REG - Tatton Asset Mgt PLC - Interim results for the six-months to 30 Sept 2022
22/11/2022 07:00
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RNS Number : 1268H Tatton Asset Management PLC 22 November 2022
22 November 2022
Tatton Asset Management PLC
("TAM plc", the "Group" or the "Company")
AIM: TAM
Interim results for the six-month period ended 30 September 2022
"Record net inflows during volatile markets"
TAM plc, the investment management and IFA support services group, today
announces its interim results for the six-month period ended 30 September 2022
(the "Period").
FINANCIAL HIGHLIGHTS
- Group revenue increased 15.1% to £15.9m (Sep 2021: £13.8m)
- Adjusted operating profit(1) up 15.1% to £8.0m (Sep 2021: £6.9m)
- Adjusted operating profit(1) margin 50.1% (Sep 2021: 50.1%)
- Adjusted fully diluted EPS(2) increased 12.9% to 9.89p (Sep 2021: 8.76p)
- Interim dividend up 12.5% to 4.5p (Sep 2021: 4.0p)
- Strong financial liquidity position, with net cash of £21.6m (Sep 2021:
£14.7 million)
- Strong balance sheet - Net assets increased 29.5% to £35.7m (Sep 2021:
£27.5m)
(1)Adjusted for exceptional items, share-based payment costs and amortisation
(2)Adjusted for exceptional items, share-based payment costs, amortisation and
potentially dilutive shares
OPERATIONAL HIGHLIGHTS
- Record organic net inflows of £907m (Sep 2021: £652m), an increase of
8.0% of opening Assets Under Management ("AUM") - Average run rate of £151m
per month
- Acquisition of 50% of the share capital of 8AM Global Limited ("8AM")
adding c.£1.0bn of Assets Under Influence ("AUI")
- Assets Under Management / Influence increased by £1.0bn to £12.3bn (Mar
2022: £11.3bn)
- Current AUM / AUI at 18 November 2022 c.£12.9bn
- Tatton's IFA firms increased by 14.7% to 806 (Sep 2021: 703) and the
number of accounts increased 20.9% to 98,650 (Sep 2021: 81,600)
- Paradigm mortgage completions up by 10.6% to £7.3bn (Sep 2021: £6.6bn).
Paradigm Mortgages member firms increased by 3.6% to 1,706 members (Sep 2021:
1,646 members)
- Paradigm Consulting increased its members by 1.4% to 424 (Sep 2021: 418)
Paul Hogarth, Chief Executive Officer, commented:
"We are pleased with our performance and while volatile markets were a drag on
AUM growth, by delivering record net inflows coupled with the acquisition of
8AM we continue to execute our Roadmap to Growth strategy, a three-year target
of increasing AUM from £9.0bn (Mar 2021) to £15.0bn through a combination of
organic new net inflows and strategically aligned acquisitions. At the end
of this Period our AUM / AUI sits at over £12.3 billion just over halfway to
our target.
As we look forward, while net inflows were very strong in the first six months
as we had a number of significant wins which complemented underlying flows, we
anticipate net inflows will return to a more normalised level in line with the
second half of the prior year and that the Paradigm business will continue to
perform well.
We look forward to making further progress over the rest of the year while
remaining mindful of the continuing macro-economic turbulence and market
volatility and we remain confident in the Group's longer-term prospects."
For further information please contact:
Tatton Asset Management plc +44 (0) 161 486 3441
Paul Hogarth (Chief Executive
Officer)
Paul Edwards (Chief Financial
Officer)
Lothar Mentel (Chief Investment Officer)
Zeus - Nominated Adviser and Broker +44 (0) 20 3829 5000
Martin Green/Dan Bate (Investment Banking)
+44 (0) 20 7496 3000
Singer Capital Markets - Joint Broker
Peter Steel, Rachel Hayes, Amanda Gray (Investment Banking)
Belvedere Communications - Financial PR +44 (0) 7407 023147
John West / Llew Angus (media) +44 (0) 7715 769078
Cat Valentine / Keeley Clarke (investors) tattonpr@belvederepr.com (mailto:tattonpr@belvederepr.com)
+44 (0) 20 7139 1452
Trade Media Enquiries
Roddi Vaughan Thomas (Head of Communications)
For more information, please visit: www.tattonassetmanagement.com
(http://www.tattonassetmanagement.com)
Strategic Review
THE GROUP DELIVERS CONTINUED GROWTH
The Group has performed well in the Period with continued growth in revenue
and profits assisted by record net inflows in what has been a difficult and
volatile market. We also completed our third strategically aligned acquisition
towards the end of the Period.
Group revenue for the Period increased 15.1% to £15.934 million (Sep 2021:
£13.847 million). Adjusted operating profit(1) for the Period increased 15.1%
to £7.982 million (Sep 2021: £6.934 million) with adjusted operating profit
margin(1) holding firm at 50.1% (Sep 2021: 50.1%).
Pre-tax profit after the impact of exceptional items, amortisation of
acquisition related intangibles, finance costs and share-based payment charges
increased to £6.624 million (Sep 2021: £4.787 million) and taxation charges
for the Period were £1.291 million (Sep 2021: £0.889 million). This gives an
effective tax rate of 19.5% when measured against profit before tax. Adjusting
for exceptional costs and share-based payments, the effective tax rate is
19.6%.
The basic earnings per share was 9.01p (Sep 2021: 6.82p). When adjusted for
exceptional items, amortisation of acquisition related intangibles and
share-based payment charges, basic adjusted earnings per share was 10.43p
(Sep 2021: 9.48p). Adjusted earnings per share fully diluted for the impact
of share options was 9.89p (Sep 2021: 8.76p), an increase of 12.9%.
TATTON
Tatton continues to perform strongly and has delivered record net inflows in
the last six months of £907 million an increase of 39.1% on the prior year
(Sep 2021: £652 million). Total AUM at the end of the Period increased to
£11.343 billion (Mar 2022: £11.341 billion) and while net inflows were very
strong the volatile markets over the Period have caused a significant drag
on the closing AUM. In addition to the strong organic inflows the Group added
a further £1.0 billion of AUI towards the end of the Period following the
acquisition of 50% of 8AM Global Limited. This added to the existing AUM gives
AUM / AUI of £12.343 billion at the end of the Period and maintains our
momentum towards the £15.0 billion target in our "Roadmap to Growth" strategy
by March 2024.
As a result, Tatton's revenue, which now accounts for 79.9% of Group
revenue, grew 17.0% to £12.738 million (Sep 2021: £10.885 million) and
adjusted operating profit(1) grew 14.8% to £7.663 million (Sep 2021: £6.673
million), delivering an adjusted operating profit margin(1) of 60.2% (Sep
2021: 61.3%).
The Model Portfolio Services ("MPS") market is forecast to grow at a rate of
25% per annum (Platforum Report: August 2022) and reach up to £200 billion by
the end of 2026 (Dec 2021: £81.37 billion). As we continue to promote and
support the growth of the MPS market on platform and through a wide range of
IFA education programmes, we will look to increase our penetration through a
broadened distribution base. As a minimum we aim to maintain our market share
and continue to grow our distribution footprint through meaningful strategic
partnerships. In support of this we have been pleased to see our IFA firms
continue to grow by over 8.0% to 806 (Mar 2022: 746) throughout this Period.
We look forward to seeing these close relationships continue to evolve in the
coming months as intensive activity continues to further promote the Tatton
service.
