REG - JTC PLC - Full year results for year ended 31 December 2023
09/04/2024 07:00
For best results when printing this announcement, please click on link below:
http://newsfile.refinitiv.com/getnewsfile/v1/story?guid=urn:newsml:reuters.com:20240409:nRSI7701Ja&default-theme=true
RNS Number : 7701J JTC PLC 09 April 2024
full year RESULTS for year ended 31 december 2023
9 April 2024
JTC PLC
("the Company" together with its subsidiaries ("the Group" or "JTC")
Full year results for the year ended 31 December 2023
Another year of outstanding financial performance and strong momentum into
2024
As reported Underlying*
2023 2022 Change 2023 2022 Change
Revenue (£m) 257.4 200.0 +28.7% 257.4 200.0 +28.7%
EBITDA (£m) 77.8 56.1 +38.8% 85.9 66.0 +30.1%
EBITDA margin* 30.2% 28.0% +2.2pp 33.4% 33.0% +0.4pp
Operating profit/EBIT (£m) 52.7 33.8 +55.8% 60.8 43.8 +38.8%
Profit before tax (£m) 24.3 35.9 -32.3% 40.5 34.1 +18.9%
Earnings per share (p)** 14.20 23.92 -40.6% 37.23 33.27 +11.9%
Cash conversion* 106% 91% +15pp 106% 91% +15pp
Net debt (£m) 135.1 120.4 +14.7 123.3 104.8 +18.5
Dividend per share (p) 11.17 9.98 +11.9% 11.17 9.98 +11.9%
* For further information on our alternative performance measures
(APM) see the appendix to the CFO Review.
** Average number of shares (thousands) for 2023: 153,659 (2022: 145,137)
EXCEPTIONAL FINANCIAL PERFORMANCE
· Revenue +28.7%, driven by record net organic growth of 19.9%
(2022: 12.0%)
· Underlying EBITDA +30.1% to £85.9m (2022: £66.0m) with an
improvement in underlying EBITDA margin to 33.4% (2022: 33.0%)
· New business wins +25.2% to a record £30.8m (2022: £24.6m)
· Significant reduction in client attrition to 5.1% (2022: 6.4%)
reflecting the longevity of client relationships associated with recent
acquisitions
· Exceptional underlying cash conversion of 106% (2022: 91%)
resulting in leverage of 1.43x underlying EBITDA at period end, below the
guidance range of 1.5x - 2.0x
· Increased debt facility of £400m at period end to support
delivery of Cosmos era business plan
· Total dividend per share +11.9% to 11.17p (2022: 9.98p)
SUCCESSFUL EXECUTION OF GROWTH STRATEGY
· Institutional Client Services Division performed well with net
organic revenue growth of +19.4% as the businesses acquired during the Galaxy
era continue to perform strongly, especially in the US
· Private Client Services Division saw excellent revenue growth of
+48.5% and record net organic revenue growth of +20.9% driven by strong
performance in the Caribbean, US, and Jersey
· The Group Commercial Office delivered strong results with
cross-sales value increasing +32.3%
· Strategically important acquisition of SDTC integrating well
· Galaxy era growth objective of doubling from FY20 achieved two
years ahead of plan
STRONG GROWTH OUTLOOK
· Good momentum into the new year, with strong organic growth
trends set to continue, supported by robust pipeline of new business
· Active pipeline of M&A opportunities across both Divisions
with four accretive bolt-on deals in exclusivity, supported by existing
balance sheet capacity
· Net organic revenue growth guidance raised to 10%+ per annum for
the Cosmos era
· All other well-established guidance metrics maintained:
underlying EBITDA margin of 33% - 38%; cash conversion of 85% - 90% and net
debt of between 1.5x - 2.0x underlying EBITDA
· Cosmos era strategic objective to double the size of the business
again from FY23 by FY27
Nigel Le Quesne, Chief Executive Officer of JTC, said:
"2023 was another exceptional year for JTC. We delivered further above
guidance net organic revenue growth of 19.9%, driven by record net new
business wins of £30.8 million, on an improved 33.4% EBITDA margin, supported
by continued strong client demand for our services. This result exceeded last
year's outstanding performance and continues our track record of 36 years of
uninterrupted profitable growth, demonstrating JTC's consistent earnings power
through the cycle and resilience to wider market volatility.
Having achieved our Galaxy era strategic objective to double the size of the
business in 2023, two years earlier than planned, we start 2024 with strong
growth momentum towards our new Cosmos era goal to double the size of the
business again. I am convinced that one of the key drivers of our success has
been, and will continue to be, our employee shared ownership, which means that
everyone is aligned in creating long-term value for the Group and all its
stakeholders. I have no doubt that this success will continue, and we look
forward to delivering further strong profitable growth in 2024 and beyond."
ENQUIRIES
JTC PLC +44 (0) 1534 700 000
Nigel Le Quesne, Chief Executive Officer
Martin Fotheringham, Chief Financial Officer
David Vieira, Chief Communications Officer
Camarco
Geoffrey Pelham-Lane +44 (0) 7733 124 226
Sam Morris +44 (0) 7796 827 008
Charles Dingwall +44 (0) 7586 712 964
(JTC@camarco.co.uk)
A presentation for analysts will be held at 09:30 BST via Zoom video
conference. The slides and an audio-cast of the presentation will subsequently
be made available on the JTC website www.jtcgroup.com/investor-relations
(http://www.jtcgroup.com/investor-relations)
CHIEF EXECUTIVE OFFICER'S REVIEW
ACCELERATING TOGETHER
NIGEL LE QUESNE
CHIEF EXECUTIVE OFFICER
ANOTHER EXCEPTIONAL YEAR
Last year, I started my review by stating that 2022 had arguably been the best
in my 30+ years at JTC. This is a phrase I will have to stop using, as 2023
surpassed it. From record organic growth to another platform acquisition in
the US, the Group delivered an exceptional performance, in every respect.
DELIVERING OUR GALAXY ERA GOAL TWO YEARS EARLY
We are proud of our ability to deliver against stretching multi-year business
plans, which we call eras. We deliberately name each era to give it an
identity and focus collective effort within the business to achieve it. Each
era is a controlled effort that matches the ever-growing capabilities of the
Group with the market opportunities we see. To our employee-owners, the eras
are also milestone targets that create opportunities for Shared Ownership
awards, which have sat at the heart of our culture for over 25 years.
After listing in March 2018, we commenced the 'Odyssey era' and doubled the
size of the Group (as measured by revenue and underlying EBITDA) by the end of
2020.
We then set ourselves the challenge of doubling again and named the era
'Galaxy', anticipating a four-to-five-year timeframe due to increased scale.
The strong execution of our growth strategies allowed us to accelerate
progress in both 2021 and 2022 and in 2023 we achieved our Galaxy era goal
after just three years, some two years ahead of schedule. This is an
outstanding performance, especially given the post pandemic environment and
wider macro volatility and demonstrates how robust our business model is and
how the demand for our services continues to grow. I am particularly pleased
that net organic revenue growth has increased each year from 9.6% in 2021, to
12.0% in 2022 and now 19.9% in 2023, well ahead of our 8% - 10% medium term
guidance. The Galaxy era also saw us make several important acquisitions in
the US, most notably the platform businesses SALI in the ICS Division and SDTC
in the PCS Division. These, along with smaller complementary deals, have
created a strong platform for growth in the US. We now enter the Cosmos era
during which we aim to double the size of the Group for the third time in a
decade and achieve £0.5bn+ of revenue, with a higher proportion of Group
revenues coming from the high growth US market.
FINANCIAL PERFORMANCE
Revenue grew 28.7% to £257.4m (2022: £200.0m) and underlying EBITDA also
increased 30.1% to £85.9m (2022: £66.0m). Net organic revenue growth was a
record 19.9% (2022: 12.0%) driven by another record in new business wins of
£30.8m (2022: £24.6m). Despite the excellent organic growth performance and
associated costs of on-boarding new business, our underlying EBITDA margin
increased by 0.4pp to 33.4% (2022: 33.0%) and continued within our medium-term
guidance for this metric of 33% to 38%. Cash conversion was once again robust
and above guidance at 106% (2022: 91%). With the acquisition of SDTC being
funded by a successful capital raise in June, leverage stood at 1.43x
underlying EBITDA at period end, again aligned with our guidance range of 1.5x
to 2.0x.
CONSISTENT GROWTH AND INNOVATION
I have written before about the natural 'hedge' that exists within the
business, which allows us to deliver consistent growth throughout the economic
cycle. When markets are buoyant, we win more 'new from new' business as
clients launch new investment vehicles (notably funds) and the propensity to
invest and add to portfolios more generally increases. When conditions are
less favourable, we generate more work from existing clients as they respond
to threats and opportunities in relation to their current holdings and
structures. As a professional services business with client contracts that
span 14 years or more, increased activity levels within the existing client
base can generate meaningful growth for the Group.
In addition to this established pattern of demand, which we have observed for
more than 30 years, we have a culture of continuous improvement and innovation
that permeates through the business and sets ambitious standards for growth.
Through both M&A and internal development via our Divisions and the
Commercial Office, we add new services that are complementary to our core
fund, corporate and private client offering. This allows us to grow 'share of
wallet' with existing clients and also helps us to win new mandates. Service
lines that we added or proactively expanded in the Galaxy era are now making
meaningful contributions to Group revenue, often at strong margins. These
include our banking platform (incorporating foreign exchange, treasury and
custody), employer solutions, tax compliance, regulatory reporting,
operational due diligence and strategic transformation services, all of which
in combination delivered over £60m of revenue in 2023. With a global
addressable market that we believe is at least $12bn per annum in size, there
remains enormous opportunity for further long-term growth.
INSTITUTIONAL CLIENT SERVICES DIVISION
Revenue increased 19.5% to £163.3m (2022: £136.7m) with a 19.9% increase in
underlying EBITDA to £51.6m (2022: £43.0m). Underlying EBITDA margin
increased by 0.1pp to 31.6% (2022: 31.5%) and improved by a total of 3.7pp
during the Galaxy era (2021 to 2023 inclusive). Net organic growth was once
again strong and increased by 4.8pp to 19.4% (2022: 14.6%) with the annualised
value of new business wins increasing by 19.8% to a record £20.6m (2022:
£17.2m).
The availability of acquisitions that met our disciplined criteria led to a
front-loading of inorganic activity for the Division during the Galaxy era,
with a record seven ICS deals in 2021. This led to a natural period of focus
on integration and value capture in 2022, which continued in 2023. We
announced the acquisition of Blackheath Capital, an established UK ManCo
business, which completed post period end and will add further scale and
strategically important UK coverage to our Global AIFM Solutions business.
The ICS businesses acquired during the Galaxy era continued to perform
strongly. JTC Employer Solutions (formerly RBC cees) remains one of the
Group's most successful acquisitions in terms of ROIC and continues to evolve
and grow on our platform. The innovative perfORM Operational Due Diligence
business has scaled well, with expansion in the US and Europe, as well as the
UK, creating a large number of cross-selling opportunities. Ballybunion, the
Irish ManCo business, was fully re-branded as JTC and continued to contribute
to our growing platform in Ireland, along with the depositary business, INDOS.
In the US, the in-country senior leadership team delivered even greater
cohesion and alignment, bringing together the talent and skills from SALI ,
Segue and EFS, as well as legacy JTC operations. Post period end in January,
the final earnout payment for the SALI acquisition was made, confirming its
smooth integration into the Division and the highly predictable, long-term
revenue streams that SALI brings to the Group as an ICS platform business in
the large, high-growth US market.
Regionally, the US remained the fastest growing market for ICS, and we also
saw good growth in our Luxembourg and UK offices with stable performance from
the Netherlands, Channel Islands and South Africa. At the end of the year, the
Division stood at some c. 1,000 people serving clients from 21 offices and
generating 63.4% of Group revenues (2022: 68.3%). This scale and reach,
combined with our focus on providing client service excellence enabled by
best-in-class technology, stands us in good stead to succeed in a competitive
market.
Overall, the ICS Division made excellent progress in 2023 and has been a major
component of the Group's accelerated delivery of the Galaxy era. As the
Division continues to scale, particularly in the US, we anticipate further
strong organic growth, additional opportunities for M&A and more service
line innovation.
We have assembled a strong global leadership team, with a number of key
appointments during the period. The team are ambitious for further success
during the Cosmos era and have constructed an ambitious plan centred on our
clients, employee-owners, growth (organic and inorganic) and enhanced market
positioning.
PRIVATE CLIENT SERVICES DIVISION
Revenue increased 48.5% to £94.1m (2022: £63.4m) with an increase of 49.2%
in underlying EBITDA to £34.3m (2022: £23.0m). The underlying EBITDA margin
was 36.5% (2022: 36.3%) and remains towards the top end of our established
guidance range of 33% - 38%. The investments made in the PCS platform
throughout the Galaxy era continued to bear fruit, with net organic revenue
growth increasing by an outstanding 12.2pp to 20.9% (2022: 8.7%) and the
annualised value of new business wins being a record £10.2m (2022: £7.4m).
The strong organic growth reflects both the quality of our offering as the
pre-eminent trust company business and our commitment to innovation and the
delivery of sophisticated services including JTC Private Office, Strategic
Transformation services, treasury, custody tax compliance and regulatory
reporting. The Division continues to successfully redefine the parameters of a
world-class PCS offering, which includes both direct services to end clients
and indirect services providing solutions and support to institutions for
their PCS client books, which in turn, enlarges its addressable global market.
The integration of New York Private Trust Company (NYPTC), which was acquired
in the final quarter of 2022, progressed as planned. NYPTC enabled us to
become the first non-US, non-bank firm to be licensed to provide trust company
services from Delaware, an important competitive advantage as we build out our
offering in the US. This was supplemented in August when we made our latest
strategic 'platform' move in the US with the acquisition of South Dakota Trust
Company (SDTC), a business known to JTC since 2016, with an established client
base of c. 1,700 high net worth and ultra-high net worth clients and a 22-year
track record of consistent growth, high margins and strong cash conversion. We
have been pleased with the performance of the business to date, with
integration progressing well, including a strong cultural alignment. These
deals, in combination with our well-established legacy business in the US,
established JTC as the leading independent provider of administration services
to the US personal trust market with more than $150 billion of assets under
administration (AuA).
Regionally, we further expanded our footprint with a licence to operate in the
Bahamas in support of Project Amaro, the Group's largest ever single mandate
for the provision of services to a US-based global bank and its clients. Our
Miami and Cayman offices celebrated their ten-year anniversaries and post
period end we established a new office in Vienna, Austria, to enhance our
European presence. The Division continued to attract top talent from the
industry and its global network delivered growth across key regions, including
the US, Caribbean and Jersey.
The Division has cemented its position as a leader in its markets. In support
of JTC's ambition for its brand to be recognised globally as a hallmark of
quality, the Division launched its six client service excellence principles:
Above and Beyond Service, Can Do Attitude, Entrepreneurial Outlook, Know Your
Client, Transparent Communications, and Integrity. These, along with ambitious
growth targets, will form the foundation of the Division's approach to success
during the Cosmos era.
RISK
We continued our excellent record in managing the risks associated with being
a leading regulated professional services business. In 2023 the team focused
much of their time and effort on further enhancing our Risk & Compliance
function globally to meet the ever-evolving requirements of international
regulation. While this inevitably presents challenges, it also creates
opportunities for growth and we seek to embrace these as our clients,
especially larger and more complex organisations, look to us for expertise and
support in this area. Many of our most recently developed service lines,
including Strategic Transformation, tax compliance and regulatory reporting
are driven, in part or in whole, by the regulatory landscape.
We continue to see long-term emerging risks come into greater focus, including
transition risks associated with the world seeking to decarbonise. The
internal Sustainability Forum, created in 2022, worked to manage and deliver
our sustainability roadmap across the Group. At Board level, the Governance
& Risk Committee, formed at the end of 2022, took on responsibility for
oversight of risk at a Group level, as well as providing guidance on our
sustainability journey and the commercial opportunities the Group might
capture through the provision of sustainability services to clients. We were
once again a Carbon Neutral+ organisation and made our first public submission
to the Carbon Disclosure Project (CDP). Our commitment to achieve net zero by
2030 was advanced with the selection of the Science Based Target initiative
(SBTi) as the framework we will follow to achieve this goal. More detail,
including our latest TCFD disclosures, will be published in our 2023 Annual
Report.
As the war in Ukraine enters its third year and with conflict between Israel
and Palestine and the wider Middle East region, global macro uncertainty
escalated significantly in 2023. As a Group, we remain acutely aware of our
responsibilities in relation to sanctions compliance and enforce all such
measures rigorously.
Significant advances in artificial intelligence (AI) came to the fore in 2023,
in particular generative AI and large language models. As with almost every
technological innovation, we see both opportunity and risk inherent in these
inventions. Given that our services rely extensively on dealing with large
amounts of data in a secure manner and where many of the outputs we produce to
clients are in the form of 'words and numbers', we have embraced the
opportunity to partner with our technology providers and examine use cases
that are of benefit to the growth of the business, as well as those that
present risks. This work has been supplemented with updates to system use
policies and internal training and communications.
Looking ahead 2024 will see a presidential election in the US and a high
probability of a general election in the UK. While we will continue to closely
monitor any potential impact from these key political events, our experience
over 36 years of trading suggests that the Group will remain resilient and
adaptable to any changes that arise.
OUTLOOK
2023 was another exceptional year for JTC and will go down as a milestone in
our history with the achievement of our Galaxy era goal to once again double
the size of the Group. Our ability to grow consistently is a fundamental
feature of the business that has been refined over 36 years and we remain
dedicated to the culture, approach and discipline that have enabled it. I am
particularly pleased with the organic growth performance of the Group, in 2023
specifically, where we had a number of initiatives come to fruition
simultaneously, bringing and embedding revenue upgrade to the Group. The
ability to continually expand client relationships over lifespans that average
14 years, as well as to win new clients in competitive markets, is testament
to the quality of service that our people deliver and the way we innovate and
add value through relevant new services over time.
While we are committed to using the best technology tools available, it is our
people that form and nurture relationships with our clients and it is our
culture of Shared Ownership that binds our team together and gives us shared
vision, purpose and belief in our ability to succeed. Our commitment to a
meritocratic Shared Ownership culture remains unwavering and I look forward to
the anticipated opportunity to share the success of the Galaxy era with our
global team later this year.
Our inorganic growth has always been highly disciplined and focused on the
opportunities that we believe will deliver the best long-term benefits for the
Group. We made nine acquisitions during the Galaxy era, all of which have and
will add value to the business. We had a specific focus on establishing a
platform for growth in the important US market and I am pleased that in the
form of SALI and SDTC, we have made the cornerstone purchases needed for the
ICS and PCS Divisions respectively. We will continue to identify and target
high quality opportunities in our chosen markets and in addition will seek to
return, on occasion, to our pre-IPO approach of acquisitions at lower
multiples where we were able to revitalise under-performing businesses on our
platform, thus delivering an attractive return on invested capital across our
portfolio of acquisitions.
Our two Divisions continue to provide balance and diversification to the Group
and as noted above, have sizeable opportunities to capture in the US, as well
as growth potential in other markets, including Asia, in the Cosmos era. The
catalyst of the Commercial Office proved itself in Galaxy and it has already
been strengthened, with a new Group Head appointed post period end in January.
Looking ahead, we begin the Cosmos era with excellent momentum and anticipate
continued strong organic growth in 2024 and beyond. While we are excited by
our ambition to double the size of the Group for the third time in a decade
and achieve £0.5bn+ of revenue, we will continue to ensure that the JTC
platform remains well-invested at all times and that our talented global team
are ready and equipped to grow with the business, maximise their individual
potential and exceed the expectations of our clients. JTC will continue to
innovate and shape the markets we serve in a way that supports long-term value
creation for the Group and all its stakeholders.
In concluding, I once again extend my thanks to every member of the growing
and talented JTC team for their efforts in 2023.
NIGEL LE QUESNE
Chief Executive Officer
CHIEF FINANCIAL OFFICER'S REVIEW
EXCEPTIONAL FINANCIAL PERFORMANCE
MARTIN FOTHERINGHAM
CHIEF FINANCIAL OFFICER
REVENUE
In 2023, revenue was £257.4m, an increase of £57.4m (+28.7%) from 2022
(+35.6%). Revenue growth on a constant currency basis was also +28.7% (2022:
+32.0%).
Net organic growth continued to be strong through the year with an excellent
full-year result of 19.9% (2022: 12.0%). The rolling three year average
increased to 13.8% (2022: 9.8%).
As highlighted in our interim results, we have continued to see particularly
strong volume growth in the business. This was driven by the expansion of our
Tax Compliance offering as well as an increased uptake of our Treasury and
Banking services. As a predominantly time and materials business, organic
growth was also supported by strong pricing growth.
Our largest 15 clients represent 9.5% (2022: 10.7%) of our annual revenue
thereby demonstrating the lack of customer concentration in the business. The
new business pipeline is healthy and at the period end stood at £54.9m
(31.12.2022: £45.8m).
Net organic growth was driven by gross new business revenues in the year of
£49.6m (24.9%) (2022: £23.9m, 18.4%). Within this we saw client attrition of
5.1% (2022: 6.4%), with the three year average falling to 6.4% (2022: 7.7%).
Alongside the increased lifetime value of our book and long-term earnings
stability, this reduction in attrition can be attributed in large part to the
high quality acquisitions the Group has made in recent years (notably RBC cees
and SALI). In making these acquisitions, we deployed our capital at a lower
immediate rate of return knowing that the contracts associated with these
businesses are typically of a 30 - 40 year duration and represented a sound
investment in the future of the business.
The retention of revenues that were not end of life remained consistent at
98.2% (2022: 98.3%) with the rolling three year average improving to 98.0%
(2022: 97.4%).
Geographical growth is summarised below, with the highlight being the US which
grew by 70.5% and represents 25% of our 2023 revenues (2022: 19%).
2023 2022 £ +/- % +/-
Revenue Revenue
UK & Channel Islands £128.2m £107.8m +£20.4m +18.9%
US £64.8m £38.0m +£26.8m +70.5%
Rest of Europe £38.7m £34.3m +£4.4m +12.7%
Rest of the World £25.7m £19.9m +£5.8m +29.3%
£257.4m £200.0m +£57.4m +28.7%
Revenue growth, on a constant currency basis, is summarised as follows.
2022 Revenue £200.0m
Lost - JTC decision (£0.8m)
Lost - Moved service provider (£2.7m)
Lost - Natural end/no longer required (£6.6m)
Net more from existing clients £36.3m
New clients £13.3m
Acquisitions* £17.9m
2023 Revenue £257.4m
* When JTC acquires a business, the acquired book of clients are
defined as inorganic for the first two years of JTC ownership. Acquired
clients contributed an additional £17.9m in 2023 and is broken down as
follows: NYPTC £5.2m and SDTC £12.7m.
UNDERLYING EBITDA AND MARGIN PERFORMANCE
Underlying EBITDA in 2023 was £85.9m, an increase of £19.9m (30.1%) from
2022.
