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Share Name Share Symbol Market Type Share ISIN Share Description
Integrafin Holdings Plc LSE:IHP London Ordinary Share GB00BD45SH49 ORD 1P
  Price Change % Change Share Price Bid Price Offer Price High Price Low Price Open Price Shares Traded Last Trade
  8.00 1.62% 501.00 500.00 503.00 507.00 494.50 507.00 568,053 16:29:50
Industry Sector Turnover (m) Profit (m) EPS - Basic PE Ratio Market Cap (m)
General Financial 99.2 56.1 12.1 41.4 1,660

IntegraFin Holdings plc Half-year Report

21/05/2020 7:00am

UK Regulatory (RNS & others)


Integrafin (LSE:IHP)
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TIDMIHP

RNS Number : 5377N

IntegraFin Holdings plc

21 May 2020

IntegraFin Holdings plc - Interim Results for the Six Months Ended

31 March 2020

IntegraFin Holdings plc today announces its Interim Results for the six months to 31 March 2020.

Highlights

   --      Revenue up 13.0% to GBP53.8m (HY2019: GBP47.6m) 
   --      Profit before tax profits up 21.9% to GBP27.3m (HY2019: GBP22.4m) 
   --      Earnings per share up 23.6% to 6.8 pence (HY2019: 5.5p) 
   --      Interim dividend 2.7 pence per share (HY2019: 2.6pps) 
   --      Funds under direction up 1.7% to GBP34.99bn (HY2019: GBP34.41bn) 
   --      Gross inflows up 14.0% to GBP3.2bn (HY2019: GBP2.8bn) 
   --      Client numbers up 8.1% to 187k (HY2019: 173k) 

Alex Scott, Chief Executive Officer, commented:

"Results for the first half of the year are positive. We have seen our highest ever gross inflows and record first half year profits.

Strong inflow growth has contributed to a year on year increase in Funds Under Direction (FUD), despite the COVID-19 pandemic causing substantial, downward movements in world equity markets from late February. Prior to these market falls, FUD growth had been solid.

The growth in net flows and higher daily average FUD over the period (GBP38.3bn) have driven strong revenue growth. Coupled with sensible expense management, this has enabled us to deliver an increase in profit before tax.

Performance in the second half of the year will very much depend upon the effects of measures taken to combat COVID-19 and their impact upon the economy, the equity markets, FUD and flows.

Against this backdrop, the business continues to be well positioned. The number of clients on the platform increased from 173k to 187k year on year, an increase of 8.1%. In the same period the number of advisers using the platform increased by 6.3%.

The welfare of our staff and the maintenance of services to clients are, of course, my primary concerns. All staff are currently working from home, from where they continue to do a fantastic job, providing as good a quality service as possible to clients and their advisers.

We are not utilising any schemes under the National Temporary Framework for State Aid and none of our staff have been furloughed.

After careful consideration, the Board has declared a first interim dividend in accordance with the Company's dividend policy. In respect of the six months to 31 March 2020, an interim dividend of 2.7 pence per ordinary share (H1 2019: 2.6 pence) will be payable on 26 June 2020 to ordinary shareholders on the register on 5 June 2020. The ex-dividend date will be 4 June 2020."

Financial Highlights

 
                          Change        Six months        Six months      Year ended 
                                    ended 31 March    ended 31 March    30 September 
                                              2020              2019            2019 
                                              GBPm              GBPm            GBPm 
 Funds under direction     +1.7%            34,990            34,406          37,799 
 Revenue                  +13.0%              53.8              47.6            99.2 
 Profit before tax        +21.9%              27.3              22.4            49.0 
 Basic and diluted 
  earnings per share      +23.6%              6.8p              5.5p           12.1p 
 Operating profit         +22.5%              27.2              22.2            48.6 
 Operating margin          +8.5%               51%               47%             49% 
 

Contacts

 
 Media 
 Lansons 
 Tony Langham             +44 (0)79 7969 2287 
 Maddy Morgan Williams    +44 (0)79 4736 4578 
 
 Investors 
 Jane Isaac               +44 (0)20 7608 4937 
 

Analyst Presentation

IntegraFin Holdings plc will be hosting an analyst presentation on 21 May 2020, following the release of these results for the half year ended 31 March 2020. Attendance is by invitation only. Slides accompanying the analyst presentation will be available on the IntegraFin Holdings plc website.

Cautionary Statement

These Interim Results have been prepared in accordance with the requirements of English Company Law and the liabilities of the Directors in connection with these Interim Results shall be subject to the limitations and restrictions provided by such law.

These Interim Results are prepared for and addressed only to the Company's shareholders as a whole and to no other person. The Company, its Directors, employees, agents or advisers do not accept or assume responsibility to any other person to whom these Interim Results are shown or into whose hands it may come and any such responsibility or liability is expressly disclaimed.

These Interim Results contain forward looking statements, which are unavoidably subject to risk and uncertainty because they relate to events and depend upon circumstances that will occur in the future. It is believed that the expectations set out in these forward looking statements are reasonable but they may be affected by a wide range of variables which could cause future outcomes to differ from those foreseen. All statements in these Interim Results are based upon information known to the Company at the date of this report. Except as required by law, the Company undertakes no obligation to publicly update or revise any forward looking statement, whether as a result of new information, future events or otherwise.

Financial Review

Operational performance

Transact achieved record platform inflows in the first half of financial year 2020. The strong inflows in the period helped negate the effect of market falls and contributed to a small increase in Funds Under Direction over the year, ending GBP0.6bn higher than at 31 March 2019. FUD ended the interim period GBP2.8bn lower than at 2019 financial year end, due to the substantial, downward movements in world equity markets since late February.

FUD, inflows and outflows

 
                       Six months ended   Six months ended     Year ended 30 
                          31 March 2020      31 March 2019    September 2019 
                                   GBPm               GBPm              GBPm 
 Opening FUD                     37,799             33,113            33,113 
 Inflows                          3,234              2,837             5,700 
 Outflows                       (1,172)            (1,027)           (2,203) 
--------------------  -----------------  -----------------  ---------------- 
 Net flows                        2,062              1,810             3,497 
 Market movements               (4,872)              (515)             1,197 
 Other movements(1)                   1                (2)               (8) 
--------------------  -----------------  -----------------  ---------------- 
 Closing FUD                     34,990             34,406            37,799 
 

(1) Other movements includes dividends, interest, fees and tax charges and rebates.

Gross inflows for the six months to 31 March 2020 increased by GBP397m (14.0%) compared with the same period in the prior year. Gross outflows increased by GBP145m (14.1%) in the six months, representing an annualised outflow of 6.2% of opening FUD, which remained broadly consistent with both March 2019 (6.2%) and financial year 2019 (6.7%). The net result of the increase in both inflows and outflows was in an increase in net flows of GBP252m (13.9%).

Financial performance

Total gross profit in the six months to 31 March 2020 increased by GBP6.3m (13.4%) from the same period in financial year 2019. This growth was driven by an uplift in the average value of FUD through the period, strong inflows and an increase in the number of tax wrappers.

Profit before tax grew from GBP22.4m at half year March 2019 to GBP27.3m at March 2020, an increase of 21.9% year on year. This can be attributed to increased revenue and prudent expense management.

