TIDMRIV
RNS Number : 4863S
River and Mercantile Group PLC
17 March 2021
17 March 2021
LEI: 2138005C7REHURGWHW31
River and Mercantile Group PLC
Interim Results for the Six Months Ended 31 December 2020
River and Mercantile Group PLC today publishes its interim
results for the six months ended 31 December 2020.
James Barham, Group Chief Executive commented:
"This has been a very busy period for the Group. Not only have
we addressed the significant disruption caused by the pandemic, but
we have also successfully launched a number of new initiatives
across the business; from our Global Responsible Equity Strategy,
to the positive start by our European Equity Fund, and, more
recently, the hiring of our new Infrastructure team. Each of these
initiatives is a response to strong client interest and need in
these asset classes. There is also a strong sustainability and ESG
theme within them, reflecting a growing requirement from clients
that investment strategies should mirror wider social demands
whilst continuing to achieve good returns.
In addition, we believe we have made the right investments in
people to enable River and Mercantile to take advantage of the
attractive growth opportunities that we have identified, to
continue to deliver strong investment returns for our growing
client base, and to provide longer-term value to shareholders.
Following a period of substantial investment, we are now
redoubling our focus on improving our profitability through a
series of cost cutting exercises to ensure that we return our core
underlying margin to previous levels."
Operational Highlights
-- 93% of investment strategies by AUM beat their respective
benchmarks over the period;
-- The Group has GBP2.2 billion of new mandates with IMAs under
negotiation, the majority of which are Fiduciary Management;
-- Average Fiduciary Management client term weighted by AUM of
8.1 years and 72% of assets managed for over five years;
-- Derivatives business shows healthy growth with 2.5% increase,
GBP0.6 billion, of net flows;
-- US Solutions Business now profitable;
-- New Wholesale team has driven a return to net inflows in
Q2;
-- Global Responsible Equity Strategy developed and now being
marketed;
-- European Equity Fund launched and performing well;
-- New Infrastructure business established and team hired, first
fund to be launched in 2021;
-- Group Head of ESG hired.
Financial Highlights
-- Fee earning AUM(1) increased by 3.4% to GBP45.7 billion (June
2020: GBP44.2 billion);
-- Net AUM flows of +GBP0.1 billion, investment performance of
+GBP1.4 billion;
-- Underlying revenue(2) fell by 3.0% to GBP34.2 million (six
months to 31 December 2019: GBP35.2 million);
-- No material performance fees for the period (six months to 31
December 2019: GBP1.1 million), although UK Micro Cap Investment
Company performance fee earned of GBP1.2 million will fall in H2
results;
-- Adjusted underlying profit before tax(3) of GBP6.2 million
(six months ended December 2019: GBP7.3 million);
-- Statutory profit before tax of GBP4.6 million (six months
ended December 2019: GBP5.7 million);
-- Adjusted underlying basic EPS(4) of 5.56 pence (six months
ended December 2019: 6.52 pence);
-- Basic EPS of 3.94 pence (six months ended December 2019: 4.86
pence);
-- The Board of Directors has declared a first interim dividend
of 3.89 pence per share (prior year first interim ordinary dividend
of 3.89 pence and a 0.5 pence special dividend).
Notes:
(1) Assets Under Management (AUM) represents amounts on which
management fees and performance fees are charged across all asset
classes managed by the Group. In relation to Derivatives, AUM
represents the aggregate billing notional of the derivative
contracts on which management fees are charged.
(2) Underlying revenue is total revenue less performance
fees.
(3) Adjusted underlying profit before tax is a measure of the
underlying performance of the Group and is determined by adjusting
statutory profit before tax for the impact of performance fees and
associated remuneration, amortisation and impairment of intangible
assets (excluding software), other unrealised gains and losses and
dilutive share awards.
(4) Adjusted underlying basic EPS is the adjusted underlying
profit after tax divided by the weighted average number of shares
outstanding in the period.
This RNS has been approved on behalf of the Board.
Forward Looking Statements
This announcement contains certain forward-looking statements
with respect to the financial condition, results of operations and
businesses of River and Mercantile Group PLC. These statements are
made by the Directors in good faith based on the information
available to them up to the time of their approval of this report.
However, such statements should be treated with caution as they
involve risk and uncertainty because they relate to events and
depend upon circumstances that may occur in the future.
