TIDMCBP
RNS Number : 2599A
Curtis Banks Group PLC
23 March 2017
Curtis Banks Group plc
("Curtis Banks", the "Group")
Final Results for 12 months to 31 December 2016
Curtis Banks Group plc, one of the UK's leading SIPP providers
with a portfolio of over 72,000 SIPPs, is pleased to announce its
final results for the 12 months to 31 December 2016.
Highlights for the period include:
2016 2015
Financial
Operating Revenue GBP29.7m GBP17.0m
Profit before Tax, Amortisation GBP7.1m GBP6.0m
and Non- recurring costs
Profit Margin on Profit
before Tax, Amortisation
and Non-recurring costs 24% 35%
Basic EPS 7.23p 7.12p
Basic EPS on Profit before
tax, amortisation and
Non-recurring costs,
less an effective tax
rate 11.38p 11.24p
Operational Highlights
Number of SIPPs Administered 72,983 39,236
Assets under Administration GBP18.8bn GBP9.0bn
Total organic New Full
SIPPs in year 3,398 2,386
2016 Results delivered in line with expectations
86% growth in SIPP numbers, 16% gross from organic
growth
Acquisition of Suffolk Life from Legal & General
for GBP45m - completed 25 May 2016
GBP27m raised in equity placing
GBP15m, 5 year debt facility and GBP8.3m revolving
credit facility secured
Full integration of European Pensions Management
acquisition
Middle management strengthening programme completed
Commenting on the results and prospects, Rupert Curtis, CEO of
Curtis Banks, said:
"2016 has been a transformational year for Curtis Banks with the
acquisition of Suffolk Life. 7 years after founding the business we
now administer over 72,000 SIPPs with approaching GBP20bn of
assets.
"SIPP numbers grew by 86% in 2016 and revenues by 75%. Adjusted
net profit increased to GBP7.1m and we will see the benefit of full
year contributions in 2017 from our acquisitions and enhanced
business levels. We see great opportunity to consolidate the
businesses of Curtis Banks and Suffolk Life and enhance our
performance as a unified business, building on what we have
achieved so far. With the support of our great team of 600 people,
we're tremendously excited about 2017 and the future ahead of
us."
Analyst Presentation:
A briefing for Analysts will be held at 11.00am 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 - Finance Director
Peel Hunt LLP (Nominated Adviser +44 (0) 20 7418
& Broker) 8900
Guy Wiehahn
+44 (0) 20 7933
Walbrook PR 8780
+44 (0) 797 122
Tom Cooper / Paul Vann 1972
tom.cooper@walbrookpr.com
Notes to Editors on Curtis Banks:
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 600 staff in its
head office in Bristol and regional offices in Ipswich, Dundee and
Market Harborough.
For more information - www.curtisbanks.co.uk
Chairman's Statement
I am pleased to present the second set of annual results for
Curtis Banks as a listed company, for the year ended 31 December
2016. We report continued growth combined with progress towards
aligning our businesses and developing our infrastructure.
Growth
The acquisition of Suffolk Life Group in May 2016 delivered a
positive contribution during the second half year, coming on top of
continued strong organic growth through the reporting period. The
full financial benefits of the acquisition of Suffolk Life will be
delivered in the current reporting year and beyond, however
benefits are already being realised. We are delighted to welcome
the strong Suffolk Life management team to the Group and are
working with them to strengthen our position as the largest
dedicated SIPP provider in the UK.
In July 2016 we completed a further acquisition, of a book of
circa 5,000 SIPPs from European Pensions Management Ltd, increasing
the Group's administered plans to over 72,000.
Growth was also driven by full year contributions from the
pension books acquired from Friends Life and the Zurich
administration contract that completed in 2015.
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.
Infrastructure
Our focus during the year 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 aligned with the Group's existing robust processes and
procedures contributing toward reduced yet still healthy operating
margins in the reporting period. Development work to align books of
business and deliver operational efficiencies has also begun.
Continued investment and resource will be required before the
benefits are fully realised.
In the second half of the year we delivered a key alignment of
Suffolk Life's SIPP banking systems, to those already operated
within the Group. The financial benefit will be delivered in full
during 2017 and beyond. Stability of interest rates in recent
months provides hope of retaining margins close to those currently
being achieved by the Group's newly co-ordinated central treasury
function
The development of our business proposition is focussed on
aligning our business, combining the best of the existing
operations of Curtis Banks and Suffolk Life. A strategy has been
put in place that focusses on opportunities that are expected to be
revenue enhancing and identify where efficiencies and cost savings
can be made.
