REG - XPS Pensions Group - Final Results
22/06/2023 07:00
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RNS Number : 5157D XPS Pensions Group PLC 22 June 2023
22 June 2023
XPS Pensions Group plc
Delivering another year of record growth
Final results for the year ended 31 March 2023
XPS Pensions Group plc ("XPS" or the "Group"), the Pensions Advisory and
Administration business, is pleased to announce its full year results for the
year ended 31 March 2023 ("FY 2023").
Financial Highlights:
Continuing operations FY 2023 FY 2022((1)) Change YoY
Pensions Actuarial and Consulting £77.4m £62.2m 24%
Pensions Investment Consulting £18.0m £13.7m 31%
Total Advisory £95.4m £75.9m 26%
Pensions Administration £57.5m £52.3m 10%
SIP £9.4m £6.1m 54%
NPT £4.3m £4.3m -
Total Group Revenue £166.6m £138.6m 20%
Adj. EBITDA((2)) £42.4m £34.1m 24%
Profit before tax £19.1m £16.9m 13%
Basic EPS 7.7p 4.6p 67%
Adj. diluted EPS((2)) 12.6p 10.2p 24%
Full year dividend 8.4p 7.2p 17%
((1) ) Management responsibilities and operations for a small
part of the business moved during the year from the Pensions division to
Administration. Related revenue was £1.5 million, and the prior year (which
has been restated) was also £1.5 million.
((2) ) Adjusted measures exclude the impact of acquisition
related amortisation, share based payments, exceptional costs and the fair
value adjustment to contingent consideration
· Strong client demand, inflationary fee increases and bolt on
M&A drove 20% growth in Group revenues to £166.6 million (organic growth
of 17% year on year)
· Operational gearing coming through with adjusted EBITDA ((2)) up
24% YoY, ahead of revenue growth despite inflationary pressures in our cost
base
· Highest YoY growth in Pensions Actuarial Consulting and
Investment Consulting since listing - 24% and 31% respectively - driven by
inflationary fee increases, strong client demand due to regulatory changes and
market volatility
· Pensions Administration revenue grew 10% YoY driven by new client
wins and ongoing project work. Increased inflation partially reflected in
contractual revenue growth, but lag delays full impact into FY24
· SIP revenues up 54% with strong underlying sales, full year
impact of the MJF acquisition and increase in the bank base rate
· NPT revenues flat YoY with AUM at 31 March 2023 over £1.4
billion
· Strong balance sheet supported by highly cash generative platform
- operating cash-flow conversion of 99%
· Net debt/adjusted EBITDA((2)) of 1.38x at 31 March 2023 (31 March
2022: 1.74x)
· Statutory profit before tax up 13% YoY
· Adjusted diluted EPS((2)) up 24% YoY to 12.6p
· Continuing with progressive dividend policy - final Dividend of
5.7p resulting in total dividends for the year of 8.4p up 17% YoY
Operational Highlights:
· Sixth consecutive year of growth since listing - performance
underscores the non-cyclical and resilient nature of the business
· Strong growth in higher margin value-add services including Risk
Transfer, DC Consulting, Scheme Secretarial and Corporate Consulting - areas
where we have significantly bolstered our capabilities in the last two years
· Good new business performance - winning new clients across all
our business units
· New administration platform, which will drive operational
efficiency and new business opportunities, developed during the year and
successfully went live in June 2023, on time and on budget
· Delivered on our M&A strategy with the acquisition of
Penfida, boosting our capability in employer covenant advice, a growing area
in which our clients need support
· Agile response to LDI crisis with strong client feedback and an
enhanced reputation, bolstering a strong new business pipeline in Investment
Consulting
· Strong brand, enhanced by multiple industry awards - 'Pensions
Actuarial Consulting Firm of the Year', 'Investment Consulting Firm of the
Year' and 'Third Party Administrator of the Year' won in September 2022 - the
first time a firm has won all three awards simultaneously
· Strong employee-centric culture, with an employee net promoter
score of +33, increased from +5 in FY 2022. Also named as one of the Best
Places to Work 2023 by The Sunday Times
· Continued focus on sustainability within the business, notable
milestones achieved:
o Fully carbon neutral for the second year in a row (scope 1, 2 and 3
emissions)
o Retained signatory to the FRC's Stewardship Code
Paul Cuff, Co-CEO of XPS Pensions Group, commented:
"We are pleased with the Group's performance, and proud of our people. It
was a very busy year indeed, as we helped our clients to navigate volatile
financial markets, including of course the gilts crisis in September and
October last year. Our people worked incredibly hard and provided excellent
support throughout, and we received fantastic feedback from our clients.
With our reputation enhanced we are continuing to see excellent opportunities
to grow our client base in this area.
It was also a year in which many of the investments we have made in the
Group's services really paid off, as we grew strongly and gained real market
traction in areas such as risk transfer work and DC consulting. This,
combined with new client wins coming onboard, and against the backdrop of
higher contractual inflationary fee increases coming through, drove a record
year of growth for the firm.
We were delighted to welcome new colleagues to the Group through the
acquisition of Penfida, which enhanced our existing capability in the area of
employer covenant advice. This is in line with our strategy to offer a
market leading service across the full range of support that our clients
need."
Ben Bramhall, Co-CEO of XPS Pensions Group, commented:
"The delivery of our new administration platform, Aurora, is a big milestone
for our Pensions Administration business. It was delivered on time and on
budget and is now live. We are excited as Aurora is truly cutting edge and
will deliver a better experience for our clients and their members. It is
already driving new business opportunities for us in this area.
We remain a truly employee-centric organisation and were very proud of both
our staff survey results, with an employee net promoter score of +33, and to
be recognised in the Sunday Times annual survey as one of the best big
companies to work for in the UK.
Our culture is set by everyone at our firm, and we would like to thank all of
our people for the way they look after each other and our clients. We are
proud of what they have achieved in what has been a brilliant year for XPS."
Outlook
The FY 2023 results demonstrate the non-cyclical, resilient and predictable
nature of our business and the opportunities for growth. Our brand has
strengthened further in the year with multiple awards, we have won further new
mandates and have achieved high levels of client and staff satisfaction. The
investments we have made into high-growth, high-margin areas are increasingly
being reflected in our earnings.
We expect the demand for our services to remain high as we help our clients
navigate the complex and evolving regulatory backdrop as well as economic and
financial market developments. We have continued to grow market share, but
with this still under 10% there are continued opportunities to grow, supported
by both market and regulatory tailwinds. We expect the operational gearing
that has come through this year to be a continued feature of our results in
the future.
The Group has made a strong start to the new financial year with continued
high levels of demand for our services particularly within Advisory and
further success in winning new business. We remain confident in delivering
against our expectations for the current year.
-Ends-
For further information, contact:
XPS Pensions Group
Snehal Shah +44 (0)20 3978 8626
Chief Financial Officer
Canaccord Genuity(Joint Broker) +44 (0)20 7523 8000
Adam James
Partrick Dolaghan
RBC Capital Markets (Joint Broker) +44 (0)20 7653 4000
James Agnew
Jamil Miah
Media Enquiries:
Camarco
Gordon Poole +44 (0)20 3757 4997
Rosie Driscoll +44 (0)20 3757 4981
Notes to Editors:
XPS Pensions Group is a leading pension consulting and administration
business focussed on UK pension schemes. XPS combines expertise, insight and
technology to address the needs of over 1,500 pension schemes and their
sponsoring employers on an ongoing and project basis. We undertake pensions
administration for over 1 million members and provide advisory services to
schemes and corporate sponsors in respect of schemes of all sizes, including
81 with assets over £1bn.
Forward Looking Statements
This announcement may include statements that are forward-looking in nature.
Forward-looking statements involve known and unknown risks, assumptions,
uncertainties and other factors which may cause the actual results,
performance or achievements of the Group to be materially different from any
future results, performance or achievements expressed or implied by such
forward-looking statements. These forward-looking statements are made only as
at the date of this announcement. Nothing in this announcement should be
construed as a profit forecast. Except as required by applicable law,
regulation or stock exchange rules, the Group undertakes no obligation to
update, revise or change any forward-looking statements to reflect events or
developments occurring after the date such statements are published.
The release, publication, transmission or distribution of this announcement in
jurisdictions other than the United Kingdom may be restricted by law and
therefore persons in such jurisdictions into which this announcement is
released, published, transmitted or distributed should inform themselves about
and observe such restrictions. Any failure to comply with the restrictions may
constitute a violation of the securities laws of any such jurisdiction.
Co-Chief Executives' review
Sixth consecutive year of growth
A year of record revenues, record dividends, a strategic bolt-on acquisition,
multiple award wins, a strong culture with excellent employee feedback
sustainably delivered including carbon neutrality - shareholders would be
forgiven for thinking they are reading last year's Co-CEO Statement. There's
even another five-year anniversary to mention. It is true all the above were
milestones achieved during the year ended 31 March 2022 but 12 months on and
many of those same achievements have been repeated, and in many cases
bettered. This is testament to the successful execution of the strategy we
have pursued since we listed to deliver our societal purpose.
Record revenues: the year ended 31 March 2023 saw a record 20% increase in
year on year revenues to £166.6 million, of which 17% was organic growth.
Record dividends: the Board is proposing a 17% increase in the full-year
payout to 8.4p per share.
Strategic acquisition: this year we acquired Penfida, a leading covenant
adviser to UK pension funds. Just as the previous year's acquisition of
Michael J Field brought scale to our SIP division, Penfida has done the same
for our existing employer covenant practice. Together with our award-winning
Administration, Actuarial and Investment Advisory divisions, XPS is now a
one-stop shop of scale for all services needed by pension trustees and
sponsoring employers.