There are a number of factors that could cause actual results or
developments to differ materially from those expressed or implied
by these forward-looking statements.
Nothing in this announcement should be construed as a profit
forecast.
For further information please contact:
Montfort Communications
Gay Collins, e: gaycollins@montfort.london t: +44(0)7798 626 282
Nick Bastin, e: bastin@montfort.london t: +44(0)7931 500 066
Group Chief Executive's Statement
Introduction
The six month period to 31 December 2020 continued to be
demanding, with uncertainty and disruption caused by the pandemic
which, despite our diversified business model, impacted our
shorter-term financial results. There is a significant amount of
positive work being undertaken across the business that will impact
in our second half. I am grateful to all our employees for their
success in maintaining a full service to all our clients whilst
working from home and delivering excellent investment performance
during the period.
Significant Developments
This has been a very busy period for the Group and we have
successfully launched a number of new initiatives and there are a
number of positive developments:
-- The Group has GBP2.2 billion of new mandates with investment
agreements currently in negotiation. The majority of these are for
Fiduciary Management and will flow into "in transition" once
documents are signed;
-- Following a period of investment, our US Solutions business
is now profitable;
-- Our Global Responsible Equity Strategy, which builds on an
existing investment strategy in our Fiduciary business, where we
currently manage in excess of GBP4 billion of equities, has been
developed into a product that we are successfully presenting to our
wider wholesale and institutional clients;
-- Our European Equity Fund has made a good start both in
performance and funds raised;
-- We have opened our newly established Infrastructure business
and we will be launching our first infrastructure fund during
2021.
Each of these developments is a response to strong client
interest and need in these asset classes. There is also a strong
ESG theme within them reflecting a growing requirement from clients
that investment strategies should mirror wider social demand for
responsible investment strategies whilst continuing to achieve good
returns and is in line with our sustainability theme. Our
appointment of our Group Head of ESG underscores our long term
commitment to responsible investing.
Distribution
The strengthening of our sales capability is largely complete.
This investment has focussed on our Fiduciary and importantly our
Wholesale business where we have under-performed in recent years.
This investment is beginning to deliver results and it was
encouraging to see a return to positive net flows over the second
quarter in this key market. In addition, the gross pipeline of
prospective mandates in our Fiduciary business following our
refocus on distribution has recovered strongly having tapered off
during the early stages of the pandemic and is now larger than at
any point in our history.
Costs
The initial focus on our strategy has been to target
distribution and we are now turning our focus to our profit margin.
We are developing a series of cost cutting exercises to ensure that
we return our core underlying margin to previous levels and we will
update the market in due course. In addition, we continue to work
on our longer-term detailed plans and associated timing to
re-engineer the Group's operational infrastructure to allow us to
cut operating costs materially and improve processes. Getting this
right is key to delivering on our potential to improve the Group's
financial performance while providing us with the capacity to scale
up our activities.
Investment Performance
Over 71 per cent of investment strategies by number and over 93
per cent by assets under management have beaten their respective
benchmarks during the period and in most cases by significantly
more than 5 per cent. This has led to the crystallisation of a
performance fee from the River & Mercantile UK Micro Cap
Investment Company of approximately GBP1.2 million which will fall
into H2's results. We have previously stated that given the
economic and in particular the interest rate backdrop and the
impact these have on clients' specific liability-based benchmarks,
the potential to generate Fiduciary performance fees this year
would be at lower levels than in FY2019. However, should our strong
performance against benchmark continue for the balance of the
financial year, we expect to crystallise some performance fees from
our Fiduciary business at a higher level than in FY2020.
Our Strategy
As set out in our Annual Report last year we have continued to
progress our five-year strategy, "Investing for Profitable Growth".
As highlighted above, the investment in our distribution platform
is largely complete and the deepening and broadening of our
investment capabilities is underway. To help broaden understanding
of our strategy we are focussing our business around two key
activities;
Investment Solutions This will cover all our Fiduciary, Advisory
and Derivatives activities;
Asset Management This encompasses all our Equity, Liquid
Alternatives and Infrastructure activities.
These activities increasingly have sustainability as a core
element of our proposition. Investment Solutions is well positioned
to take advantage of the significant opportunities in the Fiduciary
market as I have highlighted in the development of our pipeline of
prospective mandates. In addition, we see Asset Management having
significant growth opportunities and our range of strategies have
significant excess capacity. We will provide detailed financial
reporting on these two businesses separately in our full year
results later this year.