A key decision for 2017 is the direction of our IT strategy; the
Chief Executive's Report provides more detail on this. The solution
chosen will ultimately be the best for the Group over the longer
term.
People
I am pleased to welcome Will Self to the Board as deputy CEO.
Will joined the Board in August 2016, maintaining his role as Chief
Executive Officer of Suffolk Life, and has a wealth of experience
on both the SIPP industry and the operations of Suffolk Life.
During the year 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 600 employees participated
in the Scheme. Shortly after the year end we also introduced an
Employee Benefit Trust.
Dividends
Your Board paid interim dividends of 3.5p per share on 26
February 2016 and 1.0p per share on 15 November 2016 in respect of
the years ended 31 December 2015 and 31 December 2016. A further
interim dividend of 3p per share will be paid to shareholders on
the register at the close of business on 28 April 2017. The shares
will be marked ex-dividend on 27 April 2017 and the dividend paid
on 12 May 2017.
Summary and outlook
The year reflects positive progress for the Group with continued
organic growth and successful acquisitions. The decisions and
investments made to enhance our infrastructure will secure
important capability to support future development and growth of
the business.
The outlook for 2017 is strong. We continue to be approached by
SIPP operators looking for an exit for a variety of reasons and we
evaluate opportunities as they come to us. We will only consider
acquisitions of high quality books of SIPPs where we have
confidence that they can provide at least the required level of
operating margins. Admission to AIM has provided us with the
resources and ability to consider and fund all levels of
acquisition.
The implementation of the 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. We are not reliant on free movement of labour across
Europe.
Our strategy for the future is set out in detail in the Chief
Executive's review. The focus of our business will be to deliver on
this strategy, aligning and developing the two businesses of Curtis
Banks and Suffolk Life for the benefit of shareholders.
The continued development of Curtis Banks is the result of the
hard work of our staff Group-wide. I would like to take this
opportunity to thank them all.
We continue to be inspired by the opportunity for Curtis Banks
and believe the current strategy and economic environment to be
complementary. We look forward to updating the market on further
achievements in 2017.
Chris Banks
Chairman
Chief Executive's Review
Operational Review
The beginning of the year under review marked the full
integration of the two transactions that completed in 2015: the
acquisition of the Friends Life book of schemes and the Zurich
third party administration arrangements. We recruited more staff,
principally during the first half of the year, to service the
enlarged Group with support and management functions, to deliver
change and ensure that thorough and efficient procedures are being
followed throughout the Group.
In January 2016 we exchanged contracts for the significant
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. During the period from
exchange of contracts to completion we worked closely with the
management of Suffolk Life to understand their operations and began
to plan the optimum way forward for the combined Group. Unlike
previous acquisitions, where the Group had 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 management, staff and systems.
The Suffolk Life operation has a strong and experienced
management team that ran this business as a stand-alone operation
under the Legal & General umbrella. This continued in the year
under review as part of the Group, however the current focus is on
merging the two operations as much as possible to identify
operational synergies and efficiencies. Delivering these, as well
as developing revenue enhancing opportunities for both businesses,
will ensure the margins achievable are enhanced across the whole
Group.
The operating structures, culture 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, with the combined
operations being significantly stronger than the component parts.
The Suffolk Life acquisition brought circa 28,000 SIPPs to the
Group with circa GBP10bn of assets under administration. As at 31
December 2016, 300 staff work for Suffolk Life, all based in
Ipswich. Combined staff meetings already take place on a regular
basis to exchange ideas and take action where there is synergy and
duplication of resources across the Group.
Your Board has spent considerable time formulating the strategy
of the Company going forward and has identified five primary
statements of our strategic objectives:
-- Meet changing customer needs - adapting to the changing needs
of the UK population and regulatory environment to be the SIPP
provider of choice both pre and post-retirement.
-- Capitalise on the right opportunities for growth - Focus on
profitable areas of organic market growth and selective
acquisitions of well-aligned books or businesses, with a clear
business identity
-- Enhance revenue generation - extend proven revenue generation
activities across the wider group and continually review fee income
relative to the services provided
-- Drive efficiency through technology - continue technology
advances appropriate to the business to deliver improved margins
through efficiency and improved service to customers
-- Maintain a robust and sustainable business model - market
leading governance, capitalisation and robust systems to ensure a
sustainable long term business and confidence for our business
partners, customers and shareholders.
Beneath these strategic objectives an action plan has been
defined that sets out the internal initiatives in order to deliver
the strategy above. The business will focus on delivering this
strategy.
