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| Share Name | Share Symbol | Market | Type | Share ISIN | Share Description |
|---|---|---|---|---|---|
| Jtc Plc | LSE:JTC | London | Ordinary Share | JE00BF4X3P53 | ORD GBP0.01 |
| Price Change | % Change | Share Price | Bid Price | Offer Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
|---|---|---|---|---|---|---|---|---|---|---|
| -3.00 | -0.36% | 835.00 | 834.00 | 837.00 | 844.00 | 831.00 | 836.00 | 71,962 | 12:27:23 |
| Industry Sector | Turnover | Profit | EPS - Basic | PE Ratio | Market Cap |
|---|---|---|---|---|---|
| Unit Inv Tr, Closed-end Mgmt | 257.52M | 21.38M | 0.1291 | 64.91 | 1.39B |
From Apr 2022 to Apr 2024
TIDMJTC
RNS Number : 7107V
JTC PLC
11 April 2023
JTC PLC
("the Company") together with its subsidiaries ("the Group" or "JTC")
Full year results for the year ended 31 December 2022
A year of exceptional organic growth, inorganic consolidation and cash generation, with strong momentum carried into 2023
Hot Features
Premium
As reported Underlying*
2022 2021 Change 2022 2021 Change
----------------------------- ------ ----- ------- ------ ----- ------
Revenue (GBPm) 200.0 147.5 +35.6% 200.0 147.5 +35.6%
----------------------------- ------ ----- ------- ------ ----- ------
EBITDA (GBPm) 56.1 26.6 +110.9% 66.0 48.4 +36.4%
----------------------------- ------ ----- ------- ------ ----- ------
EBITDA margin 28.0% 18.0% +10.0pp 33.0% 32.8% +0.2pp
----------------------------- ------ ----- ------- ------ ----- ------
Operating profit/EBIT (GBPm) 33.8 9.0 +275.9% 43.8 30.8 +42.1%
----------------------------- ------ ----- ------- ------ ----- ------
Profit before tax (GBPm) 35.9 27.8 +29.3% 34.1 24.9 +36.7%
----------------------------- ------ ----- ------- ------ ----- ------
Earnings per share (p)** 23.92 20.49 +16.7% 33.27 25.55 +30.2%
----------------------------- ------ ----- ------- ------ ----- ------
Cash conversion 91% 79% +12pp 91% 87% +4pp
----------------------------- ------ ----- ------- ------ ----- ------
Net debt (GBPm) 120.4 117.2 +3.2 104.8 113.3 -8.5
----------------------------- ------ ----- ------- ------ ----- ------
Dividend per share (p) 9.98 7.67 +30.1% 9.98 7.67 +30.1%
----------------------------- ------ ----- ------- ------ ----- ------
* For further information on our alternative performance measures ("APM") see the appendix to the CFO Review.
** Average number of shares (thousands) for 2022: 145,137 (2021: 130,044)
strong financial performance
-- Revenue +35.6% achieving GBP200.0m milestone, driven by record net organic growth of 12.0% (2021: 9.6%)
-- Underlying EBITDA +36.4% to GBP66.0m (2021: GBP48.4m) with an improvement in underlying EBITDA margin to 33.0% (2021: 32.8%)
-- Record new business wins +17.7% to GBP24.6m (2021: GBP20.9m)
-- Strong underlying cash conversion of 91% (2021: 87%) substantially reducing leverage in the period by 0.75x, bringing it to 1.59x underlying EBITDA at period end, towards the lower end of the guidance range of 1.5 to 2.0x, providing headroom for further growth
-- Total dividend +30.1% at 9.98p (2021: 7.67p)
Strategic momentum
-- Commercial Office further established to drive innovation and growth, which has delivered strong results, with Banking revenues of GBP11m, Tax Compliance Revenues of GBP9m and Strategic Transformation Revenues of GBP6m
-- Primarily a year of consolidation for inorganic growth, with the seven acquisitions made in 2021 integrating well onto the JTC platform
-- Strategically important NYPTC acquisition made in Q4, enhancing our growing US business -- Maintained our well invested platform, investing for long-term growth -- Unique Shared Ownership culture underpinning industry leading employee retention
growth Outlook
-- Good momentum continued in the new year, with strong net organic growth expected to continue in 2023 and beyond
-- Healthy pipeline of M&A opportunities across both Divisions
-- Remain well on track to deliver the Galaxy era plan, doubling from FY20 position, earlier than anticipated
-- All medium-term guidance metrics maintained: net organic revenue growth of 8% - 10% per annum; underlying EBITDA margin of 33% - 38%; cash conversion of 85% - 90% and net debt up to 2.0x underlying EBITDA
Nigel Le Quesne, CEO of JTC, said:
"2022 was arguably our best year ever in my 30 years at JTC. We reached the GBP200m revenue milestone, generated 12.0% net organic revenue growth, secured record new business wins of GBP24.6m and delivered an underlying EBITDA margin of 33.0%. All of this was achieved while integrating a record seven acquisitions from 2021 onto our global platform, completing the strategically important NYPTC deal at an attractive multiple in Q4 and reducing our leverage to 1.59x underlying EBITDA. The Group has once again extended its 35 year track record of profitable growth and carries strong momentum into 2023. We expect to exceed our guidance for organic growth and maintain a healthy pipeline of acquisition opportunities. Thanks to the outstanding efforts of our global team of employee-owners, we are on course to deliver our Galaxy era business some two years earlier than anticipated."
ENQUIRIES:
JTC PLC +44 (0) 1534 700 000
Nigel Le Quesne, Chief Executive Officer
Martin Fotheringham, Chief Financial Officer
David Vieira, Chief Communications Officer
Camarco +44(0)20 3757 4985
Geoffrey Pelham-Lane
Georgia Edmonds
Sam Morris
A presentation for analysts will be held at 09:30 today via audio-conference arranged by Camarco.
An audio-cast of the presentation will subsequently be made available on the JTC website: www.jtcgroup.com/investor-relations
FORWARD LOOKING STATEMENTS
This announcement may contain forward looking statements. No forward-looking statement is a guarantee of future performance and actual results or performance or other financial condition could differ materially from those contained in the forward looking statements. These forward-looking statements can be identified by the fact they do not relate only to historical or current facts. They may contain words such as "may", "will", "seek", "continue", "aim", "anticipate", "target", "projected", "expect", "estimate", "intend", "plan", "goal", "believe", "achieve" or other words with similar meaning. By their nature forward looking statements involve risk and uncertainty because they relate to future events and circumstances. A number of these influences and factors are outside of the Company's control. As a result, actual results may differ materially from the plans, goals and expectations contained in this announcement. Any forward-looking statements made in this announcement speak only as of the date they are made. Except as required by the FCA or any applicable law or regulation, the Company expressly disclaims any obligation or undertaking to release publicly any updates or revisions to any forward-looking statements contained in this announcement.
ABOUT JTC
JTC is a publicly listed, global professional services business with deep expertise in fund, corporate and private client services. Every JTC person is an owner of the business, and this fundamental part of our culture aligns us with the best interests of all our stakeholders. Our purpose is to maximize potential and our success is built on service excellence, long-term relationships and technology capabilities that drive efficiency and add value.
www.jtcgroup.com
Chief Executive Officer's review
Growing Together
NIGEL LE QUESNE
CHIEF EXECUTIVE OFFICER
An exceptional year
I am delighted to be able to start the review of 2022 by stating that it has been arguably the best ever in my 30 years at JTC.
AHEAD OF PLAN TO DELIVER OUR GALAXY ERA GOAL
As a business with a track record of 35 consecutive years of revenue and profit growth, we are proud of our ability to deliver against stretching multi-year business plans, which we call eras. After listing in March 2018, we embarked on our 'Odyssey era' business plan and doubled the size of the Group (as measured by revenue and underlying EBITDA) by the end of 2020. We then set ourselves the challenge of doubling again and named this latest era 'Galaxy', anticipating a four to five year timeframe. 2021 saw us deliver a record seven acquisitions as well as net organic revenue growth of 9.6% (17.5% gross). This excellent start to the Galaxy era continued in 2022 when we delivered a record 12.0% net organic revenue growth (18.4% gross) and acquired NYPTC in Q4, alongside successfully integrating the seven acquisitions from 2021. This exceptional performance against our strategy means that we are ahead of plan and well on way to delivering Galaxy by the end of 2023.
FINANCIAL PERFORMANCE
Revenue grew 35.6% to reach GBP200.0m for the first time (2021: GBP147.5m) another significant milestone and underlying EBITDA increased 36.4% to GBP66.0m (2021: GBP48.4m). Net organic revenue growth was a record 12.0% (2021: 9.6%) driven by another record in new business wins of GBP24.6m (2021: GBP20.9m). Despite the excellent organic growth performance and associated costs of on-boarding new business, underlying EBITDA margin also increased by 0.2pp to 33.0% (2021: 32.8%). Cash conversion was once again robust and above guidance at 91% (2021: 87%) and even with the acquisition of NYPTC in Q4, which was funded from cash, leverage stood at 1.59x underlying EBITDA at period end, which is towards the lower end of our guidance range of 1.5x to 2.0x.
GROWING, WHATEVER THE WEATHER
Our ability to grow consistently even through periods of macro volatility is something I am often asked to explain and it is always an opportunity to highlight the strengths of our business model and global platform. In simple terms, we like to think of it as in-built load balancing capabilities, but to a large degree it stems from a culture of constant improvement and an expectation of improved financial performance year on year, with every team member knowing that we never settle for less. When the macro environment is buoyant, we typically benefit from greater flows of new business, especially from new clients, as institutions and individuals seek to establish and launch new structures. When market conditions are less favourable, we often observe a modest reduction in 'new work from new clients' business volumes, but this is countered by an increase in activity from existing clients as they respond to threats and opportunities in relation to their current structures. As a professional services business with client contracts that now typically span 14 years or more, the increased activity within the existing client base generates meaningful growth. In addition, we are constantly innovating and expanding our range of services - both through M&A activity and internal commercial development - to grow the scope of engagement with existing clients and to win new ones. The most recent examples of service line expansion include a banking platform (incorporating foreign exchange, treasury and custody), tax compliance regulatory reporting and strategic transformation solutions. This constant desire to innovate and support our clients, extend our relationships and services, supplemented by new acquisitions, ensures JTC grows consistently year on year irrespective of the prevailing external factors.
INSTITUTIONAL CLIENT SERVICES DIVISION
Revenue increased 47.4% to GBP136.7m (2021: GBP92.7m) with a 53.5% increase in underlying EBITDA to GBP43.0m (2021: GBP28.0m). Pleasingly, and in keeping with the consistent progress seen over the past two years, the underlying EBITDA margin increased by 1.3pp to 31.5% (2021: 30.2%) and has increased 3.6pp since 2020. Net organic growth was strong and increased by 3.1pp to 14.6% (2021: 11.5%) with the annualised value of new business wins increasing by 31% to a record GBP17.2m (2021: GBP13.1m).
In 2021 we completed a record seven acquisitions within the Division, creating a natural focus in 2022 around integration, organisation and value capture. The INDOS and Ballybunion businesses contributed to our growing platform in Ireland, which also saw us move to a new environmentally friendly office in Dublin and secure a fund services licence, giving us the complete set of fund administration, Alternative Investment Fund Manager (AIFM), depositary and corporate services in the jurisdiction. The RBC cees business, re-branded to JTC Employer Solutions, remains one of our most successful acquisitions and continued to go from strength to strength in terms of growth and margin. We also added the innovative perfORM Operational Due Diligence (ODD) business, which is an excellent example of how we expand our range of services through M&A in a way that complements our organic growth ambitions. Crucially, we assembled the pieces that will form the next phase of our push into the large, high-growth US market. The SALI Fund Services, Segue Partners and EFS acquisitions have been brought together with our original market-entry deal (NESF, which was acquired in 2020) to create a substantial US ICS platform of scale. Our US business now has over 130 employees across seven offices, serving over 410 clients, including some of the biggest global names in asset management and insurance.
Outside of those regions bolstered by recent M&A activity, we also saw good growth in our UK and Luxembourg offices with stable performance from the Netherlands, Channel Islands and South Africa. At the end of the year, the Division stood at some 900 people serving clients from 16 offices and generating 68.3% of Group revenues. This scale and reach, combined with our focus on providing client service excellence enabled by best-in-class technology, stands us in good stead to succeed in a competitive market.
In the second half of the year, the Group Head of ICS, Jon Jennings, left the business for a new challenge after four successful years with the Group. Jon was replaced by Dean Blackburn, who had been appointed the Group Chief Commercial Officer in 2020 and after a successful tenure working with the ICS team he was promoted to Group Head of ICS post period end, in January 2023.
Overall, the ICS Division made exceptional progress in 2022 and has been a major component of the Group's accelerated progress through the Galaxy era. As the Division continues to scale, particularly in the US, we anticipate further strong organic growth, additional opportunities for M&A and more service line innovation. I know that Dean is ambitious for long-term success for the Division and he is supported by a world-class, global team.
PRIVATE CLIENT SERVICES DIVISION
Revenue increased 15.7% to GBP63.4m (2021: GBP54.8m) with an increase of 12.9% in underlying EBITDA to GBP23.0m (2021: GBP20.4m). The underlying EBITDA margin decreased slightly, as anticipated, by 0.9pp to 36.3% (2021: 37.2%) but remains squarely within our guidance range of 33% - 38% and is as a result of continued investment in the PCS platform. Reflecting this investment, net organic growth increased 1.6pp to 8.7% (2021: 7.1%) with the annualised value of new business wins being GBP7.4m, which was a strong result against a tough 2021 comparator of GBP7.8m that included the Group's largest ever single win for 'Project Amaro', the provision of 'white label' services to a US-based global bank and its clients. Project Amaro is a prime example of our ability to deliver strategic transformation services to large clients in a range of financial services sub-sectors, including banking, investment management, legal and trust services. Importantly, strategic transformation spans both our Divisions and will be actively promoted as a JTC capability in 2023, alongside a direct to market programme that will target specific prospective clients.
In the final quarter of the year we acquired New York Private Trust Company (NYPTC), a high quality private client business headquartered in Delaware.
This deal enabled us to become the first non-US, non-bank firm to be licensed to provide trust company services from Delaware, an important competitive advantage that we will leverage as we use the acquisition to help build out our domestic trust offering in the US. Post period end, we also secured a licence to operate in the Bahamas to support Project Amaro, further expanding the footprint of the PCS business and providing greater optionality for clients.
More broadly, the Division's global network continued to deliver growth across a number of key regions, including its original nexus in the Channel Islands.
Under Iain's consistent leadership and drive for growth and innovation, the PCS Division continues to be regarded as the pre-eminent trust company business and a leader in its markets. It is now evolving to become more than just a trust company and this is evidenced by growth in revenues from sophisticated and enhanced services, such as JTC Private Office, and Group wide services including strategic transformation, treasury, custody, tax compliance and regulatory reporting. We are successfully redefining the parameters of a world-class PCS offering, which in turn enlarges our addressable market. This innovative and growth-orientated approach, coupled with our geographic expansion, particularly in the US, and well-established reputation for client service excellence, sets the PCS Division on an exciting course for 2023 and beyond.
RISK
JTC continues to have an excellent record in managing the risks associated with being a leading regulated professional services business. In 2022 the senior risk team once again focused a large amount of their time and effort on developing and enhancing our Risk & Compliance function globally to meet the ever evolving and increasing burden of international regulation. While this brings a number of complex challenges, it also provides huge opportunities for growth and we are embracing these as clients of all sizes, but especially larger and more complex organisations, look to us for support and recognise the value we offer in this area. Emerging service lines such as strategic transformation, tax compliance and regulatory reporting are all driven, in part or in whole, by the expanding regulatory landscape.
We continue to see long-term emerging risks come into greater focus, and in particular, transition risks associated with the world moving to a low carbon future. In 2022, we created an ESG Forum within the Executive arm of the business to manage and deliver our internal sustainability roadmap and oversee target setting and disclosures. At Board level, the former Audit & Risk Committee was separated into an Audit Committee and a new Risk & Governance Committee, with the latter taking responsibility for oversight of risk at a Group level, as well as providing guidance on our ongoing sustainability journey and the commercial opportunities the Group might capture through the provision of ESG services to clients. We were once again a Carbon Neutral+ organisation in 2022 and post period end, have set ourselves the goal to achieve net zero by 2030 at the latest. More detail, including our latest TCFD disclosures, can be read in the Sustainability section of the Annual Report.
At the time of writing, the conflict in Ukraine is entering its second year and it remains unclear how or when it will come to an end. As reported last year, as a Group, we have virtually no exposure to Russia, Ukraine or Belarus with no operations there and limited exposure amongst a small number of clients to those countries. However, we remain acutely aware of our responsibilities in relation to sanctions compliance and enforce all such measures rigorously. The knock-on effects relating to energy prices, inflation and interest rates have been monitored closely at all times and successfully navigated to date.
OUTLOOK
2022 was an exceptional year for JTC and I am delighted with the accelerated progress made towards the Galaxy era goal of once again doubling the size of the Group. Our ability to grow consistently through periods of volatility is a fundamental feature of the business that has been refined over 35 years of operations. The natural rhythm we observe between growth contributions from new and existing clients is supplemented by our ability to source and secure the right acquisitions in a consolidating market and to shape our own future through sophisticated innovation and service expansion.
None of this would be possible without our people and I am more convinced than ever that our shared ownership culture is the unique and vital glue that bonds us together and allows us to execute our strategies with passion, energy and commitment. This culture infuses every aspect of our approach to growth, including our proven ability to integrate acquisitions fully onto the JTC platform.
Our two Divisions continue to provide balance and diversification to the Group with the added catalyst of the Commercial Office and are generating more cross-pollination opportunities than ever before, particularly in the exciting area of strategic transformation.
Looking ahead, we have carried good momentum into 2023 and anticipate continued strong organic growth. We are energised by the Galaxy era progress already made as well as the prospect of what is possible in the future. We will continue to ensure that our platform remains well-invested at all times and that our talented global team are ready and equipped to grow with the business, maximise their individual potential and exceed the expectations of our clients. In a sector that remains primed for consolidation, we have a healthy pipeline of opportunities and will maintain our disciplined approach to M&A. JTC will continue to innovate and shape the markets we serve in a way that supports long-term value creation for the Group and its stakeholders.
In concluding, I once again extend my thanks to every member of the growing, talented and market leading JTC team for their efforts in 2022. We are both stronger together and growing together.
Nigel le Quesne
CHIEF EXECUTIVE OFFICER
Chief Financial Officer's review
Record revenue growth and profits
Martin Fotheringham
CHIEF FINANCIAL OFFICER
REVENUE
In 2022, revenue was GBP200.0m, an increase of GBP52.5m (+35.6%) from 2021. Revenue growth on a constant currency basis was +32.0% (2021: +30.9%).
Net organic growth was a record high 12.0% and above our medium-term guidance range of 8% - 10%. The three year average stands at 9.8% and the outstanding performance across both these metrics provides continued evidence and assurance of our ability to deliver tangible revenue growth from our capital allocation choices.
Gross new revenue for the year was 18.4% (2021: 17.5%), driven by new business wins of GBP24.6m (2021: GBP20.9m), with GBP14.4m recognised in the year (2021: GBP9.8m). Additional revenue contributed from acquisitions in 2022 was GBP32.8m (2021: GBP24.7m). This was offset by attrition of 6.4% (2021: 7.9%), with the three year average now 7.7% (2021: 7.9%). We have seen the longevity of our client relationships increase and this is driving the reduction in attrition rates.
The retention of revenues that were not end of life increased to 98.3% (2021: 97.4%). The rolling three year average improved to 97.4%.
We have seen strong growth in the UK & Channel Islands, and particularly strong growth in the US where we continue to expand our capabilities whilst integrating numerous acquisitions.
As our business has grown, our revenues have become less concentrated by region. The table below illustrates clearly that the US is an increasingly large component of our business. Given the organic and inorganic growth opportunities in that region, we anticipate that we will see a continuance of that trend.
Geographical growth is summarised as follows:
2022 2021
Revenue Revenue GBP +/- % +/-
--------------------- ---------- ---------- ---------- -------
UK & Channel Islands GBP107.8m GBP87.0m +GBP20.8m +23.8%
US GBP38.0m GBP15.7m +GBP22.3m +142.9%
Rest of Europe GBP34.3m GBP29.9m +GBP4.4m +14.9%
Rest of the World GBP19.9m GBP14.9m +GBP5.0m +33.2%
GBP200.0m GBP147.5m +GBP52.5m +35.6%
---------- ---------- -------------------------------- -------
Off the back of a strong year for new business, we continue to report a healthy pipeline of GBP45.8m at 31 December 2022 (2021: GBP47.9m).
Revenue growth, on a constant currency basis, is summarised as follows:
2021 Revenue GBP151.6m ------------------------------------- --------- Lost - JTC decision (GBP0.3m) ------------------------------------- --------- Lost - Moved service provider (GBP2.0m) ------------------------------------- --------- Lost - End of life/no longer required (GBP6.0m) ------------------------------------- --------- Net more from existing clients GBP13.5m ------------------------------------- --------- New clients GBP10.4m ------------------------------------- --------- Acquisitions* GBP32.8m ------------------------------------- --------- 2022 Revenue GBP200.0m ------------------------------------- ---------
* When JTC acquires a business, the acquired book of clients are defined as inorganic for the first two years of JTC ownership. Acquired clients contributed an additional GBP32.8m in 2022 and is broken down as follows: NYPTC GBP1.0m, EFS GBP1.5m, SALI GBP13.3m, Ballybunion GBP1.7m, perfORM GBP0.2m, Segue GBP1.3m, INDOS GBP1.5m, and RBC cees GBP12.3m.
Management re-iterates its medium-term guidance range of 8% - 10% net organic growth, albeit with the expectation that short-term growth will be in excess of this guidance range.
UNDERLYING EBITDA AND MARGIN PERFORMANCE
Underlying EBITDA in 2022 was GBP66.0m, an increase of GBP17.6m (36.4%) from 2021.
The underlying EBITDA margin improved to 33.0% (2021: 32.8%) and now sits at the beginning of our medium-term guidance range. Despite a challenging global economic and political backdrop, the business delivered on the anticipated margin improvement alongside record revenue growth and the continued integration of acquisitions.
Whilst we have been pleased with achieving an underlying EBITDA margin within our guidance range, we have noted that this margin has been impacted by inflationary cost increases and the continued upfront investment in human capital that is required to deliver record levels of growth.
This investment can inherently slow margin progression. Experience tells us that it can take time and upfront costs before we are delivering optimal margins on the new business that we win. However, we believe that this initial investment is key to ensuring the continuing longevity of our client relationships.
Management re-iterates its medium-term guidance range of 33% - 38%.
INSTITUTIONAL CLIENT SERVICES
Revenue increased by 47.4% when compared with 2021.
Net organic growth improved significantly to 14.6% (2021: 11.5%), with a rolling three year average of 11.0% and strong growth in the US, UK and Luxembourg. Attrition for the Division was lower at 7.5% (2021: 8.7%), 5.6% of which were end of life losses.
Revenue growth, on a constant currency basis, is summarised below.
The Division's underlying EBITDA margin increased from 30.2% in 2021 to 31.5% in 2022. This continued improvement is the result of delivering the revised operating model alongside the ongoing, and successful, integration of the businesses acquired in 2021.
The volume of acquisitions (11) in the last three years has meant that the Division has required continuous investment and we are pleased that margins have improved.
REVENUE GROWTH ICS ------------------------------------- --------- 2021 Revenue GBP94.2m ------------------------------------- --------- Lost - JTC decision (GBP0.2m) ------------------------------------- --------- Lost - Moved service provider (GBP1.2m) ------------------------------------- --------- Lost - End of life/no longer required (GBP4.1m) ------------------------------------- --------- Net more from existing clients GBP9.1m ------------------------------------- --------- New clients GBP7.1m ------------------------------------- --------- Acquisitions* GBP31.8m ------------------------------------- --------- 2022 Revenue GBP136.7m ------------------------------------- ---------
* Acquired clients contributed an additional GBP31.8m in 2022 and is broken down as follows: EFS GBP1.5m, SALI GBP13.3m, Ballybunion GBP1.7m, perfORM GBP0.2m, Segue GBP1.3m, INDOS GBP1.5m, and RBC cees GBP12.3m.
PRIVATE CLIENT SERVICES
Revenue increased by 15.7% from 2021.
Net organic growth was 8.7% (2021: 7.1%) with a rolling three year average of 8.3% (2021: 7.8%). Attrition for the Division was also lower at 4.8% (2021: 6.9%), 3.3% of which was for end of life losses.
Organic growth for the Division had been lower than normal whilst we onboarded the Amaro mandate. This was a complex mandate to fulfil and the solution required 15 months of investment with the client before we could recognise any revenue. The solution was delivered on time and we started recognising revenues from 1 October 2022. This mandate will generate a minimum of $4m of annual revenues.
Revenue growth, on a constant currency basis, is summarised below.