We are pleased to have delivered further margin improvement with an underlying
EBITDA margin of 33.4% (2022: 33.0%), despite the macroeconomic environment
remaining uncertain.
Management were also particularly pleased to be able to deliver margin
improvement at the same time as registering organic growth of 19.9%. During
periods of heightened growth, the required up-front investment in
infrastructure and human capital inherently slows down margin progression.
This initial investment is a key allocation of capital in order to maximise
and deliver on growth opportunities and ensure the continued longevity of our
client relationships.
INSTITUTIONAL CLIENT SERVICES
Revenue increased by 19.5% when compared with 2022 (47.4%).
Net organic growth, on a constant currency basis, was 19.4% (2022: 14.6%) with
the main source of growth coming from the US. The rolling three year average
now stands at 15.2% (2022: 11.0%).
Attrition for the Division fell to 5.2% (2022: 7.5%), of which 3.5% (2022:
5.6%) was for end of life losses. The improvement in attrition is largely
attributable to the SALI and RBC cees acquisitions but also to lengthening of
structure lives as the adverse economic environment persisted.
Revenue growth, on a constant currency basis, is summarised below.
REVENUE GROWTH ICS
2022 Revenue £136.7m
Lost - JTC decision (£0.6m)
Lost - Moved service provider (£1.7m)
Lost - Natural end/no longer required (£4.8m)
Net more from existing clients £25.5m
New clients £8.2m
2023 Revenue £163.3m
The Division's underlying EBITDA margin increased from 31.5% in 2022 to 31.6%
in 2023 and we are pleased that the margin continues to improve in the face of
outstanding growth and continued investment.
PRIVATE CLIENT SERVICES
Revenue increased by 48.5% when compared with 2022 (15.7%).
Net organic growth, on a constant currency basis, was 20.9% (2022: 8.7%) with
strong growth in the Caribbean, US, and Jersey. The rolling three year average
now stands at 12.2% (2022: 8.3%).
Attrition for the Division was consistent at 5.0% (2022: 4.8%), of which 3.0%
(2022: 3.3%) were for end of life losses.
Net organic growth for the Division in 2022 had been suppressed whilst we
onboarded our largest ever mandate. This was a complex mandate to fulfil and
without these revenues in 2023, the Division would have been well above our
medium-term guidance range.
Revenue growth, on a constant currency basis, is summarised below.
REVENUE GROWTH PCS
2022 Revenue £63.3m
Lost - JTC decision (£0.2m)
Lost - Moved service provider (£1.0m)
Lost - Natural end/no longer required (£1.8m)
Net more from existing clients £10.8m
New clients £5.1m
Acquisitions* £17.9m
2023 Revenue £94.1m
* When JTC acquires a business, the acquired book of clients are
defined as inorganic for the first two years of JTC ownership. Acquired
clients contributed an additional £17.9m in 2023 and is broken down as
follows: NYPTC £5.2m and SDTC £12.7m.
The Division's underlying EBITDA margin increased from 36.3% in 2022 to 36.5%
in 2023. The Division continues to perform well and the margin improvement has
been driven by the integration of NYPTC and the recent acquisition of SDTC.
PROFIT BEFORE TAX
The reported profit before tax was £24.3m (2022: £35.9m).
The depreciation and amortisation charge increased to £25.1m from £22.3m in
2022. Of the £2.8m increase, £2.2m was as a result of intangible assets and
£0.4m as a result of increased depreciation charges on property, plant and
equipment.
Whereas in 2022 we reported an exchange rate gain upon revaluation of our
intercompany loans of £11.9m, in 2023 there was a translation loss of £8.5m
as a result of closing exchange rates. Management considers these
gains/(losses) as non-underlying as they are unrealisable movements from the
elimination of inter-company loans upon consolidation and do not relate to the
underlying trading activities of the Group.
Adjusting for non-underlying items, the underlying profit before tax increased
by 18.9% to £40.5m (2022: £34.1m).
The relative increase was lower than the 30.1% growth reported in underlying
EBITDA and this was due to the increased interest expense on our borrowings
that fund M&A activity and an underlying foreign exchange rate loss of
£1.1m (2022: £2.5m gain).
The interest rate applied to our loan facilities is determined using SONIA
plus a margin based on net leverage calculations. Policy rate increases in
2023 resulted in a £5.9m increase in the interest expense on our borrowings.
The Board sought to increase the predictability of JTC's interest expense and
minimise market risk over the next couple of years. During Q4 2023, we
successfully completed a refinancing process and purchased a two year interest
rate swap covering £180m of our drawn debt facilities. This fixed the
interest rate for that portion of the facility at c. 4.3% (excluding bank
margin). The remaining balance of the facility is chargeable at the floating
SONIA rate.
NON-UNDERLYING ITEMS
Non-underlying items incurred in the period totalled a £16.2m debit (2022:
£1.9m credit) and comprised the following:
2023 2022
£m £m
EBITDA
Acquisition and integration costs 7.1 3.4
Office start-up costs 0.6 0.8
Other costs 0.4 0.2
Employee Incentive Plan (EIP) - 5.2
Revision of ICS operating model - 0.4
Total non-underlying items within EBITDA 8.1 10.0
Profit before tax
Items impacting EBITDA 8.1 10.0
(Gains)/losses on revaluation of contingent consideration (0.4) 0.1
Foreign exchange losses/(gains) 8.5 (11.9)
Total non-underlying items within profit before tax 16.2 (1.9)
Non-underlying items within EBITDA were lower than the prior period as 2022
included an EIP expense in relation to the vesting of the second tranche of
awards made to employees in 2021.
Acquisition and integration costs of £7.1m were £3.7m higher than 2022,
reflecting the increased M&A activity and primarily the costs associated
with the acquisition of SDTC.
Office start-up costs of £0.6m included costs in relation to establishing the
infrastructure to trade in new offices in Austria and the Bahamas. Our
experience is that these require significant up-front investment in personnel
in advance of trading and the generation of revenues.
The gain on revaluation of contingent consideration relates to the Segue
earn-out (acquired Q2 2021) where upon reassessment on 31 December 2023,
Management concluded that no additional payments would be due.
As highlighted in the profit before tax commentary, the foreign exchange loss
of £8.5m relates to the revaluation of inter-company loans (£11.9m gain in
2022).
TAX
The net tax charge in the year was £2.5m (2022: £1.2m). The cash tax charge
was £4.1m (2021: £2.8m), but this is reduced by deferred tax credits of
£1.6m (2022: £1.6m) mainly as a result of movements in relation to the value
of acquired intangible assets held on the balance sheet. When excluding
non-underlying items, our 2023 effective tax rate was 10.1% (2022: 8.2%).
With our increasing global presence, this increased tax rate reflects the
restructuring of our US businesses to support the M&A activity in the
region. This has resulted in an increased tax charge but enables the Group to
efficiently manage its global cash flows.
The Group regularly reviews its transfer pricing policy, is fully committed to
responsible tax practices and continues to be fully compliant with OECD
guidelines. Whilst we are not legally required to publish our tax strategy, we
consider it best practice to demonstrate transparency on tax matters and our
Board-approved strategy is available online.
EARNINGS PER SHARE
Basic EPS decreased by 40.6% to 14.20p. Taking into account non-underlying
items and adjustments that we make against profit for the year our adjusted
underlying EPS increased by 11.9% and was 37.23p (2022: 33.27p).
Adjusted underlying basic EPS reflects the profit for the year adjusted to
remove the impact of non-underlying items, amortisation of acquired intangible
assets and associated deferred tax, amortisation of loan arrangement fees,
impairment of intangible customer relationships and the unwinding of net
present value discounts in relation to contingent consideration.
RETURN ON INVESTED CAPITAL (ROIC)
ROIC for 2023 was 12.3%, reporting a strong increase on prior year (2022:
11.5%) with both periods significantly above our cost of capital. In 2023 we
completed the acquisition of SDTC, our largest to date, and such outlays can
result in a short-term dilution on returns.
These investment decisions are critical and when evaluating opportunities, we
consider both the immediate return on capital but also the long-term potential
and strategic fit. As highlighted in the commentary on revenue, the SALI
acquisition (acquired in 2021) was an example whereby short-term return on
capital was reduced but we gained 30 - 40 year customer life-cycles which lead
to lower attrition rates as well as significant cross-selling opportunities
resulting in attractive returns when measured over the long term.
We measure ROIC on a post-tax basis and more information on our approach can
be found in the CFO's Review appendix.
INTANGIBLE ASSETS
Our total assets at 31 December 2023 were £905.1m, a c. 300% increase to the
£225.3m reported in our first post-IPO set of results (2018). Much of this
increase has been the result of acquisitions, with goodwill now comprising 58%
of our total assets with other intangible assets representing a further 16%.
Goodwill is assessed for impairment on an annual basis, or more frequently if
events or changes in circumstances indicate potential impairment. No goodwill
impairments were recorded in 2023. One significant and positive change in 2023
was the consolidation of our US ICS acquisitions into one single
cash-generating unit (CGU) - reflecting both how the segment is now managed
and the successful integration of these acquisitions.
Customer relationships that form part of other intangible assets are subject
to impairment assessments when impairment indicators are present. Forthcoming
legislative changes in the Netherlands highlighted a possible impairment with
our previously acquired Aufisco customer relationship. Having considered all
the risk factors, the Group decided to sell its Global Tax Support (GTS)
subsidiary (sold on 1 March 2024). The assessment of the customer relationship
balance at 31 December 2023 resulted in a £0.7m impairment. No goodwill
impairment was required for the Netherlands CGU.
CASH FLOW AND DEBT
Underlying cash generated from operations was £91.2m (2022: £60.3m) and
underlying cash conversion was 106%, significantly ahead of 2022 (91%) and
well above our medium-term guidance range.
This exceptional result was driven by the acceleration in the growth of our
Treasury and Banking services and our growing US presence, both of which
continued to shorten our working capital cycle with highly predictable and
timely cash receipts. These helped drive down our net investment days,
excluding SDTC, to 89 (2022: 110).
Management maintain their medium-term cash conversion guidance range of 85% -
90%.
Reported net debt includes cash balances set aside for regulatory compliance
purposes. Underlying net debt excludes this and at the period end was £123.3m
compared with £104.8m at 31 December 2022. This increase in net debt at the
year end was expected as the business funded the SDTC acquisition in part
through a £62m gross fundraise in June and a subsequent £118m drawdown from
its debt facility on 1 August 2023.
We are pleased to report that we reduced our net debt / underlying EBITDA
leverage at the year end to a level below our guidance range (1.5x - 2.0x) at
1.43x (2022: 1.59x).
The business completed a successful refinancing process in Q4 2023 and
increased its debt facilities to £400m, with an accordion for an additional
£100m. As of 31 December 2023, the Group had undrawn funds of £176.3m
providing the business with significant capacity for further M&A activity.
The facilities terminate on 4 December 2026 with an option to extend to 30
June 2028.
Post year end, on the 10 January 2024, the Group paid out £21.1m from its
cash on hand to settle the SALI earn-out in full.
DIVIDEND PER SHARE
We are pleased to propose a final dividend of 7.67p, resulting in a 2023
dividend per share of 11.17p (2022: 9.98p) which was a 11.9% increase on prior
year. This remains consistent with our dividend policy to declare at 30% of
adjusted underlying EPS.
Subject to Shareholders' approval at the forthcoming AGM, the final dividend
will be paid on 28 June 2024 to Shareholders on the register of members as at
close of business on 31 May 2024.
MARTIN FOTHERINGHAM
CHIEF FINANCIAL OFFICER
APPENDIX: RECONCILIATION OF REPORTED RESULTS TO ALTERNATIVE PERFORMANCE MEASURES (APMS)
In order to assist the reader's understanding of the financial performance of
the Group, APMs have been included to better reflect the underlying activities
of the Group excluding specific items as set out in note 7 in the financial
statements. The Group appreciates that APMs are not considered to be a
substitute for, or superior to, IFRS measures but believes that the selected
use of these may provide stakeholders with additional information which will
assist in the understanding of the business.
An explanation of our key APMs and link to equivalent statutory measure has
been detailed below.
Alternative performance measure Closest equivalent statutory measure APM Definition / PURPOSE AND STRATEGIC LINK
net Organic revenue growth % Revenue Definition: Revenue growth from clients not acquired through business
combinations and reported on a constant currency basis where the prior year
results are restated using current year consolidated income statement exchange
rates.
Acquired clients are defined as inorganic for the first two years of JTC
ownership.
Purpose and strategic link: Enables the business to monitor growth excluding
acquisitions and the impact of external exchange rate factors. The current
strategy is to double the size of the business by a mix of organic and
acquisition growth and the ability to monitor and set clear expectations on
organic growth is vital to the successful execution of its business strategy.
For all periods up to and including 2023, Management's medium-term guidance
range was 8% - 10%.
Underlying EBITDA % Profit/(loss) Definition: Earnings before interest, tax, depreciation, and amortisation
excluding non-underlying items (see note 7 of the financial statements).
Purpose and strategic link: An industry-recognised alternative measure of
performance which has been at the heart of the business since its
incorporation and therefore fundamental to the performance management of all
business units.
The measure enables the business to measure the relative profitability of
servicing clients.
Management's medium-term guidance range is 33% - 38%.
Underlying cash conversion % Net cash from operating activities Definition: The conversion of underlying EBITDA into cash excluding
non-underlying items.
Purpose and strategic link: Measures how effectively the business is managing
its operating cash flows. It differs to net cash from operating profits as it
excludes non-underlying items and tax, the latter in order to better compare
operating profitability to cash from operating activities.
Management's medium-term guidance range is 85% - 90%.
Underlying leverage Cash and cash equivalents Definition: Leverage ratio showing the relative amount of third party debt
(net of cash held in the business) that we have in comparison to underlying
LTM EBITDA.
Purpose and strategic link: Ensures Management can measure and control
exposure to reliance on third party debt in support of its inorganic growth.
Management's medium-term guidance range is 1.5x - 2.0x.
Adjusted underlying BASIC EPS (p) Basic Earnings Per Share Definition: Reflects the profit after tax for the year adjusted to remove the
impact of non-underlying items. Additionally, a number of other items relating
to the Group's acquisition activities, including amortisation of acquired
intangible assets and associated deferred tax, amortisation of loan
arrangement fees, impairment of intangible customer relationships and the
unwinding of NPV discounts in relation to contingent consideration, are
removed.
Purpose and strategic link: Presents an adjusted underlying basic EPS which is
used more widely by external investors and analysts, and is in addition the
basis upon which the dividend is calculated.
return on invested capital (ROIC) Profit/(loss) Definition: Reflects the net operating profit after tax divided by the average
invested capital.
Purpose and strategic link: Measures our capital efficiency in generating
profit against deployed capital. An industry-accepted APM and one that both
external investors and analysts use in addition to statutory measures.
A reconciliation of our APMs to their closest equivalent statutory measure has
been provided below.
1. ORGANIC GROWTH
2023 2022
£m £m
Reported prior year revenue 200.0 147.5
Impact of exchange rate restatement - 4.1
Acquisition revenues (1.0) (21.2)
a. Prior year organic growth 199.0 130.4
Reported revenue 257.4 200.0
Less: acquisition revenues (18.9) (54.0)
b. Current year organic growth 238.5 146.0
Net organic growth % (b/a) -1 19.9% 12.0%
2. UNDERLYING EBITDA
2023 2022
£m £m
Reported profit 21.8 34.7
Less:
Income tax 2.7 1.2
Finance cost 19.2 12.3
Finance income (0.8) (0.2)
Other losses/(gains) 9.7 (14.2)
Depreciation and amortisation 25.1 22.3
Non-underlying items within EBITDA* 8.1 10.0
Underlying EBITDA 85.9 66.0
Underlying EBITDA % 33.4% 33.0%
* As set out in note 7 in the financial statements. A reconciliation of
divisional EBTIDA can be found in note 4 of the financial statements.
3. UNDERLYING CASH CONVERSION
2023 2022
£m £m
Net cash generated from operating activities 81.3 53.3
Less:
Non-underlying cash items* 6.5 4.9
Income taxes paid 3.4 2.1
a. Underlying cash generated from operations 91.2 60.3
b. Underlying EBITDA 85.9 66.0
Underlying cash conversion (a / b) 106% 91%
* As set out in note 35.2 in the financial statements.
4. UNDERLYING LEVERAGE
2023 2022
£m £m
Cash and cash equivalents 97.2 48.9
Bank debt (220.5) (153.6)
a. Net debt - underlying 123.3 104.8
b. Underlying EBITDA 85.9 66.0
Leverage (a / b) 1.43 1.59
5. ADJUSTED UNDERLYING BASIC EPS
2023 2022
£m £m
Profit for the year as per basic EPS 21.8 34.7
Less:
Non-underlying items* 16.8 (1.9)
Amortisation of customer relationships, acquired software and brands 14.3 12.4
Impairment of customer relationship intangible asset 0.7 -
Amortisation of loan arrangement fees 0.8 1.1
Unwinding of NPV discounts for contingent consideration 5.1 3.5
Temporary tax differences arising on amortisation of customer relationships, (1.7) (1.5)
acquired software and brands
a. Adjusted underlying profit for the year 57.2 48.3
b. Weighted average number of shares 153.7 145.1
Adjusted underlying basic EPS (a / b) 37.23 33.27
The definition of adjusted underlying basic EPS was updated to include the
removal of any impairments to acquired intangible assets. Management consider
this adjustment to be consistent with their existing treatment of acquired
intangible assets. Prior to this update, the adjusted underlying EPS was
36.76p (2022: 33.27p).
* As set out in note 7 in the financial statements.
6. RETURN ON INVESTED CAPITAL
2023 2022
£m £m
Profit for the period 21.8 34.7
Add back:
Non-underlying items 16.2 (1.9)
Amortisation of customer relationships, acquired software and brands 14.3 12.4
Impairment of customer relationship intangible asset 0.7 -
Temporary tax differences arising on amortisation of customer relationships, (1.7) (1.5)
acquired software and brands
Net finance costs 18.4 12.1
Tax estimate on financing costs (0.3) (0.4)
a. Net operating profit after tax 69.5 55.3
+ Closing equity 503.9 400.2
+ Closing debt 220.5 153.6
- Closing cash (97.2) (48.9)
Invested capital 627.2 505.0
b. Average invested capital (opening + closing/2) 566.1 481.4
c. ROIC (a / b) 12.3% 11.5%
CONSOLIDATED INCOME STATEMENT
FOR THE YEAR ENDED 31 DECEMBER 2023
Note 2023 2022
£'000 £'000
Revenue 4 257,440 200,035
Staff expenses 5 (131,921) (105,831)
Other operating expenses 6 (44,855) (35,570)
Credit impairment losses 12 (2,934) (3,092)
Other operating income 75 44
Share of (loss)/profit of equity-accounted investee 32 (15) 478
Earnings before interest, taxes, depreciation and amortisation ("EBITDA") 77,790 56,064
Comprising:
Underlying EBITDA 85,909 66,039
Non-underlying items 7 (8,119) (9,975)
77,790 56,064
Depreciation and amortisation 8 (25,140) (22,261)
Profit from operating activities 52,650 33,803
Other (losses)/gains 9 (9,912) 14,201
Finance income 10 794 244
Finance cost 10 (19,222) (12,313)
Profit before tax 24,310 35,935
Comprising:
Underlying profit before tax 40,498 34,052
Non-underlying items 7 (16,188) 1,883
24,310 35,935
Income tax 11 (2,489) (1,221)
Profit for the year 21,821 34,714
Earnings Per Share ("EPS") Pence Pence
Basic EPS 34.1 14.20 23.92
Diluted EPS 34.2 14.07 23.60
The notes are an integral part of these consolidated financial statements.
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
FOR THE YEAR ENDED 31 DECEMBER 2023
Note 2023 2022
£'000 £'000
Profit for the year 21,821 34,714
Other comprehensive (loss)/income
Items that may be reclassified to profit or loss:
Exchange difference on translation of foreign operations (net of tax) 38 (7,038) 21,314
Losses on cash flow hedges 29.1 (615) -
Hedging gains reclassified to profit or loss 10 (134) -
Items that will not be reclassified to profit or loss:
Remeasurements of post-employment benefit obligations 5.1 (300) 316
Total other comprehensive (loss)/income (8,087) 21,630
Total comprehensive income for the year 13,734 56,344
The notes are an integral part of these consolidated financial statements.
CONSOLIDATED BALANCE SHEET
AS AT 31 DECEMBER 2023
Note 2023 2022
£'000 £'000
Assets
Property, plant and equipment 20 49,659 49,566
Goodwill 21 522,964 363,708
Other intangible assets 21 147,302 128,020
Investments 32 3,365 3,156
Other non-financial assets 22 2,981 2,369
Other receivables 15 - 535
Deferred tax assets 23 266 143
Total non-current assets 726,537 547,497
Trade receivables 12 32,071 33,290
Work in progress 13 11,615 12,525
Accrued income 14 26,574 23,911
Other non-financial assets 22 6,899 5,983
Other receivables 15 4,181 3,827
Cash and cash equivalents 16 97,222 48,861
Total current assets 178,562 128,397
Total assets 905,099 675,894
Equity
Share capital 26.1 1,655 1,491
Share premium 26.1 392,213 290,435
Own shares 26.2 (3,912) (3,697)
Capital reserve 26.3 28,584 24,361
Translation reserve 26.3 8,941 15,979
Other reserve 26.3 (749) -
Retained earnings 26.3 77,144 71,648
Total equity 503,876 400,217
Liabilities
Trade and other payables 17 49,794 26,896
Loans and borrowings 18 220,531 153,622
Lease liabilities 19 37,924 40,602
Deferred tax liabilities 23 9,474 11,184
Derivative financial instruments 29 749 -
Other non-financial liabilities 24 1,307 788
Provisions 25 2,200 1,884
Total non-current liabilities 321,979 234,976
Trade and other payables 17 46,897 23,424
Lease liabilities 19 6,117 4,292
Other non-financial liabilities 24 20,512 8,628
Current tax liabilities 5,346 4,088
Provisions 25 372 269
Total current liabilities 79,244 40,701
Total equity and liabilities 905,099 675,894
The consolidated financial statements were approved by the Board of Directors
on 8 April 2024 and signed on its behalf by:
NIGEL LE
QUESNE
MARTIN FOTHERINGHAM
CHIEF EXECUTIVE
OFFICER
CHIEF FINANCIAL OFFICER
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
FOR THE YEAR ENDED 31 DECEMBER 2023
Note Share Share Own Capital Translation Other Retained Total
capital premium shares reserve reserve reserve earnings equity
£'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000
Balance at 1 January 2023 1,491 290,435 (3,697) 24,361 15,979 - 71,648 400,217
Profit for the year - - - - - - 21,821 21,821
Other comprehensive loss - - - - (7,038) (749) (300) (8,087)
Total comprehensive income for the year - - - - (7,038) (749) 21,521 13,734
Issue of share capital 26.1 164 103,631 - - - - - 103,795
Cost of share issuance 26.1 - (1,853) - - - - - (1,853)
Share-based payments 36.5 - - - 4,223 - - - 4,223
Movement of own shares 26.2 - - (215) - - - - (215)
Dividends paid 27 - - - - - - (16,025) (16,025)
Total transactions with owners 164 101,778 (215) 4,223 - - (16,025) 89,925
Balance at 31 December 2023 1,655 392,213 (3,912) 28,584 8,941 (749) 77,144 503,876
Balance at 1 January 2022 1,476 285,852 (3,366) 17,536 (5,335) - 48,462 344,625
Profit for the year - - - - - - 34,714 34,714
Other comprehensive income - - - - 21,314 - 316 21,630
Total comprehensive income for the year - - - - 21,314 - 35,030 56,344
Issue of share capital 26.1 15 4,654 - - - - - 4,669
Cost of share issuance 26.1 - (71) - - - - - (71)
Share-based payments 36.5 - - - 2,045 - - - 2,045
Employee Incentive Plan (EIP) share-based payments 36.5 - - - 4,780 - - - 4,780
Movement of own shares 26.2 - - (331) - - - - (331)
Dividends paid 27 - - - - - - (11,844) (11,844)
Total transactions with owners 15 4,583 (331) 6,825 - - (11,844) (752)
Balance at 31 December 2022 1,491 290,435 (3,697) 24,361 15,979 - 71,648 400,217
The notes are an integral part of these consolidated financial statements.
