TIDMAJB
RNS Number : 2492U
AJ Bell PLC
02 December 2021
2 December 2021
AJ Bell plc
Final results for the year ended 30 September 2021
AJ Bell plc ('AJ Bell' or the 'Company'), one of the UK's
largest investment platforms, today announces its final results for
the year ended 30 September 2021.
Highlights
-- A record year of growth, with total customers up by 87,449 to
382,754, net inflows of GBP6.4 billion and assets under administration
(AUA) closing at a record GBP72.8 billion
-- Customer retention rate remained high at 95.0% (FY20: 95.5%)
-- Strong financial performance, with revenue up 15% to GBP145.8
million (FY20: GBP126.7 million) and profit before tax (PBT)
up 13% to GBP55.1 million (FY20: GBP48.6 million)
-- Diluted earnings per share up 13% to 10.67 pence (FY20: 9.47
pence)
-- Strong financial position, with net assets up 19% in the year
to GBP130.7 million (FY20: GBP109.5 million)
-- Final dividend of 4.50 pence per share proposed, increasing
the total ordinary dividend for the year by 13% to 6.96 pence
per share (FY20: 6.16 pence per share)
-- Special dividend of 5.00 pence per share proposed (FY20: nil),
taking the total dividend for the year to 11.96 pence per share
(FY20: 6.16 pence per share)
Andy Bell, Chief Executive Officer at AJ Bell, commented:
"Our award-winning platform propositions attracted record levels
of new customer numbers and inflows in the year, underpinning
another strong set of financial results. Revenue was up 15%, profit
before tax up 13% and earnings per share up 13%. Our profitable
business model and strong financial position has enabled us to
invest significantly in our customer propositions during the year,
whilst also increasing dividends to shareholders.
"The Board has recommended a final dividend of 4.50 pence per
share, increasing the total ordinary dividend for the year by 13%
to 6.96 pence per share, our 17(th) consecutive year of ordinary
dividend growth. Reflecting the Board's confidence in the outlook
for the business, it has also recommended a special dividend of
5.00 pence per share in line with our policy to periodically return
surplus capital to shareholders whilst continuing to maintain our
strong financial position.
"We continue to see significant long-term opportunities in the
investment platform market. The pandemic has highlighted the need
for people to take more control over their financial future, with
increasing numbers of people investing for the first time. We
believe there is increasing demand for simplified, app-based
investment propositions in both the D2C and advised markets, so we
are investing in two which we will soon bring to market.
"Dodl by AJ Bell, a new investment app, will enable retail
investors to invest easily in a range of UK equities and funds, via
a full range of tax wrappers. There will be no commission on buying
and selling investments and a low annual platform charge of
0.15%.
"Touch by AJ Bell is a new mobile-led investment platform for
financial advisers, which will enable them to provide an entirely
digital service to clients who want that form of relationship and
expand the range of client profiles they can serve.
"These two new propositions will sit alongside our flagship
platform propositions, AJ Bell Youinvest and AJ Bell Investcentre,
broadening our reach in both the D2C and advised markets. We expect
both to launch during 2022 and we will be investing further in our
brand and marketing activities to support their initial phase of
growth.
"The continued strong growth of the business and the development
of innovative new propositions would not be possible without the
energy and commitment of our staff. As well as strengthening our
Board and senior management team, we have put new processes and a
hybrid working model in place to provide our staff with a safe,
energetic working environment for the post-pandemic era. I would
like to thank them all for their continued hard work and focus,
during what has been a very challenging time for many."
Financial highlights
Year ended Year ended
30 September 30 September
2021 2020 Change
Revenue GBP145.8 million GBP126.7 million 15%
----------------- ----------------- ----------
Revenue per GBPAUA* 22.2bps 23.9bps (1.7bps)
----------------- ----------------- ----------
PBT GBP55.1 million GBP48.6 million 13%
----------------- ----------------- ----------
PBT margin 37.8% 38.4% (0.6ppts)
----------------- ----------------- ----------
Diluted earnings per share 10.67 pence 9.47 pence 13%
----------------- ----------------- ----------
Total ordinary dividend
per share 6.96 pence 6.16 pence 13%
----------------- ----------------- ----------
Total special dividend per 5.00 pence nil n/a
share
----------------- ----------------- ----------
Non-financial highlights
Year ended Year ended
30 September 30 September
2021 2020 Change
Number of retail customers 382,754 295,305 30%
---------------- ---------------- ----------
- Platform 367,965 281,094 31%
---------------- ---------------- ----------
- Non-platform 14,789 14,211 4%
---------------- ---------------- ----------
AUA* GBP72.8 billion GBP56.5 billion 29%
---------------- ---------------- ----------
- Platform GBP65.3 billion GBP49.7 billion 31%
---------------- ---------------- ----------
- Non-platform GBP7.5 billion GBP6.8 billion 10%
---------------- ---------------- ----------
AUM* GBP2.2 billion GBP0.8 billion 175%
---------------- ---------------- ----------
Customer retention rate 95.0% 95.5% (0.5ppts)
---------------- ---------------- ----------
*see definitions
Contacts:
AJ Bell
Shaun Yates, Investor Relations
-- Director +44 (0) 7522 235 898
-- Charlie Musson, Head of PR +44 (0) 7834 499 554
Results presentation details
A recorded Q&A with Andy Bell (CEO) and Michael Summersgill
(Deputy CEO and CFO) discussing these results will be available on
our website ( ajbell.co.uk/investor-relations ) along with an
accompanying investor presentation from 07.00 GMT today. Management
will be hosting a meeting for sell-side analysts at 09:15 GMT
today. Those wishing to participate should register their interest
with Shaun Yates by emailing ir@ajbell.co.uk .
Forward-looking statements
The full year results contain forward-looking statements that
involve substantial risks and uncertainties, and actual results and
developments may differ materially from those expressed or implied
by these statements. These forward-looking statements are
statements regarding AJ Bell's intentions, beliefs or current
expectations concerning, among other things, its results of
operations, financial condition, prospects, growth, strategies, and
the industry in which it operates. By their nature, forward-looking
statements involve risks and uncertainties because they relate to
events and depend on circumstances that may or may not occur in the
future. These forward-looking statements speak only as of the date
of these full year results and AJ Bell does not undertake any
obligation to publicly release any revisions to these
forward-looking statements to reflect events or circumstances after
the date of these results.
Chairman's statement
Overview
"AJ Bell enjoyed another successful year. We delivered strong
financial results, demonstrating the strength and robustness of our
business model."
Our focus has continued to be on the wellbeing of our staff,
whilst maintaining a high-quality service to our customers and
delivering positive outcomes for all our stakeholders.
Over the past 12 months customer numbers increased by 87,449 to
382,754 and we delivered GBP6.4bn of net inflows of assets under
administration (AUA), ending the year with total AUA of GBP72.8bn.
Our range of investment solutions was popular with customers,
attracting GBP1.2bn of net inflows, with assets under management
(AUM) closing at GBP2.2bn, an increase of 175% from the previous
year. This excellent performance demonstrates the robustness of our
business.
We continue to enhance our platform product propositions to meet
customers' changing needs. During the year, we began to invest in
the development of two new simplified platform propositions, one
serving the advised market and another serving the
direct-to-consumer market, with a view to launching each in the
coming year.
Our clear and succinct purpose, to help people to invest, is
embodied within our strategy, while our governance framework,
strengthened by a number of recent appointments, ensures we remain
focused on achieving our long-term strategic goals.
Governance
The Board remains focused on applying high standards of
corporate governance and ensuring these principles are embedded
into our culture.
We believe effective stakeholder engagement is key to the
long-term success of our business and we aim to proactively engage
with our key stakeholders and understand what is most important to
them. The Board approved several key decisions during the year,
including the acquisition of Adalpha, the development of two
simplified platform propositions and a long-term hybrid working
arrangement for our people. Such decisions required the
consideration of our wider stakeholders, as outlined in our Section
172 statement.
The events of the past couple of years have accelerated public
interest in sustainability, and environmental, social and
governance (ESG) considerations increasingly form part of our
decision-making process. We strive to behave responsibly with a
focus on our responsible propositions, being a responsible
employer, supporting our local communities, and environmental
awareness. During the year we undertook a detailed review to
determine our key ESG priorities, which will now form the basis of
developing a full ESG framework that will be embedded into our
business strategy. Further details on ESG can be found in our
Responsible business section.
The Board continues to provide strong support and appropriate
challenge to the Executive Management Board (EMB) to ensure the
Group's strategy is appropriate, achievable and ultimately
delivered. Full details of the work of the Board and its Committees
are set out in the Corporate Governance report.
Board changes and succession
It is important to have the appropriate resource and expertise
on the Board as we embark on the next phase of the Group's strategy
as a listed business, and during the year three new appointments
were made to increase the level of non-executive presence on the
Board.
As previously announced, after serving 13 years on the Board and
eight years as Chair, I will be stepping down at our 2022 Annual
General Meeting (AGM). Baroness Helena Morrissey joined us as
Chair-Designate in July and will take over as Chair when I step
down in January 2022. Helena brings a great deal of relevant
knowledge and experience, having spent over 30 years in the
financial services sector, and I am very confident in the future of
the business under her stewardship.
Two further Board appointments were made during the year, with
Evelyn Bourke and Margaret Hassall joining the Board as
Non-Executive Directors on 1 July 2021 and 1 September 2021
respectively. Both appointments bring exceptional experience gained
both at an Executive and Non-Executive Director level, and together
will strengthen the Board's diversity and range of skills.
Laura Carstensen will also step down from the Board at the 2022
AGM. On behalf of the Board, I would like to thank Laura for her
valuable contribution to the Group and we wish her well for the
future.
Further details on all Board changes can be found in the
Nomination Committee report.
Our culture and our people
The Board plays a vital role in shaping and embedding a strong
and healthy culture through the promotion of the core values and
principles of the Group and this continued to be a focus throughout
the year. We recognise the importance of an engaged workforce and
it was pleasing to see that this year's staff survey reported an
overall response rate of 91%, up from 89% in 2020.
The preservation of our culture and our staff's health and
wellbeing remain a priority for the Board. Regular updates and
feedback on employee engagement are provided to the Board,
including the review and discussion of a bi-annual culture
dashboard to ensure our people strategy remains focused. Our
Employee Voice Forum is now in its third year and is proving to be
an invaluable platform for facilitating discussion and ideas, with
a high level of engagement from each cohort. We were delighted to
receive presentations and feedback from this year's Employee Voice
Forum representatives, outlining how we can continue to support and
promote the physical, mental and emotional wellbeing of our staff
both in and outside of the workplace. Through the Forum, we have
gained some valuable insights and we are progressing with several
initiatives to enhance our employee wellbeing offering.
Our 'future of work' project set out to find the right
post-pandemic working arrangements for our staff and our business.
Our HR team held a series of workshops and discussions with
managers and senior leaders as well as the wider workforce. The
Board considered the potential benefits to a wide range of
stakeholders when making the decision to adopt a hybrid working
model. The new model will come into effect from 1 January 2022 and
as we transition to this new way of working, we have created
guidelines to ensure staff receive the support they need, enabling
us to uphold our strong culture and ensure it continues to be
aligned with our purpose.
Dividend
The Group's policy is to adopt a 65% pay-out ratio of profit
after tax (PAT) with a view to returning any further surplus
capital to our shareholders periodically. The Board reviewed the
Group's financial position at 30 September 2021, considering the
planned growth of the business, subsequent investment needs,
ongoing ordinary dividend payments and future regulatory capital
and liquidity requirements and concluded that GBP20.5m of capital
should be returned to shareholders in the form of a special
dividend. As a result, the Board is pleased to announce both an
ordinary dividend of 4.50p and a special dividend of 5.00p per
share, which will take the total dividend for the year to 11.96p.
This will increase the total ordinary dividend for the financial
year compared with the prior year by 13% and including the special
dividend will represent an increase of 94%.
This enhanced dividend payment reflects the financial strength
of the Group, the Board's commitment to a progressive dividend
policy and its positive outlook for the long-term prospects of the
business.
Both the special dividend and the final ordinary dividend will
be paid, subject to shareholder approval at our AGM on 26 January
2022, to shareholders on the register at the close of business on 7
January 2022.
Looking back
Since joining the Board in 2008, the business has continued to
develop and evolve, whilst maintaining the same simple purpose, to
help people to invest.
It has been a privilege to chair the Group over the last eight
years, and I would like to extend my gratitude to Andy. It has been
a pleasure to work closely with him as he has led AJ Bell to become
one of the UK's largest investment platforms and an established
FTSE 250 listed business. As the business has evolved, we have
always preserved our strong, cohesive culture, which is underpinned
by our core values and principles.
I would like to thank all our people for their outstanding work
and commitment, not just over the last 12 months but throughout my
tenure.
Looking ahead
The UK investment platform market continues to grow at pace. Our
strong platform propositions, supported by our robust, scalable and
efficient operating model make us well placed to capitalise on
opportunities as they arise.
AJ Bell is a financially strong business, as evidenced by a
profitable, well-capitalised and highly cash-generative business
model and the Board remains confident about the long-term prospects
of the business.
Les Platts
Chairman
1 December 2021
Chief Executive Officer's review
Overview
Our easy-to-use award-winning platform propositions attracted a
record number of new customers during the year. We continue to
provide a high-quality service at a low cost, which is key to the
attraction and retention of new customers. The growth in the
customer base has enabled the business to enjoy another year of
double-digit percentage growth in profits.
Retail customer numbers increased by 87,449 during the year to a
total of 382,754 (FY20: 295,305). This increase reflects the strong
growth in our two flagship platform propositions, AJ Bell
Investcentre and AJ Bell Youinvest, with customer numbers for each
growing by 17% and 40% respectively and our platform customer
retention rate remaining high at 95.0% (FY20: 95.5%).
We delivered record net AUA inflows of GBP6.4bn (FY20: GBP4.2bn)
during the year, with AUA exceeding the GBP70bn mark for the first
time, closing at GBP72.8bn (FY20: GBP56.5bn). The driver of this
growth was the platform business, which had underlying net inflows
of GBP7.0bn (FY20: GBP4.9bn). This was partially offset by net
outflows of GBP0.6bn in the non-platform business, following the
decision to close our small institutional stockbroking service. The
overall impact from market and other movements was GBP9.9bn, with
the FTSE All Share index closing 23.7% higher than 12 months
earlier.
Strong financial performance
Total revenue increased by 15% during the period from GBP126.7m
to GBP145.8m, driven by a significant growth in the customer base
and AUA, with the macroeconomic backdrop having a mixed impact on
the results.
A marked improvement in investor sentiment was reflected in
global asset prices recovering close to or exceeding pre-pandemic
highs, which resulted in a favourable impact on recurring ad
valorem revenue. However, this was partially offset by the adverse
impact of the UK base interest rate remaining at a historic low
throughout the year, reducing the rate earned on customer cash
balances.
The elevated customer dealing activity trends in funds and
shares, triggered by the UK lockdown during the 2020/21 winter,
contributed to a significant increase in transactional revenue
during the first half of the financial year. As expected, customers
gradually returned to a normalised pattern of dealing activity in
the second half of the year, as the Government's lockdown
restrictions eased.
Profit before tax (PBT) increased broadly in line with revenue
by 13% from GBP48.6m to GBP55.1m, whilst we invested significantly
in our platform propositions, supporting our position as a market
leader in terms of ease of use and value for money. We have also
made significant progress in our ambition to develop our next
generation of low-cost, mobile-focused platform propositions.
I am pleased to announce the Board is recommending the payment
of a special dividend of 5.00p per share to our shareholders at the
AGM on 26 January 2022, in line with our stated policy to
periodically return surplus capital to shareholders. This is in
addition to our final ordinary dividend of 4.50p per share,
resulting in a total dividend payment for the year of 11.96p per
share including the special dividend, an increase of 94% compared
with the prior year. This is testament to our resilient business
model and strong financial position and reflects the Board's
confidence in the future prospects of the business.
Investing for the future
We have invested in two new product developments during the
year, both of which are focused on the next generation of customers
and advisers, and are expected to launch in the first half of 2022.
Dodl by AJ Bell (Dodl) is a new low-cost D2C investment app. Touch
by AJ Bell (Touch) is also app-based, but will only be available
via an adviser. Both propositions share a number of features such
as a simplified and intuitive on-boarding and investment journey
along with a streamlined investment range that will appeal
particularly to those who are new to investing. Charges for both
will be extremely competitive.
We value the importance of our brand and have seen improved
awareness of our business since our IPO in 2018, which has helped
to deliver strong organic growth. During the year we have continued
to invest in our brand, sponsoring events such as the AJ Bell Tour
of Britain, the AJ Bell Women's Tour and the AJ Bell World
Triathlon Leeds. We have also recently launched AJ Bell Money
Matters, a new initiative designed to help women engage with
investing in order to close the gender investment gap. Our research
shows that, on average, women in the UK have half the level of
savings and investments that men do. As a company that is
passionate about helping people to invest, that is a statistic that
we want to see change. AJ Bell Money Matters is our programme
designed to help achieve this, through a range of initiatives
including dedicated website content, a regular podcast, monthly
newsletters, webinars and social media interaction, all supported
by a number of live events.
Money Matters
The AJ Bell Money Matters campaign is a range of initiatives
designed to encourage women to engage with investing and close
the gender investment gap.
Findings from a major new study of 5,000 UK adults suggests
that the average level of savings and investments held by
women is GBP49,000, less than half the average amount held
by men of GBP114,000. Extrapolating this GBP65,000 difference
in savings and investments between the sexes across the UK
population puts the UK's gender investment gap at a staggering
GBP1.65 trillion.
The research highlights the gender pay gap as the biggest
cause of this discrepancy, but it also shows that women are
less confident when it comes to investing and less comfortable
with the risks that come with investing. The ultimate result
is that only around a third of women (37%) are confident their
long-term investments will meet their goals.
The campaign is designed to give women the information and
inspiration they need to become more confident investors.
It aims to get women talking about money and investing via
a new podcast series, monthly newsletters, webinars, in-person
events, videos and Instagram account (ajbellmoneymatters).
Business update
Advised propositions
Customer numbers grew by 18,009 in the year to 126,920 (FY20:
108,911), an increase of 17%. Net inflows of GBP3.8bn and
favourable market movements of GBP5.7bn in the year resulted in AUA
closing at GBP45.8bn (FY20: GBP36.3bn).
During the year we continued to develop our Investcentre
proposition, maintaining our focus on ease of use and value for
money. We made a number of enhancements to our proposition
including improvements to our adviser website, with improved user
journeys for regular dealing functionality and cash management
tools. We also introduced additional flexibility within ISA
accounts, and we further expanded our third-party Discretionary
Fund Manager service, which gives advisers and their customers
access to our Managed Portfolio Service (MPS) from a range of eight
external providers.
It was pleasing to be recognised as the 'Best Platform', 'Best
Retirement Provider' and 'Provider of the Year' at the recent Money
Marketing Awards. Our advised platform proposition was also named
the 'leading retirement proposition' at the UK Platform Awards
2021, with judges commending the range of available asset classes,
low charges and functionality of the platform.
Financial advisers increasingly need a variety of solutions to
meet the diverse range of customers' needs and portfolio sizes. We
continue to develop, adapt and simplify where appropriate our
propositions for the benefit of our customers and their
advisers.
Our Retirement Investment Account (RIA), launched in January
2020, continues to be a popular choice for customers with pensions
worth less than GBP250,000 and this contributed to the growth of
advised customers and AUA.
We are progressing well with the development of Touch, our new
mobile-focused platform proposition, following the acquisition of
Adalpha during the year. This will complement our existing advised
proposition and further broaden our offering to financial advisers,
providing clients with access to the entire advice process via a
smartphone or tablet.
Following the lifting of lockdown restrictions in the summer we
were pleased to resume our 'On the Road' seminars, which were
delivered across eight UK venues in October 2021 and Investival,
which is now recognised as one of the largest and best-attended
investment conferences for advisers in the UK. Due to positive
feedback and ongoing demand from advisers, we also continued to
provide online content via monthly 'Off the Road' webinars, which
generated over 22,000 views.
