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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 | |
|---|---|---|---|---|---|---|---|---|---|---|
| -9.00 | -1.06% | 838.00 | 844.00 | 847.00 | 860.00 | 843.00 | 843.00 | 391,375 | 16:35:21 |
| Industry Sector | Turnover | Profit | EPS - Basic | PE Ratio | Market Cap |
|---|---|---|---|---|---|
| Unit Inv Tr, Closed-end Mgmt | 257.52M | 21.82M | 0.1318 | 64.19 | 1.4B |
From Apr 2019 to Apr 2024
TIDMJTC
RNS Number : 0402B
JTC PLC
18 September 2018
18 September 2018
JTC PLC
("the Company) together with its subsidiaries ("the Group" or "JTC")
Interim results for the six months ended 30 June 2018
JTC delivers a strong performance in its first results as a listed company, building on a 30 year record of growth
Hot Features
Premium
H1 2018 H1 2017 Variance
Revenue (GBP) GBP35.3m GBP28.2m +25.2%
--------- --------- ---------
Underlying EBITDA (GBP)* GBP10.5m GBP6.7m +56.7%
--------- --------- ---------
Underlying EBITDA margin
(%)* 29.9% 23.6% +6.3 pp
--------- --------- ---------
Underlying profit from
operating activities
('EBIT') GBP8.6m GBP5.5m +56%
--------- --------- ---------
Underlying diluted EPS(p)* 7.29p (1.51p) n/a
--------- --------- ---------
Interim dividend per
share(p) 1p - +1p
--------- --------- ---------
Enquiry pipeline (GBP) GBP25.8m GBP24.5m +5.3%
--------- --------- ---------
* Items classified as non-underlying are: IPO costs, EBT capital distribution, acquisition and integration costs and other non-underlying costs. Non-underlying items are defined as specific items that the directors do not believe will recur in future periods. The H1 2018 results reflect the pre listing capital structure up to 14 March 2018 and the subsequent structure post IPO.
In order to assist the reader's understanding of the financial performance of the Group in this period of significant change, alternative performance measures ("APMs") have been included to ensure consistency with the IPO prospectus and to better reflect the underlying activities of the Group excluding specific non-recurring items as set out in note 6.
H1 2018 Highlights
Profitable growth momentum
-- Revenue up 25.2% to GBP35.3m (H1 2017: GBP28.2m), reflecting a combination of good net organic (8%) and FY17 acquisitions (17%) growth
-- Underlying EBITDA up 56.7% to GBP10.5m (H1 2017: GBP6.7m)
-- Underlying EBITDA margin increased materially to 29.9% (H1 2017: 23.6%) in line with expectations
-- Underlying EBIT up 56% to GBP8.6m (H1 2017: GBP5.5m)
-- Strong performance by both Institutional Client Services (ICS) and Private Client Services (PCS) Divisions
Focused growth strategy
-- Strong enquiry pipeline of GBP25.8m, up 5.3% from GBP24.5m (H1 2017)
-- Well positioned to take advantage of consolidation opportunities in the global fund, corporate and trust administration industry
-- Post period end, successfully acquired(1) Minerva and Van Doorn, broadening our proposition and global network and leveraging our existing and scalable operating platform
-- Active deal pipeline under consideration subject to continued disciplined acquisition criteria
Investing for further growth
-- Enhancements to senior management team -- 2017 acquisitions successfully integrated -- Continued operational investments including IT systems and office infrastructure
Outlook
-- The Group is trading in line with Board expectations
-- The industry outlook remains positive for further growth opportunities, both organic and through acquisitions
1 Subject to relevant regulatory approvals
Nigel Le Quesne, Chief Executive Officer of JTC PLC, said:
"We are very pleased with the performance of the Group in the first half of the year and delighted with our successful listing during the period. We continue to see positive organic growth in both our Institutional and Private Client Divisions with a healthy ongoing pipeline from new and existing clients. As well as good progress with integrating the businesses acquired in 2017 we have also made two further acquisitions, post period end, with the recent Van Doorn (Netherlands) and Minerva (Jersey, London, Geneva, Dubai, Mauritius and Singapore) businesses, which are progressing well. In addition to these, we have several other potential targets where we are engaged in negotiations. We have continued to strengthen the senior management team as part of an ongoing drive to improve performance in all our key jurisdictions and service lines and this, coupled with our ongoing investment in improving processes and technologies, makes us confident in the ability of the Group to deliver on the expectations we set ourselves at the time of listing and in meeting the Board's expectations for the full year."
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
Kimberley Taylor
Sophie Boyd
A presentation for analysts will be held at 09:30 today (09:15 arrival) at the offices of Camarco, 107 Cheapside, London, EC2V 6DN.
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 an award-winning provider of fund, corporate and private wealth services to institutional and private clients. The Company has a global presence, with over 650 staff operating in more than 18 different jurisdictions and assets under administration totalling c. US$ 100+ billion.
JTC remains fully committed to its shared ownership culture and philosophy, with management and staff continuing to hold over 20% of the equity in the firm, clearly aligning the interests of clients, employees and other stakeholders.
www.jtcgroup.com
Chief Executive's Review
Introduction
We are pleased to present our interim results for the first time as a listed company.
Although this is a momentous first, for the JTC senior management and the business at large, this is in effect another phase in a process started nearly 30 years ago to build a first class institution which aligns the interests of all its stakeholders over the long term, whilst seeking to improve in every respect on a daily basis.
As a result, the transition from private ownership into the listed environment has been relatively smooth for JTC. We have been able to concentrate on continuing to develop and grow the business in every respect. From a trading perspective we have found that being a listed business has been well received by clients, potential clients and intermediaries across both the Institutional and Private Client Divisions.
Having finalised our 3 year plan to 2020 our strategy for growth can be defined as JTC continuing to focus on excellence in the delivery of our core competencies as a provider of fund, corporate and trust administration services to both institutional and private clients, with growth coming from organic activities supplemented by acquisitions and by the maintenance of an appropriate infrastructure to support these objectives. We are confident that this period will be consistent with our 30 year track record of growth and profitability with the opportunity for an acceleration driven by the consolidating market dynamics. Key to our success will be to continue to be true to our shared ownership credentials and look to ensure that the team is of the highest quality and as a result our people are rewarded appropriately for their efforts as true stakeholders in the Group.
We have had a strong first half and continue to see profitable growth momentum in the underlying business, we have a successful growth strategy by acquisition and continue to be a suitor of choice to potential targets across our global industry. We are on track to meet our full year expectations and have positive impetus into 2019.
Financial Highlights
We are pleased with the first half year results, which are in line with expectations and consistent with our view at the time of listing in March. Both Divisions are on target and the Group's revenue has increased by GBP7.1 m (25.2%) to GBP35.3m and underlying EBITDA by GBP3.8m (56.7%) by comparison with H1 2017. Underlying EBIT increased by GBP3.1m (56%) to GBP8.6m (H1 2017: GBP5.5m) and this reflects the strong business performance highlighted in the underlying EBITDA figures. These results have been achieved by a mixture of net organic growth of 8% and the anticipated positive contribution of the two 2017 acquisitions; New Amsterdam Cititrust (NACT) in the Netherlands in the ICS Division and the Bank of America Merrill Lynch International Trust and Wealth Structuring (ITWS) business (US, Cayman, Geneva, Isle of Man and Singapore) in the PCS Division.
As anticipated we have seen a significant margin improvement to 29.9% (a 6.3pp increase on H1 2017) due to enhancements in processes, the bedding in of acquisitions and increased operational efficiency between our ICS Global Service Centre (GSC) in South Africa and the jurisdictions it supports, together with the swift integration, including resultant synergies, of the ITWS business in the PCS Division.
Growth by Acquisition
A key component of our strategy is to continue to supplement organic growth with acquisitions. JTC has a successful track record of executing deals at favourable prices and we are well placed to leverage our ability and proven methodology, together with our ability to source, negotiate and integrate acquisitions swiftly and efficiently.
The opportunity is supported by both the trend towards consolidation in the industry and leveraging the attraction of our 'shared ownership for all' model as a fundamental premise of our proposal. More often than not this, together with an open and honest dialogue, leads to JTC achieving preferred bidder status in a competitive process and allows us to approach other off-market opportunities with confidence.
The constant investment in scalable infrastructure and the disciplined approach to the integration process, coupled with the skill of the team, gives us both the capability and bandwidth to continue to consider both smaller 'bolt-ons' and larger acquisitions on a regular basis. The two acquisitions executed this year (subject to regulatory approval) are immediately accretive and help to demonstrate this.
Van Doorn - the Van Doorn acquisition for the ICS Division is a high quality, fast-growing corporate services business that is an ideal and complementary addition to our existing Netherlands platform. The enlarged team will provide opportunities for both organic and potential inorganic growth in country, as well as enhance our management bandwidth in the Benelux region and business development activities across continental Europe.
Minerva - the larger Minerva business which is a traditional trust company business with elements of both corporate and private client services will primarily be managed in our PCS Division and will bring both greater depth to a number of existing platforms (Jersey, London, Geneva, Mauritius and Singapore) as well as a Middle East base in Dubai. With links and client relationships in the Indian Sub-Continent we are exploring plans for greater penetration into this important region, which also acts as a cross-selling bridge into Asia.
Our acquisition pipeline is very healthy with a number of opportunities of varying scale and stages of progress that are well aligned with the business plans of both Divisions.
Institutional Client Services (ICS) Division
Our ICS Division provides fund and corporate administration services to institutional clients, primarily fund managers and multinationals. The ICS footprint is global and includes: New York, Miami, Cayman, Jersey, Guernsey, London, Luxembourg, Amsterdam, Cape Town and Mauritius. The scalable infrastructure of the Division is underpinned by asset class expertise, best-in-breed IT systems and our GSC in South Africa, which provides fund administration and accounting services to the entire network.
The key market drivers identified in our IPO Prospectus earlier this year continue to prevail, with market trends in the ICS business pointing towards a market appetite for greater outsourcing particularly in the alternative assets arena led by a number of factors including greater regulatory complexity, a desire from investors for third party scrutiny and transparency and a preference from managers to concentrate on performance rather than building infrastructure.
The Division accounted for 56% of Group turnover in the period and made strong, steady progress against its financial objectives with a 15.3% increase in total revenue (to GBP19.9m) over H1 2017 (GBP17.3m) and a 2.7pp increase in gross margin (to 59.6% from 56.9%) over the same period.
This has been driven largely by finessing and improving the operating model between the ICS service jurisdictions and the GSC in Cape Town, South Africa, which we expect to see continue in H2.
The organic growth in the Division is primarily driven by the appetite for outsourcing in alternative assets, largely real estate and private equity, with particularly strong performance from Jersey, Luxembourg and the UK.
The addition of the Van Doorn business to the recently acquired (2017) NACT business will add further firepower in the Netherlands into H2 and there remain other opportunities for further acquisitions in the near term.
