REG - Tatton Asset Mgt PLC - Audited Final Results
18/06/2024 07:00
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RNS Number : 7803S Tatton Asset Management PLC 18 June 2024
18 June 2024
Tatton Asset Management PLC
("TAM plc", the "Group" or the "Company")
AIM: TAM
AUDITED FINAL RESULTS
For the year ended 31 March 2024
New growth target of £30 billion AUM/I by the end of FY 2029
TAM plc, the investment management and IFA support services group, today
announces its audited final results for the year ended 31 March 2024 ("FY24"),
which show strong, double-digit growth across revenue and adjusted operating
profit, at the top end of market consensus, driven by record levels of AUM and
net inflows.
FINANCIAL HIGHLIGHTS
· Group revenue increased 13.9% to £36.807m (2023: £32.327m)
· Adjusted operating profit(1) up 12.9% to £18.514m (2023: £16.402m)
· Adjusted operating profit(1) margin 50.3% (2023: 50.7%)
· Profit before tax £16.751m (2023: £15.996m)
· Adjusted fully diluted EPS(2) increased 11.2% to 22.91p (2023: 20.61p)
· Final dividend of 8.0p (2023: 10.0p), giving a total dividend for the year of
16.0p (2023: 14.5p) - up 10.3%
· Strong financial liquidity position, with net cash of £24.8m (2023: £26.5m)
· Strong balance sheet - net assets increased to £43.3m (2023: £41.8m)
OPERATIONAL HIGHLIGHTS
· AUM/I(3) increased 26.9% to £17.604bn (2023: £13.871bn). Current AUM/I(3)
at June 2024 c.£18.564bn (AUM(3) c.£17.516bn)
· AUM(3) increased 30.0% to £16.551bn (2023: £12.735bn)
· Organic net inflows were £2.303bn (2023: £1.794bn), an increase of 18.1% of
opening AUM with an average run rate of £192m per month
· The Group exceeded its three-year 'Roadmap to Growth' strategy, which set an
ambitious target of £15.0bn AUM/AUI(3) by 31 March 2024, achieving an
additional £2.6bn or 17.4% above target
· Tatton's IFA firms increased by 12.2% to 975 (2023: 869) and the number of
client accounts increased 17.9% to 126,150 (2023: 107,010)
· Paradigm Mortgages grew market share, participating in mortgage completions
totalling £13.1 billion (2023: £14.5 billion), a 9.7% reduction year on year
compared to a 29% year-on-year fall in the gross mortgage market
· Mortgage member firms increased 9.4% in the year to 1,916 members (2023: 1,751
members)
OUTLOOK
· New growth target set at £30 billion AUM/I(3) by the end of the financial
year 2029
· Net AUM/I(3) inflows of £0.9 billion in Q1 FY25, matching inflows in the
whole of H1 in the year under review, with more normalised run rate expected
for the remainder of FY25
· The Board looks to the year ahead and beyond with confidence
1 Operating profit before exceptional items, share-based payment charges,
amortisation of acquired intangibles, changes in fair value of contingent
consideration and operating loss relating to non-controlling interest.
2 Adjusted fully diluted earnings per share is calculated by dividing the
adjusted operating profit less cash interest and less tax on operating
activities by the weighted average number of ordinary shares in issue during
the year plus potentially dilutive ordinary shares.
3 "AUM" is Assets under management. "AUM/I" is Asset under management and
influence.
Paul Hogarth, Chief Executive Officer, commented:
"This has been another exceptional year for the Group. We achieved a
substantial increase in net inflows, totalling £2.3 billion, with a
particularly strong finish in the second half, especially in the last quarter.
This performance underscores the organic growth potential in our market,
culminating in an end-of-year AUM/I of £17.6 billion-26.9% higher than at the
start of the year and 17.4% above our three-year target of £15 billion.
"As promised, we have set a new milestone for the future: we aim to grow our
AUM/I to £30 billion by the end of the financial year 2029. I am pleased to
report that we have made an encouraging start towards this goal, achieving net
inflows of approximately £0.9 billion in Q1 FY25. To put this in perspective,
£0.9 billion was the same level of net inflows we achieved in the first half
of FY24, the year under review. Whilst this is a very positive start, it is
important to note that several large new mandates have boosted net inflows. We
are delighted with this, but we do anticipate a return to a more normalised
run rate for the remainder of the year."
Commenting on Outlook he added:
"Looking ahead, we are very optimistic about our growth trajectory and the
opportunities that lie ahead. Our goal is to exceed our £30 billion AUM/I
target, enhance our market position, and continue to support and champion the
IFA community. Our focus will remain on maintaining organic growth,
improving operational efficiency, and fulfilling our commitments to our
stakeholders. We are confident that our strategic approach, coupled with our
dedication to excellence, will lead to continued success and solidify our
position as a leading asset management firm in the UK."
-ends-
For further information please contact:
Tatton Asset Management plc +44 (0) 161 486 3441
Paul Hogarth (Chief Executive Officer)
Paul Edwards (Chief Financial Officer)
Lothar Mentel (Chief Investment Officer)
Zeus - Nomad and Broker +44 (0) 20 3829 5000
Martin Green/Dan Bate (Investment Banking)
Singer Capital Markets - Joint Broker
Peter Steel / Charles Leigh-Pemberton (Investment Banking) +44 (0) 20 7496 3000
Belvedere Communications - Financial PR
John West / Llew Angus (media) +44 (0) 7407 023147
Cat Valentine / Keeley Clarke (investors) +44 (0) 7715 769078
tattonpr@belvederepr.com (mailto:tattonpr@belvederepr.com)
Trade Media Enquiries
Roddi Vaughan Thomas +44 (0) 20 7139 1452
For more information, please visit: www.tattonassetmanagement.com
(http://www.tattonassetmanagement.com)
Chairman's Report
TEAM WORK AND TALENT DELIVERS RESULTS
Over the twelve-month period ended 31 March 2024 - a year that delivered
little to improve the challenging political and economic circumstances of
previous reporting periods, both globally and domestically - I am pleased to
be able to report, once again, a satisfying outcome for Tatton Asset
Management plc ("TAM", the "Group" or the "Company") with our highest-yet
levels of assets under management ("AUM"), revenue and profit before tax,
enabling us to announce another year of increased dividends.
The year under review saw the successful culmination of the Group's three-year
"Roadmap to Growth" strategy announced in 2021, targeting an increase in AUM
from £9 billion to £15 billion through a combination of organic growth and
strategic acquisitions. At 31 March 2024, our AUM/AUI(1) of £17.6 billion
materially exceeded this objective, with £1.65 billion of the additional
£8.6 billion derived from strategic acquisitions, and the balance derived
through a combination of organic growth and increased investment values.
Following this significant achievement, the Group has targeted a further rise
in AUM for the five-year period ending March 2029, rising from £17.6 billion
to £30 billion. Details of this development are set out in the Strategic
Report on pages 16 and 17 of the 2024 Annual Report. In planning for a
successful outcome for this new challenge we will build on our already
extensive relationships within the Independent Financial Adviser ("IFA")
community. The combination of our long term investment track record, our
cutting-edge customer service reputation, and our effective investment
communications, provide leading support for the products and services that we
offer IFAs helping them better advise and support their own clients.
A relentless focus on this single route to market has been the platform for
the growth that is outlined in this report, and we are committed
to optimising this approach over the next several years.
Paradigm, our IFA consultancy business, has continued to perform in line with
expectations, delivering expert regulatory consulting to the IFA community,
and remains well-positioned to continue to do so. This year has been a more
challenging period for the Mortgage division. We participated in mortgage
completions totalling £13.1 billion (2023: £14.5 billion), a 9.7% reduction
year on year; however this was in line with our expectations and compares well
to the UK gross mortgage market where gross advances (mortgage lending)
declined by 29% over the same period. We continue to expand our distribution
footprint and are well-placed to take advantage of opportunities as the
market recovers.
FINANCIAL HIGHLIGHTS
Group revenue increased by 13.9% to £36.8m (2023: £32.3m), while adjusted
operating profit(1) rose by 12.9% to £18.5m (2023: £16.4m). The Group's
operating profit fell slightly to £16.5m (2023: £16.6m), while profit before
tax improved to £16.8m (2023: £16.0m). Profit after tax fell by 3.4% to
£12.9m (2023: £13.4m), largely due to the increase in the corporation tax
rate from 19% to 25%. The impact of the above changes on fully diluted
adjusted earnings per share ("EPS") was an increase of 11.2% to 22.9p (2023:
20.6p), with diluted adjusted EPS increasing to 23.32p (2023: 21.01p), while
basic EPS fell to 21.4p (2023: 22.4p), mostly due to the larger gain on the
release of contingent consideration in the prior year, along with the increase
in the corporation tax rate this year.
OUR PEOPLE
The staff at TAM remain the most important factor in the Group's success.
Their commitment and capability are the driving force behind the achievements
detailed in this annual report and accounts, and their collective
determination to flourish, on a personal as well as corporate level, forms
a foundation that supports the confidence that runs through the entirety of
this report. On behalf of the Board, I would like to thank every member of
staff for their contribution over a gratifying year.
We remain committed to fostering a culture of inclusion, collaboration, and
professional development, one in which our employees are empowered to take
ownership of their work and are provided with opportunities for professional
growth and advancement. We are proud of the diverse and talented team that we
have built, and we are committed to investing in their continued success in
order to drive the success of the organisation over the longer term.
ROLE OF THE BOARD AND ITS EFFECTIVENESS
The Board of Directors plays a crucial role in governance and strategic
direction and is responsible for overseeing the management of the Group,
setting its strategic direction, and ensuring that TAM operates in the best
interests of its shareholders and other stakeholders. My primary role as
Chairman is to provide leadership to the Board and to provide the right
environment to enable each of the Directors, and the Board as a whole, to
perform effectively, provide sound guidance and oversight, make informed
decisions and ensure that the company operates with integrity and
transparency. It is my view that the Board has an appropriate balance of
skills with which to carry out its duties and that it is highly effective,
with a thorough understanding of the opportunities and threats facing the
Group.
UK CORPORATE GOVERNANCE
Tatton Asset Management plc is committed to maintaining high standards of
corporate governance. The Board of Directors recognises the importance of good
governance in the management of the Group and in the protection of
shareholder interests. The Group adheres to the principles of the QCA
Corporate Governance Code (the "QCA Code") and continuously reviews its
governance practices to ensure that they meet the evolving needs of the
business and its stakeholders. Details of how we have applied the principles
that form the QCA Code are provided throughout the 2024 Annual Report and are
detailed on pages 51 and 52.
SECTION 172 STATEMENT
Section 172 of the Companies Act 2006 requires that the Directors act in the
way that they consider, in good faith, would be most likely to promote the
success of the Company for the benefit of its members as a whole. For this
reason section 172 requires a Director to have regard, amongst other matters,
to: the likely consequences of any decisions in the long term; the interests
of the Company's employees; the need to foster the Company's business
relationships with suppliers, customers and others; the impact of the
Company's operations on the community and environment; the desirability of the
Company maintaining a reputation for high standards of business conduct; and
the need to act fairly as between members of the Company. Further information
can be found on pages 44 and 45 of the 2024 Annual Report.
DIVIDENDS
The Group continues to perform well, as we maintain our focus on creating
long-term sustainable shareholder value. Given our continued progress, and in
line with the guidance that we issued at the half year when we indicated that
the split of the dividend would be 50:50 between the interim and final
dividend, the Board is proposing a final full year dividend of 8.0p per share
(see note 11). This brings the total ordinary dividend for the year to 16.0p
per share, an increase of 10.3% on the prior year, which is covered 2.9 times
by adjusted earnings per share1. Subject to shareholder approval at the
forthcoming Annual General Meeting, the dividend will be paid on 6 August 2024
to shareholders who are on the register on 28 June 2024. The ex-dividend date
will be 27 June 2024.
OUTLOOK AND PROSPECTS
In general, the global economy has been surprisingly resilient over the
twelve-month period under review. While we are cautiously optimistic regarding
the immediate future, we remain conscious that threats to the economic
landscape remain, and that persistent inflation and geopolitical events have
the potential to undermine recent progress. Nevertheless, we are confident
that the momentum that we have created over recent years has the potential to
provide a continuing increase in our market share, while general recognition
that the Model Portfolio Service approach to asset management is a growing
sector of the industry and will, in the absence of headwinds, combine to
provide a strong platform for further progress.
Finally, I would like to express my gratitude to shareholders for their
continued support, to clients for their trust and loyalty, to advisers for
their partnership and collaboration, and to our employees for their loyalty
and commitment. I look forward to another successful year ahead for
Tatton Asset Management plc.
Roger Cornick
Chairman
Chief Executive Officer's Review
CREATING THE ENVIRONMENT FOR GROWTH
This year marks the end of our three-year "Roadmap to Growth" strategy,
wherein in 2021, we set ourselves the ambitious target of increasing our AUM
by £6bn, from what was then £9bn to £15bn, through a combination
of organic growth and acquisitions.
While we were close to reaching the target at this year's interim result, I am
now delighted to say that we have exceeded the target with a final value of
AUM/AUI(1) of £17.6bn as of 31 March 2024, 17.4% ahead of the original
target. While we delivered the £17.6bn through a combination of organic
growth and acquisitions, I am particularly pleased that we would have exceeded
the target due to purely organic growth alone, through a combination of
£5.4bn of net inflows and a positive investment performance of £1.5bn over
the three-year period. We can add to that the two strategic acquisitions of
£0.65bn of Verbatim Funds and £1.05bn of AUI from 8AM Global Limited, which
complemented the organic growth to reach the £17.6bn milestone.
Financial Performance
This year has been another challenging year for many businesses, due to a
combination of continued geopolitical and global economic influences that
have continued to impact not only the markets generally, but also the key
areas in which we operate. As in prior years, we are not immune to the
impacts of these events. However, we have continued to adapt and respond to
the challenges that we face by continuing to focus on servicing the customer
and IFA community while expanding our distribution footprint, with a view to
maintaining and increasing our market share wherever possible. This aim is
underpinned by our long-term track record of consistent investment performance
and market-leading customer service and communications, which, when combined
with our existing IFA distribution partnerships, continue to drive the success
of the business. We were delighted to have this validated through being
recognised in a recent Defaqto DFM survey as both the preferred and the most
recommended DFM MPS provider.
Group revenue increased by 13.9% to £36.8m (2023: £32.3m) and Group adjusted
operating profit¹ increased by 12.9% to £18.5m, with an adjusted operating
profit(1) margin that was broadly in line with the prior year of 50.3% (2023:
50.7%). Our operating profit was £16.5m, in line with that of the prior year
of £16.6m. We ended the year with cash on the balance sheet of £24.8m
(2023: £26.5m).
1. Alternative performance measures are detailed in note 27.
Tatton revenue increased strongly by 19.0% to £30.9m, which was accompanied
by a new record for organic net inflows in the year of £2.303bn, 18.1% of
opening AUM. Net inflows in the first half of the year were £0.910bn with
the second half of the year materially improving to £1.393bn. We are pleased
that net inflows stayed consistently strong throughout the year, averaging
£192m per month. This was split £152m in the first six months and a
significant improvement to £232m in the second six months. Clearly, the
second half of the year was much stronger, although there was no single event
responsible for this strong performance; it was due to a general improvement
across the board with the last three months, and particularly March, being
very strong. In addition to organic flows, the markets added a further
£1.538bn over the year, with the second half of the year accounting for
£1.438bn. During the year, we disposed of our £25m AIM portfolio and, with
8AM Global contributing £1.053bn of AUI, our total AUM/AUI(1) finished the
year at £17.604bn.
Total £bn
Opening AUM 1 April 2023 12.735
Organic net inflows 2.303
Market and investment performance 1.538
Disposal of AIM portfolio (0.025)
Closing AUM 31 March 2024 16.551
8AM - AUI(1) 1.053
Total closing combined AUM/AUI(1) 31 March 2024 17.604
Tatton adjusted operating profit(1) increased by 22.8% to £19.4m (2023:
£15.8m) and the adjusted operating profit(1) margin increased to 63.0% (2023:
61.1%). Operating profit margin fell to 60.2% from 65.6%, partly due to a
large release of contingent consideration payable on 8AM and Verbatim in the
prior year of £2.7m, while this year took the impact of an impairment of
£1.3m against the investment in 8AM. While we have continued to invest in
the business to drive future growth, this year saw the benefit of the sale of
AIM, which overall, contributed a one-off gain by adding £0.5m to the
adjusted operating profit(1) of Tatton. Tatton continues to account for a
greater proportion of the income and now stands at 83.9% of Group revenue,
along with contributing the vast majority of the Group operating profit.
Paradigm revenue decreased by £0.5m, or 7.1%, to £5.9m. In many ways this
was a very resilient performance from the business. While the consultancy
element of this business remained stable, albeit losing a small number of
firms to consolidation, as predicted the Mortgages business faced a more
difficult year, with completions reducing by 9.7% to £13.1bn (2023:
£14.5bn). This was in line with guidance, but was, more importantly, a good
result when compared to the UK gross mortgage market, which fell by 29%. As a
consequence of reduced revenue and investment in the cost base, which included
the full-year effect of new personnel and cost inflation, the adjusted
operating profit(1) fell to £1.8m (2023: £2.4m) with a margin of 29.9%
(2023: 37.5%), with a similar fall in Operating profit and related margin
delivering £1.5m at 25.6% (2023: £2.2m at 34.5%).
Strategy: Progress and Market Trends
Our vision has always been to create lasting and sustainable growth by being
the preferred provider for IFAs. To achieve and support this vision, we have
offered products and services that are competitive in the market and that help
IFAs give better advice to their clients. We have also sought to improve our
market position by growing our client base and increasing our AUM while
expanding our range of service offerings. After celebrating our 10th
anniversary last year and completing our 'Roadmap to Growth' strategy this
year, we look forward with excitement and the same passion for the business
that we have always had, and we are eager to enter the next phase of our
growth and development as a business.
We constantly monitor the IFA sector to identify the trends and the direction
of the broader market, and how we can assist in developing and creating
solutions that help the IFA with their own strategic direction and growth,
while supporting their clients and improving client outcomes. In response to
considering how we can further support our IFAs, during the year we made an
investment of £0.5m in Fintegrate Financial Solutions Limited, a company
which provides a financial planning software tool to IFAs.
There have been two main trends lately across the IFA sector. The first
involves the growing use of the MPS solution, as IFAs have increasingly
delegated investment decisions to an independent DFM; Tatton has been a major
beneficiary of this trend. The second trend, consolidation, has been a rising
factor in the wider IFA market. Some market consultants think that over time,
the market will consolidate further, whereby five or six major consolidators
will take over about half of the market. I do not agree with this view, as I
think that there will always be a demand for the independent local high-street
IFA. When IFAs wish to retire, I can see many younger IFA businesses wanting
to buy them up. Some consolidators think that it is just a matter of
aggregation, i.e. buying firms at a lower price than their target exit value,
while others aim to vertically integrate the firms. We think that there is
more to this process than that, and we continue to research and consider
possible alternative solutions.
Market Development
The core trends that continue to drive growth regarding the adoption of UK MPS
remain unchanged, with the key aspect being outsourcing portfolio management
responsibilities, which allows the advisers to focus on financial planning and
client relationships and on continuing to grow and improve their businesses.
The MPS market has continued to show significant growth and, as in prior
years, the assets held on platform and in MPS remain the fastest-growing area
for Wealth Managers and are becoming a substantial part of the investment
landscape. Platforum, industry research consultants, have provided a market
update which supports the view that this trend is set to continue. There was
last reported over £139bn of MPS assets on platform as of December 2023,
which accounted for 19.3% of the £722bn of assets on platform in total, an
increase from 16% in the previous year. We believe that the market remains on
track to reach £200bn by 2027. Extending the picture globally reinforces
this view, as the current level of $4.2tn of assets being held in MPS is
set to increase to $10tn by 2028(2).
