REG - IntegraFin Holdings - Final Results
14/12/2023 07:15
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RNS Number : 7257W IntegraFin Holdings plc 14 December 2023
LEI Number: 213800CYIZKXK9PQYE87
14 December 2023
IntegraFin Holdings plc
Announcement of full year results for the year ended 30 September 2023
IntegraFin Holdings plc (IHP, or the Group), operator of the UK's premium
investment platform - Transact - for clients and UK financial advisers, is
pleased to report its full year results.
The Group displayed solid financial performance and operational progress in a
challenging macro-economic environment.
Highlights
· Record year end Transact investment platform funds under
direction ('FUD') of £55.0bn.
· Solid growth of the Transact investment platform business during
FY23 with resilient net inflows of £2.7bn, representing over 5% of opening
FUD.
· Group revenue increase of 1% to £134.9m (FY22: £133.6m).
· Underlying Group profit before tax of £63.0m (FY22: £65.8m), after
adjusting for non-underlying expenses of £0.4m, with IFRS profit before tax
up 15% to £62.6m (FY22: £54.3m).
· Underlying Group earnings per share of 15.2p (FY22:16.3p). IFRS
Group earnings per share of 15.1p (FY22: 13.3p).
· Financial guidance for the year ending 30 September 2024 remains
unchanged.
· Declared second interim dividend of 7.0 pence per ordinary share,
resulting in a total dividend for the year of 10.2 pence per share in line
with prior year (2022: 10.2 pps). The dividend is payable on 26 January 2024
to ordinary shareholders on the register on 22 December 2023. The ex-dividend
date will be 21 December 2023.
Commenting on the Full Year results, Alexander Scott, IHP Group Chief
Executive said:
"I am pleased with the solid performance shown by the Group during the past
financial year. We have grown Group revenue, client numbers, and adviser
numbers, and delivered resilient net inflows over the period. This is
attributable to the dedication of our staff in delivering a first-class
service to our clients and their advisers.
"While the external market has been volatile, the UK adviser platform market
remains healthy and is expected to grow well over the coming years. We are
well placed to take advantage of this market growth, and we remain confident
in our market position, despite the uncertainty in the wider economy.
"Above all, we remain focused on our goal of being the number one provider of
software and services for clients and UK financial advisers."
Operational Highlights
· Performance of the Transact platform remains strong and growing:
- A 2% increase in the Transact platform's adviser base to c.7.7k advisers
(30 September 2022: 7.5k)
- A 2% increase in the number of clients using the Transact platform to
c.230k (30 September 2022: 225k)
· Digitalisation programme to deliver operational efficiencies for the
Transact platform is progressing well:
- Recruitment of IT and software professionals advancing despite competitive
IT recruitment market
- Recruitment will continue into FY24 in line with planned total
headcount additions
· Strong growth at Time4Advice including:
- Revenue for FY23 of £4.8m, an increase of 22% over the past financial
year
- Increase in chargeable users for FY23 of 22%
Financial information
IHP Group
Year to 30 September 2023 Year to 30 September 2022
Total Group revenue £134.9m £133.6m
Underlying profit before tax £63.0m £65.8m
IFRS profit before tax £62.6m £54.3m
Underlying earnings per share 15.2p 16.3p
Total dividend per share 10.2p 10.2p
Transact platform:
Year ended 30 September 2023 Year ended 30 September 2022
Net new business inflows £2.7bn £4.4bn
Closing funds under direction ('FUD') £55.0bn £50.1bn
£53.6bn £52.5bn
Average daily FUD
230,294 224,705
Transact platform clients (as at 30 September)
7,683 7,537
Transact platform registered advisers (as at 30 September)
Time4Advice:
Year ended 30 September 2023 Year ended 30 September 2022
£4.8m £3.9m
Time4Advice revenue
Total number of CURO software users (as at 30 September) 2.8k 2.3k
Enquiries
Investors
Luke Carrivick, IHP Head of Investor Relations +44 020 7608 5463
Media
FGS Global: Mike Turner +44 7775992415
FGS Global: Chris Sibbald +44 7855955531
2023 Full year results presentation
IHP will be hosting a virtual analyst audio presentation at 09:30am on 14
December 2023. This will be available at https://brrmedia.news/IHP_FY23.
A recording of the presentation will be available for playback after the event
at https://www.integrafin.co.uk/. Slides accompanying the analyst presentation
will also be available this morning at
https://www.integrafin.co.uk/annual-reports/.
CEO Statement
Overview
The Group has continued its record of resilient growth, with Transact
demonstrating robust performance in increasing funds under direction (FUD),
net inflows and client and adviser numbers. This financial year has been
marked by persistently high inflation and interest rates, with only modest
economic growth.
The first half of our financial year saw relatively solid equity market
performance. Global equity markets were volatile but there was an upward trend
during the period from October 2022 to March 2023. The latter two quarters
of financial year 2023 saw less volatility. Slowing inflation towards year end
led to a pause in the rate rises that characterised much of the year but the
high cost of living persisted.
Under these challenging conditions, we support our clients and their financial
advisers through our combination of proprietary technologies - the Transact
investment platform and CURO - and our industry-leading customer service.
We remain focused on our goal of making financial planning easier and more
efficient and, to this end, we have continued our programme to deliver organic
growth through investment in our people and our technologies, seeking
long-term efficiencies through scale and ensuring we continue to attract
investors to our platform.
Platform performance - Transact overview
Throughout the period, Transact has steadily grown both its adviser base and
client numbers. In the first half of the year, we undertook a programme of
portfolio rationalisation as part of preparations for the Consumer Duty
regulations, resulting in a one-time reduction.
Platform inflows fell across the whole advised retail sector due to the
cost-of-living crisis, which diminished the available income for investment.
Consequently, our gross inflows fell during the year. This nevertheless
represents strong performance in a difficult market, being the third highest
level of gross inflows in the industry which, coupled with high retention,
delivered 22% of net inflows within the advised platform market.
Transact grew its market share as a result of these resilient net inflows.
Nevertheless, owing to both macro-economic and industry factors, outflows were
substantially higher in the year. In contrast to FY22 - where sharply negative
market movements in the second half reduced otherwise-robust net inflows -
market movements this year were broadly positive.
Financial performance
Driven by the rise in FUD, revenue grew during the year. Annual commission on
client funds remains the main contributor to revenue, whilst administration
fees were the second largest component. T4A's contribution also increased
during this year.
Underlying expenses rose in 2023, with most of the uplift stemming from our
increase in staff costs. This is in line with our expectations, as the bulk of
the IT software hires stipulated in our growth strategy fell within this year.
Other cost increases were driven by both inflationary and scale-based factors,
as the Group continues to invest in its key competencies.
The Group's IFRS profit before tax has risen by £8.3m, a 15% increase over
the prior year. However, there is a decrease in underlying profit before tax
from last year. The underlying figure excludes exceptional items, which were
elevated in FY22 due to the impact of T4A post-combination remuneration and
the VAT decision. The reduction in underlying profit before tax is driven by
the increased investment in the business in this year and next year; we then
anticipate the resultant improvements from scale and efficiency to start to
come through from 2025.
The Group maintains its focus on organic platform growth, which has continued
to yield steady increases in both FUD and revenue. Our aim is to achieve
sustainable growth through incremental improvements to our proposition,
thereby allowing us to continue providing the high quality of service to which
we are committed.
Our people
We have continued with the IT and software professional hiring plan announced
in mid-2022 and since then we have added 27 such employees. Based on this
progress, we anticipate finalising the plan during 2024. We are already
benefitting from the new expertise and scale, allowing us to accelerate our
programme of platform improvement.
Given the importance of our people to the Group's success, we have made their
wellbeing a priority during the year. Responding to feedback from the previous
employee engagement survey, we have reworked our remuneration approach. This
has led to a tiered pay rise, changes to the bonus system and enhanced
maternity and paternity benefits.
We have selected a new CFO, Euan Marshall, who will be joining in January
2024. Euan brings with him significant experience in listed financial services
companies and I look forward to working with him to execute on our Group
strategy.
The Group has made other key senior hires, specifically our first UK-based
Chief Technology Officer (CTO), Damien Francis, and a new Group Chief Risk
Officer (CRO), Emma Vernon, both of whom joined in January 2023. These new
perspectives and skills will strengthen our strategy as well as helping the
Group adapt to key changes taking place in the industry.
Digitalisation programme
Led by our new CTO, our programme of platform digitalisation has delivered
significant improvements. We have aimed to reduce as many paper routes as
possible on the platform, especially those relating to account transfers, and
we have introduced efficient, intuitive digital alternatives. The success of
these initiatives means that now all new accounts opened on our platform are
paperless and the majority of wrappers in portfolios are also opened on a
paperless online basis.
Our adviser support team is now well established and has been making use of
new support functionality to promptly address questions from our clients and
advisers; through our live chat feature we have achieved a 96% query
resolution rate. In addition to the technical improvements to the platform, we
have sought also to expand our service offerings.
Our BlackRock Model Portfolio Service (MPS), launched in November 2022, has
outperformed our expectations in terms of adviser and client interest. This
service offers our clients access to flexible, diversified model portfolios
investing in a broad range of markets.
Protecting our customers - Consumer Duty
Consumer Duty represented perhaps the largest regulatory change of the year,
with the legislation taking effect in July 2023. Prioritising good outcomes
for our clients and advisers has always been at the centre of the Group's
activities. We were well positioned to adapt to the new rules and have ensured
the necessary changes have been implemented. This includes mandatory training
for all employees and new joiners.
Our commitment to Consumer Duty is embodied in our approach to interest on
client cash. With interest rates at their highest level in recent years,
greater industry focus has been placed on the interest generated from client
cash. In accordance with our 'customer first' principles, Transact does not
take any client cash interest earned and instead passes it all onto our
clients. At the time of writing, we are paying the highest interest rate
across the UK platform sector to our clients.
Throughout 2023, we have moved forward with our sustainability initiatives
including significantly increased monitoring of energy usage and waste, as
well as applying tangible initiatives such as solar panels on our Melbourne
office.
Outlook
The market outlook for the coming year is more optimistic than it was at the
start of FY23 but headwinds are anticipated to persist. Inflation is expected
to come down but at a pace that is as yet unknown, and the Bank of England
base rate is predicted to remain at a higher level than has been seen in the
past 10 years. By investing in the key drivers of our competitive advantage -
our proprietary technology and our industry-leading customer service - the
Group aims to continue to grow our adviser, client and FUD base.
Throughout FY24, we will continue our work on the platform digitalisation
project. Our digitalisation approach will focus on further limiting
paper-based forms and expanding straight-through processing. These
technological developments will accelerate processing, making transfers
quicker and easier for clients and advisers. We also seek to add additional
data analysis functionality by making available to advisers more data on the
transactions they perform.
Consumer Duty is expected to remain one of the most prominent features of the
regulatory environment. We put positive consumer outcomes at the centre of our
business model. To secure continued adherence to the new requirements, we will
focus our training and development to ensure our people are well able to
comply with the objectives of Consumer Duty.
Following the successful beta client test during the year, T4A's next
generation Power Platform CURO software will commence roll out to the pipeline
of adviser firms. We will seek further innovation including a data interface
with the Transact platform.
In this period of ongoing economic and market volatility, clients rely more
than ever on their advisers for high quality, personalised financial planning
and support. As we have always done, we'll continue to support UK financial
advisers and their clients by providing our combination of in-house technology
and well-trained people delivering high quality service. Our holistic
financial planning solution will serve clients and advisers alike in managing
their portfolios easily and efficiently.
I would like to thank all my colleagues across the Group for their diligent
work over the year. Their commitment and dedication have been crucial in
working towards our strategic objective: to be the number one provider of
software and services for our clients and their financial advisers. I look
forward to continuing to grow our business and deliver on our strategy
throughout FY24 and beyond.
Alexander Scott
IHP Group CEO
13 December 2023
Financial Review
Headlines
Group revenue remained broadly steady in FY23, increasing by 1% to £134.9
million. This was against another year of economic volatility, due to elevated
inflation and rapidly increasing interest rates, both of which impacted the
financial markets and client wealth.
Despite ongoing global economic challenges, FY23 ended with a record 230,294
Transact platform clients (FY22: 224,705) and 7,683 registered advisers (FY22:
7,537).
IHP Group has a strong liquidity profile, largely due to regulatory capital
requirements, and therefore benefited from UK interest rates rising, with
interest received on corporate cash increasing from £0.6 million in FY22 to
£5.3 million in FY23.
Headline IFRS profit before tax rose 15% to £62.6 million (FY22: £54.3
million), however underlying profit before tax fell by 4% to £63.0 million
(FY22: £65.8 million). The reduction is due to an increase in administration
expenses, largely driven by the ongoing strategic programme of investment in
software and IT infrastructure and offset by the increase in corporate
interest income.
Profit after tax rose 13% to £49.9 million (FY22: £44.0 million).
EPS (earnings per share) is 15.1p (FY22: 13.3p). After removing all
non-underlying expenses in FY23, underlying EPS* is 15.2p, compared with 16.3p
in FY22.
Transact platform operational performance
FY23 FY22
£m £m
Opening FUD 50,070 52,112
Inflows 6,406 7,275
Outflows (3,753) (2,873)
Net flows 2,653 4,402
Market movements 2,272 (6,248)
Other movements(1) (36) (196)
Closing FUD 54,959 50,070
(1) Other movements includes fees, tax charges and rebates, dividends and
interest.
Funds Under Direction closed the year up 10% on FY22 at £55.0 billion.
FY23 gross inflows of £6.4 billion, in a competitive marketplace and with
ongoing economic pressure on our clients, are due to the reliability and
quality of our advised investment platform.
Whilst outflows have increased to £3.8 billion, the annualised rate is 7% of
opening FUD (FY22: 6%) therefore they are still within the historical banding,
as a percentage of FUD, that we expect. One factor driving outflows is clients
withdrawing savings as the cost of living has increased and also as the world
has returned to normal post lockdown.
Our net flows of £2.7 billion are strong for the sector and represent more
than 50% of the increase in FUD in FY23.
*Alternative performance measures (APMs) which are indicated with an asterisk.
APMs are financial measures which are not defined by IFRS. They are used in
order to provide better insight into the performance of the Group. Further
details are provided in the glossary.
T4A operational performance
In the 12 months to September 2022, T4A has increased CURO licence users by
22%, from 2,253 at 30 September 2022, to 2,752 at September 2023.
Group financial performance
There are two streams of Group revenue: investment platform revenue (96% of
total revenue) and T4A revenue (4% of total revenue).
Investment platform revenue
Investment platform revenue has increased by £0.4 million year-on-year to
£130.1 million and comprises three elements, 99% (FY22: 98%) of which is from
a recurring source.
Annual commission income (an annual, ad valorem tiered fee on FUD) and wrapper
administration fee income (quarterly fixed wrapper fees for each of the tax
wrapper types available) are recurring. Other income is composed of buy
commission and dealing charges.
FY23 FY22
Investment platform revenue £m £m
Annual commission income (recurring) 116.1 115.9
Wrapper fee income (recurring) 12.3 11.6
Other income 1.7 2.2
Total platform revenue 130.1 129.7
Average daily FUD for the year, arising from the performance of the assets in
client portfolios, increased by 2% in FY23 to £53.6 billion. Annual
commission income increased to £116.1 million in FY23. The increase in
annual commission revenue was moderated by the reduction in the annual
commission rate from 0.27% to 0.26%, with effect from 1 July 2022, therefore
only three months of the reduction impacted FY22, but a full 12 months
impacted FY23.
Recurring wrapper administration fee income increased by £0.7 million (6%)
year-on-year, reflecting the increase in the number of open tax wrappers for
both existing and new clients.
Buy commission, included in other income, has been deliberately reduced as a
component of revenue each year. Buy commission was £0.7 million in FY23
(FY22: £1.5 million), falling due to the threshold at which clients receive a
rebate of buy commission being reduced from £0.2 million which was the
threshold from 1 March 2022, to £0.1 million with effect from 1 March 2023.
The reduction in the buy commission threshold is another positive step in our
responsible pricing strategy, as we seek to remove an increasing proportion of
clients from the buy commission charge and simplify our fee structure.
T4A revenue
T4A's revenue was £4.8 million for FY23, compared with £3.9 million for
FY22, an increase of 23%. This was driven by an increase in recurring revenue
from additional CURO user licences.
Interest income on corporate cash
Interest income rose from £0.8 million in FY22 to £6.4 million in FY23. The
average Group corporate cash balance was £186.3 million over the year and the
Bank of England base rate rose 3% over the course of the financial year,
ending the financial year at 5.25%.
This resulted in interest income on corporate cash balances rising £4.7
million, to £5.3 million. We also received another £0.8 million, being a
combination of interest due from the Vertus loan facility and interest
received from HMRC.
Operating expenses
FY23 FY22
£m £m
Employee costs 53.9 47.1
Occupancy 2.8 2.4
Regulatory and professional fees 9.8 9.8
Other income - tax relief due to shareholders (1.6) (2.4)
Other costs 6.8 6.3
Non-underlying expenses - backdated VAT and interest - 8.8
Non-underlying expenses - other 0.4 2.7
Total expenses 72.1 74.7
Depreciation and amortisation 2.5 3.0
Total operating expenses 74.6 77.7
Operating expenses on a statutory IFRS basis have reduced by £2.6 million, or
3%.
Underlying expenses
Employee costs £53.9 million (+£6.8 million, +14%)
Costs have increased due to increased headcount and pay rises.
Group employee numbers through the year increased by 6% (FY22: 8%) from an
average of 594 in FY22 to an average of 631 in FY23, this accounted for £2.7
million of the increase in costs. Notable senior additions are a CTO and
CRO. We have also recruited a further 26 people in IT through the year, as
we continue to implement plans announced in FY22 to significantly increase
system development capacity across the Group and drive future efficiencies.
We continued to enhance salaries to reflect the inflationary environment,
recognising the pressures being placed on our people due to the rise in the
cost of living. We also want to ensure we retain talent and we monitor the
market with regard to inflationary pressures and market-competitive salary
levels. Inflationary pay rises, including resultant impact on share scheme
costs and company pension contributions, increased costs by £3.7 million in
FY23.
Current year VAT, included in Other costs (£3.6 million (+£0.4 million
(+13%))
Current year VAT has increased by £0.4 million, largely due to increased
investment platform development software fees, charged by IHP's wholly owned
software development company and now subject to reverse charge VAT.
Occupancy costs £2.8 million (+£0.4 million, +17%), depreciation and
amortisation costs £2.5 million (-£0.5 million, -17%)
Occupancy costs increased by £0.4 million, and depreciation and amortisation
reduced by £0.5 million. The increase in occupancy costs is due to the head
office lease ending in June 2023 and the accounting impact of IFRS 16, the
Leases accounting standard, no longer applying. This means depreciation of
the right of use asset has been replaced by rent expense for the final three
months of the financial year. The lease is being renewed for a limited period.
Regulatory and professional fees £9.8 million (no change)
Regulatory and professional fees did not increase in FY23, due to an uplift in
professional fees being partially offset by regulatory fees that were lower
than expected.
Other income - tax relief due to shareholders £1.6 million (-£0.8 million,
-33%)
Tax relief due to shareholders relates to life insurance company tax
requirements and thus is subject to valuations at year-end, which are
inherently dependent on market valuations at that date.
Non-underlying expenses
Non-underlying expenses - other £0.4 million (-£2.3 million, -85%)
In FY22, within non-underlying expenses, we recognised £3.0 million of
ongoing expenses. This was attributable to the IFRS requirement that we
recognise the post combination deferred and additional consideration payable
to the original T4A shareholders in respect of the acquisition of T4A, as
remuneration over the four years from January 2021 to December 2024.
However, T4A has not met the minimum threshold for highly stretching targets
to earn the additional consideration element of post combination remuneration.
Therefore, the post combination expense in respect of the additional
consideration element that was recognised in FY21 and FY22 of £1.6 million
has been released, and we have not recognised any cost in FY23. This has led
to the reduction in non-underlying post combination remuneration expense for
FY23 from £3.0 million to £0.4 million.
Moreover, the post combination consideration cost in respect of FY24 and FY25
is expected to reduce to £2.1 million and £0.5 million respectively, as only
the deferred consideration element will now be recognised.
Tax
The Group has operations in three tax jurisdictions: UK, Australia and the
Isle of Man. This results in profits being subject to tax at three different
rates. However, 96% of the Group's income is earned in the UK.
Shareholder tax on ordinary activities for the year increased by £2.5
million, or 24%, to £12.8 million (FY22: £10.3 million) due to the increase
in taxable profit and the increase in corporation tax rate from 19% to 25%,
with effect from 6 April 2023.
Our effective rate of tax over the period was 20% (FY22: 18%). The effective
rate of tax in FY22 was dampened by the effect of the backdated, non-recurring
VAT expense of £8.8 million, incurred in September 2022, being tax
deductible.
Our tax strategy can be found at:
https://www.integrafin.co.uk/legal-and-regulatory-information/
(https://www.integrafin.co.uk/legal-and-regulatory-information/)
Consolidated statement of financial position
Net assets have grown 10% (FY22: 8%), or £16.7 million, in the year to
£189.9 million, and the material movements on the consolidated statement of
financial position are as follows:
Cash and significant cash flows
Shareholder cash has decreased by £5.1 million year on year to £177.9
million (FY22: £183.0 million). This is due to the strong cash flows
generated from operating activities being used to invest in gilts to maximise
returns, whilst maintaining minimal risk on assets supporting regulatory
solvency requirements. The gilt investments increased by £19.3 million from
£3.1 million to £22.3 million. We also paid dividends of £33.7 million in
the year (FY22: £33.7 million).
We continue to operate without any need for debt, so have not incurred an
increase in financing costs from the increase in base rate through the year,
rather, we benefited due to our strong corporate cash reserves.