 
 Income                Six months ended   Six months ended     Year ended 30 
                          31 March 2020      31 March 2019    September 2019 
                                   GBPm               GBPm              GBPm 
 Revenue                           53.8               47.6              99.2 
 Cost of sales                    (0.4)              (0.5)             (0.8) 
--------------------  -----------------  -----------------  ---------------- 
 Gross profit                      53.4               47.1              98.4 
 Operating expenses              (26.2)             (24.9)            (49.8) 
--------------------  -----------------  -----------------  ---------------- 
 Operating profit 
  attributable 
  to shareholder 
  returns                          27.2               22.2              48.6 
 Investment returns 
  and interest 
  income                            0.1                0.2               0.4 
--------------------  -----------------  -----------------  ---------------- 
 Profit before 
  tax attributable 
  to shareholder 
  returns                          27.3               22.4              49.0 
 Tax on ordinary 
  shareholder only 
  activities                      (4.8)              (4.2)             (8.9) 
--------------------  -----------------  -----------------  ---------------- 
 Profit after 
  tax                              22.5               18.2              40.1 
--------------------  -----------------  -----------------  ---------------- 
 
 

The above table does not include income, expenses or tax charges relating to policyholders as their net impact on profit is GBPnil. For more details on policyholder returns please see note 7.

Components of revenue

Our revenue comprises three elements: annual commission income, wrapper fee income and other income.

Annual commission income (an annual, ad valorem tiered fee on FUD) and wrapper administration fee income (quarterly fixed wrapper fees for each of the tax wrapper types clients hold) constitute our recurring revenue. Other income includes buy commission charged on asset purchases.

 
                       Six months ended   Six months ended     Year ended 30 
                          31 March 2020      31 March 2019    September 2019 
                                   GBPm               GBPm              GBPm 
 Annual commission 
  income                           47.4               41.3              86.7 
 Wrapper fee income                 4.8                4.4               9.0 
 Other income                       1.6                1.9               3.5 
--------------------  -----------------  -----------------  ---------------- 
 Total revenue                     53.8               47.6              99.2 
 

Recurring revenue streams constituted 97.0% of total fee income in the six months to 31 March 2020, which is a small increase from 96.0% in the same period in the prior year.

Annual commission income increased by GBP6.1m (14.8%) in the period versus the same period in the prior financial year. This resulted from higher average FUD over the period (the downturn in the markets only affected asset values towards the end of the period).

Wrapper administration fee income increased by GBP0.4m (9.1%) year on year, reflecting the increase in the number of open tax wrappers.

Other income, mainly buy commission and dealing charges, reduced by GBP0.3 million (15.8%) year on year. The primary reason for this fall was the reduction in the buy commission rebate threshold in March 2019 and March 2020. The required portfolio value for client family groups to receive the rebate was reduced from GBP1.0 million to GBP0.5 million, with effect from 1 March 2019, and was reduced again from GBP0.5 million to GBP0.4 million from 1 March 2020.

Operating expenses

 
                      Six months ended   Six months ended     Year ended 30 
                         31 March 2020      31 March 2019    September 2019 
                                  GBPm               GBPm              GBPm 
 Staff costs                      18.3               18.4              36.3 
 Occupancy                         1.0                1.8               3.6 
 Regulatory and 
  professional 
  fees                             3.5                2.5               5.5 
 Other costs                       2.2                1.9               3.7 
-------------------  -----------------  -----------------  ---------------- 
 Total expenses                   25.0               24.6              49.1 
 Depreciation 
  and amortisation                 1.2                0.3               0.7 
-------------------  -----------------  -----------------  ---------------- 
 Total operating 
  expenses                        26.2               24.9              49.8 
-------------------  -----------------  -----------------  ---------------- 
 

In the six months to March 2020, total operating expenses increased by GBP1.3m (5.2%), compared with the six months to March 2019.

Staff costs decreased by GBP0.1m (0.5%) to GBP18.3m in the six months to March 2020. This was the net effect of Group headcount reducing to 492 at the end of March 2020 (March 2019: 514) and general, inflationary cost increases. The reduction in headcount resulted from natural attrition and efficiency gains delivered through platform development.

Regulatory and professional fees increased by GBP1.0m in the six months to March 2020, mainly due to changes in regulatory fee tariff data calculations. These include Financial Services Compensation Scheme levies, which increased by GBP0.7m (197.8%).

The Group adopted IFRS 16 (Leases) from the start of the new financial year. This standard requires recognition and subsequent depreciation of right of use assets - in our case buildings leased by the Group - and it means that we no longer recognise building rent expense. The year to date, financial impact of IFRS 16 is a reduction in occupancy costs of GBP0.8m and an increase in depreciation and amortisation costs of GBP0.9m.

Profit before tax attributable to shareholder returns

Profit before tax increased by GBP4.9m (21.9%) year on year.

 
                                  Six months ended   Six months ended     Year ended 30 
                                     31 March 2020      31 March 2019    September 2019 
                                              GBPm               GBPm              GBPm 
 Operating profit 
  attributable 
  to shareholder 
  returns                                     27.3               22.2              48.6 
------------------  ------------------------------  -----------------  ---------------- 
 

The operating margin increased to 50.6% (March 2019: 46.6%) in the six months to 31 March 2020. The increase is due to higher revenue, as a result of the increase in average FUD, and controlled expenses.

Financial position

The material items on the consolidated statement of financial position that merit comment include the following:

IFRS 16 (Leases)

On adoption of IFRS 16, the Group recognised right of use assets of GBP5.6m and corresponding lease liabilities of GBP8.3m. Liabilities of GBP2.5m previously recognised in relation to the rent free reserve were also derecognised and adjusted through retained earnings.

The overall reduction in retained earnings on 1 October 2019 was therefore GBP0.2m, which is the cumulative effect of recognising the asset and corresponding liabilities for each of the leases and the release of the rent free reserve.

Deferred tax

Deferred policyholder tax liabilities decreased by GBP12.7m to GBP0.5m, while deferred policyholder tax assets increased by GBP7.9m to GBP8.1m. These movements have arisen from the deemed capital losses on policyholder assets, as a result of the market falls in relation to the COVID-19 pandemic.

Dividends

During the six month period to 31 March 2020, the Company paid a second interim dividend of GBP17.2m to shareholders in respect of financial year 2019. This was in addition to the first interim dividend of GBP8.6m, which was paid in June 2019. The financial year total of GBP25.8m compares with a full year interim dividend of GBP21.2m in respect of the full financial year 2018.

In respect of the six months to 31 March 2020, and in line with dividend policy, the Board has declared a first interim dividend of GBP8.9 million, or 2.7 pence per ordinary share. This compares with an interim dividend of GBP8.6 million, or 2.6 pence per ordinary share, in respect of the same period in the prior year.

Earnings Per Share

 
                                    Six months ended   Six months ended 
                                       31 March 2020      31 March 2019 
 Profit after tax for the period            GBP22.5m           GBP18.2m 
 Number of shares in issue                    331.3m             331.3m 
 Earnings per share - basic and 
  diluted                                       6.8p               5.5p 
 

Earnings per share grew to 6.8p per share up 23.6% on the six months to 31 March 2019.

Going Concern

The financial statements have been prepared on a going concern basis following an assessment by the Directors.