Multiple awards: we won arguably the three most important awards at the 2022
Professional Pensions' UK Pensions Awards - Third Party Administrator of the
Year; Actuarial and Pensions Consultancy of the Year (second consecutive
year); and Investment Consultancy of the Year (second consecutive year). This
represents the first time all three of these categories have been won outright
by one company in the same year - third-party validation of our continued
excellence in client service and innovation. Our SIP business also won Best
SIP Provider at the Moneyfacts awards.
Carbon neutral: for the second year in a row, our activities have been carbon
neutral, just one example of how we strive to do business sustainably. This
has been achieved through a combination of a reduction in our direct footprint
and the purchase of high-quality carbon offsets. Fostering a strong and caring
culture is another, and with this in mind it is encouraging to note that 98%
of our people rate XPS a good place to work.
Fifth anniversary: 2023 marks the fifth anniversary of the launch of XPS as a
new brand in the market with clear objectives to be the best for people and
for clients.
By developing content, investing in people and innovating consistently, our
brand has grown stronger each year ever since, so that five years on we are
reporting revenues of £166.6 million. Furthermore, this 60% revenue growth
has been achieved during a period which included the pandemic, heightened
macroeconomic uncertainty and decades-high inflation, evidence of our
non-cyclical, all-weather end markets - our defined benefit (DB) and defined
contribution (DC) pension scheme clients require our advice and services
regardless of the prevailing economic environment.
The progress made is also down to our people. Without their commitment and
expertise, becoming the first company to win all three key awards at the 2022
Professional Pensions' UK Pensions Awards while reporting a sixth consecutive
year of growth would have been impossible.
Record financial performance
Total Group revenues for the year ended 31 March 2023 came in at a record
£166.6 million, a 20% increase on FY 2022's £138.6 million. Of this, 17% of
the growth was organic.
The record revenues represent a step-change compared to the mid-to-high
single-digit revenue growth we have reported for each of the years since our
listing. This is partly down to higher inflation being passed through to
clients and onboarding of new client wins but is also due to a considerable
amount of regulatory and market change - the two chief drivers of activity in
our client base. The record revenue performance can also be attributed to the
scaling up of our platform into high-growth areas - the product of investment
in staff, technology and acquisitions to respond to these market and
regulatory changes. Because of this, we are now able to service larger
pensions schemes and offer a wider range of value-add services. The increased
scale of our capabilities is being reflected in our financial performance, a
trend we expect to continue going forward.
In the past, the investments we have made in our business have meant growth in
earnings has not outpaced revenues. Last year, we reported a significant
narrowing in this historical revenue and earnings gap. We also stated that we
expected this metric to improve further in the years ahead as our efficiency
drive and investment into higher-growth areas increasingly translated into
higher margins. This has proven to be the case with FY 2023 adjusted EBITDA
increasing 24% to £42.4 million (FY 2022: £34.1 million); statutory profit
before tax rising 13% to £19.1 million (FY 2022: £16.9 million); and
adjusted diluted EPS up 24% to 12.6p (FY 2022: 10.2p). The improved
profitability and continued confidence in future prospects has enabled us to
propose a 17% increase in the full-year dividend, another record.
Divisionally, Advisory (comprising Pensions Actuarial & Consulting and
Pension Investment Consultancy) was the top performer with full-year revenues
growing 26% to £95.4 million (FY 2022: £75.9 million), while Administration
increased revenues 10% to £57.5 million (FY 2022: £52.3 million).
Pension Actuarial & Consulting revenues grew 24% to £77.4 million (FY
2022: £62.2 million) thanks to inflationary fee increases, new client wins
such as BT Group plc contributing for a full year and elevated levels of
activity centred around regulatory/market-driven dynamics. Risk transfer work
was a stand-out performer with revenues rising sharply to £6.4 million
compared to £1.5 million the previous year thanks to big new mandate wins.
This follows the appointment of a Head of Risk Settlement and further team
hires in 2022.
Pension Investment Consulting has also been a beneficiary of new business
wins. Increased demand from clients for support in navigating regulatory and
financial market upheaval (including the gilts crisis in autumn 2022) has also
been a tailwind, as has inflation-aligned fee increases. In all, YoY revenues
grew 31% YoY to £18.0 million (FY 2022: £13.7 million).
Pension Administration revenues rose 10% to £57.5 million (FY 2022: £52.3
million) helped by new client wins including Peugeot and BAA and a full year
of our outsourced contract with IBM. The wins saw the number of members we
have under administration surpass the one million mark for the first time. We
see further growth opportunities within Administration and continue to invest
in our capability here. For example, this year we successfully developed our
own proprietary Administration platform which, as well as giving us greater
control, will drive efficiencies and differentiate us as we look to win
further mandates.
SIP revenues benefited from a full-year contribution from the acquisition of
the Michael J Field SIPP and SSAS books, as well as strong organic growth and
the higher bank base rate. Overall, SIP revenues rose 54% to £9.4 million (FY
2022: £6.1 million). We continue to expand the distribution channels for our
SIPP offering and we were recently added to the panel of recommended SIPP
providers for St James' Place, one of the UK's leading financial advisers. We
view our inclusion on the panel as a major endorsement of our SIPP offering.
National Pensions Trust (NPT), our defined contribution (DC) master trust,
posted another year of growth in assets under management (AUM) which grew 8%
to £1.4 billion (FY 2022: £1.3 billion), while revenues came in flat at
£4.3 million (FY 2022: £4.3 million) driven by lower asset prices early in
the financial year as well as competitive price pressures. Growth in AUM was
driven by an increase in client numbers to 152 during the year but was
suppressed a little by reductions in asset prices.
Four core strategic pillars to capture growth in our all-weather markets
Our markets are driven by regulatory and market change rather than by economic
cycles - pension schemes require support to navigate the ever-changing
regulatory/market landscape, which leads to increased demand for services and
in turn market growth. Our markets are therefore all-weather and to capture
the regulatory and market-driven growth, we have in place four core strategic
pillars:
1. Regulatory change as a driver of activity
2. Growth through expanding services
3. Growing market share
4. Growth through M&A
Every time a regulatory change is made, pension schemes require bespoke advice
and guidance on how the change affects them. Examples of this in action
include the November 2020 GMP equalisation ruling which stipulated that
companies rectify the unequal treatment of men and women who were members of
pension schemes in the 1980s and 1990s. The ruling triggered a work stream
that did not exist prior to November 2020 and will take years to complete.
Further regulatory change is on the horizon. The Single Code of Practice,
which is focused on trustees' governance requirements, is expected to come
into force later this year or in early 2024.
Compared to regulations, market-driven change has been relatively muted in
recent years thanks to the prevalence of low interest rates. Low interest
rates have had a largely negative impact on schemes' financial positions, but
the stable environment meant strategy/advice did not require frequent resets.
All this changed in 2022 with aggressive rate hikes to tackle inflation
causing a paradigm shift in interest rates.
By reducing pension scheme liabilities, higher interest rates are generally
positive for pension schemes - we estimate in aggregate schemes moved from a
deficit of around £300 billion at the start of 2022 to a surplus of around
£60 billion by the end of the year. This was a positive move for many of our
clients, but one that has generated much work for pension schemes. Clients
have needed wide-ranging advice on the consequences for them specifically,
with many seeking support to lock in improvements through changes in their
investment strategy. In some cases employers have sought to reduce their cash
commitments towards deficits. This has caused a major uptick in work, as all
of our clients have needed to reassess the 'journey plans' they have in place.
We expected to remain busy supporting clients for the foreseeable future,
particularly against the backdrop of evolving regulations.
Another consequence of the increase in long-term interest rates is that bulk
annuities, insurance policies purchased by defined benefit schemes to secure
members' benefits, have become more affordable for many schemes. The bulk
annuities market has grown in recent years as pension schemes have sought to
de-risk and transaction volumes are expected to rise further, from around
£30-40 billion a year to £50-60 billion a year in 2024 and beyond. High
interest rates are expected to spur this further growth, as financially
healthier pension schemes re-evaluate de-risking options. This will generate
more work for our Risk Transfer team, which provides all the support required
including broking insurance transactions and all of the 'behind the scenes'
additional work that is required, which typically includes complex data
cleansing projects. We expect tangential growth opportunities to open up too;
one such opportunity is working more closely with insurance companies that
take on the liabilities of pension schemes in these transactions. Insurers are
resource constrained and frequently outsource to meet some of their needs and
we therefore see considerable scope to expand our footprint here.
Aside from higher interest rates, the Liability Driven Investment (LDI) crisis
was the standout market development of 2022. LDI allows pension schemes to
hedge against volatility and financial risk caused by moves in interest rates.
If these risks are not hedged the risks can be material - for a typical scheme
a 1% fall in interest rates could increase the mark to market value of the
scheme's liabilities by 25%, all else being equal, which can put huge pressure
on cash funding requirements and company balance sheets. LDI funds have
protected schemes from sharply widening deficits as interest rates fell during
the last 20 years. What triggered the 2022 crisis was the speed of interest
rate moves - bond yields rose 1% in the space of three days causing bond
prices to fall 25%. Whilst in terms of funding levels this resulted in an
improvement of the financial position of many schemes it put LDI funds under
stress, with many facing significant liquidity challenges. Clients needed
advice to navigate the crisis. This gave us a real chance to differentiate
ourselves and we are very proud of how well we looked after our clients.
Despite the crisis, LDI continues to have an important role to play,
particularly in helping to protect the improved financial position many
pension schemes find themselves in today. There are learnings to be had
though. Schemes need to ensure they invest in sound LDI funds with strong
controls and more oversight is required. Post-crisis, we are offering an
enhanced LDI reporting and oversight service that is open to schemes,
including those that are not clients - a further example of market changes
giving rise to growth opportunities and our response to it.
