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Curtis Banks Group PLC Interim Results

03/09/2020 7:00am

UK Regulatory (RNS & others)


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Curtis Banks Group PLC

03 September 2020

3 September 2020

Curtis Banks Group plc

("Curtis Banks", the "Group")

Interim Results for 6 months to 30 June 2020

Curtis Banks Group PLC, one of the UK's leading SIPP providers, is pleased to announce its interim results for the 6 months to 30 June 2020.

Highlights

   --    Revenue maintained at GBP24.5m (2019: GBP24.5m) 
   --    Adjusted profit before tax(1) increased by 0.6% to GBP6.3m (2019: GBP6.2m) 
   --    Adjusted operating margin(2) increased to 26.4% (2019: 26.3%) 
   --    Adjusted diluted EPS maintained at 9.5p (2019: 9.5p)(3) 
   --    Assets under administration increased by 4.0% to GBP28.6bn (2019: GBP27.5bn) 
   --    Interim dividend of 2.5p per share (2019: 2.5p) 

Highlights and key performance indicators for the period include:

 
                                         Unaudited six     Unaudited six month      Audited year 
                                       month period ended    period ended 30      ended 31 December 
                                          30 June 2020          June 2019               2019 
 Financial 
 Revenue                                   GBP24.5m             GBP24.5m              GBP48.9m 
 Adjusted Profit before tax1                GBP6.3m              GBP6.2m              GBP13.4m 
 Profit before Tax                          GBP4.0m              GBP5.4m              GBP10.9m 
 Adjusted Operating Margin2                  26.4%                26.3%                28.1% 
 Diluted EPS3                                5.3p                 8.2p                 16.2p 
 Adjusted diluted EPS3                       9.5p                 9.5p                 19.8p 
 
 Operational Highlights 
 Number of SIPPs Administered               76,306               77,175                76,541 
 Assets under Administration               GBP28.6bn            GBP27.5bn            GBP29.1bn 
 Total organic new own SIPPs 
  in period                                  2,107                2,220                4,567 
 Number of properties administered           6,480                6,336                6,352 
 

1 Profit before tax, amortisation and non-recurring costs

2 The ratio of operating profit before amortisation and non-recurring costs to revenue

3 Adjusted to exclude anti-dilutive options, see note 4 to the financial statements for further detail

Commenting on the results, Will Self, CEO of Curtis Banks, said:

"I am pleased to report a solid six months for the Curtis Banks Group. The first six months of the year has seen the business affected by COVID-19; however, our fixed, recurring fee model has insulated the Group from the worst of the effects of the pandemic, to date.

"I am delighted to report that core product growth during the period is up year-on-year, driven in part by organic growth in our new investment product, Your Future SIPP. In addition, the acquisitions of Dunstan Thomas and Talbot and Muir post-period end are very exciting for all of us at Curtis Banks as we look to grow through increasing scale and adding new revenue streams.

I would like to pay thanks to all our employees for their efforts during this testing time. I'm extremely proud of the way they have adapted to remote working during the COVID-19 pandemic and minimised the effect of COVID-19 on the Group."

Analyst Presentation:

There will be a presentation for analysts and investors via webcast on Thursday 3(rd) September 2020 at 9.30am. The webcast details are as follows:

URL: https://zoom.us/j/92145482793?pwd=Y2VmbFE4dHlmb1l2bWorTGsza2xzZz09

Meeting ID: 921 4548 2793

Passcode: CBG3092020

Dial in details for audio only: 020 8080 6592

For more information:

 
 Curtis Banks Group plc                   www.curtisbanks.co.uk 
 Will Self - Chief Executive Officer      +44 (0) 117 9107910 
 Dan Cowland - Chief Financial Officer 
 
 
 Peel Hunt LLP (Nominated Adviser         +44 (0) 20 7418 
  & Joint Broker)                          8900 
 James Britton 
 Rishi Shah 
 
 
 Nplus1 Singer Capital Markets Limited    +44 (0) 20 7496 
  (Joint Broker)                           3000 
 Mark Taylor 
 Rachel Hayes 
 
 
                                          +44 (0) 20 3757 
 Camarco (Financial PR)                    4984 
 Ed Gascoigne-Pees 
 Georgia Edmonds 
 Jake Thomas 
 

Chief Executive Officer's Review

Summary

I am pleased to report a solid six months for the Curtis Banks Group. The first six months of the year has seen the business affected by COVID-19; however, our fixed, recurring fee model has insulated the Group from the worst of the effects of the pandemic, to date.

I believe that the progress we have made during the period, including the acquisitions of Talbot and Muir and the fintech provider, Dunstan Thomas, post period end, is evidence that we continue to deliver on our strategy and build greater scale and additional, complementary revenue streams.

I am delighted to report that core product growth during the period is up year-on-year, driven in part by organic growth in our new investment product, Your Future SIPP. The period has been dominated by the COVID-19 pandemic impacting the wider pension market. However, I am very pleased that the business responded to the outbreak by quickly and successfully implementing our Business Continuity Plan and I am very proud of the way my colleagues have adapted to the new working environment.

Our market leading product continues to have a positive impact on the Group's organic growth and our relationships with advisers. The product means that we are extremely well placed to further increase our organic growth of Full and Mid SIPPs over the coming years.

The financial performance of the business was robust with revenue maintained year-on-year at GBP24.5m (H1 2019: GBP24.5m). Adjusted profit before tax increased by 0.6% to GBP6.3m (H1 2019: GBP6.2m). Our adjusted operating margin increased slightly compared to the prior year period to 26.4%, and we continue on our journey of operational efficiencies over the period that will benefit us in pursuit of our target operating model of 30%.

The launch of Your Future SIPP in 2019 was an important milestone for the Group. The product has been well received by advisers and we continue to grow new advisor relationships. As at August 2020, we have now registered 3,600 advisers and 3,100 clients to use the new adaptive portal.

Our mission to diversify the business has continued through focusing on areas of complementary strategic interest including the acquisition of Dunstan Thomas as detailed below. Rivergate Legal Limited continues to attract revenue, both as a result of being selected from the Curtis Banks Panel of Solicitors and also via instructions that are independent of Curtis Banks. A significant portion of Rivergate's revenue is derived from clients selecting its services from the 'Curtis Banks Panel' of Solicitors. Rivergate has remained focused on the supply of commercial property and real estate services in line with the Group's strategy. Total properties administered by the Group has increased to 6,480 (H1 2019: 6,336) and we expect this upward trend to continue.

SIPP Numbers

As at 30 June 2020, the number of SIPPs administered fell slightly to 76,306 (H1 2019: 77,175), partly due to COVID-19 impacting sales activity in H1 as well as the ongoing proactive management of the non-core legacy products.

Even with the challenging backdrop, we added 2,107 gross new own SIPPs organically, which are administered directly by the Group (H1 2019: 2,220), representing a gross annualised organic growth rate of 6.07% (H1 2019: 6.55%). In our two core areas of strategic focus, the Full SIPP saw a slightly lower level of gross annualised organic growth than last year at 2.90% (H1 2019: 3.35%) but our mid SIPP gross organic growth rate increased slightly to 11.20% (H1 2019: 10.78%). Our total own SIPP annualised attrition rate reduced to 6.14% during the year (H1 2019: 7.04%).

Acquisitions

The acquisitions of Dunstan Thomas and Talbot and Muir post-period end are very exciting for all of us at Curtis Banks.

Both these businesses are high-quality and they focus on Curtis Banks' resilient core market. The acquisitions have a strategic rationale that is in line with our stated strategy of growing the Group via acquisitions, be it through increasing scale or adding new revenue streams.

