TIDMCBP
RNS Number : 0094J
Curtis Banks Group PLC
06 September 2016
6 September 2016
Curtis Banks Group plc
("Curtis Banks", the "Group")
Interim Results
"Consolidating the growth and delivering on the strategy"
Curtis Banks Group plc, one of the UK's leading SIPP providers
with a portfolio of currently over 72,000 SIPPs, is pleased to
announce its Interim Results for the six months ended 30 June
2016.
Highlights include:
Operational Highlights
Unaudited Unaudited Audited
6 month 6 month year ended
period period 31-Dec-15
ended ended
30-Jun-16 30-Jun-15
Number of SIPPs Administered 67,161 26,755 39,236
Number of SSASs Administered 338 297 326
Assets under Administration GBP17.9bn GBP8.4bn GBP9.0bn
Total new organic growth
Full SIPPs 1,627 1,416 2,386
Financial Highlights
Over the six month period relative to the corresponding period
last year:
-- Increase in operating revenue of 44%
-- Increase in operating profit before amortisation and non-recurring costs of 11%
-- Increase in Basic EPS of 8%
Operating Revenue (GBP'000) 10,820 7,524 16,999
Operating Profit before
amortisation and non-recurring
costs (GBP'000) 2,876 2,592 6,125
Operating Profit (GBP'000) 1,631 1,410 4,198
Profit Margin on Operating
Profit before amortisation
and non-recurring costs 27% 34% 36%
Basic EPS (pence) 2.30 2.13 7.12
Basic EPS on tax adjusted
Operating Profit before
amortisation and non-recurring
costs (pence) 4.38 5.00 11.46
Commenting on the results and prospects, Chris Banks, Chairman
at Curtis Banks, said:
"The first half of 2016 will always be remembered for the
acquisition of Suffolk Life. It has been a transformational
acquisition and one which presents considerable long term
opportunities for the Group.
"It is equally important to recognise the progress within the
business aside from the Suffolk Life headlines. Curtis Banks has
successfully integrated the previous acquisitions and is in a very
strong position to continue as a specialist administrator in a
changing market. We are all very optimistic about our
prospects."
Analyst Presentation
A briefing for Analysts will be held at 9.30am today. Those
wishing to attend or requiring further information on the Company
should contact Tom Cooper on 0797 122 1972 or
tom.cooper@walbrookpr.com.
For more information:
Curtis Banks Group plc www.curtisbanks.co.uk
Rupert Curtis - Chief Executive Via Walbrook PR
Officer
Paul Tarran - Chief Financial
Officer
Peel Hunt LLP (Nominated Adviser +44 (0) 20 7418
& Broker) 8900
Guy Wiehahn
Rishi Shah
+44 (0) 20 7933
Walbrook PR 8780
+44 (0) 797 122
Tom Cooper / Paul Vann 1972
tom.cooper@walbrookpr.com
Notes to Editors:
Curtis Banks administers Self-Invested Pension products,
principally SIPPs and SSASs. The Group commenced trading in 2009
and has successfully developed, through a combination of organic
growth and acquisitions, into one of the largest UK providers of
these products. The Group employs approximately 540 staff in its
head office in Bristol and regional offices in Ipswich, Dundee,
Salisbury and Market Harborough.
For more information - www.curtisbanks.co.uk
Chairman's Statement
I am pleased to present the interim results for Curtis Banks for
the six month period ended 30 June 2016. This is the second
published set of interim results released by the Group since our
successful debut on the AIM market in May 2015.
The last six months has been another active period of
acquisitive and organic growth for the Group combined with
delivering significant development work on our infrastructure and
business alignment to support our future growth ambitions.
The period under review has shown revenues increasing by 44%
from GBP7.5m to GBP10.8m compared to the same period last year,
with operating profit increasing from GBP2.6m to GBP2.9m.
The growth in revenue and operating profits in the period under
review reflects contributions from the pension books from Friends
Life and the Zurich administration contract that completed in 2015,
together with strong organic growth.
The most significant acquisition to date by the Group has been
that of the Suffolk Life Group of companies, a long established and
well regarded SIPP provider based in Ipswich. Contracts for this
acquisition were exchanged in January 2016 and, following receipt
of the relevant regulatory approvals, the transaction completed on
25 May 2016. There has therefore only been a limited contribution
from Suffolk Life in the first half of the year and the incremental
earnings arising from integration were pushed back as a consequence
of the longer than expected completion time. The acquisition will
part contribute to the Group's earnings in 2016, with full
contribution from 2017 onwards. We are pleased to welcome the
strong management team at Suffolk Life to Curtis Banks and look
forward to working with them to strengthen our position as the
largest independent Full SIPP Provider in the UK.
Our focus during the current period has been the consolidation
of the growth over the past two years and development of our
business proposition. This growth has required higher staff
numbers, principally in middle management and support, as new books
of business are taken on and assimilated into the robust processes
and procedures already carried out in the Group, and development
work is carried out to align books of business and deliver
operational efficiencies. This obviously takes time and effort
before improvements are delivered but despite this I am pleased to
report that operating margins remain healthy despite the reduction
in margin as a result of these additional costs.
In July 2016 we completed the acquisition of a book of 5,000
SIPPs from European Pensions Management Ltd. This brings the total
number of SIPPs currently administered by the Group to over
72,000.
We are currently reviewing operating systems for the Group to
ensure the optimum system is in place to deliver greater
efficiencies and continue to provide the high service levels
needed. A thorough cost benefit analysis is being undertaken and
decisions on the optimum system will be made in the second half of
this year.
We continue to grow and develop our introducer network without
reliance on any one introducer for a significant portion of our
business. New well established introducers continue to be attracted
to our service level proposition.
Our acquisition of the business of Pointon York SIPP Solutions
in October 2014 provided us with a strong market position in the
eSIPP sector and we are continuing to develop back office systems
to operate these products more efficiently.
I would like to thank all the staff in the Group, including my
fellow executive directors, for their hard work and dedication over
a period that has again seen so much transition in our business. It
is an exciting time for Curtis Banks and we look forward to
delivering on the Group's potential. During the period we
introduced a Share Save Option Scheme to enable staff to
participate in the success of the Group. This was well received and
more than half of our staff are participating in the Scheme.