D2C propositions
Customer numbers grew by 68,862 in the year to 241,045 (FY20:
172,183), an increase of 40%. Net inflows of GBP3.2bn and
favourable market movements of GBP2.9bn in the year resulted in
closing AUA of GBP19.5bn (FY20: GBP13.4bn).
Our easy-to-use platform, simple investment solutions and
cost-effective, high-quality service attracted a broad customer
base in terms of age, AUA and approach to investing. We continue to
receive applications from a new generation of customers, seeking to
engage with their finances and generate better than cash-like
returns. The quality of our proposition ensures that we not only
maintain a high retention rate, but that our customers set up
additional accounts for themselves or family members through a
family linking facility.
During the year, we further developed our dealing service,
improving the customer journey by streamlining online processes.
Following the successful launch of live portfolio pricing on our
website in January, we extended this functionality to our mobile
application in July, allowing users to view real-time prices for UK
shares in their portfolio, during market hours.
We experienced high levels of customer engagement throughout the
year across all channels. In particular, dealing in international
equities was high in the first half of the year, gradually reducing
in recent months, although remaining above pre-pandemic levels.
During the year we introduced Saturday opening for customer
services and now open for US trading on UK bank holidays.
Our new app-only platform proposition, Dodl, is expected to
launch in the first half of 2022. The new service will compete with
the new breed of simplified offerings in the market, with an annual
charge of 0.15%, no commission for buying or selling investments
and no tax wrapper charges.
Dodl will be an easy-to-use, jargon-free investment app to help
people invest for their long-term goals. It will offer ISAs, LISAs,
pension and General Investment Accounts, and will give investors
access to a simplified investment range with options to cater for
the vast majority of investment risk appetites.
Dodl will sit alongside our existing D2C platform proposition,
AJ Bell Youinvest and together will provide great value investment
platform options for retail investors, catering for all levels of
experience and investment needs.
We are pleased to have been recognised as a Which? recommended
provider for the third consecutive year, in addition to winning a
further 16 industry awards during the year.
AJ Bell Investments
We continue to see significant growth across our range of
investment solutions, with net inflows of GBP1.2bn in the year
resulting in closing AUM of GBP2.2bn (FY20: GBP0.8bn).
AJ Bell Investments provides simple, transparent, low-cost
investment management solutions for customers at all stages of
their investing lifecycle, catering for a wide range of risk
appetites.
All our products and services utilise modern, innovative
investment techniques. As a market leader on low charges, we have
continued to share efficiency gains with our customers as they have
been achieved, by reducing charges. As we have grown, our increased
buying power has generated economies of scale, which have enabled
us to significantly reduce our ongoing charges figure (OCF) over
the past five years, in keeping with the Financial Conduct
Authority's (FCA) drive to deliver value for money for
investors.
Our range of AJ Bell Funds (Funds) is available through our
platform propositions and a number of external platforms. Our Funds
offer growth, income and sustainable options and are managed with
risk targets in mind so that investors can choose the one that best
fits their needs. Our performance has been consistently strong,
with 100% of our Funds ranked in the first or second quartile of
their respective Investment Association sectors over the three
years ending September 2021.
We also offer a broad range of risk-targeted model portfolios
via our AJ Bell MPS, which are managed by an experienced team of
professionals and can be accessed on the AJ Bell Investcentre
platform. Our AJ Bell MPS has also recently been launched on a
small number of selected external platforms. Given the consistent
approach to how we manage customers' investments, the performance
of our MPS portfolios continues to track the returns on our range
of Funds.
Almost one in thirty of our D2C customers invested in our AJ
Bell Responsible Growth Fund, which was launched in November 2020,
and we continue to see an increasing level of demand for investment
solutions which place a greater emphasis on environmental, social
and governance (ESG) factors. In March 2021 we expanded our range
of responsible investing options with the addition of our AJ Bell
Responsible MPS range.
Investment in technology
We continue to invest in technology to support our strategic aim
to become the easiest platform to use and ensure we maintain
resilience as our business continues to grow.
Our hybrid technology model is a blend of user interfaces
developed in-house, and core back-office systems outsourced to
industry expert software providers.
During the year we have progressed our ongoing transition to a
hybrid cloud-based technology framework. This will provide a more
efficient environment to accelerate the delivery of our change
programme and ensure our platform remains scalable. Our ongoing
investment in the infrastructure is to ensure our platform is
scalable for growth in the business and resilient in customer
activity spikes.
A number of system and process changes have been implemented
during the year to enhance controls as part of our ongoing
operational resilience work and which are intended to prevent any
recurrence of the operational issues we encountered on the 9
November 2020 when there was an exceptional spike in customer
activity across the market.
We welcome and wholeheartedly support the FCA's new rules and
guidance around operational resilience which come into force on 31
March 2022 that will ensure firms are better able to prevent, adapt
to, respond to, recover from and learn from operational
disruptions.
At AJ Bell, we are proud of our reputation as a high-quality
service provider, and we will continue to invest in our staff,
training and technology to ensure that we can continue to provide a
high-quality service to our customers.
People and culture
As our business continues to grow, it is important that we
maintain a strong culture along with our high levels of staff
engagement and wellbeing. It is therefore pleasing to have once
again achieved a three-star accreditation in the '100 Best
Companies to Work For', representing the highest standard of
workplace engagement, for the third consecutive year.
We are also pleased to have been named the North West regional
winner of 'Large Employer of the Year' at the National
Apprenticeship Awards 2021. The awards highlight the benefits that
apprenticeships bring to individuals, businesses, and local
communities.
During the year, we maintained our training and personal
development programmes and put systems in place to ensure employees
feel secure and supported both in the office and whilst working at
home. Our investment in technology has enabled the vast majority of
our people to work remotely since the start of the pandemic and we
have demonstrated that we can operate effectively with a balance of
both home and office working across the business.
Our 'future of work' project was set up to find the right
post-pandemic operating model for AJ Bell, consulting the wider
workforce, and balancing the needs of our staff and business
operations. The findings from this work, have enabled the
development of a new hybrid working model which will come into
effect from 1 January 2022. As well as providing health and
wellbeing benefits to our staff, it will also enable us to utilise
our current office space more efficiently, creating new areas for
collaboration and ensuring colleagues remain connected.
We are committed to creating an inclusive workplace and
prioritising employee wellbeing, to establish an environment where
all employees feel valued and supported. This year's Employee Voice
Forum has focused on promoting health and wellbeing in and outside
of the office. We relaunched the onsite gym in our Exchange Quay
office and extended the range of online fitness services on offer
to staff based in any location, as well as providing further
support through nutrition and lifestyle advice.
Throughout the year we continued to support our community with a
range of volunteering and fund-raising activities. In line with
previous years, the Group donated a percentage of its profits to
the AJ Bell Trust to help local and national charitable causes. In
addition, we recently distributed the last of the funds raised by
our Wage War on COVID campaign. The campaign raised a total of
GBP383,000 in support of those negatively impacted by the pandemic.
More details of our charitable campaigns and activities can be
found in our Responsible business section.
Board and Executive appointments
In addition to the Non-Executive Board appointments outlined in
the Chairman's statement, we also made a number of Executive Board
member changes from 1 October 2021 to support the next stage of our
growth strategy.
Michael Summersgill, who has held the position of Chief
Financial Officer since 2011, was appointed Deputy Chief Executive
Officer (Deputy CEO). In this newly created role, Michael will
support me with the development and execution of our strategy,
which will drive the future growth of the business.
Roger Stott was appointed to the newly created role of Chief
Operating Officer (COO). Previously Group Finance Director, Roger
has had a broad range of responsibilities in his 13 years at AJ
Bell. In his new role, Roger will be responsible for the Group's
operational functions, ensuring the business remains scalable and
continues to deliver a great service to customers and advisers as
AJ Bell continues to grow.
Following these changes, we have recently completed an external
search for a new Chief Financial Officer to join the Board. Further
details can be found in our Nomination Committee report.
We also made a number of changes to strengthen our executive
management team. I am pleased to welcome Karen Goodman to the
business as Chief Risk Officer. Karen joined us as a member of the
EMB in September having spent a number of years within the
financial services sector. In addition, we made three internal
promotions: Kevin Doran, AJ Bell Investments Managing Director, Liz
Carrington, HR Director and Billy Mackay, AJ Bell Investcentre
Managing Director, all joined the EMB on 1 October 2021. Their
considerable experience and knowledge of the business will enable
them to make a strong contribution, and I look forward to working
closely with the newly expanded leadership team in the year
ahead.
Fergus Lyons retired from his role as Managing Director of AJ
Bell Investcentre and as a member of the executive management team
at the end of September 2021. During his 21 years with the Group,
Fergus has operated as an executive member of the senior management
team, overseeing many areas of the business, including Commercial,
Operations and Technology Services, in addition to AJ Bell
Investcentre. Fergus has had a significant impact on developing and
maintaining our culture, consistently putting the customer at the
heart of everything we do, as the business has evolved and grown.
He leaves AJ Bell Investcentre in a very strong position and my
personal thanks go to him for the considerable contribution he has
made to the business. Fergus will continue to work with us on the
launch and development of Touch by AJ Bell.
I would also like to take the opportunity to express my sincere
thanks to Les Platts who will be stepping down from the Board as
Chairman at the 2022 AGM. As well as being an incredibly valuable
mentor, Les has provided excellent stewardship of the Group since
joining as a Non-Executive Director in 2008 and later becoming
Chairman in 2014, and we wish him well for the future.
Regulatory update
There has been a significant volume of regulatory activity in
the latter part of the year. We continue to lobby the Government
and regulators in the key areas we believe will have the most
impact on our customers and the wider investment market. Our focus
is always on campaigning for simplicity and fairness, with the
ultimate aim being good customer outcomes.
I have recently written to the Treasury and Department for Work
& Pensions (DWP) to express my concerns regarding the approach
to raising the normal minimum pension age from 55 to 57 in 2028. We
understand and do not object to the reasons for the increase,
however the current proposals are unnecessarily complex and cut
across other government and regulatory initiatives such as the
Pensions Dashboard. A far simpler solution would be to adopt the
same approach as when the normal minimum pension age increased from
50 to 55 back in 2010.
Both the FCA and DWP have published draft regulations on how a
'stronger nudge' to Pension Wise guidance could work for personal
and occupational pension schemes respectively. Whilst we support
the intention behind the proposals, we have raised concerns that
the FCA and DWP are proposing different approaches to
implementation which will be confusing for customers, and any
nudges should be delivered earlier than proposed.
We are supportive of the intent behind the FCA's proposed new
consumer duty, but the new proposals overlap with existing rules
and principles in many areas and our overriding view is that the
FCA must focus on replacing existing rules rather than expanding
them and layering new rules on old.
More recently, the DWP introduced new rules to remove the
statutory right to transfer a pension. Pension schemes will be
required to intervene where there are concerns someone is moving
their retirement pot to a scheme linked to scam activity. The DWP
consulted effectively on the changes and has found a pragmatic and
sensible solution that will help to protect consumers and deliver
more positive outcomes.
We also support the joint call for input published in June 2021
by the FCA and the Pensions Regulator on the 'Pensions customer
journey'. This appears to be a genuine effort to understand what
customers experience and how the various rules that already exist
interact. However, the timing is difficult to comprehend,
considering the variety of other regulatory interventions which
have already begun to be implemented in this area. The joint call
for input should have been the starting point, nevertheless we
support the collaboration between the two regulators.
Outlook
The long-term structural drivers of growth in the UK investment
platform market remain strong and the outlook remains positive as
an increasing number of people seek the security and peace of mind
that a trusted investment platform can give them. These structural
drivers apply to both the D2C and advised segments of this market,
which are currently at different stages of their lifecycle. The D2C
market continues to develop and grow quickly with lots of new
entrants into the market, and whilst demand for advised products
remains high, the number of advisers and advice firms remains
fairly constant. We remain well positioned in both markets to meet
the challenges that may arise and capitalise on the opportunities
presented.
As seen in the latter half of the year, we expect that customer
dealing activity on our D2C platform will remain at normalised
levels following the elevated activity during the lockdown.
Conversely, any increase in interest rates is likely to have a
favourable impact on recurring ad valorem revenue. Our diversified
revenue model ensures we are well placed to deal with the different
macroeconomic cycles that may occur.
Our focus remains on investing in our brand and enhancing our
propositions to meet the evolving needs of customers, by providing
a stable, secure platform, with a wide range of investment
solutions and a consistent, high-quality service at a low cost.
The launch of two new platform propositions, Dodl and Touch,
during 2022 will complement our existing range of propositions,
ensuring we are well positioned to capitalise on the opportunities
created by the next generation of customers seeking to use a
platform for their investment needs.
The business has a clear and focused strategy and the Board and
EMB appointments made during the year will strengthen our senior
leadership teams as we move to the next stage in our growth
journey. The business is at an exciting juncture and I look forward
to working with them to execute our business strategy.
The high calibre of our people and our strong culture has
enabled us to thrive in what have been extremely challenging times.
I would like to thank all of our staff across the business for
their hard work, commitment and dedication which has ensured
another successful year for AJ Bell.
Andy Bell
Chief Executive Officer
1 December 2021
Financial review
The Group delivered another strong set of financial results
following a year of significant growth. Revenue increased 15% from
GBP126.7m to GBP145.8m and PBT was up 13% to GBP55.1m (FY20:
GBP48.6m).
The two key drivers of our performance, customer numbers and
AUA, grew by 30% and 29% respectively in the 12-month period. The
Group achieved net inflows of GBP6.4bn, with AUA breaking the
GBP70bn milestone, closing at GBP72.8bn as at 30 September
2021.
The business is attracting new business at an impressive rate.
Notwithstanding this strong performance, we have chosen to
accelerate our investment in the long-term growth of the business
by developing new product propositions in the year and this is
reflected in cost increases that are higher than we have seen in
recent years.
Business performance
Customers
Customer numbers increased by 87,449 during the year to a total
of 382,754 (FY20: 295,305). This growth has been driven by our
platform propositions, in particular our D2C platform which saw a
40% increase in customer numbers to 241,045 as at 30 September
2021. In addition, our platform customer retention rate remained
high at 95.0% (FY20: 95.5%).
Year ended Year ended
30 September 30 September
2021 2020
No. No.
Advised platform 126,920 108,911
D2C platform 241,045 172,183
------------------- ------------- ------------
Total platform 367,965 281,094
Non-platform 14,789 14,211
------------------- ------------- ------------
Total 382,754 295,305
------------------- ------------- ------------
Assets under administration
Year ended 30 September 2021
Advised D2C Total
platform platform platform Non-platform Total
GBPbn GBPbn GBPbn GBPbn GBPbn
--------------------------- -------- -------- -------- ------------ -----
As at 1 October 2020 36.3 13.4 49.7 6.8 56.5
--------------------------- -------- -------- -------- ------------ -----
Underlying inflows 6.3 4.6 10.9 0.2 11.1
Outflows (2.5) (1.4) (3.9) (0.8) (4.7)
--------------------------- -------- -------- -------- ------------ -----
Net inflows/(outflows) 3.8 3.2 7.0 (0.6) 6.4
--------------------------- -------- -------- -------- ------------ -----
Market and other movements 5.7 2.9 8.6 1.3 9.9
--------------------------- -------- -------- -------- ------------ -----
As at 30 September 2021 45.8 19.5 65.3 7.5 72.8
--------------------------- -------- -------- -------- ------------ -----
Year ended 30 September 2020
Advised D2C Total
platform platform platform Non-platform Total
GBPbn GBPbn GBPbn GBPbn GBPbn
--------------------------- -------- -------- -------- ------------ -----
As at 1 October 2019 33.8 11.1 44.9 7.4 52.3
--------------------------- -------- -------- -------- ------------ -----
Underlying inflows 4.4 3.0 7.4 0.1 7.5
Outflows (1.6) (0.9) (2.5) (0.8) (3.3)
--------------------------- -------- -------- -------- ------------ -----
Net inflows/(outflows) 2.8 2.1 4.9 (0.7) 4.2
--------------------------- -------- -------- -------- ------------ -----
Market and other movements (0.3) 0.2 (0.1) 0.1 -
--------------------------- -------- -------- -------- ------------ -----
As at 30 September 2020 36.3 13.4 49.7 6.8 56.5
--------------------------- -------- -------- -------- ------------ -----
We continued to see significant growth in the level of AUA
inflows across both our advised and D2C platform propositions, with
total net platform inflows increasing by 43% to GBP7.0bn, compared
to GBP4.9bn in the previous year.
Net inflows to the advised platform of GBP3.8bn increased by 36%
and were mostly driven by inflows from new customers. The high
uptake of our RIA resulted in slightly lower average inflows per
customer, which was expected as this product is aimed at customers
with smaller portfolios.
D2C platform inflows increased by 52% to GBP3.2bn (FY20:
GBP2.1bn) with high levels of inflows from both new and existing
customers. Average inflows per customer increased for both new and
existing customers, with the majority of inflows being in SIPPs and
ISAs as customers focus on building long-term, tax-efficient
investment portfolios.
Non-platform net outflows of GBP0.6bn in the year were primarily
triggered by the decision to close the institutional service from
31 December 2021, which represented GBP2.2bn of AUA at 30 September
2021.
The strong performance across global markets contributed
GBP9.9bn to asset values with AUA closing at GBP72.8bn, an overall
increase of 29% in the year.
Assets under management
Year ended Year ended
30 September 30 September
2021 2020
GBPbn GBPbn
Advised 1.3 0.4
D2C 0.8 0.4
-------------- ------------- ------------
Non-platform 0.1 -
-------------- ------------- ------------
Closing AUM 2.2 0.8
-------------- ------------- ------------
AJ Bell Investments has seen a significant increase in AUM
across both our advised and D2C platform propositions, including a
one-off platform inflow of GBP0.3bn and underlying net platform
inflows of GBP0.9bn in the year (FY20: GBP0.5bn). Market and other
movements contributed GBP0.2bn to asset values, with AUM closing at
GBP2.2bn. This represented an underlying increase of 143% from the
previous year, excluding the one-off platform inflow in the
year.
Financial performance
Revenue
Year ended Year ended
30 September 30 September
2021 2020
GBP000 GBP000
--------------------- ------------- -------------
Recurring fixed 28,598 26,618
Recurring ad valorem 77,955 72,422
Transactional 39,273 27,709
---------------------- ------------- -------------
Total 145,826 126,749
---------------------- ------------- -------------
Revenue increased by 15% to GBP145.8m (FY20: GBP126.7m).
Recurring fixed revenue saw an increase of 7% to GBP28.6m (FY20:
GBP26.6m). This was primarily driven by increased pension
administration revenue from our advised platform customers.
Recurring ad valorem revenue grew by 8% to GBP78.0m (FY20:
GBP72.4m). The key driver of the growth in ad valorem revenue was
the increase in average AUA, which grew significantly in the year.
However, the reduction in the UK base rate during the previous
financial year, from 0.75% to 0.1% provided a significant headwind
and caused a substantial reduction in the interest earned on
customer cash balances.
Transactional revenue grew by 42% to GBP39.3m (FY20: GBP27.7m).
This increase was driven by the strong growth in D2C customers, in
addition to significantly elevated levels of customer dealing and a
higher proportion of deals placed in international equities in the
first half of the year.
Revenue margin fell by 1.7bps from 23.9bps to 22.2bps in the
year, primarily caused by the reduction in the UK base rate during
the previous financial year, as noted above.
Administrative expenses
Year ended Year ended
30 September 30 September
2021 2020
GBP000 GBP000
------------------------ ------------ ------------
Distribution 11,095 10,245
Technology 25,765 20,027
Operational and support 53,115 45,646
CSR initiative - 1,595
------------------------- ------------ ------------
Total 89,975 77,513
------------------------- ------------ ------------
Administrative expenses increased by 16% to GBP90.0m (FY20:
GBP77.5m).