The market remains competitive with over 100 MPS providers made up of new
entrants and traditional investment managers. Pricing has continued its
downward trend, with average pricing levels now being 19bps, although a broad
range is still found within the pricing landscape. Tatton remains very
competitive and, when coupled with our long-term track record of consistent
investment performance and market-leading customer service and communications,
and combined with our IFA distribution partnerships, our proposition remains
market-leading and compelling.
Regulation
Consumer Duty legislation came into effect in July 2023 and it has been a
factor in the IFAs' shift from in-house managed portfolios to third party MPS
providers. The FCA has made it clear that they wish firms to act in the best
interests of their retail customers, which includes considering moving some
investment clients' portfolios from more costly bespoke models to simpler
model portfolios, if these are more suitable for the customer's investment
size, as laid out under the Duty's price and value outcome principle. I remain
of the view that third party MPS providers are well placed to meet
the regulation's requirements by offering low-cost and competitive investment
options for clients, while helping the IFA to comply with Consumer Duty
requirements. As an MPS-focused investment manager, this requirement
of Consumer Duty aligns with our strengths in putting the adviser at the
centre of the value chain and enabling the delivery of better client
outcomes.
1. Alternative performance measures are detailed in note 27.
2. Fundscape: How to win business and influence model portfolios.
Paradigm
Overall, Paradigm delivered a resilient performance this year. Paradigm
Consulting remained stable, although Paradigm Mortgages' performance was not
immune from the challenges created by a difficult housing market wherein the
resilience of all intermediary participants was tested. During the year, the
housing purchase market stalled, which impacted the available product mix and
the resultant margins. In addition, affordability constraints, which were
driven by higher borrowing costs (with rates peaking in August 2023 at 5.25%,
three times higher than those two years prior), impacted both new buyers and
those rolling off less expensive fixed-term deals. As in prior periods,
lenders focused on retaining their existing customers, and Product Transfer
("PT") (fixed-rate maturities) business rose. This change was at the expense
of more margin-rich remortgage business and buy-to-let volumes, which also
suffered when both funding and affordability constraints made their mark.
As we look forward with confidence, activity and demand are improving, as
evidenced by greater numbers of sellers and prospective buyers, with mortgage
applications and approvals at their highest levels in 18 months. Property
values epitomise this resilience since UK house prices remained largely
unchanged on a monthly basis, with the latest research suggesting that house
prices will increase by 2.5% in 2024. That being said, the market remains
sensitive to short-term fluctuations; although Paradigm anticipates another
challenging year, we do believe that as the economic outlook improves and
interest rates inevitably decline, homebuyers will gain confidence from a
period of relative stability. Pent-up consumer demand, underpinned by
improving affordability, will drive transaction volumes upward. While brokers
will not ignore the opportunities presented by PTs, they will benefit from
improvements in the Purchase and Remortgage markets, both of which offer
greater margins. This positive outlook should be balanced by the general
state of political uncertainty in the UK in the run-up to the general
election, together with wider global uncertainties that have the capacity to
disrupt market stability. As a result, many commentators believe that there
are unlikely to be meaningful falls in mortgage rates this year, while there
is still the potential for short-term fluctuations in the cost of debt and
house prices.
Therefore, when evaluating the short to medium term, Paradigm's positive
membership growth, which is up by 9.4% on the prior year, is predicted to
continue and should result in increased completion volumes for 2025,
essentially returning back to 2022/23 levels of c.£14.3bn. With a stronger
economic performance expected in 2025 and 2026, we maintain a broadly positive
outlook.
Strategic Goals and Priorities
• AUM expansion and organic growth
- Target AUM/AUI(1) of £30bn by March 2029, a cumulative annual growth rate
of 11.3%
- Consistently achieve a minimum average of £2bn of net inflows per annum
• Strategic acquisitions and partnerships
- Identify and execute targeted acquisitions that align with our business model
and enhance our AUM and our wider proposition
- Forge new partnerships to aid distribution, broaden our reach, and access new
markets
• Expand Distribution
- Build on our recent success by delivering further strategic partnerships and
collaborations with larger IFA firms, delivering enhanced client outcomes
• Paradigm market share
- Continue to increase the number of firms that utilise Paradigm, specifically,
by taking a greater share of the available mortgage broker and intermediary
market and increasing the level of mortgage completions
Outlook and summary
In summary, the Group has delivered another strong year of growth in terms
of net inflows and AUM, while also demonstrating continued resilience when
seen against the backdrop of what has been another difficult year across
markets and the general economy. As we welcome the coming years, we are
excited by the future opportunities that we have as a business, and we look
forward to maintaining our focus on the strategic initiatives that we have
set out and delivering the next phase of our growth and vision for the
future.
This success would not be possible without the unwavering commitment and hard
work of our entire team across the Group. I extend my sincere gratitude for
their enduring dedication to serving our customers and clients; their
extraordinary abilities continue to be the foundation of our achievements.
Paul Hogarth
Chief Executive Officer
Q&A with our Chief Executive Officer
What has been the impact of Consumer Duty over the last 12 months and how do
you see it moving forward?
It would appear that the focus from the regulator so far has been on the
larger product manufacturers and, indeed, platforms. IFAs are now, in the
main, totally up to speed with Consumer Duty and what is required from them
to comply. We are starting to see some signs of pockets of traditional
discretionary fund management making its way to MPS. I would expect this
trend to continue and gather momentum, which should be a tailwind for our
business.
How has the IFA sector been impacted by Private Equity consolidators over the
last few years?
Private equity ("PE") has been very active in the wealth management arena.
They have led the consolidation trend in the platform market, where numerous
platforms are now owned by PE. They have also backed IFA consolidation and,
indeed, the leading consolidators are nearly all owned by PE. I do not
necessarily see this as a bad thing, as this highlights the true value of
IFA practices. The principals of the IFA businesses are, therefore, encouraged
to grow and invest in their business to take advantage of this at a future
date.
Do you see the continued growth of Model Portfolio Solutions over the coming
years?
Absolutely, yes. As a business, we continue to look to see if there are
other propositions that fulfil all the positive elements that the MPS service
provides. The combination of price, consistent investment performance and
client outcomes, along with the transparency and simplicity of the product,
underpins continual growth. At the moment, and in general, I cannot see a
better place for clients' hard-earned capital.
How do you see technology and, in particular, artificial intelligence ("AI")
impacting the investment world in the near to medium term?
We believe that IFAs should embrace AI as a tool to help them improve the
efficiency of their businesses and deliver some of the more automated
services that they provide. Simple tools and solutions that can help to record
annual review meetings and client conversations must be a good starting point.
Overall, I see AI making a really positive contribution to what we do,
although ultimately, I do not think AI is a threat to our business and will
not replace human interaction and the investment decision-making process.
How do you keep the TAM team constantly motivated?
We are still a small, growing business benefitting from our continued growth
and offer a great place to work. We are small enough to know everyone's first
name and appreciate the contribution each individual makes to the success of
the overall business. We naturally reward success with performance related
pay, bonuses and options where appropriate. We have a strong service-led
culture that permeates through the business and reflects the values to which
we aspire. The Board and senior management have always had an open door policy
and openly communicate our corporate goals and acknowledge individual
achievement.
Chief Investment Officer's Report
the first 10 years builds a foundation for the next
Proposition development
We continue to benefit from the strength of our relationships with the
advisers that recommend Tatton's investments to their clients. Our business
model, which has the genuine synergy created by mutual benefit, remains
flexible and responsive to the needs of IFAs and meeting their clients'
desired outcomes.
Listening and responding to feedback enables Tatton to build the IFA
relationship based on the trust created by long-term delivery. Central to this
is the consistency of our portfolio management approach, which generates
sustained repeatable investment performance and is not reactive to short-term
market distractions.
As part of this, we expanded our Overlay Strategy to our Tracker and Global
models, as they had reached a sufficient scale. The Overlay Strategy, created
in 2016 for Tatton's Managed models, uses an open-ended structure created at
each risk profile, which provides access to alternative share classes,
improved trading and smoother portfolio management. With this expansion, the
majority of Tatton's models now benefit from the significant efficiencies and
dynamic investment opportunities the Overlay Strategy brings.
Responding to adviser feedback and rising interest rates, in August 2023, we
launched the Tatton Money Market Portfolio, a portfolio of ultra-low-risk
money market funds, to give investors access to higher rates of interest on
cash than they could receive from a standard notice bank account and maintain
control of their asset through their chosen investment platform.
We have also improved our client reporting by enabling advisers to personalise
performance charts in our monthly and quarterly factsheets. We also enhanced
our portfolio update reporting by making it more accessible through our new
Portfolio Decisions report. All these reports are automated and generated for
each adviser through the Tatton Portal, increasing the direct support of their
day-to-day client reports.
2023/24 capital markets and returns
Tatton's strength is our clearly defined investment process and the robust
discipline of the investment team. Our focus remains on being long-term
investment managers and we are not distracted by short-term market
narratives.
The last year duly rewarded long-term investors. Capital markets rebounded
strongly from the 2022 downturn. Holders of risk assets saw significant
returns as worries about inflation, interest rates and global recession faded.
Returns were pleasing for the markets and our portfolios, which were suitably
positioned to take advantage of the opportunities that arose.
During the 2022/23 period, we saw the sharpest monetary policy squeeze in a
generation. Spiking global inflation forced central banks to rapidly raise
interest rates, pushing up government bond yields. Market sentiment showed
concerns over the central banks keeping rates 'higher for longer' but through
2023/24 it looked increasingly certain that interest rates will be cut. The
forward rate curve informs us that the markets see The Bank of England and
the US Federal Reserve to have all but confirmed that their next rates move
will be a cut, and expectations of a looser policy have already propelled risk
assets.
The turnaround started in bond markets. Indications last summer were that the
inflation crises might be over, but it was not until the end of October that
market confidence rose. Falling inflation and a growing expectation of rate
cuts helped bring an extremely difficult period for bonds to an end. This
brought tactical return opportunities through active duration management in
the Overlay Strategy.
Equities markets followed. Falling bond yields made equities more attractive
and this valuation effect clearly impacted prices, but the rally was not just
about that adjustment. Towards the end of 2023, markets also anticipated
rebounding global growth. This delivered an incredible 'Santa Rally' in
December, and the first three months of 2024 were similarly positive.
Investment portfolio returns
1 year, 1 April 2023 - 31 March 2024
Tatton investment returns (%) - core MPS product set (annualised, after DFM
charge and fund costs)
Tatton Managed Tatton Tracker Tatton Blended Tatton Ethical ARC PCI(1)
Defensive 5.3 6.5 5.9 9.6 4.7
Cautious 8.2 9.1 8.6 11.4 7.3
Balanced 10.6 11.2 10.9 12.8 7.3/9.3(2)
Active 12.4 13.0 12.7 14.2 9.3
Aggressive 14.5 14.4 14.4 15.2 11.1
Global Equity 20.6 19.6 20.1 16.6 11.1
3 years, 1 April 2021 - 31 March 2024
Tatton investment returns (%) - core MPS product set (annualised, after DFM
charge and fund costs)
Tatton Managed Tatton Tracker Tatton Blended Tatton Ethical ARC PCI(1)
Defensive 0.0 0.7 0.4 0.7 0.6
Cautious 2.3 3.0 2.7 2.3 2.0
Balanced 4.2 4.7 4.5 3.6 2.0/3.0(2)
Active 6.0 6.3 6.1 5.1 3.0
Aggressive 7.4 7.6 7.5 6.2 3.6
Global Equity 9.0 9.0 9.0 6.9 3.6
1. ARC PCI - Asset Risk Consultants Private Client Indices ("PCI").
2. Balanced Portfolios are measured against both ARC Balanced Asset PCI and
ARC Steady Growth PCI as, in risk terms, the Balanced Portfolios lie in the
middle of these Indices.
Underlying that growth story was the drop in global inflation. Growth has been
surprisingly resilient against rapid interest rate hikes, and markets became
convinced that this will carry on through to eventual rate cuts - more so for
the US, where consumer demand has stayed surprisingly strong for years.
Markets seem to believe that inflation will come all the way down without high
rates hurting the economy too much.
That belief has effectively saved markets from the typical recession at the
end of a growth cycle, and we have effectively 'rewound' into an a mid-cycle
environment. When rates inevitably fall, we expect this will bring
opportunities for smaller businesses - and they will already be starting from
a strong point, with so few 'going bust' compared to previous cycles.
In the first quarter of 2024, the rally broadened, having previously focused
on large US tech companies - the so-called "magnificent seven". The tech
domination created misplaced fears of another dotcom-style bubble, as those
companies have been propelled by growing profits and not just exuberance.
A notable feature of the capital market rally was the fall in stock market
volatility during that period, despite yields rebounding and expectations for
rate cuts being pushed further into the future. This shows that investors have
a bigger appetite for risk assets. That attitude is an endorsement of the
global economy and there are opportunities, but with high valuations there
is also room for disappointment, and this creates patches of volatility, as
seen in early April. Markets may be too positive for our liking.
Outlook
It looks like the remainder of 2024 should be a calmer period than the
immediately preceding years. The pricing of volatility options tells us that
investors think risks are low - but that is not the same thing as risks
actually being low. Markets can still fall and, with price-to-earnings ratios
so high (especially in the US), there is a sense that any extra shocks could
impact hard. However, markets have demonstrated notable resistance and there
is no clear signal that positive sentiment will falter at this time.
This year will see general elections in the UK and US, both of which should
interest markets. Britain looks certain to get a change of government. Capital
markets appear completely unphased, though in large part because they are
expecting very little to change. The Starmer-led Labour party has firmly
pushed its centrist credentials and is likely to pursue a very similar
economic policy to Rishi Sunak and Jeremy Hunt. Politics always has the
capacity to create surprises, so we note that policies could alter in the
run-up to the election.
The US presidential election outcome is much more uncertain. Donald Trump is
the very slight favourite in a rematch with President Biden. There will be
more drama as we approach November. In particular, there could be accusations
of bias thrown at the Federal Reserve if it is perceived to be helping Biden
to cut rates. How this affects bonds and the US Treasury's massive debt pile
will be crucial.
Tatton will continue to stick to our principles and pursue a calm stewardship
of our clients' investments. Short-term market dramas can be hard to ignore,
but so often, the consistent management of long-term investments require
us to do exactly that. Our portfolio performance in the last year vindicates
this strategy, and we have every faith that it will continue to do so.
Our principles of long-term stewardship have helped us not only in terms of
market returns, but in terms of growing and thriving as a business. We are
proud to have gained a reputation as a safe, professional guardian
of clients' investments. This has allowed us to grow, even through difficult
periods in recent years.
The heart of our model is about working with IFAs to manage their clients'
savings and investments to create their best outcomes. We focus on calm,
clear and consistent stewardship so that IFAs can focus on clients' individual
needs. We will always strive to communicate what we are doing and why with
utmost clarity, and we are thankful to IFAs for telling us what is best for
their clients. As ever, maintaining these high standards will be key to our
success.
LOTHAR MENTEL
Chief Investment Officer
Chief Financial Officer's Report
GROWTH DRIVes STRONG FINANCIAL RESULTS
Overview
The Group has demonstrated again the strength of its business model. Despite a
year of geopolitical tensions, global inflation and the resulting high
interest rates, the Group has continued to deliver its market leading,
customer-focused service across both Tatton and Paradigm. The financial
performance of the Group has continued to go from strength to strength,
delivering record net inflows that have driven double-digit growth in revenue
and adjusted operating profits¹, with operating profit remaining broadly in
line year on year. The Group's strong financial fundamentals are also
demonstrated on the balance sheet, with high liquidity through a
cash-generative operating model.
Revenue and profits
Group revenue increased by 13.9% to £36.8m (2023: £32.3m). Due to the
continued growth in our AUM, Tatton's investment-related income now accounts
for 83.9% (2023: 80.2%) of our total Group revenue, a trend that
is anticipated to continue through our focused strategy and continuation of
current market trends. Tatton revenue increased by 19.0% to £30.9m (2023:
£25.9m). While many asset managers have continued to see outflows and
redemptions this year, Tatton's AUM/AUI(1) increased by 26.9% to reach
£17.6bn (2023: £13.9bn), driven by our highest-yet net inflows of £2.3bn,
18.1% of opening AUM, with markets adding a further £1.5bn in the year. As
Tatton's AUM was significantly higher in March 2024 than in March 2023, the
level of trade receivables and accrued income on the balance sheet has also
increased significantly from £2.9m to £4.3m.
Tatton's adjusted operating profit¹ increased by 22.8% to £19.4m (2023:
£15.8m) and its adjusted operating profit margin¹ increased to 63.0% (2023:
61.1%). Its operating profit increased to £18.6m (2023: £17.0m), with a
fall in margin from 65.6% to 60.2% due to the impact of an impairment in the
investment in 8AM of £1.3m.
Paradigm's adjusted operating profit¹ fell to £1.8m from £2.4m due to a
reduction in mortgage completions in the year, which we had anticipated. There
was a similar reduction in operating profit to £1.5m (2023: £2.2m). While
the UK gross mortgage market fell by 29%, Paradigm's completions fell by only
9.7% to £13.1 billion, a robust performance in the circumstances. Paradigm's
adjusted operating profit¹ margin decreased to 29.9% (2023: 37.5%) with
operating profit margin of 25.6% (2023: 34.5%). Paradigm is obviously
leveraged to the UK mortgage market and we anticipate margins increasing in
line with the expected increase in completion volumes in the coming year.
Group operating profit was £16.5m (2023: £16.6m). This includes the increase
in administrative expenses of £3.3m in the year, of which £1.0m relates to
separately disclosed items; this excludes the £1.25m impairment on 8AM not
included within administrative expenses. Underlying growth in costs excluding
these items is £2.3m, or an increase of 14.3%. Of this growth, 11.7% is
people cost related, relating to investment in new employees and salary
increases, with 5.2% relating to variable pay that reflected the strong net
inflows and financial performance this year. The remaining increase
in administrative expenses predominately reflects the investment in marketing
and distribution activity, along with governance and compliance costs.
Operating profit also includes a gross contribution of £0.5m from the
disposal of our AIM portfolio in September 2023. The net impact year on year
is a modest increase of £0.3m when including the revenue foregone in the
second half of this year.
Results of joint ventures
The Group's share of the loss from joint ventures is £1.2m (2023: £0.2m
profit), including £1.3m of impairment of the investment in 8AM. Further
details are included in note 13.
Separately disclosed items
Separately disclosed items are adjusting items to Operating profit and total
£2.1m. This includes the cost of share-based payments of £1.5m, in line
with the prior year of £1.5m, amortisation of acquisition-related intangible
assets of £0.6m, a credit relating to fair value gain on contingent
consideration of £1.4m, and an exceptional item of an impairment loss of
£1.3m, as detailed above. An adjustment has also been made to remove the
operating loss relating to the non-controlling interest in Fintegrate
Financial Solutions Limited ("Fintegrate"), a small investment made during the
year, of £0.1m to reflect the Adjusted operating profit(1) attributable to
shareholders of TAM.
At March 2024, one contingent consideration payment remained outstanding
relating to the acquisition of 8AM, which is dependent on reaching target
profitability. At the year end, the Group has considered the performance of
the business and released £0.9m of contingent consideration liability,
leaving £nil remaining on the balance sheet. The fair value of the two
contingent consideration payments remaining relating to the Verbatim funds,
acquired in 2021, has also been reduced by £0.5m. These releases have
contributed to the reduction in the balance of trade and other payables as at
March 2024 to £9.1m (2023: £10.2m), along with a payment of contingent
consideration of £0.9m. In the prior year, the fair value gain
on contingent consideration was £2.7m.
