records also outperformed (Gross
of fees). For more information see Annual Report.
(2)Full-time equivalent
Chief Executive's Report
BUSINESS UPDATE
Impax has delivered commendable results during a year that started strongly
but rapidly developed considerable external headwinds. Despite weak market
sentiment, fuelled by rising inflation and geopolitical instability, we
continued to attract new business, with total net inflows of £2.9 billion
over the 12 months ending 30 September 2022 (the "Period") and positive flows
in both halves.
Despite attracting additional clients and subscriptions, the Company's assets
under discretionary and advisory management ("AUM") fell over the Period by
4.1% from £37.2 billion to £35.7 billion, driven principally by falling
markets and negative, absolute, investment performance. As of 31 October 2022
the Company's AUM had recovered to £37.4 billion.
For more than two decades we have built a robust and well-diversified global
client base of institutional and intermediary investors and served both
through our own channels and via trusted distribution partners. The Company's
performance during the Period demonstrates the benefit of this diversified
strategy as asset owners continued to show their shared conviction in the
medium to long-term opportunities presented by the transition to a more
sustainable economy.
Challenging external environment
Having reached all-time highs at the end of December 2021, global equity
markets fell, initially as a result of rising concerns over inflation,
interest rates and monetary tightening. In late February, weak sentiment was
exacerbated by Russia's invasion of Ukraine, which impacted investor
confidence for more than seven months of the financial year.
The war has intensified a looming global energy crisis caused by structural
under-investment and supply disruption. Policymakers sought to reduce quickly
Europe's dependency on Russian gas, bolstering the secular case for
renewables. Investors shifted towards value-orientated stocks such as energy
and commodities, causing the share prices of companies active in clean energy
and energy efficiency markets to suffer on both an absolute and a relative
basis: for example, the FTSE Environmental Opportunities All-Share Index
dropped 28.1%, in US$ terms, between 1 January and 30 September 2022, compared
to the MSCI ACWI Index, which fell by 25.6%.
Meanwhile, evidence of the impact of climate change on weather systems
continued to build. During summer in the northern hemisphere, temperature
records were broken and the global food crisis was exacerbated by droughts
affecting river basins from the Yangtse to the Colorado. Meanwhile, the
catastrophic storms and flooding in Pakistan and the devastation caused by
Hurricane Ian in the US have further strengthened the case for investing in
environmental solutions, especially around climate adaptation.
Amid nature's warning signs, it was encouraging to see the successful adoption
into United States law of President Biden's Inflation Reduction Act. This was
almost certainly the most significant piece of climate-related federal
legislation in US history, allocating more than US$370 billion in incentives
and programmes to accelerate action on climate and energy over the next
decade. Its progress on limiting methane emissions can be seen as one of the
major successes to have emerged from the COP26 Climate Conference in Glasgow.
At the COP27 summit in November 2022, more than 150 countries signed up to the
Global Methane Pledge and agreed to contribute to reducing global methane
emissions by at least 30% from 2020 levels by 2030.
Movements in the Company's AUM for the full year ended 30 September 2022
Listed equities Fixed income Private markets Total
firm
£m £m £m
£m
Total AUM at 30 September 2021 35,637 1,257 318 37,211
Net flows 2,634 62 191 2,887
Market movement, FX and performance (4,470) 35 12 (4,423)
Total AUM at 30 September 2022 33,801 1,354 521 35,676
Investment Performance
Given the challenging external environment, many of our investment strategies,
managed by our teams in the UK, US and Hong Kong, lagged their benchmarks over
the Period.
Our Environmental Markets strategies in particular - which use a "quality
growth at a reasonable price" investment style - were negatively impacted, as
market sentiment switched to favour value-oriented stocks. This led in
particular to stronger, relative performance of the fossil fuel energy sector,
to which Impax strategies typically have no exposure.
Longer term, eight out of the largest ten strategies, accounting for a
combined 89% of AUM, have outperformed their benchmarks over three years. Of
the nine that have five-year track records, seven have outperformed their
benchmarks.
After the Period end, we launched a UCITS fund based on a new Sustainable
Infrastructure (active) strategy, which seeks to generate long-term capital
growth with income by investing in listed equities, while seeking to avoid the
sustainability risks which dominate the traditional infrastructure universe,
for example future carbon taxes on transportation fuels.
Our team investing in privately-held companies operating in the renewable
generation sector made eight new investments through our fourth fund, ranging
from a solar and energy efficiency investment in Italy to forming a joint
venture partnership with a decentralised generation specialist to deploy
rooftop solar, battery storage and smart meters at scale in Germany.
Meanwhile, the team successfully completed its third exit from the portfolio
of our third fund.
Client Service and Business Development
We continue to expand the breadth of our client base, which is already well
diversified by channel and geography, with 79% of our AUM coming from clients
outside the UK. We are particularly focused on strengthening our direct
distribution capabilities and have appointed new Heads of Distribution in
North America (October 2021) and in Europe & Asia-Pacific (June 2022).
Inflows over the Period were directed particularly into our Sustainability
Lens strategies. Global Opportunities accounted for 58.2% of net inflows,
driven principally by our relationship with St James's Place in the UK and by
new pension fund mandates in Australia. The US Large Cap strategy was
responsible for 10.7% of net inflows, which included the launch of a fund on
Lombard Odier's PrivilEdge platform targeted at European investors.
Of our thematic Environmental Markets strategies, Leaders and Climate received
the greatest investor interest, and were responsible for 10.7% and 8.9% of net
inflows respectively. This included two new Climate strategy mandates in the
US and China during the first half of the Period.
From our intermediaries, consultants, and distribution partner channels,
amongst others, we also saw positive flows via Principal Global Investors and
a private bank in the US, Formuepleje in Denmark, and Fidante in Australia.
Our efforts to increase our direct distribution led to positive flows into our
own-label fund ranges. Our Ireland-based UCITS fund range saw net inflows of
£150 million, with AUM at £1.9 billion at the Period end, and our investment
trust, Impax Environmental Markets plc, registered net inflows of £50
million.
The AUM of US-based Pax World Funds grew by 4% to £6.4 billion, including net
inflows of £669 million.
After the Period end, we announced that the Pax World mutual fund range would
be renamed under the Impax brand, becoming the Impax Funds, effective 31
December 2022. By renaming the mutual funds while keeping the underlying
portfolios and investment processes unchanged, we are emphasising Impax's
unified investment approach, offering a consistent brand globally and avoiding
confusion in the marketplace.
Beyond Financial Returns
During the Period, we extended our 'Beyond Financial Returns' programme, an
approach to enhancing our investment outcomes and client reporting with
activity focused in four areas.
First, our corporate engagement and stewardship activity aims to improve our
understanding and management of investment risk. In 2021 we took part in 204
engagements, while in 2022 we were proud to become a signatory to the UK
Stewardship Code, a step that requires the demonstration of robust processes
in this area.
Second, we disclose through our annual impact report the quantified
environmental and social benefits linked to our clients' investments in our
portfolio companies. This year we have evolved our reporting to include inter
alia a fixed income strategy, and added metrics on social, water, and
nature-related impact.
Third, we strive to influence policy outcomes that support solutions to
environmental and social challenges. We prioritised four areas during the
Period: financing the transition to net-zero emissions; greening the financial
system; biodiversity; and human capital, including equity, diversity and
inclusion as well as the response to Covid-19. We collaborate closely with a
broad network, including the scientific community, industry bodies, and
not-for-profit organisations.
Finally, we continue to publish research that provides insights to our clients
and partners. Our work this year included a report on the investment case for
sustainable infrastructure and articles on the implications of US policy
developments, including the Inflation Reduction Act.
Climate and the Community
We are pleased this year to include, in our annual report, our first report
that describes how we manage climate risks and opportunities, using the
Taskforce for Climate-related Financial Disclosures ("TCFD") framework. Impax
has been supportive of the TCFD reporting recommendations since it was
established.
We have also expanded our community activity during 2022. In addition to
building our relationships with existing charitable partners, Ashden,
ClientEarth, Ceres and Diversity Project, we are now supporting Toigo, an
organisation in the US focused on equity, diversity & inclusion.