Talbot and Muir is a well-respected SIPP and SSAS provider and administrator with a very similar business model to our own with strong levels of reoccurring revenues based on a fixed fee model. Talbot and Muir is a strong cultural and structural fit with a similar product offering, customer profile and operating models. It delivers additional scale to the Group through 6,600 plans and Assets under Administration of approximately GBP3.6bn, with 71 employees across offices in Nottingham and Leeds, joining the Group. We exchanged contracts with Talbot and Muir on 23 July and are currently seeking FCA change of control approval, expected in mid Q4 2020.

Dunstan Thomas is a highly regarded fintech provider offering technology solutions to the pre, post and at retirement market through a small number of developed products. Curtis Banks has a long history of working with Dunstan Thomas, who have been a technology supplier to the Group for over five years. This acquisition will support the successful delivery and execution of Curtis Banks' own technology strategy. It also expands our own customer proposition offering both our existing and future clients access to a broader product and services while giving us the opportunity to take our own product offering to other target markets.

I am delighted that we have managed to announce these acquisitions and I would like to pay a warm welcome to our new colleagues at Dunstan Thomas and Talbot and Muir.

We continue to seek acquisitions as part of our stated growth strategy. We remain disciplined in our approach and will carefully examine any opportunity. Similar to the acquisitions of Dunstan Thomas and Talbot and Muir, we are committed to exploring opportunities to add scale to our existing SIPP book and expand our offering through complementary acquisitions.

Target Operating Model

Our Operating Margin of 26.4% (H1 2019: 26.3%) has increased slightly compared to the prior year period. We have continued to make good progress over the past six months in moving towards our target of a 30% operating margin for our core business.

During the period we have progressed towards the centralisation of the Group's commercial property administration. In addition to this, the strategy to transition the Group to a single administration system remains on target and within budget.

As at 30 June 2020, we are progressing our systems strategy and development work continues and is on track for completion in accordance with the original project plan.

Industry context and outlook

The pension market has been a continued focus of the regulator during the first half of the year. Our business model is clear and we only work with regulated financial advisers and do not give any advice or provide the investments held within our SIPPs. Our fee structures also remain fair, transparent and competitive for our target market.

Non-standard investments continue to receive a large amount of media coverage. While these are a significant issue for the wider industry, we do not consider them to be a material risk to our business. The Group continues to carry out robust due diligence on non-standard investments both at outset and throughout the life of the investment and all new Curtis Banks products have a clear Schedule of Allowable Investments.

Our organisation remains resilient from both a regulatory perspective but also in weathering the medium term economic impact of the COVID-19 pandemic. As a Group we continue to explore ways to further diversify our revenue generation and reduce our sensitivity to market conditions.

Our People and Culture

I would like to pay tribute to Greg Kingston, who very sadly passed away recently. Greg had joined Suffolk Life in 2007 and made a huge contribution to the full integration of the Curtis Banks Group brand and proposition. He was a true friend to many of us and a charismatic colleague to us all. Our thoughts and prayers are with his family, to whom we express our deepest sympathy.

As a Group we remain committed to our corporate social responsibility activities, acknowledging the role we play in the communities around us. This year we have commenced a programme of work with Victoria Evans at Sea Change Sport, supporting her in her ambition to row solo across the Atlantic.

As a business we are committed to being a diverse and inclusive workplace. We continue to strive for ways in which we can improve in this area. To this end, I am delighted that we have further evolved our flexible working policies and again supported Mental Health awareness throughout our locations. Our initiatives in this space will continue.

I'm extremely proud of the way my colleagues have adapted to remote working during the COVID-19 pandemic and they have continued to deliver excellent customer service. As a robust financial services organisation we have not benefitted financially from any government schemes, including Furlough, during the COVID-19 pandemic and although we paused recruitment for a short period of time, have continued to grow staff numbers as we invest in our business.

I would like to pay thanks to all our employees for their efforts during this testing time. They have minimised the effect of COVID-19 on the Group and I look forward to welcoming them back to the office.

Will Self

Chief Executive Officer

2 September 2020

Financial Review

Results

Group financial performance for the six month period to 30 June 2020 resulted in an adjusted profit before tax of GBP6.3m (2019: GBP6.2m), an increase of 0.6% over the previous interim reporting period, with the adjusted operating margin improving to 26.4% (H1 2019: 26.3%).

Profit before tax, which is stated after amortisation and non-recurring costs, decreased by 27% to GBP4.0m. Adjusted diluted EPS was maintained at 9.5p (H1 2019: 9.5p), while diluted EPS on a statutory basis decreased by 35.8% to 5.3p (H1 2019: 8.2p).

The resilient performance of the first six months of 2020 was achieved despite the challenging economic conditions brought about by Brexit and the COVID-19 pandemic. Organic growth has remained robust in the face of these challenges and the strategy to deliver a Target Operating Model, and centralise commercial property administration within one office, has remained on track in H1 2020. The centralisation of the commercial property administration within one office brings with it non-recurring redundancy and restructuring costs associated with the transition of work between office locations.

Revenues

Revenues of GBP24.5m in the six months ended 30 June 2020 were consistent with the comparable period.

Fee revenue from SIPPs and SSASs remains the predominant source of income for the Group with a strong emphasis on recurring annual fee income. In the six months ended 30 June 2020 fee income represented 73% of the total income and 84% of this fee income is recurring.

SIPP fees are based on a recurring fixed monetary annual fee and a menu of additional fixed fees depending on the services provided to the SIPP. All these fees are subject to contractual annual inflationary rises linked to the measurement of Average Weekly Earnings ("AWE").

Fees are not dependent on movements in the value of underlying assets within SIPPs and as a result the recurring fee income of the Group has not been directly affected by the volatility in financial markets experienced in the last six months. This is a key differential that sets us apart from most of our competitors and provides an attractive product in terms of fees for higher value SIPPs. As the value of a SIPP increases our product becomes increasingly affordable.

Expenses

The period ended 30 June 2020 saw administrative expenses remain static at GBP18.1m.

Staff costs for the period decreased by 2% to GBP11.4m (2019: GBP11.7m) whilst the overall headcount increased slightly as recruitment picked up towards the end of June. Staff costs in the period were impacted by further share based payment awards under the Group's Long Term Incentive Plan and Save As You Earn ("SAYE") option schemes, as well as the annual pay review. The commitment to all of these awards demonstrates the Group's continuing commitment to improving levels of key staff retention and morale, which in turn provide the service levels to clients required from our introducers of business.

Overall headcount stood at 639 as at 30 June 2020 compared to 610 as at 30 June 2019 and 605 as at 31 December 2019. This number will increase over the remainder of the year due to the acquisitions of Dunstan Thomas and Talbot and Muir, which provide the Group with 164 additional members of staff.

The Group continues to take steps to improve its adjusted operating margin through a combination of revenue enhancements, cost saving measures and operational improvements. The Board remain confident that an improved operating margin is achievable through both our planned internal strategic activities and the recently announced acquisitions of Dunstan Thomas and Talbot and Muir which are both revenue enhancing and diversifying.

Non-recurring costs

Non-recurring costs for the six months ended 30 June 2020 of GBP1.4m comprise principally of internal restructuring costs and some of the external costs associated with the acquisitions of Dunstan Thomas and Talbot and Muir.

As referenced earlier, the centralisation of commercial property administration within one office has progressed throughout the six months, resulting in a non-recurring cost of GBP0.7m being recognised during the period.

GBP0.4m of costs have been recognised in relation to the external legal and financial due diligence performed as part of the acquisitions of Dunstan Thomas and Talbot and Muir.