Board
I am pleased to welcome Will Self to the Board. Will is Chief
Executive Officer of Suffolk Life and has a wealth of experience on
both the SIPP industry and the operations of Suffolk Life.
Dividends
Your Board has declared an interim dividend of 1.0p per share to
be paid on 15 November 2016 to shareholders on the register at the
close of business on 14 October 2016. The shares will be marked
ex-dividend on 13 October 2016. It is expected that a final
dividend will be recommended in respect of the current financial
year.
Summary and outlook
The first half results reflect steady progress as we completed
the Suffolk Life acquisition and added some increased costs in
order to support the future development of the business. We expect
profits to be second half weighted as in previous years and the
outlook for 2017 is strong, with the structures to support future
growth substantially established during the current year. The
business is in a much stronger position than it was at the
beginning of the year and we now administer over 72,000 SIPPs.
With the increased regulatory environment for SIPP operators and
recent changes to capital adequacy rules we are seeing a continuing
consolidation in the industry. We are being regularly approached by
SIPP operators looking for an exit for a variety of reasons and we
are evaluating opportunities as they come to us. Whilst it is one
of our objectives to grow the business by acquisition as well as
organically, we will only consider acquisitions of high quality
books of SIPPs that we know can provide at least the level of
operating margins we are currently achieving. The admission to AIM
has provided us with the resources and ability to consider and fund
all levels of acquisition.
The recent BREXIT vote should have minimal effect on the
operations of the Group. All our business is UK based and we have
no exposure to Europe. Our fees are fixed sterling monetary amounts
and as such insulated from any adverse market or currency
movements. The recent reduction in interest rates will present
challenges and therefore will put pressure on income. We have seen
some easing of interest rates in recent weeks and whilst we are
hopeful of retaining margins close to those that we are currently
enjoying through a co-ordinated central treasury function, there
will be an impact on revenues going forward.
It is against this backdrop that we consider the environment to
be favourable for our current growth strategy. Your Board looks
forward with optimism to growing Curtis Banks further, both
organically and acquisitively, for the benefit of its
shareholders.
Chris Banks
Executive Chairman
5 September 2016
Operational Review
The beginning of the six month period under review marked the
full integration of the two transactions that completed in 2015,
namely the acquisition of the Friends Life book of schemes and the
Zurich third party administration arrangements. More staff were
recruited to service the enlarged Group in support and management
functions, to deliver change and ensure thorough and efficient
procedures are being followed throughout the Group.
Early in the period we exchanged contracts for the acquisition
of the Suffolk Life Group of companies. Considerable due diligence
was carried out on this operation prior to that date using both
internal and external resources. Since exchange of contracts we
have been working closely with the management of Suffolk Life to
understand their operations and the optimum way forward for the
combined Group. Unlike previous acquisitions where the Group has
acquired a book of SIPPs, in this case we acquired the entire
corporate structure and, when the acquisition completed in May, we
gained the benefit of all the existing staff and systems.
The Suffolk Life operation has a strong and experienced
management team that ran this business as a stand-alone operation
within the Legal & General umbrella. This will continue,
however operational synergies are being explored and acted on as
well as revenue enhancing projects for both Suffolk Life and Curtis
Banks to ensure the margins achievable are enhanced across the
whole group. The operating structures, cultures and quality of work
at Suffolk Life are similar to those of Curtis Banks, and we are
confident that we can apply best practice in each company across
the whole group, with the combined operations being significantly
stronger than the component parts. In terms of numbers, the Suffolk
Life acquisition brought to the Group circa 28,000 SIPPs with circa
GBP9bn of assets under administration. As regards staff numbers,
254 staff work for Suffolk Life, all based in Ipswich. Combined
staff meetings take place on a regular basis to exchange ideas and
take action where there is synergy and duplication of resources
across the Group.
The Suffolk Life acquisition has brought to the Group the
challenges of owning an insurance company and the new style of
financial reporting and regulatory compliance that is needed for
such an operation. It is expected that over time the operating
systems of both Curtis Banks and Suffolk Life will be harmonised
and standard processing procedures are being put in place for the
whole Group where possible.
Significant development work has taken place during the period,
specifically to align books of business, build on existing
strengths and improve efficiencies in the future, and this will
continue through the remainder of the year. More staff have been
recruited to carry out this work and improve support functions and
introduce processing efficiencies. This investment in our future
will start to deliver results in the second half of 2016 and the
full effect will be seen in 2017.
In terms of operational systems, we have continued the
development of a new system that I outlined to you in previous
Operational Reviews. The options available are changing and there
is potential for improved delivery in this area. The options are
still being evaluated and any decisions will be made in the best
interests of the Group going forward.
Total new Full SIPP numbers from organic growth in the six
months to 30 June 2016 were 1,627. Compared to the same period last
year this shows growth of 15%. Full SIPPs administered by the whole
Group at 30 June 2016 now total 41,207, together with 14,620 eSIPPs
and 11,334 SIPPs administered under third party arrangements. The
increased staff numbers have been used to service the strong
organic growth in Full SIPPs as well as working on books of SIPPs
acquired, development work and on providing general reporting and
support functions.
We have reviewed our major products and introduced additional
services with effect from 1 October 2016. This process has included
an alignment of fees, with fees to reflect the additional services
we are providing, whilst maintaining service levels and charges in
line with our peer group and reflecting more closely the time
expended on these services.
The average revenue per SIPP, excluding third party
administration arrangements, has increased slightly to GBP615 in
the six month period to 30 June 2016 from GBP609 for the period
ended 30 June 2015.
The changes in pension legislation over the past two budgets
have to date had little impact on the business of Curtis Banks
other than implicitly driving the growth levels in new SIPPs. The
Group has seen no significant increase in withdrawals as a result
of the new pension freedom abilities. All products, systems and
literature of Curtis Banks have however been updated to reflect the
changes and allow clients to take full advantage of the new rules
where allowed.
Subsequent to the period end the acquisition of a book of circa
5,000 SIPPs from European Pensions Management Limited was
completed. The management of this book of SIPPs is being carried
out by Suffolk Life Pensions Limited where there is operational
capacity. The financial benefits of this acquisition are expected
to be seen in 2017. The acquisition also brings to the Group a
number of new high quality introducers of business.