CONSOLIDATED CASH FLOW STATEMENT
FOR THE YEAR ENDED 31 DECEMBER 2023
Note 2023 2022
£'000 £'000
Cash generated from operations 35.1 84,725 55,366
Income taxes paid (3,432) (2,053)
Net movement in cash generated from operations 81,293 53,313
Comprising:
Underlying cash generated from operations 91,180 60,308
Non-underlying cash items 35.2 (6,455) (4,942)
84,725 55,366
Investing activities
Interest received 744 254
Payments for property, plant and equipment 20 (2,346) (2,979)
Payments for intangible assets 21 (3,811) (5,491)
Payments for business combinations (net of cash acquired) 17.1, 31 (114,719) (15,113)
Payments to obtain or fulfil a contract 22 (693) (2,210)
Payment for investment 32 (250) -
Loan to third party 15 (160) -
Net cash used in investing activities (121,235) (25,539)
Financing activities
Proceeds from issue of shares 26.1 62,000 -
Share issuance costs 26.1 (1,853) (169)
Purchase of own shares 26.2 (200) (320)
Dividends paid 27 (16,025) (11,844)
Repayment of loans and borrowings 18 (50,000) -
Proceeds from loans and borrowings 18 118,000 -
Loan arrangement fees 18 (1,896) -
Interest paid on loans and borrowings (11,348) (6,173)
Principal paid on lease liabilities (6,074) (4,907)
Interest paid on lease liabilities (1,439) (1,336)
Net cash generated from/(used in) financing activities 91,165 (24,749)
Net increase in cash and cash equivalents 51,223 3,025
Cash and cash equivalents at the beginning of the year 48,861 39,326
Effect of foreign exchange rate changes (2,862) 6,510
Cash and cash equivalents at the end of the year 16 97,222 48,861
The notes are an integral part of these consolidated financial statements.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2023
SECTION 1 - BASIS FOR REPORTING AND GENERAL INFORMATION
1. Reporting entity
2. Basis of preparation
3. Material accounting policies and standards
SECTION 2 - RESULT FOR THE YEAR
4. Operating segments
5. Staff expenses
6. Other operating expenses
7. Non-underlying items
8. Depreciation and amortisation
9. Other (losses)/gains
10. Finance income and finance cost
11. Income tax
SECTION 3 - FINANCIAL ASSETS AND FINANCIAL LIABILITIES
12. Trade receivables
13. Work in progress
14. Accrued income
15. Other receivables
16. Cash and cash equivalents
17. Trade and other payables
18. Loans and borrowings
19. Lease liabilities
SECTION 4 - NON-FINANCIAL ASSETS AND NON-FINANCIAL LIABILITIES
20. Property, plant and equipment
21. Goodwill and other intangible assets
22. Other non-financial assets
23. Deferred tax
24. Other non-financial liabilities
25. Provisions
SECTION 5 - EQUITY
26. Share capital and reserves
27. Dividends
SECTION 6 - RISK
28. Critical accounting estimates and judgements
29. Financial risk management
30. Capital management
SECTION 7 - GROUP STRUCTURE
31. Business combinations
32. Investments
33. Subsidiaries
SECTION 8 - OTHER DISCLOSURES
34. Earnings Per Share
35. Cash flow information
36. Share-based payments
37. Contingencies
38. Foreign currency
39. Related party transactions
40. Consideration of climate change
41. Events occurring after the reporting period
SECTION 1 - BASIS FOR REPORTING AND GENERAL INFORMATION
1. REPORTING ENTITY
JTC PLC (the "Company") was incorporated on 12 January 2018 and is domiciled
in Jersey, Channel Islands. The Company was admitted to the London Stock
Exchange on 14 March 2018 (the "IPO"). The address of the Company's registered
office is 28 Esplanade, St Helier, Jersey.
The consolidated financial statements of the Company for the year ended 31
December 2023 comprise the Company and its subsidiaries (together the "Group"
or "JTC") and the Group's interest in an associate and investments.
The Group provides fund, corporate and private wealth services to
institutional and private clients.
2. BASIS OF PREPARATION
2.1. STATEMENT OF COMPLIANCE AND BASIS OF MEASUREMENT
The consolidated financial statements for the year ended 31 December 2023 have
been approved by the Board of Directors of JTC PLC. They are prepared in
accordance with International Financial Reporting Standards ("IFRS") as
adopted by the European Union, the interpretations of the IFRS Interpretations
Committee ("IFRS IC") and Companies (Jersey) Law 1991.
They are prepared under the historical cost convention except for certain
items which are measured at fair value as described in the accounting
policies shown in relevant notes.
In assessing the going concern assumption, the Directors considered the
principal risks and uncertainties that can be impacted by wider macroeconomic
volatility and noted that against this backdrop the Group continued to
experience revenue growth and generate positive cash flows from its operating
activities and has funding available from its bank loan facilities.
Considering these factors as part of the review of the Group's financial
performance and position, forecasts and expected liquidity, the Directors have
a reasonable expectation that the Group will have adequate resources to
continue in operational existence for the foreseeable future, being at least
12 months from the date of approval of the consolidated financial statements.
They have concluded it is appropriate to adopt the going concern basis of
accounting in preparing the consolidated financial statements.
2.2. FUNCTIONAL AND PRESENTATION CURRENCY
The consolidated financial statements are presented in pounds sterling, which
is the functional and reporting currency of the Company and the presentation
currency of the consolidated financial statements. All amounts disclosed in
the consolidated financial statements and notes have been rounded to the
nearest thousand (£'000) unless otherwise stated.
3. MATERIAL ACCOUNTING POLICIES AND STANDARDS
3.1. CHANGES IN ACCOUNTING POLICIES AND NEW STANDARDS ADOPTED
The accounting policies set out in these consolidated financial statements
have been consistently applied by all Group entities for the years presented.
There have been no significant changes compared with the prior year
consolidated financial statements as at and for the year ended 31 December
2022.
NEW AND AMENDED STANDARDS ADOPTED BY THE GROUP
To the extent relevant, all IFRS standards and interpretations including
amendments that were in issue and effective from 1 January 2023 have been
adopted by the Group from 1 January 2023.
The Group has considered the following amendments for the first time for its
annual reporting period commencing 1 January 2023:
· Presentation of Financial Statements - Amendments to IAS 1
· Accounting Policies, Changes in Accounting Estimates and Errors -
Amendments to IAS 8
· Deferred Tax - Amendments to IAS 12
· Insurance Contracts - IFRS 17
The amendments listed above did not have any material impact on the amounts
recognised in prior periods and are not expected to significantly affect the
current or future periods.
NEW STANDARDS AND INTERPRETATIONS NOT YET ADOPTED
Certain new accounting standards and interpretations have been published that
are not mandatory for the 31 December 2023 reporting period and have not been
early adopted by the Group. These standards are not expected to have a
material impact on the Group in the current or future reporting periods or on
foreseeable future transactions.
3.2. SUMMARY OF MATERIAL ACCOUNTING POLICIES
The basis of consolidation is described below, otherwise material accounting
policies related to specific items are described under the relevant note. The
description of the accounting policy in the notes forms an integral part of
the accounting policies. Unless otherwise stated, these policies have been
consistently applied to both years presented.
BASIS OF CONSOLIDATION
The consolidated financial statements incorporate the financial statements of
the Company and entities controlled by the Company (its "subsidiaries"). The
Group controls an entity when it is exposed to, or has rights to, variable
returns from its involvement with the entity and has the ability to affect
those returns through its power to direct the activities of the entity.
De-facto control exists where the Company has the practical ability to direct
the relevant activities of the entity without holding the majority of the
voting rights. In determining whether de-facto control exists the Company
considers the size of the Company's voting rights relative to other parties,
substantive potential voting rights held by the Company and by other parties,
other contractual arrangements and historical patterns in voting attendance.
Subsidiaries are fully consolidated from the date on which control is
transferred to the Group. They are deconsolidated from the date that control
ceases. When the Group loses control over a subsidiary, it derecognises the
assets and liabilities of the subsidiary, and any related non-controlling
interest and other components of equity. Any resulting gain or loss is
recognised in the consolidated income statement.
Where necessary, adjustments are made to the financial statements of
subsidiaries to bring their accounting policies in line with the Group. All
inter-company transactions and balances arising from transactions between
Group companies are eliminated on consolidation.
The acquisition method of accounting is used to account for business
combinations by the Group (see note 31). Investments in associates are
accounted for via the equity method of accounting (see note 32).
COMPANY ONLY FINANCIAL STATEMENTS
Under Article 105(11) of the Companies (Jersey) Law 1991, the directors of a
holding company need not prepare separate financial statements (i.e. company
only financial statements). Separate financial statements for the Company are
not prepared unless required to do so by the members of the Company by
ordinary resolution. The members of the Company had not passed a resolution
requiring separate financial statements and, in the Directors' opinion, the
Company meets the definition of a holding company. As permitted by law, the
Directors have elected not to prepare separate financial statements.
SECTION 2 - RESULT FOR THE YEAR
4. OPERATING SEGMENTS
Revenue recognition
Revenue is measured as the fair value of the consideration received or
receivable for satisfying performance obligations contained in contracts with
customers excluding discounts, VAT and other sales-related taxes.
To recognise revenue in accordance with IFRS 15 'Revenue from Contracts with
Customers', the Group applies the five-step approach: identify the contract(s)
with a customer, identify the performance obligations in the contract,
determine the transaction price, allocate the transaction price to the
performance obligations and recognise revenue when, or as, performance
obligations are satisfied by the Group.
The Group enters into contractual agreements with institutional and private
clients for the provision of fund, corporate and private client services. The
agreements set out the services to be provided and each component is distinct
and can be performed and delivered separately. For each of these performance
obligations, the transaction price can be either a pre-set (fixed) fee based
on the expected amount of work to be performed or a variable time spent fee
for the actual amount of work performed. For some clients, the fee for agreed
services is set at a percentage of the net asset value ("NAV") of funds being
administered or deposits held. Where contracts include multiple performance
obligations, the transaction price is allocated to each performance obligation
based on its stand-alone selling price.
Revenue is recognised in the consolidated income statement when, or as, the
Group satisfies performance obligations by transferring control of services to
clients. This occurs as follows depending upon the nature of the contract for
services:
· Variable fees are recognised over time as services are provided at the
agreed charge out rates in force at the work date where there is an
enforceable right to payment for performance completed to date. Time recorded
but not invoiced is shown in the consolidated balance sheet as work in
progress (see note 13). To determine the transaction price, an assessment of
the variable consideration for services rendered is performed by estimating
the expected value, including any price concessions, of the unbilled amount
due from clients for the work performed to date (see note 28.2).
· Pre-set (fixed), cash management and NAV based fees are recognised over
time; based on the actual service provided to the end of the reporting period
as a proportion of the total services to be provided where there is an
enforceable right to payment for performance completed to date. This is
determined based on the actual inputs of time and expenses relative to the
total expected inputs. Where services have been rendered and performance
obligations have been met but clients have not been invoiced at the reporting
date, accrued income is recognised; this is recorded based on agreed fees to
be billed in arrears (see note 14).
· Where fees are billed in advance in respect of services under contract
and give rise to a trade receivable when recognised, deferred income is
recognised and released to revenue on a time apportioned basis in the
appropriate reporting period (see note 24).
The Group does not adjust transaction prices for the time value of money as it
does not have any contracts where it expects the period between the transfer
of the promised services to the client and the payment by the client to exceed
one year.
4.1. BASIS OF SEGMENTATION
The Group has a multi-jurisdictional footprint and the core focus of
operations is on providing services to its institutional and private client
base, with revenues from alternative asset managers, financial institutions,
corporates, HNW and UHNW individuals and family office clients. Recognised
revenue is generated from external customers. Business activities include the
following:
FUND SERVICES
Supporting a diverse range of asset classes, including real estate, private
equity, renewables, hedge, debt and alternative asset classes providing a
comprehensive set of fund administration services (e.g. fund launch, NAV
calculations, accounting, compliance and risk monitoring, investor reporting,
listing services).
CORPORATE SERVICES
Includes clients spanning across small and medium entities, public companies,
multinationals, sovereign wealth funds, fund managers, HNW and UHNW
individuals and families requiring a 'corporate' service for business and
investments. As well as entity formation, administration, cash management and
other company secretarial services, the Group services international and local
pension plans, employee share incentive plans, employee ownership plans and
deferred compensation plans.
PRIVATE CLIENT SERVICES
Supporting HNW and UHNW individuals and families, from 'emerging
entrepreneurs' to established single and multi-family offices. Services
include JTC's own comprehensive Private Office, a range of cash management,
foreign exchange and lending services, as well as the formation and
administration of trusts, companies, partnerships, and other vehicles and
structures across a range of asset classes, including cash and investments.
The Chief Executive Officer and Chief Financial Officer are together the Chief
Operating Decision Makers of the Group and determine the appropriate business
segments to monitor financial performance. Each segment is defined as a set of
business activities generating a revenue stream determined by divisional
responsibility and the management information reviewed by the Board. They have
determined that the Group has two reportable segments: these are Institutional
Client Services (ICS) and Private Client Services (PCS).
4.2. SEGMENTAL INFORMATION
The table below shows the segmental information provided to the Board for the
two reportable segments (ICS and PCS) on an underlying basis:
ICS PCS Total
2023 2022 2023 2022 2023 2022
£'000 £'000 £'000 £'000 £'000 £'000
Revenue 163,323 136,657 94,117 63,378 257,440 200,035
Direct staff costs (68,405) (56,157) (36,870) (24,525) (105,275) (80,682)
Other direct costs (2,910) (2,499) (3,241) (1,874) (6,151) (4,373)
Indirect staff costs (16,024) (12,091) (7,805) (6,414) (23,829) (18,505)
Other operating expenses (24,445) (22,886) (11,890) (8,072) (36,335) (30,958)
Other income 47 9 12 513 59 522
Underlying EBITDA 51,586 43,033 34,323 23,006 85,909 66,039
Underlying EBITDA margin % 31.6% 31.5% 36.5% 36.3% 33.4% 33.0%
The Board evaluates segmental performance based on revenue, underlying EBITDA
and underlying EBITDA margin. Profit before tax is not used to measure the
performance of the individual segments as items such as depreciation,
amortisation of intangibles, other (losses)/gains (including foreign exchange
movement on revaluation of inter-company loans) and finance costs are not
allocated to individual segments. Consistent with the aforementioned
reasoning, segment assets and liabilities are not reviewed regularly on a
by-segment basis and are therefore not included in segmental reporting.
4.3. GEOGRAPHICAL INFORMATION
Revenue generated by contracting subsidiary by their location is as follows:
2023 2022 Increase/(Decrease)
£'000 £'000
£'000 %
UK & Channel Islands 128,193 107,778 20,415 18.9%
US 64,839 38,039 26,800 70.5%
Rest of Europe 38,687 34,323 4,364 12.7%
Rest of the World 25,721 19,895 5,826 29.3%
257,440 200,035 57,405 28.7%
No single customer made up more than 5% of the Group's revenue in the current
or prior year.
5. STAFF EXPENSES
EMPLOYEE BENEFITS
Short-term benefits
Short-term employee benefits are expensed as the related service is provided.
A liability is recognised for the amount expected to be paid if the Group has
a present legal or constructive obligation to pay this amount as a result of
past service provided by the employee, and the obligation can be estimated
reliably.
Defined contribution pension plans
Under defined contribution pension plans, the Group pays contributions to
publicly or privately administered pension insurance plans. The Group has no
further payment obligation once the contributions have been paid. The
contributions are recognised as an employee benefit expense when they are due.
Defined benefit pension plans
The liability or asset recognised in the consolidated balance sheet in respect
of defined benefit pension plans is the present value of the defined benefit
obligation at the end of the reporting period less the fair value of plan
assets. The calculation of defined benefit obligations is performed annually
by independent qualified actuaries using the projected unit credit method.
The present value of the defined benefit obligation is determined by
discounting the estimated future cash outflows using interest rates of
high-quality corporate bonds that are denominated in the currency in which the
benefits will be paid, and that have terms approximating to the terms of the
related obligation. In countries where there is no established market in such
bonds, the market rates on local government bonds are used.
The net interest cost is calculated by applying the discount rate to the net
balance of the defined benefit obligation and the fair value of plan assets.
This cost is included as an employee benefit expense in the consolidated
income statement.
Remeasurement gains and losses arising from experience adjustments and changes
in actuarial assumptions are recognised in the period in which they occur,
directly in other comprehensive income. They are included in retained earnings
in the consolidated statement of changes in equity and the consolidated
balance sheet.
Changes in the present value of the defined benefit obligation resulting from
plan amendments or curtailments are recognised immediately in the consolidated
income statement as past service costs.
Termination benefits
Termination benefits are expensed at the earlier of when the Group can no
longer withdraw the offer of those benefits and when the Group recognises
costs for a restructuring that is within the scope of IAS 37 and involves the
payment of termination benefits. If benefits are not expected to be settled
wholly within one year of the end of the reporting period, then they are
discounted to their present value using an appropriate discount rate.
Note 2023 2022
£'000 £'000
Salaries and Directors' fees 107,765 82,739
Employer-related taxes and other staff-related costs 10,571 8,841
Other short-term employee benefits 5,521 3,508
Pension employee benefits(1) 5,230 3,841
Share-based payments 36.5 2,834 2,122
EIP share-based payments 36.5 - 4,780
131,921 105,831
1 Pension employee benefits include defined contributions of £5.08m
(2022: £3.41m) and defined benefits of £0.15m (2022: £0.43m).
5.1. DEFINED BENEFIT PENSION PLANS
The Group operates defined benefit pension plans in Switzerland and Mauritius.
Both plans are contribution based with the guarantee of a minimum interest
credit and fixed conversion rates at retirement. Disability and death benefits
are defined as a percentage of the insured salary. The Group does not expect a
significant change in contributions year on year.
The Swiss plan must be fully funded in accordance with Swiss Federal Law on
Occupational Benefits (LPP/BVG) on a static basis at all times. The
subsidiary, JTC (Suisse) SA, is affiliated to the collective foundation Swiss
Life. The collective foundation is a separate legal entity. The foundation is
responsible for the governance of the plan; the board is composed of an equal
number of representatives from the employers and the employees chosen from all
affiliated companies. The foundation has set up investment guidelines,
defining in particular the strategic allocation with margins. Additionally,
there is a pension committee responsible for the set-up of the plan benefit;
this is composed of an equal number of representatives of JTC (Suisse) SA and
its employees.
The Mauritius plan is administered by Swan Life Ltd. JTC Fiduciary Services
(Mauritius) Limited is required to contribute a specific percentage of payroll
costs to the retirement benefit scheme. Employees under this pension plan are
entitled to statutory benefits prescribed under parts VIII and IX of the
Workers' Rights Act 2019.
The amounts recognised in the consolidated balance sheet are as follows:
Note 2023 2022
£'000 £'000
Present value of funded obligations (4,020) (3,342)
Fair value of plan assets(1) 3,205 2,770
Consolidated balance sheet liability 24 (815) (572)
1 All plan assets are held in insurance contracts.
The movement in the net defined benefit obligation recognised in the
consolidated balance sheet is as follows:
2023 2022
Defined Fair value Net defined Defined Fair value Net defined
benefit of plan benefit benefit of plan benefit
obligation assets obligation obligation assets obligation
£'000 £'000 £'000 £'000 £'000 £'000
At 1 January 3,342 2,770 572 2,010 1,233 777
Included in the consolidated income statement
Current service cost 229 - 229 233 - 233
Past service cost (98) - (98) 18 - 18
Interest 81 67 14 13 4 9
Total 212 67 145 264 4 260
Included in other comprehensive loss
Remeasurements loss/(gain):
- Change in demographic assumptions 15 - 15 - - -
- Change in financial assumptions 360 - 360 (739) - (739)
- Experience adjustment (127) - (127) 432 - 432
- Return on plan assets - (52) 52 - 9 (9)
Total 248 (52) 300 (307) 9 (316)
Other
Contributions:
- Employers - 221 (221) - 214 (214)
- Plan participants 109 109 - 105 105 -
Benefit payments (18) (18) - 994 994 -
Exchange differences 127 108 19 276 211 65
Total 218 420 (202) 1,375 1,524 (149)
At 31 December 4,020 3,205 815 3,342 2,770 572
The plans are exposed to actuarial risks relating to the discount rate, the
interest rate for the projection of the savings capital, salary increases and
pension increases.
The principal actuarial assumptions used for the IAS 19 disclosures were as
follows:
Switzerland Mauritius
Discount rate at 1 January 2023 2.4% 5.2%
Discount rate at 31 December 2023 1.4% 5.0%
Future salary increases 1.4% 5.2%
Rate of increase in deferred pensions 0.0% 0.0%
For the Swiss plan, longevity must be reflected in the defined benefit
liability. The mortality probabilities used were as follows:
2023 2022
Years Years
Mortality probabilities for pensioners at age 65
- Males 21.80 21.84
- Females 23.54 23.58
Mortality probabilities at age 65 for current members aged 45
- Males 23.46 23.50
- Females 25.14 25.18
6. OTHER OPERATING EXPENSES
Other operating expenses are accounted for on an accruals basis.