Statutory Mar-24 Mar-23
Operating profit (£m) 16.464 16.610
Basic EPS (p) 21.39 22.43
Diluted EPS (p) 21.02 21.70
Cash generated from operations (£m) 16.930 15.790
Alternative performance measures ("APMs")
A comparison between key statutory measures and APMs is detailed in the table
above, with further information as to the reconciliation between the two
measures being provided in note 27. The APMs provide additional information
to investors and other external shareholders to provide additional
understanding of the Group's results of operations as supplemental measures of
performance. The APMs are used by the Board and management to analyse the
business and financial performance, track the Group's progress and help
develop long-term strategic plans. Some APMs are also used as key management
incentive metrics.
Finance income/(costs)
The Group has recognised finance income of £0.6m (2023: £nil) due to the
interest received on corporate cash. Finance costs have reduced from £0.6m to
£0.4m as a result of the Group's banking facility coming to an end in the
year.
Taxation
The Group's tax charge for the year is £3.8m (2023: £2.6m), an effective tax
rate of 23% (2023: 16%). The charge has increased this year, largely due to
the increase in the corporation tax rate to 25%. In addition, the prior year's
effective tax rate was reduced due to release of £2.7m of contingent
consideration which is non-taxable. This year's results included non taxable
income of £1.4m relating to the release of contingent consideration, offset
by the £1.3m impairment loss which is not deductible. The Group has
recognised a deferred tax asset of £2.7m (2023: £1.3m), which has grown in
the year due to the increase in the value of unexercised share options as a
result of the increase in TAM's share price. This deferred tax asset is
expected to be recoverable against future profits.
Acquisition
During the year, the Group acquired a controlling interest in Fintegrate, a
digital financial planning software company. The acquisition of Fintegrate
was made in order to broaden the support services that the Group can offer to
its IFA firms. The Group paid £0.5m for 56.49% of the share capital of
Fintegrate, and has recognised on acquisition £0.5m of goodwill
and £0.4m of software; see note 25.
Statement of financial position and cash
The Group's balance sheet remains strong, with net assets of £43.3m (2023:
£41.8m) and cash of £24.8m (2023: £26.5m). The Group maintains a very
strong operating cash conversion of over 90%; however during the year, there
was a reduction in cash held on the balance sheet, explained by strategic cash
allocation decisions. In addition to the items already detailed, the Group
acquired 658,800 of its own shares for £3.3m in the Employee Benefit Trust
for the purpose of managing employee incentives and to protect against future
share price fluctuations. We also paid £10.8m in dividends this year.
Our financial resources are kept under continual review, ensuring that we
have headroom over our regulatory capital requirements at both a Group and
entity level. We formally review comprehensive stress and conduct scenario
testing on at least an annual basis.
Alternative performance measure Mar-24 Mar-23
Adjusted operating profit (£m) 18.514 16.402
Adjusted basic EPS (p) 23.73 21.72
Adjusted fully diluted EPS (p) 22.91 20.61
Cash generated from operations before exceptional items (£m) 16.930 16.188
£'000 31-MaR 2024 31-Mar 2023
Total equity 43,334 41,781
Less: Foreseeable dividend (4,841) (6,000)
Less: Non-qualifying assets (21,405) (20,972)
Total qualifying capital resources 17,088 14,809
Less: Capital requirement (4,274) (4,400)
Surplus Capital 12,814 10,409
% Capital resource requirement held 400% 337%
Capital allocation
As we grow, capital allocation decisions will continue to be made in a manner
that supports the Group's strategic objectives, maximises shareholder value
and sustains long-term growth. We will continue to invest in strategic
initiatives through prioritising organic investment in our product offering
but also by making strategically aligned investments and acquisitions. This
year, return on capital employed1 was 41.9% (2023: 42.2%). The Board
regularly reviews the Group's capital structure to ensure alignment with the
Group's strategic objectives and will respond, should the needs of our
business and market change.
Earnings per share ("EPS")
Basic EPS reduced slightly to 21.39p (2023: 22.43p). Despite the growth in
revenue in the year, the prior year results included the release of £2.7m of
contingent consideration, with a smaller further release in the current year
of £1.4m. This, along with £1.3m of impairment in the investment in 8AM,
have contributed to the reduction in basic EPS. However, removing the impact
of separately disclosed items, adjusted fully diluted EPS¹ has increased by
11.2% to 22.91p (2023: 20.61p), with adjusted diluted EPS of 23.32p (2023:
21.01p).
Dividends
The Board is recommending a final dividend of 8.0p. When added to the interim
dividend of 8.0p, this gives a full year dividend of 16.0p (2023: 14.5p), an
increase of 10.3% on the prior year. This proposed dividend reflects our
underlying confidence in our business and follows the 50/50 split highlighted
at the half year, maintaining our policy of paying a dividend that is
approximately 70% of the adjusted earnings. If approved at the Annual General
Meeting, the final dividend will be paid on 6 August 2024 to shareholders on
the register on 28 June 2024.
Risk management
Risk is managed closely; it is spread across our businesses and managed to
individual materiality. Our principal risks have been referenced primarily on
pages 23 to 25 of the 2024 Annual Report. We choose key performance indicators
that reflect our strategic priorities of investment, growth and profit, and
these are detailed on pages 18 and 19 of the 2024 Annual Report.
The Strategic Report found on pages 1 to 45 of the 2024 Annual Report has been
approved and authorised for issue by the Board of Directors and signed on
their behalf on 17 June 2024 by:
Paul Edwards
Chief Financial Officer
1. Alternative performance measures are detailed in note 27.
Consolidated Statement of Total Comprehensive Income
for the year ended 31 March 2024
NOTE 31-MAR 31-MAR
2024 2023
(£'000) (£'000)
Revenue 5 36,807 32,327
Share of (loss)/profit from joint ventures 13 (1,188) 160
Administrative expenses (19,155) (15,877)
Operating profit 6 16,464 16,610
• Share-based payment costs 7 1,458 1,511
• Amortisation of acquisition-related intangibles 7 633 534
• Operating loss relating to non-controlling interest 7 59 -
• Gain arising on changes in fair value of contingent consideration 7 (1,350) (2,651)
• Exceptional items 7 1,250 398
Adjusted operating profit(1) 18,514 16,402
Finance income 8 640 -
Finance costs 9 (353) (614)
Profit before tax 16,751 15,996
Taxation charge 10 (3,830) (2,623)
Profit and total comprehensive income for the financial year 12,921 13,373
Profit and total comprehensive income attributable to owners of the Parent 12,986 13,373
Company
Profit and total comprehensive income attributable to non-controlling (65) -
interests
Earnings per share - Basic 11 21.39p 22.43p
Earnings per share - Diluted 11 21.02p 21.70p
Adjusted earnings per share - Basic(1) 11 23.73p 21.72p
Adjusted earnings per share - Diluted(1) 11 23.32p 21.01p
Adjusted earnings per share - Fully Diluted(1) 11 22.91p 20.61p
1. See note 27.
All revenue, profit and earnings are with respect to continuing operations.
There were no other recognised gains or losses other than those recorded above
in the current or prior year, therefore, a Statement of Other Comprehensive
Income has not been presented.
Consolidated Statement of Financial Position
as at 31 March 2024
NOTE 31-MAR 31-MAR
2024 2023
(£'000) (£'000)
Non-current assets
Investments in joint ventures 13 5,352 6,762
Goodwill 14 9,796 9,337
Intangible assets 15 3,686 3,615
Property, plant and equipment 16 816 454
Deferred tax assets 19 2,571 1,258
Other receivables 17 188 -
Total non-current assets 22,409 21,426
Current assets
Trade and other receivables 17 5,108 3,782
Financial assets at fair value through profit or loss 21 106 123
Corporation tax - 121
Cash and cash equivalents 24,838 26,494
Total current assets 30,052 30,520
Total assets 52,461 51,946
Current liabilities
Trade and other payables 18 (8,109) (7,911)
Corporation tax (2) -
Total current liabilities (8,111) (7,911)
Non-current liabilities
Other payables 18 (1,016) (2,254)
Total non-current liabilities (1,016) (2,254)
Total liabilities (9,127) (10,165)
Net assets 43,334 41,781
Equity
Share capital 22 12,102 12,011
Share premium account 15,487 15,259
Own shares 23 (3,278) -
Other reserve 2,041 2,041
Merger reserve (28,968) (28,968)
Retained earnings 45,892 41,438
Equity attributable to owners of the Parent Company 43,276 41,781
Non-controlling interest 58 -
Total equity 43,334 41,781
The financial statements were authorised and approved by the Board of
Directors on 17 June 2024 and were signed on its behalf by:
PAUL EDWARDS
DIRECTOR
Company registration number: 10634323
Consolidated Statement of Changes in Equity
for the year ended 31 March 2024
NOTE SHARE SHARE OWN OTHER
Capital
PREMIUM
SHARES
RESERVE
(£'000) (£'000) (£'000) (£'000)
At 1 April 2022 11,783 11,632 - 2,041
Profit and total comprehensive income - - - -
Dividends 11 - - - -
Share-based payments - - -
Deferred tax on share-based payments - - - -
Current tax on share-based payments - - - -
Issue of share capital on exercise of employee share options 52 117 - -
Own shares acquired in the year 23 - - (28) -
Own shares utilised on exercise of options 23 - - 28 -
Issue of share capital on acquisition of a joint venture 176 3,510 - -
At 31 March 2023 12,011 15,259 - 2,041
Profit and total comprehensive income - - - -
Acquisition of a subsidiary - - - -
Dividends 11 - - - -
Share-based payments - - - -
Deferred tax on share-based payments - - - -
Current tax on share-based payments - - - -
Issue of share capital on exercise of employee share options 91 228 - -
Own shares acquired in the year 23 - - (3,347) -
Own shares utilised on exercise of options 23 - - 69 -
At 31 March 2024 12,102 15,487 (3,278) 2,041
MERGER RETAINED TOTAL EQUITY ATTRIBUTABLE TO SHAREHOLDERS NON- TOTAL
RESERVE
EARNINGS
CONTROLLING INTEREST
EQUITY
(£'000)
(£'000) (£'000) (£'000) (£'000)
At 1 April 2022 (28,968) 34,556 31,044 - 31,044
Profit and total comprehensive income - 13,373 13,373 - 13,373
Dividends - (7,714) (7,714) - (7,714)
Share-based payments - 1,307 1,307 - 1,307
Deferred tax on share-based payments - 18 18 - 18
Current tax on share-based payments - (102) (102) - (102)
Issue of share capital on exercise of employee share options - - 169 - 169
Own shares acquired in the year - - (28) - (28)
Own shares utilised on exercise of options - - 28 - 28
Issue of share capital on acquisition of a joint venture - - 3,686 - 3,686
At 31 March 2023 (28,968) 41,438 41,781 - 41,781
Profit and total comprehensive income - 12,986 12,986 (65) 12,921
Acquisition of a subsidiary - - - 123 123
Dividends - (10,846) (10,846) - (10,846)
Share-based payments - 980 980 - 980
Deferred tax on share-based payments - 760 760 - 760
Current tax on share-based payments - 643 643 - 643
Issue of share capital on exercise of employee share options - - 319 - 319
Own shares acquired in the year - - (3,347) - (3,347)
Own shares utilised on exercise of options - (69) - - -
At 31 March 2024 (28,968) 45,892 43,276 58 43,334
The other reserve and merger reserve were created on 19 June 2017 when the
Group was formed. The other reserve comprises the profits of the group
entities prior to the merger, and the merger reserve is the difference between
the Company's capital and the acquired Group's capital, which has been
recognised as a component of equity. The merger reserve was created through
merger accounting principles on the share for share exchange on the formation
of the Group. Both the other reserve and the merger reserve are
non-distributable.
Consolidated Statement of Cash Flows
for the year ended 31 March 2024
NOTE 31-MAR 31-MAR
2024 2023
(£'000) RESTATED*
(£'000)
Operating activities
Profit for the year 12,921 13,373
Adjustments:
Income tax expense 10 3,830 2,623
Finance income 8 (640) -
Finance costs 9 353 614
Depreciation of property, plant and equipment 16 375 384
Amortisation of intangible assets 15 543 661
Share-based payment expense 24 1,236 1,420
Post tax share of loss/(profit) of joint venture less amortisation 13 1,188 (39)
and the impairment loss on the investment
Changes in fair value of contingent consideration 7 (1,350) (2,651)
Changes in:
Trade and other receivables (1,576) (146)
Trade and other payables 50 (449)
Cash flows from exceptional items 7 - 398
Cash generated from operations before exceptional items 16,930 16,188
Cash generated from operations 16,930 15,790
Income tax paid (3,740) (2,559)
Net cash from operating activities 13,190 13,231
Investing activities
Payment for the acquisition of a business combination or joint venture, net of 25 (254) (152)
cash acquired
Dividends received from joint venture 255 60
Purchase of intangible assets (249) (229)
Purchase of property, plant and equipment (115) (89)
Interest received 640 -
Payment of contingent consideration (937) -
Net cash used in investing activities (660) (410)
Financing activities
Interest paid (63) (186)
Dividends paid 11 (10,846) (7,714)
Proceeds from the issue of shares 249 132
Purchase of own shares 23 (3,278) -
Repayment of loan liabilities 20 (18) -
Repayment of lease liabilities 20 (230) (269)
Net cash used in financing activities (14,186) (8,037)
Net (decrease)/increase in cash and cash equivalents (1,656) 4,784
Cash and cash equivalents at the beginning of the period 26,494 21,710
Cash and cash equivalents at the end of the period 24,838 26,494
* See note 2.1 for details regarding the prior year restatement.
Notes to the Consolidated Financial Statements
1 General Information
Tatton Asset Management plc (the "Company") is a public company limited by
shares. The address of the registered office is Paradigm House, Brooke Court,
Lower Meadow Road, Wilmslow, SK9 3ND. The registered number is 10634323.
The Group comprises the Company and its subsidiaries. The Group's principal
activities are discretionary fund management, the provision of compliance and
support services to independent financial advisers ("IFAs"), the provision of
mortgage adviser support services and the marketing and promotion of
multi-manager funds.
News updates, regulatory news and financial statements can be viewed and
downloaded from the Group's website, www.tattonassetmanagement.com. Copies can
also be requested from: The Company Secretary, Tatton Asset Management plc,
Paradigm House, Brooke Court, Lower Meadow Road, Wilmslow, SK9 3ND.
The Company has taken advantage of the exemption in section 408 of the
Companies Act 2006 not to present its own income statement.
2 MATERIAL Accounting Policies
The principal accounting policies applied in the presentation of the annual
financial statements are set out below. The accounting policies set out below
have, unless otherwise stated, been applied consistently to all periods
presented in the consolidated financial statements.
2.1 Basis of preparation
The consolidated financial statements of the Group have been prepared in
accordance with International Financial Reporting Standards ("IFRSs"), as
adopted by the United Kingdom and International Financial Reporting
Interpretations Committee ("IFRIC") interpretations issued by the
International Accounting Standards Board ("IASB") and the Companies Act 2006.
The financial statements of the Company have been prepared in accordance with
UK Generally Accepted Accounting Practice, including Financial Reporting
Standard 101 "Reduced Disclosure Framework" ("FRS 101").
The consolidated financial statements have been prepared on a going concern
basis and prepared on a historical cost basis, except for financial assets and
financial liabilities measured at fair value. The consolidated financial
statements are presented in sterling and have been rounded to the nearest
thousand (£'000). The functional currency of the Company is sterling as this
is the currency of the jurisdiction wherein all of the Group's sales are made.
The preparation of financial information in conformity with IFRSs requires
management to make estimates and assumptions that affect the reported amounts
of assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Although these estimates are based on management's best knowledge of the
amount, event or actions, actual events may ultimately differ
from those estimates.
A restatement has been made to the Consolidated Statement of Cash Flows for
the year ending 31 March 2023 to reflect dividends received from joint
ventures as cash flows from investing activities, whereas it was shown as cash
flows from financing activities in the prior year. This has reduced cash flows
used in investing activities and increased cash flows used in financing
activities by £60,000 in the year ended 31 March 2023.
In the prior year, a separate Joint venture deficit of £21,000 was presented
in the Consolidated Statement of Changes in Equity. This has been included
within Retained earnings in the current year and the comparatives restated.
2.2 Going concern
The Board has reviewed detailed papers prepared by management that consider
the Group's expected future profitability, dividend policy, capital position
and liquidity, both as they are expected to be and also under more
stressed conditions. In doing so, the Directors have considered the current
economic environment, with its high interest rates, high yet falling
inflation, cost of living pressures, and the impact of climate change.
Whilst macroeconomic conditions and the impact of climate change may affect
the Group, and are considered under the Group's principal risks, these are not
considered to impact the going concern basis of the Group - the Board is
satisfied that the business can operate successfully in these conditions but
will continue to monitor developments in these areas. The Board uses the
approved budget as its base case and then applies stress tests to this. In its
stress tests, the Board has considered a significant reduction in equity
market values, for example if there was a repeat of market impacts seen at the
start of COVID-19, or sudden and high volumes of outflows from AUM as a result
of a reputational, regulatory or performance issues. This would reduce revenue
and profitability, however the results of these tests show that there are
still sufficient resources to continue as a going concern. There are not
considered to be any plausible scenarios which would lead to the failure of
the Company. The Board closely monitors KPIs and reports from management
around investment performance, feedback from IFAs and key regulatory changes
or issues. See more information in the Directors' report on pages 62 to 63
of the 2024 Annual Report. Accordingly, the Directors continue to adopt the
going concern basis in preparing these financial statements.
2.3 Basis of consolidation
The Group's financial statements consolidate those of the Parent Company and
entities controlled by the Parent Company (its subsidiaries) as at 31 March
2024. The Parent controls a subsidiary if it has power over the investee, is
exposed, or has rights, to variable returns from its involvement with the
subsidiary and has the ability to affect those returns through its power over
the subsidiary. The Parent Company reassesses whether or not it controls an
investee if facts and circumstances indicate that there are changes to one or
more of these three elements of control. Consolidation of a subsidiary begins
when the Parent Company obtains control over the subsidiary and ceases when
the Parent Company loses control of the subsidiary.
All subsidiaries have a reporting date of 31 March, with the exception of
Fintegrate Financial Solutions Limited which has a reporting date of 30 June.
In the case of joint ventures, those entities are presented as a single line
item in the Consolidated Statement of Total Comprehensive Income
and Consolidated Statement of Financial Position.
All transactions between Group companies are eliminated on consolidation,
including unrealised gains and losses on transactions between Group companies.
Where unrealised losses on intra-group asset sales are reversed on
consolidation, the underlying asset is also tested for impairment from a Group
perspective. Amounts reported in the financial statements of subsidiaries
have been adjusted where necessary to ensure consistency with the accounting
policies adopted by the Group.
Profit or loss and other comprehensive income of subsidiaries acquired or
disposed of during the year are recognised from the effective date of
acquisition (when control is obtained), up to the effective date of disposal
(when control of the subsidiary ceases), as applicable.
2.4 Adoption of new and revised standards
New and amended IFRS Standards that are effective for the current year
• IFRS 17 "Insurance Contracts"
• Amendments to IAS 8 "Definition of Accounting Estimates"
• Amendments to IAS 1 and IFRS Practice Statement 2 "Disclosure of Accounting
Policies"
• Amendments to IAS 12 "Deferred Tax Related to Assets and Liabilities Arising
from a Single Transaction" and "International Tax Reform - Pillar 2 Model
Rules"
The Directors adopted the new or revised Standards listed above, but they have
had no material impact on the financial statements of the Group.
Standards in issue but not yet effective
The following IFRS and IFRIC interpretations have been issued but have not
been applied by the Group in preparing these financial statements, as they
are not yet effective. The Group intends to adopt these Standards and
Interpretations when they become effective, rather than adopting them early.