Rupert Curtis
Chief Executive Officer
5 September 2016
Financial Review
Operational revenues of GBP10.8m for the period have increased
by 44% over the comparable period. This is through a combination of
strong organic growth and the two transactions that completed since
31 December 2014. These transactions were:
-- Third Party administration arrangements for a book of 10,000
Zurich SIPPs commencing in October 2015.
-- A book of self-invested pension products acquired from
Friends Life PLC in March 2015.
The revenue contribution from these acquisitions accounted for
GBP1,647,000 of the revenue for the period to 30 June 2016.
The acquisition of the Suffolk Life Group of Companies completed
on 25 May 2016 and accordingly the interim results for the period
to 30 June 2016 include only one month of results for Suffolk Life
with operating revenues of GBP1,390,000. The contribution of this
acquisition will be felt in the second half of the year and future
financial periods.
Interest income remains under pressure from the low interest
rate environment currently being experienced for instant access
funds and we have experienced some fall in rates being achieved
compared to last year. This will have an adverse effect on revenues
for the rest of the current year and 2017.
Administrative expenses of GBP7.9m for the period have increased
by 61% compared to the equivalent period last year. This is largely
a result of additional staff resources needed to service the new
acquisitions noted above and also to strengthen central support
functions. In addition, there has been one month of Suffolk Life
costs of GBP1.2m. Without this latter increase, costs have only
increased by 37% over the comparable period last year.
Excluding the Suffolk Life acquisition, staff numbers in Curtis
Banks have increased from 225 as at 30 June 2015 to 285 as at 30
June 2016. Computer costs have increased significantly due to the
increased staff numbers and as a result the operating margin has
fallen slightly in comparison to the same period last year. Once
the new back office systems are fully developed we believe the
Group will be well positioned to generate considerable organic
growth.
The acquisition of Suffolk Life Group completed on 25 May 2016.
The total acquisition cost was GBP45m; however net assets acquired
were GBP16m, held principally for regulatory purposes. The GBP45m
consideration was satisfied by part equity and part debt. In
January 2016 the Group raised new equity funds of GBP27m (gross)
through a placing at GBP3.20 a share. The remaining balance of the
consideration was provided by bank debt. Existing outstanding bank
debt was repaid and refinanced at reduced interest rates through
the provision of a GBP15m 5 year term loan facility and an GBP8.3m
revolving credit facility.
As a result of the acquisition of Suffolk Life, Suffolk Life
Annuities Limited became a wholly owned subsidiary of the Group. It
is an insurance company that writes SIPP Products as insurance
contracts. These are all non-participating insurance policy
contracts and so the Group does not bear any insurance risk. As the
policyholder assets and liabilities are shown on the balance sheet
of Suffolk Life Annuities Limited, these will also show on the
Group balance sheet on consolidation, significantly increasing
gross assets and gross liabilities. As the policies are
non-participating contracts the Client related assets and
liabilities in Suffolk Life Annuities match. In addition the
revenues, expenses and investment returns of the non-participating
insurance policy contracts are shown in the consolidated statement
of comprehensive income. Again, these income, expense items and
investment returns due to the policy holders equal each other. The
acquisition has been accounted for in accordance with IFRS 3
Business Combinations. Consequently, the results of Suffolk Life
are included from 25 May 2016 through to 30 June 2016, and there is
no impact on the prior year figures.
Non recurring costs principally comprise two items:
-- Acquisition costs of GBP284,000 relating to the Suffolk Life
transaction that were required to be expensed in accordance with
IFRS 3 Business Combinations.
-- Costs of GBP530,000 relating to our defence and settlement of
a legal action by another business.
Capital expenditure on property, plant and equipment at Curtis
Banks during the period has been significant at GBP926,000 mainly
arising from the investment and development in a new operating
system and partly through general upgrades in computer hardware for
the enlarged Group.
Costs incurred during the period that relate to the proposed new
operating systems and development of new products have been
capitalised and will be written off over a four year period when
the systems are operational and the products launched.
New capital adequacy requirements for SIPP operators become
effective from September 2016. Calculations have been made for the
whole Curtis Banks Group, including the two regulated entities at
Suffolk Life and, based on these calculations, Curtis Banks Group
has confirmed that it has a healthy level of headroom above the
requirements.
Paul Tarran
Chief Financial Officer
5 September 2016
Condensed consolidated statement of comprehensive income
As restated
Unaudited
6 month Unaudited
period 6 month Audited
ended period year
30-Jun-16 ended ended
GBP'000 30-Jun-15 31-Dec-15
Notes GBP'000 GBP'000 GBP'000
Revenue
Continuing operations 9,430 6,925 15,364
Acquisitions - operating
income 3 1,390 599 1,635
----------- ------------ -----------
Operating revenues 10,820 7,524 16,999
Acquisitions - policyholder
investment returns 3 45,900 - -
----------- ------------ -----------
56,720 7,524 16,999
Administrative expenses (7,944) (4,932) (10,874)
Non-participating investment (3,214) - -
contract expenses
Changes in provisions: (42,686) - -
Non-participating
investment contract
liabilities
----------- ------------ -----------
Acquisitions - policyholder (45,900) - -
total expenses
Operating profit before
amortisation and non-recurring
costs 2,876 2,592 6,125
Non-recurring costs 6 (859) (849) (1,194)
Amortisation (386) (333) (733)
----------- ------------ -----------
Operating profit 1,631 1,410 4,198
Finance income 76 5 40
Finance costs (179) (84) (158)
----------- ------------ -----------
Profit before tax 1,528 1,331 4,080
Tax (317) (427) (983)
----------- ------------ -----------
Total comprehensive
income for the period 1,211 904 3,097
=========== ============ ===========
Attributable to:
Equity holders of
the company 1,208 881 3,072
Non-controlling interests 3 23 25
----------- ------------ -----------
1,211 904 3,097
=========== ============ ===========
Earnings per ordinary
share on operating
profit
Basic (pence) 5 2.30 2.13 7.12
Diluted (pence) 5 2.25 2.08 6.96
Earnings per ordinary
share on operating
profit before amortisation
and non-recurring
costs
Basic (pence) 5 4.38 5.00 11.46
Diluted (pence) 5 4.28 4.93 11.20
The operating profit before financing for each period arises
from the Group's continuing operations.
