REG - St. James's Place - Half-year Report
30/07/2024 07:00
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RNS Number : 2866Y St. James's Place PLC 30 July 2024
-1-
PRESS RELEASE AND HALF-YEAR REPORT AND ACCOUNTS
30 July 2024
ANNOUNCEMENT OF HALF-YEAR RESULTS FOR THE SIX MONTHS ENDED 30 JUNE 2024
SJP PERFORMING WELL AND POSITIONING FOR FURTHER LONG-TERM SUCCESS
St. James's Place plc (SJP) today issues its half-year results for the six
months ended 30 June 2024:
Mark FitzPatrick, Chief Executive Officer, commented:
"I am encouraged to report robust business performance for the first half of
2024 across each of our key operating and financial metrics, demonstrating the
continued resilience of our business model even as we work to address the past
challenges that I set out earlier in the year. We have seen high levels of
activity and engagement between our advisers and our clients, contributing to
positive flows. Helped by strong investment returns for our clients, we have
achieved record funds under management, delivered a good outturn for the Cash
result, and grown the Partnership and our client base. It's evident that we
remain in good shape.
The first half has seen us make progress against our significant programmes of
work to simplify our charging structure and review historic client servicing
records. We are on track to deliver our new charging structure in the second
half of 2025, in line with previous guidance. The focus of our review of
historic client servicing records has been on building and readying the
infrastructure that is necessary to analyse significant amounts of servicing
records efficiently and accurately. We remain comfortable that the provision
we have set up to cover the costs of this exercise is appropriate.
Beyond our operating and financial performance, we have performed a thorough
review of the business and the markets in which we operate. Ultimately, this
work has reinforced our conviction that SJP continues to be a very strong
business, with a fantastic opportunity ahead.
We must though acknowledge that for all our qualities as a business, we have a
lot of hard work ahead of us over the next 24 months to strengthen our core
and execute our existing programmes of work, helping us to become a more
efficient and effective business. From a strong base, we can capture the
structural market opportunities ahead of us and drive growth over the
long-term.
As we look to the future, we are ambitious and have a clear direction of
travel towards achieving sustained success. I am confident that the approach
set out following our business review will enable us to achieve annual FUM
growth in the mid-to-high single digits over time. While near-term profit
growth will reflect the structural impact of transitioning to our new simpler
and more comparable charging structure as announced last October, we expect to
see the Underlying cash result accelerate in 2027 and beyond, doubling between
2023 and 2030. Importantly, much of this rapid growth is highly predictable
because of those changes that we are making to our charges.
We are positioning for further success, and I am confident that our refreshed
strategic focus leaves us well placed for a very bright future ahead."
-2-
Operating highlights
· Gross inflows of £8.5 billion (2023: £8.0 billion)
· Continued strong retention of client funds at 94.6%(1) (2023:
95.6%(1))
· Net inflows of £1.9 billion (2023: £3.4 billion), representing
an annualised 2.3% of opening funds under management (2023: 4.6%)
· Record funds under management of £181.9 billion (31 December
2023: £168.2 billion)
· Net 3% increase in client base to 988,000 (31 December 2023:
958,000)
Financial highlights and shareholder returns
· Underlying post-tax cash result £205.2 million (2023: £207.1
million)(2)
· IFRS profit after tax £165.1 million (2023: £161.7 million)
· Interim dividend of 6.00 pence per share (2023: 15.83 pence)
· Interim share buyback of £32.9 million, equivalent to 6.00 pence
per share
H1 business review findings and outcomes
· Market opportunity remains compelling given structural growth
drivers and rising demand for advice
· Reinforced conviction that SJP remains a strong business, with
key and sustainable competitive advantages
· Future strategic focus to be built around four pillars:
o Brilliant basics: We will simplify and standardise our operations,
sharpening focus on delivering excellent client outcomes
o Differentiated client proposition: We will enhance our client proposition,
providing a quality offering across differing client segments
o Leading adviser offering: We will continue to be the best place to be a
financial adviser in the UK,
setting the standard for the future of financial advice
o Performance-focused organisation: We will foster empowerment and
accountability, evolving our culture and driving performance across our
community
· Near-term focus on strengthening business and executing existing
programmes of work, laying the foundations for sustained growth
· Plan to increase strategic investment over time, funded through
optimising our existing c. £670m addressable cost base(3)
Saving to invest
o Ambition between now and the end of 2026 to deliver an addressable cost
base reduction programme, which will reach full run-rate savings of £100
million (pre-tax) or 15% p.a. by 2027
o Total costs to achieve savings of £80 million largely incurred in 2025
and 2026
o Anticipate cumulative net savings of approaching £500 million through to
2030, after costs to achieve
Investing to grow
o Approximately half of these savings, once realised, will be invested back
into the business between 2025 and 2030, supporting strategic initiatives and
underpinning long-term growth ambitions
Overall benefit to the cost base
o Combination of cost savings, costs to achieve, and investing for growth,
expected to be broadly neutral to the cost base in 2024, 2025 and 2026 with
benefits emerging thereafter
o Benefits anticipated, before tax, of £30 million in 2027, £50 million in
2028, and £70 million from 2029 onwards
o Further underpins our ambition to double the Underlying cash result from
2023 to 2030
The details of the announcement are attached.
(1) Throughout this press release our retention rate is calculated as the
proportion of FUM retained over the period after allowing for the effect of
full and partial withdrawals, but excluding the effect of intrinsic regular
income and maturity payments.
(2) The Underlying cash result is an alternative performance measure (APM).
The glossary of alternative performance measures on pages 96 - 99 defines this
APM and explains why it is useful. The Underlying cash result is reconciled to
International Financial Reporting Standards (IFRS) on pages 19 and 20.
(3) The addressable cost base for the purposes of our business review is total
IFRS expenses, less those which were either out of scope for the review,
one-off in nature or outside of management's control.
-3-
Enquiries:
Hugh Taylor, Director - Investor Relations Tel: 07818 075143
Roy Beale, Divisional Director - Media Relations Tel: 07825 165329
Brunswick Group: Tel: 020 7404 5959
Eilis Murphy Email: sjp@brunswickgroup.com (mailto:sjp@brunswickgroup.com)
Charles Pretzlik
-4-
2024 Half Year Results Presentation
Date: 30 July 2024
Time: 08:30 BST
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CONTENTS
Page(s)
New Business Inflows and Funds Under Management 5
Interim Management Statement 6 - 42
Condensed Consolidated Half-Year Financial Statements prepared under 43 - 84
International Financial Reporting Standards (IFRS) as adopted by the United
Kingdom (UK)
Independent review report to St. James's Place plc 85 - 86
Responsibility Statement of the Directors in respect of the Half-Year 87
Financial Report
Supplementary Information: Consolidated Half-Year Financial Statement on a 88 - 94
Cash Result Basis
Other Information 95 - 99
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New Business Inflows and Funds Under Management
The following table shows how FUM evolved during the six months to 30 June
2024 and 30 June 2023, and the year to 31 December 2023. Investment return is
presented net of all charges.
Six months ended 30 June 2024 Year
Six months ended 30 June ended
2023 31 December
2023
Investment Pension UT/ISA Total
and
DFM
£'Billion £'Billion £'Billion £'Billion £'Billion £'Billion
Opening FUM 35.99 87.32 44.89 168.20 148.37 148.37
Gross inflows 1.00 5.59 1.94 8.53 8.04 15.39
Net investment return 2.24 6.53 2.98 11.75 5.71 14.71
Regular income withdrawals and maturities (0.19) (1.68) - (1.87) (1.27) (2.77)
Surrenders and part-surrenders (1.14) (1.50) (2.11) (4.75) (3.33) (7.50)
Closing FUM 37.90 96.26 47.70 181.86 157.52 168.20
Net (outflows)/inflows (0.33) 2.41 (0.17) 1.91 3.44 5.12
Implied surrender rate as a percentage of average FUM 6.2% 3.3% 9.1% 5.4% 4.4% 4.7%
-6-
Interim Management Statement
Chief Executive Officer's report
Introduction
I am encouraged to report robust business performance for the first half of
2024 across each of our key operating and financial metrics, demonstrating the
continued resilience of our business model even as we work to address the past
challenges that I set out earlier in the year. We have seen high levels of
activity and engagement between our advisers and clients, contributing to
positive flows. Helped by strong investment returns for our clients, we have
achieved record funds under management, delivered a good outturn for the Cash
result, and grown the Partnership and our client base.
At the time of our full-year results in February, I provided my initial
reflections on the business. Since then, I have continued my work to get deep
into the fabric of SJP, deliver change and tell our story. This has included
meeting many Partners, advisers, employees and shareholders to understand
their perspectives; strengthening our relationship with our key regulators
through regular engagement; and meeting with policymakers, industry peers and
those in government to increase our voice and help shape the future of our
industry.
Together with the review of the business that we undertook in the first half,
this activity has only added to our conviction that SJP is a fundamentally
strong and growing business with an enormously powerful distribution and asset
gathering capability. The attractive investment proposition powered by high
quality advice from our Partnership of 4,852 advisers, helps deliver good
outcomes for our growing client base.
Operating and financial performance
It has been well documented that recent years have been challenging for UK
consumers, but we are starting to see some more positive indicators in the
macroeconomic environment. Consumer confidence is increasing in response to
falling inflation and the resulting optimism that interest rates may soon
follow a similar path. While it is too early to draw firm conclusions, we are
encouraged by these early signs of recovery.
This improving operating environment has resulted in gross inflows in the
second quarter of 2024 of £4.5 billion (three months to 30 June 2023: £3.8
billion), 18% higher than that seen in 2023, providing a welcome return to
quarterly growth. Combined with a resilient first quarter of the year this
means our financial advisers have attracted a total of £8.5 billion (six
months to 30 June 2023: £8.0 billion) of new client investments during the
first half of 2024, an increase of 6% versus the same period in 2023. We have
continued to see high activity levels, resulting in case volumes being higher
year on year, partially offset by lower average case sizes as financial
pressures persist.
We are encouraged by the continued strong retention of client funds under
management, with an annualised retention rate of 94.6% (six months to 30 June
2023: 95.6%) for the first half, despite the ongoing financial pressures
facing clients. As a result, we continue to generate significant levels of net
inflows, which stood at £1.9 billion for the first half (six months to 30
June 2023: £3.4 billion). Our investment management approach (IMA) continues
to perform well, achieving strong positive returns for clients in the first
half of the year. This, together with new business, has seen funds under
management increase to £181.9 billion (31 December 2023: £168.2 billion), up
8% from the start of the year.
This operating performance has been mirrored by a strong financial result for
the period. We have delivered an Underlying post-tax cash result of £205.2
million, down 1% versus the prior year as a result of the significant
additional short-term cost of investing in the systems and processes required
to support the simplified charging structure that we announced in October last
year. Excluding these short-term costs, the Underlying cash result increased
by 11%, driven by higher average mature funds under management and the
associated net income. This affirms the underlying strength and resilience of
our business model.
Meanwhile, we are progressing our significant programme of work to review
historic client servicing records with a focus on building and readying the
infrastructure that is necessary to analyse significant amounts of servicing
records efficiently and accurately. We remain comfortable that the provision
we have set up to cover the costs of this exercise is appropriate.
-7-
We are also making good progress in our implementation programme for the
future of simple and comparable charging at SJP, in line with the plans we
communicated in October last year. We remain on track to deliver this in line
with previous guidance.
Business review
Over the last few months we have completed a review of all aspects of the
business with the aim of taking a step back to assess the development of our
marketplace, hold a mirror up to our business, and ensure we are setting out
on a clear path forward so that we drive great outcomes for our clients and
all our stakeholders.
We have done a lot of work assessing our marketplace to consider not just what
it looks like today, but how it might develop in the years ahead. We see a
compelling opportunity, with the UK wealth management market expected to grow
at some 7% per annum compound over the next 7 years (1), driven by a
combination of structural and cyclical factors including asset appreciation
and growing provision for retirement.
Ultimately, this work has reinforced our conviction that SJP continues to be a
very strong business, with a fantastic opportunity ahead. We are the scale
market leader in an industry that has embedded structural growth across all
market segments. We are well placed to capitalise upon this opportunity and
build upon our long track record of success given the strengths of our
distinct business model that include the Partnership, our Academy and our
investment management approach.
Our strategic direction going forwards is underpinned by our redefined
purpose: to empower clients with invaluable advice to realise bolder
ambitions. This is what drives our advisers, our employees and everyone else
across our community of 15,000 people. We will leverage our great strengths,
whilst making changes where necessary to drive sustained growth, and to ensure
we capture economies of scale as we succeed. We will build a confident,
high-performance culture that will see SJP thrive for the benefit of all our
stakeholders.
We will focus our priorities on 4 strategic pillars. These are:
· Brilliant basics: simplifying and standardising our operations,
sharpening focus on delivering excellent client outcomes. This includes
building on our core technology infrastructure to improve our operational and
administrative processes, leveraging our rich data universe to provide
unparalleled insight and support Partner productivity, and driving improved
awareness of the value of financial advice.
· Differentiated client proposition: enhancing our client
proposition to provide a quality offering
across differing client segments, for example by tailoring it to better serve
the needs of high-net-worth clients, developing our digital capabilities and
broadening our investment shelf to provide greater choice. This includes
increasing our use of passives, deepening our alternatives offering and
building on our cash proposition.
· Leading adviser offering: continuing to be the best place to be a
professional financial adviser in the UK, setting the standard for the future
of financial advice. This includes further enhancing our Academy programme,
evolving our Partnership support model to focus on helping our quality
advisers to become more productive, while supporting the continued evolution
of our market-leading succession proposition
· Performance-focused organisation: fostering empowerment and
accountability, embedding a high-performance culture through a new leadership
framework while also optimising our cost base for a more efficient operating
model which is aligned to our redefined purpose and refreshed strategy.
We have an ambition to reduce our addressable cost base by around £100
million per annum before tax. We will have completed the work to achieve these
cost savings by the end of 2026, with one-off costs to achieve of
approximately £80 million.
This means that up to 2030, we estimate cumulative savings, net of costs to
achieve, of approaching £500m. In creating this significant capacity, we have
the opportunity to fund investment in a disciplined manner. This investment
will enable us to deliver on our strategic initiatives, further underpin our
long-term growth ambitions, and improve the Cash result.
(1)Source: GlobalData
-8-
We expect to invest a total of around £250 million through to 2030, or around
half the total savings we will create over this period. Our investment
priorities will be primarily focused around three areas:
1) enhancing our technology and data capabilities;
2) developing and tailoring our differentiated client proposition; and,
3) broadening our investment shelf.
These will support our operational performance, adviser productivity and
further enhance our differentiated client offering.
The net effect of costs savings, costs to achieve, and investing for growth,
is expected to be broadly neutral to our cost base in 2024-2026. Net positive
benefits to our cost base are expected to emerge thereafter, of around £30
million in 2027 and £50 million in 2028, before we achieve full ongoing
savings of around £70 million per annum by 2029.
We know that for all our qualities as a business, we have a lot of hard work
ahead of us over the next 24 months. We need to deliver our simpler and more
comparable charging structure, and refund those clients where ongoing
servicing has not been evidenced historically. We therefore have an initial
period of heavy lifting ahead of us, where a lot of our work is about
strengthening our core and executing to become a more efficient and effective
business. From a strong base, we can look to drive sustained growth over the
long term, managing all aspects of our business to drive returns and create
long-term value for shareholders.
Summary and outlook
It has been a challenging period for the business, but we have made good
progress on many fronts during the first half of the year, which is testament
to the resilience of our business model and the hard work of all our advisers,
Partner Support Staff and our employees. I thank them all for their continued
efforts.
We are ambitious and have a clear direction of travel for how we are going to
achieve sustained success. I am confident that the approach we have set out
following our business review will enable us to achieve annual FUM growth in
the mid-to-high single digits over time. While near-term profit growth will
reflect the impact of transitioning to our new charging structure as announced
last October, we expect to see the Underlying cash result accelerate in 2027
and beyond, doubling between 2023 and 2030. Importantly, much of this rapid
growth is highly predictable because of those changes that we are making to
our charges.
We are positioning for further success, and I am confident that our refreshed
strategic focus leaves us well placed for a very bright future ahead.
Mark FitzPatrick, Chief Executive Officer
29 July 2024
-9-
Chief Financial Officer's report
We are pleased to report a strong set of financial results for the first half
of 2024, as the operating environment shows early signs of improvement
following a challenging couple of years.
As already summarised in the Chief Executive Officer's Report, our business
has performed well in the first half delivering positive flows and growth in
funds under management. This has underpinned growth in fee income, enabling us
to deliver a post-tax Underlying cash result for the half year of £205.2
million (six months to 30 June 2023: £207.1 million, year to 31 December
2023: £392.4 million), despite significant additional investment as we
implement our new charging structure.
Our financial results are presented in more detail on pages 13 to 38 of the
Financial Review, but this report provides a summary of financial performance
on a statutory International Financial Reporting Standard (IFRS) basis, as
well as our chosen alternative performance measures (APMs).
Financial results
IFRS
As is often the case, IFRS profit before tax of £577.0 million (six months to
30 June 2023: £385.0 million, year to 31 December 2023: £439.6 million) and
IFRS profit before shareholder tax of £225.1 million (six months to 30 June
2023: £215.7 million, year to 31 December 2023: £4.5 million loss) are each
heavily distorted by the inclusion of policyholder tax and the associated
charges, with further detail included in the Financial Review on page 19.
Excluding the short-term impact of items related to policyholder tax, IFRS
profit before shareholder tax is subject to similar drivers as those described
for the Cash result below.
Cash result
The Cash result, and the Underlying cash result contained within it, are based
on IFRS but adjusted to exclude certain non-cash items. They therefore
represent useful guides to the level of cash profit generated by the business.
All items in the Cash result, and in the commentary below, are presented net
of tax, with prior period comparisons impacted by a change in the rate of
corporation tax on 1 April 2023.
The post-tax Underlying cash result of £205.2 million (six months to 30 June
2023: £207.1 million, year to 31 December 2023: £392.4 million) has reduced
by 1%, as increased recurring net income was offset by significant additional
short-term costs as we invest in the systems and processes required to
implement our new charging structure; excluding these short-term costs, the
Underlying cash result increased by 11%. It was also impacted by a higher rate
of corporation tax.
The key driver of our Underlying cash result is the Net income from funds
under management which has increased by 8% to £324.8 million (six months to
30 June 2023: £299.6 million, year to 31 December 2023: £599.2 million) as
a result of strong growth in funds under management and the first contribution
from gestation balances that matured during the period.
With a further £49.5 billion of gestation FUM that is not currently
contributing to the Cash result, but will begin to as it matures over the next
six years, we are well placed for further growth in net income in the years
ahead. For illustrative purposes, our current stock of funds in gestation
would, in due course, contribute around £295.5 million a year in recurring
income to the Cash result.
In addition, we have also generated income through a Margin arising from new
business where initial product charges levied on gross inflows exceed
new-business-related expenses, as well as Shareholder interest which
represents the interest earned on shareholder working capital and business
loans to Partners.
These sources of income are used to meet our costs, including Controllable
expenses which have increased by 8% on a post-tax basis, reflecting a
weighting of development expenditure towards the first half of the year, as
well as our Investment in Asia and DFM and our FSCS levy and other regulatory
costs.
As referenced above, we have also incurred additional short-term Charge
structure implementation costs of £25.0 million post-tax (six months to 30
June 2023: £nil, year to 31 December 2023: £7.2 million). Our guidance on
implementation costs remains unchanged.
-10-
European Embedded Value
We supplement our IFRS and Cash results with additional disclosure on a
European Embedded Value (EEV) basis, providing a measure of the total value
that might be expected to arise over the lifetime of the existing business,
though without making any allowance for new business that may be written in
the future.
The EEV operating profit before exceptional items of £545.9 million for the
period (six months to 30 June 2023: £740.1 million, year to 31 December 2023:
£1,041.0 million), has reduced as a result of the ongoing impact of changes
to our charging structure announced in 2023, which have reduced the
contribution from new business in the period, as well as reducing the opening
value of in-force business and the associated unwind of the discount rate.
The EEV operating profit after exceptional items of £793.1 million (six
months to 30 June 2023: £119.1 million loss, year to 31 December 2023:
£1,891.6 million loss) has been impacted in both the current and prior year
by the announced changes to our charging structure.
The EEV profit before tax of £1,229.0 million for the period (six months to
30 June 2023: £76.3 million, year to 31 December 2023: £1,387.4 million
loss) has benefitted from a positive investment return variance of £437.9
million (six months to 30 June 2023: £157.6 million, year to 31 December
2023: £501.7 million), reflecting the increased market values across our FUM
that exceeded our long-term assumptions.
The EEV net asset value per share was £15.71 at 30 June 2024 (30 June 2023:
£16.28, 31 December 2023: £14.11).
Solvency and capital
We take a prudent approach to managing the balance sheet and our capital
requirements. This continues to be the case, with both the Group and our life
companies in a strong financial position. Given the simplicity of our business
model, our preferred approach to considering solvency remains to hold assets
to match client unit-linked liabilities and allow for a management solvency
buffer (MSB).
At 30 June 2024 we held surplus assets over the MSB of £711.2 million (30
June 2023: £824.2 million, 31 December 2023: £603.5 million), increasing as
a result of cash generated exceeding the dividend paid during the period.
We also ensure that our approach meets the requirements of the Solvency II
regime. Our UK life company, the largest insurance entity in the Group,
targets capital equal to 130% of the standard formula requirement. This is a
prudent and sustainable policy given the risk profile of our business, which
is largely operational.
At 30 June 2024, the solvency ratio for our life companies was 164% (30 June
2023: 131%, 31 December 2023: 162%) of the standard formula capital
requirements, comfortably exceeding our target capital levels. Taking into
account entities in the rest of the Group, the Group solvency ratio at 30
June 2024 was 188% (30 June 2023: 151%, 31 December 2023: 191%).
Financial position
Our IFRS Condensed Consolidated Statement of Financial Position, presented on
page 46, contains policyholder interests in unit-linked liabilities and the
underlying assets that are held to match them. To understand the true assets
and liabilities that the shareholder can benefit from, these policyholder
balances, along with non-cash 'accounting' balances such as deferred income
(DIR) and deferred acquisition costs (DAC), are removed in the Solvency II Net
Assets balance sheet. This balance sheet is straightforward and demonstrates
that the Group has deep liquidity. Further information on liquidity can be
found on page 30.
Analysis of the key movements in the Solvency II Net Assets balance sheet
during the period is set out on pages 28 to 31.
-11-
Capital allocation
As stewards of shareholder capital, disciplined allocation of our capital
resources is of the utmost importance. Our capital allocation framework sets
out our priorities:
1. We will maintain a strong balance sheet, ensuring the safety of our
client investments;
2. We will invest to drive organic growth, ensuring we have the
necessary core capabilities in the business;
3. We will deliver annual shareholder returns, which are reliable and
in line with our guidance; and
4. We will return excess capital over and above what we need to invest
in the business at attractive returns.
We see being deliberate and disciplined in how we manage capital allocation as
critical to ensuring we have a well invested business that drives returns and
creates sustained value for shareholders.
Shareholder returns
As we announced in February, our approach is to return 50% of the full year
Underlying cash result. For 2024, this is expected to comprise 18.00 pence per
share in annual dividends declared with the balance returned through share
buybacks.
We target an interim return of approximately one-third of the anticipated full
year total. The Board is therefore declaring an interim dividend of 6.00 pence
per share, together with an interim share buyback of £32.9 million,
equivalent to 6.00 pence per share, due to be completed in the third quarter
of the year.
Craig Gentle, Chief Financial Officer
29 July 2024
-12-
Summary financial information
Six months Six months Year ended
Page ended ended 31 December
reference 30 June 2024 30 June 2023 2023
FUM-based metrics
Gross inflows (£'Billion) 15 8.5 8.0 15.4
Net inflows (£'Billion) 15 1.9 3.4 5.1
Total FUM (£'Billion) 15 181.9 157.5 168.2
Total FUM in gestation (£'Billion) 16 49.5 47.2 47.6
IFRS-based metrics
IFRS profit/(loss) after tax (£'Million) 18 165.1 161.7 (9.9)
IFRS profit/(loss) before shareholder tax (£'Million) 18 225.1 215.7 (4.5)
Underlying profit/(loss) before shareholder tax (£'Million) 19 222.0 215.8 (8.0)
IFRS basic earnings per share (EPS) (Pence) 30.1 29.6 (1.8)
IFRS diluted EPS (Pence) 29.9 29.5 (1.8)
IFRS net asset value per share (Pence) 201.1 227.1 179.3
Dividend per share (Pence) 6.00 15.83 23.83
Cash result-based metrics
Controllable expenses (£'Million) 22 144.9 134.0 283.3
Underlying cash result (£'Million) 22 205.2 207.1 392.4
Cash result (£'Million) 22 202.2 202.4 68.7
Underlying cash result basic EPS (Pence) 37.4 37.9 71.7
Underlying cash result diluted EPS (Pence) 37.1 37.7 70.5
EEV-based metrics
EEV operating profit/(loss) after exceptional items before tax (£'Million) 32 793.1 (119.1) (1,891.6)
EEV operating profit/(loss) after exceptional items after tax basic EPS 108.8 (16.9) (260.6)
(Pence)
EEV operating profit/(loss) after exceptional items after tax diluted EPS 107.9 (16.9) (256.5)
(Pence)
EEV net asset value per share (£) 15.71 16.28 14.11
Solvency-based metrics
Solvency II net assets (£'Million) 37 1,251.1 1,351.3 1,133.0
Management solvency buffer (£'Million) 37 539.9 527.1 529.5
Solvency II free assets (£'Million) 37 1,682.6 1,760.0 1,572.1
Solvency ratio (Percentage) 37 188% 151% 191%
The Cash result should not be confused with the IFRS Condensed Consolidated
Statement of Cash Flows, which is prepared in accordance with IAS 7.