Separately, our colleagues voted that our new "Community Cause of the Year",
coordinated by our Volunteering Group, should focus on food scarcity. We plan
to grow our community support further next year.
Impax's Chief Financial Officer
Charlie Ridge, who has been Impax's Chief Financial Officer since 2008,
recently signalled his wish to retire and will step down from this role in
January 2023. On behalf of my colleagues, I would like to extend my sincere
thanks to Charlie for his outstanding leadership of our Finance team and,
until 2021, our Corporate Services teams, and for his excellent contribution
to communicating with our shareholders over the past 14 years.
I'm very pleased to report that, upon Charlie's retirement, Karen Cockburn
will become Impax's Chief Financial Officer in January 2023. Karen, who joined
Impax as CFO Designate last month, is a highly experienced professional, whose
career includes spells in banking, insurance, wealth management and digital
platforms. She will lead the Finance function, including Investor Relations,
have oversight of Governance arrangements and the Legal function, and will be
a member of Impax's Executive Committee.
Attracting and developing our talent
Karen is just one of the many outstanding colleagues that we have welcomed
recently. Over the Period we grew our headcount by 26%, opened a new office in
Manhattan and welcomed 21 summer interns to Impax as part of our first global
internship scheme.
We now conduct our global employee engagement survey annually. This year, the
overall engagement score, which reflects staff satisfaction and commitment,
was in the top decile of our peer group. Our colleagues continue to tell us
that they feel closely aligned to Impax's purpose and values, in particular
our focus on sustainable development. Our staff turnover remains low relative
to peers.
The People team continues to build the systems, processes and resources that
we require as we scale and grow. This has included providing additional
training and development opportunities for our colleagues and reviewing our
employee benefits to make sure they are in line with market practice.
Following a review where we worked with independent external advisers, we are
rolling out an updated remuneration framework, including encouraging clearer
objective setting and providing more clarity on the link between performance
and pay outcomes.
Systems and infrastructure
We are paying particular attention to ensuring that our Corporate Services
functions are appropriately scaled to support the expansion of our investment
and distribution capabilities. In the context of our current business plan, we
have developed further our IT platform, and are expanding and globalising our
compliance team and risk function.
Awards and industry recognition
Impax continues to be recognised for our leadership within the investment
management industry. After the Period, we were named as "ESG Manager of the
Year" by Financial News. Highlights during the Period included Pensions Age's
"Active Manager of the Year" and "Listed Equities Manager of the Year" at
Environmental Finance's Sustainable Investment Awards.
Keith Falconer AND DAVID LI
In May this year, we received the very sad news that Keith Falconer had died
unexpectedly at the age of 67. Keith played an integral role in Impax's growth
during his time as Chairman from 2004 until 2020. In particular, his long
experience of distribution helped us to raise our level of ambition as we
sought to extend our reach outside Europe. But above all, Keith was a kind,
warm and generous person: the Impax leadership team benefitted greatly from
his encouragement and sage advice.
In October 2022, we were also devastated to hear that our friend and
colleague, David Li had died suddenly at the age of just 51. David joined
Impax in 2007 as our first colleague in the Asia-Pacific region and co-managed
our Asian Environmental and Asian Opportunities strategies, together with
Oscar Yang. David was a valued leader and mentor of the Asia-Pacific team, a
talented portfolio manager and a generous and warm person with a gentle
humour.
Outlook
Looking ahead to 2023, we face the prospect of a sharp drop in consumer
confidence associated with spiralling energy and food prices and higher costs
of borrowing. The growing cost-of-living crisis will create severe social
challenges requiring a significant response from policymakers.
Inflationary pressures are expected to continue to create challenges for
companies unable to reflect rising costs in price increases. For this reason,
our investment teams remain focused on companies with strong market positions
and pricing power that should be more resilient during this period.
For companies exposed to the transition to a more sustainable economy, the
current environment is also providing positive tailwinds. Over the longer
term, we expect the rise in input prices to drive an increased focus on
energy- and resource-efficiency and to accelerate the shift to diversify
energy supplies and decarbonise economies. At a policy level, energy security
concerns are likely to remain high, further prioritising the shift away from
fossil fuels, while pressure on investors to demonstrate climate resilience
and protect ecosystems are also likely to grow in prominence. Although market
volatility is likely to remain elevated, robust companies with correctly
designed business strategies should continue to out-perform.
Regulation should also provide a tailwind. Regulators are increasingly
examining the appropriate use of "ESG" and sustainability-related terms in the
promotion of investment products. We believe these proposals and rules will
broadly be helpful in reducing "greenwashing" and those investment managers
that have robust practices in this area should benefit from additional demand
from asset owners.
2023 will also mark Impax's 25-year anniversary. Since our inception, it has
become even clearer that global sustainability challenges, combined with
disruptive forces in technology, policy, and consumer preferences, are
creating transformations on the scale of the Industrial Revolution across all
sectors of the global economy. This is creating mispricing of capital and
growth opportunities for well-positioned companies and increased risks for
companies that do not adapt.
Asset owners continue to be attracted to Impax's specialist focus on the
transition to a more sustainable economy. We remain confident in our ability
to respond to this increased client demand. While continuing to expand our
current strategies and develop new products, we have the capacity to
significantly grow our assets under management using our existing investment
platform.
With a quarter century of experience, our authenticity and heritage, our
institutionally focused client-base, and our commitment to delivering value
for clients beyond financial returns, make us well positioned to continue to
provide long-term benefits for all our stakeholders.
Ian Simm
29 November 2022
Financial Review
I am pleased to report another year of strong results despite challenging
market conditions, including growth in adjusted operating profit of 20.8%.
Financial highlights for financial year 2022 versus financial year 2021
2022 2021
AUM £35.7bn £37.2bn
Revenue £175.4m £143.1m
Adjusted operating profit £67.4m £55.8m
Adjusted profit before tax £68.4m £54.9m
Adjusted diluted earnings per share 42.1p 34.4p
Cash reserves £107.0m £70.1m
Seed investments £7.3m £7.5m
Dividend per share 4.7p interim + 22.9p final 3.6p interim + 17.0p final
2022 2021
IFRS operating profit £65.2m £47.4
IFRS profit before tax £72.6m £45.7m
IFRS diluted earnings per share 44.7p 30.3p
As in previous periods, in order to facilitate comparison of performance with
previous time periods and to provide an appropriate comparison with our peers,
the Board encourages shareholders to focus on financial measures after
adjustment for accounting charges or credits arising from the acquisition
accounting from Impax NH, adjustments arising from the accounting treatment of
National Insurance costs on share-based payment awards and significant tax
credits related to prior periods.
This year we have also made an adjustment to remove certain foreign exchange
gains and losses. The same adjustment has been made to the prior year reported
numbers. A reconciliation of the International Financial Reporting Standards
("IFRS") and adjusted numbers is provided in Note 4 of the Financial report.
This also marks my final Report and Accounts as CFO. My time at Impax has been
fulfilling and exciting and I hand over the role to a superb successor in
Karen Cockburn.
Revenue
Revenue for the Period grew by £32.3 million to £175.4 million (2021:
£143.1 million). Growth was driven by the positive net inflows across the
business seen in the current and prior year offset in part by market falls
during the Period.
The weighted average run rate revenue margin remained consistent with 2021 at
46 basis points. Our run-rate revenue, which is based on the Period end AUM,
fell to £166.2 million (2021: £173.8 million).
Operating costs
Adjusted operating costs increased to £108.0 million (2021: £87.3 million),
mainly reflecting a full year of costs from hires made in 2021 as well as
further hires made during the Period to support the Group's current and
projected growth. We expect costs to increase further in the next financial
year as a result of inflation and further investment in the Group's
infrastructure and people.
IFRS operating costs include additional charges and credits, principally the
amortisation of intangible assets arising on the Impax NH acquisition and
National Insurance charges and credits on share options and restricted shares.
Employer's National Insurance is payable based on the share price when an
option is exercised or restricted shares vest and accordingly a credit has
been recognised as our share price has fallen over the year. This credit is
offset by the reversal of a tax credit which is recorded in equity.