When making this assessment the Directors have taken into consideration the reduction in FUD of GBP2.8bn in the interim period, due to the substantial, downward movements in world equity markets since late February. Market volatility and uncertainty is expected to continue for some time, due to the COVID-19 pandemic and the effect of measures taken to combat it. Operations continue as near as possible to usual, whilst being in compliance with Government guidelines. The Group continues to maintain a robust financial position.

Having conducted detailed cash flow and working capital projections, and stress-tested liquidity, profitability and regulatory capital, taking account of the impact of the COVID-19 pandemic and further possible adverse changes in trading performance, the Directors are satisfied that the Group is well placed to manage its business risks.

The Directors are also satisfied that it will be able to operate within the regulatory capital limits imposed by the Financial Conduct Authority (FCA), Prudential Regulation Authority (PRA), and Isle of Man Financial Services Authority (IoM FSA). Accordingly, after considering the effects of the COVID-19 pandemic, the Directors do not believe a material uncertainty exists that would have an effect on the going concern of the Group and have prepared the financial statements on a going concern basis.

P rincipal Risks and Uncertainties

Following the onset of the COVID-19 pandemic, we implemented a number of business continuity measures. In particular, following the Government announcement on 24 March 2020 that the public should not leave homes to travel to work if they could work at home, we limited office attendance to short visits by essential IT colleagues and other key workers necessary to maintain the continuity of operations and systems. All other staff support the business through remote home working.

The pandemic has created many uncertainties and we have adapted the business rapidly to reflect the sudden change in its risk profile. This has resulted in changes to our operational risk profile. However, in other respects the key risks and uncertainties associated with our strategic objectives remain broadly the same. An overview of those risks, along with the associated risk management and controls, follows:

1. Increased operational risk: The remote working of staff and the inaccessibility of the Group's normal offices presents heightened operational risks. The extent of use of remote IT access has increased threat of external fraud and cyber-attack. Our critical business services have been reviewed and, in some instances, it has been necessary to amend the usual routines and procedures.

Risk management and control: All modifications to operating procedures were reviewed by management and assessed by Risk Management for impact, prior to approval. Management also considered any potential impact on clients with the aim to avoid client detriment. Where necessary, external regulatory approval was sought to ensure documentation and data met requirements. A revised IT strategy was put in place which includes enhanced remote access controls.

2. Stock market volatility: The COVID-19 pandemic and Brexit have created uncertainty in stock markets and are expected to continue to have a negative impact for some time. This has an effect upon the value of FUD.

Risk management and control: Stock market volatility, and its impact on revenue, is partly mitigated by the wide range of assets in which FUD is invested. This ensures that FUD based revenue is not wholly correlated to any one market. Clients are also able to switch into cash, and this is likely to remain on platform. The wrapper fees are also not reduced by falls in the value of assets, as they are levied at a fixed rate. Expenses are also closely monitored and controlled.

3. Service standards failure: Our high levels of client and adviser retention are dependent to a great extent upon our consistently reliable and high quality service. Failure to maintain these service levels would affect our ability to attract and retain business. As discussed above, recent events have resulted in changes to working practices - so making this service harder to deliver.

Risk management and control: The risk of service standards failure is managed by providing client service teams with extensive initial and ongoing training, supported by experienced subject matter experts and managers. During the working at home phase, the monitoring and checking of service levels and capacity has continued and any deviation from the expected has been addressed by management.

4. Increased competition: The market is competitive. Increased levels of competition for clients and advisers; improvements in offerings from other investment platforms; and consolidation in the adviser market may all make it more challenging to attract and retain business. The COVID-19 pandemic has added to this uncertainty. The level of client and adviser activity may be adversely impacted for some time.

Risk management and control: Competition is countered by focussing on providing exceptionally high levels of service and being responsive to client and financial adviser demands. The efficient management of expenses also helps make possible a continued proposition of "value for money" involving the reduction of charges.

5. Reduced investment: The maintenance of quality and relevance requires ongoing investment. Any reduction in investment due to diversion of resources to other non-discretionary expenditure may affect our competitive position.

Risk management and control: This risk has not significantly increased as a result of the COVID-19 pandemic as minimal additional unexpected expenses have been incurred so far Otherwise, the risk of reduced investment in the business is managed through a disciplined approach to expense management and forecasting. In particular, forthcoming regulatory and taxation regime changes are noted and planned for and a contingency sum is maintained to allow for unexpected expenses.

6. Expense overrun: Expenses that were higher than expected and budgeted for could adversely impact profits. Whilst the key constituent of expenses is salary cost, other expenses, such as legal, compliance or regulatory costs and levies are more likely to change unexpectedly. The outcome of a reconsideration of HMRC's view that Integrated Application Development Pty Ltd should be excluded from a UK VAT group is currently awaited. Following that, a formal review may be required and, possibly, a referral to the Tribunal and/or litigation before the matter is finally resolved. It is possible that a retrospective additional VAT charge (plus interest and/or a penalty) and/or a prospective increase in VAT charges might be applied. Further details are set out in the RNS issued on 28 January 2020.

Risk management and control: Expenses have not significantly increased as a result of the COVID-19 pandemic. The most significant element of the expense base is staff cost. This is controlled through modelling staff requirements against forecast business volumes and factoring in expected efficiencies from platform and other systems development. Expenditure requests that deviate from plan are rigorously challenged and must receive prior approval. With regard to the HMRC VAT issue, the Group has taken and continues to take specialist legal and tax advice. Financial projections assuming an unfavourable outcome, including those used to demonstrate viability, have been cast.

7. Capital strain: Unexpected, additional capital requirements imposed by regulators could negatively impact solvency coverage ratios.

Risk management and control: Specific resources are allocated to monitor the current and anticipated regulatory environment to ensure that all regulatory obligations are met. Assessments of capital requirements are also undertaken, which includes running extreme stress and scenario tests to the point of regulatory failure. A buffer over and above the regulatory minimum solvency capital requirements is maintained. The capital position has not significantly changed as a result of the COVID-19 pandemic and the regulated companies within the Group continue to maintain healthy solvency coverage ratios.

Directors' Responsibility Statement

The Directors are responsible for preparing the interim financial statements in accordance with applicable law and regulations. A list of current directors is maintained on the Group's website: https://www.integrafin.co.uk.

The Directors confirm that, to the best of their knowledge, the interim financial statements have been prepared in accordance with IAS 34 as adopted by the European Union, and give a true and fair view of the assets, liabilities, financial position and profit or loss of the issuer, or the undertakings included in the consolidation as a whole as required by DTR 4.2.4 R.

The Directors further confirm that the interim financial statements include a fair review of the information required by DTR 4.2.7R and DTR 4.2.8R.

By Order of the Board

Helen Wakeford

Company Secretary

Registered Office

29 Clement's Lane

London

EC4N 7AE

20 May 2020

Independent Review Report to IntegraFin Holdings plc

Introduction

We have been engaged by the Company to review the condensed set of financial statements in the half-yearly financial report for the six months ended 31 March 2020 which comprises the Condensed Consolidated Statement of Comprehensive Income, Condensed Consolidated Statement of Financial Position, Condensed Consolidated Statement of Cash Flows and Condensed Consolidated Statement of Changes in Equity and related notes.

We have read the other information contained in the half-yearly financial report and considered whether it contains any apparent misstatements or material inconsistencies with the information in the condensed set of financial statements.