-13-
Financial Review
This financial review provides analysis of the Group's financial position and
performance.
It is split into the following sections:
Section 1
Funds under management (FUM)
1.1 FUM analysis
1.2 Gestation
As set out on page 15 and below, FUM is a key driver of ongoing profitability
on all measures, and so information on growth in FUM is provided in Section
1.
Find out more on pages 15 to 17.
Section 2
Performance measurement
2.1 International Financial Reporting Standards (IFRS)
2.2 Cash result
2.3 European Embedded Value (EEV)
Section 2 analyses the performance of the business using three different
bases: IFRS, the Cash result, and EEV.
Find out more on pages 18 to 36.
Section 3
Solvency
Section 3 addresses solvency, which is an important area given the multiple
regulated activities carried out within the Group.
Find out more on pages 37 and 38.
-14-
Our financial business model
Our financial business model is straightforward. We generate revenue
by attracting clients through the value of our proposition, who trust us
with their investments and then stay with us. This grows our funds under
management (FUM), on which we receive:
· advice charges for the provision of valuable, face-to-face
advice; and
· product charges for our manufactured investment, pension and
ISA/unit trust products.
Further information on our charges can be found on our website:
www.sjp.co.uk/charges (http://www.sjp.co.uk/charges) . A breakdown of fee and
commission income, our primary source of revenue under IFRS, is set out in
Note 4 on page 53.
The primary source of the Group's profit is the income we receive
from annual product management charges on FUM. However, under our current
charging structure, most of our investment and pension products are
structured so that annual product management charges are not taken for the
first six years after the business is written. This means that the Group has
six years' worth of FUM in the 'gestation' period that is not generating
annual product management charges, but will 'mature' over a six-year period
and begin to contribute annual product management charges.
We will be simplifying our charging structure from the middle of 2025 and new
business will no longer enter a gestation period, but in the meantime,
gestation FUM represents a significant store of shareholder value.
Initial and ongoing advice charges, and initial product charges levied
when a client first invests into one of our products, are not major drivers
of the Group's profitability, because:
· most advice charges received are offset by corresponding
remuneration for Partners, so an increase in these revenue streams will
correspond with an increase in the associated expense and vice versa; and
· under IFRS, initial product charges are spread over the expected
life of the investment through deferred income (DIR - see page 20 for
further detail). The contribution to the IFRS result from spreading these
historic charges can be seen in Note 4 as amortisation of DIR. Initial product
charges contribute immediately to our Cash result through margin arising on
new business.
Our income is used to meet overheads, pay ongoing product expenses and invest
in the business. Controllable expenses, being the costs of running the Group's
infrastructure, the Academy and development expenses, are carefully managed to
ensure strong discipline on costs. Other ongoing expenses, including payments
to Partners, increase with business levels and are generally aligned with
product charges.
Gross inflows into FUM
-15-
Section 1: Funds under management
1.1 FUM analysis
Our financial business model is to attract and retain FUM, on which we receive
an annual management fee. As a result, the level of income we receive is
ultimately dependent on the value of our FUM, and so its growth is a clear
driver of future growth in profits. The key drivers for FUM are:
· our ability to attract new funds in the form of gross inflows;
· our ability to retain FUM by keeping unplanned withdrawals at a
low level; and
· net investment returns.
The following table shows how FUM evolved during the six months to 30 June
2024 and 30 June 2023, and the year to 31 December 2023. Investment return is
presented net of all charges.
Six months ended 30 June 2024 Year
Six months ended
ended 30 June 31 December
2023 2023
Investment Pension UT/ISA Total
and
DFM
£'Billion £'Billion £'Billion £'Billion £'Billion £'Billion
Opening FUM 35.99 87.32 44.89 168.20 148.37 148.37
Gross inflows 1.00 5.59 1.94 8.53 8.04 15.39
Net investment return 2.24 6.53 2.98 11.75 5.71 14.71
Regular income withdrawals and maturities (0.19) (1.68) - (1.87) (1.27) (2.77)
Surrenders and part-surrenders (1.14) (1.50) (2.11) (4.75) (3.33) (7.50)
Closing FUM 37.90 96.26 47.70 181.86 157.52 168.20
Net (outflows)/inflows (0.33) 2.41 (0.17) 1.91 3.44 5.12
Implied surrender rate as a percentage of average FUM 6.2% 3.3% 9.1% 5.4% 4.4% 4.7%
Included in the table above is:
· Rowan Dartington Group FUM of £3.53 billion at 30 June 2024 (30
June 2023: £3.33 billion, 31 December 2023: £3.43 billion), gross inflows of
£0.14 billion for the period (six months to 30 June 2023: £0.20 billion,
year to 31 December 2023: £0.36 billion) and outflows of £0.12 billion for
the period (six months to 30 June 2023: £0.09 billion, year to 31 December
2023: £0.18 billion); and
· SJP Asia FUM of £1.77 billion at 30 June 2024 (30 June 2023:
£1.62 billion, 31 December 2023: £1.72 billion), gross inflows of £0.11
billion for the period (six months to 30 June 2023: £0.12 billion, year to 31
December 2023: £0.21 billion) and outflows of £0.11 billion for the period
(six months to 30 June 2023: £0.06 billion, year to 31 December 2023: £0.15
billion).
The following table shows the significant net inflows and the progression of
FUM over recent periods:
Period Opening FUM Net inflows Investment return Closing FUM
£'Billion £'Billion £'Billion £'Billion
Six months to 30 June 2024 168.2 1.9 11.8 181.9
Year to 31 December 2023 148.4 5.1 14.7 168.2
Year to 31 December 2022 154.0 9.8 (15.4) 148.4
Year to 31 December 2021 129.3 11.0 13.7 154.0
Year to 31 December 2020 117.0 8.2 4.1 129.3
Year to 31 December 2019 95.6 9.0 12.4 117.0
-16-
The table below provides a geographical and investment-type analysis of FUM at
the end of each period:
30 June 2024 30 June 2023 31 December 2023
£'Billion Percentage £'Billion Percentage £'Billion Percentage
of total of total of total
North American equities 66.8 37% 52.2 33% 57.4 34%
Fixed income securities 29.6 16% 24.4 16% 27.1 16%
European equities 26.2 14% 22.0 14% 23.6 14%
Asia and Pacific equities 22.9 13% 19.6 12% 20.5 12%
UK equities 15.0 8% 16.0 10% 16.0 10%
Alternative investments 8.6 5% 11.9 8% 10.5 6%
Cash 6.7 4% 6.1 4% 7.2 4%
Other 4.5 2% 3.3 2% 4.1 3%
Property 1.6 1% 2.0 1% 1.8 1%
Total 181.9 100% 157.5 100% 168.2 100%
1.2 Gestation
As explained in our financial business model on page 14, due to our current
product structure, there is a significant amount of FUM that has not yet
started to contribute net income to the Cash result.
When we attract new FUM there is a margin arising on new business that emerges
at the point of investment, which is a surplus of income over and above the
initial costs incurred at the outset. Within our Cash result presentation this
is recognised as it arises, but it is deferred under IFRS.
Once the margin arising on new business has been recognised, the pattern of
future emergence of cash from annual product management charges differs by
product. Broadly, annual product management charges from unit trust and ISA
business begin contributing positively to the Cash result from day one, whilst
investment and pensions business enters a six-year gestation period during
which no net income from FUM is included in the Cash result. Once this
business has reached its six-year maturity point, it starts contributing
positively to the Cash result, and will continue to do so in each year that it
remains with the Group. Approximately 53% of gross inflows for 2024, after
initial charges, moved into gestation FUM (six months to 30 June 2023: 54%,
year to 31 December 2023: 54%).
The following table shows an analysis of FUM, after initial charges, split
between mature FUM that is contributing net income to the Cash result and FUM
in gestation which is not yet contributing as at 30 June 2024, as well as at
the year-end for the past five years. The value of both mature and gestation
FUM is impacted by investment return as well as net inflows.
Mature FUM Gestation FUM that Total FUM
contributing to will contribute
the Cash result to the Cash result
in the future
Position as at £'Billion £'Billion £'Billion
30 June 2024 132.4 49.5 181.9
31 December 2023 120.6 47.6 168.2
31 December 2022 102.9 45.5 148.4
31 December 2021 104.7 49.3 154.0
31 December 2020 85.9 43.4 129.3
31 December 2019 76.8 40.2 117.0
-17-
We will be simplifying our charging structure in the second half of 2025
following a period of investment in the required systems and processes. Under
the revised charging structure, new business will no longer enter a period of
gestation and the existing gestation business at the point of implementation
will gradually mature, after which there will be no further concept of
gestation FUM. In the meantime, gestation FUM continues to be a material store
of shareholder value that will make a significant contribution to the Cash
result in the future.
The following table gives an indication, for illustrative purposes, of the way
in which the reduction in fees in the gestation period element of the Cash
result could unwind, and so how the gestation balance of £49.5 billion at 30
June 2024 may start to contribute to the Cash result over the next six years
and beyond:
Year Cumulative gestation FUM Gestation FUM future contribution to the post-tax Cash result
maturity profile
£'Billion £'Million
2024 3.6 31.2
2025 10.7 78.5
2026 18.4 109.6
2027 27.0 161.3
2028 36.4 217.7
2029 45.2 269.8
2030 onwards 49.5 295.5
The contribution of gestation FUM to the Cash result shown in the table above
allows for a reduction in ongoing charges in the second half of 2025 as we
simplify our charging structure. For simplicity the table assumes that FUM
values remain unchanged, that there are no surrenders, and that business is
written at the start of the year. Actual emergence in the Cash result will
reflect the varying business mix of the relevant cohort and business
experience.
-18-
Section 2: Performance measurement
In line with statutory reporting requirements we report profits assessed on an
IFRS basis. The presence of a significant life insurance company within the
Group means that, although we are a wealth management group in substance with
a simple business model, we apply IFRS accounting requirements for insurance
companies. These requirements lead to financial statements which are more
complex than those of a typical wealth manager and so our IFRS results may not
provide the clearest presentation for users who are trying to understand our
wealth management business.
Key examples of this include the following:
· our IFRS Condensed Consolidated Statement of Comprehensive Income
includes policyholder tax balances which we are required to recognise as part
of our corporation tax arrangements. This means that our Group IFRS profit
before tax includes amounts charged to clients to meet policyholder tax
expenses, which are unrelated to the underlying performance of our business;
and
· our IFRS Condensed Consolidated Statement of Financial Position
includes policyholder liabilities and the corresponding assets held to match
them, and so policyholder liabilities increase or decrease to match increases
or decreases experienced on these assets. This means that shareholders are not
exposed to any gains or losses on the £182.3 billion of policyholder assets
and liabilities recognised in our IFRS Condensed Consolidated Statement of
Financial Position, which represented over 97% of our IFRS total assets at 30
June 2024.
To address this, we developed alternative performance measures (APMs) with the
objective of stripping out the policyholder element to present solely
shareholder-impacting balances, as well as removing items such as deferred
acquisition costs and deferred income to reflect Solvency II recognition
requirements and to better match the way in which cash emerges from the
business. We therefore present our financial performance and position on
three different bases, using a range of APMs to supplement our IFRS reporting.
The three different bases, which are consistent with those presented last
year, are:
· International Financial Reporting Standards (IFRS);
· Cash result; and
· European Embedded Value (EEV).
APMs are not defined by the relevant financial reporting framework (which for
the Group is IFRS), but we use them to provide greater insight to the
financial performance, financial position and cash flows of the Group and the
way it is managed. A complete glossary of APMs is set out on pages 96 to 99,
in which we define each APM used in our financial review, explain why it is
used and, if applicable, explain how the measure can be reconciled to the IFRS
Condensed Consolidated Financial Statements.
2.1 International Financial Reporting Standards (IFRS)
The following table demonstrates the way in which IFRS profit is presented in
the Condensed Consolidated Statement of Comprehensive Income:
Six months Six months Year ended
ended ended 31 December
30 June 2024 30 June 2023 2023
£'Million £'Million £'Million
IFRS profit before tax 577.0 385.0 439.6
Policyholder tax (351.9) (169.3) (444.1)
IFRS profit/(loss) before shareholder tax 225.1 215.7 (4.5)
Shareholder tax (60.0) (54.0) (5.4)
IFRS profit/(loss) after tax 165.1 161.7 (9.9)
-19-
As referenced above, our IFRS results are impacted by policyholder tax
balances which we are required to recognise as part of our corporation tax
arrangements. This means that our Group IFRS profit before tax includes
amounts charged to clients to meet policyholder tax expenses, which are
unrelated to the underlying performance of our business. The scale and
direction of these amounts can vary significantly: for example, in the first
half of 2024 we deducted £351.9 million from clients due to investment market
gains which flowed through our IFRS profit before tax as income, compared to
an equivalent deduction of £169.3 million in the first half of 2023,
resulting in a period-on-period impact of £182.6 million. See Note 4 Fee and
commission income for further information.
To address the challenge of policyholder tax being included in the IFRS
results we focus on the following two APMs, based on IFRS, as our pre-tax
metrics:
· IFRS profit before shareholder tax; and
· underlying profit.
Further information on these IFRS-based measures is set out below.
Profit before shareholder tax
This is a profit measure based on IFRS which aims to remove the impact of
policyholder tax. The policyholder tax expense or credit is typically matched
by an equivalent deduction or credit from the relevant funds, which is
recorded within Fee and commission income in the Condensed Consolidated
Statement of Comprehensive Income. Policyholder tax does not therefore
normally impact the Group's overall profit after tax.
However, in both the current and prior year IFRS profit before shareholder tax
and IFRS profit after tax have been impacted by another nuance of life
insurance tax, which has acted to reduce these balances.
As set out above, life insurance tax incorporates a policyholder tax element,
and the financial statements of a life insurance group need to reflect the
liability to HMRC and the corresponding deductions incorporated into policy
charges. In particular, the tax liability to HMRC is assessed using IAS 12
Income Taxes, which does not allow discounting, whereas the policy charges
are designed to ensure fair outcomes between clients and so reflect a wide
range of possible outcomes.
This gives rise to different assessments of the current value of future cash
flows and hence an asymmetry in the Condensed Consolidated Statement of
Financial Position between the deferred tax position and the offsetting client
balance. The net balance reflects a temporary position, and in the absence
of market volatility we expect it will unwind as future cash flows become
less uncertain and are ultimately realised. Movement in the asymmetry is
recognised in the Condensed Consolidated Statement of Comprehensive Income
and analysed in Note 4 Fee and commission income.
We refer to it throughout this Annual Report and Accounts as the impact
of policyholder tax asymmetry.
Under normal conditions this asymmetry is small, but market volatility can
result in significant balances. Market gains in the six months to 30 June 2024
have resulted in a negative policyholder tax asymmetry impact of £33.4
million, compared to a negative impact of £17.5 million in the six months to
30 June 2023. This leads to a negative £15.9 million period-on-period
difference in both IFRS profit after tax and IFRS profit before shareholder
tax, which can be seen in the underlying profit to Cash result reconciliation
on page 21.
Ultimately the effect of the policyholder tax asymmetry will be eliminated
from the Condensed Consolidated Statement of Financial Position, and so it is
temporary and we expect it to reverse over time.
Shareholder tax reflects the tax charge attributable to shareholders and is
closely related to the performance of the business. However, it can vary year
on year due to several factors: further detail is set out in Note 6 Income and
deferred taxes.
Underlying profit
This is IFRS profit before shareholder tax (as calculated above) adjusted to
remove the impact of accounting for deferred acquisition costs (DAC), deferred
income (DIR) and the purchased value of in-force business (PVIF).
IFRS requires certain upfront expenses incurred and income received to be
deferred. The deferred amounts are initially recognised on the Condensed
Consolidated Statement of Financial Position as a DAC asset and DIR liability,
which are subsequently amortised to the Condensed Consolidated Statement of
Comprehensive Income over a future period. Substantially all of the Group's
deferred expenses are amortised over a 14-year period, and substantially all
deferred income is amortised over a six-year period.
-20-
The impact of accounting for DAC, DIR and PVIF in the IFRS result is that
there is a significant accounting timing difference between the emergence of
accounting profits and actual cash flows. For this reason, Underlying profit
is considered to be a helpful metric. The following table demonstrates the
way in which IFRS profit reconciles to Underlying profit.
Six months Six months Year ended
ended ended 31 December
30 June 2024 30 June 2023 2023
£'Million £'Million £'Million
IFRS profit/(loss) before shareholder tax 225.1 215.7 (4.5)
Remove the impact of movements in DAC/DIR/PVIF (3.1) 0.1 (3.5)
Underlying profit/(loss) before shareholder tax 222.0 215.8 (8.0)
The impact of movements in DAC, DIR and PVIF on IFRS profit before shareholder
tax is further analysed as follows. Due to policyholder tax on DIR, the
amortisation of DIR and DIR on new business for the period set out below
cannot be agreed to those set out in Note 7, which is presented before both
policyholder tax and shareholder tax.
Six months Six months Year ended
ended ended 31 December
30 June 2024 30 June 2023 2023
£'Million £'Million £'Million
Amortisation of DAC (31.6) (36.1) (72.2)
DAC on new business for the period 22.3 20.9 39.9
Net impact of DAC (9.3) (15.2) (32.3)
Amortisation of DIR 71.0 74.6 149.3
DIR on new business for the period (57.0) (57.9) (110.3)
Net impact of DIR 14.0 16.7 39.0
Amortisation of PVIF (1.6) (1.6) (3.2)
Movement in the period 3.1 (0.1) 3.5
Net impact of DAC
The scale of the £9.3 million negative overall impact of DAC on the IFRS
result (six months to 30 June 2023: negative £15.2 million, year to 31
December 2023: negative £32.3 million) is largely due to changes arising from
the 2013 Retail Distribution Review (RDR). After these changes, the level of
expenses that qualified for deferral reduced significantly, but the large
balance accrued previously is still being amortised. As deferred expenses are
amortised over a 14-year period there is a significant transition period,
which could last until 2027, over which the amortisation of pre-RDR expenses
previously deferred will significantly outweigh new post-RDR expenses deferred
despite significant business growth, resulting in a net negative impact on
IFRS profits.
Net impact of DIR
The new business income deferred and the income released from the deferred
income liability has remained broadly static in the first half of 2024.
Together, these effects mean that DIR has had a positive £14.0 million impact
on the IFRS result in the six months to 30 June 2024 (six months to 30 June
2023: £16.7 million positive, year to 31 December 2023: £39.0 million
positive).
The simplification of our charging structure in the second half of 2025 will
see the removal of initial product fees and result in immaterial income being
deferred from this point onwards. The existing DIR liability from the point of
implementation of our simplified charging structure will continue to amortise
over a further period of six years.
-21-
2.2 Cash result
The Cash result is used by the Board to assess and monitor the level of cash
profit (net of tax) generated by the business. It is based on IFRS with
adjustments made to exclude policyholder balances and certain non-cash items,
such as DAC, DIR, deferred tax and equity-settled share-based payment costs.
Further details, including the full definition of the Cash result, can be
found in the glossary of APMs. Although the Cash result should not be confused
with the IAS 7 Condensed Consolidated Statement of Cash Flows, it provides a
helpful supplementary view of the way in which cash is generated and emerges
within the Group.
The Cash result reconciles to Underlying profit, as presented in Section 2.1,
as follows.
Six months ended Six months ended Year ended
30 June 2024
30 June 2023
31 December 2023
Before After tax Before After tax Before After tax
Shareholder Shareholder Shareholder
tax tax tax
£'Million £'Million £'Million £'Million £'Million £'Million
Underlying profit/(loss) 222.0 162.5 215.8 161.4 (8.0) (13.0)
Impact of policyholder tax asymmetry 33.4 33.4 17.5 17.5 44.4 44.4
Equity-settled share-based payments 2.1 2.1 9.9 9.9 5.4 5.4
Impact of deferred tax - 9.2 - 12.1 - 24.9
Other (2.2) (5.0) 5.0 1.5 15.2 7.0
Cash result 255.2 202.2 248.2 202.4 57.0 68.7
The impact of policyholder tax asymmetry is a temporary effect caused by
asymmetries between fund tax deductions and the policyholder tax due to HMRC.
Movement in the asymmetry can be significant dependent on market conditions.
For further explanation, refer to page 19.
Equity-settled share-based payments represent the expense associated with a
number of equity-settled share schemes across the Group. The expense has
reduced in the six months to 30 June 2024 compared to the same period in 2023,
reflecting a reduction in the anticipated vesting rate on specific schemes.
The impact of deferred tax is the recognition in the Cash result of the
benefit from realising tax relief on various items including share options,
capital allowances and deferred expenses. This has already been recognised
under IFRS, through the establishment of deferred tax assets. More information
can be found in Note 6 within the IFRS Condensed Consolidated Financial
Statements.
Other represents a number of other small items, including the removal of other
intangibles and the difference between the lease expense recognised under
IFRS 16 Leases and lease payments made.
The following table shows an analysis of the Cash result using two different
measures:
· Underlying cash result
This measure represents the regular emergence of cash from the business,
excluding any items of a one-off nature and temporary timing differences; and
· Cash result
This measure includes items of a one-off nature and temporary timing
differences.
-22-
Consolidated cash result (presented post-tax)
Note Six months ended 30 June 2024 Six months Year ended
ended 30 December 2023
30 June 2023
In-force New Total Total Total
business
£'Million £'Million £'Million £'Million £'Million
Net annual management fee 1 523.4 15.6 539.0 497.7 1,000.8
Reduction in fees in gestation period 1 (214.2) - (214.2) (198.1) (401.6)
Net income from FUM 1 309.2 15.6 324.8 299.6 599.2
Margin arising from new business 2 - 53.7 53.7 53.0 104.5
Controllable expenses 3 (11.0) (133.9) (144.9) (134.0) (283.3)
Asia - net investment 4 - (4.5) (4.5) (10.8) (19.4)
DFM - net investment 4 - (2.3) (2.3) (2.6) (6.4)
Regulatory fees and FSCS levy 5 (1.5) (13.8) (15.3) (16.5) (23.1)
Shareholder interest 6 36.3 - 36.3 27.5 61.8
Tax relief from capital losses 7 - - - 2.1 2.1
Charge structure implementation costs 8 - (25.0) (25.0) - (7.2)
Miscellaneous 9 (17.6) - (17.6) (11.2) (35.8)
Underlying cash result 315.4 (110.2) 205.2 207.1 392.4
Establishment of Ongoing Service Evidence provision 10 - - - - (323.7)
Variance 11 (3.0) - (3.0) (4.7) -
Cash result 312.4 (110.2) 202.2 202.4 68.7
The Cash result comprises the emergence of cash from in-force business of
£312.4 million (six months to 30 June 2023: £286.8 million, year to 31
December 2023: £222.5 million) and an investment in new business of £110.2
million (six months to 30 June 2023: £84.4 million, year to 31 December 2023:
£153.8 million)
Notes to the Cash result
1. Net income from FUM
The net annual management fee is the net margin that the Group retains from
FUM after payment of the associated costs: for example, advice fees paid to
Partners, investment management fees paid to external fund managers and the
policy servicing tariff paid to our third-party administration provider.
As noted on page 14, however, our investment and pension business product
structure means that these products do not generate net Cash result, after
the margin arising from new business, during the first six years. This is
known as the 'gestation period' and is reflected in the reduction in fees in
gestation period line.
We focus our explanatory analysis on the net income from FUM, which reflects
the net annual management fee after the reduction in fees in the gestation
period, representing the Cash result income from FUM that has reached
maturity.
The average rate of net income can vary over time with business mix. Each
product has standard fees, but they vary between products and their historic
versions, with products also subject to different tax treatments, particularly
life insurance tax on onshore investment business. To allow for this annual
variation, we guide to a margin range, with the range being applicable to
average mature FUM, excluding discretionary fund management (DFM) and Asia
FUM.