2023 2022
£'000 £'000
Third party administration fees 6,241 4,403
Legal and professional fees(1) 12,226 8,354
Auditor's remuneration for audit services 1,409 1,255
Auditor's remuneration for other assurance services 287 337
Establishment costs 3,362 3,618
Insurance 1,649 1,660
Travel and accommodation 2,559 1,772
Marketing 2,235 1,950
IT expenses 10,915 9,286
Telephone and postage 1,726 1,638
Other expenses 2,246 1,297
Other operating expenses 44,855 35,570
1 Included in legal and professional fees are £4.5m (2022: £1.4m) of
non-underlying items.
7. NON-UNDERLYING ITEMS
Non-underlying items represent specific items of income or expenditure that
are not of a continuing operational nature or do not represent the underlying
operating results, and based on their significance in size or nature are
presented separately to provide further understanding about the financial
performance of the Group.
Note 2023 2022
£'000 £'000
EBITDA 77,790 56,064
Non-underlying items within EBITDA:
Acquisition and integration costs(1) 7,080 3,380
Office start-up(2) 612 768
Other(3) 427 228
EIP share-based payments(4) - 5,197
Revision of ICS operating model(5) - 402
Total non-underlying items within EBITDA 8,119 9,975
Underlying EBITDA 85,909 66,039
Profit before tax 24,310 35,935
Total non-underlying items within EBITDA 8,119 9,975
(Gain)/loss on revaluation of contingent consideration(6) 9 (446) 78
Foreign exchange losses/(gains)(7) 9 8,515 (11,936)
Total non-underlying items within profit before tax 16,188 (1,883)
Underlying profit before tax 40,498 34,052
1 Acquisition and integration costs include deal and tax advisory fees,
legal and professional fees, staff reorganisation costs and other integration
costs. This includes acquisition-related share-based payment awards granted to
act as retention tools for key management and/or to recruit senior management
to support various acquisitions. Acquisition and integration costs are
typically incurred in the first two years following acquisition.
2 Office start-up includes up-front investment in personnel and
infrastructure which is required in advance of trading.
3 Includes expenses in relation to a change in making annual bonus
awards in cash rather than shares (see note 36.3(B)), legal costs relating to
a regulatory action from the Dutch Central Bank and aborted project costs.
4 The prior year included the share-based payment expense and
employer-related taxes for share awards under the EIP which vested on 22 July
2022 (see note 36.1).
5 The prior year included costs to complete the implementation of a
revised operating model for ICS.
6 Includes the gain on the revaluation of contingent consideration for
Segue of £0.58m (2022: loss of £0.13m), the loss on revaluation of
liability-classified contingent consideration payable for perfORM of £0.17m
(2022: gain of £0.05m) and the gain on the revaluation of contingent
consideration for INDOS of £0.03m (2022: £nil) (see note 17.1).
7 Foreign exchange losses/(gains) that relate to the revaluation of
inter-company loans. Management consider these to be non-underlying as they
are unrealisable movements as the loans are eliminated upon consolidation.
8. DEPRECIATION AND AMORTISATION
Note 2023 2022
£'000 £'000
Depreciation of property, plant and equipment 20 8,262 7,883
Amortisation of intangible assets 21 15,766 13,562
Amortisation of assets recognised from costs to obtain or fulfil a contract 22 1,112 816
Depreciation and amortisation 25,140 22,261
9. OTHER (LOSSES)/GAINS
Note 2023 2022
£'000 £'000
Net profit/(loss) on disposal of fixed asset 5 (130)
Gain/(loss) on revaluation of contingent consideration 17.1 446 (78)
Impairment of customer relationship intangible asset 21.2 (737) -
Foreign exchange (losses)/gains(1) 38 (9,626) 14,409
Other (losses)/gains (9,912) 14,201
1 This includes £8.5m of foreign exchange losses (2022: £11.9m gains)
that relate to the revaluation of inter-company loans; these foreign exchange
movements are considered by Management to be non-underlying items.
10. FINANCE INCOME AND FINANCE COST
Finance income includes interest income from loan receivables and bank
deposits and is recognised when it is probable that the economic benefits will
flow to the Group and the amount of revenue can be measured reliably.
Finance costs include interest expenses on loans and borrowings, the unwinding
of the discount on provisions, contingent consideration and lease liabilities
and the amortisation of directly attributable transaction costs which have
been capitalised upon issuance of the financial instrument and released to the
consolidated income statement on a straight-line basis over the contractual
term.
2023 2022
£'000 £'000
Bank interest 744 239
Loan interest 50 5
Finance income 794 244
Bank loan interest 11,123 5,112
Gain on cash flow hedge reclassified from other comprehensive income (134) -
Amortisation of loan arrangement fees 805 1,062
Unwinding of net present value ("NPV") discounts(1) 6,514 4,852
Other finance expense 914 1,287
Finance cost 19,222 12,313
1 Of the £6.5m total, £5.1m relates to unwinding of NPV discounts on
contingent consideration (see note 17.1); this is excluded when calculating
underlying basic EPS (see note 34.3). By acquisition this is as follows:
2023 2022
£'000 £'000
INDOS 54 161
Segue 139 342
perfORM 461 472
Ballybunion - 214
SALI 2,316 2,329
SDTC 2,123 -
5,093 3,518
11. INCOME TAX
Income tax
Income tax includes current and deferred tax. Current and deferred tax are
recognised in the consolidated income statement, except when they relate to
items that are recognised in other comprehensive income or directly in equity,
in which case, the current and deferred tax are recognised in other
comprehensive income or directly in equity respectively. Where current tax or
deferred tax arises from the initial accounting for a business combination,
the tax effect is included in the accounting for the business combination.
Current tax
Current tax is the expected tax payable or receivable on the taxable income or
loss for the year using tax laws enacted or substantively enacted at the
balance sheet date, and any adjustment to tax payable or receivable in respect
of previous years.
Deferred tax
Deferred tax is the tax expected to be payable or recoverable on differences
between the carrying amounts of assets and liabilities in the financial
statements and the corresponding tax bases used in the computation of taxable
profit or losses.
Deferred tax liabilities are generally recognised for all taxable temporary
differences and deferred tax assets are recognised to the extent that it is
probable that taxable profits will be available against which deductible
temporary differences can be utilised. Such assets and liabilities are not
recognised if the temporary difference arises from the initial recognition of
goodwill or from the initial recognition (other than in a business
combination) of other assets and liabilities in a transaction that affects
neither the taxable profit nor the accounting profit.
The carrying amount of deferred tax assets is reviewed at the end of each
reporting period and reduced to the extent that it is no longer probable that
sufficient taxable profits will be available to allow all or part of the asset
to be recovered.
Deferred tax is calculated using tax rates which have been enacted or
substantively enacted at the balance sheet date, for the periods when the
asset is expected to be realised or the liability is expected to be settled.
Deferred tax assets are offset with deferred tax liabilities when there is a
legally enforceable right to set off tax assets against current tax
liabilities and when they relate to income taxes levied by the same taxation
authority and the Group intends to settle its current tax assets and
liabilities on a net basis.
The income tax expense in the consolidated income statement comprises:
2023 2022
£'000 £'000
Jersey tax on current year profit 1,197 1,197
Foreign company taxes on current year profit 2,583 1,611
Adjustment in respect of previous periods 305 -
Total current tax expense 4,085 2,808
Deferred tax (see note 23):
Temporary differences in relation to acquired intangible assets (1,694) (1,531)
Jersey origination and reversal of temporary differences (6) (17)
Foreign company origination and reversal of temporary differences 104 (39)
Total deferred tax credit (1,596) (1,587)
Income tax expense 2,489 1,221
The difference between the total current tax shown above and the amount
calculated by applying the standard rate of Jersey income tax to the profit
before tax is as follows:
2023 2022
£'000 £'000
Profit on ordinary activities before tax 24,310 35,935
Tax on profit on ordinary activities at standard Jersey income tax rate of 10% 2,431 3,594
(2022: 10%)
Effects of:
Results from entities subject to tax at a rate of 0% (Jersey company) (1,262) (1,040)
Results from tax exempt entities (foreign company) (186) (223)
Foreign taxes not at Jersey rate 1,313 (1,301)
Depreciation in excess of capital allowances (Jersey company) (6) (17)
Depreciation in excess of capital allowances (foreign company) 104 (39)
Temporary differences in relation to acquired intangible assets (1,694) (1,531)
Non-deductible expenses 118 479
Consolidation adjustments 1,639 1,304
Other differences 32 (5)
Income tax expense 2,489 1,221
Income tax expense computations are based on the jurisdictions in which
profits were earned at prevailing rates in the respective jurisdictions.
The Company is subject to Jersey income tax at the general rate of 0%;
however, the majority of the Group's trading profits are reported in Jersey
by Jersey financial services companies. JTC subsidiaries located in Jersey are
categorised as financial services companies and are subject to an income tax
rate of 10%. It is therefore appropriate to use this rate for reconciliation
purposes.
2023 2022
% %
Reconciliation of effective tax rates
Tax on profit on ordinary activities 10.00 10.00
Effect of:
Results from entities subject to tax at a rate of 0% (Jersey company) (5.19) (2.89)
Results from tax exempt entities (foreign company) (0.77) (0.62)
Foreign taxes not at Jersey rate 5.40 (3.62)
Depreciation in excess of capital allowances (Jersey company) (0.02) (0.05)
Depreciation in excess of capital allowances (foreign company) 0.43 (0.11)
Temporary differences in relation to acquired intangible assets (6.97) (4.26)
Non-deductible expenses 0.48 1.33
Consolidation adjustments 6.75 3.63
Other differences 0.13 (0.01)
Effective tax rate 10.24 3.40
SECTION 3 - FINANCIAL ASSETS AND FINANCIAL LIABILITIES
This section provides information about the Group's financial instruments,
including: accounting policies; specific information about each type of
financial instrument; and, where applicable, information about determining the
fair value, including judgements and estimation uncertainty involved.
Financial assets
The Group classifies its financial assets as either amortised cost, fair value
through profit or loss ("FVTPL") or fair value through other comprehensive
income ("FVOCI") depending on the Group's business model objective for
managing financial assets and their contractual cash flow characteristics.
All financial assets are measured at amortised cost as they arise from the
provision of services to clients (e.g. trade receivables) or the objective is
to hold the asset in order to collect contractual cash flows (where the
contractual cash flows are solely payments of principal and interest).
Financial assets measured at amortised cost are recognised on the trade date,
being the date that the Group became party to the contractual provisions of
the instrument. They are initially recognised at fair value less transaction
costs and then are subsequently carried at amortised cost using the effective
interest rate method, less provision for impairment. Financial assets are
derecognised when the contractual rights to the cash flows from the asset
expire, or the rights to receive the contractual cash flows from the
transaction in which substantially all of the risks and rewards of ownership
of the financial asset have been transferred.
The Group assesses, on a forward-looking basis, the expected credit losses
("ECL") associated with its financial assets carried at amortised cost. The
impairment methodology applied takes into consideration whether there has been
a significant increase in credit risk.
Financial assets comprise trade receivables, work in progress, accrued income,
other receivables and cash and cash equivalents. For further details on
impairment for each, see notes 12 to 16.
Financial liabilities
The Group classifies its financial liabilities as either amortised cost or
FVTPL depending on the purpose for which the liability was acquired.
All financial liabilities are measured at amortised cost, with the exception
of liability-classified contingent consideration which is measured at FVTPL
and derivative financial instruments where hedge accounting is applied (see
note 29.1).
Trade and other payables represent liabilities incurred for goods and services
provided to the Group prior to the end of the financial year which are unpaid.
They are recognised initially at fair value and subsequently measured at
amortised cost using the effective interest method and are presented as
current liabilities unless payment is not due within 12 months after the
reporting period. The Group derecognises a financial liability when its
contractual obligations have been discharged, cancelled or expired.
Borrowings are initially recognised at fair value, net of transaction costs
incurred. Borrowings are subsequently measured at amortised cost. Any
difference between the proceeds (net of transaction costs) and the redemption
amount is recognised in the consolidated income statement over the period of
the borrowings using the effective interest rate method.
Borrowings are removed from the consolidated balance sheet when the obligation
specified in the contract is discharged, cancelled or has expired. The
difference between the carrying amount of a financial liability that has been
extinguished or transferred to another party and the consideration paid,
including any non-cash assets transferred or liabilities assumed, is
recognised in the consolidated income statement as finance income or finance
cost.
Borrowings are classified as current liabilities unless the Group has an
unconditional right to defer settlement of the liability for at least 12
months after the reporting period.
Lease liabilities are financial liabilities measured at amortised cost. They
are initially measured at the NPV of the following lease payments:
· fixed payments, less any lease incentives receivable;
· variable lease payments that are based on an index or a rate;
· amounts expected to be payable by the lessee under residual value
guarantees;
· the exercise price of a purchase option if the lessee is reasonably
certain to exercise that option; and
· payments of penalties for terminating the lease, if the lease term
reflects the lessee exercising that option.
Lease payments to be made under reasonably certain extension options are also
included in the measurement of the liability.
The lease payments are discounted using the interest rate implicit in the
lease. If that rate cannot be determined, which is generally the case for
leases in the Group, the lessee's incremental borrowing rate is used, being
the rate that the lessee would have to pay to borrow the funds necessary to
obtain an asset of similar value to the right-of-use asset in a similar
economic environment with similar terms, security and conditions.
The incremental borrowing rate applied to each lease was determined
considering the Group's borrowing rate and the risk-free interest rate,
adjusted for factors specific to the country, currency and term of the lease.
The Group can be exposed to potential future increases in variable lease
payments based on an index or rate which are not included in the lease
liability until they take effect. When adjustments to lease payments based on
an index or rate take effect, the lease liability is reassessed and adjusted
against the right-of-use asset.
Lease payments are allocated between principal and finance cost. The finance
cost is charged to the consolidated income statement over the lease period to
produce a constant periodic rate of interest on the remaining balance of the
liability for each period.
Derivative financial instruments and hedge accounting
The Group uses derivative financial instruments to hedge its exposure to
interest rate risks. All derivative financial instruments are initially
measured at fair value on the contract date and subsequently remeasured at
fair value at each reporting date. Derivatives are only used for economic
hedging purposes and not as speculative investments. Hedge accounting is
applied only where all of the following conditions are met:
· formal documentation exists of the relationship between the hedging
instrument and hedged item at inception;
· the hedged cash flows must be highly probable and must present an
exposure to variations in cash flows that could affect comprehensive income;
· the effectiveness of the hedge can be reliably measured; and
· an economic relationship exists, with the relationship being assessed on
an ongoing basis.
For qualifying cash flow hedges, the fair value gain or loss associated with
the effective portion of the cash flow hedge is recognised initially in other
comprehensive income and is released to the consolidated income statement in
the same period during which the hedged item will affect the Group's results.
Any ineffective portion of the gain or loss on the hedging instrument is
recognised in the consolidated income statement immediately. See note 29.1 for
further detail on the hedging instruments used by the Group.
12. TRADE RECEIVABLES
The ageing analysis of trade receivables with the loss allowance is as
follows:
2023 Gross Loss allowance Net
£'000 £'000 £'000
<30 days 12,633 (216) 12,417
30-60 days 5,019 (376) 4,643
61-90 days 2,976 (247) 2,729
91-120 days 1,532 (142) 1,390
121-180 days 2,236 (307) 1,929
>180 days 14,088 (5,125) 8,963
Total 38,484 (6,413) 32,071
2022 Gross Loss allowance Net
£'000 £'000 £'000
<30 days 15,161 (125) 15,036
30-60 days 3,401 (114) 3,287
61-90 days 2,091 (111) 1,980
91-120 days 2,208 (101) 2,107
121-180 days 1,558 (165) 1,393
>180 days 14,516 (5,029) 9,487
Total 38,935 (5,645) 33,290
The movement in the allowances for trade receivables is as follows:
2023 2022
£'000 £'000
Balance at the beginning of the year (5,645) (4,832)
Credit impairment losses in the consolidated income statement (2,934) (3,092)
Amounts written off (including unused amounts reversed) 2,166 2,279
Total allowance for doubtful debts (6,413) (5,645)
The loss allowance includes both specific and ECL provisions. To measure the
ECL, trade receivables are grouped based on shared credit risk characteristics
and the days past due. The ECL are estimated collectively using a provision
matrix based on the Group's historical credit loss experience, adjusted for
factors that are specific to the debtor's financial position (this includes
unlikely to pay indicators such as liquidity issues, insolvency or other
financial difficulties) and an assessment of both the current as well as the
forecast direction of macroeconomic conditions at the reporting date.
Management have identified gross domestic product and inflation in each
country the Group provides services in to be the most relevant macroeconomic
factors. Management have considered these factors as well as climate-related
changes on customers and are satisfied that any impact is not material to the
ultimate recovery of receivables, such is the diversification across the book
in industries and geographies. The loss allowance at 31 December 2023 is in
line with previous trading and supports this conclusion. See note 29.2 for
further comment on credit risk management.
ECL provision rates are segregated according to geographical location and by
business line. The Group considers any specific impairments on a by-client
basis rather than on a collective basis. The carrying amount of the asset is
reduced through the use of an allowance account and the amount of the loss is
recognised in the consolidated income statement as a credit impairment loss.
When a trade receivable is uncollectible, it is written off against the
allowance account. Subsequent recoveries of amounts previously written off are
credited against credit impairment losses.
13. WORK IN PROGRESS
2023 2022
£'000 £'000
Total 11,710 12,594
Loss allowance (95) (69)
Net 11,615 12,525
Work in progress (WIP) relates to variable fee contracts and represents the
net unbilled amount expected to be collected from clients for work performed
to date. It is measured at the chargeable rate agreed with the individual
clients adjusted for unrecoverable amounts less progress billed and ECL. As
these financial assets relate to unbilled work and have substantially the same
risk characteristics as trade receivables, the Group has concluded that the
expected loss rates for trade receivables <30 days is an appropriate
estimation of the ECL.
Sensitivity analysis
The total carrying amount of WIP (before ECL allowances) is £11.7m (2022:
£12.6m). If Management's estimate of the recoverability of the WIP (the
amount expected to be billed and collected from clients for work performed to
date) is 10% lower than expected on the total WIP balance due to adjustments
for unrecoverable amounts, revenue would be £1.2m lower (2022: £1.3m lower).
14. ACCRUED INCOME
2023 2022
£'000 £'000
Total 26,609 23,936
Loss allowance (35) (25)
Net 26,574 23,911
Accrued income relates to pre-set (fixed), cash management, and NAV based fees
across all service lines and represents the billable amount relating to the
provision of services to clients which has not been invoiced at the reporting
date. Accrued income is recorded based on agreed fees billed in arrears less
ECL. As these financial assets relate to unbilled work and have substantially
the same risk characteristics as trade receivables, the Group has concluded
that the expected loss rates for trade receivables <30 days is an
appropriate estimation of the ECL.
15. OTHER RECEIVABLES
2023 2022
£'000 £'000
Non-current
Loan receivable from third party - 535
Total non-current - 535
Current
Other receivables 2,685 2,804
Loans receivable from employees - 162
Loan receivable from related party(1) - 861
Loans receivable from third parties 1,496 -
Total current 4,181 3,827
Total other receivables 4,181 4,362
1 The balance at 31 December 2022 related to amounts owed from Harmonate
Corp. (see note 32), as there is no longer a common directorship this has been
reclassified to loans receivable from third parties.
Other receivables are subject to the impairment requirements of IFRS 9 and
they were assessed to have low credit risk and no loss allowance is
recognised.
16. CASH AND CASH EQUIVALENTS
2023 2022
£'000 £'000
Cash and cash equivalents 97,222 48,861
Total 97,222 48,861
For the purpose of presentation in the statement of cash flow, cash and cash
equivalents includes cash in hand, deposits held on call with banks, other
short-term highly liquid investments with original maturities of three months
or less and bank overdrafts.
Cash and cash equivalents are subject to the impairment requirements of IFRS 9
but, as balances are held with reputable international banking institutions,
they were assessed to have low credit risk and no loss allowance
is recognised.
The cash and cash equivalents disclosed above and in the statement of cash
flows includes cash allocated against regulatory and capital adequacy
requirements of £11.8m (see note 35.4). These deposits vary by jurisdiction
and therefore are not available for general use by the other entities within
the Group.
17. TRADE AND OTHER PAYABLES
2023 2022
£'000 £'000
Non-current
Other payables - 72
Contingent consideration 49,794 26,824
Total non-current 49,794 26,896
Current
Trade payables 1,255 2,728
Other taxation and social security 1,127 926
Other payables 4,333 4,391
Accruals 13,276 9,907
Contingent consideration 26,906 5,472
Total current 46,897 23,424
Total trade and other payables 96,691 50,320
For current trade and other payables, due to their short-term nature,
Management consider the carrying value of these financial liabilities to
approximate to their fair value.
17.1. CONTINGENT CONSIDERATION
Contingent consideration payables are discounted to NPV, split between current
and non-current, and are due as follows:
Acquisition 2023 2022
£'000 £'000
SDTC 45,989 -
perfORM(1) 3,805 3,181
SALI(2) - 23,643
Total non-current contingent consideration 49,794 26,824
INDOS(3) - 1,483
Segue(4) - 2,163
SALI(2) 24,644 -
SDTC 1,536 -
Sterling 726 1,826
Total current contingent consideration 26,906 5,472
Total contingent consideration 76,700 32,296
1 The earn-out (capped at £6m) for perfORM is calculated based on a
multiple of its underlying EBITDA for the year ending 31 December 2024. This
is payable in an equal split of cash and JTC PLC Ordinary shares; the 50%
payable in shares is liability-classified contingent consideration as this is
settled by a variable number of shares. In accordance with IAS 32, Management
are required to update the fair value at each reporting date.
At the acquisition date, Management forecast the underlying EBITDA
for perfORM and estimated that £4.48m would be due. At 31 December 2023,
Management revisited their forecast and have identified no evidence to
indicate an adjustment was required to the total due. To update the fair value
of the 282,854 JTC PLC Ordinary shares payable, the Monte Carlo simulation was
updated and this increased the share price applied to £8.47 (2022: £7.92).
The simulation is based on JTC's share price at 31 December 2023,
factoring in historical volatility and projected dividend payments, and is
then discounted using an appropriate risk-free rate. The updated share price
resulted in a loss on revaluation of £0.17m as the fair value of the
contingent consideration payable in JTC Ordinary shares increased to £2.40m
(2022: £2.24m). The revalued earn-out contingent consideration of £4.62m
(cash £2.22m/ JTC PLC Ordinary shares £2.40m) has then been discounted to a
present value of £3.81m.
2 On 10 January 2024, having successfully met earn-out targets for the
two year period following acquisition, the earn-out for SALI was settled in
full.
3 At 31 December 2023, 212,014 JTC Ordinary shares vested to settle the
£1.5m contingent consideration payable to INDOS (see note 26.2) and is shown
within the capital reserve. This resulted in a gain on revaluation of £0.03m.
4 Contingent consideration was subject to Segue meeting adjusted EBITDA
targets over the calendar years 2022 and 2023. During the period, Management
paid £1.4m ($1.7m) in cash and issued 45,386 JTC Ordinary shares in
part-payment of the outstanding liability (see note 26.1). Adjusted EBITDA
targets were not met for 2023, resulting in a gain on revaluation of
contingent consideration of £0.58m.