SIPP Numbers and Revenues
New SIPP numbers for both Full and mid SIPPs (Full SIPPs with
one integrated investment relationship) from organic growth in the
year for Curtis Banks were 2,750. Compared to the previous year
(2015: 2,386) this shows an impressive growth of 15%. For Suffolk
Life since acquisition in May 2016 new Full and mid SIPPs totalled
648. The number of SIPPs administered by the Group as at 31
December 2016 totalled 21,060 Full SIPPs, 23,277 mid SIPPs, 18,143
eSIPPs and 10,503 SIPPs administered under third party
administration contracts. The increased staff numbers have been
used to support this strong organic growth in Full SIPPs during the
year, as well as working on books of SIPPs acquired.
The attrition rate for the year has remained comparable to the
previous year at 5%.
The average revenue per SIPP has fallen to GBP574 (excluding
SIPPs administered under outsourcing contracts) in the year 31
December 2016 from GBP620 for the year ended 31 December 2015. This
is attributable to the effect of the lower interest rates received
on client deposits during the year and interest margins only being
received of the Suffolk Life books of SIPPs from late in the year.
On average 88% of the revenue per Full SIPP is derived from fees
and the balance from interest. Average total revenues from Full
SIPPs were GBP1,207, GBP379 from mid SIPPs and GBP124 from
eSIPPs.
Our market and products
The changes to pension legislation over the past three Budgets
have, to date, had little impact on the business of Curtis Banks
other than implicitly driving the growth levels in new SIPPs by
increasing the flexibilities available. The Group has experienced
no significant increase in withdrawals as a result of the new
pension freedom abilities. All products, systems and literature of
Curtis Banks and the Group companies have however been updated to
reflect the changes and allow clients to take full advantage of the
new rules where allowed.
Through acquisitions the Group has taken on a number of
different products. Work has begun on aligning these products to
bring consistency of features, terms and conditions, thus enhancing
product management and strengthening governance.
The Group acquired additional marketing and brand capability
through the purchase of Suffolk Life. A review of the Group brand
strategy began in the reporting year, with implementation and
delivery anticipated during the current year.
IT strategy
As reported in previous years, we are reviewing the back office
operating systems in place throughout the Group. Prior to the
acquisition of Suffolk Life in May 2016, all acquisitions of SIPP
business made by the Group were integrated onto the current
operating systems used by Curtis Banks. A specific new operating
system has been under review for the past two years and
considerable time and expense incurred on evaluating and developing
this potentially more efficient back office system as a
replacement.
The decision as to which new operating system to adopt will be
based on the most commercially appropriate and operationally
effective system over the longer term. It will deliver a pathway to
the most efficient processing for the Group's products and
services, and will allow for automation of many of the manual
processes currently incurred. This will lead to improved margins
and profitability for the Group.
As well as the core operating system, work is being done to
align and develop ancillary systems and processes, to deliver
increased functionality and efficiencies. We see significant
opportunities to deliver a more effective operating model across
the whole group.
People
As a result of the exceptional growth of the business over the
past few years additional staff have been recruited to strengthen
the provision of general support services. Staff numbers were
increased across the Group, principally in Bristol. Staff resource
is now considered to be at the level necessary to support current
business levels and provide the service levels expected using
current systems and processes.
Rupert Curtis
Chief Executive Officer
Financial Review
Operational revenues of GBP29.7m in 2016 have increased by 75%
over the comparable period. This is through a combination of strong
organic growth, the acquisition of the Suffolk Life Group of
Companies and the full year effect of two transactions that
completed in the year ended 31 December 2015. These transactions
were:
-- Third Party administration arrangements for a book of over
10,000 Zurich SIPPs commencing in October 2015; and
-- A book of self-invested pension products acquired from Friends Life PLC on 13 March 2015.
The contribution from these two transactions accounted for
GBP3.2m of the operational revenue for the year ended 31 December
2016 (2015 - GBP2.8m)
The acquisition of the Suffolk Life Group of Companies completed
on 25 May 2016 and accordingly the results for the year to 31
December 2016 include only seven months of results for Suffolk Life
with operating revenues of GBP10.4m in that period. The full
contribution of this acquisition will be felt in the current and
future financial periods.
Additional year on year revenues of GBP1.9m were generated from
organic growth.
During the latter part of the year the client banking systems at
Suffolk Life were aligned with the virtual banking system operated
at Curtis Banks. This allowed for a central treasury function,
placing these funds on deposit with more attractive interest rates
as well as enabling these accounts to be operated more efficiently.
The full benefit of this will be recognised in the current year. In
the year ended 31 December 2016 GBP4.5m of the Group operating
revenues were from interest margin.