Deferred tax asset, non-current provisions and non-current deferred tax
liability
The reduction in the deferred tax asset of £5.2 million to £0.8 million
(FY22: £6.0 million) the non-current provisions of £5.6 million to £40.5
million (FY22: £46.1 million), and the current provision of £3.0 million to
£7.7 million (FY22: 10.7 million), plus the increase in non-current deferred
tax liabilities of £6.4 million to £7.3 million (FY22: 0.9 million) are all
a function of the realised and unrealised gains that have arisen on
policyholder assets, as the value of linked funds has risen year on year.
ILUK holds tax charges deducted from ILUK policyholders in reserve to meet
future tax liabilities and the tax reserve may be paid back to policyholders
if asset values do not recover such that the tax liability unwinds.
Investments and cash held for the benefit of policyholders and liabilities for
linked investment contracts (notes 17, 18 and 20)
ILUK and ILInt write only unit-linked insurance policies. They match the
assets and liabilities of their linked policies such that, in their own
individual statements of financial position, these items always net off
exactly. These line items are required to be shown under IFRS in the
consolidated statement of comprehensive income, the consolidated statement of
financial position and the consolidated statement of cash flows but have zero
net effect.
Cash and investments held for the benefit of ILUK and ILInt policyholders have
risen to £24.4 billion (FY21: £22.2 billion). This increase of 10% is
entirely consistent with the rise in total FUD on the investment platform.
Capital resources and capital management
To enable the investment platform within the Group to offer a wide range of
tax wrappers, there are three regulated entities within the Group: a UK
investment firm, a UK life insurance company and an Isle of Man life insurance
company.
Each regulated entity maintains capital well above the minimum level of
regulatory capital required, ensuring sufficient capital remains available to
fund ongoing trading and future growth. Cash and investments in short-dated
gilts are held to cover regulatory capital requirements and tax liabilities.
The regulatory capital requirements and resources in ILUK and ILInt are
calculated by reference to economic capital-based regimes.
IFAL is subject to Investment Firms Prudential Regime (IFPR) regulatory
capital and liquidity rules introduced in January 2022, following the
implementation in the UK of the MiFIDPRU rule book.
These prudential rules require the calculation of capital requirements
reflecting 'K' factor requirements that cover potential harms arising from
business activities. The K factors are calculated using formulae for assets
and cash under administration.
Regulatory Capital as at 30 September 2023
Regulatory Capital requirements Regulatory Capital resources Regulatory cover
£m £m %
IFAL 33.3 44.4 133
ILUK 201.4 261.6 130
ILInt 23.8 41.1 173
Regulatory Capital as at 30 September 2022
Regulatory Capital requirements Regulatory Capital resources Regulatory cover
£m £m %
IFAL 32.6 39.7 122
ILUK 186.9 244.0 131
ILInt 23.7 42.0 177
The Company's regulated subsidiaries continue to hold regulatory capital
resources well in excess of their regulatory capital requirements. We will
maintain sufficient regulatory capital and an appropriate level of working
capital. We will use retained capital to further invest in the delivery of our
service to clients, pay dividends to shareholders and provide fair rewards to
employees.
The following table shows the surplus capital held by the Group, after
consideration of the Group's risk appetite and future dividend payments. This
is shown on a different basis to the above table, which is on a regulatory
basis while the below shows equity on an IFRS basis.
Capital as at 30 September 2023
FY23 FY22
£m £m
Total equity 189.9 173.2
Loans and receivables, intangible assets and property, plant and equipment (30.6) (30.6)
Available capital pre dividend 159.3 142.6
Interim dividend declared (23.2) (23.2)
Available capital post dividend 136.1 119.4
Additional risk appetite capital (72.7) (76.2)
Surplus 63.4 43.2
Additional risk appetite capital is capital the board considers to be
appropriate for it to hold to ensure the smooth operation of the business such
that it can meet future risks to the business plan and future changes to
regulatory capital requirements without recourse to additional capital.
The board considers the impact of regulatory capital requirements and risk
appetite levels on prospective dividends from its regulated subsidiaries.
Our Group's Pillar 3 document contains further details and can be found on our
website at: https://www.integrafin.co.uk/legal-and-regulatory-information/
Pillar 3 Disclosures.
As stated in the Chair's report, the board has declared a second interim
dividend for the year of 7.0 pence per ordinary share, taking the total
dividend for the year to 10.2 pence per share (2022: 10.2p)
Dividends
During the year to 30 September 2023, IHP (the Company) paid a second interim
dividend of £23.2 million to shareholders in respect of financial year 2022
and a first interim dividend of £10.6 million in respect of financial year
2023.
In respect of the second interim dividend for financial year 2023, the board
has declared a dividend of 7.0 pence per ordinary share (FY22: 7.0p).
The financial year 2023 total dividends paid and declared of £33.7 million
compares with full year interim dividends of £33.7 million in respect of
financial year 2022.
Principal risks and uncertainties
The directors, in conjunction with the board and ARC, have undertaken a review
of the potential risks to the Group that could undermine the successful
achievement of its strategic objectives, threaten its business model or future
performance and considered non-financial risks that might present operational
disruption.
The tables below set out the Group's principal risks and uncertainties to the
achievement of the identified strategic objectives, risk trend for 2023
together with a summary of how we manage the risks.
Business and strategic risks
Principal risk and uncertainty Management of the principal risk and uncertainty
Service standard failure - our high levels of client and adviser retention are We manage the risk by providing our client service teams with extensive
dependent upon our consistent and reliable levels of service. Failure to initial and ongoing training, supported by experienced subject matter experts
maintain these service levels would affect our ability to attract and retain and managers. The challenges facing the business and the wider industry, have
business. There is a potential risk of greater outflows than expected and/or a increased during the year, however monitoring service metrics has allowed us
net outflow of FUD impacting profitability and/or the medium/long-term to identify the areas where there is deviation from expected service levels or
sustainability of the platform. where processing backlogs have arisen and to deliver targeted remediation
plans to ensure client outcomes and service standards are maintained. We have
substantially reduced backlogs relative to FY22 and are better able to address
them when they occur.
Change over the year
Stable
We also conduct satisfaction surveys to ensure our service levels are still
perceived as excellent by our clients and their advisers. Service standards
are also dependent on resilient operations, both current and forward looking,
ensuring that risk management is in place.
Aligned to strategic financial objectives
Sustainable growth
T4A continues to develop the delivery of next generation CURO.
Increase earnings
Diversion of platform development resources - maintaining our quality and The risk of reduced investment in the platform is managed through a
relevance requires ongoing investment. Any reduction in investment due to disciplined approach to expense management and forecasting. We horizon scan
diversion of resources to other non-discretionary expenditure (for example, for upcoming regulatory and taxation regime changes and maintain contingency
regulatory developments) may affect our competitive position. to allow for unexpected expenses e.g. UK Financial Services Compensation
Scheme (FSCS) levies, which ensures we do not need to compromise on investment
Change over the year in our platform to a degree that affects our offering.
Increase
The risk has increased over the year driven in large part due to preparation
for, and the implementation of, the Consumer Duty regime for our regulated
entities, both as manufacturers and/or distributors.
Aligned to strategic financial objectives
We remain proactive in embedding all mandatory changes (e.g. Consumer Duty,
Sustainable growth Operational Resilience, HMRC changes to lifetime allowances) through our
business-as-usual model. Our platform developers remain responsive to the
Invest business needs and have increased developer resources over the year.
Increase earnings
Increased competition: cheaper and/or more sophisticated propositions - we The advised market remains our key target and competitor risk is mitigated by
operate in an increasingly competitive market, both for clients and their focusing on providing exceptionally high levels of service and being
advisers. Consolidation in the adviser market makes it more challenging to responsive to client and financial adviser feedback and demands through an
attract and retain business. The consequences may be that greater outflows are efficient process and operational base.
experienced than expected and/or a net outflow of FUD impacting profitability
and/or the medium/long-term sustainability of the platform.
We also keep close to the landscape of our platform competitors, as well as
the trends impacting the financial adviser market. Our platform service and
Change over the year developments remain award winning. We release a monthly update to our
proprietary platform technology, incorporating improvements and new
Increase functionality. We continue to develop our digital strategy, expanding our
Transact Online interface allowing advisers direct processing onto the
platform. This is essential to remain relevant and competitive, improving both
functionality and service efficiency and allows us to continue to increase the
value-for-money of our service by reducing client charges, subject to profit
and capital parameters when deemed appropriate.
Aligned to strategic financial objectives
Sustainable growth The Group continues to review its business strategy and growth potential. In
this regard, it primarily considers organic opportunities that will enhance or
Increase earnings complement its current service offerings to the adviser market.
T4A continues to broaden our service offering to advisers. We also continue
to support the diversification of the adviser market through the Vertus scheme
which continues to be successful.
Financial risks
Principal risk and uncertainty Management of the principal risk and uncertainty
Stock and bond market value volatility (Market Risk) - our core business The risk of depressed stock and bond market values, and the impact on revenue,
revenue is derived from our platform business which has a fee structure based, has been and remains high. External economic, political and geopolitical
in large part, upon a percentage of the FUD. Depressed equity and bond values factors continue to influence markets in 2023. The risk is mitigated through a
have an impact on the revenue streams of the platform business. wide asset offering which ensures we are not wholly correlated with one
market, and which enables clients to switch assets in times of uncertainty. In
particular, clients are able to switch into cash assets, which remain on our
platform supported by our top quartile interest rates. In addition, our
Change over the year wrapper fees are not impacted by market volatility as they are based on a
fixed quarterly charge.
Increase
We can closely monitor and control expenses by continually driving efficiency
improvements in our business processes including increasing online and digital
Aligned to strategic financial objectives processing. Strong investment platform service and sales and marketing
activity ensures we attract new advisers and clients. Sustaining positive net
Sustainable growth inflows during turbulent times presents the potential for longer-term
profitability.
Increase earnings
Generate cash
This value volatility is not expected to ease in the foreseeable future and
Retain strong balance sheet while hedging options have been explored, they have been deemed expensive in
terms of the revenue protection they afford.
Deliver on dividend policy
Uncontrolled expense risk - higher expenses than expected and budgeted for The risk has increased over the year as a direct result of sustained
would adversely impact cash profits. inflationary pressures on the UK and global economy.
Change over the year The most significant element of our expense base is employee costs. These are
controlled through modelling employee requirements against forecast business
Increase volumes. The Group has made sustainable salary increases to employees over the
year and built out its capability in several key areas across all three lines
of risk governance to support the business.
Aligned to strategic financial objectives
Planned investment in IT and software development deliver enhancements to our
Generate cash proprietary platform enabling us to implement enhanced straight through
processing of operational activities. A robust multi-year costing plan is
Deliver on dividend policy produced which reflects the strategic initiatives of the business. This
captures planned investment expenditure required to build our operational
capability and cost-effective scalability of the business. Cost base
variance analysis is completed monthly with any expenditure that deviates
unexpectedly from plan being rigorously reviewed to assess the likely trend
with reforecasts completed accordingly.
Occupancy and utility costs have also increased. Regulatory fees decreased
slightly while professional fees have increased in line with expectations, as
a result of the broad regulatory agenda.
Also notable, and a growing issue, is that suppliers are wrestling with the
requirements of climate initiatives in terms of disclosures, and with unit
costs for sustainable or green energy and supplies likely to attract a premium
as organisations stride toward a net zero carbon footprint. Such costs are
difficult to control directly and may unexpectedly impact the base case
budget.
Capital strain (including liquidity) - unexpected, additional capital or We continuously monitor the current and expected future regulatory environment
liquidity requirements imposed by regulators may negatively impact our and ensure that all regulatory obligations are or will be met. This provides a
solvency coverage ratio. proactive control to mitigate this risk. Additionally, we carry out an
assessment of our capital requirements, which includes assessing the
regulatory capital required. We retain a capital buffer over and above the
regulatory minimum solvency capital requirements.
Change over the year
Stable
We await the detail of corporate tax changes resulting from the OECD Base
Erosion and Profit Shifting project relating to our Isle of Man life company,
ILInt. We anticipate that there will be a reduced level of retained income,
which will impact the future coverage levels of regulatory capital.
Aligned to strategic financial objectives
Retain strong balance sheet
Deliver on dividend policy
Credit risk - loss due to defaults from holdings of cash and cash equivalents, The Group seeks to invest its shareholder assets in high quality, highly
deposits, formal loans and reinsurance treaties with banks and financial liquid, short-dated investments. For the banks holding corporate cash, maximum
institutions. counterparty limits are set in addition to minimum credit quality steps.
Change over the year The Vertus loan scheme has an agreed commitment level and the value of the
drawn and undrawn balances are monitored regularly. Loans are made on approved
Stable business cases.
Aligned to strategic financial objectives
Retain strong balance sheet
Non-financial risks
Principal risk and uncertainty Management of the principal risk and uncertainty
Reputational risk - the risk that current and potential clients' and their The Risk Management Framework provides the monitoring mechanisms to ensure
advisers desire to do business with the Group reduces due to a lower that reputational damage controls operate effectively and reputational risk is
perception in the marketplace of the Group's offered services covering the mitigated.
Transact platform and T4A adviser support software.
Mitigation includes a focus on internal operational risk controls, error
management and complaints handling processes as well as root cause analysis
investigations. Additionally, controls include training for key company staff
on how to manage company reputation internally; regular management and
monitoring of the company websites and social media; and engaging the services
Change over the year of an external PR firm to consult on reputational matters.
Stable
Aligned to strategic financial objectives
Sustainable growth
Political and Geopolitical risk - the risk of changes in the political Political and Geopolitical risk cannot be directly mitigated by the Group.
landscape within the UK and between countries or geographies, disrupting the However, by closely monitoring developments through its risk horizon scanning
operations of the business or resulting in significant development costs. process, potential impacts are taken into consideration as part of the
business planning process.
Change over the year
The external geopolitical environment in 2023 has built on 2022 and become
Increase increasingly uncertain through a series of significant global events,
including the continuing Russian invasion of Ukraine, the escalating conflict
in the Middle East, trade tensions between USA and China, the global energy
crisis and supply chain issues. Furthermore, domestic political instability
exists within both the UK and the USA with elections due within the next 24
Aligned to strategic financial objectives months. These dynamics and related events can cause disruption to markets and
macroeconomics with a direct impact on FUD for the Group.
Sustainable growth
Invest
Increase earnings
Generate cash
Retain strong balance sheet
Deliver on dividend policy
Operational risk (including operational resilience and the sustainability The Group aims to minimise operational risks at all times, through a strong
agenda) - the risk of loss arising from inadequate or failed internal and well-resourced control and operational structure. Note that operations
processes, people and systems, or from external events. form an integral part of the ESG and sustainability agenda.
Change over the year We note the principal types of operational risk below and provide the change
over the year for each.
Increase
Aligned to strategic financial objectives
Sustainable growth
Invest
Increase earnings
Generate cash
People - the inability to attract, retain and motivate performing and The business operates both performance management and talent recognition
values-aligned employees within the business. programmes to reward high performing employee members, identify future
leaders, and retain and attract talent within the business.
Significant attrition rates of such employees or an inability to attract such
new employees can have a detrimental impact on the service provided as well as We maintain a comprehensive career and training development programme and
poor adherence to regulatory procedures and requirements resulting in provide a flexible working environment that meets our employees' and business
reputational damage and potential compliance breaches. needs. These are supported by robust Group HR policies and practices. Our
benefits package is competitive.
Change over the year
No less than annually, the Group undertakes a staff engagement survey and
Decrease addresses any identified areas for improvement to drive high engagement.
↓ Since the "great resignation" of 21/22 difficulties with the retention of
employees and the ability to attract new recruits in our UK and Australian
operations have significantly improved.
IT Infrastructure and software - ageing and underinvested IT infrastructure The continuous and evolving sophistication of the cyber threat to our IT
and software has the potential to cause the Group disruption through systems infrastructure environment means risk within this space remains high.
outages, a failure to plan and maintain operational capacity and create
vulnerabilities to operational resilience and loss of a competitive market
share as newer technology emerges.
Wars and conflict contribute to a global technology environment that is
constantly under attack. Protecting our services against this continues to
be a core focus. We continue to carry out cyber penetration testing and evolve
Change over the year our cyber security capabilities. Awareness training is provided to ensure
employees understand and recognise threats to our business systems.
Stable
Investment in IT and software development continues, with modernisation of our
digital workplace capabilities presenting opportunity for improved security
controls.
There is a full programme of digitalisation work to be delivered over the
business planning period for our proprietary investment platform, focussing on
the provision of online, straight through processes for common financial
planning practices, which will benefit our UK advisers and their clients. This
will also significantly increase the scalability of our investment platform.
Integration between adviser software applications is paramount, with data
access and synchronisation between systems being key requirements. Our
Application Programming Interfaces (APIs) are already integrated with many
third-party software providers, and we will continue to enhance our data
services to meet the demands of our clients in a secure manner.
IT Resilience and Information Security - the Group creates, obtains, stores, Data and continuity of services are critical focus areas for us given the
processes and retrieve significant volumes of commercial and corporate increase of risk in channels like cybersecurity. Ensuring that our core
matters, some of which is highly sensitive. services are resilient and that are controls around business and client data
are robust is a constantly evolving focus area. Resilience testing of the
Transact platform, for example, takes place every two months.
Change over the year
Increasing In particular, the Group has a dedicated financial crime team and an on-going
fraud and cyber risk awareness programme. Additionally, the Group carries
out regular IT system vulnerability testing. The crisis management team (CMT)
reviews the Group's business continuity plans during the course of the year.
Key changes in the last year are the establishment of dedicated first and
second line Cyber Security teams, the heads of which are due to start in early
2024. This will provide an improved governance and operational framework for
Cyber Security.
Beyond IT and cyber security, the Company also has a function led by the
Company's Data Protection Officer (DPO) to manage information security risk
and compliance with UK GDPR. The DPO carries out monitoring and works with the
business to ensure the risks from its evolving physical and digital workplace
and business operations are managed.
Regulatory risk - the financial services regulated entities within the Group The Group has an established compliance function that analyses regulation and
have a full and stretching regulatory agenda. Expanding law, regulation and advises on and monitors how our financial services regulatory standards are
guidance need analysing and transitioning effectively into business as usual met.
to avoid failing to comply with regulatory rules or standards.
The financial services regulated entities in the group ensure regulatory
Change over the year standards are met through a framework of policies, procedures, governance,
training, horizon scanning, monitoring and engagement with our regulators.
Increasing
Cross-departmental projects are established to deliver for significant
regulatory changes, with Group internal audit undertaking reviews during the
project phases and/or post-implementation thematic reviews. During the period
such projects included preparation and implementation of the FCA's Consumer
Duty, which requires ongoing work to ensure it is embedded within operations,
and work to meet FCA PS21/3 Operational Resilience requirements.
Meeting the regulatory agenda is an imperative for the operation of our core
platform business. The regulatory agenda remains challenging, particularly in
light of the demands of the new consumer duty.
Emerging risk focus
Through regular conversations and more formal quarterly risk review meetings
with risk owners and other business stakeholders, attending industry events
and reviewing external sources, emerging risks are identified. These emerging
risks by their nature have uncertainty of likelihood and impact on the
business. Emerging risks are categorised as near- (next 12 months), medium-
and longer-term (more than 3 years) and are regularly reported and assessed,
both at the executive level and, no less than quarterly, at ARCs and boards
where appropriate.
Emerging risks discussed during 2023 have included:
· Changing expectations of the UK and Isle of Man regulators.
· Increasing regulatory scrutiny or focus impacting our platform business
model.
· Shift in tax regime which may alter the tax benefits of pensions and ISAs
including the abolition of inheritance tax.
· The aging population of the UK, the platform client base and the advisers
using our platform and/or the CURO software and the generational shift in
wealth to different generations with differing preferences and needs.
The directors have carried out a robust assessment of the principal and
emerging risks facing the Group, including those that would threaten its
business model, future performance, solvency or liquidity, and have concluded
that the Group is well positioned to manage these risks.
Statement of Directors' Responsibilities
The directors are responsible for preparing the Annual report and financial
statements in accordance with applicable United Kingdom law and regulations.
Company law requires the directors to prepare financial statements for each
financial year. Under that law the directors have elected to prepare the Group
and parent Company financial statements in accordance with UK-adopted
international accounting standards (IFRSs). 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 the Company
and of the profit or loss of the Group and the Company for that period.
In preparing these financial statements the directors are required to:
• select suitable accounting policies in
accordance with IAS 8 Accounting Policies, Changes in Accounting Estimates and
Errors and then apply them consistently;
• make judgements and accounting estimates that
are reasonable and prudent;
• present information, including accounting policies, in a
manner that provides relevant, reliable, comparable and understandable
information;
• provide additional disclosures when compliance
with the specific requirements in IFRSs is insufficient to enable users to
understand the impact of particular transactions, other events and conditions
on the Group and Company financial position and financial performance;
• in respect of the Group financial statements, state
whether IFRSs have been followed, subject to any material departures disclosed
and explained in the financial statements;
• in respect of the parent Company financial statements,
state whether IFRSs have been followed, subject to any material departures
disclosed and explained in the financial statements; and
• prepare the financial statements on the going concern
basis unless it is inappropriate to presume that the Company and/ or the Group
will continue in business.
The directors are responsible for keeping adequate accounting records that are
sufficient to show and explain the Company's and Group's transactions and
disclose with reasonable accuracy, at any time, the financial position of the
Company and the Group and enable them to ensure that the Company and the Group
financial statements comply with the Companies Act 2006. They are also
responsible for safeguarding the assets of the Group and parent Company and
hence for taking reasonable steps for the prevention and detection of fraud
and other irregularities.
Under applicable law and regulations, the directors are also responsible for
preparing a strategic report, directors' report, directors' remuneration
report and corporate governance statement that comply with that law and those
regulations. The directors are responsible for the maintenance and integrity
of the corporate and financial information included on the Company's website.