As noted in our last annual financial statements, management had initiated a review of data records relating to properties held within SIPPs administered by the Group. Based on a detailed review of a sample of properties and extrapolation of the initial findings across the full population of relevant properties, the Directors recognised that additional direct costs may be incurred in completing this data cleansing exercise, including from any potential remediation. The data cleansing exercise is continuing with any remedial follow up actions to be completed by the end of 2020. Of the original provision of GBP500,000 made at 31 December 2018, there is a remaining provision of GBP141,000 as at 30 June 2020. This is still considered to be adequate to cover any remaining costs.

Impairment

Impairment charges totalling GBP344,000 against the value of the Group's client portfolios within intangible assets have been recognised during the six month period ended 30 June 2020 (H1 2019: GBPnil). This relates to changes in the estimate of future cash flows expected on these assets over their remaining useful economic lives owing to increased uncertainty over the longevity of the current low interest rate environment.

Accounting Policies

There have been no changes in accounting policies during the period.

Cash flows

Shareholder cash balances at period end were GBP24.9m compared to GBP25.7m at the end of the previous interim period to 30 June 2019.

Net cash inflows from shareholder operating activities for the period were GBP0.4m (H1 2019: GBP4.4m net cash inflow), the decline in cash generation attributable to a reduction in profit before tax for the period in addition to greater amounts of accrued interest being receivable and a higher amount of tax paid in the period.

Suffolk Life Annuities Limited

Part of the Group, Suffolk Life Annuities Limited, is an insurance company that writes SIPP Products as insurance contracts. These are all non-participating insurance policy contracts and so the Group does not bear any insurance risk. As the policies are non-participating contracts, the client related assets and liabilities in Suffolk Life Annuities Limited match. In addition, the revenues, expenses and investment returns of the non-participating insurance policy contracts are shown in the consolidated statement of comprehensive income. Again, these income, expense items and investment returns due to the policy holders are completely matched. An illustrative balance sheet as at 30 June 2020 showing the financial position of the Group excluding the policy holder assets and liabilities is included as supplementary information after the notes to the financial statements. An illustrative cash flow on the same basis has also been provided.

Systems Development

As reported in our financial statements for the year ended 31 December 2019, the decision was taken to improve our IT infrastructure by both upgrading the existing operating systems at Curtis Banks and to move all the back office systems onto one of our incumbent systems (Navision).

Costs associated with these upgrades and operating system changes where appropriate will be capitalised and amortised in accordance with their useful economic life. Amortisation will commence once the upgrades are completed and fully operational.

Employee Benefit Trust

The Group operates an independent Employee Benefit Trust ("EBT") to acquire shares in the Company in the market to satisfy future option and long term incentive awards. The financial statements of the EBT are consolidated within the overall Group financial statements and these shares are shown on the balance sheet of the Group as Treasury Shares and are included within total equity.

Capital requirements

The Group's regulated subsidiary companies submit regular returns to the FCA and the PRA relating to their capital resources. At 30 June 2020 the total regulatory capital requirement across the Group was GBP14.7m and the Group had an aggregate surplus above this of GBP15.4m across all regulated entities. In addition to this it is Group internal policy for regulated companies within the Group to hold at least 130% of their required regulatory capital and this has been maintained throughout the period.

Two of the principal trading subsidiaries of the Group are regulated by the FCA and the capital adequacy rules of that organisation do not allow current year profits to contribute towards solvency requirements until such profits are audited or externally verified. If the interim profits were taken into account the regulatory capital surplus at 30 June 2020 increases to GBP19.2m.

Financial Position

The statement of Financial Position as at 30 June 2020 shows a strong position with shareholder net assets increasing from GBP51.6m at 30 June 2019 to GBP54.6m as at 30 June 2020.

As at the 30 June 2020 the Group had net shareholder cash (after debt) of GBP15.1m (2019: GBP12.8m).

Summary and outlook

Despite the political and economic turbulence of the past six months, the Group has once again demonstrated its financial robustness and a high degree of insensitivity to market volatility, upon which our business model is based. The strong operating performance reported within these statements is testament to this although there is no doubt that the current economic environment, influenced primarily by COVID-19, will continue to provide challenges within our industry and the persistence of the current low interest rate environment will require the Group to remain dynamic in its approach to maintaining those current levels of performance.

Strategically, the Board remains confident in the Group's ability to achieve its stated objectives, both internally and through acquisition.

The acquisitions of Dunstan Thomas and Talbot and Muir, which were announced at the end of July, will be funded through a combination of equity and debt. Despite the difficult market conditions, the Group achieved a successful equity placing of GBP25m and as part of this issuance was able to add a number of significant new institutional investors to the shareholder register. The Group also successfully re-negotiated its borrowing facilities with Santander which now provide up to GBP30m of borrowing on the same terms as the previous debt facility and the combination of these two transactions has also enabled the Group to strengthen its overall cash position.

Dan Cowland

Chief Financial Officer

2 September 2020

Condensed consolidated statement of comprehensive income

 
                                       Unaudited 6 month period                    Unaudited 6 month period                  Audited year ended 31 December 
                                           ended 30 June 2020                          ended 30 June 2019                                  2019 
                                      Before                                      Before                                      Before 
                                amortisation    Amortisation                amortisation    Amortisation                amortisation    Amortisation 
                                         and             and                         and             and                         and             and 
                               non-recurring   non-recurring               non-recurring   non-recurring               non-recurring   non-recurring 
                                       costs           costs       Total           costs           costs       Total           costs           costs         Total 
                       Notes         GBP'000         GBP'000     GBP'000         GBP'000         GBP'000     GBP'000         GBP'000         GBP'000       GBP'000 
 
 Revenue                              24,529               -      24,529          24,491               -      24,491          48,949               -        48,949 
 
 Administrative 
  expenses                          (18,061)         (1,978)    (20,039)        (18,059)           (795)    (18,854)        (35,218)         (2,470)      (37,688) 
 Impairment on 
  client 
  portfolios             5                 -           (344)       (344)               -               -           -               -               -             - 
 Policyholder 
  investment 
  returns*                         (113,907)                   (113,907)         232,517                     232,517         365,815                     365,815 
 Non-participating 
  investment 
  contract expenses                 (17,531)               -    (17,531)        (16,503)               -    (16,503)        (33,943)               -    (33,943) 
 Changes in 
  provisions: 
  Non-participating 
  investment 
  contract 
  liabilities                        131,438               -     131,438       (216,014)               -   (216,014)       (331,872)               -   (331,872) 
                              --------------  --------------  ----------  --------------  --------------  ----------  --------------  --------------  ---------- 
 Policyholder total                        -               -           -               -               -           -               -               -             - 
 
 Operating profit                      6,468         (2,322)       4,146           6,432           (795)       5,637          13,731         (2,470)        11,261 
 
 Finance income                           53               -          53              77               -          77             145               -           145 
 Finance costs                         (240)               -       (240)           (266)               -       (266)           (523)               -         (523) 
                              --------------  --------------  ----------  --------------  --------------  ----------  --------------  --------------  ------------ 
 Profit before tax                     6,281         (2,322)       3,959           6,243           (795)       5,448          13,353         (2,470)        10,883 
 
 Tax                                 (1,496)             441     (1,055)         (1,107)             151       (956)         (2,502)             469       (2,033) 
                              --------------  --------------  ----------  --------------  --------------  ----------  --------------  --------------  ------------ 
 Total comprehensive 
  income 
  for the period                       4,785         (1,881)       2,904           5,136           (644)       4,492          10,851         (2,001)         8,850 
                              ==============  ==============  ==========  ==============  ==============  ==========  ==============  ==============  ============ 
 
 Attributable to: 
 Equity holders of 
  the 
  company                                                          2,904                                       4,490                                         8,850 
 Non-controlling                                                       -                                           2                                             - 
 interests 
                                                              ----------                                  ----------                                  ------------ 
                                                                   2,904                                       4,492                                         8,850 
                                                              ==========                                  ==========                                  ============ 
 Earnings per 
 ordinary 
 share on net 
 profit 
 Basic (pence)           4                                           5.4                                         8.4                                          16.5 
 Diluted (pence)**       4                                           5.3                                         8.2                                          16.2 
 

*Policyholder investment returns were previously presented within revenue. Amounts for the current period and comparatives are now represented alongside non-participating investment contract expenses and changes in provisions for non-participating investment contract liabilities to better reflect the fact that all such returns are due back to policyholders under non-participating investment contracts, and therefore have nil impact on shareholder profit or loss. Please see note 2.3 to the financial statements for further information.