M&A is a route to growing market share, and/or addressing any gaps in our
capability. This year we acquired Penfida, a firm that specialises in
'employer covenant' advice - this is advice that pension trustees need about
the strength of the sponsoring employer that stands behind the scheme. We had
a team in this area of work, but it was small - the addition of Penfida brings
scale to our existing offering, in the one remaining area in the pensions
business where our presence had been sub-scale. We will continue to look at
M&A and partnership opportunities which we believe make strategic sense as
well as those that allow us to expand into tangential markets, for example,
around support for insurers.
We value our people
Our revenues are not the only area seeing growth. So too is the number of our
people. The year under review saw our numbers increase by a further 200 so
that today our employee count stands at over 1,600. Regardless of how many we
are, we take our responsibility to every one of our people seriously. Our
people work hard for the Group and the Group must work hard for our people.
This is why we have a growing number of employee committees and networks as
part of our inclusion and diversity ('I&D') drive so that all our people
feel they are a part of XPS regardless of background, gender or ethnicity. It
is why we introduced our flexible working model, My XPS My Choice, last year
and why, during the year under review, we awarded an additional mid-year pay
rise to all staff (apart from those in senior positions) in response to the
cost-of-living crisis.
We are proud of our eNPS of +33%, a very high score for a professional
services firm, and that 89% of our people think we are truly committed to
I&D. We will continue to work hard for our people, caring for their
wellbeing, supporting their many volunteering efforts and providing
opportunities for career progression. Not only is this the right thing to do
but it also helps attract and retain talented people.
Everyone at XPS plays a part in the continued success of the Group. One
individual who has played an invaluable role in XPS's success to date is Tom
Cross Brown, who was our Chairman until September 2022. Tom had held the Chair
since our listing and has therefore overseen tremendous change at the Company.
We thank him wholeheartedly for the substantial contribution he has made over
the years and we and the rest of the Board wish him all the best with his
retirement.
We value our environment
Environmental and climate considerations shape our strategy and culture. We
are proud of the growth we have achieved to date but we are equally proud of
our efforts to ensure we grow in a sustainable way. The year under review was
the second in which XPS has been a carbon-neutral business. We have reduced
our emissions and additionally as with last year, we achieved this by
purchasing UN Approved Carbon Credits that cover our own Scope 1 and 2
emissions, as well as Scope 3 emissions produced by our suppliers.
Carbon neutrality is not the sum of our ambitions. Our ultimate aim is to
achieve a significant reduction in our direct carbon footprint which we aim to
accomplish as part of our science-based net zero objective, which we committed
to in 2023. Our pledge includes ambitious targets to halve our operational
Scope 1 and 2 emissions by 2030, sourcing 100% renewable energy in all our
offices, while promoting a low-carbon culture amongst our staff and suppliers.
Ultimately this can support our ambition of reducing all emissions to net zero
by 2050.
Outlook
The FY 2023 results demonstrate the non-cyclical, resilient and predictable
nature of our business and the opportunities for growth. Our brand has
strengthened further in the year with multiple awards, we have won further new
mandates and have achieved high levels of client and staff satisfaction. The
investments we have made into high-growth, high-margin areas are increasingly
being reflected in our earnings.
We expect the demand for our services to remain high as we help our clients
navigate the complex and evolving regulatory backdrop as well as economic and
financial market developments. We have continued to grow market share, but
with this still under 10% there are continued opportunities to grow, supported
by both market and regulatory tailwinds. We expect the operational gearing
that has come through this year to be a continued feature of our results in
the future.
The Group has made a strong start to the new financial year with continued
high levels of demand for our services particularly within Advisory and
further success in winning new business. We remain confident in delivering
against our expectations for the current year.
Paul
Cuff
Ben Bramhall
Co-Chief Executive
Officer
Co-Chief Executive Officer
21 June
2023
21 June 2023
FINANCIAL REVIEW
The business has performed strongly with revenues growing 20% year on year;
17% organically. The revenue growth has been delivered efficiently, with total
staff cost growth now below revenue growth. We have continued to invest in
areas such as risk transfer and member analytics and made capital investment
in developing our own administration platform which will further enhance our
operational gearing in the future.
Significant accounting matters
Adjusted numbers
We continue to show adjusted numbers in our results to better reflect the
underlying business performance. The adjusted numbers exclude exceptional and
non-trading items such as the amortisation of acquired intangible assets as
well as share-based payment costs. The exceptional and non-trading items are
disclosed in the notes to the financial statements. These alternative
performance measures may differ from those defined by other entities but help
to explain the progress within the underlying business.
Group income statement
FY 2023 FY 2022((1)) Change
£m £m %
Revenue
Pensions Actuarial & Consulting 77.4 62.2 24%
Pensions Investment Consulting 18.0 13.7 31%
Total Advisory 95.4 75.9 26%
Pensions Administration 57.5 52.3 10%
SIP 9.4 6.1 54%
NPT 4.3 4.3 -
Total revenue 166.6 138.6 20%
Adj. EBITDA2 42.4 34.1 24%
Depreciation & amortisation (5.5) (5.3) (4%)
Adj. EBIT2 36.9 28.8 28%
Exceptional & non-trading items (14.2) (9.8) (45%)
Net finance expense (3.6) (2.1) (71%)
Profit before tax 19.1 16.9 13%
Income tax expense (3.3) (7.5) 56%
Profit after tax 15.8 9.4 68%
1 Management responsibilities and operations for a small part of the
business moved during the year from the Pensions division to Administration.
Related revenue was £1.5 million, and the prior year (which has been
restated) was also £1.5 million.
2 Adjusted measures exclude the impact of exceptional and
non-trading items: acquisition-related amortisation, share-based payments,
corporate transaction costs, restructuring costs and other items considered
exceptional by virtue of nature, size and incidence. See note 2 for details
of exceptional and non-trading items.
Revenue
Total Group revenues grew 20% year on year; 17% organically.
Pensions Actuarial and Consulting is the Group's largest business. The
division achieved 24% year on year growth in revenues, due to high client
activity levels driven by continued regulatory changes as well as inflationary
increases in fees. The Penfida acquisition in the year has contributed £2.3
million of the growth.
Pensions Investment Consulting had another strong year with a number of new
client mandates, continued demand driven by regulatory changes and financial
market volatility as well as inflationary fee increases. The LDI crisis
following the September mini-budget led to a significant increase in client
activity. Revenues in this division grew 31% year on year.
Pensions Administration revenues grew 10% year on year with a number of new
client wins coming on stream during the year and increased levels of project
work. As with the advisory business, inflationary increases in fees also drove
the growth in the year. Pensions Administration accounted for 35% of the Group
revenues (FY 2022: 38%).
SIP revenues were up 54% on prior year, due to strong underlying sales, and
increases in commission due to the base rate increases in the year. The
acquisition of the trade and assets of Michael J Field Consulting Actuaries
("Michael J Field") completed in February 2022, and this accounted for £2.0
million of the revenue in FY 2023.
The National Pension Trust (NPT) revenues were flat year on year; driven by
competitive price pressures, asset price volatility partially offset by
increased contributions paid into the trust in the year. Total assets under
management are now over £1.5 billion.
Operating costs
Total operating costs (excluding exceptional and non-trading items) for the
Group grew by 19% or £19.7 million year on year. The main drivers for the
cost increases are an increase in headcount as the business grew (1,574 FTE v
1,442 last year), inflationary pay increases including a mid-year salary
increase for all our people below Partner level amounting to c. £1.5 million
additional cost for the year, higher bonus cost commensurate with the strong
financial performance and inflationary increases in other operating costs.
Despite the high inflation impacting our costs, the Group has delivered
further operational gearing with adjusted EBITDA growing by 24% year on year -
ahead of the Group revenue growth of 20%. Adjusted EBITDA margin was 25.5% (FY
2022: 24.6%). Statutory profit before tax grew by 13% year on year.
Exceptional and non-trading items
Exceptional and non-trading items in the year totalled £14.2 million (FY
2022: £9.8 million). Amortisation of acquired intangible assets amounted to
£6.9 million (FY 2022: £6.6 million). Share-based payment charges were £4.7
million (FY 2022: £3.9 million) with higher levels of vesting expected due to
the strong financial performance of the Group. The Group also incurred
corporate transaction costs of £2.9 million (FY 2022: £0.3 million) in the
year. Included within that is £0.8 million of contingent consideration in
respect of the acquisition of Penfida Limited. The maximum contingent
consideration of £3.4 million would be payable on the second anniversary of
the acquisition subject to business performance which includes retention of
clients as well as continued employment of key employees. As continued
employment is one part of the contingent consideration test, according to IFRS
3, the entire contingent consideration must be treated as a post transaction
employment cost accruing over the deferment period of two years. The
contingent consideration is material in size and it is one-off in nature. As
such, in line with the Group's accounting policies, it has been classified as
an exceptional item. If the entire contingent consideration is not payable
at the end of the two year period, any resulting credit will also flow through
the exceptional category. The remainder £2.1 million of corporate
transaction costs relate to the acquisition of Penfida Limited and other
potential M&A opportunities explored by the Group in the year. These
costs have been partially offset by a credit of £0.2 million relating to the
write back of contingent consideration for the acquisition of the business of
Michael J Field completed in February 2022.
Tax on the exceptional and non-trading items was a credit of £2.9 million (FY
2022: charge of £2.5 million). The charge in the prior year was due to the
revaluation of deferred tax liabilities as a consequence of the increase in
corporation tax from 1 April 2023 to 25%. The credit in the current year is
driven by the unwinding of deferred tax liabilities linked to intangible
assets acquired in previous periods.
Net finance costs
Net finance costs for the year were £3.6 million (FY 2022: £2.1 million).
The increase is due to the increases in the bank base rate during the year,
along with a modest increase in the loan balance.