For the first half of 2024, our net income from FUM is consistent with our
margin range of 0.54% to 0.56%, reflecting the introduction in the second
half of 2023 of a charge cap applicable to client bonds and pension
investments with a duration longer than ten years, together with the 25%
rate of corporation tax being applicable throughout 2024.
Following the simplification of our charging structure in the second half of
2025, the range will reduce by 0.11%, resulting in a range from 0.43% to
0.45%. However, new business after this date will no longer enter a period of
gestation and so once the existing gestation FUM has matured over a six-year
period there will be no further gestation FUM, and the margin will apply to
all FUM.
Net income from Asia and DFM FUM is not included in this line. Instead, this
is included in the Asia - net investment and DFM - net investment lines.
-23-
2. Margin arising from new business
This is the net positive Cash result impact of new business in the year,
reflecting initial charges levied on gross inflows and new-business-related
expenses. The majority of these expenses vary with new business levels, such
as the incremental third-party administration costs of setting up a new policy
on our back-office systems, and payments to Partners for the initial advice
provided to secure clients' investment. As a result, gross inflows are a key
driver behind this line.
However, the margin arising from new business also contains some fixed
expenses, and elements which do not vary exactly in line with gross inflows.
For example, our third-party administration tariff structure includes a fixed
fee, and to provide some stability for Partner businesses, elements of our
support for them are linked to prior-year new business levels.
Therefore, whilst the margin arising from new business tends to move
directionally with the scale of gross inflows generated during the year, the
relationship between the two is not linear.
3. Controllable expenses
Controllable expenses are those which do not vary with business volumes,
including the costs of running the Group's infrastructure, development
expenses and the costs associated with running our Academy. Growth in
controllable expenses has been contained to 10% on a pre-tax basis, with the
increase driven by the phasing of development expenses which are weighted
towards the first half of the year. This is equivalent to an 8% increase on a
post-tax basis as presented in the Cash result, reflecting the corporation tax
of 25% being applicable for the whole year.
4. Asia and DFM
These lines represent the net income from Asia and DFM FUM, including the Asia
and DFM expenses set out in the reconciliation on page 25 between expenses
presented separately on the face of the Cash result before tax and IFRS
expenses.
We have continued to invest in developing our presence in Asia, as well as in
discretionary fund management via Rowan Dartington. Investment in Asia has
reduced, reflecting the restructuring undertaken during the prior year.
Investment in DFM is anticipated to reduce sharply as it is in the final
stages of a back-office restructuring programme that is expected to result in
the business materially breaking even by the end of the year.
5. Regulatory fees and FSCS levy
The costs of operating in a regulated sector include regulatory fees and the
Financial Services Compensation Scheme (FSCS) levy. On a post-tax basis, these
are as follows:
Six months Six months Year ended
ended ended 31 December
30 June 2024 30 June 2023 2023
£'Million £'Million £'Million
FSCS levy 8.7 10.2 10.0
Regulatory fees 6.6 6.3 13.1
Regulatory fees and FSCS levy 15.3 16.5 23.1
-24-
Our position as a market-leading provider of advice means we make a very
substantial contribution to supporting the FSCS, thereby providing protection
for clients of other businesses in the sector that fail. The FSCS levy in 2024
remains at a level below that typically seen in recent years, as a result of
the FSCS having a surplus brought forward.
6. Shareholder interest
This is the income accruing on shareholder investments and cash held for
regulatory purposes together with the interest received on the surplus capital
held by the Group. It is presented net of funding-related expenses, including
interest paid on borrowings and securitisation costs. It has increased
significantly period-on-period following rises in the Bank of England base
rate.
7. Tax relief from capital losses
A deferred tax asset was previously recognised under IFRS for historic capital
losses which were regarded as being capable of utilisation over the medium
term. The tax asset was ignored for Cash result purposes as it was not
fungible, but instead the cash benefit realised when losses were utilised were
shown in the tax relief from capital losses line. Due to the utilisation in
full of the remaining stock of capital losses in 2023, this is no longer a
feature of the Cash result.
8. Charge structure implementation costs
We announced in October 2023 that we would be simplifying our charging
structure and disaggregating our charges into their component parts,
supporting clients by making it easier to compare charges for advice,
investment management and other services, on a component-by-component basis.
We have commenced a broad and complex programme to accommodate these changes,
investing £140 to £160 million over a two-year period to develop our
systems and processes to support the new charging structure to be implemented
in the second half of 2025.
9. Miscellaneous
This category represents the net cash flow of the business not covered in any
of the other categories. It includes Group contributions to the St. James's
Place Charitable Foundation, movements in the fair value of renewal income
assets and the remediation costs associated with client complaints.
10. Ongoing Service Evidence provision
The Ongoing Service Evidence provision was established in 2023 following the
appointment of a skilled person and an assessment undertaken into the
evidencing and delivery of historic ongoing servicing, reflecting the
anticipated cost of refunding ongoing servicing charges, together with the
interest, and the administrative costs associated with completing the work.
More information can be found in Note 11 within the IFRS Condensed
Consolidated Financial Statements.
11. Variance
The variance recognised at the half-year reflects an allowance for fewer days
of AMC income in the first half compared to the second half. It will reverse
in the second half of the year and will not feature in the full year Cash
result.
-25-
Reconciliation of Cash result expenses to IFRS expenses
Whilst certain expenses are recognised in separate line items on the face of
the Cash result, expenses which vary with business volumes, such as payments
to Partners and third-party administration expenses, and expenses which relate
to investment in specific areas of the business such as DFM, are netted from
the relevant income lines rather than presented separately. In order to
reconcile to the IFRS expenses presented on the face of the Condensed
Consolidated Statement of Comprehensive Income, the expenses netted from
income lines in the Cash result need to be added in, as do certain IFRS
expenses which by definition are not included in the Cash result. In addition,
all expenses need to be converted from post-tax, as they are presented in the
Cash result, to pre-tax, as they are presented under IFRS.
Expenses presented on the face of the Cash result before and after tax are set
out below:
Six months ended Six months ended Year ended
30 June 2024 30 June 2023 31 December 2023
Before Tax rate After Before Tax rate After Before Tax rate After
tax tax tax tax tax tax
£'Million Percentage £'Million £'Million Percentage £'Million £'Million Percentage £'Million
Controllable expenses 193.2 25.0% 144.9 175.2 23.5% 134.0 370.4 23.5% 283.3
Regulatory fees and FSCS levy 20.4 25.0% 15.3 21.6 23.5% 16.5 30.2 23.5% 23.1
Charge structure implementation costs 33.3 25.0% 25.0 - - - 9.4 23.5% 7.2
Total expenses presented on the face of the Cash result 246.9 185.2 196.8 150.5 410.0 313.6
The total expenses presented separately on the face of the Cash result before
tax then reconciles to IFRS expenses as set out below:
Six months Six months Year ended
ended ended 31 December
30 June 2024 30 June 2023(1) 2023
£'Million £'Million £'Million
Total expenses presented on the face of the Cash result before tax 246.9 196.8 410.0
Expenses which vary with business volumes
Other performance-related costs 76.4 76.3 147.4
Payments to Partners 551.5 511.9 1,013.2
Investment expenses 54.2 48.2 96.9
Third-party administration 84.3 79.1 151.8
Other(1) 46.3 37.7 513.3
Expenses relating to investment in specific areas of the business
Asia expenses 9.2 13.9 26.5
DFM expenses 15.4 18.0 33.3
Total expenses included in the Cash result 1,084.2 981.9 2,392.4
Reconciling items to IFRS expenses
Amortisation of DAC and PVIF, net of additions 11.0 16.9 35.5
Equity-settled share-based payments expenses 2.1 9.9 5.4
Insurance contract expenses presented elsewhere 0.7 (2.1) 2.4
Other (0.5) 1.3 (2.4)
Total IFRS Group expenses before tax 1,097.5 1,007.9 2,433.3
(1) Restated to reclassify interest paid of £7.0 million to Other finance
income.
-26-
Expenses which vary with business volumes
Other performance-related costs, for both Partners and employees, vary with
the level of new business and the financial performance of the business.
Payments to Partners, investment expenses and third-party administration costs
are met through charges to clients, and so any variation in them from changes
in the volumes of new business or the level of the stock markets does not
impact Group profitability significantly.
Each of these items is recognised within the most relevant line of the Cash
result, which is determined based on the nature of the expense. In most cases,
this is either the net annual management fee or margin arising from new
business lines.
Other expenses include operating costs of acquired financial adviser
businesses, donations to the St. James's Place Charitable Foundation and
complaint costs. They are recognised across various lines in the Cash result.
Expenses relating to investment in specific areas of the business
Asia expenses and DFM expenses both reflect disciplined expense control during
the year, whilst continuing to invest to support growth.
In the Cash result, Asia and DFM expenses are presented net of the income they
generate in the Asia - net investment and DFM - net investment lines.
Reconciling items to IFRS expenses
DAC amortisation, net of additions, PVIF amortisation and equity-settled
share-based payment expenses are the primary expenses which are recognised
under IFRS but are excluded from the Cash result.
Expenses associated with insurance contract expenses are included in the Cash
result but are shown within the Insurance service expense rather than the
Expenses line under IFRS 17.
-27-
Derivation of the Cash result
The Cash result is derived from the IFRS Condensed Consolidated Statement of
Financial Position in a two-stage process:
Stage 1: Solvency II Net Assets Balance Sheet
Firstly, the IFRS Condensed Consolidated Statement of Financial Position is
adjusted for a number of material balances that reflect policyholder interests
in unit-linked liabilities together with the underlying assets that are held
to match them. Secondly, it is adjusted for a number of non-cash 'accounting'
balances such as DIR, DAC and associated deferred tax. The result of these
adjustments is the Solvency II Net Assets Balance Sheet and the following
table shows the way in which it has been calculated at 30 June 2024.
IFRS Adjustment Adjustment Solvency II Solvency II Net Assets
Balance 1 2 Net Assets Balance Sheet
Sheet Balance
Sheet
30 June 2023 31 December
2023
30 June 2024 Note £'Million £'Million £'Million £'Million £'Million £'Million
Assets
Goodwill 1 33.6 - (33.6) - - -
Deferred acquisition costs 2 295.0 - (295.0) - - -
Purchased value of in-force business 1 6.4 - (6.4) - - -
Computer software 1 21.2 - (21.2) - - -
Property and equipment 3 147.9 - - 147.9 156.8 153.1
Deferred tax assets 4 13.2 - (11.5) 1.7 2.2 20.4
Investment in associates 10.4 - - 10.4 4.7 10.2
Reinsurance assets 15.9 - (6.2) 9.7 7.0 6.7
Other receivables 5 4,023.8 (1,419.9) (3.1) 2,600.8 2,064.1 2,147.3
Investment property 1,039.5 (1,039.5) - - - -
Equities 125,349.2 (125,349.2) - - - -
Fixed income securities 6 25,185.5 (25,177.1) - 8.4 8.0 8.2
Investment in Collective Investment Schemes 6 21,432.2 (19,354.3) - 2,077.9 1,250.5 1,454.4
Derivative financial instruments 3,828.0 (3,828.0) - - - -
Cash and cash equivalents 6 6,504.8 (6,155.4) - 349.4 268.7 285.4
Total assets 187,906.6 (182,323.4) (377.0) 5,206.2 3,762.0 4,085.7
Liabilities
Borrowings 7 490.6 - - 490.6 189.2 251.4
Deferred tax liabilities 4 565.2 - 2.5 567.7 228.9 414.5
Insurance contract liabilities 517.4 (453.9) (38.8) 24.7 20.1 18.2
Deferred income 2 477.9 - (477.9) - - -
Other provisions 8 508.1 - - 508.1 55.5 500.1
Other payables 3, 9 4,080.8 (1,780.5) (10.7) 2,289.6 1,890.4 1,757.0
Investment contract benefits 133,823.5 (133,823.5) - - - -
Derivative financial instruments 2,807.5 (2,807.5) - - - -
Net asset value attributable to unit holders 43,458.0 (43,458.0) - - - -
Income tax liabilities 10 74.4 - - 74.4 26.6 11.5
Total liabilities 186,803.4 (182,323.4) (524.9) 3,955.1 2,410.7 2,952.7
Net assets 1,103.2 - 147.9 1,251.1 1,351.3 1,133.0
Adjustment 1 strips out the policyholder interest in unit-linked assets and
liabilities, to present solely shareholder-impacting balances.
Adjustment 2 removes items such as DAC, DIR, PVIF and their associated
deferred tax balances from the IFRS Condensed Consolidated Statement
of Financial Position to bring it in line with Solvency II recognition
requirements.
-28-
Notes to the Solvency II Net Assets Balance Sheet
1. Goodwill / Purchased value of in-force business / Computer software
Goodwill represents the excess of the cost of an acquisition over the fair
value of the Group's share of the identifiable net assets of the acquired
entity at the date of acquisition. Goodwill is not amortised, but is reviewed
annually for impairment.
The purchased value of in-force business represents the present value of
future profits that are expected to emerge from insurance business acquired on
business combinations, calculated at the time of acquisition using
best-estimate assumptions. The balance is amortised over the anticipated lives
of the related insurance contracts.
Each of these items is excluded from the Solvency II Net Assets due to their
intangible nature. See Note 7 to the IFRS Condensed Consolidated Financial
Statements for further detail.
2. Deferred acquisition costs / Deferred income
IFRS requires certain upfront expenses incurred and income received to be
deferred. The deferred amounts are initially recognised on the IFRS Condensed
Consolidated Statement of Financial Position as a DAC asset and DIR liability,
which are subsequently amortised to the Condensed Consolidated Statement of
Comprehensive Income over a future period.
They are each excluded from the Solvency II Net Assets due to their intangible
nature. See Note 7 to the IFRS Condensed Consolidated Financial Statements for
further detail.
3. Property and equipment, and other payables
The property and equipment balance includes the right to use leased assets of
£114.6 million (30 June 2023: £124.5 million, 31 December 2023: £118.5
million). It has decreased over the period as the leased assets are
depreciated.
Lease liabilities of £117.3 million are recognised within the other payables
line (30 June 2023: £127.0 million, 31 December 2023: £120.5 million).
4. Deferred tax assets and liabilities
Analysis of deferred tax assets and liabilities, including how they have moved
year on year, is set out in Note 6 Income and deferred taxes within the IFRS
Condensed Consolidated Financial Statements.
5. Other receivables
Other receivables on the Solvency II Net Assets Balance Sheet have increased
from £2,147.3 million at 31 December 2023 to £2,600.8 million at 30 June
2024, principally reflecting an increase in short-term outstanding market
trade settlements. Other receivables on the IFRS balance sheet have increased
from £2,997.4 million at 31 December 2023 to £4,023.8 million at 30 June
2024, additionally reflecting receivables within policyholder funds.
Detailed breakdowns of other receivables can be found in Note 9 Other
receivables within the IFRS Condensed Consolidated Financial Statements.
Within other receivables there are two items which merit further analysis:
Operational readiness prepayment
The operational readiness prepayment asset arose from the investment we have
made into our back-office infrastructure project, which was a complex,
multi-year programme. In addition to expensing our internal project costs
through the IFRS Condensed Consolidated Statement of Comprehensive Income and
Cash result as incurred, we capitalised Bluedoor development costs as a
prepayment asset.
-29-
The asset, which stood at £272.3 million at 30 June 2024 (30 June 2023:
£277.1 million, 31 December 2023: £283.5 million) has been amortising
through the IFRS Condensed Consolidated Statement of Comprehensive Income and
the Cash result since 2017 and will continue to do so over the remaining
life of the contract.
The amortisation expense is recognised within third-party administration
expenses in the IFRS result, and within the net annual management fee line of
the Cash result. It is more than offset by the lower tariff charges on
Bluedoor compared to the previous system, which grew as the business grew,
benefiting both the IFRS and Cash results.
Business loans to Partners
Facilitating business loans to Partners is a key way in which we are able to
support growing Partner businesses. Such loans are principally used to enable
Partners to take over the businesses of retiring or downsizing Partners, and
this process creates broad stakeholder benefits. First, clients benefit from
enhanced continuity of St. James's Place advice and service over time;
second, Partners are able to build and ultimately realise value in the
high-quality and sustainable businesses they have created; and finally, the
Group and, in turn, shareholders, benefit from high levels of adviser and
client retention.
In addition to recognising a strong business case for facilitating such
lending, we recognise too the fundamental strength and credit quality of
business loans to Partners. Over more than ten years, cumulative write-offs
have totalled less than 5bps of gross loans advanced, with such low impairment
experience attributable to a number of factors that help to mitigate
the inherent credit risk in lending. These include taking a cautious approach
to Group credit decisions, with lending secured against prudent business
valuations. Demonstrating this, loan-to-value (LTV) information is set
out in the table below.
30 June 30 June 31 December
2024 2023 2023
Aggregate LTV across the total Partner lending book 26% 30% 29%
Proportion of the book where LTV is over 75% 3% 7% 5%
Net exposure to loans where LTV is over 100% (£'Million) 7.6 6.8 6.7
If FUM were to decrease by 10%, the net exposure to loans where LTV is over
100% at 30 June 2024 would increase to £8.1 million (30 June 2023: increase
to £8.8 million, 31 December 2023: increase to £7.7 million).
Our credit experience also benefits from the repayment structure of business
loans to Partners. The Group collects advice charges from clients. Prior to
making the associated payment to Partners, we deduct loan capital and interest
payments from the amount due. This means the Group is able to control
repayments.
We have continued to facilitate business loans to Partners during the period
and have also repurchased a proportion of the loans previously funded by third
parties and guaranteed by the Group, with the majority of these loans
transferring into our externally funded securitisation vehicle. Further
information is provided in Note 9 Other receivables, Note 12 Borrowings and
financial commitments and Note 16 Events after the end of the reporting
period.
30 June 30 June 31 December 2023
2024 2023
£'Million £'Million £'Million
Total business loans to Partners 507.0 400.2 408.0
Split by funding type:
Business loans to Partners directly funded by the Group 384.9 362.2 340.8
Securitised business loans to Partners 122.1 38.0 67.2
-30-
6. Liquidity
Cash generated by the business is held in highly rated government securities,
AAA-rated money market funds, and bank accounts. Although these are all highly
liquid, only the latter is classified as cash and cash equivalents on the
Solvency II Net Assets Balance Sheet. The total liquid assets held are as
follows:
30 June 30 June 31 December
2024 2023 2023
£'Million £'Million £'Million
Fixed interest securities 8.4 8.0 8.2
Investment in Collective Investment Schemes 2,077.9 1,250.5 1,454.4
(AAA-rated money market funds)
Cash and cash equivalents 349.4 268.7 285.4
Total liquid assets 2,435.7 1,527.2 1,748.0
The Group's primary source of net cash generation is product charges. In line
with profit generation, as most of our investment and pension business enters
a gestation period, there is no cash generated (apart from initial charges)
for the first six years of an investment. This means that the amount of FUM
that is contributing to the Cash result will increase year on year
as FUM in the gestation period becomes mature and is subject to annual
product management charges. Unit trust and ISA business does not enter the
gestation period, and so generates cash immediately from the point of
investment.
Cash is used to invest in the business and to support returns to shareholders.
Our shareholder return guidance is set such that appropriate cash is retained
in the business to support the investment needed to meet our future growth
aspirations.
7. Borrowings
The Group continues to pursue a strategy of diversifying and broadening its
access to debt finance. We have done this successfully over time, including
via the creation and execution of the securitisation vehicle referred to
above. For accounting purposes we are obliged to disclose on our Condensed
Consolidated Statement of Financial Position the value of loan notes relating
to the securitisation. However, as the securitisation loan notes were secured
only on the securitised portfolio of business loans to Partners, they were
non-recourse to the Group's other assets. This means that the senior tranche
of non-recourse securitisation loan notes, whilst included within borrowing,
is very different from the Group's senior unsecured corporate borrowings,
which are used to manage working capital and fund investment in the business.
Senior unsecured corporate borrowings of £401.1 million at 30 June 2024 has
increased from 31 December 2023, reflecting the drawing of an additional
£250.0 million loan facility to provide additional funding certainty. Further
information is provided in Note 12 Borrowings and financial commitments within
the IFRS Condensed Consolidated Financial Statements.
30 June 30 June 31 December
2024 2023 2023
£'Million £'Million £'Million
Corporate borrowings: bank loans 250.0 - 50.0
Corporate borrowings: loan notes 151.1 163.9 151.1
Senior unsecured corporate borrowings 401.1 163.9 201.1
Senior tranche of non-recourse securitisation loan notes 89.5 25.3 50.3
Total borrowings 490.6 189.2 251.4
-31-
8. Other Provisions
Further information on other provisions, including how the balance has moved
period on period, is set out in Note 11 Other provisions and contingent
liabilities within the IFRS Condensed Consolidated Financial Statements.
9. Other payables
Other payables on the Solvency II Net Assets Balance Sheet have increased from
£1,757.0 million at 31 December 2023 to £2,289.6 million at 30 June 2024,
largely due to an increase in short-term outstanding policy related
settlements. Other payables on the IFRS balance sheet have increased from
£2,388.1 million at 31 December 2023 to £ 4,080.8 million at 30 June 2024,
additionally reflecting payables within policyholder funds.
Detailed breakdowns of other payables can be found in Note 10 Other payables
within the IFRS Condensed Consolidated Financial Statements.
10. Income tax liabilities
The Group has an income tax liability of £74.4 million at 30 June 2024
compared to a liability of £11.5 million at 31 December 2023. This is due to
a current tax charge of £253.1 million, tax paid in the year of £162.1
million and other credits of £28.1 million relating to interactions between
current tax and other taxes such as deferred taxes. Further detail is provided
in Note 6 Income and deferred taxes within the IFRS Condensed Consolidated
Financial Statements.
Stage 2: Movement in Solvency II Net Assets Balance Sheet
After the Solvency II Net Assets Balance Sheet has been determined, the second
stage in the derivation of the Cash result identifies a number of movements in
that balance sheet which do not represent cash flows for inclusion within the
Cash result. The following table explains how the overall Cash result
reconciles to the total movement.
Six months Six months Year ended
ended ended 31 December
30 June 2024 30 June 2023 2023
£'Million £'Million £'Million
Opening Solvency II net assets 1,133.0 1,379.9 1,379.9
Dividend paid (43.9) (203.3) (289.9)
Issue of share capital and exercise of options - 6.4 6.8
Consideration paid for own shares (3.6) (0.5) (0.5)
Change in deferred tax (9.2) (12.1) (24.9)
Impact of policyholder tax asymmetry (33.4) (17.5) (44.4)
Reassurance recapture add-back - - 39.8
Change in goodwill, intangibles and other non-cash movements 6.0 (4.0) (2.5)
Cash result 202.2 202.4 68.7
Closing Solvency II net assets 1,251.1 1,351.3 1,133.0
Further detail can be found in the Consolidated Financial Statements on a Cash
Result Basis on pages 88 - 94.
-32-
2.3 European Embedded Value (EEV)
Wealth management differs from most other businesses, in that the expected
shareholder income from client investment activity emerges over a long period
in the future. We therefore supplement the IFRS and Cash results by providing
additional disclosure on an EEV basis, which brings into account the net
present value of the expected future cash flows. We believe that a measure of
the total economic value of the Group's operating performance is useful to
investors.
As in previous reporting, our EEV continues to be calculated on a basis
determined in accordance with the EEV principles originally issued in May 2004
by the Chief Financial Officers Forum (CFO Forum) and supplemented both in
October 2005 and, following the introduction of Solvency II, in April 2016.
Many of the principles and practices underlying EEV are similar to the
requirements of Solvency II, and we have sought to align them as closely as
possible. The table below and accompanying notes summarise the profit before
tax of the combined business.
Six months Six months Year ended
ended ended 31 December
30 June 2024 30 June 2023 2023
Note £'Million £'Million £'Million
Funds management business 1 633.1 818.7 1,234.3
Distribution business 2 (35.9) (34.1) (68.3)
Other (51.3) (44.5) (125.0)
EEV operating profit before exceptional items 545.9 740.1 1,041.0
Exceptional item: Charge structure 3 247.2 (859.2) (2,506.6)
Exceptional item: Ongoing Service Evidence provision 3 - - (426.0)
EEV operating profit/(loss) after exceptional items 793.1 (119.1) (1,891.6)
Investment return variance 4 437.9 157.6 501.7
Economic assumption changes 5 (2.0) 37.8 2.5
EEV profit/(loss) before tax 1,229.0 76.3 (1,387.4)
Tax (304.6) (20.6) 340.3
EEV profit/(loss) after tax 924.4 55.7 (1,047.1)
A reconciliation between EEV operating profit before tax and IFRS profit
before tax is provided in Note 3 Segment reporting within the within the IFRS
Condensed Consolidated Financial Statements.