18. LOANS AND BORROWINGS
This note provides information about the contractual terms of the Group's
interest-bearing loans and borrowings, which are measured at amortised cost.
2023 2022
£'000 £'000
Non-current
Bank loans 220,531 153,622
Total loans and borrowings 220,531 153,622
The terms and conditions of outstanding bank loans are as follows:
Facility Currency Initial termination date Interest rate 2023 2022
£'000 £'000
Term facility GBP 4 December 2026 SONIA + 1.65% margin 100,000 75,000
Revolving credit facility ("RCF") GBP 4 December 2026 SONIA + 1.65% margin 123,662 80,662
Total principal value 223,662 155,662
Issue costs (3,131) (2,040)
Total bank loans 220,531 153,622
The interest rate applied to loan facilities is determined using SONIA plus a
margin based on net leverage calculations. At 1 January 2023, the margin was
1.65%; this reduced to 1.15% effective from 29 September 2023 and increased to
1.65% on 4 December 2023 (2022: At 1 January 2022, the margin was 1.9%; this
reduced to 1.65% effective from 16 September 2022 until 31 December 2022).
On 4 December 2023, the Group entered into a two year interest rate swap at a
fixed interest (excluding margin) of 4.237% on £180m of its drawn debt
facilities. For more information on the Group's hedging strategy, see note
29.1.
Under the terms of the facility, the debt is supported by guarantees from JTC
PLC and other applicable subsidiaries deemed to be obligors, and in the event
of default, demand could be placed on these entities to settle outstanding
liabilities.
The movement in bank facilities is as follows:
At Drawdowns(1) Repayment(1) Amortisation At
1 January £'000 £'000 release 31 December
2023 £'000 2023
£'000 £'000
Principal value 155,662 118,000 (50,000) - 223,662
Issue costs (2,040) (1,896) - 805 (3,131)
Total 153,622 116,104 (50,000) 805 220,531
At Drawdowns Repayment Amortisation At
1 January £'000 £'000 release 31 December
2022 £'000 2022
£'000 £'000
Principal value 155,662 - - - 155,662
Issue costs (3,084) - - 1,044 (2,040)
Total 152,578 - - 1,044 153,622
1 On 21 June 2023, following the Company's equity raise that took place
on 14 June 2023 (see note 26.1), the Group used £50m of the proceeds to
temporarily part repay its existing RCF. On 1 August 2023, £118m of the RCF
was drawn to satisfy the cash consideration for the acquisition of SDTC (see
note 31.1).
On 6 October 2021, the Group entered into a multicurrency loan facility
agreement (the "original facilities agreement") with HSBC for a total
commitment of £225m consisting of a term loan of £75m and a RCF of £150m.
The initial termination date was the third anniversary of the date of the
agreement, being 6 October 2024.
On 4 December 2023, an amendment and restatement agreement (the "A&R
agreement") relating to the original facilities agreement increased the total
commitment to £400m and extended the initial termination date to 4 December
2026 with an option for two further extensions available to 30 June 2027 and
30 June 2028, respectively. At 31 December 2023, the Group had available
£176.3m of committed facilities currently undrawn (2022: £69.3m).
The cost of the facility depends upon a covenant tested on net leverage being
the ratio of total net debt to underlying EBITDA (for LTM at average exchange
rates and adjusted for pro-forma contributions from acquisitions) for a
relevant period as defined in the A&R agreement. At 31 December 2023,
arrangement and legal fees amounting to £5.3m have been capitalised for
amortisation over the term of the loan (2022: £3.4m).
The Group has complied with the financial covenants of its borrowing
facilities during the 2023 and 2022 reporting periods (see note 30).
The fair values are not materially different from their carrying amounts since
the interest payable on those borrowings is close to current market rates.
19. LEASE LIABILITIES
Where the Group is a lessee its lease contracts are for the rental of
buildings for office space and also office furniture and equipment. In
accordance with IFRS 16 'Leases', the Group recognises right-of-use assets
which are shown within property, plant and equipment (see note 20) and lease
liabilities which are shown separately on the consolidated balance sheet.
2023 2022
£'000 £'000
Non-current 37,924 40,602
Current 6,117 4,292
Total lease liabilities 44,041 44,894
The Group makes business decisions that affect their lease contracts and those
containing renewal and termination clauses are reassessed to determine whether
there is any change to the lease term. Management has an ongoing programme of
review and have not identified any leases with an extension option that would
have a significant impact on the carrying amount of lease assets and
liabilities. Where the Group has issued an early termination notice, the net
present value of the liability and carrying value of the right-of-use asset
has been reassessed based on the new expected termination date.
SECTION 4 - NON-FINANCIAL ASSETS AND NON-FINANCIAL LIABILITIES
20. PROPERTY, PLANT AND EQUIPMENT
Items of property, plant and equipment are initially recorded at cost and are
stated at historical cost less depreciation and impairment losses.
Depreciation is recognised so as to write off the cost or valuation of assets
less their residual values over their useful lives, using the straight-line
method, on the following bases:
· Computer equipment - 4 years
· Office furniture and equipment - 4 years
· Leasehold improvements - over the period of the lease
The estimated useful lives, residual values and depreciation methods are
reviewed at the end of each reporting period with the effect of any changes in
estimate accounted for on a prospective basis.
An asset's carrying amount is written down immediately to its recoverable
amount if the asset's carrying amount is greater than its estimated
recoverable amount.
An item of property, plant and equipment and any significant part initially
recognised is derecognised upon disposal or when no future economic benefits
are expected from its use or disposal. Any gain or loss arising on
derecognition of the asset (calculated as the difference between the net
disposal proceeds and the carrying amount of the asset) is included in the
consolidated income statement when the asset is derecognised.
For right-of-use assets, upon inception of a contract, the Group assesses
whether a contract conveys the right to control the use of an identified asset
for a period in exchange for consideration, in which case it is classified as
a lease. The Group recognises a right-of-use asset and a lease liability at
the lease commencement date. Right-of-use assets are measured at cost
comprising of the following: the amount of the initial measurement of lease
liability; any lease payments made at or before the commencement date less any
lease incentives received; any initial direct costs; and estimated restoration
costs.
The right-of-use asset is subsequently depreciated using the straight-line
method from the commencement date to the end of the useful life; this is
considered to be the end of the lease term as assessed by Management. The
lease asset is periodically adjusted for certain remeasurements of the lease
liability and impairment losses (if any).
The movements of all tangible assets are as follows:
Computer Office furniture Leasehold Right-of-use Total
equipment and equipment improvements assets £'000
£'000 £'000 £'000 £'000
Cost
At 1 January 2022 4,188 2,710 9,457 53,304 69,659
Additions 633 1,249 1,076 4,592 7,550
Additions through business combinations 22 - - 471 493
Disposals (330) (977) (671) - (1,978)
Exchange differences 116 249 351 2,085 2,801
At 31 December 2022 4,629 3,231 10,213 60,452 78,525
Additions 424 406 1,770 4,482 7,082
Additions through business combinations 62 38 616 2,735 3,451
Disposals (278) (271) - (1,454) (2,003)
Exchange differences 34 415 395 (828) 16
At 31 December 2023 4,871 3,819 12,994 65,387 87,071
Accumulated depreciation
At 1 January 2022 3,215 1,511 3,627 12,966 21,319
Charge for the year 524 516 759 6,346 8,145
Disposals (329) (842) (548) - (1,719)
Exchange differences 77 267 116 754 1,214
At 31 December 2022 3,487 1,452 3,954 20,066 28,959
Charge for the year 523 598 1,296 6,240 8,657
Disposals (208) (261) - (186) (655)
Exchange differences 66 481 422 (518) 451
At 31 December 2023 3,868 2,270 5,672 25,602 37,412
Carrying amount
At 31 December 2023 1,003 1,549 7,322 39,785 49,659
At 31 December 2022 1,142 1,779 6,259 40,386 49,566
21. GOODWILL AND OTHER INTANGIBLE ASSETS
Goodwill
Goodwill that arises on the acquisition of subsidiaries is considered an
intangible asset. See note 31 for the measurement of goodwill at initial
recognition; subsequent to this, measurement is at cost less accumulated
impairment losses.
Intangible assets acquired in a business combination
Intangible assets acquired in a business combination and recognised separately
from goodwill are initially recognised at their fair value at the acquisition
date (which is regarded as their cost). The initial valuation work is
performed with support from external valuation specialists. Subsequent to
initial recognition, these are measured at cost less accumulated amortisation
and accumulated impairment losses.
Amortisation is recognised in the consolidated income statement on a
straight-line basis over the estimated useful life of the asset from the date
of acquisition. The estimated useful lives are as follows:
· Customer relationships - 8 to 25 years
· Software - 5 to 10 years
· Brand - 5 to 10 years
The estimated useful lives and residual value are reviewed at each reporting
date and adjusted if appropriate, with the effect of any change in estimate
being accounted for on a prospective basis.
Intangible assets acquired separately
Intangible assets that are acquired separately by the Group and have finite
useful lives are measured at cost less accumulated amortisation and
accumulated impairment losses.
Amortisation is recognised in the consolidated income statement on a
straight-line basis over the estimated useful life of the asset from the date
that they are available for use. The estimated useful lives are as follows:
· Customer relationships - 10 years
· Regulatory licence - 12 years
· Software - 4 years
The estimated useful lives and residual value are reviewed at each reporting
date and adjusted if appropriate, with the effect of any change in estimate
being accounted for on a prospective basis.
Internally generated software intangible assets
Development costs that are directly attributable to the design and testing of
identifiable software products controlled by the Group are recognised as
intangible assets where the following criteria are met:
· it is technically feasible to complete the software so that it will be
available for use;
· there is an ability to use or sell the software;
· Management intend to complete the software and use or sell it;
· it can be demonstrated how the software will generate probable future
economic benefits;
· adequate technical, financial and other resources to complete the
development and to use or sell the software are available; and
· the expenditure attributable to the software during its development stage
can be reliably measured.
Directly attributable costs that are capitalised as part of the software
include employee costs and an appropriate portion of relevant overheads.
Capitalised development costs are recorded as intangible assets and
amortisation is recognised in the consolidated income statement on a
straight-line basis over the estimated useful life of the asset from the date
at which the asset is ready to use. The estimated useful life for internally
generated software intangible assets is four years.
The estimated useful lives and residual value are reviewed at each reporting
date and adjusted if appropriate, with the effect of any change in estimate
being accounted for on a prospective basis.
Impairment of non-financial assets
Goodwill that arises on the acquisition of business combinations and
intangible assets that have an indefinite useful life are not subject to
amortisation and are tested annually for impairment, or more frequently if
events or changes in circumstances indicate that they might be impaired. Other
non-financial assets are tested for impairment whenever events or changes in
circumstances indicate that the carrying amount might not be recoverable. An
impairment loss is recognised for the amount by which the asset's carrying
amount exceeds its recoverable amount. The recoverable amount is the higher of
an asset's fair value less costs of disposal ("FVLCD") and value in use
("VIU"). For the purposes of assessing impairment, assets are grouped at the
lowest levels for which there are separately identifiable cash inflows which
are largely independent of the cash inflows from other assets or groups of
assets (cash-generating units or CGUs). Non-financial assets other than
goodwill that have been previously impaired are reviewed for possible reversal
of the impairment at the end of each reporting period.
The movements in goodwill and other intangible assets are as follows:
Goodwill(1) Customer Regulatory Software Brands Total
£'000 relationships licence £'000 £'000 £'000
£'000 £'000
Cost
At 1 January 2022 327,868 137,769 314 10,861 2,613 479,425
Additions - 4,288 - 3,018 - 7,306
Additions through business combinations 10,982 5,663 - - - 16,645
Disposals - - - (46) - (46)
Exchange differences 24,858 8,884 17 316 268 34,343
At 31 December 2022 363,708 156,604 331 14,149 2,881 537,673
Additions - - - 3,811 - 3,811
Additions through business combinations 171,108 34,747 - 16 2,455 208,326
Measurement period adjustments (235) - - - - (235)
Impairment charge - (737) - - - (737)
Disposals - (1,003) - (182) - (1,185)
Exchange differences (11,617) (4,165) (6) (79) (365) (16,232)
At 31 December 2023 522,964 185,446 325 17,715 4,971 731,421
Accumulated amortisation ( )
At 1 January 2022 - 24,984 178 5,406 274 30,842
Charge for the year - 11,219 29 1,817 525 13,590
Disposals - - - (46) - (46)
Exchange differences - 1,374 11 130 44 1,559
At 31 December 2022 - 37,577 218 7,307 843 45,945
Charge for the year(2) - 12,799 20 2,276 712 15,807
Disposals - (79) - (119) - (198)
Exchange differences - (151) (4) (186) (58) (399)
At 31 December 2023 - 50,146 234 9,278 1,497 61,155
Carrying amount
At 31 December 2023 522,964 135,300 91 8,437 3,474 670,266
At 31 December 2022 363,708 119,027 113 6,842 2,038 491,728
1 In accordance with IFRS 3, the presentation of the 2022 opening
balance has been updated for measurement period adjustments.
2 Total amortisation charge includes £1.6m (2022: £1.2m) related to
software not acquired through business combinations; the balance of £14.2m
(2022: £12.4m) is excluded when calculating adjusted underlying basic EPS
(see note 34.3).
21.1. GOODWILL
The aggregate carrying amounts of goodwill allocated to each CGU is as
follows:
In the current year: Note At Combination Business Exchange At
1 Jan 2023 of CGUs combinations differences 31 Dec 2023
CGU £'000 £'000 £'000 £'000 £'000
Jersey 66,104 - - - 66,104
Guernsey 10,761 - - - 10,761
BVI 752 - - - 752
Switzerland 2,504 - - 52 2,556
Cayman 251 - - (14) 237
Luxembourg 29,186 - - (459) 28,727
Netherlands 14,992 - - (258) 14,734
Dubai 1,975 - - (105) 1,870
Mauritius 2,656 - - (138) 2,518
US - ICS - 205,421 - (10,955) 194,466
US - NESF 49,704 (49,704) - - -
US - SALI 144,271 (144,271) - - -
US - Other 11,446 (11,446) - - -
US - SDTC 31.1 - - 171,108 844 171,952
US - NYPTC 8,062 - - (664) 7,398
Ireland 9,051 - - (155) 8,896
UK 11,993 - - - 11,993
363,708 - 171,108 (11,852) 522,964
In the prior year: Note Balance at Combination Business Exchange Balance at
1 Jan 2022 of CGUs combinations differences 31 Dec 2022
CGU £'000 £'000 £'000 £'000 £'000
Jersey 66,104 - - - 66,104
Guernsey 10,761 - - - 10,761
BVI 752 - - - 752
Switzerland 2,366 - - 138 2,504
Cayman 224 - - 27 251
Luxembourg 27,809 - - 1,377 29,186
Netherlands 14,220 - - 772 14,992
Dubai 1,763 - - 212 1,975
Mauritius 2,379 - - 277 2,656
US - NESF 44,387 - - 5,317 49,704
US - SALI 126,136 - 2,598 15,537 144,271
US - Other 10,177 - - 1,269 11,446
US - NYPTC 31.2 - - 8,384 (322) 8,062
Ireland 8,796 - - 255 9,051
UK 11,994 - - (1) 11,993
Total 327,868 - 10,982 24,858 363,708
(A) COMBINATION OF ICS CGUS
At 31 December 2023, Management made an assessment of facts and circumstances
and determined that US - NESF, US - SALI and US - Other should form one CGU
(known as "US - ICS CGU").
The facts and circumstances used in arriving at this conclusion are detailed
below:
· the US ICS CGUs have integrated fully post acquisition;
· components benefit from significant cross-selling revenues;
· Management now forecast, monitor, and drive growth for US ICS revenues
through a combined jurisdictional offering, as opposed to the individual CGUs'
product offerings; and
· collective US Management oversight and decision-making have been in
operation during 2023.
Individual assessments have been performed to establish whether impairments
existed before consolidation. Management have concluded no impairment is
required for US - NESF, US - SALI, or US - Other CGUs, and have proceeded to
combine into one US - ICS CGU as at 31 December 2023.
Other US CGUs (US - NYPTC and US - SDTC) that relate to the PCS Division will
continue to be assessed at their individual levels.
(B) GOODWILL IMPAIRMENT
Goodwill is not amortised but is tested for impairment annually, or more
frequently if events or changes in circumstances indicate that the carrying
amount may not be recoverable. With the exception of US - SDTC and US - NYPTC,
goodwill is monitored at a jurisdictional level by Management. Goodwill is
allocated to groups of CGUs for the purpose of impairment testing and this
allocation is made to those CGUs that are expected to benefit from the
business combination in which the goodwill arose.
Key assumptions used to calculate the recoverable amount for each CGU
The recoverable amount of all CGUs has been determined based on the higher of
VIU and FVLCD. Projected cash flows are calculated with reference to each
CGU's latest budget and business plan which are subject to a rigorous review
and challenge process. Management prepare the budgets through an assessment of
historical revenues from existing clients, the pipeline of new projects,
historical pricing, and the required resource base needed to service new and
existing clients, coupled with their knowledge of wider industry trends and
the economic environment.
Year 1 cash flow projections are based on the latest approved budget and years
2 to 5 on detailed outlooks prepared by Management. The US - ICS CGU employs a
10 year period due to the significantly longer useful economic life of their
customer relationships, where these cash flow projections are able to be
accurately forecasted due to their recurring nature and increased client
longevity.
Previously, the terminal growth rate was based on expected long-term
inflation. This has been updated to also consider the long-term average growth
rate for the jurisdiction and services provided.
Management estimate discount rates using pre-tax rates that reflect current
market assessments of the time value of money. In assessing the discount rate
applicable to the Group the following factors have been considered:
· long-term treasury bond rates for the relevant jurisdiction;
· the cost of equity based on an adjusted Beta for the relevant
jurisdiction; and
· the risk premium to reflect the increased risk of investing in equities.
Management have given due consideration to climate change and any potential
impact on projected cash flows. Such is the nature of JTC's business and the
diversification of customer relationships that Management have concluded the
impact to be immaterial to each of the CGUs recoverable amount.
The recoverable amounts for both the US - SDTC and Ireland CGUs were
determined based on FVLCD. These were calculated using a discounted cash flow
method, utilising Level 3 inputs under the IFRS 13 fair value hierarchy.
A summary of the values assigned to the key assumptions used in the VIU and
FVLCD are as follows:
· Revenue growth rate: up to 33%
· Terminal value growth rate: between 0.5% to 4.0%
· Discount rate: between 9.6% to 11.2%
The key assumptions used for CGUs where the carrying amount is a significant
proportion of the Group's total carrying value of goodwill is as follows:
Forecasted average annual revenue growth rate Terminal value growth rate Discount rate
CGU % of Group's 2023 2022 2023 2022 2023 2022
total carrying % % % % % %
value of goodwill
Jersey 12.6 6.8 7.6 2.6 2.5 10.8 11.2
Luxembourg 5.5 8.7 10.9 2.0 2.0 9.9 11.4
US - ICS 37.2 18.2 - 4.0 - 10.9 -
US - SDTC 32.9 13.1 - 2.5 - 10.5 -
At 31 December 2023, the recoverable amount of goodwill determined for each
CGU was found to be higher than its carrying amount.
Sensitivity to changes in assumptions
Management believe that any reasonable changes to the key assumptions on which
recoverable amounts are based would not cause the aggregate carrying amount
to exceed the recoverable amount of the CGUs, except for US - SDTC where for
the recoverable amount to equal the carrying amount there would need to be a
reduction of £43.6m. This may be caused by an increase of 1.5% in the
discount rate from 10.5% to 12.0%. An increase of 1.6% in discount rate would
result in a £1.98m impairment.
21.2. CUSTOMER RELATIONSHIP INTANGIBLE ASSETS
The carrying amounts of identifiable customer relationship intangible assets
acquired separately and through business combinations are as follows:
Acquisitions Amortisation Useful Carrying amount
period end economic
life ("UEL")
2023 2022
£'000 £'000
During previous financial reporting periods
Signes 30 April 2025 10 years 412 699
KB Group 30 June 2027 12 years 1,221 1,570
S&GFA 30 September 2025 10 years 689 1,143
BAML 30 September 2029 12 years 4,851 6,016
NACT 31 July 2027 10 years 706 957
Van Doorn 28 February 2030 11.4 years 3,985 4,724
Minerva 30 May 2027 - 30 July 2030 8.7 - 11.8 years 7,387 8,762
Exequtive 31 March 2029 10 years 5,261 6,373
Aufisco 30 June 2029 10 years 398 1,365
Sackville 28 February 2029 10 years 545 681
NESF 30 April 2028 8 years 739 1,256
Sanne Private Clients 30 June 2030 10 years 4,155 4,794
Anson Registrars 28 February 2030 10 years 19 22
RBC cees 31 March 2033 12 years 17,241 19,105
INDOS 31 May 2031 10 years 1,003 1,138
Segue 30 September 2031 10 years 826 1,016
perfORM 30 September 2031 10 years 21 23
Ballybunion 31 October 2031 10 years 2,058 2,362
SALI 31 October 2046 25 years 41,917 46,215
EFS 30 November 2031 10 years 1,136 1,351
Sterling 30 June 2032 10 years 2,621 4,099
NYPTC 31 October 2032 10 years 4,555 5,356
During the year ended 31 December 2023
SDTC 31 January 2036 12.5 years 33,554 -
Total 135,300 119,027
(A) ACQUIRED IN A BUSINESS COMBINATION
On 2 August 2023, the Group recognised customer relationship intangible assets
for SDTC of £34.5m ($44.2m) (see note 31.1(A)). The UEL of twelve and a half
years was based on the historical length of relationships as well as observed
attrition rates for companies operating in the personal trust administration
sector. At 31 December 2023, the carrying amount was £33.6m as shown in the
previous table.
Key assumptions in determining fair value
The fair value at acquisition was derived using the multi-period excess
earnings method ("MEEM") financial valuation model. Management consider the
following key assumptions to be significant for the valuation of new customer
relationships:
· annual revenue growth;
· the discount rate applied to free cash flow; and
· annual client attrition rate.
Sensitivity analysis
Management carried out a sensitivity analysis on the key assumptions used in
the valuation of new customer relationship intangible assets for SDTC. The
following table shows the impact reasonable changes in the UEL/Attrition rate
% and discount rate would have on the valuation of the customer relationships
(£'000):
UEL/Attrition rate %
Discount rate 13.3 years/7.5% 12.5 years/8.0% 11.8 years/8.5%
9.5% 3,336 1,357 (420)
10.5% 1,837 - (1,656)
11.5% 452 (1,256) (2,802)
Management estimate that any other reasonable change to the key assumptions
for the new customer relationship intangible assets recognised in the year
would not result in a significant change to fair value.