As we look ahead, we will keep the needs of the IFA at the heart of our
business as this remains central to all we do. We are delighted to be able to
assist IFAs in meeting the rising regulatory bar and standards required
by the Consumer Duty through the continued application of building
long-term partnerships and delivering consistent service, performance and IFA
support. Consequently, we were delighted to be recognised as leaders in our
field for a fifth year running by Moneyfacts through the "Best Investment
Service" award - voted for by IFAs across the UK.
As we head towards our tenth anniversary it is rewarding to see the MPS space
come of age. We acknowledge and welcome the increased competitor activity in
this space and see this as recognition and validation that our price point of
0.15% is becoming the new normal, a trend we have long predicted. We continue
to respond to competition by listening to our firms, evolving our service
to meet their changing needs and further embedding Tatton into their
operating models. We have also continued to actively engage with consolidators
as activity persists in this space and we are optimistic that, while this is
an ongoing challenge, we also see this as an opportunity to deliver our
service through this fast-evolving landscape.
PARADIGM
Paradigm has maintained its performance following a strong result in the year
ended March 2022, growing revenue over the same Period last year by 8.3% to
£3.198 million (Sep 2021: £2.954 million) and adjusted operating profit(1)
by 7.8% to £1.352 million (Sep 2021: £1.254 million).
Paradigm Consulting increased its members to 424 (Mar 2022: 421) and Paradigm
Mortgages, the Group's mortgage distribution and support services business,
increased the number of mortgage firms utilising the services to 1,706 (Mar
2022: 1,674).
While the mortgage market environment post COVID-19 has remained challenging,
especially given the impact of rising interest rates, Paradigm Mortgages
saw the momentum from the prior year continue into this Period.
Applications with associated value of £8.75 billion, an increase of 18% on
the prior year, translated into Paradigm Mortgages participating in
record completions of £7.3 billion (Sep 2021: £6.6 billion) of gross
lending an increase of over 10%. Protection sales also hit record highs as
annual premiums rose to £8.37 million (Sep 2021: £7.97 million) as
membership and cross-sales activities grew against market trends.
In the second half of the year we anticipate a more uncertain environment.
At the end of this Period and as a result of the September mini budget,
a significant number of products were withdrawn from the market by lenders,
twice the number withdrawn during April 2020, and those lenders that remained
active repriced products as interest rates rose rapidly. The pressure has
since eased somewhat with residential mortgage products being reintroduced at
more competitive rates as uncertainty also eased, but the buy-to-let
and specialist markets remain difficult. In addition, with the current cost
of living crisis and general level of inflation, affordability and resultant
lender attitude to risk, it is likely that this will hamper the purchase and
mover market, certainly in the short term.
As buyers pursue home ownership over rental status, the issue of the number of
buyers to available properties (supply and demand) will remain and will
potentially constrain the new mortgage market.
As a result, mortgage firms' bias has moved to re-mortgages and this is
expected to continue as record market retention volumes present significant
product transfer business opportunities.
This environment is anticipated to continue into 2023 and while the market and
case placement may be more complex, it has also never been more important to
gain good advice, enhancing the opportunity for advisers. In summary, as we
continue to grow the number of firms, we anticipate the second half of the
year to remain stable as the market recovers.
ACQUISITION
On 15 August 2022 the Group acquired 50% of the issued share capital of 8AM
Global Limited ("8AM") for a consideration of £7.0 million (the
"Consideration"), with an option to acquire a further 50% in due course. The
Consideration of c.£7.0 million comprises 50% or £3.5 million of initial
consideration, payable through the issue of new shares which incurred an
additional £0.3 million related to underwriting costs, and £3.5 million
deferred consideration payable in equal cash instalments against financial
performance targets at the end of the first year and second year post
completion. This takes the total consideration for the acquisition to £7.3
million. It is expected to generate adjusted operating profit(1) of £0.7
million in its first full financial year.
SEPARATELY DISCLOSED ITEMS
Exceptional items, along with share-based payment charges and amortisation of
acquisition related intangible assets, are reported separately to give better
clarity of the underlying performance of the Group. The alternative
performance measures ("APMs") are consistent with how the business performance
is planned and reported within the internal reporting to the Board. Some of
these measures are also used for the purpose of setting remuneration
targets.
The Group incurred exceptional costs of £0.352 million related to the
acquisition of 8AM Global Limited and a latent one-off cost related to the
acquisition of the Verbatim range of funds in the prior year.
BALANCE SHEET
The Group's balance sheet remains healthy with net assets at 30 September 2022
totalling £35.7 million (Sep 2021: £27.5 million) reflecting the continued
growth and profitability of the Group. In line with the capital light nature
of the business model property, plant and equipment has decreased slightly to
£0.6 million (Sep 2021: £0.9 million). Intangible assets, including
goodwill and investment in joint ventures, of £20.2 million have been
recognised (Sep 2021: £13.4 million), an increase of £6.8 million largely
relating to the acquisition of 8AM Global Limited.
CASH RESOURCES
Cash generated from operations was £7.0 million, £7.3 million before
exceptional items (Sep 2021: £7.0 million) and was 101% of operating profit.
The Group remains debt free with closing net cash at the end of the Period
of £21.6 million (Sep 2021: £14.7 million). The cash resources are after the
payment of corporation tax of £1.6 million and dividend payments of £5.0
million relating to the final dividend for the year ended 31 March 2022.
ISSUE OF NEW SHARES
In the Period, the Group issued 1,115,699 new shares, of which 237,962 shares
were issued to satisfy the exercise of options related to the Enterprise
Management Incentive ("EMI") and Company's Save As You Earn ("SAYE") employee
share option schemes, with a further 877,737 issued as consideration for the
initial payment relating to the acquisition of 50% of 8AM Global Limited.
DIVIDEND PROPOSAL AND CAPITAL ADEQUACY
The Board is pleased to recommend an interim dividend of 4.5p per share, an
increase of 12.5% on the prior period interim dividend. This level of dividend
reflects our cash performance and underlying confidence in the business, while
at the same time ensuring that appropriate levels of capital resources are
maintained within the Group.
On 1 January 2022, the Financial Conduct Authority ("FCA") introduced a new
prudential regime for MiFID investment firms, the Investment Firms Prudential
Regime ("IFPR"). As a result of these new rules, the Group will face an
increased level of requirement in relation to the level of capital resources
held across the Group, with restrictions in utilising cash or debt
to fund acquisitions.
The interim dividend of 4.5p per share, totalling £2.7 million, will be paid
on 16 December 2022 to shareholders on the register at close of business
on 2 December 2022 and will have an ex-dividend date of 1 December 2022. In
accordance with International Financial Reporting Standards ("IFRSs"), the
interim dividend has not been included as a liability in this interim
statement.
BUSINESS RISK
The Board identified principal risks and uncertainties which may have a
material impact on the Group's performance in the Group's 2022 Annual Report
and Financial Statements (pages 30 and 31) and believes that the nature of
these risks remains largely unchanged at the half year. The Board will
continue to monitor and manage identified principal risks throughout the
second half of the year.
POST BALANCE SHEET EVENTS
There have been no post balance sheet events.
GOING CONCERN
As stated in note 2.2 of these condensed financial statements, the Directors
are satisfied that the Group has sufficient resources to continue in operation
for the foreseeable future, a period not less than 12 months from the date of
this report. To form this view, the Directors have also considered the impact
of the recent COVID-19 pandemic and the resulting economic uncertainty.
Accordingly, they continue to adopt the going concern basis in preparing
these condensed financial statements.