Administrative expenses of GBP14m at Curtis Banks only
(excluding Suffolk Life) increased by 29% compared to the previous
year. This was largely a result of recruiting additional staff
resources needed to service the two new transactions noted above
and also to strengthen central support functions. Suffolk Life
administration costs for the seven month period to 31 December 2016
amounted to GBP8.4m.
Excluding the Suffolk Life acquisition, staff numbers in Curtis
Banks have increased from 235 as at 31 December 2015 to 291 as at
31 December 2016, resulting in an increase in staff costs of 27%.
Due to higher staff numbers and the transactions that completed
part way through 2015, computer and licensing costs have also
increased significantly.
As a result of these increased costs and lower interest margins
in 2016 the operating margins at Curtis Banks have fallen to 26%
from 35% in the previous years. Lower margins at Suffolk Life, due
to virtual banking not being introduced until later in the
reporting year as noted above, resulted in the overall operating
margins for the Group falling to 24% for the year.
The successful implementation of a new core infrastructure,
along with other changes being made to our business model, will
deliver improved capability to sustain organic and acquisitive
growth as well as drive margin enhancing internal efficiencies.
Suffolk Life acquisition
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. 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 31 December 2016, and
there is no impact on the prior year figures. An illustrative
balance sheet as at 31 December 2016 showing the financial position
of the Group excluding the policy holder assets and liabilities is
included in the Notes to the Accounts.
Non recurring costs
Non recurring costs for the year ended 31 December 2016
principally comprise:
-- Acquisition costs of GBP0.7m relating to the Suffolk Life
transaction that were required to be expensed in accordance with
IFRS 3 Business Combinations;
-- Costs of GBP0.5m relating to our defence and settlement of a
legal action by another business;
-- Restructuring costs of GBP0.5m following acquisitions of businesses.
Capital requirements
New capital adequacy requirements for SIPP operators became
effective from September 2016. As a result of the Suffolk Life
acquisition, the Group also came under new Solvency II requirements
for Insurance Companies. Based on calculations as at 31 December
2016, Curtis Banks Group has a healthy level of headroom above the
requirements and its internal policy. Group internal policy is for
regulated companies within the Group to hold at least 130% of their
required regulatory capital.
The Group's regulated subsidiary companies submit regular
returns to the FCA and the PRA relating to their capital resources.
At 31 December 2016 the total regulatory capital requirement across
the Group was GBP10.3m million (2015: GBP2.4 million) and the Group
had an aggregate surplus of GBP15.98 million (2015: GBP1 million)
across all regulated entities. All the regulated firms within the
Group maintained surplus regulated capital throughout the year.
Paul Tarran
Chief Financial Officer
Curtis Banks Group PLC
Consolidated statement of comprehensive income
Year ended 31 December 2016 Year ended 31 December 2015
---------------------------------------------------------------- --------------------------------------------------
Before amortisation Amortisation Before Amortisation
and non-recurring and non-recurring amortisation and
costs costs and non-recurring non-recurring
Total costs costs Total
Notes GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Operating revenue 29,731 - 29,731 16,999 - 16,999
Policyholder
investment
returns 261,639 - 261,639 - - -
---------- -------------- -------- -------------- ------------ --------
Revenue 291,370 - 291,370 16,999 - 16,999
Administrative
expenses (22,403) - (22,403) (10,874) (10,874)
Non-participating
investment
contract
expenses (18,268) - (18,268) - - -
Changes in
provisions:
Non-participating
investment
contract
liabilities (243,371) - (243,371) - - -
---------- ----------
Policyholder total
expenses (261,639) - (261,639) - - -
---------- -------------- -------------- ------------
Operating profit
before
amortisation
and non-recurring
costs 7,328 - 7,328 6,125 - 6,125
Non-recurring
costs 3 - (1,690) (1,690) - (1,194) (1,194)
Amortisation - (884) (884) - (733) (733)
---------- -------------- -------- -------------- ------------ --------
Operating profit 2 7,328 (2,574) 4,754 6,125 (1,927) 4,198
Finance income 117 - 117 40 - 40
Finance costs (381) - (381) (158) - (158)
---------- -------------- -------- -------------- ------------ --------
Profit before
tax 7,064 (2,574) 4,490 6,007 (1,927) 4,080
Tax 4 (1,126) 470 (656) (1,368) 385 (983)
---------- -------------- -------- -------------- ------------ --------
Total comprehensive