Profits
Adjusted operating profit increased to £67.4 million (2021: £55.8 million),
driven by the revenue growth described above. Run-rate adjusted operating
profits at the end of the Period was £54.3 million (2021: £67.5 million).
IFRS operating profit in 2022 increased to £65.2 million (2021: £47.4
million).
Including adjusted net finance income of £0.9 million (2021: adjusted net
finance losses of £0.9 million) gives adjusted profit before tax of £68.4
million (2021: £54.9 million (restated)). IFRS profit before tax of £72.6
million (2021: £45.7m) includes foreign exchange gains of £6.4 million
(2021: foreign exchange losses of £0.9 million) on the retranslation of
intercompany loans and other unrealised foreign exchange gains and losses that
are not linked to the performance of the Group.
Tax
Tax rates were higher than the prior period as we benefited in the prior year
from a £2.8 million credit in relation to taxation of prior years private
equity income.
Earnings per Share
Adjusted diluted earnings per share grew to 42.1 pence (2021: 34.4 pence
(restated)) as a result of the growth in profits. IFRS diluted earnings per
share increased to 44.7 pence (2021: 30.3 pence).
Financial management
At the Period end the Company held £107.0 million of cash resources, an
increase of £36.9 million on 2021. The Company had no debt (2021: no debt).
The Company continues to make seed investments and to invest in our private
equity funds. These investments were valued at £7.3 million at the Period
end.
Share management
The Board will consider purchasing the Company's shares from time to time
after due consideration of alternative uses of the Company's cash resources.
Share purchases are usually made by the Group's Employee Benefit Trust ("EBT")
(subject to the trustees' discretion), using funding provided by the Company.
During the Period, the EBT purchased 1.1 million ordinary shares. The EBT
holds shares for Restricted Share awards until they vest or to satisfy share
option exercises.
At the Period end the EBTs held a total of 3.3 million shares, 2.5 million of
which were held for Restricted Share awards leaving up to 0.8 million
available for option exercises and future share awards. There were 2.7 million
options outstanding at the Period end, of which 0.7 million were exercisable.
No new shares were issued during the Period.
Dividends
The Company paid an interim dividend of 4.7 pence per share in July 2022. Our
dividend policy is to pay, in normal circumstances, an annual dividend within
a range of 55% and 80% of adjusted profit after tax. Impax has reported strong
growth in revenue and profits and is in good financial health. The Board has
therefore decided to recommend a final dividend of 22.9 pence. This would be
an increase in the total dividend for the year of 7.0 pence or 34%. The total
dividend for the year represents 65% of our adjusted profit after tax which is
in the middle of our stated range.
This dividend proposal will be submitted for formal approval by shareholders
at the Annual General Meeting on 16 March 2023. If approved, the dividend will
be paid on or around 21 March 2023. The record date for the payment of the
proposed dividend will be 10 February 2023 and the ex-dividend date will be 9
February 2023.
The Company operates a dividend reinvestment plan ("DRIP"). The final date for
receipt of elections under the DRIP will be 28 February 2023. For further
information and to register and elect for this facility, please visit
www.signalshares.com and search for information related to the Company.
Going concern
The Financial Reporting Council requires all companies to perform a rigorous
assessment of all the factors affecting the business when deciding to adopt a
"going concern" basis for the preparation of the accounts.
The Board has made an assessment covering a period of at least 12 months from
the date of approval of this report which indicates that, taking account of a
reasonably possible downside in relation to asset inflows, market performance
and costs, the Group will have sufficient funds to meet its liabilities as
they fall due for that period. The Group has high cash balances and no debt
and, at the Period end market levels, is profitable. A significant part of the
Group's cost base is variable as bonuses are linked to profitability. The
Group can also preserve cash through dividend reduction and through issuance
of shares to cover share option exercises/restricted share awards (rather than
purchasing shares). The Directors therefore have a reasonable expectation that
the Group has adequate resources to continue in operational existence for the
foreseeable future and have continued to adopt the going concern basis in
preparing the financial statements.
Charles D Ridge
Chief Financial Officer
29 November 2022
Consolidated Income Statement
For the year ended 30 September 2022
Notes 2022 2021
£000
£000
Revenue 6 175,396 143,056
Operating costs 7 (110,213) (95,622)
Finance income 10 7,950 286
Finance expense 11 (574) (1,971)
Profit before taxation 72,559 45,749
Taxation 12 (13,077) (5,504)
Profit after taxation 59,482 40,245
Earnings per share
Basic 13 46.0p 31.5p
Diluted 13 44.7p 30.3p
Dividends per share
Interim dividend paid and final dividend declared for the year 14 27.6 20.6p
Adjusted results are provided in Note 4.
Consolidated Statement of Comprehensive Income
For the year ended 30 September 2022
2022 2021
£000
£000
Profit for the year 59,482 40,245
Change in value of cash flow hedges - 137
Tax on change in value of cash flow hedges - (26)
Exchange differences on translation of foreign operations 2,685 (1,075)
Total other comprehensive income 2,685 (964)
Total comprehensive income for the year attributable to equity holders of the 62,167 39,281
Parent
All amounts in other comprehensive income may be reclassified to income in the
future.
The statement has been prepared on the basis that all operations are
continuing operations.
Consolidated Statement of Financial Position
As at 30 September 2022
Notes 2022 2021
£000 £000 £000 £000
Assets
Goodwill 15 13,932 11,816
Intangible assets 16 18,340 17,473
Property, plant and equipment 17 9,279 9,435
Deferred tax assets 12 4,781 11,895
Total non-current assets 46,332 50,619
Trade and other receivables 18 38,769 39,800
Investments 19 7,255 7,564
Current tax asset 176 134
Cash invested in money market funds 21 58,687 38,066
Cash and cash equivalents 21 52,232 36,172
Total current assets 157,119 121,736
Total assets 203,451 172,355
Equity and liabilities
Ordinary shares 24 1,326 1,326
Share premium 9,291 9,291
Merger reserve 1,533 1,533
Exchange translation reserve 3,059 374
Retained earnings 122,969 97,998
Total equity 138,178 110,522
Trade and other payables 22 53,624 50,107
Lease liabilities 17 1,488 1,330
Current tax liability 2,202 1,923
Total current liabilities 57,314 53,360
Lease liabilities 17 7,590 8,102
Deferred tax liability 12 369 371
Total non-current liabilities 7,959 8,473
Total equity and liabilities 203,451 172,355
Consolidated Statement of Changes in Equity
For the year ended 30 September 2022
Note Share capital Share premium Merger reserve Exchange translation reserve Hedging reserve Retained earnings Total Equity
£000 £000 £000 £000 £000 £000 £000
1 October 2020 1,304 9,291 - 1,449 (111) 59,515 71,448
Transactions with owners of the Company:
New shares issued 22 - 1,533 - - (20) 1,535
Dividends paid 14 - - - - - (13,616) (13,616)
Cash received on option exercises - - - - - 597 597
Purchase of Impax NH shares - - - - - (2,239) (2,239)
Tax credit on long-term incentive schemes - - - - - 8,634 8,634
Share based payment charges 9 - - - - - 4,882 4,882
Total transactions with owners of the Company 22 9,291 1,533 - - (1,762) (207)
Profit for the year - - - - 40,245 40,245
Other comprehensive income: - - - -
Change in value of cash flow hedge - - - - 137 - 137
Tax on change in value of cash flow hedges - - - - (26) - (26)
Exchange differences on translation of foreign operations - - - (1,075) - - (1,075)
Total other comprehensive Income - - - (1,075) 111 - (964)
30 September 2021 1,326 9,291 1,533 374 - 97,998 110,522
Transactions with owners of the Company:
Dividends paid 14 - - - - - (28,665) (28,665)
Cash received on option exercises - - - - - 540 540
Tax charge on long-term incentive schemes - - - - - (3,756) (3,756)
Share based payment charges 9 - - - - - 6,151 6,151
Acquisition of own shares - - - - - (8,781) (8,781)
Total transactions with owners - - - - - (34,511) (34,511)
of the Company
Profit for the year - - - - 59,482 59,482
Other comprehensive income:
Exchange differences on translation - - - 2,685 - - 2,685
of foreign operations
Total other comprehensive Income - - - 2,685 - - 2,685
30 September 2022 1,326 9,291 1,533 3,059 - 122,969 138,178
Consolidated Cash Flow Statement
For the year ended 30 September 2022
Note 2022 2021
£000
£000
Operating activities
Cash generated from operations 27 80,321 59,812
Corporation tax paid (9,046) (4,445)
Net cash generated from operating activities 71,275 55,367
Investing activities
Net acquisition of property plant & equipment and intangible assets (796) (257)
Net redemptions/(investments) from/into unconsolidated Impax funds 355 (2,529)
Income from settlement of investment related hedges 69 (455)
Purchase of Impax NH shares - (704)
Investment income received 586 93
Increase in cash held in money market funds (19,091) (19,550)
Net cash used by investing activities (18,877) (23,402)
Financing activities
Acquisition of non-controlling interest (182) (191)
Interest paid on bank borrowings (141) (129)
Payment of lease liabilities (1,729) (1,691)
Acquisition of own shares (8,781) -
Cash received on exercise of Impax staff share options 540 597
Dividends paid (28,665) (13,616)
Net cash used by financing activities (38,958) (15,030)
Net increase in cash and cash equivalents 13,440 16,935
Cash and cash equivalents at beginning of year 36,172 20,245
Effect of foreign exchange rate changes 2,620 (1,008)
Cash and cash equivalents at end of year 21 52,232 36,172
Cash and cash equivalents under IFRS does not include cash held in money
market funds. The Group however considers its total cash reserves to include
these amounts. Cash held in RPA accounts are not included in cash reserves
(see note 21). There are no significant changes to liabilities arising from
financing activities.