SUMMARY AND OUTLOOK
In summary, the Group has delivered a solid first half result, delivering
against our strategic objectives and maintaining strong growth of revenue and
profits.
We are pleased with this performance and while volatile markets were a drag on
AUM growth, by delivering record net inflows coupled with the acquisition of
8AM, we continue to execute our "Roadmap to Growth" strategy, a three-year
target of increasing AUM from £9.0 billion (Mar 2021) to £15.0 billion
through a combination of organic new net inflows and strategically aligned
acquisitions. At the end of this Period our AUM / AUI now sits at over £12.3
billion, just over halfway to our target.
As we look forward, while net inflows were very strong in the first six
months due partly to a number of significant wins which complemented
underlying flows, we anticipate net inflows will return to a more normalised
level in line with the second half of the prior year and that the Paradigm
business will continue to perform well.
We look forward to making further progress in the rest of the year while
remaining mindful of the continuing macro-economic turbulence and market
volatility and we remain confident in the Group's longer-term prospects.
1. Alternative performance measures are detailed in note 17.
financial statements
CONSOLIDATED STATEMENT OF TOTAL COMPREHENSIVE INCOME
FOR THE SIX MONTHS ENDED 30 SEPTEMBER 2022
Note Unaudited six months ended 30-Sep 2022 (£'000) Unaudited six months ended 30-Sep 2021 (£'000) Audited year
ended 31-Mar 2022
(£'000)
Revenue 15,934 13,847 29,356
Administrative expenses (9,006) (8,895) (17,726)
Operating profit 6,928 4,952 11,630
Share-based payment costs 4 495 1,735 2,399
Amortisation of acquisition related intangibles 4 207 60 266
Exceptional items 4 352 187 231
Adjusted operating profit (before separately disclosed items)(1) 7,982 6,934 14,526
Finance costs (304) (165) (355)
Profit before tax 6,624 4,787 11,275
Taxation charge 5 (1,291) (889) (2,033)
Profit attributable to shareholders 5,333 3,898 9,242
Earnings per share - Basic 6 9.01p 6.82p 15.92p
Earnings per share - Diluted 6 8.72p 6.45p 15.17p
Adjusted earnings per share - Basic(2) 6 10.43p 9.48p 19.87p
Adjusted earnings per share - Diluted(2) 6 9.89p 8.76p 18.62p
1. Adjusted for exceptional items, amortisation of acquisition
related intangibles and share-based payment costs. See note 17.
2. Adjusted for exceptional items, amortisation of acquisition
related intangibles and share-based payment costs and the tax thereon. See
note 17.
There were no other recognised gains or losses other than those recorded above
in the current or prior period and therefore a statement of other
comprehensive income has not been presented.
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
AS AT 30 SEPTEMBER 2022
Note Unaudited six months ended 30-Sep 2022 Unaudited six months ended 30-Sep 2021 (£'000) Audited year
(£'000) ended 31-Mar 2022
(£'000)
Non-current assets
Goodwill 7 9,337 9,275 9,337
Investment in joint ventures 8 6,996 - -
Intangible assets 9 3,831 4,162 4,047
Property, plant and equipment 10 593 888 749
Deferred tax assets 806 1,414 841
Total non-current assets 21,563 15,739 14,974
Current assets
Trade and other receivables 11 3,902 8,565 3,805
Financial assets at fair value through profit or loss 13 122 177 152
Corporation tax 941 2,043 706
Cash and cash equivalents 21,622 14,747 21,710
Total current assets 26,587 25,532 26,373
Total assets 48,150 41,271 41,347
Current liabilities
Trade and other payables 12 (6,633) (10,335) (7,556)
Total current liabilities (6,633) (10,335) (7,556)
Non-current liabilities
Other payables 12 (5,851) (3,388) (2,747)
Total non-current liabilities (5,851) (3,388) (2,747)
Total liabilities (12,484) (13,723) (10,303)
Net assets 35,666 27,548 31,044
Equity attributable to equity holders of the entity
Share capital 12,006 11,781 11,783
Share premium account 15,219 11,617 11,632
Other reserve 2,041 2,041 2,041
Merger reserve (28,968) (28,968) (28,968)
Retained earnings 35,368 31,077 34,556
Total equity 35,666 27,548 31,044
The financial statements on pages 10 to 33 were approved by the Board of
Directors on 21 November 2022 and were signed on its behalf by:
Paul Edwards
Director
Company registration number: 10634323
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
FOR THE SIX MONTHS ENDED 30 SEPTEMBER 2022
Share Share premium (£'000) Own shares Other Merger Retained earnings (£'000) Total
capital (£'000)
reserve (£'000)
reserve (£'000)
equity
(£'000)
(£'000)
At 1 April 2021 11,578 11,534 (1,969) 2,041 (28,968) 30,230 24,446
Profit and total comprehensive income - - - - - 3,898 3,898
Dividends - - - - - (4,284) (4,284)
Share-based payments - - - - - 2,130 2,130
Tax on share-based payments - - - - - 1,265 1,265
Issue of share capital on exercise of employee share options 203 83 (193) - - - 93
Own shares utilised on exercise of options - - 2,162 - - (2,162) -
At 30 September 2021 11,781 11,617 - 2,041 (28,968) 31,077 27,548
Profit and total comprehensive income - - - - - 5,344 5,344
Dividends - - - - - (2,357) (2,357)
Share-based payments - - - - - 549 549
Tax on share-based payments - - - - - (57) (57)
Issue of share capital on exercise of employee share options 2 15 - - - - 17
At 31 March 2022 11,783 11,632 - 2,041 (28,968) 34,556 31,044
Profit and total comprehensive income - - - - - 5,333 5,333
Dividends - - - - - (5,012) (5,012)
Share-based payments - - - - - 658 658
Tax on share-based payments - - - - - (167) (167)
Issue of share capital on exercise of employee share options 47 77 (28) - - - 96
Own shares utilised on exercise of options - - 28 - - - 28
Issue of share capital on acquisition of a joint venture 176 3,510 - - - - 3,686
At 30 September 2022 12,006 15,219 - 2,041 (28,968) 35,368 35,666
CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE SIX MONTHS ENDED 30 SEPTEMBER 2022
Note Unaudited six months ended 30-Sep 2022 (£'000) Unaudited six months ended 30-Sep 2021 (£'000) Audited year
ended 31-Mar 2022 (£'000)
Operating activities
Profit for the period 5,333 3,898 9,242
Adjustments:
Income tax expense 5 1,291 889 2,033
Finance costs 304 165 355
Depreciation of property, plant and equipment 10 190 181 377
Amortisation of intangible assets 9 330 210 536
Share-based payment expense 4 495 1,735 1,492
Distributions receivable from joint ventures (40) - -
Changes in:
Trade and other receivables (169) (3,146) 309
Trade and other payables (751) 2,879 907
Exceptional costs 4 352 187 231
Cash generated from operations before exceptional costs 7,335 6,998 15,482
Cash generated from operations 6,983 6,811 15,251
Income tax paid (1,620) (1,612) (1,612)
Net cash from operating activities 5,363 5,199 13,639
Investing activities
Payment for the acquisition of subsidiary, net of cash acquired - - (2,825)
Purchase of intangible assets (114) (2,957) (211)
Purchase of property, plant and equipment (34) (17) (74)
Cost of underwriting shares (152)
Net cash used in investing activities (300) (2,974) (3,110)
Financing activities
Interest paid (92) (47) (144)
Dividends paid (5,012) (4,284) (6,641)
Proceeds from the issue of shares 87 93 111
Proceeds from exercise of options - - 1,230
Repayment of the lease liabilities (134) (174) (309)
Net cash used in financing activities (5,151) (4,412) (5,753)
Net (decrease)/increase in cash and cash equivalents (88) (2,187) 4,776
Cash and cash equivalents at beginning of period 21,710 16,934 16,934
Net cash and cash equivalents at end of period 21,622 14,747 21,710
The accompanying notes are an integral part of the interim financial
statements.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
1. GENERAL INFORMATION
Tatton Asset Management plc (the "Company") is a public company limited by
shares.