Directors' responsibilities pursuant to DTR4
The directors confirm, to the best of their knowledge:
• that the consolidated financial statements, prepared in
accordance with IFRSs give a true and fair view of the assets, liabilities,
financial position and profit of the parent Company and undertakings included
in the consolidation taken as a whole;
• that the annual report, including the strategic report, includes a
fair review of the development and performance of the business and the
position of the Company and undertakings included in the consolidation taken
as a whole, together with a description of the principal risks and
uncertainties that they face; and
• that they consider the annual report, taken as a whole, is
fair, balanced and understandable and provides the information necessary for
shareholders to assess the Company's position, performance, business model and
strategy.
By order of the board,
Helen Wakeford
Company Secretary
13 December 2023
Consolidated Statement of Comprehensive Income
Note 2023 2022
£m £m
Revenue 5 134.9 133.6
Cost of sales (3.9) (2.1)
Gross profit 131.0 131.5
Expenses
Administrative expenses 8 (74.6) (77.7)
Expected credit losses on financial assets 16, 22 (0.1) (0.2)
Operating profit 56.3 53.6
Interest income 9 6.4 0.8
Interest expense 25 (0.1) (0.1)
Net policyholder returns
Net income/(loss) attributable to policyholder returns 12.1 (38.5)
Change in investment contract liabilities (1,056.0) 2,770.3
Fee and commission expenses 18 (193.3) (192.6)
Policyholder investment returns 10 1,249.3 (2,577.7)
Net policyholder returns 12.1 (38.5)
Profit on ordinary activities before taxation attributable to policyholders 74.7 15.8
and shareholders
Policyholder tax (charge)/credit (12.1) 38.5
Profit on ordinary activities before taxation attributable to shareholders 62.6 54.3
Total tax attributable to shareholder and policyholder returns 11 (24.8) 28.2
Less: tax attributable to policyholder returns 12.1 (38.5)
Shareholder tax on profit on ordinary activities (12.7) (10.3)
Profit for the financial year 49.9 44.0
Other comprehensive (loss)/income
Exchange (losses)/gains arising on translation of foreign operations (0.1) 0.1
Total other comprehensive (losses)/income for the financial year (0.1) 0.1
Total comprehensive income for the financial year 49.8 44.1
Earnings per share
Earnings per share - basic 7 15.1p 13.3p
Earnings per share - diluted 7 15.1p 13.3p
All activities of the Group are classed as continuing.
Notes 1 to 36 form part of these Financial Statements.
Consolidated Statement of Financial Position
Note 2023 2022
£m £m
Non-current assets
Loans receivable 16 6.3 5.5
Intangible assets 12 21.4 21.8
Property, plant and equipment 13 1.1 1.2
Right-of-use assets 14 1.0 2.1
Deferred tax asset 26 0.7 6.0
30.5 36.6
Current assets
Investments 21 22.4 3.1
Prepayments and accrued income 22 17.2 17.2
Trade and other receivables 23 3.6 2.0
Current tax asset 14.3 15.0
Cash and cash equivalents 19 177.9 183.0
235.4 220.3
Current liabilities
Trade and other payables 24 19.5 21.5
Provisions 27 7.7 10.7
Lease liabilities 25 0.3 1.9
27.5 34.1
Non-current liabilities
Provisions 27 40.5 46.1
Contingent consideration 28 - 1.7
Lease liabilities 25 0.8 0.9
Deferred tax liabilities 26 7.2 0.9
48.5 49.6
Policyholder assets and liabilities
Cash held for the benefit of policyholders 20
1,419.2 1,458.6
Investments held for the benefit of policyholders 17
23,021.7 20,715.8
Liabilities for linked investment contracts
18 (24,440.9) (22,174.4)
- -
Net assets 189.9 173.2
Equity
Called up equity share capital 3.3 3.3
Share-based payment reserve 29 3.4 2.6
Employee Benefit Trust reserve 30 (2.6) (2.4)
Foreign exchange reserve 31 (0.1) -
Non-distributable reserves 31 5.7 5.7
Retained earnings 180.2 164.0
Total equity 189.9 173.2
These Financial Statements were approved by the Board of Directors on 13
December 2023 and are signed on their behalf by:
Alexander Scott
Director
Company Registration Number: 08860879
Notes 1 to 36 form part of these Financial Statements.
Company Statement of Financial Position
Note 2023 2022
£m £m
Non-current assets
Investment in subsidiaries 15 35.3 33.3
Loans receivable 16 6.3 5.5
41.6 38.8
Current assets
Prepayments 22 - 0.1
Trade and other receivables 23 0.1 0.2
Cash and cash equivalents 26.0 33.1
26.1 33.4
Current liabilities
Trade and other payables 24 2.5 2.4
Loans payable 16 1.0 1.0
3.5 3.4
Non-current liabilities
Contingent consideration 28 - 1.7
Loans payable 16 6.0 7.0
6.0 8.7
Net assets 58.2 60.1
Equity
Called up equity share capital 3.3 3.3
Share-based payment reserve 29 2.7 2.2
Employee Benefit Trust reserve 30 (2.4) (2.1)
Profit or loss account
Brought forward retained earnings 56.7 50.7
Profit for the year 31.6 39.8
Dividends paid in the year (33.7) (33.8)
Profit or loss account 54.6 56.7
Total equity 58.2 60.1
The Company has taken advantage of the exemption in section 408 (3) of the
Companies Act 2006 not to present its own income statement in these financial
statements.
These Financial Statements were approved by the Board of Directors on 13
December 2023 and are signed on their behalf by:
Alexander Scott
Director
Company Registration Number: 08860879
Notes 1 to 36 form part of these Financial Statements.
Consolidated Statement of Cash Flows
2023 Restated 2022
£m £m
Cash flows from operating activities
Profit on ordinary activities before taxation attributable to policyholders 74.7 15.8
and shareholders
Adjustments for non-cash movements:
Amortisation and depreciation 2.5 3.0
Share-based payment charge 2.1 2.0
Interest charged on lease 0.1 0.1
(Decrease)/increase in contingent consideration (1.7) 0.9
(Decrease)/increase in provisions (8.6) 38.5
Adjustments for cash effecting investing and financing activities:
Interest on cash and loans (6.4) (0.8)
Adjustments for statement of financial position movements:
(Increase)/decrease in trade and other receivables, and prepayments and (1.6) 0.5
accrued income
(Decrease)/increase in trade and other payables (2.0) 4.0
Adjustments for policyholder balances:
(Increase)/decrease in investments held for the benefit of policyholders
(2,305.9) 1,071.3
Increase/(decrease) in liabilities for linked investment contracts 2,266.5 (879.0)
Increase/(decrease) in policyholder tax recoverable 10.0 (6.0)
Cash generated from operations 29.7 250.3
Income taxes paid (22.4) (13.5)
Interest paid on lease liabilities (0.1) (0.1)
Net cash flows (used in)/generated from operating activities 7.2 236.7
Investing activities
Acquisition of property, plant and equipment (0.7) (0.3)
Purchase of financial instruments (22.3) (3.0)
Redemption of financial instruments 3.0 5.0
Increase in loans (0.8) (2.1)
Interest on cash and loans 6.4 0.8
Net cash generated from/(used in)investing activities (14.4) 0.4
Consolidated Statement of Cash Flows (continued)
2023 Restated 2022
£m £m
Financing activities
Purchase of own shares in Employee Benefit Trust (0.4) (0.5)
Purchase of shares for share scheme awards (1.1) (1.3)
Equity dividends paid (33.7) (33.7)
Payment of principal portion of lease liabilities (1.9) (2.4)
Net cash used in financing activities (37.1) (37.9)
(44.3) 199.2
Net (decrease)/increase in cash and cash equivalents
Cash and cash equivalents at beginning of year 1,641.6 1,442.4
Exchange losses on cash and cash equivalents (0.1) -
Cash and cash equivalents at end of year 1,597.1 1,641.6
Cash and cash equivalents consist of:
Cash and cash equivalents 177.9 183.0
Cash held for the benefit of policyholders 1,419.2 1,458.6
Cash and cash equivalents 1,597.1 1,641.6
Notes 1 to 36 form part of these Financial Statements.
See note 36 for details on 2022 restated balances.
Company Statement of Cash Flows
2023 Restated
2022
£m £m
Cash flows from operating activities
Loss before interest and dividends (2.0) (4.9)
Adjustments for non-cash movements:
(Decrease)/increase in contingent consideration (1.7) 0.9
Adjustment for statement of financial position movements:
Decrease/(increase) in trade and other receivables 0.2 (0.2)
Increase in trade and other payables 0.1 -
Net cash flows used in operating activities (3.4) (4.2)
Investing activities
Dividends received 33.3 45.0
Interest received 0.9 0.2
Increase in loans receivable (0.8) (2.0)
Net cash generated from investing activities 33.4 43.2
Financing activities
Purchase of own shares in Employee Benefit Trust (0.3) (0.5)
Purchase of shares for share scheme awards (1.3) (1.3)
Repayment of loans (1.0) (1.0)
Interest expense on loans (0.6) (0.2)
Equity dividends paid (33.7) (33.8)
Net cash used in financing activities (37.1) (36.8)
Net (decrease)/increase in cash and cash equivalents (7.1) 2.2
Cash and cash equivalents at beginning of year 33.1 30.9
Cash and cash equivalents at end of year 26.0 33.1
Notes 1 to 36 form part of these Financial Statements.
See note 36 for details on 2022 restated balances.
Consolidated Statement of Changes in Equity
Called up equity share capital Non-distributable insurance and foreign exchange reserves Share-based payment reserve Employee Benefit Trust reserve Retained earnings Total equity
£m £m £m £m £m £m
Balance at 1 October 2021 3.3 6.2 2.4 (2.1) 153.5 163.3
Comprehensive income for the year:
Profit for the year - - - - 44.0 44.0
Movement in currency translation - 0.1 - - - 0.1
Total comprehensive income for the year - 0.1 - - 44.0 44.1
Share-based payment expense - - 2.0 - - 2.0
Settlement of share based payment - - (1.5) - - (1.5)
Purchase of own shares in EBT - - - (0.5) - (0.5)
Excess tax relief charged to equity - - (0.3) - - (0.3)
Exercised share options - - - 0.2 (0.2) -
Release of actuarial reserve - (0.5) - - 0.5 -
Other movement - (0.1) - - (0.1) (0.2)
Distributions to owners - Dividends paid - - - - (33.7) (33.7)
Balance at 30 September 2022 3.3 5.7 2.6 (2.4) 164.0 173.2
Balance at 1 October 2022
Comprehensive income for the year: 3.3 5.7 2.6 (2.4) 164.0 173.2
Profit for the year - - - - 49.9 49.5
Movement in currency translation - (0.1) - - - (0.1)
Total comprehensive income for the year - (0.1) - - 49.9 49.4
Share-based payment expense - - 2.1 - - 2.1
Settlement of share based payment - - (1.5) - - (1.5)
Purchase of own shares in EBT - - - (0.4) - (0.4)
Excess tax relief charged to equity - - 0.2 - - 0.2
Exercised share options - - - 0.2 - 0.2
Distributions to owners - Dividends paid - - - - (33.7) (33.7)
Balance at 30 September 2023 3.3 5.6 3.4 (2.6) 180.2 189.9
Notes 1 to 36 form part of these Financial Statements.
Company Statement of Changes in Equity
Called up equity share capital Share-based payment reserve Employee Benefit Trust reserve Retained earnings Total equity
£m £m £m £m £m
Balance at 1 October 2021 3.3 1.7 (1.8) 50.7 53.9
Comprehensive income for the year:
Profit for the year - - - 39.8 39.8
Total comprehensive income for the year - - - 39.8 39.8
Share-based payment expense - 2.0 - - 2.0
Settlement of share-based payments - (1.5) - - (1.5)
Purchase of own shares in EBT - - (0.3) - (0.3)
Distributions to owners - dividends - - - (33.8) (33.8)
Balance at 30 September 2022 3.3 2.2 (2.1) 56.7 60.1
Comprehensive income for the year:
Profit for the year - - - 31.6 31.6
Total comprehensive income for the year - - - 31.6 31.6
Share-based payment expense - 1.9 - - 1.9
Settlement of share-based payments - (1.4) - - (1.4)
Purchase of own shares in EBT - - (0.3) - (0.3)
Distributions to owners - dividends - - - (33.7) (33.7)
Balance at 30 September 2023 3.3 2.7 (2.4) 54.6 58.2
Notes 1 to 36 form part of these Financial Statements.
Notes to the Financial Statements
1. Basis of preparation and significant accounting policies
General information
IntegraFin Holdings plc (the "Company"), a public limited company incorporated
and domiciled in the United Kingdom ("UK"), along with its subsidiaries
(collectively the "Group"), offers a range of services which are designed to
help financial advisers and their clients to manage financial plans in a
simple, effective and tax efficient way.
The registered office address, and principal place of business, is 29
Clement's Lane, London, EC4N 7AE.
a) Basis of preparation
The consolidated Financial Statements have been prepared and approved by the
directors in accordance with UK-adopted international accounting standards
(IFRSs).
The Financial Statements have been prepared on the historical cost basis,
except for the revaluation of certain financial instruments, which are stated
at their fair value, have been prepared in pound sterling, which is the
presentational and functional currency of the Group and Company and are
rounded to the nearest hundred thousand.
Climate risks have been considered where appropriate in the preparation of
these Financial Statements, with particular consideration given to the impact
of climate risk on the fair value calculations and impairment assessments.
This has concluded that the impact of climate risk on the financial statements
is not material.
Going concern
The financial statements have been prepared on a going concern basis,
following an assessment by the board.
Going concern is assessed over the 12-month period from when the Annual Report
is approved, and the board has concluded that the Group has adequate
resources, liquidity and capital to continue in operational existence for the
next 12 months. This is supported by:
· The current financial position of the Group:
o The Group maintains a conservative balance sheet and manages and monitors
solvency and liquidity on an ongoing basis, ensuring that it always has
sufficient financial resources for the foreseeable future.
o As at 30 September 2023, the Group had £177.9 million of shareholder cash
on the statement of financial position, demonstrating that liquidity remains
strong.
· Detailed cash flow and working capital projections; and
· stress-testing of liquidity, profitability and regulatory
capital, taking account of possible adverse changes in trading performance.
1. Basis of preparation and significant accounting policies (continued)
When making this assessment, the board has taken into consideration both the
Group's current performance and the future outlook, including the impact of
the cost-of-living crisis, sustained levels of high inflation, increasing
interest rates and volatile equity markets. The environment has been
challenging during the year, but our financial and operational performance has
been robust, and the Group's fundamentals remain strong.
Stress and scenario testing has been carried out, in order to understand the
potential financial impacts of severe, yet plausible, scenarios on the Group.
This assessment incorporated a number of stress tests covering a broad range
of scenarios, including a cyber attack, system and process failures, and
persistent high inflation with continued market uncertainty.
Having conducted detailed cash flow and working capital projections, and
stress-tested liquidity, profitability and regulatory capital; taking account
of the economic challenges mentioned above; the board is satisfied that the
Group is well placed to manage its business risks. The board is also satisfied
that it will be able to operate within the regulatory capital limits imposed
by the Financial Conduct Authority (FCA), Prudential Regulation Authority
(PRA), and Isle Man Financial Services Authority (IoM FSA).
The board has concluded that the Company has adequate resources and there are
no material uncertainties to the Company's ability to continue to operate for
the foreseeable future, being a period of at least twelve months from the date
the financial statements are approved. For this reason, they have adopted the
going concern basis for the preparation of the financial statements.
Basis of consolidation
The consolidated Financial Statements incorporate the Financial Statements of
the Company and its subsidiaries. Where the Company has control over an
investee, it is classified as a subsidiary. The Company controls an investee
if all three of the following elements are present: power over the investee,
exposure to variable returns from the investee, and the ability of the
investor to use its power to affect those variable returns. Control is
presumed to exist where the Group owns the majority of the voting rights of an
entity. Control is reassessed whenever facts and circumstances indicate that
there may be a change in any of these elements of control.
Subsidiaries are fully consolidated from the date on which control is obtained
by the Company and are deconsolidated from the date that control ceases.
Acquisitions are accounted for under the acquisition method. Intercompany
transactions, balances, income and expenses, and profits and losses are
eliminated on consolidation.
The Financial Statements of all of the wholly owned subsidiary companies are
incorporated into the consolidated Financial Statements. Two of these
subsidiaries, IntegraLife International Limited (ILInt) and IntegraLife UK
Limited (ILUK) issue contracts with the legal form of insurance contracts, but
which do not transfer significant insurance risk from the policyholder to the
Company, and which are therefore accounted for as investment contracts.
In accordance with IFRS 9, the contracts concerned are therefore reflected in
the consolidated statement of financial position as investments held for the
benefit of policyholders, and a corresponding liability to policyholders.
1. Basis of preparation and significant accounting policies (continued)
Changes in accounting policies
i) There have been no new standards, amendments to standards or
interpretations adopted during the financial year that had a material effect.
ii) Future standards, amendments to standards, and interpretations not
yet effective are noted below.
The following amendments are effective for periods beginning on or after 1
January 2023:
IFRS 17 Insurance Contracts
In June 2022, the IASB issued amendments to IFRS 17 which will replace IFRS 4
Insurance Contracts. IFRS 17 establishes the principles for the recognition,
measurement, presentation and disclosure of insurance contracts within the
scope of the Standard. The Group would be required to provide information that
faithfully represents those contracts, such that users of the financial
statements can assess the effect insurance contracts have on the entity's
financial position, financial performance and cash flows.
The Group has performed an assessment regarding the impact of IFRS 17 on the
Financial Statements and, while the insurance companies in the Group do
administer insurance business and hold capital relating to the risks
associated with this, there is no significant insurance risk in any of the
contracts. Therefore all contracts are investment contracts under IFRS 9, and
IFRS 17 has no impact.
Disclosure of Accounting Policies (Amendments to IAS 1 and IFRS Practice
Statement 2)
In February 2021, the IASB issued amendments to IAS 1 to assist in determining
which accounting policies to disclose, with reference to materiality and how
to determine which policies fall into this category. IFRS Practice Statement 2
includes guidance to support this.
The Group has assessed the impact of this amendment and does not note any
significant impact.
Definition of Accounting Estimates (Amendments to IAS 8)
In February 2021, the IASB issued amendments to IAS 8 to clarify how to
distinguish changes in accounting policies from changes in accounting
estimates. That distinction being that changes in accounting estimates are
applied prospectively to future transactions and events, but changes in
accounting policies are applied retrospectively to past transactions and
events.
The Group has assessed the impact of this amendment and does not note any
significant impact.
Deferred Tax Related to Assets and Liabilities arising from a Single
Transaction (Amendments to IAS 12)
In May 2021, the IASB issued amendments to IAS 12 which will require
recognition of deferred taxes on particular transactions which, on initial
recognition, give rise to equal amounts of taxable and deductible temporary
differences.
The Group has assessed the impact of this amendment and does not note any
significant impact.
1. Basis of preparation and significant accounting policies (continued)
Amendments to IAS 12: International Tax Reform Pillar Two Model Rules
Amendments to IAS 12 Income Taxes have been introduced in response to the
OECD's BEPS Pillar Two Model Rules. The amendments include a temporary
mandatory exception from accounting for deferred taxes arising from the Pillar
Two model rules and a requirement to disclose that the exception has been
applied immediately and retrospectively. IHP has taken up this exemption for
FY23.
The Group is continuing to assess whether it will be in scope of the Pillar
Two model Rules. If so, the rules would be expected to apply to the Group
from 1 October 2024 and give rise to a financial impact. However, the Group
does not anticipate that any tax liabilities that may arise from its overseas
operations will be material to the Group, as most of its revenue and profits
are generated in the UK and taxed at a rate of 25%.
The following amendments are effective for periods beginning on or after 1
January 2024:
Classification of Liabilities as Current or Non-Current (Amendments to IAS 1)
In October 2022, the IASB issued amendments to IAS 1 regarding how conditions
with which an entity must comply within twelve months after the reporting
period, affect the classification of a liability.
The Group has assessed the impact of this amendment and does not note any
significant impact.
The following amendments are effective for the period beginning 1 January
2025:
The Effects of Changes in Foreign Exchange Rates (IAS 21)
In August 2023, the IASB issued amendments to IAS 21 to provide guidance to
specify when a currency is exchangeable and how to determine the exchange rate
when it is not.
The Group has assessed the impact of this amendment and does not note any
impact as the only non-Sterling currency in use is Australian Dollars.
No other future standards, amendments to standards, or interpretations are
expected to have a material effect on the financial statements.
b) Principal accounting policies
Revenue from contracts with customers
Revenue represents the fair value of services supplied by the Company. All fee
income is recognised as revenue on an accruals basis and in line with the
provision of the services.
Fee and commission income is recognised at an amount that reflects the
consideration to which the Group expects to be entitled in exchange for
providing the services.
The performance obligations, as well as the timing of their satisfaction, are
identified, and determined, at the inception of the contract.
1. Basis of preparation and significant accounting policies (continued)
When the Group provides a service to its customers, consideration is generally
due immediately upon satisfaction of a service provided at a point in time or
at the end of the contract period for a service provided over time. The Group
has generally concluded that it is the principal in its revenue arrangements
because it typically controls the services before transferring them to the
customer.
The Group has discharged all of its obligations in relation to contracts with
customers, and the amounts received or receivable from customers equal the
amount of revenue recognised on the contracts. All amounts due from customers
are therefore recognised as receivables within accrued income, and the Group
has no contract assets or liabilities.
Fee income comprises:
Annual commission income
Annual commission is charged for the administration of products on the
Transact platform, and is levied monthly in arrears on the average value of
assets and cash held on the platform. The value of assets and cash held on the
Platform is driven by market movements, inflows, outflows and other factors.
Wrapper fee income
Wrapper fees are charged for each of the tax wrappers held by clients and are
levied quarterly in arrears based on fixed fees for each wrapper type.