Condensed consolidated statement of changes in equity
Group
Issued Share Equity Retained Total Non-controlling Total
capital premium share earnings GBP'000 interest equity
GBP'000 GBP'000 based GBP'000 GBP'000 GBP'000
payments
GBP'000
As at 1 January
2015
- audited 200 - 32 3,591 3,823 1,405 5,228
Comprehensive
income
for the period - - - 881 881 23 904
Share based
payments - - 65 - 65 - 65
Ordinary shares
issued 24 - - - 24 - 24
Share premium - 7,126 - - 7,126 - 7,126
Ordinary dividends
declared & paid - - - (500) (500) - (500)
Preference
dividends
declared - - - - - (21) (21)
Preference shares
redeemed - - - - - (1,400) (1,400)
--------- --------- ---------- ---------- --------- ---------------- ---------
As at 30 June 2015
- unaudited - as
restated 224 7,126 97 3,972 11,419 7 11,426
Comprehensive
income
for the period - - - 2,191 2,191 2 2,193
Ordinary shares
issued 1 - - - 1 - 1
Share premium - 20 - - 20 - 20
As at 31 December
2015 - audited 225 7,146 97 6,163 13,631 9 13,640
Comprehensive
income
for the period - - - 1,208 1,208 3 1,211
Share based
payments - - 24 - 24 - 24
Ordinary dividends
declared & paid - - - (1,869) (1,869) (5) (1,874)
Ordinary shares
issued 42 - - - 42 - 42
Share premium - 26,260 - - 26,260 - 26,260
As at 30 June 2016
- unaudited 267 33,406 121 5,502 39,296 7 39,303
========= ========= ========== ========== ========= ================ =========
Condensed consolidated statement of financial position
Group
----------------------------------------
As restated
Unaudited Unaudited Audited
30-Jun-16 30-Jun-15 31-Dec-15
Notes GBP'000 GBP'000 GBP'000
ASSETS
Non-current assets
Intangible assets 4 43,851 13,391 13,379
Property, plant and
equipment 1,163,587 1,112 1,519
Deferred tax asset 25 - -
Investments 1,798,828 1 1
------------ ------------ ------------
3,006,291 14,504 14,899
------------ ------------ ------------
Current assets
Trade and other receivables 14,472 3,458 4,049
Cash and cash equivalents 422,034 7,532 7,630
------------ ------------ ------------
436,506 10,990 11,679
------------ ------------ ------------
Total assets 3,442,797 25,494 26,578
------------ ------------ ------------
LIABILITIES
Current liabilities
Trade and other payables 14,373 1,454 1,951
Deferred income 9,591 4,866 4,649
Borrowings 31,105 1,159 1,195
Deferred consideration 778 1,769 1,242
Current tax liability 452 802 434
------------ ------------ ------------
56,299 10,050 9,471
------------ ------------ ------------
Non-current liabilities
Borrowings 81,391 2,674 2,036
Deferred consideration 1,009 1,265 1,219
Non-participating investment 3,264,795 - -
contract liabilities
Deferred tax liability - 79 212
------------ ------------ ------------
3,347,195 4,018 3,467
------------ ------------ ------------
Total liabilities 3,403,494 14,068 12,938
------------ ------------ ------------
Net assets 39,303 11,426 13,640
------------ ------------ ------------
Equity attributable
to owners of the parent
Issued capital 267 224 225
Share premium 33,406 7,126 7,146
Equity share based
payments 121 97 97
Retained earnings 5,502 3,972 6,163
------------ ------------ ------------
39,296 11,419 13,631
Non-controlling interest 7 7 9
Total equity 39,303 11,426 13,640
------------ ------------ ------------
Condensed consolidated statement of cash flows
Group
--------------------------------------
As restated
Unaudited Unaudited
6 month 6 month Audited
period period year
ended ended ended
30-Jun-16 30-Jun-15 31-Dec-15
Notes GBP'000 GBP'000 GBP'000
Cash flows from operating
activities
Profit before tax 1,528 1,331 4,080
Adjustments for:
Depreciation 208 120 267
Amortisation 390 348 733
Interest expense 186 84 158
Share based payment
expense 24 19 19
Fair value gains (34,701) - -
on financial investments
Additions of financial (56,381) - -
investments
Disposals of financial 79,578 - -
investments
Fair value gains (2,339) - -
on investment properties
Increase in liability 26,567 - -
for investment contracts
Changes in working
capital:
(Decrease) Increase in
trade and other payables (3,678) 817 1,113
Decrease/(increase) in trade
and other receivables 1,462 (1,254) (2,055)
Cash generated from/(used
in) operations 12,844 1,465 4,315
Taxes paid (480) - (794)
Net cash flows from operating
activities 12,364 1,465 3,521
----------- ------------ -----------
Cash flows from investing
activities
Purchase of intangible
assets (14) (166) (220)
Purchase of property, plant
& equipment (18,174) (537) (1,092)
Receipts from sale of property, 17,701 - -
plant & equipment
Net cash flows from acquisitions 3 359,406 (438) (1,128)
Net cash flow from investing
activities 358,919 (1,141) (2,440)
----------- ------------ -----------
Cash flows from financing
activities
Capital element of finance
lease contracts - (18) (20)
Equity dividends paid (1,874) (535) (535)
Net proceeds from issue of
ordinary shares 26,301 7,150 7,171
Redemption of preference
shares - (1,400) (1,400)
Net increase/(decrease) in
borrowings 18,824 (598) (1,195)
Interest element of finance
lease rentals - (2) (4)
Interest paid (130) (88) (167)
Net cash received from financing
activities 43,121 4,509 3,850
----------- ------------ -----------
Net increase in cash and
cash equivalents 414,404 4,833 4,931
----------- ------------ -----------
Cash and cash equivalents
at the beginning of the period 7,630 2,699 2,699
=========== ============ ===========
Cash and cash equivalents
at the end of the period 422,034 7,532 7,630
=========== ============ ===========
1. The Group's Condensed Consolidated Statement of Cash Flows
includes all cash and cash equivalent flows, including
GBP397,256,038 (2015: GBPnil) relating to policyholder
non-participating investment contracts.