Taxation
A tax charge of £6.2 million (FY 2022: £5.0 million) was recognised on
adjusted profits (before exceptional and non-trading items) which represents
an effective tax rate of 19% (FY 2022: 19%). The Group also recognised a tax
credit of £2.9 million (FY 2022: charge of £2.5 million) on exceptional and
non-trading items, which resulted in an overall tax charge for the year of
£3.3 million (FY 2022: £7.5 million). As previously disclosed, the increase
in corporation tax in FY 2024 to 25% drove an increase in tax charges in the
prior year as the deferred tax liabilities were revalued at the higher rate.
Our businesses generate considerable tax revenue for the government in the UK.
For the year ended 31 March 2023, we paid corporation tax of £4.9 million (FY
2022: £3.9 million); we collected employment taxes of £27.0 million (FY
2022: £22.5 million) and VAT of £24.7 million (FY 2022: £21.3 million).
Additionally, we have paid £1.2 million (FY 2022: £1.2 million) in business
rates. The total tax contribution of the Group was therefore £57.8 million
(FY 2022: £48.9 million), which equates to 35% of revenue (FY 2022: 35%).
EPS
Basic EPS for FY 2023 grew 67% year on year to 7.7p (FY 2022: 4.6p) owing to
the strong financial performance of the Group. Adjusted fully diluted EPS grew
24% year on year to 12.6p in FY 2023 (FY 2022: 10.2p) enabled by the strong
revenue growth as well as delivery of further operational gearing in the
business.
Dividend
A final dividend of 5.7p is being proposed by the Board (FY 2022: 4.8p). The
final dividend, if approved, which amounts to £11.8 million (FY 2022: £9.7
million), will be paid on 21 September 2023 to those shareholders on the
register on 25 August 2023.
Cash flow, capital expenditure and financing
Non-GAAP cash flow 31 March 2023 31 March 2022
£m £m
Operating
Adjusted EBITDA 42.4 34.1
Change in net working capital (0.3) (1.3)
Adjusted operating cash flow 42.1 32.8
OCF conversion 99% 96%
Financing & tax
Net finance expense (3.3) (1.5)
Taxes paid (4.9) (3.9)
Proceeds from/(repayment of) new loans 4.0 3.9
Repayment of lease liabilities (3.0) (2.7)
Share-related movements (1.0) (3.3)
Net cash flow after financing 33.9 25.3
Investing
Acquisition (8.3) (1.5)
Capex (5.4) (7.9)
Restricted cash (NPT) - -
Net cash flow after investing 20.2 15.9
Dividends paid (15.3) (14.1)
Exceptional items (1.8) (0.3)
Movement in cash 3.1 1.5
Net debt 55.3 54.6
Leverage 1.38x 1.74x
FY 2023 has been another year of strong cash performance for the Group.
Adjusted operating cash flow increased by £9.3 million driven by a £8.3
million increase in EBITDA and a £1.0 million increase in net working
capital. Overall, this resulted in adjusted operating cash flow conversion of
99% compared to 96% in the prior year.
Taxes paid in the year were £1.6 million higher than the income statement
charge due to the current year tax credit in relation to exceptional items in
the year which is largely a deferred tax.
During the year, the Group drew down £4.0 million of the RCF. Capital
expenditure in the year amounted to £5.4 million (FY 2022: £7.9 million)
with £0.6 million spent on leasehold improvements and office fitouts and the
remaining £4.8 million on software development, enhancements to our
platforms, cyber security, and other IT equipment.
In September 2022, the Group acquired Penfida Limited for an initial cash
consideration of £8.3 million net of cash acquired.
After paying £15.3 million in dividends and £1.8 million of exceptional
costs, the Group cash balance increased by £3.1 million year on year to close
at £13.3 million. The Group had drawn down £68 million of its £100 million
RCF at 31 March 2023, resulting in a net debt of £55.3 million, an increase
of £0.7 million year on year.
Going concern
Details on the Directors continuing to adopt the going concern basis in
preparing the financial statements can be found in the Viability Statement in
the Strategic Report in the Annual Report. The Directors have confirmed that,
after due consideration, they have a reasonable expectation that the Company
and the Group have adequate resources to continue in operational existence for
the foreseeable future. For this reason, they continue to adopt the going
concern basis in preparing the financial statements.
Subsidiary undertakings
The subsidiary undertakings of the Group in the year are listed in note 35 in
the Annual Report.
Share premium reduction
The Group undertook an exercise in the year to reduce the balance in XPS
Pensions Group plc's share premium account. This was completed in October
2022, and as a result £116.8 million was transferred to retained earnings.
Snehal Shah
Chief Financial Officer
21(st) June 2023
Principal Risks and Uncertainties
The Risk Management Frameworks embedded within the Group continue to support
the growth of the business. Effective risk management provides the Group
with the information required to understand our key risks and identify and
embrace opportunity. The frameworks also allow us to proactively develop our
controls, protecting the Group and its customers from new and developing
threats such as Cyber Crime.
Over the last year our risk management frameworks have been fundamental to
enabling us to react effectively to the changing risk environment that the
business faces during its day-to-day operations. The risk profile of the Group
is regularly reviewed by senior management along with the controls framework
in place, to ensure they are enhanced to address changes in the external
threat environment. These reviews are supported by comprehensive internal and
external assurance activities, which validate controls design and
effectiveness, highlighting opportunities for further improvements. The
increasing threat of cyber-crime continues to be a key area of focus for
management, with particular focus on protecting the Group from phishing,
business email compromise and ransomware attacks.
To allow the Group to address the evolving threat environment it faces we have
continued to develop our overall risk management capabilities, improving our
ability to detect, understand and manage our risks. Since the last report
there have been a number of significant enhancements, including:
· The successful achievement of the PASA Pensions administration
standard. This standard is recognised by The Pensions Regulator as a way of
demonstrating high-quality pensions administration as provided by XPS to its
clients.
· The development of the existing Risk team, through the
recruitment of additional SMEs and supporting existing staff members to
achieve this status. This has been done through supporting training to achieve
and then maintain relevant professional qualifications, e.g. CISA/CRISC/CISM.
· The expansion of the existing ISO 27001 information security
certification to cover all activities provided by the Group. This external
assurance provides assurance that the Group has the right frameworks in place
to identify and effectively manage its information security and cyber risks.
· The development of the existing acquisitions framework, to
support the effective integration of new businesses. This supports the
alignment of risk and controls frameworks, including the application of
relevant assurance frameworks.
· The development of the existing third party assurance framework,
recognising the importance of supply chain risk in relation to cyber and
business resilience risks.
· The ongoing development of the executive level Risk Management
Committee to support the identification of new risks and monitoring of
existing risks, and agree prioritisation of mitigation activities.
· The further expansion of the dedicated Information Security team,
along with developing and enhancing the suite of technical controls in place.
· The development of the Environmental Management System to ensure
we identify and manage our impact on the environment. This includes supporting
TCFD reporting and consideration of the risks associated with climate change.
The Group continues to operate a three lines of defence model which supports
the promotion of effective risk management and seeks to prevent risk taking
that exceeds the Group's appetite.
The Board, with the support of the Audit & Risk Committee, has identified
the principal risks that could materially impact the Group's ability to
achieve its objectives and deliver its strategy.
These include general business risks that are faced by the Group and are
comparable to those that would be faced by similar businesses operating in the
pensions sector.
These general business risks include:
Political/economic/social - risks created by the
political, economic/ financial and social environment in which we operate,
e.g. war, demographic trends, pandemics, government influence on business,
currency changes, market volatility, interest rates, liquidity.
Competition - risks of change on demand side of
business due to changes in customer demands or competitors, likely to
influence the entire industry, e.g. aggressive competitor pricing,
consolidation trends, major technological innovation, substitute technologies.
These changes may not directly affect the Group but could influence the entire
industry.
Legal and regulatory - risks associated with the
criminal and civil judicial processes and contract law, e.g. not identifying
changes required by new legislation, increased litigation in a particular
field, industrial accidents.
Environmental - risks associated with climate-related
change, how these changes can impact business models and how businesses in
turn can manage the impact of their operations on the environment.
The material risks and uncertainties which are either unique to the Group or
apply to the pensions industry in which we operate are detailed below. They
are not set out in any priority order, nor do they include all those
associated with the Group.
Specific risks that are material to XPS Group are:
Strategy
Stable
Description Key mitigations Rationale for change
Risks linked to the assumptions of future development and size of pensions The Board approves and regularly reviews the Group's strategy in conjunction Stable
market used to develop the strategy or business model or business portfolio, with budgets, targeting long term increases in shareholder value and ensuring
e.g. poor data, groupthink or lack of diversity of opinions. robust independent challenge.
Key decisions are assessed against risk appetites for key Group risks with a
risk management framework in place to identify and escalate where strategic
decisions may have unintended impacts.
Strategic planning and execution
Improving
Description Key mitigations Rationale for change
Risks linked to assessing, evaluating, planning and executing the strategy, The Board regularly reviews the Group's strategy, supported by the Executive XPS has built on previous years initiatives to develop frameworks to
e.g. poor budgeting and planning, inadequate or misleading communications or with responsibilities assigned for the delivery of initiatives and provision co-ordinate and deliver market leading technology change. This is evidenced by
poor management of change or projects. of regular progress updates. the successful rollout of the new Aurora administration system.
Specific project management resources are used to deliver large scale change
initiatives, allowing risks to delivery of initiatives to be clearly
identified at planning stage along with mitigations.
Financial performance
Improving
Description Key mitigations Rationale for change
Risks relating to the failure to monitor and appropriately manage the The Group has a highly qualified and experienced financial reporting team. The Group has continued to improve its budgeting and forecasting frameworks.
financial performance of the Group on an ongoing basis which could lead to There is an extensive financial controls framework in place and key controls These ongoing improvements are evidenced through consistent delivery of
poor management decisions, higher costs and/or inaccurate external financial are regularly tested by internal and external audits. The Group undertakes financial results in line with or ahead of market consensus.
reporting. detailed bottom-up budgeting and reforecasting exercises with the final budget
and reforecast approved by the Board.