Distribution costs increased by 8% from GBP10.2m to GBP11.1m.
This increase was predominately driven by the increase in headcount
in our platform marketing and business development teams. We
recognise the importance of investing in our brand, and while some
of our planned spend was paused as a result of the pandemic, we see
more opportunities to invest in this area in the future.
Technology costs increased by 29% to GBP25.8m (FY20: GBP20.0m),
predominantly driven by an increase in headcount and the investment
in the development of our two new simplified platform propositions,
Dodl and Touch. Included in this amount is a GBP2.8m share-based
payment charge in relation to the earn-out on the acquisition of
Adalpha (see note 25).
Operational and support costs increased by 16% to GBP53.1m
(FY20: GBP45.6m). Excluding the costs associated with elevated
levels of customer dealing activity this year, the underlying
year-on-year increase was 10% which included investment in a HR
technology solution to assist in the delivery of our new hybrid
working model. The increase in operational and support costs
compares to a 30% increase in customer numbers and a 29% increase
in AUA and demonstrates the efficiency of our business model.
Our prior year share-based payment expense included a one-off
charge of GBP1.6m relating to the CSR initiative announced in
December 2019.
Profitability and earnings
PBT rose to GBP55.1m (FY20: GBP48.6m), an increase of 13%
compared with the prior year and our PBT margin remained at 38%
(FY20: 38%). The increase in profitability is due to the strong
growth in our customer base and AUA.
The effective rate of tax for the year was 20.4% (FY20: 20.0%),
slightly higher than the standard rate of UK Corporation Tax of
19.0%, as a result of disallowable charges relating to the earn-out
arrangement.
Basic earnings per share increased by 13% to 10.71p. Diluted
earnings per share (DEPS) increased by 13% to 10.67p.
Financial position
The Group's balance sheet remains strong, with net assets
totalling GBP130.7m (FY20: GBP109.5m) at 30 September 2021 and a
return on assets of 34% (FY20: 35%). We have no significant
borrowings, with the exception of the lease liability that arose on
adoption of IFRS 16 as noted in the prior year.
Financial resources and regulatory capital position
Our financial resources are continually kept under review,
incorporating comprehensive stress and scenario testing, which is
formally reviewed and agreed at least annually. We manage our
financial resources prudently and have maintained a healthy surplus
over our regulatory capital requirement throughout the year.
Year ended Year ended
30 September 30 September
2021 2020
GBP000 GBP000
-------------------------- ------------- -------------
Total shareholder
funds 130,708 109,466
Less: unregulated
business capital (4,722) (3,703)
CRD consolidation
group - CET1 capital 125,986 105,763
Less: provision for
dividend (38,912) (19,050)
Less: non-qualifying
assets (11,469) (4,109)
--------------------------- ------------- -------------
Total capital resources 75,605 82,604
Less: capital requirement (40,525) (35,439)
--------------------------- ------------- -------------
Surplus capital 35,080 47,165
--------------------------- ------------- -------------
% of capital resource
requirement held 187% 233%
Our regulatory requirement increased to GBP40.5m (FY20:
GBP35.4m) which results in surplus capital of GBP35.1m (FY20:
GBP47.2m). After making appropriate deductions, including our
recommended ordinary and special dividend, our total capital
resources at 30 September 2021 were GBP75.6m (FY20: GBP82.6m).
Cash balances increased by 12% from GBP86.4m to GBP97.1m. Our
short working capital cycle means that profits are quickly
converted into cash, and we maintain sufficient financial resources
to support the liquidity requirements of our growing operation.
The Investment Firm Prudential Regime (IFPR) will come into
effect from 1 January 2022, focusing prudential requirements on the
potential harm the firm itself can pose to consumers and markets
whilst introducing a basic liquidity requirement for all investment
firms. This is not expected to have a material impact on our
capital requirements.
Acquisition of Adalpha
On 18 March 2021, AJ Bell plc acquired Adalpha, and is
progressing well with the development of our new mobile-focused
platform proposition, Touch by AJ Bell.
On acquisition, the Group recognised an intangible asset of
GBP1.1m, relating to the development of the simplified advised
platform proposition, and goodwill of GBP3.3m. Further details can
be found within note 6.
Costs incurred in the year relate primarily to technology costs
for the development of the simplified advised platform proposition.
Costs capitalised as an intangible asset can be found in note
8.
Dividends
The Board has proposed a final dividend of 4.50p per share
(FY20: 4.66p per share), resulting in a total ordinary dividend of
6.96p (FY20: 6.16p) and equating to a dividend pay-out ratio of 65%
of statutory profit after tax.
In addition, the Board reviewed the Group's financial position
at 30 September 2021, considering the payment of the ordinary
dividend, planned growth of the business, subsequent investment
needs and future regulatory capital and liquidity requirements and
has proposed a special dividend of 5.00p per share which will take
the total dividend for the year to 11.96p, an increase of 94% on
the prior year.
This enhanced dividend payment reflects the financial strength
of the Group, the Board's commitment to returning surplus capital
to shareholders in an appropriate form and at an appropriate time
and the positive outlook for the long-term prospects of the
business.
Michael Summersgill
Deputy Chief Executive Officer and Chief Financial Officer
1 December 2021
Principal risks and uncertainties
The Board is committed to a continual process of improvement and
embedment of the risk management framework within the Group. This
ensures that the business identifies both existing and emerging
risks and continues to develop appropriate mitigation
strategies.
The Board believes that there are a number of potential risks to
the Group that could hinder the successful implementation of its
strategy. These risks may arise from internal and external events,
acts and omissions. The Board is proactive in identifying,
assessing and managing all risks facing the business, including the
likelihood of each risk materialising in the short or longer
term.
The Group has continually reviewed its risk management and
internal control systems during the pandemic, to identify any areas
that required further attention or action. Whilst the level of
inherent risk for some of Group's principal risks and uncertainties
has increased, the Group's controls continue to mitigate this
increase in risk.
The principal risks and uncertainties facing the Group are
detailed below, along with potential impacts and mitigating
actions.
Risk Potential impact Mitigations
1. Strategic risk
Competitor or market The Group regularly reviews its products
risk * Loss of competitive advantage, such that AUA and against competitors, in relation to
customer number targets are adversely impacted. This pricing, functionality
The risk that the would have a negative impact on profitability. and service, and actively seeks to make
Group fails to remain enhancements where necessary to maintain or
competitive in its improve
peer group, due to * Reputational damage as a result of underperformance its competitive position in line with the
lack of innovative and/or regulatory scrutiny. Group's strategic objectives.
products and services,
increased competitor The Group remains closely aligned with
activity, regulatory trade and industry bodies, and other policy
expectations, and lack makers
of across our market. The use of ongoing
marketing focus and competitor analysis provides insight and an
spend to keep pace opportunity
with competitors. to adapt strategic direction in response to
market conditions.
------------------------------------------------------------- --------------------------------------------
2. Operational risk
Regulatory, compliance The Group maintains a strong compliance
& legal risk * Regulatory censure and/or fines, including fines from culture geared towards positive customer
The risk that the the FCA and ICO. outcomes
Group fails to comply and regulatory compliance.
with regulatory and
legal standards. * Related negative publicity could reduce customer The Group performs regular horizon scanning
confidence and affect ability to generate new to ensure all regulatory change is detected
inflows. and
highlighted to the Group for consideration.
* Poor conduct could have a negative impact on customer The Group maintains an open dialogue with
outcomes, impacting the Group's ability to achieve the FCA and actively engages with them on
strategic objectives. relevant
proposed regulatory change.
The Compliance function is responsible for
ensuring all standards of the regulatory
system
are being met by the Group. This is
achieved by implementing policies and
procedures across
the business, raising awareness and
developing an effective control environment
through providing
comprehensive training. Where appropriate,
the compliance monitoring team conducts
reviews
to ensure a high standard of compliance has
been embedded into the business.
------------------------------------------------------------- --------------------------------------------
Information security The Group continually reviews its cyber
and data risk * Related negative publicity could damage customer and security position to ensure that it
market confidence in the business, affecting our protects the confidentiality,
The risk of a ability to attract and retain customers. integrity and availability of its network
vulnerability in the and the data that it holds.
Group's infrastructure
being exploited or * Information security breaches could adversely impact A defence in depth approach is in place
user misuse individuals' data rights and freedoms and could with firewalls, web gateway, email gateway
that causes harm to result in fines/censure from regulators, such as the and anti-virus
service, data and/or ICO and FCA. amongst the technologies deployed. Staff
an asset causing awareness is seen as being a key component
material business of the
impact. layered defences, with regular updates,
training and mock phishing exercises.
Data risk is defined
as the risk of the Our security readiness is subject to
Group failing to independent assessment by a penetration
effectively govern, testing partner
manage and control that considers both production systems and
its data (including development activities. This is
data processed by supplemented by
third party running a programme of weekly vulnerability
suppliers). scans to identify configuration issues and
assess
the effectiveness of the software patching
schedule.
The Group regularly assesses its maturity
against an acknowledged security framework,
which
includes an ongoing programme of staff
training and assessment through mock
security exercises.
The Group monitors the adequacy of its
internal data governance framework via the
Data Steering
Group.
------------------------------------------------------------- --------------------------------------------
Fraud and financial Extensive controls are in place to minimise
crime risk * The Group may be adversely affected, including the risk of financial crime.
regulatory censure or enforcement, if we fail to Policies and procedures, include:
The risk of failure to mitigate the risk of being used to facilitate any mandatory financial crime training in
protect the Group and form of financial crime. This includes money anti-money laundering and counter terrorist
its customers from all laundering and counter terrorist financing, market financing,
aspects of fraud and abuse, fraud, cyber-crime and the facilitation of tax fraud, market abuse and the criminal
financial crime evasion. finances act for all employees to aid the
(anti-money laundering detection,
and counter terrorist prevention and reporting of financial
financing, market * Loss of data or inability to maintain our systems, crime. The Group has an extensive
abuse, fraud, resulting in reputational damage through negative recruitment process
cyber-crime and the press exposure. in place to screen potential employees.
facilitation of tax
evasion). The Group actively maintains defences
* Potential customer detriment as customers are at risk against a broad range of likely attacks by
of losing funds or personal data, which can subject global actors,
them to further loss via other organisations. bringing together tools from well-known
providers, external consultancy and
internal expertise
* Fraudulent activity leading to identity fraud and/or to create multiple layers of defence. The
loss of customer holdings to fraudulent activity. latter includes intelligence shared through
participation
in regulatory, industry and national cyber
security networks.
------------------------------------------------------------- --------------------------------------------
Third-party IT failure To mitigate the risk posed by third-party
risk * Loss of service from a third-party technology software suppliers, the Group continues to
provider could have a negative impact on customer build
The risk that a outcomes due to website unavailability, delays in strong partnerships with key suppliers,
third-party provider receiving and/or processing customer transactions or managing relationships day-to-day under
materially fails to interruptions to settlement and reconciliation formal governance
deliver the contracted processes. structures, and monitoring performance
services. against documented service standards to
ensure their
* Financial impact through increased operational continued commitment to service, financial
losses. stability and viability. Performance
metrics are
discussed monthly with documented actions
* Regulatory fine and/or censure. for any identified improvements.
This is supplemented by attendance at
formal user groups with other clients of
the key suppliers,
sharing experience and leveraging the
strength of the user base. Where relevant
and appropriate,
annual financial due diligence on critical
IT suppliers and on-site audits are also
undertaken.
------------------------------------------------------------- --------------------------------------------
IT system performance, The Group continues to implement a
capacity and * The reliance on evolving technology remains crucial programme of increasing annual investment
resilience risk to the Group's effort to develop its services and in the technology
enhance products. Prolonged underinvestment in platform. This is informed by
The risk that the technology will affect our ability to serve our recommendations that result from regular
design, implementation customers and meet their needs. architectural reviews
and management of of applications and of the underpinning
applications, infrastructure and services.
infrastructure and * Failing to deliver and manage a fit-for-purpose
services fail to meet technology platform could have an adverse impact on Daily monitoring routines provide oversight
current and future customer outcomes and affect our ability to attract of performance and capacity.
business requirements. new customers.
Our rolling programme of both business
continuity planning and testing, and single
* IT failures may lead to financial or regulatory point
penalties, and reputational damage. of failure management, maintains our focus
on the resilience of key systems in the
event of
an interruption to service.
------------------------------------------------------------- --------------------------------------------
Operational resilience The Group is in the process of developing a
risk * Failure to maintain or quickly recover operations comprehensive operational resilience
could lead to intolerable harm to customers and the framework,
The risk that the Group. under the direction of the Operational
Group does not have an Resilience Committee (ORC), a sub-committee
adequate operational of the
resilience framework * Operational resilience disruptions may lead to Executive Management Board (EMB).
to prevent, financial or regulatory penalties, and reputational
adapt, respond to, damage. The Group is on track to implement the
recover and learn from operational resilience regulatory
operational requirements set
disruptions. out in the FCA policy statement (PS) 21/3,
which are:
* Identify important business services.
* Undertake core mapping.
* Set impact tolerances.
* Undertake scenario testing.
* Board sign-off on a self-assessment.
------------------------------------------------------------- --------------------------------------------
Operational capability The Group focuses on increasing the
risk * A decline in the quality of work will have a effectiveness of its operational procedures
financial impact through increased operational and, through
The risk that, due to losses. its business improvement function,
unexpectedly high aims to improve and automate more of its
volumes and or levels processes. This reduces the need for manual
of change activity, * Unexpectedly high volumes coupled with staff intervention
the Group recruitment and retention issues could lead to poor and the potential for errors.
is unable to process customer outcomes and reputational damage.
work within agreed There is an ongoing programme to train
service levels and/or staff on multiple operational functions.
to an acceptable Diversifying
quality for the workforce enables the business to
a sustained period. deploy staff when high work volumes are
experienced.
Causes of increased volumes of work, for
example competitor behaviour, are closely
monitored
in order to plan resource effectively.
The Group maintains succession plans for
key members of management and has also
sought to
mitigate this risk by facilitating equity
ownership for senior employees through
various share
schemes and the development of a staff
engagement strategy.
------------------------------------------------------------- --------------------------------------------
Financial control The Group's financial control and fraud
environment risk * Reputational damage with regulators, leading to prevention policies and procedures are
increased capital requirement. designed to
The risk that the ensure that the risk of fraudulent access
financial control to customer or corporate accounts is
environment is weak. * Potential customer detriment resulting from minimised.
This includes the risk inadequate protection of customer assets.
of loss to Anti-fraud training is provided to all
the business, or its members of staff who act as first line of
customers, because of * Increased expenditure in order to compensate defence
either the actions of customers for loss incurred. to facilitate early detection of
an associated potentially fraudulent activity.
third-party
or the misconduct of Strong technology controls are in place to
an employee. identify potential money laundering
activity or
market abuse.
------------------------------------------------------------- --------------------------------------------
Retail The Group's customer focus is founded on
conflicts/conduct risk * Poor conduct could have a negative effect on customer our guiding principles, which drive the
outcomes, impacting the growth of our business. culture of
the business and ensure customers remain at
The risk that the fair the heart of everything we do. Training on
treatment of customers * Reputational damage resulting from poor levels of the
is not central to the customer service. importance and awareness of the delivery of
Group's corporate good customer outcomes is provided to all
culture. staff
* Additional regulatory scrutiny and financial loss. on a regular basis.
The Group continues to focus on
enhancements to its risk management
framework, in relation
to the identification, monitoring and
mitigation of risks of poor customer
outcomes, and to
its product management process to reduce
the potential for customer detriment.
All developments are assessed for potential
poor customer outcomes, and mitigating
actions
are delivered alongside the developments as
appropriate.
------------------------------------------------------------- --------------------------------------------
Investment risk The Group maintains robust Investment
* Outflows or loss of assets under management as a Governance arrangements for decision-making
Risk of failures result of underperformance or reputational damage. in relation
surrounding the to the AJBI products and services. The
investment activities performance of AJBI products and services
carried out by AJ Bell * Compensation required to cover operational losses, are monitored
Investments such as trading errors. on an ongoing basis for alignment with
(AJBI). The risks customer expectations and mandates,
specific to the AJBI including through
entity include * Potential customer detriment resulting from dedicated committees and by an independent
operational, inadequate governance arrangements. Risk function.
reputational and
conduct Operational risks are reviewed and
risks. monitored through AJBI's Department Risk
Committee. Any
trading undertaken on the AJ Bell Funds is
subject to a number of internal controls to
minimise
the risk of any operational losses.
------------------------------------------------------------- --------------------------------------------
3. Financial risk
Economic and capital The Group's products are targeted at UK
markets fluctuation * Adverse effect on customer transactional activity or residents. We do not do business in any
risk ad valorem fees generated from assets under other countries
administration from which the Group derives revenue. and have relatively few customers outside
The risk that a Sensitivities for interest rate and market movements the UK. However, in the event that the
significant and are shown in note 26 to the consolidated financial economy falls
prolonged capital statements. back into a prolonged recession, this may
market or economic impact contribution levels and confidence
downturn has an generally
adverse in the savings and investment markets. The
effect on customer Directors believe that the Group's overall
confidence, asset income
values and interest levels and in particular the balance
rates. between the different types of assets and
transactions
from which that income is derived, provide
a robust defensive position against a
sustained
economic downturn.
Revenue from retained interest income is
derived from the pooling of customer cash
balances.
The Group has a variety of transactional
and recurring revenue streams, some of
which are
monetary amounts while others are ad
valorem. This mix of revenue types helps to
limit the
Group's exposure to interest rate
fluctuations and capital market
fluctuations.
------------------------------------------------------------- --------------------------------------------
Counterparty credit The Group's credit risk extends principally
risk * Unintended market exposure. to its financial assets, cash balances held
with
The risk of potential banks and trade and other receivables. The
failure of clients, * Customer detriment. Group carries out initial and ongoing due
market counterparties diligence
or banks used by the on the market counterparties and banks that
Group * Increased future capital requirements. it uses, and regularly monitors the level
to fulfil contractual of exposure.
obligations. The Group holds an appropriate amount of
capital against the materialisation of this
risk.
The Group continues to diversify across a
range of approved banking counterparties,
reducing
the concentration of credit risk as
exposure is spread over a larger number of
counterparties.
The banks currently used by the Group are
detailed in note 26 to the consolidated
financial
statements.
With regard to trade receivables, the Group
has implemented procedures that require
appropriate
credit or alternative checks on potential
customers before business is undertaken.
This has
minimised credit risk in this area.
The Group will maintain its existing
strategy of diversification to ensure
acceptable exposure
across a wide range of well-capitalised
banks with appropriate credit ratings.
It will continue to regularly monitor its
level of exposure and to assess the
financial strength
of its banking counterparties.
------------------------------------------------------------- --------------------------------------------
Liquidity risk The Group has robust systems and controls
* Reputational damage. and monitors all legal entities to ensure
The risk that the they have
Group suffers sufficient funds to meet their liabilities
significant settlement * Potential customer detriment. as they fall due.
default or otherwise
suffers major The Group continues to monitor trade
liquidity problems or * Financial loss. settlement on both an intra-day and daily
issues of liquidity basis.
deficiency which
severely impact on the * Unable to meet obligations as they fall due. The Group continues to be a highly
Group's cash-generative business and to maintain
reputation in the sufficient cash
markets. and standby banking facilities to fund its
foreseeable trading requirements.
The risk that the
Group does not have
available readily
realisable financial
resources to
enable it to meet its
obligations as they
fall due or can only
secure such resources
at excessive
cost.
------------------------------------------------------------- --------------------------------------------
Viability statement
In accordance with provision 31 of the UK Corporate Governance
Code 2018, the Board has assessed the viability of the Group,
considering a four-year period to September 2025. The Board
considers a four-year horizon to be an appropriate period to assess
the Group's strategy and its capital requirements, considering the
investment needs of the business and the potential risks that could
impact the Group's ability to meet its strategic objectives.