The Division's underlying EBITDA margin decreased from 37.2% in 2021 to 36.3% in 2022. The Division continues to perform very well and is comfortably within our medium-term guidance range. This reduction in margin is explained in large part by the above upfront investment required to deliver the Amaro solution.
REVENUE GROWTH PCS ------------------------------------- --------- 2021 Revenue GBP57.4m ------------------------------------- --------- Lost - JTC decision (GBP0.1m) ------------------------------------- --------- Lost - Moved service provider (GBP0.8m) ------------------------------------- --------- Lost - End of life/no longer required (GBP1.9m) ------------------------------------- --------- Net more from existing clients GBP4.4m ------------------------------------- --------- New clients GBP3.3m ------------------------------------- --------- Acquisitions* GBP1.0m ------------------------------------- --------- 2022 Revenue GBP63.4m ------------------------------------- ---------
* Acquired clients contributed an additional GBP1.0m in 2022 and is broken down as follows: NYPTC GBP1.0m.
PROFIT BEFORE TAX
The reported profit before tax was GBP35.9m (2021: GBP27.8m).
The depreciation and amortisation charge increased to GBP22.3m in 2022 from GBP17.6m in 2021. GBP3.5m of this increase was as a result of acquired intangible assets, GBP0.7m as a result of an increased charge for right-of-use assets reflecting the increased global footprint of the business, and GBP0.4m for the increased use of software reflecting the increased importance of technology in the business.
The increase in amortisation for acquired intangible assets (GBP3.5m) is significant but the direct result of the acquisitions we made in 2021.
Adjusting for non-underlying items, the underlying profit before tax for 2022 was GBP34.1m (2021: GBP24.9m).
NON-UNDERLYING ITEMS
Non-underlying items incurred in the period totalled a GBP1.9m credit (2021: GBP2.9m credit) and comprised the following:
2022 2021
GBPm GBPm
------------------------------------------------------- ------ ------
EBITDA
------------------------------------------------------- ------ ------
Employee Incentive Plan (EIP) 5.2 14.5
------------------------------------------------------- ------ ------
Acquisition and integration costs 3.4 6.6
------------------------------------------------------- ------ ------
Revision of ICS operating model 0.4 0.4
------------------------------------------------------- ------ ------
Office start-up costs 0.8 -
------------------------------------------------------- ------ ------
Other costs 0.2 0.3
------------------------------------------------------- ------ ------
Total non-underlying items within EBITDA 10.0 21.8
------------------------------------------------------- ------ ------
Profit before tax
------------------------------------------------------- ------ ------
Items impacting EBITDA 10.0 21.8
------------------------------------------------------- ------ ------
Loss/(gain) on revaluation of contingent consideration 0.1 (20.9)
------------------------------------------------------- ------ ------
Loss on settlement of contingent consideration - 0.7
------------------------------------------------------- ------ ------
(Gain) on bargain purchase of RBC cees - (5.4)
------------------------------------------------------- ------ ------
Foreign exchange (gains)/losses (11.9) 0.9
------------------------------------------------------- ------ ------
Total non-underlying items within profit before tax (1.9) (2.9)
------------------------------------------------------- ------ ------
We announced the distribution of the EIP awards in 2021 and the GBP5.2m charge in the current period relates to the second tranche of the awards that vested in July 2022.
Acquisition and integration costs were significantly lower (GBP3.4m) than the prior period and this reflects the fact that there were seven acquisitions in 2021 compared with one in 2022.
The business incurred GBP0.8m of non-underlying office start-up costs in relation to pre-trading expenses incurred in order to establish an additional fund administration offering in Ireland. This included significant up-front investment in personnel in order to meet regulatory requirements in advance of obtaining the licence to trade and generate revenues.
The foreign exchange gain of GBP11.9m relates to the year end revaluation of intercompany loans. Management considers these foreign exchange movements to be non-underlying items and not reflective of the underlying performance of the business.
TAX
The net tax charge in the year was GBP1.2m (2021: GBP1.1m). The cash tax charge was GBP2.8m (2021: GBP2.6m), but this is reduced by significant deferred tax credits of GBP1.5m (2021: GBP1.4m) as a result of movements in relation to the value of acquired intangible assets held on the balance sheet. Our effective tax rate decreased from 9.4% to 7.8% in 2022. The decrease is the result of the utilisation of US tax credits.
The Group regularly reviews its transfer pricing policy and is fully committed to responsible tax practices. Given the evolving nature and increasing complexity of the business, JTC performed a detailed review in 2022 and our policy continues to be fully compliant with OECD guidelines.
EARNINGS PER SHARE
Basic EPS increased by 16.7% to 23.92p. Adjusted underlying EPS increased by 30.2% and was 33.27p (2021: 25.55p).
Adjusted underlying basic EPS reflects the profit for the year adjusted to remove the impact of non-underlying items, amortisation of acquired intangible assets and associated deferred tax, amortisation of loan arrangement fees and unwinding of net present value discounts in relation to contingent consideration.
Every year we issue 1% of our share capital to the JTC EBT. This is equity that is allocated amongst all JTC staff and we believe this promotes better client service, a higher staff retention rate and cultivates our unique culture. Whilst this issuance dilutes EPS, we firmly believe that the benefits greatly outweigh the cost.
CASH FLOW AND DEBT
Underlying cash generated from operations was GBP60.3m (2021: GBP38.4m) and the underlying cash conversion was 91% (2021: 87%). It is extremely pleasing to deliver cash conversion better than our medium-term guidance during a period of record high organic growth. High levels of growth can come with short-term impacts to cash collection, but the business continues to effectively manage its working capital needs and management re-iterates its medium-term guidance range of 85% - 90%. We were pleased to reduce our pro-forma net investment days to 110 days at the end of the year (2021: 115 days).
Underlying net debt at the period end was GBP104.8m compared with GBP113.3m at 31 December 2021. We financed the acquisition of NYPTC in November without recourse to our debt facilities and by using cash we generated during the year. Leverage at the year end was 1.59x underlying EBITDA, a decrease of 0.75x from the level on 31 December 2021 (2.34x). Including the pro-forma EBITDA impact of the NYPTC acquisition, net leverage is 1.55x.
With no additional drawdowns in 2022, there continues to be undrawn funds of GBP69.3m available out of the GBP225m banking facilities secured in 2021.
dividend per share
We are pleased to propose a final dividend of 6.88p, resulting in a 2022 dividend per share of 9.98p (2021: 7.67p) which was a 30.1% increase on prior year. This is consistent with our dividend policy to declare at 30% of adjusted underlying EPS.
MARTIN FOTHERINGHAM
CHIEF FINANCIAL OFFICER
Appendix: Reconciliation of reported results to Alternative Performance Measures (APM s )
In order to assist the reader's understanding of the financial performance of the Group, APMs have been included to better reflect the underlying activities of the Group excluding specific items as set out in note 7 in the financial statements. The Group appreciates that APMs are not considered to be a substitute for, or superior to, IFRS measures but believes that the selected use of these may provide stakeholders with additional information which will assist in the understanding of the business.
An explanation of our key APMs and link to equivalent statutory measure has been detailed below.
Alternative performance measure Closest equivalent statutory measure APM Definition
------------------------------- ------------------------------------ -----------------------------------------------
net Organic revenue growth % Revenue Definition: Revenue growth from clients not
acquired through business combinations and
reported
on a constant currency basis where the prior
year results are restated using current year
consolidated income statement exchange rates.
Acquired clients are defined as inorganic for
the first two years of JTC ownership.
Purpose and strategic link: Enables the
business to monitor growth excluding
acquisitions
and the impact of external exchange rate
factors. The current strategy is to double the
size
of the business by a mix of organic and
acquisition growth and the ability to monitor
and
set clear expectations on organic growth is
vital to the successful execution of its
business
strategy.
Management's medium-term guidance range is 8% -
10%.
------------------------------- ------------------------------------ -----------------------------------------------
Underlying EBITDA % Profit/(loss) Definition: Earnings before interest, tax,
depreciation and amortisation excluding
non-underlying
items (see note 7 of the financial statements).
Purpose and strategic link: An
industry-recognised alternative measure of
performance which
has been at the heart of the business since its
incorporation and therefore fundamental to
the performance management of all business
units.
The measure enables the business to measure the
relative profitability of servicing clients.
Management's medium-term guidance range is 33%
- 38%.
------------------------------- ------------------------------------ -----------------------------------------------
Underlying cash conversion % Net cash from operating activities Definition: The conversion of underlying EBITDA
into cash excluding
non-underlying items.
Purpose and strategic link: Measures how
effectively the business is managing its
operating
cash flows. It differs to net cash from
operating profits as it excludes non-underlying
items
and tax, the latter in order to better compare
operating profitability to cash from operating
activities.
Management's medium-term guidance range is 85%
- 90%.
------------------------------- ------------------------------------ -----------------------------------------------
Underlying leverage Cash and cash equivalents Definition: Leverage ratio showing the relative
amount of third party debt that we have in
the business in comparison to underlying
EBITDA.
Purpose and strategic link: Ensures Management
can measure and control exposure to reliance
on third party debt in support of its inorganic
growth.
Management's medium-term guidance range is 1.5x
- 2.0x.
------------------------------- ------------------------------------ -----------------------------------------------
Adjusted underlying EPS (p) Basic Earnings Per Share Definition: Reflects the profit for the year
adjusted to remove the impact of non-underlying
items. Additionally, a number of other items
relating to the Group's acquisition activities,
including amortisation of acquired intangible
assets and associated deferred tax,
amortisation
of loan arrangement fees and unwinding of NPV
discounts in relation to contingent
consideration,
are removed.
Purpose and strategic link: Presents an
adjusted underlying EPS which is used more
widely
by external investors and analysts, and is in
addition the basis upon which the dividend is
calculated.
------------------------------- ------------------------------------ -----------------------------------------------
A reconciliation of our APMs to their closest equivalent statutory measure has been provided below.
1. ORGANIC GROWTH
2022 2021
GBPm GBPm
------------------------------------ ------ ------
Reported prior year revenue 147.5 115.1
------------------------------------ ------ ------
Impact of exchange rate restatement 4.1 (2.4)
------------------------------------ ------ ------
Acquisition revenues (21.2) (7.2)
------------------------------------ ------ ------
a. Prior year organic growth 130.4 105.5
------------------------------------ ------ ------
Reported revenue 200.0 147.5
------------------------------------ ------ ------
Less: acquisition revenues (54.0) (32.0)
------------------------------------ ------ ------
b. Current year organic growth 146.0 115.5
------------------------------------ ------ ------
Net organic growth % (b / a) -1 12.0% 9.6%
------------------------------------ ------ ------
2. UNDERLYING EBITDA
2022 2021
GBPm GBPm
------------------------------------ ------ ------
Reported profit 34.7 26.6
------------------------------------ ------ ------
Less:
------------------------------------ ------ ------
Income tax 1.2 1.1
------------------------------------ ------ ------
Finance cost 12.3 6.0
------------------------------------ ------ ------
Finance income (0.2) (0.1)
------------------------------------ ------ ------
Other (gains) (14.2) (24.7)
------------------------------------ ------ ------
Depreciation and amortisation 22.3 17.6
------------------------------------ ------ ------
Non-underlying items within EBITDA* 10.0 21.8
------------------------------------ ------ ------
Underlying EBITDA 66.0 48.4
------------------------------------ ------ ------
Underlying EBITDA % 33.0% 32.8%
------------------------------------ ------ ------
* As set out in note 7 in the financial statements
3. UNDERLYING CASH CONVERSION
2022 2021
GBPm GBPm
--------------------------------------------- ----- -----
Net cash generated from operating activities 53.3 28.9
--------------------------------------------- ----- -----
Less:
--------------------------------------------- ----- -----
Non-underlying cash items* 4.9 7.7
--------------------------------------------- ----- -----
Income taxes paid 2.1 1.8
--------------------------------------------- ----- -----
Acquisition normalisation** - 3.6
--------------------------------------------- ----- -----
a. Underlying cash generated from operations 60.3 42.0
--------------------------------------------- ----- -----
b. Underlying EBITDA 66.0 48.4
--------------------------------------------- ----- -----
Underlying cash conversion (a / b) 91% 87%
--------------------------------------------- ----- -----
* As set out in note 35.2 in the financial statements
** Acquisition normalisation refers to the following: In 2021, GBP3.6m of RBC cees revenues were billed in advance and collected by the previous owners in advance of JTC ownership.
4. UNDERLYING LEVERAGE
2022 2021
GBPm GBPm
-------------------------------------------------------------------- ------- -------
Cash and cash equivalents 48.9 39.3
-------------------------------------------------------------------- ------- -------
Bank debt (153.6) (152.6)
-------------------------------------------------------------------- ------- -------
Other debt - -
-------------------------------------------------------------------- ------- -------
a. Net debt - underlying (104.8) (113.3)
-------------------------------------------------------------------- ------- -------
b. Underlying EBITDA (see 2. for reconciliation to reported profit) 66.0 48.4
-------------------------------------------------------------------- ------- -------
Leverage (a / b) 1.59 2.34
-------------------------------------------------------------------- ------- -------
5. ADJUSTED UNDERLYING EPS
2022 2021
GBPm GBPm
----------------------------------------------------------------------------------------------- ----- -----
Profit for the year as per basic EPS 34.7 26.7
----------------------------------------------------------------------------------------------- ----- -----
Less:
----------------------------------------------------------------------------------------------- ----- -----
Non-underlying items* (1.9) (2.9)
----------------------------------------------------------------------------------------------- ----- -----
Amortisation of customer relationships, acquired software and brands 12.4 8.8
----------------------------------------------------------------------------------------------- ----- -----
Amortisation of loan arrangement fees 1.1 1.5
----------------------------------------------------------------------------------------------- ----- -----
Unwinding of NPV discounts for contingent consideration 3.5 0.6
----------------------------------------------------------------------------------------------- ----- -----
Temporary tax differences arising on amortisation of customer relationships, acquired software
and brands (1.5) (1.4)
----------------------------------------------------------------------------------------------- ----- -----
a. Adjusted underlying profit for the year 48.3 33.2
----------------------------------------------------------------------------------------------- ----- -----
b. Weighted average number of shares 145.1 130.0
----------------------------------------------------------------------------------------------- ----- -----
Adjusted underlying EPS (a / b) 33.27 25.55
----------------------------------------------------------------------------------------------- ----- -----
* As set out in note 7 in the financial statements
CONSOLIDATED INCOME STATEMENT
FOR THE YEARED 31 DECEMBER 2022
2022 2021
Note GBP'000 GBP'000
-------------------------------------------------------------------------- ---- --------- --------
Revenue 4 200,035 147,502
Staff expenses 5 (105,831) (89,540)
Other operating expenses 6 (35,570) (30,114)
Credit impairment losses 12 (3,092) (1,690)
Other operating income 44 61
Share of profit of equity-accounted investee 32 478 364
-------------------------------------------------------------------------- ---- --------- --------
Earnings before interest, taxes, depreciation and amortisation ("EBITDA") 56,064 26,583
-------------------------------------------------------------------------- ---- --------- --------
Comprising:
Underlying EBITDA 66,039 48,405
Non-underlying items 7 (9,975) (21,822)
-------------------------------------------------------------------------- ---- --------- --------
56,064 26,583
-------------------------------------------------------------------------- ---- --------- --------
Depreciation and amortisation 8 (22,261) (17,591)
-------------------------------------------------------------------------- ---- --------- --------
Profit from operating activities 33,803 8,992
-------------------------------------------------------------------------- ---- --------- --------
Other gains 9 14,201 24,707
Finance income 10 244 112
Finance cost 10 (12,313) (6,028)
-------------------------------------------------------------------------- ---- --------- --------
Profit before tax 35,935 27,783
-------------------------------------------------------------------------- ---- --------- --------
Comprising:
Underlying profit before tax 34,052 24,908
Non-underlying items 7 1,883 2,875
-------------------------------------------------------------------------- ---- --------- --------
35,935 27,783
-------------------------------------------------------------------------- ---- --------- --------
Income tax 11 (1,221) (1,135)
-------------------------------------------------------------------------- ---- --------- --------
Profit for the year 34,714 26,648
-------------------------------------------------------------------------- ---- --------- --------
Earnings per Ordinary share ("EPS") Pence Pence
-------------------------------------------------------------------------- ---- --------- --------
Basic EPS 34.1 23.92 20.49
Diluted EPS 34.2 23.60 20.21
-------------------------------------------------------------------------- ---- --------- --------
The notes are an integral part of these consolidated financial statements.
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
FOR THE YEARED 31 DECEMBER 2022
2022 2021
Note GBP'000 GBP'000
------------------------------------------------------------------------- ---- -------- --------
Profit for the year 34,714 26,648
------------------------------------------------------------------------- ---- -------- --------
Other comprehensive income/(loss)
Items that may be reclassified to profit or loss
Exchange difference on translation of foreign operations (net of tax) 38 21,314 (2,476)
Items that will not be reclassified to profit or loss:
Remeasurements of post-employment benefit obligations 5 316 61
------------------------------------------------------------------------- ---- -------- --------
Total comprehensive income for the year 56,344 24,233
------------------------------------------------------------------------- ---- -------- --------
The notes are an integral part of these consolidated financial statements.
CONSOLIDATED BALANCE SHEET
AS AT 31 DECEMBER 2022
2022 2021
Note GBP'000 GBP'000
-------------------------------- ---- -------- --------
Assets
Property, plant and equipment 20 49,566 48,340
Goodwill 21 363,708 341,605
Other intangible assets 21 128,020 120,715
Investments 32 3,156 2,638
Other non-financial assets 22 2,369 558
Other receivables 15 535 988
Deferred tax assets 23 143 119
-------------------------------- ---- -------- --------
Total non-current assets 547,497 514,963
-------------------------------- ---- -------- --------
Trade receivables 12 33,290 28,870
Work in progress 13 12,525 12,834
Accrued income 14 23,911 19,587
Other non-financial assets 22 5,983 4,147
Other receivables 15 3,827 2,090
Cash and cash equivalents 16 48,861 39,326
-------------------------------- ---- -------- --------
Total current assets 128,397 106,854
-------------------------------- ---- -------- --------
Total assets 675,894 621,817
-------------------------------- ---- -------- --------
Equity
Share capital 26.1 1,491 1,476
Share premium 26.1 290,435 285,852
Own shares 26.2 (3,697) (3,366)
Capital reserve 26.3 24,361 17,536
Translation reserve 26.3 15,979 (5,335)
Retained earnings 26.3 71,648 48,462
-------------------------------- ---- -------- --------
Total equity 400,217 344,625
-------------------------------- ---- -------- --------
Liabilities
Trade and other payables 17 26,896 22,903
Loans and borrowings 18 153,622 152,578
Lease liabilities 19 40,602 37,916
Deferred tax liabilities 23 11,184 24,355
Other non-financial liabilities 24 788 956
Provisions 25 1,884 1,720
-------------------------------- ---- -------- --------
Total non-current liabilities 234,976 240,428
-------------------------------- ---- -------- --------
Trade and other payables 17 23,424 19,497
Lease liabilities 19 4,292 5,463
Other non-financial liabilities 24 8,628 8,579
Current tax liabilities 11 4,088 2,978
Provisions 25 269 247
-------------------------------- ---- -------- --------
Total current liabilities 40,701 36,764
-------------------------------- ---- -------- --------
Total equity and liabilities 675,894 621,817
-------------------------------- ---- -------- --------
The consolidated financial statements were approved by the Board of Directors on 6 April 2023 and signed on its behalf by:
Nigel Le Quesne
CHIEF EXECUTIVE OFFICER
Martin Fotheringham
CHIEF FINANCIAL OFFICER
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
FOR THE YEARED 31 DECEMBER 2022
Share Share Own Capital Translation Retained Total
capital premium shares reserve reserve earnings equity
Note GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
-------------------------------------- ---- -------- -------- -------- -------- ----------- --------- --------
Balance at 1 January 2022 1,476 285,852 (3,366) 17,536 (5,335) 48,462 344,625
Profit for the year - - - - - 34,714 34,714
Other comprehensive income - - - - 21,314 316 21,630
-------------------------------------- ---- -------- -------- -------- -------- ----------- --------- --------
Total comprehensive income for the
year - - - - 21,314 35,030 56,344
-------------------------------------- ---- -------- -------- -------- -------- ----------- --------- --------
Issue of share capital 26.1 15 4,654 - - - - 4,669
Cost of share issuance 26.1 - (71) - - - - (71)
Share-based payment expense 36.2 - - - 2,045 - - 2,045
EIP share-based payment expense 36.2 - - - 4,780 - - 4,780
Movement of own shares 26.2 - - (331) - - - (331)
Dividends paid 27 - - - - - (11,844) (11,844)
-------------------------------------- ---- -------- -------- -------- -------- ----------- --------- --------
Total transactions with owners 15 4,583 (331) 6,825 - (11,844) (752)
-------------------------------------- ---- -------- -------- -------- -------- ----------- --------- --------
Balance at 31 December 2022 1,491 290,435 (3,697) 24,361 15,979 71,648 400,217
-------------------------------------- ---- -------- -------- -------- -------- ----------- --------- --------
Balance at 1 January 2021 1,225 130,823 (3,084) 1,456 (2,859) 30,844 158,405
Profit for the year - - - - - 26,648 26,648
Other comprehensive loss - - - - (2,476) 61 (2,415)
-------------------------------------- ---- -------- -------- -------- -------- ----------- --------- --------
Total comprehensive income for the
year - - - - (2,476) 26,709 24,233
-------------------------------------- ---- -------- -------- -------- -------- ----------- --------- --------
Issue of share capital 26.1 251 159,537 - - - - 159,788 Cost of share issuance 26.1 - (4,508) - - - - (4,508) Share-based payment expense 36.2 - - - 2,164 - - 2,164 EIP share-based payment expense 36.1 - - - 13,916 - - 13,916 Movement of own shares 26.2 - - (282) - - - (282) Dividends paid 27 - - - - - (9,091) (9,091) -------------------------------------- ---- -------- -------- -------- -------- ----------- --------- -------- Total transactions with owners 251 155,029 (282) 16,080 - (9,091) 161,987 -------------------------------------- ---- -------- -------- -------- -------- ----------- --------- -------- Balance at 31 December 2021 1,476 285,852 (3,366) 17,536 (5,335) 48,462 344,625 -------------------------------------- ---- -------- -------- -------- -------- ----------- --------- --------
The notes are an integral part of these consolidated financial statements.
CONSOLIDATED CASH FLOW STATEMENT
FOR THE YEARED 31 DECEMBER 2022
2022 2021
Note GBP'000 GBP'000
------------------------------------------------------- ---- -------- ---------
Cash generated from operations 35.1 55,366 30,697
------------------------------------------------------- ---- -------- ---------
Income taxes paid (2,053) (1,835)
------------------------------------------------------- ---- -------- ---------
Net movement in cash generated from operations 53,313 28,862
------------------------------------------------------- ---- -------- ---------
Comprising:
Underlying cash generated from operations 60,308 38,402
Non-underlying cash items 35.2 (4,942) (7,705)
------------------------------------------------------- ---- -------- ---------
55,366 30,697
------------------------------------------------------- ---- -------- ---------
Investing activities
Interest received 254 87
Property, plant and equipment 20 (2,979) (1,378)
Intangible assets 21 (5,491) (1,603)
Business combinations (net of cash acquired) 31 (15,113) (186,433)
Costs to obtain or fulfil a contract 22 (2,210) (1,017)
Loans to related parties - (415)
------------------------------------------------------- ---- -------- ---------
Net cash used in investing activities (25,539) (190,759)
------------------------------------------------------- ---- -------- ---------
Financing activities
Proceeds from issue of shares - 144,801
Share issuance costs (169) (4,409)
Purchase of own shares (320) (269)
Dividends paid 27 (11,844) (9,091)
Proceeds from repayment of employee loans - 2,028
Repayment of loans and borrowings - (125,099)
Proceeds from loans and borrowings - 176,662
Loan arrangement fees - (3,364)
Interest paid on loans and borrowings (6,173) (2,571)
Facility fees paid on loans and borrowings - (285)
Repayment of other loans - (2,684)
Principal paid on lease liabilities (4,907) (4,639)
Interest paid on lease liabilities (1,336) (1,183)
------------------------------------------------------- ---- -------- ---------
Net cash (used in)/generated from financing activities (24,749) 169,896
------------------------------------------------------- ---- -------- ---------
Net increase in cash and cash equivalents 3,025 7,999
------------------------------------------------------- ---- -------- ---------
Cash and cash equivalents at the beginning of the year 39,326 31,078
------------------------------------------------------- ---- -------- ---------
Effect of foreign exchange rate changes 6,510 249
------------------------------------------------------- ---- -------- ---------
Cash and cash equivalents at the end of the year 16 48,861 39,326
------------------------------------------------------- ---- -------- ---------
The notes are an integral part of these consolidated financial statements.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARED 31 DECEMBER 2022
SECTION 1 - BASIS FOR REPORTING AND GENERAL INFORMATION
1. Reporting entity 2. Basis of preparation 3. Significant accounting policies and standards
SECTION 2 - RESULT FOR THE YEAR
4. Operating segments 5. Staff expenses 6. Other operating expenses 7. Non-underlying items 8. Depreciation and amortisation 9. Other gains 10. Finance income and finance cost 11. Income tax
SECTION 3 - FINANCIAL ASSETS AND FINANCIAL LIABILITIES
12. Trade receivables 13. Work in progress 14. Accrued income 15. Other receivables 16. Cash and cash equivalents 17. Trade and other payables 18. Loans and borrowings 19. Lease liabilities
SECTION 4 - NON-FINANCIAL ASSETS AND NON-FINANCIAL LIABILITIES
20. Property, plant and equipment 21. Goodwill and other intangible assets 22. Other non-financial assets 23. Deferred taxation 24. Other non-financial liabilities 25. Provisions
SECTION 5 - EQUITY
26. Share capital and reserves 27. Dividends
SECTION 6 - RISK
28. Critical accounting estimates and judgements 29. Financial risk management 30. Capital management
SECTION 7 - GROUP STRUCTURE
31. Business combinations 32. Investments 33. Subsidiaries
SECTION 8 - OTHER DISCLOSURES
34. Earnings Per Share 35. Cash flow information 36. Share-based payments 37. Contingencies 38. Foreign currency 39. Related party transactions 40. Consideration of climate change 41. Events occurring after the reporting period
SECTION 1 - BASIS FOR REPORTING AND GENERAL INFORMATION
1. REPORTING ENTITY
JTC PLC (the "Company") was incorporated on 12 January 2018 and is domiciled in Jersey, Channel Islands. The Company was admitted to the London Stock Exchange on 14 March 2018 (the "IPO"). The address of the Company's registered office is 28 Esplanade, St Helier, Jersey.