Effective date 1 January 2024 or later
• Amendment to IAS 1 "Classification of Liabilities as Current or Non-current"
• Amendment to IFRS 16 "Lease Liability in a Sale and Leaseback"
• Amendments to IAS 1 "Non-current Liabilities with Covenants"
• Amendments to IAS 7 and IFRS 7 "Supplier Finance Arrangements"
• IFRS S1 General Requirements for Disclosure of Sustainability-related
Financial Information and IFRS S2 Climate-related Disclosures
• Amendments to IAS 21 "Lack of Exchangeability"
• IFRS 18 Presentation and Disclosure in Financial Statements
With the exception of the adoption of IFRS 18, the adoption of the above
standards and interpretations is not expected to lead to any changes to the
Group's accounting policies nor have any other material impact on the
financial position or performance of the Group. The impact of IFRS 18 on the
Group is currently being assessed and it is not yet practicable to quantify
the effect of this standard on these consolidated financial statements,
however there is no impact on presentation for the Group in the current year
given the effective date - this will be applicable for the Group's 2027/28
Annual Report.
2.5 Revenue
Revenue is measured at the fair value of the consideration received or
receivable, and represents amounts receivable for services provided in the
normal course of business, net of discounts, VAT and other sales-related
taxes. Revenue is recognised when control is transferred and the performance
obligations are considered to be met.
The Group's revenue is made up of the following principal revenue streams:
• Fees for discretionary fund management services in relation to on-platform
investment assets under management ("AUM"). Revenue is recognised daily,
based on the AUM on a continuous basis over the period in which the related
service is provided.
• Fees charged to IFAs for compliance consultancy services, which are
recognised when performance obligations are met. Membership services include
support and software income that is recognised on an over-time basis in line
with the access to the services. Membership services also includes specific
services, such as regulatory visits and learning and development, and revenue
is recognised in line with the service to the customer, at the point the
service is provided.
• Fees for providing investment platform services. Revenue is recognised on a
daily basis, in line with the satisfaction of performance obligations, on the
assets under administration held on the relevant investment platform.
• Fees for mortgage-related services, including commissions from mortgage and
other product providers and referral fees from strategic partners. Commission
is recognised at a point in time when commission is approved for payment by
the lender, which is the point at which all performance obligations have been
met.
• Fees for marketing services provided to providers of mortgage and investment
products, which are recognised in line with the service provided to the
customer.
Contract assets
A contract asset is initially recognised for revenue earned from services for
which the receipt of consideration is conditional on the successful completion
of the service and performance obligation. Upon completion of the service,
the amount recognised as accrued income is reclassified to trade receivables.
Contract assets are stated at amortised cost as reduced by appropriate
allowances for estimated irrecoverable amounts and are presented as 'Accrued
income' in the notes to the financial statements.
Contract liabilities
A contract liability is recognised if a payment is received or a payment is
due (whichever is earlier) from a customer before the Group transfers the
related goods or services. Contract liabilities are recognised as deferred
income until the Group delivers the performance obligations under the contract
(i.e., transfers control of the related goods or services to the customer),
at which point revenue is recognised in line with the delivery of the
performance obligation.
2.6 Interest income and interest expense
Finance income is recognised as interest accrued (using the effective interest
method) and includes interest receivable on the Group's cash and cash
equivalents and on funds invested outside the Group. Interest received is
recognised as a cash flow from investing activities in the Consolidated
Statement of Cash Flows.
Finance expense comprises the unwinding of discounts on contingent
consideration and interest incurred on lease liabilities recognised under IFRS
16. Finance costs are recognised in the Consolidated Statement of Total
Comprehensive Income using the effective interest rate method. Interest paid
is recognised as a cash flow from financing activities in the Consolidated
Statement of Cash Flows.
2.7 Separately disclosed items
Separately disclosed items may include "Exceptional items" as detailed below,
but may also include other items that meet at least one of the following
criteria:
• It is a significant item, which may cross more than one accounting period.
• It is a significant non-cash item, including share based payment charges.
• It has been directly incurred as a result of either an acquisition or
divestiture, including amortisation of acquisition-related intangible assets
or fair value changes of contingent consideration.
• It is unusual in nature, e.g. outside of the normal course of business.
• The operating profit/(loss) relating to non-controlling interest is also
removed to reflect the adjusted operating profit attributable to the Company's
shareholders.
The Board exercises judgement as to whether the item should be classified as
an adjusting item within Separately disclosed items. Separately disclosed
items are shown separately on the face of the Statement of Total
Comprehensive Income and included within administrative expenses. Although
some of these items may recur from one period to the next, operating profit
has been adjusted for these items on a consistent basis to provide additional
helpful information and enable an alternative comparison of performance over
time. The alternative performance measures ("APMs") are consistent with how
the business performance is planned and reported within the internal
management reporting to the Board. Some of these measures are also used for
the purpose of setting remuneration targets.
2.8 Exceptional items
Exceptional items are disclosed and described separately in the financial
statements to provide further information on items which are one off and are
material in size or nature and so are shown separately due to
the significance of their nature and amount. This includes items which are
incremental to normal operations, such as costs relating to an acquisition,
disposal or integration, or impairment losses, these do not reflect the
business's trading performance and so are adjusted to ensure consistency
between periods.
2.9 Goodwill and intangible assets
Goodwill from a business combination is initially recognised and measured as
set out in note 2.13. Goodwill is not amortised but is reviewed for
impairment at least annually. For the purpose of impairment testing, goodwill
is allocated to each of the Group's cash-generating units ("CGU") (or groups
of CGUs) expected to benefit from the synergies of the combination. CGUs to
which goodwill has been allocated are tested for impairment annually, or more
frequently when there is an indication that the unit may be impaired. If the
recoverable amount of the CGU is less than the carrying amount of the unit,
the impairment loss is allocated first to reduce the carrying amount of any
goodwill allocated to the unit and then to the other assets of the unit pro
rata on the basis of the carrying amount of each asset in the unit.
An impairment loss recognised for goodwill is not reversed in a subsequent
period. On disposal of a CGU, the attributable amount of goodwill
is included in the determination of the profit or loss on disposal.
Following initial recognition, intangible assets are held at cost less any
accumulated amortisation and any provision for impairment. Assets that are
subject to amortisation are reviewed for impairment whenever events or changes
in circumstances indicate that the carrying amount may not be recoverable. An
impairment loss is recognised for the amount by which the asset's carrying
amount exceeds its recoverable amount. The recoverable amount is the higher
of an asset's fair value less costs to sell and value in use. For the
purpose of assessing impairment, assets are grouped at the lowest levels for
which there are separately identifiable cash inflows (CGUs).
Intangible assets acquired separately are measured on initial recognition at
cost. Computer software licences acquired are capitalised at the cost
incurred to bring the software into use, and are amortised on a straight-line
basis over their estimated useful lives, which are estimated as being five
years. An internally generated intangible asset arising from development (or
from the development phase of an internal project) is recognised if, and only
if, all of the following conditions have been demonstrated:
• The technical feasibility of completing the intangible asset so that it will
be available for use or sale;
• The intention to complete the intangible asset and use or sell it;
• The ability to use or sell the intangible asset
• How the intangible asset will generate probable future economic benefits;
• The availability of adequate technical, financial and other resources to
complete the development and to use or sell the intangible asset; and
• The ability to measure reliably the expenditure attributable to the intangible
asset during its development
The amount initially recognised for internally generated intangible assets is
the sum of the expenditure incurred from the date when the intangible asset
first meets the recognition criteria listed above.
Costs associated with developing or maintaining computer software programs
that do not meet the capitalisation criteria under IAS 38 are recognised as
an expense as incurred.
Intangible assets acquired in a business combination and recognised separately
from goodwill are recognised initially at their fair value at the acquisition
date (which is regarded as their cost). Subsequent to initial recognition, the
client relationship intangible assets, brand intangible assets, and acquired
software have a finite useful life and are carried at cost less accumulated
amortisation and accumulated impairment losses. Amortisation is calculated
using the straight-line method over their useful lives, estimated for
all asset classes at 10 years.
Gains and losses arising from derecognition of an intangible asset are
measured as the difference between the net disposal proceeds and the carrying
value of the asset. The difference is then recognised in the income
statement.
An assessment is made at each reporting date as to whether there is any
indication that an asset in use may be impaired. If any such indication exists
and the carrying values exceed the estimated recoverable amount at that time,
the assets are written down to their recoverable amount. The recoverable
amount is measured as the greater of fair value less costs to sell and value
in use. Non-financial assets that have suffered impairment are reviewed for
possible reversal of the impairment at each reporting date.
2.10 Impairment
Assets that have an indefinite useful life are not subject to amortisation
and are tested for impairment at each Statement of Financial Position date and
whenever there is an indication at the end of a reporting period that the
asset may be impaired. Assets subject to depreciation and amortisation are
reviewed for impairment whenever events or circumstances indicate that the
carrying amount may not be recoverable. Where the asset does not generate
cash flows that are independent of other assets, the Group estimates the
recoverable amount of each cash-generating unit ("CGU") to which the asset
belongs. Impairment losses on previously revalued assets are recognised
against the revaluation reserve as far as this reserve relates to previous
revaluations of the same assets. Other impairment losses are recognised in the
Statement of Total Comprehensive Income, based on the amount by which the
carrying value of an asset or CGU exceeds its recoverable amount. The
recoverable amount is the higher of the fair value less the costs to sell and
the value in use. In assessing value in use, the estimated future cash flows
are discounted to their present value using a pre-tax discount rate that
reflects current market assessments of the time value of money and the risks
specific to the asset for which estimates of future cash flows have not been
adjusted. Impairment losses recognised with respect to CGUs are allocated
first to reduce the carrying amount of any goodwill allocated to CGUs and then
to reduce the carrying amount of other assets in the unit on a pro rata
basis.
Where an impairment loss on intangible assets, excluding goodwill,
subsequently reverses, the carrying amount of the asset or CGU is increased
to the revised estimate of its recoverable amount, in such a way that the
increased carrying amount does not exceed the carrying amount that would have
been determined had no impairment loss been recognised for the asset (or CGU)
in prior years. A reversal of an impairment loss is recognised immediately in
profit or loss to the extent that it eliminates the impairment loss that has
been recognised for the asset in prior years. Any increase in excess of this
amount is treated as a revaluation increase.
2.11 Property, plant and equipment
Property, plant and equipment assets are stated at cost net of accumulated
depreciation and accumulated provision for impairment. Depreciation is
charged to the income statement on a straight-line basis over the estimated
useful lives of each part of an item of property, plant and equipment.
Principal annual rates are as follows:
• Computer, office equipment and motor vehicles - 20-33% straight-line.
• Fixtures and fittings - 20% straight-line.
The estimated useful lives, residual values and depreciation method are
reviewed at the end of each reporting period, with the effect of any changes
in estimate accounted for on a prospective basis.
An item of property, plant and equipment is derecognised upon disposal or when
no future economic benefits are expected to arise from the continued use of
the asset. The gain or loss arising on disposal or scrappage of an asset is
determined as the difference between the sales proceeds and the carrying
amount of the asset and is recognised in the Statement of Total Comprehensive
Income.
2.12 Change in accounting estimates
During the year, the Group reviewed the useful economic life of software
assets held on the balance sheet and concluded that the life should be
increased from three years to five years, in order to bring it in line with
the expected use of the software. This change in accounting estimate has been
accounted for prospectively in the accounts, in line with IAS 8.
The effect of this increase in useful economic life in the current year
accounts amounts to a decrease in amortisation and the respective increase in
intangible assets on the balance sheet of £129,000. It is expected that in
future years, the impact of this change will be on a similar scale.
2.13 Business combinations
Acquisitions of businesses are accounted for using the acquisition method. The
consideration transferred in a business combination is measured at fair value,
which is calculated as the sum of the acquisition-date fair values of assets
transferred by the Group, liabilities incurred by the Group to the former
owners of the acquiree and the equity interest issued by the Group in exchange
for control of the acquiree. Acquisition-related costs are recognised in the
income statement as incurred.
At the acquisition date, the identifiable assets acquired and the liabilities
assumed are recognised at their fair value at the acquisition date, except
that: deferred tax assets or liabilities and assets or liabilities related to
employee benefit arrangements are recognised and measured in accordance with
IAS 12 Income Taxes and IAS 19 Employee Benefits respectively; liabilities or
equity instruments related to share-based payment arrangements of the acquiree
or share-based payment arrangements of the Group entered into to replace
share-based payment arrangements of the acquiree are measured in accordance
with IFRS 2 Share-Based Payments at the acquisition date (see below); and
assets (or disposal groups) that are classified as held for sale in accordance
with IFRS 5 Non-current Assets Held for Sale and Discontinued Operations are
measured in accordance with that Standard.
Goodwill is measured as the excess of the sum of the consideration
transferred, the amount of any non-controlling interests in the acquiree, and
the fair value of the acquirer's previously held equity interest in the
acquiree (if any) over the net of the acquisition-date amounts of the
identifiable assets acquired and the liabilities assumed. If, after
reassessment, the net of the acquisition-date amounts of the identifiable
assets acquired and liabilities assumed exceeds the sum of the consideration
transferred, the amount of any non-controlling interests in the acquiree and
the fair value of the acquirer's previously held interest in the acquiree (if
any), the excess is recognised immediately in profit or loss as a bargain
purchase gain.
When the consideration transferred by the Group in a business combination
includes a contingent consideration arrangement, the contingent consideration
is measured at its acquisition-date fair value and included as part of
the consideration transferred in a business combination. Changes in fair
value of the contingent consideration that qualify as measurement period
adjustments are adjusted retrospectively, with corresponding adjustments
against goodwill. Measurement period adjustments are adjustments that arise
from additional information obtained during the 'measurement period' (which
cannot exceed one year from the acquisition date) about facts and
circumstances that existed at the acquisition date. The payment of contingent
consideration will be treated as an investing cash flow of the Group.
The subsequent accounting for changes in the fair value of the contingent
consideration that do not qualify as measurement period adjustments depends on
how the contingent consideration is classified. Contingent consideration that
is classified as equity is not remeasured at subsequent reporting dates and
its subsequent settlement is accounted for within equity. Any other
contingent consideration is remeasured to fair value at subsequent reporting
dates, with changes in fair value recognised in profit or loss. The unwinding
of the discount rate where contingent consideration is discounted is
recognised as a finance cost in the Statement of Comprehensive Income.
If the initial accounting for a business combination is incomplete by the end
of the reporting period in which the combination occurs, the Group reports
provisional amounts for the items for which the accounting is incomplete.
Those provisional amounts are adjusted during the measurement period (see
above), or additional assets or liabilities are recognised to reflect new
information obtained about facts and circumstances that existed as at the
acquisition date that, if known, would have affected the amounts recognised as
of that date.
2.14 Joint ventures
Joint ventures are entities in which the Company has an investment where it,
along with one or more other shareholders, has contractually agreed to share
control of the business and where decisions over the relevant activities
require the unanimous consent of the joint partners. The results and assets
and liabilities of joint ventures are incorporated in these financial
statements using the equity method of accounting, except when the investment
is classified as held for sale, in which case it is accounted for in
accordance with IFRS 5. Under the equity method, the Company initially records
the investment in the consolidated Statement of Financial Position at the fair
value of the purchase consideration (cost) and adjusted thereafter to
recognise the Company's share of the entity's profit or loss after tax and
amortisation of intangible assets.
An investment in a joint venture is accounted for using the equity method from
the date on which the investee becomes a joint venture. On acquisition of the
investment in a joint venture, any excess of the cost of the investment over
the Group's share of the net fair value of the identifiable assets and
liabilities of the investee is recognised as goodwill, which is included
within the carrying amount of the investment. Any excess of the Group's share
of the net fair value of the identifiable assets and liabilities over the
cost of the investment, after reassessment, is recognised immediately
in profit or loss in the period in which the investment is acquired. The
Statement of Financial Position, therefore, subsequently records the Company's
share of the net assets of the entity plus any goodwill and intangible
assets that arose on purchase less subsequent amortisation. The Statement
of Changes in Equity records the Company's share of other equity movements
of the entity. At each reporting date, the Company applies judgement to
determine whether there is any indication that the carrying value of joint
ventures may be impaired.
If there is objective evidence that the Group's net investment in a joint
venture is impaired, the requirements of IAS 36 are applied to determine
whether it is necessary to recognise any impairment loss with respect to the
Group's investment. When necessary, the entire carrying amount of the
investment (including goodwill) is tested for impairment in accordance with
IAS 36 as a single asset by comparing its recoverable amount (higher of value
in use and fair value less costs of disposal) with its carrying amount. Any
impairment loss recognised is not allocated to any asset, including goodwill
that forms part of the carrying amount of the investment. Any reversal of that
impairment loss is recognised in accordance with IAS 36 to the extent that the
recoverable amount of the investment subsequently increases. The Group
discontinues the use of the equity method from the date when the investment
ceases to be a joint venture.
2.15 Leases
At the inception of a contract, the Group assesses whether a contract is, or
contains, a lease. A contract is, or contains, a lease if the contract
conveys the right to control the use of an identified asset for a period of
time in exchange for consideration. To assess whether a contract conveys the
right to control the use of an identified asset, the Group uses the
definition of a lease in IFRS 16.
The Group recognises a right-of-use ("ROU") asset and a lease liability at
the commencement date of the lease, with the exception of short-term leases
(defined as leases with a lease term of 12 months or less). The ROU asset is
initially measured at cost, which comprises the initial amount of the lease
liability adjusted for any lease payments made at or before the commencement
date, plus any initial direct costs incurred and an estimate of costs to
dismantle and remove the underlying asset or to restore the underlying asset
or the site on which it is located, less any lease incentives received. The
ROU assets are subsequently depreciated on a straight-line basis over the
shorter of the expected life of the asset and the lease term, adjusted for any
remeasurements of the lease liability. At the end of each reporting period,
the ROU assets are assessed for indicators of impairment in accordance with
IAS 36.
The lease liability is initially measured at the present value of the lease
payments that are not paid at the commencement date, discounted using the
Group's incremental borrowing rate. The incremental borrowing rate is
determined, where possible, by using recent third-party financing received by
the individual lessee as a starting point, adjusted to reflect changes in
financing conditions since third-party financing was received. The incremental
borrowing rate depends on the term, country, currency and security of the
lease, and also the start date of the lease.
Lease payments included in the measurement of the lease liability comprise the
following:
• fixed payments, including in-substance fixed payments;
• variable lease payments that depend on an index or a rate, initially measured
using the index or rate as at the commencement date;
amounts expected to be payable under a residual value guarantee; and
the exercise price under a purchase option that the Group is reasonably
certain to exercise, lease payments in an optional renewal period if the Group
is reasonably certain to exercise an extension option, and penalties for early
termination of a lease unless the Group is reasonably certain not to terminate
early.
The lease liability is subsequently measured by adjusting the carrying amount
to reflect the interest charge, the lease payments made and any reassessment
or lease modifications. The lease liability is remeasured if the Group changes
its assessment of whether it will exercise a purchase, extension or
termination option.
When the lease liability is remeasured in this way, a corresponding adjustment
is made to the carrying amount of the ROU asset, or is recorded in profit or
loss if the carrying amount of the ROU asset has been reduced to zero.
Where the Group is an intermediate lessor in a sub-lease, it accounts for its
interests in the head lease and the sub‑lease separately. It assesses the
lease classification of a sub-lease with reference to the ROU asset arising
from the head lease, not with reference to the underlying asset.
2.16 Cash and cash equivalents
Cash and cash equivalents comprise cash at bank and short-term deposits held
with banks by the Group. Cash equivalents are short-term (generally with an
original maturity of three months or less), highly liquid investments that are
readily convertible to a known amount of cash and that are subject to an
insignificant risk of changes in value. Cash equivalents are held for the
purpose of meeting short-term cash commitments rather than for investment
or other purposes.