The Division has also been boosted by some senior hires including a Head of Business Development for Institutional Services & the US and a new Managing Director in London for the UK business. These individuals, together with invitees from the rest of the Group's existing senior team, will be included in the new leadership programme (LION) being introduced by the JTC Academy in H2 of 2018.
Private Client Services (PCS) Division
Our PCS Division provides trust and corporate administration services to cater for the personal and business needs of private clients including HNW and UHNW individuals and families as well as family and private offices. The Division also services institutions such as international wealth management firms. The PCS footprint is global and includes: New York, Miami, South Dakota, Cayman, BVI, Jersey, Guernsey, Isle of Man, London, Geneva, Dubai, Labuan, Mauritius, Singapore, Hong Kong, Malaysia and New Zealand. The scalable infrastructure of the Division is underpinned by regional expertise, best-in-breed IT systems and growing outsourcing centres in Labuan (Malaysia) and Mauritius, which provide accounting services to the PCS network.
With the rise of a generation of true 'world citizens' in the UHNW community underpinned by a desire for wealth preservation, legitimate privacy and to be fully compliant across several territories, the outlook for the private wealth sector remains positive. There is also a need for a more sophisticated delivery of service over product in the emerging markets with a 'flight to quality' evident. In the wider market there is a desire to provide access to client friendly consolidated information supplementing a preference for delivery from one service provider rather than several. These dynamics together with JTC's historic pedigree in providing corporate services to the business needs of UHNW individuals and family and private offices provides a positive backdrop for the Division.
PCS accounted for 44% of Group turnover in the period, of which 21% comprised corporate services provided to private clients, which makes corporate services the Group's biggest service line at 36% of total revenue. The Division posted a particularly strong set of numbers when compared with the same period in 2017 due to the full period effect of the acquisition of the ITWS business. As a result it achieved a 40.7% increase in total revenue from GBP11.0m in H1 2017 to GBP15.4m in H1 2018 and a 7.7% gross margin improvement from 57.2% to 64.9% over the same period. The ITWS business has performed very well including the contribution of GBP1.6m of new revenue from restructuring activities and yielded synergy cost savings as it was integrated into our operating model. We continue to work with Bank of America Merrill Lynch (BAML) to improve the product offering to their clients via the BAML financial adviser network to drive new work from existing BAML clients and to attract new BAML clients to JTC.
The opportunity presented by the recent Minerva acquisition will add to both the senior management expertise and the geographical spread and offering of the Group during H2 and into the future. This together with the launch of a more bespoke and exclusive JTC Private Office proposition introducing the proprietary Edge technology platform during H2 is expected to a positive impetus for the Division into 2019.
New business growth is being seen across the Division driven primarily by the Channel Islands business, where flight to quality is a theme and the US business leveraging our increased network and local capability.
Risk
The principal risks facing the Group remain as set out in our Prospectus at the time of listing. Material risks include acquisition risk, competition risk, data protection and cyber security risk, staff resourcing risk, political and regulatory change risk, and regulatory and procedural compliance risk. We remain satisfied as to the effectiveness of the Group's risk analysis, management and culture, developed over the past 30 years of JTC's operations. A detailed update on our approach to monitoring and managing risk, identifying new or changed risks and the effectiveness of our risk responses and reporting mechanisms, will be presented as part of our first Annual Report, which will be released in H1 2019.
Going Concern
The financial statements are prepared on a going concern basis, as the Directors are satisfied that the Group has the resources to continue in business for the foreseeable future. In making this assessment, the Directors have considered a wide range of information relating to present and future conditions, including future projections of profitability and cash flows.
Dividend
The Board has declared an interim dividend of 1 pence per share. The dividend will be paid on 26 October 2018 to shareholders on the register as at the close of business on the record date of 28 September 2018.
Outlook
We remain confident in the ability of the Group to deliver on the expectations we set ourselves at the time of the listing and in meeting the Board's expectations for the full year, and these will be further enhanced by the consolidation of the recent acquisitions. From an organic perspective we have opportunities in both Divisions to improve performance from widening our offering, a healthy enquiries pipeline, new business wins and more work from our existing clients. This, coupled with the value accretive effect of the acquisitions and the cross selling opportunities these will deliver, will continue to allow the Group's operating model to be developed and improved. This growth will be supplemented by further new strategic and opportunistic acquisitions in the foreseeable future bringing further diversification and greater capability to the Group.
The outlook remains positive for further growth in the industry with compelling fundamentals prevailing in the addressable market. This is particularly the case for JTC with its well organised global footprint to allow jurisdictional arbitrage and an understanding of what the trends are and positions itself appropriately from a skill set, operational and technological perspective.
JTC's history of being able to adapt to these trends and develop accordingly, together with our own strategy for success, leaves us confident for H2 2018 and into the future.
Nigel Le Quesne
Chief Executive Officer
Chief Financial Officer's Review
JTC Group KPI's
H1 2018 H1 2017 Growth
Revenue (GBP) GBP35.3m GBP28.2m +25.2%
----------- ----------- ----------
Gross profit margin 61.9% 57.0% +4.9pp
----------- ----------- ----------
Gross profit margin ICS 59.6% 56.9% +2.7pp
----------- ----------- ----------
Gross profit margin PCS 64.9% 57.2% +7.7pp
----------- ----------- ----------
Reported EBITDA (GBP) (GBP5.8m) GBP6.0m n/a
----------- ----------- ----------
Underlying EBITDA (GBP)* GBP10.5m GBP6.7m +56.7%
----------- ----------- ----------
Underlying EBITDA margin
(%)* 29.9% 23.6% +6.3pp
----------- ----------- ----------
Underlying EBIT* GBP8.6m GBP5.5m +56%
----------- ----------- ----------
Loss before tax (GBP) (GBP9.2m) (GBP1.1m) n/a
----------- ----------- ----------
Underlying profit/(loss) GBP7.4m (GBP0.5m) +GBP7.9m
before tax (GBP)
----------- ----------- ----------
Basic and diluted EPS (p) (10.97p) (2.45p) n/a
----------- ----------- ----------
Underlying diluted EPS (p)* 7.29p (1.51p) n/a
----------- ----------- ----------
Interim dividend per share
(p) 1p - +1p
----------- ----------- ----------
Cash and Bank balance (GBP)** GBP21.7m GBP18.6m +GBP3.1m
----------- ----------- ----------
Net debt (GBP)** (GBP23.7m) (GBP41.3m) -GBP17.6m
----------- ----------- ----------
* Items classified as non-underlying are as detailed in Note 6 of the condensed financial statements. Non-underlying items are defined as specific items that the directors do not believe will recur in future periods.
**Excludes cash held by JTC EBT at 30/6/18
Financial Review
The H1 2018 results reflect the pre listing capital structure up to 14 March 2018 and the subsequent structure post IPO.
In order to assist the reader's understanding of the financial performance of the Group in this period of significant change, alternative performance measures ("APMs") have been included to ensure consistency with the IPO prospectus and to better reflect the underlying activities of the Group excluding specific non-recurring items as set out in note 6.
Revenue
In H1 2018, revenue totalled GBP35.3m, an increase of GBP7.1m (25.2%) compared to H1 2017.
Period on period growth was driven by net LTM organic growth of 8% and inorganic growth from the acquisitions of the Merrill Lynch International Trust and Wealth Structuring business (ITWS) and New Amsterdam Cititrust (NACT).
Non regretted losses in the LTM period were 6.1% and therefore gross organic growth was 14%.
GBP1.6m of H1 2018 revenue growth was achieved from providing new restructuring services to the ITWS clients. This was a clear example of the opportunity that JTC has to provide additional services to this newly acquired client base.
New Business/ Pipeline
The enquiry pipeline increased from GBP24.5m at 30 June 2017 to GBP25.8m (+5.3%) at 30 June 2018.
Gross Profit Margin
Gross profit margin for H1 2018 was 61.9%, an improvement of 4.9pp from H1 2017.
This improvement was seen in both operating Divisions with ICS improving gross margin from 56.9% in H1 2017 to 59.6% (+2.7pp) in H1 2018. The margin improvement is due to the continuing focus on improving operational efficiency and leveraging the GSC in Cape Town.
Within PCS the gross profit margin was 64.9%, a 7.7pp improvement from the equivalent period in 2017. The gross profit margin improvement has been due to the swift integration and re-organisation of the global PCS business following the acquisition of the ITWS business.
Underlying profit and margin performance
Underlying EBITDA in H1 2018 was GBP10.5m, an increase of GBP3.8m and 57% from H1 2017.
The underlying EBITDA margin % is an extremely important KPI for the business and is a key measure of management's ability to return the business to historic performance levels. The performance in 2018 highlights the progress that has been made with underlying EBITDA margin up to 29.9% from 23.6% in H1 2017 - a significant improvement of 6.3pp. This has been driven by improved operational efficiency in both operating divisions as well as continuing cost control.
Underlying EBIT was GBP8.6m, an increase of GBP3.1m and 56% from H1 2017. The improvement reflects the strong business performance highlighted above and takes into account the increased amortisation cost in the period arising from the ITWS and NACT acquisitions.
Non Underlying Items
Non underlying items within EBITDA in the period totalled GBP16.3m. These were comprised as follows:
-- GBP0.7m costs associated with the IPO -- GBP2.1m of acquisition and integration costs associated with the ITWS acquisition -- GBP13.4m capital distribution made by JTC EBT12 following the IPO -- GBP0.1m other costs
JTC currently consolidates its EBTs within its results and hence the reason that the capital distribution is included within staff costs. The full charge to the Income Statement is recognised in the period to 30 June 2018.
Loss Before Tax
The reported loss before tax for the period ended 30 June 2018 was GBP9.2m (H1 2017 GBP1.1m loss). Adjusting for non-underlying items the underlying profit before tax for H1 2018 was GBP7.4m (H1 2017: GBP0.5m loss).
It should be noted that Finance costs in the reporting period include the costs of the Group's pre IPO capital structure and changes to the capital structure made at the time of the IPO. Finance costs in H1 2018 comprise GBP1.1m of amortisation/non cash flow items and GBP1m of costs which impact cash flow. Within the cash flow items the loan note interest relates to the pre IPO period and is not recurring. The bank loan interest rate pre IPO was higher than the rate under the post IPO debt package. The interest rate charged in the first six months of new bank loan facility is higher than the ongoing rate. The combined impact of these two factors on the H1 2018 results was a higher bank loan interest cost of GBP200k.
Cash Flow and debt
Cash generated from underlying operations was GBP5.9m representing a 56% conversion of underlying EBITDA. The conversion rate was adversely impacted in the period due to the ITWS acquisition. This is due to the bi-annual billing frequency whereby JTC has not yet benefitted from a full cycle of cash flows. Cash conversion for the full year will include a full cycle of the ITWS cash flows.