income for the
year 5,938 (2,104) 3,834 4,639 (1,542) 3,097
========== ============== ======== ============== ============ ========
Attributable to:
Equity holders
of the company 3,829 3,072
Non-controlling
interests 5 25
-------- --------
3,834 3,097
======== ========
Earnings per
ordinary
share on net
profit
Basic (pence) 5 7.23 7.12
Diluted (pence) 5 7.02 6.96
Curtis Banks Group PLC
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
At 1 January 2015 200 - 32 3,591 3,823 1,405 5,228
Total comprehensive
income for the
year - - - 3,072 3,072 25 3,097
Share based
payments - - 65 - 65 - 65
Ordinary shares
issued 25 7,146 - - 7,171 - 7,171
Ordinary dividends
declared and paid - - - (500) (500) - (500)
Preference
dividends
declared and paid - - - - - (21) (21)
Preference shares
redeemed - - - - - (1,400) (1,400)
--------- --------- ---------- ---------- --------- ---------------- ---------
At 31 December 2015 225 7,146 97 6,163 13,631 9 13,640
Total comprehensive
income for the
year - - - 3,829 3,829 5 3,834
Share based
payments - - 142 - 142 - 142
Ordinary shares
issued 43 26,279 - - 26,322 - 26,322
Ordinary dividends
declared and paid - - - (2,403) (2,403) (5) (2,408)
At 31 December 2016 268 33,425 239 7,589 41,521 9 41,530
========= ========= ========== ========== ========= ================ =========
Curtis Banks Group PLC
Consolidated statement of financial position
Group
--------------------------
Group
31-Dec-16 31-Dec-15
Notes GBP'000 GBP'000
ASSETS
Non-current assets
Intangible assets 6 47,442 14,226
Investment property 7 1,149,135 -
Property, plant and
equipment 8 1,073 672
Investments 1,924,913 1
------------ ------------
3,122,563 14,899
------------ ------------
Current assets
Trade and other receivables 17,523 4,049
Cash and cash equivalents 9 447,510 7,630
------------ ------------
465,033 11,679
------------ ------------
Total assets 3,587,596 26,578
------------ ------------
LIABILITIES
Current liabilities
Trade and other payables 12,138 1,951
Deferred income 21,993 4,649
Borrowings 38,329 1,195
Deferred consideration 641 1,242
Current tax liability 504 434
------------ ------------
73,605 9,471
------------ ------------
Non-current liabilities
Borrowings 77,194 2,036
Deferred consideration 821 1,219
Non-participating investment 3,394,404 -
contract liabilities
Deferred tax liability 42 212
------------ ------------
3,472,461 3,467
------------ ------------
Total liabilities 3,546,066 12,938
------------ ------------
Net assets 41,530 13,640
------------ ------------
Equity attributable
to owners of the parent
Issued capital 268 225
Share premium 33,425 7,146
Equity share based
payments 239 97
Retained earnings 7,589 6,163
------------ ------------
41,521 13,631
Non-controlling interest 9 9
Total equity 41,530 13,640
------------ ------------
Curtis Banks Group PLC
Consolidated statement of cash flows
Group
Year ended 31 December
2016 2015
GBP'000 GBP'000
Cash flows from operating activities
Profit before tax 4,490 4,080
Adjustments for:
Depreciation 519 267
Amortisation 884 733
Dividend income - -
Interest expense 387 158
Share based payment expense 142 19
Fair value gains on financial investments (199,681) -
Additions of financial investments (328,511) -
Disposals of financial investments 390,603 -
Fair value gains on investment properties 25,038 -
Increase in liability for investment contracts 156,175 -
Changes in working capital:
Increase in trade and other receivables (6,447) (2,055)
Increase/(decrease) in trade and other payables 11,024 1,113
Taxes paid (667) (794)
Net cash flows from operating activities 53,956 3,521
----------------------- ---------
Cash flows from investing activities
Purchase of intangible assets (1,533) (843)
Purchase of property, plant and equipment (101,473) (469)
Receipts from sale of property, plant and equipment 85,758 -
Net cash flows from acquisitions 357,821 (1,128)
Net cash flow from investing activities 340,573 (2,440)
----------------------- ---------
Cash flows from financing activities
Capital element of finance lease contracts - (20)
Equity dividends paid (2,408) (535)
Net proceeds from issue of ordinary shares 26,322 7,171
Redemption of preference shares - (1,400)
Net increase/(decrease) in borrowings 21,848 (1,195)
Interest element of finance lease rentals - (4)
Interest paid (411) (167)
Net cash received from financing activities 45,351 3,850
----------------------- ---------
Net increase/(decrease) in cash and cash equivalents 439,880 4,931
----------------------- ---------
Cash and cash equivalents at the beginning of the year 7,630 2,699
======================= =========
Cash and cash equivalents at the end of the year 447,510 7,630
======================= =========
The Group's Consolidated Statement of Cash Flows includes all
cash and cash equivalent flows, including GBP426,054,538 (2015:
GBPnil) relating to policyholder non-participating investment
contracts.