Bank overdrafts that are repayable on demand and form an integral part of the
Group's cash management are included as a component of cash and cash
equivalents for the purpose only of the Consolidated Statement of Cash Flows.
At 31 March 2024, there were no balances drawn down on bank overdrafts (2023:
nil).
2.17 Financial instruments
Financial assets and financial liabilities are recognised in the Statement of
Financial Position when the Group becomes a party to the contractual
provisions of the instrument.
Financial assets and financial liabilities are initially measured at fair
value. Transaction costs that are directly attributable to the acquisition or
issue of financial assets and financial liabilities (other than financial
assets and financial liabilities at fair value through profit or loss) are
added to or deducted from the fair value of the financial assets or financial
liabilities, as appropriate, on initial recognition. Transaction costs
directly attributable to the acquisition of financial assets or financial
liabilities at fair value through profit or loss are recognised immediately in
profit or loss.
All financial assets are recognised and derecognised on a trade date where
the purchase or sale of a financial asset is under a contract with terms that
require delivery of the financial asset within a timeframe established by the
market concerned, and are initially measured at fair value, plus transaction
costs, except for those financial assets classified as at fair value through
profit or loss.
Non-derivative financial instruments comprise investments in equity and debt
securities, trade and other receivables, cash and bank balances, and trade and
other payables.
Financial investments
Financial investments are classified as fair value through profit or loss
("FVTPL") if they do not meet the criteria of Fair Value through Other
Comprehensive Income ("FVOCI") or amortised cost. They are also classified as
FVTPL if they are either held for trading or specifically designated in this
category on initial recognition. Assets in this category are initially
recognised at fair value and subsequently remeasured, with gains or losses
arising from changes in fair value being recognised in the Statement of
Comprehensive Income.
The Group's financial investments include investments in a regulated
open-ended investment company that is managed and evaluated on a fair value
basis in line with the market value. These financial assets do not meet the
criteria of FVOCI or amortised cost as the asset is not held to collect
contractual cash flows and/or selling financial assets, and the asset's
contractual cash flows do not represent solely payments of principal and
interest ("SPPI").
Trade receivables
Trade receivables do not carry interest and are stated at amortised cost as
reduced by appropriate allowances for estimated irrecoverable amounts. They
are recognised when the Group's right to consideration is only conditional on
the passage of time. The financial assets are held in order to collect the
contractual cash flows and those cash flows are payments of interest and
principal only.
Impairment of financial assets
The Group applies the IFRS 9 simplified approach to measuring expected credit
losses that uses a lifetime expected loss allowance for all trade receivables
and contract assets. To measure the expected credit losses, trade receivables
and contract assets have been grouped based on shared credit risk
characteristics and the days past due.
The contract assets relate to unbilled work in progress and have substantially
the same risk characteristics as the trade receivables for the same types of
contracts. The Group has, therefore, concluded that the expected loss rates
for trade receivables are a reasonable approximation of the loss rates for the
contract assets.
The expected loss rates are based on the payment profiles of sales over a
period of 12 months before 31 March 2024 and the corresponding historical
credit losses experienced within this period. The historical loss rates are
adjusted to reflect current and forward-looking information on macroeconomic
factors affecting the ability of the customers to settle the receivables. No
impairment has been recognised in the year (2023: nil).
The carrying amount of the financial assets is reduced by the use of a
provision. When a trade receivable is considered uncollectable, it is written
off against the provision. Subsequent recoveries of amounts previously written
off are credited against the provision. Changes in the carrying amount of
the provision are recognised in the income statement.
Trade and other payables
Trade and other payables, except for those which are financial liabilities at
FVTPL, are recognised initially at fair value and are subsequently measured
at amortised cost using the effective interest method, where applicable or
required. These amounts represent liabilities for goods and services provided
to the Group prior to the end of the financial period, which are unpaid.
Financial liabilities at FVTPL
Financial liabilities are classified as at FVTPL when the financial liability
is (i) contingent consideration of an acquirer in a business combination, (ii)
held for trading or (iii) designated as at FVTPL. Financial liabilities at
FVTPL are measured at fair value, with any gains or losses arising
on changes in fair value recognised in profit or loss.
2.18 Taxation
Current tax
The tax currently payable is based on taxable profit for the year. Taxable
profit differs from net profit as reported in the income statement because it
excludes items of income or expense that are taxable or deductible in other
years, and it further excludes items that are never taxable or deductible. The
Group's liability for current tax is calculated using tax rates that have been
enacted or substantively enacted by the Statement of Financial Position date.
Deferred tax
Deferred tax is the tax expected to be payable or recoverable on differences
between the carrying amounts of assets and liabilities in the financial
statements and the corresponding tax bases used in the computation of taxable
profit, and is accounted for using the balance sheet liability method.
Deferred tax liabilities are generally recognised for all taxable temporary
differences and deferred tax assets are recognised to the extent that it is
probable that taxable profits will be available against which deductible
temporary differences can be utilised. Such assets and liabilities are not
recognised if the temporary difference arises from the initial recognition of
goodwill or from the initial recognition (other than in a business
combination) of other assets and liabilities in a transaction that affects
neither the taxable profit nor the accounting profit.
Deferred tax liabilities are recognised for taxable temporary differences
arising on investments in subsidiaries and interests in joint ventures, except
where the Group is able to control the reversal of the temporary difference
and it is probable that the temporary difference will not reverse
in the foreseeable future. Deferred tax assets arising from deductible
temporary differences associated with such investments and interests are only
recognised to the extent that it is probable that there will be sufficient
taxable profits against which to utilise the benefits of the temporary
difference and they are expected to reverse in the foreseeable future.
The carrying amount of deferred tax assets is reviewed at each Statement of
Financial Position date and reduced to the extent that it is no longer
probable that sufficient taxable profits will be available to allow all or
part of the asset to be recovered.
Deferred tax is calculated at the tax rates that are expected to apply in the
period when the liability is settled or the asset is realised based on tax
laws and rates that have been enacted or substantively enacted at the
Statement of Financial Position date. Deferred tax is charged or credited in
the income statement, except when it relates to items charged or credited in
other comprehensive income, in which case the deferred tax is also dealt with
in other comprehensive income.
The measurement of deferred tax liabilities and assets reflects the tax
consequences that would follow from the manner in which the Group expects, at
the end of the reporting period, to recover or settle the carrying amount
of its assets and liabilities. Deferred tax assets and liabilities are offset
when there is a legally enforceable right to set off the current tax assets
against current tax liabilities and when they relate to income taxes levied
by the same taxation authority and the Group intends to settle its current
tax assets and liabilities on a net basis.
Current and deferred tax for the year
Current and deferred tax are recognised in profit or loss, except when they
relate to items that are recognised in other comprehensive income or directly
in equity, in which case the current and deferred tax are also recognised in
other comprehensive income or directly in equity, respectively.
Where current tax or deferred tax arises from the initial accounting for a
business combination, the tax effect is included in the accounting for the
business combination.
2.19 Retirement benefit costs
The Group pays into personal pension plans for which the amount charged to
income with respect to pension costs and other post-retirement benefits is
the amount of the contributions payable in the year. Payments to defined
contribution retirement benefit scheme are recognised as an expense when
employees have rendered service entitling them to the contributions.
Differences between contributions payable and paid are accrued or prepaid. The
assets of the plans are invested and managed independently of the finances of
the Group.
2.20 Equity, reserves and dividend payments
Share capital represents the nominal value of shares that have been issued.
Retained earnings include all current and prior period retained profits or
losses.
Dividend distributions payable to equity shareholders are included in other
liabilities when the dividends have been approved at a general meeting prior
to the reporting date.
2.21 Employee Benefit Trust
The Company provides finance to the EBT to purchase the Company's shares on
the open market in order to meet its obligation to provide shares when an
employee exercises awards made under the Group's share-based payment schemes.
Administration costs connected with the EBT are charged to the Statement of
Comprehensive Income.
The cost of shares purchased and held by the EBT is deducted from equity in
the Company and the Group. The assets held by the EBT are consolidated into
the Group's financial statements. Any consideration paid or received for the
purchase or sale of these shares is shown as a reduction in the
reconciliation of movements in shareholders' funds. No gain or loss is
recognised in the Statement of Comprehensive Income on the purchase,
sale, issue or cancellation of these shares.
2.22 Share-based payments
The Group issues equity-settled share-based payments to certain employees.
Equity-settled share-based payments are measured at fair value at the date of
grant. The fair value determined at the grant date of the equity-settled
share-based payments is expensed on a straight-line basis over the vesting
period, based on the Group's estimate of shares that will eventually vest. At
each reporting date, the Group revises its estimate of the number of equity
instruments expected to vest as a result of the effect of non-market-based
vesting conditions. The impact of the revision of the original estimates, if
any, is recognised in profit or loss such that the cumulative expense reflects
the revised estimate, with a corresponding adjustment to reserves. Fair value
is measured by use of the Black-Scholes model or Monte Carlo model, as
appropriate.
2.23 Climate change
The Group is continually developing its assessment of the impact that climate
change has on the assets and liabilities recognised and presented in its
financial statements. The potential impact of climate change on the Group's
AUM and future net operating revenue generation is considered in the
Principal Risks section of this Annual Report and Accounts. These
considerations did not have a material impact on the financial reporting
judgements and estimates in the current year. This reflects the conclusion
that climate change is not expected to have a significant impact on the
Group's short-term cash flows, including those considered in the going
concern and viability assessments.
2.24 Operating segments
The Board is considered to be the chief operating decision maker ("CODM"). The
Group comprises two operating segments, which are defined by trading activity:
• Tatton - investment management services
• Paradigm - the provision of compliance and support services to IFAs and
mortgage advisers.
Some centrally incurred overhead costs are allocated to the Tatton and
Paradigm divisions on an appropriate pro rata basis. There remain central
overhead costs within the Operating Group which have not been allocated to the
Tatton and Paradigm divisions which are classified as "Unallocated" within
note 4.
2.25 Critical accounting judgements and key sources of estimation uncertainty
In the process of applying the Group's accounting policies, which are
described above, management have made judgements and estimations about the
future that have an effect on the amounts recognised in the financial
statements. The estimates and underlying assumptions are reviewed on an
ongoing basis. Revisions to accounting estimates are recognised in the period
in which the estimate is revised if the revision affects only that period or
in the period of the revision and future periods if the revision affects both
current and future periods. Changes for accounting estimates would be
accounted for prospectively under IAS 8.
The prior year financial statements discussed critical accounting judgements
in relation to the acquisition of 8AM Global Limited ("8AM") and of the
Verbatim funds business in prior years and therefore are not relevant for the
current year financial statements. In addition there were disclosed key
sources of estimation uncertainty in relation to the contingent consideration
in respect of these two acquisitions. There remains outstanding contingent
consideration payments still to be made in the future that are dependent on
the outcome of the performance targets. The contingent consideration for 8AM
is dependent on the future profitability of the business and the contingent
consideration for the Verbatim funds is dependent on the value of AUM held in
the funds over the measurement periods. There are no reasonable assumptions
that the Group could make about the future, or about other major sources of
estimation uncertainty, in relation to the contingent consideration that would
have a significant risk of resulting in a material adjustment to the carrying
amounts of assets and liabilities within the next financial year. Therefore
these have not been disclosed as key sources of estimation uncertainty in the
current year.
Investments in joint ventures
Estimation uncertainty
Impairment of investments in joint ventures
Impairment exists when there is objective evidence of impairment as a result
of one or more events that occurred after the initial recognition of the net
investment (a 'loss event') and that loss event (or events) has an impact on
the estimated future cash flows from the net investment that can be reliably
estimated. The entire carrying amount of the investment is tested for
impairment, in accordance with IAS 36, as a single asset, by comparing its
recoverable amount (higher of value in use and fair value less costs of
disposal) with its carrying amount.
For the purposes of impairment testing, the cash-generating potential of the
investment in the joint venture, 8AM, has been determined using a discounted
cash flow model that assesses sensitivity to operating margins, discount rates
and AUM growth rates. The results of the calculation indicate that the
investment in 8AM is impaired, and an impairment charge of £1,250,000 has
been recognised in the Statement of Total Comprehensive Income in the
financial year. The remaining value of the investment in 8AM is £5.352
million.
The Group has conducted an analysis of the sensitivity to changes in the key
assumptions used to determine amount and timing of cashflows. A reduction in
the terminal growth rate by 1% would lead to an additional impairment of
£481,000.
The impact of the discount rate used has also been considered, and a 1%
increase in the discount rate applied to the discounted cash flow model would
lead to an additional impairment charge of £826,000.
Business combinations
Critical judgement
Client relationship, brand and software intangibles purchased
through corporate transactions
When the Group purchases client relationships, brands and software through
transactions with other corporate entities, a judgement is made as to the
identification of the intangible asset and whether the transaction should
be accounted for as a business combination or as a separate purchase
of intangible assets. In making this judgement, the Group assesses the
assets, liabilities, operations and processes that were the subject of the
transaction against the definition of a business combination in IFRS 3. For a
business combination it is determined whether all elements of a business in
IFRS 3 have been met, in particular, consideration is given to the inputs,
processes and outputs, and that there is at least, an input and a substantive
process that together significantly contribute to the ability to create
output. It has also been considered whether the integrated set of activities
is capable of being conducted and managed as a business by a market
participant, and judgement made as to whether the acquired process is
substantive. If the acquisition is not deemed to be a business, it is treated
as an acquisition of an asset or a group of assets.
There are no other judgements or assumptions made about the future, or any
other major sources of estimation uncertainty at the end of the reporting
period, which have a significant risk of resulting in a material adjustment
to the carrying amounts of assets and liabilities within the next financial
year.
2.26 Other estimates
Estimation uncertainty
Given the significance of share-based payments as a form of employee
remuneration for the Group, management are providing additional information on
the estimates involved in the accounting for share-based payments. This is
not considered to be a key source of estimation uncertainty given the
materiality of the impact that changes in estimates have and as a result of
the changes in estimates not impacting the carrying amount of an asset or
liability in the balance sheet. The principal estimations relate to:
• forfeitures (where awardees leave the Group as "bad" leavers and, therefore,
forfeit unvested awards); and
• the satisfaction of performance obligations attached to certain awards.
These estimates are reviewed regularly and the charge to the Statement of
Total Comprehensive Income is adjusted accordingly (at the end of the relevant
scheme as a minimum). Based on the current forecasts of the Group, the charge
for the year is based on a range of 85% to 100% of the options in various
scheme years vesting for the element relating to non-market-based performance
conditions. If the estimate was increased to 100% for all schemes, it would
increase the charge in the next 12 months by £37,000. A decrease of 10% in
the vesting assumptions would reduce the charge in the next financial year by
£54,000.
In considering the level of satisfaction of performance obligations, the
Group's forecast has been reviewed and updated for the expected impact of the
various market scenarios and management actions. This forecast has been used
to estimate the relevant vesting assumptions for the Enterprise Management
Incentive ("EMI") schemes in place.
2.27 Alternative performance measures
In reporting financial information, the Group presents alternative performance
measures ("APMs") that are not defined or specified under the requirements of
IFRSs. The Group believes that these APMs provide users with additional
helpful information on the performance of the business. The APMs are
consistent with how the business performance is planned and reported within
the internal management reporting to the Board. Some of these measures are
also used for the purpose of setting remuneration targets. The APMs used by
the Group are set out in note 27, including explanations of how they are
calculated and how they can be reconciled to a statutory measure where
relevant. There is also further information on separately disclosed items in
note 7.
3 Capital Management
The components of the Group's capital are detailed on the Consolidated
Statement of Financial Position and as at the reporting date the Group had
capital of £43,334,000 (2023: £41,781,000). Capital generated from the
business is both reinvested in the business to generate future growth and
returned to shareholders principally in the form of dividends.
The Group's objectives when managing capital are (i) to safeguard the Group's
ability to continue as a going concern so that it can continue to provide
returns for shareholders and benefits for other stakeholders; (ii) to maintain
a strong capital base and utilise it efficiently to support the development of
its business; and (iii) to comply with the regulatory capital requirements set
by the FCA. Capital adequacy and the use of regulatory capital are monitored
by the Group's management and Board. There is one active regulated entity in
the Group: Tatton Investment Management Limited, regulated by the FCA.
Regulatory capital is determined in accordance with the requirements of the
FCA's Investment Firms Prudential Regime and the Capital Requirements
Directive IV prescribed in the UK by the FCA. The Directive requires
continual assessment of the Group's risks that is underpinned by the Group's
Internal capital adequacy and risk assessment ("ICARA"). The ICARA considers
the relevant current and future risks to the business and the capital
considered necessary to support these risks.
The Group actively monitors its capital base to ensure that it maintains
sufficient and appropriate capital resources to cover the relevant risks to
the business and to meet consolidated and individual regulated entity
regulations and liquidity requirements. The Group assesses the adequacy
of its own funds on a consolidated and legal entity basis on a frequent
basis. This includes continuous monitoring of 'K-factor' variables, which
captures the variable nature of risk involved in the Group's business
activities. A regulatory capital update is additionally provided to senior
management on a monthly basis. In addition to this, the Group has implemented
a number of 'Key Risk Indicators', which act as early warning signs with the
aim of notifying senior management if own funds misalign with the Group's risk
appetite and internal thresholds.
The FCA requires the Group to hold more regulatory capital resources than the
total capital resource requirement. The total capital requirement for the
Group is the higher of the Group's Own Funds Requirement (based on 25% of
fixed overheads), its Own Harm requirement (based on the Group's requirement
for harms from ongoing activities as calculated in the ICARA) and Wind-down
requirement (capital requirement should the firm wind down). The total capital
requirement for the Group is £4.27 million (unaudited), which is based on
the Group's Own Funds Requirement. As at 31 March 2024, the Group has
regulatory capital resources of £9.52 million (unaudited), significantly in
excess of the Group's total capital requirement. During the period, the Group
and its regulated subsidiary entities complied with all regulatory capital
requirements.
4 Segment Reporting
Information reported to the Board of Directors as the CODM for the purposes of
resource allocation and assessment of segmental performance is focused on the
type of revenue. The principal types of revenue are discretionary fund
management and the marketing and promotion of the funds run by the companies
under Tatton Capital Limited ("Tatton") and the provision of compliance and
support services to IFAs and mortgage advisers ("Paradigm").
The Group's reportable segments under IFRS 8 are, therefore, Tatton and
Paradigm, with centrally incurred overhead costs applicable to the segments
being allocated to the Tatton and Paradigm divisions on an appropriate
pro-rata basis. Unallocated central overhead costs of the Operating Group are
classified as "Unallocated" in the table below to provide a reconciliation of
the segment information to the financial statements. Unallocated costs include
general corporate expenses, head office salaries, and other administrative
costs that are not directly attributable to the operating segments. These
costs are managed at the corporate level and are not allocated to the
segments for performance evaluation.
The principal activity of Tatton is that of discretionary fund management
("DFM") of investments on-platform and the provision of investment wrap
services.
The principal activity of Paradigm is that of the provision of support
services to IFAs and mortgage advisers. For management purposes, the Group
uses the same measurement policies as are used in its financial statements.
The Paradigm division includes the trading subsidiaries of Paradigm Partners
Limited and Paradigm Mortgages Services LLP, which operate as one operating
segment as they have the same economic characteristics, they are run and
managed by the same management team, and the methods used to distribute the
products to customers are the same. The information presented in this Note is
consistent with the presentation for internal reporting. Total assets
and liabilities for each operating segment are not regularly provided to the
CODM.