Working capital (trade receivables minus deferred revenue) as a percentage of revenue fell from 33.1% at 31 December 2017 to 30.2% (improvement of 2.9pp) by 30 June 2018.
Net debt at the period end was GBP23.7m (excluding JTC EBT12 cash).
Reconciliation of underlying EBITDA to Loss before tax
The reconciliation of underlying EBITDA to Loss before tax for H1, 2018 is as follows:
All figures in GBP'm for H1, Reported Non underlying Underlying
2018 performance items performance
Underlying EBITDA (5.8) (16.3) 10.5
------------- --------------- -------------
Depreciation and amortisation 2.0 - 2.0
------------- --------------- -------------
(Loss)/ profit from operating
activities (EBIT) (7.7) (16.3) 8.6
------------- --------------- -------------
Finance costs, other gains
and losses etc 1.5 (0.3) 1.2
------------- --------------- -------------
Loss before tax (9.2) (16.6) 7.4
------------- --------------- -------------
Non underlying items are set out in detail in note 6 to the condensed interim financial statements and are in the opinion of the directors specific items that will not recur.
Martin Fotheringham
Chief Financial Officer
Statement of directors' responsibilities in respect of the interim financial statements
For the 6 month period ended 30 June 2018
"The directors' confirm that these condensed interim financial statements have been prepared in accordance with International Accounting Standard 34, 'Interim Financial Reporting', as adopted by the European Union and that the interim management report includes a fair review of the information required by DTR 4.2.7 and DTR 4.2.8, namely:
-- an indication of important events that have occurred during the first six months and their impact on the condensed set of financial statements, and a description of the principal risks and uncertainties for the remaining six months of the financial year; and
-- material related-party transactions in the first six months and any material changes in the related-party transactions described in the last annual report."
Nigel Le Quesne Martin Fotheringham
Chief Executive Officer Chief Financial Officer
17 September 2018 17 September 2018
Independent Review Report to JTC PLC
For the 6 month period ended 30 June 2018
Report on review of the condensed consolidated interim financial statements
Our conclusion
We have reviewed the accompanying condensed consolidated interim financial statements of JTC PLC (the "Company") and its subsidiaries (together the "Group") as of 30 June 2018. Based on our review, nothing has come to our attention that causes us to believe that the accompanying condensed consolidated interim financial statements are not prepared, in all material respects, in accordance with International Accounting Standard 34, 'Interim Financial Reporting', as adopted by the European Union, and the Disclosure Guidance and Transparency Rules sourcebook of the United Kingdom's Financial Conduct Authority.
What we have reviewed
The accompanying condensed consolidated interim financial statements comprise:
-- the condensed consolidated balance sheet as of 30 June 2018; -- the condensed consolidated income statement for the six-month period then ended;
-- the condensed consolidated statement of comprehensive income for the six-month period then ended;
-- the condensed consolidated statement of changes in equity for the six-month period then ended;
-- the condensed consolidated cash flow statement for the six-month period then ended; and
-- the notes, comprising a summary of significant accounting policies and other explanatory information.
The condensed consolidated interim financial statements have been prepared in accordance with International Accounting Standard 34, 'Interim Financial Reporting', as adopted by the European Union, and the Disclosure Guidance and Transparency Rules sourcebook of the United Kingdom's Financial Conduct Authority.
Our responsibilities and those of the directors
The Directors are responsible for the preparation and presentation of the condensed consolidated interim financial statements in accordance with the Disclosure Guidance and Transparency Rules sourcebook of the United Kingdom's Financial Conduct Authority.
Our responsibility is to express a conclusion on the condensed consolidated interim financial statements based on our review. This report, including the conclusion, has been prepared for and only for the Company for the purpose of complying with the Disclosure Guidance and Transparency Rules sourcebook of the United Kingdom's Financial Conduct Authority and for no other purpose. We do not, in giving this conclusion, accept or assume responsibility for any other purpose or to any other person to whom this report is shown or into whose hands it may come save where expressly agreed by our prior consent in writing.
Scope of review
We conducted our review in accordance with International Standard on Review Engagements 2410, 'Review of interim financial information performed by the independent auditor of the entity' issued by the International Auditing and Assurance Standards Board. A review of the interim financial information consists of making inquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures.
A review is substantially less in scope than an audit conducted in accordance with International Standards on Auditing and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion.
We have read the other information contained in the interim financial reporting report and considered whether it contains any apparent misstatements or material inconsistencies with the information in the condensed consolidated interim financial statements.
PricewaterhouseCoopers CI LLP
Chartered Accountants
Jersey, Channel Islands
17 September 2018
The maintenance and integrity of the JTC PLC website is the responsibility of the Directors; the work carried out by the auditors does not involve consideration of these matters and, accordingly, the auditors accept no responsibility for any changes that may have occurred to the financial statements since they were initially presented on the website.
Legislation in Jersey governing the preparation and dissemination of financial statements may differ from legislation in other jurisdictions.
JTC PLC
Condensed Consolidated Income Statement
For the period from 1 January 2018 to 30 June 2018
----------------------------------------------------------------------------------------------------------
6 Months to 6 Months
to
30 Jun 2018 30 Jun 2017
Notes GBP'000 GBP'000
--------------------------------------------------------------- ------------------- --------------------
Revenue 4 35,307 28,212
Staff costs 6 (30,990) (15,162)
Establishment costs (2,194) (1,837)
Other operating expenses (8,023) (5,405)
Other operating income 142 220
---------------------------------------------- --------------- ------------------- --------------------
Earnings before interest, taxes, depreciation
and amortisation ("EBITDA") (5,758) 6,028
---------------------------------------------- --------------- ------------------- --------------------
Comprising:
Underlying EBITDA 10,545 6,656
Non-underlying items 6 (16,303) (628)
---------------------------------------------- --------------- ------------------- --------------------
(5,758) 6,028
---------------------------------------------- --------------- ------------------- --------------------
Depreciation and amortisation (1,982) (1,152)
---------------------------------------------- --------------- ------------------- --------------------
(Loss)/profit from operating activities (7,740) 4,876
---------------------------------------------- --------------- ------------------- --------------------
Other gains and losses 509 167
Finance income 49 31
Finance cost 5 (2,120) (6,173)
Share of profit/(loss) of equity-accounted
investee 104 (1)
---------------------------------------------- --------------- ------------------- --------------------
Loss before tax (9,198) (1,100)
---------------------------------------------- --------------- ------------------- --------------------
Comprising:
Underlying profit/(loss) before tax 7,421 (472)
Non-underlying items 6 (16,619) (628)
---------------------------------------------- --------------- ------------------- --------------------
(9,198) (1,100)
---------------------------------------------- --------------- ------------------- --------------------
Tax 7 (787) (531)
---------------------------------------------- --------------- ------------------- --------------------
Loss for the period (9,985) (1,631)
---------------------------------------------- --------------- ------------------- --------------------
Earnings per ordinary share ("EPS") (expressed in pence per ordinary
share)
Basic and diluted EPS (pence) 8 (10.97) (2.45)
Underlying and diluted EPS (pence) 8 7.29 (1.51)
The above condensed consolidated income statement should be read
in conjunction with the accompanying notes.
Condensed Consolidated Statement of Comprehensive Income
For the period from 1 January 2018 to 30 June 2018
-----------------------------------------------------------------------------------------------------------
6 Months to 6 Months
to
30 Jun 2018 30 Jun 2017
GBP'000 GBP'000
--------------------------------------------------- -------------------------------- --------------------
Loss for the period (9,985) (1,631)
--------------------------------------------------- -------------------------------- --------------------
Other comprehensive income/(loss):
Items that may be subsequently reclassified to profit or loss:
Exchange differences on translation of foreign
operations 229 (332)
--------------------------------------------------- -------------------------------- --------------------
Total comprehensive loss for the period (9,756) (1,963)
--------------------------------------------------- -------------------------------- --------------------
The above condensed consolidated statement of comprehensive income
should be read in conjunction with the accompanying notes.
Condensed Consolidated Balance Sheet
As at 30 June 2018
-------------------------------------------------------------------------------------
30 Jun 2018 31 Dec 2017
Notes GBP'000 GBP'000
-------------------------------------------- ------------------ -------------------
Assets
Non-current assets
Goodwill 9 76,168 76,183
Other intangible assets 9 21,000 21,761
Property, plant and equipment 10 5,496 5,504
Contract-related assets 11 952 -
Investment in equity-accounted investee 12 990 886
Other debtors and prepayments 972 940
Deferred tax assets 57 61
---------------------------------------- ------------------ -------------------
Total non-current assets 105,635 105,335
---------------------------------------- ------------------ -------------------
Current assets
Contract-related assets 11 476 -
Trade and other receivables 13 25,707 24,769
Other debtors and prepayments 3,645 2,639
Current tax receivables 105 24
Cash and cash equivalents 3 28,583 16,164
---------------------------------------- ------------------ -------------------
Total current assets 58,516 43,596
---------------------------------------- ------------------ -------------------
Total assets 164,151 148,931
---------------------------------------- ------------------ -------------------
Equity
Share capital 14 1,069 10
Share premium 14 78,980 238
Own shares (1,500) (1)
Capital reserve (525) (1,213)
Translation reserve 1,339 1,110
Accumulated profits 8,372 2,884
---------------------------------------- ------------------ -------------------
Total equity 87,735 3,028
---------------------------------------- ------------------ -------------------
Non-current liabilities
Contract-related liabilities 11 830 -
Loans and borrowings 15 44,739 63,341
Provisions 698 646
Deferred tax liabilities 2,698 2,817
Trade and other payables 16 4,213 1,805
---------------------------------------- ------------------ -------------------
Total non-current liabilities 53,178 68,609
---------------------------------------- ------------------ -------------------
Current liabilities
Contract-related liabilities 11 473 -
Loans and borrowings 15 678 56,364
Provisions 110 187
Trade and other payables 16 15,023 14,736
Deferred revenue 5,656 5,012
Current tax liabilities 1,298 995
---------------------------------------- ------------------ -------------------
Total current liabilities 23,238 77,294
---------------------------------------- ------------------ -------------------
Total equity and liabilities 164,151 148,931
---------------------------------------- ------------------ -------------------
The above condensed consolidated balance sheet should be read in
conjunction with the accompanying notes.