Notes to the EEV result
1. Funds management business EEV operating profit before exceptional items
The funds management business operating profit has reduced to £633.1 million
(six months to 30 June 2023: £818.7 million, year to 31 December 2023:
£1,234.3 million) and a full analysis of the result is shown below:
Six months Six months Year ended
ended ended 31 December
30 June 2024 30 June 2023 2023
£'Million £'Million £'Million
New business contribution 399.6 463.7 695.4
Profit from existing business
- unwind of the discount rate 297.1 346.8 506.0
- experience variance (76.1) (3.8) (11.3)
- operating assumption change - - 13.9
Investment income 12.5 12.0 30.3
Funds management EEV operating profit before exceptional items 633.1 818.7 1,234.3
-33-
The new business contribution for the period at £399.6 million (six months to
30 June 2023: £463.7 million, year to 31 December 2023: £695.4 million) was
14% lower than the prior period, primarily reflecting the impact of changes to
our charging structure described below.
The unwind of the discount rate for the period was lower at £297.1 million
(six months to 30 June 2023: £346.8 million, year to 31 December 2023:
£506.0 million), reflecting the decrease in the opening risk discount rate
to 6.8% (2023: 7.0%), together with a lower value of in-force business after
allowing for the changes to our charging structure described below.
The experience variance during the period was negative £76.1 million (six
months to 30 June 2023: £3.8 million negative, year to 31 December 2023:
£11.3 million negative). The change relative to 2023 principally reflects
persistency experience in the period being lower than our long-term
assumptions, which represent a best-estimate of likely experience over the
lifetime of the in-force business.
The impact of operating assumption changes in the period was £nil (six months
to 30 June 2023: £nil, year to 31 December 2023: positive £13.9 million).
The impact in the prior year reflects a small improvement to the persistency
assumptions for our offshore bond business.
2. Distribution business
The distribution loss includes the positive gross margin arising from advice
income less payments to advisers, offset by the costs of supporting the
Partnership and building the distribution capabilities in Asia. The reported
loss has benefited from a reduction in the FSCS levy expense for our
distribution business to £7.0 million (six months to 30 June 2023: £10.8
million, year to 31 December 2023: £10.6 million).
3. Exceptional items
The exceptional charges recorded in the prior periods reflected the impact on
the opening position of changes to our charge structure announced during 2023
as well as the impact of a provision that we established following a review
into the evidencing of historic ongoing servicing. The changes announced to
our charge structure include:
· the change, announced in July 2023, to improve value for
long-term clients by capping annual product management charges at 0.85% for
bond and pension investments with a duration longer than ten years;
· the change, announced in October 2023, to simplify our charging
structure in the second half of 2025.
The exceptional profit recorded in the current period reflects a revision to
the anticipated impact of the charge structure changes for our UT/ISA product,
reducing the exceptional impact recorded in the prior year.
4. Investment return variance
The investment return variance reflects the capitalised impact on the future
annual management fees resulting from the difference between the actual and
assumed investment returns. Given the size of our FUM, a small difference can
result in a large positive or negative variance.
The typical investment return on our funds during the period was 7.7% after
charges, compared to the assumed investment return of 2.6%. This resulted in
an investment return variance of £437.9 million (six months to 30 June 2023:
positive £157.6 million, year to 31 December 2023: positive £501.7 million).
5. Economic assumption changes
The negative variance of £2.0 million arising in the period (six months to 30
June 2023: positive £37.8 million, year to 31 December 2023: positive £2.5
million) reflects the impact of an increase in the risk-free rate and
long-term inflation.
New business margin
The largest single element of the EEV operating profit (analysed in the
previous section) is the new business contribution. The level of new business
contribution generally moves in line with new business levels. To demonstrate
this link, and aid understanding of the results, we provide additional
analysis of the new business margin (the 'margin'). This is calculated as the
new business contribution divided by the gross inflows, and is expressed as a
percentage.
-34-
The table below presents the margin before tax from our manufactured business:
Six months Six months Year ended
ended ended 31 December
30 June 2024 30 June 2023 2023
Investment
New business contribution (£'Million) 48.0 67.4 96.6
Gross inflows (£'Billion) 1.00 1.10 2.09
Margin (%) 4.8 6.1 4.6
Pension
New business contribution (£'Million) 258.5 256.6 469.2
Gross inflows (£'Billion) 5.59 4.89 9.77
Margin (%) 4.6 5.2 4.8
Unit trust and DFM
New business contribution (£'Million) 93.1 139.7 129.6
Gross inflows (£'Billion) 1.94 2.05 3.53
Margin (%) 4.8 6.8 3.7
Total business
New business contribution (£'Million) 399.6 463.7 695.4
Gross inflows (£'Billion) 8.53 8.04 15.39
Margin (%) 4.7 5.8 4.5
Post-tax margin (%) 3.5 4.3 3.4
The overall margin for the period was 4.7% (six months to 30 June 2023: 5.8%,
year to 31 December 2023: 4.5%). This has reduced compared to the same period
in 2023 reflecting the impact of the exceptional changes to our charge
structure, which have subsequently been revised upwards for our UT/ISA
product.
Economic assumptions
The principal economic assumptions used within the cash flows are set out
below:
Six months Six months Year ended
ended ended 31 December
30 June 2024 30 June 2023 2023
Risk-free rate 4.3% 4.5% 3.7%
Inflation rate 3.6% 3.6% 3.5%
Risk discount rate 7.3% 7.6% 6.8%
Future investment returns:
- Gilts 4.3% 4.5% 3.7%
- Equities 7.3% 7.5% 6.7%
- Unit-linked funds 6.5% 6.8% 6.0%
The risk-free rate is set by reference to the yield on ten-year gilts. Other
investment returns are set by reference to the risk-free rate.
The inflation rate is derived from the implicit inflation in the valuation of
ten-year index-linked gilts. This rate is increased to reflect higher
increases in earnings-related expenses.
-35-
EEV sensitivities
The table below shows the estimated impact on the reported value of new
business and EEV to changes in various EEV-calculated assumptions. The
sensitivities are specified by the EEV principles and reflect reasonably
possible levels of change. In each case, only the indicated item is varied
relative to the restated values.
Note Change in new business contribution Change in European Embedded Value
Pre-tax Post-tax Post-tax
£'Million £'Million £'Million
Value at 30 June 2024 399.6 301.6 8,618.1
100bps reduction in risk-free rates, with corresponding change in fixed 1 (4.2) (3.2) (60.9)
interest asset values
10% increase in withdrawal rates 2 (27.7) (20.8) (399.9)
10% reduction in market value of equity assets 3 - - (817.6)
10% increase in expenses 4 (4.7) (3.5) (72.5)
100bps increase in assumed inflation 5 (5.3) (4.0) (70.8)
Notes to the EEV sensitivities
1. This is the key economic basis change sensitivity. The business model
is relatively insensitive to change in economic basis. Note that the
sensitivity assumes a corresponding change in all investment returns but no
change in inflation.
2. The 10% increase is applied to the withdrawal rate. For instance, if
the withdrawal rate is 8% then a 10% increase would reflect a change to 8.8%.
3. For the purposes of this sensitivity all unit-linked funds are assumed
to be invested in equities. The actual mix of assets varies and in recent
years the proportion invested directly in UK and overseas equities has
exceeded 70%.
4. For the purposes of this sensitivity only non-fixed elements of the
expenses are increased by 10%.
5. This reflects a 100bps increase in the assumed RPI underlying the
expense inflation calculation.
Change in new business contribution Change in
European
Embedded Value
Pre-tax Post-tax Post-tax
£'Million £'Million £'Million
100bps reduction in risk discount rate 52.6 39.5 684.5
Although not directly relevant under a market-consistent valuation, this
sensitivity shows the level of adjustment which would be required to reflect
differing investor views of risk.
-36-
Analysis of the EEV result
The table below provides a summarised breakdown of the embedded value position
at the reporting dates.
30 June 30 June 31 December
2024 2023 2023
£'Million £'Million £'Million
Value of in-force business 7,367.0 7,581.5 6,606.1
Solvency II net assets 1,251.1 1,351.3 1,133.0
Total embedded value 8,618.1 8,932.8 7,739.1
30 June 30 June 31 December
2024 2023 2023
£ £ £
Net asset value per share 15.71 16.28 14.11
The EEV result above reflects the specific terms and conditions of our
products. Our pension business is split between two portfolios. Our current
product, the Retirement Account, was launched in 2016 and incorporates both
pre-retirement and post-retirement phases of investment in the same product.
Earlier business was written in our separate Retirement Plan and Drawdown Plan
products, targeted at each of the two phases separately, and therefore has a
slightly shorter term and lower new business margin.
Our experience is that much of our Retirement Plan business converts into
Drawdown Plan business at retirement, but, in line with the EEV guidelines, we
are required to defer recognition of the additional value from the Drawdown
Plan until it crystallises. If instead we were to assess the future value of
Retirement Plan business (beyond the immediate contract boundary) in a more
holistic fashion, in line with Retirement Account business, this would result
in an increase of approximately £255 million to our embedded value at 30 June
2024 (30 June 2023: approximately £290 million, 31 December 2023:
approximately £250 million).
-37-
Section 3: Solvency
St. James's Place has a business model and risk appetite that results in
underlying assets being held that fully match our obligations to clients. Our
clients can access their investments 'on demand' and because the encashment
value is matched, movements in equity markets, currency markets, interest
rates, mortality, morbidity and longevity have very little impact on our
ability to meet liabilities. We also have a prudent approach to investing
shareholder funds and surplus assets in cash, AAA-rated money market funds and
highly rated government securities. The overall effect of the business model
and risk appetite is a resilient solvency position capable of enabling
liabilities to be met even during adverse market conditions.
Our Life businesses are subject to the Solvency II capital regime which
applied for the first time in 2016. Given the relative simplicity of our
business compared to many, if not most, other organisations that fall within
the scope of Solvency II, we have continued to manage the solvency of the
business on the basis of holding assets to match client unit-linked
liabilities plus a management solvency buffer (MSB). This has ensured that not
only can we meet client liabilities at all times (beyond the Solvency II
requirement of a '1-in-200 years' event), but we also have a prudent level of
protection against other risks to the business. At the same time, we have
ensured that the resulting capital held meets with the requirements of the
Solvency II regime, to which we are ultimately accountable.
The Group's overall Solvency II net assets position, MSB, and management
solvency ratios are as follows:
30 June 2024 Life Other Other Total 30 June 31 December
regulated 2023 2023
Total Total
£'Million £'Million £'Million £'Million £'Million £'Million
Solvency II net assets 601.6 404.8 244.7 1,251.1 1,351.3 1,133.0
MSB 355.0 184.9 - 539.9 527.1 529.5
Management solvency ratio 169% 219%
Solvency II Balance Sheet
Whilst we focus on Solvency II net assets and the MSB to manage solvency, we
provide additional information about the Solvency II free asset position for
information. The presentation starts from the same Solvency II net assets, but
includes recognition of an asset in respect of the expected value of in-force
(VIF) cash flows and a risk margin (RM) reflecting the potential cost to
secure the transfer of the business to a third party.
The Solvency II net assets, VIF and RM comprise the 'own funds', which are
assessed against our regulatory solvency capital requirement (SCR), reflecting
the capital required to protect against a range of '1-in-200' stresses. The
SCR is calculated on the standard formula approach. No allowance has been made
for transitional provisions in the calculation of technical provisions or the
SCR.
An analysis of the Solvency II position for our Group, split by regulated and
non-regulated entities at the year-end,
is presented in the table below:
30 June 2024 Life Other Other Total 30 June 31 December
regulated 2023 2023
Total Total
£'Million £'Million £'Million £'Million £'Million £'Million
Solvency II net assets 601.6 404.8 244.7 1,251.1 1,351.3 1,133.0
Value of in-force (VIF) 2,664.9 - - 2,664.9 5,289.9 2,485.2
Risk margin (320.2) - - (320.2) (1,419.5) (318.4)
Own funds (A) 2,946.3 404.8 244.7 3,595.8 5,221.7 3,299.8
Solvency capital requirement (B) (1,791.1) (122.1) - (1,913.2) (3,461.7) (1,727.7)
Solvency II free assets 1,155.2 282.7 244.7 1,682.6 1,760.0 1,572.1
Solvency ratio (A/B) 164% 332% 188% 151% 191%
-38-
The solvency ratio after payment of the proposed Group interim dividend is
186% at 30 June 2024 (30 June 2023: 148%, 31 December 2023: 188%).
We target a solvency ratio of 130% for St. James's Place UK plc, our largest
insurance subsidiary. The combined solvency ratio for our life companies,
after payment of the year-end intra-Group dividend, is 164% at 30 June 2024
(30 June 2023: 131%, 31 December 2023: 162%).
-39-
Risk and risk management
The Group's approach to risk management continues to provide assurance of
SJP's financial and operational resilience.
The Risk and Risk Management section on pages 74 to 84 of the 2023 Annual
Report and Accounts provides a comprehensive review of the principal risks
facing the business, and the Group's approach to managing these risks. The
section below highlights the key developments in the risk environment since
the year-end Annual Report and Accounts.
Risk environment
Following a prolonged period of high inflation it has now fallen to meet the
Bank of England's 2% long-term target for the first time since 2021. The Bank
of England base rate rose to 5.25% in August of last year and there are
increased expectations of reduction in the second half of 2024. The impact of
the recent change in UK Government remains to be seen, with an Autumn budget
expected to give more clarity on economic impacts of the new government's
policies. However, the key potential financial risks for SJP remain consistent
and arise through:
· increases in non-controllable expenses in particular arising
through complaints management;
· reductions in asset prices;
· changes in new business levels due to factors such as shifting
consumer confidence, market sentiment, government policy changes, reduced
investable income and/or attraction of lower risk savings accounts;
· changes in withdrawal rates to maintain living standards or in
response to consumer confidence and sentiment; and,
· increased financial pressure on Partner businesses, which are
exposed to their own expense increases, including interest rate risk on
borrowing, and pressure on revenue.
We expect and have shown in the stress and scenario testing carried out as
part of our Own Risk and Solvency Assessment (ORSA) and Group dividend
assessments, that the Group continues to remain resilient (from a solvency and
liquidity perspective) to macroeconomic shocks (including inflation, interest
rate shifts and increased withdrawals) as well as more extreme and prolonged
operational events.
In October 2023, SJP announced important changes to its costs and charges for
clients, which are expected to come into force in the second half of 2025.
We believe the change improves our proposition for clients and as such will
have long-term benefits for the business, and it also reflects the Group's
long-term commitment to improving client outcomes. A significant programme of
work is underway involving system developments in 2024. We are conscious of
the implementation risks introduced through this significant change, with the
need for strong change discipline and careful management to deliver this
without undue operational risks that could impact client outcomes and/or
financial risk through additional expenditure.
SJP has several other significant programmes of work underway, most notably
work to manage elevated levels of complaints, primarily from Claims Management
Companies (CMC). This includes the changes made to ensure more consistent,
centralised evidence of the activities of the Partnership with clients to
reduce the risk of clients not receiving an ongoing advice service of value to
them. This also involves reviewing present and historic (since the start of
2018) evidential standards for ongoing advice, switching off ongoing advice
charges for clients where an ongoing annual advice service is not sufficiently
evidenced, and refunding clients for previous charges where evidence of
delivery falls below an acceptable standard. The estimated financial cost of
this was recognised in 2023 year-end accounts based on an informed set of
assumptions, as set out in the 2023 Annual Report and Accounts. No change is
considered necessary to these assumptions or to the disclosures of estimation
uncertainty made at the last year end.
We have embraced the significant regulatory change agenda, including Consumer
Duty which requires continuous monitoring of client outcomes. We have been
working on improving and embedding our governance arrangements, including for
closed products ahead of July 2024. Looking forward, SJP will continue to
focus on embedding activity to monitor and assess client outcomes, and
ensuring good outcomes are central to our SJP strategy.
-40-
The Board has been and continues to be actively involved in defining responses
to macroeconomic trends, regulatory change, emerging risks and threats as they
arise. Timely and targeted risk-based information has been provided to the
Board to continue to support decision-making and help in the understanding of
key issues to ensure risks are mitigated and opportunities are identified. The
risk activity undertaken in the past 12 months demonstrates that SJP continues
to remain resilient to the potential threats it faces.
Principal risks and uncertainties
A summary of the principal risks and uncertainties which could impact the
Group for the remainder of the current financial year have been provided in
the table below.
Risk Risk considerations Mitigations/controls
description
Client proposition Our product proposition fails to meet the needs, objectives and expectations • Investments provide poor returns relative to their benchmarks or • Monitoring of asset allocations across portfolios to consider
of our clients. This includes poor relative investment performance and poor peers and/or do not deliver expected client outcomes. whether they are performing as expected in working towards long-term
product design.
objectives.
• Range of solutions does not align with the product and service
requirements of our current and potential future clients. • Monitoring funds against their objectives mindful of an
appropriate level of investment risk.
• Failure to meet client expectations of a sustainable business, not
least in respect of climate change and responsible investing. • Ongoing assessment of value delivered by funds and portfolios
versus their objectives.
• Where necessary, managers are changed in the most effective way
possible (other actions include reducing fees).
• Continuous review and development of the range of services offered
to clients.
• Engagement with fund managers around principles of responsible
investment.
Conduct We fail to provide quality, suitable advice or service to clients. • Advisers deliver poor-quality or unsuitable advice. • Licensing programme which supports the quality of advice and
service from advisers.
• Failure to evidence the provision of good-quality service and
advice. • Technical support helplines for advisers.
• Increasing complaint volumes. • Client complaint handling process and reporting.
• Evidence of ongoing servicing of clients and charge switch-off
process where ongoing advice is not sufficiently evidenced.
• Review of the provision of ongoing advice services in line with
expectations and acceptable evidential standards, and refund of charges as
appropriate.
• Robust oversight process of the advice provided to clients
delivered by Business Assurance, Field Risk, Advice Guidance and Compliance
Monitoring teams.
• Partner financial monitoring.
Financial We fail to effectively manage the business's finances. • Failure to meet client liabilities. • Policyholder liabilities are fully matched.
• Investment/market risk. • Excess assets generally invested in high-quality, high-liquidity
cash and cash equivalents.
• Credit risk.
• Direct lending to the Partnership is secured.
• Liquidity risk.
• Part-reinsurance of insurance risks.
• Insurance risk.
• Ongoing monitoring of all risk exposures and experience analysis.
• Expense risk.
• Setting and monitoring budgets.
• Monitoring and management of subsidiaries' solvency to minimise
Group interdependency.
Partner proposition Our proposition solution fails to meet the needs, objectives and expectations • Failure to attract new members of the Partnership. • Focus on providing a market-leading Partner proposition.
of our current and potential future advisers.
• Failure to retain advisers. • Adequately skilled and resourced population of supporting field
managers.
• Failure to increase adviser productivity.
• Reliable systems and administration support.
• Available technology falls short of client and adviser
expectations and fails to support growth objectives. • Expanding the Academy capacity and supporting recruits through the
Academy and beyond.
• The Academy does not adequately support growth of the Partnership.
• Market leading support to Partners' businesses.
-41-
Risk Risk considerations Mitigations/controls
description
People We are unable to attract, retain and organise the right people to run the • Failure to attract and retain personnel with key skills. • Measures to maintain a stable population of employees, including
business.
competitive total reward packages.
• Poor employee engagement.
• Monitoring of employee engagement and satisfaction.
• Failure to create an inclusive and diverse business.
• Employee wellbeing is supported through various initiatives,
• Poor employee wellbeing. benefits and services.
• Our culture of supporting social value is eroded. • Corporate incentives to encourage social value engagement,
including matching of employee giving to the Charitable Foundation.
• Whistleblowing hotline.
Regulatory We fail to meet current, changing or new regulatory and legislative • Failure to comply with existing regulations. • Compliance function provides expert guidance and carries out
expectations.
monitoring work, particularly over highly regulated areas.
• Failure to comply with changing regulation or respond to changes
in regulatory expectations. • Maintenance of appropriate solvency capital buffers, and
continuous monitoring of solvency experience.
• Inadequate internal controls.
• Clear accountabilities and understanding of responsibilities
across the business.
• Fostering of positive regulatory relationships.
Security and resilience We fail to adequately secure our physical assets, systems and/or sensitive • Internal or external fraud. • Business continuity planning for SJP and its key suppliers.
information, or to deliver critical business services to our clients.
• Core system failure. • Focus on building and strengthening operational resilience
capabilities and undertaking robust identification, assessment and testing of
• Corporate, Partnership or third-party information security and important business services.
cyber risks.
• Mandatory 'Cyber Essentials Plus' accreditation for Partner
• Disruption in key business services to our clients. practices or use of an SJP 'Device as a Service' solution.
• Clear cyber strategy and data protection roadmap for continuous
development.
• Data leakage detection technology and incident reporting systems.
• Identification, communication, and response planning for the event
of cyber crime.
• Group Executive Committee level cyber scenario work to test
strategic response.
• Internal awareness programmes.
Strategy, change and reputation Challenge from competitors and impact of reputational damage. • Unnecessary delays/errors caused by failures in change delivery. • Robust change governance and change management practices,
including testing.
• Increased competitive pressure from traditional and disruptive
(non-traditional) competitors. • Clear demonstration of value delivered to clients through advice,
service and products.
• Cost and charges pressure.
• Investment in improving positive brand recognition.
• Negative media coverage.
• Ongoing development of client and Partner propositions
• Failure to meet our commitments to net zero.
• Proactive engagement with external agencies including media,
industry groups, shareholders and regulators.
• Clear interim targets to be tracked towards meeting our long-term
net zero targets.
-42-
Risk Risk considerations Mitigations/controls
description
Third parties Third-party outsourcers' activities impact our performance and risk • Operational failures by material outsourcers. • Oversight regime in place to identify prudent steps to reduce risk
management.
of operational failures by material third-party providers.
• Failure of critical services. Significant areas include:
• Ongoing monitoring, including assessment of operational
o investment administration. resilience.
o fund management. • Due diligence on key suppliers.
o custody. • Oversight of service levels of our third-party administration
provider.
o policy administration.
o cloud services.
-43-
Condensed Consolidated Half-Year Financial Statements prepared under
International Financial Reporting Standards (IFRS) as adopted by the United
Kingdom (UK)
-44-
Condensed Consolidated Statement of Comprehensive Income
Note Six months Six months Year ended
ended ended 31 December
30 June 2024 30 June 2023(1) 2023
£'Million £'Million £'Million
Fee and commission income 4 1,604.4 1,351.7 2,788.9
Expenses(1) (1,097.5) (1,007.9) (2,433.3)
Investment return(1) 5 14,162.4 6,629.5 16,197.6
Movement in investment contract benefits (14,102.2) (6,595.8) (16,130.9)
Insurance revenue 10.6 12.6 25.3
Insurance service expenses (16.3) (12.3) (24.5)
Net reinsurance income/(expense) 2.7 (3.3) (5.0)
Insurance service result (3.0) (3.0) (4.2)
Net insurance finance income/(expense) 3.2 (0.3) (10.0)
Other finance income(1) 9.7 10.8 31.5
Profit before tax 3 577.0 385.0 439.6
Tax attributable to policyholders' returns 6 (351.9) (169.3) (444.1)
Profit/(loss) before tax attributable to shareholders' returns 225.1 215.7 (4.5)
Total tax charge 6 (411.9) (223.3) (449.5)
Less: tax attributable to policyholders' returns 6 351.9 169.3 444.1
Tax attributable to shareholders' returns 6 (60.0) (54.0) (5.4)
Profit/(loss) and total comprehensive income for the year 165.1 161.7 (9.9)
Profit attributable to non-controlling interests - 0.1 0.2
Profit/(loss) attributable to equity shareholders 165.1 161.6 (10.1)
Profit/(loss) and total comprehensive income for the year 165.1 161.7 (9.9)
Pence Pence Pence
Basic earnings per share 15 30.1 29.6 (1.8)
Diluted earnings per share 15 29.9 29.5 (1.8)
(1) Restated to reclassify Other finance income which had been misclassified.
For the six months ended 30 June 2023 the restatement comprised a decrease of
£7.0 million in expenses, decrease of £17.8 million in investment return and
a corresponding net £10.8 million Other finance income recognised resulting
in a net nil impact on the profit for the period.
The results relate to continuing operations.
The Notes and information on pages 48 to 84 form part of these Condensed
Consolidated Financial Statements.