This assessment has been made considering the Group's financial
position and regulatory capital and liquidity requirements in the
context of its business model, strategy and four-year financial
forecasts and in consideration of the principal risks and
uncertainties, as detailed in the Strategic report. The principal
risks and uncertainties are those that may adversely impact the
Group based on its business model and strategy and are derived from
both the Group's business activities and the wider macroeconomic
environment in which the Group operates but does not control.
As an FCA-regulated entity, a continual assessment is undertaken
by the Group to identify and quantify its principal risks and
uncertainties through the ICAAP; a process that uses a combination
of techniques including stress-testing and scenarios to consider
severe but plausible events to determine the capital and liquidity
requirements for the Group. The estimated capital and liquidity
requirements from the crystallisation of risks arising from the
Group's business activities are assessed and compared with the
rules based quantitative requirements from the new prudential
regime to inform the Group's regulatory requirements for the next
12 months. The estimated capital required for the crystallisation
of risks arising from the wider macroeconomic environment is used
to determine if the Group is able to maintain sufficient financial
resources over its regulatory capital and liquidity requirements
over the four-year assessment period.
The Board approved four-year financial forecast assumes the
business continues to grow customer numbers and AUA through
investment in our brand, product propositions, technology and
people. It is assumed that the Bank of England base interest rate
remains flat at 0.10% during the financial forecasts and there are
no significant market movements in underlying asset values based on
the position at the point the projections were approved by the
Board.
The Board has considered the potential impact of three stress
test scenarios, which cumulatively represent a severe, remote but
plausible scenario:
1) Macroeconomic ( Economic and capital markets fluctuation
risk) - a significant reduction in equity market values, modelled
on the 2008-09 global financial crisis. Asset values fall by 47% in
year 1, recovering to 32% below the level they were prior to the
fall in year 2, and remain flat in years 3 and 4.
2) Macroeconomic ( Economic and capital markets fluctuation
risk) - Bank of England base interest rate reduced from 0.10% to
-0.10% throughout the assessment period.
3) Idiosyncratic ( IT system performance, capacity and
resilience risk, Third-party IT failure risk) - prolonged IT issues
with key operating software suppliers cause significant damage to
AJ Bell's service and reputation; which results in a reduction in
customers. Following year 1 the Group incurs development and
license costs to upgrade or replace key components of the platform
software, with service levels and net inflows returning to normal
in year 3.
The Board would consider raising prices as a possible management
action that could be taken in the event that the modelled scenarios
crystallise. The Board considers this approach reasonable in light
of the industry-wide impact of the scenario, and the firm's
profitability and price positioning relative to its
competitors.
The results have confirmed that the Group would be able to
withstand the adverse financial impact of these three scenarios
occurring simultaneously over the four-year assessment period. This
assumes that dividends are paid in line with the recommendation
made in the 30 September 2021 annual report and with the Group
dividend policy on a forward-looking basis. During the period, the
Group continues to retain surplus financial resources over and
above its regulatory capital and liquidity requirements, with or
without any management remediation actions.
The Group's strategy and four-year financial forecasts were
approved by the Board in September 2021. The Directors confirm that
they have a reasonable expectation that the Group will be able to
continue in operation and meet its liabilities as they fall due
over the four-year period ending September 2025.
The Strategic report was approved by the Board of Directors and
signed on its behalf by :
Andy Bell
Chief Executive Officer
1 December 2021
Statement of Directors' responsibilities
The Directors are responsible for preparing the annual report
and the financial statements in accordance with international
accounting standards in conformity with the requirements of the
Companies Act 2006 and applicable law and regulations.
Company law requires the Directors to prepare Group and Parent
Company financial statements for each financial year. Under that
law the Directors are required to prepare the Group financial
statements in accordance with international accounting standards in
conformity with the requirements of the Companies Act 2006 and have
elected to prepare the Parent Company financial statements in
accordance with UK accounting standards and applicable law (UK
Generally Accepted Accounting Practice), including FRS 101 Reduced
Disclosure Framework.
Under company law the Directors must not approve the financial
statements unless they are satisfied that they give a true and fair
view of the state of affairs of the Group and Parent Company and of
the profit or loss for the Group for that period. The Directors are
also required to prepare the Group financial statements in
accordance with international financial reporting standards adopted
pursuant to Regulation (EC) No 1606/2002 as it applies in the
European Union.
In preparing these financial statements, the Directors are
required to:
-- select suitable accounting policies and then apply them consistently;
-- make judgements and accounting estimates that are reasonable and prudent;
-- for the Group financial statements, state whether they have
been prepared in accordance with international accounting standards
in conformity with the requirements of the Companies Act 2006,
subject to any material departures disclosed and explained in the
financial statements;
-- for the Group financial statements state whether they have been prepared in accordance with international financial reporting standards adopted pursuant to Regulation (EC) No 1606/2002 as it applies in the European Union, subject to any material departures disclosed and explained in the financial statements;
-- for the Parent Company financial statements, state whether
applicable UK accounting standards have been followed, subject to
any material departures disclosed and explained in the financial
statements;
-- prepare the financial statements on the going concern basis
unless it is inappropriate to presume that the Group or Parent
Company will continue in business; and
-- prepare a Directors' report, a Strategic report and
Directors' remuneration report which comply with the requirements
of the Companies Act 2006.
The Directors are responsible for keeping adequate accounting
records that are sufficient to show and explain the Parent
Company's transactions and disclose with reasonable accuracy at any
time the financial position of the Parent Company and enable them
to ensure that the financial statements comply with the Companies
Act 2006 and, as regards the Group financial statements, Article 4
of the IAS Regulation.
They are also responsible for safeguarding the assets of the
Group and hence for taking reasonable steps for the prevention and
detection of fraud and other irregularities. The Directors are
responsible for ensuring that the annual report and accounts, taken
as a whole, are fair, balanced, and understandable and provide the
information necessary for shareholders to assess the Group's
position and performance, business model and strategy.
The Directors are responsible for ensuring the annual report and
the financial statements are made available on a website. Financial
statements are published on the Company's website in accordance
with legislation in the United Kingdom governing the preparation
and dissemination of financial statements, which may vary from
legislation in other jurisdictions. The maintenance and integrity
of the Company's website is the responsibility of the Directors.
The Directors' responsibility also extends to the ongoing integrity
of the financial statements contained therein.
Each of the Directors, whose names and responsibilities are
listed in the Corporate Governance report, confirms that, to the
best of their knowledge:
-- The financial statements have been prepared in accordance
with the applicable set of accounting standards and Article 4 of
the IAS Regulation and give a true and fair view of the assets,
liabilities, financial position and profit and loss of the
Group.
-- The annual report includes a fair review of the development
and performance of the business and the financial position of the
Group and Parent Company, together with a description of the
principal risks and uncertainties that they face.
We consider that the Annual Report and Financial Statements,
taken as a whole, is fair, balanced and understandable and provides
the information necessary for shareholders to assess the Group's
position and performance, business model and strategy.
Approved by the Board on 1 December 2021 and signed on its
behalf by:
Christopher Bruce Robinson
Company Secretary
4 Exchange Quay
Salford Quays
Manchester
M5 3EE
Consolidated income statement
for the year ended 30 September 2021
2021 2020
Note GBP 000 GBP 000
------------------------------------------- ---- -------- --------
Revenue 5 145,826 126,749
Administrative expenses (89,975) (77,513)
------------------------------------------- ---- -------- --------
Operating profit 7 55,851 49,236
Investment income 9 23 162
Finance costs 10 (790) (848)
------------------------------------------- ---- -------- --------
Profit before tax 55,084 48,550
Tax expense 11 (11,262) (9,721)
------------------------------------------- ---- -------- --------
Profit for the financial year attributable
to:
Equity holders of the parent company 43,822 38,829
------------------------------------------- ---- -------- --------
Earnings per share:
Basic (pence) 13 10.71 9.51
Diluted (pence) 13 10.67 9.47
------------------------------------------- ---- -------- --------
All revenue, profit and earnings are in respect of continuing
operations.
There were no other components of recognised income or expense
in either period and, consequently, no statement of other
comprehensive income has been presented.
Consolidated statement of financial position
as at 30 September 2021
2021 2020
Note GBP 000 GBP 000
------------------------------ ---- -------- --------
Assets
Non-current assets
Goodwill 14 6,991 3,660
Other intangible assets 15 6,014 1,986
Property, plant and equipment 16 3,351 3,224
Right-of-use assets 17 13,325 14,522
Deferred tax asset 19 940 1,003
------------------------------ ---- -------- --------
30,621 24,395
------------------------------ ---- -------- --------
Current assets
Trade and other receivables 20 34,408 30,561
Current tax receivable 51 -
Cash and cash equivalents 21 97,062 86,384
-------- --------
131,521 116,945
------------------------------ ---- -------- --------
Total assets 162,142 141,340
------------------------------ ---- -------- --------
Liabilities
Current liabilities
Trade and other payables 22 (12,765) (12,368)
Current tax liabilities - (17)
Lease liabilities 17 (1,708) (1,323)
Provisions 23 (1,526) (1,595)
------------------------------ ---- -------- --------
(15,999) (15,303)
------------------------------ ---- -------- --------
Non-current liabilities
Lease liabilities 17 (13,886) (15,022)
Provisions 23 (1,549) (1,549)
------------------------------ ---- -------- --------
(15,435) (16,571)
------------------------------ ---- -------- --------
Total liabilities (31,434) (31,874)
------------------------------ ---- -------- --------
Net assets 130,708 109,466
============================== ==== ======== ========
Equity
Share capital 24 51 51
Share premium 8,658 8,459
Own shares (740) (1,147)
Retained earnings 122,739 102,103
------------------------------ ---- -------- --------
Total equity 130,708 109,466
============================== ==== ======== ========
The financial statements were approved by the Board of Directors
and authorised for issue on 1 December 2021 and signed on its
behalf by:
Michael Summersgill
Deputy Chief Executive Officer and Chief Financial Officer
AJ Bell plc
Company registered number: 04503206
Consolidated statement of changes in equity
for the year ended 30 September 2021
Share capital Share premium Retained earnings Own shares Total equity
GBP 000 GBP 000 GBP 000 GBP 000 GBP 000
------------------------------------------- ------------- ------------- ----------------- ---------- ------------
Balance at 1 October 2020 51 8,459 102,103 (1,147) 109,466
------------------------------------------- ------------- ------------- ----------------- ---------- ------------
Total comprehensive income for the year:
Profit for the year - - 43,822 - 43,822
Transactions with owners, recorded directly
in equity:
Issue of shares - 199 - - 199
Dividends paid - - (29,138) - (29,138)
Equity settled share-based payment
transactions - - 6,330 - 6,330
Deferred tax effect of share-based payment
transactions - - (202) - (202)
Tax relief on exercise of share options - - 231 - 231
Share transfer relating to EIP (note 24) - - (110) 110 -
Share transfer relating to earn-out
arrangement
(note 24) - - (297) 297 -
Total transactions with owners - 199 (23,186) 407 (22,580)
------------------------------------------- ------------- ------------- ----------------- ---------- ------------
Balance at 30 September 2021 51 8,658 122,739 (740) 130,708
=========================================== ============= ============= ================= ========== ============
Share capital Share premium Retained earnings Own shares Total equity
GBP 000 GBP 000 GBP 000 GBP 000 GBP 000
------------------------------------------- ------------- ------------- ----------------- ---------- ------------
Balance at 1 October 2019 51 7,667 79,136 (1,147) 85,707
------------------------------------------- ------------- ------------- ----------------- ---------- ------------
Total comprehensive income for the year:
Profit for the year - - 38,829 - 38,829
Transactions with owners, recorded directly
in equity:
Issue of shares - 792 - - 792
Dividends paid - - (19,733) - (19,733)
Equity settled share-based payment
transactions - - 3,364 - 3,364
Deferred tax effect of share-based payment
transactions - - (304) - (304)
Tax relief on exercise of share options - - 811 - 811
Total transactions with owners - 792 (15,862) - (15,070)
------------------------------------------- ------------- ------------- ----------------- ---------- ------------
Balance at 30 September 2020 51 8,459 102,103 (1,147) 109,466
=========================================== ============= ============= ================= ========== ============
Consolidated statement of cash flows
for the year ended 30 September 2021
2021 2020
Note GBP 000 GBP 000
-------------------------------------------- ---- -------- --------
Cash flows from operating activities
Profit for the financial year 43,822 38,829
Adjustments for:
Investment income (23) (162)
Finance costs 790 848
Income tax expense 11,262 9,721
Depreciation and amortisation 3,623 3,574
Share-based payment expense 25 4,952 3,364
(Decrease) / Increase in provisions and
other payables (69) 499
Loss on disposal of property, plant and
equipment 13 1
Profit on disposal of right-of-use assets (3) -
Increase in trade and other receivables (3,835) (7,644)
(Decrease) / Increase in trade and other
payables (1,347) 2,485
-------------------------------------------- ---- -------- --------
Cash generated from operations 59,185 51,515
Income tax paid (11,455) (11,827)
Interest expense paid (1) -
-------------------------------------------- ---- -------- --------
Net cash flows from operating activities 47,729 39,688
-------------------------------------------- ---- -------- --------
Cash flows from investing activities
Purchase of other intangible assets 15 (2,370) (201)
Purchase of property, plant and equipment 16 (1,174) (856)
Acquisition of subsidiary, net of cash
acquired 6 (2,561) -
Proceeds from sale of property, plant
and equipment - 3
Interest received 23 180
-------------------------------------------- ---- -------- --------
Net cash flows used in investing activities (6,082) (874)
-------------------------------------------- ---- -------- --------
Cash flows from financing activities
Payments of principal in relation to lease
liabilities (1,241) (1,708)
Payments of interest on lease liabilities (789) (848)
Proceeds from issue of share capital 199 792
Dividends paid 12 (29,138) (19,733)
-------------------------------------------- ---- -------- --------
Net cash flows used in financing activities (30,969) (21,497)
-------------------------------------------- ---- -------- --------
Net increase in cash and cash equivalents 10,678 17,317
Cash and cash equivalents at beginning
of year 21 86,384 69,067
-------------------------------------------- ---- -------- --------
Total cash and cash equivalents at end
of year 21 97,062 86,384
============================================ ==== ======== ========
Notes to the consolidated financial statements
for the year ended 30 September 2021
1 General information
AJ Bell plc (the 'Company') is the Parent Company of the AJ Bell
group of companies (together the 'Group'). The Group provides
investment administration, dealing and custody services. The nature
of the Group's operations and its principal activities are set out
in the Strategic report and the Directors' report.
The Company is a public limited company which is listed on the
Main Market of the London Stock Exchange and incorporated and
domiciled in the United Kingdom. The Company's number is 04503206
and the registered office is 4 Exchange Quay, Salford Quays,
Manchester, M5 3EE. A list of investments in subsidiaries,
including the name, country of incorporation, registered office,
and proportion of ownership is given in note 6 of the Company's
separate financial statements.
The consolidated financial statements were approved by the Board
on 1 December 2021.
The financial information contained in this report does not
constitute statutory accounts within the meaning of Section 434 of
the Companies Act 2006. The financial information set out in this
report has been extracted from the Group's 2021 Annual Report and
Financial Statements, which have been approved by the Board of
Directors on 01 December 2021. The Auditors have reported on the
2020 and 2021 accounts, their reports were (i) unqualified; (ii)
did not include a reference to any matters to which the Auditors
drew attention by way of emphasis without qualifying their report;
and (iii) did not contain a statement under sections 498(2) or (3)
of the Companies Act 2006.
2 Significant accounting policies
Basis of accounting
The consolidated financial statements of AJ Bell plc have been
prepared in accordance with international accounting standards in
conformity with the requirements of the Companies Act 2006 and the
International Financial Reporting Standards adopted pursuant to
Regulation (EC) No 1606/2002 as it applied in the European
Union.
The financial statements are prepared on the historical cost
basis and prepared on a going concern basis. They are presented in
sterling, which is the currency of the primary economic environment
in which the Group operates, rounded to the nearest thousand.
The accounting policies have been applied consistently to all
periods presented in these financial statements and by all Group
entities, unless otherwise stated.
Changes to International Reporting Standards
Interpretations and standards which became effective during the
year:
The following amendments and interpretations became effective
during the year. Their adoption has not had any significant impact
on the Group.
Effective from
IFRS 16 COVID-19-Related Rent Concessions (Amendment) 1 June 2020
IFRS 9, IAS Interest Rate Benchmark Reform (Amendments) 1 January 2020
39 and IFRS
7
IAS 1 and IAS Definition of Material (Amendments) 1 January 2020
8
IFRS 3 Definition of a Business (Amendments) 1 January 2020
Amendments to References to the Conceptual Framework 1 January 2020
in IFRS Standards
Interpretations and standards in issue but not yet effective
There are a number of amendments to IFRSs that have been issued
by the IASB that become mandatory in a subsequent accounting period
including: IFRS 17 Insurance Contracts and Amendments to IAS 1 -
Classification of Liabilities as Current or Non-current.
The Group has evaluated these changes and none are expected to
have a significant impact on these consolidated financial
statements.
Basis of consolidation
The consolidated financial statements incorporate the financial
statements of the Company and entities controlled by the Company
(its subsidiaries) made up to 30 September each year. The Group
controls an entity when it is exposed to, or it has rights to
variable returns from its involvement with the entity and has the
ability to affect those returns through its power over the entity.
The Group reassesses whether it controls an entity if facts and
circumstances indicate there are changes to one or more elements of
control. The results of a subsidiary undertaking are included in
the consolidated financial statements from the date the control
commences until the date that control ceases.
All intercompany transactions, balances, income and expenses are
eliminated on consolidation.
2.1 Going concern
The Group's business activities, together with its financial
position and the factors likely to affect its future development
and performance are set out in the Strategic report and the
Directors' report. Note 26 includes the Group's policies and
processes for managing exposure to credit and liquidity risk.
The Group's forecasts and objectives, considering a number of
potential changes in trading conditions, show that the Group should
be able to operate at adequate levels of both liquidity and capital
for at least 12 months from the date of signing this report. The
Directors have performed a number of stress tests, covering a
significant reduction in equity market values and negative Bank of
England base interest rates with a further Group-specific,
idiosyncratic stress relating to a scenario whereby prolonged IT
issues cause a reduction in customers. Further detail of the
forecasts and stress test scenarios are set out in the Viability
statement. These scenarios provide assurance that the Group has
sufficient capital and liquidity to operate under stressed
conditions.
Consequently, after making reasonable enquiries, the Directors
are satisfied that the Group has sufficient financial resources to
continue in business for at least 12 months from the date of
signing the report and therefore have continued to adopt the going
concern basis in preparing the financial statements.
2.2 Business combinations
A business combination is recognised where separate entities or
businesses have been acquired by the Group. The acquisition method
of accounting is used to account for the business combinations made
by the Group. The cost of a business combination is measured at the
aggregate of the fair values (at the date of exchange), of assets
given, liabilities incurred or assumed and equity instruments
issued by the Group in exchange for control of the acquired entity.
Where the consideration includes a contingent consideration
arrangement, the contingent consideration is measured at its
acquisition date fair value and included as part of the cost of the
acquisition. Subsequent changes in such fair values are adjusted
against the cost of acquisition where they qualify as measurement
period adjustments. All other subsequent changes in the fair value
of contingent consideration are charged to the income statement,
except for obligations that are classified as equity, which are not
re-measured. Where consideration is dependent on continued
employment within the business this is treated as a separate
transaction as post-acquisition remuneration.
Acquisition related costs are expensed as incurred in the income
statement, except if related to the issue of debt or equity
securities. Identifiable assets acquired and liabilities and
contingent liabilities assumed in the business combination are
measured initially at their fair values at the acquisition date.