Condensed Consolidated Statement of Changes in Equity
For the period from 1 January 2018 to 30 June 2018
------------------------------------------------------------------------------------------------------------------------------------
Attributable to owners of JTC PLC
Share Share Own Capital Translation Accumulated Total
capital premium shares reserve reserve profits/(losses) equity
Notes GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
------------------------ ------------- ------------- ------------ ----------- -------------- ------------------- ------------
Balance as at 1
January
2017 10 83 (1) (2,349) 1,826 (24,010) (24,441)
---------------- ------ ------------- ------------- ------------ ----------- -------------- ------------------- ------------
Loss for the
period - - - - - (1,631) (1,631)
Other
comprehensive
loss
for the period - - - - (332) - (332)
---------------- ------ ------------- ------------- ---- ------ ----------- -------------- ------------------- ------------
Total
comprehensive
loss
for the period - - - - (332) (1,631) (1,963)
---------------- ------ ------------- ------------- ---- ------ ----------- -------------- ------------------- ------------
Share based
payment expense - - - 269 - - 269
Sale and
purchase of own
shares - - - (5) - - (5)
---------------- ------ ------------- ------------- ---- ------ ----------- -------------- ------------------- ------------
Balance as at 30
June 2017 10 83 (1) (2,085) 1,494 (25,641) (26,140)
---------------- ------ ------------- ------------- ------------ ----------- -------------- ------------------- ------------
Balance as at 31 December 2017
as originally
presented 10 238 (1) (1,213) 1,110 2,884 3,028
Change in
accounting
policy
* 19 - - - - - (168) (168)
---------------- ------ ------------- ------------- ---- ------ ----------- -------------- ------------------- ------------
Restated total equity
as at 31
December 2017 10 238 (1) (1,213) 1,110 2,716 2,860
Loss for the
period - - - - - (9,985) (9,985)
Other
comprehensive
income
for the period - - - - 229 - 229
---------------- ------ ------------- ------------- ---- ------ ----------- -------------- ------------------- ------------
Total
comprehensive
loss
for the period - - - - 229 (9,985) (9,756)
---------------- ------ ------------- ------------- ---- ------ ----------- -------------- ------------------- ------------
Issue of share
capital 14 1,059 79,484 - - - - 80,543
Cost of share
issuance - (742) - - - - (742)
Share based
payment expense 17 - - - 172 - - 172
Movement in EBT
and JSOP's - - - 516 - - 516
Movement of own
shares 3 - - (1,499) - - - (1,499)
EBT12 gain on
sale of shares 3 - - - - - 15,641 15,641
---------------- ------ ------------- ------------- ---- ------ ----------- -------------- ------------------- ------------
Balance as at 30
June 2018 1,069 78,980 (1,500) (525) 1,339 8,372 87,735
---------------- ------ ------------- ------------- ------------ ----------- -------------- ------------------- ------------
* See note 19 for details regarding the restatement as a result of
a change in accounting policy.
The above condensed consolidated statement of changes in equity should
be read in conjunction with the accompanying notes.
Condensed Consolidated Cash Flow Statement
---------------------------------
For the period from 1 January 2018 to
30 June 2018
----------------------------------------------- -------- ---------------------- --------------------------
30 Jun 2018 30 Jun 2017
Notes GBP'000 GBP'000
------------------------------------------------- -------- ---------------------- --------------------------
Operating (loss)/profit (7,740) 4,876
Adjustments for:
Amortisation of intangible assets 9 1,338 718
Depreciation of tangible assets 10 430 434
Amortisation of contract-related assets 11 214 -
Share-based payment expense 17 172 269
Acquisition costs - 128
Foreign exchange 437 123
------------------------------------------------- -------- ---------------------- --------------------------
Operating cash flows before movements
in working capital (5,149) 6,548
------------------------------------------------- -------- ---------------------- --------------------------
(Increase)/decrease in receivables (2,137) 617
Increase/(decrease) in payables 3,745 (508)
------------------------------------------------- -------- ---------------------- --------------------------
Cash (used in)/generated by operations (3,541) 6,657
------------------------------------------------- -------- ---------------------- --------------------------
Income taxes paid (593) (714)
------------------------------------------------- -------- ---------------------- --------------------------
Net movement in cash from operating activities (4,134) 5,943
------------------------------------------------- -------- ---------------------- --------------------------
Comprising:
Underlying net movement in cash from
operating activities 5,891 6,354
Non-underlying cash items 6 (10,025) (411)
------------------------------------------------- -------- ---------------------- --------------------------
(4,134) 5,943
------------------------------------------------- -------- ---------------------- --------------------------
Investing activities
Interest received 48 31
Purchase of intangible assets 9 (454) (274)
Purchase of tangible assets 10 (373) (3,519)
Deferred consideration 16 (1,160) -
Acquisition of subsidiaries - (184)
------------------------------------------------- -------- ---------------------- --------------------------
Net cash used in investing activities (1,939) (3,946)
------------------------------------------------- -------- ---------------------- --------------------------
Financing activities
Bank charges (68) (50)
Interest on other loans (47) (45)
Interest on bank loans (492) (1,138)
Facility fees (26) (37)
Share capital raised 20,000 -
Share issuance costs (742) -
Proceeds from sale of EBT12 shares 3 15,641 -
Acquisition of own shares 3 (1,500) -
Loan arrangement fees (756) (38)
Redemption of bank loans (55,836) -
Redemption of other borrowings (508) (325)
Bank loan drawn down 45,000 -
Other loan drawn down - 2,525
Redemption of loan notes (2,161) -
------------------------------------------------- -------- ---------------------- --------------------------
Net cash from financing activities 18,505 892
------------------------------------------------- -------- ---------------------- --------------------------
Net increase in cash and cash equivalents 12,432 2,889
------------------------------------------------- -------- ---------------------- --------------------------
Cash and cash equivalents at the beginning
of the period 16,164 15,765
Effect of foreign exchange rate changes (13) (93)
------------------------------------------------- -------- ---------------------- -------------------------- Cash and cash equivalents at end of period* 28,583 18,561 ------------------------------------------------- -------- ---------------------- --------------------------
* Cash balance includes GBP6.92m for pending EBT12 capital distributions (see note 3).
The above condensed consolidated cash flow statement should be read in conjunction with the accompanying notes.
Notes to the condensed consolidated interim financial statements
For the period from 1 January 2018 to 30 June 2018
1. General information
JTC PLC ("the Company") and its subsidiaries (together "the Group"
or "JTC") present their condensed consolidated interim financial statements
for the six months ended 30 June 2018. JTC is a publicly listed provider
of fund, corporate and private wealth services to institutional and
private clients.
On 14 March 2018, the Company obtained control of the entire share
capital of JTC Group Holdings Limited ("JTCGHL") via a share exchange,
and thus control of the Group (see note 14).
Although the share exchange resulted in a change of legal ownership,
in substance these condensed financial statements reflect the continuation
of the pre-existing Group, formerly headed by JTCGHL. As a result,
the comparatives for 30 June 2017 and 31 December 2017 presented in
these condensed financial statements are the consolidated results of
JTCGHL. For the impact on the earnings per share calculation, see note
8.
The condensed consolidated balance sheet at 31 December 2017 reflects
the share capital structure of JTCGHL. The condensed consolidated balance
sheet at 30 June 2018 presents the legal change in ownership of the
Group, including the share capital of JTC PLC and the effects of the
share exchange transactions.
Basis of preparation
The consolidated results have been prepared in accordance with International
Accounting Standard 34 'Interim
Financial Reporting' as adopted by the European Union ("EU"). The consolidated
interim financial statements are therefore presented on a condensed
basis as permitted by IAS 34 and do not include all disclosures that
would otherwise be required in a full set of financial statements and
should be read in conjunction with the Historical Financial Information
("HFI") within the prospectus available at www.jtcgroup.com. Where
there are no significant changes, no additional disclosures have been
made.
These condensed consolidated financial statements do not constitute
statutory accounts. Statutory accounts for JTCGHL for the year ended
31 December 2017 were approved by the board of directors on 8 March
2018. The report of the Auditors on the 31 December 2017 accounts was
unqualified.
These financial statements were approved by the board of directors
on 17 September 2018 and have been reviewed but not audited by the
Group's external auditors.
Going concern
The directors have a reasonable expectation that the Group has adequate
resources to continue in operational existence for the foreseeable
future. The directors have reviewed the Group's financial projections
and cash flow forecasts and believe, based on these, that it is appropriate
to prepare the condensed consolidated interim financial statements
of the Group on a going concern basis. Accordingly, they have adopted
the going concern basis of accounting in preparing the condensed consolidated
interim financial statements.
Accounting policies
The Group has applied consistent accounting policies, presentation
and methods of calculation as those followed in the preparation of
the Group's consolidated financial statements for the year ended 31
December 2017, except for the adoption of new and amended standards
as set out in note 19.
The condensed financial statements are presented in pounds sterling,
which is the functional and reporting currency of the Company, and
the presentation currency of the Group. All amounts disclosed in the
condensed financial statements and accompanying notes have been rounded
to the nearest thousand (GBP'000) unless otherwise stated.
New and amended standards adopted by the Group
A number of new or amended standards became applicable for the current
reporting period and the Group had to change its accounting policies
and make modified retrospective adjustments as a result of adopting
the following standards:
- IFRS 9 'Financial Instruments', and
- IFRS 15 'Revenue from Contracts with Customers'.
The impact of the adoption of these standards and the new accounting
policies are disclosed in note 19. The other new or amended standards
did not have any impact on the Group's accounting policies and did
not require retrospective adjustments.
Seasonality
Given the makeup of the Group's customers and contracts, seasonality
is not expected to have a significant bearing on the financial performance
of the Group.
Impact of standards issued but not yet applied by the Group
IFRS 16 'Leases'
IFRS 16 'Leases', published in January 2016, introduces a new definition
of a lease and eliminates the current dual accounting model for lessees,
bringing most leases on to the balance sheet in the financial statements
of the lessee. It replaces existing guidance on leases, including IAS
17. The Group has a significant number of operating lease contracts,
mainly for office properties and therefore the following changes are
expected upon transition to IFRS 16:
- Assets and liabilities of the Group are expected to increase due
to recognition of the right-of-use asset and a lease liability.
- Earnings before Interest, Taxes, Depreciation and Amortisation
(EBITDA) will increase as the lease payments will be presented
as depreciation and net finance expenses rather than operating
expenses.
- Operating cash flow will increase and investing and financing
cash flow will decrease as the lease payments will no longer be
considered as operational.
The Group plans to adopt the new standard on the required effective
date. The Group will complete its review of the operating and finance
leases in existence across the business during 2018 in order to assess
the impact.
2. Critical accounting estimates and judgements
The preparation of these condensed financial statements requires management
to make certain assumptions, estimates and judgements that affect the
reported amounts of assets, liabilities and disclosure of contingent
assets and liabilities as of the date of the condensed financial statements
and the reported amounts of revenues and expenses during the reporting
period. Actual results may differ from those estimates.
The estimates and underlying assumptions are reviewed on an ongoing
basis. Revisions to accounting estimates are recognised in the period
in which the estimate is revised if the revision affects only that
period or in the period of revision and the future periods if the revision
affects both current and future periods. The judgements, estimates
and assumptions applied in the condensed financial statements, including
the key sources of estimation of uncertainty, were the same as those
applied in the Group's HFI, except as noted below.