-45-
Condensed Consolidated Statement of Changes in Equity
Equity attributable to owners of the Parent Company
Share capital Share premium Shares in trust reserve Misc. reserves Retained earnings Total Non-controlling interests Total
equity
Note £'Million £'Million £'Million £'Million £'Million £'Million £'Million £'Million
At 1 January 2023 81.6 227.8 (4.1) 2.5 963.8 1,271.6 0.2 1,271.8
Profit and total comprehensive income for the period - - - - 161.6 161.6 0.1 161.7
Dividends 15 - - - - (203.1) (203.1) (0.2) (203.3)
Exercise of options 15 0.7 5.7 - - - 6.4 - 6.4
Consideration paid for own shares - - (0.5) - - (0.5) - (0.5)
Shares sold during the period - - 3.8 - (3.8) - - -
Retained earnings credit in respect of share option charges - - - - 9.9 9.9 - 9.9
At 30 June 2023 82.3 233.5 (0.8) 2.5 928.4 1,245.9 0.1 1,246.0
At 1 January 2024 82.3 233.9 (0.7) 2.5 665.4 983.4 0.1 983.5
Profit and total comprehensive income for the period - - - - 165.1 165.1 - 165.1
Dividends 15 - - - - (43.8) (43.8) (0.1) (43.9)
Exercise of options 15 - - - - - - - -
Consideration paid for own shares - - (3.6) - - (3.6) - (3.6)
Shares sold during the period - - - - - - - -
Retained earnings credit in respect of share option charges - - - - 2.1 2.1 - 2.1
At 30 June 2024 82.3 233.9 (4.3) 2.5 788.8 1,103.2 - 1,103.2
Miscellaneous reserves represent other non-distributable reserves.
-46-
Condensed Consolidated Statement of Financial Position
Note 30 June 30 June
2024 2023 31 December
2023
£'Million £'Million £'Million
Assets
Goodwill 7 33.6 33.6 33.6
Deferred acquisition costs 7 295.0 321.4 304.4
Intangible assets
- Purchased value of in-force business 7 6.4 9.6 8.0
- Computer software 7 21.2 32.7 28.0
Property and equipment, including leased assets 147.9 156.8 153.1
Deferred tax assets 6 13.2 6.4 36.5
Investment in associates 10.4 4.7 10.2
Reinsurance assets 15.9 55.3 13.0
Other receivables 9 4,023.8 3,177.0 2,997.4
Investments
- Investment property 8 1,039.5 1,191.9 1,110.3
- Equities 8 125,349.2 110,771.4 116,761.5
- Fixed income securities 8 25,185.5 27,886.4 27,244.7
- Investment in Collective Investment Schemes 8 21,432.2 7,174.1 13,967.5
- Derivative financial instruments 8 3,828.0 4,149.6 3,420.6
Cash and cash equivalents 6,504.8 6,684.0 6,204.3
Total assets 187,906.6 161,654.9 172,293.1
Liabilities
Borrowings 12 490.6 189.2 251.4
Deferred tax liabilities 6 565.2 219.5 411.7
Insurance contract liabilities 517.4 475.3 496.0
Deferred income 7 477.9 513.6 491.5
Other provisions 11 508.1 55.5 500.1
Other payables 10 4,080.8 2,670.2 2,388.1
Investment contract benefits 8 133,823.5 113,924.8 123,149.8
Derivative financial instruments 8 2,807.5 3,490.4 3,073.0
Net asset value attributable to unit holders 8 43,458.0 38,843.8 40,536.5
Income tax liabilities 74.4 26.6 11.5
Total liabilities 186,803.4 160,408.9 171,309.6
Net assets 1,103.2 1,246.0 983.5
Shareholders' equity
Share capital 15 82.3 82.3 82.3
Share premium 233.9 233.5 233.9
Shares in trust reserve (4.3) (0.8) (0.7)
Miscellaneous reserves 2.5 2.5 2.5
Retained earnings 788.8 928.4 665.4
Equity attributable to owners of the Parent Company 1,103.2 1,245.9 983.4
Non-controlling interests - 0.1 0.1
Total equity 1,103.2 1,246.0 983.5
Pence Pence Pence
Net assets per share 201.1 227.1 179.3
-47-
Condensed Consolidated Statement of Cash Flows
Note Six months Six months Year ended
ended ended 31 December
30 June 2024 30 June 2023(1) 2023(1)
£'Million £'Million £'Million
Cash flows from operating activities
Cash generated from operations(1) 14 187.5 476.1 53.4
Interest received(1) 113.3 76.2 168.6
Interest paid (16.2) (7.0) (17.3)
Income taxes paid 6 (162.1) (99.1) (179.4)
Contingent consideration paid - - (6.7)
Net cash inflow from operating activities 122.5 446.2 18.6
Cash flows from investing activities
Payments for property and equipment (3.5) (4.5) (11.2)
Payment of software development costs 7 (3.0) (6.7) (10.9)
Payments for acquisition of subsidiaries and other business combinations, net - - (5.4)
of cash acquired
Payments for associates - (3.3) (8.8)
Proceeds from sale of shares in subsidiaries and other business combinations, - - 1.1
net of cash disposed
Net cash outflow from investing activities (6.5) (14.5) (35.2)
Cash flows from financing activities
Proceeds from the issue of share capital and exercise of options - 6.4 6.8
Consideration paid for own shares (3.6) (0.5) (0.5)
Proceeds from borrowings 412.7 58.1 233.1
Repayment of borrowings (173.6) (33.0) (144.8)
Principal elements of lease payments (6.7) (7.9) (14.2)
Dividends paid to Company's shareholders 15 (43.8) (203.1) (289.6)
Dividends paid to non-controlling interests in subsidiaries (0.1) (0.2) (0.3)
Net cash inflow/(outflow) from financing activities 184.9 (180.2) (209.5)
Net increase/(decrease) in cash and cash equivalents 300.9 251.5 (226.1)
Cash and cash equivalents at beginning of period 6,204.3 6,432.8 6,432.8
Effects of exchange rate changes on cash and cash equivalents (0.4) (0.3) (2.4)
Cash and cash equivalents at end of period 6,504.8 6,684.0 6,204.3
(1) Restated to reclassify money market fund interest from cash generated from
operations to interest received (six months ended 30 June 2023: £28.1
million, year ended 31 December 2023: £60.6 million), which had been
misclassified.
-48-
Notes to the Financial Statements
1. Basis of preparation
This condensed set of Consolidated Half-Year Financial Statements for the six
months ended 30 June 2024, which comprise the Half-Year Financial Statements
of St. James's Place plc (the Company) and its subsidiaries (together referred
to as the 'Group'), has been prepared in accordance with the Disclosure
Guidance and Transparency Rules sourcebook of the Financial Conduct Authority
and with IAS 34 'Interim Financial Reporting', an International Financial
Reporting Standard (IFRS) as adopted by the United Kingdom (UK). The Condensed
Consolidated Half-Year Financial Statements should be read in conjunction with
the Annual Financial Statements for the year ended 31 December 2023, which
have been prepared in accordance with UK-adopted International Accounting
Standards and with the requirements of the Companies Act 2006.
Going concern
The Group's business activities, together with the factors likely to affect
its future development, performance and position, are set out in the Chief
Executive's report and the Chief Financial Officer's report. The financial
performance and financial position of the Group are described in the Financial
Review.
The Board has considered the ongoing financial pressures faced by clients
which prevailed during the period, noting that the business continued to be
successful in this environment. Notwithstanding this challenge, the Group
attracted gross inflows of £8.5 billion and net inflows of £1.9 billion.
This, along with the performance of our key outsource providers monitored
through our ongoing oversight, supports its view that the business will
continue to remain operationally resilient.
Forecasts have been considered and there are no material adverse changes to
the approach and conclusions stated in the Group Annual Report and Financial
Statements for 2023, a copy of which is available on the Group's website,
www.sjp.co.uk. (https://www.sjp.co.uk.)
As a result of its review, the Board believes that the Group will continue to
operate, with neither the intention nor the necessity of liquidation, ceasing
trading or seeking protection from creditors pursuant to laws or regulations,
for a period of at least 12 months from the date of approval of the Group
Interim Financial Statements, and that it is appropriate to prepare them on a
going concern basis.
2. Significant accounting policies
(a) Statement of compliance
These Condensed Consolidated Half-Year Financial Statements were prepared and
approved by the Directors in accordance with International Financial Reporting
Standards as adopted by the UK.
There were no new or amended IFRS standards, effective for periods beginning 1
January 2024.
In preparing these Condensed Consolidated Half-Year Financial Statements the
significant judgements made by management in applying the Group's accounting
policies and the key sources of estimation uncertainty were the same as those
applied to the Consolidated Financial Statements for the year ended 31
December 2023, except for:
Determining the value of a complaints provision
In accordance with IAS 37 the Group has continued to quantify the complaints
provision as the best estimate of the amount necessary to settle the present
obligation, taking into account the associated risks and uncertainties. The
key estimate in assessing the value of the provision is the assessment of the
proportion of cases requiring redress.
Further details of the provision, including sensitivity analysis, are set out
in Note 11.
-49-
(b) New and amended accounting standards not yet effective
As at 30 June 2024, the following new and amended standards, which are
relevant to the Group but have not been applied in the Financial Statements,
were in issue but are not yet effective. All of the below are yet to be
endorsed by the UK endorsement board.
· Amendments to the Classification and Measurement of Financial
Instruments - Amendments to IFRS 9 and IFRS 7;
· IFRS 18 Presentation and Disclosure in Financial Statements; and
· IFRS 19 Subsidiaries without Public Accountability: Disclosures.
The Group is currently assessing the impact that the adoption of the above
standards and amendments will have on the Group's results reported within the
Financial Statements. The only one expected to have a significant impact on
the Group's Financial Statements is IFRS 18 Presentation and Disclosure in
Financial Statements. Further information on this standard is given below.
IFRS 18 Presentation and Disclosure in Financial Statements
The IASB issued IFRS 18 Presentation and Disclosure in Financial Statements on
9 April 2024 which will replace IAS 1. IFRS 18 introduces three sets of new
requirements to improve companies' reporting of financial performance and
gives investors better basis for analysing and comparing companies:
· Improved comparability in the income statement.
· Enhanced transparency of management-defined performance measures;
and
· More useful grouping of information in the Financial Statements.
Management are currently assessing the impacts of adopting the new standard
however it is only expected to have an impact on the presentation and
disclosure of the Financial Statements and is not expected to have an impact
on recognition and measurement. The effective date of the standard is 1
January 2027.
3. Segment reporting
IFRS 8 Operating Segments requires operating segments to be identified on the
basis of internal reports about components of the Group that are regularly
reviewed by the Board, in order to allocate resources to each segment and
assess its performance.
The Group's only reportable segment under IFRS 8 is a 'wealth management'
business - providing support to our clients through our network of advisers
providing valuable face-to-face financial advice, and financial solutions
including (but not limited to) wealth management products manufactured in the
Group, such as insurance bonds, pensions, unit trust and ISA investments, and
a DFM service.
Separate geographical segmental information is not presented since the Group
does not segment its business geographically. Most of its customers are based
in the United Kingdom, as is management of the assets. In particular, the
operation based in Asia is not yet sufficiently material for separate
consideration.
Segment revenue
Revenue received from fee and commission income is set out in Note 4, which
details the different types of revenue received from our wealth management
business.
Segment profit
Two separate measures of profit are monitored by the Board. These are the
post-tax Underlying cash result and the pre-tax European Embedded Value (EEV)
profit.
-50-
Underlying cash result
The measure of cash profit monitored by the Board is the post-tax Underlying
cash result. For further information please refer to the glossary of APMs.
More detail is provided in Section 2.2 of the Financial Review.
The Cash result should not be confused with the IFRS Condensed Consolidated
Statement of Cash Flows, which is prepared in accordance with IAS 7.
Six months Six months Year ended
ended ended 31 December
30 June 2024 30 June 2023 2023
£'Million £'Million £'Million
Underlying cash result after tax 205.2 207.1 392.4
Equity-settled share-based payments (2.1) (9.9) (5.4)
Deferred tax impacts (9.2) (12.1) (24.9)
Ongoing Service Evidence provision - - (323.7)
Impact in the period of DAC/DIR/PVIF 2.6 0.3 3.1
Impact of policyholder tax asymmetry (see Note 4) 1 (33.4) (17.5) (44.4)
Other 2.0 (6.2) (7.0)
IFRS profit/(loss) after tax 165.1 161.7 (9.9)
Shareholder tax 60.0 54.0 5.4
Profit/(loss) before tax attributable to shareholders' returns 225.1 215.7 (4.5)
Tax attributable to policyholder returns 351.9 169.3 444.1
IFRS profit before tax 577.0 385.0 439.6
(1) Further information on policyholder tax asymmetry can also be found in
Section 2.1 of the Financial Review.
-51-
EEV operating profit/(loss) after exceptional item before tax
EEV operating profit is monitored by the Board. The components of the EEV
operating profit are included in more detail in the Financial Review section.
Six months Six months Year ended
ended ended 31 December
30 June 2024 30 June 2023 2023
£'Million £'Million £'Million
EEV operating profit/(loss) after exceptional item before tax 793.1 (119.1) (1,891.6)
Investment return variance 437.9 157.6 501.7
Economic assumption changes (2.0) 37.8 2.5
EEV profit/(loss) before tax 1,229.0 76.3 (1,387.4)
Adjustments to IFRS basis:
Deduct: amortisation of purchased value of in-force business (1.6) (1.6) (3.2)
Movement of balance sheet life value of in-force business (net of tax) (153.4) 251.6 2,769.6
Movement of balance sheet unit trust and DFM value of in-force business (net (360.5) (23.4) 226.0
of tax)
Movement of balance sheet other value of in-force business (net of tax) (326.5) - (1,918.9)
Tax on movement in value of in-force business (161.9) (87.2) 309.4
Profit/(loss) before tax attributable to shareholders' returns 225.1 215.7 (4.5)
Tax attributable to policyholder returns 351.9 169.3 444.1
IFRS profit before tax 577.0 385.0 439.6
The movement in life, unit trust and DFM, and other value of in-force business
is the difference between the opening and closing discounted value of the
profits that will emerge from the in-force book over time, after adjusting for
DAC and DIR impacts which are already included under IFRS.
-52-
Segment assets
Funds under management (FUM)
FUM, as reported in Section 1 of the Financial Review, is the measure of
segment assets which is monitored on a monthly basis by the Board.
30 June 30 June 31 December
2024 2023 2023
£'Million £'Million £'Million
Investment 37,900.0 34,360.0 35,990.0
Pension 96,260.0 79,870.0 87,320.0
UT/ISA and DFM 47,700.0 43,290.0 44,890.0
Total FUM 181,860.0 157,520.0 168,200.0
Exclude client and third-party holdings in non-consolidated unit trusts and (4,403.1) (4,367.4) (4,360.4)
DFM
Other 4,866.5 4,287.4 3,968.2
Gross assets held to cover unit liabilities 182,323.4 157,440.0 167,807.8
IFRS intangible assets 377.0 452.9 399.6
Shareholder gross assets 5,206.2 3,762.0 4,085.7
Total assets 187,906.6 161,654.9 172,293.1
Other represents liabilities included within the underlying unit trusts. The
unit trust liabilities form a reconciling item between total FUM, which is
reported net of these liabilities, and total assets, which exclude these
liabilities.
More detail on IFRS intangible assets and shareholder gross assets is provided
in Section 2.2 of the Financial Review.
-53-
4. Fee and commission income
Six months Six months Year ended
ended ended 31 December
30 June 2024 30 June 2023 2023
£'Million £'Million £'Million
Advice charges (post-RDR) 528.1 493.7 954.3
Third-party fee and commission income 62.7 65.9 132.4
Wealth management fees 577.6 518.7 1,065.0
Investment management fees 37.1 36.9 68.4
Fund tax deductions 351.9 169.3 444.1
Policyholder tax asymmetry (33.4) (17.5) (44.4)
Discretionary fund management fees 11.8 12.0 23.6
Fee and commission income before DIR amortisation 1,535.8 1,279.0 2,643.4
Amortisation of DIR 68.6 72.7 145.5
Total fee and commission income 1,604.4 1,351.7 2,788.9
Advice charges are received from clients for the provision of initial and
ongoing advice in relation to a post-Retail Distribution Review (RDR)
investment into a St. James's Place or third-party product.
Third-party fee and commission income is received from the product provider
where an investment has been made into a third-party product.
Wealth management fees represent charges levied on manufactured business.
Investment management fees are received from clients for the provision of all
aspects of investment management. Broadly, investment management fees are
matched by investment management expenses.
Fund tax deductions represent amounts credited to the life insurance business
to match policyholder tax credits or charges. Market conditions will impact
the level of fund tax deductions. This may lead to significant year on year
movements when markets are volatile.
Life insurance tax incorporates a policyholder tax element, and the Financial
Statements of a life insurance group need to reflect the liability to HMRC,
with the corresponding deductions incorporated into policy charges ('Fund tax
deductions' in the table above). The tax liability to HMRC is assessed using
IAS 12 Income Taxes, which does not allow discounting, whereas the policy
charges are designed to ensure fair outcomes between clients and so reflect a
wide range of possible outcomes. This gives rise to different assessments of
the current value of future cash flows and hence an asymmetry in the IFRS
Condensed Consolidated Statement of Financial Position between the deferred
tax position and the offsetting client balance. The net tax asymmetry balance
reflects a temporary position, and in the absence of market volatility we
expect it will unwind as future cash flows become less uncertain and are
ultimately realised.
Market conditions and other macroeconomic factors, such as interest rate
changes will impact the level of asymmetry experienced in a year and may be
significant where there is volatility. Market growth experienced in 2024 has
resulted in a negative movement impacting both profit before shareholder tax
and profit after tax. For the six months ended 30 June 2023, significantly
lower market growth than 2024, coupled with interest rate increases, also
resulted in a negative movement impacting both profit before shareholder tax
and profit after tax albeit at a lower level.
Discretionary fund management fees are received from clients for the provision
of DFM services.
Where an investment has been made in a St. James's Place product, the initial
product charge is deferred and recognised as a deferred income liability. This
liability is extinguished, and income recognised, over the expected life of
the investment. The income is the amortisation of DIR in the table above.
-54-
5. Investment return
The majority of the business written by the Group is unit-linked investment
business, and so investment contract benefits are measured by reference to the
underlying net asset value of the Group's unitised investment funds. As a
result, investment return on the unitised investment funds and the movement in
investment contract benefits are linked.
Investment return
Six months Six months Year ended
ended ended 31 December
30 June 2024 30 June 2023(1) 2023
£'Million £'Million £'Million
Attributable to unit-linked investment contract benefits:
Rental income 35.4 35.4 69.9
(Loss)/gain on revaluation of investment properties (22.8) 5.2 (44.9)
Net investment return on financial instruments classified as fair value 9,728.7 4,950.7 13,013.4
through profit and loss
9,741.3 4,991.3 13,038.4
Income attributable to third-party holdings in unit trusts 4,360.9 1,604.5 3,092.5
Investment return on net assets held to cover unit liabilities 14,102.2 6,595.8 16,130.9
Net investment return on financial instruments classified as fair value 59.5 27.5 60.2
through profit and loss
Net investment return on financial instruments held at amortised cost(1) 0.7 6.2 6.5
Investment return on shareholder assets 60.2 33.7 66.7
Total investment return 14,162.4 6,629.5 16,197.6
(1) Restated to reclassify interest received on business loans to Partners of
£13.4 million and shareholders cash and cash equivalents of £4.4 million to
Other finance income.
Included in the net investment return on financial instruments classified as
fair value through profit and loss, within investment return on net assets
held to cover unit liabilities, is dividend income of £960.8 million (six
months ended 30 June 2023: £781.8 million, year ended 31 December 2023:
£1,499.1 million).
-55-
6. Income and deferred taxes
Tax for the year
Six months Six months Year ended
ended ended 31 December
30 June 2024 30 June 2023 2023
£'Million £'Million £'Million
Current tax
UK corporation tax
- Current year charge 241.5 157.5 222.8
- Adjustment in respect of prior year (0.1) - (0.5)
Overseas taxes
- Current year charge 12.3 3.2 2.9
- Adjustment in respect of prior year (0.6) - 0.1
253.1 160.7 225.3
Deferred tax
Unrealised capital gains in unit-linked funds 151.9 53.7 243.4
Unrelieved expenses
- Utilisation in the year 4.5 5.6 11.3
Capital losses
- Utilisation in the year - 2.1 2.2
- Adjustment in respect of prior year - - (0.1)
DAC, DIR and PVIF (2.4) (3.9) (7.8)
Share-based payments 0.6 3.6 8.1
Renewal income assets 1.8 (0.6) (1.4)
Fixed asset timing differences 0.3 1.2 2.6
UK trading losses - - (36.1)
Other temporary differences 1.7 0.6 1.8
Overseas losses - (0.1) 0.3
Adjustments in respect of prior periods 0.4 0.4 (0.1)
158.8 62.6 224.2
Total tax charge for the year 411.9 223.3 449.5
Attributable to:
- policyholders 351.9 169.3 444.1
- shareholders 60.0 54.0 5.4
411.9 223.3 449.5
( )
-56-
The prior year adjustment of £0.7 million credit in current tax above
represents £nil in respect of policyholder tax (six months ended 30 June
2023: £nil, year ended 31 December 2023: £1.4 million credit) and £0.7
million credit in respect of shareholder tax (six months ended 30 June 2023:
£nil, year ended 31 December 2023: £1.0 million charge). The prior year
adjustment of £0.4 million charge in deferred tax above represents £nil in
respect of policyholder tax (six months ended 30 June 2023: £nil, year ended
31 December 2023: £nil) and a charge of £0.4 million in respect of
shareholder tax (six months ended 30 June 2023: £0.4 million charge, year
ended 31 December 2023: £0.2 million credit).
In arriving at the profit/(loss) before tax attributable to shareholders'
return, it is necessary to estimate the analysis of the total tax charge
between that payable in respect of policyholders and that payable by
shareholders. Shareholder tax is estimated by making an assessment of the
effective rate of tax that is applicable to the shareholders on the profits
attributable to shareholders. This is calculated by applying the appropriate
effective corporate tax rates to the shareholder profits. The remainder of
the tax charge represents tax on policyholders' investment returns. This
calculation method is consistent with the legislation relating to the
calculation of tax on shareholder profits.
Reconciliation of tax charge to expected tax
Six months Six months Year ended
ended ended 31 December
30 June 2024 30 June 2023 2023
£'Million £'Million £'Million
Profit before tax 577.0 385.0 439.6
Tax attributable to policyholders' returns (351.9) (169.3) (444.1)
Profit/(loss) before tax attributable to shareholders' returns 225.1 215.7 (4.5)
Shareholder tax charge/(credit) at corporate tax rate of 25.0% (2023: 23.5%) 56.3 25.0% 50.7 23.5% (1.1) 23.5%
Adjustments:
Lower rates of corporation tax in overseas subsidiaries (0.9) (0.4%) (0.7) (0.3%) (1.8) 39.4%
Expected shareholder tax 55.4 24.6% 50.0 23.2% (2.9) 62.9%
Effects of:
Non-taxable income (0.2) (0.8) (2.5)
Adjustment in respect of prior year
- Current tax (0.7) - 1.0
- Deferred tax 0.4 0.4 (0.2)
Differences in accounting and tax bases in relation to employee share schemes - (1.7) 0.3
Impact of difference in tax rates between current and deferred tax - - (2.3)
Disallowable expenses 3.8 1.2 4.3
Provision for future liabilities 0.2 3.7 5.1
Tax losses not recognised 0.9 1.1 1.9
Other 0.2 0.1 0.7
4.6 2.1% 4.0 1.8% 8.3 (182.9%)
Shareholder tax charge 60.0 26.7% 54.0 25.0% 5.4 (120.0%)
Policyholder tax charge 351.9 169.3 444.1
Total tax charge for the year 411.9 223.3 449.5
( )
-57-
Tax calculated on profit before tax at 25% (2023: 23.5%) would amount to a
charge of £144.3 million (six months to 30 June 2023: charge of £90.5
million, year to 31 December 2023: charge of £103.3 million). The difference
of £267.6 million (six months to 30 June 2023: £132.8 million, year to 31
December 2023: £346.2 million) between this number and the total tax charge
of £411.9 million (six months to 30 June 2023: £223.3 million charge, year
to 31 December 2023: £449.5 million charge) is made up of the reconciling
items above which total a charge of £3.7 million (six months to 30 June 2023:
£3.3 million charge, year to 31 December 2023: £6.5 million charge) and the
effect of the apportionment methodology on tax applicable to policyholder
returns of £263.9 million (six months to 30 June 2023: £129.5 million
credit, year to 31 December 2023: £339.7 million credit).