The excess of the cost of acquisition over the fair value of the
Group's share of the identifiable net assets acquired is recorded
as goodwill. If this is less than the fair value of the Group's
share of the identifiable net assets of the subsidiary acquired,
the difference is taken immediately to the income statement.
2.3 Segmental reporting
The Group determines and presents operating segments based on
the information that is provided internally to the Board, which is
the Group's Chief Operating Decision Maker (CODM). In assessing the
Group's operating segments the Directors have considered the nature
of the services provided, product offerings, customer bases,
operating model and distribution channels amongst other factors.
The Directors concluded there is a single segment as it operates
with a single operating model; operations, support and technology
costs are managed and reported centrally to the CODM. A description
of the services provided is given within note 4.
2.4 Revenue recognition
Revenue represents fees receivable from investment
administration and dealing and custody services for both client
assets and client money. Revenue is measured based on the
consideration specified in a contract with a customer. The Group
recognises revenue when it transfers control over a good or service
to a customer.
Recurring fixed
Recurring fixed revenue comprises recurring administration fees
and media revenue.
Administration fees include fees charged in relation to the
administration services provided by the Group and are recognised
over time as the related service is provided.
Included within administration fees are annual pension
administration fees. The Group recognises revenue from such fees
over time, using an input method to measure progress towards
complete satisfaction of a single performance obligation. The Group
determined that the input method is the best method in measuring
progress of the services relating to these fees because there is a
direct relationship between the Group's effort (i.e. labour hours
incurred) and the transfer of service to the customer.
The Group recognises revenue on the basis of the labour hours
expended relative to the total expected labour hours to complete
the service.
Certain pension administration fees are received in arrears or
in advance. Where revenue is received in arrears for an ongoing
service, the proportion of the income relating to services provided
but not yet received is accrued. This is recognised as accrued
income until the revenue is received. Where revenue is received in
advance for an ongoing service, the proportion of the income
relating to services that have not yet been provided is deferred.
This is recognised as deferred income until the services have been
provided.
Media revenue includes advertising, subscriptions, events and
award ceremony and corporate solutions contracts. Subscriptions and
corporate solutions revenue is recognised evenly over the period in
which the related service is provided. Advertising, event and award
ceremony revenue is recognised in the period in which the
publication is made available to customers or the event or award
ceremony takes place.
Recurring ad valorem
Recurring ad valorem revenue comprises custody fees, retained
interest income and investment management fees provided by the
Group and is recognised evenly over the period in which the related
service is provided.
Ad valorem fees include custody fees charged in relation to the
holding of client assets and interest received on client money
balances. Custody fees and investment management fees are accrued
on a time basis by reference to the AUA.
Transactional fees
Transactional revenue comprises dealing fees and pension scheme
activity fees.
Transaction-based fees are recognised when received in
accordance with the date of settlement of the underlying
transaction.
Other non-recurring fees are recognised in the period to which
the service is rendered.
Cash incentives paid to new retail customers are considered to
be a reduction in revenue under IFRS 15. In line with IFRS 15, cash
incentives to acquire new customers are offset against recurring ad
valorem revenue and spread over a period of 12 months, i.e. the
period over which the incentive is earned.
2.5 Share-based payments
The Group operates a number of share-based payment arrangements
for its employees and non-employees. These generally involve an
award of share options (equity-settled share-based payments) which
are measured at the fair value of the equity instrument at the date
of grant.
The share-based payment arrangements have conditions attached
before the beneficiary becomes entitled to the award. These can be
performance and/or service conditions.
The total cost is recognised, together with a corresponding
increase in the equity reserves, over the period in which the
performance and/or service conditions are fulfilled. Costs relating
to the development of internally generated intangible assets are
capitalised in accordance with IAS 38. The cumulative cost
recognised for equity-settled transactions at each reporting date
until the vesting date reflects the extent to which the vesting
period has expired and management's estimate of shares that will
eventually vest. At the end of each reporting period, the entity
revises its estimates of the number of share options expected to
vest based on the non-market vesting conditions. It recognises any
revision to original estimates in the income statement, with a
corresponding adjustment to equity reserves.
No cost is recognised for awards that do not ultimately vest,
except for equity-settled transactions for which vesting is
conditional upon a market or non-vesting condition. These are
treated as vested irrespective of whether or not the market or
non-vesting condition is satisfied, provided that all other
performance and/or service conditions are satisfied.
The cost of equity-settled awards is determined by the fair
value at the date when the grant is made using an appropriate
valuation model or the market value discounted to its net present
value, further details of which are given in note 25. The expected
life applied in the model has been adjusted based on management's
best estimate for the effects of non-transferability, exercise
restrictions and behavioural considerations. Following the listing
of AJ Bell plc in December 2018, share price volatility has been
estimated as the average volatility applying to a comparable group
of listed companies.
2.6 Investment income
Investment income comprises the returns generated on corporate
cash at banks and short-term highly-liquid investments. Investment
income is recognised in the income statement as it accrues, using
the effective interest rate method.
2.7 Finance costs
Finance costs comprise interest incurred on lease liabilities in
relation to the right-of-use assets arising due to the leases of
the Group accounted for under IFRS 16. Finance costs are recognised
in the income statement using the effective interest rate
method.
2 .8 Taxation
The tax expense represents the sum of the current tax payable
and deferred tax. Tax is recognised in the income statement except
to the extent that it relates to items recognised directly in
equity, in which case it is recognised in equity.
Current tax is the expected tax payable or receivable on the
taxable income or loss for the year and any adjustment to tax
payable or receivable in respect of previous years, using tax rates
enacted or substantively enacted at the reporting date.
Deferred tax is provided on temporary differences between the
carrying amounts of assets and liabilities for financial reporting
purposes and the amounts used for taxation purposes. Deferred tax
is not recognised if the temporary difference arises from:
-- the initial recognition of goodwill; or
-- investments in subsidiaries to the extent that the Group is
able to control the timing of the reversal of the temporary
differences and it is probable they will not reverse in the
foreseeable future; or
-- the initial recognition of an asset and liability in a
transaction other than a business combination that, at the time of
the transaction, affects neither the accounting nor taxable profit
or loss.
Deferred tax assets are recognised for unused tax losses, unused
tax credits and deductible temporary differences to the extent that
it is probable that taxable profits will be available in the
future, against which deductible temporary differences can be
utilised. Recognised and unrecognised deferred tax assets are
reassessed at each reporting date.
The principal temporary differences arise from accelerated
capital allowances, provisions for share-based payments and
unutilised losses.
Deferred tax is measured at the tax rates that are expected to
be applied to temporary differences when they reverse, using tax
rates enacted or substantively enacted at the reporting date.
Deferred tax assets and liabilities are offset when there is a
legally enforceable right to set off current tax assets against
current tax liabilities and when they relate to income taxes levied
by the same taxation authority and the Group intends to settle its
current tax assets and liabilities on a net basis.
2.9 Dividends
Dividend distributions to the Company's shareholders are
recognised in the period in which the dividends are declared and
approved by the Company's shareholders at the Annual General
Meeting.
2.10 Goodwill
Goodwill arising on consolidation represents the difference
between the consideration transferred and the fair value of net
assets acquired of the subsidiary at the date of acquisition.
Goodwill is not amortised, but is reviewed at least annually for
impairment. Any impairment is recognised immediately through the
income statement and is not subsequently reversed.
For the purposes of impairment testing goodwill acquired in a
business combination is allocated to the cash generating unit (CGU)
expecting to benefit from the synergies of the combination. CGUs to
which goodwill has been allocated are reviewed annually or more
frequently when there is an indication that the goodwill relating
to that CGU may have been impaired. If the recoverable amount from
the CGU is less than the carrying amount of the assets present on
the consolidated statement of financial position forming that CGU,
the impairment loss is allocated first to reduce the carrying
amount of any goodwill
allocated to the assets forming that CGU and then to the assets
of the CGU pro-rata on the basis of the carrying amount of each
asset in the CGU.
On disposal of a subsidiary, the attributable amount of goodwill
is included in the determination of the profit or loss on
disposal.
2.11 Intangible assets (excluding goodwill)
Intangible assets comprise computer software and mobile
applications, customer contracts and non-contractual customer
relationships and the Group's Key Operating Systems (KOS). These
are stated at cost less amortisation and any recognised impairment
loss. Amortisation is provided on all intangible assets excluding
goodwill and assets under construction at rates calculated to write
off the cost or valuation, less estimated residual value, of each
asset evenly using a straight-line method over its estimated useful
economic life as follows:
Computer software and mobile applications - 3 - 4 years
KOS - 15 years
KOS enhancements - Over the remaining life of the KOS
Customer contracts and non-contractual customer relationships -
5 - 10 years
The assets' estimated useful lives, amortisation rates and
residual values are reviewed, and adjusted if appropriate at the
end of each reporting period. An asset's carrying value is written
down immediately to its recoverable amount if its carrying value is
greater than the recoverable amount.
The gain or loss arising on the disposal or retirement of an
asset is determined as the difference between the sales proceeds
and the carrying amount of the asset and is recognised in the
income statement immediately.
Change in estimate
During the year, the useful life of the KOS was reviewed and
subsequently extended from 13 years to 15 years reflecting the
recent extension of contract with the host. The planned growth of
the business can be supported by the KOS and the change in useful
life has been applied prospectively from 1 October 2020, therefore
the KOS will be amortised on a straight-line basis over the
remaining useful life of the asset.
The effect of this change on the actual and expected future
amortisation expense, included in 'administrative expenses', is as
follows:
GBP 000 2021 2022 2023 2024 2025 2026
--------------------------------------------- ------ ------ ------ ----- ----- -----
(Decrease)/increase in amortisation expense (281) (281) (281) 337 337 168
============================================== ====== ====== ====== ===== ===== =====
2.12 Internally-generated intangible assets
An internally-generated asset arising from work performed by the
Group is recognised only when the following criteria can be
demonstrated:
-- the technical feasibility of completing the intangible
asset so that it will be available for use or sale;
-- the intention to complete the intangible asset and use
or sell it;
-- the ability to use or sell the intangible asset;
-- how the intangible asset will generate probable future
economic benefits;
-- the availability of adequate technical, financial and other
resources to complete the development and to use or sell
the intangible asset; and
-- the ability to measure reliably the expenditure attributable
to the intangible asset during its development.
The amo unt initially recognised for internally-generated
intangible assets is the sum of expenditure incurred from the date
when the asset first meets the recognition criteria listed above.
Development expenditure that does not meet the criteria is
recognised as an expense in the period which it is incurred.
Subsequent to initial recognition, internally-generated
intangible assets are reported at cost less accumulated
amortisation and accumulated impairment losses, on the same basis
as intangible assets that are acquired separately. Assets under
construction are not amortised until the asset is operational and
available for use.
Expenditure on research activities is recognised as an expense
in the period in which it is incurred.
2.13 Property, plant and equipment
All property, plant and equipment is stated at cost, which
includes directly attributable acquisition costs, less accumulated
depreciation and any recognised impairment losses. Depreciation is
provided on all property, plant and equipment, except assets under
construction, at rates calculated to write off the cost, less
estimated residual value, of each asset evenly using a
straight-line method over its estimated useful economic life as
follows:
Leasehold improvements - Over the life of the lease
Office equipment - 4 years
Computer equipment - 3 - 5 years
The assets' estimated useful lives, depreciation rates and
residual values are reviewed, and adjusted if appropriate at the
end of each reporting period. An asset's carrying value is written
down immediately to its recoverable amount if its carrying value is
greater than the recoverable amount.
Assets under construction relate to capital expenditure on
assets not yet in use by the Group and are therefore not
depreciated.
The gain or loss arising on the disposal or retirement of an
asset is determined as the difference between the sales proceeds
and the carrying amount of the asset and is recognised in the
income statement immediately.
2.14 Leased assets and lease liabilities
Leases
(i) Right-of-use assets
The Group recognises right-of-use assets at the commencement
date of the leases. Right-of-use assets are measured at cost, less
any accumulated depreciation and impairment losses, and adjusted
for any re-measurement of lease liabilities. The cost of
right-of-use assets includes the amount of lease liabilities
recognised, initial direct costs incurred, and lease payments made
at or before the commencement date less any lease incentives
received.
Depreciation is applied in accordance with IAS 16: Property,
Plant and Equipment. Right-of-use assets are depreciated over the
lease term.
Right- of-use assets are subject to impairment.
(ii) Lease liabilities
At the commencement date of the lease, the Group recognises
lease liabilities measured at the present value of lease payments
to be made over the lease term. The lease payments include fixed
payments less any lease incentives receivable.
In calculating the present value of lease payments, the Group
uses the incremental borrowing rate at the lease commencement date
if the interest rate implicit in the lease is not readily
determinable. After the commencement date, the amount of lease
liabilities is increased to reflect the addition of interest and
reduced for the lease payments made. In addition, the carrying
amount of lease liabilities is re-measured if there is a
modification, a change in the lease term, a change in the fixed
lease payments or a change in the assessment to purchase the
underlying asset.
2.15 Impairment of intangible assets (excluding goodwill),
property, plant and equipment and leased assets
At each reporting date the Group reviews the carrying amount of
its intangible assets, property, plant and equipment and leased
assets to determine whether there is any indication that those
assets have suffered impairment. If such an indication exists then
the recoverable amount of that particular asset is estimated.
An impairment test is performed for an individual asset unless
it belongs to a CGU, in which case the present value of the net
future cash flows generated by the CGU is tested. A CGU is the
smallest group of assets that generates cash inflows from
continuing use that are largely independent of the cash inflows of
other assets or of groups of other assets. An intangible asset with
an indefinite useful life is tested for impairment annually and
whenever there is an indication that the asset may be impaired.
The recoverable amount is the higher of its fair value less
costs to sell and its value-in-use. In assessing its value-in-use,
the estimated net future pre-tax cash flows are discounted to their
present value using a pre-tax discount rate that reflects current
market assessments of the time value of money and the risks
specific to the asset for which the estimates of future cash flows
have not been adjusted.
If the recoverable amount of an asset or CGU in which the asset
sits is estimated to be lower than the carrying value, then the
carrying amount is reduced to the recoverable amount. An impairment
loss is recognised immediately in the income statement as an
expense.
An impairment loss is reversed only if subsequent external
events reverse the effect of the original event which caused the
recognition of the impairment. An impairment loss is reversed only
to the extent that the asset's carrying amount does not exceed the
carrying amount that would have been determined, net of
depreciation or amortisation, if no impairment loss had been
recognised. An impairment reversal is recognised in the income
statement immediately.
2.16 Retirement benefit costs
The Group makes payments into the personal pension schemes of
certain employees as part of their overall remuneration package.
Contributions are recognised in the income statement as they are
payable.
The Group also contributes to employees' stakeholder pension
schemes. The assets of the scheme are held separately from those of
the Group in independently-administered funds. Any amount charged
to the income statement represents the contribution payable to the
scheme in respect of the period to which it relates.
Alternatively, the Group will pay contributions to an employee's
AJ Bell Youinvest SIPP, if they wish, instead of the stakeholder
pension.
2.17 Provisions
Provisions are recognised when the Group has a present
obligation (legal or constructive) as a result of a past event and
it is probable that the Group will be required to settle that
obligation.
The amount recognised as a provision is the Directors' best
estimate of the consideration required to settle that obligation at
the reporting date and is discounted to present value where the
effect is material.
2.18 Levies
The Group applies the guidance provided in IFRIC 21 to levies
issued under the Financial Services Compensation Scheme. The
interpretation clarifies that an entity should recognise a
liability when it conducts the activity that triggers the payment
of the levy under law or regulation.
2.19 Financial instruments
Financial assets and liabilities are recognised in the statement
of financial position when a member of the Group becomes party to
the contractual provisions of the instrument.
Financial assets
Financial assets are classified according to the business model
within which the asset is held and the contractual cash-flow
characteristics of the asset. All financial assets are classified
as at amortised cost.
Financial assets at amortised cost
The Group's financial assets at amortised cost comprise trade
receivables, loans, other receivables and cash and cash
equivalents.
Financial assets at amortised cost are initially recognised at
fair value including any directly attributable costs. They are
subsequently measured at amortised cost using the effective
interest method, less any impairment. No interest income is
recognised on financial assets measured at amortised cost, with the
exception of cash and cash equivalents, as all financial assets at
amortised cost are short-term receivables and the recognition of
interest would be immaterial. Financial assets are derecognised
when the contractual right to the cash flows from the asset
expire.
Trade and other receivables
Trade and other receivables are initially recorded at the fair
value of the amount receivable and subsequently measured at
amortised cost using the effective interest method, less any
provision for impairment. Other receivables also represent client
money required to meet settlement obligations.
Cash and cash equivalents
Cash and cash equivalents include cash in hand, on demand
deposits with banks and other short-term highly-liquid investments
with original maturities of three months or less, or those over
which the Group has an immediate right of recall. Where
appropriate, bank overdrafts are shown within borrowings in current
liabilities in the consolidated statement of financial
position.
Impairment of financial assets
The Group applies the IFRS 9 simplified approach to measuring
expected credit losses which uses a lifetime expected loss
allowance for all trade receivables and contract assets. To measure
the expected credit losses, trade receivables have been grouped
based on shared credit risk characteristics and number of days past
due. The Group considers a trade receivable to be in default when
it is past due by more than 90 days, or when the value of a
client's receivable balance exceeds the value of the assets they
hold with AJ Bell.
The expected loss rates are based on the payment profiles of
sales over a period of 12 months before 30 September 2021 and the
corresponding historical credit losses experienced within this
period.
The carrying amount of the financial assets is reduced by the
use of a provision. When a trade receivable is considered
uncollectable, it is written off against the provision. Subsequent
recoveries of amounts previously written off are credited against
the provision. Changes in the carrying amount of the provision are
recognised in the income statement.
Financial liabilities
Financial liabilities are classified according to the substance
of the contractual arrangements entered into.
Lease liabilities
Lease liabilities consist of amounts payable by the Group
measured at the present value of lease payments to be made over the
lease term.
Other financial liabilities
The Group's other financial liabilities comprised borrowings and
trade and other payables. Other financial liabilities are initially
measured at fair value, net of transaction costs. They are
subsequently carried at amortised cost using the effective interest
rate method. A financial liability is derecognised when, and only
when, the Group's obligations are discharged, cancelled or they
expire.
Trade and other payables
Trade and other payables consist of amounts payable to clients
and other counterparties and obligations to pay suppliers for goods
and services in the ordinary course of business, including amounts
recognised as accruals. Trade and other payables are measured at
amortised cost using the effective interest method.
2.20 Employee benefit trust
The Group has an employee benefit trust, the AJ Bell Employee
Benefit Trust, used for the granting of shares to certain
employees. AJ Bell plc is considered to be the sponsoring employer
and so the assets and liabilities of the Trust are recognised as
those of AJ Bell plc.
Shares of AJ Bell plc held by the Trust are treated as 'own
shares' held and shown as a deduction from equity. Subsequent
consideration received for the sale of such shares is also
recognised in equity, with any difference between the sales
proceeds and original cost being taken to equity.
3 Critical accounting adjustments and key sources of estimation
uncertainty
In the application of the Group's accounting policies, which are
described in note 2, the Directors are required to make judgements,
estimates and assumptions to determine the carrying amounts of
certain assets and liabilities. The estimates and associated
assumptions are based on the Group's historical experience and
other relevant factors. Actual results may differ from the
estimates applied.
Estimates and underlying assumptions are reviewed on an ongoing
basis. Revisions to accounting estimates are recognised in the
period in which the estimate is revised if the revision affects
only that period, or in the period of the revision and future
periods if the revision affects both current and future
periods.
There are no judgements made, in applying the accounting
policies, about the future, or any other major sources of
estimation uncertainty at the end of the reporting period, that
have a significant risk of resulting in a material adjustment to
the carrying amounts of assets and liabilities within the next
financial year.
4 Segmental reporting
It is the view of the Directors that the Group has a single
operating segment being investment services in the advised and D2C
space administering investments in SIPPs, ISAs and General
Investment/Dealing accounts. Details of the Group's revenue,
results and assets and liabilities for the reportable segment are
shown within the consolidated income statement and consolidated
statement of financial position respectively.