(i) Critical judgements in applying the entity's accounting policies
(a) Capitalisation of costs to obtain a contract
IFRS 15 requires incremental costs of obtaining a contract (i.e. costs
that would not have been incurred if the contract had not been obtained)
to be recognised as an asset if the costs are expected to be recovered.
IFRS 15 further requires that capitalised costs of obtaining a contract
are amortised in a systematic manner consistent with the pattern of
transfer of the related goods or services and are subject to an impairment
analysis.
The directors have concluded that as the commission fees payable in
obtaining a contract are incremental costs and are expected to be recovered
over the useful economic life of the client contract, they should be
capitalised and included in the balance sheet as contract-related assets.
This includes commission paid and expected to be paid in the future
as a percentage of revenue generated. In accordance with the transition
provisions in IFRS 15, the Group has applied the modified retrospective
approach, which means that the cumulative impact of the adoption is
recognised in retained earnings as of 1 January 2018 and that the comparative
figures have not been restated. For the impact of the adoption, see
note 19 (d).
(b) Expected credit losses
The Group applies the simplified approach to measuring expected credit
losses which uses a lifetime expected loss allowance for all trade
receivables, see note 19.
(ii) Critical accounting estimates and assumptions
(a) Useful economic life ("UEL") of contract-related assets
To derive the value of the contract-related asset the directors have
estimated the commissions payable over the life of the commission agreements
and in accordance with their terms. Where the commission due is a percentage
of revenue, the directors estimate based on historical information,
when applying retrospectively, or otherwise using management judgement
based on experiences of the UEL of similar clients in comparable locations
and business divisions. As the asset is expected to be recovered over
the UEL of the introduced client, it is amortised over the estimate
of this period.
The contract-related liability, being the accrued commission expense,
is the estimated value of future cash flows, using a suitable discount
value in order to calculate the present value.
(b) Credit loss rates
In accordance with IFRS 9, the expected credit losses on trade receivables
are estimated using a provision matrix based on the Group's historical
credit loss experience, adjusted for factors that are specific to the
debtors' general economic conditions and an assessment of both the current
as well as the forecast direction of conditions at the reporting date,
including the time value of money where appropriate. Provision rates
are segregated according to geographical location (JTC entity) and by
client division.
The net debt positions calculated using this matrix are reviewed by
management to assess whether the applied probability of future losses
are appropriate to known changes in the credit risk, where applicable,
specific provisions may be allocated. WIP and accrued income provisions
are assessed on a line-by-line basis to reflect the amount expected
to be billed, with an additional provision to recognise future credit
losses on conversion to debt.
3. Significant events and transactions
(i) Capital restructure and share exchange
Immediately prior to Admission to the London Stock Exchange, the Group
undertook a reorganisation of its corporate structure that resulted
in the Company being the ultimate holding company of the Group and JTCGHL
becoming a direct subsidiary of the Company. Subject to the terms and
conditions of the Share Exchange Agreement signed on 14 March 2018,
the sellers (being the holders of shares and loan notes in JTCGHL) agreed
to sell and the purchaser (being the Company) agreed to purchase the
entire issued share capital and all loan notes issued by JTCGHL as at
completion in order to facilitate the proposed application of the whole
of the issued and to be issued ordinary share capital of the Company
to be admitted to the premium segment of the Official List of the FCA
and to trading on the London Stock Exchange plc's main market for listed
securities (see note 14).
(ii) Admission to London Stock Exchange
On 14 March 2018, the Company was admitted to trading on the main market
of the London Stock Exchange with a market capitalisation of GBP310m.
The IPO involved a conditional placing of GBP84.1m existing and new
ordinary shares at a price of GBP2.90 each, raising GBP243.8m of gross
proceeds. Selling shareholders raised net proceeds of GBP218.2m from
existing shares.
(iii) Debt facilities
From the Admission, the Company raised net proceeds of GBP15.1m and
these together with funds available under a new debt facility, were
used to repay the JTCGHL's existing debt facility, see note 15. The
balance of funds raised will be used for general working capital and
wider corporate purposes. The directors believe the IPO will position
the Group for its next stage of development and provide it with an optimal
capital structure for future growth.
(iv) Shared ownership
On 8 March 2018, the Company settled The JTC PLC Employee Benefit Trust
("PLC EBT") with a view to encouraging, motivating and retaining its
employees and those of its group companies. In accordance with the accounting
policies in Note 4 of the Historical Financial Information ("HFI") for
31 December 2017, this Trust and the previous EBT, the Jersey Trust
Company Employee Benefit Trust 2012 ("EBT12") are consolidated into
the results of the Company as it is considered that the 'de facto' control
exists.
From the Admission, EBT12 received net proceeds of GBP15.64m for the
benefit of all staff members. As at 30 June 2018, EBT12 had made capital
distributions of GBP7.22m to employees and in July 18, a further GBP0.28m
was distributed. The Trustees have committed to making further capital
distributions of GBP6.29m. During the period to 30 June 2018, GBP13.39m
has been included in direct staff costs, being the discounted value
of the total committed capital distributions. Due to the capital nature
of these awards and given they are directly related to the IPO, the
directors consider these to be non-underlying items (see note 6).
In addition, EBT12 appointed GBP1.5m to settle PLC EBT, thus continuing
shared ownership for new and existing employees. The GBP1.5m was used
to buy JTC PLC shares, these have been treated as own shares in accordance
with IAS 32 'Financial Instruments'. In July 2018, a cash surplus arising
from leavers has resulted in a further capital appointment of GBP0.35m
from EBT12 to PLC EBT.
As EBT12 is consolidated into the results of the Group, the gain of
sale of shares of GBP15.64m is shown in the condensed consolidated statement
of changes in equity. A total of GBP6.92m is included within cash (being
GBP6.57m to be distributed by March 2020 and a surplus of GBP0.35m arising
from leavers). Current other payables includes GBP3.34m for distributions
payable in March 19 and non-current other payables includes GBP2.9m
for distributions payable in March 2020 (see note 16).
4. Segmental and Revenue information
(i) Description of
segments
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 and family office clients. Declared revenue
is generated from external customers.
The Chief Executive Officer and Chief Finance 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 of directors.
The Group has two divisions and therefore two reportable segments,
these are Institutional Client Services and Private Client Services.
Within this, the divisions focus on three business lines: Fund Services,
Corporate Services and Private Wealth Services. These are as follows
-
- Fund Services
Support 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 and
high net worth ("HNW") and ultra-high net worth ("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 Wealth
Services
Support HNW and UHNW individuals and families, from 'emerging entrepreneurs'
to established single and multifamily offices. Services include formation
and administration of trusts, companies, partnerships, and other vehicles
and structures across a range of asset classes, including cash and
investments.
(ii) Segmental
information
The tables below show the segmental information provided to the board
of directors for the two reportable segments, being the Institutional
Client Services and Private Client Services divisions, for the half-year
ended 30 June 2018 and also the basis on which revenue is recognised.
The board evaluates segmental performance on the basis of gross profit,
after the deduction of the direct costs of staff and third party administration.
Revenue Other
recognised
At a point Total Direct direct Gross
in time Over time revenue staff cost costs profit
6 Months to 30 June GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 Margin
2018
------------------- ----------------- ------------------ ------------- -------------- ------------ ------------- ---------
Segments
Institutional Client
Services 767 19,115 19,882 (7,790) (243) 11,849 59.6%
Private Client Services 2,558 12,867 15,425 (4,413) (1,000) 10,012 64.9%
------------------------------ ----------------- ------------------ ------------- -------------- ------------ ------------- ---------
Total 3,325 31,982 35,307 (12,203) (1,243) 21,861 61.9%
------------------------------ ----------------- ------------------ ------------- -------------- ------------ ------------- ---------
Indirect staff costs (3,730)
Operating expenses (7,728)
Other operating income 142
------------------------------ ----------------- ------------------ ------------- -------------- ------------ ------------- ---------
Underlying EBITDA 10,545 29.9%
------------------------------ ----------------- ------------------ ------------- -------------- ------------ ------------- ---------
Non-underlying items specific
to EBITDA (see note 6) (16,303)
--------------------------------------------------------------------- ------------- -------------- ------------ ------------- ---------
Non-underlying EBITDA (5,758) (16.3%)
------------------------------ ----------------- ------------------ ------------- -------------- ------------ ------------- ---------
Revenue Other
recognised At a direct
point Total Direct Gross
in time Over time revenue staff cost costs profit
6 Months to 30 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 Margin
June
2017
---------------- ----------------- ------------------------ ------------ -------------- ----------- ------------- --------------
Segments
Institutional
Client
Services 260 16,992 17,252 (7,405) (22) 9,825 56.9%
Private Wealth
Services 656 10,304 10,960 (4,055) (640) 6,265 57.2%
---------------- ----------------- ------------------------ ------------ -------------- ----------- ------------- --------------
Total 916 27,296 28,212 (11,460) (662) 16,090 57.0%
---------------- ----------------- ------------------------ ------------ -------------- ----------- ------------- --------------
Indirect staff
costs (3,433)
Operating
expenses* (6,221)
Other operating
income 220
---------------- ----------------- ------------------------ ------------ -------------- ----------- ------------- --------------
Underlying
EBITDA 6,656 23.6%
---------------- ----------------- ------------------------ ------------ -------------- ----------- ------------- --------------
Non-underlying items specific to EBITDA (see
note 6) (628)
------------------------------------------------------------------------------------------- ----------- ------------- --------------
Non-underlying EBITDA 6,028 21.4%
------------------------------------------------------------------------------------------- ----------- ------------- --------------
* Includes commission expenses as prior year
results have not been restated for IFRS 15.
(iii) Geographical information
The Group's revenue from external customers by geographical location of contracting Group entity is detailed below:
6 Months to 6 Months
30 Jun 2018 to
GBP'000 30 Jun
2017
GBP'000
---------------- ------------ -----------------
Africa 192 155
Americas 1,383 396
Caribbean 2,979 3,486
Channel Islands 19,800 19,980
Europe 8,700 4,103
Isle of Man 1,467 -
United Kingdom 786 92
---------------- ------------ -----------------
Total revenue 35,307 28,212
---------------- ------------ -----------------
EBITDA is not used to measure the performance of the individual segments as items like establishment costs and legal and professional fees are not allocated to individual segments. Consistent with the aforementioned reasoning, segment assets/liabilities are not reviewed regularly on a segment by segment basis and are therefore not included in the Group segmental reporting.