Directors' responsibilities

The half-yearly financial report is the responsibility of and has been approved by the Directors. The Directors are responsible for preparing the half-yearly financial report in accordance with the Disclosure Guidance and Transparency Rules of the United Kingdom's Financial Conduct Authority.

As disclosed in note 1, the annual financial statements of the Group are prepared in accordance with International Financial Reporting Standards (IFRSs) as adopted by the European Union. The condensed set of financial statements included in this half-yearly financial report has been prepared in accordance with International Accounting Standard 34, "Interim Financial Reporting", as adopted by the European Union.

Our responsibility

Our responsibility is to express to the Company a conclusion on the condensed set of financial statements in the half-yearly financial report based on our review.

Scope of review

We conducted our review in accordance with International Standard on Review Engagements (UK and Ireland) 2410, "Review of Interim Financial Information Performed by the Independent Auditor of the Entity", issued by the Financial Reporting Council for use in the United Kingdom. A review of interim financial information consists of making enquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with International Standards on Auditing (UK) and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion.

Conclusion

Based on our review, nothing has come to our attention that causes us to believe that the condensed set of financial statements in the half-yearly financial report for the six months ended 31 March 2020 is not prepared, in all material respects, in accordance with International Accounting Standard 34, as adopted by the European Union, and the Disclosure Guidance and Transparency Rules of the United Kingdom's Financial Conduct Authority.

Use of our report

Our report has been prepared in accordance with the terms of our engagement to assist the Company in meeting its responsibilities in respect of half-yearly financial reporting in accordance with the Disclosure Guidance and Transparency Rules of the United Kingdom's Financial Conduct Authority and for no other purpose. No person is entitled to rely on this report unless such a person is a person entitled to rely upon this report by virtue of and for the purpose of our terms of engagement or has been expressly authorised to do so by our prior written consent. Save as above, we do not accept responsibility for this report to any other person or for any other purpose and we hereby expressly disclaim any and all such liability.

BDO LLP

Chartered Accountants

London

United Kingdom

20 May 2020

BDO LLP is a limited liability partnership registered in England and Wales (with registered number OC305127).

Condensed Consolidated Statement of Comprehensive Income

 
 
                                                     Six months     Six months 
                                            Note    to 31 March    to 31 March 
                                                           2020           2019 
                                                        GBP'000        GBP'000 
 Revenue 
 Fee income                                    4         53,824         47,615 
 Cost of sales                                            (382)          (456) 
---------------------------------------  -------  -------------  ------------- 
 Gross profit                                            53,442         47,159 
 
 Administrative expenses                               (26,137)       (24,879) 
 Impairment losses on financial 
  assets                                                   (57)           (19) 
 
 Net income/(expense) attributable 
  to policyholder returns                      8       (24,312)        (5,098) 
 Operating profit                                         2,936         17,163 
---------------------------------------  -------  -------------  ------------- 
 Operating profit/(loss) attributable 
  to policyholder returns                              (24,312)        (5,098) 
 
 Operating profit attributable 
  to shareholder returns                                 27,248         22,261 
 
 Investment returns                                          30             25 
 Interest income                                            186            149 
 Interest expense                                         (126)              - 
 
 Profit on ordinary activities 
  before taxation                                         3,026         17,337 
---------------------------------------  -------  -------------  ------------- 
 Profit/(loss) on ordinary activities 
  before taxation attributable to 
  policyholder returns                                 (24,312)        (5,098) 
 
 Profit on ordinary activities 
  before taxation attributable to 
  shareholder returns                                    27,338         22,435 
 
 Policyholder tax                              8         24,312          5,098 
 
 Tax on profit on ordinary activities          6        (4,849)        (4,241) 
 Profit for the period                                   22,489         18,194 
 
 Other comprehensive income 
 
 Exchange gains/(losses) arising 
  on translation of foreign operations                    (131)           (25) 
 Total other comprehensive income 
  for the period                                          (131)           (25) 
 
 Total comprehensive income for 
  the period                                             22,358         18,169 
---------------------------------------  -------  -------------  ------------- 
 
 
 Earnings per share 
 Ordinary shares - basic and diluted    5   6.8p   5.5p 
 

All activities of the Group are classed as continuing.

Condensed Consolidated Statement of Financial Position

 
 
                                                  31 March     30 September 
                                         Note         2020             2019 
                                                   GBP'000          GBP'000 
 Non-current assets 
 Loans                                     12        2,242            1,185 
 Intangible assets                                  12,951           12,951 
 Property, plant and equipment                       2,307            2,405 
 Right of use assets                                 4,741                - 
 Deferred tax assets                        7        8,084              157 
 Deferred acquisition costs                11       52,886           50,443 
                                                    83,211           67,141 
 
 Current assets 
 Financial assets at fair value 
  through profit or loss                             5,094            5,066 
 Other prepayments and accrued income               12,956           13,082 
 Trade and other receivables               13        3,232            6,510 
 Investments and cash held for the 
  benefit of policyholders                 10   15,410,189       16,665,048 
 Cash and cash equivalents                         131,668          132,340 
--------------------------------------  -----  -----------  --------------- 
                                                15,563,139       16,822,046 
 
 Current liabilities 
 Trade and other payables                  14       18,449           17,024 
 Finance lease liabilities                           2,379                - 
 Liabilities for linked investment 
  contracts                                10   15,410,189       16,665,048 
 Current tax liabilities                                91            3,342 
--------------------------------------  -----  -----------  --------------- 
                                                15,431,108       16,685,414 
 
 Non-current liabilities 
 Provisions                                 9       36,912           24,564 
 Finance lease liabilities                           4,807                - 
 Deferred income liability                 11       52,886           50,443 
 Deferred tax liabilities                   7          528           13,248 
--------------------------------------  -----  -----------  --------------- 
                                                    95,133           88,255 
 
 Net assets                                        120,109          115,518 
--------------------------------------  -----  -----------  --------------- 
 
 Capital and reserves 
 Called up equity share capital                      3,313            3,313 
 Capital redemption reserve                              2                2 
 Share-based payment reserve                           961            1,008 
 Employee Benefit Trust reserve                      (540)            (275) 
 Foreign exchange reserve                            (175)             (44) 
 Non-distributable reserves                          5,722            5,722 
 Non-distributable insurance reserves                  501              501 
 Profit or loss account                            110,325          105,291 
--------------------------------------  -----  -----------  --------------- 
 Total equity                                      120,109          115,518 
--------------------------------------  -----  -----------  --------------- 
 

These interim financial statements were approved by the Board of Directors on 20 May 2020 and are signed on their behalf by:

Alexander Scott, Director

Company Registration Number: 08860879

Condensed Consolidated Statement of Cash Flows

 
 
                                                Six months       Six months 
                                               to 31 March               to 
                                                      2020    31 March 2019 
                                                   GBP'000          GBP'000 
 