Annual commission and wrapper fees relate to services provided on an on-going
basis, and revenue is therefore recognised on an on-going basis to reflect the
nature of the performance obligations being discharged. As the benefit to the
customer of the services is transferred evenly over the service period, these
fees are recognised as revenue evenly over the period, based on time elapsed.
Accrued income on both annual commission and wrapper fees is recognised as a
trade receivable on the statement of financial position, as the Group's right
to consideration is conditional on nothing other than the passage of time.
Licence income
Licence income is the rental charge for use of access to T4A's CRM software.
The rental charge is billed monthly in advance, based on the number of
users. Revenue is recognised in line with the provision of the service.
Consultancy income
Consultancy income relates to consultancy services provided by T4A on an
as-needs basis. Revenue is recognised when the services are provided.
Other income
This comprises buy commission and dealing charges. These are charges levied on
the acquisition of assets, due upon completion of the transaction. Revenue is
recorded on the date of completion of the transaction, as this is the date the
services are provided to the customer. As the benefit to the customer of the
services is transferred at a point in time, these fees are recognised at the
point they are provided.
1. Basis of preparation and significant accounting policies (continued)
Interest income
Interest on shareholder cash, policyholder cash, loans and coupon on
shareholder gilts are the sources of interest income received. These are
recognised in the Consolidated Statement of Comprehensive Income, with
interest on shareholder assets recognised within interest income, and interest
on policyholder assets recognised within policyholder returns. Under IFRS 9,
interest income is recorded using the effective interest method for all
financial assets measured at amortised cost and is recognised in the
Consolidated Statement of Comprehensive Income.
Cost of sales
Cost of sales relate to costs directly attributable to the supply of services
provided to the Group and are recognised in the Consolidated Statement of
Comprehensive Income on an accruals basis.
Administrative expenses
Administration expenses relate to overhead costs and are recognised in the
Consolidated Statement of Comprehensive Income on an accruals basis.
Fee and commission expenses
Fee and commission expenses are paid by ILUK and ILInt policyholders to their
financial advisers. Expenses comprise annual commission which is levied
monthly in arrears on the average value of assets and cash held on the
platform in the month and upfront fees charged on new premiums on the
platform.
Investments
Fixed asset investments in subsidiaries are stated at cost less any provision
for impairment.
Other investments comprise UK Government gilts held as shareholder
investments. The Group held a gilt in the prior year that matured in the
current year, which was held at fair value through profit or loss as it fell
under the 'other' business model, and was stated at quoted bid price which
equates to fair value, with any resultant gain or loss recognised in profit or
loss.
New gilts were acquired in the current financial year, which were assessed
upon purchase and deemed to meet the criteria to classify as amortised cost
under IFRS 9 Financial Instruments, namely:
• they are held within a business model whose objective is to hold assets in
order to collect contractual cash flows; and,
• the contractual terms of the financial assets give rise on specified dates
to cash flows that are solely payments of principal and interest on the
principal amount outstanding.
Investment contracts - investments held for the benefit of policyholders
Investment contracts held for the benefit of policy holders are comprised of
unit-linked contracts. Investments held for the benefit of policyholders are
stated at fair value and reported on a separate line in the statement of
financial position, see accounting policy on financial instruments for fair
value determination. Investment contracts result in financial liabilities
whose fair value is dependent on the fair value of underlying financial
assets. They are designated at inception as financial liabilities at 'fair
value through profit or loss' in order to reduce an accounting mismatch with
the underlying financial assets. Gains and losses arising from changes in fair
value are presented in the Consolidated Statement of Comprehensive Income
within "Policyholder investment returns".
1. Basis of preparation and significant accounting policies (continued)
Investment inflows received from policyholders are invested in funds selected
by the policyholders. The resulting liabilities for linked investment
contracts are accounted for under the 'fair value through profit or loss'
option, in line with the corresponding assets as permitted by IFRS 9.
As all investments held for the benefit of policyholders are matched entirely
by corresponding linked liabilities, any gain or loss on assets recognised
through the Consolidated Statement of Comprehensive Income are offset entirely
by the gains and losses on linked liabilities, which are recognised within the
"change in investment contract liabilities" line. The overall net impact on
profit is therefore £nil.
Investment contracts are measured at fair value using quoted mid prices that
are available at the reporting date and are traded in active markets. Where
this is not available, valuation techniques are used to establish the fair
value at inception and each reporting date. The Company's main valuation
techniques incorporate all factors that market participants would consider and
are based on observable market data. The financial liability is measured both
initially and subsequently at fair value. The fair value of a unit-linked
financial liability is determined using the fair value of the financial assets
contained within the funds linked to the financial liability.
Dividends
Equity dividends paid are recognised in the accounting period in which the
dividends are declared and approved.
Intangible non-current assets
Intangible non-current assets, excluding goodwill, are stated at cost less
accumulated amortisation and comprise intellectual property software rights.
The software rights were amortised over seven years on a straight line basis,
as it was estimated that the software would be rewritten every seven years,
and therefore have a finite useful life. The software rights are now fully
amortised, but due to ongoing system development and coding updates no
replacement is required.
Goodwill is held at cost and, in accordance with IFRS, is not amortised but is
subject to annual impairment reviews.
Property, plant and equipment
Property, plant and equipment are stated at cost less accumulated depreciation
and accumulated impairment losses. Cost includes expenditures that are
directly attributable to the acquisition of the asset. Subsequent costs are
included in the asset's carrying amount or recognised as a separate asset, as
appropriate, only when it is probable that future economic benefits associated
with the item will flow to the Group and the cost can be measured reliably.
Repairs and maintenance costs are charged to the Consolidated Statement of
Comprehensive Income during the period in which they are incurred.
The major categories of property, plant, equipment are depreciated as follows:
Asset class All UK and Isle of Man entities Australian entity
Leasehold improvements Straight line over the life of the lease Straight line over 40 years
Fixtures & Fittings Straight line over 10 years Straight line over 10 years
Equipment Straight line over 3 to 10 years Straight line over 3 years
Motor vehicles N/A 25% reducing balance
1. Basis of preparation and significant accounting policies (continued)
Residual values, method of depreciation and useful lives of the assets are
reviewed annually and adjusted if appropriate.
Goodwill and goodwill impairment
Goodwill represents the excess of the cost of an acquisition over the fair
value of the Group's share of the identifiable net assets of the acquired
entity at the date of acquisition. Goodwill is recognised as an asset at cost
at the date when control is achieved and is subsequently measured at cost less
any accumulated impairment losses.
Goodwill is allocated to one or more cash generating units (CGUs) expected to
benefit from the synergies of the combination, where the CGU represents the
smallest identifiable group of assets that generates cash inflows that are
largely independent of the cash inflows from other assets or group of assets.
Goodwill is reviewed for impairment at least once annually, and also whenever
circumstances or events indicate there may be uncertainty over this value. The
impairment assessment compares the carrying value of goodwill to the
recoverable amount, which is the higher of value in use and the fair value
less costs of disposal. Any impairment loss is recognised immediately in the
Consolidated Statement of Comprehensive Income and is not subsequently
reversed.
Intangible assets acquired as part of a business combination
Intangible assets acquired as part of a business combination are recognised
where they are separately identifiable and can be measured reliably.
Acquired intangible assets consist of contractual customer relationships,
software and brand. These items are capitalised at their fair value, which are
based on either the 'Relief from Royalty' valuation methodology or the
'Multi-period Excess Earnings Method', as appropriate for each asset.
Subsequent to initial recognition, acquired intangible assets are measured at
cost less accumulated amortisation and any recognised impairment losses.
Amortisation is recognised in the consolidated statement of comprehensive
income within administration expenses on a straight line basis over the
estimated useful lives of the assets, which are as follows:
Asset class Useful life
Customer relationships 15 years
Software 7 years
Brand 10 years
The method of amortisation and useful lives of the assets are reviewed
annually and adjusted if appropriate.
Impairment of non-financial assets
Property, plant and equipment, right-of-use assets and intangible assets are
tested for impairment when events or changes in circumstances indicate that
the carrying amount may not be recoverable. Recoverable amount is the higher
of an asset's fair value less costs to sell and value in use (being the
present value of the expected future cash flows of the relevant asset).
The Group evaluates impairment losses for potential reversals when events or
circumstances warrant such consideration.
1. Basis of preparation and significant accounting policies (continued)
Goodwill is tested for impairment annually and once an impairment is
recognised this cannot be reversed. For more detailed information in relation
to this, please see note 12.
Pensions
The Group makes defined contributions to the personal pension schemes of its
employees. These are chargeable to Consolidated Statement of Comprehensive
Income in the year in which they become payable.
Foreign currencies
Transactions in foreign currencies are translated into the functional currency
at the exchange rate in effect at the date of the transaction. Foreign
currency monetary assets and liabilities are translated to sterling at the
year end closing rate. Foreign exchange rate differences that arise are
reported net in the Consolidated Statement of Comprehensive Income as foreign
exchange gains/losses.
The assets and liabilities of foreign operations are translated to sterling
using the year end closing exchange rate. The revenues and expenses of foreign
operations are retranslated to sterling at rates approximating the foreign
exchange rates ruling at the relevant month of the transactions. Foreign
exchange differences arising on retranslation are recognised directly in the
reserves.
Taxation
Current income tax
The taxation charge is based on the taxable result for the year. The taxable
result for the year is determined in accordance with enacted legislation and
taxation authority practice for calculating the amount of corporation tax
payable.
Policyholder tax comprises corporation tax payable at the policyholder rate on
the policyholders' share of the taxable result for the year, together with
deferred tax at the policyholder rate on temporary differences relating to
policyholder items.
Current income tax assets and liabilities are measured at the amount expected
to be recovered from or paid to the taxation authorities. The tax rates and
tax laws used to compute the amount are those that are enacted or
substantively enacted at the reporting date in countries where the Group
operates and generates taxable income. Management periodically evaluates
positions taken in the tax returns with respect to situations in which
applicable tax regulations are subject to interpretation and establishes
provisions where appropriate.
Deferred tax
Deferred tax assets and liabilities are recognised where the carrying amount
of an asset or liability in the statement of financial position differs from
its tax base.
The amount of the asset or liability is determined using tax rates that have
been enacted or substantively enacted by the reporting date and are expected
to apply when the deferred tax assets/liabilities are recovered/settled.
With regard to capital gains tax on policyholders' future tax obligations,
management has determined that reserves should be held to cover this, based on
a reserve charge rate of 20%. The deferred capital gains upon which the
reserve charges are calculated are reflected in the closing deferred tax
balance.
1. Basis of preparation and significant accounting policies (continued)
We are aware of the proposed BEPS Pillar 2 changes which might impact the tax
rate in some jurisdictions in future years and continue to monitor for
updates.
The carrying amount of deferred tax assets is reviewed at each reporting date
and reduced to the extent that it is no longer probable that sufficient tax
profit will be available to allow all or part of the deferred tax asset to be
utilised. Unrecognised deferred tax assets are re-assessed at each reporting
date and are recognised to the extent that it has become probable that future
taxable profits will allow the deferred tax asset to be recovered.
In assessing the recoverability of deferred tax assets, the Group relies on
the same forecast assumptions used elsewhere in the financial statements and
in other management reports, which, among other things, reflect the potential
impact of climate-related development on the business, such as increased cost
of production as a result of measures to reduce carbon emissions.
The Group offsets deferred tax assets and deferred tax liabilities if and only
if it has a legal enforceable right to set off current tax assets and current
tax liabilities and the deferred tax assets and deferred tax liabilities
relate to income taxes levied by the same taxation authority on either the
same taxable entity or different taxable entities which intend to either
settle current tax liabilities and assets on a net basis, or to realise the
assets and settle the liabilities simultaneously, in each future period in
which significant amounts of deferred tax liabilities or assets are expected
to be settled or recovered.
Policyholder Tax
HMRC requires ILUK to charge basic rate income tax on its life insurance
policies (FA 2012, s102). ILUK collects this tax quarterly, by charging 20%
tax (2022: 20%) on gains from assets held in the policies, based on the
policyholder's acquisition costs and market value at each quarter end.
Additional charges are applied on any increases in the previously charged
gain. The charge is adjusted by the fourth financial year quarter so that the
total charge for the year is based on the gain at the end of the financial
year. When assets are sold at a loss or reduce in market value by the
financial year end, a refund of the charges may be applied. Policyholder tax
is recorded as a tax expense/(tax credit) in the statement of comprehensive
income, with a corresponding asset/(liability) recognised on the statement of
financial position (under IAS 12).
Segmental reporting
Operating segments are reported in a manner consistent with the internal
reporting provided to the chief operating decision-maker. The chief operating
decision-maker is responsible for allocating resources and assessing
performance of the operating segments and has been identified as the Chief
Executive Officer of the Company.
Client assets and client monies
Integrated Financial Arrangements Ltd (IFAL) client assets and client monies
are not recognised in the parent and consolidated statements of financial
position as they are owned by the clients of IFAL.
1. Basis of preparation and significant accounting policies (continued)
Lease assets and lease liabilities
Right-of-use
assets
The Group recognises right-of-use assets on the date the leased asset is made
available for use by the Group. These assets relate to rental leases for the
office of the Group, which have varying terms clauses and renewal rights.
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.
Depreciation is applied in accordance with IAS 16: Property, Plant and
Equipment. Right-of-use assets are depreciated over the lease term. See note
13 and 14.
Lease liabilities
The Group measures lease liabilities in line with IFRS 16 on the balance sheet
as the present value of all future lease payments, discounted using an
incremental borrowing rate at the date of commencement. After the commencement
date, the amount of lease liabilities is increased to reflect the addition of
interest and reduced for the lease payments made. The Group's incremental
borrowing rate is the rate at which a similar borrowing could be obtained from
an independent creditor under comparable terms and conditions. See note 25.
Short-term leases
The Group defines short-term leases as those with a lease term of 12 months or
less and leases of low value assets. For these leases, the Group recognises
the lease payments as an operating expense on a straight line basis over the
term of lease.
Cash and cash equivalents
Cash and cash equivalents comprise cash balances from instant access and
notice accounts, call deposits, and other short-term deposits with an original
maturity of three months or less. The carrying amount of these assets
approximates to their fair value.
Cash and cash equivalents held for the benefit of the policyholders are held
to cover the liabilities for unit linked investment contracts. These amounts
are 100% matched to corresponding liabilities.
Financial instruments
Financial assets and liabilities are recognised when the Group becomes a party
to the contractual provisions of the instrument. Financial assets are
derecognised when the rights to receive cash flows from the assets have
expired or have been transferred and the Group has transferred substantially
all risks and rewards of ownership. Financial liabilities are derecognised
when the obligation specified in the contract is discharged, cancelled or
expires.
At initial recognition, the Group classifies its financial instruments in the
following categories, based on the business model in which the assets are
managed and their cash flow characteristics:
(i) Financial assets and liabilities at fair value through profit
or loss
This category includes financial assets and liabilities acquired principally
for the purpose of selling or repurchasing in the short-term, comprising of
listed shares and securities.
1. Basis of preparation and significant accounting policies (continued)
Financial instruments in this category are recognised on the trade date, and
subsequently measured at fair value. Purchases and sales of securities are
recognised on the trade date. Transaction costs are expensed in the
Consolidated Statement of Comprehensive Income. Gains and losses arising from
changes in fair value are presented in the Consolidated Statement of
Comprehensive Income within "policyholder investment returns" for corporate
assets and "net income attributable to policyholder returns" for policyholder
assets in the period in which they arise. Financial assets and liabilities
at fair value through profit or loss are classified as current except for the
portion expected to be realised or paid beyond twelve months of the balance
sheet date, which are classified as long-term.
(ii) Financial assets at amortised cost
These assets comprised of accrued fees, trade and other receivables, loans,
investments in gilts and cash and cash equivalents. These are included in
current assets due to their short-term nature, except for the loan which is
included in non-current assets.
Financial assets are measured at amortised cost when they are held within the
business model whose objective is to hold assets to collect contractual cash
flows and their contractual cash flows represent solely payments of principal
and interest.
The carrying value of assets held at amortised cost are adjusted for
impairment arising from expected credit losses.
(iii) Financial liabilities at amortised cost
Financial liabilities at amortised cost comprise trade and other payables and
loans payable. These are initially recognised at fair value. Subsequent
measurement is at amortised cost using the effective interest method. Trade
and other payables are classified as current liabilities due to their
short-term nature. The loan is split between current and non-current
liabilities, based on the repayment terms.
Impairment of financial assets
Expected credit losses are required to be measured through a loss allowance at
an amount equal to:
· the 12-month expected credit losses (expected credit losses from
possible default events within 12 months after the reporting date); or
· full lifetime expected credit losses (expected credit losses from
all possible default events over the life of the financial instrument).
A loss allowance for full lifetime expected credit losses is required for a
financial instrument if the credit risk of that financial instrument has
increased significantly since initial recognition, as well as to contract
assets or trade receivables, where the simplified approach is applied to
assets that do not contain a significant financing component.
For all other financial instruments, expected credit losses are measured at an
amount equal to the 12-month expected credit losses.
Impairment losses on financial assets carried at amortised cost are reversed
in subsequent periods if the expected credit losses decrease.
1. Basis of preparation and significant accounting policies (continued)
Provisions
Provisions are recognised when the Group has a present obligation (legal or
constructive) as a result of a past event, it is probable that an outflow of
resources embodying economic benefits will be required to settle the
obligation and a reliable estimate can be made of the amount of the
obligation.
If the effect of the time value of money is material, provisions are
discounted using a current pre-tax rate that reflects, when appropriate, the
risks specific to the liability. When discounting is used, the increase in the
provision due to the passage of time is recognised as a finance cost.
The ILUK policyholder reserves, which are part of the provisions balance,
arises from tax reserve charges collected from life insurance policyholders,
which are held to cover possible future tax liabilities. If no tax liability
arises the charges are refunded to policyholders, where possible. As these
liabilities are of uncertain timing or amounts, they are recognised as
provisions on the statement of financial position.
Balances due to HMRC are considered under IAS 12 Income Taxes, whereas
balances due to policyholders are considered under IAS 37 Provisions,
Contingent Liabilities and Contingent Assets.
Share-based payments
Equity-settled share-based payment awards granted to employees are measured at
fair value at the date of grant. The awards are recognised as an expense, with
a corresponding increase in equity, spread over the vesting period of the
awards, which accords with the period for which related services are provided.
The total amount expensed is determined by reference to the fair value of the
awards as follows:
(i) Share Incentive Plan (SIP) shares
The fair value is the market price on the grant date. There are no vesting
conditions, as the employees receive the shares immediately upon grant.
(ii) Performance share plan (PSP) share options
The fair value of share options is determined by applying a valuation
technique, usually an option pricing model, such as Black Scholes. This takes
into account factors such as the exercise price, the share price, volatility,
interest rates, and dividends.
At each reporting date, the estimate of the number of share options expected
to vest based on the non-market vesting conditions is assessed. Any change to
original estimates is recognised in the statement of comprehensive income,
with a corresponding adjustment to equity reserves.
2. Critical accounting estimates and judgements
Critical accounting estimates are those where there is a significant risk of
material adjustment in the next 12 months, and critical judgements are those
that have the most significant effect on amounts recognised in the accounts.
In preparing these Financial Statements, management has made judgements,
estimates and assumptions about the future that affect the application of the
Group's accounting policies and the reported amounts of assets, liabilities,
income and expenses.
2. Critical accounting estimates and judgements (continued)
Management uses its knowledge of current facts and applies estimation and
assumption techniques that are aligned with relevant accounting policies to
make predictions about the future. Actual results may differ from these
estimates.
Estimates and judgements are reviewed on an ongoing basis and revisions are
recognised in the period in which the estimate is revised. There are no
assumptions made about the future, or 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.
Judgements which do not involve estimates
The assessment to recognise the ILUK policyholder provision comes from an
evaluation of the likelihood of a constructive or legal obligation, and
whether that obligation can be estimated reliably. The provision required has
been calculated based on an assessment of tax payable to HM Revenue &
Customs (HMRC) and refunds payable back to policyholders.
1. Financial instruments
(i) Principal financial instruments
The principal financial instruments, from which financial instrument risk
arises, are as follows:
· Trade and other receivables
· Accrued fees
· Investments - Gilts
· Investments - Listed shares and securities
· Trade and other payables
· Loans receivable and loans payable
(ii) Financial instruments by category
As explained in note 1, financial assets and liabilities have been classified
into categories that determine their basis of measurement and, for items
measured at fair value, whether changes in fair value are recognised in the
statement of comprehensive income. The following tables show the carrying
values of assets and liabilities for each of these categories for the Group:
Financial assets: Fair value through profit or loss Amortised cost
2023 2023 Restated
2022 2022
£m £m £m £m
Cash and cash equivalents - - 177.9 183.0
Cash held for the benefit of policyholders - - 1,419.2 1,458.6
Investments - Listed shares and securities 0.1 0.1 - -
Investments - Gilts - 3.0 22.3 -
Loans receivable - - 6.3 5.5
Accrued income - - 12.5 12.1
Trade and other receivables - - 3.2 2.0
Investments held for the policyholders 23,021.7 20,715.8 - -
Total financial assets 23,021.8 20,718.9 1,641.4 1,661.2
2023 Restated 2022
Assets which are not financial instruments £m £m
Prepayments 4.7 5.1
Current tax asset 14.3 15.0
Trade and other receivables - 0.4 -
repayment interest due from HMRC
19.4 20.1
See note 36 for details on 2022 restated balances.
3. Financial instruments (continued)
Financial liabilities: Fair value through profit or loss Amortised cost
2023 Restated 2022 2023 Restated 2022
£m £m £m £m
Trade payables - - 0.7 1.6
Lease liabilities - - 1.1 2.8
Other payables 5.9 5.4
Liabilities for linked investments contracts 23,021.7 20,715.8 1,419.2 1,458.6
Total financial liabilities 23,021.7 20,715.8 1,426.9 1,468.4
2023 Restated 2022
Liabilities which are not financial instruments £m £m
Accruals and deferred income 7.8 8.3
PAYE and other taxation 2.6 2.2
Other payables - due to HMRC 0.9 2.3
Deferred consideration 1.6 1.7
Contingent consideration - 1.7
12.9 16.2
See note 36 for details on 2022 restated balances.