5. Finance cost 6 Months to 6 Months
to
30 Jun 2018 30 Jun
2017
GBP'000 GBP'000
---------------------------------------- -------------------------------------- --------------------
Bank loan interest 754 1,136
Other loan interest 62 45
Loan note interest* 48 4,686
Amortisation of loan arrangement fees 147 160
Accelerated amortisation of loan
arrangement
fees 251 -
Unwinding of discount 734 34
Other finance expense 124 112
----------------------------------------- -------------------------------------- --------------------
Total finance cost 2,120 6,173
----------------------------------------- -------------------------------------- --------------------
*Sale of loan notes following capital restructure, see note 3.
6. Non-underlying items 6 Months to 6 Months
to
30 Jun 2018 30 Jun
2017
GBP'000 GBP'000
---------------------------------------- -------------------------------------- --------------------
Initial Public Offering ("IPO") (i) 724 -
Acquisition and integration costs (ii) 2,094 361
Capital distribution from EBT12 (iii) 13,385 -
Other (iv) 100 267
----------------------------------------- -------------------------------------- --------------------
Non-underlying items within EBITDA* 16,303 628
----------------------------------------- -------------------------------------- --------------------
Unwinding of discount on capital 65 -
distribution
from EBT12 (iii)
Accelerated amortisation of loan
arrangement
fees (v) 251 -
----------------------------------------- -------------------------------------- --------------------
Total non-underlying items 16,619 628
----------------------------------------- -------------------------------------- --------------------
*Includes GBP10,025k (30 June 17:
GBP411k)
of cash items
The directors consider that the items above are not representative
of underlying performance:
(i) During the period ended 30 June 2018,
the Group expensed
fees relating to the IPO of GBP724k.
(ii) During the period ended 30 June 2018, the Group expensed
GBP2,094k
in relation to the following acquisitions (30 June 17:
GBP361k).
This includes; International Trust and Wealth Structuring
Business
of Bank of America Corporation ("ITWS") GBP2,072k (30 June
17:
GBP64k), New Amsterdam Cititrust B.V. ("NACT") GBP1k (30 June
17:
GBP68k), Kleinwort Benson (Channel Islands) Fund Services
Limited
("KB Group") GBP21k (30 June 17: GBP180k) and Swiss & Global
Fund Administration (Cayman) Ltd ("S&GFA") (30 June 17:
GBP49k).
(iii) Capital distribution from EBT12 to employees following the
IPO,
these are reflected in staff costs (see note 3).
(iv) One off costs relating to other items not considered to
represent
the ongoing operations of the business. This includes one off
costs of GBP93k to reorganise the senior management team (30
June 17: GBP100k).
(v) Due to refinancing at the time of the IPO, GBP251k of loan
arrangement
fees were written off in relation to the previous bank
facility
(see note 15(i)).
7. Tax 6 Months to 6 Months
to
30 Jun 2018 30 Jun
2017
GBP'000 GBP'000
---------------------------------------- -------------------------------------- --------------------
Current income tax 962 588
Deferred income tax (175) (57)
----------------------------------------- -------------------------------------- --------------------
Total income tax 787 531
----------------------------------------- -------------------------------------- --------------------
Income tax is calculated across the Group based on the prevailing
income tax rates in the jurisdictions in which profits are earned.
8. Earnings per share
6 Months 6 Months
to to
30 Jun 2018 30 Jun
GBP'000 2017
Note GBP'000
------------------------------------------- ---- ------------ -----------------
Loss for the period (9,985) (1,631)
------------------------------------------- ---- ------------ -----------------
Non-underlying items:
- included with operating expenses 6 16,303 628
- included with finance costs 6 316 -
------------------------------------------- ---- ------------ -----------------
Underlying earnings 6,634 (1,003)
------------------------------------------- ---- ------------ -----------------
Weighted average number of shares:
Original shareholder exchange 66,534,213 66,534,213
New issue to original shareholders 693,024 -
Primary raise 4,153,172 -
Loan note conversion 19,609,979 -
------------------------------------------- ---- ------------ -----------------
Weighted average number of ordinary shares 90,990,388 66,534,213
------------------------------------------- ---- ------------ -----------------
Basic and diluted EPS (pence) (10.97) (2.45)
Underlying and diluted EPS (pence) 7.29 (1.51)
------------------------------------------- ---- ------------ -----------------
The Group presents basic and diluted earnings per share ("EPS") data for its ordinary shares. Basic EPS is calculated by dividing the underlying earnings, attributable to ordinary shareholders, by the weighted average number of ordinary shares in issue during the period.
As explained in note 1, the Group's financial statements reflect the continuation of the pre-existing group previously headed by JTCGHL. To aid comparability following the Group's reconstruction and share reorganisation, the number of ordinary shares issued to the original shareholders in exchange for their shareholding in JTCGHL has been used to best indicate the share capital in existence at that time and provide earnings per share information on a consistent basis.
9. Intangible
assets and
goodwill Customer Assets under
Goodwill Contracts Licenses Software construction Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Cost
At 1 January 2018 76,183 23,274 245 2,786 - 102,488
Adjustments* 27 - - - - 27
Additions - - - 194 65 259
Exchange
differences (42) 320 (2) - - 276
At 30 June 2018 76,168 23,594 243 2,980 65 103,050
-------------
Accumulated
amortisation
At 1 January 2018 - 2,730 29 1,785 - 4,544
Charge for the
period - 1,065 10 263 - 1,338
-------------
At 30 June 2018 - 3,795 39 2,048 - 5,882
-------------
Carrying
amount
At 30 June 2018 76,168 19,799 204 932 65 97,168
-------------
At 31 December
2017 76,183 20,544 216 1,001 - 97,944
-------------
*Additional consideration paid in relation to a working capital adjustment for the NACT acquisition.
10. Property, plant
and equipment
Office Assets
Computer furniture Leasehold under
and
equipment equipment improvements construction Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Cost
At 1 January 2018 2,639 927 6,071 - 9,637
Additions 224 70 82 53 429
Disposals (270) (60) (25) - (355)
Exchange
differences (17) (14) 11 - (20)
At 30 June 2018 2,576 923 6,139 53 9,691
----------------
Accumulated depreciation
At 1 January 2018 1,938 735 1,460 - 4,133
Charge for the
period 205 38 187 - 430
Disposals (270) (60) (23) - (353)
Exchange
differences (16) (8) 9 - (15)
----------------
At 30 June 2018 1,857 705 1,633 - 4,195
----------------
Carrying amount
At 30 June 2018 719 218 4,506 53 5,496
At 31 December 2017 701 192 4,611 - 5,504
----------------
11. Contract-related 30 Jun 31 Dec
assets and 2018 2017
liabilities
GBP'000 GBP'000
Contract-related
assets -
non-current 952 -
Contract-related
assets -
current 476 -
Contract-related
liabilities
- non-current (830) -
Contract-related
liabilities
- current (473) -
----------------
Net
contract-related
assets 125 -
----------------
The commission fees due to intermediaries as a result of obtaining
contracts are viewed as incremental costs of obtaining a contract
and are expected to be recovered over the useful economic life.
In accordance with IFRS 15, the commission fees are capitalised as
contract-related assets and amortised on a straight line basis over
the useful economic life of the client contract. During the six months
to 30 June 2018, the Group recognised amortisation of GBP214k. Contract-related
liabilities represent the discounted value of future cash payments
to be made to intermediaries for commissions.
12. Investment in equity-accounted investee
Kensington International Group Pte. Ltd ("KIG") provides corporate, fiduciary, trust and accounting services in Singapore and is a strategic partner for the Group, providing access to new clients and markets in the Far East.
% ownership interest
Name of entity Country of 30 Jun 2018 31 Dec Nature of Measurement
incorporation 2017 relationship method
Kensington
International
Group Pte.
Ltd ("KIG") Singapore 42% 42% Associate Equity method
The carrying amount of the equity-accounted investment has changed
as follows:
30 Jun 2018 31 Dec
GBP'000 2017
GBP'000
Carrying value at the beginning
of the period / year 886 674
Increase in investment in the
period / year - 218
Profit / (Loss) for the period
/ year 104 (6)
Carrying value at the end of the
period / year 990 886
13. Trade and other receivables 30 Jun 2018 31 Dec 2017
GBP'000 GBP'000
Trade receivables 14,195 13,498
Allowance for doubtful debts (3,041) (2,635)
11,154 10,863
Accrued income 8,213 8,051
Work in progress 6,340 5,855
Total trade and other receivables 25,707 24,769
14. Share capital and share premium 30 Jun 2018
GBP'000
Authorised
300,000,000 Ordinary shares of GBP0.01
each 3,000
Called up, issued and fully paid
106,896,552 Ordinary shares of GBP0.01
each 1,069
The Company was incorporated on 12 January 2018 with an authorised share capital of GBP10,000 divided into 1,000,000 shares of GBP0.01 each, of which 2 shares were issued on incorporation at par. On 12 February 2018, the date of the IPO prospectus, a further 902,427 Ordinary Shares were issued, also at par.
Immediately prior to Admission, the Group undertook a reorganisation (the "Reorganisation") of its corporate structure that resulted in the Company being the ultimate holding company of the Group and JTCGH becoming a direct subsidiary of the Company. In connection with the Reorganisation and the IPO Offer, the Company's shareholders resolved by written resolution on 8 March 2018 that the authorised share capital of the Company be increased from GBP10,000 divided into 1,000,000 Ordinary Shares to GBP3,000,000 divided into 300,000,000 Ordinary Shares. The Reorganisation was effected pursuant to a Share Exchange Agreement made with the previous shareholders of, and holders of loan notes issued by, JTCGHL which was entered into on 14 March 2018.
Under the Share Exchange Agreement, all of the shares in, and Loan Notes (save in the case of certain Loan Notes which were repaid prior to Admission) issued by JTCGHL were transferred to the Company and the Company issued an additional 99,097,573 Ordinary Shares to such shareholders and noteholders following which the Company became the sole shareholder of JTCGHL. Completion of the Share Exchange Agreement took place immediately prior to Admission, being conditional upon the Board deciding to proceed with Admission and any necessary prior regulatory consents being obtained.
On 14 March 2018, the directors authorised the issue of 99,097,573 Ordinary shares at par for the Reorganisation and a further 6,896,552 Ordinary shares at par for the IPO Offer and Admission.
The IPO Offer comprised of the sale by Original Shareholders of 77,173,702 Ordinary shares and 6,896,552 New Ordinary Shares at GBP2.90 per share, raising gross proceeds of GBP243.8m. These were admitted to the Official List of the UK Listing Authority with a Premium Listing and approval to trade on the Main Market of the London Stock Exchange.
Following a capital appointment of GBP1.5m from EBT12 to PLC EBT (see note 3), 474,500 Ordinary shares in the Company were purchased and are held by PLC EBT and have been treated as own shares in accordance with IAS 32 'Financial Instruments'.