Movements on cash reserves are shown in the table below:
At the beginning Cashflow Foreign exchange At the end
of the year
of the year
£000 £000
£000 £000
Cash and cash equivalents 36,172 13,440 2,620 52,232
Cash invested in money market funds 38,066 19,091 1,530 58,687
Cash in RPAs (4,089) 138 - (3,951)
Total Group cash reserves 70,149 32,669 4,150 106,968
Notes to the Financial Statements
For the year ended 30 September 2022
1 REPORTING ENTITY
Impax Asset Management Group plc (the "Company") is incorporated and domiciled
in the UK and is listed on the Alternative Investment Market ("AIM"). These
consolidated financial statements comprise the Company and its subsidiaries
(together referred to as the "Group").
2 BASIS OF PREPARATION
These Group and Parent Company financial statements have been prepared in
accordance with UK-adopted international accounting standards.
The financial statements have been prepared under the historical cost
convention, with the exception of the revaluation of certain investments and
derivatives being measured at fair value.
The financial statements are presented in sterling. All amounts have been
rounded to the nearest thousand unless otherwise indicated.
Going concern
The financial statements have been prepared on a going concern basis which the
Directors consider to be appropriate for the following reasons. Cash flow
forecasts covering a period of 12 months from the date of approval of these
financial statements indicate that, taking account of reasonably possible
downside assumptions in relation to asset inflows, market performance and
costs, the Group will have sufficient funds to meet its liabilities as they
fall due and regulatory capital requirements for that period. The Group has
sufficient cash balances and no debt and, at the Period-end market levels, is
profitable. A significant part of the Group's cost basis is variable as
bonuses are linked to profitability. The Group can also preserve cash through
dividend reduction and through issuance of shares to cover share option
exercises/restricted share awards (rather than purchasing shares).
Consequently, the Directors are confident that the Group will have sufficient
funds to continue to meet its liabilities as they fall due for at least 12
months from the date of approval of the financial statements and therefore
have prepared the financial statements on a going concern basis.
3 USE OF JUDGEMENTS AND ESTIMATES
In preparing these financial statements management has made estimates that
affect the reported amounts of assets, liabilities, income and expenses.
Actual results may differ from estimates. Revisions to estimates are
recognised prospectively.
The Group has not identified any significant judgements and estimates at the
end of the reporting period. However the key areas that include judgement
and/or estimates are set out in notes 15 and 16.
4 ADJUSTED PROFITS AND EARNINGS
The reported operating earnings, profit before tax and earnings per share are
substantially affected by business combination affects and other items. The
Directors have therefore decided to report an Adjusted operating profit,
Adjusted profit before tax and Adjusted earnings per share which exclude these
items in order to enable comparison with peers and provide consistent measures
of performance over time. A reconciliation of the adjusted amounts to the
IFRS reported amounts is shown below.
Year ended 30 September 2022
Reported - IFRS Adjustments Adjusted
£000 £000
Business combination effects Other
£000 £000
Revenue 175,396 175,396
Operating Costs (110,213) (107,980)
Amortisation of intangibles arising on acquisition 2,420
Acquisition equity incentive scheme charges 1,340
Mark to market credit on equity awards* (1,527)
Operating Profit 65,183 3,760 (1,527) 67,416
Finance income 7,950 (6,440) 1,510
Finance costs (574) (574)
Profit before taxation 72,559 3,760 (7,967) 68,352
Taxation (13,077) (12,293)
Credit re historical tax charges (730)
Tax charge on adjustments 1,514
Profit after taxation 59,482 3,760 (7,183) 56,059
Diluted earnings per share 44.7 2.8 (5.4) 42.1
* The credit is offset by £3,756,000 of tax charges shown in the Statement
of Changes in Equity.
Year ended 30 September 2021
Reported - IFRS Adjustments Adjusted (restated)**
£000 £000
Business combination effects Other
£000 £000
Revenue 143,056 143,056
Operating costs (95,622) (87,272)
Amortisation of intangibles arising on acquisition 2,358
Acquisition equity incentive scheme charges 1,649
Contingent consideration adjustment 167
Mark to market charge on equity awards* 4,176
Operating Profit 47,434 4,174 4,176 55,784
Finance income 286 (89) 197
Finance costs (1,971) 906 (1,065)
Profit before taxation 45,749 4,174 4,993 54,916
Taxation (5,504) (9,255)
Credit re historical tax charges (2,803)
Tax credit on adjustments (948)
Profit after taxation 40,245 4,174 1,242 45,661
Diluted earnings per share 30.3 3.2 0.9 34.4
* The charge is offset by £8,634,000 of tax credits shown in the statement
of changes in equity.
** Adjusted profit before tax has been restated to add back unrealised foreign
exchange losses of £906,000.
The diluted number of shares is the same as used for the IFRS calculation of
earnings per share (see note 13).
Amortisation of intangibles
Management contracts, which are classified as intangible assets, were acquired
as part of the acquisition of Impax NH and are amortised over their 11 year
life. This charge is not linked to the operating performance of the Impax NH
business so is excluded from adjusted profit.
Acquisition equity incentive scheme charges
Impax NH staff have been awarded share based payments in respect of the
transaction. Charges in respect of these relate to the acquisition rather than
the operating performance of the Group and are therefore excluded from
adjusted profit.
Mark to market charge on equity incentive awards
The Group has in prior years and the current period awarded employees options
over the Group's shares, some of which are either unvested or unexercised at
the balance sheet date. The Group has also made awards of restricted shares
("RSS awards") which have not vested at the balance sheet date. Employers
National Insurance Contributions ("NIC") are payable on the option awards when
they are exercised and on the RSS awards when they vest, based on the
valuation of the underlying shares at that point. The Group does however
receive a corporation tax credit equal to the value of the awards at the date
they are exercised (options) or vest (RSS awards). An accrual for the NIC is
recognised based on the share price at the balance sheet date and changes in
the accrual are recognised as a charge or credit within IFRS operating profit.
Similarly, the corporation tax credit is accrued within equity based on the
share price at the balance sheet date with changes in the credit recognised as
a credit or charge to equity. The charge to profit varies based on the Group's
share price and is not linked to the operating performance of the Group. It is
therefore eliminated when reporting adjusted profit.