Management information is published on a regular basis and the Executive
Committee reviews the financial performance of the Group at least monthly. The
Board receives and scrutinises the financial performance of the Group at each
Board meeting.
Errors
Stable
Description Key mitigations Rationale for change
Risks relating to material mistakes made by staff, including the The Group recruitment process ensures only high calibre staff are recruited, Stable
non-compliance with established procedures, e.g. failure to calculate benefits who are then supported by training programmes. Staff use standardised
correctly or not following peer review processes. documented processes and checklists for key processes.
Higher risk work is identified with peer review and additional sign-off
required, with regular quality audits to confirm processes are being followed
correctly.
Insurance arrangements are in place to limit the loss should an error occur,
with root cause analysis used to identify where controls can be improved.
Theft and fraud (financial and physical assets)
Improving
Description Key mitigations Rationale for change
Risks relating to the safeguarding of Group and client financial and physical The Group deploys robust physical and systems access controls, along with Controls frameworks continue to be developed to manage this risk, including
assets from malicious actors, e.g. stealing physical assets, deliberate enforcing segregation of duties to preventing individuals from making addressing areas identified in previous audits and internal self assessments.
misrepresentation leading to fraud or theft from Group or client bank fraudulent payments or transfers.
accounts.
These controls are supported with staff vetting, training and awareness and
are regularly independently audited. We continue to see small number of attempts to impersonate pension scheme
members, with controls identifying and preventing these.
Insurance arrangements are in place to protect against larger claims.
Information/cyber security
Improving
Description Key mitigations Rationale for change
Risks relating to the confidentiality, integrity and availability of The Group has an Information Security Management System (ISMS) in place to The Group has continued to develop its capabilities to meet the increasing
information assets including IT systems, e.g. unauthorised access to or ensure that risks are identified and managed effectively. This includes a cyber risk. Regular threat assessments ensure that controls frameworks in
disclosure of staff or client information, denial of access to systems or data range of technical controls, a dedicated Information Security team, and a 24/7 place address new and emerging threats. This includes the implementation of
required or business continuity incidents caused by equipment breakdown/fire/ Security Operations Centre. These are supported by regular independent audits new technical controls as well as maintaining exiting assurance frameworks
flood. and penetration tests. including ISO27001 and Cyber Essential Plus certifications.
All staff are provided with comprehensive policies and guidance, with
awareness of key topics reinforced with regular training initiatives, e.g.
phishing awareness.
The Group has a range of business continuity capabilities in place to minimise
impact of incidents impacting the Group's data, facilities or systems. These
include documented plans which are tested regularly.
Staff/human resources
Stable
Description Key mitigations Rationale for change
Risks relating to our people, e.g. compensation, retention, succession The Group's recruitment strategy is to seek professional, experienced and Stable
planning, skills and competence and management capability. qualified staff utilising robust staff recruitment and selection processes.
This is supported by comprehensive training, development and performance
management processes, with longer-term incentives in place to aid retention.
Regular key staff reviews ensure succession planning is kept up to date and
remains appropriate.
Staffing requirements are considered as part of the strategy and budgeting
process to ensure alignment with business plans.
Third party supplier/outsourcing
Stable
Description Key mitigations Rationale for change
Risks relating to the use of third parties to support our operations, e.g. The Group has a formal selection process that ensures due diligence is carried Stable
poor due diligence and selection processes, failure of a supplier to follow out, which is proportionate to the risk of the potential failure of the third
agreed upon procedures or financial failure of supplier resulting in inability party.
to deliver service.
The approvals and signing framework also ensure contracts include key risks
relating to services provided and risks identified are managed and accepted
prior to agreements being signed. This is supported by ongoing monitoring of
key third parties, including SLAs and financial status.
Where there is a reliance on a single supplier, contingency plans are in place
to protect against failure.
Client engagement
Stable
Description Key mitigations Rationale for change
Risks relating to the provision of poor service or advice to clients, e.g. The Group client engagement process ensures that expectations are matched to Stable
advice that is not clear, not understood by the client or poorly presented or Group capabilities. Regular ongoing dialogue with clients ensures that the
uses out of date technologies, but not errors. services provided meet their requirements and continue to be appropriate to
their specific needs.
Client surveys are used to gather feedback and identify trends and insights.
Business conduct and reputation
Stable
Description Key mitigations Rationale for change
Risks that could lead to a breach of acceptable conduct or ethics, impacting The Group's mission, vision and values clearly set out the tone from the top, Stable
the Group's brand, image or reputation. Failure to ensure services are highlighting to all staff the conduct and ethics that are expected from them
appropriate for client's needs, any discrimination, or a poor response to a at all times. This is supported by a recruitment strategy that seeks
cyber incident or client complaint. professional, experienced and qualified staff who fit with the Group's values.
Due diligence of third parties considers supply chain risks, ensuring that
only suppliers that comply with their legal obligations are selected.
The Group has incident management processes in place to ensure that it is able
to effectively respond to significant events that could impact its brand or
reputation, which is regularly tested.
The Directors confirm that they have carried out a robust assessment of the
principal risks facing the Group, including those that would threaten its
business model, future performance, solvency or liquidity. The principal risks
are those listed above. The Directors do not believe there to be any
additional emerging risks that are not already addressed within the principal
risks and uncertainties section.
This Strategic Report has been approved by the Board and signed by order of
the Board:
Paul Cuff
Ben Bramhall
Co-Chief Executive
Officer
Co-Chief Executive Officer
21 June
2023
21 June 2023
INDEPENDENT AUDITOR'S REPORT TO THE SHAREHOLDERS OF XPS PENSIONS GROUP PLC ON
THE PRELIMINARY STATEMENT OF ANNUAL RESULTS
As the independent auditor of XPS Pensions Group Plc we are required by UK
Listing Rules to agree to the publication of the company's preliminary
statement of annual results for the year ended 31 March 2023 which includes
the Financial Highlights, Operational Highlights, Outlook, Co-Chief
Executives' review, Financial review, Principal Risks and Uncertainties, the
Consolidated Statement of Comprehensive Income, the Consolidated Statement of
Financial Position, the Consolidated Statement of Changes in Equity, the
Consolidated Statement of Cash Flows and selected notes to the Consolidated
Financial Statements.
Use of our report
This report and our auditor's report on the company's financial statements are
made solely to the company's members, as a body, in accordance with Chapter 3
of part 16 of the Companies Act 2006 and the terms of our engagement. Our
audit work has been undertaken so that we might state to the company's members
those matters we have agreed to state to them and for no other purpose. To the
fullest extent permitted by law, we do not accept or assume responsibility to
anyone other than the company and the company's members as a body, for our
audit work, for our auditor's report on the financial statements or this
report, or for the opinions we have formed.
Responsibilities of directors and auditor
The directors of the company are responsible for the preparation, presentation
and publication of the preliminary statement of annual results in accordance
with the UK Listing Rules. We are responsible for agreeing to the publication
of the preliminary statement of annual results, having regard to the Financial
Reporting Council's Bulletin "The Auditor's Association with Preliminary
Announcements made in accordance with the requirements of UK Listing Rules".
Status of our audit of the financial statements
Our audit of the annual financial statements of the company is complete and we
signed our auditor's report on 21 June 2023. Our auditor's report is not
modified and contains no emphasis of matter paragraph.
Our auditor's report on the full financial statements contained the following
information regarding key audit matters and how they were addressed by us in
the audit, our application of materiality and the scope of our audit.
An overview of the scope of our audit
Our Group audit was scoped by obtaining an understanding of the Group and its
environment, including the Group's system of internal control, and assessing
the risks of material misstatement in the financial statements. We also
addressed the risk of management override of internal controls, including
assessing whether there was evidence of bias by the Directors that may have
represented a risk of material misstatement.
Significant components:
Component Type of work performed
XPS Pensions Consulting Limited Full scope audit
XPS Pensions Limited Full scope audit
XPS Investment Limited Full scope audit
XPS Administration Limited Full scope audit
Non-significant components:
Other than the four significant components noted above, there were 12 other
components within the Group which formed part of our Group audit.
The following three non-significant components were subjected to a full scope
audit on account of them being part of a non-small group and being entities
that do not avail themselves of a parental guarantee from audit under s479A of
the Companies Act 2006:
Component Type of work performed
Xafinity SIPP Services Limited Full scope audit
XPS Pensions Group plc Full scope audit
XPS Consulting (Reading) Limited Full scope audit
All 9 of the remaining non-significant components were subjected to desktop
review procedures. All audit work on all entities (significant and
non-significant) was undertaken by the Group audit team.
Climate change
Our work on the assessment of potential impacts on climate-related risks on
the XPS Pensions Group plc operations and financial statements included:
• Enquiries and challenge of management to understand the actions they have
taken to identify climate-related risks and their potential impacts on the
financial statements and adequately disclose climate-related risks within the
Annual Report;
• Reviewing management's SECR report and supporting workings to check that
the climate change disclosure ties into the disclosures presented in the
financial statements as required;
• Our own qualitative risk assessment taking into consideration the sector
in which the Group operates and how climate change affects this particular
sector; and
• Review of the minutes of Board and Audit & Risk Committee meetings and
other papers related to climate change and performed a risk assessment as to
how the impact of the Group's commitment as set out in strategic report may
affect the financial statements and our audit.
•We challenged the extent to which climate-related considerations, including
the expected cash flows from the initiatives and commitments have been
reflected, where appropriate, in the Directors' going concern assessment and
viability assessment;
•We also assessed the consistency of management's disclosures included as
Statutory Other Information' with the financial statements and with our
knowledge obtained from the audit.