 Cash flows from operating activities 
 Profit before tax                                   3,026           17,337 
 Adjustments for: 
 Amortisation and depreciation                       1,250              297 
 Share-based payments expense                          814              561 
 Interest on cash held                               (186)            (149) 
 Interest paid on lease liability                      126                - 
 Investment returns                                   (30)             (25) 
 Increase in policyholder tax recoverable            3,663                - 
 Decrease/(increase) in receivables                  3,405          (4,678) 
 Increase/(decrease) in payables                     3,941            (318) 
 Decrease/(increase) in current 
  asset investments                                   (29)             (13) 
 Increase/(decrease) in provisions                  12,348            7,118 
 Decrease/(increase) in investments 
  and cash held for the benefit 
  of policyholders                               1,254,859        (597,820) 
 Increase/(decrease) in liabilities 
  for linked investment contracts              (1,254,859)          597,820 
 Cash generated from operations                     28,328           20,130 
 
 Income taxes paid                                 (8,099)          (3,034) 
 Net cash flows from operating 
  activities                                        20,229           17,096 
 
 Investing activities 
 Acquisition of tangible assets                      (314)            (574) 
 (Increase)/decrease in loans                      (1,056)                - 
 Interest on cash held                                 186              149 
 Investment returns                                     30               25 
 Net cash used in investing activities             (1,154)            (400) 
 
 Financing activities 
 Repayment of lease liabilities                    (1,111)                - 
 Interest paid on lease liability                    (126)                - 
 Purchase of own shares in Employee 
  Benefit Trust                                      (265)            (104) 
 Settlement of share-based payment 
  reserve                                            (860)            (377) 
 Equity dividends paid                            (17,215)         (21,197) 
-------------------------------------------  -------------  --------------- 
 
 Net cash used in financing activities            (19,577)         (21,678) 
 
 Net decrease in cash and cash 
  equivalents                                        (502)          (4,982) 
 
 Cash and cash equivalents at beginning 
  of period                                        132,340          116,849 
 
 Exchange losses on cash and cash 
  equivalents                                        (170)             (25) 
-------------------------------------------  -------------  --------------- 
 
 Cash and cash equivalents at end 
  of period                                        131,668          111,842 
 
 

Condensed Consolidated Statement of Changes in Equity

 
                                                            Share-based   Non-distributable   Employee 
                    Share   Non-distributable       Other       payment           insurance    benefit   Retained      Total 
                  capital            reserves    reserves       reserve            reserves      trust   earnings     equity 
                  GBP'000             GBP'000     GBP'000       GBP'000             GBP'000    GBP'000    GBP'000    GBP'000 
 
 Balance 
  at 1 October 
  2018              3,313               5,722        (22)           530                 501          -     94,899    104,943 
 Comprehensive 
  income for 
  the year: 
 Profit for 
  the year              -                   -           -             -                   -          -     18,194     18,194 
 Movement 
  in currency 
  translation           -                   -        (25)             -                   -          -          -       (25) 
 Other movement         -                   -           -             -                   -          -        (1)        (1) 
 Total 
  comprehensive 
  income for 
  the year              -                   -        (25)             -                   -          -     18,193     18,168 
 Distributions 
  to owners: 
 Dividends              -                   -           -             -                   -          -   (21,197)   (21,197) 
 Share-based 
  payment 
  expense               -                   -           -           561                   -          -          -        561 
 Settlement 
  of 
  share-based 
  payment               -                   -           -         (377)                   -          -          -      (377) 
 Purchase 
  of own shares 
  in EBT                -                   -           -             -                   -      (104)          -      (104) 
 Total 
  distributions 
  to owners             -                   -           -           184                   -      (104)   (21,197)   (21,117) 
---------------  --------  ------------------  ----------  ------------  ------------------  ---------  ---------  --------- 
 Balance 
  at 31 March 
  2019              3,313               5,722        (47)           714                 501      (104)     91,895    101,994 
---------------  --------  ------------------  ----------  ------------  ------------------  ---------  ---------  --------- 
 
 Balance 
  at 1 October 
  2019              3,313               5,722        (42)         1,008                 501      (275)    105,291    115,518 
 Effect of 
  adoption 
  of IFRS 
  16 (note 
  1)                    -                   -           -             -                   -          -      (239)      (239) 
---------------  --------  ------------------  ----------  ------------  ------------------  ---------  ---------  --------- 
 Adjusted 
  balance 
  at 1 October 
  2019              3,313               5,722        (42)         1,008                 501      (275)    105,052    115,279 
 Comprehensive 
  income for 
  the year: 
 Profit for 
  the year              -                   -           -             -                   -          -     22,489     22,489 
 Movement 
  in currency 
  translation           -                   -       (131)             -                   -          -          -      (131) 
 Other movement         -                   -           -             -                   -          -          -          - 
 Total 
  comprehensive 
  income for 
  the year              -                   -       (131)             -                   -          -     22,489     22,358 
 Distributions 
  to owners: 
 Dividends              -                   -           -             -                   -          -   (17,215)   (17,215) 
 Share-based 
  payment 
  expense               -                   -           -           814                   -          -          -        814 
 Settlement 
  of 
  share-based 
  payment               -                   -           -         (860)                   -          -          -      (860) 
 Purchase 
  of own shares 
  in EBT                -                   -           -             -                   -      (265)          -      (265) 
 Total 
  distributions 
  to owners             -                   -           -          (46)                   -      (265)   (17,215)   (17,526) 
---------------  --------  ------------------  ----------  ------------  ------------------  ---------  ---------  --------- 
 Balance 
  at 31 March 
  2020              3,313               5,722       (173)           962                 501      (540)    110,325    120,109 
---------------  --------  ------------------  ----------  ------------  ------------------  ---------  ---------  --------- 
 

Notes to the Financial Statements

1. Basis of preparation

The consolidated interim financial statements have been prepared and approved by the Directors in accordance with International Financial Reporting Standards (IFRSs) as adopted by the EU, and in accordance with the International Accounting Standard (IAS) 34 Interim Financial Reporting, and the Disclosure Guidance and Transparency Rules of the Financial Conduct Authority (FCA).

The financial information contained in these interim financial statements does not constitute statutory accounts within the meaning of Section 434 of the Companies Act 2006. The information has been reviewed by the company's auditor, BDO LLP, and their report is presented on pages 7-8.

The comparative financial information for the year ended 30 September 2019 in this interim report does not constitute statutory accounts for that year.

The statutory accounts for 30 September 2019 have been delivered to the Registrar of Companies. The auditor's report on those accounts was unqualified, did not draw attention to any matters by way of emphasis, and did not contain a statement under 498(2) or 498(3) of the Companies Act 2006.

The same accounting policies, methods of calculation and presentation have been followed in the preparation of the interim financial statements for the six months to 31 March 2020 as were applied in the Audited Annual Financial Statements for the year ended 30 September 2019. The only change is the adoption of IFRS 16 on 1 October 2019, as noted below.

Going Concern

The financial statements have been prepared on a going concern basis following an assessment by the Directors.

When making this assessment the Directors have taken into consideration the reduction in FUD of GBP2.8bn in the interim period, due to the substantial, downward movements in world equity markets since late February. Market volatility and uncertainty is expected to continue for some time, due to the COVID-19 pandemic and the effect of measures taken to combat it. Operations continue as near as possible to usual, whilst being in compliance with Government guidelines. The Group continues to maintain a robust financial position.

Having conducted detailed cash flow and working capital projections, and stress-tested liquidity, profitability and regulatory capital, taking account of the impact of the COVID-19 pandemic and further possible adverse changes in trading performance, the Directors are satisfied that the Group is well placed to manage its business risks.