Tax paid in the year
Six months Six months Year ended
ended ended 31 December
30 June 2024 30 June 2023 2023
£'Million £'Million £'Million
Current tax charge for the period 253.1 160.7 225.3
(Payments to be made) / Refunds due to be received in future years in respect (91.0) (3.8) 1.7
of current year
Refunds received in current year in respect of prior years (0.2) (57.8) (39.7)
Other 0.2 - (7.9)
Tax paid 162.1 99.1 179.4
Tax paid can be analysed as:
- Taxes paid in UK 95.0 92.0 156.4
- Taxes paid in overseas jurisdictions 0.7 0.4 6.2
- Withholding taxes suffered on investment income received 66.4 6.7 16.8
Total 162.1 99.1 179.4
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Deferred tax balances
Deferred tax assets
As at Credit/(charge) to the Statement of Comprehensive Income Reanalysis to deferred tax liabilities As at 30 June 2024 Expected utilisation period
1 January
2024
Utilised and created in year Total credit/ Transfers As at 30 June 2024
(charge)
£ Million £ Million £ Million £ Million £ Million £ Million
Deferred acquisition costs (DAC) (18.6) 0.5 0.5 (0.5) - (18.6) 14 years
Deferred income (DIR) 35.1 (1.8) (1.8) - - 33.3 14 years
Fixed asset temporary differences 1.3 (0.7) (0.7) - - 0.6 6 years
Renewal income assets (19.9) (1.8) (1.8) - - (21.7) 20 years
Share-based payments 4.8 (0.6) (0.6) 0.1 - 4.3 3 years
UK trading losses 36.1 - - - (18.0) 18.1 0.5 years
Other temporary differences (2.3) (1.6) (1.6) 1.1 - (2.8) -
Total 36.5 (6.0) (6.0) 0.7 (18.0) 13.2
As at Credit/(charge) to the Statement of Comprehensive Income Impact of acquisitions Reanalysis to deferred tax liabilities As at 30 June 2023 Expected utilisation period
1 January
2023
Utilised and created in year Total credit/ As at 30 June 2023
(charge)
£ Million £ Million £ Million £ Million £ Million £ Million
Deferred acquisition costs (DAC) (20.4) 0.7 0.7 - (0.5) (20.2) 14 years
Deferred income (DIR) 37.7 (1.2) (1.2) - - 36.5 14 years
Fixed asset temporary differences 3.9 (1.6) (1.6) - - 2.3 6 years
Renewal income assets (20.7) 0.6 0.6 (0.1) - (20.2) 20 years
Share-based payments 12.9 (3.6) (3.6) - - 9.3 3 years
Other temporary differences (0.9) (0.9) (0.9) - 0.5 (1.3) -
Total 12.5 (6.0) (6.0) (0.1) - 6.4
-59-
Deferred tax liabilities
As at Credit/(charge) to the Statement of Comprehensive Income Reanalysis to deferred tax liabilities As at 30 June 2024 Expected utilisation period
1 January
2024
Utilised and created in year Total credit/(charge) As at 30 June 2024
£ Million £ Million £ Million £ Million £ Million
Deferred acquisition costs (DAC) 12.3 (3.3) (3.3) (0.5) 8.5 14 years
Purchased value of in-force business (PVIF) 2.0 (0.4) (0.4) - 1.6 2 years
Share based payments - - - 0.1 0.1 3 years
Unrealised capital gains on life insurance (BLAGAB) assets 423.4 151.9 151.9 6 years
backing unit liabilities
- 575.3
Unrelieved expenses on life insurance business (26.2) - (21.7) 5 years
4.5 4.5
Other temporary differences 0.2 0.1 0.1 1.1 1.4 -
Total 411.7 152.8 152.8 0.7 565.2
As at Credit/(charge) to the Statement of Comprehensive Income Reanalysis to deferred tax liabilities As at 30 June 2023 Expected utilisation period
1 January
2023
Utilised and created in year Total credit/(charge) As at 30 June 2023
£ Million £ Million £ Million £ Million £ Million
Capital losses (2.1) 2.1 2.1 - - -
(available for future relief)
Deferred acquisition costs (DAC) 20.2 (4.1) (4.1) (0.5) 15.6 14 years
Purchased value of in-force business (PVIF) 2.8 (0.4) (0.4) - 2.4 2.5 years
Unrealised capital gains on life insurance (BLAGAB) assets backing unit 180.1 53.7 53.7 233.8 6 years
liabilities
-
Unrelieved expenses on life insurance business (37.5) 5.6 5.6 - (31.9) 6 years
Other temporary differences (0.6) (0.3) (0.3) 0.5 (0.4) -
Total 162.9 56.6 56.6 - 219.5
-60-
Appropriate investment income, gains or profits are expected to arise against
which the tax assets can be utilised. Whilst the actual rates of utilisation
will depend on business growth and external factors, particularly investment
market conditions, they have been tested for sensitivity to experience and are
resilient to a range of reasonably foreseeable scenarios.
At the reporting date there were unrecognised deferred tax assets of £18.2
million (30 June 2023: £16.2 million, 31 December 2023: £17.3 million) in
respect of £107.6 million (30 June 2023: £95.5 million, 31 December 2023:
£101.9 million) of losses in companies where appropriate profits are not
considered probable in the forecast period. These losses primarily relate to
our Asia-based businesses and can be carried forward indefinitely.
UK Corporation Tax Rate
The main rate of corporation tax in the UK was increased from 19% to 25% on 1
April 2023.
Pillar Two - Global minimum tax
With effect from 1 January 2024 the SJP Group is subject to the Global minimum
tax rules introduced by the Organisation for Economic Co-operation and
Development (OECD) and adopted into local legislation of various territories
in which the SJP Group operates; including the UK and Ireland. The Group is
subject to a domestic top-up tax in relation to its operations in Ireland,
where the statutory corporate tax rate is 12.5%. This increases the
effective tax rate for the profits arising in Ireland to 15% and at the half
year an adjustment of £0.3 million additional Irish tax has been posted in
this respect. It is not expected that a Pillar Two adjustment will be required
in respect of any other SJP location.
-61-
7. Goodwill, intangible assets, deferred acquisition costs and deferred income
Goodwill Purchased Computer DAC DIR
value of in-force software and
business other specific
software
developments
£'Million £'Million £'Million £'Million £'Million
Cost
At 1 January 2023 36.6 73.4 70.9 1,050.6 (1,635.0)
Additions - - 6.7 20.9 (55.9)
Disposals - - (15.4) (69.4) 45.0
At 30 June 2023 36.6 73.4 62.2 1,002.1 (1,645.9)
Additions - - 4.2 19.0 (50.7)
Disposals _ - (0.8) (75.3) 60.3
At 31 December 2023 36.6 73.4 65.6 945.8 (1,636.3)
Additions - - 3.0 22.3 (55.0)
Disposals - - - (89.4) 72.2
At 30 June 2024 36.6 73.4 68.6 878.7 (1,619.1)
Accumulated amortisation
At 1 January 2023 3.0 62.2 37.6 714.0 (1,104.6)
Charge for the period - 1.6 7.3 36.1 (72.7)
Eliminated on disposal - - (15.4) (69.4) 45.0
At 30 June 2023 3.0 63.8 29.5 680.7 (1,132.3)
Charge for the period - 1.6 8.1 36.0 (72.8)
Eliminated on disposal - - - (75.3) 60.3
At 31 December 2023 3.0 65.4 37.6 641.4 (1,144.8)
Charge for the period - 1.6 9.8 31.7 (68.6)
Eliminated on disposal - - - (89.4) 72.2
At 30 June 2024 3.0 67.0 47.4 583.7 (1,141.2)
Carrying value
At 30 June 2023 33.6 9.6 32.7 321.4 (513.6)
At 31 December 2023 33.6 8.0 28.0 304.4 (491.5)
At 30 June 2024 33.6 6.4 21.2 295.0 (477.9)
Outstanding amortisation period
At 30 June 2023 n/a 2.5 years 5 years 14 years 6-14 years
At 31 December 2023 n/a 2 years 5 years 14 years 6-14 years
At 30 June 2024 n/a 1.5 years 5 years 14 years 6-14 years
( )
-62-
Purchased value of in-force business/DAC/Computer software
Amortisation is charged to expenses in the IFRS Condensed Consolidated
Statement of Comprehensive Income. Amortisation profiles are reassessed
annually.
DIR
Amortisation is credited within fee and commission income in the IFRS
Condensed Consolidated Statement of Comprehensive Income. Amortisation
profiles are reassessed annually.
8. Investments
Net assets held to cover unit liabilities
Included within the IFRS Condensed Consolidated Statement of Financial
Position are the following assets and liabilities comprising the net
assets held to cover unit liabilities. The net assets held to cover unit
liabilities are set out in adjustment 1 of the IFRS to Solvency II Net Assets
Balance Sheet reconciliation on page 27.
30 June 30 June 31 December
2024 2023 2023
£'Million £'Million £'Million
Assets
Investment property 1,039.5 1,191.9 1,110.3
Equities 125,349.2 110,771.4 116,761.5
Fixed income securities 25,177.1 27,878.4 27,236.5
Investment in Collective Investment Schemes 19,354.3 5,923.6 12,513.1
Cash and cash equivalents 6,155.4 6,415.3 5,918.9
Other receivables 1,419.9 1,109.8 846.9
Derivative financial instruments 3,828.0 4,149.6 3,420.6
Total assets 182,323.4 157,440.0 167,807.8
Liabilities
Other payables 1,780.5 763.2 613.3
Derivative financial instruments 2,807.5 3,490.4 3,073.0
Total liabilities 4,588.0 4,253.6 3,686.3
Net assets held to cover linked liabilities 177,735.4 153,186.4 164,121.5
Investment contract benefits 133,823.5 113,924.8 123,149.8
Net asset value attributable to unit holders 43,458.0 38,843.8 40,536.5
Unit-linked insurance contract liabilities 453.9 417.8 435.2
Net unit-linked liabilities 177,735.4 153,186.4 164,121.5
The Condensed Consolidated Statement of Financial Position includes
shareholder assets not included in the above net assets held to cover unit
liabilities. See Note 13 for further information.
-63-
9. Other receivables
30 June 30 June 31 December
2024 2023 2023
£'Million £'Million £'Million
Receivables in relation to unit liabilities excluding policyholder interests 1,259.9 842.9 956.0
Other receivables in relation to life and unit trust business 193.6 203.7 151.9
Operational readiness prepayment 272.3 277.1 283.5
Advanced payments to Partners 135.5 99.0 127.4
Other prepayments and accrued income 46.3 97.5 37.9
Business loans to Partners 507.0 400.2 408.0
Renewal income assets 145.0 122.3 138.3
Miscellaneous 41.2 21.4 44.3
Total other receivables on the Solvency II Net Assets Balance Sheet 2,600.8 2,064.1 2,147.3
Policyholder interests in other receivables (see Note 8) 1,419.9 1,109.8 846.9
Other 3.1 3.1 3.2
Total other receivables 4,023.8 3,177.0 2,997.4
All items within other receivables meet the definition of financial assets
with the exception of prepayments and advanced payments to Partners. The fair
value of those financial assets held at amortised cost is not materially
different from amortised cost.
Receivables in relation to unit liabilities relate to outstanding
market trade settlements (sales) in the life unit-linked funds and the
consolidated unit trusts. Other receivables in relation to insurance and unit
trust business primarily relate to outstanding policy-related settlement
timings. Both of these categories of receivables are short-term.
The operational readiness prepayment relates to the Bluedoor administration
platform which has been developed by our key outsourced back-office
administration provider. Management has assessed the recoverability of this
prepayment against the expected cost-saving benefit of lower future tariff
costs arising from the platform. It is believed that no reasonably possible
change in the assumptions applied within this assessment, notably levels of
future business, the anticipated future service tariffs and the discount rate,
would have an impact on the carrying value of the asset.
Renewal income assets represent the present value of future cash flows
associated with business combinations or books of business acquired by the
Group.
-64-
Business loans to Partners
30 June 30 June 31 December
2024 2023 2023
£'Million £'Million £'Million
Business loans to Partners directly funded by the Group 384.9 362.2 340.8
Securitised business loans to Partners 122.1 38.0 67.2
Total business loans to Partners 507.0 400.2 408.0
Business loans to Partners are interest-bearing (linked to Bank of England
base rate plus a margin), repayable in line with the terms of the loan
contract and secured against the future income streams of the respective
Partner.
During 2024, the Group has securitised £54.9 million (six months ended 30
June 2023: £38.0 million, year ended 31 December 2023: £67.2 million) of
business loans to Partners. The securitised loans remain ring-fenced from the
other assets of the Group.
See Note 16 for further information on movements in Total business loans to
Partners after the end of the reporting period.
Business loans to Partners: provision
The expected loss impairment model for business loans to Partners is based on
the levels of loss experienced in the portfolio, with due consideration given
to forward-looking information.
The provision held against business loans to Partners as at 30 June 2024 was
£3.9 million (30 June 2023: £3.7 million, 31 December 2023: £4.8 million).
-65-
10. Other payables
30 June 30 June 31 December
2024 2023 2023
£'Million £'Million £'Million
Payables in relation to unit liabilities excluding policyholder interests 597.4 536.0 437.1
Other payables in relation to life and unit trust business 1,111.7 802.9 738.6
Accrual for ongoing advice fees 146.7 128.8 150.0
Other accruals 112.0 82.4 101.1
Contract payment 78.2 90.0 84.2
Lease liabilities: properties 117.3 127.0 120.5
Other payables in relation to Partner payments 77.4 72.4 75.1
Miscellaneous 48.9 50.9 50.4
Total other payables on the Solvency II Net Assets Balance Sheet 2,289.6 1,890.4 1,757.0
Policyholder interests in other payables (see Note 8) 1,780.5 763.2 613.3
Other (see adjustment 2 on page 27) 10.7 16.6 17.8
Total other payables 4,080.8 2,670.2 2,388.1
Payables in relation to unit liabilities relate to outstanding market trade
settlements (purchases) in the life unit-linked funds and the consolidated
unit trusts. Other payables in relation to insurance and unit trust business
primarily relate to outstanding policy-related settlement timings. Both of
these categories of payables are short-term.
The contract payment of £78.2 million (30 June 2023: £90.0 million, 31
December 2023: £84.2 million) represents payments made by a third-party
service provider to the Group as part of a service agreement, which are
non-interest-bearing and repayable over the life of the service agreement. The
contract payment received prior to 2020 is repayable on a straight-line basis
over the original 12-year term, with repayments commencing on 1 January 2017.
The contract payment received in 2020 is repayable on a straight-line basis
over 13 years and 4 months, with repayments commencing on 1 September 2020.
The Lease liabilities: properties line item represents the present value of
future cash flows associated with the Group's portfolio of property leases.
The fair value of financial instruments held at amortised cost within other
payables is not materially different from amortised cost.
Policyholder interests in other payables are short-term in nature and can vary
significantly from period to period due to prevailing market conditions and
underlying trading activity.
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11. Other provisions
Complaints Ongoing Service Evidence provision Lease Clawback Total
provision provision provision provisions
£'Million £'Million £'Million £'Million £'Million
At 1 January 2023 29.7 - 13.3 3.0 46.0
Additional provisions 28.4 - 0.6 - 29.0
Utilised during the period (7.3) - (0.6) - (7.9)
Release of provision (11.4) - (0.2) - (11.6)
At 30 June 2023 39.4 - 13.1 3.0 55.5
Additional provisions 33.4 426.0 2.0 0.1 461.5
Utilised during the period (13.7) - (0.2) - (13.9)
Release of provision (3.0) - - - (3.0)
At 31 December 2023 56.1 426.0 14.9 3.1 500.1
Additional provisions 17.6 - 0.3 - 17.9
Utilised during the period (13.5) (0.5) (0.1) - (14.1)
Impact of discounting - 5.1 - - 5.1
Release of provision (0.6) - (0.3) - (0.9)
At 30 June 2024 59.6 430.6 14.8 3.1 508.1
Complaints provision
The provision represents the best estimate of the complaint redress, based on
complaints identified, an assessment of the proportion redressed; and an
estimated cost of redress based on historic experience. A reasonably possible
change of 10% in the key assumption, being the proportion requiring redress,
would result in an increase/decrease of circa £6.0 million to the total
complaints provision. For further information see Note 2.
Ongoing Service Evidence provision
During 2023 the Group experienced elevated levels of complaints in connection
with the delivery of historic ongoing advice services.
Given the claims experience, a skilled person was engaged to undertake an
initial assessment of a statistically credible representative cohort of
clients to explore whether issues raised by the complaints were replicated
across the wider client base. Following the assessment, the Group has
committed to review the sub-population of clients that has been charged for
ongoing servicing since the start of 2018 but where the evidence of delivery
falls below the acceptable standard. Where the standard of evidence is deemed
by the Group to be marginal the Group will invite clients to join the review
(the "Opt-In population"), but where the standard of evidence is deemed to be
poor the Group will include clients in the review unless instructed otherwise
(the "Opt-Out population").
The provision that has been recognised includes an estimated refund of
charges, together with interest at FOS rates, plus the administration costs
associated with completing this work. Allowance is also made for discounting
over the expected duration of the exercise.
A provision of £426.0 million was recognised at 31 December 2023 with the
best estimate assessment based on extrapolation of the experience of the
statistically credible representative cohort of clients.
During the period costs were incurred in relation to the commencement of the
review resulting in the utilisation of £0.5 million.
-67-
In accordance with IAS 37 the discounted provision recognised at 31 December
2023 has been appropriately unwound. Note, interest income arising on the
assets held to support the provision offsets the impact of unwind of
discounting in the Group result.
IAS 37 and IAS 1 requires the Group to set out sensitivities. In compliance
with these requirements, the following table sets out the potential change to
the provision balance at 30 June 2024 if the key assumptions were to vary as
described:
Sensitivity analysis Change in profit before tax
Change in assumption
Favourable changes Unfavourable changes
Percentage £'Million £'Million
Extrapolation from a representative cohort 2% 22.0 (22.0)
- Variation in proportion of client population subject to the review
Extrapolation from a representative cohort 10% 31.0 (31.0)
- Variation in the level of charges, based on average client FUM, subject to
refund
Opt-In response rate 10% 17.0 (17.0)
- Variation in response rate
Administration costs 10% 12.0 (12.0)
- Change in estimation of the cost to fulfil the exercise (cost per claim)
It is estimated that significantly all the provision will be utilised over a
two-to-three-year period from the reporting date.
Lease provision
The lease provision represents the value of expected future costs of
reinstating leased property to its original condition at the end of the lease
term. The estimate is based on the square footage of leased properties and
typical costs per square foot of restoring similar buildings to their original
state.
Clawback provision
The clawback provision represents amounts due to third parties less amounts
recovered from Partners. The provision
is based on estimates of the indemnity commission that may be repaid.
With the exception of the Complaints and Ongoing Service Evidence provisions,
it is considered that no reasonably possible level of changes in estimates
would have a material impact on the value of the best estimate of the
provisions.
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12. Borrowings and financial commitments
Borrowings
Borrowings are a liability arising from financing activities. The Group has
two different types of borrowings:
· senior unsecured corporate borrowings which are used to manage
working capital, bridge intra-group cash flows and fund investment in the
business; and
· securitisation loan notes which are secured only on a legally
segregated pool of the Group's business loans to Partners, and hence are
non-recourse to the Group's other assets. Further information about business
loans to Partners is provided in Note 9.
Senior unsecured corporate borrowings
30 June 30 June 31 December
2024 2023 2023
£'Million £'Million £'Million
Corporate borrowings: bank loans 250.0 - 50.0
Corporate borrowings: loan notes 151.1 163.9 151.1
Senior unsecured corporate borrowings 401.1 163.9 201.1
The primary senior unsecured corporate borrowings are:
· a £345.0 million revolving credit facility, which is repayable
at maturity in 2028 with a variable interest rate. At 30 June 2024 the undrawn
credit available under this facility was £345.0 million (30 June 2023:
£345.0 million, 31 December 2023: £295.0 million);
· a fully drawn £250.0 million bridging facility, which is
repayable at maturity in 2026 with a variable interest rate.
· a Note Purchase Agreement for £51.1 million. The notes are
repayable in instalments over ten years, ending in 2027, with variable
interest rates; and
· a Note Purchase Agreement for £100.0 million. The notes are
repayable in one amount in 2031, with variable interest rates.
The Group has a number of covenants within the terms of its senior unsecured
corporate borrowing facilities. These covenants are monitored on a regular
basis and reported to lenders on a six-monthly basis. Since year end the Group
has satisfactorily concluded discussions with a number of lenders regarding
some routine disclosure matters. During the course of the period all financial
covenants were complied with.
As at 30 June 2024, 30 June 2023 and 31 December 2023 the Group had sufficient
headroom available under its covenants to fully draw the remaining commitment
under its senior unsecured corporate borrowing facilities.
-69-
Total borrowings
30 June 30 June 31 December
2024 2023 2023
£'Million £'Million £'Million
Senior unsecured corporate borrowings 401.1 163.9 201.1
Senior tranche of non-recourse securitisation loan note 89.5 25.3 50.3
Total borrowings 490.6 189.2 251.4
The senior tranche of securitisation loan notes are AAA-rated and repayable
over the expected life of the securitisation (estimated to be five years) with
a variable interest rate. They are held by third-party investors and secured
on a legally segregated portfolio of business loans to Partners, and on the
other net assets of the securitisation entity SJP Partner Loans No.1 Limited.
Holders of the securitisation loan notes have no recourse to the assets held
by any other entity within the Group.
In addition to the senior tranche of securitisation loan notes, a junior
tranche has been issued to another entity within the Group. The junior notes
were eliminated on consolidation in the preparation of the Group Financial
Statements and so do not form part of Group borrowings.
30 June 30 June 31 December
2024 2023 2023
£'Million £'Million £'Million
Junior tranche of non-recourse securitisation loan note 37.9 14.8 20.9
Senior tranche of non-recourse securitisation loan note 89.5 25.3 50.3
Total non-recourse securitisation loan notes 127.4 40.1 71.2
Backed by
Securitised business loans to Partners (see Note 9) 122.1 38.0 67.2
Other net assets of SJP Partner Loans No.1 Limited 5.3 2.1 4.0
Total net assets held by SJP Partner Loans No.1 Limited 127.4 40.1 71.2
The fair value of the outstanding borrowings is not materially different from
amortised cost. Interest expense on borrowings is recognised within expenses
in the IFRS Condensed Consolidated Statement of Comprehensive Income.
-70-
Financial commitments
Guarantees
The Group guarantees loans provided by third parties to Partners. In the event
of default on any individual Partner loan, the Group guarantees to repay the
full amount of the loan, with the exception of Metro Bank. For this third
party the Group guarantees to cover losses up to 50% of the value to the total
loans drawn. These loans are secured against the future income streams of the
Partner. The value of the loans guaranteed is as follows:
Loans guaranteed Facility
30 June 30 June 31 December 30 June 30 June 31 December
2024 2023 2023 2024 2023 2023
£'Million £'Million £'Million £'Million £'Million £'Million
Bank of Scotland 15.4 22.6 19.6 35.0 35.0 35.0
Investec 31.8 26.9 33.3 50.0 50.0 50.0
Metro Bank 13.1 21.1 17.6 50.0 50.0 50.0
NatWest 30.3 35.7 32.2 75.0 75.0 75.0
Santander 159.3 166.9 186.5 189.1 169.9 189.1
Total loans 249.9 273.2 289.2 399.1 379.9 399.1
The fair value of these guarantees has been assessed as £nil (30 June 2023:
£nil, 31 December 2023: £nil).
-71-
13. Fair value measurement
Fair value estimation
Financial assets and liabilities, which are held at fair value in the
Financial Statements, are required to have disclosed their fair value
measurements by level from the following fair value measurement hierarchy:
· Quoted prices (unadjusted) in active markets for identical assets
or liabilities (Level 1);
· Inputs other than quoted prices included within Level 1 that are
observable for the asset or liability, either directly (that is, as prices) or
indirectly (that is, derived from prices) (Level 2); and
· Inputs for the asset or liability that are not based on
observable market data (that is, unobservable inputs) (Level 3).
The following tables present the Group's shareholder assets and liabilities
measured at fair value:
Shareholder assets and liabilities
30 June 2024 Level 1 Level 2 Level 3 Total
balance
£'Million £'Million £'Million £'Million
Financial assets
Fixed income securities 8.4 - - 8.4
Investment in Collective Investment Schemes(1) 2,077.9 - - 2,077.9
Renewal income assets - - 145.0 145.0
Total financial assets 2,086.3 - 145.0 2,231.3
Financial liabilities
Contingent consideration - - 3.7 3.7
Total financial liabilities - - 3.7 3.7
30 June 2023 Level 1 Level 2 Level 3 Total
balance
£'Million £'Million £'Million £'Million
Financial assets
Fixed income securities 8.0 - - 8.0
Investment in Collective Investment Schemes(1) 1,250.5 - - 1,250.5
Renewal income assets - - 122.3 122.3
Total financial assets 1,258.5 - 122.3 1,380.8
Financial liabilities
Contingent consideration - - 8.4 8.4
Total financial liabilities - - 8.4 8.4
-72-
31 December 2023 Level 1 Level 2 Level 3 Total
balance
£'Million £'Million £'Million £'Million
Financial assets
Fixed income securities 8.2 - - 8.2
Investment in Collective Investment Schemes(1) 1,454.4 - - 1,454.4
Renewal income assets - - 138.3 138.3
Total financial assets 1,462.6 - 138.3 1,600.9
Financial liabilities
Contingent consideration - - 3.2 3.2
Total financial liabilities - - 3.2 3.2
(1) All assets included as shareholder investment in collective investment
schemes are holdings of high-quality, highly liquid unitised money market
funds, containing assets which are cash and cash equivalents.