Finance income and expense
Finance income for the Period has been adjusted for foreign exchange gains on
intercompany loans and other unrealised foreign exchange gains and losses that
are not linked to the performance of the Group. Prior year adjusted profit
before tax has been restated to remove unrealised foreign exchange losses of
£906,000 to aid comparability with the current Period.
Taxation
The IFRS tax charge in both the current and prior period included a credit in
respect of the reversal of historical tax charges related to private equity
income. This does not reflect the performance of the Group and is therefore
excluded from adjusted profit.
Contingent consideration adjustment
Until the time it was settled, the Group was required to review and adjust its
estimate of the contingent consideration payable in respect of the Impax NH
acquisition. Adjustments were recorded through income but excluded from
adjusted profit. These adjustments are not linked to the operating performance
of the Impax NH business and are therefore eliminated from operating costs.
5 SEGMENTAL REPORTING
(a) Operating segments
The Group is managed on an integrated basis and there are no reportable
segments. Segment information is presented on the same basis as that provided
for internal reporting purposes to the Group's chief operating decision maker,
the Chief Executive.
(b) Geographical analysis
An analysis of revenue by the location of client is presented below:
Revenue
2022 2021
£000 £000
UK 34,069 26,733
North America 61,890 50,608
France 12,261 12,680
Luxembourg 43,362 35,448
Ireland 13,175 9,412
Netherlands 3,012 3,359
Australia 2,796 1,523
Other 4,831 3,293
175,396 143,056
The Group's non-current assets (property plant and equipment, goodwill and
intangible assets) are located in the countries listed below:
Non-current assets
2022 2021
£000
£000
UK 6,427 6,952
United States 34,907 31,594
Hong Kong 140 7
Ireland 77 171
41,551 38,724
6 REVENUE
The Group's main source of revenue is investment management and advisory fees.
The Group may also earn carried interest from its Private Equity funds.
Management and advisory fees are generally based on an agreed percentage of
the valuation of assets under management ("AUM") for Listed Equity and Fixed
Income funds. For Private Equity funds they are generally based on an agreed
percentage of commitments made to the fund by investors during the fund's
investment period and thereafter on the cost price of investments made and not
exited. Carried interest is earned from Private Equity funds if the cash
returned to investors exceeds an agreed return.
The Group determines the investment management and advisory fees to be a
single revenue stream as they are all determined through a consistent
performance obligation. Should AUM reduce as result of equity market downturns
or allocation of capital away from equity markets then the revenue would
reduce.
None of the Group's funds individually represented more than 10% of Group
revenue in the current or prior year.
Revenue includes £170,840,243 (2021: £140,236,441) from related parties.
7 OPERATING COSTS
The Group's largest operating cost is staff costs. Other significant costs
include direct fund costs, IT and communication costs, premises costs
(depreciation on office building leases, rates and service charge),
amortisation of intangible assets, mark to market charges on share awards and
professional fees.
2022 2021
£000
£000
Staff costs (note 8) 81,766 66,215
Direct fund expenses 6,388 5,542
IT and communications 5,805 4,457
Depreciation and amortisation 4,257 4,057
Professional fees 4,006 3,321
Placing agent fees 1,783 1,774
Premises costs 1,333 1,015
Research costs 980 780
Mark to market (credit)/charge on share awards (1,527) 4,176
Other costs 5,422 4,118
Sub-total 110,213 95,455
Contingent Consideration - 167
Total 110,213 95,622
Operating costs include £1,183,000 (2021: £898,000) in respect of placing
agent fees paid to related parties.
Other costs include £295,000 (2021: £291,000) paid to the Group's auditors
which is analysed below:
2022 2021
£000
£000
Audit of the Group's Parent Company and consolidated financial statements 91 75
Audit of subsidiary undertakings 124 130
Audit-related assurance services 80 86
295 291
8 STAFF COSTS AND EMPLOYEES
Staff costs include salaries, a variable bonus, social security cost
(principally UK NIC on salary, bonus and share awards), the cost of
contributions made to employees' pension schemes and share-based payment
charges. Further details of the Group's remuneration policies are provided in
the Remuneration Committee Report. Share-based payment charges are offset
against the total cash bonus pool paid to employees. NIC charges on
share-based payments are accrued based on the share price at the balance sheet
date and the proportion vested.
2022 2021
£000
£000
Salaries and variable bonuses 62,393 51,510
Social security costs 6,356 5,181
Pensions 1,635 1,069
Share-based payment charge (see note 9) 6,152 4,882
Other staff costs 5,230 3,573
81,766 66,215
The Group contributes to private pension schemes. The assets of the schemes
are held separately from those of the Group in independently administered
funds. The pension cost represents contributions payable by the Group to these
funds. Contributions totalling £105,000 (2021: £82,000) were payable to the
funds at the year end and are included in trade and other payables.
Other staff costs include the cost of providing health and other insurances
for staff, Non-Executive Directors' fees, contractor fees, recruitment fees
and termination costs.
Directors and key management personnel
Key management personnel are related parties and are defined as members of the
Board and/or the Executive Committee. The remuneration of key management
personnel, including pension contributions, during the year was £14,525,298
with £2,239,493 of share-based payments (2021: £14,080,503 plus £1,024,156
of share-based payments). No Board members received pension contributions
during the year (2021: nil).
Employees
The average number of persons (excluding Non-Executive Directors and including
temporary staff), employed during the year was 240 (2021: 195).
2022 2021
No.
No.
Portfolio Management 86 69
Private Equity 13 12
Client Service and Business Development 82 63
Group 59 51
240 195
9 SHARE-BASED PAYMENT CHARGES
The total expense recognised for the year arising from share-based payment
transactions was £6,151,000 (2021: £4,882,000). The charges arose in respect
of the Group's Restricted Share Scheme ("RSS") and the Group's Employee Share
Option Plans which are described below. Share based payment charges also arose
in the prior year in respect of the Put and Call arrangement made with Impax
NH management to acquire their shares in Impax NH. Details of all outstanding
options are provided at the end of this note. The charges for each scheme are:
2022 2021
£000
£000
RSS 5,231 3,636
LTOP 920 1,003
Put and Call - 243
6,151 4,882
Restricted Share Scheme
Restricted shares are awarded to some employees as part of their year-end
remuneration. These awards are made post year end but part of the charge is
recorded in the Period based on an estimated value at the year end date.
413,750 restricted shares were granted during the Period under the 2021 plan.
Awards may also be made to new employees and during the Period, 397,889 RSS
awards were granted to employees joining under the 2022 plan ("RSS 2022A").
Post year end, the Board approved the grant of a further 763,000 restricted
shares under the 2022 plan ("RSS 2022 Final"). Following grant, the shares are
held by a nominee for employees, who are then immediately entitled to receive
dividends. After a period of three years' continuous employment, the employees
will receive unfettered access to one third of the shares, after four years a
further third and after five years the final third. The employees are not
required to make any payment for the shares on grant or when the restrictions
lapse other than personal taxes.
In the prior period, 912,084 restricted shares were also granted to employees
of Impax NH following the acquisition of the remaining shares held by
management in that business ("2021 RSS NH"). These have the same conditions as
described above except that unfettered access is gained to all of the shares
after a period of 3 years.
Full details of the awards granted during the year along with their valuation
and the inputs used in the valuation are described in the tables below. The
valuation was determined using the Black-Scholes-Merton model with an
adjustment to reflect that dividends are received during the vesting period.
2022 RSS Final (estimated) 2022 2021
2022 2021 2020 2021
RSS A
RSS
RSS
RSS NH
Awards originally granted 763,000 397,889 413,750 356,500 912,084
Weighted average award value £7.45 £7.32 £13.82 £7.10 £4.78
Weighted average share price on grant £7.58 £7.32 £13.94 £7.26 £5.02
Weighted average expected volatility 35.0% 34.6% 34.0% 32.4% 32.4%
Weighted average award life on grant 5.2 years 2.6 years 5.2 years 5.3 years 3.2 years
Weighted average expected dividend yield 3.9% 3.0% 1.5% 1.2% 1.2%
Weighted average risk free interest rate 4.3% 1.6% 1.0% 0.0% 0.0%
The expected volatility was determined by reviewing the historical volatility
of the Company and that of comparator companies. The expected dividend rate is
determined using the Company share price and most recent full year dividend to
grant date.