**Adjusted to exclude anti-dilutive options, see note 4 to the financial statements for further detail

Condensed consolidated statement of changes in equity

 
                                        Equity 
                                         share 
                   Issued     Share      based   Treasury   Retained             Non-controlling     Total 
                  capital   premium   payments     shares   earnings     Total          interest    equity 
                  GBP'000   GBP'000    GBP'000    GBP'000    GBP'000   GBP'000           GBP'000   GBP'000 
 
 As at 1 
  January 2019 
  - audited           269    33,451      1,357      (716)     15,295    49,656                14    49,670 
 
 Comprehensive 
  income 
  for the 
  period                -         -          -          -      4,490     4,490                 2     4,492 
 Share based 
  payments              -         -        463          -          -       463                 -       463 
 Deferred tax 
  on share 
  based 
  payments              -         -          -          -        140       140                 -       140 
 Ordinary               -         -          -          -          -         -                 -         - 
 shares bought 
 and sold by 
 EBT 
 
   Ordinary 
   dividends 
   paid                 -         -          -          -    (3,212)   (3,212)                 -   (3,212) 
                                                --------- 
 
 As at 30 June 
  2019 - 
  unaudited           269    33,451      1,820      (716)     16,713    51,537                16    51,553 
 
 Comprehensive 
  income 
  for the 
  period                -         -          -          -      4,360     4,360               (2)      4358 
 Share based 
  payments              -         -        493          -          -       493                 -       493 
 Deferred tax 
  on share 
  based 
  payments              -         -          -          -          7         7                 -         7 
 Ordinary 
  shares issued         2       208          -          -          -       210                 -       210 
 Ordinary 
  shares bought 
  and sold by 
  EBT                   -         -          -        182          -       182                 -       182 
 Ordinary 
  dividends 
  paid                  -         -          -          -    (1,350)   (1,350)                 -   (1,350) 
                                                --------- 
 
 As at 31 
  December 2019 
  - audited           271    33,659      2,313      (534)     19,730    55,439                14    55,453 
 
 Comprehensive 
  income 
  for the 
  period                -         -          -          -      2,904     2,904                 -     2,904 
 Share based 
  payments              -         -        410          -          -       410                 -       410 
 Ordinary 
  shares bought 
  and sold by 
  EBT                   -         -          -      (590)          -     (590)                 -     (590) 
 Deferred tax 
  on share 
  based 
  payments              -         -          -          -      (312)     (312)                 -     (312) 
 Ordinary 
  dividends 
  paid                  -         -          -          -    (3,507)   (3,507)                 -   (3,507) 
 
 As at 30 June 
  2020 - 
  unaudited           271    33,659      2,723    (1,124)     18,815    54,344                14    54,358 
                 ========  ========  =========  =========  =========  ========  ================  ======== 
 
 

Condensed consolidated statement of financial position

 
                                             Unaudited    Unaudited      Audited 
                                             30-Jun-20    30-Jun-19    31-Dec-19 
                                    Notes      GBP'000      GBP'000      GBP'000 
 ASSETS 
 
 Non-current assets 
 Intangible assets                    5         42,750       43,937       43,427 
 Investment property                         1,219,856    1,271,004    1,265,784 
 Property, plant and equipment                   5,742        6,629        6,195 
 Investments                                 1,842,818    1,961,654    1,994,197 
 Deferred tax asset                                435          855          911 
                                           -----------  -----------  ----------- 
                                             3,111,601    3,284,079    3,310,514 
                                           -----------  -----------  ----------- 
 Current assets 
 Trade and other receivables                    30,976       21,827       19,915 
 Cash and cash equivalents                     440,790      412,710      421,547 
 Current tax asset                                 604          274          446 
                                           -----------  -----------  ----------- 
                                               472,370      434,811      441,908 
                                           -----------  -----------  ----------- 
 
 Total assets                                3,583,971    3,718,890    3,752,422 
                                           -----------  -----------  ----------- 
 
 LIABILITIES 
 Current liabilities 
 Trade and other payables                       16,893       15,405       15,608 
 Deferred income                                26,345       24,532       26,192 
 Borrowings                                     34,486       32,303       28,215 
 Lease liabilities                                 909          904          719 
 Provisions                                        408          450          553 
 Deferred consideration                              -          380          214 
 Current tax liability                               -        1,005          738 
                                           -----------  -----------  ----------- 
                                                79,041       74,979       72,239 
                                           -----------  -----------  ----------- 
 Non-current liabilities 
 Borrowings                                     46,617       47,258       48,911 
 Lease liabilities                               3,377        4,109        3,915 
 Non-participating investment 
  contract liabilities                       3,400,578    3,540,991    3,571,904 
                                             3,450,572    3,592,358    3,624,730 
                                           -----------  -----------  ----------- 
 
 Total liabilities                           3,529,613    3,667,337    3,696,969 
                                           -----------  -----------  ----------- 
 
 Net assets                                     54,358       51,553       55,453 
                                           -----------  -----------  ----------- 
 
 Equity attributable to owners 
  of the parent 
 Issued capital                                    271          269          271 
 Share premium                                  33,659       33,451       33,659 
 Equity share based payments                     2,723        1,820        2,313 
 Treasury shares                               (1,124)        (716)        (534) 
 Retained earnings                              18,815       16,713       19,730 
                                           -----------  -----------  ----------- 
                                                54,344       51,537       55,439 
 
 Non-controlling interest                           14           16           14 
 
 Total equity                                   54,358       51,553       55,453 
                                           -----------  -----------  ----------- 
 

Approved by the Board and authorised for issue on 2 September 2020. Dan Cowland - Chief Financial Officer

Condensed consolidated statement of cash flows

 
                                                       Unaudited       Unaudited 
                                                         6 month         6 month       Audited 
                                                    period ended    period ended    year ended 
                                                       30-Jun-20       30-Jun-19     31-Dec-19 
                                                         GBP'000         GBP'000       GBP'000 
 Cash flows from operating 
  activities 
 Profit before tax                                         3,959           5,448        10,883 
 Adjustments for: 
 Depreciation                                                694             636         1,321 
 Amortisation and impairments                                941             627         1,379 
 Interest expense                                            240             261           523 
 Share based payment expense                                 410             463           956 
 Fair value losses/(gains) on 
  financial investments                                   82,297       (175,076)     (232,848) 
 Additions of financial investments                    (298,196)       (255,361)     (532,717) 
 Disposals of financial investments                      367,278         281,842       584,425 
 Fair value losses on investment 
  properties                                              57,664           7,981        12,469 
 (Decrease)/increase in liability 
  for investment contracts                             (171,327)         135,561       166,476 
 Changes in working capital: 
 Increase in trade and other 
  receivables                                           (10,460)         (3,359)       (1,730) 
 Increase/(decrease) in trade and 
  other payables                                             772           (139)         1,990 
 Taxes paid                                              (2,063)         (1,073)       (2,454) 
 