The following tables show the carrying values of assets and liabilities for
each of these categories for the Company:
Financial assets:
Fair value through profit or loss Amortised cost
2023 2022 2023 2022
£m £m £m £m
Cash and cash equivalents - - 26.0 33.1
Trade and other receivables - - 0.1 0.2
Loans receivable - - 6.3 5.5
Total financial assets - - 32.4 38.8
Financial liabilities:
Fair value through profit or loss Amortised cost
Restated
2023 2022 2023 2022
£m £m £m £m
Other payables - - 0.4 0.3
Loans payable - - 7.0 8.0
Due to Group undertakings - - - 0.1
Total financial liabilities - - 7.4 8.4
2023 Restated 2022
Liabilities which are not financial instruments £m £m
Accruals and deferred income 0.3 0.3
PAYE and other taxation 0.1 0.1
Deferred consideration - - 1.6 1.7
Contingent consideration - 1.7
2.0 3.8
See note 36 for details on 2022 restated balances.
(iii) Financial instruments not measured at fair value
Financial instruments not measured at fair value include cash and cash
equivalents, accrued fees, investments held in gilts, loans, trade and other
receivables, and trade and other payables. Due to their short-term nature
and/or expected credit losses recognised, the carrying value of these
financial instruments approximates their fair value.
3. Financial instruments (continued)
(iv) Financial instruments measured at fair value - fair value
hierarchy
The table below classifies financial instruments that are recognised on the
statement of financial position at fair value in a hierarchy that is based on
significance of the inputs used in making the measurements. The levels of
hierarchy are disclosed on the next page.
The following table shows the three levels of the fair value hierarchy:
· Level 1: quoted prices (unadjusted) in active markets for
identical instruments;
· Level 2: instruments which are not actively traded but provide
regular observable prices; and
· Level 3: inputs that are based on level 1 or level 2 data, but
for which the last known price is over a year old (unobservable inputs).
The following table shows the Group's financial instruments measured at fair
value and split into the three levels:
2023 Level 1 Level 2 Level 3 Total
£m £m £m £m
Assets
Term deposits 182.0 - - 182.0
Investments and securities 740.3 181.9 0.5 922.7
Bonds and other fixed-income securities 16.5 1.0 - 17.5
Holdings in collective investment schemes 21,754.5 143.3 1.7 21,899.5
Investments held for the benefit of policyholders 22,693.3 326.2 2.2 23,021.7
Investments - listed shares and securities 0.1 - - -
Total 22,693.4 326.2 2.2 23,021.8
Liabilities
Liabilities for linked investments contracts 22,693.3 326.2 2.2 23,021.7
Total 22,693.3 326.2 2.2 23,021.7
2022 Level 1 Level 2 Level 3 Total
£m £m £m £m
Assets
Term deposits 63.9 - - 63.9
Investments and securities 631.9 137.9 0.3 770.1
Bonds and other fixed-income securities 10.9 1.2 - 12.1
Holdings in collective investment schemes 19,730.4 137.7 1.6 19,869.7
Investments held for the benefit of policyholders 20,437.1 276.8 1.9 20,715.8
Investments 3.1 - - 3.1
Total 20,440.2 276.8 1.9 20,718.9
Liabilities
Liabilities for linked investments contracts 20,437.1 276.8 1.9 20,715.8
Contingent consideration - - 1.7 1.7
Total 20,437.1 276.8 3.6 20,717.5
3. Financial instruments (continued)
Level 1 valuation methodology
Financial instruments included in Level 1 are measured at fair value using
quoted mid
prices that are available at the reporting date and are traded in active
markets. These
are mainly Open-Ended Investment Companies (OEICs), Unit Trusts, Investment
trusts
and Exchange Traded Funds.
The price is sourced from our 3rd party provider, who source this directly
from the
stock exchange or obtain the price directly from the fund manager.
Level 2 valuation methodology
Financial instruments included in Level 2 are measured at fair value using
observable
mid prices traded in markets that have been assessed as not active but which
provide
regular observable prices. These are mainly Structured products and OEICs.
The price is sourced from the structured product provider or from our 3rd
party
provider, who obtain the price directly from the fund manager.
Level 3 valuation methodology
Financial instruments included in Level 3 are measured at fair value using the
last known price and for which the price is over a year old. These are mainly
OEICs and Unit Trusts. These instruments have unobservable inputs as the
current observable market information is no longer available. Where these
instruments arise management will value them based on the last known
observable market price.
The prices are sourced as noted in level 1 and level 2 above.
For the purposes of identifying level 3 instruments, unobservable inputs means
that current observable market information is no longer available. Where these
instruments arise management will value them based on the last known
observable market price. No other valuation techniques are applied.
Level 3 sensitivity to changes in unobservable measurements
For financial instruments assessed as Level 3, based on its review of the
prices used, the Group believes that any change to the unobservable inputs
used to measure fair value would not result in a significantly higher or lower
fair value measurement at year end, and therefore would not have a material
impact on its reported results.
Review of prices
As part of its pricing process, the Group regularly reviews whether each
instrument can be valued using a quoted price and if it trades on an active
market, based on available market data and the specific circumstances of each
market and instrument.
The Group regularly assesses instruments to ensure they are categorised
correctly and Fair Value Hierarchy (FVH) levels adjusted accordingly. The
Group monitors situations that may impact liquidity such as suspensions and
liquidations while also actively collecting observable market prices from
relevant exchanges and asset managers. Should an instrument price become
observable following the resumption of trading the FVH level will be updated
to reflect this.
3. Financial instruments (continued)
Changes to valuation methodology
There have been no changes in valuation methodology during the year under
review.
Transfers between Levels
The Group's policy is to assess each financial instrument it holds at the
current financial year end, based on the last known price and market
information, and assign it to a Level.
The Group recognises transfers between Levels of the fair value hierarchy at
the end of the reporting period in which the changes have occurred. Changes
occur due to the availability of (or lack thereof) quoted prices and whether a
market is now active or not.
Transfers between Levels between 01 October 2022 and 30 September 2023 are
presented in the table below at their valuation at 30 September 2023:
Transfers from Transfers to £m
Level 1 Level 2 32.3
Level 2 Level 1 20.9
The reconciliation between opening and closing balances of Level 3 assets are
presented in the table below:
2023 2022
£m £m
Opening balance 1.9 1.9
Unrealised gains or losses in the year ended 30 September 2023 (0.1) (0.4)
Transfers in to Level 3 at 30 September 2023 valuation 0.4 0.4
Transfers out of Level 3 at 30 September 2023 valuation - -
Purchases, sales, issues and settlement - -
Closing balance 2.2 1.9
Any resultant gains or losses on financial assets held for the benefit of
policyholders are offset by a reciprocal movement in the linked liability.
(v) Capital maintenance
The regulated companies in the Group are subject to capital requirements
imposed by the relevant regulators as detailed below:
Legal entity Regulatory regime
IFAL IFPR
ILUK Solvency II
ILInt Isle of Man risk based capital regime
Group capital requirements for 2023 are driven by the regulated entities,
whose capital resources and requirements as detailed below:
3. Financial instruments (continued)
IFAL ILUK ILInt
30 September 30 September 30 September
2023 2022 2023 2022 2023 2022
£m £m £m £m £m £m
Capital resource 44.4 39.7 269.2 244.0 46.6 42.0
Capital requirement 33.3 32.6 215.8 186.9 27.1 23.7
Coverage ratio 133% 122% 125% 131% 172% 177%
The Group has complied with the requirements set by the regulators during the
year. The Group's policy for managing capital is to ensure each regulated
entity maintains capital well above the minimum requirement.
4. Risk and risk management
Risk assessment
The board has overall responsibility for the determination of the Group's risk
management objectives and policies and, whilst retaining ultimate
responsibility for them, it has delegated the authority for designing and
operating processes that ensure the effective implementation of the objectives
and policies to the Group's risk function.
Risk assessment is the determination of quantitative values and/or qualitative
judgements of risk related to a concrete situation and a recognised threat.
Quantitative risk assessment requires calculations of two components of risk,
the magnitude of the potential impact, and the likelihood that the risk
materialises. Qualitative aspects of risk, despite being more difficult to
express quantitatively, are also taken into account in order to fully evaluate
the impact of the risk on the organisation.
(1) Market risk
Market risk is the risk of loss arising either directly or indirectly from
fluctuations in the level and in the volatility of market prices of assets,
liabilities and other financial instruments.
(a)
Price risk
Market price risk from reduced income
The Company's dividend income from its regulated subsidiaries, IFAL, ILUK and
ILInt, is exposed to market risk. The Group's main source of income is derived
from annual management fees and transaction fees which are linked to the value
of the clients' portfolios, which are determined by the market prices of the
underlying assets. The Group's revenue is therefore affected by the value of
assets on the platform, and consequently it has exposure to equity market
levels and economic conditions.
4. Risk and risk management (continued)
The Group mitigates the second order market price risk by applying fixed
charges per tax wrapper in addition to income derived from the charges based
on clients' linked portfolio values. These are recorded in note 5 as wrapper
fee income and annual commission income, respectively. This approach of fixed
and variable charging offers an element of diversification to its income
stream. The risk of stock market volatility, and the impact on revenue, is
also mitigated through a wide asset offering which ensures the Group is not
wholly correlated with one market, and which enables clients to switch assets,
including into cash on the platform, in times of uncertainty.
Sensitivity testing has been performed to assess the impact of market
movements on the Group's profit after tax and equity for the year. The
sensitivity is applied as an instantaneous shock at the start of the year, and
shows the impact of a 10% change in values across all assets held on the
platform.
Impact on profit and equity for the year
2023 2022
£m £m
10% increase in asset values 8.7 8.5
10% decrease in asset values (8.7) (8.5)
Market risk from direct asset holdings
The Group and the Company have limited exposure to primary market risk as
capital is invested in high quality, highly liquid, short-dated investments.
Market risk from unit-linked assets
The Group and the Company have limited exposure to primary market risk from
the value of unit-linked assets as fluctuations are borne by the
policyholders.
(b) Interest rate risk
The Group receives interest on its cash and cash equivalents of £177.9
million (2022: 183.0 million), on its loans £6.3 million (2022: £5.5
million) and on financial investments of £22.4 million (2022: £3.1 million).
The Group mitigates interest rate risk by diversifying its investments, which
include government gilts which have a fixed rate of interest.
Sensitivity testing has been performed to assess the impact of a 1% change in
interest rates. This would be expected to increase/decrease interest received
on cash and cash equivalents by £1.7 million (2022: £1.8 million) and on
loans by £0.1 million (2022: £0.1 million), which would increase/decrease
profit after tax and equity by £1.4 million (2022: £1.5 million).
(c) Currency risk
The Group is not directly exposed to significant currency risk however it is
exposed to currency risk which arises on the platform software maintenance and
support fees charged by IAD Pty, which are charged in Australian Dollars. The
total amount of software maintenance and support fees in FY23 amounted to
£7.2 million (FY22: £6.2 million).
Sensitivity testing has been performed to assess the impact of a 10% change in
the GBP-AUD exchange rate. This would be expected to cause an
increase/decrease of £0.7 million (2022: £0.6 million) on the software
maintenance and support fees.
4. Risk and risk management (continued)
The table below shows a breakdown of the material foreign currency exposures
for the unit-linked policies within the Group:
2023 2023 2022 2022
Currency £m % £m %
GBP 24,279.2 99.3 22,021.1 99.3
USD 133.4 0.5 127.0 0.6
EUR 15.9 0.1 16.4 0.1
Others 12.4 0.1 9.8 0.0
Total 24,440.9 100.0 22,174.3 100.0
99.3% of investments and cash held for the benefit of policyholders are
denominated in GBP, its base currency. Remaining currency holdings greater
than 0.1% of the total are shown separately in the table. However, it is
recognised that the majority of investments held for the benefit of
policyholders are in collective investment schemes and some of their
underlying assets are denominated in currencies other than GBP, which
increases the funds under direction currency risk exposure. A significant rise
or fall in sterling exchange rates would not have a significant first order
impact on the Group's results since any adverse or favourable movement in
policyholder assets is entirely offset by a corresponding movement in the
linked liability.
(2) Credit (counterparty default) risk
Credit risk is the risk that the Group or Company is exposed to a loss if
another party fails to meet its financial obligations. For the Company, the
exposure to counterparty default risk arises primarily from loans directly
held by the Company, while for the Group this risk also arises from fees owed
by clients.
Assets held at amortised cost
(a)
Accrued income
This comprises fees owed by clients. These are held at amortised cost, less
expected credit losses ("ECLs").
Under IFRS 9, a forward-looking approach is required to assess ECLs, so that
losses are recognised before the occurrence of any credit event. The Group
estimates that pending fees three months or more past due are unlikely to be
collected and are written off. Based on management's experience, pending fees
one or two months past due are generally expected to be collected, but
consideration is also given to potential losses on these fees. Historical loss
rates have been used to estimate expected future losses, while consideration
is also given to underlying economic conditions, in order to ensure that
expected losses are recognised on a forward-looking basis. This has led to the
additional recognition of an immaterial amount of ECLs.
Details of the ECLs recognised in relation to accrued income can be seen in
note 22.
(b)
Loans
Loans subject to the 12 month ECL are £6.3m (2022: £5.5m). While there
remains a level of economic uncertainty in the current climate, leading to
potentially higher credit risk, there is not considered to be a significant
increase in credit risk, as all of the loans are currently performing to
schedule, and there are no significant concerns regarding the borrowers. There
is therefore no need to move from the 12 month ECL model to the lifetime ECL
model. Expected losses are recognised on a forward-looking basis, which has
led to the additional recognition of an immaterial amount of ECLs.
4. Risk and risk management (continued)
In addition to the above, the Company has committed a further £5.0m in
undrawn loans.
Details of the ECLs recognised in relation to loans can be seen in note 16. No
ECLs have been recognised on the undrawn loan commitments, as any ECLs would
not be considered to be material.
(c) Cash and equivalents
The Group has a low risk appetite for credit risk, which is mainly limited to
exposures to credit institutions for its bank deposits. A range of major
regulated UK high street banks is used. A rigorous annual due diligence
exercise is undertaken to assess the financial strength of these banks with
those used having a minimum credit rating of A (Fitch).
In order to actively manage the credit and concentration risks, the board has
agreed risk appetite limits for the regulated entities of the amount of
corporate and client funds that may be deposited with any one bank; which is
represented by a set percentage of the respective bank's total customer
deposits. Monthly monitoring of these positions along with movements in Fitch
ratings is undertaken, with reports presented to the Directors for review.
Collectively these measures ensure that the Group diligently manages the
exposures and provide the mitigation scope to be able to manage credit and
concentration exposures on behalf of itself and its customers
Counterparty default risk exposure to loans
The Company has loans of £6.3m (2022: £5.5m). There are no other loans held
by the Group.
Counterparty default risk exposure to Group companies
As well as inconvenience and operational issues arising from the failure of
the other Group companies, there is also a risk of a loss of assets. The
Company is due £81k (2022: £160k) from other Group companies.
Counterparty default risk exposure to other receivables
The Company has no other receivables arising, due to the nature of its
business, and the structure of the Group.
Across the Group, there is exposure to counterparty default risk arising
primarily from:
· corporate assets directly held by the Group;
· exposure to clients; and
· exposure to other receivables.
The other exposures to counterparty default risk include a credit default
event which affects funds held on behalf of clients and occurs at one or more
of the following entities:
· a bank where cash is held on behalf of clients;
· a custodian where the assets are held on behalf of clients; and
· Transact Nominees Limited (TNL), which is the legal owner of the
assets held on behalf of clients.
4. Risk and risk management (continued)
There is no first order impact on the Group from one of the events in the
preceding paragraph. This is because any credit default event in respect of
these holdings will be borne by clients, both in terms of loss of value and
loss of liquidity. Terms and conditions have been reviewed by external lawyers
to ensure that these have been drafted appropriately. However, there is a
second order impact where future profits for the Group are reduced in the
event of a credit default which affects funds held on behalf of clients.
There are robust controls in place to mitigate credit risk, for example,
holding corporate and client cash across a range of banks in order to minimise
the risk of a single point of counterparty default failure. Additionally,
maximum counterparty limits and minimum credit quality steps are set for
banks.
Cash and cash equivalents and investments are classed as stage 1 on the
expected credit loss model (meaning that they are not credit-impaired on
initial recognition and have not experienced a significant increase in credit
risk since initial recognition) with no material expected credit loss
provision held.
Corporate assets and funds held on behalf of clients
There is no significant risk exposure to any one UK clearing bank.
Counterparty default risk exposure to clients
The Group is due £12.3m (2022: £11.8m) from fee income owed by clients.
Impact of credit risk on fair value
Due to the limited direct exposure that the Group and the Company have to
credit risk, credit risk does not have a material impact on the fair value
movement of financial instruments for the year under review. The fair value
movements on these instruments are predominantly due to changes in market
conditions.
(3) Liquidity risk
Liquidity risk is the risk that funds are not accessible such that the
Company, although solvent, does not have sufficient liquid financial resources
to meet obligations as they fall due, or can secure such resources only at
excessive cost.
As a holding company, the Company's main liquidity risk is related to paying
out shareholder dividends and operating expenses it may incur. Additionally,
the Company has made short term commitments, in the form of a capped facility
arrangement, to Vertus Capital SPV1 Limited ('Vertus') (as one of Vertus'
sources of funding) to assist Vertus in developing its business, which is to
provide tailored niche debt facilities to adviser firms to fund acquisitions,
management buy-outs and other similar transactions.
Across the Group, the following key drivers of liquidity risk have been
identified:
· liquidity risk arising due to failure of one or more of the
Group's banks;
· liquidity risk arising due to the bank's system failure which
prevents access to Group funds; and
· liquidity risk arising from clients holding insufficient cash to
settle fees when they become due.
4. Risk and risk management (continued)
The Group's liquidity risk arises from a lack of readily realisable cash to
meet debts as they become due. This takes a number of forms - clients'
liabilities coming due, other liabilities (e.g. expenses) coming due,
insufficient liquid assets to meet loan repayments to subsidiary companies and
future payment commitments over the next three years following the acquisition
of T4A.
The first of these, clients' liabilities is primarily covered through the
terms and conditions with clients' taking their own liquidity risk, if their
funds cannot be immediately surrendered for cash.
Payment of other liabilities depends on the Group having sufficient liquidity
at all times to meet obligations as they fall due. This requires access to
liquid funds, i.e. working banks and it also requires that the Group's main
source of liquidity, charges on its clients' assets, can also be converted
into cash.
The payment of loan obligations is covered by the upward dividends from
subsidiary entities which were assessed against the financial plans and
capital projections of the regulated entities to ensure the level of
affordability of the future dividends.
The purchase price for T4A comprised three elements, a fixed sum payable on
deal completion which has been settled, a further fixed sum to be paid in four
equal annual instalments and a variable amount by reference to T4A's
performance over that four year period. The payment of these future
obligations is expected to be met from the Company's own reserves and
dividends it expects to receive from its subsidiaries.
The Company has set out two key liquidity requirements: first, to ensure that
clients maintain a percentage of liquidity in their funds at all times, and
second, to maintain access to cash through a spread of cash holdings in bank
accounts.
There are robust controls in place to mitigate liquidity risk, for example,
through regular monitoring of expenditure, closely managing expenses in line
with the business plan, and, in the case of the Vertus facility, capping the
value of loans. Additionally, the Group holds corporate and client cash across
a range of banks in order to mitigate the risk of a single point of
counterparty default failure.
Maturity schedule
The following table shows an analysis of the financial assets and financial
liabilities by remaining expected maturities as at 30 September 2023 and 30
September 2022. All financial liabilities are undiscounted.
In addition to the financial assets and financial liabilities shown in the
tables below, the Company committed a further £5.6m in undrawn loans. These
are available to be drawn down immediately.
4. Risk and risk management (continued)
Financial assets:
2023 Up to 3 months 3-12 months 1-5 Over 5 years Total
years
£m £m £m £m £m
Investments held for the policyholders 23,021.7 - - - 23,021.7
Investments - - 22.4 - 22.4
Accrued income 12.5 - - - 12.5
Trade and other receivables 3.2 - - - 3.2
Loans - - 6.3 - 6.3
Cash and cash equivalents 177.9 - - - 177.9
Cash held for the benefit of policyholders 1,419.2 - - - 1,419.2
Total 24,634.5 - 28.7 - 24,663.1
Restated 2022 Up to 3 months 3-12 months 1-5 Over 5 years Total
years
£m £m £m £m £m
Investments held for the policyholders 20,715.8 - - - 20,715.8
Investments 0.1 - 3.0 - 3.1
Accrued income 12.1 - - - 12.1
Trade and other receivables 2.0 - - - 2.0
Loans - - 5.5 - 5.5
Cash and cash equivalents 183.0 - - - 183.0
Cash held for the benefit of policyholders 1,458.6 - - - 1,458.6
Total 22,371.6 - 8.5 - 22,380.1
See note 36 for details on 2022 restated balances.
Financial liabilities:
2023 Up to 3 months 3-12 months 1-5 Over 5 years Total
years
£m £m £m £m £m
Liabilities for linked investment contracts 24,440.9 - - - 24,440.9
Trade and other payables 6.6 - - - 6.6
Lease liabilities 0.1 0.3 0.9 - 1.3
Total 24,447.6 0.3 0.9 - 24,448.8
2022 Up to 3 months 3-12 months 1-5 Over 5 years Total
years
£m £m £m £m £m
Liabilities for linked investment contracts 22,174.4 - - - 22,174.4
Trade and other payables 7.0 - - - 7.0
Lease liabilities 0.6 1.3 0.9 - 2.8
Total 22,182.0 1.3 0.9 - 22,184.2
As per note 3, accruals, deferred consideration and contingent consideration
have been reclassified as non-financial instruments and have therefore been
removed from this table.