Curtis Banks Group PLC
Notes to the Results
1 Corporate information
Curtis Banks Group PLC ("the Company") is a public limited
company incorporated and domiciled in England and Wales, whose
shares are public traded on the AIM market of the London Stock
Exchange PLC. The consolidated financial statements of Curtis Banks
Group PLC and its subsidiaries ("the Group") have been prepared on
a historical cost basis and are presented in pounds sterling, with
all values rounded to the nearest thousand pounds except when
otherwise indicated.
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.
As a result of the acquisition of Suffolk Life during the year,
Suffolk Life Annuities Limited became a wholly owned subsidiary of
the Group. This company 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. 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. Note
13 to this Announcement shows for illustrative purposes the Group
Balance Sheet excluding policy holder assets and liabilities.
2 Profit for the year
Profit for the year is arrived at after:
Year ended 31 December
2016 2015
GBP'000 GBP'000
Charging:
Amortisation of intangible
assets 884 733
Depreciation of property,
plant and equipment 519 267
Operating lease rentals
for land and buildings 320 321
Other operating lease rentals - 326
Auditors remuneration:
- audit of the annual accounts
of the Group 186 55
- regulatory and tax audits 83 18
- corporation tax services - 8
- professional fees in
respect of listing - 130
=============================== ===============================
3 Non-recurring costs
Non-recurring costs include the following significant items:
Year ended 31 December
2016 2015
GBP'000 GBP'000
IPO of the Company and
listing on AIM - 750
Set up costs associated
with the take on of SIPPs 50 243
Bristol head office move - 103
Exceptional legal fees 537 68
Redundancy & restructuring
costs following acquisitions 310 30
Suffolk Life acquisition 735 -
costs
European Pension Management 58 -
acquisition costs
1,690 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 year ended 31 December 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 31 December 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 and its subsidiaries. In accordance with IFRS 3 Business
Combinations, these have been expensed and treated as non-recurring
costs.
European Pension Management acquisition costs
The Group incurred considerable legal and professional fees in
connection with the acquisition of the trade and assets of European
Pension Management Limited. In accordance with IFRS 3 Business
Combinations, these have been expensed and treated as non-recurring
costs.
4 Taxation
Year ended 31 December
2016 2015
GBP'000 GBP'000
Domestic current period tax
UK Corporation tax 650 851
Deferred tax
Origination and reversal
of temporary differences 6 132
656 983
============================= =============================
Factors affecting the tax
charge for the period
Profit before tax 4,490 4,080
============================= =============================
Profit before tax multiplied
by standard rate of UK Corporation
tax of 20.00% (2015: 20.25%) 898 826
----------------------------- -----------------------------
Effects of:
Adjustment to prior period (234) -
Non-deductible expenses 61 165
Depreciation 104 201
Capital allowances (146) (311)
Other tax adjustments (33) (30)
----------------------------- -----------------------------
(248) 25
Current tax charge 650 851
============================= =============================
5 Earnings per share
Basic earnings per share amounts are calculated by dividing net
profit for the year attributable to ordinary equity holders of the
parent by the weighted average number of ordinary shares
outstanding during the year.
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 year 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:
2016 2015
GBP'000 GBP'000
Net profit and diluted net profit
available to equity holders of
the Group 3,829 3,072
================= ===========
Net profit and diluted net profit
before non-recurring costs and
amortisation available to equity
holders of the Group. 7,064 6,007
================= ===========
Weighted average number of ordinary Number Number
shares:
Issued ordinary shares at start
of period 44,954,769 200,000
Subdivision of shares by factor
of 200 - 39,800,000
Effect of shares issued in current
period 8,031,907 3,147,923
----------------- -----------
Basic weighted average number
of shares 52,986,676 43,147,923
Effect of options exercisable
at the reporting date 533,333 195,604
Effect of options not yet exercisable
at the reporting date 991,959 806,009
----------------- -----------
Diluted weighted average number
of shares 54,511,968 44,149,536
================= ===========
Pence Pence
Earnings per share:
Basic 7.23 7.12
Diluted 7.02 6.96
Earnings per share on operating
profit before non-recurring costs
and amortisation, less an effective
tax rate:
Basic 11.38 11.24
Diluted 11.07 10.99
6 Intangible assets
Group
Goodwill Development Client Computer Total
GBP'000 Costs Portfolios Software GBP'000
GBP'000 GBP'000 GBP'000
Cost
At 1 January
2016 - 151 14,641 1,039 15,831
Arising on
acquisition 28,903 - 3,789 472 33,164
Additions - 1 - 1,548 1,549
Disposals - - - (95) (95)
At 31 December
2016 28,903 152 18,430 2,964 50,449
---------- ------------ ------------ ---------- ----------
Amortisation
At 1 January
2016 - - 1,477 128 1,605
Arising on
acquisition - - 229 384 613
Charge for
the year - - 827 57 884
Disposals - - - (95) (95)
At 31 December
2016 - - 2,533 474 3,007
---------- ------------ ------------ ---------- ----------
Net book value
At 31 December
2015 - 151 13,164 911 14,226
========== ============ ============ ========== ==========
At 31 December
2016 28,903 152 15,897 2,490 47,442
========== ============ ============ ========== ==========
Intangible assets include a re-presentation of computer software
costs relating to a software package for SIPP administration with a
carrying value of GBP1,991,553 (2015: GBP847,218). As at 31
December 2015, these costs were presented as property, plant and
equipment.