 Net cash flows from operating 
  activities                                              32,209         (2,189)        10,673 
                                                  --------------  --------------  ------------ 
 
 Cash flows from investing 
  activities 
 Purchase of intangible 
  assets                                                   (264)           (454)         (696) 
 Purchase of property, plant & equipment                   (241)           (770)       (1,015) 
 Purchase of investment property                        (66,685)        (51,399)     (125,848) 
 Purchase and sale of shares 
  in the Group by the EBT                                  (590)               -           182 
 Receipts from sale of investment 
  property                                                54,948          46,865       122,047 
 Net cash flows from acquisitions                          (152)               -         (166) 
 
 Net cash flows used in investing 
  activities                                            (12,984)         (5,758)       (5,496) 
                                                  --------------  --------------  ------------ 
 
 Cash flows from financing activities 
 Equity dividends paid                                   (3,507)         (3,212)       (4,562) 
 Net proceeds from issue of ordinary 
  shares                                                       -               -           210 
 Net increase/(decrease) in borrowings                     3,981         (6,988)       (9,456) 
 Principal elements of lease payments                      (422)           (421)         (933) 
 Interest paid                                              (34)           (298)         (465) 
 
 Net cash flows used in financing 
  activities                                                  18        (10,919)      (15,206) 
                                                  --------------  --------------  ------------ 
 
 Net increase/(decrease) in cash and 
  cash equivalents                                        19,243        (18,866)      (10,029) 
                                                  --------------  --------------  ------------ 
 
 Cash and cash equivalents at the 
  beginning of the period                                421,547         431,576       431,576 
                                                  ==============  ==============  ============ 
 
 Cash and cash equivalents at the 
  end of the period                                      440,790         412,710       421,547 
                                                  ==============  ==============  ============ 
 
 

Notes to the financial statements

   1               Corporate information 

Curtis Banks Group PLC ("the Company") is a public limited company incorporated and domiciled in England and Wales, whose shares are publicly traded on the AIM market of the London Stock Exchange PLC. The interim condensed consolidated financial statements were authorised for issue in accordance with a resolution of the Directors on 2 September 2020.

The principal activity of the Group is that of the provision of pension administration services principally for Self-Invested Personal Pension schemes ("SIPPs") and Small Self-Administered Pension schemes ("SSASs"). The Group is staffed by experienced professionals who all have proven track records in this sector.

   2               Basis of preparation and accounting policies 
   2.1            Basis of preparation 

The interim condensed consolidated financial statements comprise the Company and its subsidiaries ("the Group") and have been prepared on a historical cost basis modified by revaluation of financial assets and financial liabilities through profit and loss where held at fair value, and are presented in pounds sterling, with all values rounded to the nearest thousand pounds except when otherwise indicated.

The interim condensed consolidated financial statements have been prepared in accordance with IAS 34 Interim Financial Reporting except for certain requirements in relation to financial instrument disclosure. The board has considered the requirements of IAS 34 in relation to policyholder assets and liabilities and, given the unit-linked nature of these assets and liabilities, has concluded that revaluing certain policyholder financial instruments for the purposes of these interim financial statements would incur expense which is disproportionate to any potential benefits of doing so. Further, the board considers that the omission of updated valuations for these certain policyholder financial instruments will not influence the economic decisions of users of these financial statements, as all revenue and expenditure associated with these policyholder assets and liabilities is due back to the policyholders under non-participating investment contracts and therefore has nil impact on shareholder equity.

The interim condensed consolidated financial statements do not include all the information and disclosures required in the annual financial statements and should be read in conjunction with the Group's financial statements for the year ended 31 December 2019, which were prepared in accordance with International Financial Reporting Standards adopted by the International Accounting Standards Board ("IASB") and interpretations issued by the International Financial Reporting Interpretations Committee ("IFRIC") of the IASB (together "IFRS") as adopted by the European Union, and in accordance with the requirements of The Companies Act 2006 applicable to companies reporting under IFRS.

The information relating to the six months ended 30 June 2020 and the six months ended 30 June 2019 is unaudited and does not constitute statutory financial statements within the meaning of section 434 of the Companies Act 2006. The Group's statutory financial statements for the year ended 31 December 2019 have been reported on by its auditor and delivered to the Registrar of Companies. The report of the auditor was unmodified and did not contain a statement under section 498(2) or (3) of The Companies Act 2006.

The interim condensed consolidated financial statements have been reviewed by the auditor and their report to the Board of Curtis Banks Group PLC is included within this interim report.

   2.2            Basis of consolidation 

The interim condensed consolidated financial statements consolidate the financial statements of the Company and its subsidiaries up to 30 June each year.

Subsidiaries are fully consolidated from the date of acquisition, being the date on which the Group obtains control, and continue to be consolidated until the date that such control ceases. The financial statements of subsidiaries are prepared for the same reporting period as the parent company, using consistent accounting policies. All inter-Group balances, income and expenses and unrealised gains and losses resulting from intra-Group transactions are eliminated in full.

The trading subsidiaries of Curtis Banks Group PLC as at 30 June 2020 and 30 June 2019 were Curtis Banks Limited, Curtis Banks Investment Management Limited, Suffolk Life Annuities Limited, Suffolk Life Pensions Limited, Rivergate Legal Limited and Templemead Property Solutions Limited.

Certain trading subsidiaries of Curtis Banks Group PLC hold the entire issued share capital of a number of non-trading trustee companies. All of these companies are nominee companies for the pension products administered by the trading subsidiaries of Curtis Banks Group PLC and have been dormant or non-trading throughout the period and are expected to remain dormant or non-trading.

   2.3            Significant accounting policies 

The accounting policies adopted in the preparation of the interim condensed consolidated financial statements are consistent with those followed in the preparation of the Group's annual financial statements for the year ended 31 December 2019 except for the following change in policy.

Presentation of policyholder investment returns

Policyholder investment returns were previously presented within revenue in the Consolidated Statement of Comprehensive Income. To better reflect the fact that all such returns are due back to policyholders under non-participating investment contracts the Group has decided to present such amounts alongside non-participating investment contract expenses and changes in provisions for non-participating investment contract liabilities, such that the nil impact on shareholder profit or loss is evident.

New standards issued but not yet effective

The IASB and IFRIC have issued standards and interpretations with an effective date for periods starting on or after the date on which these financial statements start. There are no newly issued standards expected to potentially have a material impact on the condensed consolidated interim financial statements and the consolidated financial statements to the Group.

Financial statements for the year ending 31 December 2020

The accounting policies adopted in the preparation of the interim condensed consolidated financial statements will be consistent with those to be followed in the preparation of the Group's annual financial statements for the year ending 31 December 2020.

   2.4            Critical accounting judgements and key sources of estimation uncertainty 

Estimates and judgements are continually evaluated and are based on historical experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances.

In preparing the financial statements the Group has selected and applied various accounting policies which are described in the notes to the financial statements. In order to apply these accounting policies the Group has made estimates and judgements concerning the future.

There are no critical judgements in the application of accounting policies.

The key sources of estimation uncertainty are disclosed below:

IFRS 9 impairment

Trade and other receivables are impaired based on the IFRS 9 simplified approach to measure expected credit losses using a lifetime expected loss allowance for all trade receivables. The loss allowances for trade and other receivables are based on assumptions about risk of default and expected loss rates. The Group uses judgement in making these assumptions and selecting the inputs to the impairment calculation, based on the Group's past history of shared credit risk characteristics, days past due, existing market conditions, including the COVID-19 pandemic, as well as forward looking estimates at the end of each reporting period.