4. Risk and risk management (continued)
(4) Outflow risk
Outflows occur when funds are withdrawn from the platform for any reason.
Outflows typically occur where clients' circumstances and requirements change.
However, these outflows can also be triggered by operational failure,
competitor actions or external events such as regulatory or economic changes.
Outflow risk is mitigated by focusing on providing exceptionally high levels
of service. Outflow rates are closely monitored and unexpected experience is
investigated. Despite the current challenging and uncertain economic and
geopolitical environment, outflow rates remain stable and within historical
norms.
(5) Expense risk
Expense risk arises where costs increase faster than expected or from one-off
expense "shocks".
The Group and the Company has exposure related to expense inflation risk,
where actual inflation deviates from expectations. As a significant percentage
of the Group's expenses are staff related the key inflationary risk arises
from salary inflation. The Group and the Company have no exposures to defined
benefit staff pension schemes or client related index linked liabilities.
The Group's expenses are governed at a high level by the Group's Expense
Policy. The monthly management accounts are reviewed against projected future
expenses by the Board and by senior management and action is taken where
appropriate.
5. Disaggregation of revenue
The Group has the following categories of revenue:
· Annual commission - based on a fixed percentage applied to the
value of the client's portfolio each month.
· Wrapper fee income - based on a fixed quarterly charge per
wrapper.
· Other income - buy commission is based on a set percentage charge
applied to each transaction. Dealing charges are charged based on a fixed fee
for each type of transaction.
· Adviser back-office technology - licence income based on a fixed
monthly charge per number of users. Consultancy income is charged based on
the services provided.
For the financial year ended
30 September
2023 2022
£m £m
Annual commission income 116.1 115.8
Wrapper fee income 12.3 11.6
Other income 1.7 2.2
Adviser back-office technology 4.8 4.0
Total revenue 134.9 133.6
6. Segmental reporting
The revenue and profit before tax are attributable to activities carried out
in the UK and the Isle of Man.
The Group has three classes of business, which have been organised primarily
based on the products they offer, as detailed below:
· Investment administration services - this relates to services
performed by IFAL, which is the provider of the Transact wrap service. It is
the provider of the General Investment Account (GIA), is a Self-Invested
Personal Pension (SIPP) operator, an ISA manager and is the custodian for all
assets held on the platform (except for those held by third party custodians).
· Insurance and life assurance business - this relates to ILUK and
ILInt, insurance companies which provide the Transact Personal Pension,
Executive Pension, Section 32 Buy-Out Bond, Transact Onshore and Offshore
Bonds, and Qualifying Savings Plan on the Transact platform.
· Adviser back-office technology - this relates to T4A, provider of
financial planning technology to adviser and wealth management firms via the
CURO adviser support system.
Other Group entities relates to the rest of the Group, which provide services
to support the Group's core operating segments.
Analysis by class of business is given below.
6. Segmental reporting (continued)
Statement of comprehensive income - segmental information for the year ended
30 September 2023:
Investment administration services Insurance and life assurance business Adviser back-office technology Other Group entities Consolidation adjustments Total
£m £m £m £m £m £m
Revenue
Annual commission income 63.1 53.0 - - - 116.1
Wrapper fee income 3.0 9.3 - - - 12.3
Adviser back-office technology - - 4.8 - - 4.8
Other income 1.2 0.5 - 76.0 (76.0) 1.7
Total revenue 67.3 62.8 4.8 76.0 (76.0) 134.9
Cost of sales (2.1) (0.6) (0.7) (0.5) - (3.9)
Gross profit/(loss) 65.2 62.2 4.1 75.5 (76.0) 131.0
Administrative expenses (42.2) (30.2) (5.5) (72.3) 75.6 (74.6)
Impairment losses - - - (0.1) - (0.1)
Operating profit/(loss) 23.0 32.0 (1.4) 3.1 (0.4) 56.3
Interest expense - - - (0.7) 0.6 (0.1)
Interest income 1.2 4.4 - 1.4 (0.6) 6.4
Net policyholder returns
Net income/(loss) attributable to policyholder returns - 12.1 - - - 12.1
Change in investment contract liabilities - (1,056.0) - - - (1,056.0)
Fee and commission expenses - (193.3) - - - (193.3)
Policyholder investment returns - 1,249.3 - - - 1,249.3
Net policyholder returns - 12.1 - - - 12.1
Profit/(loss) on ordinary activities before taxation attributable to 24.2 48.5 (1.4) 3.8 (0.4) 74.7
policyholders and shareholders
Policyholder tax credit/(charge) - (12.1) - - - (12.1)
Profit on ordinary activities before taxation attributable to shareholders 24.2 36.4 (1.4) 3.8 (0.4) 62.6
Total tax attributable to shareholder and policyholder returns (5.0) (18.7) 0.5 (1.7) (0.1) (24.9)
Less: tax attributable to policyholder returns - 12.1 - - - 12.1
Shareholder tax on profit on ordinary activities (5.0) (6.6) 0.5 (1.7) (0.1) (12.8)
Profit/(loss) for the period 19.2 29.8 (0.9) 2.1 (0.3) 49.9
6. Segmental reporting (continued)
Statement of comprehensive income - segmental information for the year ended
30 September 2022:
Investment administration services Insurance and life assurance business Adviser back-office technology Other Group entities Consolidation adjustments Total
£m £m £m £m £m £m
Revenue
Annual commission income 63.4 52.6 - - - 116.0
Wrapper fee income 2.8 8.7 - - - 11.5
Adviser back-office technology - - 3.9 - - 3.9
Other income 1.3 0.9 - 64.4 (64.4) 2.2
Revenue 67.5 62.2 3.9 64.4 (64.4) 133.6
Cost of sales (0.7) (0.4) (0.5) (0.5) - (2.1)
Gross profit/(loss) 66.8 61.8 3.4 63.9 (64.4) 131.5
Admin expenses (43.0) (28.8) (5.3) (64.6) 64.0 (77.7)
Expected credit losses on financial assets (0.1) - - (0.1) - (0.2)
Operating profit/(loss) 23.7 33.0 (1.9) (0.8) (0.4) 53.6
Interest expense - - - (0.4) 0.3 (0.1)
Interest income 0.1 1.0 - - (0.3) 0.8
Net policyholder returns
Net income/(loss) attributable to policyholder returns (38.5) - - - (38.5)
Change in investment contract liabilities - 2,770.3 - - - 2,770.3
Fee and commission expenses - (192.6) - - - (192.6)
Policyholder investment returns - (2,577.7) - - - (2,577.7)
Net policyholder returns - 38.5 - - - (38.5)
Profit on ordinary activities before taxation attributable to policyholders 23.8 (4.5) (1.9) (1.2) (0.4) 15.8
and shareholders
Policyholder tax credit/(charge) - 38.5 - - - 38.5
Profit on ordinary activities before taxation attributable to shareholders 23.8 34.0 (1.9) (1.2) (0.4) 54.3
Total tax attributable to shareholder and policyholder returns (4.4) 32.6 0.3 (0.4) 0.1 28.2
Less: tax attributable to policyholder returns - (38.5) - - - (38.5)
Shareholder tax on profit on ordinary activities (4.4) (5.9) 0.3 (0.4) 0.1 (10.3)
Profit/(loss) for the period 19.4 28.1 (1.6) (1.6) (0.3) 44.0
6. Segmental reporting (continued)
Statement of financial position - segmental information for the year ended 30
September 2023:
Investment administration services Insurance and life assurance business Total
Adviser back-office technology
£m £m £m £m
Assets
Non-current assets 10.3 19.1 1.1 30.5
Current assets 78.0 154.6 2.8 235.4
Total assets 88.3 173.7 3.9 265.9
Liabilities
Current liabilities 8.4 18.1 1.0 27.5
Non-current liabilities 0.2 48.5
0.8 47.5
Total liabilities 9.2 65.6 1.2 76.0
Policyholder assets and liabilities
Cash held for the benefit of policyholder
- 1,419.2 - -
Investments held for the benefit of policyholders
- 23.021.7 - -
Liabilities for linked investment contracts
- (24,440.9) - -
Total policyholder assets and liabilities - - - -
Net assets 79.1 108.1 2.7 189.9
Non-current asset additions
0.3 0.3 0.0 0.6
6. Segmental reporting (continued)
Restated Statement of financial position - segmental information for the year
ended 30 September 2022:
Investment administration services Insurance and life assurance business Total
Adviser back-office technology
£m £m £m £m
Assets
Non-current assets 10.4 25.4 0.8 36.6
Current assets 71.8 144.7 3.8 220.3
Total assets 82.2 170.1 4.6 256.9
Liabilities
Current liabilities 10.5 22.5 1.1 34.1
Non-current liabilities 1.9 47.6 0.1 49.6
Total liabilities 12.4 70.1 1.2 83.7
Policyholder assets and liabilities
Cash held for the benefit of policyholder - 1,458.6 - 1,458.6
Investments held for the benefit of policyholders - 20,715.8 - 20,715.8
Liabilities for linked investment contracts - (22,174.4) - (22,174.4)
Total policyholder assets and liabilities - - - -
Net assets 69.8 100.0 3.4 173.2
Non-current asset additions 0.2 0.1 - 0.3
See note 36 for details on 2022 restated balances.
Segmental information: Split by geographical location
2023 2022
£m £m
Revenue
United Kingdom 129.4 128.3
Isle of Man 5.5 5.3
Total 134.9 133.6
2023 2022
£m £m
Non-current assets
United Kingdom 23.4 25.1
Isle of Man 0.1 -
Total 23.5 25.1
7. Earnings per share
2023 2022
Profit
Profit for the year and earnings used in basic and diluted earnings per share £49.9m £44.0m
Weighted average number of shares
Weighted average number of Ordinary shares 331.3m 331.3m
Weighted average numbers of Ordinary Shares held by Employee Benefit Trust (0.5m) (0.4m)
Weighted average number of Ordinary Shares for the purposes of basic EPS 330.8m 330.9m
Adjustment for dilutive share option awards 0.5m 0.4m
Weighted average number of Ordinary Shares for the purposes of diluted EPS 331.3m 331.3m
Earnings per share
Basic 15.1p 13.3p
Diluted 15.1p 13.3p
Earnings per share ("EPS") is calculated based on the share capital of
IntegraFin Holdings plc and the earnings of the consolidated Group.
Basic EPS is calculated by dividing profit after tax attributable to ordinary
equity shareholders of the Company by the weighted average number of Ordinary
Shares outstanding during the year. The weighted average number of shares
excludes shares held within the Employee Benefit Trust to satisfy the Group's
obligations under employee share awards.
Diluted EPS is calculated by adjusting the weighted average number of Ordinary
Shares outstanding to assume conversion of all potentially dilutive Ordinary
Shares.
8. Expenses by nature
The following expenses are included within administrative expenses:
Group
2023 2022
£m £m
Depreciation 2.1 2.6
Amortisation 0.4 0.4
Wages and employee benefits expense 52.8 46.1
Other staff costs 1.1 1.0
Auditor's remuneration:
- auditing of the Financial Statements of the Company pursuant to the 0.2 0.1
legislation
- auditing of the Financial Statements of subsidiaries 0.6 0.4
- other assurance services 0.4 0.3
Other professional fees 4.8 4.7
Regulatory fees 3.9 4.2
- Non-underlying expenses - backdated VAT - 8.0
- Non-underlying expenses - interest on backdated VAT - 0.8
- Other non-underlying expenses - deferred consideration 2.1 2.1
- Other non-underlying expenses -contingent consideration (1.7) 0.9
- Other non-underlying expenses - (0.3)
Short-term lease payments:
- land and buildings 0.6 0.1
Other occupancy costs 2.2 2.3
Other costs 6.7 6.4
Other income - tax relief due to shareholders (1.6) (2.4)
Total administrative expenses 74.6 77.7
Other income - tax relief due to shareholders, relates to the release of
policyholder reserves to the statement of comprehensive income.
Company
2023 2022
£m £m
Wages and employee benefits expense 0.7 0.6
Non underlying expenses:
-Remuneration 0.3 3.0
Auditor's remuneration:
- auditing of the Financial Statements of the Company pursuant to the 0.2 0.2
legislation
Other professional fees 0.6 0.8
Other costs 0.2 0.2
Total administrative expenses 2.0 4.8
8. Expenses by nature (continued)
Wages and employee benefits expense
The average number of staff (including executive directors) employed by the
Group during the financial year amounted to:
2023 2022
No. No.
CEO 2 2
Client services staff 232 223
Finance staff 72 69
Legal and compliance staff 39 38
Sales, marketing and product development staff 65 64
Software development staff 139 131
Technical and support staff 82 67
631 594
The Company has no employees (2022: nil).
Wages and employee (including executive directors) benefits expenses during
the year, included within administrative expenses, were as follows:
2023 2022
£m £m
Wages and salaries 43.9 36.3
Social security costs 4.8 4.2
Other pension costs 2.0 3.6
Share-based payment costs 2.1 2.0
52.8 46.1
Compensation of key management personnel
Key management personnel are defined as those persons having authority and
responsibility for planning, directing, and controlling the activities of the
entity and as such, only directors are considered to meet this definition.
2023 2022
£m £m
Short-term employee benefits 3.0 2.9
Post-employment benefits 0.2 0.2
Share based payment 0.5 0.4
Social security costs 0.5 0.4
4.1
Highest paid director:
Short-term employee benefits 0.6 0.6
Other benefits 0.2 0.2
No. No.
Number of directors for whom pension contributions are paid 8 8
Short-term employee benefits comprise salary and cash bonus.
9. Interest income
Group Company Group Company
2023 2023 2022 2022
£m £m £m £m
Interest income on bank deposits 5.3 0.5 0.6 -
Interest income on tax repayments 0.4 - - -
Interest income on loans 0.4 0.4 0.2 0.2
Interest income on financial investments 0.3 - - -
6.4 0.9 0.8 0.2
All interest income is calculated using the effective interest rate method,
except for Interest income on tax repayments.
10. Policyholder investment returns
2023 2022
£m £m
Change in fair value of underlying assets 1,024.2 (2,729.2)
Investment income 225.1 151.5
Total policyholder investment returns 1,249.3 (2,577.7)
11. Tax on profit on ordinary activities
Group
a) Analysis of charge in year
The income tax expense comprises:
2023 2022
£m £m
Corporation tax
Current year - corporation tax 12.7 10.0
Adjustment in respect of prior years (0.1) 0.7
12.6 10.7
Deferred tax
Current year 0.1 (0.4)
Change in deferred tax charge/(credit) as a result of higher tax rate - -
Total shareholder tax charge for the year 12.7 10.3
Policyholder taxation
UK policyholder tax at 20% (2022: 20%) - -
Deferred tax at 25% (2022: 25%) 11.8 (33.8)
Prior year adjustments - (4.9)
Tax deducted on overseas dividends 0.3 0.2
Total policyholder taxation 12.1 (38.5)
Total tax attributable to shareholder and policyholder returns 24.8 (28.2)
11. Tax on profit on ordinary activities (continued)
b) Factors affecting tax charge for the year
The tax on the Group's profit before tax differs from the amount
that would arise using the weighted average tax rate applicable to profits of
the consolidated entities as follows:
2023 2022
£m £m
Profit on ordinary activities before taxation attributable to shareholders 62.6 54.3
Profit on ordinary activities multiplied by effective rate of Corporation Tax 13.8 10.3
22% (2021: 19%)
Effects of:
Non-taxable dividends - -
Group relief - -
Income / expenses not taxable / deductible for tax purposes multiplied by (0.6) (0.2)
effective rate of corporation tax
Adjustments in respect of prior years 0.1 0.7
Effect of change in tax rate - -
Effect of lower tax rate jurisdiction (0.6) (0.5)
Other adjustments - -
12.7 10.3
Add policyholder tax 12.1 (38.5)
24.8 (28.2)
Company
a) Analysis of charge in year
2023 2022
£m £m
Deferred tax charge/(credit) (see note 26) - -
b) Factors affecting tax charge for the year
2023 2022
£m £m
Profit on ordinary activities before tax 31.6 39.9
Profit on ordinary activities multiplied by effective rate of Corporation Tax 7.0 7.6
22% (2021: 19%)
Effects of:
Non-taxable dividends (7.3) (8.5)
Income / expenses not taxable / deductible for tax purposes multiplied by - 0.6
effective rate of Corporation Tax
Group loss relief to ISL 0.3 0.3
- -
12. Intangible assets - Group
Software and IP rights Goodwill Customer relationships Software Brand Total
Cost £m £m £m £m £m £m
At 1 October 2022 12.5 18.3 2.1 2.0 0.3 35.2
At 30 September 2023 12.5 18.3 2.1 2.0 0.3 35.2
Amortisation
At 1 October 2022 12.5 - 0.3 0.5 0.1 13.4
Charge for the year - - 0.1 0.3 - 0.4
At 30 September 2023 12.5 - 0.4 0.8 0.1 13.8
Net Book Value
At 30 September 2022 - 18.3 1.8 1.5 0.2 21.8
At 30 September 2023 - 18.3 1.7 1.2 0.2 21.4
Cost
At 1 October 2021 12.5 18.3 2.1 2.0 0.3 35.2
At 30 September 2022 12.5 18.3 2.1 2.0 0.3 35.2
Amortisation
At 1 October 2021 12.5 - 0.1 0.2 0.1 12.9
Charge for the year - - 0.2 0.3 - 0.5
At 30 September 2022 12.5 - 0.3 0.5 0.1 13.4
Net Book Value
At 30 September 2021 - 18.3 2.0 1.8 0.2 22.3
At 30 September 2022 - 18.3 1.7 1.5 0.2 21.8
All intangible assets are externally generated.
Goodwill impairment assessment
In accordance with IFRS, goodwill is not amortised, but is assessed for
impairment on an annual basis. The impairment assessment compares the carrying
value of goodwill to the recoverable amount, which is the higher of value in
use and the fair value less costs of disposal. The recoverable amount is
determined based on value in use calculations. The use of this method requires
the estimation of future cash flows and the determination of a discount rate
in order to calculate the present value of the cash flows.
The goodwill relates to the acquisition of IAD Pty in July 2016 and T4A in
January 2021.
The carrying amount of the IAD Pty goodwill is allocated to the two cash
generating units ("CGUs") that relate to the Transact platform, as these are
benefitting from the IAD PTY acquisition. The carrying amount of the goodwill
for T4A is allocated to the CGU that relates to the CURO software as this is
the source of revenue for T4A.
12. Intangible assets - Group (continued)
IAD Pty
2023 2022
£m £m
Investment administration services 7.2 7.2
Insurance and life assurance business 5.7 5.7
Total 12.9 12.9
Other assumptions are as follows:
2023 2022
Discount rate 13.2% 13.3%
Period on which detailed forecasts are based 5 years 5 years
Long-term growth rate 2.0% 1.0%
The carrying amount of the T4A goodwill is all allocated to the below CGU:
T4A
2023 2022
£m £m
Adviser back-office technology 5.3 5.3
Other assumptions are as follows:
2023 2022
Discount rate 14.0% 11.6%
Period on which detailed forecasts are based 5 years 5 years
Long-term growth rate 2.0% 2.0%
The recoverable amounts of the above CGUs have been determined from value in
use calculations based on cash flow projections from formally approved budgets
covering a five year period to 30 September 2028. Post the five year business
plan, the growth rate used to determine the terminal value of the cash
generating units was based on a long-term growth rate of 2.0%. The discount
rate is assessed on an annual basis and has been calculated using the weighted
average cost of capital.
Based on management's experience, the key assumptions on which management has
calculated its projections are net inflows, market growth and expense
inflation.
The annual impairment tests relating to both acquisitions indicated that there
is significant headroom in the recoverable amount over the carrying value of
the CGUs. There is therefore no indication of impairment.
Projected cash flows are impacted by movements in underlying assumptions,
including equity market levels, number of CURO users, employee numbers and
cost inflation. The Group considers that projected cash flows of the
investment administration services and insurance and life assurance business
CGUs are most sensitive to movements in equity markets, because they have a
direct impact on the level of the Group's fee income, while the adviser
back-office technology CGU is most sensitive to the number of CURO users, as
this forms the basis of its licence income.
A sensitivity analysis has been performed, with key assumptions being revised
adversely to reflect the potential for future performance being below expected
levels. This estimated that a fall in equity markets of approximately 45%, or
a reduction of CURO users of approximately 30% compared to expectations, would
be required before the carrying value of any CGU would exceed the recoverable
amount.
13. Property, plant and equipment - Group
Leasehold improvements Equipment Fixtures and Fittings Motor Vehicles Total
Cost £m £m £m £m £m
At 1 October 2022 1.7 3.7 0.2 - 5.6
Additions 0.1 0.4 0.1 0.1 0.7
Disposals - (0.4) - - (0.4)
Reclassification - (0.2) 0.2 - -
Foreign exchange - (0.1) - - (0.1)
At 30 September 2023 1.8 3.4 0.5 0.1 5.8
Depreciation
At 1 October 2022 1.4 2.9 0.1 - 4.4
Charge in the year 0.1 0.7 0.1 - 0.9
Disposals - (0.5) - - (0.5)
Reclassification - (0.1) 0.1 -
Foreign exchange - (0.1) - - (0.1)
At 30 September 2023 1.5 2.9 0.3 - 4.7
Net Book Value
At 30 September 2022 0.3 0.8 0.1 - 1.2
At 30 September 2023 0.3 0.5 0.2 0.1 1.1
Cost £m £m £m £m £m
At 1 October 2021 1.7 3.6 0.2 - 5.5
Additions - 0.3 - - 0.3
Disposals - (0.2) - - (0.2)
At 30 September 2022 1.7 3.7 0.2 - 5.6
Depreciation
At 1 October 2021 1.3 2.3 0.1 - 3.7
Charge in the year 0.1 0.8 - 0.9
Disposals - (0.2) - - (0.2)
At 30 September 2022 1.4 2.9 0.1 - 4.4
Net Book Value
At 30 September 2021 0.4 1.3 0.1 - 1.8
At 30 September 2022 0.3 0.8 0.1 - 1.2
The Company holds no property, plant and equipment.