The fair value of the 2022 RSS Final awards has initially been estimated using
the average share price over the period of five days preceding the final
Remuneration Committee and other inputs as at this date.
Restricted shares outstanding
Outstanding at 1 October 2021 3,322,833
Granted during the year 811,639
Vested during the year (1,616,286)
Forfeited during the year (24,180)
Outstanding at 30 September 2022 2,494,006
Employee share option plans
Options are awarded to some employees as part of their year-end remuneration.
Options granted in 2017
Awards were granted to employees under the Company's Employee Share Option
Plan ("ESOP"). The strike price of these options was set at a 10% premium to
the average market price of the Company's shares for the five business days
following the announcement of the results for the preceding financial year.
The 2017 options did not have performance conditions but did have a time
vesting condition such that they vested subject to continued employment on 31
December 2020.
The valuation was determined using the Black-Scholes-Merton model.
Options granted between 2018 and 2021
Awards have been granted to employees under the Company's Long Term Option
Plan ("LTOP"). The strike prices of these options were £1 (2018 and 2019),
£3 (2020) and £9 (2021). These options do not have performance conditions
but do have a time vesting condition such that the options vest subject to
continued employment on five years following grant. Vested shares are
restricted from being sold until after a further five year period (other than
to settle any resulting tax liability).
Post year end the Board approved the grant of 60,000 options under the 2022
plan with a £7.50 strike price and with the other conditions the same as the
2018-2021 plans.
The valuation was determined using the binomial model. Full details of the
awards granted during the year along with their valuation and the inputs used
in the valuation are described in the table below.
Share options are equity settled.
2022 LTOP (estimated) 2022 2021
2021 LTOP 2020 LTOP
Awards originally granted 60,000 339,575 610,000
Exercise price £7.50 £9.00 £3.00
Weighted average award value £1.87 £4.87 £3.47
Weighted average share price on grant £7.58 £13.90 £7.26
Weighted average expected volatility 35.0% 34.2% 32.4%
Weighted average award life on grant 6 years 6 years 6 years
Weighted average expected dividend yield 3.9% 1.5% 1.2%
Weighted average risk free interest rate 4.3% 0.8% 0.0%
The expected volatility was determined by reviewing the historical volatility
of the Company and that of comparator companies. The expected dividend rate is
determined using the Company share price and most recent full year dividend to
grant date.
The fair value of the 2022 LTOP awards has initially been estimated as at the
time of preparing the accounts.
Options outstanding
An analysis of the outstanding options arising from the Company's option plans
is provided below:
Number Weighted average exercise price
p
Options outstanding at 1 October 2021 2,660,000 176.0
Options granted 339,575 900.0
Options exercised (300,000) 180.2
Options outstanding at 30 September 2022 2,699,575 266.6
Options exercisable at 30 September 2022 700,000 180.2
The weighted average remaining contractual life, including the exercise
period, was 6.0 years.
10 FINANCE INCOME
2022 2021
£000
£000
Fair value gains 148 161
Interest income 520 36
Other investment income 33 89
Foreign exchange gains 7,249 -
7,950 286
Fair value gains represent those arising on the revaluation of listed and
unlisted investments held by the Group (see note 19) and any gains or losses
arising on related hedge instruments held by the Group.
The fair value gain comprises realised gains of £102,000 and unrealised gains
of £46,000 (2021: £487,000 of realised losses and £648,000 of unrealised
gains). Foreign exchange gains mainly arise on the retranslation of cash and
intercompany loans held in USD.
11 FINANCE EXPENSE
2022 2021
£000
£000
Interest on lease liabilities 433 468
Finance costs on bank loans 141 85
Foreign exchange losses - 1,418
574 1,971
Commitment fees are payable on the revolving credit facility which the Group
retains (see note 23). Foreign exchange losses in the prior year mainly arose
on the retranslation of intercompany loans.
12 TAXATION
The Group is subject to taxation in the countries in which it operates (the
UK, the US, Hong Kong and Ireland) at the rates applicable in those countries.
The total tax charge includes taxes payable for the reporting period (current
tax) and also charges relating to taxes that will be payable in future years
due to income or expenses being recognised in different periods for tax and
accounting periods (deferred tax).
(a) Analysis of charge for the year
2022 2021
£000
£000
Current tax expense:
UK corporation tax 13,400 5,960
Foreign taxes 472 235
Adjustment in respect of prior years (1,606) 73
Total current tax 12,266 6,268
Deferred tax expense/(credit):
Charge for the year 133 2,104
Adjustment in respect of prior years 678 (2,868)
Total deferred tax 811 (764)
Total income tax expense 13,077 5,504
Net tax charges of £3,756,000 (deferred tax charges of £6,739,000 net of
current tax credits of £2,983,000) are also recorded in equity in respect of
tax deductions on share awards arising due to the share price decrease (2021:
credits of £8,634,000). Tax credits of £26,000 on cash flow hedges were
reclassified from equity to the income statement in 2021 on maturity of the
hedges.
A tax credit of £713,000 was recorded in 2021 in respect of prior year tax
losses that previously had not been recognised.
The current tax adjustment in respect of prior years in the Period arises as a
result of tax that was expected to be payable on private equity income as well
as the finalisation of intra-group recharges.
The deferred tax adjustment in respect of prior years in the Period arises
from the finalisation of intra-group recharges.
The deferred tax adjustment in respect of prior years in the prior period
mainly reflects reductions in the tax expected to be payable on private equity
income, recorded in prior years, as a result of transactions which took place
in the year.
An increase in the main rate of UK corporation tax from 19% to 25% with effect
from 1 April 2023 was enacted in the Finance Act 2021. This rate increase has
been taken into account in the calculation of the Group's UK deferred tax
assets and liabilities as at 30 September 2022, to the extent that they are
expected to reverse after the rate increase comes into effect.
(b) Factors affecting the tax charge for the year
The UK tax rate for the year is 19%. The tax assessment for the period is
lower than this rate (2021: lower).
The differences are explained below:
2022 2021
£000
£000
Profit before tax 72,559 45,749
Tax charge at 19% (2021: 19%) 13,786 8,692
Effects of:
Non-taxable income (506) (18)
Non-deductible expenses and charges 617 316
Adjustment in respect of historical tax charges (928) (2,795)
Effect of higher tax rates in foreign jurisdictions 31 22
Tax losses not recognised 77 -
Recognition of prior year tax losses - (713)
Total income tax expense 13,077 5,504
(c) Deferred tax
The deferred tax asset/(liability) included in the Consolidated Statement of
Financial Position is as follows:
Share-based payment scheme Other assets Total assets Income not yet taxable Other liabilities Total liabilities
£000 £000 £000 £000 £000 £000
As at 1 October 2020 5,202 291 5,493 (3,130) (210) (3,340)
Credit to equity 8,634 (26) 8,608 - - -
Exchange differences on consolidation - - (1) - - -
Credit/(charge) to the income statement (3,243) 1,038 (2,205) 2,969 - 2,969
As at 30 September 2021 10,593 1,303 11,895 (161) (210) (371)
Credit/(charge) to equity (7,848) 1,109 (6,739) - - -
Exchange differences on consolidation 311 127 438 - - -
Credit/(charge) to the income statement 267 (1,081) (813) 161 (159) 2
As at 30 September 2022 3,323 1,458 4,781 - (369) (369)
Other assets include carried forward losses of £611,000 as at 30 September
2022 (2021: £681,000). The tax credit on other assets recognised directly in
equity of £1,109,000 relates to the increase in carried forward tax losses
arising from share-based payment schemes that vested during the period.
13 Earnings per share
Basic earnings per share ("EPS") is calculated by dividing the profit for the
year attributable to ordinary equity holders of the Parent Company (the
"Earnings") by the weighted average number of ordinary shares outstanding
during the year, less the weighted average number of Own Shares held. Own
Shares are held in Employee Benefit Trusts ("EBTs").
Diluted EPS includes an adjustment to reflect the dilutive impact of share
awards.