15. Loans and borrowings
30 Jun 2018 31 Dec
GBP'000 2017
GBP'000
Non-current
Bank loans (i) 43,892 -
Investor loan notes
(ii) - 28,126
Management loan
notes (iii) - 34,029
Other loans 847 1,186
44,739 63,341
Current
Bank loan (i) - 55,522
Other loans 678 842
678 56,364
Total loans and borrowings 45,417 119,705
(i) As part of the restructure at the time of the IPO, the Group settled the secured bank loan with HSBC Bank plc and Royal Bank of Scotland plc totalling GBP55.8 million. The issue costs of GBP251k associated with the loan have been written off, having previously been capitalised for amortisation over the term of the loan. To partially fund the repayment the Group has taken out a replacement loan arrangement with HSBC for GBP55m, of which GBP45m has been drawn as at 30 June 2018 with an additional GBP10m undrawn and available on a revolving credit facility and a further
GBP30m in the form of an undrawn accordion facility. Loan covenants in place monitor interest cover and leverage, with leverage defining the interest payable at a margin above LIBOR.
(ii) As part of the Reorganisation prior to the IPO, (save in the case of certain Loan Notes which were repaid prior to Admission), the Loan Notes were transferred to the Company and the Company issued Ordinary Shares to such noteholders. See note 14.
The following table details the Group's remaining contractual maturity for its loans and borrowings with agreed repayment years. This has been drawn up based on the undiscounted cash flows 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.
<3 3 - 12 months 1 - 5 years >5 years Total
months
Loans and borrowings GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
30 June 2018 740 1,257 50,851 - 52,848
31 December 2017 587 58,770 64,151 - 123,508
With regards to interest rate sensitivity, the Group considers a reasonable interest rate movement in LIBOR to be 50 basis points based on recent historical changes to interest rates. If interest rates had been higher/lower by 50 basis points and all other variables were held constant, the Group's loss for the period ended 30 June 2018 would decrease/increase by GBP225k (year ended 31 December 2017: GBP278k).
16. Trade and other payables
30 Jun 31 Dec
2018 2017
Current GBP'000 GBP'000
Trade payables 398 415
Other taxation and social security 163 145
Other payables* 5,665 4,133
Deferred consideration*** 5,217 5,356
Accruals 3,580 4,687
Total current 15,023 14,736
Non-current
Other payables** 4,001 716
Deferred revenue 1 2
Deferred consideration*** 211 1,087
Total non-current 4,213 1,805
*Includes GBP3.34m of discounted EBT12 capital distributions payable
in March 2019.
**Includes GBP2.9m of discounted EBT12 capital distributions payable
in March 2020.
***Deferred consideration paid in the period ended 30 June 2018 includes;
GBP1.15m for the NACT acquisition and GBP0.45m for the S&GFA acquisition.
17. Share-based payments 30 Jun 30 Jun
2018 2017
GBP'000 GBP'000
Acquisition related share based payments 33 74
Non-acquisition related share based
payments* 139 195
Total share based payments expense 172 269
*The non-acquisition related share based payments were all awarded
prior to the IPO.
18. 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.
The Group's other significant related parties are:
- Key management personnel, being those persons having the
authority
and responsibility for planning, directing and controlling
the
activities of the Group are defined as the board of
directors
of the principal operating entities, JTC PLC and JTCGHL.
- CBPE Capital LLP ("CBPE"), a key shareholder prior to the
IPO.
The directors of CBPE were also directors of entities within
the Group during the year ended 31 December 2017 and up to
the
IPO.
Following the Reorganisation and prior to admission to the London
Stock Exchange, the shares held and subsequently sold were as follows:
- Key management personnel held 27,822,439 Ordinary shares,
13,714,600
were sold, raising net proceeds of
GBP38.78m.
- CBPE held 42,654,162 Ordinary shares, they sold their entire
shareholding, raising net proceeds of GBP120.60m.
Following Admission, key management personnel hold 14,107,839 Ordinary
shares, representing 13.2% of the total in issue.
The remuneration of key management personnel of the Group is set out
below in aggregate for each of the categories specified in IAS 24
'Related Party Disclosures'.
6 Months 6 Months
to to
30 Jun 30 Jun
2018 2017
GBP'000 GBP'000
Salaries and other short-term employee
benefits 719 601
Post employment and other long-term
benefits 32 30
Share based payments 51 108
Total 802 739
19. Changes in accounting
policies
This note explains the impact of the adoption of IFRS 9 'Financial
Instruments' and IFRS 15 'Revenue from Contracts with Customers' on
the Group's financial statements and also discloses the new accounting
policies that have been applied from 1 January 2018, where they are
different to those applied in prior periods.
(a) Impact on the financial statements
As a result of the changes in the Group's accounting policies, prior
year financial statements had to be restated. As explained in note
19(b) below, IFRS 9 was adopted without restating comparative information.
The reclassifications and the adjustments arising from the new impairment
rules are therefore not reflected in the restated balance sheet as
at 31 December 2017, but are recognised in the opening balance sheet
on 1 January 2018.
The following table shows the adjustments recognised for each individual
line item. The adjustments are explained in more detail by standard
below.
1 Jan 2018
As originally presented IFRS 15 IFRS 9 1 Jan
2018
Balance sheet GBP'000 GBP'000 GBP'000 GBP'000
Non-current assets
Goodwill 76,183 - - 76,183
Other intangible assets 21,761 - - 21,761
Property, plant and equipment 5,504 - - 5,504
Contract-related assets - 227 - 227
Investment in equity-accounted
investee 886 - - 886
Other debtors and prepayments 940 - - 940
Deferred tax assets 61 - - 61
Total non-current assets 105,335 227 - 105,562
Current assets
Contract-related assets - 92 - 92
Trade and other receivables 24,769 - (301) 24,468
Other debtors and prepayments 2,639 - - 2,639
Current tax receivables 24 - - 24
Cash and cash equivalents 16,164 - - 16,164
Total current assets 43,596 92 (301) 43,387
Total assets 148,931 319 (301) 148,949
Share capital 10 - - 10
Share premium 238 - - 238
Own shares (1) - - (1)
Capital reserve (1,213) - - (1,213)
Translation reserve 1,110 - - 1,110
Accumulated profits 2,884 133 (301) 2,716
Total equity 3,028 133 (301) 2,860
Non-current liabilities
Contract-related liabilities - 125 - 125
Loans and borrowings 63,341 - - 63,341
Provisions 646 - - 646
Deferred tax liabilities 2,817 - - 2,817
Trade and other payables 1,805 - - 1,805
Total non-current liabilities 68,609 125 - 68,734
Current liabilities
Contract-related liabilities - 167 - 167
Loans and borrowings 56,364 - - 56,364
Provisions 187 - - 187
Trade and other payables 14,736 (106) - 14,630
Deferred revenue 5,012 - - 5,012
Current tax liabilities 995 - - 995
Total current liabilities 77,294 61 - 77,355
Total equity and liabilities 148,931 319 (301) 148,949
(b) IFRS 9 'Financial Instruments' - Impact of adoption
IFRS 9 replaces the provisions of IAS 39 that relate to the recognition, classification and measurement of financial assets and financial liabilities, derecognition of financial instruments, impairment of financial assets and hedge accounting.
The adoption of IFRS 9 'Financial Instruments' from 1 January 2018 resulted in changes in accounting policies and adjustments to the amounts recognised in the financial statements. The new accounting policies are set out in note 19(c) below. In accordance with the transitional provisions in IFRS 9 (7.2.15) and (7.2.26), comparative figures have not been restated.
The total impact on the Group's retained earnings as at 1 January 2018 is as follows:
Notes GBP'000
Closing retained earnings 31 December 2017 - IAS 39
Reclassify investments from available-for-sale to Fair 2,884
Value through Profit and Loss ("FVPL") (i) -
Increase in provision for trade and other receivables (ii) (301)
Adjustment to retained earnings from adoption of IFRS
9 on 1 January 2018 (301)
Opening retained earnings 1 January 2018 - IFRS 9 (before
restatement for IFRS 15) 2,583
(i) Classification and measurement
On 1 January 2018 (the date of initial application of IFRS 9), management has assessed that loans as well as trade receivables are held to collect contractual cash flows and give rise to cash flows representing solely payments of principal and interest and will therefore continue to be measured at amortised cost under IFRS 9. The application of the classification and measurement requirements of IFRS 9 had no financial impact on the balance sheet or equity of the Group.
(ii) Impairment of financial assets
The Group was required to revise its impairment methodology under IFRS 9 for each class of financial asset. The impact of the change in impairment methodology on the Group's retained earnings and equity is disclosed in the table in note 19(b) above.
While cash and cash equivalents are also subject to the impairment requirements of IFRS 9, the identified impairment loss was immaterial.
Trade and other receivables
The Group applies the simplified approach to measuring expected credit losses which uses a lifetime expected loss allowance for all trade receivables, further enhanced by specific provisions where deemed appropriate by management.
To measure the expected credit losses, trade receivables have been grouped based on shared credit risk characteristics and the days past due. The expected credit losses on trade receivables are estimated using a provision matrix based on the Group's historical credit loss experience, adjusted for factors that are specific to the debtors' general economic conditions and an assessment of both the current as well as the forecast direction of conditions at the reporting date. Provision rates are segregated according to geographical location and by client division.
On that basis, the total loss allowance as at 1 January 2018 was determined as follows for trade receivables.
Trade Receivable Allowance
1 January 2018 < 30 Days 31 - 60 61 - 120 > 120 Days Total
Days Days
Gross carrying amount
(GBP'000) 4,215 2,149 1,360 5,774 13,498
Loss allowance (GBP'000) (81) (86) (122) (2,583) (2,872)
Expected loss rate 1.92% 4.00% 8.97% 44.74% 21.28%
The other receivables relate to unbilled work and have substantially the same risk characteristics as the trade receivables. The Group has therefore concluded that the expected loss rates for trade receivables < 30 days, being 1.9%, is an appropriate estimation of the expected credit loss on other receivables this results in a loss allowance of
GBP64k as at 1 January 2018.
The loss allowances for trade receivables and other receivables as
at 31 December 2017 reconcile to the opening loss allowances on 1
January 2018 as follows:
Trade Other Total
GBP'000 GBP'000 GBP'000
At 31 December 2017 - calculated under IAS 39 2,635 - 2,635
Amounts restated through opening retained earnings 237 64 301
Opening loss allowance as at 1 January 2018 - calculated
under IFRS 9 2,872 64 2,936
The loss allowance on trade receivables increased by a further GBP169k
to GBP3,041k for trade receivables as at 30 June 2018 (See note 13).
Trade receivables and other receivables are written off when there
is no reasonable expectation of recovery. Indicators that there is
no reasonable expectation of recovery include, amongst others, when
the debtor has been placed under liquidation or has entered into bankruptcy
proceedings, the failure of a debtor to engage in a repayment plan
with the Group (and no payments have been received for a period of
time) and contact with the client has been lost.