The Directors are also satisfied that it will be able to operate within the regulatory capital limits imposed by the Financial Conduct Authority (FCA), Prudential Regulation Authority (PRA), and Isle Man Financial Services Authority (IoM FSA). Accordingly, after considering the effects of the COVID-19 pandemic, the Directors do not believe a material uncertainty exists that would have an effect on the going concern of the Group and have prepared the financial statements on a going concern basis.

Principal risks and uncertainties

The Group's principal risks and uncertainties are listed on pages 5-6, and have changed since year end as a result of the COVID-19 pandemic.

Basis of consolidation

The consolidated financial statements incorporate the financial statements of the Company and its subsidiaries.

New accounting standards

The Group adopted IFRS 16 on 1 October 2019. The Group used the modified retrospective approach of transition, which uses the net effect of applying IFRS 16 on the first day of the first accounting period in which the new standard is applied.

On commencement date, the Group measured the lease liability as the present value of all future lease payments, discounted using the incremental borrowing rate. The Group's incremental borrowing rate is the rate at which a similar borrowing could be obtained from an independent creditor under comparable terms and conditions.

The right of use asset was measured at its net book value, assuming it had been capitalised and depreciated from inception. The net effect is recognised through an adjustment to retained earnings. Prior periods have not been restated.

On adoption the Group recognised right of use assets of GBP5.6m and corresponding lease liabilities of GBP8.3m. Liabilities of GBP2.5m previously recognised in relation to the rent free reserve were also derecognised and adjusted through retained earnings.

The overall reduction in retained earnings on 1 October 2019 was therefore GBP0.2m, which is the cumulative effect of recognising the asset and corresponding liabilities for each of the leases, and the release of the rent free reserve.

Right of use assets - Property:

 
                                                      GBP'000 
 Additions on adoption of IFRS 16 - 1 October 2019      5,582 
 Depreciation charge                                    (807) 
 AUD FX adjustment                                       (34) 
---------------------------------------------------  -------- 
 Balance at 31 March 2020                               4,741 
---------------------------------------------------  -------- 
 

Depreciation is calculated on a straight line basis over the term of the lease.

Lease liabilities - Property:

 
                                                       GBP'000 
 Lease liability on adoption of IFRS 16 - 1 October 
  2019                                                   8,336 
 Lease payments                                        (1,237) 
 Interest expense                                          126 
 AUD FX adjustment                                        (40) 
----------------------------------------------------  -------- 
 Balance at 31 March 2020                                7,185 
----------------------------------------------------  -------- 
 

The following is a reconciliation of total operating lease commitments at 30 September 2019 (as disclosed in the Annual Report to 30 September 2019) to the lease liabilities recognised at

1 October 2019:

 
                                                         GBP'000 
 Lease commitments - 1 October 2019                        8,841 
 Discounted using incremental borrowing rate               (505) 
------------------------------------------------------  -------- 
 Lease liabilities on adoption of IFRS 16 - 1 October 
  2019                                                     8,336 
------------------------------------------------------  -------- 
 

2. Critical accounting estimates and judgements

The preparation of interim consolidated financial statements in compliance with IAS 34 requires the use of certain critical accounting estimates. There have been no material revisions to the Group's critical accounting estimates and judgements methodology from year ending 30 September 2019.

3. Financial instruments

Financial assets and liabilities have been classified into categories that determine their basis of measurement and, for items measured at fair value, whether changes in fair value are recognised in the statement of comprehensive income. The following tables show the carrying values of assets and liabilities for each of these categories.

Financial assets:

 
 
                                     Fair value through         Amortised cost 
                                        profit or loss 
                                       31 Mar         30 Sep    31 Mar    30 Sep 
                                         2020           2019      2020      2019 
                                      GBP'000        GBP'000   GBP'000   GBP'000 
 Cash and cash equivalents                  -              -   131,668   132,340 
 Listed shares and securities             104             69         -         - 
 Loans                                      -              -     2,242     1,185 
 Investments in quoted 
  debt instruments                      4,990          4,997         -         - 
 Accrued income                             -              -     9,682     9,768 
 Trade and other receivables                -              -     2,952     2,766 
 Investments and cash held 
  for the policyholders            15,410,189     16,665,048         -         - 
 Total financial assets            15,415,283     16,670,114   146,544   146,059 
 

Financial liabilities:

 
                                  Fair value through       Amortised cost 
                                     profit or loss 
                                    31 Mar       30 Sep    31 Mar    30 Sep 
                                      2020         2019      2020      2019 
                                   GBP'000      GBP'000   GBP'000   GBP'000 
 Trade and other payables                -            -     6,777     5,889 
 Accruals                                -            -     6,580     6,909 
 Liabilities for linked 
  investments contracts         15,410,189   16,665,048         -         - 
                               -----------  -----------  --------  -------- 
 Total financial liabilities    15,410,189   16,665,048    13,357    12,798 
 
 

Financial instruments not measured at fair value

Financial instruments not measured at fair value include cash and cash equivalents, accrued fees, loans, trade and other receivables, and trade and other payables. Due to their short-term nature and/or annual impairment review, the carrying value of these financial instruments approximates their fair value.

Financial instruments measured at fair value - fair value hierarchy

The table below classifies financial assets that are recognised on the statement of financial position at fair value in a hierarchy that is based on significance of the inputs used in making the measurements. The levels of hierarchy are disclosed on the next page.

Level 1: quoted prices (unadjusted) in active markets for identical assets;

Level 2: inputs other than quoted prices included within Level 1 that are observable for the asset either directly (i.e. as prices) or indirectly (i.e. derived from prices); and

Level 3: inputs for the asset that are not based on observable market data (unobservable inputs).

 
 At 31 March 2020                                            Level 1         Level 2         Level 3              Total 
                                                             GBP'000         GBP'000         GBP'000            GBP'000 
 Investments and 
  assets held for 
  the benefit of policyholders 
 
   *    Policyholder cash                                  1,509,721               -               -          1,509,721 
 
   *    Investments and securities                           389,437         111,905          21,188            522,530 
 
   *    Bonds and other fixed-income securities               14,189              84               4             14,277 
 
   *    Holdings in collective investment schemes         13,251,742         111,052             867         13,363,661 
                                                   -----------------  --------------  --------------  ----------------- 
                                                          15,165,089         223,041          22,059         15,410,189 
   Other investments                                           5,094               -               -              5,094 
                                                   -----------------  --------------  --------------  ----------------- 
   Total                                                  15,170,183         223,041          22,059         15,415,283 
                                                   -----------------  --------------  --------------  ----------------- 
 
 
  At 30 September                                             Level 1         Level 2    Level 3         Total 
   2019 
                                                              GBP'000         GBP'000    GBP'000       GBP'000 
  Investments and 
   assets held for 
   the benefit of 
   policyholders 
 
   *    Policyholder cash                                   1,213,371               -          -     1,213,371 
 
   *    Investments and securities                            444,076         140,991      2,447       587,514 
 
   *    Bonds and other fixed-income securities                 4,485           9,320      3,005        16,810 
 
   *    Holdings in collective investment schemes          14,731,562         109,714      6,077    14,847,353 
                                                    -----------------  --------------  ---------  ------------ 
                                                           16,393,494         260,025     11,529    16,665,048 
   Other investments                                            5,066               -          -         5,066 
                                                    -----------------  --------------  ---------  ------------ 
  Total                                                    16,398,560         260,025     11,529    16,670,114 
                                                    -----------------  --------------  ---------  ------------ 
 

Level 1 valuation methodology

Financial assets included in Level 1 are measured at fair value using quoted mid prices that are available at the reporting date and are traded in active markets. These financial assets are mainly collective investment schemes and listed equity instruments.