Notes to accounts:
1 Corporate information
Curtis Banks Group PLC ("the Company") is a public limited
company incorporated and domiciled in England and Wales, whose
shares were admitted to trading on the AIM market of the London
Stock Group Exchange PLC on 7 May 2015. The interim condensed
consolidated financial statements comprise the Company and its
subsidiaries ("the Group"). The interim condensed consolidated
financial statements were authorised for issue in accordance with a
resolution of the directors on 5 September 2016.
The principal activity of the Group is that of the provision of
pension administration services principally for Self Invested
Personal Pension schemes ("SIPPs") and Small Self-Administered
Pension schemes ("SSASs"). The Group is staffed by experienced
professionals who all have proven track records in this sector.
2 Basis of preparation and accounting policies
2.1 Basis of preparation
The interim condensed consolidated financial statements have
been prepared in accordance with IAS 34 Interim Financial
Reporting. The interim condensed consolidated financial statements
do not include all the information and disclosures required in the
annual financial statements and should be read in conjunction with
the Group's financial statements for the year ended 31 December
2015, which were prepared in accordance with International
Financial Reporting Standards adopted by the International
Accounting Standards Board ("IASB") and interpretations issued by
the International Financial Reporting Interpretations Committee
("IFRIC") of the IASB (together "IFRS") as adopted by the European
Union, and in accordance with the requirements of The Companies Act
2006 applicable to companies reporting under IFRS.
The information relating to the six months ended 30 June 2016
and the six months ended 30 June 2015 is unaudited and does not
constitute statutory financial statements within the meaning of
section 434 of the Companies Act 2006. The Group's statutory
financial statements for the year ended 31 December 2015 have been
reported on by its auditor and delivered to the Registrar of
Companies. The report of the auditor was unqualified and did not
draw attention to any matters by way of emphasis, or contain a
statement under section 498(2) or (3) of The Companies Act
2006.
The interim condensed consolidated financial statements have
been reviewed by the auditor and their report to the Board of
Curtis Banks Group PLC is included within this interim report.
2.2 Basis of consolidation
The interim condensed consolidated financial statements
consolidate the financial statements of the Company and its
subsidiaries up to 30 June each year.
Subsidiaries are fully consolidated from the date of
acquisition, being the date on which the Group obtains control, and
continue to be consolidated until the date that such control
ceases. The financial statements of subsidiaries are prepared for
the same reporting period as the parent company, using consistent
accounting policies. All inter-group balances, income and expenses
and unrealised gains and losses resulting from intra-group
transactions are eliminated in full.
The trading subsidiaries of Curtis Banks Group PLC as at 30 June
2016 were Curtis Banks Limited, Curtis Banks Investment Management
Limited, Suffolk Life Annuities Limited and Suffolk Life Pensions
Limited. The trading subsidiaries of Curtis Banks Group PLC as at
30 June 2015 were Curtis Banks Limited and Curtis Banks Investment
Management Limited.
Certain trading subsidiaries of Curtis Banks Group PLC hold the
entire issued share capital of Colston Trustees Limited, Montpelier
Pension Trustees Limited, Tower Pension Trustees Limited, Temple
Quay Trustees Limited, Tower Pension Trustees (S-B) Limited,
Crescent Trustees Limited, Bridgewater Pension Trustees Limited,
Final Pursuit Limited, SPS Trustees Limited. The accounts of these
companies have not been consolidated into the group accounts as
they would be immaterial to the Group's position. All of these
companies are nominee companies for the pension products
administered by the trading subsidiaries of Curtis Banks Group PLC
and have been dormant throughout the period and are expected to
remain dormant.
2.3 Comparative period restatement
The comparative results for the six month period ended 30 June
2015 have been restated to take account of audit adjustments
arising from the audit of the results for the year ended 31
December 2015. The restatements were required as a result of
accounting error in the treatment of costs associated with the
Group's IPO in May 2015, and in order to represent reorganisation
costs incurred in moving the Bristol head office in February 2015
as a non-recurring cost. Earnings per share and diluted earnings
per share for the comparative period have been changed to reflect
the amendments accordingly.
2.4 Significant accounting policies
The accounting policies adopted in the preparation of the
interim condensed consolidated financial statements are consistent
with those followed in the preparation of the Group's annual
financial statements for the year ended 31 December 2015.
Amendments to IFRSs effective for 2016 have not had a material
effect on the results for the 6 months ended 30 June 2016.
New standards issued but not yet effective
The IASB and IFRIC have issued standards and interpretations
with an effective date for periods starting on or after the date on
which these financial statements start. Except for IFRS 15 and IFRS
9 no other newly issued standards are expected to have a material
impact on the condensed consolidated interim financial statements
and the consolidated financial statements to the Group. The
potential impact of IFRS 15 and IFRS 9 is currently being
evaluated.
Financial statements for the year ending 31 December 2016
The accounting policies adopted in the preparation of the
interim condensed consolidated financial statements will be
consistent with those to be followed in the preparation of the
Group's annual financial statements for the year ending 31 December
2016.
2.5 Critical accounting judgements and key sources of estimation uncertainty
Estimates and judgements are continually evaluated and are based
on historical experience and other factors, including expectations
of future events that are believed to be reasonable under the
circumstances.
In preparing the financial statements the Group has selected and
applied various accounting policies which are described in the
notes to the financial statements. In order to apply these
accounting policies the Group has made estimates and judgements
concerning the future. Key areas of judgement and estimation
uncertainty are disclosed below:
Client portfolios
Client portfolios acquired are amortised over their estimated
useful economic life (UEL) of 20 years. This UEL is based upon
management's historical experience of similar portfolios.
Additionally, the Group reviews whether acquired client
portfolios are impaired at least on an annual basis. This comprises
an estimation of future cash flows expected to arise from each
client portfolio, discounted to their present value using a pre-tax
discount rate that reflects current market assessments of the time
value of money and the risks specific to that asset, together with
an estimated rate of attrition for each portfolio.