The address of the registered office is Paradigm House, Brooke Court, Lower
Meadow Road, Wilmslow, SK9 3ND, United Kingdom. The registered number is
10634323.
The Group comprises the Company and its subsidiaries. The Group's principal
activities are discretionary fund management, the provision of compliance and
support services to independent financial advisers ("IFAs"), the provision of
mortgage adviser support services and the marketing and promotion of
multi-manager funds run by the companies under Tatton Capital Limited.
The condensed consolidated interim financial statements for the six months
ended 30 September 2022 do not constitute statutory accounts as defined under
section 434 of the Companies Act 2006. The Annual Report and Financial
Statements (the "financial statements") for the year ended 31 March 2022 were
approved by the Board on 14 June 2022 and have been delivered to the Registrar
of Companies. The Auditor, Deloitte LLP, reported on these financial
statements; its report was unqualified, did not contain an emphasis of
matter paragraph and did not contain statements under section 498 (2) or (3)
of the Companies Act 2006.
News updates, regulatory news and financial statements can be viewed and
downloaded from the Group's website, www.tattonassetmanagement.com. Copies can
also be requested from: The Company Secretary, Tatton Asset Management plc,
Paradigm House, Brooke Court, Lower Meadow Road, Wilmslow, SK9 3ND.
2. ACCOUNTING POLICIES
The principal accounting policies applied in the presentation of the interim
financial statements are set out below.
2.1 BASIS OF PREPARATION
The unaudited condensed consolidated interim financial statements for the six
months ended 30 September 2022 have been prepared in accordance with IAS 34
'Interim Financial Reporting' as adopted by the United Kingdom. The condensed
consolidated interim financial statements should be read in conjunction with
the financial statements for the year ended 31 March 2022, which have been
prepared in accordance with International Financial Reporting Standards
("IFRSs") as adopted by the United Kingdom. The condensed consolidated interim
financial statements were approved for release on 17 November 2022.
The condensed consolidated interim financial statements have been prepared on
a going concern basis and prepared on the historical cost basis.
The condensed consolidated interim financial statements are presented in
sterling and have been rounded to the nearest thousand (£'000). The
functional currency of the Company is sterling as this is the jurisdiction
where all the Group's sales are made.
The preparation of financial information in conformity with IFRSs requires
management to make estimates and assumptions that affect the reported amounts
of assets and liabilities at the date of the financial statements and the
reported amounts of revenues and expenses during the reporting Period.
Although these estimates are based on management's best knowledge of the
amount, event or actions, actual events may ultimately differ from
those estimates.
The key accounting policies set out below have, unless otherwise stated, been
applied consistently to all periods presented in the consolidated financial
statements. The accounting policies adopted by the Group in these interim
financial statements are consistent with those applied by the Group in its
consolidated financial statements for the year ended 31 March 2022.
2.2 GOING CONCERN
These financial statements have been prepared on a going concern basis. The
Directors have prepared cash flow projections and are satisfied that the
Group has adequate resources to continue in operational existence for the
foreseeable future. To form the view that the consolidated financial
statements should continue to be prepared on an ongoing basis in light of the
current economic uncertainty, the Directors have assessed the outlook of the
Group by considering various market scenarios and management actions. This
review has allowed management to assess the potential impact on income, costs,
cash flow and capital and the ability to implement effective management
actions that may be taken to mitigate the impact. Accordingly, the Directors
continue to adopt the going concern basis in preparing these financial
statements.
2.3 NEW ACCOUNTING STANDARDS
There have been a number of amendments to standards which have been adopted in
the Period but these have not had a significant impact on the Group's
financial results or position.
A number of new standards are effective for annual periods beginning after 1
April 2022 and earlier application is permitted; however, the Group has not
early adopted the new or amended standards in preparing these condensed
consolidated financial statements.
None of the standards not yet effective are expected to have a material impact
on the Group's financial statements.
2.4 OPERATING SEGMENTS
The Group comprises the following two operating segments which are defined by
trading activity:
· Tatton - investment management services.
· Paradigm - the provision of compliance and support services to IFAs and
mortgage advisers.
The Board is considered to be the chief operating decision maker.
2.5 SIGNIFICANT JUDGEMENTS, KEY ASSUMPTIONS AND ESTIMATES
In the process of applying the Group's accounting policies, which are
described in the consolidated financial statements for the year ended 31 March
2022, management have made judgements and estimations about the future that
have an effect on the amounts recognised in the financial statements. The
estimates and underlying assumptions are reviewed on an ongoing basis.
Revisions to accounting estimates are recognised in the period in which the
estimate is revised if the revision affects only that period. If the revision
affects both current and future periods, it is revised in the period of the
revision and in future periods. Changes for accounting estimates would be
accounted for prospectively under IAS 8.
The judgements, estimates and assumptions applied in the interim financial
statements, including the key sources of estimation uncertainty, were the same
as those applied in the Group's last annual financial statements for the year
ended 31 March 2022. The only exceptions relate to the contingent
consideration recognised in the period and the estimated average annual
effective income tax rate applied to the pre-tax income of the interim period.
During the Period, the Group made an acquisition of 50% of the share capital
of 8AM Global Limited and has recognised an investment and contingent
consideration. The value of the earnout consideration is variable dependent on
performance conditions and management will perform a further assessment of the
valuation of certain assets acquired and liabilities assumed with the
acquisition.
Management have reviewed the estimates for the satisfaction of the performance
obligations attached to certain awards in the share-based payment schemes. It
is currently estimated that 100% of the options in the existing schemes will
vest.
2.6 ALTERNATIVE PERFORMANCE MEASURES
In reporting financial information, the Group presents alternative performance
measures ("APMs") which are not defined or specified under the requirements of
IFRSs. The Group believes that these APMs provide users with additional
helpful information on the performance of the business.
The APMs are consistent with how the business performance is planned and
reported within the internal management reporting to the Board. Some of these
measures are also used for the purpose of setting remuneration targets. All
the APMs used by the Group are set out in note 17 including explanations of
how they are calculated and how they can be reconciled to a statutory measure
where relevant.
3 SEGMENT REPORTING
Information reported to the Board of Directors as the chief operating decision
maker ("CODM") for the purposes of resource allocation and assessment of
segmental performance is focused on the type of revenue. The principal types
of revenue are discretionary fund management and the marketing and promotion
of the funds run by the companies under Tatton Capital Limited ("Tatton") and
the provision of compliance and support services to IFAs and mortgage advisers
("Paradigm").
The Group's reportable segments under IFRS 8 are therefore Tatton, Paradigm,
and "Central", which contains the Operating Group's central overhead costs.
Centrally incurred overhead costs are allocated to the Tatton and Paradigm
divisions on a pro rata basis and this is how information is presented to the
Group's CODM.
The principal activity of Tatton is that of discretionary fund management of
investments on platform and the provision of investment wrap services.
The principal activity of Paradigm is that of provision of support services to
IFAs and mortgage advisers.