The consolidated financial statements of the Company for the year ended 31 December 2022 comprise the Company and its subsidiaries (together the "Group" or "JTC") and the Group's interest in an associate and investments.
The Group provides fund, corporate and private wealth services to institutional and private clients.
2. BASIS OF PREPARATION
2.1. STATEMENT OF COMPLIANCE AND BASIS OF MEASUREMENT
The consolidated financial statements have been prepared in accordance with International Financial Reporting Standards ("IFRS") as adopted by the European Union, the interpretations of the IFRS Interpretations Committee ("IFRS IC") and Companies (Jersey) Law 1991.
The consolidated financial statements are prepared on a going concern basis and under the historical cost convention except for the following:
-- Certain financial liabilities measured at fair value (see note 29)
-- Defined benefit liabilities/(assets) recognised at the fair value of plan assets less the present value of defined benefit obligations (see note 5).
In assessing the going concern assumption, the Directors considered the challenging global economic and political backdrop, and increasing inflationary pressures, and noted that the Group continued to experience revenue growth and generate positive cash flows from its operating activities. Considering these factors as part of the review of the Group's financial performance and position, forecasts and expected liquidity, the Directors have a reasonable expectation that the Group will have adequate resources to continue in operational existence for the foreseeable future, being at least 12 months from the date of approval of the consolidated financial statements. They have concluded it is appropriate to adopt the going concern basis of accounting in preparing the consolidated financial statements.
2.2. FUNCTIONAL AND PRESENTATION CURRENCY
The consolidated financial statements are presented in pounds sterling, which is the functional and reporting currency of the Company and the presentation currency of the consolidated financial statements. All amounts disclosed in the consolidated financial statements and notes have been rounded to the nearest thousand (GBP'000) unless otherwise stated.
3. SIGNIFICANT ACCOUNTING POLICIES AND STANDARDS
3.1. CHANGES IN ACCOUNTING POLICIES AND NEW STANDARDS ADOPTED
The accounting policies set out in these consolidated financial statements have been consistently applied to all the years presented, and have been applied consistently by Group entities. There have been no significant changes compared with the prior year consolidated financial statements as at and for the year ended 31 December 2021.
To the extent relevant, all IFRS standards and interpretations, including amendments that were in issue and effective from 1 January 2022, have been adopted by the Group from 1 January 2022. These standards and interpretations had no material impact for the Group.
New and amended standards adopted by the Group
The Group has applied the following amendments for the first time for the annual reporting period commencing 1 January 2022:
-- Property, Plant and Equipment: Proceeds before Intended Use - Amendments to IAS 16
-- Onerous Contracts - Cost of Fulfilling a Contract - Amendments to IAS 37
-- Annual Improvement to IFRS Standards 2018-2020
-- Reference to the Conceptual Framework - Amendments to IFRS 3
The amendments listed above did not have any impact on the amounts recognised in prior periods and are not expected to significantly affect the current or future periods.
New standards and interpretations not yet adopted
Certain new accounting standards and interpretations have been published that are not mandatory for 31 December 2022 reporting periods and have not been early adopted by the Group. These standards are not expected to have a material impact on the entity in the current or future reporting periods or on foreseeable future transactions.
3.2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The basis of consolidation is described below, otherwise significant accounting policies related to specific items are described under the relevant note. The description of the accounting policy in the notes forms an integral part of the accounting policies. Unless otherwise stated, these policies have been consistently applied to all the years presented.
Basis of consolidation
The consolidated financial statements incorporate the financial statements of the Company and entities controlled by the Company (its "subsidiaries"). The Group controls an entity when it is exposed to, or has rights to, variable returns from its involvement with the entity and has the ability to affect those returns through its power to direct the activities of the entity.
De-facto control exists where the Company has the practical ability to direct the relevant activities of the investee without holding the majority of the voting rights. In determining whether de-facto control exists the Company considers the size of the Company's voting rights relative to other parties, substantive potential voting rights held by the Company and by other parties, other contractual arrangements and historical patterns in voting attendance.
Subsidiaries are fully consolidated from the date on which control is transferred to the Group. They are deconsolidated from the date that control ceases. When the Group loses control over a subsidiary, it derecognises the assets and liabilities of the subsidiary, and any related non-controlling interest and other components of equity. Any resulting gain or loss is recognised in the consolidated income statement.
Where necessary, adjustments are made to the financial statements of subsidiaries to bring their accounting policies in line with the Group. All inter-company transactions and balances, including unrealised gains and losses, arising from transactions between Group companies are eliminated on consolidation.
The acquisition method of accounting is used to account for business combinations by the Group (see note 31). Associates and investments in associates are accounted for via the equity method of accounting (see note 32).
Company only financial statements
Under Article 105(11) of the Companies (Jersey) Law 1991, the directors of a holding company need not prepare separate financial statements (i.e. company only financial statements). Separate financial statements for the Company are not prepared unless required to do so by the members of the Company by ordinary resolution. The members of the Company had not passed a resolution requiring separate financial statements and, in the Directors' opinion, the Company meets the definition of a holding company. As permitted by law, the Directors have elected not to prepare separate financial statements.
SECTION 2 - RESULT FOR THE YEAR
4. OPERATING SEGMENTS
Revenue recognition
Revenue is measured as the fair value of the consideration received or receivable for satisfying performance obligations contained in contracts with customers excluding discounts, VAT and other sales-related taxes.
To recognise revenue in accordance with IFRS 15 "Revenue from Contracts with Customers", the Group applies the five step approach: identify the contract(s) with a customer, identify the performance obligations in the contract, determine the transaction price, allocate the transaction price to the performance obligations and recognise revenue when, or as, performance obligations are satisfied by the Group.
The Group enters into contractual agreements with institutional and private clients for the provision of fund, corporate and private client services. The agreements set out the services to be provided and each component is distinct and can be performed and delivered separately. For each of these performance obligations, the transaction price can be either a pre-set (fixed) fee based on the expected amount of work to be performed or a variable time spent fee for the actual amount of work performed. For some clients, the fee for agreed services is set at a percentage of the net asset value ("NAV") of funds being administered or deposits held. Where contracts include multiple performance obligations, the transaction price is allocated to each performance obligation based on its stand-alone selling price.
Revenue is recognised in the consolidated income statement when, or as, the Group satisfies performance obligations by transferring control of services to clients. This occurs as follows depending upon the nature of the contract for services:
-- Variable fees are recognised over time as services are provided at the agreed charge out rates in force at the work date where there is an enforceable right to payment for performance completed to date. Time recorded but not invoiced is shown in the consolidated balance sheet as work in progress (see note 13). To determine the transaction price, an assessment of the variable consideration for services rendered is performed by estimating the expected value, including any price concessions, of the unbilled amount due from clients for the work performed to date (see note 28.2).
-- Pre-set (fixed), cash management and NAV based fees are recognised over time; based on the actual service provided to the end of the reporting period as a proportion of the total services to be provided where there is an enforceable right to payment for performance completed to date. This is determined based on the actual inputs of time and expenses relative to the total expected inputs. Where services have been rendered and performance obligations have been met but clients have not been invoiced at the reporting date, accrued income is recognised, this is recorded based on agreed fees to be billed in arrears (see note 14). Where fees are billed in advance in respect of services under contract and give rise to a trade receivable when recognised, deferred income is recognised and released to revenue on a time apportioned basis in the appropriate reporting period (see note 24).
The Group does not adjust transaction prices for the time value of money as it does not have any contracts where the period between the transfer of the promised services to the client and the payment by the client exceeds one year.
4.1. BASIS OF SEGMENTATION
The Group has a multi-jurisdictional footprint and the core focus of operations is on providing services to its institutional and private client base, with revenues from alternative asset managers, financial institutions, corporates, HNW and UHNW individuals and family office clients. Recognised revenue is generated from external customers. Business activities include:
Fund services
Supporting a diverse range of asset classes, including real estate, private equity, renewables, hedge, debt and alternative asset classes providing a comprehensive set of fund administration services (e.g. fund launch, NAV calculations, accounting, compliance and risk monitoring, investor reporting, listing services).
Corporate services
Includes clients spanning across small and medium entities, public companies, multinationals, sovereign wealth funds, fund managers, HNW and UHNW individuals and families requiring a 'corporate' service for business and investments. As well as entity formation, administration and other company secretarial services, the Group also services international and local pension plans, employee share incentive plans, employee ownership plans and deferred compensation plans.
Private client services
Supporting HNW and UHNW individuals and families, from 'emerging entrepreneurs' to established single and multi-family offices. Services include JTC's own comprehensive Private Office, a range of cash management, foreign exchange and lending services, as well as the formation and administration of trusts, companies, partnerships, and other vehicles and structures across a range of asset classes, including cash and investments.
The Chief Executive Officer and Chief Financial Officer are together the Chief Operating Decision Makers of the Group and determine the appropriate business segments to monitor financial performance. Each segment is defined as a set of business activities generating a revenue stream determined by divisional responsibility and the management information reviewed by the Board. They have determined that the Group has two reportable segments: these are Institutional Client Services and Private Client Services.
4.2. SEGMENTAL INFORMATION
The table below shows the segmental information provided to the Board for the two reportable segments (ICS and PCS) on an underlying basis:
ICS PCS Total
------------------ ------------------ ------------------
2022 2021 2022 2021 2022 2021
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
--------------------------------- -------- -------- -------- -------- -------- --------
Revenue 136,657 92,706 63,378 54,796 200,035 147,502
Direct staff costs (56,157) (39,256) (24,525) (20,025) (80,682) (59,281)
Other direct costs (2,499) (640) (1,874) (1,467) (4,373) (2,107)
Underlying gross profit 78,001 52,810 36,979 33,304 114,980 86,114
Underlying gross profit margin % 57.1% 57.0% 58.3% 60.8% 57.5% 58.4%
Indirect staff costs (12,091) (8,225) (6,414) (6,296) (18,505) (14,521)
Other operating expenses (22,886) (16,573) (8,072) (7,040) (30,958) (23,613)
Other income 9 18 513 407 522 425
Underlying EBITDA 43,033 28,030 23,006 20,375 66,039 48,405
Underlying EBITDA margin % 31.5% 30.2% 36.3% 37.2% 33.0% 32.8%
--------------------------------- -------- -------- -------- -------- -------- --------
The Board evaluates segmental performance based on revenue, underlying EBITDA and underlying EBITDA margin. Profit before tax is not used to measure the performance of the individual segments as items such as depreciation, amortisation of intangibles, other gains and finance costs are not allocated to individual segments. Consistent with the aforementioned reasoning, segment assets and liabilities are not reviewed regularly on a by-segment basis and are therefore not included in segmental reporting.
4.3. GEOGRAPHICAL INFORMATION
The table below shows revenue generated by the geographical location of the contracting Group entity.
Increase/(decrease)
---------------------
2022 2021
GBP'000 GBP'000 GBP'000 %
--------------------- -------- -------- ----------- --------
UK & Channel Islands 107,778 87,038 20,740 23.8%
US 38,039 15,661 22,378 142.9%
Rest of Europe 34,323 29,867 4,456 14.9%
Rest of the World 19,895 14,935 4,960 33.2%
200,035 147,501 52,534 35.6%
--------------------- -------- -------- ----------- --------
The geographical location is based on the jurisdiction in which the legal entity is based and not on the location of the client.
No single customer made up more than 10% of the Group's revenue in the current or prior year.
5. STAFF EXPENSES
EMPLOYEE BENEFITS
Short-term benefits
Short-term employee benefits are expensed as the related service is provided. A liability is recognised for the amount expected to be paid if the Group has a present legal or constructive obligation to pay this amount as a result of past service provided by the employee, and the obligation can be estimated reliably.
Defined contribution pension plans
Under defined contribution pension plans, the Group pays contributions to publicly or privately administered pension insurance plans. The Group has no further payment obligation once the contributions have been paid. The contributions are recognised as an employee benefit expense when they are due.
Defined benefit pension plans
The liability or asset recognised in the consolidated balance sheet in respect of defined benefit pension plans is the present value of the defined benefit obligation at the end of the reporting period less the fair value of plan assets. The calculation of defined benefit obligations is performed annually by independent qualified actuaries using the projected unit credit method.
The present value of the defined benefit obligation is determined by discounting the estimated future cash outflows using interest rates of high quality corporate bonds that are denominated in the currency in which the benefits will be paid, and that have terms approximating to the terms of the related obligation. In countries where there is no established market in such bonds, the market rates on local government bonds are used.
The net interest cost is calculated by applying the discount rate to the net balance of the defined benefit obligation and the fair value of plan assets. This cost is included as an employee benefit expense in the consolidated income statement.
Remeasurement gains and losses arising from experience adjustments and changes in actuarial assumptions are recognised in the period in which they occur, directly in other comprehensive income. They are included in retained earnings in the consolidated statement of changes in equity and the consolidated balance sheet.
Changes in the present value of the defined benefit obligation resulting from plan amendments or curtailments are recognised immediately in the consolidated income statement as past service costs.
Termination benefits
Termination benefits are expensed at the earlier of when the Group can no longer withdraw the offer of those benefits and when the Group recognises costs for a restructuring that is within the scope of IAS 37 and involves the payment of termination benefits. If benefits are not expected to be settled wholly within one year of the end of the reporting period, then they are discounted to their present value using an appropriate discount rate.
2022 2021
Note GBP'000 GBP'000
----------------------------------------------------- ---- -------- --------
Salaries and Directors' fees 82,739 62,685
Employer-related taxes and other staff-related costs 8,841 6,141
Other short-term employee benefits 3,508 2,099
Pension employee benefits(1) 3,841 2,535
Share-based payments 36.2 2,122 2,164
Employee Incentive Plan ("EIP") share-based payments 36.2 4,780 13,916
----------------------------------------------------- ---- -------- --------
105,831 89,540
----------------------------------------------------- ---- -------- --------
1 Pension employee benefits include defined contributions of GBP3.41m (2021: GBP2.39m) and defined benefits of GBP0.43m (2021: GBP0.14m).
Defined benefit pension plans
The Group operates defined benefit pension plans in Switzerland and Mauritius. Both plans are contribution based with guarantee of a minimum interest credit and fixed conversion rates at retirement. Disability and death benefits are defined as a percentage of the insured salary.
At 31 December 2022, the Group net defined benefit obligation recognised on the consolidated balance sheet in respect of amounts that are expected to be paid out to employees was GBP0.6m (2021: GBP0.8m). The Group does not expect a significant change in contributions for the following years.
The Swiss plan must be fully funded in accordance with Swiss Federal Law on Occupational Benefits (LPP/BVG) on a static basis at all times. The subsidiary, JTC (Suisse) SA, is affiliated to the collective foundation Swiss Life. The collective foundation is a separate legal entity. The foundation is responsible for the governance of the plan, the board is composed of an equal number of representatives from the employers and the employees chosen from all affiliated companies. The foundation has set up investment guidelines, defining in particular the strategic allocation with margins. Additionally, there is a pension committee responsible for the set-up of the plan benefit, this is composed of an equal number of representatives of JTC (Suisse) SA and its employees.
The Mauritius plan is administered by Swan Life Ltd. JTC Fiduciary Services (Mauritius) Limited is required to contribute a specific percentage of payroll costs to the retirement benefit scheme. Employees under this pension plan are entitled to statutory benefits prescribed under parts VIII and IX of the Workers' Rights Act 2019.
The amounts recognised in the consolidated balance sheet are as follows:
2022 2021
GBP'000 GBP'000
------------------------------------- -------- --------
Present value of funded obligations (3,344) (2,010)
Fair value of plan assets(1) 2,772 1,233
------------------------------------- -------- --------
Consolidated balance sheet liability (572) (777)
------------------------------------- -------- --------
1 All plan assets are held in insurance contracts.
The movement in the net defined benefit obligation recognised in the consolidated balance sheet is as follows:
2022 2021
------------------------------------ ------------------------------------
Defined Fair value Net defined Defined Fair value Net defined
benefit of plan benefit benefit of plan benefit
obligation assets obligation obligation assets obligation
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
------------------------------------------ ----------- ---------- ----------- ----------- ---------- -----------
At 1 January 2,010 1,233 777 2,285 1,382 903
Included in the consolidated income
statement
Current service cost 233 - 233 207 - 207
Past service cost 18 - 18 (66) - (66)
Interest 13 4 9 5 1 4
------------------------------------------ ----------- ---------- ----------- ----------- ---------- -----------
Total 264 4 260 146 1 145
------------------------------------------ ----------- ---------- ----------- ----------- ---------- -----------
Included in other comprehensive
income/(loss)
Remeasurements loss/(gain):
* Change in financial assumptions (739) - (739) (42) - (42)
* Experience adjustment 432 - 432 (93) - (93)
* Return on plan assets - 9 (9) - (74) 74
------------------------------------------ ----------- ---------- ----------- ----------- ---------- -----------
Total (307) 9 (316) (135) (74) (61)
------------------------------------------ ----------- ---------- ----------- ----------- ---------- -----------
Other
Contributions:
* Employers - 214 (214) - 177 (177)
* Plan participants 105 105 - 87 87 -
Benefit payments 994 994 - (302) (302) -
Exchange differences 276 211 65 (71) (38) (33)
------------------------------------------ ----------- ---------- ----------- ----------- ---------- -----------
Total 1,375 1,524 (149) (286) (76) (210)
------------------------------------------ ----------- ---------- ----------- ----------- ---------- -----------
At 31 December 3,342 2,770 572 2,010 1,233 777
------------------------------------------ ----------- ---------- ----------- ----------- ---------- -----------
The plans are exposed to actuarial risks relating to discount rate, interest rate for the projection of the savings capital, salary increase and pension increase.
The principal annual actuarial assumptions used for the IAS 19 disclosures were as follows:
Switzerland Mauritius
-------------------------------------- ----------- ---------
Discount rate at 1 January 2022 0.3% 4.6%
Discount rate at 31 December 2022 2.4% 5.2%
Future salary increases 1.6% 4.0%
Rate of increase in deferred pensions 0.0% 0.0%
-------------------------------------- ----------- ---------
In Switzerland, longevity must be reflected in the defined benefit liability. The mortality probabilities were determined based on BVG 2020 Generational tables (CMI 1.25%) and the life expectancy is as follows:
2022 2021
Years Years
-------------------------------------------------------------- ------ ------
Mortality probabilities for pensioners at age 65
* Males 21.84 21.70
* Females 23.58 23.41
Mortality probabilities at age 65 for current members aged 45
* Males 23.50 23.29
* Females 25.18 24.98
-------------------------------------------------------------- ------ ------
6. OTHER OPERATING EXPENSES
Other operating expenses are accounted for on an accruals basis.
2022 2021
GBP'000 GBP'000
---------------------------------------------------- -------- --------
Third party administration fees 4,403 2,300
Legal and professional fees(1) 8,354 9,846
Auditor's remuneration for audit services 1,255 1,126
Auditor's remuneration for other assurance services 337 190
Establishment costs 3,618 2,611
Insurance 1,660 1,703
Travel and accommodation 1,772 433
Marketing 1,950 1,493
IT expenses 9,286 7,942
Telephone and postage 1,638 1,390
Other expenses 1,297 1,080
---------------------------------------------------- -------- --------
Other operating expenses 35,570 30,114
---------------------------------------------------- -------- --------
1 Included in legal and professional fees are GBP1.4m (2021: GBP5.2m) of non-underlying items.
7. NON-UNDERLYING ITEMS
Non-underlying items represent specific items of income or expenditure that are not of a continuing operational nature or do not represent the underlying operating results, and based on their significance in size or nature are presented separately to provide further understanding about the financial performance of the Group.
2022 2021
Note GBP'000 GBP'000
---------------------------------------------------------- ---- -------- --------
EBITDA 56,064 26,583
---------------------------------------------------------- ---- -------- --------
Non-underlying items within EBITDA:
Acquisition and integration costs(1) 3,380 6,610
Revision of ICS operating model(2) 402 421
Office start-up costs(3) 768 -
Other(4) 228 263
EIP share-based payments(5) 5,197 14,528
---------------------------------------------------------- ---- -------- --------
Total non-underlying items within EBITDA 9,975 21,822
---------------------------------------------------------- ---- -------- --------
Underlying EBITDA 66,039 48,405
---------------------------------------------------------- ---- -------- --------
Profit before tax 35,935 27,783
---------------------------------------------------------- ---- -------- --------
Total non-underlying items within EBITDA 9,975 21,822
Gain on bargain purchase(6) 9 - (5,357)
Loss/(gain) on revaluation of contingent consideration(7) 9 78 (20,910)
Loss on settlement of contingent consideration(8) 9 - 701
Foreign exchange (gains)/losses(9) 9 (11,936) 869
---------------------------------------------------------- ---- -------- --------
Total non-underlying items within profit before tax (1,883) (2,875)
---------------------------------------------------------- ---- -------- --------
Underlying profit before tax 34,052 24,908
---------------------------------------------------------- ---- -------- --------
1 Acquisition and integration costs include deal and tax advisory fees, legal and professional fees, any client-acquired penalties, staff reorganisation costs and other integration costs. This includes acquisition-related share-based payment awards granted to act as retention tools for key management and/or to recruit senior management to support various acquisitions. Most acquisition and integration costs are incurred in the first two years following acquisition, but this period can be longer depending on the nature of the costs.
2 During 2022, the Group incurred costs to complete the implementation of a revised operating model for the fund services practice; the timing of delivery was initially impacted by Covid-19.
3 Relates to pre-trading costs incurred by the Group in order to establish an additional fund administration offering in Ireland. This included significant up-front investment in personnel in order to meet regulatory requirements in advance of obtaining the license to trade and generate profits.
4 This includes further legal costs relating to a regulatory action from the Dutch Central Bank and aborted project costs.
5 Following the conclusion of the Odyssey business plan era at the end of 2020, share awards with a two year vesting period were made to staff members under the EIP (see note 36.1); the expense includes employer-related taxes relating to the share awards.
6 Gain on bargain purchase arising on the acquisition of RBC cees (see note 31.2).
7 Includes a loss on revaluation of contingent consideration for Segue of GBP0.13m (see note 31.4) and a gain on revaluation of liability-classified contingent consideration payable for perfORM of GBP0.05m (see note 31.5). The prior year gain related to the release of the NESF contingent consideration.
8 In the prior year, a loss was recognised on settlement of the holdback fund share consideration for NESF.
9 Foreign exchange (gains)/losses that relate to the revaluation of inter-company loans. Management consider these to be non-underlying as they are unrealisable (gains)/losses as the loans are eliminated upon consolidation.
8. DEPRECIATION AND AMORTISATION
2022 2021
Note GBP'000 GBP'000
---------------------------------------------------------------------------- ---- -------- --------
Depreciation of property, plant and equipment 20 7,883 7,157
Amortisation of intangible assets 21 13,562 9,776
Amortisation of assets recognised from costs to obtain or fulfil a contract 22 816 658
---------------------------------------------------------------------------- ---- -------- --------
Depreciation and amortisation 22,261 17,591
---------------------------------------------------------------------------- ---- -------- --------
9. OTHER GAINS
2022 2021
Note GBP'000 GBP'000
--------------------------------------------------------------- ---- -------- --------
Net (loss)/profit on disposal of property, plant and equipment (130) 2
Gain on bargain purchase - 5,357
(Loss)/gain on revaluation of contingent consideration (78) 20,910
(Loss) on settlement of contingent consideration - (701)
Foreign exchange gains/(losses)(1) 38 14,409 (861)
--------------------------------------------------------------- ---- -------- --------
Other gains 14,201 24,707
--------------------------------------------------------------- ---- -------- --------
1 This includes GBP11.9m of foreign exchange gains (2021: GBP0.9m losses) that relate to the revaluation of inter-company loans; these foreign exchange movements are considered by Management to be non-underlying items.