(c) IFRS 9 'Financial Instruments' - Accounting policies
applied from 1 January 2018
Investments and other financial assets
(i) Classification
From 1 January 2018, the Group classifies its financial assets in
the following measurement categories:
- those to be measured subsequently at fair value (either through
other comprehensive income, or through the profit and loss account),
and
- those to be measured at amortised cost.
The classification depends on the Group's business model for managing
the financial assets and the contractual terms of the cash flows.
For assets measured at fair value, gains and losses will either be
recorded in the profit and loss account or other comprehensive income.
For investments in equity instruments that are not held for trading,
this will depend on whether the Group has made an irrevocable election
at the time of initial recognition to account for the equity investment
at fair value through other comprehensive income ("FVOCI").
The Group reclassifies debt investments when and only when its business
model for managing those assets changes.
(ii) Measurement
At initial recognition, the Group measures a financial asset at its
fair value plus, in the case of a financial asset not at FVPL, transaction
costs that are directly attributable to the acquisition of the financial
asset. Transaction costs of financial assets carried at FVPL are expensed
through the profit and loss account.
Financial assets with embedded derivatives are considered in their
entirety when determining whether their cash flows are solely payment
of principal and interest.
Debt instruments
Subsequent measurement of debt instruments depends on the Group's business
model for managing the asset and the cash flow characteristics of the
asset. There are three measurement categories into which the Group
classifies its debt instruments:
- Amortised cost: Assets that are held for collection of contractual
cash flows where those cash flows represent solely payments of
principal and interest are measured at amortised cost. Interest
income from these financial assets is included in finance income
using the effective interest rate method. Any gain or loss arising
on derecognition is recognised directly in profit and loss and
presented in other gains/(losses), together with foreign exchange
gains and losses. Impairment losses are presented as separate
line item in the statement of profit and loss.
- Fair Value through Other Comprehensive Income ("FVOCI"): Assets
that are held for collection of contractual cash flows and for
selling the financial assets, where the assets' cash flows represent
solely payments of principal and interest, are measured at FVOCI.
Movements in the carrying amount are taken through Other Comprehensive
Income ("OCI"), except for the recognition of impairment gains
or losses, interest revenue and foreign exchange gains and losses
which are recognised in profit and loss. When the financial asset
is derecognised, the cumulative gain or loss previously recognised
in OCI is reclassified from equity to profit and loss and recognised
in other gains/(losses). Interest income from these financial
assets is included in finance income using the effective interest
rate method. Foreign exchange gains and losses are presented in
other gains/(losses) and impairment expenses are presented as
separate line item in the statement of profit and loss.
- FVPL: Assets that do not meet the criteria for amortised cost
or FVOCI are measured at FVPL. A gain or loss on a debt investment
that is subsequently measured at FVPL is recognised in profit
and loss and presented net within other gains/(losses) in the
period in which it arises.
Equity instruments
The Group subsequently measures all equity investments at fair value.
Where the Group's management has elected to present fair value gains
and losses on equity investments in OCI, there is no subsequent reclassification
of fair value gains and losses to profit and loss following the derecognition
of the investment. Dividends from such investments continue to be recognised
in profit and loss as other income when the Group's right to receive
payments is established.
Changes in the fair value of financial assets at FVPL are recognised
in other gains/(losses) in the statement of profit and loss as applicable.
Impairment losses (and reversal of impairment losses) on equity investments
measured at FVOCI are not reported separately from other changes in
fair value.
(iii) Impairment
From 1 January 2018, the Group assesses on a forward looking basis
the expected credit losses associated with its debt instruments carried
at amortised cost and FVOCI. The impairment methodology applied depends
on whether there has been a significant increase in credit risk.
For trade receivables, the Group applies the simplified approach permitted
by IFRS 9, which requires expected lifetime losses to be recognised
from initial recognition of the receivables.
(d) IFRS 15 'Revenue from Contracts with Customers' - Impact of adoption
The Group has adopted IFRS 15 'Revenue from Contracts with Customers' from 1 January 2018 which resulted in changes in accounting policies and adjustments to the amounts recognised in the financial statements.
In accordance with the transition provisions in IFRS 15, the Group has applied the modified retrospective approach, which means that the cumulative impact of the adoption is recognised in retained earnings as of 1 January 2018 and that the comparative figures have not been restated.
(i) Accounting for costs to obtain a contract
When commission is due to a third party or intermediary to obtain a contract, the Group previously expensed these as commissions payable. For the year ended 31 December 2017, the expense was GBP269k. Following their IFRS 15 assessment, the directors concluded that the commission fees paid are incremental to obtaining a contract and are expected to be recovered over the term of the contract and therefore should be capitalised. As a result, the Group now estimates the commissions due over the life of each contract and capitalises these costs as current and non current contract-related assets. The assets are then amortised on a straight line basis over the expected term of the specific contract it relates to, with an amortisation charge recognised on the income statement. When the expected life of a contract is less than one year, the commissions payable will be expensed directly to the profit and loss account.
Current and non current contract-related liabilities are also now recognised being the commissions payable over the term of the contract. These are discounted to record the net present value of the obligation with the unwinding of discount also now shown in the income statement, within finance costs. The current contract-related liabilities reflect the cash flows expected within one year and would be reduced as payments are made.
To reflect this change in policy:
- accrued commissions payable of GBP106k in Trade and other payables were reversed,
- contract-related assets of GBP319k were recognised, split between current and non-current, GBP92k and GBP227k,
- contract-related liabilities of GBP292k were recognised, split between current and non-current, GBP167k and GBP125k.
The net adjustment to retained earnings on 1 January 2018 was GBP133k.
The following sets out the adjustments made to the amounts recognised in the balance sheet at the date of initial application (1 January 2018):
IAS 18 IFRS 15
carrying carrying
amount amount
31 Dec 2017 Reclassification 1 Jan 2018
GBP'000 GBP'000 GBP'000
Non-current contract-related
assets - 227 227
Current contract-related assets - 92 92
Non-current contract-related
liabilities - 125 125
Current contract-related liabilities - 167 167
Trade and other payables 14,736 (106) 14,630
The impact on the Group's retained earnings as at 1 January 2018 is as follows:
GBP'000
Retained earnings - after IFRS 9 restatement
(see note 19b) 2,583
Recognition of asset for costs to fulfil a contract
(i), adjustment to be retained earnings from
adoption of IFRS 15 133
Opening retained earnings 1 January 2018 - IFRS
9 and IFRS 15 2,716
Since 1 January 2018, the Group has recognised additional contract-related assets and liabilities and the net position after amortisation of the assets and discounting and payments against the liabilities, is shown in note 11. During the six months to 30 June 2018, the Group recognised amortisation charges of GBP214k, finance costs of GBP30k and foreign exchange differences of GBP10k, reducing profit after tax by GBP255k.
(e) IFRS 15 'Revenue from Contracts with Customers' - Accounting policies
(i) Rendering of services
The Group is a multijurisdictional, independent provider of fund, corporate
and private wealth services. Revenue from the rendering of these services
is recognised in the accounting period in which the services are rendered.
For fixed fee contracts, revenue is recognised on a straight-line basis
over the term of the contract, as the customers simultaneously benefit
from the services as they are performed.
Some contracts include multiple deliverables, such as client set-up
fees. However, as client set-up engages multiple groups throughout
the organisation, has a different risk profile, is non-recurring in
nature, separately identifiable from the other services promised in
the contract and the customer can benefit from the service on its own,
it is therefore accounted for as a separate performance obligation.
In this case, the transaction price will be allocated to each performance
obligation based on the stand-alone selling prices. If contracts include
set-up fees, revenue for this performance obligation is recognised
when control over the corresponding service is transferred to the customer.
(ii) Financing components
The Group does not ordinarily expect to have any contracts where the
period between the transfer of the promised services to the customer
and payment by the customer exceeds one year. As a consequence, the
Group does not adjust any of the transaction prices for the time value
of money.
(iii) Costs to obtain a contract
Incremental costs of obtaining a contract (i.e. costs that would not
have been incurred if the contract had not been obtained) will be recognised
as a contract-related asset if the costs are expected to be recovered
over the useful economic life of the client contract. The capitalised
costs of obtaining a contract will be amortised on a straight line
basis over the estimated UEL of the contract. The asset will be subject
to an impairment analysis each period end.
Incremental costs of obtaining a contract are expensed when incurred,
if the amortisation period of an asset that the entity would have recognised
is one year or less.
Contract-related liabilities are recognised to reflect the incremental
costs payable (e.g. sales commissions). The expected cash flows are
discounted using an appropriate rate to establish the net present value
of the obligations. The unwinding of the discount is shown in finance
costs in the income statement.
20. Events after the reporting period
(a) Business combinations
(i) Acquisition of Van Doorn CFS B.V.
On 17 August 2018, the Company entered into an agreement with International
Capital Group B.V. to purchase the entire issued share capital of Van
Doorn CFS B.V., a specialist provider of corporate and related fiduciary
services based in Amsterdam, in the Netherlands. The consideration
for the acquisition will be satisfied through the payment of EUR10.5m
cash (adjusted for net working capital and net debt), consideration
shares in the Company to the value of
EUR5m and contingent consideration up to a maximum of EUR5.5m (subject
to meeting appropriate EBITDA and Revenue performance criteria).
(ii) Acquisition of Minerva Holdings Limited and MHL Holdings SA
On 5 September 2018, the Company entered into an agreement with Dome
Management Limited and Dome Management SA to purchase the entire issued
share capital of Minerva Holdings Limited and MHL Holdings SA, a fund,
corporate and private wealth services provider with operations in Jersey,
London, Geneva, Singapore, Dubai and Mauritius. The consideration for
the acquisition will be satisfied through the payment of GBP16.8m cash
(adjusted for net working capital and net debt), consideration shares
in the Company to the value of GBP11.2m and contingent consideration
up to a maximum of GBP2m (subject to achieving a minimum EBITDA margin
of 30%).
For the two acquisitions noted above, at the date the condensed financial
statements were authorised for issue, it was impracticable to disclose
the information required by IFRS 3 'Business Combinations' as management
needed to consider the pertinent facts and circumstances surrounding
each of the business combinations in order to appropriately determine
the date upon which control was obtained and then make their fair value
assessments.
(b) Interim dividend
On 17 September 2018, an interim dividend of GBP0.01 per ordinary share
was approved by the directors in respect of the year ended 31 December
2018 and will be payable on 26 October 2018 to shareholders on the
record at the close of business of 28 September 2018.
This information is provided by RNS, the news service of the London Stock Exchange. RNS is approved by the Financial Conduct Authority to act as a Primary Information Provider in the United Kingdom. Terms and conditions relating to the use and distribution of this information may apply. For further information, please contact rns@lseg.com or visit www.rns.com.
END
IR BIGDCIUBBGIR
(END) Dow Jones Newswires
September 18, 2018 02:01 ET (06:01 GMT)
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