For management purposes, the Group uses the same measurement policies used in
its financial statements.
The following is an analysis of the Group's revenue and results by reportable
segment:
Period ended 30 September 2022 Tatton Paradigm Central Group
(£'000) (£'000) (£'000) (£'000)
Revenue 12,738 3,198 (2) 15,934
Administrative expenses (5,634) (1,846) (1,526) (9,006)
Operating profit/(loss) 7,104 1,352 (1,528) 6,928
Share-based payment costs - - 495 495
Amortisation of acquisition related intangibles 207 - - 207
Exceptional costs 352 - - 352
Adjusted operating profit/(loss) (before separately disclosed items)(1) 7,663 1,352 (1,033) 7,982
Finance costs (124) (1) (179) (304)
Profit/(loss) before tax 6,980 1,351 (1,707) 6,624
1. Alternative performance measures are detailed in note 17.
Period ended 30 September 2021 Tatton Paradigm Central Group
(£'000) (£'000) (£'000) (£'000)
Revenue 10,885 2,954 8 13,847
Administrative expenses (4,272) (1,700) (2,923) (8,895)
Operating profit/(loss) 6,613 1,254 (2,915) 4,952
Share-based payment costs - - 1,735 1,735
Amortisation of acquisition related intangibles 60 - - 60
Exceptional costs - - 187 187
Adjusted operating profit/(loss) (before separately disclosed items)(1) 6,673 1,254 (993) 6,934
Finance costs (9) - (156) (165)
Profit/(loss) before tax 6,604 1,254 (3,071) 4,787
Year ended 31 March 2022 Tatton Paradigm Central Group
(£'000) (£'000) (£'000) (£'000)
Revenue 23,345 5,995 16 29,356
Administrative expenses (9,939) (3,561) (4,226) (17,726)
Operating profit/(loss) 13,406 2,434 (4,210) 11,630
Share-based payment costs - - 2,399 2,399
Amortisation of acquisition related intangibles 231 - - 231
Exceptional costs 266 - - 266
Adjusted operating profit/(loss) (before separately disclosed items)(1) 13,903 2,434 (1,811) 14,526
Finance costs (18) - (337) (355)
Profit/(loss) before tax 13,388 2,434 (4,547) 11,275
All turnover arose in the United Kingdom.
1. Alternative performance measures are detailed in note 17.
4 SEPARATELY DISCLOSED ITEMS
Unaudited six months ended 30-Sep 2022 (£'000) Unaudited six months ended 30-Sep 2021 (£'000) Audited year
ended 31-Mar 2022
(£'000)
Acquisition-related expenses 352 187 231
Total exceptional costs 352 187 231
Amortisation of acquisition related intangible assets 207 60 266
Share-based payment costs 495 1,735 2,399
Total separately disclosed costs 1,054 1,982 2,896
Separately disclosed items shown separately on the face of the Consolidated
Statement of Total Comprehensive Income or included within administrative
expenses reflect costs and income that do not relate to the Group's normal
business operations and that are considered material individually, or in
aggregate if of a similar type, due to their size or frequency.
EXCEPTIONAL ITEMS
During the Period, the Group acquired 50% of the share capital of 8AM Global
Limited. The Group incurred professional fees of £256,000 during the process
which have been treated as exceptional items.
The Group also incurred one-off costs relating to the acquisition of the
Verbatim funds in the period amounting to £96,000. These costs have been
treated as exceptional items.
Acquisition-related expenses in the prior year relate to professional fees
incurred as a result of the Group acquiring £650 million of assets under
management in the Verbatim funds.
SHARE-BASED PAYMENT CHARGES
Share-based payments is a recurring item, though the value will change
depending on the estimation of the satisfaction of performance obligations
attached to certain awards. It has been excluded from the core business
operating profit since it is a significant non-cash item. Underlying profit,
being adjusted operating profit, represents largely cash-based earnings and
more directly relates to the financial reporting period.
AMORTISATION OF ACQUISITION RELATED INTANGIBLE ASSETS
Payments made for the introduction of client relationships and brands that are
deemed to be intangible assets are capitalised and amortised over their useful
life, which has been assessed to be ten years. This amortisation charge is
recurring over the life of the intangible asset, though has been excluded from
the core business operating profit since it is a significant non-cash item.
Underlying profit, being adjusted operating profit, represents largely
cash-based earnings and more directly relates to the financial reporting
period.
5 TAXATION
Unaudited six months ended 30-Sep 2022 (£'000) Unaudited six months ended 30-Sep 2021 (£'000) Audited year
ended 31-Mar 2022
(£'000)
Current tax expense
Current tax on profits for the period 1,498 1,150 2,010
Share-based payment costs (83) (487) -
Adjustment for under-provision in prior periods - - (52)
1,415 663 1,958
Deferred tax expense
Share-based payment costs (101) 250 261
Origination and reversal of temporary differences (23) 7 -
Adjustment in respect of previous years - - (30)
Effect of changes in tax rates - (31) (156)
(124) 226 75
Total tax expense 1,291 889 2,033
The reasons for the difference between the actual tax charge for the period
and the standard rate of corporation tax in the UK applied to profit for the
period are as follows:
Unaudited six months ended 30-Sep 2022 (£'000) Unaudited six months ended 30-Sep 2021 (£'000) Audited year
ended 31-Mar 2022
(£'000)
Profit before taxation 6,624 4,787 11,275
Tax at UK corporation tax rate of 19% (2021: 19%) 1,259 910 2,142
Expenses not deductible for tax purposes 49 44 45
Capital allowances in excess of depreciation 42 32 1
Adjustments in respect of previous years - - (82)
Share-based payments (59) (66) 20
Income not taxable - - 1
Effect of changes in tax rates - (31) (94)
Total tax expense 1,291 889 2,033
An increase in the UK corporation rate from 19% to 25% (effective 1 April
2023) was substantively enacted on 24 May 2021. This will increase the
Company's future current tax charge accordingly. The deferred tax asset at 30
September 2022 has been calculated based on these rates, reflecting the
expected timing of reversal of the related temporary differences (31 March
2022: 25%).
6 EARNINGS PER SHARE AND DIVIDENDS
Basic earnings per share is calculated by dividing the earnings attributable
to ordinary shareholders by the weighted average number of ordinary shares
during the period.
NUMBER OF SHARES
Number of shares Unaudited six months ended 30-Sep 2022 Unaudited six months ended 30-Sep 2021 Audited
year ended 31-Mar 2022
Basic
Weighted average number of shares in issue 59,220,759 57,937,803 58,424,150
Effect of own shares held by an EBT - (745,506) (373,774)
59,220,759 57,192,297 58,050,376
Diluted
Effect of weighted average number of options outstanding for the year 1,909,700 3,266,404 2,875,504
Weighted average number of shares in issue (diluted)(1) 61,130,459 60,458,701 60,925,880
Adjusted diluted
Effect of full dilution of employee share options which are contingently 1,305,290 1,429,271 1,042,011
issuable or have future attributable service costs
Adjusted diluted weighted average number of options and shares for the 62,435,749 61,887,972 61,967,891
year(2)
1. The weighted average number of shares is diluted due to the
effect of potentially dilutive contingent issuable shares from share option
schemes.
2. The dilutive shares used for this measure differ from those used
for statutory dilutive earnings per share; the future value of service costs
attributable to employee share options is ignored and contingently issuable
shares for Long-Term Incentive Plan ("LTIP") options are assumed to fully
vest. The Directors have selected this measure as it represents the underlying
effective dilution by offsetting the impact to the calculation of basic shares
of the purchase of shares by the Employee Benefit Trust ("EBT") to satisfy
options.