14. Right-of-use assets - Property - Group
Cost £m
At 1 October 2022 6.6
Additions 0.4
Disposals (5.2)
Foreign exchange (0.1)
At 30 September 2023 1.7
Depreciation £m
At 1 October 2022 4.5
Charge in the year 1.4
Disposals (5.2)
At 30 September 2023 0.7
Net Book Value
At 30 September 2022 2.1
At 30 September 2023 1.0
Cost £m
At 1 October 2021 6.5
Foreign exchange 0.1
At 30 September 2022 6.6
Depreciation £m
At 1 October 2021 2.8
Charge in the year 1.7
At 30 September 2022 4.5
Net Book Value
At 30 September 2021 3.6
At 30 September 2022 2.1
Depreciation is calculated on a straight-line basis over the term of the
lease.
During the year, the right of use asset for the Group's Clement's Lane office
was fully depreciated as the lease came to an end in June 2023. The Group has
'security of tenure' and therefore the original lease continues until it is
terminated by either party. The Group intends to occupy the building whilst
the terms of a new lease for the same building are finalised. Costs of the
lease from July 2023 onwards were therefore recognised directly in the
statement of comprehensive income as occupancy costs.
15. Investment in subsidiaries
2023 2022
£m £m
Carrying value at 1 October 33.3 31.6
Share-based payments 2.0 1.7
Carrying value at 30 September 35.3 33.3
The Company has investments in the ordinary share capital of the following
subsidiaries at 30 September 2023:
Name of Company Holding % Held Incorporation and significant place of business Business
Direct holdings
Integrated Financial Arrangements Ltd Ordinary Shares 100% United Kingdom Investment Administration
IntegraFin Services Limited Ordinary Shares 100% United Kingdom Services Company
Transact IP Limited Ordinary Shares 100% United Kingdom Software provision & development
Integrated Application Development Pty Ltd Ordinary Shares 100% Australia Software maintenance
Transact Nominees Limited Ordinary Shares 100% United Kingdom Non-trading
IntegraLife UK Limited Ordinary Shares 100% United Kingdom Life Insurance
IntegraLife International Limited Ordinary Shares 100% Isle of Man Life Assurance
Transact Trustees Limited Ordinary Shares 100% United Kingdom Non-trading
Objective Funds Limited Ordinary Shares 100% United Kingdom Dormant
Objective Wealth Management Limited Ordinary Shares 100% United Kingdom Dormant
Time For Advice Limited Ordinary Shares 100% United Kingdom Financial planning software
Indirect holdings
IntegraFin Limited Ordinary Shares 100% United Kingdom Non-trading
ObjectMastery (UK) Limited Ordinary Shares 100% United Kingdom Dormant
IntegraFin (Australia) Pty Limited Ordinary Shares 100% Australia Non-trading
The Group has 100% voting rights on shares held in each of the subsidiary
undertakings.
All the UK subsidiaries have their registered office address at 29 Clement's
Lane, London, EC4N 7AE. ILInt's registered office address is at 18-20 North
Quay, Douglas, Isle of Man, IM1 4LE. IntegraFin (Australia) Pty's registered
office address is at Level 4, 854 Glenferrie Road, Hawthorn, Victoria,
Australia 3122. Integrated Application Development Pty Ltd.'s registered
office address is 19-25 Camberwell Road, Melbourne, Australia.
The above subsidiaries have all been included in the consolidated Financial
Statements.
15. Investments in subsidiaries (continued)
Integrated Financial Arrangements Ltd is authorised and regulated by the
Financial Conduct Authority. The principal activity of the Company and its
subsidiaries is the provision of 'Transact', a wrap service that arranges and
executes transactions between clients, their financial advisers and financial
product providers including investment managers and stockbrokers.
IntegraFin Services Limited (ISL), is the Group services company. All
intra-group service contracts are held by this services company.
Integrated Application Development Pty Ltd (IAD Pty) provides software
maintenance services to the Group.
IntegraFin Limited is the trustee of the IntegraSIP Share Incentive Plan,
which was set up to allocate Class C Shares in the capital of the Company to
staff. IntegraFin Limited undertakes no other activities.
Transact Nominees Limited holds customer assets as a nominee company on behalf
of Integrated Financial Arrangements Ltd.
IntegraFin (Australia) Pty Limited is currently non-trading.
Transact IP Limited licenses its proprietary software to other members of the
IntegraFin Group.
IntegraLife UK Limited is authorised by the Prudential Regulation Authority
and regulated by the Financial Conduct Authority and the Prudential Regulation
Authority. Its principal activity is the transaction of ordinary long-term
insurance business within the United Kingdom.
IntegraLife International Limited is authorised and regulated by the Isle of
Man Financial Services Authority and its principal activity is the transaction
of ordinary long-term insurance business within the United Kingdom through the
Transact Offshore Bond.
Time For Advice Limited is a specialist software provider for financial
planning and wealth management.
16. Loans
This note analyses the loans payable by and receivable to the Company. The
carrying amounts of loans are as follows:
Loans receivable
2023 2022
£m £m
Loans receivable from third parties 6.5 5.7
Interest receivable on loans 0.1 -
Total gross loans 6.6 5.7
Expected credit losses allowance (0.3) (0.2)
Total net loans 6.3 5.5
16. Loans (continued)
Movement in the expected credit losses for the loan is as follows:
2023 2022
£m £m
Opening expected credit losses (0.2) (0.2)
Increase during the year (0.1) -
Balance at 30 September (0.3) (0.2)
The loans receivable are measured at amortised cost with the expected credit
losses charged straight to the statement of comprehensive income.
Loans payable
2023 2022
£m £m
Loan payable to subsidiary 7.0 8.0
To be settled within 12 months 1.0 1.0
To be settled after 12 months 6.0 7.0
Total loan payable 7.0 8.0
The loan payable was initially recognised at fair value. Subsequent
measurement is at amortised cost using the effective interest rate method. The
interest charge is recognised on the statement of comprehensive income.
Interest on the loan is paid quarterly, whilst the remaining capital
repayments are annual over the next 7 years.
17. Investments held for the benefit of policyholders
2023 2023 2022 2022
Cost Fair value Cost Fair value
ILInt £m £m £m £m
Investments held for the benefit of policyholders 2,155.5 2,310.3 1,988.9 2,057.2
2,155.5 2,310.3 1,988.9 2,057.2
ILUK
Investments held for the benefit of policyholders 19,249.9 20,711.4 19,215.4 18,658.6
19,249.9 20,711.4 19,215.4 18,658.6
Total 21,405.4 23,021.7 21,214.3 20,715.8
All amounts are current as customers are able to make same-day withdrawal of
available funds and transfers to third-party providers are generally performed
within a month.
These assets are held to cover the liabilities for unit linked investment
contracts. All contracts with customers are deemed to be investment contracts
and, accordingly, assets are 100% matched to corresponding liabilities.
18. Liabilities for linked investment contracts
2023 2022
Fair value Fair value
ILInt £m £m
Unit linked liabilities 2,481.5 2,201.4
2,481.5 2,201.4
ILUK
Unit linked liabilities 21,959.4 19,973.0
21,959.4 19,973.0
Total 24,440.9 22,174.4
Analysis of change in liabilities for linked investment contracts
2023 2022
£m £m
Opening balance 22,174.4 23,053.4
Investment inflows 2,670.3 3,113.9
Investment outflows (1,400.5) (1,163.1)
Changes in fair value of underlying assets 1,024.1 (2,729.0)
Investment income 225.1 151.5
Other fees and charges - Transact (59.2) (59.7)
Other fees and charges - third parties (193.3) (192.6)
Closing balance 24,440.9 22,174.4
The benefits offered under the unit-linked investment contracts are based on
the risk appetite of policyholders and the return on their selected collective
fund investments, whose underlying investments include equities, debt
securities, property and derivatives. This investment mix is unique to
individual policyholders. When the diversified portfolio of all policyholder
investments is considered, there is a clear correlation with the FTSE 100
index and other major world indices, providing a meaningful comparison with
the return on the investments.
The maturity value of these financial liabilities is determined by the fair
value of the linked assets at maturity date. There will be no difference
between the carrying amount and the maturity amount at maturity date.
19. Cash and cash equivalents
2023 2022
£m £m
Bank balances - instant access 165.9 173.5
Bank balances - notice accounts 12.0 9.5
Total 177.9 183.0
Bank balances held in instant access accounts are current and available for
use by the Group.
All of the bank balances held in notice accounts require less than 35 days'
notice before they are available for use by the Group.
20. Cash held for the benefit of policyholders
2023 2022
£m £m
Cash and cash equivalents held for the benefit of the policyholders - instant
access - ILUK
1,248.0 1,314.3
Cash and cash equivalents held for the benefit of the policyholders - instant
access - ILINT
171.2 144.2
Total 1,419.2 1,458.5
Cash and cash equivalents held for the benefit of the policyholders are held
to cover the liabilities for unit linked investment contracts. These amounts
are 100% matched to corresponding liabilities.
21. Investments
Group Group
2023 2022
£m £m
Fair value through profit or loss
Listed shares and securities 0.1 0.1
Gilts - 3.0
Total 0.1 3.1
Amortised cost
Gilts 22.3 -
Total 22.3 -
22.4 3.1
In July 2023, the previously held gilt of £3.0 million matured, and new gilts
of £22.3 million were purchased in August 2023. These gilts are
interest-bearing and the associated income is referenced in Note 9 as
"interest on financial investments".
22. Prepayments and accrued income
Group Company Group Company
2023 2023 2022 2022
£m £m £m £m
Accrued income 13.5 - 13.1 -
Less: expected credit losses (1.0) - (1.0) -
Accrued income - net 12.5 - 12.1 -
Prepayments 4.7 - 5.1 0.1
Total 17.2 - 17.2 0.1
Movement in the expected credit losses (for accrued income and trade and other
receivables) is as follows:
2023 2022
£m £m
Opening expected credit losses (1.0) (0.8)
Increase during the year - (0.2)
Balance at 30 September (1.0) (1.0)
23. Trade and other receivables
Group Company Group Company
2023 2023 2022 2022
£m £m £m £m
Other receivables 3.2 - 2.1 -
Less: expected credit losses
(0.1) - (0.1) -
Other receivables net 3.1 - 2.0 -
Amounts owed by Group undertakings - 0.1 - 0.2
Repayment interest due from HMRC 0.4 - - -
Total 3.6 0.1 2.0 0.2
Amount due from HMRC is in respect of tax claimed on behalf of policyholders
for tax deducted at source.
24. Trade and other payables
Group Company Group Company
2023 2023 2022 2022
£m £m £m £m
Trade payables 0.7 - 1.6 -
PAYE and other taxation 2.6 0.1 2.2 0.1
Other payables 6.8 0.4 7.7 0.3
Accruals 7.8 0.4 8.3 0.3
Deferred consideration 1.6 1.6 1.7 1.7
Total 19.5 2.5 21.5 2.4
Other payables mainly comprises £5.3 million (2022: £4.8 million) in
relation to bonds awaiting approval.
25. Lease liabilities
2023 2022
£m £m
Opening balance 2.8 5.1
Additions 0.2 -
Lease payments (2.0) (2.4)
Interest expense 0.1 0.1
Balance at 30 September 1.1 2.8
Amounts falling due within one year 0.3 1.9
Amounts falling due after one year 0.8 0.9
The Group has various leases in respect of property as a lessee. Lease terms
are negotiated on an individual basis and run for a period of one to five
years.
As per Note 14, the lease for the Group's Clement's Lane office ended in June
2023.
26. Deferred tax
Deferred tax is calculated in full on temporary differences under the
liability method using a tax rate of 20% (2022: 20%) on policyholder assets
and liabilities and 25% (2022: 25%) on non-policyholder items. The increase in
the UK corporation tax rate from the current rate of 19% to 25% was
substantively enacted in May 2021. This new rate has been applied to deferred
tax balances which are expected to reverse after 1 April 2023, the date on
which that new rate becomes effective.
Deferred Tax Asset Accelerated Capital Allowances Share based payments Policyholder Excess management expenses and deferred acquisition costs Other deductible temporary differences Total
Policyholder Unrealised losses/ (unrealised gains) Policyholder Unrealised losses on investment trusts
£m £m £m £m £m £m £m
At 1 October 2021 - 0.6 - - - 0.1 0.7
Excess tax relief charged to equity (0.3) (0.3)
Charge to income 0.1 0.2 8.1 2.2 0.2 - 10.8
Offset Deferred Tax Liability (5.2) (5.2)
At 30 September 2022 0.1 0.5 2.9 2.2 0.2 0.1 6.0
Excess tax relief charged to equity - 0.2 - - - - 0.2
Charge to income - (0.2) (2.9) 0.3 0.4 0.1 (2.3)
Offset Deferred Tax Liability - - - (2.5) (0.6) (0.1) (3.2)
At 30 September 2023 0.1 0.5 - - - 0.1 0.7
Deferred Tax Liability Accelerated capital allowances Policyholder tax on unrealised gains Other taxable differences Total
£m £m £m £m
At 1 October 2021 0.1 28.4 1.0 29.5
Charge to income (0.1) (23.2) (0.1) (23.4)
Offset against Deferred Tax asset - (5.2) (5.2)
At 30 September 2021 - - 0.9 0.9
Charge to income - 9.6 (0.1) 9.5
Offset against Deferred Tax asset (3.1) (0.1) (3.2)
At 30 September 2023 - 6.5 0.7 7.2
The Company has no deferred tax assets or liabilities.
27. Provisions - Group
2023 2022
£m £m
Balance brought forward 56.8 17.8
(Decrease)/increase in dilapidations provision - (0.3)
Decrease in ILInt non-linked unit provision - (0.1)
(Decrease)/increase in ILUK policyholder reserves (9.7) 45.0
Increase/(decrease) in other provisions 1.1 (5.6)
Balance carried forward 48.2 56.8
Amounts falling due within one year 10.7
7.7
Amounts falling due after one year 40.5 46.1
Dilapidations provisions 0.2 0.2
Other provisions 1.1 -
ILUK policyholder reserves 46.9 56.6
Total 48.2 56.8
ILUK policyholder reserve comprises claims received from HMRC that are yet to
be returned to policyholders, charges taken from unit-linked funds and claims
received from HMRC to meet current and future policyholder tax obligations.
These are expected to be paid to policyholders over the course of the next
seven years.
28. Contingent consideration - Group and Company
2023 2022
£m £m
Contingent consideration - 1.7
The T4A acquisition cost included additional consideration between £0 and
£8.6 million, which was payable in January 2025 and contingent on T4A meeting
certain highly stretching performance targets over the next four years. During
the year, it was determined that T4A is not expected to meet these targets,
and therefore, the contingent consideration recognised to date has been
released.
29. Share-based payments
Share-based payment reserve
Group Company Group Company
2023 2023 2022 2022
£m £m £m £m
Balance brought forward 2.6 2.2 2.4 1.7
Movement in the year 0.8 0.5 0.2 0.5
Balance carried forward 3.4 2.7 2.6 2.2
29. Share-based payments (continued)
Share schemes
(i) SIP 2005
IFAL implemented a SIP trust scheme for its staff in October 2005. The SIP is
an approved scheme under Schedule 2 of the Income Tax (Earnings &
Pensions) Act 2003.
This scheme entitled all the staff who were employed in October 2005 to Class
C shares in IFAL, subject to their remaining in employment with the Company
until certain future dates.
The Trustee for this scheme is IntegraFin Limited, a wholly owned non-trading
subsidiary of IFAL.
Shares issued under the SIP may not be sold until the earlier of three years
after issue or cessation of employment by the Group. If the shares are held
for five years they may be sold free of income tax or capital gains tax. There
are no other vesting conditions.
The cost to the Group in the financial year to 30 September 2023 was £nil
(2022: £nil). There have been no new share options granted.
(ii) SIP 2018
The Company implemented an annual SIP awards scheme in January 2019. This is
an approved scheme under Schedule 2 of the Income Tax (Earnings &
Pensions) Act 2003, and entitles all eligible employees to ordinary shares in
the Company. The shares are held in a UK Trust.
The scheme includes the following awards:
Free Shares
The Company may give Free Shares up to a maximum value, calculated at the date
of the award of such Free Shares, of £3,600 per employee in a tax year.
The share awards are made by the Company each year, dependent on 12 months
continuous service at 30 September. The cost to the Group in the financial
year to 30 September 2023 was £0.8m (2022: £0.6m).
Partnership and Matching Shares
The Company provides employees with the opportunity to enter into an agreement
with the Company to enable such employees to use part of their pre-tax salary
to acquire Partnership Shares. If employees acquire Partnership Shares, the
board grants relevant Matching Shares at a ratio of 2:1.
The cost to the Group in the financial year to 30 September 2023 was £0.5m
(2022: £0.5m).
29. Share-based payments (continued)
(iii) Performance Share Plan
The Company implemented an annual PSP scheme in December 2018. Awards granted
under the PSP take the form of options to acquire Ordinary Shares for nil
consideration. These are awarded to Executive Directors, Senior Managers and
other employees of any Group Company, as determined by the Remuneration
Committee.
The exercise of the PSP awards is conditional upon the achievement of a
performance condition set at the time of grant and measured over a three year
performance period.
The cost to the Group in the financial year to 30 September 2023 was £0.9m
(2022: £0.8m). This is based on the fair value of the share options at grant
date, rather than on the purchase cost of shares held in the Employee Benefit
Trust reserve, in line with IFRS 2 Share-based Payment.
Details of the share awards outstanding are as follows:
2023 2022
Shares Shares
(number) (number)
SIP 2018
Shares in the plan at start of the year 854,247 692,683
Granted 504,113 292,318
Shares withdrawn from the plan (152,748) (130,754)
Shares in the plan at end of year 1,205,612 854,247
Available to withdraw from the plan at end of year 557,544 314,161
Details of the movements in the share scheme during the year are as follows:
2023 2023 2022 2022
Weighted average exercise price Shares Weighted average exercise price Shares
(pence) (number) (pence) (number)
SIP 2005
Outstanding at start of the year 0.0 805,509 0.0 872,709
Shares withdrawn from the plan 0.0 (42,804) 0.0 (67,200)
Shares in the plan at end of year 0.0 762,705
0.0 805,509
Available to withdraw from the plan at end of year 0.0 762,705
0.0 805,509
The weighted average share price at the date of withdrawal for shares
withdrawn from the plan during the year was 273.1 pence (2022: 425.5 pence).
29. Share-based payments (continued)
At 30 September 2023 the exercise price was £nil as they were all nil cost
options.
2023 2023 2022 2022
Weighted average exercise price Share options Weighted average exercise price Share options
(pence) (number) (pence) (number)
PSP
Outstanding at start of the year 0.00 675,307 0.00 576,088
Granted 0.00 293,376 0.00 184,772
Forfeited 0.00 - 0.00 -
Exercised (69,019) (85,553)
Outstanding at end of year 0.00 899,664 0.00 675,307
Exercisable at end of year 0.00 249,985 0.00 183,958
The fair value of options granted during the year has been estimated using the
Black-Scholes model. The principal assumptions used in the calculation were as
follows:
2023 2022
PSP
Share price at date of grant 287.8 522.5
Exercise price Nil Nil
Expected life 3 years 3 years
Risk free rate 3.5% 0.7%
Dividend yield 3.5% 1.9%
Weighted average fair value per option 258.8p 493.3p
30. Employee Benefit Trust reserve
Group:
2023 2022
£m £m
Balance brought forward (2.4) (2.1)
Purchase of own shares (0.2) (0.3)
Balance carried forward (2.6) (2.4)
Company:
2023 2022
£m £m
Balance brought forward (2.1) (1.8)
Purchase of own shares (0.3) (0.3)
Balance carried forward (2.4) (2.1)
The Employee Benefit Trust ("EBT") was settled by the Company pursuant to a
trust deed entered into between the Company and Intertrust Employee Benefit
Trustee Limited ("Trustee"). The Company has the power to remove the Trustee
and appoint a
new trustee. The EBT is a discretionary settlement and is used to satisfy
awards made under the PSP.
30. Employee Benefit Trust reserve (continued)
The Trustee purchases existing Ordinary Shares in the market, and the amount
held in the EBT reserve represents the purchase cost of IHP shares held to
satisfy options awarded under the PSP scheme. IHP is considered to be the
sponsoring entity of the EBT, and the assets and liabilities of the EBT are
therefore recognised as those of IHP. Shares held in the trust are treated as
own shares and shown as a deduction from equity.
31. Other reserves - Group
2023 2022
£m £m
Foreign exchange reserves (0.1) -
Non-distributable merger reserve 5.7 5.7
Foreign exchange reserves are gains/losses arising on retranslating the net
assets of
IAD Pty into sterling.
Non-distributable reserves relate to the non-distributable merger reserve held
by one of the Company's subsidiaries, IFAL, which is classified within other
reserves on a Group level.
32. Related parties
During the year the Company did not render nor receive any services with
related parties within the Group, and at the year end the Company had the
following intra-Group receivables:
Amounts owed by related parties
Company 2023 2022
£m £m
Integrated Financial Arrangements Ltd - 0.1
A loan of £10 million was issued to the Company by IntegraLife UK Limited in
FY21. This is an arm's length transaction as interest is charged at a
commercial rate. IHP is paying the loan off over ten years and made the second
payment of £1 million, plus accrued interest, during the year. The current
loan balance is £7 million.
The Group has not recognised any expected credit losses in respect of related
party receivables, nor has it been given or received any guarantee during 2023
or 2022 regarding related party transactions.
Payments to key management personnel, defined as members of the board, are
shown in the Remuneration Report. Directors of the Company received a total of
£3.6 million (2022: £3.6 million) in dividends during the year and
benefitted from staff discounts for using the platform of £4k (2022: £2k).