(B) IMPAIRMENT
At 31 December 2023, forthcoming legislative changes in the Netherlands were
considered to be an indicator of impairment for the Aufisco customer
relationship intangible ("Aufisco"). Having considered all the risk factors,
on 1 March 2024, the Group decided to sell its subsidiary, Global Tax Support
B.V. ("GTS"). The sale terms included all GTS clients and associated future
cash inflows and the subsequent impairment assessment of Aufisco resulted in
an impairment charge of £0.74m.
For all other customer relationship intangibles, consideration was given to
many indicators, including the current macroeconomic environment and its
potential impact on financial performance. With the exception of Aufisco for
the reasons set out above, Management concluded there were no indicators of
impairment present at 31 December 2023.
21.3. BRAND INTANGIBLE ASSETS
(A) ACQUIRED IN A BUSINESS COMBINATION
On 2 August 2023, the Group recognised a brand intangible asset for SDTC of
£2.2m ($2.8m) (see note 31.1(A)).The UEL of five years was based on
Management's expectation, as well as UELs observed for benchmark transactions.
Key assumptions in determining fair value
The fair value at acquisition was derived using a relief from royalty
methodology. Management consider the key assumptions in this model to be the
UEL and the royalty rate applied to projected revenue growth.
Sensitivity analysis
Management estimate that any reasonable change to the key assumptions for the
new brand intangible asset recognised in the year would not result in a
significant change to fair value.
(B) IMPAIRMENT
Management review brand intangible assets for indicators of impairment at each
reporting date and have concluded that no indicators were present as at 31
December 2023.
22. OTHER NON-FINANCIAL ASSETS
Assets recognised from costs to obtain or fulfil a contract
Incremental costs of obtaining a contract (i.e. costs that would not have been
incurred if the contract had not been obtained) and the costs incurred to
fulfil a contract are recognised within non-financial assets if the costs are
expected to be recovered. The capitalised costs are amortised on a
straight-line basis over the estimated useful economic life of the contract.
The carrying amount of the asset is tested for impairment on an annual basis.
2023 2022
£'000 £'000
Non-current
Prepayments 614 361
Assets recognised from costs to obtain or fulfil a contract 2,367 2,008
Total non-current 2,981 2,369
Current
Prepayments 5,237 4,660
Assets recognised from costs to obtain or fulfil a contract 656 549
Current tax receivables 1,006 774
Total current 6,899 5,983
Total other non-financial assets 9,880 8,352
Current and non-current assets recognised from costs to obtain or fulfil a
contract include £1.9m for costs to obtain a contract (2022: £1.2m) and
£1.1m for costs incurred to fulfil a contract (2022: £1.3m). The
amortisation charge for the year was £1.1m (2022: £0.8m). Management review
assets recognised from costs to obtain or fulfil a contract and have concluded
that there was no impairment at 31 December 2023.
23. DEFERRED TAX
For the accounting policy on deferred income tax, see note 11.
The deferred tax (assets) and liabilities recognised in the consolidated
financial statements are set out below:
2023 2022
£'000 £'000
Deferred tax (assets) (266) (143)
Deferred tax liabilities 9,474 11,184
9,208 11,041
Intangible assets 9,167 11,097
Other origination and reversal of temporary differences 41 (56)
9,208 11,041
The movement in the year is analysed as follows:
Intangible assets 2023 2022
£'000 £'000
Balance at the beginning of the year 11,097 10,375
Recognised through business combinations - 1,682
Recognised in the consolidated income statement (1,694) (1,531)
Foreign exchange (to other comprehensive income) (236) 571
Balance at 31 December 9,167 11,097
Other origination and reversal of temporary differences
Balance at the beginning of the year (56) (2)
Recognised in the consolidated income statement 97 (54)
Balance at 31 December 41 (56)
At 31 December 2023, the total unrecognised deferred tax (asset) in respect of
brought forward losses was approximately £2.1m (2022: £2.5m).
24. OTHER NON-FINANCIAL LIABILITIES
Deferred income
Fixed fees received in advance across all the service lines and up-front fees
in respect of services due under contract are time apportioned to respective
accounting periods, and those billed but not yet earned are included in
deferred income in the consolidated balance sheet. As such liabilities are
associated with future services, they do not give rise to a contractual
obligation to pay cash or another financial asset.
Contract liabilities
Commissions expected to be paid over the term of a customer contract are
discounted and recognised at the NPV. The finance cost is charged to the
consolidated income statement over the contract life so as to produce a
constant periodic rate of interest on the remaining balance of the liability
for each period.
Employee benefit obligations
For the accounting policy on employee benefit obligations, see note 5.
2023 2022
£'000 £'000
Non-current
Contract liabilities 492 216
Employee benefit obligations 815 572
Total non-current 1,307 788
Current
Deferred income(1) 19,639 7,856
Contract liabilities 873 772
Total current 20,512 8,628
Total other non-financial liabilities 21,819 9,416
1 Of the £7.9m of deferred income at 31 December 2022, £7.8m was
recognised as revenue in the 2023 consolidated income statement.
25. 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 will be required to settle the obligation, and a reliable estimate
can be made of the amount of the obligation. Provisions are not recognised for
future operating losses.
The amount recognised as a provision is the best estimate of the consideration
required to settle the present obligation at the end of the reporting period,
taking into account the risks and uncertainties surrounding the obligation. If
the impact of the time value of money is material, provisions are determined
by discounting the expected future cash flows at a pre-tax rate that reflects
current market assessments of the time value of money and the risks specific
to the liability. The unwinding of the discount is recognised as a finance
cost in the consolidated income statement.
Dilapidations
The Group has entered into lease agreements for the rental of office space in
different countries. There are a number of leases which include an obligation
to remove any leasehold improvements (thus returning the premises to an agreed
condition at the end of the respective lease terms) and to restore wear and
tear by repairing and repainting (this is known as "dilapidations"). The
estimated cost of the dilapidations payable at the end of each tenancy, unless
specified, is generally estimated by reference to the square footage of the
building and in consultation with local property agents, landlords and prior
experience. Having estimated the likely amount due, a country specific
discount rate is applied to calculate the present value of the expected
outflow. The provisions are expected to be utilised when the leases expire or
upon exit. The discounted dilapidation cost has been capitalised against the
leasehold improvement asset in accordance with IFRS 16.
Dilapidations
2023 2022
£'000 £'000
At 1 January 2,153 1,967
Additions 277 219
Additions through business combinations 409 56
Release of unutilised provided amount (230) (181)
Unwind of discount 40 22
Amounts utilised - (21)
Impact of foreign exchange (77) 91
At 31 December 2,572 2,153
Analysis of total provisions: 2023 2022
£'000 £'000
Non-current 2,200 1,884
Current 372 269
Total 2,572 2,153
SECTION 5 - EQUITY
26. SHARE CAPITAL AND RESERVES
26.1. SHARE CAPITAL AND SHARE PREMIUM
The Group's Ordinary shares are classified as equity. Incremental costs
directly attributable to the issue of Ordinary shares are recognised as a
deduction from equity, net of any tax effects.
2023 2022
£'000 £'000
Authorised
300,000,000 Ordinary shares (2022: 300,000,000 Ordinary shares) 3,000 3,000
Called up, issued and fully paid
165,521,678 Ordinary shares (2022: 149,061,113 Ordinary shares) 1,655 1,491
Ordinary shares have a par value of £0.01 each. All shares are equally
eligible to receive dividends and the repayment of capital and represent one
vote at Shareholders' meetings of JTC PLC.
Movements in Ordinary shares Note No. of shares Par value Share premium
(thousands) £'000 £'000
At 1 January 2022 147,586 1,476 285,852
PLC EBT issue 1,150 12 -
Acquisition of SALI - EBT Contribution 325 3 2,056
Acquisition of SALI - adjust fair value of equity instruments - - 2,598
Less: Cost of share issuance - - (71)
Movement in the year 1,475 15 4,583
At 31 December 2022 149,061 1,491 290,435
Shares issued for equity raises(1) 8,857 88 61,912
PLC EBT issue(2) 1,580 16 -
Acquisition of SDTC 31.1 5,978 60 41,359
Acquisition of Segue 17.1 45 - 360
Less: Cost of share issuance(3) - - (1,853)
Movement in the year 16,460 164 101,778
At 31 December 2023 165,521 1,655 392,213
1 On 14 June 2023, the Company issued 8,857,143 Placing Shares at a
price of £7.00 per share, raising gross proceeds of £62m for the Company.
The Placing Shares are fully paid and rank pari passu in all respects with the
existing shares, including the right to receive all dividends and other
distributions declared, made or paid after the issue date.
2 On 21 June 2023, the Company issued an additional 1,579,636 Ordinary
shares to the Company's Employee Benefit Trust ("PLC EBT") (see note 26.2) in
order for PLC EBT to satisfy anticipated future exercises of awards granted to
beneficiaries.
3 This includes costs associated with the equity raise (£1.7m) and the
issue of shares for the acquisition of SDTC (£0.15m).
26.2. OWN SHARES
Own shares represent the shares of the Company that are unallocated and
currently held by PLC EBT. They are recorded at cost and deducted from equity.
When shares vest unconditionally, are cancelled or are reissued, they are
transferred from the own shares reserve at their cost. Any consideration paid
or received for the purchase or sale of the Company's own shares is shown as a
movement in Shareholders' equity.
Note No. of shares PLC EBT
(thousands) £'000
At 1 January 2022 3,171 3,366
EIP award 36.1 (1,411) -
PSP awards 36.2 (188) -
DBSP awards 36.3 (62) -
Other awards 36.4 (70) -
PLC EBT issue 1,475 12
Purchase of own shares 42 319
Movement in year (214) 331
At 31 December 2022 2,957 3,697
PSP awards 36.2 (200) -
DBSP awards 36.3 (48) -
Other awards 36.4 (89) -
Acquisition of INDOS 17.1 (212) -
PLC EBT issue 1,580 15
Purchase of own shares 29 200
Movement in year 1,060 215
At 31 December 2023 4,017 3,912
26.3. OTHER RESERVES
CAPITAL RESERVE
This reserve is used to record the gains or losses recognised on the purchase,
sale, issue or cancellation of the Company's own shares, which may arise from
capital transactions by the Group's employee benefit trusts as well as any
movements in share-based awards to employees (see note 36).
TRANSLATION RESERVE
The translation reserve comprises all foreign currency differences arising
from the translation of the financial statements of foreign operations.
OTHER RESERVE
Other reserve includes the cash flow hedge reserve, which is used to recognise
the effective portion of gains or losses on derivatives designated and
qualifying as cash flow hedges (see note 29.1).
RETAINED EARNINGS
Retained earnings includes accumulated profits and losses.
27. DIVIDENDS
Provision is made for the amount of any dividend declared, being appropriately
authorised and no longer at the discretion of the entity, on or before the end
of the reporting period but not distributed at the end of the reporting
period. Interim dividends are recognised when paid.
The following dividends were declared and paid by the Company for the year:
2023 2022
£'000 £'000
Final dividend for 2021 of 5.07p per qualifying Ordinary share - 7,322
Interim dividend for 2022 of 3.1p per qualifying Ordinary share - 4,522
Final dividend for 2022 of 6.88p per qualifying Ordinary share 10,240 -
Interim dividend for 2023 of 3.5p per qualifying Ordinary share 5,785 -
Total dividend declared and paid 16,025 11,844
SECTION 6 - RISK
28. CRITICAL ACCOUNTING ESTIMATES AND JUDGEMENTS
In the application of the Group's accounting policies, Management are required
to make judgements, estimates and assumptions about the carrying amounts of
assets and liabilities that are not readily apparent from other sources. The
estimates and associated assumptions are regularly evaluated based on
historical experience, current circumstances, expectation of future events and
other factors that are considered to be relevant. Actual results may differ
from these estimates. In preparing the financial statements, Management have
ensured they have assessed any direct and indirect impacts of inflation and
interest rates when applying IFRS.
This note provides an overview of the areas that involved a higher degree of
judgement or complexity, and of items which are more likely to be materially
adjusted due to estimates and assumptions turning out to be wrong.
The following are the critical judgements and estimates that Management have
made in the process of applying the Group's accounting policies and that have
the most significant effect on the amounts recognised in the consolidated
financial statements.
28.1. CRITICAL JUDGEMENTS IN APPLYING THE GROUP'S ACCOUNTING POLICIES
RECOGNITION OF SEPARATELY IDENTIFIABLE INTANGIBLE ASSETS
In 2023, the Group acquired SDTC (see note 31.1). IFRS 3 'Business
Combinations' requires Management to identify assets and liabilities
purchased, including intangible assets. Following their assessment, Management
concluded that the intangible assets meeting the recognition criteria were
customer relationships and brand. The fair values at acquisition date were
£34.5m ($44.2m) and £2.2m ($2.8m), respectively.
TREATMENT OF CONTINGENT CONSIDERATION FOR SDTC
IFRS 3 'Business Combinations' requires Management to assess whether
contingent payments are consideration or remuneration. Following their
assessment, Management concluded the total earn-out of £54.7m ($70.0m) for
SDTC to be contingent consideration (see note 31.1(B)).
28.2. CRITICAL ACCOUNTING ESTIMATES AND ASSUMPTIONS
RECOVERABILITY OF WIP
To assess the fair value of consideration received for services rendered,
Management are required to make an assessment of the net unbilled amount
expected to be collected from clients for work performed to date. To make this
assessment, WIP balances are reviewed regularly on a by-client basis and the
following factors are taken into account: the ageing profile of the WIP, the
agreed billing arrangements, value added and status of the client
relationship. See note 13 for the sensitivity analysis.
GOODWILL IMPAIRMENT - KEY ASSUMPTIONS USED TO CALCULATE THE RECOVERABLE AMOUNT FOR EACH GROUP OF CGUS
Goodwill is tested annually for impairment and the recoverable amount of
groups of CGUs is determined based on a value in use or fair value less costs
of sale calculation using cash flow projections containing key assumptions.
See note 21.1 for further detail on key assumptions and sensitivity analysis.
FAIR VALUE OF CUSTOMER RELATIONSHIP INTANGIBLES
The customer relationship intangible assets are valued using the MEEM
financial valuation model. Cash flow forecasts and projections are produced by
Management and form the basis of the valuation analysis. Other key estimates
and assumptions used in the modelling to derive the fair values include:
annual revenue growth, the discount rate applied to free cash flow and annual
client attrition rates. See note 21.2(A) for the sensitivity analysis.
FAIR VALUE OF EARN-OUT CONSIDERATION FOR SDTC
To derive the fair value of the earn-out contingent consideration, Management
assessed the likelihood of achieving pre-defined revenue targets to determine
the value of contingent consideration. Management considers the forecast
revenue to be the key assumption in the calculation of the fair value. See
note 31.1(B) for the sensitivity analysis.
29. FINANCIAL RISK MANAGEMENT
The Group is exposed through its operations to the following financial risks:
market risk (including foreign currency risk and interest rate risk), credit
risk and liquidity risk.
The Group is exposed to risks that arise from the use of its financial
instruments. This note describes the Group's objectives, policies and
processes for managing those risks and the methods used to measure them.
There have been no material changes in the Group's exposure to financial
instrument risks, its objectives, policies and processes for managing those
risks or the methods used to measure them from previous periods unless
otherwise stated in this note.
General objectives, policies and processes
The Board has overall responsibility for determining the Group's financial
risk management objectives and policies and, whilst retaining ultimate
responsibility for them, it delegates the authority for designing and
operating processes that ensure effective implementation of the objectives and
policies to Management, in conjunction with the Group's finance department.
The financial risk management policies are considered on a regular basis to
ensure that these are in line with the overall business strategies and the
Board's risk management philosophy. The overall objective is to set policies
to minimise risk as far as possible without adversely affecting the Group's
financial performance, competitiveness and flexibility.
Principal financial instruments
The principal financial instruments used by the Group, from which financial
instrument risk arises, are as follows:
Note 2023 2022
£'000 £'000
Financial assets - measured at amortised cost
Trade receivables 12 32,071 33,290
Work in progress 13 11,615 12,525
Accrued income 14 26,574 23,911
Other receivables 15 4,181 3,991
Cash and cash equivalents 16 97,222 48,861
171,663 122,578
Financial assets - measured at fair value
Other receivables 15 - 371
- 371
Financial liabilities - measured at amortised cost
Trade and other payables 17 94,789 48,722
Loans and borrowings 18 220,531 153,622
Lease liabilities 19 44,041 44,894
359,361 247,238
Financial liabilities - measured at fair value
Derivative financial liabilities 29.1 749 -
Trade and other payables(1) 17 1,902 1,598
2,651 1,598
1 Included within trade and other payables is the liability-classified
contingent consideration of £1.9m for perfORM (2022: £1.6m) (see note 17.1)
Management considered the following fair value hierarchy levels in line with
IFRS 13.
Level 1 - Inputs are quoted prices (unadjusted) in active markets for
identical assets and liabilities
Level 2 - Inputs other than quoted prices included within Level 1 that are
observable for the asset and liability, either directly or indirectly
Level 3 - Inputs are unobservable for the asset or liability
Management concluded that the interest rate swap was classified under Level 2,
calculated as the present value of the estimated future cash flows based on
observable yield curves, and the liability-classified contingent consideration
was classified under Level 3, as per the valuation methodology outlined in
note 17.
29.1. MARKET RISK
Market risk arises from the Group's use of interest-bearing, tradable and
foreign currency financial instruments. It is the risk that changes in
interest rates (interest rate risk) or foreign exchange rates (currency risk)
will affect the Group's future cash flows or the fair value of the financial
instruments held. The objective of market risk management is to manage and
control market risk exposures within acceptable parameters, while optimising
the return.
FOREIGN CURRENCY RISK MANAGEMENT AND SENSITIVITY
Foreign currency risk arises when individual Group entities enter into
transactions denominated in a currency other than their functional currency.
The Group's policy is, where possible, to allow Group entities to settle
liabilities denominated in their functional currency with the cash generated
from their own operations in that currency. Where Group entities have
liabilities denominated in a currency other than their functional currency
(and have insufficient reserves of that currency to settle them), cash already
denominated in the required currency will, where possible and ensuring no
adverse impact on local regulatory capital adequacy requirements (see note
30), be transferred from elsewhere in the Group.
In order to implement and monitor this policy, on an ongoing basis Management
periodically analyse cash reserves by individual Group entities and in major
currencies together with information on expected liabilities due for
settlement. The effectiveness of this policy is measured by the number of
resulting cash transfers made between entities and any necessary foreign
exchange trades. Management consider this policy to be working effectively but
continue to regularly assess if foreign currency hedging is appropriate.
The Group's exposure to the risk of changes in exchange rates relates
primarily to the Group's operating activities when the revenue or expenses are
denominated in a different currency from the Group's functional and
presentation currency of pounds sterling ("£"). For trading entities that
principally affect the profit or net assets of the Group, the exposure is
mainly from Euro and US dollar. The Group's bank loans are denominated in £,
although the facility is multicurrency.
As at 31 December 2023, the Group's exposure to its material foreign currency
denominated financial assets and liabilities is as follows:
£ Euro US dollar
Net foreign currency assets/(liabilities) 2023 2022 2023 2022 2023 2022
£'000 £'000 £'000 £'000 £'000 £'000
Trade receivables 18,661 17,612 2,894 3,502 10,021 12,031
Work in progress 8,894 9,628 1,441 1,625 875 743
Accrued income 13,820 12,802 2,314 1,704 10,326 9,395
Other receivables 1,243 1,693 - 374 2,776 2,053
Cash and cash equivalents 12,102 9,811 15,534 10,192 67,669 27,114
Trade and other payables (8,708) (10,435) (7,529) (6,236) (79,097) (32,695)
Loans and borrowings (223,662) (153,622) - - - -
Lease liabilities (24,966) (26,621) (9,168) (10,863) (7,093) (5,603)
Total net exposure (202,616) (139,132) 5,486 298 5,477 13,038
The following table illustrates the possible effect on comprehensive income
for the year and net assets arising from a 20% strengthening or weakening of
UK sterling against other currencies.
Strengthening/ Effect on comprehensive income and net assets
(weakening) of
UK sterling(1)
2023 2022
£'000 £'000
Euro +20% (914) (50)
US dollar +20% (913) (2,173)
Total (1,827) (2,223)
Euro (20%) 1,371 74
US dollar (20%) 1,369 3,259
Total 2,740 3,333
1 Holding all other variables constant.
Inter-company loans
A 20% strengthening of UK sterling would result in a £1.6m foreign exchange
loss within the consolidated income statement. Conversely, a 20% weakening of
UK sterling would result in a £2.5m foreign exchange gain.
INTEREST RATE RISK MANAGEMENT AND SENSITIVITY
(A) BANK LOANS
The Group is exposed to interest rate risk as it borrows all funds at floating
interest rates. The interest rate applied to loan facilities is determined
using SONIA plus a margin based on net leverage calculations. The Group
manages the interest rate risk by maintaining an appropriate leverage ratio
and through this ensuring that the interest rate is kept as low as possible.
During the current year, the macroeconomic environment resulted in increased
interest rates and higher costs for the Group. Management have continued to
assess the risk and the cost versus benefit of taking hedging instruments to
manage this exposure, and upon the refinancing of the RCF on 4 December 2023,
entered into a two year interest rate swap.
(B) HEDGE ACCOUNTING
The Group exercised the choice to use hedge accounting for the two year
interest rate swap on its loans and borrowings in accordance with IFRS 9
'Financial Instruments'.
The Group designates certain derivatives held for risk management as hedging
instruments in qualifying hedging relationships. On initial designation of the
hedge, the Group formally documents the relationship between the hedging
instruments and hedged items, including the risk management objective, the
strategy in undertaking the hedge and the method that will be used to assess
the effectiveness of the hedging relationship.
The Group makes an assessment, both at the inception of the hedge relationship
and on an ongoing basis, as to whether the hedging instruments are expected to
be highly effective in offsetting the movements in the fair value of the
respective hedged items during the period for which the hedge is designated.
Cash flow hedges
In accordance with its risk management strategy, the Group entered into
interest rate swap contracts to manage the interest rate risk arising in
respect of the floating interest rate exposures on its borrowings.
The Group assessed prospective hedge effectiveness by comparing the changes in
the floating rate on its borrowings with the changes in fair value of
allocated interest rate swaps used to hedge the exposure.
The Group has identified the following possible sources of ineffectiveness:
· the use of derivatives as a protection against interest rate risk creates
an exposure to the derivative counterparty's credit risk which is not offset
by the hedged item;
· different amortisation profiles on hedged item principal amounts and
interest rate swap notionals;
· for derivatives the discounting curve used depends on collateralisation
and the type of collateral used; and
· differences in the timing of settlement of hedging instruments and hedged
items.
Management have concluded there are no sources of ineffectiveness.
Instruments used by the Group
The Group holds three interest rate swap contracts which commenced on 4
December 2023 and expire on 4 December 2025, with a blended swap rate of
4.237% (excluding margin). Each of the contracts covers a notional amount of
£60m, and as at 31 December 2023, the Group held 80% (2022: 0%) of fixed rate
debt and 20% (2022: 100%) of floating rate debt, from its total borrowings of
£223.7m (2022: £153.6m).