Own shares held by an EBT represents the Company's own shares purchased and
held by the EBT, shown at cost. During the Period the EBT was gifted 139,500
of the Company's own shares. These shares were subsequently fully utilised
during the Period to satisfy the exercise of employees' EMI options. In the
year ended 31 March 2022 the EBT purchased 966,546 of the Company's own shares
which were fully utilised during that year to satisfy the exercise
of employee share options.
Unaudited six months ended 30-Sep 2022 (£'000) Unaudited six months ended 30-Sep 2021 (£'000) Audited year
ended 31-Mar 2022
(£'000)
Earnings attributable to ordinary shareholders
Basic and diluted profit for the period 5,333 3,898 9,242
Share-based payments - IFRS 2 option charges 495 1,735 2,399
Amortisation of acquisition related intangibles 207 60 266
Exceptional costs (note 4) 352 187 231
Tax impact of adjustments (401) (457) (602)
Adjusted basic and diluted profits for the period and attributable earnings 5,986 5,423 11,536
Earnings per share - basic (pence) 9.01 6.82 15.92
Earnings per share - diluted (pence) 8.72 6.45 15.17
Adjusted earnings per share - basic (pence)(1) 10.43 9.48 19.87
Adjusted earnings per share - diluted (pence)(1) 9.89 8.76 18.62
1. Alternative performance measures are detailed in note 17.
DIVIDENDS
The Directors consider the Group's capital structure and dividend policy at
least twice a year ahead of announcing results and do so in the context of its
ability to continue as a going concern, to execute the strategy and to invest
in opportunities to grow the business and enhance shareholder value.
In August 2022, Tatton Asset Management plc paid the final dividend related to
the year ended 31 March 2022 of £5,012,000 representing a payment of 8.5p per
share.
In the year ended 31 March 2022, Tatton Asset Management plc paid the final
dividend related to the year ended 31 March 2021 of £4,284,000 representing a
payment of 7.5p per share.
In addition, the Company paid an interim dividend of £2,357,000 (2021:
£1,999,000) to its equity shareholders. This represents a payment of 4.0p per
share (2021: 3.5p per share).
7 GOODWILL
Intangible assets
(£'000)
Cost and carrying value at 31 March 2021 6,254
Recognised as part of a business combination 3,021
Balance at 30 September 2021 9,275
Recognised as part of a business combination 62
Balance at 31 March 2022 and 30 September 2022 9,337
IMPAIRMENT LOSS AND SUBSEQUENT REVERSAL
Goodwill is subject to an annual impairment review based on an assessment of
the recoverable amount from future trading. Where, in the opinion of the
Directors, the recoverable amount from future trading does not support the
carrying value of the goodwill relating to a subsidiary company then an
impairment charge is made. Such impairment is charged to the Consolidated
Statement of Total Comprehensive Income.
GOODWILL IMPAIRMENT TESTING
For the purpose of impairment testing, goodwill is allocated to the Group's
operating companies, which represents the lowest level within the Group at
which the goodwill is monitored for internal management accounts purposes.
Goodwill acquired in a business combination is allocated, at acquisition, to
the cash-generating units ("CGUs") or group of units that are expected to
benefit from that business combination. The Directors test goodwill annually
for impairment, or more frequently if there are indicators that goodwill might
be impaired. The Directors have considered the carrying value of goodwill at
30 September 2022 and do not consider that it is impaired.
GROWTH RATES
The value in use is calculated from cash flow projections based on the Group's
forecasts for the year ended 31 March 2023 which are extrapolated for a
further four years. The Group's latest financial forecasts, which cover a
three-year period, are reviewed by the Board.
DISCOUNT RATES
The pre-tax discount rate used to calculate value is 11.5% (2021: 10.8%). The
discount rate is derived from a benchmark calculated from a number of
comparable businesses.
CASH FLOW ASSUMPTIONS
The key assumptions used for the value in use calculations are those regarding
discount rate, growth rates and expected changes in margins. Changes in prices
and direct costs are based on past experience and expectations of future
changes in the market. The growth rate used in the calculation reflects the
average growth rate experienced by the Group for the industry.
From the assessment performed, there are no reasonable sensitivities that
result in the recoverable amount being equal to the carrying value of the
goodwill attributed to the CGU.
8. INVESTMENT IN JOINT VENTURES
Unaudited six months ended 30-Sep 2022 (£'000) Unaudited six months ended 30-Sep 2021 (£'000) Audited year ended
31-Mar 2022 (£'000)
Opening Investment - - -
Additions in the period 6,956 - -
Profit for the period after tax 40 - -
Closing Investment 6,996 - -
Additions in the Period relates to the acquisition of 50% of the share capital
of 8AM Global Limited for an initial consideration of £3,838,000 followed by
discounted deferred consideration of £3,118,000 (undiscounted deferred
consideration £3,501,000) based on certain performance measures. The initial
consideration was paid by way of shares in Tatton Asset Management plc.
9 INTANGIBLES
Computer software Client relationships (£'000) Brand Total
(£'000) (£'000) (£'000)
Cost
Balance at 1 April 2021 819 1,196 - 2,015
Acquired as part of a business combination - 2,838 98 2,936
Balance at 30 September 2021 819 4,034 98 4,951
Additions 211 - - 211
Disposals (24) - - (24)
Balance at 31 March 2022 1,006 4,034 98 5,138
Additions 114 - - 114
Balance at 30 September 2022 1,120 4,034 98 5,252
Accumulated amortisation and impairment
Balance at 1 April 2021 (399) (180) - (579)
Charge for the period (150) (60) - (210)
Balance at 30 September 2021 (549) (240) - (789)
Charge for the period (120) (201) (5) (326)
Disposals 24 - - 24
Balance at 31 March 2022 (645) (441) (5) (1,091)
Charge for the period (123) (202) (5) (330)
Balance at 30 September 2022 (768) (643) (10) (1,421)
Carrying amount
At 1 April 2021 420 1,016 - 1,436
At 30 September 2021 270 3,794 98 4,162
At 31 March 2022 361 3,593 93 4,047
At 30 September 2022 352 3,391 88 3,831
All amortisation charges on intangible assets are included within
administrative expenses in the Consolidated Statement of Total Comprehensive
Income.
10 PROPERTY, PLANT AND EQUIPMENT
Computer, office equipment and motor vehicles (£'000) Fixtures and fittings (£'000) Right-of-use assets (£'000) Total
(£'000)
Cost
Balance at 1 April 2021 432 477 931 1,840
Additions 17 - 60 77
Balance at 30 September 2021 449 477 991 1,917
Additions 57 - - 57
Disposals (161) - - (161)
Balance at 31 March 2022 345 477 991 1,813
Additions 31 3 - 34
Balance at 30 September 2022 376 480 991 1,847
Accumulated depreciation
and impairment (327) (207) (314) (848)
Balance at 1 April 2021 (327) (207) (314) (848)
Charge for the period (31) (48) (102) (181)
Balance at 30 September 2021 (358) (255) (416) (1,029)
Charge for the period (42) (47) (107) (196)
Disposals 161 - - 161
Balance at 31 March 2022 (239) (302) (523) (1,064)
Charge for the period (34) (48) (108) (190)
Balance at 30 September 2022 (273) (350) (631) (1,254)
Carrying amount
At 1 April 2021 105 270 617 992
At 30 September 2021 91 222 575 888
At 31 March 2022 106 175 468 749
At 30 September 2022 103 130 360 593
All depreciation charges are included within administrative expenses in the
Consolidated Statement of Total Comprehensive Income.