Based on our risk assessment procedures, we did not identify there to be any
key audit matters materially impacted by climate-related risks and related
commitments.
Key audit matters
Key audit matters are those matters that, in our professional judgement, were
of most significance in our audit of the financial statements of the current
period and include the most significant assessed risks of material
misstatement (whether or not due to fraud) that we identified, including those
which had the greatest effect on: the overall audit strategy, the allocation
of resources in the audit, and directing the efforts of the engagement team.
These matters were addressed in the context of our audit of the financial
statements as a whole, and in forming our opinion thereon, and we do not
provide a separate opinion on these matters.
Key audit matter How the scope of our audit addressed the key audit matter
Year-end revenue recognition (accrued income) for core pension services The risk of fraudulent revenue recognition arises from core pension services
(excluding triennial and investment strategic review services). Management
applies judgements and estimates concerning the completeness, existence and Year-end recognition was assessed by selecting a sample of accrued income
valuation of revenue around year end, specifically accrued income, therefore a balances from the accrued income listing and agreeing back to contract with
The accounting policy for revenue is disclosed in note 1 of the consolidated risk of material misstatement exists in order to meet current or future the clients, underlying timesheet data, invoice, and where possible,
financial statements. financial targets or performance related bonuses. subsequent receipt of payment. The above procedures supported the individual
accrued income valuation judgements applied as well as existence of the
balances
The segmental information relating to Group revenue is disclosed in note 8 to This results in core pensions services year end accrued income, excluding
the consolidated financial statements. triennial and investment strategic review services being assessed as a
significant risk of material misstatement and a key audit matter. Post year end revenue recognised was sampled and agreed back to underlying
documentation to check that revenue was recognised in the correct period, and
to check that accrued income was at the year end, complete.
We identified outliers in the journals population that were posted to revenue
and accrued income based on our knowledge of the Group, corroborating them
back to supporting documentation to determine the validity thereof.
Key observations:
Based on the procedures undertaken, we did not identify any evidence that core
pensions services revenue recognised associated with accrued income (excluding
triennial and investment strategic review services) had not been recognised in
the correct period or at the correct value via the accrued income entries.
The judgements and estimates applied were consistent with our expectations.
Our application of materiality
We apply the concept of materiality both in planning and performing our audit,
and in evaluating the effect of misstatements. We consider materiality to be
the magnitude by which misstatements, including omissions, could influence the
economic decisions of reasonable users that are taken on the basis of the
financial statements.
In order to reduce to an appropriately low level the probability that any
misstatements exceed materiality, we use a lower materiality level,
performance materiality, to determine the extent of testing needed.
Importantly, misstatements below these levels will not necessarily be
evaluated as immaterial as we also take account of the nature of identified
misstatements, and the particular circumstances of their occurrence, when
evaluating their effect on the financial statements as a whole.
Based on our professional judgement, we determined materiality for the
financial statements as a whole and performance materiality as follows:
Group financial statements Parent company financial statements
2023 2022 2023 2022
Materiality £1,000,000 £900,000 £750,000 £360,000
Basis for determining materiality 3% of EBITDA 3% of EBITDA 75% of Group materiality 40% of Group materiality
Rationale for the benchmark applied EBITDA is considered to be the benchmark that is of the most interest of the EBITDA is considered to be the benchmark that is of the most interest of the 75% of Group materiality given the assessment of the component's aggregation 40% of Group materiality given the assessment of the component's aggregation
majority of users of the financial statements based on investor and majority of the users of the financial statements based on investor and risk. risk.
stakeholder expectations. stakeholder expectations.
Performance materiality £700,000 £650,000 £525,000 £252,000
Basis for determining performance materiality 70% 70% 70% 70%
Rationale for the percentage applied for performance materiality These thresholds are based on our knowledge of the Group and Parent Company,
control environment over financial reporting, history of misstatements in
previous periods and management's attitude to proposed adjustments.
Component materiality
We set materiality for each significant component of the Group based on a
percentage of between 36% and 62% (FY 2022: 22% and 75%) of Group materiality
dependent on the size and our assessment of the risk of material misstatement
of that component. Component materiality ranged from £360,000 to £620,000
(FY 2022: £200,000 to £675,000), with aggregation risk considered. In the
audit of each component, we further applied performance materiality levels of
70% of the component materiality to our testing to ensure that the risk of
errors exceeding component materiality was appropriately mitigated.
Reporting threshold
We agreed with the Audit & Risk Committee that we would report to them all
individual audit differences in excess of £40,000 (FY2022:£40,000). We
also agreed to report differences below this threshold that, in our view,
warranted reporting on qualitative grounds.
Procedures performed to agree to the preliminary statement of annual results
In order to agree to the publication of the preliminary statement of annual
results of the company we:
· checked the accuracy of extraction of the financial information in
the preliminary statement from the audited financial statements of the
company;
· considered whether any "alternative performance measures" and
associated narrative explanations may be misleading; and
· read the Financial Highlights, Operational Highlights and Outlook and
considered whether it is in conflict with the information that we have
obtained in the course of our audit.
Andrew Radford (Senior Statutory Auditor)
For and on behalf of BDO LLP, Statutory Auditor
London, UK
21 June 2023
Consolidated Statement of Comprehensive Income
for the year ended 31 March 2023
Year ended 31 March 2023 Year ended 31 March 2022
Trading items Non-trading and exceptional items Total Trading items Non-trading and exceptional items Total
Note £'000 £'000 £'000 £'000 £'000 £'000
Revenue 4 166,596 - 166,596 138,622 - 138,622
Other operating income - 197 197 - - -
Operating expenses (129,652) (14,413) (144,065) (109,826) (9,808) (119,634)
Profit/(loss) from operating activities 36,944 (14,216) 22,728 28,796 (9,808) 18,988
Finance income 5 10 - 10 - - -
Finance costs 5 (3,596) - (3,596) (2,047) - (2,047)
Profit/(loss) before tax 33,358 (14,216) 19,142 26,749 (9,808) 16,941
Income tax (expense)/credit 6 (6,215) 2,910 (3,305) (4,988) (2,530) (7,518)
Profit/(loss) after tax and total comprehensive income/(loss) for the year 27,143 (11,306) 15,837 21,761 (12,338) 9,423
Memo
EBITDA 42,448 (7,334) 35,114 34,139 (3,229) 30,910
Depreciation and amortisation (5,504) (6,882) (12,386) (5,343) (6,579) (11,922)
Profit/(loss) from operating activities 36,944 (14,216) 22,728 28,796 (9,808) 18,988
Pence Pence Pence Pence
Earnings per share attributable to the ordinary equity holders of the Company: Adjusted Adjusted
Profit or loss:
Basic earnings per share 9 13.2 - 7.7 10.7 - 4.6
Diluted earnings per share 9 12.6 - 7.3 10.2 - 4.4
Consolidated Statement of Financial Position
as at 31 March 2023
31 March 31 March
2023 2022
Note £'000 £'000
Assets
Non-current assets
Property, plant and equipment 3,079 3,187
Right-of-use assets 9,684 10,927
Intangible assets 212,103 206,800
Other financial assets 1,847 1,814
226,713 222,728
Current assets
Trade and other receivables 43,765 38,776
Cash and cash equivalents 13,285 10,150
57,050 48,926
Total assets 283,763 271,654
Liabilities
Non-current liabilities
Loans and borrowings 7 67,310 63,309
Lease liabilities 7,234 8,935
Provisions 1,869 1,781
Trade and other payables 845 -
Deferred income tax liabilities 18,445 18,966
95,703 92,991
Current liabilities
Lease liabilities 2,701 2,745
Provisions 2,009 1,236
Trade and other payables 31,218 27,275
Current income tax liabilities 2,280 2,207
Deferred consideration 568 765
38,776 34,228
Total liabilities 134,479 127,219
Net assets 149,284 144,435
Equity and liabilities
Equity attributable to owners of the parent
Share capital 104 103
Share premium 1,786 116,804
Merger relief reserve 48,687 48,687
Investment in own shares held in trust (1,350) (4,157)
Retained earnings/accumulated deficit 100,057 (17,002)
Total equity 149,284 144,435
In prior years, deferred tax assets and liabilities were disaggregated and
presented gross in the statement of financial position; per IAS 12 these are
now netted off and presented as a deferred tax liability. The prior year has
been restated. There is no impact on the income statement as a result of this;
it purely impacts the presentation on the statement of financial position of
deferred tax, decreasing deferred tax assets and deferred tax liabilities by
£1,099,000 (£767,000 as at 1 April 2021).