10. FINANCE INCOME AND FINANCE COST
Finance income includes interest income from loan receivables and bank deposits and is recognised when it is probable that the economic benefits will flow to the Group and the amount of revenue can be measured reliably.
Finance costs include interest expenses on loans and borrowings, the unwinding of the discount on provisions, contingent consideration and lease liabilities and the amortisation of directly attributable transaction costs which have been capitalised upon issuance of the financial instrument and released to the consolidated income statement on a straight-line basis over the contractual term.
2022 2021
Note GBP'000 GBP'000
---------------------------------------------------- ---- -------- --------
Bank interest 239 80
Loan interest 5 32
---------------------------------------------------- ---- -------- --------
Finance income 244 112
---------------------------------------------------- ---- -------- --------
Bank loan interest 5,112 1,772
Amortisation of loan arrangement fees 34.3 1,062 1,501
Unwinding of net present value ("NPV") discounts(1) 4,852 1,769
Other finance expense 1,287 986
---------------------------------------------------- ---- -------- --------
Finance cost 12,313 6,028
---------------------------------------------------- ---- -------- --------
1 Of the GBP4.85m total, GBP3.5m relates to unwinding of NPV discounts on contingent consideration (see note 17); this is excluded when calculating adjusted underlying basic EPS (see note 34.3). By acquisition this is as follows:
Acquisition 2022 2021
date Note GBP'000 GBP'000
------------ ------------------ ---- -------- --------
INDOS 1 June 2021 161 94
Segue 15 September 2021 342 79
perfORM 18 October 2021 472 84
Ballybunion 3 November 2021 214 43
SALI 12 November 2021 2,329 287
------------ ------------------ ---- -------- --------
34.3 3,518 587
------------------------------- ---- -------- --------
11. INCOME TAX
Income tax
Income tax includes current and deferred tax. Current and deferred tax are recognised in the consolidated income statement, except when they relate to items that are recognised in other comprehensive income or directly in equity, in which case, the current and deferred tax are also recognised in other comprehensive income or directly in equity respectively. Where current tax or deferred tax arises from the initial accounting for a business combination, the tax effect is included in the accounting for the business combination.
Current tax
Current tax is the expected tax payable or receivable on the taxable income or loss for the year using tax laws enacted or substantively enacted at the balance sheet date, and any adjustment to tax payable in respect of previous years.
Deferred tax
Deferred tax is the tax expected to be payable or recoverable on differences between the carrying amounts of assets and liabilities in the financial statements and the corresponding tax bases used in the computation of taxable profit.
Deferred tax liabilities are generally recognised for all taxable temporary differences and deferred tax assets are recognised to the extent that it is probable that taxable profits will be available against which deductible temporary differences can be utilised. Such assets and liabilities are not recognised if the temporary difference arises from the initial recognition of goodwill or from the initial recognition (other than in a business combination) of other assets and liabilities in a transaction that affects neither the taxable profit nor the accounting profit.
The carrying amount of deferred tax assets is reviewed at the end of each reporting period and reduced to the extent that it is no longer probable that sufficient taxable profits will be available to allow all or part of the asset to be recovered.
Deferred tax is calculated using tax rates that are expected to apply when the liability is settled or the asset realised using tax rates enacted or substantively enacted at the balance sheet date.
Deferred tax assets offset with deferred tax liabilities when there is a legally enforceable right to set off tax assets against current tax liabilities and when they relate to income taxes levied by the same taxation authority and the Group intends to settle its current tax assets and liabilities on a net basis.
2022 2021
Note GBP'000 GBP'000
------------------------------------------------------------------ ---- -------- --------
The tax charges comprises:
Jersey tax on current year profit 1,197 1,362
Foreign company taxes on current year profit 1,611 1,249
------------------------------------------------------------------ ---- -------- --------
Total current tax expense 2,808 2,611
Deferred tax: 23
Jersey origination and reversal of temporary differences (17) (15)
Temporary differences in relation to acquired intangible assets 34.3 (1,531) (1,446)
Foreign company origination and reversal of temporary differences (39) (15)
------------------------------------------------------------------ ---- -------- --------
Total deferred tax credit (1,587) (1,476) ------------------------------------------------------------------ ---- -------- -------- Total tax charge for the year 1,221 1,135 ------------------------------------------------------------------ ---- -------- --------
The difference between the total current tax shown above and the amount calculated by applying the standard rate of Jersey income tax to the profit before tax is as follows:
2022 2021
GBP'000 GBP'000
------------------------------------------------------------------------------------------- -------- --------
Profit on ordinary activities before tax 35,935 27,783
------------------------------------------------------------------------------------------- -------- --------
Tax on profit on ordinary activities at standard Jersey income tax rate of 10% (2021: 10%) 3,594 2,778
Effects of:
Results from entities subject to tax at a rate of 0% (Jersey company) (1,040) (432)
Results from tax exempt entities (foreign company) (223) (120)
Foreign taxes not at Jersey rate (1,301) 664
Depreciation in excess of capital allowances (Jersey company) (17) (15)
Depreciation in excess of capital allowances (foreign company) (39) (15)
Temporary differences in relation to acquired intangible assets (1,531) (1,446)
Non-deductible expenses(1) 479 1,398
Consolidation adjustments(2) 1,304 (1,738)
Other differences (5) 61
------------------------------------------------------------------------------------------- -------- --------
Total tax charge for the year 1,221 1,135
------------------------------------------------------------------------------------------- -------- --------
1 The current year includes GBP4.6m of expenses relating to share awards made under the EIP (2021: GBP13.9m), see note 36.1.
2 The current year includes a loss on revaluation of contingent consideration for Segue of GBP0.13m (see note 31.4) and a gain on revaluation of liability-classified contingent consideration payable for perfORM of GBP0.05m (see note 31.5).
Income tax expense computations are based on the jurisdictions in which profits were earned at prevailing rates in the respective jurisdictions.
The Company is subject to Jersey income tax at the general rate of 0%; however, the majority of the Group's profits are reported in Jersey by Jersey financial services companies. JTC subsidiaries located in Jersey are categorised as financial services companies and are subject to an income tax rate of 10%. It is therefore appropriate to use this rate for reconciliation purposes.
2022 2021
GBP'000 GBP'000
---------------------------------------------------------------------- -------- --------
Reconciliation of effective tax rates
Tax on profit on ordinary activities 10.00% 10.00%
Effect of:
Results from entities subject to tax at a rate of 0% (Jersey company) (2.89%) (1.55%)
Results from tax exempt entities (foreign company) (0.62%) (0.43%)
Foreign taxes not at Jersey rate (3.62%) 2.39%
Depreciation in excess of capital allowances (Jersey company) (0.05%) (0.05%)
Depreciation in excess of capital allowances (foreign company) (0.11%) (0.06%)
Temporary differences in relation to acquired intangible assets (4.26%) (5.20%)
Non-deductible expenses 1.33% 5.03%
Consolidation adjustments 3.63% (6.26%)
Other differences (0.01%) 0.22%
---------------------------------------------------------------------- -------- --------
Effective tax rate 3.40% 4.09%
---------------------------------------------------------------------- -------- --------
SECTION 3 - FINANCIAL ASSETS AND FINANCIAL LIABILITIES
This section provides information about the Group's financial instruments, including; accounting policies; specific information about each type of financial instrument; and, where applicable, information about determining the fair value, including judgements and estimation uncertainty involved.
Financial assets
The Group classifies its financial assets as either amortised cost, fair value through profit or loss ("FVTPL") or fair value through other comprehensive income ("FVOCI") depending on the Group's business model objective for managing financial assets and their contractual cash flow characteristics.
As the Group's financial assets arise principally from the provision of services to clients (e.g. trade receivables), but also incorporate other types of financial assets where the objective is to hold these assets in order to collect contractual cash flows and the contractual cash flows are solely payments of principal and interest, they are classified at amortised cost.
Financial assets are recognised initially on the trade date, which is the date that the Group became party to the contractual provisions of the instrument and are derecognised when the contractual rights to the cash flows from the asset expire, or the rights to receive the contractual cash flows from the transaction in which substantially all of the risks and rewards of ownership of the financial asset have been transferred.
Financial assets are initially recognised at fair value plus transaction costs that are directly attributable to their acquisition or issue, and are subsequently carried at amortised cost using the effective interest rate method, less provision for impairment.
The Group assesses, on a forward-looking basis, the expected credit losses ("ECL") associated with its financial assets carried at amortised cost. The impairment methodology applied takes into consideration whether there has been a significant increase in credit risk.
Financial assets comprise trade receivables, work in progress, accrued income, other receivables and cash and cash equivalents. For further details on impairment for each, see notes 12 to 16.
Financial liabilities
The Group classifies its financial liabilities as either amortised cost or FVTPL depending on the purpose for which the liability was acquired.
As the Group does not have any financial liabilities held for trading (derivatives), all other financial liabilities are classified as measured at amortised cost unless otherwise noted. Other financial liabilities include trade and other payables, borrowings and lease liabilities.
Trade and other payables represent liabilities incurred for goods and services provided to the Group prior to the end of the financial year which are unpaid. They are recognised initially at fair value and subsequently measured at amortised cost using the effective interest method and are presented as current liabilities unless payment is not due within 12 months after the reporting period. The Group derecognises a financial liability when its contractual obligations are discharged, cancelled or expired.
Borrowings are initially recognised at fair value, net of transaction costs incurred. Borrowings are subsequently measured at amortised cost. Any difference between the proceeds (net of transaction costs) and the redemption amount is recognised in the consolidated income statement over the period of the borrowings using the effective interest rate method.
Borrowings are removed from the consolidated balance sheet when the obligation specified in the contract is discharged, cancelled or has expired. The difference between the carrying amount of a financial liability that has been extinguished or transferred to another party and the consideration paid, including any non-cash assets transferred or liabilities assumed, is recognised in the consolidated income statement as finance income or finance cost.
Borrowings are classified as current liabilities unless the Group has an unconditional right to defer settlement of the liability for at least 12 months after the reporting period.
Lease liabilities are financial liabilities measured at amortised cost. They are initially measured at the NPV of the following lease payments:
-- fixed payments, less any lease incentives receivable;
-- variable lease payments that are based on an index or a rate;
-- amounts expected to be payable by the lessee under residual value guarantees;
-- the exercise price of a purchase option if the lessee is reasonably certain to exercise that option; and
-- payments of penalties for terminating the lease, if the lease term reflects the lessee exercising that option.
Lease payments to be made under reasonably certain extension options are also included in the measurement of the liability.
The lease payments are discounted using the interest rate implicit in the lease. If that rate cannot be determined, which is generally the case for leases in the Group, the lessee's incremental borrowing rate is used, being the rate that the lessee would have to pay to borrow the funds necessary to obtain an asset of similar value to the right-of-use asset in a similar economic environment with similar terms, security and conditions.
The incremental borrowing rate applied to each lease was determined considering the Group's borrowing rate and the risk-free interest rate, adjusted for factors specific to the country, currency and term of the lease.
The Group can be exposed to potential future increases in variable lease payments based on an index or rate which are not included in the lease liability until they take effect. When adjustments to lease payments based on an index or rate take effect, the lease liability is reassessed and adjusted against the right-of-use asset.
Lease payments are allocated between principal and finance cost. The finance cost is charged to the consolidated income statement over the lease period so as to produce a constant periodic rate of interest on the remaining balance of the liability for each period.
Offsetting financial assets and liabilities
Financial assets and liabilities are offset and the net amount is reported in the consolidated balance sheet where there is a legally enforceable right to offset the recognised amounts, and there is an intention to settle on a net basis or realise the asset and settle the liability simultaneously.
12. TRADE RECEIVABLES
The ageing analysis of trade receivables with the loss allowance is as follows:
Loss
Gross allowance Net
2022 GBP'000 GBP'000 GBP'000
--------------- -------- ---------- --------
<30 days 15,161 (125) 15,036
30 - 60 days 3,401 (114) 3,287
61 - 90 days 2,091 (111) 1,980
91 - 120 days 2,208 (101) 2,107
121 - 180 days 1,558 (165) 1,393
180> days 14,516 (5,029) 9,487
--------------- -------- ---------- --------
Total 38,935 (5,645) 33,290
--------------- -------- ---------- --------
Loss
Gross allowance Net
2021 GBP'000 GBP'000 GBP'000
--------------- -------- ---------- --------
<30 days 15,167 (164) 15,003
30 - 60 days 3,493 (100) 3,393
61 - 90 days 1,868 (136) 1,732
91 - 120 days 3,579 (203) 3,376
121 - 180 days 1,965 (412) 1,553
180> days 7,629 (3,816) 3,813
--------------- -------- ---------- --------
Total 33,701 (4,831) 28,870
--------------- -------- ---------- --------
The movement in the allowances for trade receivables is as follows:
2022 2021
GBP'000 GBP'000
-------------------------------------------------------------- -------- --------
Balance at the beginning of the year (4,832) (4,892)
Credit impairment losses in the consolidated income statement (3,092) (1,690)
Amounts written off (including unused amounts reversed) 2,279 1,750
-------------------------------------------------------------- -------- --------
Total allowance for doubtful debts (5,645) (4,832)
-------------------------------------------------------------- -------- --------
The loss allowance includes both specific and ECL provisions. To measure the ECL, trade receivables are grouped based on shared credit risk characteristics and the days past due. The ECLs are estimated collectively using a provision matrix based on the Group's historical credit loss experience, adjusted for factors that are specific to the debtor's financial position (this includes unlikely to pay indicators such as liquidity issues, insolvency or other financial difficulties) and an assessment of both the current as well as the forecast direction of macroeconomic conditions at the reporting date. Management have identified gross domestic product and inflation in each country the Group provides services in to be the most relevant macroeconomic factors.
Management have given consideration to these factors as well as climate-related changes on customers and are satisfied that any impact is not material to the ultimate recovery of receivables, such is the diversification across the book in industries and geographies. The loss allowance at 31 December 2022 is in line with previous trading and supports this conclusion. See note 29.2 for further comment on credit risk management.
Provision rates are segregated according to geographical location and by business line. The Group considers any specific impairments on a by-client basis rather than on a collective basis. The carrying amount of the asset is reduced through the use of an allowance account and the amount of the loss is recognised in the consolidated income statement as a credit impairment loss. When a trade receivable is uncollectible, it is written off against the allowance account. Subsequent recoveries of amounts previously written off are credited against credit impairment losses.
13. WORK IN PROGRESS
2022 2021
GBP'000 GBP'000
--------------- -------- --------
Total 12,594 12,906
Loss allowance (69) (72)
--------------- -------- --------
Net 12,525 12,834
--------------- -------- --------
Work in progress ("WIP") relates to variable fee contracts and represents the net unbilled amount expected to be collected from clients for work performed to date. It is measured at the chargeable rate agreed with the individual clients adjusted for unrecoverable amounts less progress billed and ECL. As these financial assets relate to unbilled work and have substantially the same risk characteristics as trade receivables, the Group has concluded that the expected loss rates for trade receivables <30 days is an appropriate estimation of the ECL.
Sensitivity analysis
The total carrying amount of WIP (before ECL allowances) is GBP12.6m (2021: GBP12.9m). If Management's estimate of the recoverability of the WIP (the amount expected to be billed and collected from clients for work performed to date) is 10% lower than expected on the total WIP balance due to adjustments for unrecoverable amounts, revenue would be GBP1.3m lower (2021: GBP1.3m lower).
14. ACCRUED INCOME
2022 2021
GBP'000 GBP'000
--------------- -------- --------
Total 23,936 19,621
Loss allowance (25) (34)
--------------- -------- --------
Net 23,911 19,587
--------------- -------- --------
Accrued income relates to fixed and NAV based fees across all service lines and represents the billable amount relating to the provision of services to clients which has not been invoiced at the reporting date. Accrued income is recorded based on agreed fees billed in arrears less ECL. As these financial assets relate to unbilled work and have substantially the same risk characteristics as trade receivables, the Group has concluded that the expected loss rates for trade receivables <30 days is an appropriate estimation of the ECL.
The GBP4.3m increase in accrued income is reflective of overall revenue growth and that revenue from recently acquired businesses is on a fixed or NAV based fee basis.
15. OTHER RECEIVABLES
2022 2021
GBP'000 GBP'000
---------------------------------------------- -------- --------
Non-current
Loans receivable from related undertakings(1) - 833
Loan receivable from third party(2) 535 155
---------------------------------------------- -------- --------
Total non-current 535 988
---------------------------------------------- -------- --------
Current
Other receivables(3) 2,804 1,884
Loans receivable from employees(4) 162 206
Loan receivable from related undertakings(1) 861 -
---------------------------------------------- -------- --------
Total current 3,827 2,090
---------------------------------------------- -------- --------
Total other receivables 4,362 3,078
---------------------------------------------- -------- --------
1 Includes loans receivable from Harmonate Corp. (see note 32) of GBP0.86m current (2021: GBP0.77m non-current) and, in the prior year, Northpoint Byala IC (GBP0.05m) and Northpoint Finance IC (GBP0.01m); both of these balances were impaired to GBPnil at the year end. The Harmonate loan is unsecured, interest bearing at 4% per annum and repayable on demand at any time on or after 31 December 2023.
2 The loan receivable from a third party is interest bearing at 2.5% per annum and is repayable by 19 October 2024.
3 Other receivables includes mortgage-backed securities held at fair value of GBP0.4m (2021: GBPnil) that were sold in January 2023 (see note 31.1(a)).
4 Includes GBP0.16m due from employees participating in Advance to Buy ("A2B") programmes (2021: GBP0.2m). These are interest bearing at 3% per annum and repayable two years after the commencement date of each annual programme unless the employment contract is terminated at an earlier date.
Other receivables are subject to the impairment requirements of IFRS 9 but, as balances are primarily with related parties or part of a business combination, they were assessed to have low credit risk and no loss allowance is recognised.
16. CASH AND CASH EQUIVALENTS
2022 2021
GBP'000 GBP'000
------------------------------- -------- --------
Cash attributable to the Group 48,861 39,326
------------------------------- -------- --------
Total 48,861 39,326
------------------------------- -------- --------
For the purpose of presentation in the statement of cash flow, cash and cash equivalents includes cash in hand, deposits held on call with banks, other short-term highly liquid investments with original maturities of three months or less and bank overdrafts.
Cash and cash equivalents are subject to the impairment requirements of IFRS 9 but, as balances are held with reputable international banking institutions, they were assessed to have low credit risk and no loss allowance is recognised.
17. TRADE AND OTHER PAYABLES
2022 2021
GBP'000 GBP'000
----------------------------------- -------- --------
Non-current
Other payables 72 382
Contingent consideration(1) 26,824 22,521
----------------------------------- -------- --------
Total non-current 26,896 22,903
----------------------------------- -------- --------
Current
Trade payables 2,728 2,091
Other taxation and social security 926 642
Other payables 4,391 3,803
Accruals 9,907 7,059
Contingent consideration(1) 5,472 5,902
----------------------------------- -------- --------
Total current 23,424 19,497
----------------------------------- -------- --------
Total trade and other payables 50,320 42,400
----------------------------------- -------- --------
1 Contingent consideration payables are discounted to NPV, split between current and non-current, and are due as follows:
2022 2021
Acquisition Note GBP'000 GBP'000
------------------------------------------- ------- -------- --------
Segue - 773
perfORM 31.5 3,181 2,768
SALI 31.7 23,643 18,980
------------------------------------------- ------- -------- --------
Total non-current contingent consideration 26,824 22,521
------------------------------------------- ------- -------- --------
INDOS 31.3 1,483 1,322
Segue 31.4 2,163 917
Ballybunion - 1,607
SALI - 2,037
EFS - 19
Sterling 21.2(b) 1,826 -
------------------------------------------- ------- -------- --------
Total current contingent consideration 5,472 5,902
------------------------------------------- ------- -------- --------
For current trade and other payables, due to their short-term nature, Management consider the carrying value of these financial liabilities to approximate to their fair value.
18. LOANS AND BORROWINGS
This note provides information about the contractual term of the Group's interest-bearing loans and borrowings, which are measured at amortised cost. For more information about the Group's exposure to interest rates, foreign currency and liquidity risk, see note 29.
2022 2021
GBP'000 GBP'000
--------------------------- -------- --------
Non-current
Bank loans 153,622 152,578
--------------------------- -------- --------
Total loans and borrowings 153,622 152,578
--------------------------- -------- --------
18.1. BANK LOANS
The terms and conditions of outstanding loan facilities are as follows:
2022 2021
Facility Currency Termination date Interest rate GBP'000 GBP'000
-------------------------- --------- ----------------- --------------------- -------- --------
Term facility GBP 6 October 2025 SONIA + 1.65% margin 75,000 75,000
Revolving credit facility GBP 6 October 2025 SONIA + 1.65% margin 80,662 80,662
-------------------------- --------- ----------------- --------------------- -------- --------
Total principal value 155,662 155,662
------------------------------------------------------------------------------- -------- --------
Issue costs (2,040) (3,084)
------------------------------------------------------------------------------- -------- --------
Total bank loans 153,622 152,578
------------------------------------------------------------------------------- -------- --------
The interest rate applied to loan facilities is determined using SONIA plus a margin based on net leverage calculations. At 1 January 2022, the margin was 1.9%; this changed to 1.65% effective from 16 September 2022 and this is the margin as at 31 December 2022 (2021: 1.9%).
Under the terms of the facility, the debt is supported by guarantees from JTC PLC and other applicable subsidiaries deemed to be obligors, and in the event of default, demand could be placed on these entities to settle outstanding liabilities.
Movement in loan facilities is as follows:
Effect of
At 1 January Amortisation foreign At 31 December
2022 Drawdowns Repayment release exchange 2022
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
---------------- ------------ --------- --------- ------------ --------- --------------
Principal value 155,662 - - - - 155,662
Issue costs (3,084) - - 1,044 - (2,040)
---------------- ------------ --------- --------- ------------ --------- --------------
Total 152,578 - - 1,044 - 153,622
---------------- ------------ --------- --------- ------------ --------- --------------
Effect of
At 1 January Amortisation foreign At 31 December
2021 Drawdowns Repayment release exchange 2021
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
---------------- ------------ --------- --------- ------------ --------- --------------
Principal value 105,594 176,662 (125,099) - (1,495) 155,662
Issue costs (1,218) (3,364) - 1,498 - (3,084)
---------------- ------------ --------- --------- ------------ --------- --------------
Total 104,376 173,298 (125,099) 1,498 (1,495) 152,578
---------------- ------------ --------- --------- ------------ --------- --------------
On 6 October 2021, the Group entered into a multicurrency loan facility agreement (the "facilities agreement") with HSBC for a total commitment of GBP225m consisting of a term loan of GBP75m and a revolving credit facility ("RCF") of GBP150m. The initial termination date is the third anniversary of the date of the agreement, being 6 October 2024. The facilities agreement was amended on 22 November 2021 and introduced Fifth Third Bank and Citibank N.A. as incoming lenders, joining the syndicate that includes existing lenders HSBC, Barclays Bank Plc, Santander UK Plc and the Bank of Ireland. On 8 November 2022, the facilities agreement was further amended to extend the termination date by one year to 6 October 2025. All facilities are due to be repaid on or before the termination date of 6 October 2025 unless the termination date is extended for the available one year extension.
The cost of the facility depends upon net leverage, being the ratio of total net debt to underlying EBITDA (for LTM at average FX rates and adjusted for pro-forma contributions from acquisitions) for a relevant period as defined in the facilities agreement. At 31 December 2022, arrangement and legal fees amounting to GBP3.4m have been capitalised for amortisation over the term of the loan (2021: GBP3.4m).
At 31 December 2022, the Group had available GBP69.3m of committed facilities currently undrawn (2021: GBP69.3m).
18.2. COMPLIANCE WITH LOAN COVENANTS
The Company has complied with the financial covenants of its borrowing facilities during the 2022 and 2021 reporting periods (see note 30).
18.3. FAIR VALUE
For the majority of the borrowings, the fair values are not materially different from their carrying amounts, since the interest payable on those borrowings is close to current market rates or the borrowings are short term in nature.
19. LEASE LIABILITIES
Where the Group is a lessee its lease contracts are for the rental of buildings for office space and also office furniture and equipment. In accordance with IFRS 16 'Leases', the Group recognises right-of-use assets which are shown with property, plant and equipment (see note 20), and lease liabilities, which are shown separately on the consolidated balance sheet.