The Group leases buildings, IT equipment and a car. The Group has applied the
practical expedient for low value assets and so has not recognised IT
equipment within right-of-use assets.
The average lease term is five years. No leases have expired in the current
financial Period.
RIGHT-OF-USE ASSETS
Unaudited six months ended 30-Sep 2022 (£'000) Unaudited six months ended 30-Sep 2021 (£'000) Audited year
ended 31-Mar 2022
(£'000)
Amounts recognised in profit and loss
Depreciation on right-of-use assets (108) (102) (209)
Interest expense on lease liabilities (7) (11) (23)
Expense relating to short-term leases (31) (15) (30)
Expense relating to low value assets (1) (1) -
Total (147) (129) (262)
At 30 September 2022, the Group is committed to £59,000 (2021: £14,000) for
short-term leases. The total cash outflow for leases amounts to £166,000
(2021: £190,000).
11 TRADE AND OTHER RECEIVABLES
Unaudited six months ended 30-Sep 2022 (£'000) Unaudited six months ended 30-Sep 2021 (£'000) Audited year
ended 31-Mar 2022
(£'000)
Trade receivables 522 275 329
Prepayments and accrued income 3,348 3,165 3,442
Other receivables 32 5,125 34
Total trade and other payables 3,902 8,565 3,805
All trade receivable amounts are short term. The carrying value is considered
a fair approximation of their fair value. The Group applies the IFRS 9
simplified approach to measuring expected credit losses ("ECLs") for trade
receivables at an amount equal to lifetime ECLs. In line with the Group's
historical experience, and after consideration of current credit exposures,
the Group does not expect to incur any credit losses and has not recognised
any ECLs in the current year (2021: £nil).
The amounts due from related parties are net of provisions. The carrying value
of the provisions as at 30 September 2022 was £1,311,000 (2021: £1,311,000).
The decrease in Other receivables largely relates to the money owed to the
Group from the sale of shares on exercise of employee share options in the
period ended 30 September 2021 which was settled shortly after that date.
There are no such receivables in the current Period.
Trade receivable amounts are all held in sterling.
12 TRADE AND OTHER PAYABLES
Unaudited six months ended 30-Sep 2022 (£'000) Unaudited six months ended 30-Sep 2021 (£'000) Audited year
ended 31-Mar 2022
(£'000)
Trade payables 913 458 855
Amounts due to related parties 234 231 235
Accruals 2,521 3,307 3,468
Deferred income 155 92 98
Contingent consideration 5,722 3,000 2,486
Other payables 2,939 6,635 3,161
12,484 13,723 10,303
Less non-current portion:
Contingent consideration (5,722) (3,000) (2,486)
Other payables (129) (388) (261)
Total non-current trade and other payables (5,851) (3,388) (2,747)
Total current trade and other payables 6,633 10,335 7,556
The carrying values of trade payables, amounts due to related parties,
accruals and deferred income are considered reasonable approximation of fair
value. Trade payable amounts are all held in sterling.
13 FINANCIAL INSTRUMENTS
The Group finances its operations through a combination of cash resource and
other borrowings. Short-term flexibility is satisfied by overdraft facilities
in Paradigm Partners Limited which are repayable on demand.
FAIR VALUE ESTIMATION
IFRS 7 requires disclosure of fair value measurements of financial instruments
by level of 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).
· Inputs for the asset or liability that are not based on observable market
data (that is, unobservable inputs) (level 3).
All financial assets except for financial investments are categorised as Loans
and receivables and are classified as level 1. Financial investments are
categorised as Financial assets at fair value through profit or loss and are
classified as level 1 and the fair value is determined directly by reference
to published prices in an active market.
Financial assets at fair value through profit or loss (level 1)
Unaudited six months ended 30-Sep 2022 (£'000) Unaudited six months ended 30-Sep 2021 (£'000) Audited year
ended 31-Mar 2022 (£'000)
Financial investments in regulated funds or model portfolios 122 177 152
All financial liabilities except for contingent consideration are categorised
as Financial liabilities measured at amortised cost and are also classified as
level 1. The only financial liabilities measured subsequently at fair value on
level 3 fair value measurement represent contingent consideration relating to
a business combination.
Financial liabilities at fair value through profit or loss (level 3)
Contingent consideration £'000
Balance at 1 April 2021 -
Recognised on acquisition 3,000
Balance at 30 September 2021 3,000
Changes in fair value of contingent consideration (514)
Balance at 31 March 2022 2,486
Recognised on acquisition 3,118
Changes in the fair value of contingent consideration 118
Balance at 30 September 2022 5,722
14 EQUITY
Number
Authorised, called up and fully paid
At 1 April 2021 55,889,065
Issue of share capital on exercise of employee share options 1,016,349
At 30 September 2021 58,905,414
Issue of share capital on exercise of employee share options 9,473
At 31 March 2022 58,914,887
Issue of share capital on exercise of employee share options 237,962
Issue of share capital as payment for an acquisition 877,737
At 30 September 2022 60,030,586
15 SHARE-BASED PAYMENTS
During the Period, a number of share-based payment schemes and share options
schemes have been utilised by the Company.
(A) SCHEMES
(I) Tatton Asset Management plc EMI Scheme ("TAM EMI Scheme")
On 7 July 2017 the Group launched an EMI share option scheme relating to
shares in Tatton Asset Management plc to enable senior management to
participate in the equity of the Company. 3,022,733 options with a weighted
average exercise price of £1.89 were granted, exercisable in July 2021. There
have been nil (2021: 650,933) options exercised during the Period from this
scheme.
The scheme was extended on 8 August 2018, 1 August 2019, 28 July 2020, 15 July
2021 and 25 July 2022 with 1,720,138, 193,000, 1,000,000, 279,858 and 274,268
zero cost options granted in each respective year. These options are
exercisable on the third anniversary of the grant date.
The options granted in 2018 vested and became exercisable in August 2021.
There have been 50,000 (2021: 1,090,770) options exercised during the Period
from this scheme. 168,201 of these options lapsed in 2021.
The options granted in 2019 vested and became exercisable in August 2022.
There have been 139,500 options exercised during the Period from this scheme.
The options granted in 2020, 2021 and 2022 vest in August 2023, July 2024 and
July 2025 respectively provided certain performance conditions and targets,
set prior to grant, have been met. If the performance conditions are not met,
the options lapse.
A total of 2,806,544 options remains outstanding at 30 September 2022,
1,256,668 of which are currently exercisable.
4,250 options were forfeited in the Period (2021: 30,000). Within the accounts
of the Company, the fair value at grant date is estimated using the
appropriate models including both the Black-Scholes and Monte Carlo modelling
methodologies.