The loss rates are considered the key source of estimation uncertainty because the impact of a change in these could result in a material change in the expected credit loss. The Group determines its loss rates by reference to the underlying level of liquidity in each of the Group's clients' SIPPs because clients' fees are normally settled directly from their SIPP cash holdings. A lower level of liquidity in the SIPP, or indeed illiquidity, indicates reduced credit quality in the related trade receivable balance.

Changes in macroeconomic factors may impact the Group's clients' use of the SIPP and cause the level of liquidity in the SIPP to increase or decrease. A 10% increase or decrease in loss rates estimated at the period end would have the following impact:

 
                               Increase / (decrease)   Effect on profit 
                                       in percentage         before tax 
 Period ended 30 June 2020                     rates            GBP'000 
 
 Loss rate                                       10%              (270) 
 Loss rate                                     (10)%                445 
 
 

The Group charges fixed fees for its services reducing its exposure to changes in macroeconomic factors such as COVID-19 which may otherwise impact a percentage basis point fee charging model.

The Group continually assesses historical recovery data to help determine how the underlying level of liquidity in the SIPPs fits into each of the credit quality ratings. Future historical data available may lead to changes in the estimated categorisation of trade receivables gross carrying amounts and associated loss allowance.

Where trade and other receivables have been outstanding for more than six years, amounts are deemed to have no reasonable expectation of recovery and are written off.

Client portfolios

Client portfolios acquired are amortised over their useful economic life ("UEL") which management estimate to be 20 years. This estimated UEL is based upon management's historical experience of similar portfolios and expectation of the future persistency of the portfolio. The reasonableness of this estimated is assessed annually by comparison to actual lapse rates and consideration of factors that may affect it in the future, for example, changes to products.

Additionally, the Group reviews and judges whether acquired client portfolios show any indicators of impairment at least on an annual basis by considering actual versus forecast lapse rates and comparing the carrying value and recoverable amount. An impairment would exist where the recoverable amount determined is less than the carrying value of the asset.

Assessing recoverable amount through value in use comprises an estimation of future cash flows expected to arise from each client portfolio, 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 that asset, together with an estimated rate of attrition for each portfolio. The estimation of future cash flows is derived by taking the current earnings before tax, interest, depreciation and amortisation ("EBITDA") margin of the Group and applying this against forecast revenue from the relevant client portfolio.

One key source of estimation uncertainty is the level of future interest income expected, and in particular the longevity of the current low interest rate environment. Another key source of estimation uncertainty arises from the attrition rates used. The recoverable amount is most sensitive to both of these assumptions.

   3               Non-recurring costs 

Non-recurring costs comprise the following items:

 
                                                 Unaudited    Unaudited 
                                                   6 month      6 month 
                                                    period       period       Audited 
                                                     ended        ended    year ended 
                                                 30-Jun-20    30-Jun-19     31-Dec-19 
                                                   GBP'000      GBP'000       GBP'000 
 
 Hargreave Hale acquisition costs                        -           40            32 
 Redundancy & restructuring costs following 
  acquisitions                                         814          128           696 
 European Pensions Management acquisition 
  costs                                                  -            -            29 
 Costs relating to directorate and 
  senior management changes                              -            -           334 
 Dunstan Thomas acquisition costs                      195            -             - 
 Talbot and Muir acquisition costs                     220            -             - 
 Other acquisition related costs                       152 
 
                                                     1,381          168         1,091 
                                               ===========  ===========  ============ 
 

Redundancy & restructuring costs following acquisitions

During the year ended 31 December 2019 and into the six month period ended 30 June 2020, the Group progressed its strategy to deliver its Target Operating Model and centralise commercial property administration within one office location. Redundancy costs associated with this decision as well as costs associated with duplicated staff efforts while work is transferred between offices have been included within non-recurring cost.

Costs relating to directorate and senior management changes

During the year ended 31 December 2019, the incumbent Chief Financial Officer of the Group announced he was stepping down from the role and a successor was recruited. An orderly handover of responsibilities took place between the previous Chief Financial Officer and the new Chief Financial Officer. Costs associated with this transitional period, including recruitment costs and costs of associated senior staff changes, have been treated as non-recurring costs.

Dunstan Thomas acquisition costs

The Group acquired fintech provider Dunstan Thomas on 3 August 2020 and has incurred legal and professional fees in connection with this acquisition during the six month period ended 30 June 2020. In accordance with IFRS 3 Business Combinations, these have been expensed and treated as non-recurring costs.

Talbot and Muir acquisition costs

The Group entered into an agreement to acquire fellow SIPP provider Talbot and Muir on 3 August 2020 subject to regulatory approval and has incurred legal and professional fees in connection with this acquisition during the six month period ended 30 June 2020. In accordance with IFRS 3 Business Combinations, these have been expensed and treated as non-recurring costs.

Other acquisition related costs

During the six month period ended 30 June 2020, the Group incurred some further final costs in relation to deferred consideration payable on the client portfolio acquired from Friends Life in 2015.

   4               Earnings per ordinary share 

Basic earnings per share amounts are calculated by dividing net profit for the period attributable to ordinary equity holders of the parent by the weighted average number of ordinary shares outstanding during the period.

Diluted earnings per share amounts are calculated by dividing the net profit attributable to ordinary equity holders of the parent by the weighted average number of ordinary shares outstanding during the period plus the weighted average number of ordinary shares that would be issued on the conversion of all the dilutive potential ordinary shares into ordinary shares.

Changes in income or expense that would result from the conversion of the dilutive potential ordinary shares are deemed to be trivial, and therefore no separate diluted net profit is presented. The following reflects the income and share data used in the basic and diluted earnings per share computations:

 
                                               Unaudited       Unaudited 
                                                 6 month         6 month       Audited 
                                            period ended    period ended    year ended 
                                               30-Jun-20       30-Jun-19     31-Dec-19 
                                                 GBP'000         GBP'000       GBP'000 
 
 Net profit available 
  to equity holders of the Group                   2,904           4,490         8,850 
                                          ==============  ==============  ============ 
 Net profit before tax, non-recurring 
  costs (note 3) and amortisation 
  (note 5) available to equity holders 
  of the Group                                     6,281           6,432        13,353 
 
                                                  Number          Number        Number 
 Weighted average number of ordinary 
  shares: 
 Issued ordinary shares at start 
  of period                                   54,142,346      53,807,346    53,807,346 
 Effect of shares issued during the 
  year                                                 -               -        90,192 
 Effect of shares held by Employee 
  Benefit Trust                                (211,890)       (266,482)     (244,741) 
 Basic weighted average number of 
  shares                                      53,930,456      53,540,864    53,652,797 
 
 Effect of options exercisable at 
  the reporting date**                           578,795         644,471     1,173,236 
 Effect of options not yet exercisable 
  at the reporting date**                        609,081         531,552     1,000,925 
 
 Diluted weighted average number 
  of shares                                   55,118,332      54,716,887    55,826,958 
                                          ==============  ==============  ============ 
 
                                                   Pence           Pence         Pence 
 Earnings per share: 
 Basic                                               5.4             8.4          16.5 
 Diluted**                                           5.3             8.2          16.2 
 
 Earnings per share on profit before 
  non-recurring costs and amortisation, 
  less an effective tax rate*: 
 Basic                                               9.7             9.7          20.2 
 Diluted**                                           9.5             9.5          19.8 
 

*The effective tax rate used is the current tax rate applicable to the accounting year. The current tax rate applicable for the year ending 31 December 2020 is 19.00% (2019: 19.00%).