The following is an analysis of the Group's revenue and results by reportable
segment:
YEAR ENDED 31 MARCH 2024 TATTON PARADIGM Unallocated GROUP
(£'000) (£'000) (£'000) (£'000)
Revenue 30,864 5,943 - 36,807
Share of post-tax loss from joint ventures (1,188) - - (1,188)
Administrative expenses (11,092) (4,421) (3,642) (19,155)
Operating profit/(loss) 18,584 1,522 (3,642) 16,464
Share-based payments 340 186 932 1,458
Gain arising on changes in fair value of contingent consideration (1,350) - - (1,350)
Exceptional items 1,250 - - 1,250
Amortisation of acquisition-related intangible assets 621 12 - 633
Non-controlling interest - 59 - 59
Adjusted operating profit/(loss)1 19,445 1,779 (2,710) 18,514
YEAR ENDED 31 MARCH 2024 TATTON PARADIGM Unallocated GROUP
(£'000) (£'000) (£'000) (£'000)
Statutory operating costs included the following:
Depreciation 249 112 14 375
Amortisation 734 16 - 750
YEAR ENDED 31 MARCH 2023 TATTON PARADIGM Unallocated GROUP
(£'000) (£'000) (£'000) (£'000)
Revenue 25,929 6,396 2 32,327
Share of post tax profit from joint ventures 160 - - 160
Administrative expenses (restated) (9,084) (4,191) (2,602) (15,877)
Operating profit/(loss) (restated) 17,005 2,205 (2,600) 16,610
Share-based payments (restated) 544 192 775 1,511
Exceptional items 398 - - 398
Gain arising on changes in fair value of contingent consideration (2,651) - - (2,651)
Amortisation of acquisition-related intangible assets 534 - - 534
Adjusted operating profit/(loss)1 15,830 2,397 (1,825) 16,402
YEAR ENDED 31 MARCH 2023 TATTON PARADIGM Unallocated GROUP
(£'000) (£'000) (£'000) (£'000)
Statutory operating costs included the following:
Depreciation 238 135 11 384
Amortisation 769 12 - 781
All turnover arose in the United Kingdom. Note that the share-based payments
costs in the prior year have been restated to reflect the charge relating to
employees of the relevant divisions. This has reduced administrative expenses
within 'Unallocated', with an increased charge being reflected in Tatton and
Paradigm.
The key decision makers use the KPIs as detailed on pages 18 and 19 of the
2024 Annual Report.
1. Alternative performance measures are detailed in note 27.
5 REVENUE
The disaggregation of consolidated revenue is as follows:
Operating segment MAJOR PRODUCT/SERVICE LINES 31-MAR 2024 31-MAR 2023
(£'000) (£'000)
Tatton Investment management fees 30,864 25,929
Paradigm IFA consulting and support services income 2,221 2,276
Paradigm Mortgage-related services income 2,990 3,342
Paradigm Marketing income 732 778
Central income (presented as a reconciling item to Group revenue) - 2
36,807 32,327
The disclosure of revenue by product line is consistent with the revenue
information that is disclosed for each reportable segment under IFRS 8
Operating segments (see note 4). All the revenue relates to trading undertaken
in the UK.
Investment management fees are recurring charges derived from the market value
of retail customer assets, based on asset mix and portfolio size, and are,
therefore, subject to market and economic risks. The rate charged is variable
and is dependent on the product. Although most ongoing revenue is based on the
value of underlying benefits, these are not considered to constitute variable
income in which significant judgement or estimation is involved. The
calculations are based on short timelines or point-in-time calculations that
represent the end of a quantifiable period, in accordance with the contract.
These are charged to and paid by the client on the same value, constituting
the transaction price for the specified period. At any time during the
period, a client may choose to remove their assets from a service and no
further revenue is received.
All obligations to the customer are satisfied at the end of the period in
which the service is provided for ongoing revenue, with payment being due
immediately.
IFA consulting and support services income and marketing income are fixed
based on the service provided. The rate charged for mortgage-related services
income is variable and is dependent on the product. See note 2.5 for details
of when revenue is recognised for the Paradigm product lines, including
compliance consultancy services, mortgage-related services and marketing
services.
There are no elements of revenue that relate to contracts with an expected
duration of over on year, therefore the Group has applied the practical
expedient for contracts less than one year.
6 Operating Profit
The operating profit and the profit before taxation are stated after
charging/(crediting):
31-MAR 31-MAR
2024 2023
(£'000) (£'000)
Amortisation of software 117 247
Amortisation of acquisition-related intangibles (note 7) 633 534
Depreciation of property, plant and equipment (note 16) 159 168
Depreciation of right-of-use assets (note 16) 216 216
Impairment of investment in joint venture (note 7) 1,250 -
Loss arising on financial assets designated as FVTPL 2 28
Employee benefit expense (note 12) 12,448 10,764
Gain arising on changes in fair value of contingent consideration (note 7) (1,350) (2,651)
Services provided by the Group's auditor:
Audit of the statutory consolidated and Company financial statements of
Tatton Asset Management plc 130 121
Audit of subsidiaries 79 66
Other fees payable to auditor:
Non-audit services 9 8
Total audit fees were £209,000 (2023: £187,000). Total non-audit fees
payable to the auditor were £9,000 (2023: £8,000).
'Amortisation of software' in the table above excludes £12,000 (2023: £nil)
of amortisation relating to the software acquired on acquisition of
Fintegrate, which is included in the £633,000 (2023: £534,000) of
amortisation of acquisition-related intangibles.
7 Separately Disclosed Items
31-MAR 31-MAR
2024 2023
(£'000) (£'000)
Gain arising on changes in fair value of contingent consideration (1,350) (2,651)
Exceptional costs 1,250 398
Share-based payment charges 1,458 1,511
Operating loss due to non-controlling interest 59 -
Amortisation of acquisition-related intangible assets 633 534
Total separately disclosed items 2,050 (208)
Separately disclosed items that are shown separately on the face of the
Statement of Total Comprehensive Income reflect costs and income that do not
reflect the Group's trading performance and may be considered material
(individually or in aggregate if of a similar type) due to their size or
frequency, and are adjusted to present Adjusted operating profit so as
to ensure consistency between periods. The costs or income above are all
included within administrative expenses except for the Exceptional costs in
FY24 of £1,250,000 which is recognised within the Share of loss of joint
ventures.
Although some of these items may recur from one period to the next, operating
profit has been adjusted for these items to give better clarity regarding the
underlying performance of the Group. The alternative performance measures
("APMs") are consistent with how the business performance is planned and
reported within the internal management reporting to the Board. Some of these
measures are also used for the purpose of setting remuneration targets.
Gain arising on changes in fair value of acquisition-related items
During the year, the Group revalued its financial liability at fair value
through profit or loss relating to the contingent consideration on the
acquisition of the Verbatim funds business and 8AM Global Limited. This has
resulted in a credit of £1,350,000 being recognised in the year (2023:
£2,651,000).
Exceptional items
During the year, the Group has reviewed the investment in the 8AM joint
venture for impairment and has recognised an impairment loss in the year of
£1,250,000. Further information is included in note 13. As the impairment of
the investment is a non-cash item, there are no cash flows from exceptional
items included on the Consolidated Statement of Cash Flows.
During the prior year, the Group acquired 50% of the share capital of 8AM
Global Limited. The Group incurred professional fees of £229,000 during the
process, which have been treated as exceptional items. The Group also incurred
other one-off costs of £169,000 during the prior year, including costs in
relation to the acquisition of the Verbatim funds business in 2022.
Share-based payment charges
Share-based payments is a recurring item, although the value will change
depending on the estimation of the satisfaction of performance obligations
attached to certain awards. It is an adjustment to operating profit since it
is a significant non-cash item. Adjusted operating profit represents largely
cash-based earnings and more directly relates to the trading performance of
the financial reporting period.
Operating loss due to non-controlling interest
There are £59,000 of losses within the Group's operating profit relating to
the non-controlling interest in Fintegrate Financial Solutions Limited. This
has been excluded from the Group's adjusted operating profit to reflect the
adjusted operating profit attributable to the Group.
Amortisation of acquisition-related intangible assets
Payments made for the introduction of client relationships and brands that are
deemed to be intangible assets are capitalised and amortised over their useful
life, which has been assessed to be ten years. This includes £207,000 of
amortisation of the intangibles recognised on the acquisition of 8AM, where
the amortisation charge is included within the Share of profit from joint
venture on the Consolidated Statement of Total Comprehensive Income. This
amortisation charge is recurring over the life of the intangible asset,
although it is an adjustment to operating profit since it is a significant
non-cash item. Adjusted operating profit represents largely cash-based
earnings and more directly relates to the trading performance of
the financial reporting period.
8 Finance income
31-MAR 2024 (£'000) 31-MAR 2023 (£'000)
Bank interest income 640 -
Total finance income 640 -
9 FINANCE Costs
31-MAR 2024 (£'000) 31-MAR 2023 (£'000)
Unwinding of the discount on contingent consideration (201) (228)
Interest expense on lease liabilities (6) (14)
Bank interest income - 6
Interest payable in the servicing of banking facilities (146) (378)
Total finance costs (353) (614)
10 Taxation
31-MAR 2024 (£'000) 31-MAR 2023 (£'000)
Current tax expense
Current tax on profits for the period 4,798 3,159
Adjustment for (over)/under provision in prior periods (290) 14
4,508 3,173
Deferred tax credit
Current year (credit)/charge (173) (371)
Adjustment with respect to previous years (505) (56)
Effect of changes in tax rates - (123)
(678) (550)
Total tax expense 3,830 2,623
Deferred tax credit includes £33,000 relating to the release of the deferred
tax liability on the investment in 8AM Global Limited, which is recognised
within the 'Investment in joint ventures' balance on the Consolidated
Statement of Financial Position.
The reasons for the difference between the actual tax charge for the year and
the standard rate of corporation tax in the UK applied to profit for the year
are as follows:
31-MAR 2024 (£'000) 31-MAR 2023 (£'000)
Profit before taxation 16,751 15,996
Tax at UK corporation tax rate of 25% (2023: 19%) 4,188 3,039
Expenses not deductible for tax purposes 462 93
Income not taxable (443) (533)
Adjustments with respect to previous years (795) (41)
Effect of changes in tax rates - (122)
Capital allowances in excess of depreciation 6 3
Deferred tax asset not recognised 142 -
Share-based payments 270 184
Total tax expense 3,830 2,623
The increase in the UK corporation tax rate from 19% to 25% became effective
on 1 April 2023. The deferred tax asset in both the current and prior year
was calculated based on this rate, reflecting the expected timing of reversal
of the related temporary differences. £603,000 of the adjustments with
respect of prior years relates to the reversal of a deferred tax liability on
the Verbatim intangible assets following the remeasurement of the tax base of
the asset.
11 Earnings Per Share and Dividends
Basic earnings per share is calculated by dividing the earnings attributable
to ordinary shareholders by the weighted average number of ordinary shares
during the year.
Number of shares
31-MAR 2024 31-MAR 2023
Basic
Weighted average number of shares in issue(1) 61,064,870 59,608,203
Effect of own shares held by an EBT (358,196) -
60,706,674 59,608,203
Diluted
Effect of weighted average number of options outstanding for the year 1,075,124 2,006,603
Weighted average number of shares (diluted)(2) 61,781,798 61,614,806
Fully diluted
Effect of full dilution of employee share options which are
contingently issuable or have future attributable service costs 1,096,621 1,192,528
Adjusted diluted weighted average number of options and shares for the year(3) 62,878,419 62,807,334
1. The weighted average number of shares in issue includes contingently issuable
shares where performance obligations have been met and there will be little to
no cash consideration, but the share options have yet to be exercised.
2. The weighted average number of shares is diluted due to the effect of
potentially dilutive contingent issuable shares from share option schemes.
3. The dilutive shares used for this measure differ from that used for statutory
dilutive earnings per share; the future value of service costs attributable to
employee share options is ignored and contingently issuable shares for
long-term incentive plan options are assumed to fully vest.
Own shares held by an EBT represents the Company's own shares purchased and
held by the Employee Benefit Trust ("EBT"), shown at cost. In the year ended
31 March 2024, the EBT purchased 1,005,696 (2023: 139,500) of the Company's
own shares. The Company utilised 346,896 (2023: 139,500) of the shares during
the year to satisfy the exercise of employee share options. At March 2024,
there remained 658,800 of the Company's own shares being held by the EBT
(2023: nil).
31-MAR 2024 (£'000) 31-MAR 2023 (£'000)
Earnings attributable to ordinary shareholders
Basic and diluted profit for the period 12,986 13,373
Share-based payments - IFRS 2 option charges 1,458 1,511
Amortisation of acquisition-related intangible assets 633 534
Exceptional costs (note 7) 1,250 398
Gain arising on changes in fair value of contingent consideration (note 7) (1,350) (2,651)
Unwinding of discount on contingent consideration (note 9) 201 228
Tax impact of adjustments (770) (447)
Adjusted basic and diluted profits for the period and attributable earnings 14,408 12,946
Earnings per share (pence) - Basic 21.39 22.43
Earnings per share (pence) - Diluted 21.02 21.70
Adjusted earnings per share (pence) - Basic 23.73 21.72
Adjusted earnings per share (pence) - Diluted 23.32 21.01
Adjusted earnings per share (pence) - Fully Diluted 22.91 20.61
Dividends
The Directors consider the Group's capital structure and dividend policy at
least twice a year ahead of announcing results and do so in the context of its
ability to continue as a going concern, to execute its strategy and to invest
in opportunities to grow the business and enhance shareholder value. The
Company's dividend policy is described in the Directors' Report on pages 62
and 63, of the 2024 Annual Report. As at 31 March 2024, the Company's
distributable reserves were £7,761,000 (2023: £9,562,000).
During the year, Tatton Asset Management plc paid the final dividend related
to the year ended 31 March 2023 of £6,006,000 representing a payment of 10p
per share. During FY23 £4,810,000 was paid as the final dividend related to
the year ended 31 March 2022 representing 8.5p per share. In addition, the
Company paid an interim dividend of £4,841,000 (2023: £2,904,000) to its
equity shareholders. This represents a payment of 8.0p per share (2023: 4.5p
per share).
The Directors are proposing a final dividend with respect to the financial
year ended 31 March 2024 of 8.0p (2023: 10.0p) per share, which will absorb
£4,841,000 (2023: £6,006,000) of shareholders' funds. It will be paid on 6
August 2024 to shareholders who are on the register of members on 28 June
2024.
During the year to March 2024, the Directors became aware that interim
dividends paid in 2020, 2021, 2022 and 2023 were made other than in accordance
with the Companies Act 2006 because interim accounts had not been filed prior
to payment. In addition, the Board became aware that the calculation of
distributable reserves for FY21 was completed across the Group rather than the
Company meaning that there were insufficient distributable profits in the
Company at the time the final dividend relating to FY21 was paid in July 2021,
A resolution has been proposed for the Annual General Meeting due to be held
on 30 July 2024 to authorise the appropriation of distributable profits to the
payment of the relevant dividends, and remove any right for the Company to
pursue shareholders or Directors for repayment. The overall effect of the
resolution would be to return all parties to the position they would have been
in, should the relevant dividends have been made in full compliance with the
Companies Act 2006.
12 Staff Costs
The staff costs were as follows:
31-MAR 2024 (£'000) 31-MAR 2023 (£'000)
Wages, salaries and bonuses 9,468 7,934
Social security costs 1,161 1,032
Pension costs 361 287
Share-based payments 1,458 1,511
Total employee benefit expense 12,448 10,764
The remuneration relating to Executive Directors has been included in the
figures above. In the prior year, these costs were presented separately and so
the prior year figures have been restated to include Executive Directors'
remuneration for consistency.
The average monthly number of employees (including Executive Directors) during
the year was as follows:
31-MAR 2024 31-MAR 2023
Administration 101 94
Key management 3 3
104 97
Key management compensation
The remuneration of the statutory Directors who are the key management of the
Group is set out below in aggregate for each of the key categories specified
in IAS 24 "Related Party Disclosures".
31-MAR 2024 (£'000) 31-MAR 2023 (£'000)
Short-term employee benefits 2,058 1,434
Post-employment benefits 10 4
Share-based payments 571 676
2,639 2,114
The table above shows the remuneration for both Executive Directors and
Non-Executive Directors, whereas in the prior year, Non-Executive Directors'
fees of £270,000 were shown separately.
The Group incurred social security costs of £293,000 (2023: £195,000) on the
remuneration of the Directors and Non-Executive Directors. Retirement benefits
are accruing to one Director (2023: one) under a defined contribution
pension scheme. Within the figures above is £10,000 of company contributions
paid to a pension scheme in respect of this Director's qualifying services.
Dividends totalling £2,026,000 (2023: £1,458,000) were paid in the year with
respect to ordinary shares held by the Company's Directors. The aggregate
gains made by the Directors on the exercise of share options during the year
were £248,250 (2023: £190,750).
The remuneration of individual Directors is provided in the Remuneration
Committee report on pages 58 to 61 of the 2024 Annual Report. The Directors'
remuneration disclosures on pages 58 to 61 of the 2024 Annual Report form part
of these financial statements.
The remuneration of the highest paid Director was:
31-MAR 2024 (£'000) 31-MAR 2023 (£'000)
Total remuneration and benefits in kind 695 424
The highest paid Director exercised nil share options in the period (2023:
nil). There were 20,000 share options granted to the highest paid Director in
the year (2023: 30,000). There was £nil (2023: £nil) of money or net assets
(other than share options) paid to or receivable by the highest paid Director
under long term incentive schemes in respect of qualifying services. The
highest paid Director received £1,740,000 (2023: £1,257,000) in dividends
in the year with respect to ordinary shares held by the Director and connected
parties. No contributions were made to a defined contribution scheme with
respect to the highest paid Director in the period.
13 Investments in Joint Ventures Accounted for using the Equity Method
(£'000)
At 1 April 2023 6,762
Profit for the year after tax 269
Amortisation of intangible assets relating to joint ventures (207)
Deferred tax credit on amortisation of intangible assets relating to joint 33
ventures
Impairment loss (1,250)
Distributions of profit (255)
At 31 March 2024 5,352
An impairment review was carried out over the investment in 8AM Global Limited
("8AM") due to the trading performance of the entity being lower than
expected. A value in use calculation has been performed with the recoverable
amount being lower than the carrying value of the investment. An impairment
loss of £1,250,000 has been recognised within administrative expenses in the
Consolidated Statement of Total Comprehensive Income in the year. The pre-tax
discount rate applied to the cashflow forecasts has been calculated using the
capital asset pricing model, the inputs of which include a country risk-free
rate, equity risk premium, company size premium and a risk adjustment (beta),
grossed up to a pre-tax rate. The pre-tax discount rate used to calculate
value is 16.3% (2023: 11.2%).
The value-in-use is calculated from cash flow projections based on the Group's
forecasts for the five years ending 31 March 2029. The Group's latest
forecasts, which covers a five-year period, are reviewed by the Board. The
Group has also considered expectations about possible variations in the amount
or timing of those cash flows, details about changes in assumptions and the
impact of these changes is detailed in note 2.25. A declining growth rate of
13% down to 5% has been applied for the ten year period following the
five-year forecast period and a terminal growth rate of 2.5% for the
investment in 8AM has been applied to year fifteen cash flows. The terminal
growth rate is prudent given the historical growth seen by the Group in the
market in which 8AM operates, and does not exceed the long-term industry
average growth rate.
8AM belongs to the Tatton operating segment as disclosed within note 4.
NAME OF JOINT VENTURE NATURE OF PRINCIPAL PLACE OF BUSINESS CLASS OF SHARE PERCENTAGE OWNED BY THE GROUP
BUSINESS
8AM Global Limited Investment Management United Kingdom Ordinary Shares 50.0%
Niche Investment Management Limited Investment Management United Kingdom Ordinary Shares 50.0%
Becketts Wealth Limited Investment Management United Kingdom Ordinary Shares 50.0%
All of the above joint ventures are accounted for using the equity method in
these consolidated financial statements, as set out in the Group's
accounting policies in note 2.