The Group operates in one geographical segment, being the
UK.
Due to the nature of its activities, the Group is not reliant on
any one customer or group of customers for generation of
revenues.
5 Revenue
The analysis of the consolidated revenue is as follows:
2021 2020
GBP 000 GBP 000
--------------------- -------- --------
Recurring fixed 28,598 26,618
Recurring ad valorem 77,955 72,422
Transactional 39,273 27,709
--------------------- -------- --------
145,826 126,749
--------------------- -------- --------
Recurring ad valorem fees include custody fees. These recurring
charges are derived from the market value of retail customer
assets, based on asset mix and portfolio size, and are therefore
subject to market and economic risks. The rate charged is variable
dependent on portfolio size and asset mix within the portfolio. The
risks associated with this revenue stream in terms of its nature
and uncertainty is discussed further within the Financial
instruments and risk management note.
Recurring ad valorem fees also include retained interest income
earned on the level of customer cash balances, which are based on
customers' asset mix and portfolio size and are therefore subject
to market and economic risks. The risks associated with this
revenue stream in terms of its nature and uncertainty is discussed
further within the Financial instruments and risk management
note.
The total revenue for the Group has been derived from its
principal activities undertaken in the United Kingdom.
6 Business combinations
On 18 March 2021, AJ Bell plc acquired the entire issued share
capital of AJ Bell Touch Limited (formally 'Whiztec Limited') and
its wholly-owned subsidiary Ad Alpha Solutions Limited. Ad Alpha
Solutions Limited is an early-stage start-up business currently
developing a simplified, mobile-focused platform proposition for
advisers.
The acquisition will complement the Group's existing adviser
platform business, AJ Bell Investcentre, and will broaden the
offering to financial advisers and help them service a wider base
of clients.
The consideration for the acquisition of AJ Bell Touch Limited
was in the form of an earn-out arrangement, conditional upon
completion of a number of operational and financial milestones. The
maximum consideration payable is GBP16.5m and will be satisfied by
the issue of shares in AJ Bell plc. This consideration is accounted
for as post-combination remuneration in accordance with IFRS 3, for
which further details are included within note 25.
AJ Bell Touch Limited acquired Ad Alpha Solutions Limited on the
same day for consideration of GBP2.6m, comprising GBP2.6m cash
together with a share-for-share exchange for the management team
for nominal value shares in AJ Bell Touch Limited.
The purchase has been accounted for as a business combination
under the acquisition method in accordance with IFRS 3. The fair
value of the identifiable assets and liabilities of Adalpha as at
the date of acquisition was as follows:
Fair value Fair value
Book value adjustments on acquisition
GBP 000 GBP 000 GBP 000
Intangible assets - 1,142 1,142
Deferred tax liability (arising on
intangible assets) - (217) (217)
---------- ------------------ -------------------
- 925 925
Property, plant and equipment 37 - 37
Trade and other receivables 12 - 12
Cash and cash equivalents 56 - 56
---------- ------------------ -------------------
Total assets 105 925 1,030
---------- ------------------ -------------------
Trade and other payables (1,744) - (1,744)
---------- ------------------ -------------------
Total liabilities (1,744) - (1,744)
---------- ------------------ -------------------
Total net liabilities acquired (714)
-------------------
Goodwill 3,331
-------------------
Total cost of acquisition 2,617
===================
Satisfied by:
GBP 000
-------------------
Cash consideration 2,617
===================
Cash outflow on acquisition:
GBP 000
Cash paid for the subsidiary 2,617
Less: cash acquired (56)
-------------------
Net cash outflow 2,561
===================
Acquisition costs of GBP344,000 are recognised within
administrative expenses in the consolidated income statement.
The goodwill is attributable to the skills and technical talent
of the assembled workforce and synergies expected to arise
following the acquisition. It has been allocated to the Group's
single CGU.
In addition to the goodwill recognised, the development of the
simplified platform proposition obtained through the acquisition
met the requirements to be separately identifiable under IFRS 3. A
deferred tax liability of GBP217,000 has been provided in relation
to these fair value adjustments.
None of the acquired intangible assets or goodwill is expected
to be deductible for tax purposes.
Adalpha has not yet started to trade and therefore has not
contributed any revenue to the Group but has contributed a net loss
of GBP3.4m for the period from acquisition to 30 September 2021,
GBP2.8m of which is a share based payment expense relating to the
earn-out arrangement.
If the acquisition had occurred on 1 October 2020, Group revenue
and Group profit after tax for the year ended 30 September 2021
would have been an estimated GBP145.8m and GBP43.1m
respectively.
7 Operating profit
Profit for the financial year has been arrived at after
charging:
2021 2020
GBP 000 GBP 000
------------------------------------------- -------- --------
Amortisation of intangible assets 862 668
Depreciation of:
* property, plant and equipment 1,071 1,112
* right-of-use assets 1,690 1,794
Loss/(profit) on the disposal of:
* property, plant and equipment 13 1
* right-of-use assets (3) -
Auditor's remuneration (see below) 368 284
Staff costs (note 8) 47,654 40,183
CSR initiative (note 25) - 1,595
------------------------------------------- -------- --------
During the year there was no expenditure in relation to research
and development expensed to the income statement (2020:
GBPnil).
Auditor's remuneration
The analysis of auditor's remuneration is as follows:
2021 2020
GBP 000 GBP 000
------------------------------------------------- -------- --------
Fees payable to the Company's auditor for
the audit of the Company's annual accounts 116 95
Fees payable to the Company's auditor and
its associates for other services to the Group:
- Audit of the Company's subsidiaries' accounts,
pursuant to legislation 151 90
- Audit-related assurance services 62 60
- Other assurance services 39 39
368 284
------------------------------------------------- -------- --------
Of the above, audit-related services for the year totalled
GBP349,000 (2020: GBP284,000).
8 Staff costs
The average monthly number of employees (including Executive
Directors) of the Group was:
2021 2020
No. No.
------------------------ ---- ----
Operational and support 709 625
Technology 181 167
Distribution 99 87
------------------------ ---- ----
989 879
------------------------ ---- ----
Employee benefit expense for the Group during the year:
2021 2020
GBP 000 GBP 000
------------------------------- -------- --------
Wages and salaries 35,516 32,305
Social security costs 3,918 3,557
Retirement benefit costs 3,202 2,542
Termination benefits 66 11
Share-based payments (note 25) 4,952 1,768
------------------------------- -------- --------
47,654 40,183
------------------------------- -------- --------
In addition to the above GBP454,000 staff costs and GBP1,378,000
share-based payment expenses (2020: GBPnil) have been capitalised
as an internally generated intangible asset (see note 15).
9 Investment income
2021 2020
GBP 000 GBP 000
--------------------------------- -------- --------
Interest income on cash balances 23 123
Other income - 39
--------------------------------- -------- --------
23 162
--------------------------------- -------- --------
10 Finance costs
2021 2020
GBP 000 GBP 000
---------------------------------------- -------- --------
Interest on lease liabilities 789 848
Interest on other financial liabilities 1 -
---------------------------------------- -------- --------
790 848
---------------------------------------- -------- --------
11 Taxation
Tax charged in the income statement:
2021 2020
GBP 000 GBP 000
-------------------------------------------------- -------- --------
Current taxation
UK Corporation Tax 11,629 9,830
Adjustment to current tax in respect of prior
periods (11) 21
-------------------------------------------------- -------- --------
11,618 9,851
-------------------------------------------------- -------- --------
Deferred taxation
Origination and reversal of temporary differences (328) (132)
Adjustment to deferred tax in respect of prior
periods 12 23
Effect of changes in tax rates (40) (21)
-------------------------------------------------- -------- --------
(356) (130)
-------------------------------------------------- -------- --------
Total tax expense 11,262 9,721
-------------------------------------------------- -------- --------
Corporation Tax is calculated at 19% of the estimated assessable
profit for the year to 30 September 2021 (2020: 19%).
In addition to the amount charged to the income statement,
certain tax amounts have been credited directly to equity as
follows:
2021 2020
GBP 000 GBP 000
------------------------------------------------ -------- --------
Deferred tax relating to share-based payments
(see note 19) 202 304
Current tax relief on exercise of share options (231) (811)
------------------------------------------------ -------- --------
(29) (507)
------------------------------------------------ -------- --------
The charge for the year can be reconciled to the profit per the
income statement as follows:
2021 2020
GBP 000 GBP 000
------------------------------------------- -------- --------
Profit before tax 55,084 48,550
------------------------------------------- -------- --------
UK Corporation Tax at 19% (2020: 19%) 10,466 9,225
Effects of:
Expenses not deductible for tax purposes 709 448
Amounts not recognised 126 25
Effect of rate changes to deferred tax (40) (21)
Adjustments to current and deferred tax in
respect of prior periods 1 44
------------------------------------------- -------- --------
11,262 9,721
------------------------------------------- -------- --------
Effective tax rate 20.4% 20.0%
Following the enactment of the Finance Act 2021 the standard UK
corporation tax rate will remain at 19% before increasing to 25%
from 1 April 2023 on a tiered basis. Accordingly, the Group's
profits for this accounting year are taxed at 19%.
Deferred tax has been recognised at either 19% or 25% depending
on the rate expected to be in force at the time of the reversal of
the temporary difference (2020: 19%). A deferred tax asset in
respect of future share option deductions has been recognised based
on the Company's share price at 30 September 2021.
12 Dividends
2021 2020
GBP 000 GBP 000
------------------------------------------------- -------- --------
Amounts recognised as distributions to equity
holders during the year:
Final dividend for the year ended 30 September
2020 of 4.66p (2019: 3.33p) per share 19,070 13,601
Interim dividend for the year ended 30 September
2021 of 2.46p (2020: 1.50p) per share 10,068 6,132
------------------------------------------------- -------- --------
Total dividends paid on equity shares 29,138 19,733
------------------------------------------------- -------- --------
Proposed final dividend for the year ended
30 September 2021 of 4.50p (2020: 4.66p) per
share 18,471 19,050
Proposed special dividend for the year ended
30 September 2021 of 5.00p (2020: nil) per
share 20,523 -
------------------------------------------------- -------- --------
A final dividend declared of 4.50p per share is payable on 4
February 2022 to shareholders on the register on 7 January 2022.
The ex-dividend date will be 6 January 2022. The final dividend is
subject to approval by the shareholders at the Annual General
Meeting on 26 January 2022 and has not been included as a liability
within these financial statements.
A special dividend declared of 5.00p per share is payable on 4
February 2022 to shareholders on the register on 7 January 2022.
The ex-dividend date will be 6 January 2022. The special dividend
is subject to approval by the shareholders at the Annual General
Meeting on 26 January 2022 and has not been included as a liability
within these financial statements.
Dividends are payable on all ordinary shares as disclosed in
note 24.
AJ Bell Employee Benefit Trust, which held 885,701 ordinary
shares (2020: 1,369,428) in AJ Bell plc at 30 September 2021, has
agreed to waive all dividends. This represented 0.2% (2020: 0.3%)
of the Company's called-up share capital. The maximum amount held
by the Trust during the year was 1,369,428.
13 Earnings per share
Basic earnings per share is calculated by dividing the profit
attributable to the owners of the parent company by the weighted
average number of ordinary shares, excluding own shares, in issue
during the year.
Diluted earnings per share is calculated by adjusting the
weighted average number of shares to assume exercise of all
potentially dilutive share options.
The calculation of basic and diluted earnings per share is based
on the following data:
2021 2020
GBP 000 GBP 000
----------------------------------------------- -------- --------
Earnings
Earnings for the purposes of basic and diluted
earnings per share being profit attributable
to equity holders of the parent company 43,822 38,829
----------------------------------------------- -------- --------
2021 2020
No. No.
----------------------------------------------- ----------- -----------
Number of shares
Weighted average number of ordinary shares
for the purposes of basic EPS in issue during
the year 409,249,186 408,342,783
Effect of potentially dilutive share options 1,643,911 1,722,941
----------------------------------------------- ----------- -----------
Weighted average number of ordinary shares
for the purposes of fully diluted EPS 410,893,097 410,065,724
----------------------------------------------- ----------- -----------
2021 2020
------------------------- ----- ----
Earnings per share (EPS)
Basic (pence) 10.71 9.51
Diluted (pence) 10.67 9.47
------------------------- ----- ----
14 Goodwill
2021 2020
GBP 000 GBP 000
--------------------------------------------- -------- --------
Cost
At 1 October 3,772 3,772
Acquired through business combinations (note
6) 3,331 -
At 30 September 7,103 3,772
--------------------------------------------- -------- --------
Impairment
At 1 October and 30 September (112) (112)
--------------------------------------------- -------- --------
Carrying value at 30 September 6,991 3,660
--------------------------------------------- -------- --------
Goodwill relates to acquisitions allocated to the Group's single
CGU.
The Group tests goodwill annually for impairment or more
frequently if there are indications that goodwill might be
impaired.
The recoverable amount of the assets within the CGU is
determined using value-in-use calculations. In assessing the
value-in-use the estimated future cash flows of the CGU are
discounted to their present value using a pre-tax discount rate.
Cash flows are based upon the most recent forecasts, approved by
the Board, covering a four-year period representing the remaining
useful economic life of the asset.
The key assumptions for value-in-use calculations are those
regarding discount rate, growth rates and expected changes to
revenues and costs in the period, as follows:
- a compound rate of 17% (2020: 6%) has been used to assess the
expected growth in revenue for the four-year forecast period. This
is based on a combination of historical and expected future
performance.
- economies of scale are expected to be gained in the medium to
long-term, although there are not expected to be any significant
changes to the nature of administrative expenses.
- modest ongoing maintenance expenditure is required on the
assets within the CGU in order to generate the expected level of
cash flows.
The Directors have made these assumptions based upon past
experience and future expectations in the light of anticipated
market conditions and the results of streamlining processes through
implementation of the target operating model for customer
services.
Cash flows have been discounted using a pre-tax discount rate of
14.52% (2020: 11.35%).
The pre-tax discount rate has been calculated using an
independent external source. The Directors have performed
sensitivity analysis on their calculations, with key assumptions
being revised adversely to reflect the potential for future
performance being below expected levels. Changes to revenue are the
most sensitive as they would have the greatest impact on future
cash flows. However, even with nil growth in revenue, there would
still be sufficient headroom to support the carrying value of the
assets under the CGU.
Based upon the review above the estimated value-in-use of the
CGU comfortably supports the carrying value of the assets held
within it, and so the Directors are satisfied that for the period
ended 30 September 2021 goodwill is not impaired.
15 Other intangible assets
Computer software
Key operating Contractual and mobile
system customer relationships applications Total
GBP 000 GBP 000 GBP 000 GBP 000
------------------------------- ------------- ----------------------- ----------------- ---------
Cost
At 1 October 2019 8,657 2,135 5,234 16,026
Additions 50 - 151 201
------------------------------- ------------- ----------------------- ----------------- ---------
At 30 September 2020 8,707 2,135 5,385 16,227
------------------------------- ------------- ----------------------- ----------------- ---------
Additions 1,832 - 1,916 3,748
Disposals - - (832) (832)
Arising on acquisition
(note 6) 1,142 - - 1,142
------------------------------- ------------- ----------------------- ----------------- ---------
At 30 September 2021 11,681 2,135 6,469 20,285
------------------------------- ------------- ----------------------- ----------------- ---------
Amortisation
At 1 October 2019 6,240 2,135 5,198 13,573
Amortisation charge 614 - 54 668
------------------------------- ------------- ----------------------- ----------------- ---------
At 30 September 2020 6,854 2,135 5,252 14,241
------------------------------- ------------- ----------------------- ----------------- ---------
Amortisation charge 337 - 525 862
Eliminated on disposal - - (832) (832)
------------------------------- ------------- ----------------------- ----------------- ---------
At 30 September 2021 7,191 2,135 4,945 14,271
------------------------------- ------------- ----------------------- ----------------- ---------
Carrying amount
At 30 September 2021 4,490 - 1,524 6,014
------------------------------- ------------- ----------------------- ----------------- ---------
At 30 September 2020 1,853 - 133 1,986
------------------------------- ------------- ----------------------- ----------------- ---------
At 30 September 2019 2,417 - 36 2,453
------------------------------- ------------- ----------------------- ----------------- ---------
Average remaining amortisation 4 years 2 years
period
The amortisation charge above is included within administrative
expenses in the income statement.
As part of the acquisition of Adalpha in the period,
GBP1,142,000 of intangibles met the requirements to be separately
identifiable under IFRS 3.
Additions include an amount of GBP2,289,000 relating to
internally generated assets for the year ended 30 September 2021
(2020: GBPnil), of which GBP1,378,000 (2020: GBPnil) relates to
capitalised share-based payment expenses (see note 25).
The net carrying amount of key operating systems, and computer
software and mobile applications include GBP2,974,000 and
GBP457,000 respectively, relating to assets in development which
are currently not amortised.
16 Property, plant and equipment
Leasehold improvements Office equipment Computer equipment Total
GBP 000 GBP 000 GBP 000 GBP 000
---------------------------- ---------------------- ---------------- ------------------ --------
Cost
As at 1 October
2019 1,942 950 4,240 7,132
--------
Additions 202 70 584 856
Disposals - (78) (115) (193)
At 30 September
2020 2,144 942 4,709 7,795
---------------------------- ---------------------- ---------------- ------------------ --------
Arising on acquisition
(note 6) - 11 52 63
Additions 48 27 1,099 1,174
Disposals - (26) (643) (669)
Transfers from right-of-use
assets - - 393 393
At 30 September
2021 2,192 954 5,610 8,756
---------------------------- ---------------------- ---------------- ------------------ --------
Depreciation
At 1 October 2019 318 492 2,838 3,648
Charge for the year 153 231 728 1,112
Eliminated on disposal - (78) (111) (189)
---------------- ------------------ --------
At 30 September
2020 471 645 3,455 4,571
---------------------------- ---------------------- ---------------- ------------------ --------
Arising on acquisition
(note 6) - 5 21 26
Charge for the year 184 169 718 1,071
Eliminated on disposal - (22) (634) (656)
Transfers from right-of-use
assets - - 393 393
At 30 September
2021 655 797 3,953 5,405
---------------------------- ---------------------- ---------------- ------------------ --------
Carrying amount
At 30 September
2021 1,537 157 1,657 3,351
---------------------------- ---------------------- ---------------- ------------------ --------
At 30 September
2020 1,673 297 1,254 3,224
---------------------------- ---------------------- ---------------- ------------------ --------
At 30 September
2019 1,449 361 1,674 3,484
---------------------------- ---------------------- ---------------- ------------------ --------
The depreciation charge above is included within administrative
expenses in the income statement.
At the year end, the Group had no commitments (2020: GBPnil) to
purchase any property, plant and equipment.
Computer equipment includes assets under construction of
GBP71,000 (2020: GBP5,000) which are currently not depreciated.
17 Leases
i) Right-of-use assets
Computer and
Property office equipment Total
GBP 000 GBP 000 GBP 000
---------------------------------- ---------------- -------------------------------- --------------------------
Cost
At 1 October 2019 15,735 575 16,310
Additions - 9 9
Effect of modification to leases - (2) (2)
Reduction in dilapidations
provision (1) - (1)
---------------------------------- ---------------- -------------------------------- --------------------------
At 30 September 2020 15,734 582 16,316
---------------------------------- ---------------- -------------------------------- --------------------------
Additions 424 36 460
Disposals - (15) (15)
Effect of modification to leases - 42 42
Transfer to property, plant and
equipment - (393) (393)
---------------------------------- ---------------- -------------------------------- --------------------------
At 30 September 2021 16,158 252 16,410
---------------------------------- ---------------- -------------------------------- --------------------------
Depreciation
At 1 October 2019 - - -
Charge for the year 1,455 339 1,794
----------------
At 30 September 2020 1,455 339 1,794
---------------------------------- ---------------- -------------------------------- --------------------------
Charge for the year 1,485 205 1,690
Eliminated on disposal - (6) (6)
Transfer to property, plant and
equipment - (393) (393)
---------------------------------- ---------------- -------------------------------- --------------------------
At 30 September 2021 2,940 145 3,085
----------------------------------
Carrying amount
At 30 September 2021 13,218 107 13,325
---------------------------------- ---------------- -------------------------------- --------------------------
At 30 September 2020 14,279 243 14,522
---------------------------------- ---------------- -------------------------------- --------------------------
L
The depreciation charge above is included within administrative expenses
in the income statement.