Consolidated Statement of Changes in Equity
for the year ended 31 March 2023
Share capital Share premium Investment in own shares Accumulated (deficit) / retained earnings Total equity
£'000 £'000 Merger relief reserve £'000 £'000 £'000
£'000
Balance at 1 April 2021 103 116,797 48,687 (2,563) (13,958) 149,066
Comprehensive income and total comprehensive income for the year - - - - 9,423 9,423
Contributions by and distributions to owners:
Share capital issued - 7 - - - 7
Dividends paid - - - - (13,831) (13,831)
Dividend equivalents paid on exercised share options - - - - (268) (268)
Shares purchased by Employee Benefit Trust for cash - - - (3,324) - (3,324)
Share-based payment expense - equity settled from Employee Benefit Trust - - 1,730 (1,704) 26
-
Share-based payment expense - IFRS 2 charge - - - 3,343 3,343
-
Deferred tax movement in respect of share-based payment expense - - - - (7) (7)
Total contributions by and distributions to owners - 7 - (1,594) (12,467) (14,054)
Balance at 31 March 2022 103 116,804 48,687 (4,157) (17,002) 144,435
Balance at 1 April 2022 103 116,804 48,687 (4,157) (17,002) 144,435
Comprehensive income and total comprehensive income for the year - - - - 15,837 15,837
Contributions by and distributions to owners:
Share capital issued 1 1,786 - - - 1,787
Share premium reduction - (116,804) - - 116,804 -
Dividends paid - - - - (15,331) (15,331)
Dividend equivalents paid on exercised share options - - - - (549) (549)
Shares purchased by Employee Benefit Trust for cash - - - (2,200) - (2,200)
Share-based payment expense - equity settled from Employee Benefit Trust - - 5,007 (4,137) 870
-
Share-based payment expense - IFRS 2 charge - - - 3,892 3,892
-
Deferred tax movement in respect of share-based payment expense - - - - 258 258
Current tax movement in respect of share-based payment expense - - - - 285 285
Total contributions by and distributions to owners 1 (115,018) - 2,807 101,222 (10,988)
Balance at 31 March 2023 104 1,786 48,687 (1,350) 100,057 149,284
Consolidated Statement of Cash Flows
for the year ended 31 March 2023
Note Year ended Year ended
31 March 31 March
2023 2022
£'000 £'000
Cash flows from operating activities
Profit for the year 15,837 9,423
Adjustments for:
Depreciation 897 842
Depreciation of right-of-use assets 2,854 3,046
Amortisation 8,635 8,034
Finance income 5 (10) -
Finance costs 5 3,596 2,047
Share-based payment expense 3,892 3,343
Other operating income (197) -
Income tax expense 6 3,305 7,518
38,809 34,253
Increase in trade and other receivables (3,432) (3,982)
Increase in trade and other payables 3,603 2,315
Increase/(decrease) in provisions 442 (65)
39,422 32,521
Income tax paid (4,866) (3,862)
Net cash inflow from operating activities 34,556 28,659
Cash flows from investing activities
Finance income received 5 10 -
Acquisition of other intangible assets - (1,469)
Acquisition of subsidiary, net of cash acquired 4 (8,268) -
Purchases of property, plant and equipment (640) (1,050)
Purchases of software (4,814) (6,820)
Increase in restricted cash balances - other financial assets (33) (34)
Net cash outflow from investing activities (13,745) (9,373)
Cash flows from financing activities
Proceeds from the issue of share capital 1,787 7
Proceeds from loans net of capitalised costs 11,000 5,895
Repayment of loans (7,000) (2,000)
Sale of own shares 870 26
Purchase of ordinary shares by EBT (2,200) (3,324)
Interest paid (2,985) (1,222)
Lease interest paid (311) (299)
Payment of lease liabilities (2,957) (2,743)
Dividends paid to the holders of the parent (15,331) (13,831)
Dividend equivalents paid on exercise of share options (549) (268)
Net cash outflow from financing activities (17,676) (17,759)
Net increase in cash and cash equivalents 3,135 1,527
Cash and cash equivalents at start of year 10,150 8,623
Cash and cash equivalents at end of year 13,285 10,150
Selected notes to the Consolidated Financial Statements
for the year ended 31 March 2023
1 Accounting Basis
The financial information set out in this document does not constitute the
Company's statutory accounts for the years ended 31 March 2023 or 31 March
2022. Statutory accounts for the year ended 31 March 2023, which were
approved by the directors on 21 June 2023, and 31 March 2022 have been
reported on by the Independent Auditors. The Independent Auditor's report on
the Annual Report and Financial Statements for years ended 31 March 2023 and
31 March 2022 were unqualified, did not draw attention to a matter by way of
emphasis, and did not contain a statement under 498(2) or 498(3) of the
Companies Act 2006.
The statutory accounts for the year ended 31 March 2023 will be delivered to
the Registrar of Companies in due course and will be posted to shareholders
shortly, and thereafter will be available from the Company's registered office
at Phoenix House, 1 Station Hill, Reading, RG1 1NB and from the Company's
website www.xpsgroup.com (http://www.xpsgroup.com) . The statutory accounts
for the year ended 31 March 2022 have been filed with the Registrar of
Companies and are available from the Company's registered office and from the
Company's website.
The financial information set out in these results has been prepared in
accordance with UK adopted International Accounting Standards. The accounting
policies adopted in these results have been consistently applied to all the
years presented and are consistent with the policies used in the preparation
of the financial statements for the year ended 31 March 2022. New standards,
amendments, and interpretations to existing standards effective for the first
time for periods beginning on (or after) 1 April 2022, which have been adopted
by the Group have not been listed, since they have no material impact on the
financial statements.
2 Non-trading and exceptional items
Year ended Year ended
31 March 31 March
2023 2022
£'000 £'000
Corporate transaction costs (1) (2,871) (320)
Other exceptional costs (2) - 966
Exceptional items (2,871) 646
Contingent consideration write back (3) 197 -
Share-based payment costs (4) (4,660) (3,875)
Amortisation of acquired intangibles (5) (6,882) (6,579)
Non-trading items (11,345) (10,454)
Total before tax (14,216) (9,808)
Tax on adjusting items (6) 2,910 (2,530)
Adjusting items after taxation (11,306) (12,338)
1 The Group incurred corporate transaction costs of £2,871,000 in the year
(2022: £320,000, relating to acquisitions by the Group). Included within that
is £845,000 of contingent consideration in respect of the acquisition of
Penfida Limited. The maximum contingent consideration of £3,379,000 would
be payable on the second anniversary of the acquisition subject to business
performance which includes retention of clients as well as continued
employment of key employees. As continued employment is one part of the
contingent consideration test, according to IFRS 3, the entire contingent
consideration must be treated as a post transaction employment cost accruing
over the deferment period of two years. The contingent consideration is
material in size and it is one-off in nature. As such, in line with the
Group's accounting policies, it has been classified as an exceptional item.
If the entire contingent consideration is not payable at the end of the two
year period, any resulting credit will also flow through the exceptional
category. The remaining £2,026,000 of corporate transaction costs relate to
the acquisition of Penfida Limited and other potential M&A opportunities
explored by the Group in the year.
2 The prior year credit of £966,000 relates to the reversal of the
exceptional holiday pay accrual in the previous year. The one-off non-cash
holiday pay accrual in the year ended 31 March 2021 arose as the holiday cycle
was disrupted by the pandemic and a higher than normal level of holiday was
carried forward at the end of the holiday year in December 2020. Prior to the
pandemic the holiday pay accrual had been stable. In the year ending 31 March
2022 the Group changed its holiday year to align with its accounting year, and
as a result there was no cash outflow as a result of the charge in the year
ended 31 March 2021. Due to its one off nature and the size of the holiday pay
accrual in the prior year, as well as the corresponding reversal in the year
ending 31 March 2022, it was deemed appropriate to disclose the amount
separately from the underlying business performance.
3 The contingent consideration write back relates to the revaluation of the
contingent consideration for the MJF acquisition.
4 Share-based payment expenses are included in non-trading and exceptional
costs as they are a significant non-cash cost which are excluded from the
results for the purposes of measuring performance for PSP awards and dividend
amounts. Additionally, the largely non-cash related credits go directly to
equity and so have a limited impact on the reserves of the Group. They are
therefore shown as a non-trading item to give clarity to users of the accounts
on the profit figures that dividends and PSP performance are based on.
5 During the year the Group incurred £6,882,000 of amortisation charges in
relation to acquired intangible assets (customer relationships and brand)
(2022: £6,579,000).
6 The tax credit on non-trading items of £2,910,000 (2022: charge of
£2,530,000) represents 20% (2022: 26%) of the non-trading items incurred of
£14,216,000 (2022: £9,808,000). This is different to the expected tax credit
of 19% (2022: 19%), as various adjustments are made to tax including for
deferred tax, and the exclusion of amounts not allowable for tax. The tax on
non-trading and exceptional items was a large tax charge in the year ended 31
March 2022 instead of a tax credit, because of the tax rate increase from 19%
to 25% from 1 April 2023, which was enacted in the year to 31 March 2022. As a
result the Group incurred a large deferred tax charge in the prior year (£4.4
million).
3 Business combinations during the period
On 21 September 2022, the Group acquired 100% of the share capital of Penfida
Limited from the shareholders of Penfida Limited for £8.64 million in cash
upon completion, and a further payment of £3.38 million in September 2024,
subject to the achievement of a client retention target, and the sellers still
being in employment with the Group. Because this element is only payable to
the sellers who remain in employment at the end of the two-year period, under
IFRS 3 the £3.38 million is treated as post-acquisition remuneration and will
be an expense to the business over the two year period to September 2024. This
expense will be treated as an exceptional cost, as it meets the Group's
definition of an exceptional item (see note 2).
Penfida Limited provides employer covenant advisory services. The transaction
will strengthen the covenant advice offering of XPS and give the Group the
resource to expand this offering to both existing clients, and new prospects.
Details of the fair value of identifiable assets and liabilities acquired,
purchase consideration and goodwill are as follows:
Book value Adjustment Fair value
£'000 £'000 £'000
Right-of-use asset - 686 686
Non-current asset 55 - 55
Trade and other receivables 1,899 (67) 1,832
Cash 373 - 373
Lease liability - (534) (534)
Provisions (162) (31) (193)
Trade and other payables (1,031) 50 (981)
Corporation tax payable (272) (20) (292)
Customer relationships - 5,215 5,215
Brand - 295 295
Deferred tax - (1,364) (1,364)
Total net assets 862 4,230 5,092
The fair value and the gross value of acquired receivables are the same. The
receivables have been reviewed and it is expected that all contractual
cashflows will be collected.
Fair value of consideration paid
£'000
Cash 8,641
Total consideration 8,641
3,549
Goodwill
The main factors leading to the recognition of goodwill are the presence of
certain intangible assets, such as the assembled workforce of the acquired
entities, synergies and potential future cost savings, and the expected growth
in the business generated by new customers, which do not qualify for separate
recognition.
The goodwill arising from the above acquisition is not deductible for tax
purposes.