**The diluted EPS calculated has been adjusted to exclude anti-dilutive options. Diluted EPS for the year ended 31 December 2019 and the 6 month period ended 30 June 2019 have been restated on the same basis in these financial statements. There is no impact to either the income statement or balance sheet of the Group.

   5               Intangible assets 
 
                                                                    Computer software 
                                   Goodwill     Client portfolios             GBP'000       Total 
                                    GBP'000               GBP'000                         GBP'000 
 Cost 
 At 1 January 2019                   28,903                18,866               1,481      49,250 
 Additions                                -                     -                 454         454 
 
 At 30 June 2019                     28,903                18,866               1,935      49,704 
 Additions                                -                     -                 242         242 
 
 At 31 December 2019                 28,903                18,866               2,177      49,946 
 Additions                                -                     -                 264         264 
 
 At 30 June 2020                     28,903                18,866               2,441      50,210 
                                -----------  --------------------  ------------------  ---------- 
 
 Amortisation and impairments 
 At 1 January 2019                        -                 4,379                 761       5,140 
 Charge for the period                    -                   472                 155         627 
 
 At 30 June 2019                          -                 4,851                 916       5,767 
 Charge for the period                    -                   469                 283         752 
 
 At 31 December 2019                      -                 5,320               1,199       6,519 
 Charge for the period                    -                   473                 124         597 
 Impairment                               -                   344                   -         344 
 
 At 30 June 2020                          -                 6,137               1,323       7,460 
                                -----------  --------------------  ------------------  ---------- 
 
 Net book value 
 At 31 December 2018                 28,903                14,487                 720      44,110 
                                ===========  ====================  ==================  ========== 
 At 30 June 2019                     28,903                14,015               1,019      43,937 
                                ===========  ====================  ==================  ========== 
 At 31 December 2019                 28,903                13,546                 978      43,427 
                                ===========  ====================  ==================  ========== 
 At 30 June 2020                     28,903                12,729               1,118      42,750 
                                ===========  ====================  ==================  ========== 
 

Impairment charges totalling GBP344,000 against the value of the Group's client portfolios within intangible assets have been recognised during the six month period ended 30 June 2020 (H1 2019: GBPnil). This relates to changes in the estimate of future cash flows expected on these assets over their remaining useful economic lives owing to increased uncertainty over the longevity of the current low interest rate environment.

   6               Dividends paid 
 
                                  Unaudited         Unaudited 
                             6 month period    6 month period       Audited 
                                      ended             ended    year ended 
                                  30-Jun-20         30-Jun-19     31-Dec-19 
                                    GBP'000           GBP'000       GBP'000 
 
 Ordinary dividends paid              3,507             3,212         4,562 
 
                                      3,507             3,212         4,562 
                           ================  ================  ============ 
 
 

A final dividend of 6.00p per ordinary share in respect of the year ended 31 December 2018 was paid on 23 May 2019.

An interim dividend of 2.50p per ordinary share in respect of the year ended 31 December 2019 was paid on 14 November 2019.

A final dividend of 6.50p per ordinary share in respect of the year ended 31 December 2019 was paid on 8 June 2020.

   7               Income tax 

Tax is charged at 19% for the six months ended 30 June 2020 (30 June 2019: 19%) representing the best estimate of the average annual effective tax rate expected to apply for the full year, applied to the pre-tax income of the six month period.

Current tax for current and prior periods is classified as a current liability to the extent that it is unpaid. Any amounts paid in excess of amounts owed are classified as a current asset.

   8               Contingent liabilities 

In-specie contributions

The Group has been in correspondence with HMRC regarding processes and documentation in respect of in specie contributions. HMRC have alleged that incorrect procedures were followed and is seeking to reclaim tax reliefs granted and interest thereon. This is an industry wide issue affecting other SIPP operators and is being challenged by the industry as a whole. It is not possible to determine when this matter will be resolved and the outcome and impact are not known at this stage. We do not believe that the net exposure arising from this will be material to the Group.

Data cleansing

During the year ended 31 December 2018 management initiated a review of data records related to properties held within SIPPs administered by the Group.

This review requires a case by case assessment of each of the properties within the population in order to assess whether any remedial action is required by the Group in respect of that property or the associated SIPP.

In addition to the remaining provision of GBP141,000 for the estimated direct costs that the Group may still incur in respect of this exercise, the directors consider that it is possible that the Group may also be exposed to indirect costs in the future, depending on the outcome of the case by case reviews.

The Directors' best estimate of this contingent liability is GBP1.8m (31 December 2019: GBP2.3m). The decrease in estimate has arisen following a reduction in the total value of cases remaining.

This estimate continues to be reviewed regularly, and any changes or refinements will be reported as appropriate. The Directors currently expect that, with COVID-19 related working limitations and also additional forbearance having been permitted in connection with the COVID-19 pandemic, any potential material follow up actions will be completed by 2021.

   9               Post balance sheet events 

Acquisition of Dunstan Thomas

The Group is pleased to confirm its acquisition of fintech provider Dunstan Thomas which completed on 3rd August 2020 for a maximum total consideration of GBP27.5m (including GBP6m of deferred consideration on 3 year earn out period). An estimate of net assets on completion is still subject to completion accounts being prepared and subsequent fair value adjustments in accordance with IFRS 3 Business Combinations.

The acquisition has been funded through a combination of debt financing and existing cash, with existing borrowings refinanced into a new facility comprising a GBP20m term loan over 5 years and a GBP10m rolling credit facility, GBP6m of which has been utilised in relation to the Dunstan Thomas acquisition.

Acquisition of Talbot and Muir

The Group is further pleased to confirm its acquisition, subject to regulatory approval, of the SIPP and SSAS products provider Talbot and Muir. Total maximum consideration is GBP25.25m, inclusive of deferred consideration of up to GBP8.75m over a 2 year earn out period.

The acquisition is being funded through equity financing and in July 2020 the Group successfully placed 11,904,762 shares at a price of 210p per share, raising gross proceeds of GBP25m.

10 Illustrative condensed consolidated statement of financial position as at 30 June 2020 split between insurance policyholders and the Group's shareholders

 
                                    30-Jun-20      30-Jun-20     30-Jun-20     30-Jun-19 
                                      GBP'000        GBP'000       GBP'000       GBP'000 
 ASSETS                           Group Total   Policyholder   Shareholder   Shareholder 
 Non-current assets 
 Intangible assets                     42,750              -        42,750        43,937 
 Investment property                1,219,856      1,219,814            42            42 
 Property, plant and 
  equipment                             5,742              -         5,742         6,629 
 Investments                        1,842,818      1,842,818             -             - 
 Deferred tax asset                       435              -           435           855 
                                 ------------  -------------  ------------  ------------ 
                                    3,111,601      3,062,632        48,969        51,463 
                                 ------------  -------------  ------------  ------------ 
 Current assets 
 Trade and other receivables           30,976         17,190        13,786        11,849 
 Cash and cash equivalents            440,790        415,922        24,868        25,731 
 Current tax asset                        604            172           432             - 
                                 ------------  -------------  ------------  ------------ 
                                      472,370        433,284        39,086        37,580 
                                 ------------  -------------  ------------  ------------ 
 
 Total assets                       3,583,971      3,495,916        88,055        89,043 
                                 ------------  -------------  ------------  ------------ 
 