Goodwill
Goodwill arose on the acquisition of Suffolk Life Group Limited
and its subsidiaries on 25 May 2016. The Group tests goodwill for
impairment annually or more frequently if there are indications
that goodwill might be impaired. The recoverable amount of goodwill
has been determined based on value-in-use calculations. These
calculations use operating cash flow projections based on financial
budgets approved by management covering a three year period,
assuming business then continues onward after this point at a
steady rate for the purpose of the analysis.
Development Costs
Development costs represent costs incurred for the development
of new SIPP products, with a carrying value as at 31 December 2016
of GBP151,922 (2015: GBP151,402). No amortisation has been provided
in the year to 31 December 2016 as products have yet to be released
to the market and are consequently not yet available for sale.
Computer Software
Computer software includes costs for a software package for SIPP
administration, with a carrying value of GBP1,991,553 (2015:
GBP847,218). As at 31 December 2016 this was still under
construction and therefore is not yet being amortised.
Computer software also includes a virtual banking system to
improve the efficiency of treasurer facilities within the Group and
generate higher levels of interest, with a carrying value as at 31
December 2015 and 2016 of GBP63,978 and GBP435,477 respectively.
This is being amortised over its useful economic life of four years
on a straight line basis.
Client Portfolios
Client portfolios represent individual client portfolios
acquired through business combinations.
The brought forward balance relates to the purchase of the trade
and assets of Montpelier Pension Administration Services Limited on
13 May 2011, the full SIPP business of Alliance Trust Savings
Limited on 18 January 2013, the full SIPP business and certain
assets of Pointon York SIPP Solutions Limited on 31 October 2014,
the full SIPP business of Rathbones Pension & Advisory Services
Limited on 31 December 2014, and a book of full SIPPs from Friends
Life plc (now Aviva plc) on 13 March 2015.
Client portfolios arising on acquisition represent the two
business combinations undertaken during the year; that of Suffolk
Life and EPM. The Suffolk Life business combination included
existing intangible assets for historical books of SIPPs purchased
from Pointon York SIPP Solutions Limited on 9 November 2012,
Pearson Jones PLC on 30 April 2013, and Origen Investment Services
Limited on 22 May 2013.
All acquisitions have been accounted for under the acquisition
method of accounting.
The directors have considered the carrying value of the client
portfolios and have concluded that no impairment is required. The
client portfolios are being amortised over a period of 20 years and
have an average remaining expected useful economic life as at 31
December 2016 of 17 years and 4 months.
7 Investment Property
Assets held at fair value
Group
Investment Properties Total
GBP'000 GBP'000
Fair value
At 1 January 2016 - -
Arising on acquisitions 1,158,965 1,158,965
Additions 100,967 100,967
Disposals (85,758) (85,758)
Fair value gains/(losses) (25,039) (25,039)
At 31 December 2016 1,149,135 1,149,135
====================== ==========
All investment properties have been valued by the directors at
the year end with reference to previous professional valuations and
this is further adjusted by applying the corresponding property
index available. Investment properties held to cover the linked
policyholder business are included in non-participating investment
contract liabilities.
8 Property, plant and equipment
Assets held at cost
Group
Leasehold Computer equipment Plant & equipment Total
Improvements
GBP'000 GBP'000 GBP'000 GBP'000
Cost
At 1 January 2016 54 1,149 138 1,341
Arising on acquisition - 2,051 859 2,910
Additions - 406 99 505
Disposals - - (3) (3)
At 31 December 2016 54 3,606 1,093 4,753
-------------- ------------------- ------------------ --------
Depreciation
At 1 January 2016 15 576 78 669
Arising on acquisition - 1,664 831 2,495
Charge for the year 13 457 49 519
Disposals - - (3) (3)
At 31 December 2016 28 2,697 955 3,680
-------------- ------------------- ------------------ --------
Carrying value
At 31 December 2015 39 573 60 672
============== =================== ================== ========
At 31 December 2016 26 909 138 1,073
============== =================== ================== ========
Intangible assets include a re-presentation of computer software
costs relating to a software package for SIPP administration with a
carrying value of GBP1,991,553 (2015: GBP847,218). As at 31
December 2015, these costs were presented as property, plant and
equipment.