As at 31 December 2023, the interest rate swap contracts were revalued
resulting in a financial liability with a fair value of £0.75m. There was a
corresponding loss recorded within other comprehensive income, of which
£0.13m was reclassified to the profit or loss (see note 10).
(C) SENSITIVITY ANALYSIS FOR VARIABLE RATE INSTRUMENTS
An increase/decrease of 100 basis points in interest rates on loans and
borrowing with floating interest rates would have decreased/increased the
profit and loss before tax by £1.6m (2022: increase/decrease by 100 basis
points, +/-£1.6m). This analysis assumes that all other variables remain
constant.
The Group's exposures to interest rates on financial assets and financial
liabilities are detailed in the liquidity risk management section of this
note.
29.2. CREDIT RISK MANAGEMENT
Credit risk is the risk of financial loss to the Group should a customer or
counterparty to a financial instrument fail to meet its contractual
obligations. The Group's principal exposure to credit risk arises from
contracts with customers and therefore the following financial assets: trade
receivables, work in progress and accrued income (together "customer
receivables").
The Group manages credit risk for each new customer by giving consideration to
the risk of insolvency or closure of the customer's business, current or
forecast liquidity issues and general creditworthiness (including past default
experience of the customer or customer type).
Subsequently, customer credit risk is managed by each of the Group entities
subject to the Group's policy, procedures and control relating to customer
credit risk management. Outstanding customer receivables are monitored and
followed up continuously. Specific provisions incremental to ECL are made when
there is objective forward-looking evidence that the Group will not be able to
bill the customer in line with the contract or collect the debts arising from
previous invoices. This evidence can include the following: indication that
the customer is experiencing significant financial difficulty or default,
probability of bankruptcy, problems in contacting the customer, disputes with
a customer, or similar factors.
Management give close and regular consideration to the potential impact of the
macroeconomic environment (including increased interest rates) and any
climate-related risks upon the customer's behaviours and ability to pay. This
analysis is performed on a customer-by-customer basis. Such is the
diversification across the book in industries and geographies that any impact
is not considered to be material to the recoverability of customer
receivables. For more commentary on this, the ageing of trade receivables and
the provisions thereon at the year end, including the movement in the
provision, see note 12.
Credit risk in relation to other receivables is considered for each separate
contractual arrangement and the risk of the counterparty defaulting is
considered to be low.
Credit risk also arises from cash and cash equivalents and deposits with banks
and financial institutions. Cash and cash equivalents are held mainly with
banks which are rated 'A-' or higher by Standard & Poor's Rating Services
or Fitch Ratings Ltd for long-term credit rating.
The financial assets are subject to the impairment requirements of IFRS 9; for
further detail of how this is assessed and measured, see notes 12 to 16.
CREDIT RISK EXPOSURE
Trade receivables, work in progress and accrued income result from the
provision of services to a large number of customers (individuals and
corporate), spread across different industries and geographies. The gross
carrying amount of financial assets represents the maximum credit exposure and
as at the reporting date this can be summarised as follows:
Total Loss Net Total Loss Net
2023 allowance 2023 2022 allowance 2022
£'000 2023 £'000 £'000 2022 £'000
£'000 £'000
Trade receivables 38,484 (6,413) 32,071 38,935 (5,645) 33,290
Work in progress 11,710 (95) 11,615 12,594 (69) 12,525
Accrued income 26,609 (35) 26,574 23,936 (25) 23,911
Other receivables 4,181 - 4,181 4,362 - 4,362
Cash and cash equivalents 97,222 - 97,222 48,861 - 48,861
178,206 (6,543) 171,663 128,688 (5,739) 122,949
29.3. LIQUIDITY RISK MANAGEMENT
Liquidity risk is the risk that the Group will not be able to meet its
financial obligations as they fall due. The Group manages liquidity risk to
maintain adequate reserves by regular review around the working capital cycle
using information on forecast and actual cash flows. Management have
considered the impact of increased interest rates during the year, and do not
consider there to be a significant negative impact on the Group's ability to
meet its financial obligations.
The Board is responsible for liquidity risk management and it has established
an appropriate liquidity risk management framework for the management of the
Group's short, medium and long-term funding and liquidity management
requirements. Regulation in most jurisdictions also requires the Group to
maintain a level of liquidity in order that the Group does not
become exposed.
LIQUIDITY TABLES
The tables detail the Group's remaining contractual maturity for its financial
liabilities with agreed repayment years. The tables have been drawn up based
on the undiscounted cash flows of financial liabilities based on the earliest
date on which the Group can be required to pay. The table includes both
interest and principal cash flows. To the extent that interest flows are
floating rate, the undiscounted amount is derived from interest rates at the
balance sheet date. The contractual maturity is based on the earliest date on
which the Group may be required to pay.
The total contractual cash flows are as follows:
2023 <6 6-12 1-3 3-5 5-10 >10 Total
months months years years years years contractual
£'000 £'000 £'000 £'000 £'000 £'000 cash flow
£'000
Loans and borrowings(1) 7,292 7,372 253,457 - - - 268,121
Trade payables and accruals 19,896 - - - - - 19,896
Contingent consideration 25,465 - 59,342 - - - 84,807
Lease liabilities 3,888 3,888 13,136 10,887 14,012 5,931 51,742
Total 56,541 11,260 325,935 10,887 14,012 5,931 424,566
2022 <6 6-12 1-3 3-5 5-10 >10 Total
months months years years years years contractual
£'000 £'000 £'000 £'000 £'000 £'000 cash flow
£'000
Loans and borrowings(1) 4,221 4,344 170,020 - - - 178,585
Trade payables and accruals 17,952 - 72 - - - 18,025
Contingent consideration 2,734 - 29,358 - - - 32,092
Lease liabilities 3,537 3,511 13,225 10,346 14,812 7,806 53,237
Total 28,444 7,855 212,675 10,345 14,812 7,806 281,938
1 This includes the future interest payments not yet accrued and the
repayment of capital upon maturity.
30. CAPITAL MANAGEMENT
30.1. RISK MANAGEMENT
The Group's objective for managing capital is to safeguard the ability to
continue as a going concern, while maximising the return to Shareholders
through the optimisation of the debt and equity balance, and to ensure capital
adequacy requirements are met for local regulatory requirements at entity
level.
The managed capital refers to the Group's debt and equity balances; for
quantitative disclosures, see note 18 for loans and borrowings and note 26 for
share capital and reserves. For the Group's risk management and strategy
regarding interest rate and foreign exchange risk, see note 29.1.
30.2. LOAN COVENANTS
The Group has bank loans which require it to meet leverage and interest cover
covenants. In order to achieve the Group's capital risk management objective,
the Group aims to ensure that it meets financial covenants attached to bank
borrowings. Breaches in meeting the financial covenants would permit the
lender to immediately recall the loan. In line with the loan agreement the
Group tests compliance with the financial covenants on a bi-annual basis.
Under the terms of the loan facility, the Group is required to comply with the
following financial covenants:
· Leverage (being the ratio of total net debt to underlying EBITDA (for LTM
at average exchange rates and adjusted for pro-forma contributions from
acquisitions) for a relevant period) must not be more than 3:1.
· Interest cover (being the ratio of underlying EBITDA to net finance
charges) must not be less than 4:1.
The Group has complied with all financial covenants throughout the reporting
period and is satisfied that there is sufficient headroom should rising
inflation and interest rates adversely affect trading going forward.
30.3. CAPITAL ADEQUACY
Individual regulated entities within the Group are subject to regulatory
requirements to maintain adequate capital and liquidity to meet local
requirements in Jersey, Guernsey, Ireland, the Isle of Man, the UK, the US,
Switzerland, the Netherlands, Luxembourg, Mauritius, South Africa and the
Caribbean; all are monitored regularly to ensure compliance. There have been
no breaches of applicable regulatory requirements during the reporting period.
SECTION 7 - GROUP STRUCTURE
31. BUSINESS COMBINATIONS
A business combination is defined as a transaction or other event in which an
acquirer obtains control of one or more businesses. Where the business
combination does not include the purchase of a legal entity but the
transaction includes acquired inputs and processes applied to those inputs in
order to generate outputs, the transaction is also considered a business
combination.
The Group applies the acquisition method to account for business combinations.
The consideration transferred in an acquisition comprises the fair value of
assets transferred, the liabilities incurred to the former owners of the
acquiree and the equity interests issued by the Group in exchange for control
of the acquiree. The identifiable assets acquired and liabilities assumed in a
business combination are measured at their fair values at the acquisition
date. Acquisition-related costs are recognised in the consolidated income
statement as non-underlying items within operating expenses.
The excess of the consideration transferred, the amount of any non-controlling
interest in the acquiree and the acquisition date fair value of any previous
equity interest in the acquiree over the fair value of the identifiable net
assets acquired is recorded as goodwill. If those amounts are less than the
fair value of the net identifiable assets of the business acquired, the
difference is recognised directly in the consolidated income statement as a
gain on bargain purchase.
When the consideration transferred includes an asset or liability resulting
from a contingent consideration arrangement, this is measured at its
acquisition-date fair value. Changes in fair value of the contingent
consideration that qualify as measurement period adjustments are adjusted
retrospectively, with corresponding adjustments against goodwill.
Measurement period adjustments are adjustments that arise from additional
information obtained during the measurement period (which cannot exceed one
year from the acquisition date) about facts and circumstances that existed at
the acquisition date.
The subsequent accounting for changes in the fair value of the contingent
consideration that do not qualify as measurement period adjustments depends on
how the contingent consideration is classified. Contingent consideration that
is classified as equity is not remeasured at subsequent reporting dates and
its subsequent settlement is accounted for within equity. Contingent
consideration that is classified as an asset or liability is remeasured at
subsequent reporting dates at fair value with the corresponding gain or loss
being recognised in the consolidated income statement.
31.1. TC3 GROUP HOLDING LLC AND ITS SUBSIDIARIES INCLUDING SOUTH DAKOTA TRUST COMPANY LLC (together "SDTC")
On 14 June 2023, JTC entered into an agreement to acquire 100% of the share
capital of TC3 Group Holding LLC and its subsidiaries, including South Dakota
Trust Company LLC. SDTC is a US based and market-leading provider of private
client trust services, including the administration of trusts and estates on
behalf of HNW and UHNW individuals. The acquisition is highly complementary to
JTC's existing US operations and establishes JTC as the leading independent
provider of administration services to the US personal trust sector.
Following regulatory approval for the transaction, 100% of the cash
consideration was transferred on 2 August 2023, as well as the equity element
of initial consideration. The results of the acquired business have been
consolidated from 2 August 2023 as Management concluded this was the date
control was obtained by the Group.
The acquired business contributed revenues of £12.8m and underlying profit
before tax (before central costs have been applied) of £5.6m to the Group for
the period from 2 August 2023 to 31 December 2023. If the business had been
acquired on 1 January 2023, the consolidated pro-forma revenue and underlying
profit before tax for the period would have been £275.4m and £33.7m,
respectively.
(A) IDENTIFIABLE ASSETS ACQUIRED AND LIABILITIES ASSUMED ON ACQUISITION
The following table shows, at fair value, the recognised assets acquired and
liabilities assumed at the acquisition date:
Note Book value Adjustments Fair value Fair value
at acquisition £'000 £'000 $'000
£'000
Property, plant and equipment(1) 1,941 1,299 3,240 4,146
Intangible assets - computer software 16 - 16 22
Intangible assets - customer relationships 21.2 - 34,540 34,540 44,198
Intangible assets - brand 21.3 - 2,212 2,212 2,831
Trade receivables 831 - 831 1,064
Other receivables 163 - 163 209
Cash and cash equivalents 1,588 - 1,588 2,032
Assets 4,539 38,051 42,590 54,502
Trade and other payables 381 1,385 1,766 2,257
Lease liabilities(1) 1,708 1,076 2,784 3,563
Deferred income 7,177 - 7,177 9,185
Provisions - 409 409 524
Liabilities 9,266 2,870 12,136 15,529
Total identifiable net (liabilities)/assets (4,727) 35,181 30,454 38,973
Other than those items detailed below and referenced above, all adjustments
relate to additional information obtained post acquisition, about facts and
circumstances that existed at the acquisition date.
1 The acquired business leases office premises, a lease liability of
£2.8m ($3.6m) is measured at the present value of the remaining lease
payments with a corresponding right-of-use assets.
(B) CONSIDERATION
Total consideration is satisfied by the following:
£'000 $'000
Cash consideration(1) 114,916 147,050
Equity instruments(2) 41,419 53,000
Deferred consideration - PLC EBT contribution(3) 1,499 1,918
Contingent consideration - earn-out(4) 43,728 55,955
Fair value of total consideration at acquisition 201,562 257,923
1 This comprises £115.1m ($147.2m) of initial cash consideration paid
upon completion less £0.15m ($0.2m) received subsequently for purchase price
adjustments.
2 On 2 August 2023, the Company issued 5,978,400 Ordinary shares at fair
value to satisfy the equity element of initial consideration (see note 26.1).
3 This relates to a £1.6m ($2.0m) contribution to PLC EBT due to be
paid during 2024. The amount payable has been discounted to its present value
of £1.5m ($1.9m).
4 A total of up to £54.7m ($70.0m) is payable, subject to meeting
revenue targets for the calendar years 2024 and 2025. Based on Management's
assessment of the budgeted forecast for the period, it is estimated that the
contingent consideration payable will be £54.7m ($70.0m), therefore meeting
the earn-out in full. The estimated contingent consideration has been
discounted to its present value of £43.7m ($56.0m) and is payable in a
73.5%/26.5% ratio of cash and JTC PLC Ordinary shares. In determining the fair
value of the contingent consideration payable under IFRS 3 'Business
Combinations', Management noted that the seller may distribute up to £6.6m
($8.4m) of the earn-out to employees of SDTC in recognition of their past
service, should the earn-out targets be met. Management have applied judgment
to the treatment of this contingent payment and concluded that the full
earn-out (including the £6.6m ($8.4m)) should be recognised as
consideration, as the seller is the main beneficiary of the service provided
and the Company will be required to make any contingent payments regardless
of the employment status of the recipients.
Sensitivity analysis on fair value of earn-out consideration
Management carried out a sensitivity analysis on the output of the key
assumptions and estimates used to calculate the fair value of the earn-out
contingent consideration. Management consider the key assumption and estimate
to be forecast revenue for the two year period. A decrease in the forecast
revenue of 5% would decrease the earn-out contingent consideration by £2.7m
($3.5m). Discounted to its present value this would be equal to a £2.2m
($2.8m) decrease.
(C) GOODWILL
£'000 $'000
Total consideration 201,562 257,923
Less: Fair value of identifiable net assets (30,454) (38,973)
Goodwill 171,108 218,950
Goodwill is represented by assets that do not qualify for separate recognition
or other factors. The acquisition is highly complementary to JTC's existing US
operations and establishes JTC as the leading independent provider of
administration services to the US personal trust sector, including new
customer relationships, a recognised brand and the effects of an assembled
workforce.
(D) IMPACT ON CASH FLOW
£'000 $'000
Cash consideration 114,916 147,050
Less: cash balances acquired (1,588) (2,032)
Net cash outflow from acquisition 113,328 145,018
(E) ACQUISITION-RELATED COSTS
The Group incurred acquisition-related costs of £3.8m for legal,
professional, advisory and other integration expenses. These costs have been
recognised within other operating expenses in the Group's consolidated income
statement (see note 6) and are treated as non-underlying items to calculate
underlying EBITDA (see note 7).
31.2. NEW YORK PRIVATE TRUST COMPANY ("NYPTC")
On 31 October 2022, JTC acquired NYPTC, a Delaware non-deposit trust company
offering a broad range of services to HNW and UHNW individuals, families and
corporate clients.
At the acquisition date, the fair value of consideration was £17.0m ($19.7m)
for acquired identifiable net assets of £8.6m ($10.0m), resulting in goodwill
of £8.4m ($9.7m). Consideration for the acquisition was paid as 100% cash.
Within the acquired identifiable net assets were customer relationship
intangibles of £5.7m ($6.6m) with a UEL of 10 years. Deferred tax liabilities
of £1.7m ($2.0m) were recognised in relation to identified intangible assets,
the amortisation of which is non-deductible against US Corporation Taxes and
therefore creates temporary differences between the accounting and taxable
profits.
32. INVESTMENTS
The Group's interest in other entities includes an associate and other
investments held at cost.
An associate is an entity in which the Group has significant influence, but
not control or joint control, over the financial and operating policies. The
Group's interest in an equity-accounted investee solely comprises an interest
in an associate.
Investments in associates are accounted for using the equity method. Under the
equity method, the investment in an associate is initially recognised at cost,
which includes transaction costs. Subsequent to initial recognition, the
carrying amount of the investment is adjusted to recognise the Group's share
of post-acquisition profits or losses in the consolidated income statement
within EBITDA, and the Group's share of movements in other comprehensive
income of the investee in other comprehensive income. Unrealised gains and
losses resulting from transactions between the Group and the associate are
eliminated to the extent of the interest in the associate.
The carrying amount of equity-accounted investments is tested for impairment
in accordance with the policy described in note 21.
Where the Group has an interest in an entity but does not have significant
influence, the investment is held at cost.
The following table details the associate and investments the Group holds as
at 31 December 2023. The entities listed have share capital consisting solely
of Ordinary shares, which are held directly by the Group. The country of
incorporation is also their principal place of business, and the proportion of
ownership interest is the same as the proportion of voting rights held.
% of ownership interest Carrying amount
Name of entity Country of incorporation Nature of relationship Measurement method 2023 2022 2023 2022
% % £'000 £'000
Kensington International Group Pte. Ltd Singapore Associate(1) Equity method 42 42 2,310 2,325
Harmonate Corp. United States Investment(2) Cost 11.2 11.2 805 831
FOMTech Limited United Kingdom Investment(3) Cost 0.2 - 250 -
Total investments 3,365 3,156
1 Kensington International Group Pte. Ltd ("KIG") provides corporate,
fiduciary, trust and accounting services and is a strategic partner of the
Group, providing access to new clients and markets in the Far East.
2 Harmonate Corp. ("Harmonate") provides fund operation and data
management solutions to clients in the financial services industry.
3 FOMTech Limited and its subsidiaries operate a FinTech platform that
specialises in venture capital funding.
The summarised financial information for KIG, which is accounted for using the
equity method, is as follows:
Summarised income statement 2023 2022
£'000 £'000
Revenue 7,554 7,253
Gross profit 6,313 6,133
Operating expenditure 5,753 4,933
Total comprehensive income for the year 114 668
Summarised balance sheet 2023 2022
£'000 £'000
Non-current assets 650 600
Current assets 6,944 10,805
Current liabilities (3,365) (7,141)
Closing net assets 4,229 4,264
Reconciliation of summarised financial information 2023 2022
£'000 £'000
Opening net assets 4,264 3,133
Total comprehensive income for the year 114 668
Foreign exchange differences (149) 463
Closing net assets 4,229 4,264
Group's share of closing net assets 1,788 1,803
Goodwill 522 522
Carrying value of investment in associate 2,310 2,325
Impact on consolidated income statements 2023 2022
£'000 £'000
Balance at 1 January 2,325 1,847
Share of (loss)/profit of equity-accounted investee (15) 478
Balance at 31 December 2,310 2,325
33. SUBSIDIARIES
In the opinion of Management, the Group's subsidiaries which principally
affect the profit or the net assets of the Group at 31 December 2023 are
listed below. Unless otherwise stated, the Company owns 100% of share capital
consisting solely of Ordinary shares, and the proportion of ownership
interests held equals the voting rights held by the Group. The country
of incorporation is also their principal place of business.
Where shareholding and voting rights are less than 100%, Management have
considered the circumstances of each subsidiary shareholding and any specific
agreements in support and have concluded that the subsidiaries should be
consolidated (as per the accounting policy in note 3.2), the interest
attributed in full to the Company and no minority interest recognised. Please
see specific comments below the table.
Name of subsidiary Country of incorporation and place of business Activity %
holding
JTC Group Holdings Limited Jersey Holding 100
JTC Group Limited Jersey Head office services 100
JTC (Jersey) Limited Jersey Trading 100
JTC Employer Solutions Limited Jersey Trading 100
JTC Fund Solutions (Jersey) Limited Jersey Trading 100
JTC (Austria) GmbH Austria Trading 100
JTC (Bahamas) Limited Bahamas Trading 100
JTC (BVI) Limited British Virgin Islands Trading 100
JTC (Cayman) Limited Cayman Islands Trading 100
JTC Fund Services (Cayman) Ltd Cayman Islands Trading 100
JTC Corporate Services (DIFC) Limited Dubai Trading 100
JTC Fund Solutions (Guernsey) Limited Guernsey Trading 100
JTC Global AIFM Solutions Limited Guernsey Trading 100
JTC Registrars Limited Guernsey Trading 100
JTC Employer Solutions (Guernsey) Limited Guernsey Trading 100
JTC Corporate Services (Ireland) Limited Ireland Trading 100
JTC Fund Solutions (Ireland) Limited Ireland Trading 100
JTC Global AIFM Solutions (Ireland) Limited Ireland Trading 100
INDOS Financial (Ireland) Limited Ireland Trading 100
JTC Trustees (IOM) Limited Isle of Man Trading 100
JTC Luxembourg Holdings S.à r.l. Luxembourg Holding 100
JTC (Luxembourg) S.A. Luxembourg Trading 100
JTC Global AIFM Solutions SA Luxembourg Trading 100
JTC Corporate Services (Luxembourg) SARL Luxembourg Trading 100
JTC Signes Services SA Luxembourg Trading 100
Exequtive Services S.à r.l. Luxembourg Trading 100
JTC Fiduciary Services (Mauritius) Limited Mauritius Trading 100
JTC (Netherlands) B.V. Netherlands Trading 100
JTC Holdings (Netherlands) B.V. Netherlands Holding 100
JTC Institutional Services Netherlands B.V. Netherlands Trading 100
Global Tax Support B.V.(1) Netherlands Trading -
JTC Fund and Corporate Services (Singapore) Pte. Limited Singapore Trading 100
JTC Fund Solutions RSA (Pty) Ltd South Africa Trading 100
JTC (Suisse) SA Switzerland Trading 100
JTC Trustees (Suisse) Sàrl Switzerland Trading 100
JTC Group Holdings (UK) Limited UK Holding 100
INDOS Financial Limited UK Trading 100
JTC Fund Services (UK) Limited UK Trading 100
JTC Trust Company (UK) Limited UK Trading 100
JTC (UK) Limited UK Trading 100
JTC UK (Amsterdam) Limited UK Holding 100
JTC Registrars (UK) Limited UK Trading 100
perfORM Due Diligence Services Limited UK Trading 100
JTC USA Holdings, Inc. US Trading 100
JTC Miami Corporation(2) US Trading 50
JTC Trust Company (South Dakota) Ltd US Trading 100
Essential Fund Services, LLC US Trading 100
SALI Fund Management, LLC US Trading 100
JTC Americas Holdings, LLC US Holding 100
JTC Americas TrustCo Holdings, LLC US Holding 100
Segue Partners, LLC US Trading 100
JTC Trust Company (Delaware) Limited US Trading 100
TC3 Group Holding, LLC US Holding 100
South Dakota Trust Company, LLC US Trading 100
1 At 31 December 2023, JTC had a call option to purchase Global Tax
Support B.V. for €1 from its parent company, therefore Management had
control of this entity and no minority interest is recognised.