 LIABILITIES 
 Current liabilities 
 Trade and other payables              16,893         10,215         6,678         6,156 
 Deferred income                       26,345         13,776        12,569        11,594 
 Borrowings                            34,486         33,030         1,456         3,149 
 Lease Liabilities                        909              -           909           904 
 Provisions                               408              -           408           450 
 Deferred consideration                     -              -             -           380 
 Current tax liability                      -              -             -         1,005 
                                 ------------  -------------  ------------  ------------ 
                                       79,041         57,021        22,020        23,638 
                                 ------------  -------------  ------------  ------------ 
 Non-current liabilities 
 Borrowings                            46,617         38,317         8,300         9,743 
 Lease Liabilities                      3,377              -         3,377         4,109 
 Non-participating investment 
  contract liabilities              3,400,578      3,400,578             -             - 
                                                                            ------------ 
                                    3,450,572      3,438,895        11,677        13,852 
                                 ------------  -------------  ------------  ------------ 
 
 Total liabilities                  3,529,613      3,495,916        33,697        37,490 
                                 ------------  -------------  ------------  ------------ 
 
 Net assets                            54,358              -        54,358        51,553 
                                 ------------  -------------  ------------  ------------ 
 
 Equity attributable 
  to owners of the parent 
 Issued capital                           271              -           271           269 
 Share premium                         33,659              -        33,659        33,451 
 Equity share based payments            2,723              -         2,723         1,820 
 Treasury shares                      (1,124)              -       (1,124)         (716) 
 Retained earnings                     18,815              -        18,815        16,713 
                                 ------------  -------------  ------------  ------------ 
                                       54,344              -        54,344        51,537 
 
 Non-controlling interest                  14              -            14            16 
 
 Total equity                          54,358              -        54,358        51,553 
                                 ------------  -------------  ------------  ------------ 
 
 

11 Illustrative condensed consolidated statement of cash flows for the six month period ended 30 June 2020 split between insurance policyholders and the Group's shareholders

 
                                         30-Jun-20       30-Jun-20      30-Jun-20      30-Jun-19 
                                           GBP'000         GBP'000        GBP'000        GBP'000 
                                       Group Total    Policyholder    Shareholder    Shareholder 
 Cash flows from operating 
  activities 
 Profit before tax                           3,959               -          3,959          5,448 
 Adjustments for: 
 Depreciation                                  694               -            694            636 
 Amortisation and impairments                  941               -            941            627 
 Interest expense                              240               -            240            261 
 Share based payment expense                   410               -            410            463 
 Fair value gains on financial 
  investments                               82,297          82,297              -              - 
 Additions of financial 
  investments                            (298,196)       (298,196)              -              - 
 Disposals of financial 
  investments                              367,278         367,278              -              - 
 Fair value losses on investment 
  properties                                57,664          57,664              -              - 
 Decrease in liability for 
  investment contracts                   (171,327)       (171,327)              -              - 
 Changes in working capital: 
 Increase in trade and other 
  receivables                             (10,460)         (6,109)        (4,351)        (2,226) 
 Increase in trade and other 
  payables                                     772             173            599            302 
 Taxes paid                                (2,063)               -        (2,063)        (1,073) 
 
 Net cash flows from operating 
  activities                                32,209          31,780            429          4,438 
                                     -------------  --------------  -------------  ------------- 
 
 Cash flows from investing 
  activities 
 Purchase of intangible 
  assets                                     (264)               -          (264)          (454) 
 Purchase of property, plant 
  & equipment                                (241)               -          (241)          (770) 
 Purchase of investment property          (66,685)        (66,685)              -              - 
 Purchase and sale of shares 
  in the Group by the EBT                    (590)               -          (590)              - 
 Receipts from sale of investment 
  property                                  54,948          54,948              -              - 
 Net cash flows from acquisitions            (152)               -          (152)              - 
 
 Net cash flows from investing 
  activities                              (12,984)        (11,737)        (1,247)        (1,224) 
                                     -------------  --------------  -------------  ------------- 
 
 Cash flows from financing 
  activities 
 Equity dividends paid                     (3,507)               -        (3,507)        (3,212) 
 Net increase/(decrease) 
  in borrowings                              3,981           5,560        (1,579)        (1,572) 
 Principal elements of 
  lease payments                             (422)               -          (422)          (421) 
 Interest paid                                (34)               -           (34)          (298) 
 
 Net cash flows from financing 
  activities                                    18           5,560        (5,542)        (5,503) 
                                     -------------  --------------  -------------  ------------- 
 
 Net increase/(decrease) 
  in cash and cash equivalents              19,243          25,603        (6,360)        (2,289) 
                                     -------------  --------------  -------------  ------------- 
 
 Cash and cash equivalents 
  at the beginning of the 
  period                                   421,547         390,319         31,228         28,020 
                                     =============  ==============  =============  ============= 
 Cash and cash equivalents 
  at the end of the period                 440,790         415,922         24,868         25,731 
                                     =============  ==============  =============  ============= 
 

12 Illustrative table of SIPP number movements over the six month period ended 30 June 2020

 
                             Full    Mid SIPPs   eSIPPs   Total own    Third Party     Total 
                             SIPPs                          SIPPs      Administered 
 As at 30 June 2020         19,487    28,798     21,210    69,495         6,811       76,306 
                           -------  ----------  -------  ----------  --------------  -------- 
 As at 31 December 
  2019                      19,869    27,799     21,726    69,394         7,147       76,541 
                           -------  ----------  -------  ----------  --------------  -------- 
 Annualised gross 
  organic growth rate*      2.90%     11.20%     2.41%      6.07%         0.20%        5.52% 
                           -------  ----------  -------  ----------  --------------  -------- 
 SIPPs added organically     288       1,557      262       2,107           7          2,114 
                           -------  ----------  -------  ----------  --------------  -------- 
 Conversions and 
  reclassifications         (161)       161        -          -             -            - 
                           -------  ----------  -------  ----------  --------------  -------- 
 SIPPs lost through 
  attrition                 (509)      (719)     (778)     (2,006)        (343)       (2,349) 
                           -------  ----------  -------  ----------  --------------  -------- 
 Annualised attrition 
  rate *                    5.12%      5.17%     7.16%      5.78%         9.60%        6.14% 
                           -------  ----------  -------  ----------  --------------  -------- 
 

(*Growth and attrition percentage rates are annualised and are based on the 6 months' worth of SIPPs added organically or lost through attrition to 30 June 2020)

 
 Directors 
 Will Self - Chief Executive Officer 
 Dan Cowland - Chief Financial Officer 
  Jane Ridgley - Chief Operating Officer 
 Chris Macdonald - Chairman, Non-Executive 
  Director 
 Bill Rattray - Non-Executive Director 
 Jules Hydleman - Non-Executive Director 
 
 Company Secretary 
 Dan Cowland 
 
 Registered Office 
 3 Temple Quay 
 Temple Back East 
 Bristol 
 BS1 6DZ 
 
 Registered Number 
 07934492 
 
 Nominated Adviser and Broker                Joint Broker 
 Peel Hunt LLP                               N+1 Singer 
 Moor House                                  1 Bartholomew Lane 
 120 London Wall                             London 
 London                                      EC2N 2AX 
 EC2Y 5ET 
 
 Independent Auditors 
 PricewaterhouseCoopers LLP 
 2 Glass Wharf 
 Bristol 
 BS2 0FR 
 
 Solicitors 
 Roxburgh Milkins Limited 
 Merchants House North 
 Wapping Road 
 Bristol 
 BS1 4RW 
 
 Registrars 
 Computershare Limited 
 The Pavilions 
 Bridgewater Road 
 Bristol 
 BS13 8AE 
 

Company information

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END

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