2022 2021
GBP'000 GBP'000
------------------------ -------- --------
Non-current 40,602 37,916
Current 4,292 5,463
------------------------ -------- --------
Total lease liabilities 44,894 43,379
------------------------ -------- --------
The Group makes business decisions that affect its lease contracts and those containing renewal and termination clauses are reassessed to determine whether there is any change to the lease term. Management have an ongoing programme of review and have not identified any leases with an extension option that would have a significant impact on the carrying amount of lease assets and liabilities.
SECTION 4 - NON-FINANCIAL ASSETS AND NON-FINANCIAL LIABILITIES
20. PROPERTY, PLANT AND EQUIPMENT
Items of property, plant and equipment are initially recorded at cost and are stated at historical cost less depreciation and impairment losses. Depreciation is recognised so as to write off the cost or valuation of assets less their residual values over their useful lives, using the straight-line method, on the following bases:
-- Computer equipment - 4 years
-- Office furniture and equipment - 4 years
-- Leasehold improvements - over the period of the lease
The estimated useful lives, residual values and depreciation methods are reviewed at the end of each reporting period with the effect of any changes in estimate accounted for on a prospective basis.
An asset's carrying amount is written down immediately to its recoverable amount if the asset's carrying amount is greater than its estimated recoverable amount.
An item of property, plant and equipment and any significant part initially recognised is derecognised upon disposal or when no future economic benefits are expected from its use or disposal. Any gain or loss arising on derecognition of the asset (calculated as the difference between the net disposal proceeds and the carrying amount of the asset) is included in the consolidated income statement when the asset is derecognised.
Assets under the course of construction are stated at cost. These assets are not depreciated until they are available for use.
For right-of-use assets, upon inception of a contract, the Group assesses whether a contract conveys the right to control the use of an identified asset for a period in exchange for consideration, in which case it is classified as a lease. The Group recognises a right-of-use asset and a lease liability at the lease commencement date. Right-of-use assets are measured at cost comprising of the following: the amount of the initial measurement of lease liability; any lease payments made at or before the commencement date less any lease incentives received; any initial direct costs; and estimated restoration costs.
The right-of-use asset is subsequently depreciated using the straight-line method from the commencement date to the end of the useful life; this is considered to be the end of the lease term as assessed by Management. The lease asset is periodically adjusted for certain remeasurements of the lease liability and impairment losses (if any).
The movements of all tangible assets are as follows:
Computer Office furniture Leasehold Right-of-use
equipment and equipment improvements assets Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
---------------------------------------- ---------- ---------------- ------------- ------------ --------
Cost
At 1 January 2021 4,162 2,398 8,441 48,810 63,811
Additions 114 299 1,092 4,037 5,542
Additions through business combinations 20 100 - 1,495 1,615
Disposals (6) - - (79) (85)
Exchange differences (102) (87) (76) (959) (1,224)
---------------------------------------- ---------- ---------------- ------------- ------------ --------
At 31 December 2021 4,188 2,710 9,457 53,304 69,659
---------------------------------------- ---------- ---------------- ------------- ------------ --------
Additions 633 1,249 1,076 4,592 7,550
Additions through business combinations 22 - - 471 493
Disposals (330) (977) (671) - (1,978)
Exchange differences 116 249 351 2,085 2,801
---------------------------------------- ---------- ---------------- ------------- ------------ --------
At 31 December 2022 4,629 3,231 10,213 60,452 78,525
---------------------------------------- ---------- ---------------- ------------- ------------ --------
Accumulated depreciation
At 1 January 2021 2,805 1,107 2,988 7,662 14,562
Charge for the year 471 449 687 5,500 7,107
Disposals (6) - - - (6)
Exchange differences (55) (45) (48) (196) (344)
---------------------------------------- ---------- ---------------- ------------- ------------ --------
At 31 December 2021 3,215 1,511 3,627 12,966 21,319
---------------------------------------- ---------- ---------------- ------------- ------------ --------
Charge for the year 524 516 759 6,346 8,145
Disposals (329) (842) (548) - (1,719)
Exchange differences 77 267 116 754 1,214
---------------------------------------- ---------- ---------------- ------------- ------------ --------
At 31 December 2022 3,487 1,452 3,954 20,066 28,959
---------------------------------------- ---------- ---------------- ------------- ------------ --------
Carrying amount
---------------------------------------- ---------- ---------------- ------------- ------------ --------
At 31 December 2022 1,142 1,779 6,259 40,386 49,566
---------------------------------------- ---------- ---------------- ------------- ------------ --------
At 31 December 2021 973 1,199 5,830 40,338 48,340
---------------------------------------- ---------- ---------------- ------------- ------------ --------
21. GOODWILL AND OTHER INTANGIBLE ASSETS
Goodwill
Goodwill that arises on the acquisition of subsidiaries is considered an intangible asset. See note 31 for the measurement of goodwill at initial recognition; subsequent to this, measurement is at cost less accumulated impairment losses.
Intangible assets acquired in a business combination
Intangible assets acquired in a business combination and recognised separately from goodwill are initially recognised at their fair value at the acquisition date (which is regarded as their cost). The initial valuation work is performed with support from external valuation specialists. Subsequent to initial recognition, these are measured at cost less accumulated amortisation and accumulated impairment losses.
Amortisation is recognised in the consolidated income statement on a straight-line basis over the estimated useful life of the asset from the date of acquisition. The estimated useful lives are as follows:
-- Customer relationships - 2 to 25 years
-- Software - 5 to 10 years
-- Brand - 5 to 10 years
The estimated useful lives and residual value are reviewed at each reporting date and adjusted if appropriate, with the effect of any change in estimate being accounted for on a prospective basis.
Intangible assets acquired separately
Intangible assets that are acquired separately by the Group and have finite useful lives are measured at cost less accumulated amortisation and accumulated impairment losses.
Amortisation is recognised in the consolidated income statement on a straight-line basis over the estimated useful life of the asset from the date that they are available for use. The estimated useful lives are as follows:
-- Customer relationships - 10 years
-- Software - 4 years
-- Regulatory licence - 12 years
The estimated useful lives and residual value are reviewed at each reporting date and adjusted if appropriate, with the effect of any change in estimate being accounted for on a prospective basis.
Internally generated software intangible assets
Development costs that are directly attributable to the design and testing of identifiable and unique software products controlled by the Group are recognised as intangible assets where the following criteria are met:
-- It is technically feasible to complete the software so that it will be available for use
-- Management intend to complete the software and use or sell it
-- There is an ability to use or sell the software
-- It can be demonstrated how the software will generate probable future economic benefits
-- Adequate technical, financial and other resources to complete the development and to use or sell the software are available
-- The expenditure attributable to the software during its development stage can be reliably measured
Directly attributable costs that are capitalised as part of the software include employee costs and an appropriate portion of relevant overheads. Capitalised development costs are recorded as intangible assets and amortisation is recognised in the consolidated income statement on a straight-line basis over the estimated useful life of the asset from the date at which the asset is ready to use. The estimated useful life for internally generated software intangible assets is 4 years.
The estimated useful lives and residual value are reviewed at each reporting date and adjusted if appropriate, with the effect of any change in estimate being accounted for on a prospective basis.
Impairment of non-financial assets
Goodwill that arises on the acquisition of business combinations and intangible assets that have an indefinite useful life are not subject to amortisation and are tested annually for impairment, or more frequently if events or changes in circumstances indicate that they might be impaired. Other non-financial assets are tested for impairment whenever events or changes in circumstances indicate that the carrying amount might not be recoverable. An impairment loss is recognised for the amount by which the asset's carrying amount exceeds its recoverable amount. The recoverable amount is the higher of an asset's fair value less costs of disposal and value in use. For the purposes of assessing impairment, assets are grouped at the lowest levels for which there are separately identifiable cash inflows which are largely independent of the cash inflows from other assets or groups of assets ("CGUs"). Non-financial assets other than goodwill that suffered an impairment are reviewed for possible reversal of the impairment at the end of each reporting period.
The movements in goodwill and other intangible assets are as follows:
Customer Regulatory
Goodwill relationships licence Software Brands Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
---------------------------------------- -------- -------------- ---------- -------- -------- --------
Cost
At 1 January 2021 173,777 67,351 338 7,926 630 250,022
Additions - - - 1,771 - 1,771
Additions through business combinations 171,983 72,393 - 1,151 1,993 247,520
Exchange differences (4,155) (1,975) (24) 13 (10) (6,151)
---------------------------------------- -------- -------------- ---------- -------- -------- --------
At 31 December 2021 341,605 137,769 314 10,861 2,613 493,162
---------------------------------------- -------- -------------- ---------- -------- -------- --------
Additions - 4,288 - 3,018 - 7,306
Additions through business combinations 10,982 5,663 - - - 16,645
Measurement period adjustments (13,737) - - - - (13,737)
Disposals - - - (46) - (46)
Exchange differences 24,858 8,884 17 316 268 34,343
---------------------------------------- -------- -------------- ---------- -------- -------- --------
At 31 December 2022 363,708 156,604 331 14,149 2,881 537,673
---------------------------------------- -------- -------------- ---------- -------- -------- --------
Accumulated amortisation
At 1 January 2021 - 17,149 131 3,937 84 21,301
Charge for the year - 8,070 58 1,462 186 9,776
Exchange differences - (235) (11) 7 4 (235)
---------------------------------------- -------- -------------- ---------- -------- -------- --------
At 31 December 2021 - 24,984 178 5,406 274 30,842
---------------------------------------- -------- -------------- ---------- -------- -------- --------
Charge for the year(1) - 11,219 29 1,817 525 13,590
Disposals - - - (46) - (46)
Exchange differences - 1,374 11 130 44 1,559
---------------------------------------- -------- -------------- ---------- -------- -------- --------
At 31 December 2022 - 37,577 218 7,307 843 45,945
---------------------------------------- -------- -------------- ---------- -------- -------- --------
Carrying amount
---------------------------------------- -------- -------------- ---------- -------- -------- --------
At 31 December 2022 363,708 119,027 113 6,842 2,038 491,728
---------------------------------------- -------- -------------- ---------- -------- -------- --------
At 31 December 2021 341,605 112,785 136 5,455 2,339 462,320
---------------------------------------- -------- -------------- ---------- -------- -------- --------
1 Total amortisation charge includes GBP1.2m related to software not acquired through business combinations; the balance of GBP12.4m is excluded when calculating underlying basic EPS (see note 34.3).
21.1. GOODWILL
Goodwill impairment
Goodwill is not amortised but is tested for impairment annually, or more frequently if events or changes in circumstances indicate that the carrying amount may not be recoverable. With the exception of US, goodwill is monitored at a jurisdictional level by Management. Goodwill is allocated to CGUs for the purpose of impairment testing and this allocation is made to those CGUs that are expected to benefit from the business combination in which the goodwill arose. The aggregate carrying amounts of goodwill allocated to each CGU is as follows:
In the current year: Balance at Business Measurement period Exchange Balance at
1 Jan 2022 combinations adjustments differences 31 Dec 2022
CGU Note GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
--------------------- ---- ----------- ------------- ------------------ ------------ ------------
Jersey 66,104 - - - 66,104
Guernsey 10,761 - - - 10,761
BVI 752 - - - 752
Switzerland 2,366 - - 138 2,504
Cayman 224 - - 27 251
Luxembourg 27,809 - - 1,377 29,186
Netherlands 14,220 - - 772 14,992
Dubai 1,763 - - 212 1,975
Mauritius 2,379 - - 277 2,656
US - NESF 44,387 - - 5,317 49,704
US - SALI 31.7 139,573 2,598 (13,437) 15,537 144,271
US - Other 31.8 10,603 - (426) 1,269 11,446
US - NYPTC 31.1 - 8,384 - (322) 8,062
Ireland 8,688 - 108 255 9,051
UK 11,976 - 18 (1) 11,993
--------------------- ---- ----------- ------------- ------------------ ------------ ------------
Total 341,605 10,982 (13,737) 24,858 363,708
--------------------- ---- ----------- ------------- ------------------ ------------ ------------
In the prior year: Balance at Business Measurement period Exchange Balance at
1 Jan 2021 combinations adjustments differences 31 Dec 2021
CGU GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
------------------- ----------- ------------- ------------------ ------------ ------------
Jersey 66,569 - (465) - 66,104
Guernsey 10,761 - - - 10,761
BVI 752 - - - 752
Switzerland 2,400 - - (34) 2,366 Cayman 222 - - 2 224 Luxembourg 29,721 - - (1,912) 27,809 Netherlands 15,292 - - (1,072) 14,220 Dubai 1,746 - - 17 1,763 Mauritius 2,357 - - 22 2,379 US - NESF 43,957 - - 430 44,387 US - Other - 151,724 - (1,548) 150,176 Ireland - 8,748 - (60) 8,688 UK - 11,976 - - 11,976 ------------------- ----------- ------------- ------------------ ------------ ------------ Total 173,777 172,448 (465) (4,155) 341,605 ------------------- ----------- ------------- ------------------ ------------ ------------
Key assumptions used to calculate the recoverable amount for each CGU
The recoverable amount of all CGUs has been determined based on the higher of the value in use calculation and fair value less cost to sell. Projected cash flows are calculated with reference to each CGU's latest budget and business plan which are subject to a rigorous review and challenge process. Management prepare the budgets through an assessment of historical revenues from existing clients, the pipeline of new projects, historical pricing, and the required resource base needed to service new and existing clients, coupled with their knowledge of wider industry trends and the economic environment.
The year 1 cash flow projections are based on the latest approved budget and years 2 to 5 on detailed outlooks prepared by Management, except for the recently acquired US - SALI CGU, which covers a 10 year period due to the significantly longer useful economic life of its customer relationships.
Previously, the terminal growth rate was based on expected long-term inflation. This has been updated to also consider the long-term average growth rate for the jurisdiction and services provided.
Management estimate discount rates using pre-tax rates that reflect current market assessments of the time value of money. In assessing the discount rate applicable to the Group, the following factors have been considered:
-- Long-term treasury bond rate for the relevant jurisdiction
-- The cost of equity based on an adjusted Beta for the relevant jurisdiction
-- The risk premium to reflect the increased risk of investing in equities
Management have given due consideration to climate change and any potential impact on projected cash flows. Such is the nature of JTC's business and the diversification of customer relationships that Management have concluded the impact to be immaterial to each CGU's recoverable amount.
A summary of the values assigned to the key assumptions used in the value in use calculations are as follows:
-- Revenue growth rate: up to 56.1%
-- Terminal value growth rate: between 0.5% and 4.0%
-- Discount rate: between 10.5% and 15.3%
The key assumptions used for CGUs where the carrying amount is a significant proportion of the total carrying value of goodwill is as follows:
Average annual revenue growth rate Terminal value growth rate Discount rate
------------------------------------ ---------------------------- ---------------
% of total carrying
CGU value of goodwill 2022 2021 2022 2021 2022 2021
----------- -------------------- ----------------- ----------------- ------------- ------------- ------- ------
Jersey 18.2% 7.6% 2.7% 2.5% 0.0% 11.2% 10.6%
Luxembourg 8.0% 10.9% 7.9% 2.0% 1.5% 11.4% 12.4%
US - NESF 13.7% 17.1% 19.0% 3.0% 3.0% 11.3% 11.4%
US - SALI 39.7% 17.2% - 4.0% - 10.5% -
----------- -------------------- ----------------- ----------------- ------------- ------------- ------- ------
Conclusion
The recoverable amount of goodwill determined for each CGU as at 31 December 2022 was found to be higher than its carrying amount.
Sensitivity to changes in assumptions
Management believe that any reasonable changes to the key assumptions on which recoverable amounts are based would not cause the aggregate carrying amount to exceed the recoverable amount of the CGUs, except for US - NESF and US - SALI where the sensitivity of key assumptions have been detailed below.
US - SALI
The following would cause the carrying amount to exceed the recoverable amount:
-- A reduction of 4.1% in the average annual revenue growth rate would result in a GBP3.0m impairment
-- An increase of 2.0% in the discount rate would result in a GBP2.8m impairment
For the recoverable amount to equal the carrying amount, there would need to be a reduction of GBP63.6m. This may be caused by either of the following:
-- A reduction of 3.9% in the average annual revenue growth rate from 17.2% to 13.3%
-- An increase of 1.9% in the discount rate from 10.5% to 12.4%
US - NESF
The following would cause the carrying amount to exceed the recoverable amount:
-- A reduction of 2.0% in the average annual revenue growth rate would result in a GBP2.7m impairment
-- An increase of 2.5% in discount rate would result in a GBP3.2m impairment
For the recoverable amount to equal the carrying amount, there would need to be a reduction of GBP11.7m. This may be caused by either of the following:
-- A reduction of 1.6% in the average annual revenue growth rate from 17.1% to 15.4%
-- An increase of 1.9% in the discount rate from 11.3% to 13.2%
21.2. CUSTOMER RELATIONSHIP INTANGIBLE ASSETS
The carrying amount of identifiable customer relationship intangible assets acquired separately and through business combinations are as follows:
Carrying amount
------------------------------------- ------- --------------------------- -------------- ------------------
Useful
Amortisation economic 2022 2021
Acquisitions Note period end life ("UEL") GBP'000 GBP'000
------------------------------------- ------- --------------------------- -------------- -------- --------
Previous financial reporting periods
Signes 30 April 2025 10 years 699 928
KB Group 30 June 2027 12 years 1,570 1,918
S&GFA 30 September 2025 10 years 1,143 1,392
BAML 30 September 2029 12 years 6,016 6,168
NACT 31 July 2027 10 years 957 1,146
Van Doorn 28 February 2030 11.4 years 4,724 5,114
Minerva 30 May 2027-30 July 2030 8.7-11.8 years 8,762 9,759
Exequtive 31 March 2029 10 years 6,373 7,012
Aufisco 30 June 2029 10 years 1,365 1,494
Sackville 28 February 2029 10 years 681 703
NESF 30 April 2022-30 April 2028 2-8 years 1,256 1,555
Sanne Private Clients 30 June 2030 10 years 4,794 5,433
Anson Registrars 28 February 2030 10 years 22 25
RBC cees 31.2 31 March 2033 12 years 19,105 20,969
INDOS 31.3 31 May 2031 10 years 1,138 1,273
Segue 31.4 30 September 2031 10 years 1,016 1,036
perfORM 31.5 30 September 2031 10 years 23 26
Ballybunion 31.6 31 October 2031 10 years 2,362 2,494
SALI 31.7 31 October 2046 25 years 46,215 42,999
EFS 31.8 30 November 2031 10 years 1,351 1,341
For the year ended 31 December 2022
NYPTC 31.1 31 October 2032 10 years 5,356 -
Sterling 21.2(b) 30 June 2032 10 years 4,099 -
------------------------------------- ------- --------------------------- -------------- -------- --------
Total 119,027 112,785
------------------------------------- ------- --------------------------- -------------- -------- --------
(a) Customer relationships acquired in a business combination
Customer relationship intangible assets acquired in a business combination and recognised separately from goodwill are initially recognised at their fair value at the acquisition date. In 2022, the Group recognised customer relationship intangible assets for NYPTC of GBP5.7m ($6.6m). The UEL and carrying amounts at 31 December 2022 are shown in the table above.
Key assumptions in determining fair value
The fair value at acquisition was derived using the multi-period excess earnings method ("MEEM") financial valuation model. Management consider the following key assumptions to be significant for the valuation of new customer relationships:
-- Year on year revenue growth
-- The discount rate applied to free cash flow
-- Year on year client attrition rate
Sensitivity analysis
Management carried out a sensitivity analysis on the key assumptions used in the valuation of new customer relationship intangible assets for NYPTC. Management concluded that any reasonable change to the key assumptions for the new customer relationship intangible assets recognised in the year would not result in a significant change to fair value.
(b) Customer relationships acquired separately
On 17 June 2022, JTC entered into a facilitation and referral agreement ("F&R agreement") and an outsourcing agreement with Sterling Trust (Cayman) Limited ("Sterling"), whereby Sterling will, on an exclusive basis, refer, introduce and recommend its clients to JTC as a replacement provider of services. Such services include initial onboarding and client due diligence services, and subsequent provision of trust, custody, director, company management and administration services.
The fair value of the customer relationships acquired is the consideration due; this is based on a percentage of revenue attributable to each client successfully introduced. The assets are being amortised over their estimated useful economic life of 10 years.
JTC made an initial payment of GBP2.2m ($3.0m) following the signing of the F&R agreement and a final payment of GBP1.8m ($2.2m) will become due on 17 June 2023 subject to the successful onboarding of at least 75% of the client revenue. Management are confident that the contingent consideration will be settled in full, see note 17.
(c) Customer relationship intangibles impairment
Management review customer relationship intangible assets for indicators of impairment at each reporting date. Whilst significant consideration was given to the challenging global political and economic backdrop, including increasing inflationary pressures, Management did not consider this to be an indicator of impairment. Management concluded that no indicators of impairment were present as at 31 December 2022.
22. OTHER NON-FINANCIAL ASSETS
Assets recognised from costs to obtain or fulfil a contract
Incremental costs of obtaining a contract (i.e. costs that would not have been incurred if the contract had not been obtained) and the costs incurred to fulfil a contract are recognised as assets within non-financial assets if the costs are expected to be recovered. The capitalised costs are amortised on a straight-line basis over the estimated useful economic life of the contract. The carrying amount of the asset is tested for impairment in accordance with the policy described in note 21.
2022 2021
GBP'000 GBP'000
------------------------------------------------------------ -------- --------
Non-current
Prepayments 361 42
Assets recognised from costs to obtain or fulfil a contract 2,008 516
------------------------------------------------------------ -------- --------
Total non-current 2,369 558
------------------------------------------------------------ -------- --------
Current
Prepayments 4,660 3,468
Assets recognised from costs to obtain or fulfil a contract 549 247
Current tax receivables 774 432
------------------------------------------------------------ -------- --------
Total current 5,983 4,147
------------------------------------------------------------ -------- --------
Total other non-financial assets 8,352 4,705
------------------------------------------------------------ -------- --------
Current and non-current assets recognised from costs to obtain or fulfil a contract include GBP1.2m for costs to obtain a contract (2021: GBP0.6m) and GBP1.4m for costs incurred to fulfil a contract (2021: GBP0.2m). The amortisation charge for the year was GBP0.8m (2021: GBP0.7m). Management review assets recognised from costs to obtain or fulfil a contract for indicators of impairment at each reporting date and have concluded that no indicators were present as at 31 December 2022.
23. DEFERRED TAXATION
For the accounting policy on deferred income tax, see note 11.
The deferred taxation (assets) and liabilities recognised in the consolidated financial statements are set out below:
2022 2021
GBP'000 GBP'000
-------------------------------------------------------- -------- --------
Deferred tax assets (143) (119)
Deferred tax liabilities 11,184 24,355
-------------------------------------------------------- -------- --------
11,041 24,236
-------------------------------------------------------- -------- --------
Intangible assets 11,097 24,238
Other origination and reversal of temporary differences (56) (2)
-------------------------------------------------------- -------- --------
11,041 24,236
-------------------------------------------------------- -------- --------
The movement in the year is analysed as follows:
2022 2021
Intangible assets Note GBP'000 GBP'000
-------------------------------------------------------- ---- -------- --------
Balance at the beginning of the year 24,238 8,784
Measurement period adjustments (13,863) -
Recognised through business combinations (1) 31 1,682 17,349
Recognised in the consolidated income statement 11 (1,531) (1,446)
Foreign exchange (to other comprehensive income) 571 (449)
-------------------------------------------------------- ---- -------- --------
Balance at 31 December 11,097 24,238
-------------------------------------------------------- ---- -------- --------
Other origination and reversal of temporary differences
Balance at the beginning of the year (2) 14
Acquired through acquisitions - 14
Recognised in the consolidated income statement (54) (30)
-------------------------------------------------------- ---- -------- --------
Balance at 31 December (56) (2)
-------------------------------------------------------- ---- -------- --------
1 Deferred tax liabilities have been recognised in relation to identified intangible assets, the amortisation of which is non-deductible against Corporation Tax in the jurisdictions in which the business operates and therefore creates temporary differences between the accounting and taxable profits. See note 31.
24. OTHER NON-FINANCIAL LIABILITIES
Deferred income
Fixed fees received in advance across all the service lines and up-front fees in respect of services due under contract are time apportioned to respective accounting periods, and those billed but not yet earned are included in deferred income in the consolidated balance sheet. As such liabilities are associated with future services, they do not give rise to a contractual obligation to pay cash or another financial asset.
Contract liabilities
Commissions expected to be paid over the term of a customer contract are discounted and recognised at the NPV. The finance cost is charged to the consolidated income statement over the contract life so as to produce a constant periodic rate of interest on the remaining balance of the liability for each period.
Employee benefit obligations
For the accounting policy on employee benefit obligations, see note 5.