The fair value of financial instruments traded in active markets is based on
quoted bid prices at the reporting date. These instruments are included in
Level 1.
Level 2 financial assets are valued using observable prices for identical
current arm's length transactions.
The renewal income assets are classified as Level 3 and are valued using a
discounted cash flow technique. The effect of applying reasonably possible
alternative assumptions of a movement of +100bps on the discount rate and a
10% movement in the lapse rate would result in an unfavourable change in
valuation of £5.8 million (30 June 2023: £10.5 million, 31 December 2023:
£5.2 million) and a favourable change in valuation of £6.4 million (30 June
2023: £11.3 million, 31 December 2023: £5.5 million), respectively.
The contingent consideration liability is classified as Level 3 and is valued
based on the terms set out in the sale and purchase agreement. Given the
nature of the valuation basis, the effect of applying reasonably possible
alternative assumptions would result in an unfavourable change of £nil (30
June 2023: £nil, 31 December 2023: £nil) and a favourable change of £3.7
million (30 June 2023: £8.4 million, 31 December 2023: £3.2 million).
There were no transfers between Level 1 and Level 2 during the period, nor
into or out of Level 3.
The following tables present the changes in Level 3 financial assets and
liabilities at fair value through the profit and loss:
Financial assets
Six months ended Six months Year ended
30 June 2024 ended 31 December
30 June 2023 2023
£'Million £'Million £'Million
Renewal income assets
Opening balance 138.3 115.5 115.5
Additions during the period 2.3 8.2 32.0
Disposals during the period (0.4) (0.8) (2.1)
Unrealised gains/(losses) recognised in the Condensed Consolidated Statement 4.8 (0.6) (7.1)
of Comprehensive Income
Closing balance 145.0 122.3 138.3
Unrealised losses on renewal income assets are recognised within investment
return in the IFRS Condensed Consolidated Statement of Comprehensive Income.
-73-
Financial liabilities
Six months ended Six months Year ended
30 June 2024 ended 31 December
30 June 2023 2023
£'Million £'Million £'Million
Contingent consideration
Opening balance 3.2 8.3 8.3
Additions during the period 0.5 0.1 3.2
Payments made during the period - - (6.7)
Released during the year - - (1.6)
Closing balance 3.7 8.4 3.2
Unit liabilities and associated assets
30 June 2024 Level 1 Level 2 Level 3 Total
balance
£'Million £'Million £'Million £'Million
Financial assets and investment properties
Investment property - - 1,039.5 1,039.5
Equities 124,208.2 - 1,141.0 125,349.2
Fixed income securities 6,686.7 18,354.7 135.7 25,177.1
Investment in Collective Investment Schemes 19,344.5 - 9.8 19,354.3
Derivative financial instruments - 3,828.0 - 3,828.0
Cash and cash equivalents 6,155.4 - - 6,155.4
Total financial assets and investment properties 156,394.8 22,182.7 2,326.0 180,903.5
Financial liabilities
Investment contract benefits - 133,823.5 - 133,823.5
Derivative financial instruments - 2,807.5 - 2,807.5
Net asset value attributable to unit holders 43,458.0 - - 43,458.0
Total financial liabilities 43,458.0 136,631.0 - 180,089.0
-74-
Level 1 Level 2 Level 3 Total
balance
30 June 2023
£'Million £'Million £'Million £'Million
Financial assets and investment properties
Investment property - - 1,191.9 1,191.9
Equities 109,188.9 - 1,582.5 110,771.4
Fixed income securities 7,204.1 20,355.9 318.4 27,878.4
Investment in Collective Investment Schemes 5,915.9 - 7.7 5,923.6
Derivative financial instruments - 4,149.6 - 4,149.6
Cash and cash equivalents 6,415.3 - - 6,415.3
Total financial assets and investment properties 128,724.2 24,505.5 3,100.5 156,330.2
Financial liabilities
Investment contract benefits - 113,924.8 - 113,924.8
Derivative financial instruments - 3,490.4 - 3,490.4
Net asset value attributable to unit holders 38,843.8 - - 38,843.8
Total financial liabilities 38,843.8 117,415.2 - 156,259.0
31 December 2023 Level 1 Level 2 Level 3 Total
balance
£'Million £'Million £'Million £'Million
Financial assets and investment properties
Investment property - - 1,110.3 1,110.3
Equities 115,134.5 - 1,627.0 116,761.5
Fixed income securities 6,883.7 20,006.3 346.5 27,236.5
Investment in Collective Investment Schemes 12,505.7 - 7.4 12,513.1
Derivative financial instruments - 3,420.6 - 3,420.6
Cash and cash equivalents 5,918.9 - - 5,918.9
Total financial assets and investment properties 140,442.8 23,426.9 3,091.2 166,960.9
Financial liabilities
Investment contract benefits - 123,149.8 - 123,149.8
Derivative financial instruments - 3,073.0 - 3,073.0
Net asset value attributable to unit holders 40,536.5 - - 40,536.5
Total financial liabilities 40,536.5 126,222.8 - 166,759.3
In respect of the derivative financial liabilities, £128.9 million of
collateral has been posted at 30 June 2024, comprising cash and treasury bills
(30 June 2023: £163.6 million, 31 December 2023: £181.3 million), in
accordance with the terms and conditions of the derivative contracts.
The fair value of financial instruments traded in active markets is based on
quoted bid prices at the reporting date. These instruments are included in
Level 1.
-75-
The Group closely monitors the valuation of assets in markets that have become
less liquid. Determining whether a market is active requires the exercise of
judgement and is determined based upon the facts and circumstances of the
market for the instrument being measured. Where it is determined that there is
no active market, fair value is established using a valuation technique. The
techniques applied incorporate relevant information available and reflect
appropriate adjustments for credit and liquidity risks. These valuation
techniques maximise the use of observable market data where it is available
and rely as little as possible on entity specific estimates. The relative
weightings given to differing sources of information and the determination of
non-observable inputs to valuation models can require the exercise of
significant judgement.
If all significant inputs required to fair value an instrument are observable,
the instrument is included in Level 2. If one or more of the significant
inputs is not based on observable market data, the instrument is included in
Level 3.
Note that all of the resulting fair value estimates are included in Level 2,
except for certain equities and investments in Collective Investment Schemes
(CIS) and investment properties as detailed below.
Specific valuation techniques used to value Level 2 financial assets and
liabilities include the use of observable prices for identical current arm's
length transactions, specifically:
· The fair value of unit-linked liabilities is assessed by
reference to the value of the underlying net asset value of the Group's
unitised investment funds, determined on a bid value, at the reporting date;
and
· The Group's derivative financial instruments are valued using
valuation techniques commonly used by market participants. These consist of
discounted cash flow and options pricing models, which typically incorporate
observable market data, principally interest rates, basis spreads, foreign
exchange rates, equity prices and counterparty credit.
Specific valuation techniques used to value Level 3 financial assets and
liabilities include:
· The use of unobservable inputs, such as expected rental values
and equivalent yields; and
· Other techniques, such as discounted cash flow and historic lapse
rates, are used to determine fair value for the remaining financial
instruments.
There were no transfers between Level 1 and Level 2 during the period.
Transfers into and out of Level 3 portfolios
Transfers out of Level 3 portfolios arise when inputs that could have a
significant impact on the instrument's valuation become market observable;
conversely, transfers into the portfolios arise when consistent sources of
data cease to be available.
Transfers in of certain equities and investments in CIS occur when asset
valuations can no longer be obtained from an observable market price i.e.
become illiquid, in liquidation, suspended etc. The converse is true if an
observable market price becomes available.
Transfers into Level 3 during the period total £4.0 million (30 June 2023:
£3.9 million, 31 December 2023: £4.0 million) and were transferred from
Level 1 to Level 3 due to asset valuations no longer being obtained from an
observable market price. The transfers out of Level 3 during the period
total £2.0 million (30 June 2023: £nil, 31 December 2023: £nil) and were
transferred from Level 3 to Level 1 due to assets being actively priced.
-76-
The following table presents the changes in Level 3 financial assets and
liabilities at fair value through the profit and loss:
Six months ended 30 June 2024 Investment Fixed Equities Investment
property income in CIS
securities
£'Million £'Million £'Million £'Million
Opening balance 1,110.3 346.5 1,627.0 7.4
Transfer into Level 3 - - - 4.6
Transfer out of Level 3 - - - (2.0)
Additions during the period 9.2 9.9 9.5 -
Disposals during the period (57.2) (223.7) (503.4) (0.3)
(Losses)/gains recognised in the Income statement (22.8) 3.0 7.9 0.1
Closing balance 1,039.5 135.7 1,141.0 9.8
Realised (losses)/gains (81.1) 2.2 133.4 -
Unrealised gains/(losses) 58.3 0.8 (125.5) 0.1
(Losses)/gains recognised in the income statement (22.8) 3.0 7.9 0.1
Six months ended 30 June 2023 Investment Fixed Equities Investment
property income in CIS
securities
£'Million £'Million £'Million £'Million
Opening balance 1,294.5 366.4 1,592.0 3.9
Transfer into Level 3 - - - 3.9
Transfer out of Level 3 - - - -
Additions during the period 4.8 11.5 146.6 -
Disposals during the period (112.6) (37.0) (127.9) (0.1)
Gains/(losses) recognised in the Income statement 5.2 (22.5) (28.2) -
Closing balance 1,191.9 318.4 1,582.5 7.7
Realised (losses)/gains (22.0) 1.3 5.1 -
Unrealised gains/(losses) 27.2 (23.8) (33.3) -
Gains/(losses) recognised in the Income statement 5.2 (22.5) (28.2) -
-77-
Year ended 31 December 2023 Investment Fixed Equities Investment
property income in CIS
securities
£'Million £'Million £'Million £'Million
Opening balance 1,294.5 366.4 1,592.0 3.9
Transfer into Level 3 - 26.7 - 4.0
Additions during the year 10.1 25.9 227.1 -
Disposals during the year (149.4) (58.2) (225.0) (0.4)
(Losses)/gains recognised in the Income statement (44.9) (14.3) 32.9 (0.1)
Closing balance 1,110.3 346.5 1,627.0 7.4
Realised (losses)/gains (39.0) 7.4 (4.4) -
Unrealised (losses)/gains (5.9) (21.7) 37.3 (0.1)
(Losses)/gains recognised in the income statement (44.9) (14.3) 32.9 (0.1)
Realised (losses)/gains and unrealised (losses)/gains for all Level 3 assets
are recognised within investment return in the IFRS Condensed Consolidated
Statement of Comprehensive Income.
Level 3 valuations
Investment property
At 30 June 2024 the Group held £1,039.5 million (30 June 2023: £1,191.9
million, 31 December 2023: £1,110.3 million) of investment property, all of
which is classified as Level 3 in the fair value hierarchy. It is initially
measured at cost including related acquisition costs and subsequently valued
monthly by professional external valuers at the properties' respective fair
values. The fair values derived are based on anticipated market values for the
properties in accordance with the guidance issued by the Royal Institution of
Chartered Surveyors, being the estimated amount that would be received from a
sale of the assets in an orderly transaction between market participants. The
valuation of investment property is inherently subjective as it requires,
among other factors, assumptions to be made regarding the ability of existing
tenants to meet their rental obligations over the entire life of their leases,
the estimation of the expected rental income into the future, an assessment of
a property's potential to remain as an attractive technical configuration to
existing and prospective tenants in a changing market and a judgement on the
attractiveness of a building, its location and the surrounding environment.
-78-
Investment property classification
Office Industrial Retail and All
leisure
30 June 2024
Gross ERV (per sq ft)(1)
Range £29.50 - £110.00 £5.25 - £24.00 £1.86 - £80.00 £1.86 - £110.00
Weighted average £49.54 £10.44 £12.35 £14.59
True equivalent yield
Range 4.7% - 10.3% 5.0% - 6.8% 6.2% - 9.6% 4.7% - 10.3%
Weighted average 6.6% 5.6% 7.6% 6.5%
30 June 2023
Gross ERV (per sq ft)(1)
Range £14.00 - £107.50 £5.00 - £24.00 £2.50 - £91.80 £2.50 - £107.50
Weighted average £43.86 £13.21 £13.38 £16.78
True equivalent yield
Range 4.3% - 9.7% 5.1% - 6.7% 5.7% - 10.5% 4.3% - 10.5%
Weighted average 6.4% 5.4% 7.3% 6.3%
31 December 2023
Gross ERV (per sq ft)(1)
Range £29.50 - £110.00 £5.25 - £24.00 £2.50 - £97.54 £2.50 - £110.00
Weighted average £49.58 £13.74 £13.53 £16.89
True equivalent yield
Range 4.7% - 10.3% 5.0% - 6.8% 6.2% - 13.9% 4.7% - 13.9%
Weighted average 7.0% 5.6% 7.8% 6.7%
1. Equivalent rental value (per square foot).
Fixed income securities and equities
At 30 June 2024 the Group held £135.7 million (30 June 2023: £318.4 million,
31 December 2023: £346.5 million) in private credit investments, and
£1,138.8 million (30 June 2023: £1,581.0 million, 31 December 2023:
£1,628.3 million) in private market investments through the St. James's Place
Diversified Assets (FAIF) Unit Trust. These are recognised within fixed income
securities and equities, respectively, in the IFRS Condensed Consolidated
Statement of Financial Position. They are initially measured at cost and are
subsequently remeasured to fair value following a monthly valuation process
which includes verification by suitably qualified professional external
valuers, who are members of various industry bodies including the British
Private Equity and Venture Capital Association.
The fair values of the private credit investments are principally determined
using two valuation methods:
1. The shadow rating method, which assigns a shadow credit rating to
the debt issuing entity and determines an expected yield with reference to
observable yields for comparable companies with public credit rating in the
loan market; and
2. The weighted average cost of capital (WACC) method, which
determines the debt issuing entity's WACC with reference to observable market
comparatives.
-79-
The expected yield and WACC are used as the discount rates to calculate the
present value of the expected future cash flows under the shadow rating and
WACC methods respectively, which is taken to be the fair value.
The fair values of the private equity investments are principally determined
using two valuation methods:
1. A market approach with reference to suitable market comparatives;
and
2. An income approach using discounted cash flow analysis which
assesses the fair value of each asset based on its expected future cash flows.
The output of each method for both the private credit and private equity
investments is a range of values, from which the mid-point is selected to be
the fair value in the majority of cases. The mid-point would not be selected
if further information is known about an investment which cannot be factored
into the valuation method used. A weighting is assigned to the values
determined following each method to determine the final valuation.
The valuations are inherently subjective as they require a number of
assumptions to be made, such as determining which entities provide suitable
market comparatives and their relevant performance metrics (for example
earnings before interest, tax, depreciation and amortisation), determining
appropriate discount rates and cash flow forecasts to use in models, the
weighting to apply to each valuation methodologies and the point in the range
of valuations to select as the fair value.
Sensitivity of Level 3 valuations
Investment in Collective Investment Schemes
The valuation of certain investments in CIS are based on the latest observable
price available. Whilst such valuations are sensitive to estimates, it is
believed that changing the price applied to a reasonably possible alternative
would not change the fair value significantly.
Investment property
As set out above, investment property is initially measured at cost including
related acquisition costs and subsequently valued monthly by professional
external valuers at their respective fair values. The following table sets out
the effect of applying reasonably possible alternative assumptions, being a 5%
movement in estimated rental value and a 25bps movement in the relative yield,
to the valuation of the investment properties. Any change in the value of
investment property is matched by the associated movement in the policyholder
liability, and therefore would not impact on the shareholder net assets.
Investment property significant unobservable inputs Effect of reasonable possible alternative assumptions
Carrying value Favourable Unfavourable
changes changes
£'Million £'Million £'Million
30 June 2024 Expected rental value / Relative yield 1,039.5 1,130.9 954.6
30 June 2023 Expected rental value / Relative yield 1,191.9 1,311.0 1,103.8
31 December 2023 Expected rental value / Relative yield 1,110.3 1,207.5 1,021.0
-80-
Fixed income securities and equities
As set out above, the fair values of the Level 3 fixed income securities and
equities are selected from the valuation range determined through the monthly
valuation process. The following table sets out the effect of valuing each of
the assets at the high and low point of the range. As for investment property,
any change in the value of these fixed income securities or equities is
matched by an associated movement in the policyholder liability, and therefore
would not impact on the shareholder net assets.
Effect of reasonable possible alternative assumptions
Carrying value Favourable Unfavourable
changes changes
£'Million £'Million £'Million
30 June 2024 Fixed income securities 135.7 139.9 131.5
Equities 1,141.0 1,298.3 1,049.4
30 June 2023 Fixed income securities(1) 318.4 324.2 312.4
Equities 1,582.5 1,779.2 1,402.6
31 December 2023 Fixed income securities 346.5 351.9 340.7
Equities 1,627.0 1,813.0 1,449.2
(1) Fixed income securities favourable and unfavourable changes have been
restated to correct an error. Favourable changes increased £27.0 million and
unfavourable changes increased £25.9 million.
-81-
14. Cash generated from operations
Six months Six months Year ended
ended ended 31 December
30 June 30 June 2023(1)
2024 2023(1)
£'Million £'Million £'Million
Cash flows from operating activities
Profit before tax for the period 577.0 385.0 439.6
Adjustments for:
Amortisation of purchased value of in-force business 1.6 1.6 3.2
Amortisation of computer software 9.8 7.3 15.4
Depreciation 11.7 11.3 24.0
Loss on disposal of computer software - - 0.8
Loss on disposal of property and equipment, including leased assets 1.2 0.5 2.3
Gain on disposal of subsidiary - - (1.2)
Equity-settled share-based payment charge 2.1 9.9 4.9
Interest income(1) (113.3) (76.2) (168.6)
Interest expense 16.2 7.0 17.3
Increase in provisions 8.0 9.5 454.1
Exchange rate losses 0.3 0.4 2.3
(62.4) (28.7) 354.5
Changes in operating assets and liabilities
Decrease in deferred acquisition costs 9.4 15.2 32.2
Decrease in investment property 70.8 102.6 184.2
Increase in other investments (14,400.6) (9,664.4) (21,077.2)
(Increase)/decrease in reinsurance assets (2.9) (0.7) 41.6
Increase in other receivables (1,008.5) (199.8) (14.2)
Increase in insurance contract liabilities 21.4 4.8 25.5
Increase in financial liabilities (excluding borrowings) 10,408.2 7,184.2 15,991.8
Decrease in deferred income (13.6) (16.8) (38.9)
Increase in other payables 1,667.2 479.3 206.2
Increase in net assets attributable to unit holders 2,921.5 2,215.4 3,908.1
(327.1) 119.8 (740.7)
Cash generated from operations 187.5 476.1 53.4
( 1) Restated to reclassify money market fund interest from interest income
to interest received (six months ended 30 June 2023: £28.1 million, year
ended 31 December 2023: £60.6 million), which had been misclassified.
-82-
15. Share capital, earnings per share and dividends
Share capital
Number of Called-up
ordinary share
shares capital
£'Million
At 1 January 2023 544,235,757 81.6
- Exercise of options 4,320,187 0.7
At 30 June 2023 548,555,944 82.3
- Exercise of options 48,850 -
At 31 December 2023 548,604,794 82.3
At 30 June 2024 548,604,794 82.3
Ordinary shares have a par value of 15 pence per share (30 June 2023: 15 pence
per share, 31 December 2023: 15 pence per share) and are fully paid.
Included in the called-up share capital are 4,218,520 (30 June 2023:
3,684,721, 31 December 2023: 3,411,743) shares held in the Shares in trust
reserve with a nominal value of £0.6 million (30 June 2023: £0.6 million, 31
December 2023: £0.5 million). The shares are held by the SJP Employee Benefit
Trust and the St. James's Place Share Incentive Plan Trust to satisfy
certain share-based payment schemes. The Trustees of the SJP Employee Benefit
Trust retain the right to dividends on the shares held by the Trust but have
chosen to waive their entitlement to the dividends on 1,413,848 shares at 30
June 2024 (30 June 2023: 2,062,545 shares, 31 December 2023: 1,896,985
shares). The trustees of the St. James's Place Share Incentive Plan Trust
retain the right to dividends on forfeited shares held by the Trust but have
chosen to waive their entitlement to the dividends on 205 shares at 30 June
2024 (30 June 2023: 146 shares, 31 December 2023: 556 shares).
Share capital increases are included within the 'exercise of options' line of
the table above where they relate to the Group's share-based payment schemes.
-83-
Earnings per share
Six months Six months Year ended
ended ended 31 December
30 June 30 June 2023
2024 2023
£'Million £'Million £'Million
Earnings
Profit/(loss) after tax attributable to equity shareholders (for both basic 165.1 161.6 (10.1)
and diluted EPS)
Million Million Million
Weighted average number of shares
Weighted average number of ordinary shares in issue (for basic EPS) 548.2 546.0 547.6
Adjustments for outstanding share options 4.7 2.1 8.8
Weighted average number of ordinary shares (for diluted EPS) 552.9 548.1 556.4
Pence Pence Pence
Earnings per share (EPS)
Basic earnings per share 30.1 29.6 (1.8)
Diluted earnings per share 29.9 29.5 (1.8)
( )
Dividends
The following dividends have been paid by the Group:
Six months Six months Year ended
ended ended 31 December
30 June 2024 30 June 2023 2023
£'Million £'Million £'Million
Final dividend in respect of 2022 - 37.19 pence per ordinary share - 203.1 203.1
Interim dividend in respect of 2023 - 15.83 pence per ordinary share - - 86.5
Final dividend in respect of 2023 - 8.0 pence per ordinary share 43.8 - -
Total dividends 43.8 203.1 289.6
The Directors have resolved to pay an interim dividend of 6.00 pence per share
(30 June 2023: 15.83 pence per share). This amounts to £32.9 million (30 June
2023: £86.5 million) and will be paid on 20 September 2024 to shareholders on
the register as at 23 August 2024.
In addition, the Directors have resolved to undertake a share buyback
programme committing to purchase shares up to a maximum value of £32.9
million. The share buyback will be implemented in the third quarter of 2024.
-84-
16. Events after the end of the reporting period
On 22 July 2024 £22.1 million Business loans to Partners directly funded by
the Group were sold into Securitised business loans to Partners, with an
associated £16.3 million receipt of cash and corresponding increase in Senior
tranche of non-recourse securitisation loan notes. In addition, on the same
date, £9.9 million of Business loans to Partners directly funded by the Group
were repaid and refinanced by loans provided by third parties directly to
Partners.
17. Statutory accounts
The financial information shown in this publication is unaudited and does not
constitute statutory accounts. The comparative figures for the financial year
ended 31 December 2023 are not the Company's statutory accounts for the
financial year. Those accounts have been reported on by the Company's auditors
and delivered to the Registrar of Companies.
The report of the auditors was unmodified and did not include a reference to
any matter to which the auditors drew attention to, by way of emphasis without
modifying their report, and did not contain a statement under section 498 of
the Companies Act 2006.
18. Approval of the Half-Year Report
These Condensed Consolidated Half-Year Financial Statements were approved by
the Board of Directors on 29 July 2024.
19. National storage mechanism
A copy of the Half-Year Report will be submitted shortly to the National
Storage Mechanism (NSM) and will be available for inspection at the NSM, which
is situated at: https://data.fca.org.uk/#/nsm/nationalstoragemechanism.
-85-
Independent review report to St. James's Place plc
Report on the condensed consolidated interim Financial Statements
Our conclusion
We have reviewed St. James's Place plc's condensed consolidated interim
financial statements (the "interim financial statements") in the Press Release
and Half-Year Report and Accounts of St. James's Place plc for the six-month
period ended 30 June 2024 (the "period").
Based on our review, nothing has come to our attention that causes us to
believe that the interim financial statements are not prepared, in all
material respects, in accordance with UK adopted International Accounting
Standard 34, 'Interim Financial Reporting' and the Disclosure Guidance and
Transparency Rules sourcebook of the United Kingdom's Financial Conduct
Authority.
The interim financial statements comprise:
· the Condensed Consolidated Statement of Financial Position as at
30 June 2024;
· the Condensed Consolidated Statement of Comprehensive Income for the
period then ended;
· the Condensed Consolidated Statement of Cash Flows for the period
then ended;
· the Condensed Consolidated Statement of Changes in Equity for the
period then ended; and
· the explanatory notes to the interim financial statements.