Number of share options granted (number) Weighted average price (£)
Outstanding at 1 April 2021 4,386,070 0.66
Granted during the period 279,858 -
Forfeited during the period (30,000) -
Lapsed during the period (168,201) -
Exercised during the period (1,741,703) 1.70
Outstanding at 30 September 2021 2,726,024 0.60
Exercisable at 30 September 2021 1,294,668 1.27
Outstanding at 1 October 2021 2,726,024 0.60
Granted during the period - -
Forfeited during the period - -
Exercised during the period - -
Lapsed during the period (2) -
Outstanding at 31 March 2022 2,726,026 0.60
Exercisable at 31 March 2022 1,294,668 1.27
Outstanding at 1 April 2022 2,767,026 0.60
Granted during the period 274,268 -
Forfeited during the period (4,250) -
Lapsed during the period - -
Exercised during the period (189,500) 0.50
Outstanding at 30 September 2022 2,806,544 0.59
Exercisable at 30 September 2022 1,256,668 1.31
(II) Tatton Asset Management plc Sharesave Scheme ("TAM Sharesave Scheme")
On 7 July 2017, 5 July 2018, 3 July 2019, 6 July 2020, 2 August 2021 and 4
August 2022 the Group launched all employee Sharesave schemes for options over
shares in Tatton Asset Management plc, administered by Yorkshire Building
Society. Employees are able to save between £10 and £500 per month over the
three-year life of each scheme, at which point they each have the option to
either acquire shares in the Company or receive the cash saved.
The 2019 TAM Sharesave scheme vested in August 2022 and 73,599 shares options
became exercisable. Over the life of the 2020, 2021 and 2022 TAM Sharesave
schemes it is estimated that, based on current savings rates, 114,220, 42,880
and 60,667 share options respectively will be exercisable. The exercise price
for these schemes is shown overleaf.
During the Period, 48,462 (2021: 49,803) options have been exercised and 2,232
(2021: 4,070) options have been forfeited.
Within the accounts of the Company, the fair value at grant date is estimated
using the Black-Scholes methodology for 100% of the options. Share price
volatility has been estimated using the historical share price volatility of
the Company, the expected volatility of the Company's share price over the
life of the options and the average volatility applying to a comparable group
of listed companies. Key valuation assumptions and the costs recognised
in the accounts during the Period are noted in (B) and (C) overleaf
respectively.
Number of share options granted (number) Weighted average price (£)
Outstanding at 1 April 2021 101,849 1.73
Granted during the period 60,779 2.17
Forfeited during the period (4,070) 2.13
Exercised during the period (49,803) 1.86
Outstanding at 30 September 2021 108,755 2.03
Exercisable at 30 September 2021 9,473 1.90
Outstanding at 1 October 2021 108,755 2.03
Granted during the period 17,089 2.28
Forfeited during the period (1,854) 2.22
Exercised during the period (9,473) 1.86
Outstanding at 31 March 2022 114,517 2.14
Exercisable at 31 March 2022 - -
Outstanding at 1 April 2022 114,517 2.14
Granted during the period 34,815 2.45
Forfeited during the period (2,232) 3.11
Exercised during the period (48,462) 1.79
Outstanding at 30 September 2022 98,638 2.37
Exercisable at 30 September 2022 25,137 1.79
(B) VALUATION ASSUMPTIONS
Assumptions used in the option valuation models to determine the fair value of
options at the date of grant were as follows:
EMI scheme Sharesave scheme
2022 2021 2020 2019 2022 2021 2020 2019
Share price at grant (£) 4.03 4.60 2.84 2.12 4.25 4.80 2.85 2.14
Exercise price (£) - - - - 3.26 3.60 2.29 1.79
Expected volatility (%) 34.05 33.76 34.80 30.44 34.05 33.76 34.80 30.44
Expected life (years) 3.00 3.00 3.00 3.00 3.00 3.00 3.00 3.00
Risk free rate (%) 1.71 0.24 (0.14) 0.35 1.71 0.12 (0.57) 0.35
Expected dividend yield (%) 3.11 2.39 3.38 3.96 3.11 2.39 3.38 3.96
(C) IFRS 2 SHARE-BASED OPTION COSTS
Unaudited six months ended 30-Sep 2022 (£'000) Unaudited six months ended 30-Sep 2021 (£'000) Audited year
ended 31-Mar 2022 (£'000)
TAM EMI scheme 463 1,620 2,347
TAM Sharesave scheme 32 22 52
495 1,642 2,399
16 RELATED PARTY TRANSACTIONS
There have been no related party transactions that have taken place during the
Period that have materially affected the financial position or the performance
of the Group. There were also no changes to related party transactions from
those disclosed in the 2022 Annual Report and Financial Statements that could
have a material effect on the financial position or the performance of the
Group. Transactions between the Company and its subsidiaries have been
eliminated on consolidation and are not disclosed. There were no other
transactions with related parties which were not part of the Group during the
Period, with the exception of remuneration paid to key management personnel.
17 ALTERNATIVE PERFORMANCE MEASURES ("APMs")
INCOME STATEMENT MEASURES
APM Closest equivalent measure Reconciling items to their statutory measure Definition and purpose
Adjusted operating profit before separately disclosed items Operating profit Exceptional items, share-based payments and amortisation of acquisition An important measure where exceptional items distort the understanding of the
related intangibles. See note 4. operating performance of the business.
Allows comparability between periods. See also note 2.6.
Adjusted operating profit margin before separately disclosed items Operating profit Exceptional items, share-based payments and amortisation of acquisition An important measure where exceptional items distort the understanding of the
related intangibles. See note 4. operating performance of the business.
Allows comparability between periods. See also note 2.6.
Adjusted profit before tax before separately disclosed items Profit before tax Exceptional items, share-based payments and amortisation of acquisition An important measure where exceptional items distort the understanding of the
related intangibles. See note 4. operating performance of the business.
Allows comparability between periods. See also note 2.6.
Adjusted earnings per share - basic Earnings per share - basic Exceptional items, share-based payments and amortisation of acquisition An important measure where exceptional items distort the understanding of the
related intangibles. See note 4. operating performance of the business.
Allows comparability between periods. See also note 2.6.
Adjusted earnings per share - diluted Earnings per share - diluted Exceptional items, share-based payments and amortisation of acquisition An important measure where exceptional items distort the understanding of the
related intangibles and the tax thereon. The dilutive shares for this measure operating performance of the business.
assume that all contingently issuable shares will fully vest. See note 6.
Allows comparability between periods. See also note 2.6.
Net cash generated from operations before separately disclosed items Net cash generated from operations Exceptional items, share-based payments and amortisation of acquisition An important measure where exceptional items distort the understanding of the
related intangibles. See note 4. operating performance of the business.
Allows comparability between periods. See also note 2.6.
OTHER MEASURES
APM Closest equivalent measure Reconciling items to their statutory measure Definition and purpose
Tatton - Assets under management ("AUM") and net inflows None Not applicable AUM is representative of the customer assets and is a measure of the value
of the customer base. Movements in this base are an indication of performance
in the year and growth of the business to generate revenues going forward.
Net inflows measure the net of inflows and outflows of customers assets in
the year.
Tatton - Assets under influence ("AUI") None Not applicable AUI is representative of the customers assets which are not directly managed
by Tatton but over which we hold significant influence due to our shareholding
in the company in which they are managed. Movements in this base are an
indication of our participation in the performance of the joint venture and
its growth in order to generate Tatton's share of profits going forward.
Paradigm Consulting members and growth None Not applicable Alternative growth measure to revenue, giving an operational view of growth.
Paradigm Mortgages lending, member firms and growth None Not applicable Alternative growth measure to revenue, giving an operational view of growth.
Dividend cover None Not applicable Dividend cover (being the ratio of the proposed final dividend against diluted
earnings per share before exceptional items and share-based charges)
demonstrates the Group's ability to pay the proposed dividend.
18 EVENTS AFTER THE REPORTING PERIOD
There were no material post balance sheet events.
19 CONTINGENT LIABILITIES
At 30 September 2022, the Directors confirmed there were contingent
liabilities of £nil (2021: £nil).
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