The carrying value of client portfolios at 30 June 2016 was
GBP14,375,092 (31 December 2015: GBP13,163,302; 30 June 2015:
GBP13,217,030).
Computer software
In capitalising the costs of computer software as intangible
assets management judge these costs to have an economic value that
will extend into the future and meet the recognition criteria under
IAS 38. Computer software costs are then amortised over an
estimated UEL on a project by project basis.
Additionally, the Group determines whether computer software is
impaired at least on an annual basis. This requires an estimation
of the value in use. In assessing value in use the estimated future
cash flows expected to arise from the software 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 that asset.
The carrying value of computer software capitalised as
intangible fixed assets at 30 June 2016 was GBP65,054 (31 December
2015: GBP63,978; 30 June 2015: GBP174,899).
In capitalising the operating software as computer equipment
under Property, plant and equipment management judge these costs to
be necessary for the computer hardware to operate in the manner
intended and consequently these costs have been recognised in
accordance with the criteria in IAS 16. The amount included in
computer equipment at 30 June 2016 was GBP1,669,153 (31 December
2015: GBP847,218; 30 June 2015: GBP452,208).
3 Business combinations
Acquisition of Suffolk Life Group Limited
On 25 May 2016, following regulatory approval from the Financial
Conduct Authority ("FCA") and Prudential Regulation Authority
("PRA"), Curtis Banks Group PLC completed the acquisition of the
entire share capital of Suffolk Life Group Limited and its
subsidiaries from Legal & General Retail Investments (Holdings)
Limited. Suffolk Life Group Limited holds two trading subsidiaries,
Suffolk Life Pensions Limited and Suffolk Life Annuities Limited,
and three non-trading trustee companies, all of which now form part
of the enlarged Group.
Suffolk Life Group Limited is a holding company. Suffolk Life
Pensions Limited is an FCA regulated wholly owned subsidiary of
Suffolk Life Group Limited and provides and administers SIPPs and
similar self-invested pension products. Suffolk Life Annuities
Limited is a PRA and FCA authorised wholly owned subsidiary of
Suffolk Life Group Limited and issues and maintains SIPPs and
similar self-invested pension products. SIPPs issued by Suffolk
Life Annuities Limited are written as insurance policies and
accordingly this company is a long term insurance company.
Consideration was agreed in cash of GBP45m, and was settled in
full on the completion date of 25 May 2016. The acquisition has
been accounted for using the acquisition method.
GBPm
Fair value of consideration payable 45
Less: Provisional fair value of net assets
acquired (16)
Goodwill arising on acquisition (note
4) 29
-----
The acquisition was completed close to the period end 30 June
2016 and the formal completion date of the acquisition could not be
prepared for as it was pending regulatory approval. For these
reasons, the fair values associated with the net assets acquired
could not be finalised by the date at which these financial
statements have been prepared. Appropriate fair values to be
attributed to the assets acquired and liabilities assumed will be
finalised during the 12 month period following acquisition in
accordance with IFRS 3 Business Combinations. The provisional fair
value of the identifiable assets and liabilities acquired are set
out below. There were no provisional fair value adjustments arising
on acquisition, and consequently the values below equate to both
carrying value and provisional fair value.
Carrying Value and Provisional Fair Value (unaudited)
Policyholder
Shareholder Assets Business Total
GBP'000 GBP'000 GBP'000
Non-current assets
Intangible assets 1,585 - 1,585
Property, plant and equipment 537 1,158,930 1,159,467
Investments - 1,787,323 1,787,323
Deferred tax asset 225 - 225
Current assets
Trade and other receivables 2,382 4,139 6,521
Bank and cash 18,636 386,755 405,391
Current liabilities
Trade and other payables (2,513) (8,681) (11,194)
Deferred income (4,618) - (4,618)
Borrowings (12) (90,237) (90,249)
Deferred consideration (86) - (86)
Current tax liability (170) - (170)
Non-current liabilities
Non-participating investment contract liabilities - (3,238,229) (3,238,229)
Net assets acquired 15,966 - 15,966
------------------------ ---------------- --------------
The 'Policyholder Business' acquired as disclosed above consists
of Suffolk Life Annuities Limited insurance policyholder assets and
liabilities. The liability of Suffolk Life Annuities Limited
towards its policyholders is exactly equal to the value of
policyholder assets held at all times. The net assets acquired by
the Group in respect of the Policyholder Business therefore equates
to GBPnil and will continue to be GBPnil for so long as the terms
of the underlying investment contracts remain unchanged.
As a result of the acquisition, the Group now reflects
significantly enlarged gross assets and gross liabilities as is
reflected on the Statement of Financial Position as at 30 June 2016
and shows the movement of those assets and liabilities through the
consolidated statement of comprehensive income.
Acquisition costs totalled GBP284,085 and comprised legal and
professional fees, and due diligence work. In accordance with IFRS
3 Business Combinations, this cost has been expensed as reflected
in note 6 to the interim condensed consolidated financial
statements as a non-recurring cost.
The post-acquisition operating results of Suffolk Life Group
Limited and its subsidiaries for the period from acquisition to the
end of 30 June 2016 resulted in net profits generated of
GBP125,138.
Operating revenues of GBP1,389,753 and revenue from policyholder
investment returns of GBP45,900,225 have been recognised in
relation to the acquisition of Suffolk Life Group Limited and its
subsidiaries for the period from acquisition to 30 June 2016. The
operating revenue as though the acquired business had been held for
the six months ended 30 June 2016 is estimated to be
GBP8,685,000.
The net cash outflow arising from this acquisition was as
follows:
GBPm
Consideration paid to Legal & General
Retail Investments (Holdings) Limited 45
Cash acquired on acquisition, excluding
policyholder cash (18)
Net cash outflow in the period ended 30
June 2016 27
-----
On acquisition of Suffolk Life Group Limited and its
subsidiaries, policyholder cash totalling GBP386,754,670 was taken
on by the Group. The policyholder cash forms part of total
policyholder assets which is wholly due to the policyholders.