9 Cash and cash equivalents
As at 31 December 2016 and 2015 cash and cash equivalents were
as follows:
Group Company
As at 31 December As at 31 December
2016 2015 2016 2015
GBP'000 GBP'000 GBP'000 GBP'000
Cash at bank and in
hand 447,510 7,630 458 4,832
========= ========= ========= =========
All cash at bank is held on overnight deposit. Cash at bank and
in hand includes GBP1,634,000 (2015: GBPnil) of cash equivalents
held at fair value.
10 Dividends
Year to 31 December
2016 2015
GBP'000 GBP'000
Ordinary interim declared
and paid 2,403 500
2,403 500
========== ==========
An ordinary interim share dividend was declared and paid on 26
February 2016 equating to 3.5p per ordinary share.
A further interim share dividend was declared and paid on 15
November 2016 equating to 1p per ordinary share.
11 Post balance sheet events
On 10 February 2017 the Company established an offshore Employee
Benefit Trust ("EBT") to benefit, encourage and motivate all
employees by facilitating the long term interests in, and ownership
of, shares in the Company. Shares held by the EBT will be used to
satisfy awards under the Company's Long Term Incentive Schemes and
other share-based payment schemes. As at the date of this report
the EBT had acquired 83,725 ordinary shares in the Company.
12 Contingent liabilities
The Group has been in recent correspondence with HMRC regarding
processes and documentation in respect of tax reliefs granted on
pension contributions. HMRC have alleged that incorrect procedures
were followed and as a result there may be assessments in respect
of tax reliefs granted and interest thereon. This correspondence
includes the processing of in specie contributions, which is an
industry wide issue affecting other SIPP operators and is being
challenged by the industry as a whole. Any tax reliefs incorrectly
granted would in the normal course of events, where possible, be
recovered from the SIPP that has received that relief. This issue
is at an early stage and it is not possible at this time to
determine the likely quantum of any settlement if HMRC were
successful in their claims, or when this matter will be
resolved.
13 Illustrative Consolidated Statement of Financial Position as
at 31 December 2016 split between insurance policy holders and the
Group's shareholders
ASSETS GBP'000 GBP'000 GBP'000
Group Policyholder Shareholder
Total
Non-current assets
Intangible assets 47,442 - 47,442
Property, plant and
equipment 1,150,208 1,149,099 1,109
Investments 1,924,913 1,924,912 1
---------- ------------- ------------
3,122,563 3,074,011 48,552
---------- ------------- ------------
Current assets
Trade and other receivables 17,523 8,763 8,760
Cash and cash equivalents 447,510 426,055 21,455
---------- ------------- ------------
465,033 434,818 30,215
---------- ------------- ------------
Total assets 3,587,596 3,508,829 78,767
---------- ------------- ------------
LIABILITIES
Current liabilities
Trade and other payables 12,138 7,724 4,414
Deferred income 21,993 12,120 9,873
Borrowings 38,329 35,169 3,160
Deferred consideration 641 - 641
Current tax liability 504 - 504
---------- ------------- ------------
73,605 55,013 18,592
---------- ------------- ------------
Non-current liabilities
Borrowings 77,194 59,412 17,782
Deferred consideration 821 - 821
Non-participating investment
contract liabilities 3,394,404 3,394,404 -
Deferred tax liability 42 - 42
---------- ------------- ------------
3,472,461 3,453,816 18,645
---------- ------------- ------------
Total liabilities 3,546,066 3,508,829 37,237
---------- ------------- ------------
Net assets 41,530 - 41,530
---------- ------------- ------------
Equity attributable
to owners of the parent
Issued capital 268 - 268
Share premium 33,425 - 33,425
Equity share based
payments 239 - 239
Retained earnings 7,589 - 7,589
---------- ------------- ------------
41,521 - 41,521
Non-controlling interest 9 - 9
Total equity 41,530 - 41,530
---------- ------------- ------------
This information is provided by RNS
The company news service from the London Stock Exchange
END
FR SEFESEFWSEDD
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March 23, 2017 03:01 ET (07:01 GMT)
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