The number of IHP shares held at the end of the year by key management
personnel was 35,321,348, an increase of 132,224 from last year.
32. Related parties (continued)
Schrodinger Pty Ltd, the company which leases office space to IAD Pty in
Melbourne, Australia, is considered a related party of the Company, as Michael
Howard has control or joint control of Schrodinger and is a member of the key
management personnel (as a director) of the Company. During the year IAD Pty
paid Schrodinger £0.3 million (FY22: £0.3 million) in relation to the lease.
The lease has been in place since April 2012 and was last renewed in May 2021.
ObjectMastery Services Pty Ltd (OM) provides the service of executive
directors consultancy services to IAD Pty, and IAD Pty provides consultancy
and book-keeping services to OM. OM is considered a related party of the
Company, as Michael Howard has control or joint control of it. IAD Pty paid OM
£71k (FY22: £72k) for services received during the year, £44k (FY22: £44k)
of which related to Michael Howard's services. IAD Pty received £43k (FY22:
£39k) from OM for services provided during the year. IAD owed £2k to OM as
at 30 September 2023 (30 September 2022: £1k).
The Schrodinger and OM related party transactions and balances were not
disclosed in the financial year 2022 related parties note, so the above has
been restated to include this.
All of the above transactions are commercial transactions undertaken in the
normal course of business.
33. Contingent liability
There are some assets in ILUK policyholder linked funds which are under
review. Our current best estimate of possible future outflow, in the event of
remediation, is £1.2 million. A future outflow is possible but not probable
and the timing of any outflow is uncertain. Accordingly, no provision for any
liability has been made in these financial statements.
34. Events after the reporting date
A second interim dividend of 7.0 pence per share was declared on 13 December
2023. This dividend has not been accrued in the consolidated statement of
financial position.
35. Dividends
During the year to 30 September 2023 the Company paid interim dividends of
£33.7 million (2022: £33.8 million) to shareholders. The Company received
dividends from subsidiaries of £33.4 million (2022: £45.0 million).
36. Restatement of prior period information
Certain changes have been made to the comparative financial information
included in these financial statements in order to correct prior period errors
and align it to the current year presentation. These changes are noted in the
tables below.
No prior year opening balance sheet has been included in these financial
statements, given there is no impact to total assets, total liabilities,
profit or equity, and the nature of the values impacted are such that they do
not change from year to year to an extent that would influence the decision of
a user.
Consolidated Statement of Cash Flows
The following changes have been made to the comparative information in the
Consolidated Statement of Cash Flows:
· Profit on ordinary activities before taxation attributable to
policyholders and shareholders has been used as the starting point of cash
flows from operating activities, rather than profit on ordinary activities
before taxation. Increase/(decrease) in policyholder tax recoverable has
subsequently been adjusted to reflect the movement in tax attributable to
shareholder and policyholder returns
· All other movements relate to reclassifications between headings
Per 2022 financial statements Movement Restated 2022
£m £m £m
Cash flows from operating activities
Profit on ordinary activities before taxation 54.3 (54.3) -
Profit on ordinary activities before taxation attributable to policyholders - 15.8 15.8
and shareholders
Adjustments for non-cash movements (previously income statement non-cash
movements):
Release of actuarial provision (0.5) 0.5 -
Interest charged on lease - 0.1 0.1
Increase in contingent consideration - 0.9 0.9
Increase in provisions - 38.5 38.5
Adjustments for cash effecting investing and financing activities:
Interest charged on lease 0.1 (0.1) -
Decrease in current asset investments 2.0 (2.0) -
Adjustments for statement of financial position movements:
Increase in contingent consideration 0.9 (0.9) -
Settlement of share-based payment reserve (1.3) 1.3 -
Increase in provisions 39.0 (39.0) -
Adjustments for policyholder balances:
Increase/(decrease) in policyholder tax recoverable (44.5) 38.5 (6.0)
Cash generated from operations 251.0 (2.0) 249.0
Net cash flows (used in)/generated from operating activities 237.5 (2.1) 235.4
Investing activities
Acquisition of property, plant and equipment (previously tangible assets) (0.4) 0.1 (0.3)
Purchase of financial instruments - (3.0) (3.0)
Redemption of financial instruments - 5.0 5.0
Net cash (used in)/generated from investing activities (1.7) 2.1 0.4
Consolidated Statement of Cash Flows (continued)
Per 2022 financial statements Movement Restated 2022
£m £m £m
Financing activities
Purchase of shares for share scheme awards - (1.3) (1.3)
Net cash used in financing activities (36.6) (1.3) (37.9)
Company Statement of Cash Flows
The following change has been made to the comparative information in the
Company Statement of Cash Flows, which is a reclassification between headings:
Per 2022 financial statements Movement Restated 2022
£m £m £m
Adjustments for non-cash movements:
Settlement of share-based payment reserve 1.3 (1.3) -
Net cash flows used in operating activities (5.5) (1.3) (4.2)
Financing activities
Purchase of shares for share scheme awards - (1.3) (1.3)
Net cash used in financing activities (35.5) (1.3) (36.8)
Note 3 - Financial instruments - (ii) Financial instruments by category
The following changes have been made to the comparative information within the
financial instruments note 3, to the tables in (ii) Financial instruments by
category table:
· Assets and liabilities which are not financial instruments have
been presented in the note to allow users to clearly reconcile back to other
supporting notes
· Accruals, contingent consideration, deferred consideration and
balances due to HMRC have been reclassified from financial liabilities, to
liabilities which are not financial instruments. Note that the bonus accrual
was already excluded from the table as it was not classified as a financial
instrument
· Liabilities held for the policyholders have been split to show
the liabilities linked to cash holdings at amortised cost, with those linked
to investments remaining at fair value through profit or loss
· Trade and other receivables has been restated to include the full
balance, to correct an error in the note
· Trade and other payables has been split out to show trade
payables and other payables separately, and has been restated to correct an
error in the note
Note 3 - Financial instruments - (ii) Financial instruments by category
(continued)
Financial assets:
Fair value through the profit or loss Amortised cost
2022 As per 2022 financial statements Movement Restated 2022
£m £m £m £m
Trade and other receivables - 0.6 1.4 2.0
Total financial assets 20,718.9 1,659.8 - 1,661.2
Assets which are not financial As per 2022 financial statements Movement Restated 2022
instruments
£m £m £m
Prepayments - 5.1 5.1
Current tax asset - 15.0 15.0
- - 20.1
Financial liabilities:
Fair value through the profit or loss Amortised cost
As per 2022 financial statements Movement Restated 2022 As per 2022 financial statements Movement Restated 2022
£m £m £m £m £m £m
Trade payables - - - 7.4 (5.8) 1.6
(previously
trade and
other
payables)
Other - - - - 5.4 5.4
payables
Accruals - - - 3.0 (3.0) -
Deferred - - - 1.7 (1.7) -
consideration
Contingent 1.7 (1.7) - - - -
consideration
Liabilities held 20,714.4 (1,458.6) 20,715.8 - 1,458.6 1,458.6
for the
policyholders
Total 22,176.1 20,715.8 14.9 1,468.4
Financial
liabilities
As per 2022 financial statements Movement Restated 2022
Liabilities which are not financial instruments £m £m £m
Accruals and deferred income - 8.2 8.2
PAYE and other taxation - 2.2 2.2
Other payables - due to HMRC - 2.3 2.3
Deferred consideration - 1.7 1.7
Contingent consideration - 1.7 1.7
- 16.1
Note 3 - Financial instruments - (ii) Financial instruments by category
(continued)
The following table show the carrying values of the liabilities for the
Company:
Amortised cost
As per 2022 financial statements Movement Restated 2022
£m £m £m
Trade payables (previously trade and other payables) 0.4 (0.4) -
Loans payable (previously loans) 8.0 - 8.0
Deferred consideration 1.7 (1.7) -
Contingent consideration - - -
Accruals 0.2 (0.2) -
Other payables - 0.3 0.3
Due to Group undertakings - 0.1 0.1
Total financial liabilities 10.3 8.4
As per 2022 financial statements Movement Restated 2022
Liabilities which are not financial instruments £m £m £m
Accruals and deferred income - 0.3 0.3
PAYE and other taxation - 0.1 0.1
Deferred consideration - 1.7 1.7
Contingent consideration - 1.7 1.7
- 3.8
Note 4 - Risk and risk management - (3) Liquidity risk - Maturity schedule
The following changes have been made in the 2022 risk and risk management note
4, to the tables in (3) liquidity risk, maturity schedule:
· Corrected an error in the investment balance, as the amount was shown
in thousands rather than millions
· Trade and other receivables has been restated to correct an error in
the note
· Removed accruals, VAT balances included within other taxation, deferred
consideration and contingent consideration as these have been reclassified to
liabilities which are not financial instruments
· Lease liabilities have been added to the maturity table
Financial assets:
As per 2022 financial statements
2022 Up to 3 months 3-12 months 1-5 Over 5 years Total
years
£m £m £m £m £m
Investments 124.2 - 3.1 - 127.3
Trade and other receivables 2.0 0.2 - - 2.2
Total 22,495.7 0.2 8.6 - 22,504.5
Note 4 - Risk and risk management - (3) Liquidity risk - Maturity schedule
(continued)
Movement
2022 Up to 3 months 3-12 months 1-5 Over 5 years Total
years
£m £m £m £m £m
Investments (124.1) - (0.1) - (124.2)
Trade and other receivables - (0.2) - - (0.2)
Total (124.1) (0.2) (0.1) - (124.4)
Restated
2022 Up to 3 months 3-12 months 1-5 Over 5 years Total
years
£m £m £m £m £m
Investments 0.1 - 3.0 - 3.1
Trade and other receivables 2.0 - - - 2.0
Total 22,371.6 - 8.5 - 22,380.1
Financial liabilities:
As per 2022 financial statements
2022 Up to 3 months 3-12 months 1-5 Over 5 years Total
years
£m £m £m £m £m
Trade and other payables 11.8 3.7 - - 15.5
Deferred consideration - 1.5 0.2 - 1.7
Contingent consideration - - 1.7 - 1.7
Total 22,186.8 6.5 2.8 - 22,196.1
Movement
2022 Up to 3 months 3-12 months 1-5 Over 5 years Total
years
£m £m £m £m £m
Trade and other payables (4.8) (3.7) - - (8.5)
Lease liabilities 0.6 1.3 0.9 - 2.8
Deferred consideration - (1.5) (0.2) - (1.7)
Contingent consideration - - (1.7) - (1.7)
Total (4.8) (5.2) (1.9) - (11.9)
Restated
Up to 3 months 3-12 months 1-5 Over 5 years Total
2022 years
£m £m £m £m £m
Trade and other payables 7.0 - - - 7.0
Lease liabilities 0.6 1.3 0.9 - 2.8
Total 22,182.0 1.3 0.9 - 22,184.2
Note 6 - Segmental reporting - Statement of financial position
The following changes have been made in the 2022 segmental reporting note 6,
to the statement of financial position:
· Non-current assets and non-current liabilities have been adjusted
by an equal amount to correct a prior year error in the note
Statement of financial position - segmental information for the year ended 30
September 2022:
Per 2022 financial statements Movement Restated
Insurance and life assurance business Insurance and life assurance business Insurance and life assurance business
£m £m £m
Assets
Non-current assets 30.6 (5.2) 25.4
Total assets 175.3 170.1
Liabilities
Non-current liabilities 52.8 (5.2) 47.6
Total liabilities 75.3 70.1
Other information
Directors, Company Details, Advisers
Executive Directors
Alexander Scott
Michael Howard
Jonathan Gunby
Non-Executive Directors
Richard Cranfield
Christopher Munro
Rita Dhut
Caroline Banszky
Victoria Cochrane
Robert Lister
Company Secretary
Helen Wakeford
Independent Auditors
Ernst & Young LLP, 25 Churchill Place, Canary Wharf, London, E14 5EY
Solicitors
Eversheds Sutherland (International) LLP, One Wood Street, London, EC2V 7WS
Corporate Advisers
Peel Hunt LLP, 7(th) Floor 100 Liverpool Street, London, England, EC2M 2AT
Barclays Bank PLC, 1 Churchill Place, Canary Wharf, London, E14 5HP
Principal Bankers
National Westminster Bank Plc, 250 Bishopsgate, London, EC2M 4AA
Registrars
Equiniti Group Ltd, Sutherland House, Russell Way, Crawley, RH10 1UH
Registered Office
29 Clement's Lane, London, EC4N 7AE
Investor Relations
Luke Carrivick 020 7608 4900
Website
www.integrafin.co.uk (http://www.integrafin.co.uk)
Company number
8860879
Glossary of Alternative Performance Measures (APMs)
Various alternative performance measures are referred to in the Annual Report,
which are not defined by IFRS. They are used in order to provide better
insight into the performance of the Group. Further details are provided below.
APM Definition and purpose
Operational performance measures
Funds under direction ("FUD") Calculated as the total market value of all cash and assets on the platform,
valued as at the respective year end.
Year end 2023 2022
£bn £bn
Cash 3.92 3.51
Assets 51.04 46.56
FUD 54.96 50.07
%change on the previous year 10% (4%)
Average daily FUD 2023 2022
£bn £bn
Cash 3.54 3.23
Assets 50.10 49.27
FUD 53.64 52.50
%change on the previous year 3% 11%
The measurement of FUD is the primary driver of the largest component of the
Group's revenue. FUD is used to derive the annual commissions due to the
Group.
These values are not reported within the financial statements or the
accompanying notes.
Gross inflows and Net inflows Calculated as gross inflows onto the platform less outflows leaving the
platform by clients during the respective financial year.
Inflows and outflows are measured as the total market value of assets and cash
joining or leaving the platform.
2023 2022
£bn £bn
Gross inflows 6.41 7.28
Outflows 3.75 2.88
Net inflows 2.66 4.40
%change on the previous year (40%) (11%)
The measurement of net inflows onto the platform shows the net movement of
cash and assets on the platform during the year. This directly contributes to
FUD and therefore revenue.
These values are not reported within the financial statements or the
accompanying notes.
Adviser and client numbers Calculated as the total number of advisers or clients as at the financial year
end.
Advisers are calculated as the registered number of advisers on the Platform.
Clients are calculated as the total number of clients on the platform.
T4A licence users calculated as the total number of core licence users active
on the CURO platform.
2023 2022
Advisers 7.7 7.5
%increase 2% 5%
Clients 230.3 224.7
%increase 2% 8%
T4A licence users 2.8 2.3
%increase 22% 44%
This measurement is an indicator of our presence in the market.
These values are not reported within the financial statements or the
accompanying notes.
Client retention Calculated as the total number of clients with a non-zero valuation present in
the final month of both financial periods, as a percentage of total clients in
the current financial period.
2023 2022
Client retention 95% 97%
This is a measurement of client loyalty and an indicator of customer
satisfaction with our services provided.
These values are not reported within the financial statements or the
accompanying notes.
Income statement measures
Non-underlying expenses Calculated as costs which have been incurred outside of the ordinary course of
the business.
Non-underlying expenses 2023 2022
£m £m
Backdated VAT - 8.0
Interest on backdated VAT - 0.8
Other 0.4 2.7
Non-underlying expenses 0.4 11.5
Our non-underlying expenses represent costs which do not relate to our
recurring business operations and hence should be separated from operating
expenses in the income statement.
Other costs consist of post-combination remuneration. Post-combination
remuneration relates to the payment to the original shareholders of T4A.
This is comprised of the deferred and additional consideration payable in
relation to the acquisition of T4A and is recognised as remuneration over four
years from January 2021 to December 2024.
T4A is not expected to meet the minimum threshold for highly stretching
targets to earn the additional consideration element of post combination
remuneration. Therefore, the post combination expense in respect of the
additional consideration element that was recognised in FY22 of £1.6 million
has been released, and we have not recognised any cost in FY23.
Moreover, the post combination consideration cost in respect of FY24 and FY25
is expected to reduce to £2.1 million and £0.4 million respectively, as only
the deferred consideration element will now be recognised.
Non-underlying expenses (continued)
Underlying earnings per share Calculated as profit after tax net of non-underlying expenses, divided by
called up equity share capital.
2023 2022
£m £m
Profit after tax 49.9 44.0
Non-underlying expenses 0.4 11.5
Tax allowable element of costs - (1.4)
Underlying profit after tax 50.3 54.1
Divide by: Called up equity share capital 3.3 3.3
Underlying earnings per share 15.2p 16.3p
Underlying profit before tax Calculated as profit before tax net of non-underlying expenses.
2023 2022
£m £m
Profit before tax 62.6 54.3
Add: Non-underlying expenses 0.4 11.5
Underlying profit before tax 63.0 65.8
Cash flow measures
Shareholder returns Calculated as dividend per share paid to shareholders, which relate to the
respective financial years.
2023 2022
1(st) interim dividend 3.2 pence 3.2 pence
2(nd) interim dividend 7.0 pence 7.0 pence
Shareholder returns 10.2 pence 10.2 pence
%increase on previous financial year 0.0% 2.0%
There are generally two dividend payments made relating to each financial
year. Shareholder returns is a measurement of the total cash dividend received
by each shareholder for each individual share held by them.
Dividend policy Calculated as total cash dividends paid in relation to the respective
financial year, divided by the post-tax profit relating to that same financial
year.
2023 2022
£m £m
Total cash dividends paid 33.7 33.7
Profit for the financial year 49.9 44.0
Dividends as a % of profit 68% 77%
Our policy is to pay approximately 60% to 65% of full year profit after tax as
two interim dividends.
Delivery on dividend policy is a measurement of the ability of the business to
generate distributable profits.
The measurement of FUD is the primary driver of the largest component of the
Group's revenue. FUD is used to derive the annual commissions due to the
Group.
These values are not reported within the financial statements or the
accompanying notes.
Gross inflows and Net inflows
Calculated as gross inflows onto the platform less outflows leaving the
platform by clients during the respective financial year.
Inflows and outflows are measured as the total market value of assets and cash
joining or leaving the platform.
2023 2022
£bn £bn
Gross inflows 6.41 7.28
Outflows 3.75 2.88
Net inflows 2.66 4.40
% change on the previous year (40%) (11%)
The measurement of net inflows onto the platform shows the net movement of
cash and assets on the platform during the year. This directly contributes to
FUD and therefore revenue.
These values are not reported within the financial statements or the
accompanying notes.
Adviser and client numbers
Calculated as the total number of advisers or clients as at the financial year
end.
Advisers are calculated as the registered number of advisers on the Platform.
Clients are calculated as the total number of clients on the platform.
T4A licence users calculated as the total number of core licence users active
on the CURO platform.
2023 2022
Advisers 7.7 7.5
% increase 2% 5%
Clients 230.3 224.7
% increase 2% 8%
T4A licence users 2.8 2.3
% increase 22% 44%
This measurement is an indicator of our presence in the market.
These values are not reported within the financial statements or the
accompanying notes.
Client retention
Calculated as the total number of clients with a non-zero valuation present in
the final month of both financial periods, as a percentage of total clients in
the current financial period.
2023 2022
Client retention 95% 97%
This is a measurement of client loyalty and an indicator of customer
satisfaction with our services provided.
These values are not reported within the financial statements or the
accompanying notes.
Income statement measures
Non-underlying expenses
Non-underlying expenses (continued)
Calculated as costs which have been incurred outside of the ordinary course of
the business.
Non-underlying expenses 2023 2022
£m £m
Backdated VAT - 8.0
Interest on backdated VAT - 0.8
Other 0.4 2.7
Non-underlying expenses 0.4 11.5
Our non-underlying expenses represent costs which do not relate to our
recurring business operations and hence should be separated from operating
expenses in the income statement.
Other costs consist of post-combination remuneration. Post-combination
remuneration relates to the payment to the original shareholders of T4A.
This is comprised of the deferred and additional consideration payable in
relation to the acquisition of T4A and is recognised as remuneration over four
years from January 2021 to December 2024.
T4A is not expected to meet the minimum threshold for highly stretching
targets to earn the additional consideration element of post combination
remuneration. Therefore, the post combination expense in respect of the
additional consideration element that was recognised in FY22 of £1.6 million
has been released, and we have not recognised any cost in FY23.
Moreover, the post combination consideration cost in respect of FY24 and FY25
is expected to reduce to £2.1 million and £0.4 million respectively, as only
the deferred consideration element will now be recognised.
Underlying earnings per share
Calculated as profit after tax net of non-underlying expenses, divided by
called up equity share capital.
2023 2022
£m £m
Profit after tax 49.9 44.0
Non-underlying expenses 0.4 11.5
Tax allowable element of costs - (1.4)
Underlying profit after tax 50.3 54.1
Divide by: Called up equity share capital 3.3 3.3
Underlying earnings per share 15.2p 16.3p
Underlying profit before tax
Calculated as profit before tax net of non-underlying expenses.
2023 2022
£m £m
Profit before tax 62.6 54.3
Add: Non-underlying expenses 0.4 11.5
Underlying profit before tax 63.0 65.8
Cash flow measures
Shareholder returns
Calculated as dividend per share paid to shareholders, which relate to the
respective financial years.
2023 2022
1(st) interim dividend 3.2 pence 3.2 pence
2(nd) interim dividend 7.0 pence 7.0 pence
Shareholder returns 10.2 pence 10.2 pence
% increase on previous financial year 0.0% 2.0%
There are generally two dividend payments made relating to each financial
year. Shareholder returns is a measurement of the total cash dividend received
by each shareholder for each individual share held by them.
Dividend policy
Calculated as total cash dividends paid in relation to the respective
financial year, divided by the post-tax profit relating to that same financial
year.
2023 2022
£m £m
Total cash dividends paid 33.7 33.7
Profit for the financial year 49.9 44.0
Dividends as a % of profit 68% 77%
Our policy is to pay approximately 60% to 65% of full year profit after tax as
two interim dividends.
Delivery on dividend policy is a measurement of the ability of the business to
generate distributable profits.
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