4 Intangible assets
Development Costs Client portfolios Computer
Goodwill GBP'000 GBP'000 software Total
GBP'000 GBP'000 GBP'000
Cost
At 1 January 2015 - - 11,984 123 12,107
Additions - - 48 166 214
Arising on acquisitions - - 2,291 - 2,291
----------- ------------------ ------------------ ---------- ----------
At 30 June 2015 - - 14,323 289 14,612
Additions - - - 54 54
Reclassification - 151 - (151) -
Arising on acquisitions - - 318 - 318
----------- ------------------ ------------------ ---------- ----------
At 31 December 2015 - 151 14,641 192 14,984
Additions - 1 5 13 19
Arising on acquisitions 29,259 - 1,810 - 31,069
At 30 June 2016 29,259 152 16,456 205 46,072
----------- ------------------ ------------------ ---------- ----------
Amortisation
At 1 January 2015 - - 773 99 872
Charge for the period - - 333 15 348
----------- ------------------ ------------------ ---------- ----------
At 30 June 2015 - - 1,106 114 1,220
Charge for the period - - 371 14 385
----------- ------------------ ------------------ ---------- ----------
At 31 December 2015 - - 1,477 128 1,605
Charge for the period - - 374 12 386
Arising on acquisitions - - 230 - 230
At 30 June 2016 - - 2,081 140 2,221
----------- ------------------ ------------------ ---------- ----------
Net book value
At 31 December 2014 - - 11,211 24 11,235
=========== ================== ================== ========== ==========
At 30 June 2015 - - 13,217 175 13,392
=========== ================== ================== ========== ==========
At 31 December 2015 - 151 13,164 64 13,379
=========== ================== ================== ========== ==========
At 30 June 2016 29,259 152 14,375 65 43,851
=========== ================== ================== ========== ==========
5 Earnings per ordinary share
Basic earnings per share amounts are calculated by dividing net
profit for the period attributable to ordinary equity holders of
the parent by the weighted average number of ordinary shares
outstanding during the period.
Diluted earnings per share amounts are calculated by dividing
the net profit attributable to ordinary equity holders of the
parent by the weighted average number of ordinary shares
outstanding during the period plus the weighted average number of
ordinary shares that would be issued on the conversion of all the
dilutive potential ordinary shares into ordinary shares.
Changes in income or expense that would result from the
conversion of the dilutive potential ordinary shares are deemed to
be trivial, and therefore no separate diluted net profit is
presented. The following reflects the income and share data used in
the basic and diluted earnings per share computations:
As restated
Unaudited Unaudited
6 month 6 month Audited
period period year
ended ended ended
30-Jun-16 30-Jun-15 31-Dec-15
GBP'000 GBP'000 GBP'000
Net profit and diluted
net profit available
to equity holders of the
Group 1,207 881 3,072
============ ============ ===========
Operating profit and diluted
operating profit before
non-recurring costs and
amortisation available
to equity holders of the
Group (before tax at 20%) 2,876 2,592 6,125
Number Number Number
Weighted average number
of ordinary shares:
Issued ordinary shares
at start of period 44,954,769 200,000 200,000
Subdivision of shares by
factor of 200 - 39,800,000 39,800,000
Effect of shares issued
in current period 7,551,885 1,455,322 3,147,923
------------ ------------ -----------
Basic weighted average
number of shares 52,506,654 41,455,322 43,147,923
Effect of options exercisable
at the reporting date 266,667 330,363 195,604
Effect of options not yet
exercisable at the reporting
date 948,133 660,726 806,009
------------ ------------ -----------
Diluted weighted average
number of shares 53,721,454 42,446,411 44,149,536
============ ============ ===========
Pence Pence Pence
Earnings per share:
Basic 2.30 2.13 7.12
Diluted 2.25 2.08 6.96
Earnings per share on tax
adjusted operating profit
before non-recurring costs
and amortisation:
Basic 4.38 5.00 11.46
Diluted 4.28 4.93 11.20
6 Non recurring costs
Non-recurring costs include the following significant items:
As restated
Unaudited Unaudited
6 month 6 month Audited
period period year
ended ended ended
30-Jun-16 30-Jun-15 31-Dec-15
GBP'000 GBP'000 GBP'000
IPO of the Company and
listing on AIM - 750 750
Set up costs associated
with the take on of SIPPs 45 - 243
Bristol head office move - 99 103
Exceptional legal fees 530 - 68
Redundancy & restructuring
costs following acquisitions - - 30
Suffolk Life acquisition 284 - -
costs
859 849 1,194
=========== ============ ===========
IPO of the Company and listing on AIM
The Company listed on the Alternative Investment Market ("AIM")
on 7 May 2015. The initial public offering ("IPO") consisted of
3,947,369 new ordinary shares issued, and 7,273,681 existing shares
offered. All costs directly attributable to the issue of the new
ordinary shares have been offset against share premium created in
the year in accordance with IAS 32 Financial Instruments:
Presentation. All remaining costs attributable to the listing
itself, and existing shares offered, have been recognised above as
non-recurring costs.
Exceptional legal fees
During the six month period ended 30 June 2016 the Group entered
into an agreement to settle a potential legal claim by another
business. The terms of settlement are confidential however no
further costs are expected after 30 June 2016 and the total cost
included above includes all associated legal fees incurred.
Suffolk Life acquisition costs
The Group incurred a significant level of legal and professional
fees in connection with the acquisition of Suffolk Life Group
Limited. In accordance with IFRS 3 Business Combinations, these
have been expensed as non-recurring costs. Note 3 to the interim
condensed consolidated financial statements contains further
information about the Suffolk Life acquisition.
7 Dividends paid and proposed
Unaudited Unaudited
6 month 6 month Audited
period period year
ended ended ended
30-Jun-16 30-Jun-15 31-Dec-15
GBP'000 GBP'000 GBP'000
Paid during the period:
Equity dividend on ordinary
shares:
Ordinary interim dividend
declared and paid 1,869 500 500
1,869 500 500
=========== =========== ===========
An interim dividend of 1.0p per share has been declared to be
paid on 15 November 2016 to shareholders on the register at the
close of business on 14 October 2016. During the period, GBP5,000
of ordinary share dividends were paid in relation to
non-controlling interests in the Group's trading subsidiary Curtis
Banks Investment Management Limited.
8 Income tax
Tax is charged at 20% for the six months ended 30 June 2016 (30
June 2015: 20.5%) representing the best estimate of the average
annual effective tax rate expected to apply for the full year,
applied to the pre-tax income of the six month period.