Level 2 and Level 3 valuation methodology

The Group regularly reviews whether a market is active, based on available market data and the specific circumstances of each market. Where the Group assesses that a market is not active, then it applies one or more valuation methodologies to the specific financial asset. These valuation methodologies use quoted market prices, where available, and may in certain circumstances require the Group to exercise judgement to determine fair value.

Financial assets included in Level 2 are measured at fair value using observable mid prices traded in markets that have been assessed as not active enough to be included in Level 1.

Otherwise, financial assets are included in Level 3. These are assets where one or more inputs to the valuation methodology are not based on observable market data. The key unobservable input is the pre-tax operating margin needed to price asset holdings.

Level 3 sensitivity to changes in unobservable measurements

For financial assets assessed as Level 3, based on its review of the prices used, the Company believes that any change to the unobservable inputs used to measure fair value would not result in a significantly higher or lower fair value measurement at year end, and therefore would not have a material impact on its reported results.

Changes to valuation methodology

There have been no changes in valuation methodology since year end.

Transfers between Levels

There have been no material changes between Levels since year end.

4. Segmental reporting

The revenue and profit before tax are attributable to activities carried out in the UK and Isle of Man.

The Group has two classes of business as follows:

   -       provision of investment administration services 
   -       transaction of ordinary long term insurance and underwriting life assurance 

Analysis by class of business is given below:

 
                                  Six months to    Six months to 
                                  31 March 2020    31 March 2019 
                                        GBP'000          GBP'000 
 Revenue 
 Investment administration 
  services                               28,051           24,959 
 Insurance and life assurance 
  business                               25,773           22,656 
                                ---------------  --------------- 
                                         53,824           47,615 
 Administrative expenses 
 Investment administration 
  services                               15,246           14,549 
 Insurance and life assurance 
  business                               10,891           10,329 
                                         26,137           24,879 
 Interest income 
 Investment administration 
  services                                   86               72 
 Insurance and life assurance 
  business                                  100               77 
                                            186              149 
 Shareholder tax on profit 
  on ordinary activities 
 Investment administration 
  services                                2,446            1,999 
 Insurance and life assurance 
  business                                2,403            2,242 
                                          4,849            4,241 
 Profit before tax 
 Investment administration 
  services                               12,543           10,174 
 Insurance and life assurance 
  business                              (9,517)            7,163 
                                          3,026           17,337 
 
 
                                          As at           As at 
                                  31 March 2020    30 September 
                                                           2019 
                                        GBP'000         GBP'000 
 Net assets 
 Investment administration 
  services                               63,109          61,009 
 Insurance and life assurance 
  business                               57,000          54,509 
                                ---------------  -------------- 
                                        120,109         115,518 
 

The figures above comprise the results of the companies that fall directly into each segment, as well as a proportion of the results from the other Group companies that only provide services to the revenue-generating companies. This therefore has no effect on revenue, but has an effect on the profit before tax and net assets figures.

5. Earnings per share

 
                                      Six months to    Six months to 
                                      31 March 2020    31 March 2019 
 
 Profit 
 Profit for the year and earnings          GBP22.5m         GBP18.2m 
  used in basic and diluted 
  earnings per share 
 
 Number of shares 
 Number of shares used in basic 
  and diluted earnings per share             331.3m           331.3m 
 
 Earnings per share 
 Earnings per share - basic 
  and diluted                                  6.8p             5.5p 
 

6. Tax on profit on ordinary activities

UK tax is charged at 19% for the six month period ended 31 March 2020 (31 March 2019: 19%), representing the tax rate enacted at the reporting date. For the entities within the Group operating outside of the UK, tax is charged at the relevant rate in each jurisdiction.

7. Deferred tax

 
 
                             Accelerated 
                                 capital   Share based   Policyholder 
 Deferred tax liability       allowances      payments            tax      Total 
 
                                 GBP'000       GBP'000        GBP'000    GBP'000 
 At 1 October 2018                     -             -         12,570     12,570 
 Charge to income                     61             -            617        678 
------------------------  --------------  ------------  -------------  --------- 
 At 30 September 2019                 61             -         13,187     13,248 
 Credit to income                      -             -       (12,720)   (12,720) 
 At 31 March 2020                     61             -            467        528 
------------------------  --------------  ------------  -------------  --------- 
 
 
 
 
                       Accelerated                 Other deductible 
 Deferred tax              capital   Share based          temporary   Policyholder 
  asset                 allowances      payments        differences            tax     Total 
 
                           GBP'000       GBP'000            GBP'000        GBP'000   GBP'000 
 At 1 October 
  2018                          44             -                  -              -        44 
 Charge to income             (44)           110                 47              -       113 
------------------  --------------  ------------  -----------------  -------------  -------- 
 At 30 September 
  2019                           -           110                 47              -       157 
 Credit to income                -             -                  -          7,927     7,927 
 At 31 March 2020                -           110                 47          7,927     8,084 
------------------  --------------  ------------  -----------------  -------------  -------- 
 

8. Policyholder income and expenses

 
                                                             Six months 
                                        Six months to 31    to 31 March 
                                              March 2020           2019 
                                                 GBP'000        GBP'000 
 Net income / (expense) attributable 
  to policyholder returns                       (24,312)        (5,098) 
 Policyholder tax (charge) 
  / credit                                        24,312          5,098 
 

This relates to income and expenses, and the associated tax charges, on policyholder assets and liabilities. As any gains and losses on assets are offset entirely by the gains and losses on linked liabilities, the net impact on profit is GBPnil.

There have been substantial net expenses attributable to policyholder assets in the six month period ended 31 March 2020. This has arisen from the deemed capital losses on policyholder assets, as a result of the market falls in relation to the COVID-19 pandemic. This is offset entirely by the policyholder tax credit, which has arisen because the deferred tax liability from the previous period has been reduced to zero, with a deferred tax asset recognised in its place.

9. Provisions

 
                                                                 30 September 
                                    31 March 2020                        2019 
                                          GBP'000                     GBP'000 
 Balance brought forward                   24,564                      19,137 
 Increase in dilapidations 
  provision                                    26                          38 
 Increase in ILInt non-linked 
  unit provision                                1                           3 
 Increase/(Decrease) in ILUK 
  tax provision                            12,321                       5,585 
 Release of rent provision                      -                       (102) 
 Other provisions                               -                        (97) 
---------------------------------  --------------  -------------------------- 
 Balance carried forward                   36,912                      24,564 
---------------------------------  --------------  -------------------------- 
 
 Dilapidations provisions                     439                         413 
 ILInt non-linked unit provision               40                          39 
 ILUK tax provision                        36,433                      24,112 
                                           36,912                      24,564 
---------------------------------  --------------  -------------------------- 
 

ILUK tax provision comprises claims received from HMRC that are yet to be returned to policyholders, charges taken from unit-linked funds and claims received from HMRC to meet current and future policyholder tax obligations.