Summarised financial information in respect of the Group's only material joint
venture, 8AM, is set out below.
31-MAR 2024 (£'000) 31-MAR 2023 (£'000)
Non-current assets 29 35
Current assets 645 934
Current liabilities (178) (502)
Total equity 496 467
Group's share of net assets 238 224
Goodwill and intangible assets 5,551 7,009
Deferred tax liability (437) (471)
Carrying value held by the Group 5,352 6,762
Current assets above include £345,000 of cash and cash equivalents (2023:
£675,000). There are no current or non-current financial liabilities
excluding trade and other payables and provisions included in current
liabilities and non-current liabilities.
31-MAR 2024 (£'000) 31-MAR 2023 (£'000)
Revenue 1,732 1,512
Profit for the year/period 539 320
Dividends received from the joint ventures in the year/period 255 60
The above profit for the year/period includes the following:
Depreciation and amortisation 7 8
Interest income 6 -
Income tax expense 282 78
There is no interest expense in the year (2023: £nil).
31-MAR 2024 (£'000) 31-MAR 2023 (£'000)
Joint Venture's profit for the year/period 539 320
Group's share profit for the year/period before adjustments 269 160
Amortisation of customer relationship intangible assets (207) (121)
Impairment loss (1,250) -
Group's share of (loss)/profit for the year/period (1,188) 39
8AM Global Limited has a reporting date of 30 June. The net asset position
shown in the table above is as at 31 March to align with the Group's own
reporting. Niche Investment Management Limited and Becketts Wealth Limited
both have a reporting date of 31 March, in line with the Group. The
comparative figures for income and expense for the prior year reflect the
results of 8AM Global Limited since its acquisition by the Group.
The Group's interest in all individually immaterial joint ventures accounted
for using the equity method is £nil (2023: £nil). The Group's share of
profit for the year for these joint ventures is £nil (2023: £nil).
14 Goodwill
GOODWILL
(£'000)
Cost and carrying value at 1 April 2022 and 31 March 2023 9,337
Recognised as part of a business combination 459
Cost and carrying value at 31 March 2024 9,796
The carrying value of goodwill includes £9.4 million allocated to the Tatton
operating segment and CGU. This is made up of £2.5 million arising from the
acquisition in 2014 of an interest in Tatton Oak Limited by Tatton Capital
Limited, consisting of the future synergies and forecast profits of the
Tatton Oak business, £2.0 million arising from the acquisition in 2017 of
an interest in Tatton Capital Group Limited, £1.4 million of goodwill
generated on the acquisition of Sinfonia, £3.1 million of goodwill generated
on the acquisition of the Verbatim funds business and £0.5 million of
goodwill generated on the acquisition of 56.49% Fintegrate Financial Solutions
Limited within the financial year (see note 25).
The carrying value of goodwill also includes £0.4 million allocated to the
Paradigm operating segment and CGU relating to the acquisition of Paradigm
Mortgage Services LLP.
Goodwill relating to 8AM Global Limited is shown within the Investments in
Joint Ventures (see note 13).
None of the goodwill is expected to be deductible for income tax purposes.
Impairment loss and subsequent reversal
Goodwill is subject to an annual impairment review based on an assessment of
the recoverable amount from future trading. Where, in the opinion of the
Directors, the recoverable amount from future trading does not support the
carrying value of the goodwill relating to a subsidiary company, then an
impairment charge is made. Such an impairment is charged to the Statement of
Total Comprehensive Income.
Impairment testing
For the purpose of impairment testing, goodwill is allocated to the Group's
operating companies that represent the lowest level within the Group at which
the goodwill is monitored for internal management accounts purposes. Goodwill
acquired in a business combination is allocated, at acquisition, to the CGUs
or group of units that are expected to benefit from that business combination.
The Directors test goodwill annually for impairment, or more frequently if
there are indicators that goodwill might be impaired. The Directors have
reviewed the carrying value of goodwill at 31 March 2024 and do not consider
it to be impaired.
Growth rates
The value in use is calculated from cash flow projections based on the Group's
forecasts for the next five years ending 31 March 2029. The Group's latest
financial forecasts, which cover a five-year period, are reviewed by the
Board. A terminal growth rate of 5% (2023: 5%) for the Tatton CGU has been
applied to year five cash flows. The terminal growth rate is prudent, given
the historical growth seen by the Group, and does not exceed the long-term
industry average growth rate. A terminal growth rate of 0% has been applied
to the Paradigm Mortgage Services LLP CGU that reflects the outer year budget
revenue.
Discount rates
The pre-tax discount rate applied to the cashflow forecasts is derived from
the average of the pre-tax weighted average cost of capital used by a large
number of comparable businesses, the data for which is externally available.
It is assumed that these businesses have a similar level of risk to the
Group. The pre-tax discount rate used to calculate value is 14.4% (2023:
11.2%) and has been used for all CGUs.
Cash flow assumptions
The key assumptions used for the value in use calculations are those regarding
discount rate, growth rates and expected changes in margins. Forecast sales
growth rates are based on past experience, which has been adjusted for the
strategic direction and near-term investment priorities for each CGU. The
Tatton CGU has not budgeted for any market movements and has used an average
growth rate of net flows of 10%, which management believe is prudent given the
size of the market and historical growth. The Paradigm Mortgage Services LLP
CGU has an assumed 8% per annum increase in completions for years 1-3 and then
no growth thereafter.
From the assessment performed, no reasonably possible change in a key
assumption would cause the recoverable amount of either the Tatton CGU or the
Paradigm Mortgage Services LLP CGU to equal its carrying value.
15 Intangible Assets
COMPUTER SOFTWARE (£'000) CLIENT RELATIONSHIPS (£'000) BRAND TOTAL
(£'000)
(£'000)
Cost
Balance at 31 March 2022 1,006 4,034 98 5,138
Additions 229 - - 229
Balance at 31 March 2023 1,235 4,034 98 5,367
Additions 249 - - 249
Acquired as part of a business combination 365 - - 365
Balance at 31 March 2024 1,849 4,034 98 5,981
Accumulated amortisation and impairment
Balance at 31 March 2022 (645) (441) (5) (1,091)
Charge for the period (247) (404) (10) (661)
Balance at 31 March 2023 (892) (845) (15) (1,752)
Charge for the period (129) (404) (10) (543)
Balance at 31 March 2024 (1,021) (1,249) (25) (2,295)
Net book value
As at 31 March 2022 361 3,593 93 4,047
As at 31 March 2023 343 3,189 83 3,615
As at 31 March 2024 828 2,785 73 3,686
All amortisation charges are included within administrative expenses in the
Statement of Total Comprehensive Income.
16 Property, Plant and Equipment
COMPUTER, OFFICE EQUIPMENT AND MOTOR VEHICLES (£'000) FIXTURES AND RIGHT- OF- USE ASSETS - BUILDINGS TOTAL
(£'000)
FITTINGS AND MOTOR VEHICLES (£'000)
(£'000)
Cost
Balance at 31 March 2022 345 477 991 1,813
Additions 86 3 - 89
Disposals (77) - - (77)
Balance at 31 March 2023 354 480 991 1,825
Additions 97 18 622 737
Disposals (104) - (689) (793)
Balance at 31 March 2024 347 498 924 1,769
Accumulated depreciation and impairment
Balance at 31 March 2022 (239) (302) (523) (1,064)
Charge for the period (72) (96) (216) (384)
Disposals 77 - - 77
Balance at 31 March 2023 (234) (398) (739) (1,371)
Charge for the period (86) (73) (216) (375)
Disposals 104 - 689 793
Balance at 31 March 2024 (216) (471) (266) (953)
Net book value
As at 31 March 2022 106 175 468 749
As at 31 March 2023 120 82 252 454
As at 31 March 2024 131 27 658 816
All depreciation charges are included within administrative expenses in the
Statement of Total Comprehensive Income.
The Group leases buildings, motor vehicles and IT equipment. The Group has
applied the practical expedient for short-term leases and so has not
recognised IT equipment within ROU assets. The average lease term is five
years. One lease expired in the year and a new lease was entered into in its
place. The maturity analysis for lease liabilities is shown in note 21. The
future lease payments relating to lease liabilities are fixed.
Right-of-use assets
31-MAR 2024 (£'000) 31-MAR 2023 (£'000)
Amounts recognised in profit and loss
Depreciation on right-of-use assets (216) (216)
Interest expense on lease liabilities (6) (14)
Expense relating to short-term leases (66) (59)
(288) (289)
At 31 March 2024, the Group is committed to £64,000 for short-term leases
(2023: £80,000).
The total cash outflow for all leases amounts to £294,000 (2023: £339,000).
The cash outflows for the principal portion of lease liabilities and for the
interest portion of lease liabilities is shown within financing activities in
the Consolidated Statement of Cash Flows. The cash outflows for the payments
of short-term leases are shown within operating activities in the
Consolidated Statement of Cash Flows.
17 Trade and Other Receivables
31-MAR 2024 (£'000) 31-MAR 2023 (£'000)
Trade receivables 878 278
Accrued income 3,427 2,614
Prepayments 756 843
Other receivables 235 47
5,296 3,782
Less non-current portion:
Other receivables (188) -
Total non-current trade and other receivables (188) -
Total current trade and other receivables 5,108 3,782
Trade and other receivables, excluding prepayments, are financial assets. The
carrying value of these financial assets are considered a fair approximation
of their fair value. Accrued income is made up of contract assets which are
balances due from customers that arise when the Group delivers the service.
Payment for services is not due from the customer until the services are
complete and therefore a contract asset is recognised over the period in which
the services are performed to represent the entity's right to consideration
for the services transferred to date. This usually relates to providing one
month of investment management service prior to receiving the cash from the
customer in the following month. The balance of trade receivables and of
accrued income at 1 April 2022 was £329,000 and £2,653,000 respectively.
The Group applies the IFRS 9 simplified approach to measuring expected credit
losses ("ECLs") for trade receivables and accrued income at an amount equal
to lifetime ECLs. In line with the Group's historical experience, and after
consideration of current credit exposures, the Group does not expect to
incur any credit losses and has not recognised any ECLs in the current
year (2023: £nil).
Trade receivable amounts are all held in sterling.
18 Trade and Other Payables
31-MAR 2024 (£'000) 31-MAR 2023 (£'000)
Trade payables 328 397
Amounts due to related parties - 234
Accruals 4,389 3,301
Deferred income 238 138
Contingent consideration 903 2,989
Lease liabilities 659 261
Other payables 2,608 2,845
9,125 10,165
Less non-current portion:
Contingent consideration (402) (2,209)
Lease liabilities (567) (45)
Other payables (47) -
Total non-current trade and other payables (1,016) (2,254)
Total current trade and other payables 8,109 7,911
Trade payables, accruals, lease liabilities, contingent consideration and
other payables are considered financial liabilities. The Directors consider
that the carrying amount of trade payables approximates to their fair value.
Within other payables, there is a loan of £46k that holds a fixed and
floating charge over all present and future property and undertakings of
Fintegrate Financial Solutions Limited.
Trade payable amounts are all held in sterling.
19 Deferred Taxation
DEFERRED CAPITAL ALLOWANCES (£'000) SHORT-TERM TIMING DIFFERENCES (£'000) SHARE- BASED PAYMENTS (£'000) ACQUISITION INTANGIBLES (£'000) TOTAL (£'000)
Asset/(liability) at 31 March 2022 (63) - 1,800 (896) 841
Income statement credit 49 - 251 99 399
Equity credit - - 18 - 18
Asset/(liability) at 31 March 2023 (14) - 2,069 (797) 1,258
Income statement credit/(charge) (120) 28 101 636 645
Recognised as part of a business combination - - - (92) (92)
Equity credit - - 760 - 760
Asset/(liability) at 31 March 2024 (134) 28 2,930 (253) 2,571
A deferred tax asset of £177,000 on a temporary timing difference of
£710,000 relating to a difference between the carrying value and the tax base
of intangibles acquired in Tatton Capital Limited relating to Verbatim has not
been recognised as it is not expected that the temporary difference would
reverse in the foreseeable future.
20 reconciliation of LIABILITIES ARISING FROM FINANCING ACTIVITIES
1 APRIL 2022 (£'000) Financing CASH FLOWS (£'000) NON-CASH CHANGES: INTEREST (£'000) 31 MARCH 2023 Financing CASH FLOWS (£'000) ADDITIONS (£'000) NON-CASH CHANGES: INTEREST (£'000) 31 MARCH 2024 (£'000)
(£'000)
Long-term borrowings - - - - - 62 - 62
Short-term borrowings - - - - (18) 141 3 126
Lease liabilities 516 (269) 14 261 (230) 622 6 659
516 (269) 14 261 (248) 825 9 847
Long-term and short-term borrowings relate to interest-bearing borrowings
added on the acquisition of Fintegrate Financial Solutions Limited. These are
disclosed within Other payables within note 18.
21 Financial Instruments
The Group's treasury activities are designed to provide suitable, flexible
funding arrangements to satisfy the Group's requirements. The Group uses
financial instruments comprising borrowings, cash and items such as trade
receivables and payables that arise directly from its operations. The main
risks arising from the Group's financial instruments are interest rate risks,
credit risks and liquidity risks. The Board reviews policies for managing each
of these risks and they are summarised below. The Group finances its
operations through a combination of cash resource and other borrowings.
Categories of financial instruments
The financial assets and liabilities of the Group are detailed below:
AT 31 March 2024 at 31 march 2023
Amortised cost Financial liabilities (£'000) Fvpl Carrying value Amortised cost (£'000) Financial liabilities (£'000) fvpl Carrying value (£'000)
(£'000)
(£'000)
(£'000)
(£'000)
Financial assets
Financial assets at FVPL - - 106 106 - - 123 123
Trade receivables 878 - - 878 278 - - 278
Accrued income 3,427 - - 3,427 2,614 - - 2,614
Other receivables 235 - - 235 47 - - 47
Cash and cash equivalents 24,838 - - 24,838 26,494 - - 26,494
29,378 - 106 29,484 29,433 - 123 29,556
Financial liabilities
Trade and other payables - 8,228 - 8,228 - 9,532 - 9,532
Lease liabilities - 659 - 659 - 261 - 261
- 8,887 - 8,887 - 9,793 - 9,793
Fair value estimation
IFRS 7 requires the disclosure of fair value measurements of financial
instruments by level of the following fair value measurement hierarchy:
• Quoted prices (unadjusted) in active markets for identical assets or
liabilities (level 1).
• Inputs other than quoted prices included within level 1 that are observable
for the asset or liability, either directly
(that is, as prices) or indirectly (that is, derived from prices) (level 2).
• Inputs for the asset or liability that are not based on observable market data
(that is, unobservable inputs) (level 3).
All financial assets, except for financial investments, are held at amortised
cost and are classified as level 1. The carrying amount of these financial
assets at amortised cost approximate to their fair value. Financial
investments are categorised as financial assets at fair value through profit
or loss and are classified as level 1 and the fair value is determined
directly by reference to published prices in an active market.
Financial assets at fair value through profit or loss (level 1)
31-MAR 2024 (£'000) 31-MAR 2023 (£'000)
Financial investments in regulated funds or model portfolios 106 123
All financial liabilities, except for contingent consideration, are
categorised as financial liabilities measured at amortised cost and are also
classified as level 1. The only financial liabilities measured subsequently at
fair value on level 3 fair value measurement represent contingent
consideration relating to a business combination.
Contingent consideration has been valued using a discounted cash flow method
that was used to capture the present value arising from the contingent
consideration. The unobservable inputs are:
• The risk-adjusted discount rate of 8.01%; and
• Probability-adjusted level of assets under management, which have a range of
£246,000,000 to £390,000,000.
The higher the discount rate, the lower the fair value. If the discount rate
was 1% higher/lower while all other variables were held constant, the carrying
amount would decrease/increase by £8,000. If the weighted average of AUM
increased/decreased by £10,000,000, the carrying amount would
increase/decrease by £29,000.
Financial liabilities at fair value through profit or loss (level 3)
CONTINGENT CONSIDERATION £'000
Balance at 1 April 2022 2,486
Recognition of contingent consideration as part of a business combination 2,926
Unwinding of discount rate 228
Changes in fair value of contingent consideration (2,651)
Balance at 31 March 2023 2,989
Contingent consideration paid (937)
Unwinding of discount rate 201
Changes in fair value of contingent consideration (1,350)
Balance at 31 March 2024 903
The unwinding of the discount rate and the changes in fair value of contingent
consideration have been recognised in the Consolidated Statement of Total
Comprehensive Income.
During the year, a payment of £250,000 was made relating to the contingent
consideration due for the acquisition of 8AM Global Limited. At 31 March 2023,
the undiscounted liability held for this first payment totalled £101,000. A
payment of £687,000 was made relating to the contingent consideration due for
the acquisition of the Verbatim funds. At 31 March 2023, the undiscounted
liability held for this first payment amounted to £706,000.
The fair value of the remaining contingent consideration for 8AM and Verbatim
was reviewed at 31 March 2024 using a discounted cash flow analysis. The
expected cash flows are estimated based on the Group's knowledge of the
business and how the current economic environment is likely to impact it. For
8AM Global Limited, the second contingent consideration payment is based on
the run rate EBIT at deferred payment date compared to that at acquisition.
The unobservable inputs for the 8AM contingent consideration include the
risk-adjusted discount rate of 8.0% (2023: 7.8%) and future profitability
of the business of up to £500,000. If the discount rate were to change by
1%, this would increase/decrease the fair value of contingent consideration
by £nil. If profitability were to be 10% higher or lower, the fair value of
contingent consideration would increase/decrease by £nil.
Based on results to date, it was deemed extremely unlikely that the conditions
for payment would be made and so the brought forward liability of £889,000
relating to 8AM was released.
For Verbatim, the expected change in AUM and resulting cash flows are
estimated based on the Group's knowledge of the business and how the current
economic environment is likely to impact it. The contingent consideration
payable is dependent on the total value of AUM at the payment date compared to
the value of AUM at acquisition, £650m. The scenarios used to calculate the
deferred payments were updated to include AUM movements to date and
management's perception of likelihood of occurrence. This lead to a reduction
of £461,000 in the value of contingent consideration recognised.
The unobservable inputs for the Verbatim contingent consideration include the
risk-adjusted discount rate of 8.0% (2023: 7.8%) and future AUM of the funds
ranging in value up to £400m. If the discount rate were to change by 1%, this
would increase/decrease the fair value of contingent consideration by £8,000.
If AUM were to be 10% higher or lower, the fair value of contingent
consideration would increase/decrease by £90,000.
Interest rate risk
The Group finances its operations through retained profits. The Group's cash
and cash equivalents balance of £24,838,000 and borrowings of £85,000 are
the financial instruments subject to variable interest rate risk. The impact
of a 1% increase or decrease in interest rate on the post-tax profit is not
material to the Group.
Credit risk
Credit risk is the risk that a counterparty will cause a financial loss to the
Group by failing to discharge its obligation to the Group. The financial
instruments are considered to have a low credit risk due to the mitigating
procedures in place. The Group manages its exposure to this risk by applying
Board-approved limits to the amount of credit exposure to any
one counterparty, and employs strict minimum creditworthiness criteria as to
the choice of counterparty, thereby ensuring that there are no significant
concentrations. The Group does not have any significant credit risk exposure
to any single counterparty or any group of counterparties having similar
characteristics. The maximum exposure to credit risk for receivables and other
financial assets is represented by their carrying amount.
The Group's maximum exposure to credit risk is limited to the carrying amount
of its financial assets recognised at 31 March.