The Group has entered into various leases in respect of property and
computer and office equipment as a lessee. Lease terms are negotiated
on an individual basis and contain a range of different terms and
conditions. Property leases typically run for a period of six to fifteen
years and computer and office equipment for a period of one to six
years.
Other than property and computer and office equipment there are no
further classes of assets leased by the Group.
ii) Lease liabilities
2021 2020
GBP 000 GBP 000
------------ -------- --------
Current 1,708 1,323
Non-current 13,886 15,022
------------- -------- --------
15,594 16,345
------------ -------- --------
The undiscounted maturity analysis of lease liabilities is shown
below:
2021 2020
GBP 000 GBP 000
--------------------------------------- -------- --------
Within one year 2,450 2,102
In the second to fifth years inclusive 8,333 8,317
After five years 8,678 10,500
--------------------------------------- -------- --------
Total minimum lease payments 19,461 20,919
--------------------------------------- -------- --------
The total lease interest expense for the year ended 30 September
2021 was GBP789,000 (2020: GBP848,000). Total cash outflow for
leases accounted for under IFRS 16 for the year ended 30 September
2021 was GBP1,241,000 (2020: GBP1,708,000).
18 Subsidiaries
The Group consists of a parent company, AJ Bell plc incorporated
within the UK, and a number of subsidiaries held directly and
indirectly by AJ Bell plc which operate and are incorporated in the
UK. Note 6 to the Company's separate financial statements lists
details of the interests in subsidiaries.
19 Deferred tax asset
2021 2020
GBP 000 GBP 000
----------------------- -------- --------
Deferred tax asset 1,139 1,050
Deferred tax liability (199) (47)
----------------------- -------- --------
940 1,003
----------------------- -------- --------
Deferred tax asset
The movement on the deferred tax account and movement between
deferred tax assets and liabilities is as follows:
Accelerated
capital Share-based Short-term
allowances payments timing differences Losses Total
GBP 000 GBP 000 GBP 000 GBP 000 GBP 000
-------------------------- ----------- ----------- ------------------- -------- ------------
At 1 October 2019 (52) 1,063 117 49 1,177
-------------------------- -----------
(Charge) / credit to the
income statement 5 181 (15) (41) 130
Charge to equity - (304) - - (304)
-------------------------- ----------- ----------- ------------------- -------- ------------
At 30 September 2020 (47) 940 102 8 1,003
-------------------------- ----------- ----------- ------------------- -------- ------------
(Charge) / credit to the
income statement 65 252 47 (8) 356
Charge to equity - (202) - - (202)
Acquired through business
combination (note 6) (217) - - (217)
-------------------------- ----------- ----------- ------------------- -------- ------------
At 30 September 2021 (199) 990 149 - 940
-------------------------- ----------- ----------- ------------------- -------- ------------
The current year deferred tax adjustment relating to share-based
payments reflects the estimated total future tax relief associated
with the cumulative share-based payment benefit arising in respect
of share options granted but unexercised as at 30 September
2021.
Acquired deferred tax liabilities of GBP217,000 have been
recognised in relation to the acquisition of Ad Alpha Solutions
Limited for the value of intangible assets recognised under IFRS 3
Business Combinations. See note 6 for further details.
Deferred tax assets have been recognised in respect of other
temporary differences giving rise to deferred tax assets where it
is probable that these assets will be recovered. As at 30 September
2021, deferred tax assets have not been recognised on trading
losses of GBP2,809,000 (2020: GBP1,551,000).
20 Trade and other receivables
2021 2020
GBP 000 GBP 000
------------------ -------- --------
Trade receivables 2,321 2,001
Prepayments 5,379 2,904
Accrued income 14,699 21,132
Other receivables 12,009 4,524
------------------ -------- --------
34,408 30,561
------------------ -------- --------
The Directors consider that the carrying amount of trade and
other receivables approximates their fair value. Other receivables
represent client money required to meet settlement obligations and
are payable on demand.
Included within accrued income is GBP978,000 (2020: GBP919,000)
relating to contract assets, a movement of GBP59,000 (2020:
GBP17,000) during the year due to increased revenues.
The ageing profile of trade receivables was as follows:
2021 2020
GBP 000 GBP 000
------------------------- -------- --------
Current - not past due 882 928
Past due:
0 to 30 days 798 452
31 to 60 days 159 95
61 to 90 days 125 82
91 days and over 881 859
------------------------- -------- --------
2,845 2,416
------------------------- -------- --------
Provision for impairment (524) (415)
------------------------- -------- --------
2,321 2,001
------------------------- -------- --------
The movement in the provision for impairment of trade
receivables is as follows:
2021 2020
GBP 000 GBP 000
------------------------------------------- -------- --------
Opening loss allowance as at 1 October 415 303
Loss allowance recognised 196 137
Receivables written off during the year as
uncollectable (58) (8)
Amounts recovered during the year - (4)
Unused amount reversed (29) (13)
------------------------------------------- -------- --------
Balance at end of year 524 415
------------------------------------------- -------- --------
In determining the recoverability of trade receivables, the
Directors considered any change in the credit quality of the trade
receivable from the date credit was initially granted up to the
reporting date.
21 Cash and cash equivalents
2021 2020
GBP 000 GBP 000
---------------------------------------- -------- --------
Group cash and cash equivalent balances 97,062 86,384
---------------------------------------- -------- --------
Cash and cash equivalents at 30 September 2021 and 30 September
2020 are considered to be holdings of less than one month, or those
over which the Group has an immediate right of recall.
22 Trade and other payables
2021 2020
GBP 000 GBP 000
-------------------------------- -------- --------
Trade payables 580 918
Social security and other taxes 2,111 1,586
Other payables 582 554
Accruals 7,473 7,514
Deferred income 2,019 1,796
-------------------------------- -------- --------
12,765 12,368
-------------------------------- -------- --------
Trade payables, accruals and deferred income principally
comprise amounts outstanding for trade purposes and ongoing costs.
The Directors consider that the carrying amount of trade payables
approximates their fair value.
Deferred income in the current and prior year relates to
contract liabilities. Of the deferred income recognised as at 30
September 2020, GBP1,788,000 has been recognised as revenue in this
financial year. The current year balance all relates to cash
received in the current period. Total deferred income as at 30
September 2021 is expected to be recognised as revenue in the
coming year.
23 Provisions
Office dilapidations Other provisions Total
GBP 000 GBP 000 GBP 000
------------------------------------ -------------------- ---------------- --------
At 1 October 2020 1,549 1,595 3,144
Additional provisions - 15 15
Provisions used - (47) (47)
Unused provision reversed - (37) (37)
--------
At 30 September 2021 1,549 1,526 3,075
------------------------------------ -------------------- ---------------- --------
Included in current liabilities - 1,526 1,526
------------------------------------ -------------------- ---------------- --------
Included in non-current liabilities 1,549 - 1,549
------------------------------------ -------------------- ---------------- --------
Office dilapidations:
The Group is contractually obliged to reinstate its leased
properties to their original state and layout at the end of the
lease terms. The office dilapidations provision represents
management's best estimate of the present value of costs which will
ultimately be incurred in settling these obligations.
Other provisions:
The other provisions relate to the settlement of an operational
tax dispute and the costs associated with defending a legal case.
There is some uncertainty regarding the amount and timing of the
outflows required to settle the obligations; therefore a best
estimate has been made by assessing a number of different outcomes
considering the potential areas and time periods at risk and any
associated interest. The timings of the outflows are uncertain but
the Group expects that settlement will be within the next 12
months.
24 Share capital
2021 2020 2021 2020
Issued, fully-called and paid: Number Number GBP GBP
--------------------------------- ----------- ----------- ------ ------
Ordinary shares of 0.0125p
each 410,491,708 410,168,330 51,311 51,271
--------------------------------- ----------- ----------- ------ ------
All ordinary shares have full voting and dividend rights.
The following transactions have taken place during the year:
Transaction type Share class Number of shares Share premium
GBP 000
------------------ ------------------ ----------------- --------------
Exercise of CSOP Ordinary shares
options of 0.0125p each 323,378 199
The holders of ordinary shares are entitled to receive dividends
as declared from time to time and are entitled to one vote per
share at general meetings of the Company. They are entitled to
share in the proceeds on the return of capital, or upon the winding
up of the Company in proportion to the number of and amounts paid
on shares held. The shares are non-redeemable.
Own shares
The Group has an employee benefit trust in order to acquire own
shares in the Company to satisfy future share incentive plans.
Shares held by the Trust are held at GBP740,000 (2020:
GBP1,147,000) being the price paid to repurchase, and the carrying
value is shown as a reduction within shareholders' equity.
During the year, 130,695 EIP options were exercised and issued
from the AJ Bell Employee Benefit Trust, and 353,032 shares were
issued in the period relating to the earn-out arrangement upon the
completion of operational milestones.
The costs of operating the Trust are borne by the Group but are
not material. The Trust waived the right to receive dividends on
these shares.
25 Share-based payments
Company Share Option Plan (CSOP)
The CSOP is a HMRC approved scheme in which the Board, at their
discretion, grant options to employees to purchase ordinary shares.
Each participating employee can be granted options up to the value
of GBP30,000. Options granted under the CSOP can be exercised
between the third and tenth anniversary after the date of grant and
are usually forfeited if the employee leaves the Group before the
option expires. The expense for share-based payments under the CSOP
is recognised over the respective vesting period of these
options.
Option To Buy Scheme (OTB) - Growth shares
The OTB scheme is a historical award scheme whereby the Board at
its discretion granted growth shares to employees. Growth shares
entitled the holder to participate in the growth value of the Group
above a certain threshold level, set above the current market value
of the Group at the time the shares were issued. Growth shares
granted under the OTB scheme had different vesting conditions. The
vesting condition attached to all growth shares granted is that the
threshold level needs to be met and an exit event needs to have
occurred. As part of the AJ Bell listing process all awards were
converted into ordinary shares and those awards granted with an
additional employment condition of four or six years after the date
of grant, continue to be recognised as a share-based payment.
Awards that were issued subject to employment conditions are
subject to buy back options under which the Group can buy back the
shares for their issue price if the employee leaves the Group
before the expiry of the employment condition period.
Buy As You Earn plan (BAYE)
The BAYE plan is an all-employee share plan under which shares
can be issued to employees as either free shares or partnership
shares.
The Company may grant free shares up to a maximum of GBP3,600
per employee in a tax year. During the year, no free shares have
been issued (2020: nil).
Employees have been offered the opportunity to participate in
the partnership plan to enable such employees to use part of their
pre-tax salary to acquire shares. The limit to the pre-tax salary
deduction is GBP1,800 or, if lower, 10% of salary each year. The
initial plan was an accumulation plan where employees were required
to save an amount of their gross salary for a 12 month period. The
accumulation plan ended on 6 December 2019 and employees still in
the plan at that date, were entitled to purchase shares using the
funds saved based on the IPO price of GBP1.60.
From January 2020, the plan entitles employees to use this
deduction to buy shares in the Company on a monthly basis at the
current market value. Employees are able to withdraw their shares
from the plan at any time but may be subject to income tax and
national insurance charges if withdrawn within three years of
purchasing the shares. Therefore the monthly partnership plan does
not give rise to a share-based payment charge.
Executive Incentive Plan (EIP)
The EIP is a performance share plan that involves the award of
nominal cost options to participants conditional on the achievement
of specified performance targets and continuous employment over a
certain period of time. Individual grants will be dependent on the
assessment of performance against a range of financial and
non-financial targets set at the beginning of the financial
year.
CSR initiative
A CSR initiative was introduced in December 2019 with the
intention of giving an additional contribution to charity through
the donation of share options should a number of stretching targets
be met by the Group. The awards made are equity-settled awards and
involved the grant of market value options to the AJ Bell Trust
conditional on the achievement of DEPS targets for the financial
years 2022, 2023 and 2024 ('Performance Period').
The exercise of each tranche will be conditional upon the DEPS
having increased in relation to the 7.47 pence DEPS for the year
ended 30 September 2019, by more than:
- 90% for September 2022;
- 115% for September 2023; and
- 140% for 30 September 2024.
These are considered to be the lower DEPS targets. The upper
DEPS target for each performance period is 10% above the lower DEPS
target.
The percentage of shares granted that will vest in each
performance period is determined as follows:
- If actual DEPS is below the lower DEPS target, the vesting percentage is equal to zero;
- If actual DEPS is above the upper DEPS target, the vesting percentage is equal to 100%; and
- If actual DEPS is between the lower and upper target, then the
vesting percentage is determined by linear interpolation on a
straight-line basis and rounded down to the nearest 10%.
As no service is being provided by the AJ Bell Trust, all
conditions involved in the arrangement are considered to be
non-vesting conditions. Non-vesting conditions should be taken into
account when estimating the fair value of the equity instrument
granted. The fair value has been estimated using the Monte Carlo
simulation model. The full charge of GBP1,595,000 for the CSR
initiative was recognised in the prior year, no further charge has
been recognised in the period.
Earn-out arrangement
The acquisition of Adalpha during the period has given rise to
an earn-out arrangement whereby share awards will be made should a
number of operational and financial milestones, relating to AUA
targets and the development of a simplified proposition for
financial advisers, be met. The awards will be equity-settled and
will vest in several tranches in line with the agreed milestones,
expiring on 30 September 2026.
Under the terms of the acquisition agreement, shares will be
awarded to eligible employees conditional upon the successful
completion of certain performance milestones and their continued
employment with the Group during the vesting period. There is no
exercise price attached to the share award.
Movements during the year
The tables below summarise the outstanding options for each
share-based payment scheme.
CSOP
2021 2020
------------------------------ --------------------------- ---------------------------
Weighted average Weighted average
Number exercise price Number exercise price
GBP GBP
------------------------------ --------- ---------------- --------- ----------------
Outstanding at beginning of
the year 1,003,968 1.90 1,484,709 0.65
Granted during the year 392,371 4.34 364,365 3.94
Forfeited during the year (57,198) 2.23 (30,171) 2.49
Exercised during the year (323,378) 0.61 (814,935) 0.52
------------------------------ --------- ---------------- --------- ----------------
Outstanding at the end of the
year 1,015,763 3.23 1,003,968 1.90
------------------------------ --------- ---------------- --------- ----------------
Exercisable at the end of the
year 10,000 0.52 84,807 0.48
The lowest exercise price for share options outstanding at the
end of the period was 52p (2020: 36p) and the highest exercise
price was 434p (2020: 394p). The weighted average remaining
contractual life of share options outstanding at the end of the
period was 8.3 years (2020: 7.7 years).
OTB - Growth shares
2021 2020
------------------------------ --------------------------- ---------------------------
Weighted average Weighted average
Number exercise price Number exercise price
GBP GBP
------------------------------ --------- ---------------- --------- ----------------
Outstanding at beginning of
the year 3,212,675 0.63 3,387,627 0.63
Forfeited during the year - - (20,407) 0.63
Call option expired - - (154,545) 0.63
Exercised (20,407) 0.63 - -
------------------------------ --------- ---------------- --------- ----------------
Outstanding at the end of the
year 3,192,268 0.63 3,212,675 0.63
------------------------------ --------- ---------------- --------- ----------------
Exercisable at the end of the
year - - - -
Upon listing to the London Stock Exchange, all growth shares
were converted to ordinary shares and therefore no exercise price
exists for growth shares outstanding at the end of the period. The
weighted average remaining contractual life of growth shares
converted to ordinary shares under a call option agreement at the
end of the period was 0.9 years (2020: 1.9 years).
BAYE - Free shares
2021 2020
Number Number
------------------------------------- -------- --------
Outstanding at beginning of the year 263,106 286,038
Forfeited during the year (22,994) (22,932)
------------------------------------- -------- --------
Outstanding during the year 240,112 263,106
------------------------------------- -------- --------
Exercisable at the end of the year - -
Free shares are issued to employees for free and therefore do
not have an exercise price. The weighted average remaining
contractual life of free shares outstanding at the end of the
period was 0.2 years (2020: 1.2 years).
EIP
2021 2020
---------------------------- --------------------------- ---------------------------
Weighted average Weighted average
exercise price exercise price
Number GBP Number GBP
---------------------------- --------- ---------------- --------- ----------------
Outstanding at beginning of
the year 1,208,693 0.000125 1,454,424 0.000125
Granted during the year 580,146 0.000125 703,235 0.000125
Exercised during the year (130,695) 0.000125 (432,949) 0.000125
Cancelled during the year (145,632) 0.000125 (516,017) 0.000125
Forfeited during the year (25,199) 0.000125 - -
---------------------------- --------- ---------------- --------- ----------------
Outstanding during the year 1,487,313 0.000125 1,208,693 0.000125
---------------------------- --------- ---------------- --------- ----------------
Exercisable at the end of
the year 191,509 0.000125 31,272 0.000125
The weighted average remaining contractual life of EIP shares
outstanding at the end of the period was 8.2 years (2020: 8.8
years).
CSR initiative
2021 2020
---------------------------- --------------------------- ---------------------------
Weighted average Weighted average
exercise price exercise price
Number GBP Number GBP
---------------------------- --------- ---------------- --------- ----------------
Outstanding at beginning of
the year 2,493,766 4.01 - -
Granted during the year - - 2,493,766 4.01
Outstanding during the year 2,493,766 4.01 2,493,766 4.01
---------------------------- --------- ---------------- --------- ----------------
Exercisable at the end of
the year - - - -
The weighted average remaining contractual life of CSR options
outstanding at the end of the period was 8.2 years (2020: 9.2
years).
Weighted average share price of options exercised
The weighted average share price of all options exercised during
the year was GBP4.32 (2020: GBP3.89).
Earn-out arrangement
2021
------------------------------- -------------------------
Weighted average
share price
Number GBP
------------------------------- ------- ----------------
Shares granted during the year 353,032 4.25
------------------------------- ------- ----------------
The weighted average remaining contractual life outstanding at
the end of the period was 5 years.
Measurement
The fair value of equity-settled share options granted is
estimated as at the date of grant using the Black-Scholes model,
taking into account the terms upon which the options and awards
were granted
The inputs into the Black-Scholes model and assumptions used in
the calculations are as follows:
Grant date EIP EIP EIP CSOP
12/12/2020 12/12/2020 12/12/2020 10/12/2020
---------------------------------- ----------- ----------- ----------- -----------
Number of shares under option 290,873 117,632 171,641 392,371
Fair value of share option
from generally accepted business
model (GBP) 4.24 4.12 4.06 1.60
Weighted average share price
(GBP) 4.30 4.30 4.30 4.30
Weighted average exercise
price of an option (GBP) 0.000125 0.000125 0.000125 4.34
Expected volatility 65.53% 61.26% 62.89% 61.26%
Expected dividend yield 1.43% 1.43% 1.43% 1.43%
Risk-free interest rate (0.01)% (0.07)% (0.06)% (0.07)%
Expected option life to exercise
(months) 12 36 48 36
---------------------------------- ----------- ----------- ----------- -----------
Prior to 12 December 2018, the Company's shares were not listed
on a stock exchange and therefore, no readily available market
price existed for the shares. Options granted prior to 12 December
2018, share value was calculated using dividend and earnings-based
models to determine a range of valuations. The average price
indicated by these valuations was assumed to be the approximate
market value at the date of grant. This was discounted to represent
the minority value of one share and was agreed with HMRC prior to
granting of the options.