10. Investments and cash held for the benefit of policyholders

 
                           As at        As at           As at           As at 
                        31 March     31 March    30 September    30 September 
                            2020         2020            2019            2019 
                            Cost   Fair value            Cost      Fair value 
 ILInt                   GBP'000      GBP'000         GBP'000         GBP'000 
 Cash and cash 
  equivalents 
  held for the 
  benefit of 
  the policyholder       120,571      120,571         101,065         101,065 
 Investments 
  held for the 
  benefit of 
  the policyholder     1,294,859    1,303,258       1,218,143       1,440,852 
-------------------  -----------  -----------  --------------  -------------- 
                       1,415,430    1,423,829       1,319,208       1,541,917 
-------------------  -----------  -----------  --------------  -------------- 
 
   ILUK 
 Cash and cash 
  equivalents 
  held for the 
  benefit of 
  the policyholder     1,386,138    1,386,138       1,109,214       1,109,214 
 Investments 
  held for the 
  benefit of 
  the policyholder    12,698,531   12,600,222      11,994,153      14,013,917 
-------------------  -----------  -----------  --------------  -------------- 
                      14,084,669   13,986,360      13,103,367      15,123,131 
-------------------  -----------  -----------  --------------  -------------- 
 
 Total                             15,410,189                      16,665,048 
-------------------  -----------  -----------  --------------  -------------- 
 

All amounts are current as customers are able to make same-day withdrawal of available funds and transfers to third-party providers are generally performed within a month.

These assets are held to cover the liabilities for unit-linked investment contracts. All contracts with customers are deemed to be investment contracts and, accordingly, assets are 100% matched to corresponding liabilities.

11. Deferred acquisition costs and deferred income liability

Deferred acquisition costs

 
                                                    30 September 
                                    31 March 2020           2019 
                                          GBP'000        GBP'000 
 Opening balance                           50,443         46,073 
 Capitalisation of deferred 
  income                                    6,217         11,668 
 Amortisation of deferred income          (3,774)        (7,298) 
---------------------------------  --------------  ------------- 
 Change in deferred acquisition 
  costs                                     2,443          4,370 
---------------------------------  --------------  ------------- 
 
 Closing balance                           52,886         50,443 
---------------------------------  --------------  ------------- 
 

Deferred income liability

 
                                                        30 September 
                                        31 March 2020           2019 
                                              GBP'000        GBP'000 
 Opening balance                               50,443         46,073 
 Capitalisation of deferred 
  income                                        6,217         11,668 
 Amortisation of deferred income              (3,774)        (7,298) 
-------------------------------------  --------------  ------------- 
 Change in deferred income liability            2,443          4,370 
-------------------------------------  --------------  ------------- 
 
 Closing balance                               52,886         50,443 
-------------------------------------  --------------  ------------- 
 

12. Loans

 
                                 GBP'000 
 At 1 October 2018                 1,189 
 Interest income accrued               3 
 Interest received                   (3) 
 Loan drawdowns                       20 
 Impairment losses on loans         (24) 
------------------------------  -------- 
 At 30 September 2019              1,185 
 Interest income accrued              30 
 Interest received                  (23) 
 Loan drawdowns                    1,071 
 Impairment losses on loans         (21) 
------------------------------  -------- 
 At 31 March 2020                  2,242 
------------------------------  -------- 
 

13. Trade and other receivables

 
                               As at           As at 
                       31 March 2020    30 September 
                                                2019 
                             GBP'000         GBP'000 
 Other receivables             3,232           6,510 
-------------------  ---------------  -------------- 
                               3,232           6,510 
-------------------  ---------------  -------------- 
 

14. Trade and other payables

 
                                                              As at 
                                          As at        30 September 
                                  31 March 2020                2019 
                                        GBP'000             GBP'000 
 Trade payables                           2,188                 498 
 PAYE and other taxation                  1,324               1,343 
 Other payables                           8,326               8,242 
 Accruals and deferred income             6,611               6,941 
------------------------------  ---------------      -------------- 
                                         18,449              17,024 
------------------------------  ---------------      -------------- 
 
 

15. Related parties

There were no material changes to the related party transactions during the period.

16. Contingent liabilities

In January 2020 the Company received notice from HMRC that the inclusion of Integrated Application Development Pty Ltd (IAD) in the UK VAT group was terminated with effect from 16 July 2016. The Company included IAD in the UK VAT group having taken specialist advice to ensure its actions were in accordance with the relevant laws. The consequence of the exclusion of IAD from the UK VAT group is that the services provided from Australia would now be subject to reverse-charge VAT.

HMRC's notice states that the VAT due since July 2016 will be approximately GBP4.3m and that going forward there would be an additional annual VAT charge of approximately GBP1.4m. The Company does not yet know whether HMRC will charge interest and/or a penalty.

The Company has opened a discussion with HMRC about its decision to exclude IAD from the UK VAT group, therefore the financial implications of this notice remain uncertain, pending the outcome of the reconsideration of the exclusion.

Due to the ongoing uncertainty around the additional VAT charges, pending the outcome of the dialogue with HMRC, the Directors do not believe it would be appropriate to recognise a provision in the accounts.

17. Events after the reporting date

There are no events subsequent to the year-end that require disclosure in, or amendment to the financial statements.

18. Dividends

During the six month period to 31 March 2020 the Company paid an interim dividend of GBP17.2m to shareholders in respect of financial year 2019. This was in addition to the first interim dividend of GBP8.6m in respect of financial year 2019, which was paid in June 2019. The financial total of GBP25.8m compares with a full year interim dividend of GBP21.2m in respect of the full financial year 2018.

DIRECTORS, COMPANY DETAILS, ADVISERS

Executive Directors

Alexander Scott

Ian Taylor

Michael Howard

Jonathan Gunby (appointed 2 March 2020)

Non-Executive Directors

Richard Cranfield

Christopher Munro

Neil Holden

Caroline Banszky

Victoria Cochrane

Robert Lister

Company Secretary

Helen Wakeford

Independent Auditor

BDO LLP, 150 Aldersgate Street, London, EC1A 4AB

Solicitors

Eversheds Sutherland (International) LLP, One Wood Street, London, EC2V 7WS

Corporate Advisers

Peel Hunt LLP, Moor House, 120 London Wall, London, EC2Y 5ET

Principal Bankers

NatWest Bank Plc, 135 Bishopsgate, London, EC2M 3UR

Registrars

Equiniti Group plc, Sutherland House, Russell Way, Crawley, RH10 1UH

Registered Office

29 Clement's Lane, London, EC4N 7AE

Website

www.integrafin.co.uk

Company number

08860879

LEI

213800CYIZKXK9PQYE87

IntegraFin Holdings plc, 29 Clement's Lane, London, EC4N 7AE Tel: (020) 7608 4900 Fax: (020) 7608 5300

(Registered office: as above; Registered in England and Wales under number: 8860879)

The holding company of the Integrated Financial Arrangements Ltd group of companies.

This information is provided by RNS, the news service of the London Stock Exchange. RNS is approved by the Financial Conduct Authority to act as a Primary Information Provider in the United Kingdom. Terms and conditions relating to the use and distribution of this information may apply. For further information, please contact rns@lseg.com or visit www.rns.com.

END

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