2022 2021
Note GBP'000 GBP'000
-------------------------------------- ---- -------- --------
Non-current
Contract liabilities 216 179
Employee benefit obligations 5 572 777
-------------------------------------- ---- -------- --------
Total non-current 788 956
-------------------------------------- ---- -------- --------
Current
Deferred income (1) 7,856 8,205
Contract liabilities 772 374
-------------------------------------- ---- -------- --------
Total current 8,628 8,579
-------------------------------------- ---- -------- --------
Total other non-financial liabilities 9,416 9,535
-------------------------------------- ---- -------- --------
1 Of the GBP8.2m of deferred income at 31 December 2021, GBP8.1m was recognised as revenue in the 2022 consolidated income statement.
25. PROVISIONS
Provisions are recognised when the Group has a present obligation (legal or constructive) as a result of a past event, it is probable that an outflow of resources will be required to settle the obligation, and a reliable estimate can be made of the amount of the obligation. Provisions are not recognised for future operating losses.
The amount recognised as a provision is the best estimate of the consideration required to settle the present obligation at the end of the reporting period, taking into account the risks and uncertainties surrounding the obligation. If the impact of the time value of money is material, provisions are determined by discounting the expected future cash flows at a pre-tax rate that reflects current market assessments of the time value of money and the risks specific to the liability. The unwinding of the discount is recognised as a finance cost in the consolidated income statement.
Dilapidations
The Group has entered into lease agreements for the rental of office space in different countries. There are a number of leases which include an obligation to remove any leasehold improvements (thus returning the premises to an agreed condition at the end of the respective lease terms) and to restore wear and tear by repairing and repainting (this is known as "dilapidations"). The estimated cost of the dilapidations payable at the end of each tenancy, unless specified, is generally estimated by reference to the square footage of the building and in consultation with local property agents, landlords and prior experience. Having estimated the likely amount due, a country specific discount rate is applied to calculate the present value of the expected outflow. The provisions are expected to be utilised when the leases expire or upon exit. The discounted dilapidation cost has been capitalised against the leasehold improvement asset in accordance with IFRS 16.
Dilapidation
provisions
GBP'000
---------------------------------------- ------------
At 1 January 2021 1,640
Additions 178
Additions through business combinations 116
Unwind of discount 60
Amounts utilised (31)
Impact of foreign exchange 4
---------------------------------------- ------------
At 31 December 2021 1,967
---------------------------------------- ------------
Additions 219
Additions through business combinations 56
Disposals (181)
Unwind of discount 22
Amounts utilised (21)
Impact of foreign exchange 91
---------------------------------------- ------------
At 31 December 2022 2,153
---------------------------------------- ------------
2022 2021
Analysis of total provisions: GBP'000 GBP'000
------------------------------ -------- --------
Non-current 1,884 1,720
Current 269 247
------------------------------ -------- --------
Total 2,153 1,967
------------------------------ -------- --------
SECTION 5 - EQUITY
26. SHARE CAPITAL AND RESERVES
26.1. SHARE CAPITAL AND SHARE PREMIUM
The Group's Ordinary shares are classified as equity. Incremental costs directly attributable to the issue of Ordinary shares are recognised as a deduction from equity, net of any tax effects.
2022 2021
GBP'000 GBP'000
---------------------------------------------------------------- -------- --------
Authorised
300,000,000 Ordinary shares (2021: 300,000,000 Ordinary shares) 3,000 3,000
---------------------------------------------------------------- -------- --------
Called up, issued and fully paid
149,061,113 Ordinary shares (2021: 147,585,261 Ordinary shares) 1,491 1,476
---------------------------------------------------------------- -------- --------
Ordinary shares have a par value of GBP0.01 each. All shares are equally eligible to receive dividends and the repayment of capital, and represent one vote at Shareholders' meetings of JTC PLC.
No. of shares Par value Share premium
Movements in Ordinary shares Note (thousands) GBP'000 GBP'000
------------------------------------------------------------------ ---- ------------- --------- -------------
At 1 January 2021 122,522 1,225 130,823
Shares issued for equity raises 21,618 216 144,585
PLC EBT issue 1,333 13 -
Acquisition of INDOS 177 2 1,078
Acquisition of Segue 110 1 802
Acquisition of Ballybunion 77 1 664
Acquisition of SALI 1,260 13 8,570
Acquisition of EFS 85 1 706
Acquisition of NESF 404 4 3,132
Less: Cost of share issuance - - (4,508)
------------------------------------------------------------------ ---- ------------- --------- -------------
Movement in the year 25,064 251 155,029
------------------------------------------------------------------ ---- ------------- --------- -------------
At 31 December 2021 147,586 1,476 285,852
------------------------------------------------------------------ ---- ------------- --------- -------------
PLC EBT issue (1) 1,150 12 -
Acquisition of SALI - EBT contribution (1) 31.7 325 3 2,056
Acquisition of SALI - adjust fair value of equity instruments (2) 31.7 - - 2,598
Less: Cost of share issuance - - (71)
------------------------------------------------------------------ ---- ------------- --------- -------------
Movement in the year 1,475 15 4,583
------------------------------------------------------------------ ---- ------------- --------- -------------
At 31 December 2022 149,061 1,491 290,435
------------------------------------------------------------------ ---- ------------- --------- -------------
1 On 14 June 2022, the Company issued an additional 1,475,852 Ordinary shares to the Company's Employee Benefit Trust ("PLC EBT"), see note 26.2. Of this amount, 325,272 Ordinary shares settled an element of consideration for the SALI acquisition; the remaining 1,150,580 Ordinary shares were issued in order for PLC EBT to satisfy anticipated future exercises of awards granted to beneficiaries.
2 Following a review by the FRC, an adjustment was made to the fair value of equity instruments issued as initial consideration (see note 31.7(a)).
26.2. OWN SHARES
Own shares represent the shares of the Company that are unallocated and currently held by PLC EBT. They are recorded at cost and deducted from equity. When shares vest unconditionally, are cancelled or are reissued, they are transferred from the own shares reserve at their cost. Any consideration paid or received for the purchase or sale of the Company's own shares is shown as a movement in Shareholders' equity.
No. of shares PLC EBT
Note (thousands) GBP'000
--------------------------- ------- ------------- --------
At 1 January 2021 3,317 3,084
EIP awards 36.1(a) (1,545) -
PSP awards 36.1(b) (153) -
DBSP awards 36.1(c) (42) -
Other awards 36.1(d) (57) -
PLC EBT issue 1,333 13
Acquisition of Segue 26 -
Acquisition of Ballybunion 30 -
Acquisition of SALI 215 -
Purchase of own shares 47 269
--------------------------- ------- ------------- --------
Movement in year (146) 282
--------------------------- ------- ------------- --------
At 31 December 2021 3,171 3,366
--------------------------- ------- ------------- --------
EIP awards 36.1(a) (1,411) -
PSP awards 36.1(b) (188) -
DBSP awards 36.1(c) (62) -
Other awards 36.1(d) (70) -
PLC EBT issue 26.1 1,475 12
Purchase of own shares (1) 42 319
--------------------------- ------- ------------- --------
Movement in year (214) 331
--------------------------- ------- ------------- --------
At 31 December 2022 2,957 3,697
--------------------------- ------- ------------- --------
1 Shares were purchased for PLC EBT using its surplus cash held as a result of dividend income.
26.3. OTHER RESERVES
Capital reserve
This reserve is used to record the gains or losses recognised on the purchase, sale, issue or cancellation of the Company's own shares, which may arise from capital transactions by the Group's employee benefit trusts as well as any movements in share-based awards to employees (see note 36).
Translation reserve
The translation reserve comprises all foreign currency differences arising from the translation of the financial statements of foreign operations.
Retained earnings
Retained earnings includes accumulated profits and losses.
27. DIVIDS
Provision is made for the amount of any dividend declared, being appropriately authorised and no longer at the discretion of the entity, on or before the end of the reporting period but not distributed at the end of the reporting period. Interim dividends are recognised when paid.
The following dividends were declared and paid by the Company for the year:
2022 2021
GBP'000 GBP'000
---------------------------------------------------------------- -------- --------
Final dividend for 2020 of 4.35p per qualifying Ordinary share - 5,670
Interim dividend for 2021 of 2.6p per qualifying Ordinary share - 3,421
Final dividend for 2021 of 5.07p per qualifying Ordinary share 7,322 -
Interim dividend for 2022 of 3.1p per qualifying Ordinary share 4,522 -
---------------------------------------------------------------- -------- --------
Total dividend declared and paid 11,844 9,091
---------------------------------------------------------------- -------- --------
SECTION 6 - RISK
28. CRITICAL ACCOUNTING ESTIMATES AND JUDGEMENTS
In the application of the Group's accounting policies, Management are required to make judgements, estimates and assumptions about the carrying amounts of assets and liabilities that are not readily apparent from other sources. The estimates and associated assumptions are regularly evaluated based on historical experience, current circumstances, expectation of future events and other factors that are considered to be relevant. Actual results may differ from these estimates. In preparing the financial statements, Management have ensured that they have assessed any direct and indirect impacts of rising inflation and interest rates when applying IFRS.
This note provides an overview of the areas that involved a higher degree of judgement or complexity, and of items which are more likely to be materially adjusted due to estimates and assumptions turning out to be wrong.
The following are the critical judgements and estimates that Management have made in the process of applying the Group's accounting policies and that have the most significant effect on the amounts recognised in the consolidated financial statements.
28.1. CRITICAL JUDGEMENTS IN APPLYING THE GROUP'S ACCOUNTING POLICIES
Recognition of separately identifiable intangibles
In 2022, the Group acquired New York Private Trust Company (see Note 31.1). IFRS 3 'Business Combinations' requires Management to identify assets and liabilities purchased including intangible assets. Following their assessment, Management concluded that the only intangible asset meeting the recognition criteria was customer relationships. The fair value at acquisition date was GBP5.7m ($6.6m).
28.2. CRITICAL ACCOUNTING ESTIMATES AND ASSUMPTIONS
Recoverability of WIP
To assess the fair value of consideration received for services rendered, Management are required to make an assessment of the net unbilled amount expected to be collected from clients for work performed to date. To make this assessment, WIP balances are reviewed regularly on a by-client basis and the following factors are taken into account: the ageing profile of the WIP, the agreed billing arrangements, value added and status of the client relationship. See note 13 for the sensitivity analysis.
Goodwill impairment - key assumptions used to calculate the recoverable amount for each CGU
Goodwill is tested annually for impairment and the recoverable amount of CGUs is determined based on a value in use calculation using cash flow projections containing key assumptions. See note 21.1 for further detail on key assumptions and sensitivity analysis.
Fair value of customer relationship intangibles
The customer relationship intangible assets are valued using the MEEM financial valuation model. Cash flow forecasts and projections are produced by Management and form the basis of the valuation analysis. Other key estimates and assumptions used in the modelling to derive the fair values include: year on year growth rates, client attrition rates, EBIT margins and the discount rate applied to free cash flow. See note 21.2(a) for the sensitivity analysis.
Fair value of earn-out consideration for SALI
To derive the fair value of the earn-out contingent consideration, Management assessed the likelihood of achieving pre-defined revenue targets to determine the value of contingent consideration. Management considers the forecast revenue to be the key assumption in the calculation of the fair value. See note 31.7 for the sensitivity analysis.
29. FINANCIAL RISK MANAGEMENT
The Group is exposed through its operations to the following financial risks: market risk (including foreign currency risk and interest rate risk), credit risk and liquidity risk.
The Group is exposed to risks that arise from the use of its financial instruments. This note describes the Group's objectives, policies and processes for managing those risks and the methods used to measure them.
There have been no substantive changes in the Group's exposure to financial instrument risks, its objectives, policies and processes for managing those risks or the methods used to measure them from previous periods unless otherwise stated in this note.
Principal financial instruments
The principal financial instruments used by the Group, from which financial instrument risk arises, are as follows. All are classified as measured at amortised cost:
2022 2021
Note GBP'000 GBP'000
--------------------------------------------------- ---- -------- --------
Financial assets - measured at amortised cost
Trade receivables 12 33,290 28,870
Work in progress 13 12,525 12,834
Accrued income 14 23,911 19,587
Other receivables 15 3,991 3,078
Cash and cash equivalents 16 48,861 39,326
--------------------------------------------------- ---- -------- --------
122,578 103,695
--------------------------------------------------- ---- -------- --------
Financial assets - measured at fair value
Other receivables(1) 15 371 -
--------------------------------------------------- ---- -------- --------
371 -
--------------------------------------------------- ---- -------- --------
Financial liabilities - measured at amortised cost
Trade and other payables 17 48,722 41,058
Loans and borrowings 18 153,622 152,578
Lease Liabilities 19 44,894 43,379
--------------------------------------------------- ---- -------- --------
247,238 237,015
--------------------------------------------------- ---- -------- --------
Financial liabilities - measured at fair value
Trade and other payables(1) 17 1,598 1,342
--------------------------------------------------- ---- -------- --------
1,598 1,342
--------------------------------------------------- ---- -------- --------
1 All financial assets and liabilities are measured at amortised cost which is deemed to be representative of fair value. The exception to this is liability-classified contingent consideration of GBP1.6m for perfORM (2021: GBP1.3m) (see note 31.5) and mortgage-backed securities included in other receivables of GBP0.4m (2021: GBPnil) (see note 31.1).
Management considered the following fair value hierarchy levels in line with IFRS 13:
-- Level 1 - Inputs are quoted prices (unadjusted) in active markets for identical assets and liabilities
-- Level 2 - Inputs other than quoted prices included within Level 1 that are observable for the asset and liability, either directly or indirectly
-- Level 3 - Inputs are unobservable inputs for the asset or liability
Management concluded that contingent consideration was classified under Level 3 inputs and mortgage-backed securities under Level 1 inputs.
General objectives, policies and processes
The Board has overall responsibility for determining the Group's financial risk management objectives and policies and, whilst retaining ultimate responsibility for them, it delegates the authority for designing and operating processes that ensure effective implementation of the objectives and policies to Management, in conjunction with the Group's finance department.
The financial risk management policies are considered on a regular basis to ensure that these are in line with the overall business strategies and the Board's risk management philosophy. The overall objective is to set policies to minimise risk as far as possible without adversely affecting the Group's financial performance, competitiveness and flexibility.
29.1. MARKET RISK
Market risk arises from the Group's use of interest-bearing, tradable and foreign currency financial instruments. It is the risk that changes in interest rates (interest rate risk) or foreign exchange rates (currency risk) will affect the Group's future cash flows or the fair value of the financial instruments held. The objective of market risk management is to manage and control market risk exposures within acceptable parameters, while optimising the return.
Foreign currency risk management
Foreign currency risk arises when individual Group entities enter into transactions denominated in a currency other than their functional currency. The Group's policy is, where possible, to allow Group entities to settle liabilities denominated in their functional currency with the cash generated from their own operations in that currency. Where Group entities have liabilities denominated in a currency other than their functional currency (and have insufficient reserves of that currency to settle them), cash already denominated in the required currency will, where possible and ensuring no adverse impact on local regulatory capital adequacy requirements (see note 30), be transferred from elsewhere in the Group.
The Group's exposure to the risk of changes in exchange rates relates primarily to the Group's operating activities when the revenue or expenses are denominated in a different currency from the Group's functional and presentation currency of pounds sterling ("GBP"). For trading entities that principally affect the profit or net assets of the Group, the exposure is mainly from Euro and US dollar. The Group's bank loans are denominated in GBP, although the facility is multicurrency.
As at 31 December 2022, the Group's exposure to the Group's material foreign currency denominated financial assets and liabilities are as follows:
GBP Euro US dollar
-------------------- ------------------ ------------------
2022 2021 2022 2021 2022 2021
Net foreign currency assets/(liabilities) GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
------------------------------------------ --------- --------- -------- -------- -------- --------
Trade receivables 17,612 18,048 3,502 1,712 12,031 5,031
Work in progress 9,628 10,327 1,625 1,518 743 1,062
Accrued income 12,802 9,499 1,704 1,243 9,395 8,207
Other receivables 1,693 1,141 374 317 2,053 1,487
Cash and cash equivalents 9,811 11,361 10,192 7,418 27,114 19,178
Trade and other payables (10,435) (11,665) (6,236) (4,070) (32,695) (25,840)
Loans and borrowings (153,622) (152,578) - - - -
Lease liabilities (26,621) (28,149) (10,863) (9,387) (5,603) (3,986)
------------------------------------------ --------- --------- -------- -------- -------- --------
Total net exposure (139,132) (142,016) 298 (1,249) 13,038 5,139
------------------------------------------ --------- --------- -------- -------- -------- --------
In order to implement and monitor this policy, on an ongoing basis Management periodically analyse cash reserves by individual Group entities and in major currencies together with information on expected liabilities due for settlement. The effectiveness of this policy is measured by the number of resulting cash transfers made between entities and any necessary foreign exchange trades. Management consider this policy to be working effectively but continues to regularly assess if foreign currency hedging is appropriate.
Foreign currency risk sensitivity
The following table illustrates the possible effect on comprehensive income for the year and net assets arising from a 20% strengthening or weakening of pounds sterling against other currencies.
Effect on comprehensive income and net assets
-----------------------------------------------
Strengthening/
(weakening) of 2022 2021
pound sterling (1) GBP'000 GBP'000
---------- ------------------- ----------------------- ----------------------
Euro +20% (50) 208
US dollar +20% (2,173) (857)
---------- ------------------- ----------------------- ----------------------
Total (2,223) (649)
---------- ------------------- ----------------------- ----------------------
Euro (20%) 74 (312)
US dollar (20%) 3,259 1,285
---------- ------------------- ----------------------- ----------------------
Total 3,333 973
---------- ------------------- ----------------------- ----------------------
1 Holding all other variables constant.
Interest rate risk management and sensitivity
Bank loans
The Group is exposed to interest rate risk as it borrows all funds at floating interest rates. The interest rate applied to loan facilities is determined using SONIA plus a margin based on net leverage calculations. The interest rate risk is managed by the Group maintaining an appropriate leverage ratio and through this ensuring that the interest rate is kept as low as possible.
Interest rates have been low in recent history, but the current economic environment has resulted in higher interest rates and costs. Management continue to assess the cost versus benefit of taking hedging instruments to manage this exposure based on their expectation of future interest rate movements.
Sensitivity analysis for variable rate instruments
An increase/decrease of 100 basis points in interest rates on loans and borrowing with floating interest rates would have decreased/increased the profit and loss before tax by GBP1.6m (2021: increase by 50 basis points, GBP0.8m). This analysis assumes that all other variables remain constant.
The Group's exposures to interest rates on financial assets and financial liabilities are detailed in the liquidity risk management section of this note.
29.2. CREDIT RISK MANAGEMENT
Credit risk is the risk of financial loss to the Group should a customer or counterparty to a financial instrument fail to meet its contractual obligations. The Group's principal exposure to credit risk arises from contracts with customers and therefore the following financial assets: trade receivables, work in progress and accrued income (together "customer receivables").
The Group manages credit risk for each new customer by giving consideration to the risk of insolvency or closure of the customer's business, current or forecast liquidity issues and general creditworthiness (including past default experience of the customer or customer type).
Subsequently, customer credit risk is managed by each of the Group entities subject to the Group's policy, procedures and control relating to customer credit risk management. Outstanding customer receivables are monitored and followed up continuously. Specific provisions incremental to ECL are made when there is objective forward-looking evidence that the Group will not be able to bill the customer in line with the contract or collect the debts arising from previous invoices. This evidence can include the following: indication that the customer is experiencing significant financial difficulty or default, probability of bankruptcy, problems in contacting the customer, disputes with a customer, or similar factors.
Given the current economic environment of rising inflation and interest rates, and climate-related risks, Management have ensured close and regular consideration of these factors and the impact to customer behaviours and ability to pay. This analysis is performed on a customer-by-customer basis. Such is the diversification across the book in industries and geographies that any impact is not considered to be material to the recoverability of customer receivables. For more commentary on this, the ageing of trade receivables and the provisions thereon at the year end, including the movement in the provision, see note 12.
Credit risk in relation to other receivables is considered for each separate contractual arrangement by Management. As these are primarily with related parties the risk of the counterparty defaulting is considered to be low.
Credit risk also arises from cash and cash equivalents and deposits with banks and financial institutions. Cash and cash equivalents are held mainly with banks which are rated 'A-' or higher by Standard & Poor's Rating Services or Fitch Ratings Ltd for long-term credit rating.
The financial assets are subject to the impairment requirements of IFRS 9; for further detail of how this is assessed and measured, see notes 12 to 16.
Credit risk exposure
Trade receivables, work in progress and accrued income result from the provision of services to a large number of customers (individuals and corporate), spread across different industries and geographies. The gross carrying amount of financial assets represents the maximum credit exposure and as at the reporting date this can be summarised as follows:
Loss Loss
Total allowance Net Total allowance Net
2022 2022 2022 2021 2021 2021
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
-------------------------- -------- ---------- -------- -------- ---------- --------
Trade receivables 38,935 (5,645) 33,290 33,701 (4,831) 28,870
Work in progress 12,594 (69) 12,525 12,906 (72) 12,834
Accrued income 23,936 (25) 23,911 19,621 (34) 19,587
Other receivables 4,362 - 4,362 3,078 - 3,078
Cash and cash equivalents 48,861 - 48,861 39,326 - 39,326
-------------------------- -------- ---------- -------- -------- ---------- --------
128,688 (5,739) 122,949 108,632 (4,937) 103,695
-------------------------- -------- ---------- -------- -------- ---------- --------
29.3. LIQUIDITY RISK MANAGEMENT
Liquidity risk is the risk that the Group will not be able to meet its financial obligations as they fall due. The Group manages liquidity risk to maintain adequate reserves by regular review around the working capital cycle using information on forecast and actual cash flows. Management have considered the impact of rising inflation and interest rates, and do not consider there to be a significant negative impact.
The Board is responsible for liquidity risk management and they have established an appropriate liquidity risk management framework for the management of the Group's short, medium and long-term funding and liquidity management requirements. Regulation in most jurisdictions also requires the Group to maintain a level of liquidity in order that the Group does not become exposed.
Liquidity tables
The tables detail the Group's remaining contractual maturity for its financial liabilities with agreed repayment years. The tables have been drawn up based on the undiscounted cash flows of financial liabilities based on the earliest date on which the Group can be required to pay. The table includes both interest and principal cash flows. To the extent that interest flows are floating rate, the undiscounted amount is derived from interest rates at the balance sheet date. The contractual maturity is based on the earliest date on which the Group may be required to pay.
The total contractual cash flows are as follows:
<6 6 - 12 1 - 3 3 - 5 5 - 10 >10
months months years years years years Total contractual cash flow
2022 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
---------------------------- -------- -------- -------- -------- -------- -------- ---------------------------
Loans and borrowings (1) 4,221 4,344 170,020 - - - 178,585
Trade payables and accruals - - - - - - -
Contingent consideration 2,734 - 29,358 - - - 32,092
Lease liabilities 3,537 3,511 13,225 10,346 14,812 7,806 53,237
---------------------------- -------- -------- -------- -------- -------- -------- ---------------------------
Total 10,492 7,855 212,603 10,346 14,812 7,806 263,914
---------------------------- -------- -------- -------- -------- -------- -------- ---------------------------
Total
<6 6 - 12 1 - 3 3 - 5 5 - 10 >10 contractual
months months years years years years cash flow
2021 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
---------------------------- -------- -------- -------- -------- -------- -------- ------------
Loans and borrowings (1) 1,019 2,038 3,210 157,802 - - 164,069
Trade payables and accruals 13,483 - 1,047 - - - 14,530
Contingent consideration 177 4,271 619 20,363 - - 25,430
Lease liabilities 3,305 3,270 11,522 9,597 15,375 9,682 52,751
---------------------------- -------- -------- -------- -------- -------- -------- ------------
Total 17,984 9,579 16,398 187,762 15,375 9,682 256,780
---------------------------- -------- -------- -------- -------- -------- -------- ------------
1 This includes the future interest payments not yet accrued and the repayment of capital upon maturity.
30. CAPITAL MANAGEMENT
Risk management
The Group's objective for managing capital is to safeguard the ability to continue as a going concern, while maximising the return to Shareholders through the optimisation of the debt and equity balance, and to ensure that capital adequacy requirements are met for local regulatory requirements at entity level.
The managed capital refers to the Group's debt and equity balances; for quantitative disclosures, see note 18 for loans and borrowings and note 26 for share capital.
Loan covenants
The Group has bank loans which require it to meet leverage and interest cover covenants. In order to achieve the Group's capital risk management objective, the Group aims to ensure that it meets financial covenants attached to bank borrowings. Breaches in meeting the financial covenants would permit the lender to immediately recall the loan. In line with the loan agreement the Group tests compliance with the financial covenants on a bi-annual basis.
Under the terms of the loan facility, the Group is required to comply with the following financial covenants:
-- Leverage (being the ratio of total net debt to underlying EBITDA (for LTM at average FX rates and adjusted for pro-forma contributions from acquisitions) for a relevant period) must not be more than 3:1
-- Interest cover (being the ratio of EBITDA to net finance charges) must not be less than 4:1
The Group has complied with all financial covenants throughout the reporting period and is satisfied that there is sufficient headroom should rising inflation and interest rates adversely affect trading going forward.