The interim financial statements included in the Press Release and Half-Year
Report and Accounts of St. James's Place plc have been prepared in accordance
with UK adopted International Accounting Standard 34, 'Interim Financial
Reporting' and the Disclosure Guidance and Transparency Rules sourcebook of
the United Kingdom's Financial Conduct Authority.
Basis for conclusion
We conducted our review in accordance with International Standard on Review
Engagements (UK) 2410, 'Review of Interim Financial Information Performed by
the Independent Auditor of the Entity' issued by the Financial Reporting
Council for use in the United Kingdom ("ISRE (UK) 2410"). A review of interim
financial information consists of making enquiries, primarily of persons
responsible for financial and accounting matters, and applying analytical and
other review procedures.
A review is substantially less in scope than an audit conducted in accordance
with International Standards on Auditing (UK) and, consequently, does not
enable us to obtain assurance that we would become aware of all significant
matters that might be identified in an audit. Accordingly, we do not express
an audit opinion.
We have read the other information contained in the Press Release and
Half-Year Report and Accounts and considered whether it contains any apparent
misstatements or material inconsistencies with the information in the interim
financial statements.
Conclusions relating to going concern
Based on our review procedures, which are less extensive than those performed
in an audit as described in the Basis for conclusion section of this report,
nothing has come to our attention to suggest that the directors have
inappropriately adopted the going concern basis of accounting or that the
directors have identified material uncertainties relating to going concern
that are not appropriately disclosed. This conclusion is based on the review
procedures performed in accordance with ISRE (UK) 2410. However, future events
or conditions may cause the group to cease to continue as a going concern.
-86-
Responsibilities for the interim financial statements and the review
Our responsibilities and those of the directors
The Press Release and Half-Year Report and Accounts, including the interim
financial statements, is the responsibility of, and has been approved by the
directors. The directors are responsible for preparing the Press Release and
Half-Year Report and Accounts in accordance with the Disclosure Guidance and
Transparency Rules sourcebook of the United Kingdom's Financial Conduct
Authority. In preparing the Press Release and Half-Year Report and Accounts,
including the interim financial statements, the directors are responsible for
assessing the Group's ability to continue as a going concern, disclosing, as
applicable, matters related to going concern and using the going concern basis
of accounting unless the directors either intend to liquidate the group or to
cease operations, or have no realistic alternative but to do so.
Our responsibility is to express a conclusion on the interim financial
statements in the Press Release and Half-Year Report and Accounts based on our
review. Our conclusion, including our Conclusions relating to going concern,
is based on procedures that are less extensive than audit procedures, as
described in the Basis for conclusion paragraph of this report. This report,
including the conclusion, has been prepared for and only for the Company for
the purpose of complying with the Disclosure Guidance and Transparency Rules
sourcebook of the United Kingdom's Financial Conduct Authority and for no
other purpose. We do not, in giving this conclusion, accept or assume
responsibility for any other purpose or to any other person to whom this
report is shown or into whose hands it may come, save where expressly agreed
by our prior consent in writing.
PricewaterhouseCoopers LLP
Chartered Accountants
Bristol
29 July 2024
-87-
Responsibility Statement of the Directors in respect of the Half-Year
Financial Report
The Directors confirm that this consolidated interim financial information has
been prepared in accordance with IAS 34 as adopted by the UK and that the
interim management report includes a fair review of the information required
by DTR 4.2.7R and DTR 4.2.8R, namely:
· an indication of important events that have occurred during the
first six months of the financial year and their impact on the condensed set
of Consolidated Financial Statements, and a description of the principal risks
and uncertainties for the remaining six months of the financial year; and
· material related-party transactions in the first six months and
any material changes in the related party transactions described in the last
Annual Report.
The Directors of St. James's Place plc are listed in the St. James's Place plc
Annual Report for 31 December 2023. A list of current Directors is maintained
on the St. James's Place plc website: www.sjp.co.uk (http://www.sjp.co.uk) .
The Directors are responsible for the maintenance and integrity of the Group's
website. Legislation in the United Kingdom governing the preparation and
dissemination of Financial Statements may differ from legislation in other
jurisdictions.
On behalf of the Board:
Mark FitzPatrick, Chief Executive Officer Craig Gentle, Chief Financial Officer
29 July 2024 29 July 2024
-88-
Supplementary Information: Consolidated Half-Year Financial Statements on a
Cash Result Basis
-89-
Consolidated Statement of Comprehensive Income
on a Cash Result Basis
Note Six months Six months Year ended
ended ended 31 December
30 June 2024 30 June 2023(1) 2023
£'Million £'Million £'Million
Fee and commission income 1,621.4 1,354.9 2,835.2
Expenses(1) (1,084.2) (981.9) (2,392.4)
Investment return(1) 5 60.2 33.7 66.7
Net reinsurance expense - - (39.8)
Other finance income(1) 9.7 10.8 31.5
Profit before tax 607.1 417.5 501.2
Tax attributable to policyholders' returns (351.9) (169.3) (444.2)
Tax attributable to shareholders' returns (53.0) (45.8) 11.7
Total Cash result profit for the period 202.2 202.4 68.7
(1)Restated to reclassify Other finance income. For the six months ended 30
June 2023 the restatement comprised a decrease of £7.0 million in Expenses,
decrease of £17.8 million in Investment return and a corresponding net £10.8
million Other finance income recognised resulting in a net nil impact on the
profit for the period.
The Note references above cross refer to the Notes within the Condensed
Consolidated Financial Statements under IFRS as adopted by the UK on pages 48
to 84, except where denoted in Roman numerals.
-90-
Consolidated Statement of Changes in Equity
on a Cash Result Basis
Equity attributable to owners of the Parent Company
Share capital Share premium Shares in trust reserve Misc. reserves Retained earnings Total Non-controlling interests Total
equity
Note £'Million £'Million £'Million £'Million £'Million £'Million £'Million £'Million
At 1 January 2023 81.6 227.8 (4.1) 2.5 1,071.9 1,379.7 0.2 1,379.9
Cash result for the period - - - - 202.3 202.3 0.1 202.4
Dividends 15 - - - - (203.1) (203.1) (0.2) (203.3)
Exercise of options 0.7 5.7 - - - 6.4 - 6.4
Consideration paid for own shares - - (0.5) - - (0.5) - (0.5)
Shares sold during the year - - 3.8 - (3.8) - - -
Change in deferred tax - - - - (12.1) (12.1) - (12.1)
Impact of policyholder tax asymmetry - - - - (17.5) (17.5) - (17.5)
Change in goodwill, intangibles and other non-cash movements - - - - (4.0) (4.0) - (4.0)
At 30 June 2023 82.3 233.5 (0.8) 2.5 1,033.7 1,351.2 0.1 1,351.3
At 1 January 2024 82.3 233.9 (0.7) 2.5 814.9 1,132.9 0.1 1,133.0
Cash result for the period - - - - 202.2 202.2 - 202.2
Dividends 15 - - - - (43.8) (43.8) (0.1) (43.9)
Consideration paid for own shares - - (3.6) - - (3.6) - (3.6)
Change in deferred tax - - - - (9.2) (9.2) - (9.2)
Impact of policyholder tax asymmetry - - - - (33.4) (33.4) - (33.4)
Change in goodwill, intangibles and other non-cash movements - - - - 6.0 6.0 - 6.0
At 30 June 2024 82.3 233.9 (4.3) 2.5 936.7 1,251.1 - 1,251.1
-91-
Consolidated Statement of Financial Position
on a Cash Result Basis
Note 30 June 30 June 31 December
2024 2023 2023
£'Million £'Million £'Million
Assets
Property and equipment 147.9 156.8 153.1
Deferred tax assets 1.7 2.2 20.4
Investment in associates 10.4 4.7 10.2
Reinsurance assets 9.7 7.0 6.7
Other receivables 2,600.8 2,064.1 2,147.3
Fixed income securities 13 8.4 8.0 8.2
Investment in Collective Investment Schemes 13 2,077.9 1,250.5 1,454.4
Cash and cash equivalents 349.4 268.7 285.4
Total assets 5,206.2 3,762.0 4,085.7
Liabilities
Borrowings 12 490.6 189.2 251.4
Deferred tax liabilities 567.7 228.9 414.5
Insurance contract liabilities 24.7 20.1 18.2
Other provisions 11 508.1 55.5 500.1
Other payables 2,289.6 1,890.4 1,757.0
Income tax liabilities 74.4 26.6 11.5
Total liabilities 3,955.1 2,410.7 2,952.7
Net assets 1,251.1 1,351.3 1,133.0
Shareholders' equity
Share capital 15 82.3 82.3 82.3
Share premium 233.9 233.5 233.9
Shares in trust reserve (4.3) (0.8) (0.7)
Miscellaneous reserves 2.5 2.5 2.5
Retained earnings 936.7 1,033.7 814.9
Shareholders' equity on a cash result basis 1,251.1 1,351.2 1,132.9
Non-controlling interests - 0.1 0.1
Total equity on a Cash result basis 1,251.1 1,351.3 1,133.0
Pence Pence Pence
Net assets per share 228.1 246.3 206.5
The Note references above cross refer to the Notes to the Condensed
Consolidated Financial Statements under IFRS as adopted by the UK on pages 48
to 84, except where denoted in Roman numerals.
-92-
Notes to the Consolidated Financial Statements
on a Cash Result Basis
I. Basis of preparation
The Consolidated Financial Statements on a Cash Result Basis have been
prepared by adjusting the Financial Statements prepared in accordance with
International Financial Reporting Standards adopted by the UK for items which
do not reflect the cash emerging from the business. The adjustments are as
follows:
1. Unit liabilities and net assets held to cover unit liabilities, as
set out in Note 8, are policyholder balances which are removed in the
Statement of Financial Position on a Cash Result Basis. No adjustment for
payments in or out is required in the Statement of Comprehensive Income as
this business is subject to deposit accounting, which means that policyholder
deposits and withdrawals are recognised in the Statement of Financial Position
under IFRS, with only marginal cash flows attributable to shareholders
recognised in the Statement of Comprehensive Income. However, adjustment is
required for the investment return and the movement in investment contract
liabilities, which are offsetting and are both zero-ised.
2. Deferred acquisition costs, the purchased value of in-force
business and deferred income assets and liabilities are removed from the
Statement of Financial Position on a Cash Result Basis, and the amortisation
of these balances is removed in the Statement of Comprehensive Income on a
Cash Result Basis. The assets, liabilities and amortisation are set out in
Note 7.
3. Equity-settled share-based payment expense is removed from the
Statement of Comprehensive Income on a Cash Result Basis, and the relevant
equity balances removed from the Statement of Financial Position on a Cash
Result Basis.
4. Non-unit-linked insurance contract liabilities and reinsurance
assets are removed in the Statement of Financial Position on a Cash Result
Basis. The movement in the period relating to the balances removed from the
Statement of Financial Position is also removed from the Statement of
Comprehensive Income on a Cash Result Basis.
5. Goodwill, computer software intangible assets and some other assets
and liabilities which are inadmissible under the Solvency II regime are
removed from the Statement of Financial Position on a Cash Result Basis,
however the movement in these figures are included in the Statement of
Comprehensive Income on a Cash Result Basis.
6. Deferred tax assets and liabilities are adjusted in the Statement
of Financial Position on a Cash Result Basis to reflect the adjustments noted
above and other discounting differences between tax charges and IFRS
accounting. However, the impact of movements in deferred tax assets and
liabilities are not included in the Statement of Comprehensive Income on a
Cash Result Basis.
7. Amounts due from the reinsurer, arising from the reinsurance
recapture, are removed from the Statement of Comprehensive Income on a Cash
result basis, consistent with the exclusion of the associated reinsurance
asset from the Statement of Financial Position on a Cash basis.
-93-
II. Reconciliation of the IFRS balance sheet to the cash balance sheet
The Solvency II Net Assets (or Cash) Balance Sheet is based on the IFRS
Condensed Consolidated Statement of Financial Position (on page 46), with
adjustments made to accounting assets and liabilities to reflect the Solvency
II regulations and the provision for insurance liabilities set equal to the
associated unit liabilities.
The reconciliation between the IFRS and Solvency II Net Assets Balance Sheet
as at 30 June 2024 is set out on page 27. The reconciliations as at 30 June
2023 and 31 December 2023 are provided on the following pages.
IFRS Adjustment Adjustment Solvency II
Balance 1 2 Net Assets
Sheet Balance
30 June 2023 Sheet
£'Million £'Million £'Million £'Million
Assets
Goodwill 33.6 - (33.6) -
Deferred acquisition costs 321.4 - (321.4) -
Purchased value of in-force business 9.6 - (9.6) -
Computer software 32.7 - (32.7) -
Property and equipment 156.8 - - 156.8
Deferred tax assets 6.4 - (4.2) 2.2
Investment in associates 4.7 - - 4.7
Reinsurance assets 55.3 - (48.3) 7.0
Other receivables 3,177.0 (1,109.8) (3.1) 2,064.1
Investment property 1,191.9 (1,191.9) - -
Equities 110,771.4 (110,771.4) - -
Fixed income securities 27,886.4 (27,878.4) - 8.0
Investment in Collective Investment Schemes 7,174.1 (5,923.6) - 1,250.5
Derivative financial instruments 4,149.6 (4,149.6) - -
Cash and cash equivalents 6,684.0 (6,415.3) - 268.7
Total assets 161,654.9 (157,440.0) (452.9) 3,762.0
Liabilities
Borrowings 189.2 - - 189.2
Deferred tax liabilities 219.5 - 9.4 228.9
Insurance contract liabilities 475.3 (417.8) (37.4) 20.1
Deferred income 513.6 - (513.6) -
Other provisions 55.5 - - 55.5
Other payables 2,670.2 (763.2) (16.6) 1,890.4
Investment contract benefits 113,924.8 (113,924.8) - -
Derivative financial instruments 3,490.4 (3,490.4) - -
Net asset value attributable to unit holders 38,843.8 (38,843.8) - -
Income tax liabilities 26.6 - - 26.6
Total liabilities 160,408.9 (157,440.0) (558.2) 2,410.7
Net assets 1,246.0 - 105.3 1,351.3
-94-
31 December 2023 IFRS Balance Sheet Adjustment 1 Adjustment 2 Solvency II Net Assets Balance Sheet
£'Million £'Million £'Million £'Million
Assets
Goodwill 33.6 - (33.6) -
Deferred acquisition costs 304.4 - (304.4) -
Purchased value of in-force business 8.0 - (8.0) -
Computer software 28.0 - (28.0) -
Property and equipment 153.1 - - 153.1
Deferred tax assets 36.5 - (16.1) 20.4
Investment in associates 10.2 - - 10.2
Reinsurance assets 13.0 - (6.3) 6.7
Other receivables 2,997.4 (846.9) (3.2) 2,147.3
Investment property 1,110.3 (1,110.3) - -
Equities 116,761.5 (116,761.5) - -
Fixed income securities 27,244.7 (27,236.5) - 8.2
Investment in Collective Investment Schemes 13,967.5 (12,513.1) - 1,454.4
Derivative financial instruments 3,420.6 (3,420.6) - -
Cash and cash equivalents 6,204.3 (5,918.9) - 285.4
Total assets 172,293.1 (167,807.8) (399.6) 4,085.7
Liabilities
Borrowings 251.4 - - 251.4
Deferred tax liabilities 411.7 - 2.8 414.5
Insurance contract liabilities 1 496.0 (435.2) (42.6) 18.2
Deferred income 491.5 - (491.5) -
Other provisions 500.1 - - 500.1
Other payables 1 2,388.1 (613.3) (17.8) 1,757.0
Investment contract benefits 123,149.8 (123,149.8) - -
Derivative financial instruments 3,073.0 (3,073.0) - -
Net asset value attributable to unit holders 40,536.5 (40,536.5) - -
Income tax liabilities 11.5 - - 11.5
Total liabilities 171,309.6 (167,807.8) (549.1) 2,952.7
Net assets 983.5 - 149.5 1,133.0
Adjustment 1 nets out the policyholder interest in unit-linked assets and
liabilities.
Adjustment 2 comprises adjustment to the IFRS Condensed Consolidated Statement
of Financial Position in line with Solvency II requirements, including removal
of DAC, DIR, PVIF and their associated deferred tax balances, goodwill and
other intangibles.
-95-
Other Information
-96-
Glossary of Alternative Performance Measures
Within this document various alternative performance measures (APMs) are
disclosed.
An APM is a measure of financial performance, financial position or cash flows
which is not defined by the relevant financial reporting framework, which for
the Group is International Financial Reporting Standards as adopted by the UK
(adopted IFRSs). APMs are used to provide greater insight into the performance
of the Group and the way it is managed by the Directors. The table below
defines each APM, explains why it is used and, if applicable, details where
the APM has been reconciled to IFRS:
Financial-position-related APMs
APM Definition Why is this measure used? Reconciliation
to the Financial Statements
Solvency II net assets Based on IFRS Net Assets, but with the following adjustments: Our ability to satisfy our liabilities to clients, and consequently our Refer to page 27.
solvency, is central to our business. By removing the liabilities which are
fully matched by assets, this presentation allows the reader to focus on the
business operation. It also provides a simpler comparison with other wealth
1. Adjustment to remove the matching client assets and the liabilities management companies.
as these do not represent shareholder assets.
2. Reflection of the recognition requirements of the Solvency II
regulations for assets and liabilities. In particular this removes deferred
acquisition costs (DAC), deferred income (DIR), purchased value of in-force
business (PVIF) and their associated deferred tax balances, other intangibles
and some other small items which are treated as inadmissible from a regulatory
perspective; and
No adjustment is made to deferred tax, except for that arising on DAC, DIR
and PVIF, as this is treated as an allowable asset in the Solvency II
regulation.
Total embedded value A discounted cash flow valuation methodology, assessing the long-term economic Life business and wealth management business differ from most other Not applicable.
value of the business. businesses, in that the expected shareholder income from the sale of a product
emerges over a long period in the future. We therefore supplement the IFRS and
Cash results by providing additional disclosure on an embedded value basis,
which brings into account the net present value of expected future cash flows,
Our embedded value is determined in line with the EEV principles, originally as we believe that a measure of total economic value of the Group is useful to
set out by the Chief Financial Officers' (CFO) Forum in 2004, and amended for investors.
subsequent changes to the principles, including those published in April 2016,
following the implementation of Solvency II.
EEV net asset value (NAV) per share EEV net asset value per share is calculated as the EEV net assets divided by Total embedded value provides a measure of total economic value of the Group, Not applicable.
the period-end number of ordinary shares. and assessing the NAV per share allows analysis of the overall value of the
Group by share.
IFRS NAV per share IFRS net asset value per share is calculated as the IFRS net assets divided Total IFRS net assets provides a measure of value of the Group, and assessing Not applicable.
by the period-end number of ordinary shares. the NAV per share allows analysis of the overall value of the Group by share.
-97-
Financial-performance-related APMs
APM Definition Why is this measure used? Reconciliation
to the Financial Statements
Cash result, and Underlying cash result The Cash result is defined as the movement between the opening and closing IFRS income statement methodology recognises non-cash items such as deferred Refer to Section 2.1 and 2.2 of the financial review and also see Note 3 to
Solvency II net assets adjusted as follows: tax and equity-settled share options. By contrast, dividends can only be paid the Consolidated Financial Statements.
to shareholders from appropriately fungible assets. The Board therefore uses
the Cash result to monitor the level of cash generated by the business.
1. The movement in deferred tax is excluded, except that arising from
the establishment of the exceptional Ongoing Service Evidence provision;
While the Cash result gives an absolute measure of the cash generated in the
2. The movements in goodwill and other intangibles are excluded; and period, the Underlying cash result is particularly useful for monitoring the
expected long-term rate of cash emergence, which supports dividends and
3. Other changes in equity, such as dividends paid in the period and sustainable dividend growth.
equity-settled share option costs, are excluded.
The Underlying cash result reflects the regular emergence of cash from the
business, excluding any items of a one-off nature and temporary timing
differences.
The Cash result reflects all other cash items, including any items of a
one-off nature and temporary timing differences.
Neither the Cash result nor the Underlying cash result should be confused with
the IFRS Condensed Consolidated Statement of Cash Flows which is prepared in
accordance with IAS 7.
Underlying cash basic and diluted earnings per share (EPS) These EPS measures are calculated as Underlying cash divided by the number of As Underlying cash is the best reflection of the cash generated by the Not applicable.
shares used in the calculation of IFRS basic and diluted EPS. business, Underlying cash EPS measures allow analysis of the shareholder cash
generated by the business by share.
EEV profit Derived as the movement in the total EEV during the period. Both the IFRS and Cash results reflect only the cash flows in the period. See Note 3 to the Consolidated Financial Statements.
However, our business is long-term, and activity in the period can generate
business with a long-term value. We therefore believe it is helpful to
understand the full economic impact of activity in the period, which is the
aim of the EEV methodology.
EEV operating profit A discounted cash flow valuation methodology, assessing the long-term economic Both the IFRS and Cash results reflect only the cash flows in the period. See Note 3 to the Consolidated Financial Statements.
value of the business. However, our business is long-term, and activity in the period can generate
business with a long-term value. We therefore believe it is helpful to
understand the full economic impact of activity in the period, which is the
aim of the EEV methodology.
Our embedded value is determined in line with the EEV principles, originally
set out by the Chief Financial Officers' (CFO) Forum in 2004, and amended for
subsequent changes to the principles, including those published in
April 2016, following the implementation of Solvency II. Within the EEV, many of the future cash flows derive from fund charges, which
change with movements in stock markets. Since the impact of these changes is
typically unrelated to the performance of the business, we believe that the
EEV operating profit (reflecting the EEV profit, adjusted to reflect only the
The EEV operating profit reflects the total EEV result with an adjustment to expected investment performance and no change in economic basis) provides the
strip out the impact of stock market and other economic effects during the most useful measure of embedded value performance in the period.
period.
Within EEV operating profit is new business contribution, which is the change
in embedded value arising from writing new business during the period.
-98-
Reconciliation
to the Financial Statements
APM Definition Why is this measure used?
Policyholder and shareholder tax Shareholder tax is estimated by making an assessment of the effective rate of The UK tax regime facilitates the collection of tax from life insurance Disclosed as separate line items in the Condensed Consolidated Statement of
tax that is applicable to the shareholders on the profits attributable to the policyholders by making an equivalent charge within the corporate tax of the Comprehensive Income.
shareholders. This is calculated by applying the appropriate effective Company. The total tax charge for the insurance companies therefore comprises
corporate tax rates to the shareholder profits. both this element and an element more closely related to normal corporation
tax.
The remainder of the tax charge represents tax on policyholders' investment
returns. Life insurance business impacted by this tax typically includes policy charges
which align with the tax liability, to mitigate the impact on the corporate.
As a result, when policyholder tax increases, the charges also increase. Since
these offsetting items can be large, and typically do not perform in line with
This calculation method is consistent with the legislation relating to the the business, it is beneficial to be able to identify the two elements
calculation of the tax on shareholders' profits. separately. We therefore refer to that part of the overall tax charge, which
is deemed attributable to policyholders, as policyholder tax, and the rest
as shareholder tax.
Profit before shareholder tax A profit measure which reflects the IFRS result adjusted for policyholder tax, The IFRS methodology requires that the tax recognised in the Financial Disclosed as a separate line item in the Condensed Consolidated Statement of
but before deduction of shareholder tax. Within the Condensed Consolidated Statements should include the tax incurred on behalf of policyholders in our Comprehensive Income.
Statement of Comprehensive Income, the full title of this measure is 'Profit UK life assurance company. Since the policyholder tax charge is unrelated to
before tax attributable to shareholders' returns'. the performance of the business, we believe it is also useful to separately
identify the profit before shareholder tax, which reflects the IFRS profit
before tax, adjusted only for tax paid on behalf of policyholders.
Underlying profit A profit measure which reflects the IFRS result adjusted to remove the DAC, The IFRS methodology promotes recognition of profits in line with the Refer to Section 2.1 of the Financial Review.
DIR and PVIF adjustments. provision of services and so, for long-term business, some of the initial cash
flows are spread over the life of the contract through the use of intangible
assets and liabilities (DAC and DIR). Due to the Retail Distribution Review
(RDR) regulation change in 2013, there was a step-change in the progression of
these items in our accounts, which resulted in significant accounting
presentation changes despite the fundamentals of our business remaining
unchanged. We therefore believe it is useful to consider the IFRS result
having removed the impact of movements in these intangibles as it better
reflects the underlying performance of the business.
-99-
Reconciliation
to the Financial Statements
APM Definition Why is this measure used?
Controllable expenses The total of expenses which reflects Establishment, Development and our We are focused on containing long-term growth in controllable expenses. A reconciliation of total expenses as presented on the face of the Cash result
Academy. before tax to IFRS expenses is provided in Section 2.2 of the Financial
Review.
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