The Group continuously monitors defaults of customers and other
counterparties, identified either individually or by the Group, and
incorporates this information into its credit risk controls. The Group's
policy is to deal only with credit-worthy counterparties.
The Group's management consider that all of the above financial assets that
are not impaired or past due for each of the 31 March reporting dates under
review are of good credit quality.
At 31 March, the Group had certain trade receivables that had not been settled
by the contractual date but were not considered to be impaired. The amounts at
31 March, analysed by the length of time past due, are:
31-MAR 2024 (£'000) 31-MAR 2023 (£'000)
Not more than 3 months 814 233
More than 3 months but not more than 6 months 42 30
More than 6 months but not more than 1 year 14 6
More than 1 year 8 8
Total 878 277
Trade receivables consist of a large number of customers within the UK. Based
on historical information about customer default rates, management consider
the credit quality of trade receivables that are not past due or impaired to
be good.
The Group has rebutted the presumption in paragraph 5.5.11 of IFRS 9 that
credit risk increases significantly when contractual payments are more than 30
days past due where the Group has reasonable and supportable information
that demonstrates otherwise.
The credit risk for cash and cash equivalents is considered negligible, since
the counterparties are reputable banks with high quality external credit
ratings.
Liquidity risk
Liquidity risk is the risk that companies within the Group will encounter
difficulty in meeting the obligations associated with financial liabilities.
To counter this risk, the Group operates with a high level of interest cover
relative to its net asset value. In addition, it benefits from strong cash
flow from its normal trading activities. The Group manages its liquidity
needs by monitoring scheduled debt servicing payments for long-term
financial liabilities as well as forecast cash inflows and outflows due in
day to day business. The data used for analysing these cash flows is
consistent with that used in the contractual maturity analysis below.
At 31 March 2024, the Group's non-derivative financial liabilities have
contractual maturities (including interest payments where applicable) as
summarised below:
CURRENT NON-CURRENT
AT 31 MARCH 2024 WITHIN 6 MONTHS 6 TO 12 1 TO 5 LATER
(£'000)
MONTHS
YEARS
THAN 5
(£'000)
(£'000)
YEARS
(£'000)
Trade and other payables 7,259 4 57 5
Lease liabilities 95 56 644 -
Contingent consideration 521 - 451 -
Total 7,875 60 1,152 5
Lease liabilities above totalling £795k are the undiscounted values of the
total lease liability of £659k as shown in note 18. Contingent consideration
above totalling £972k is the undiscounted liability of the contingent
consideration of £903k as shown in note 18.
This compares with the maturity of the Group's non-derivative financial
liabilities in the previous reporting period as follows:
CURRENT NON-CURRENT
AT 31 MARCH 2023 WITHIN 6 MONTHS 6 TO 12 1 TO 5 LATER
(£'000)
MONTHS
YEARS
THAN 5
(£'000)
(£'000)
YEARS
(£'000)
Trade and other payables 6,775 - - -
Lease liabilities 134 88 46 -
Contingent consideration 807 - 2,527 -
Total 7,716 88 2,573 -
The above amounts reflect the contractual undiscounted cash flows, which may
differ from the carrying values of the liabilities at the reporting date.
Market risk
The Group has made investments in its own managed funds and portfolios and the
value of these investments is subject to equity market risk, this being the
risk that changes in equity prices will affect the Group's income or the value
of its holdings of financial instruments. If equity prices had been 5%
higher/lower, the impact on the Group's Statement of Comprehensive Income
would be £5,000 higher/lower, due to changes in the fair value of financial
assets at fair value through profit or loss.
22 Share Capital
NUMBER OF SHARES
Authorised, called-up and fully paid £0.20 ordinary shares
At 1 April 2022 58,914,887
Issue of share capital on exercise of employee share options 263,098
Issue of share capital on purchase of a joint venture 877,737
At 1 April 2023 60,055,722
Issue of share capital on exercise of employee share options 455,678
At 31 March 2024 60,511,400
Each share in Tatton Asset Management plc carries one vote and the right to a
dividend.
23 Own Shares
The following movements in own shares occurred during the year:
NUMBER of shares £'000
At 1 April 2022 - -
Acquired in the year 139,500 28
Utilised on exercise of employee share options (139,500) (28)
At 1 April 2023 - -
Acquired in the year 658,800 3,278
New share capital issued to the EBT 346,896 69
Utilised on exercise of employee share options (346,896) (69)
At 31 March 2024 658,800 3,278
Own shares represent the cost of the Company's own shares, either purchased in
the market or issued by the Company, which are held by an EBT to satisfy
future awards under the Group's share-based payment schemes (note 24).
24 Share-Based Payments
During the year, a number of share-based payment schemes and share options
schemes have been utilised by the Group, described under 24.1 Current schemes.
24.1 Current schemes
(i) Tatton Asset Management plc EMI Scheme ("TAM EMI Scheme")
On 7 July 2017, the Group launched an EMI share option scheme relating to
shares in Tatton Asset Management plc, to enable senior management to
participate in the equity of the Company. 3,022,733 options with a weighted
average exercise price of £1.89 were granted, exercisable in July 2020.
There have been nil (2023: nil) options exercised during the year from
this scheme.
The scheme was extended on 8 August 2018, with 1,720,138 zero-cost options
granted. This scheme vested in August 2021 and 50,000 options were exercised
in the year (2023: 50,000). The scheme was extended again on 1 August 2019, 28
July 2020, 15 July 2021 and 25 July 2022 with 193,000, 1,000,000, 279,858 and
274,268 zero-cost options granted in each respective year. These options are
exercisable on the third anniversary of the grant date. There were 204,523
zero-cost options granted in the current year financial year on 24 July 2023.
The options granted in 2020 vested and became exercisable in July 2023. There
have been 296,896 options exercised during the period from this scheme. The
weighted average share price at the date of exercise was £4.97. 27,912 of
these options lapsed in the year. A total of 2,569,630 options remain
outstanding at 31 March 2024, 1,878,861 of which are currently exercisable.
64,524 options were forfeited in the period (2023: 6,355).
The weighted average contractual life for share options outstanding at the end
of the period was 5.55 years (2023: 6.40 years).
The vesting conditions for the scheme are detailed in the Remuneration
Committee report on pages 58 to 61 of the 2024 Annual Report. The
weighted average fair value of the options granted during the year was
£4.37. Within the accounts of the Company, the fair value at grant date is
estimated using the appropriate models, including both the Black-Scholes and
Monte Carlo modelling methodologies. Share price volatility has been
estimated using the historical share price volatility of the Company, the
expected volatility of the Company's share price over the life of the options
and the average volatility applying to a comparable group of listed
companies. Key valuation assumptions and the costs recognised
in the accounts during the period are noted in 24.2 and 24.3, respectively.
NUMBER OF WEIGHTED AVERAGE PRICE (£)
SHARE OPTIONS GRANTED
Outstanding at 1 April 2022 2,726,026 0.60
Granted during the period 274,268 -
Exercised during the period (189,500) -
Forfeited during the period (6,355) -
Outstanding at 31 March 2023 2,804,439 0.59
Exercisable at 31 March 2023 1,256,668 1.31
Outstanding at 1 April 2023 2,804,439 0.59
Granted during the period 204,523 -
Exercised during the period (346,896) -
Forfeited during the period (64,524) -
Lapsed during the period (27,912) -
Outstanding at 31 March 2024 2,569,630 0.64
Exercisable at 31 March 2024 1,878,861 0.88
(ii) Tatton Asset Management plc Sharesave scheme ("TAM Sharesave scheme")
On 6 July 2020, 2 August 2021, 4 August 2022 and 25 August 2023, the Group
launched all employee Sharesave schemes for options over shares in Tatton
Asset Management plc, with the schemes in the periods 2020 and 2021 being
administered by Yorkshire Building Society and the schemes in 2022 and 2023
being administered by Link Group. Employees are able to save between £10
and £500 per month over a three-year life of each scheme, at which point they
each have the option to either acquire shares in the Company or receive the
cash saved.
The 2020 TAM Sharesave scheme vested in August 2023 and 108,781 share options
became exercisable. Over the life of the 2021 TAM Sharesave scheme it is
estimated that, based on current savings rates, 38,160 share options will be
exercisable at an exercise price of £3.60. Over the life of the 2022 TAM
Sharesave scheme, it is estimated that, based on current savings rates, 45,763
share options will be exercisable at an exercise price of £3.26. Over the
life of the 2023 TAM Sharesave scheme, it is estimated that, based on current
savings rates, 89,223 share options will be exercisable at an exercise price
of £3.89. 108,781 options were exercised in the year at a weighted average
share price at the date of exercise of £4.97. The weighted average
contractual life for share options outstanding at the end of the period was
1.54 years (2023: 1.02 years).
The weighted average fair value of the options granted during the year was
£1.60. Within the accounts of the Company, the fair value at grant date is
estimated using the Black-Scholes methodology for 100% of the options. Share
price volatility has been estimated using the historical share price
volatility of the Company, the expected volatility of the Company's
share price over the life of the options and the average volatility applying
to a comparable group of listed companies. Key valuation assumptions and the
costs recognised in the accounts during the period are noted in 24.2 and
24.3, respectively.
NUMBER OF SHARE OPTIONS GRANTED WEIGHTED AVERAGE PRICE (£)
Outstanding at 1 April 2022 114,517 2.14
Granted during the period 60,538 2.53
Exercised during the period (73,599) 1.79
Forfeited during the period (6,361) 2.66
Outstanding at 31 March 2023 95,095 2.57
Exercisable at 31 March 2023 - -
Outstanding at 1 April 2023 95,095 2.57
Granted during the period 90,473 2.93
Forfeited during the period (6,810) 3.22
Exercised during the period (108,781) 2.29
Outstanding at 31 March 2024 69,977 3.53
Exercisable at 31 March 2024 - -
24.2 Valuation assumptions
Assumptions used in the option valuation models to determine the fair value of
options at the date of grant were as follows:
EMI SCHEME 2023 2022 2021 2020 SHARESAVE SCHEME 2022 2021 2020
2023
Share price at grant (£) 4.74 4.03 4.60 2.84 4.91 4.25 4.80 2.85
Exercise price (£) - - - - 3.89 3.26 3.60 2.29
Expected volatility (%) 35.24 34.05 33.76 34.80 35.13 34.05 33.76 34.80
Expected life (years) 3.00 3.00 3.00 3.00 3.00 3.00 3.00 3.00
Risk free rate (%) 4.64 1.71 0.24 (0.06) 4.74 1.71 0.12 (0.06)
Expected dividend yield (%) 3.06 3.11 2.39 3.38 2.95 3.11 2.39 3.38
24.3 IFRS 2 share-based option costs
31-MAR 2024 (£'000) 31-MAR 2023 (£'000)
TAM EMI scheme 1,376 1,446
TAM Sharesave scheme 82 65
1,458 1,511
The Consolidated Statement of Cash Flows shows an adjustment to Net cash from
operating activities relating to share-based payments of £1,236,000 (2023:
£1,420,000). This is a charge in the year of £1,458,000 (2023: £1,511,000)
adjusted for cash paid relating to national insurance contributions on the
exercise of share options of £222,000 (2023: £91,000). Of the charge of
£1,458,000, £980,000 is recognised through equity with the remaining
£478,000 relating to the cost of national insurance contributions which are
not accounted for through equity.
25 Business combinations
On 29 November 2023, the Group acquired 56.49% of Fintegrate Financial
Solutions Limited ("Fintegrate"), a digital financial planning software
company, and the acquisition has been treated as a business combination. The
acquisition of Fintegrate was made in order to broaden the support services
the Group can offer to its IFA firms across the Group. The amounts recognised
with respect to the identifiable assets acquired and liabilities assumed upon
the acquisition of Fintegrate are set out in the table below:
£'000
Identifiable intangible assets 365
Cash 273
Trade and other receivables 10
Trade and other payables (365)
Deferred tax liability (92)
Total identifiable assets 191
Less: non-controlling interest (123)
Goodwill 459
Total Consideration 527
Satisfied by:
Cash 527
Total consideration transferred 527
Net cash outflow arising on acquisition
Cash consideration 527
Less: net cash acquired (273)
Net cash outflow 254
The fair value of the Fintegrate software within its identifiable intangible
assets has been measured using a relief from royalty valuation methodology.
The model uses estimates of the future growth of the business to derive a
forecast series of cash flows and applies a royalty rate, with the relief from
royalty being discounted to a present value to determine the fair value
of the software acquired. The useful economic life of the software has been
determined to be ten years.
The goodwill of £459,000 arising from the acquisition consists of future
synergies and future income expected to be generated from the entity. None of
the goodwill is expected to be deductible for income tax purposes.
The Group recognises non-controlling interests in an acquired entity either at
fair value or at the non-controlling interest's proportionate share of the
acquired entity's net identifiable assets. This decision is made on an
acquisition-by-acquisition basis. For the non-controlling interests in
Fintegrate, the Group elected to recognise the non-controlling interests at
its proportionate share of the acquired net identifiable assets, which was a
net asset position of £123,000 at acquisition. Acquisition-related costs
(included in administrative expenses) amount to £27,000. Fintegrate
contributed £18,000 to revenue and a loss of £137,000 to the Group's profit,
before making any adjustment for non-controlling interest, for the period
between the date of acquisition and the reporting date. Had Fintegrate been
consolidated from 1 April 2023, the Consolidated Statement of Total
Comprehensive Income would have included revenue of £32,000 and loss of
£508,000.
26 Related Party Transactions
Ultimate controlling party
The Directors consider there to be no ultimate controlling party.
Relationships
Balances and transactions between the Parent Company and its subsidiaries,
which are related parties, have been eliminated on consolidation and are not
disclosed in this note. The Group has trading relationships with the following
entities in which Paul Hogarth, a Director, has a beneficial interest:
ENTITY NATURE OF TRANSACTIONS
Suffolk Life Pensions Limited The Group pays lease rental payments on an office building held in a pension
fund by Paul Hogarth.
Hermitage Holdings (Wilmslow) Limited The Group incurs recharged costs from this entity relating to trading
activities.
Related party balances
TERMS AND CONDITIONS 2024 VALUE OF INCOME/ (COST) (£'000) BALANCE RECEIVABLE/ (PAYABLE) 2023 VALUE OF INCOME/ (COST) (£'000) BALANCE RECEIVABLE/ (PAYABLE)
(£'000)
(£'000)
Suffolk Life Pensions Limited Payable in advance (47) (15) (61) -
Hermitage Holdings (Wilmslow) Limited Repayment on demand (12) - (12) 1
Balances with related parties are non-interest-bearing.
Key management personnel remuneration
Key management includes Executive and Non-Executive Directors. The
compensation paid or payable to key management personnel is as disclosed in
note 12.
27 ALTERNATIVE PERFORMANCE MEASURES ("APMS")
The Group has identified and defined certain measures that it uses to
understand and manage its performance. The measures are not defined under IFRS
and are not considered to be a substitute for or superior to IFRS measures,
but management believe that these APMs provide stakeholders with additional
helpful information and enable an alternative comparison of performance over
time. The APMs should not be viewed in isolation, but as supplementary
information. APMs may not be comparable with similarly titled measures
presented by other companies.
The APMs are used by the Board and management to analyse the business and
financial performance, track the Group's progress and help develop long-term
strategic plans. Some APMs, where noted below, are used as key management
incentive metrics. The APMs provide additional information to investors and
other external shareholders to provide additional understanding of the Group's
results of operations as supplemental measures of performance.
There have been a number of APMs which have been removed from the list below
this year. These are items which have previously been disclosed as an
alternative way of looking at the growth of the Group but are not KPIs of the
business. The APMs removed from this list during the year as they have not
been referred to in this Annual Report are: Adjusted profit before tax before
separately disclosed items; Dividend cover; Dividend yield; CAGR in AUM and
CAGR in Tatton firm numbers; and Average annual net inflows.
APM CLOSEST EQUIVALENT MEASURE RECONCILING ITEMS TO THEIR STATUTORY MEASURE DEFINITION AND PURPOSE
Adjusted operating profit Operating profit Items in note (a) below The reconciliation between Operating profit and Adjusted operating profit can
be seen on the face of the Consolidated Statement of Total Comprehensive
Income. See note 7 for the value of the adjusting items. This is a key
management incentive metric.
Adjusted operating profit margin Operating Items in note (a) below Adjusted operating profit divided by revenue to report the margin delivered.
profit Progression in adjusted operating margin is an indicator of the Group's
margin operating efficiency.
See note 7 for the value of the adjusting items.
Cash generated from operations before exceptional items Cash generated from operations Cash flows from exceptional items Cash generated from operations is adjusted to exclude cash flows from
exceptional items. The reconciliation between cash generated from operations
and Cash generated from operations before exceptionals can be seen on the
Statement of Cash Flows. This is a measure of the cash generation and working
capital efficiency of the Group's operations and is a key management
performance measure.
Adjusted earnings per share - Basic Earnings per share - Basic Items in note (b) below Profit after tax attributable to shareholders of the Company is adjusted to
exclude separately disclosed items as detailed in note 11 and is divided
by the same denominator as Basic EPS, being the weighted average number of
ordinary shares in issue. Adjusted EPS - Basic is presented to reflect the
impact of the separately disclosed items included in Adjusted operating
profit.
Adjusted earnings per share - Fully Diluted Earnings per share - Diluted Items in note (b) below Profit after tax is adjusted to exclude separately disclosed items as detailed
in note 11 and is divided by the total number of dilutive shares, assuming
all contingently issuable shares will fully vest. The reconciliation and
calculation of Adjusted EPS - Diluted is shown in note 11. Adjusted EPS -
Fully Diluted is presented to reflect the impact of the separately disclosed
items included in Adjusted operating profit and to include all shares which
are contingently issuable assuming share options fully vest. This is a key
management incentive metric.
Other measures
Tatton - assets under management ("AUM") and net inflows None Not applicable AUM is representative of the customer assets and is a measure of the value of
the customer base. Movements in this base are an indication of performance in
the year and growth of the business to generate revenues going forward. Net
inflows measure the net of inflows and outflows of customer assets in the
year. Net inflows are a key management incentive metric.
Tatton - assets under influence ("AUI") None Not applicable AUI is representative of the customer assets which are not directly managed
by Tatton but over which we hold influence due to our shareholding in the
company in which they are managed, and is a measure of the value of the
customer base. Movements in this base are an indication of our participation
in the joint venture and its growth in order to generate Tatton's share of
profits going forward.
Tatton firms None Not applicable Alternative growth measure to revenue; an operational view of growth in the
Tatton division.
Paradigm - Consulting members, Mortgages lending and member firms None Not applicable Alternative growth measure to revenue; an operational view of growth in the
Paradigm division which is supported by two main service lines: Consulting and
Mortgages.
Return on capital employed ("ROCE") None Not applicable ROCE is calculated as annual adjusted operating profit for the last 12 months,
as shown on the Consolidated Statement of Total Comprehensive Income,
expressed as a percentage of the average total assets less current
liabilities. The denominator for 2024 is £44.2m and for 2023 is £38.9m. ROCE
measures how effectively we have deployed our resources and how efficiently we
apply our capital.
(a) Reconciling items include: Exceptional items, share-based payments, changes in
the fair value of contingent consideration, amortisation
of acquisition-related intangibles, and operating loss relating to
non-controlling interest.
(b) Reconciling items include: Exceptional items, share-based payments, changes in
the fair value of contingent consideration, amortisation
of acquisition-related items, unwinding of discount on contingent
consideration, and the tax thereon.
28 POST BALANCE SHEET EVENTS
There have been no post balance sheet events.
29 CAPITAL COMMITMENTS
At 31 March 2024, the Directors confirmed there were no capital commitments
(2023: none) for capital improvements.
30 CONTINGENT LIABILITIES
At 31 March 2024, the Directors confirmed there were no contingent liabilities
(2023: none).
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