Capital adequacy
Individual regulated entities within the Group are subject to regulatory requirements to ensure adequate capital and liquidity to meet local requirements in Jersey, Guernsey, Ireland, the Isle of Man, the UK, the US, Switzerland, the Netherlands, Luxembourg, Mauritius, South Africa and the Caribbean; all are monitored regularly to ensure compliance. There have been no breaches of applicable regulatory requirements during the reporting period.
SECTION 7 - GROUP STRUCTURE
31. BUSINESS COMBINATIONS
A business combination is defined as a transaction or other event in which an acquirer obtains control of one or more businesses. Where the business combination does not include the purchase of a legal entity but the transaction includes acquired inputs and processes applied to those inputs in order to generate outputs, the transaction is also considered a business combination.
The Group applies the acquisition method to account for business combinations. The consideration transferred in an acquisition comprises the fair value of assets transferred, the liabilities incurred to the former owners of the acquiree and the equity interests issued by the Group in exchange for control of the acquiree. The identifiable assets acquired and liabilities assumed in a business combination are measured at their fair values at the acquisition date. Acquisition-related costs are recognised in the consolidated income statement as non-underlying items within operating expenses.
The excess of the consideration transferred, the amount of any non-controlling interest in the acquiree and the acquisition date fair value of any previous equity interest in the acquiree over the fair value of the identifiable net assets acquired is recorded as goodwill. If those amounts are less than the fair value of the net identifiable assets of the business acquired, the difference is recognised directly in the consolidated income statement as a gain on bargain purchase.
When the consideration transferred includes an asset or liability resulting from a contingent consideration arrangement, this is measured at its acquisition-date fair value. Changes in fair value of the contingent consideration that qualify as measurement period adjustments are adjusted retrospectively, with corresponding adjustments against goodwill.
Measurement period adjustments are adjustments that arise from additional information obtained during the measurement period (which cannot exceed one year from the acquisition date) about facts and circumstances that existed at the acquisition date.
The subsequent accounting for changes in the fair value of the contingent consideration that do not qualify as measurement period adjustments depend on how the contingent consideration is classified. Contingent consideration that is classified as equity is not remeasured at subsequent reporting dates and its subsequent settlement is accounted for within equity. Contingent consideration that is classified as an asset or liability is remeasured at subsequent reporting dates at fair value with the corresponding gain or loss being recognised in the consolidated income statement.
31.1. NEW YORK PRIVATE TRUST COMPANY ("NYPTC")
On 27 April 2022, JTC entered into an agreement to acquire 100% of the share capital of NYPTC, a Delaware non-deposit trust company. NYPTC offers a broad range of fiduciary services, including trust services, estate administration services and white label trust services to HNW and UHNW individuals, families and corporate clients. The acquisition supports JTC's strategy to further develop its presence in the high growth US market and in particular to develop a US domestic trust services offering and is highly complementary to JTC's existing private client operations in the US in Miami, New York and South Dakota.
Following regulatory approval for the transaction, 100% of the cash consideration was transferred on 28 October 2022 in advance of completion on 31 October 2022. The results of the acquired business have been consolidated from 31 October 2022 as Management concluded this was the date control was obtained by the Group.
The acquired business contributed revenues of GBP1.0m and underlying profit before tax (before central costs have been applied) of GBP0.3m to the Group for the period from 31 October 2022 to 31 December 2022. If the business had been acquired on 1 January 2022, the consolidated pro-forma revenue and underlying profit before tax for the period would have been GBP204.1m and GBP37.2m respectively.
(a) Identifiable assets acquired and liabilities assumed on acquisition
The following table shows, at fair value, the recognised assets acquired and liabilities assumed at the acquisition date:
Book value at acquisition Adjustments Fair value Fair value
GBP'000 GBP'000 GBP'000 $'000
----------------------------------------------- ------------------------- ----------- ---------- ----------
Property, plant and equipment (1,3) 22 471 493 573
Intangible assets - customer relationships (2) 1,334 4,328 5,662 6,566
Trade receivables 514 - 514 595
Other receivables (4) 371 - 371 431
Cash and cash equivalents 3,997 - 3,997 4,634
----------------------------------------------- ------------------------- ----------- ---------- ----------
Assets 6,238 4,799 11,037 12,799
----------------------------------------------- ------------------------- ----------- ---------- ----------
Trade and other payables 275 (14) 261 302
Lease liabilities (1) - 413 413 479
Deferred tax liabilities (2) - 1,682 1,682 1,950
Deferred income 24 - 24 27
Provisions (3) - 58 58 68
----------------------------------------------- ------------------------- ----------- ---------- ----------
Liabilities 299 2,139 2,438 2,826
----------------------------------------------- ------------------------- ----------- ---------- ----------
Total identifiable net assets 5,939 2,660 8,599 9,973
----------------------------------------------- ------------------------- ----------- ---------- ----------
1 The acquired business leases office premises; a lease liability of GBP0.4m ($0.5m) is measured at the present value of the remaining lease payments with an equal right-of-use asset.
2 Acquisition-related intangible assets of GBP5.7m ($6.6m) relate to the valuation of customer relationships; these were valued with the assistance of an expert using the MEEM financial valuation model (see note 21.2(a) for key assumptions and sensitivity analysis). The useful economic life of 10 years was based on the historical length of relationships as well as observed attrition rates for companies operating in the wealth management and fund administration sector. Deferred tax liabilities of GBP1.7m ($1.95m) have been recognised in relation to the identified intangible assets, the amortisation of which is non-deductible against US Corporation taxes and therefore creates temporary differences between the accounting and taxable profits.
3 The discounted dilapidation cost in relation to leased office premises is recognised as a provision (see note 25) and capitalised against leasehold improvements.
4 Other receivables includes mortgage-backed securities held at fair value that were sold in January 2023.
(b) Consideration
Consideration for the acquisition was cash of GBP16.98m ($19.69m) with GBP17.0m ($19.71m) paid on 28 October 2022 in advance of completion and GBP0.16m ($0.19m) received subsequently for purchase price adjustments.
(c) Goodwill
GBP'000 $'000
-------------------------------------------- ------- -------
Total consideration 16,983 19,691
Less: Fair value of identifiable net assets (8,599) (9,973)
-------------------------------------------- ------- -------
Goodwill 8,384 9,718
-------------------------------------------- ------- -------
Goodwill is represented by assets that do not qualify for separate recognition or other factors. The acquisition adds scale and is transformative to JTC PCS's offering in the large and growing US trust market, including new customer relationships and the effects of an assembled workforce.
(d) Impact on cash flow
GBP'000 $'000
---------------------------------- ------- -------
Cash consideration 17,043 19,710
Less: cash balances acquired (3,997) (4,634)
---------------------------------- ------- -------
Net cash outflow from acquisition 13,046 15,076
---------------------------------- ------- -------
(e) Acquisition-related costs
The Group incurred acquisition-related costs of GBP0.5m for legal, professional, advisory and other operating expenses. These costs have been recognised in other operating expenses in the Group's consolidated income statement (see note 6) and are treated as non-underlying items to calculate underlying EBITDA (see note 7).
31.2. RBC CEES LIMITED ("RBC CEES")
On 6 April 2021, JTC acquired RBC cees, the provider of a market-leading employee benefits platform for an internationally diverse blue-chip corporate client base. The acquisition was complementary to JTC's existing corporate and trustee services, and significantly enhanced the Group's employee benefits offering.
At the acquisition date, the fair value of consideration was GBP20.2m for acquired identifiable net assets of GBP25.5m, resulting in negative goodwill of GBP5.3m, which was recognised as a gain on bargain purchase in the prior year (see note 9).
Within the acquired identifiable net assets were customer relationship intangibles of GBP22.4m with a UEL of 12 years. Deferred tax liabilities of GBP2.2m were recognised in relation to identified intangible assets, the amortisation of which is non-deductible against Jersey and Guernsey Corporation Tax and therefore creates temporary differences between the accounting and taxable profits.
31.3. INDOS FINANCIAL LIMITED ("INDOS")
On 1 June 2021, JTC acquired INDOS, a privately owned UK and Irish based, specialist provider of depositary and other high value services for alternative investment funds. This acquisition added further technical expertise for fund services within the ICS division and directly added scale in the UK and Ireland, two growth jurisdictions.
At the acquisition date, the fair value of consideration was GBP12.3m for acquired identifiable net assets of GBP3.0m, resulting in goodwill of GBP9.3m. This included contingent consideration of GBP1.5m (discounted to GBP1.2m) which is payable subject to JTC PLC meeting an underlying EPS target for the period ending 31 December 2022. Management anticipate this will be paid in full following the release of their results in April 2023; the NPV at 31 December 2022 is GBP1.5m (2021: GBP1.3m), see note 17. The consideration is payable in equity and is subject to a one year lock in period which expires on 31 December 2023.
Within the acquired identifiable net assets were customer relationship intangibles of GBP1.4m, a brand intangible of GBP0.4m and an internally generated software intangible of GBP1.2m; all have a UEL of 10 years. Deferred tax liabilities of GBP0.2m were recognised in relation to identified intangible assets, the amortisation of which is non-deductible against UK and Irish Corporation Tax, and therefore creates temporary differences between the accounting and taxable profits.
31.4. SEGUE PARTNERS LLC ("SEGUE")
On 15 September 2021, JTC acquired Segue, an innovative fund services provider headquartered in St. Louis, Missouri, US. The business provides a range of sophisticated fund solutions to meet the needs of private equity, venture capital, debt funds and family offices, and also delivers accounting services specifically designed to meet the needs of entrepreneurs, portfolio companies and start-ups.
At the acquisition date, the fair value of consideration was GBP6.3m ($8.4m) for acquired identifiable net assets of GBP1.0m ($1.3m), resulting in goodwill of GBP5.3m ($7.1m). This included contingent consideration of GBP2.2m ($3.0m) (discounted to GBP1.6m ($2.2m)) which was subject to Segue meeting adjusted EBITDA targets over the calendar years 2022 and 2023. The contingent consideration is to be paid in a 80%/20% ratio of cash and JTC PLC Ordinary shares. During 2022, Management determined that the maximum earn-out of $3.0m would be settled and a part-payment of GBP0.2m ($0.3m) in cash. The remaining cash and the issuance of JTC PLC Ordinary shares equal to 20% is anticipated in April 2023. The NPV of contingent consideration at 31 December 2022 is now GBP2.2m ($2.6m) (see note 17) and as the settlement is earlier than initially anticipated, it resulted in a loss on revaluation of contingent consideration of GBP0.13m to accelerate the discount (see note 9).
Within the acquired identifiable net assets were customer relationship intangibles of GBP1.1m ($1.4m) with a UEL of 10 years. Deferred tax liabilities of GBP0.3m ($0.4m) were recognised in relation to identified intangible assets, the amortisation of which is non-deductible against US Corporation Taxes and therefore creates temporary differences between the accounting and taxable profits.
31.5. PERFORM DUE DILIGENCE SERVICES LIMITED ("PERFORM")
On 18 October 2021, JTC acquired perfORM, a London based, technology-led provider of due diligence services for a diverse base of UK and international investment managers and allocators.
At the acquisition date, the fair value of consideration was GBP2.74m, including a total estimated earn-out contingent consideration due of GBP4.48m (discounted to GBP2.69m) for acquired identifiable net assets of GBP0.05m, resulting in goodwill of GBP2.69m.
The earn-out for perfORM is calculated based on a multiple of underlying EBITDA for the year ended 31 December 2024 (up to a maximum of GBP6.0m) and payable in an equal split of cash and JTC PLC Ordinary shares; the 50% payable in shares is liability-classified contingent consideration. In accordance with IAS 32, Management are required to update the fair value at each reporting date.
Management therefore reassessed the forecast EBITDA and identified no evidence to indicate an adjustment was required to the GBP4.48m estimated as due. The Monte Carlo simulation was updated, decreasing the share price applied to the 282,854 JTC PLC Ordinary shares to GBP7.92 (31.12.2021: GBP7.99).
The simulation is based on JTC's share price at 31 December 2022, factoring in historical volatility and projected dividend payments and is then discounted using an appropriate risk-free rate.
The updated share price resulted in a gain on revaluation of GBP0.05m (see note 9) as the fair value of the contingent consideration payable in JTC Ordinary shares decreased to GBP2.24m (2021: GBP2.26m).
The revalued earn-out contingent consideration of GBP4.46m (cash GBP2.22m/JTC PLC Ordinary shares GBP2.24m) has then been discounted to a present value of GBP3.18m (see note 17).
Within the acquired identifiable net assets were customer relationship intangibles of GBP0.03m with a UEL of 10 years. Deferred tax liabilities of GBP0.01m were recognised in relation to identified intangible assets, the amortisation of which is non-deductible against UK Corporation Tax and therefore creates temporary differences between the accounting and taxable profits.
31.6. BALLYBUNION CAPITAL LIMITED ("BALLYBUNION")
On 3 November 2021, JTC acquired Ballybunion, a boutique asset manager based in Dublin that provides management and regulatory oversight services to investment funds.
At the acquisition date, the fair value of consideration was GBP11.9m (EUR14.1m) for acquired identifiable net assets of GBP3.1m (EUR3.7m), resulting in goodwill of GBP8.8m ($10.4m). This included contingent consideration payable in cash subject to meeting an underlying EBITDA target for the period ended 30 June 2022 and a put/call option agreement to acquire the remaining 5% of equity in Ballybunion. As the business performed successfully, exceeding the EBITDA target for 30 June 2022 and JTC exercised its option, GBP1.85m (EUR2.05m) was paid in during the year.
On 21 March 2023, Ballybunion changed its name to JTC Global AIFM Solutions (Ireland) Limited.
31.7. SALI FUND MANAGEMENT LLC AND SALI GP HOLDINGS LLC ("SALI")
On 12 November 2021, JTC acquired SALI, a US based and market-leading provider of fund services to the Insurance Dedicated Fund ("IDF") and Separately Managed Account ("SMA") market.
The fair value of consideration at acquisition recorded in the 31 December 2021 financial statements was GBP174.3m ($233.0m) for acquired identifiable net assets of GBP33.4m ($44.6m), resulting in goodwill of GBP140.9m ($188.4m).
Within the acquired identifiable net assets were customer relationship intangibles of GBP43.6m ($58.3m) with a UEL of 25 years and a brand intangible of GBP1.6m ($2.2m) with a UEL of 5 years. Deferred tax liabilities of GBP13.4m ($18.0m) were recognised in relation to identified intangible assets, the amortisation of which is non-deductible against US Corporation Taxes and therefore creates temporary differences between the accounting and taxable profits.
(a) Consideration
Total consideration was satisfied by the following:
GBP'000 $'000
-------------------------------------------------------------------------------- ------- -------
Cash consideration 144,791 193,593
Equity instruments (1,260,457 Ordinary shares) (1) 8,583 11,471
Contingent consideration - EBT contribution (2) 1,871 2,500
Contingent consideration - Closing payment 159 212
Contingent consideration - Earn-out (3) 18,899 25,258
-------------------------------------------------------------------------------- ------- -------
Fair value of total consideration at acquisition date 174,303 233,034
-------------------------------------------------------------------------------- ------- -------
Adjustment to fair value of shares issued as consideration following FRC review
-------------------------------------------------------------------------------- ------- -------
Equity instruments valued at acquisition date 2,020 2,701
Removal of discount for lack of marketability 578 772
-------------------------------------------------------------------------------- ------- -------
Total adjustment to fair value of equity instruments 2,598 3,473
-------------------------------------------------------------------------------- ------- -------
Adjusted fair value of total consideration at acquisition date 176,901 236,507
-------------------------------------------------------------------------------- ------- -------
1 FRC review
Following a review of the JTC Annual Report and Accounts 2021 by the FRC in accordance with Part 2 of the FRC Corporate Reporting Review Operating Procedures, further information was requested in respect of the valuation of shares issued as consideration. Upon investigation by Management, it was understood that our approach where equity instruments are issued as consideration did not adhere to the strict interpretation of IFRS 3 'Business Combinations', paragraph 37 ("IFRS 3 p37"), which requires consideration transferred in a business combination to be measured at the acquisition-date fair value.
On 19 November 2021, the Company issued and admitted 1,260,457 Ordinary shares to satisfy the equity element of initial consideration. At 31 December 2021, the fair value of the shares was derived using a share price of GBP7.18 on 6 October 2021, the date of the Share Purchase Agreement ("SPA"), rather than the share price of GBP8.87, the end of day share price on the acquisition date of 12 November 2022 as required by IFRS 3 p37. As a result, the fair value of consideration at the date of the acquisition was understated by GBP2.02m.
In addition, it was identified that a discount for lack of marketability had been applied to the equity instruments in the 31 December 2021 financial statements. On review, it was concluded that this had been incorrectly applied, as the restriction applies to the holders of the shares and not the Company. This resulted in an understatement of the fair value of consideration at the date of the acquisition of GBP0.58m.
The fair value of equity instruments should have been GBP11.2m ($14.9m) rather than GBP8.6m ($11.5m); the result was a total adjustment to the fair value of equity instruments of GBP2.6m ($3.5m). This was adjusted during 2022, increasing both goodwill (see (c) and note 21) and share premium (see note 26.1).
2 Contingent consideration - EBT contribution
On 14 June 2022, the Company issued 325,272 Ordinary shares to PLC EBT to settle this element of consideration (see note 26.1).
3 Contingent consideration - Earn-out
A total of up to GBP26.1m ($31.5m) is payable in cash subject to meeting revenue targets for the two year period following acquisition. Based on Management's assessment of the performance to date and the budgeted forecast for the remaining period, it is estimated that the earn-out will be paid in full. At 31 December 2022, the total amount due has been discounted to its present value GBP23.6m ($28.5m) (2021: GBP18.9m ($25.3m)), see note 17.
Sensitivity analysis on fair value of earn-out consideration
Management carried out a sensitivity analysis on the output of the key assumptions and estimates used to calculate the fair value of the earn-out contingent consideration. Management consider the key assumption and estimate to be forecast revenue for the two year period. A decrease in the forecast revenue of 10% would decrease the earn-out contingent consideration by GBP2.6m ($3.5m). Discounted to its present value, this would be equal to a GBP2.4m ($3.2m) decrease.
(b) Identifiable assets acquired and liabilities assumed
At acquisition, deferred tax liabilities of GBP13.44m ($17.96m) were recognised in relation to acquired intangible assets where it was anticipated that the amortisation would be non-deductible against US Corporation taxes and therefore give rise to temporary differences between the accounting and taxable profits. Subsequent information received identified that the purchase consideration would be tax deductible.
Management have therefore recognised a measurement period adjustment to the initial accounting for the business combination. The deferred tax liability has been derecognised resulting in a GBP13.44m ($17.96m) decrease to acquired goodwill and an adjustment of GBP0.07m ($0.09m) to income tax for the previous unwinding of the deferred tax liability.
(c) Goodwill
GBP'000 $'000
----------------------------------------------------- -------- --------
Goodwill at acquisition date 140,903 188,396
Exchange differences at 31 December 2021 (1,330) -
----------------------------------------------------- -------- --------
Goodwill at 1 January 2022 139,573 188,396
Total adjustment to fair value of equity instruments 2,598 3,473
----------------------------------------------------- -------- --------
Adjusted goodwill at acquisition date 142,171 191,869
Measurement period adjustment (13,437) (17,964)
Exchange differences at 31 December 2022 15,537 -
----------------------------------------------------- -------- --------
Goodwill at 31 December 2022 144,271 173,905
----------------------------------------------------- -------- --------
31.8. ESSENTIAL FUND SERVICES, LLC ("EFS")
On 15 December 2021, JTC acquired EFS, a fund services provider headquartered in New York, US. The business provides a broad range of services in the alternative assets space, including accounting, reporting and administrative services to investment partnerships and their investment managers.
The fair value of consideration was GBP6.5m ($8.5m) for acquired identifiable net assets of GBP1m ($1.3m), resulting in goodwill of GBP5.5m ($7.2m). Contingent consideration of GBP0.02m ($0.03m) was paid during the year following the reconciliation of the closing cash reserve.
At acquisition, deferred tax liabilities of GBP0.4m ($0.5m) were recognised in relation to acquired intangible assets where it was anticipated that the amortisation would be non-deductible against US Corporation taxes and therefore give rise to temporary differences between the accounting and taxable profits. Subsequent information received identified that the purchase consideration would be tax deductible.
Management have therefore recognised a measurement period adjustment to the initial accounting for the business combination. The deferred tax liability has been derecognised resulting in a GBP0.4m ($0.5m) decrease to acquired goodwill.
32. INVESTMENTS
The Group's interest in other entities includes an associate and an investment held at cost.
An associate is an entity in which the Group has significant influence, but not control or joint control, over the financial and operating policies. The Group's interest in an equity-accounted investee solely comprises of an interest in an associate.
Investments in associates are accounted for using the equity method. Under the equity method, the investment in an associate is initially recognised at cost, which includes transaction costs. Subsequent to initial recognition, the carrying amount of the investment is adjusted to recognise the Group's share of post-acquisition profits or losses in the consolidated income statement within EBITDA, and the Group's share of movements in other comprehensive income of the investee in other comprehensive income. Unrealised gains and losses resulting from transactions between the Group and the associate are eliminated to the extent of the interest in the associate.
The carrying amount of equity-accounted investments is tested for impairment in accordance with the policy described in note 21.
Where the Group has an interest in an entity but does not have significant influence, the investment is held at cost.
The following table details the associate and an investment the Group holds as at 31 December 2022. The entities listed have share capital consisting solely of Ordinary shares, which are held directly by the Group. The country of incorporation is also their principal place of business, and the proportion of ownership interest is the same as the proportion of voting rights held.
% of ownership interest Carrying amount
------------------------- ------------------
Country of Nature of Measurement 2022 2021 2022 2021
Name of entity incorporation relationship method % % GBP'000 GBP'000
--------------------- --------------- --------------- -------------- ------------ ----------- -------- --------
Kensington
International Group
Pte. Ltd Singapore Associate (1) Equity method 42 42 2,325 1,847
Harmonate Corp. US Investment (2) Cost method 11.2 16 831 791
--------------------- --------------- --------------- -------------- ------------ ----------- -------- --------
Total investments 3,156 2,638
----------------------------------------------------------------------- ------------ ----------- -------- --------
1 Kensington International Group Pte. Ltd ("KIG") provides corporate, fiduciary, trust and accounting services, and is a strategic partner of the Group, providing access to new clients and markets in the Far East.
2 Harmonate Corp. ("Harmonate") provides fund operation and data management solutions to clients in the financial services industry.
The summarised financial information for KIG, which is accounted for using the equity method, is as follows:
2022 2021
Summarised income statement GBP'000 GBP'000
---------------------------- -------- --------
Revenue 7,253 6,184
---------------------------- -------- --------
Gross profit 6,133 5,217
---------------------------- -------- --------
Profit for the year 668 654
---------------------------- -------- --------
2022 2021
Summarised balance sheet GBP'000 GBP'000
------------------------------------ -------- --------
Total non-current assets 600 637
Total current assets 10,805 6,043
------------------------------------ -------- --------
Total assets 11,405 6,680
------------------------------------ -------- --------
Total current liabilities 7,141 3,547
------------------------------------ -------- --------
Net assets less current liabilities 4,264 3,133
------------------------------------ -------- --------
2022 2021
Reconciliation of summarised financial information GBP'000 GBP'000
--------------------------------------------------- -------- --------
Opening net assets 3,133 2,272
Profit for the year 668 654
Foreign exchange differences 463 207
--------------------------------------------------- -------- --------
Closing net assets 4,264 3,133
--------------------------------------------------- -------- --------
Group's share of closing net assets 1,803 1,325
Goodwill 522 522
--------------------------------------------------- -------- --------
Carrying value of investment in associate 2,325 1,847
--------------------------------------------------- -------- --------
2022 2021
Impact on consolidated income statement Note GBP'000 GBP'000
--------------------------------------------- ---- -------- --------
Balance at 1 January 1,847 1,483
Share of profit of equity-accounted investee 35.1 478 364
--------------------------------------------- ---- -------- --------
Balance at 31 December 2,325 1,847
--------------------------------------------- ---- -------- --------
33. SUBSIDIARIES
In the opinion of Management, the Group's subsidiaries which principally affect the profit or the net assets of the Group at 31 December 2022 are listed below. Unless otherwise stated, the Company owns 100% of share capital consisting solely of Ordinary shares, and the proportion of ownership interests held equals the voting rights held by the Group. The country of incorporation is also their principal place of business.
Where shareholding and voting rights are less than 100%, Management have considered the circumstances of each subsidiary shareholding and any specific agreements in support, and have concluded that the subsidiaries should be consolidated (as per the accounting policy in note 3.2), the interest attributed in full to the Company and no minority interest recognised. Please see specific comments below the table.