2 JTC Miami Corporation is 50% owned by an employee as part of their
residential status in the US. The employee has signed a declaration of trust
to confirm they hold the shares in trust for JTC, would vote as directed and
would not seek to benefit from dividends or profit. Management therefore
consider it appropriate to attribute 100% of the interest to JTC and no
minority interest is recognised.
JTC PLC has the following dormant UK subsidiaries that are exempt from filing
individual accounts with the registrar in accordance with s448A of Companies
Act 2006: PTC Securities Limited, Stratford Securities Limited, St James's
Securities Limited, JTC Fiduciary Services (UK) Limited, JTC Trustees (UK)
Limited, PTC Investments Limited, Castle Directors (UK) Limited, JTC
Securities (UK) Limited, JTC Corporate Services (UK) Limited, JTC Trustees
Services (UK) Limited and JTC Directors (UK) Limited.
SECTION 8 - OTHER DISCLOSURES
34. EARNINGS PER SHARE
Basic Earnings Per Share
The calculation of basic Earnings Per Share is based on the profit for the
year divided by the weighted average number of Ordinary shares for the same
year.
Diluted Earnings Per Share
The calculation of diluted Earnings Per Share is based on basic Earnings Per
Share after adjusting for the potentially dilutive effect of Ordinary shares
that have been granted.
Adjusted underlying basic Earnings Per Share
The calculation of adjusted underlying basic Earnings Per Share is based on
basic Earnings Per Share after adjusting profit for the year for
non-underlying items and to remove the amortisation of acquired intangible
assets and associated deferred tax, amortisation of loan arrangement fees and
unwinding of NPV discounts in relation to contingent consideration.
The Group calculates basic, diluted and adjusted underlying basic Earnings Per
Share. The results can be summarised as follows:
2023 2022
Pence Pence
Basic EPS 14.20 23.92
Diluted EPS 14.07 23.60
Adjusted underlying basic EPS 37.23 33.27
34.1. BASIC EARNINGS PER SHARE
2023 2023
£'000 £'000
Profit for the year 21,821 34,714
No. of shares No. of shares
(thousands) (thousands)
Issued Ordinary shares at 1 January 146,001 144,326
Effect of shares issued to acquire business combinations 2,474 -
Effect of movement in treasury shares held 322 811
Effect of placing 4,862 -
Weighted average number of Ordinary shares (basic): 153,659 145,137
Basic EPS (pence) 14.20 23.92
34.2. DILUTED EARNINGS PER SHARE
2023 2022
£'000 £'000
Profit for the year 21,821 34,714
No. of shares No. of shares
(thousands) (thousands)
Weighted average number of Ordinary shares (basic) 153,659 145,137
Effect of share-based payments issued 1,440 1,930
Weighted average number of Ordinary shares (diluted): 155,099 147,067
Diluted EPS (pence) 14.07 23.60
34.3. ADJUSTED UNDERLYING BASIC EARNINGS PER SHARE
Note 2023 2022
£'000 £'000
Profit for the year 21,821 34,714
Non-underlying items 7 16,188 (1,883)
Amortisation of customer relationships, acquired software and brands 21 14,265 12,400
Impairment of customer relationship intangible asset 21.2 737 -
Amortisation of loan arrangement fees 10 805 1,062
Unwinding of NPV discounts for contingent consideration 10 5,093 3,518
Temporary tax differences arising on amortisation of customer relationships, 11 (1,694) (1,531)
acquired software and brands
Adjusted underlying profit for the year 57,215 48,280
No. of shares No. of shares
(thousands) (thousands)
Weighted average number of Ordinary shares (basic) 153,659 145,137
Adjusted underlying basic EPS (pence) 37.23 33.27
Adjusted underlying basic EPS is an alternative performance measure which
reflects the underlying activities of the Group. The following definition is
not consistent with the requirements of IAS 33.
The Group's definition of underlying basic EPS reflects the profit for the
year adjusted to remove the impact of non-underlying items (see note 7).
Additionally, a number of other items relating to the Group's acquisition
activities including amortisation of acquired intangible assets and associated
deferred tax, impairment of acquired intangible assets, amortisation of loan
arrangement fees and unwinding of NPV discounts in relation to contingent
consideration are removed to present an adjusted underlying basic EPS which is
used more widely by external investors and analysts.
The definition of adjusted underlying basic Earnings Per Share has been
updated to include the impairment of acquired intangible assets. Management
consider this adjustment to be consistent with its existing treatment of
acquired intangible assets. Prior to this update, adjusted underlying basic
Earnings Per Share was 36.76p (2022: 33.27p).
35. CASH FLOW INFORMATION
35.1. CASH GENERATED FROM OPERATIONS
2023 2022
£'000 £'000
Operating profit 52,650 33,803
Adjustments:
Depreciation of property, plant and equipment 8,262 7,883
Amortisation of intangible assets and assets recognised from costs to obtain 16,878 14,378
or fulfil a contract
Equity-settled share-based payment expense 2,716 2,045
EIP share-based payment expense - 4,780
Share of loss/(profit) of equity-accounted investee 15 (478)
Operating cash flows before movements in working capital 80,521 62,411
Net changes in working capital:
Decrease/(increase) in receivables 164 (10,247)
Increase in payables 4,040 3,202
Cash generated from operations 84,725 55,366
35.2. NON-UNDERLYING ITEMS WITHIN CASH GENERATED FROM OPERATIONS
2023 2022
£'000 £'000
Cash generated from operations 84,725 55,366
Non-underlying items:
Acquisition and integration costs 5,799 3,127
Office start-up 612 768
Other 44 228
Capital distribution from EBT - 417
Revision of ICS operating model - 402
Total non-underlying items within cash generated from operations 6,455 4,942
Underlying cash generated from operations 91,180 60,308
35.3. FINANCING ACTIVITIES
Changes in liabilities arising from financing activities:
Lease Lease Borrowings Borrowings Total
liabilities liabilities due within due after £'000
due within due after one year one year
one year year £'000 £'000
£'000 £'000
At 1 January 2022 5,463 37,916 - 152,578 195,957
Cash flows:
Acquired on acquisition 216 101 - - 317
Repayments (41) (6,202) - - (6,243)
Other non-cash movements(1) (1,346) 8,787 - 1,044 8,485
At 31 December 2022 4,292 40,602 - 153,622 198,516
Cash flows:
Acquired on acquisition 554 2,230 - - 2,784
Drawdowns - - - 118,000 118,000
Repayments (28) (7,482) - (50,000) (57,510)
Other non-cash movements(1) 1,299 2,574 - (1,091) 2,782
At 31 December 2023 6,117 37,924 - 220,531 264,572
1 Other non-cash movements include the capitalisation and amortisation
of loan arrangement fees, foreign exchange movements, additions and disposals
of lease liabilities relating to right-of-use assets and the unwinding of NPV
discounts.
35.4. NET DEBT
2023 2022
£'000 £'000
Bank loans (220,531) (153,622)
Cash allocated against regulatory and capital adequacy requirements(1) (11,827) (15,673)
Loans receivable from employees - 16
Less: cash and cash equivalents 97,222 48,861
Total net debt (135,136) (120,418)
1 Represents the minimum cash balance to be held to meet regulatory
capital requirements.
36. SHARE-BASED PAYMENTS
The Company operates equity-settled share-based payment arrangements under
which services are received from eligible employees as consideration for
equity instruments. The total amount to be expensed for services received is
determined by reference to the fair value at grant date of the share-based
payment awards made, including the impact of any non-vesting and market
conditions.
The fair value determined at the grant date is expensed on a straight-line
basis over the vesting period, based on Management's estimate of equity
instruments that will eventually vest. At each balance sheet date, Management
revises its estimate of the number of equity instruments expected to vest as a
result of the effect of non-market based vesting conditions. The impact of the
revision of the original estimates, if any, is recognised in the consolidated
income statement such that the cumulative expense reflects the revised
estimate, with a corresponding adjustment to equity reserves.
36.1. EMPLOYEE INCENTIVE PLAN ("EIP")
JTC has an ongoing commitment to the concept of Shared Ownership and adopted
the EIP upon listing on the London Stock Exchange in March 2018. The EIP is
designed to recognise and reward long-term performance across the whole Group
and its alignment of employees' and Shareholders' interests is linked to
multi-year business plans. All permanent employees of the Group (excluding all
Executive Directors of JTC PLC) are eligible to be granted an award under the
EIP at the discretion of the Remuneration Committee.
On 22 July 2021, following the conclusion of the Odyssey business plan (which
ran from the IPO until the end of 2020), JTC PLC granted 3,104,007 shares to
employees of the Group. Each award was separated into two tranches: 50% vested
at the grant date ("Tranche one") and 50% was a deferred award in the form of
a conditional right to receive shares on the first anniversary of grant,
subject to the achievement of the applicable performance conditions ("Tranche
two"). Tranche one was expensed in full upon grant and Tranche two was
expensed over the one year vesting period to 22 July 2022. There were no
shares granted, exercised or forfeited during 2023.
Details of movements in the number of shares are as follows:
2023 2022
No. of shares £'000 No. of shares £'000
(thousands) (thousands)
Outstanding at the beginning of the year - - 1,479 9,240
Granted - - - -
Exercised - - (1,411) (8,813)
Forfeited - - (68) (427)
Outstanding at the end of the year - - - -
Following the Odyssey era, the Galaxy business plan commenced in 2021 and its
goals were completed by the end of 2023. The Remuneration Committee will use
its discretion to consider the granting of awards under the EIP scheme during
2024.
36.2. Performance share plan ("PSP")
Executive Directors and senior managers may receive awards of shares, which
may be granted annually under the PSP. The maximum policy opportunity award
size under the PSP for an Executive Director is 150% of annual base salary;
however, the plan rules allow the Remuneration Committee the discretion to
award up to 250% of annual base salary in exceptional circumstances. The
Remuneration Committee determines the appropriate performance measures,
weightings and targets prior to granting any awards. Performance conditions
include Total Shareholder Return relative to a relevant comparator group and
the Company's absolute underlying EPS performance.
The following table provides details for PSP awards:
Plan name Performance period Grant date Vest date No. of shares Fixed amount
(thousands) at fair value
£'000
PSP 2019 1 January 2019 to 31 December 2021 3 April 2019 19 April 2022 254 614
PSP 2020 1 January 2020 to 31 December 2022 23 April 2020 6 April 2023 213 825
PSP 2021 1 January 2021 to 31 December 2023 20 May 2021 1 283 1,507
PSP 2022 1 January 2022 to 31 December 2024 19 April 2022 1 246 1,384
PSP 2023 1 January 2023 to 31 December 2025 11 April 2023 1 414 2,328
1 The vesting of awards is subject to continued employment and
achievement of performance conditions over the specified period. The awards
will vest for each PSP when the conditions have been measured for the relevant
performance period.
Details of movements in the number of shares are as follows:
2023 2022
No. of shares £'000 No. of shares £'000
(thousands) (thousands)
Outstanding at the beginning of the year 673 3,346 733 2,903
Awarded 414 2,328 246 1,384
Exercised (200) (771) (188) (425)
Forfeited (3) (17) (118) (516)
Outstanding at the end of the year 884 4,886 673 3,346
36.3. DEFERRED BONUS SHARE PLAN ("DBSP")
Depending on the performance of the Group, consideration is given annually by
the Remuneration Committee to the granting of share awards under the DBSP to
eligible Directors. This forms part of the annual bonus awards for performance
during the preceding financial year end.
(A) ANNUAL BONUS AWARDS TO EXECUTIVE DIRECTORS
For performance during the year ended 31 December 2023, the portion of bonus
earned by Executive Directors in excess of 50% of salary has been deferred
into shares. The date of grant will be determined following the release of the
annual report for the relevant performance period.
Plan name Performance period Vest date(1) Fixed amount
£'000
ED DBSP 1 Year ended 31 December 2023 1 January 2026 116
1 The vesting of awards is subject to continued employment up to the
vest date.
(B) ANNUAL BONUS AWARDS TO DIRECTORS
In previous years, the Remuneration Committee exercised its discretion and in
accordance with the DBSP rules, determined that 50% of the annual cash bonus
awards for Directors would be awarded as shares. The portion of the bonus
award deferred into shares was expensed over the three year period to the date
of vest. For the year ended 31 December 2023, the Remuneration Committee
intends to make annual bonus awards to Directors in cash rather than deferring
a portion of the bonus into shares. Due to this change, the cash bonus awards
have been expensed in full and are shown within salaries and Directors fees.
The remaining expenses associated with DBSP 4 and DBSP 5 awards that continue
to the vesting date are shown within non-underlying (see note 7(3)).
The following table provides details for each DBSP award for Directors:
Plan name Performance period Grant date Vest date(1) No. of shares Fixed amount
(thousands) £'000
DBSP 2 Year ended 31 December 2019 23 April 2020 23 April 2022 73 313
DBSP 3 Year ended 31 December 2020 14 April 2021 1 January 2023 56 364
DBSP 4 Year ended 31 December 2021 19 April 2022 1 January 2024 67 476
DBSP 5 Year ended 31 December 2022 11 April 2023 1 January 2025 96 679
1 The vesting of awards is subject to continued employment up to the
vest date.
Details of movements in the number of shares held within the DBSP schemes at
the year end were as follows:
2023 2022
No. of shares £'000 No. of shares £'000
(thousands) (thousands)
Outstanding at the beginning of the year 109 756 114 614
Awarded 96 680 67 476
Exercised (48) (315) (62) (267)
Forfeited (4) (29) (10) (67)
Outstanding at the end of the year 153 1,092 109 756
36.4. OTHER AWARDS
AD HOC AWARDS
The Group may offer ad hoc awards to Directors joining the business. The award
is expensed from the start of their employment, with the value being a fixed
amount as stated in the employee's offer letter. The number of shares awarded
is determined by the mid-market close price at the grant date which is at the
next available window since their start date (typically April or September).
The awards will vest two years following grant subject to
continued employment.
NEW JOINER AWARDS
As part of the Group's commitment to 100% employee share ownership, a share
award is made to every employee joining the business. The award is expensed
from the start of their employment with the amount based on a pre-determined
number of shares as stated in the employee's offer letter. Following
successful completion of their probationary period, the shares are granted at
the next available window (typically April or September). The awards will vest
two years following grant subject to continued employment.
EMPLOYEE REFERRAL SCHEME
As part of the Group's employee referral scheme, permanent employees up to
senior manager level are eligible to receive a pre-determined bonus when a
referred employee is hired following completion of their probation period. The
award is comprised of an initial 50% cash payment and a 50% share award. The
number of shares will be calculated using the mid-market close price on the
date the referred employee completes their probationary period and expensed
from this date. The shares will be granted at the next available window
(typically April and September) and will vest one year following grant subject
to continued employment.
Details of movements in the number of shares are as follows:
2023 2022
No. of shares £'000 No. of shares £'000
(thousands) (thousands)
Outstanding at the beginning of the year 254 2,104 260 2,102
Awarded(1) 41 296 86 683
Exercised (89) (673) (70) (451)
Forfeited (16) (174) (22) (230)
Outstanding at the end of the year 190 1,553 254 2,104
1 In 2021, as part of the RBC cees acquisition, the Group inherited
historical share awards for the eligible directors of the acquired entities.
These awards are settled in cash or a combination of 50% cash and 50% equity,
as such they are recorded as a liability with the fair value being remeasured
at each reporting period end. At the date of acquisition, 141,875 shares with
a fair value of £0.88m were awarded. During the year, 41,391 shares vested
(2022: 52,622 shares), the fair value of the outstanding awards as at 31
December 2023 is £0.3m (2022: £0.5m).
36.5. EXPENSES RECOGNISED DURING THE YEAR
The equity-settled share-based payment expenses recognised during the year,
per plan and in total, are as follows:
2023 2022
£'000 £'000
PSP awards 1,616 879
DBSP awards 471 455
Other awards 747 788
Share-based payments(1) 2,834 2,122
EIP share-based payments - 4,780
Total share-based payments expense 2,834 6,902
1 The share-based expense in the capital reserve of £4.22m (2022:
£2.04m) includes other awards that are 100% cash settled as well as those
that are settled 50% cash and 50% equity (2023: £0.12m, 2022: £0.08m); also
included is £1.5m contingent consideration for INDOS (see note 17.1).
37. CONTINGENCIES
The Group operates in a number of jurisdictions and enjoys a close working
relationship with all of its regulators. It is not unusual for the Group to
find itself in discussion with regulators in relation to past events. With any
such discussions there is inherent uncertainty in the ultimate outcome but the
Board currently does not believe that any such current discussions are likely
to result in an outcome that would have a material impact upon the Group.
38. FOREIGN CURRENCY
The individual financial statements of each Group company are presented in the
currency of the primary economic environment in which it operates (its
functional currency). For the purpose of the consolidated financial
statements, the results and financial position of each Group company are
expressed in pounds sterling, which is the functional currency of the Company
and the presentation currency for the consolidated financial statements.
In preparing the financial statements of the individual companies,
transactions in currencies other than the entity's functional currency
(foreign currencies) are recognised at the rates of exchange prevailing on the
dates of the transactions.
At each balance sheet date, monetary assets and liabilities that are
denominated in foreign currencies are retranslated at the rates prevailing at
that date. Exchange differences are recognised in the consolidated income
statement in the year in which they arise.
For the purpose of presenting consolidated financial statements, the assets
and liabilities of the Group's operations with a functional currency other
than pounds sterling are translated at exchange rates prevailing on the
balance sheet date.
Income and expense items are translated at the average exchange rates for the
year, unless exchange rates fluctuate significantly during that year, in which
case the exchange rates at the date of transactions are used. Goodwill and
other intangible assets arising on the acquisition of a foreign operation are
treated as assets of the foreign operation and are translated at the closing
rate. Exchange differences arising, if any, are recognised in other
comprehensive income and accumulated in equity in the translation reserve.
For the year ended 31 December 2023, mainly due to the Euro and US dollar
foreign currency exchange rate movements, we have recognised the following:
· a foreign exchange loss of £7.0m in other comprehensive income (2022:
£21.3m gain) upon translating our foreign operations to our functional
currency; and
· a foreign exchange loss of £9.6m (2022: £14.4m gain) in the
consolidated income statement upon the retranslation of monetary assets and
liabilities denominated in foreign currencies.
39. RELATED PARTY TRANSACTIONS
Balances and transactions between the Company and its subsidiaries, which are
related parties, have been eliminated on consolidation and are not disclosed
in this note.
39.1. KEY MANAGEMENT PERSONNEL
The Group has defined key management personnel as Directors and members of
senior management who have the authority and responsibility to plan, direct
and control the activities of the Group. The remuneration of key management
personnel in aggregate for each of the specified categories is as follows:
2023 2022
£'000 £'000
Salaries and other short-term employee benefits 3,136 2,716
Post-employment and other long-term benefits 119 145
Share-based payments 1,624 979
EIP share-based payments - 115
Total payments 4,879 3,955
39.2. OTHER RELATED PARTY TRANSACTIONS
The Group's associate, KIG (see note 32), has provided £0.55m of services to
Group entities during the year (2022: £0.94m).
39.3. ULTIMATE CONTROLLING PARTY
JTC PLC is the ultimate controlling party of the Group.
40. CONSIDERATION OF CLIMATE CHANGE
As set out in the TCFD disclosures in the Annual Report, climate change has
the potential to give rise to a number of transition risks, physical risks and
opportunities.
In preparing the consolidated financial statements, Management have considered
the impacts and areas that could potentially be affected by climate-related
changes and initiatives. No material impact was identified on the key areas of
judgement or sources of estimation uncertainty for the year ended 31 December
2023. Items that may be impacted by climate-related risks and were considered
by Management were the recoverability of trade receivables (see note 12) and
the cash flow forecasts used in the impairment assessments of goodwill (see
note 21.1).
Whilst Management consider there is no material medium-term impact expected
from climate change, they are aware of the ever-changing risks related to
climate change and will ensure regular assessment of risks against judgements
and estimates when preparing the consolidated financial statements.
41. EVENTS OCCURRING AFTER THE REPORTING PERIOD
There were no other post balance sheets events other than those discussed
within the annual report or detailed below.
41.1. ACQUISITION OF BLACKHEATH CAPITAL MANAGEMENT LLP ("BLACKHEATH")
On 4 March 2024, following regulatory approval from the UK Financial Conduct
Authority, JTC announced the completion of the acquisition of 100% of the
rights, shares and interests in Blackheath, a partnership known for its
bespoke asset management and advisory services. Initial consideration of
£0.7m was settled in £0.56m cash and through the issuance of 18,435 JTC PLC
Ordinary shares. Contingent consideration up to a maximum of £0.7m is payable
subject to achieving performance targets for the period to 31 December 2024.
This would be due on or before 1 April 2025 and would be settled in a 80%/20%
ratio of cash and JTC PLC Ordinary shares.
This acquisition will complement and enhance JTC's existing Global AIFM
Solutions businesses in Ireland, Luxembourg and Guernsey and extends our
ability to provide Management Company (ManCo) services to UK-domiciled funds.
At the date the consolidated financial statements were authorised for issue,
it was impracticable to disclose the information required by IFRS 3 'Business
Combinations' as some of the required information was not available.
This information is provided by RNS, the news service of the London Stock Exchange. RNS is approved by the Financial Conduct Authority to act as a Primary Information Provider in the United Kingdom. Terms and conditions relating to the use and distribution of this information may apply. For further information, please contact
rns@lseg.com (mailto:rns@lseg.com)
or visit
www.rns.com (http://www.rns.com/)
.
RNS may use your IP address to confirm compliance with the terms and conditions, to analyse how you engage with the information contained in this communication, and to share such analysis on an anonymised basis with others as part of our commercial services. For further information about how RNS and the London Stock Exchange use the personal data you provide us, please see our
Privacy Policy (https://www.lseg.com/privacy-and-cookie-policy)
. END FR DDGDSUSGDGSIRecent news on JTC
See all newsREG - JTC PLC - PDMR Shareholding
AnnouncementREG - JTC PLC - Holding(s) in Company
AnnouncementREG - JTC PLC - Acquisition of First Republic Trust Co of Delaware
AnnouncementREG - JTC PLC - Annual Financial Report and Notice of AGM
AnnouncementREG - JTC PLC - Vesting and Grant of Share Plan Awards
Announcement