Current tax for current and prior periods is classified as a
current liability to the extent that it is unpaid. Any amounts paid
in excess of amounts owed would be classified as a current
asset.
9 Share based payments
The weighted average exercise price for all options outstanding
at 30 June 2016 was 133.64p.
The weighted average remaining contractual life of all
unexercised share options as at 30 June 2016 was 8 years and 11
months.
The total charge to the condensed consolidated statement of
comprehensive income arising from equity-settled share-based
payment transactions for the period ended 30 June 2016 was
GBP24,454 (30 June 2015: GBP19,269). The total increase in equity
arising from equity-settled share-based payment transactions for
the period ended 30 June 2016 was GBP24,454 (30 June 2015:
GBP65,421).
SAYE share option scheme
During the period ended 30 June 2016, the Group set up a new
SAYE ("Save As You Earn") share option scheme under which all
eligible employees of the Group as of 2 June 2016 were able to
subscribe to ordinary shares in the Company following a 3 year
contribution and vesting period.
Number
of shares Number
under of shares
option Granted under
at 31 during option
Date of December the at 30 Exercise Expiry
grant 2015 period June 2016 price date
28 June 28 June
2016 - 696,435 696,435 288.88p 2026
- 696,435 696,435
============= ======== ===========
Share based payment expenses - SAYE share option scheme
The fair values of the options at the date of grant were
determined by using the Black Scholes model. The model inputs were
a risk free rate of 0.5%, expected volatility of 29%, 1% dividend
yield, and a fixed share price for the purposes of the grant of
360p per share as at 2 June 2016. Expected volatility was based
upon historical information about the Group's share price, and
comparisons against similar entities. The model includes separate
vesting periods for each proportion of options based on their
exercise dates.
Number
of shares
under option Estimated
Exercise Latest exercise at 31 December fair value
Date of grant price date 2015 per option
Employee options
28 June
28 June 2016 288.88p 2026 696,435 99.64p
696,435
================
EMI share option scheme
The Group set up an EMI scheme during the year ended 31 December
2014 by which certain employees and key management personnel of
Curtis Banks Limited are able to subscribe to ordinary shares in
the Company. As at the year-end, 26 employees (including key
management personnel) of Curtis Banks Limited held options as
follows:
Number
of shares Number
under of shares
option Granted under
at 31 / (Exercised) option
Date of December during at 30 Exercise Expiry
grant 2015 the period June 2016 price date
24 October 24 October
2014 414,800 - 414,800 10.11p 2024
8 April 8 April
2015 800,000 - 800,000 62.54p 2025
1,214,800 - 1,214,800
=========== =============== ===========
Of the remaining 414,800 options, 207,400 will vest on 24
October 2016 and 207,400 on 24 October 2017 at an exercise price of
10.11p. Of the remaining 800,000 options, 266,667 are already
exercisable, with the remaining two thirds becoming exercisable on
1 July 2016 and 1 July 2017 at an exercise price of 62.54p.
Share based payment expenses - EMI share option scheme
The fair values of the options at the date of grant were
determined by using the Black Scholes model. The model inputs were
a risk free rate of 0.5%, expected volatility of 24%, zero dividend
yield, and a share price at 24 October 2014 and 31 October 2014 of
10.11p, and at 8 April 2015 of 62.54p. Expected volatility was
based upon historical information from similar entities. The model
includes separate vesting periods for each proportion of options
based on their exercise dates.
Number of
shares under Estimated
Date of Exercise option at fair value
grant price Expiry date 30 June 2016 per option
24 October 24 October
2014 10.11p 2024 414,800 2.13p
8 April
2015 62.54p 8 April 2025 800,000 5.64p
10 Post balance sheet events
On 15 July 2016 the Group entered into an agreement to acquire
European Pensions Management Limited ("EPM") from the Special
Administrators to that company for consideration of GBP1.6m. EPM
administers circa 5,000 SIPPs with assets under administration of
circa GBP630m. The acquisition has been funded through existing
cash held by the Group.
11 Illustrative condensed consolidated statement of financial
position as at 30 June 2016 split between insurance policy holders
and the Group's shareholders
GBP'000 GBP'000 GBP'000
ASSETS
Group Policyholders Shareholders
Total
Non-current assets
Intangible assets 43,851 - 43,851
Property, plant and
equipment 1,163,587 1,160,733 2,854
Deferred tax asset 25 - 25
Investments 1,798,828 1,798,827 1
---------- -------------- -------------
3,006,291 2,959,560 46,731
---------- -------------- -------------
Current assets
Trade and other receivables 14,472 7,172 7,300
Cash and cash equivalents 422,034 397,256 24,778
---------- -------------- -------------
436,506 404,428 32,078
---------- -------------- -------------
Total assets 3,442,797 3,363,988 78,809
---------- -------------- -------------
LIABILITIES
Current liabilities
Trade and other payables 14,373 9,221 5,152
Deferred income 9,591 - 9,591
Borrowings 31,105 27,945 3,160
Deferred consideration 778 - 778
Current tax liability 452 - 452
---------- -------------- -------------
56,299 37,166 19,133
---------- -------------- -------------
Non-current liabilities
Borrowings 81,391 62,027 19,364
Deferred consideration 1,009 - 1,009
Non-participating investment
contract liabilities 3,264,795 3,264,795 -
Deferred tax liability - - -
---------- -------------- -------------
3,347,195 3,326,822 20,373
---------- -------------- -------------
Total liabilities 3,403,494 3,363,988 39,506
---------- -------------- -------------
Net assets 39,303 - 39,303
---------- -------------- -------------
Equity attributable
to owners of the parent
Issued capital 267 - 267
Share premium 33,406 - 33,406
Equity share based
payments 121 - 121
Retained earnings 5,502 - 5,502
---------- -------------- -------------
39,296 - 39,296
Non-controlling interest 7 - 7
Total equity 39,303 - 39,303
---------- -------------- -------------
This information is provided by RNS
The company news service from the London Stock Exchange
END
IR BLGDCSUGBGLU
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September 06, 2016 02:00 ET (06:00 GMT)
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