Country of incorporation and place of %
Name of subsidiary business Activity holding
----------------------------------------- ------------------------------------------ --------------------- --------
JTC Group Holdings Limited Jersey Holding 100
JTC Group Limited Jersey Head office services 100
JTC (Jersey) Limited Jersey Trading 100
JTC Employer Solutions Limited Jersey Trading 100
JTC Fund Solutions (Jersey) Limited Jersey Trading 100
JTC (BVI) Limited British Virgin Islands Trading 100
JTC (Cayman) Limited Cayman Islands Trading 100
JTC Fund Services (Cayman) Ltd Cayman Islands Trading 100
JTC Corporate Services (DIFC) Limited Dubai Trading 100
JTC Fund Solutions (Guernsey) Limited Guernsey Trading 100
JTC Global AIFM Solutions Limited Guernsey Trading 100
JTC Registrars Limited Guernsey Trading 100
JTC Employer Solutions (Guernsey) Limited Guernsey Trading 100
JTC Corporate Services (Ireland) Limited Ireland Trading 100
JTC Fund Solutions (Ireland) Limited Ireland Trading 100
JTC Global AIFM Solutions (Ireland)
Limited (formerly Ballybunion Capital
Limited) (1) Ireland Trading 100
INDOS Financial (Ireland) Limited Ireland Trading 100
JTC Trustees (IOM) Limited Isle of Man Trading 100
JTC Luxembourg Holdings S.à r.l. Luxembourg Holding 100
JTC (Luxembourg) S.A. Luxembourg Trading 100
JTC Global AIFM Solutions SA Luxembourg Trading 100
JTC Corporate Services (Luxembourg) SARL Luxembourg Trading 100
JTC Signes Services SA Luxembourg Trading 100
Exequtive Services S.à r.l. Luxembourg Trading 100
JTC Fiduciary Services (Mauritius)
Limited Mauritius Trading 100
JTC (Netherlands) B.V. Netherlands Trading 100
JTC Holdings (Netherlands) B.V. Netherlands Holding 100
JTC Institutional Services Netherlands
B.V. Netherlands Trading 100
Global Tax Support B.V. (2) Netherlands Trading -
JTC Fund and Corporate Services
(Singapore) Pte. Limited (formerly JTC
Fiduciary Services
(Singapore) Pte. Limited) Singapore Trading 100
JTC Fund Solutions RSA (Pty) Ltd South Africa Trading 100
JTC (Suisse) SA Switzerland Trading 100
JTC Trustees (Suisse) Sàrl Switzerland Trading 100
JTC Group Holdings (UK) Limited UK Holding 100
INDOS Financial Limited UK Trading 100
JTC Fund Services (UK) Limited UK Trading 100
JTC Trust Company (UK) Limited UK Trading 100
JTC (UK) Limited UK Trading 100
JTC UK (Amsterdam) Limited UK Holding 100
JTC Registrars (UK) Limited UK Trading 100
perfORM Due Diligence Services Limited UK Trading 100
JTC USA Holdings, Inc. US Trading 100
JTC Miami Corporation (3) US Trading 50
JTC Trust Company (South Dakota) Ltd
(formerly JTC Trustees (USA) Ltd) US Trading 100
Essential Fund Services, LLC US Trading 100
SALI Fund Management, LLC US Trading 100
JTC Americas Holdings, LLC US Holding 100
Segue Partners, LLC US Trading 100
JTC Trust Company (Delaware) Limited US Trading 100 ----------------------------------------- ------------------------------------------ --------------------- --------
1 During the year, JTC paid GBP0.6m to exercise a call option to purchase the remaining 5% of share capital to increase to a 100% holding.
2 JTC has a call option to purchase Global Tax Support B.V. for EUR1 from its parent company, therefore Management consider it has control of this entity and no minority interest is recognised.
3 JTC Miami Corporation is 50% owned by an employee as part of their residential status in the US. The employee has signed a declaration of trust to confirm they hold the shares in trust for JTC, would vote as directed nor seek to benefit from dividends or profit. Management therefore consider it appropriate to attribute 100% of the interest to JTC and no minority interest is recognised.
JTC PLC has the following dormant UK subsidiaries that are exempt from filing individual accounts with the registrar in accordance with s448A of Companies Act 2006: PTC Securities Limited, Stratford Securities Limited, St James's Securities Limited, JTC Fiduciary Services (UK) Limited, JTC Trustees (UK) Limited, PTC Investments Limited, Castle Directors (UK) Limited, JTC Securities (UK) Limited, JTC Corporate Services (UK) Limited, JTC Trustees Services (UK) Limited and JTC Directors (UK) Limited.
SECTION 8 - OTHER DISCLOSURES
34. EARNINGS PER SHARE
Basic Earnings Per Share
The calculation of basic Earnings Per Share is based on the profit for the year divided by the weighted average number of Ordinary shares for the same year.
Diluted Earnings Per Share
The calculation of diluted Earnings Per Share is based on basic Earnings Per Share after adjusting for the potentially dilutive effect of Ordinary shares that have been granted.
Adjusted underlying basic Earnings Per Share
The calculation of underlying basic Earnings Per Share is based on basic Earnings Per Share after adjusting profit for the year for non-underlying items and to remove the amortisation of acquired intangible assets and associated deferred tax, amortisation of loan arrangement fees and unwinding of NPV discounts in relation to contingent consideration.
The Group calculates basic, diluted and adjusted underlying basic Earnings Per Share. The results can be summarised as follows:
2022 2021
Note Pence Pence
------------------------------ ---- ------ ------
Basic EPS 34.1 23.92 20.49
Diluted EPS 34.2 23.60 20.21
Adjusted underlying basic EPS 34.3 33.27 25.55
------------------------------ ---- ------ ------
34.1. BASIC EARNINGS PER SHARE
2022 2021
GBP'000 GBP'000
-------------------- -------- --------
Profit for the year 34,714 26,648
-------------------- -------- --------
No. of shares No. of shares
(thousands) (thousands)
--------------------------------------------------------- ------------- -------------
Issued Ordinary shares at 1 January 144,326 119,097
Effect of shares issued to acquire business combinations - 362
Effect of movement in treasury shares held 811 850
Effect of placing - 9,735
--------------------------------------------------------- ------------- -------------
Weighted average number of Ordinary shares (basic): 145,137 130,044
--------------------------------------------------------- ------------- -------------
Basic EPS (pence) 23.92 20.49
--------------------------------------------------------- ------------- -------------
34.2. DILUTED EARNINGS PER SHARE
2022 2021
GBP'000 GBP'000
-------------------- -------- --------
Profit for the year 34,714 26,648
-------------------- -------- --------
No. of shares No. of shares
Note (thousands) (thousands)
------------------------------------------------------ ---- ------------- -------------
Weighted average number of Ordinary shares (basic) 34.1 145,137 130,044
Effect of share-based payments issued 1,930 1,796
------------------------------------------------------ ---- ------------- -------------
Weighted average number of Ordinary shares (diluted): 147,067 131,840
------------------------------------------------------ ---- ------------- -------------
Diluted EPS (pence) 23.60 20.21
------------------------------------------------------ ---- ------------- -------------
34.3. ADJUSTED UNDERLYING BASIC EARNINGS PER SHARE
2022 2021
Note GBP'000 GBP'000
-------------------------------------------------------------------------------------------- ---- -------- --------
Profit for the year 34,714 26,648
-------------------------------------------------------------------------------------------- ---- -------- --------
Non-underlying items 7 (1,883) (2,875)
Amortisation of customer relationships, acquired software and brands 21 12,400 8,809
Amortisation of loan arrangement fees 10 1,062 1,501
Unwinding of NPV discounts for contingent consideration 10 3,518 586
Temporary tax differences arising on amortisation of customer relationships, acquired
software
and brands 11 (1,531) (1,446)
-------------------------------------------------------------------------------------------- ---- -------- --------
Adjusted underlying profit for the year 48,280 33,223
-------------------------------------------------------------------------------------------- ---- -------- --------
No. of shares No. of shares
Note (thousands) (thousands)
--------------------------------------------------- ---- ------------- -------------
Weighted average number of Ordinary shares (basic) 34.1 145,137 130,044
--------------------------------------------------- ---- ------------- -------------
Adjusted underlying basic EPS (pence) 33.27 25.55
--------------------------------------------------- ---- ------------- -------------
Adjusted underlying basic EPS is an alternative performance measure which reflects the underlying activities of the Group. The following definition is not consistent with the requirements of IAS 33.
The Group's definition of underlying basic EPS reflects the profit for the year adjusted to remove the impact of non-underlying items (see note 7). Additionally, a number of other items relating to the Group's acquisition activities including amortisation of acquired intangible assets and associated deferred tax, amortisation of loan arrangement fees and unwinding of NPV discounts in relation to contingent consideration are removed to present an adjusted underlying basic EPS which is used more widely by external investors and analysts.
35. CASH FLOW INFORMATION
35.1. CASH GENERATED FROM OPERATIONS
2022 2021
Note GBP'000 GBP'000
--------------------------------------------------------- ---- -------- --------
Operating profit 33,803 8,992
Adjustments:
Depreciation of property, plant and equipment 7,883 7,157
Amortisation of intangible assets 14,378 10,434
Equity-settled share-based payment expense 2,045 1,708
EIP share-based payment expense 4,780 13,778
Share of profit of equity-accounted investee 32 (478) (364)
--------------------------------------------------------- ---- -------- --------
Operating cash flows before movements in working capital 62,411 41,705
--------------------------------------------------------- ---- -------- --------
Net changes in working capital:
Increase in receivables (10,247) (9,972)
Decrease in payables 3,202 (1,036)
--------------------------------------------------------- ---- -------- --------
Cash generated from operations 55,366 30,697
--------------------------------------------------------- ---- -------- --------
35.2. NON-UNDERLYING ITEMS WITHIN CASH GENERATED FROM OPERATIONS
2022 2021
GBP'000 GBP'000
----------------------------------------------------------------- -------- --------
Cash generated from operations 55,366 30,697
Non-underlying items:
Capital distribution from EBT 417 581
Acquisition and integration 3,127 6,440
Office start ups 768 -
Revision of ICS operating model 402 421
Other 228 263
----------------------------------------------------------------- -------- --------
Total non-underlying items within cash generated from operations 4,942 7,705
----------------------------------------------------------------- -------- --------
Underlying cash generated from operations 60,308 38,402
----------------------------------------------------------------- -------- --------
35.3. FINANCING ACTIVITIES
Changes in liabilities arising from financing activities:
Lease Lease
liabilities liabilities Borrowings Borrowings
due within due after due within due after
one year one year one year one year Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
----------------------------- ------------ ------------ ----------- ---------- ---------
At 1 January 2021 4,215 39,155 2,456 104,376 150,202
Cash flows:
Acquired on acquisition 324 1,018 - - 1,342
Drawdowns - - - 176,662 176,662
Repayments (74) (5,748) (2,434) (125,099) (133,355)
Other non-cash movements (1) 998 3,491 (22) (3,361) 1,106
----------------------------- ------------ ------------ ----------- ---------- ---------
At 31 December 2021 5,463 37,916 - 152,578 195,957
----------------------------- ------------ ------------ ----------- ---------- ---------
Cash flows:
Acquired on acquisition 216 101 - - 317
Repayments (41) (6,202) - - (6,243)
Other non-cash movements (1) (1,346) 8,787 - - 7,441
----------------------------- ------------ ------------ ----------- ---------- ---------
At 31 December 2022 4,292 40,602 - 152,578 197,472
----------------------------- ------------ ------------ ----------- ---------- ---------
1 Other non-cash movements include the capitalisation and amortisation of loan arrangement fees, foreign exchange movements, additions and disposals of lease liabilities relating to right-of-use assets and the unwinding of NPV discounts.
35.4. NET DEBT
2022 2021
Notes GBP'000 GBP'000
-------------------------------- ----- --------- ---------
Bank loans 18 (153,622) (152,578)
Trapped cash (1) (15,673) (3,903)
Loans receivable from employees 15 16 3
Less: cash and cash equivalents 48,861 39,326
-------------------------------- ----- --------- ---------
Total net debt (120,418) (117,152)
-------------------------------- ----- --------- ---------
1 Trapped cash represents the minimum cash balance to be held to meet regulatory capital requirements.
36. SHARE-BASED PAYMENTS
The Company operates equity-settled share-based payment arrangements under which services are received from eligible employees as consideration for equity instruments. The total amount to be expensed for services received is determined by reference to the fair value at grant date of the share-based payment awards made, including the impact of any non-vesting and market conditions.
The fair value determined at the grant date is expensed on a straight-line basis over the vesting period, based on Management's estimate of equity instruments that will eventually vest. At each balance sheet date, Management revise its estimate of the number of equity instruments expected to vest as a result of the effect of non-market based vesting conditions. The impact of the revision of the original estimates, if any, is recognised in the consolidated income statement such that the cumulative expense reflects the revised estimate, with a corresponding adjustment to equity reserves.
36.1. DESCRIPTION OF SHARE-BASED PAYMENT ARRANGEMENTS
The Group has implemented and made awards to eligible employees under three equity-settled share-based payment plans; it also continues to make awards when employees join the business, for the retention of key employees following acquisition and to incentivise key employees (see 'Other awards'). Details of the share plans are as follows:
(a) Employee Incentive Plan
JTC has an ongoing commitment to the concept of shared ownership and adopted the EIP upon listing on the London Stock Exchange in March 2018. The EIP is designed to recognise and reward long-term performance across the whole Group and its alignment of employees' and Shareholders' interests is linked to multi-year business plans. All permanent employees of the Group (excluding all Executive Directors of JTC PLC) are eligible to be granted an award under the EIP at the discretion of the Remuneration Committee.
On 22 July 2021, following the conclusion of the Odyssey business plan (which ran from the IPO until the end of 2020), JTC PLC granted 3,104,007 shares to employees of the Group. Each award was separated into two tranches: 50% vested at the grant date ("Tranche one") and 50% was a deferred award in the form of a conditional right to receive shares on the first anniversary of grant, subject to the achievement of the applicable performance conditions ("Tranche two"). Tranche one was expensed in full upon grant and Tranche two was expensed over the one year vesting period.
On 22 July 2021, 1,544,950 Ordinary shares were exercised and on 22 July 2022, tranche two vested and 1,411,248 Ordinary shares were exercised by employees of the Group.
Details of movements in the number of shares are as follows:
No. of shares 2022 No. of shares 2021
Note (thousands) GBP'000 (thousands) GBP'000
----------------------------------------- ---- ------------- -------- ------------- --------
Outstanding at the beginning of the year 1,479 9,240 - -
Granted - - 3,104 19,372
Exercised 26.1 (1,411) (8,813) (1,545) (9,652)
Forfeited (68) (427) (80) (480)
----------------------------------------- ---- ------------- -------- ------------- --------
Outstanding at the end of the year - - 1,479 9,240
----------------------------------------- ---- ------------- -------- ------------- --------
(b) Performance share plan ("PSP")
Executive Directors and senior managers may receive awards of shares, which may be granted annually under the PSP. The maximum policy opportunity award size under the PSP for an Executive Director is 150% of annual base salary; however, the plan rules allow the Remuneration Committee the discretion to award up to 250% of annual base salary in exceptional circumstances. The Remuneration Committee determines the appropriate performance measures, weightings and targets prior to granting any awards. Performance conditions include Total Shareholder Return relative to a relevant comparator group and the Company's absolute adjusted underlying EPS performance.
The following table provides details for each PSP award:
Fixed amount
No. of shares at fair value
Plan name Performance period Grant date Vest date (thousands) GBP'000
---------- ----------------------------------- ------------------ ------------- ------------- --------------
PSP 2018 14 March 2018 to 31 December 2020 18 September 2018 15 April 2021 157 534
PSP 2019 1 January 2019 to 31 December 2021 3 April 2019 19 April 2022 254 614
PSP 2020 1 January 2020 to 31 December 2022 23 April 2020 (1) 213 825
PSP 2021 1 January 2021 to 31 December 2023 20 May 2021 (1) 283 1,507
PSP 2022 1 January 2022 to 31 December 2024 19 April 2022 (1) 246 1,384
---------- ----------------------------------- ------------------ ------------- ------------- --------------
1 The vesting of awards is subject to continued employment and achievement of performance conditions over the specified period. The awards will vest for each PSP when the conditions have been measured for the relevant performance period.
Details of movements in the number of shares are as follows:
No. of shares 2022 No. of shares 2021
(thousands) GBP'000 (thousands) GBP'000
----------------------------------------- ------------- -------- ------------- --------
Outstanding at the beginning of the year 733 2,903 607 1,930
Awarded 246 1,384 283 1,507
Exercised (188) (425) (153) (519)
Forfeited (118) (516) (4) (15)
----------------------------------------- ------------- -------- ------------- --------
Outstanding at the end of the year 673 3,346 733 2,903
----------------------------------------- ------------- -------- ------------- --------
(c) Deferred bonus share plan ("DBSP")
Certain employees at director level may be eligible for an annual bonus designed to incentivise high performance based on financial and non-financial performance measures. In line with market practice, a portion of the bonus due, as determined by the Remuneration Committee, may be deferred into shares before it is paid.
Depending on the performance of the Group, consideration is given annually by the Remuneration Committee to the granting of share awards under DBSP to eligible Directors as part of the annual bonus award for performance during the preceding financial year end.
The following table provides details for each DBSP award:
Fixed amount
No. of shares at fair value
Plan name Performance period Grant date Vest date (1) (thousands) GBP'000
---------- ---------------------------- ------------- -------------- ------------- --------------
DBSP 1 Year ended 31 December 2018 3 April 2019 3 April 2021 50 149
DBSP 2 Year ended 31 December 2019 23 April 2020 23 April 2022 73 313
DBSP 3 Year ended 31 December 2020 14 April 2021 1 January 2023 56 364
DBSP 4 Year ended 31 December 2021 19 April 2022 1 January 2024 67 476
DBSP 5 Year ended 31 December 2022 (2) 1 January 2025 (2) 679
---------- ---------------------------- ------------- -------------- ------------- --------------
1 The vesting of awards is subject to continued employment up to the vest date.
2 The date of grant will be determined following the release of the Annual Report for the relevant performance period, upon which the no. of shares will be determined.
No. of shares 2022 No. of shares 2021
(thousands) GBP'000 (thousands) GBP'000
----------------------------------------- ------------- -------- ------------- --------
Outstanding at the beginning of the year 114 614 108 411
Awarded 67 476 56 364
Exercised (62) (267) (42) (127)
Forfeited (10) (67) (8) (34)
----------------------------------------- ------------- -------- ------------- --------
Outstanding at the end of the year 109 756 114 614
----------------------------------------- ------------- -------- ------------- --------
(d) Other awards
The Group has continued to make awards to employees joining the business. The grant date of each award is the start date of employment with the fair value being a fixed amount stated in an employee's offer letter. The number of shares awarded is determined by the market value at the grant date. The awards will vest on the second anniversary of the grant date subject to continued employment.
Details of movements in the number of shares are as follows:
No. of shares 2022 No. of shares 2021
(thousands) GBP'000 (thousands) GBP'000
----------------------------------------- ------------- -------- ------------- --------
Outstanding at the beginning of the year 260 2,102 102 398
Awarded (1) 86 683 217 1,933
Exercised (70) (451) (57) (219)
Forfeited (22) (230) (2) (10)
----------------------------------------- ------------- -------- ------------- --------
Outstanding at the end of the year 254 2,104 260 2,102
----------------------------------------- ------------- -------- ------------- --------
1 In the prior year, as part of the RBC cees acquisition, the Group inherited historic share awards for the eligible Directors of the acquired entities. These awards are settled in cash or a combination of 50% cash and 50% equity, as such, they are recorded as a liability, on the basis that this is at the discretion of the holder, with the fair value being remeasured at each reporting period end. At the date of acquisition, 141,875 shares with a fair value of GBP0.88m were awarded. During the year, 52,622 shares vested; the fair value of the outstanding awards as at 31 December 2022 is GBP0.5m.
36.2. EXPENSES RECOGNISED DURING THE YEAR
The equity-settled share-based payment expenses recognised during the year, per plan and in total, are as follows:
2022 2021
GBP'000 GBP'000
----------------------------------- -------- --------
PSP awards 879 988
DBSP awards 455 334
Other awards 788 842
----------------------------------- -------- --------
Share-based payments (1) 2,122 2,164
EIP share-based payments (2) 4,780 13,778
----------------------------------- -------- --------
Total share-based payments expense 6,902 15,942
----------------------------------- -------- --------
1 The share-based expense in the capital reserve is GBP2.04m as other awards includes cash settled or 50% cash and 50% equity settled awards of GBP0.08m (2021: GBP0.46m).
2 The prior year EIP expense of GBP13.92m as disclosed in note 5, included GBP0.14m of cash awards.
37. CONTINGENCIES
The Group operates in a number of jurisdictions and enjoys a close working relationship with all of its regulators. It is not unusual for the Group to find itself in discussion with regulators in relation to past events. With any such discussions there is inherent uncertainty in the ultimate outcome but the Board currently does not believe that any such current discussions are likely to result in an outcome that would have a material impact upon the Group.
38. FOREIGN CURRENCY
The individual financial statements of each Group company are presented in the currency of the primary economic environment in which it operates (its functional currency). For the purpose of the consolidated financial statements, the results and financial position of each Group company are expressed in pounds sterling, which is the functional currency of the Company and the presentation currency for the consolidated financial statements.
In preparing the financial statements of the individual companies, transactions in currencies other than the entity's functional currency (foreign currencies) are recognised at the rates of exchange prevailing on the dates of the transactions.
At each balance sheet date, monetary assets and liabilities that are denominated in foreign currencies are retranslated at the rates prevailing at that date. Exchange differences are recognised in the consolidated income statement in the year in which they arise.
For the purpose of presenting consolidated financial statements, the assets and liabilities of the Group's operations with a functional currency other than pounds sterling are translated at exchange rates prevailing on the balance sheet date.
Income and expense items are translated at the average exchange rates for the year, unless exchange rates fluctuate significantly during that year, in which case the exchange rates at the date of transactions are used. Goodwill and other intangible assets arising on the acquisition of a foreign operation are treated as assets of the foreign operation and are translated at the closing rate. Exchange differences arising, if any, are recognised in other comprehensive income and accumulated in equity in the translation reserve.
For the year ended 31 December 2022, mainly due to the Euro and US dollar foreign currency exchange rate movements, we have recognised the following:
-- A foreign exchange gain of GBP21.3m in other comprehensive income (2021: GBP2.5m loss) upon translating our foreign operations to our functional currency.
-- A foreign exchange gain of GBP14.4m (2021: GBP0.9m loss) in the consolidated income statement upon the retranslation of monetary assets and liabilities denominated in foreign currencies (see note 9).
39. RELATED PARTY TRANSACTIONS
Balances and transactions between the Company and its subsidiaries, which are related parties, have been eliminated on consolidation and are not disclosed in this note.
39.1. KEY MANAGEMENT PERSONNEL
The Group has defined key management personnel as Directors and members of senior management who have the authority and responsibility to plan, direct and control the activities of the Group. The remuneration of key management personnel in aggregate for each of the specified categories is as follows:
2022 2021
GBP'000 GBP'000
------------------------------------------------ -------- --------
Salaries and other short-term employee benefits 2,716 2,723
Post-employment and other long-term benefits 145 133
Share-based payments 979 1,066
EIP share-based payments 115 418
------------------------------------------------ -------- --------
Total payments 3,955 4,340
------------------------------------------------ -------- --------
39.2. OTHER RELATED PARTY TRANSACTIONS
Loans receivable from employees, associates and other related undertakings are disclosed in note 15.
The Group's associate, KIG (see note 32), has provided GBP0.94m of services to Group entities during the year (2021: GBP0.80).
The Group has an interest in Harmonate (see note 32). During the year, the Group has not provided any services (2021: GBP0.08m) but received GBP0.15m of services (2021: GBP0.16m).
39.3. ULTIMATE CONTROLLING PARTY
JTC PLC is the ultimate controlling party of the Group.
40. CONSIDERATION OF CLIMATE CHANGE
As set out in the TCFD disclosures in the Annual Report, climate change has the potential to give rise to a number of transition risks, physical risks and opportunities.
In preparing the consolidated financial statements, Management have considered the impacts and areas that could potentially be affected by climate-related changes and initiatives. No material impact was identified on the key areas of judgement or sources of estimation uncertainty for the year ended 31 December 2022. Items that may be impacted by climate-related risks and were considered by Management were the recoverability of trade receivables (see note 12) and the cash flow forecasts used in the impairment assessments of goodwill (see note 21.1).
Whilst Management consider there is no material medium-term impact expected from climate change, they are aware of the ever-changing risks related to climate change and will ensure regular assessment of risks against judgements and estimates when preparing the consolidated financial statements.
41. EVENTS OCCURRING AFTER THE REPORTING PERIOD
There are no material subsequent events to disclose other than those already noted in the consolidated financial statements.
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