The expected life of the options is based on the minimum period
between the grant of the option, the earliest possible exercise
date and an analysis of the historical exercise data that is not
necessarily indicative of exercise patterns that may occur. The
expected volatility reflects the assumption that historical
volatility is indicative of future trends, which may also not
necessarily be the case.
Earn-out arrangement
The fair value of the earn-out arrangement is estimated as at
the date of grant calculated by reference to the quantum of the
earn-out payment for each performance milestone and an estimated
time to proposition completion, discounted to net present value.
The performance condition included within the arrangement is not
considered a market condition and therefore the expected vesting
will be reviewed at each reporting date.
During the year, the Group recognised a share-based payment
expense of GBP4,952,000 (2020: GBP3,364,000), GBP2,764,000 of which
relates to the earn-out arrangement.
The Group capitalised share-based payment costs of GBP1,378,000
(2020: GBPnil).
26 Financial instruments and risk management
The Group's activities expose it to a variety of financial
instrument risks; market risk (including interest rate and foreign
exchange), credit risk and liquidity risk. Information is presented
below regarding the exposure to each of these risks, including the
procedures for measuring and managing them.
Financial instruments include both financial assets and
financial liabilities. Financial assets principally comprise trade
and other receivables and cash and cash equivalents. Financial
liabilities comprise trade and other payables, accruals and
obligations under leases. The Group does not have any derivative
financial instruments.
Risk management objectives
The Group has identified the financial, business and operational
risks arising from its activities and has established policies and
procedures to manage these items in accordance with its risk
appetite. The Board of Directors has overall responsibility for
establishing and overseeing the Group's RMF and risk appetite.
The Group's financial risk management policies are intended to
ensure that risks are identified, evaluated and subject to ongoing
monitoring and mitigation (where appropriate). These policies also
serve to set the appropriate control framework and promote a robust
risk culture within the business. The Group regularly reviews its
financial risk management policies and systems to reflect changes
in the business, counterparties, markets and range of financial
instruments that it uses.
The Group's Treasury Committee has principal responsibility for
monitoring exposure to the risks associated with cash and cash
equivalents. Policies and procedures are in place to ensure the
management and monitoring of each type of risk. The primary
objective of the Group's treasury policy is to manage short-term
liquidity requirements whilst maintaining an appropriate level of
exposure to other financial risks in accordance with the Group's
risk appetite.
Significant accounting policies
Details of the significant accounting policies, including the
criteria for recognition, the basis of measurement and the basis on
which income and expenses are recognised, in respect of each
financial asset and financial liability, are disclosed within note
2 to the financial statements.
Categories of financial instrument
The financial assets and liabilities of the Group are detailed
below:
2021 2020
Amortised Financial Carrying Amortised Financial Carrying
cost liabilities value cost liabilities value
GBP 000 GBP 000 GBP 000 GBP 000 GBP 000 GBP 000
-------------------------- --------- ------------ -------- --------- ------------ --------
Financial assets
Trade receivables 2,321 - 2,321 2,001 - 2,001
Accrued income 14,699 - 14,699 21,132 - 21,132
Other receivables 12,009 - 12,009 4,524 - 4,524
Cash and cash equivalents 97,062 - 97,062 86,384 - 86,384
-------------------------- --------- ------------ -------- --------- ------------ --------
126,091 - 126,091 114,041 - 114,041
-------------------------- --------- ------------ -------- --------- ------------ --------
Financial liabilities
Trade and other
payables - 8,095 8,095 - 8,469 8,469
Lease liabilities - 15,594 15,594 - 16,345 16,345
-------------------------- --------- ------------ -------- --------- ------------ --------
- 23,689 23,689 - 24,814 24,814
-------------------------- --------- ------------ -------- --------- ------------ --------
The carrying amount of all financial assets and liabilities is
approximate to their fair value due to their short-term nature.
Market risk
Interest rate risk
The Group holds interest bearing assets in the form of cash and
cash deposits. Cash at bank earns interest at floating rates based
on daily bank deposit rates. Term deposits can also be made for
varying periods depending on the immediate cash requirements of the
Group, and interest is earned at the respective fixed-term rate.
Based on the cash balances shown in the Group's statement of
financial position at the reporting date, if interest rates were to
move by 25bps it would change profit before tax by
approximately:
2021 2020
GBP 000 GBP 000
---------------- ------- -------
+ 25bps (0.25%) 246 245
- 25bps (0.25%) (23) (151)
---------------- ------- -------
As at the year end the Group had no borrowings, and therefore
was not exposed to a material interest rate risk related to debt as
the interest rate is fixed at the inception of the lease.
The Group retains a proportion of the interest income generated
from the pooling of customer cash balances and as a result, the
Group has an indirect exposure to interest rate risk. The cash
balances are held with a variety of banks and are placed in a range
of fixed-term, notice and call deposit accounts with due regard for
counterparty credit risk, capacity risk, concentration risk and
liquidity risk requirements. The spread of rate retained by the
Group is variable dependent on rates received by banks (disclosed
to customers at between 0.10% below and 0.60% above the prevailing
base rate) and amounts paid away to customers.
The impact of a 25bps increase or decrease in UK base interest
rates on the Group's revenue has been calculated and shown below.
This has been modelled on a historical basis for each year
separately assuming that the UK base rate was 25bps higher or lower
than the actual position at the time. We assume a minimum rate of
return on call cash of 0bps.
2021 2020
GBP 000 GBP 000
---------------- ------- -------
+ 25bps (0.25%) 5,324 6,341
- 25bps (0.25%) (4,901) (4,744)
---------------- ------- -------
Customer cash balances are not a financial asset of the Group
and so are not included in the statement of financial position.
Market movement sensitivity
The Group's custody fees are derived from the market value of
the underlying assets held by the retail customer in their account,
based on mix and portfolio size, charged on an ad valorem basis. As
a result, the Group has an indirect exposure to market risks, as
the value of the underlying customers' assets may rise or fall. The
impact of a 10% increase or reduction in the value of the customers
underlying assets subject to the custody fees on the Group's
revenue has been calculated and shown below. This has been modelled
on a historical basis for each year separately assuming that the
value of the customers' assets were 10% higher or lower than the
actual position at the time.
2021 2020
GBP 000 GBP 000
------------- ------- -------
+ 10% higher 4,850 3,409
- 10% lower (4,850) (3,409)
------------- ------- -------
Foreign exchange risk
The Group is not exposed to significant foreign exchange
translation or transaction risk as the Group's activities are
primarily within the UK. Foreign exchange risk is therefore not
considered material.
Credit risk
The Group's exposure to credit risk, which is the risk that a
counterparty will be unable to pay amounts in full when due, arises
principally from its cash balances held with banks and trade and
other receivables.
Trade receivables are presented net of expected credit losses
within the statement of financial position. The Group applies the
IFRS 9 simplified approach to measuring expected credit losses
which uses a lifetime expected loss allowance for all trade
receivables. To measure the expected credit losses, trade
receivables have been grouped based on shared credit risk
characteristics and number of days past due. Details of those trade
receivables that are past due are shown within note 20.
The Group has implemented procedures that require appropriate
credit or alternative checks on potential customers before business
is undertaken. This minimises credit risk in this area.
The credit and concentration risk on liquid funds, cash and cash
equivalents is limited as deposits are held across a number of
major banks. The Directors continue to monitor the strength of the
banks used by the Group. The principal banks currently used by the
Group are Bank of Scotland plc, Barclays Bank plc, Lloyds Bank plc,
Lloyds Bank Corporate Markets plc, HSBC Bank plc, HSBC Global Asset
Management, Santander UK plc, MUFG Bank Ltd, Clearstream Banking SA
and Qatar National Bank (Q.P.S.C). Bank of Scotland plc, the
Group's principal banker, is substantial and is 100% owned by
Lloyds Banking Group plc. All these banks currently have long-term
credit ratings of at least A- (Fitch). Where the services of other
banks are used, the Group follows a rigorous due diligence process
prior to selection. This results in the Group retaining the ability
to further mitigate the counterparty risk on its own behalf and
that of its customers.
The Group has no significant concentration of credit risk as
exposure is spread over a large number of counterparties and
customers. The maximum exposure to credit risk is represented by
the carrying amount of each financial asset at the reporting date.
In relation to dealing services, the Group operates as agent on
behalf of its underlying customers and in accordance with London
Stock Exchange Rules.
Any settlement risk during the period between trade date and the
ultimate settlement date is substantially mitigated as a result of
the Group's agency status, its settlement terms and the delivery
versus payment mechanism whereby if a counterparty fails to make
payment, the securities would not be delivered to the counterparty.
Therefore any risk exposure is to an adverse movement in market
prices between the time of trade and settlement. Conversely, if a
counterparty fails to deliver securities, no payment would be
made.
There has been no material change to the Group's exposure to
credit risk during the year.
Liquidity risk
This is the risk that the Group may be unable to meet its
liabilities as and when they fall due. These liabilities arise from
the day-to-day activities of the Group and from its obligations to
customers. The Group is a highly cash-generative business and
maintains sufficient cash and standby banking facilities to fund
its foreseeable trading requirements.
There has been no change to the Group's exposure to liquidity
risk or the manner in which it manages and measures the risk during
the year.
The following table shows the undiscounted cash flows relating
to non-derivative financial liabilities of the Group based upon the
remaining period to the contractual maturity date at the end of the
reporting period.
Due within 1 to 5 After 5
1 year years years Total
GBP 000 GBP 000 GBP 000 GBP 000
-------------------------- -------------- -------- -------- --------
2021
Trade and other payables 8,095 - - 8,095
Lease liabilities 2,450 8,333 8,678 19,461
-------------------------- --- ---------- -------- -------- --------
10,545 8,333 8,678 27,556
-------------------------- --- ---------- -------- -------- --------
2020
Trade and other payables 8,469 - - 8,469
Lease liabilities 2,102 8,317 10,500 20,919
-------------------------- --- ---------- -------- -------- --------
10,571 8,317 10,500 29,388
-------------------------- --- ---------- -------- -------- --------
Capital management
The Group's objectives in managing capital are to:
- safeguard the Group's ability to continue as a going concern
so that it can continue to provide returns for shareholders,
security for our customers and benefits for other stakeholders;
- maintain a strong capital base to support the development of
its business; and
- comply with regulatory requirements at all times.
The capital structure of the Group consists of share capital,
share premium and retained earnings. As at the reporting date the
Group had capital of GBP130,708,000 (2020: GBP109,466,000).
Capital generated from the business is both reinvested in the
business to generate future growth and returned to shareholders
principally in the form of dividends. The capital adequacy of the
business is monitored on an ongoing basis and as part of the
business planning process by the Board. It is also reviewed before
any distributions are made to shareholders to ensure it does not
fall below the agreed surplus as outlined in the Group's capital
management policy. The liquidity of the business is monitored by
management on a daily basis to ensure sufficient funding exists to
meet the Group's liabilities as they fall due. The Group is highly
cash-generative and maintains sufficient cash and standby banking
facilities to fund its foreseeable trading requirements.
The Group conducts an ICAAP, as required by the FCA to assess
the appropriate amount of regulatory capital to be held by the
Group. Regulatory capital resources for ICAAP are calculated in
accordance with published rules.
The ICAAP compares the Group's financial resources against
regulatory capital requirements as specified by the relevant
regulatory authorities. Our current financial resources and
regulatory capital requirements can be found in our Risk management
report.
The Group maintained a surplus of regulatory capital throughout
the year. Information under Part Eight (Pillar 3) Disclosure of the
Capital Requirements Regulation is available on the Group's website
at www.ajbell.co.uk.
27 Interests in unconsolidated structure entities
The Group manages a number of investment funds (open ended
investments) acting as agent of the Authorised Corporate Director.
The dominant factor in deciding who controls these entities is the
contractual arrangement in place between the Authorised Corporate
Director and the Group, rather than voting or similar rights. As
the Group directs the investing activities through its investment
management agreement with the Authorised Corporate Director, the
investment funds are deemed to be structured entities. The
investment funds are not consolidated into the Group's financial
statements as the Group is judged to act as an agent rather than
having control under IFRS 10.
The purpose of the investment funds is to invest capital
received from investors in a portfolio of assets in order to
generate a return in the form of capital appreciation, income from
the assets, or both. The Group's interest in the investment funds
is in the form of management fees received for its role as
investment manager. These fees are variable depending on the value
of the assets under management.
The funds do not have any debt or borrowings and are financed
through the issue of units to investors.
The following table shows the details of unconsolidated
structured entities in which the Group has an interest at the
reporting date:
Number Net AUM of Annual management Management charge
of funds funds charge receivable at 30 September
Year Type GBPm GBP 000 GBP 000
----- ----- --------- ---------- ----------------- ---------------------------
2021 OEIC 9 1,073.2 1,138 266
2020 OEIC 8 493.1 418 48
----- ----- --------- ---------- ----------------- ---------------------------
The annual management charge is included within recurring ad
valorem fees within revenue in the consolidated income
statement.
The annual management charge receivable is included within
accrued income and trade receivables in the consolidated statement
of financial position.
The maximum exposure to loss relates a reduction in future
management fees should the market value of the investment funds
decrease.
28 Reconciliation of liabilities arising from financing
activities
Change
1 October in lease 30 September
2020 Cash flows liability Additions Disposal 2021
2021 GBP 000 GBP 000 GBP 000 GBP 000 GBP000 GBP 000
------------------ --------- ---------- ---------- --------- -------- ------------
Lease liabilities 16,345 (1,241) 42 460 (12) 15,594
------------------ --------- ---------- ---------- --------- -------- ------------
Total liabilities
from financing
activities 16,345 (1,241) 42 460 (12) 15,594
------------------ --------- ---------- ---------- --------- -------- ------------
1 October Change in lease 30 September
2019 Cash flows liability 2020
2020 GBP 000 GBP 000 GBP 000 GBP 000
------------------ --------- ---------- --------------------- ----------------------
Lease liabilities 18,047 (1,708) 6 16,345
------------------ --------- ---------- --------------------- ----------------------
Total liabilities
from financing
activities 18,047 (1,708) 6 16,345
------------------ --------- ---------- --------------------- ----------------------
29 Related party transactions
Transactions between the Parent Company and its subsidiaries,
which are related parties, have been eliminated on consolidation
and are not disclosed.
Transactions with key management personnel:
Key management personnel is represented by the Board of
Directors and the EMB.
The remuneration expense of key management personnel is as
follows:
2021 2020
GBP 000 GBP 000
-------------------------------------------- -------- --------
Short-term employee benefits (excluding NI) 2,108 2,069
Retirement benefits 35 29
Share-based payment 1,256 1,066
3,399 3,164
-------------------------------------------- -------- --------
During the year there were no material transactions or balances
between the Group and its key management personnel or members of
their close families, other than noted below.
Transactions with directors:
The remuneration of individual directors is provided in the
Directors' Remuneration report.
Dividends totalling GBP6,766,000 (2020: GBP4,888,000) were paid
in the year in respect of ordinary shares held by the Company's
directors.
No aggregate gains were made by the Directors on the exercise of
share options during the year (2020: GBP547,000).
During the year Directors and their families received beneficial
staff rates in relation to personal portfolios. The discount is not
material to the Directors or to AJ Bell.
Other related party transactions:
Charitable donations
During the year the Group made donations of GBP272,000 (2020:
GBP239,000) to the AJ Bell Trust, a registered charity of which Mr
A J Bell is a trustee.
EQ Property Services Limited
The Group is party to three leases with EQ Property Services
Limited for rental of the Head Office premises, 4 Exchange Quay,
Salford Quays, Manchester, M5 3EE. Mr A J Bell and Mr M T
Summersgill are directors and shareholders of both AJ Bell plc and
EQ Property Services Limited. Mr C Galbraith, Mr R Stott and Mr F
Lyons are members of key management personnel and shareholders of
AJ Bell plc and are directors and shareholders of EQ Property
Services Limited. The leases for the rental of the building were
entered into on 17 August 2016 for terms which expire on 30
September 2031, at an aggregate market rent of GBP1,825,000 (2020:
GBP1,825,000) per annum.
At the reporting date, there is no payable outstanding (2020:
GBPnil) with EQ Property Services Limited.
Any amounts outstanding with related parties are unsecured and
will be settled in cash. No guarantees have been given or received.
No provision has been made for doubtful debts in respect of amounts
owed by related parties.
30 Subsequent events
There have been no material events occurring between the
reporting date and the date of approval of these consolidated
financial statements.
Glossary
Adalpha Acquisition of AJ Bell Touch Limited (Formally
Whiztec Limited) and its wholly-owned subsidiaries
AGM Annual General Meeting
AJBIC AJ Bell Investcentre
AJBYI AJ Bell Youinvest
Android Mobile Operating System
Board, Directors The Board of Directors osf AJ Bell plc
BPS Basis points
CASS Client Assets Sourcebook
CGU Cash Generating Unit
CODM Chief Operating Decision Maker
CRD V The Capital Requirements Directive V
CRR Capital Requirement Regulation
CSOP Company Share Option Plan
CSR Corporate Social Responsibility
DEPS Diluted Earnings Per Share
DTR Disclosure Guidance and Transparency Rules
D2C Direct to Consumer
EMB Executive Management Board
FCA Financial Conduct Authority
FRC Financial Reporting Council
FRS Financial Reporting Standards
FTSE The Financial Times Stock Exchange
GIA General Investment Account
HMRC Her Majesty's Revenue and Customs
HR Human Resources
IAS International Accounting Standard
ICAAP Internal Capital Adequacy Assessment Process
ICO Information Commissioner's Office
IFA Independent Financial Adviser
IFRIC International Financial Reporting Interpretations
Committee
IFPR Investment Firm Prudential Regime
IFRS International Financial Reporting Standards
iOS Mobile Operating System developed by Apple
Inc.
IPO Initial Public Offering
ISA Individual Savings Account
IT Information Technology
KOS Key Operating System
KPI Key Performance Indicator
KYC Know Your Customer
LISA Lifetime ISA
MiFID II Markets in Financial Instruments Directive
II
MPS Managed Portfolio Service
OCF Ongoing Charges Figure
OEIC Open-Ended Investment Company
OTB Option To Buy
PBT Profit Before Tax
PLC Public Limited Company
SIPP Self-Invested Personal Pension
SMCR Senior Manager & Certification Regime
SREP Supervisory Review and Evaluation Process
SSAS Small Self-Administered Scheme
TPDFM Third-Party Discretionary Fund Managers
Definitions
Ad valorem According to value
AUA Assets Under Administration
AUM Assets Under Management
Brexit The exit of the United Kingdom from the European
Union
Customer retention Relates to platform customers
rate
Fintech Refers to a business that uses technology
to enhance or automate financial services
and processes
Lang Cat An insight, marketing and communications
consultancy business specialising in Financial
Services
Listing rules Regulations subject to the oversight of the
FCA applicable to companies listed on a UK
stock exchange
Own shares Shares held by the Group to satisfy future
incentive plans
Platforum The advisory and research business specialising
in investment platforms
Recurring ad valorem Includes custody fees, retained interest
revenue income and investment management fees
Recurring fixed Includes recurring pension administration
revenue fees and media revenue
Revenue per GBP Represents revenue as a percentage of the
AUA average AUA in the year. Average AUA is calculated
as the average of the opening and closing
AUA in each quarter averaged for the year
Transactional revenue Includes dealing fees and pension scheme
activity fees
UK Corporate Governance A code which sets out standards for best
Code boardroom practice with a focus on Board
leadership and effectiveness, remuneration,
accountability and relations with shareholders
Company information
Company number
04503206
Company Secretary
Mr Christopher Bruce Robinson
Registered office
4 Exchange Quay
Salford Quays
Manchester
M5 3EE
Auditor
BDO LLP
55 Baker Street
London
W1U 7EU
Banker
Bank of Scotland plc
1 Lochrin Square
92 - 98 Fountainbridge
Edinburgh
EH3 9QA
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END
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