Earnings for the year Shares Earnings
per share
£000 000's
2022
Basic 59,482 129,409 46.0p
Diluted 59,482 133,168 44.7p
2021
Basic 40,245 127,644 31.5p
Diluted 40,245 132,669 30.3p
The weighted average number of shares is calculated as shown in the table
below:
2022 2021
£000
£000
Weighted average issued share capital 132,597 131,772
Less Own Shares held not allocated to vested ESOP options (3,188) (4,128)
Weighted average number of ordinary shares used in the calculation of basic 129,409 127,644
EPS
Additional dilutive shares regarding share schemes 4,860 5,983
Adjustment to reflect option exercise proceeds and future service (1,101) (958)
from employees receiving share awards
Weighted average number of ordinary shares used in the calculation of diluted 133,168 132,669
EPS
14 DIVIDENDS
Dividends are recognised as a reduction in equity in the period in which they
are paid or in the case of final dividends when they are approved by
shareholders. The reduction in equity in the year therefore comprises the
prior year final dividend and the current year interim dividend.
Dividends declared/proposed in respect of the year
2022 2021
pence
pence
Interim dividend declared per share 4.7 3.6
Final dividend proposed per share 22.9 17.0
Total 27.6 20.6
The proposed final dividend of 22.9p will be submitted for formal approval at
the Annual General Meeting to be held on 16 March 2023. Based on the number of
shares in issue at the date of this report, and excluding own shares held, the
total amount payable for the final dividend would be £30,188,130.
Dividends paid in the year
2022 2021
£000
£000
Prior year final dividend - 17.0p, 6.8p 22,475 8,871
Interim dividend - 4.7p, 3.6p 6,190 4,745
28,665 13,616
15 GOODWILL
The goodwill balance within the Group at 30 September 2022 arose from the
acquisition of Impax Capital Limited on 18 June 2001 and the acquisition of
Impax NH in January 2018.
Goodwill
£000
Cost
At 1 October 2020 12,306
Foreign exchange (490)
At 1 October 2021 11,816
Foreign exchange 2,116
At 30 September 2022 13,932
Impax NH consists of only one cash-generating unit ("CGU"). Goodwill is
allocated between CGUs at 30 September 2022 as follows - £12,303,000 to Impax
NH and £1,629,000 to the Listed Equity and Private Equity CGUs.
The Group has determined the recoverable amount of its CGUs at the Period-end
by calculating their value in use using a discounted cash flow model over a
period of 10 years. The cash flow forecasts were derived taking into account
the budget for the year ended 30 September 2023, which was approved by the
Directors in September 2022. The discount rate was derived from the Group's
weighted average cost of capital and takes into account the weighted average
cost of capital of other market participants.
The goodwill on the Listed Equity and Private Equity CGUs arose over 15 years
ago and the business has grown significantly in size and profitability since
that date. There is accordingly significant headroom before an impairment is
required. The main assumptions used to calculate the cash flows in the
impairment test for these CGUs were that assets under management would
continue at current levels and margins would continue at current levels, that
fund performance for the Listed Equity business would be 5% per year (2021:
5%) and a discount rate of 12.5% (2021: 12.5%). There has been no impairment
of goodwill related to these segments to date and there would have to be
significant asset outflows over a sustained period before any impairment was
required. If the discount rate increased by 3% there would no impairment and
if fund performance reduced to zero there would be no impairment (2021: 3%
increase in discount rate,
no impairment).
The impairment test for the Impax NH CGU showed no impairment (2021: no
impairment) was required and used the following key assumptions, based on
historical performance - average fund inflows of US$0.38 billion (2021:
US$0.38 billion), fund performance of 5% (2021: 5%), an average operating
margin of 17% (2021: 17%) and a discount rate of 12.5% (2021: 12.5%). The
following plausible changes in assumptions would individually not give rise to
an impairment: a consistent 10% decrease in inflows (2021: 10% decrease); a
100 basis point annual reduction in performance each year (2021: 100 basis
point reduction); a 1% annual reduction in operating margin (2021: 1%
reduction), a 1% increase in discount rate (2021: 1% increase).
16 INTANGIBLE ASSETS
Intangible assets mainly represents the value of the management contracts
acquired as part of the acquisition of Impax NH.
Management contracts Software Total
£000
£000
£000
Cost
As at 1 October 2020 27,707 529 28,236
Foreign exchange (1,266) - (1,266)
As at 30 September 2021 26,441 529 26,970
Additions - 81 81
Disposals (309) (309)
Foreign exchange 5,469 - 5,469
As at 30 September 2022 31,910 301 32,211
Accumulated amortisation
As at 1 October 2020 6,907 458 7,365
Charge for the year 2,358 51 2,409
Foreign exchange (277) - (277)
As at 30 September 2021 8,988 509 9,497
Charge for the year 2,459 26 2,485
Disposals - (310) (310)
Foreign exchange 2,199 - 2,199
As at 30 September 2022 13,646 225 13,871
Net book value
As at 30 September 2022 18,264 76 18,340
As at 30 September 2021 17,453 20 17,473
As at 30 September 2020 20,800 71 20,871
The management contracts were acquired with the acquisition of Impax NH in
January 2018 and are amortised over an 11 year life.
Asset inflows, operating margin and discounted cost of capital are all the
same or in excess of the assumptions when the management contracts were first
valued. As such, there are no indicators of impairment.
17 PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment mainly represents the costs of fitting out the
Group's leased London (leasehold improvements), office furniture and computers
(fixtures, fitting and equipment) and the capitalised value of the Group's
leases on its office buildings (right of use assets).
Right of use assets Leasehold improvements Fixtures, fittings and equipment Total
£000
£000
£000
£000
Cost
As at 1 October 2020 10,555 2,093 1,847 14,495
Additions 194 - 257 451
Disposals - (19) - (19)
Foreign exchange (222) - (14) (236)
As at 30 September 2021 10,527 2,074 2,090 14,691
Additions 139 274 441 854
Disposals - (6) (22) (28)
Foreign exchange 951 1 105 1,057
As at 30 September 2022 11,617 2,343 2,614 16,574
Accumulated depreciation
As at 1 October 2020 1,240 1,118 1,280 3,638
Charge for the year 1,236 145 267 1,648
Disposals - (10) - (10)
Foreign exchange (14) - (6) (20)
As at 30 September 2021 2,462 1,253 1,541 5,256
Charge for the year 1,273 181 318 1,772
Disposals - (6) (22) (28)
Foreign exchange 235 1 59 295
As at 30 September 2022 3,970 1,429 1,896 7,295
Net book value
As at 30 September 2022 7,647 914 718 9,279
At 30 September 2021 8,065 821 549 9,435
As at 30 September 2020 9,315 975 567 10,857
Lease arrangements
Property, plant and equipment includes right-of-use assets in relation to
operating leases for the Group's office buildings.
The carrying value of the Group's right of use assets, associated lease
liabilities and the movements during the period are set out below.
Right of Lease liabilities
use asset
£m
£m
At 1 October 2021 8,065 9,432
New leases 139 139
Lease payments - (1,729)
Interest expense - 433
Depreciation charge (1,273) -
Foreign exchange movement 716 803
At 30 September 2022 7,647 9,078
Current 1,488
Non-current 7,590
9,078
The contractual maturities on the undiscounted minimum lease payments under
lease liabilities are provided below:
2022 2021
£000
£000
Within one year 2,937 1,694
Between 1 and 5 years 6,339 6,452
Later than 5 years 2,447 3,110
Total undiscounted lease liabilities 11,723 11,256
The Company's London office lease has an extension option of a further five
years from June 2027, subject to a rent review, which is not included in the
above numbers on the basis that it is not yet reasonably certain that it will
be exercised.
18 TRADE AND OTHER RECEIVABLES
2022 2021
£000
£000
Trade receivables 10,196 8,679
Other receivables 1,205 1,717
Prepayments and accrued income 27,368 29,404
38,769 39,800
Accrued income relates to accrued management fees and arises where invoices
are raised in arrears.