Since the acquisition date, Penfida Limited has contributed £2.3 million to
Group revenues and £0.4 million to Group profit before tax, before taking
into account the post-acquisition remuneration referred to above. Including
this figure, Penfida has contributed a loss of £0.3 million since the
acquisition date.
If the acquisition had occurred on 1 April 2022, Group revenue would have been
£168.8 million and Group profit before tax would have been £20.7 million,
excluding the impact of the post-acquisition remuneration disclosed above.
Including this, and assuming the transaction had taken place on 1 April, Group
profit before tax would have been £19.0 million.
Acquisition expenses
Costs relating to the above acquisition (excluding the post-acquisition
remuneration) totalled £474,000 and are included within exceptional costs as
corporate transaction costs.
4 Operating segments
In accordance with IFRS 8 Operating Segments, an operating segment is defined
as a business activity whose operating results are reviewed by the chief
operating decision-maker ('CODM') and for which discrete information is
available. The Group's CODM is the Board of Directors.
The Group has one operating segment, and one reporting segment due to the
nature of services provided across the whole business being the same: pension
and employee benefit solutions. The Group's revenues, costs, assets,
liabilities and cash flows are therefore totally attributable to this
reporting segment. The table below shows the disaggregation of the Group's
revenue, by product line.
Year ended Year ended
31 March 31 March
2023 2022
£'000 £'000
Pensions Actuarial & Consulting 77,388 62,171
Pensions Administration 57,444 52,339
Pensions Investment Consulting 18,009 13,678
National Pension Trust ('NPT') 4,332 4,353
SIP (1) 9,423 6,081
Total 166,596 138,622
1 Self Invested Pensions (SIP) business, incorporating both SIPP and SSAS
products
In the year, there was a change in the way that divisional revenues are
reported to the CODM which is more reflective of the responsibilities and
operations of the business. As a result related revenue of £1.5m has been
reallocated from Pensions Actuarial & Consulting division to Pensions
Administration division.
The prior year comparative have been restated to enable fair comparability
against the current year results amounting to a reallocation of £1.5m
revenue.
5 Finance income and expense
Year ended Year ended
31 March 31 March
2023 2022
£'000 £'000
Interest income on bank deposits 10 -
Finance income 10 -
Interest expense on bank loans 2,758 1,108
Other costs of borrowing 498 602
Interest on leases 290 291
Other finance expense 50 46
Finance expenses 3,596 2,047
Other costs of borrowing largely represent the amortisation expense of
capitalised loan arrangement fees on the Group's bank debt.
6 Income tax expense
Recognised in the statement of comprehensive income
Year ended Year ended
31 March 31 March
2023 2022
£'000 £'000
Current tax expense
Current year 5,153 4,864
Adjustment in respect of prior year (223) (205)
Total current tax expense 4,930 4,659
Deferred tax (credit)/expense
Origination and reversal of temporary differences (1,403) (1,399)
Effect of tax rate changes (222) 4,258
Total income tax expense 3,305 7,518
Year ended Year ended
31 March 31 March
2023 2022
£'000 £'000
Profit for the year 15,837 9,423
Total tax expense 3,305 7,518
Profit before income tax 19,142 16,941
Tax using the UK corporation tax rate of 19% (2022: 19%) 3,637 3,219
Non-deductible expenses 74 648
Fixed asset differences 39 (55)
Adjustment in respect of prior periods (223) (205)
Amounts charged/(credited) directly to equity or otherwise transferred - (7)
Excess relief on exercise of share options - (340)
Effect of tax rate change (222) 4,258
Total tax expense 3,305 7,518
The standard rate of corporation tax in the UK was 19% (2022: 19%). Deferred
tax assets and liabilities have been measured at the rate they are expected to
unwind at, using a rate substantively enacted at 31 March 2023, which is not
lower than 25% (2022: 19%). Deferred tax not recognised relates to £6 million
of finance expense losses in a prior year and their future recoverability is
uncertain. At 31 March 2023 the total unrecognised deferred tax asset in
respect of these losses was approximately £1.1m (2022: £1.1m).
7 Loans and borrowings
Due within Due Due after Sub-total Total
2 years
(non-current)
1 year (current) between
£'000
1 and 2 years £'000 £'000
£'000
£'000
31 March 2023
Drawn Revolving Credit Facility - - 68,000 68,000 68,000
Capitalised debt arrangement fees - - (690) (690) (690)
Total - - 67,310 67,310 67,310
31 March 2022 Due within Due Due after Sub-total Total
1 year
between
2 years
(non-current)
(current)
£'000
1 and 2 years £'000 £'000
£'000
£'000
Drawn Revolving Credit Facility - - 64,000 64,000 64,000
Capitalised debt arrangement fees - (276) (415) (691) (691)
Sub-total - (276) 63,585 63,309 63,309
Capitalised debt arrangement fees shown as current assets on balance sheet (276) - - - (276)
Total (276) (276) 63,585 63,309 63,033
The book value and fair value of loans and borrowings are not materially
different.
Terms and debt repayment schedule
Amount Year of
31 March 2023 £'000 Currency Nominal interest rate maturity
Revolving Credit Facility 68,000 GBP 1.85% above SONIA 2025
Amount Nominal interest Year of
31 March 2022 £'000 Currency rate maturity
Revolving Credit Facility 64,000 GBP 1.65% above SONIA 2025
At 31 March 2023 the Group had drawn down £68,000,000 (2022: £64,000,000) of
its £100,000,000 Revolving Credit Facility. The Group's Revolving Facility
Agreement is for £100 million with an accordion of £50 million. This
facility has a 4 year term which started in October 2021. In April 2023, a 1
year extension to the term was agreed, extending it to October 2026. Interest
is calculated at a margin above SONIA, subject to a net leverage test. The
related fees for access to the facility are included in the consolidated
statement of comprehensive income.
Capitalised loan-related costs are amortised over the life of the loan to
which they relate.
Bank debt is secured by way of debentures in the Group companies which are
obligors to the loans. These are XPS Reading Limited, XPS Consulting (Reading)
Limited, XPS Pensions Consulting Limited (and its subsidiaries), Xafinity
Pensions Consulting Limited (and its subsidiaries), XPS SIPP Services Limited,
and XPS Holdings Limited (and its subsidiaries). The security is over all the
assets of the companies which are obligors to the loans.
8 Reserves
The following describes the nature and purpose of each reserve within equity:
Reserve Description and purpose
Retained earnings/accumulated deficit: All net gains and losses recognised through the consolidated statement of
comprehensive income. In the year a share premium reduction exercise was
undertaken, and as a result £116,804,000 was moved from share premium to
retained earnings.
Share premium: Amounts subscribed for share capital in excess of nominal value. In the year a
share premium reduction exercise was undertaken, and as a result £116,804,000
was moved from share premium to retained earnings.
Merger relief reserve: The merger relief reserve represents the difference between the fair value and
nominal value of shares issued on the acquisition of subsidiary companies.
Investment in own shares: Cost of own shares held by the EBT.
9 Earnings per share
31 March 31 March
2023 2022
£'000 £'000
Profit for the year 15,837 9,423
'000 '000
Weighted average number of ordinary shares in issue 205,448 203,742
Diluted weighted average number of ordinary shares 216,071 212,519
Basic earnings per share (pence) 7.7 4.6
Diluted earnings per share (pence) 7.3 4.4
The calculation of basic earnings per share is based on the earnings
attributable to ordinary shareholders divided by the weighted average number
of shares in issue during the period.
Reconciliation of weighted average ordinary shares in issue to diluted
weighted average ordinary shares:
Year ended Year ended
31 March 31 March
2023 2022
'000 '000
Weighted average number of ordinary shares in issue 205,448 203,742
Dilutive impact of share options vested up to exercise date 802 329
Dilutive impact of PSP and DSP options not yet vested 7,920 5,954
Dilutive impact of dividend yield shares for PSP and DSP options 1,069 803
Dilutive impact of SAYE options not yet vested 832 1,691
Diluted weighted average number of ordinary shares 216,071 212,519
Share awards were made to the Executive Board members and key management
personnel in each year since the year ending 31 March 2017, these are subject
to certain conditions, and each tranche of awards vest 3 years after the award
date. Dividend yield shares relating to these awards will also be awarded upon
vesting of the main awards. Further shares have been issued under SAYE share
schemes in the years ending 31 March 2020, 2022 and 2023, these will vest in
the years ending 31 March 2023, 2025 and 2026 respectively. These shares are
reflected in the diluted number of shares and diluted earnings per share
calculations.
Adjusted earnings per share
Total Total
31 March 31 March
2023 2022
£'000 £'000
Adjusted profit after tax 27,143 21,761
Adjusted earnings per share (pence) 13.2 10.7
Diluted adjusted earnings per share (pence) 12.6 10.2
10 Dividends
Amounts recognised as distributions to equity holders of the parent in the
year
31 March 31 March
2023 2022
£'000 £'000
Final dividend for the year ended 31 March 2022: 4.8p per share (2021: 4.4p 9,763 8,948
per share)
Interim dividend for the year ended 31 March 2023: 2.7p (2022: 2.4p) per 5,568 4,883
ordinary share was paid during the year
15,331 13,831
The recommended final dividend payable in respect of the year ended 31 March
2023 is £11.8 million or 5.7p per share (2022: £9,696,000).
The proposed dividend has not been accrued as a liability as at 31 March 2023
as it is subject to approval at the Annual General Meeting.
31 March 31 March
2023 2022
£'000 £'000
Proposed final dividend for year ended 31 March 2023 11,766 9,696
The Trustee of the Xafinity Employee Benefit Trust has waived its entitlement
to dividends.
The Company statement of changes in equity shows that the Company has positive
reserves of £161,040,000. Therefore there are sufficient distributable
reserves in XPS Pensions Group plc in order to pay the proposed final
dividend.
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