An analysis of the aging of trade receivables is provided below:
2022 2021
£000
£000
0-30 days 9,069 6,865
Past due but not impaired:
31-60 days 382 1,052
61-90 days 557 762
Over 90 days 188 -
10,196 8,679
At the date of this report, substantially all of the trade receivables above
have been received. As at 30 September 2022, the assessed provision under the
IFRS 9 expected loss model for trade receivables and prepayments and accrued
income was immaterial (2021: immaterial).
£32,954,000 of trade and other receivables and accrued income were due from
related parties (2021: £34,685,000).
19 CURRENT ASSET INVESTMENTS
The Group makes seed investments into its own Listed Equity funds and also
invests in its Private Equity funds. Where the funds are consolidated the
underlying investments are shown in the table below. Investments made in
unconsolidated funds are also included.
Total
£000
At 1 October 2020 4,387
Additions 2,832
Fair value movements 648
Repayments/disposals (303)
At 30 September 2021 7,564
Additions 256
Fair value movements 46
Repayments/disposals (611)
At 30 September 2022 7,255
The investments include £3,534,000 in related parties of the Group (2021:
£3,474,000).
Hierarchical classification of investments
The hierarchical classification of the investments as considered by IFRS 13
Financial Instruments: Disclosures is shown below:
Level 1 Level 2 Level 3 Total
£000
£000
£000
£000
At 1 October 2021 4,090 - 3,474 7,564
Additions - - 256 256
Fair value movements (369) - 415 46
Repayments/disposals - - (611) (611)
At 30 September 2022 3,721 - 3,534 7,255
There were no movements between any of the levels in the Period.
The level 3 investments are in the Group's Private Equity funds. The net asset
value of these funds as reported in the NAV statements represents the fair
value at the end of the reporting period and as such a range of unobservable
inputs is not reported. If the NAV of those funds changed by +/- 10% then the
valuation of those investments would change by +/- £353,000.
Market risk and investment hedges
Investments made are subject to market risk. Where appropriate the Group has
attempted to hedge against the risk of market falls by the use of derivative
contracts. The derivative contracts consist of short positions against a
global equity index and are arranged through BNP Paribas, a related party. Any
outstanding amounts on the short positions are settled daily.
20 INTERESTS IN UNCONSOLIDATED STRUCTURED ENTITIES
The Group's interest in structured entities is reflected in the Group's AUM.
The Group is exposed to movements in AUM of structured entities through
potential loss of fee income as a result of client withdrawals or market
falls. Outflows from funds are dependent on market sentiment, asset
performance and investor considerations. Further information on these risks
can be found in the Strategic Report. Considering the potential for changes in
AUM of structured entities, management has determined that the Group's
unconsolidated structured entities include segregated mandates and pooled
funds vehicles. Disclosure of the Group's exposure to unconsolidated
structured entities has been made on this basis.
At 30 September 2022, AUM managed within unconsolidated structured entities
was £35.68 billion (2021: £37.21 billion) and within consolidated structured
entities was £nil (2021: £nil).
£175,396,000 (2021: £143,056,000) in revenue was earned from unconsolidated
structured entities.
The total exposure to unconsolidated structured entities in the Statement of
Financial Position is shown in the table below:
2022 2021
£000
£000
Management fees receivable (including accrued income) 35,069 36,356
Investments 3,534 3,474
38,603 39,830
21 CASH AND CASH EQUIVALENTS AND CASH INVESTED IN MONEY MARKET FUNDS
Cash and cash equivalents under IFRS does not include cash invested in money
market funds which is exposed to market variability. However the Group
considers its total cash reserves to include these amounts. Cash held by
consolidated funds is not considered to be available to the Group so it is not
included in cash reserves. Cash held in Research Payment Accounts ("RPAs") is
collected from funds managed by the Group and can only be used towards the
cost of researching stocks. A liability of an equal amount is included in
trade and other payables. This cash is also excluded from cash reserves. A
reconciliation is shown below:
2022 2021
£000
£000
Cash and cash equivalents 52,232 36,172
Cash invested in money market funds 58,687 38,066
Less: cash held in RPAs (3,951) (4,089)
Cash reserves 106,968 70,149
The Group is exposed to interest rate risk on the above balances as interest
income fluctuates according to the prevailing interest rates. The average
interest rate on the cash balances during the year was 0.6% (2021: 0.05%).
Given current interest rate levels a sensitivity rate of 1% is considered
appropriate. A 1% increase in interest rates would have increased Group profit
after tax by £885,000. An equal change in the opposite direction would have
decreased profit after tax by £501,000.
The credit risk regarding cash balances of the operating entities of the Group
is spread by holding parts of the balance with RBS International, Lloyds Bank,
Citizens Financial Group (all with Standard & Poor's credit rating A-2),
Santander (A-1) and the Bank of New Hampshire (unrated) and the remainder in
money market funds managed by BlackRock (with a Standard & Poor's credit
rating of AAA) and Goldman Sachs (with a Standard & Poor's credit rating
of A-1).
Cash invested in money market funds is classified as Level 1 on the fair value
hierarchy.
22 TRADE AND OTHER PAYABLES
2022 2021
£000
£000
Trade payables 1,078 852
Taxation and other social security 1,981 5,160
Other payables 4,738 4,655
Accruals 45,827 39,440
53,624 50,107
The most significant accrual at the year end relates to variable staff
remuneration.
23 LOANS
The Group retains a US$13 million revolving credit facility ("RCF") with RBS
International which expires
in January 2023. No amounts were drawn down or repaid in the current Period or
in the prior year.
24 ORDINARY SHARES
Issued and fully paid 2022 2021 2022 2021
No of shares/000s No of £000 £000
shares/000s
At 1 October and 30 September 132,597 132,597 1,326 1,326
Ordinary shares have a par value of £0.01 per share. Each ordinary share
carries the right to attend and vote at general meetings of the Company.
Holders of these shares are entitled to dividends as declared from time to
time. On 16 February 2021, 2,000,000 new shares were issued to the Impax Asset
Management Group plc Employee Benefit Trust 2012 (the "EBT") and a further
181,467 shares were issued to management of Impax NH as part of the
consideration for the acquisition of that business that occurred in 2018.
25 OWN SHARES
No of Shares £000
At 1 October 2020 5,186,867 7,210
Issuance of shares to EBT 2012 2,000,000 -
Satisfaction of option exercises and RSS vesting (3,083,472) (3,093)
At 30 September 2021 4,103,395 4,117
Purchase of shares by EBT 2012 1,078,000 8,781
Satisfaction of option exercises and RSS vesting (1,916,286) (4,770)
At 30 September 2022 3,265,109 8,128
The EBT holds shares for RSS awards until they vest or to satisfy share option
exercises. Included within Own Shares are 2,494,006 shares held in a nominee
account in respect of the RSS as described in note 9. During the Period, the
EBT purchased 1,078,000 ordinary shares.
26 FINANCIAL COMMITMENTS
At 30 September 2022 the Group has outstanding commitments to invest up to the
following amounts into private equity funds that it manages:
· €57,499 into Impax New Energy Investors II LP (2021: €113,000);
this amount could be called on in the period to 22 March 2023;
· €1,276,000 into Impax New Energy Investors III LP (2021:
€1,567,000); this amount could be called on in the period to 31 December
2026; and
· €1,446,977 into Impax New Energy Investors IV LP (2021: €449,616);
this amount is called on in the period to 31 October 2031.
27 RECONCILIATION OF PROFIT BEFORE TAX TO CASH GENERATED FROM OPERATIONS
This note should be read in conjunction with the consolidated cashflow
statement. It provides a reconciliation to show how profit before tax, which
is based on accounting rules, translates to cashflows.
2022 2021
£000
£000
Profit before taxation 72,559 45,749
Adjustments for income statement non-cash charges/income:
Depreciation of property plant and equipment and amortisation of intangible 4,257 4,057
assets
Finance income (7,950) (286)
Finance expense 574 1,971
Share-based payment charges 6,151 4,882
Adjustment for statement of financial position movements:
Decrease/(increase) in trade and other receivables 1,031 (19,021)
Increase in trade and other payables 3,699 22,460
Cash generated from operations 80,321 59,812
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