Financial Performance
During the period, Group assets under management grew by 3.4 per
cent to GBP45.7 billion. Despite this, total underlying revenues
fell by 3.0 per cent against the comparable period last year and
adjusted underlying profit before tax decreased by 15.0 per cent to
GBP6.2 million (H1 FY2020: GBP7.3 million). There were a number of
institutional accounts that we had previously advised the market
were being redeemed which took effect during this reporting period;
therefore, the redemption figure looks higher than we would expect
in normal circumstances. We have generated modest client inflows
despite the challenging market conditions, however, as I
highlighted earlier there are a large number of accounts where we
are in the process of negotiating IMA's and these will contribute
to anticipated stronger AUM growth in the second half of our
financial year.
Dividends
Considering the robust capital position of the Group and the
Board's expectation of improved financial performance in the medium
term, it has decided to maintain the first ordinary interim
dividend at 3.89 pence per share, the same level as last year. This
represents 70 per cent of adjusted underling earnings for the six
months ended 31 December 2020. The Group's capital allocation
policy is to maintain a minimum distribution of 60 per cent of
adjusted underlying profit as dividend whilst, in practice, it has
distributed 80 per cent for the full financial year.
Outlook
I am encouraged by the impact the investment in distribution is
having on our business. We are focussed on returning the Group's
underlying profit margin back to historic levels. We believe we
have made the right investments in people to enable River and
Mercantile to take advantage of the attractive growth opportunities
that we have identified, to continue to deliver strong investment
returns for our growing client base, and to provide longer-term
value to shareholders.
As the CMA retender process must complete by June 2021 and given
the strength of our pipeline we are confident that in the short to
medium term there should be significant opportunity to grow
Investment Solutions as a result of pent-up activity since the CMA
review began in 2017. Asset Management is ideally positioned to
enhance its capabilities in a market place that is increasingly in
demand.
River and Mercantile has developed an exciting range of products
and solutions in markets where there is substantive and growing
demand and the early signs are very positive.
The Board however is very conscious of the continuing weak share
price: we are determined to address this with urgency to deliver
value for shareholders.
James Barham
Group Chief Executive
Group Chief Investment Officer Report
In this report I would like to address the following:
-- investment performance during the six month period to 31
December 2020;
-- our investment outlook from here; and
-- product developments we are making as a result.
Investment Performance
The table below shows the investment performance across our
product range to the end of December 2020.
AUM Estimated 6 Months (%) 1 Year (%) 5 Years (% p.a.) Since Inception (% p.a.)
GBPbn Capacity
GBPbn
------ ---------- -------------------- -------------------- -------------------- -----------------------------
Annualised 31 Absolute Relative Absolute Relative Absolute Relative Absolute Relative Date
Investment Dec
Performance 2020
By Investment
Strategy
------------------- ------ ---------- --------- --------- --------- --------- --------- --------- --------- --------- -------
STABILITY/RETURN
GENERATION
Fiduciary DB(1) 13.1 50.0 4.6% 5.5% 13.3% 2.8% 10.4% 2.2% 9.2% 1.7% Jan-04
----------
RAMIL Stable Growth
Fund 1.1 11.2% 9.6% 5.5% 2.1% 7.4% 3.9% 7.9% 4.1% Dec-08
----------
Fiduciary DC - Long
Term Growth 0.1 11.7% 8.7% 6.4% 0.7% 8.4% 1.6% 8.7% 1.9% Oct-11
Fiduciary DC -
Stable Growth 0.1 10.7% 8.1% 6.4% 1.8% 7.8% 2.1% 7.8% 2.1% Oct-11
Fiduciary DC -
Cautious Growth 0.1 8.0% 5.9% 7.0% 3.3% 7.9% 3.2% 8.1% 3.4% Oct-11
----------
Dynamic Asset
Allocation 0.2 10.0 10.7% 8.5% 6.1% 1.7% 6.9% 2.2% 5.7% 1.1% Sep-14
Global Macro 0.2 10.0 0.4% n/a (9.2%) n/a n/a n/a 3.6% n/a Mar-18
US Solutions 0.5 1.6 6.7% (0.3%) 15.2% 1.9% 10.0% 0.0% 8.5% 0.2% Aug-13
Total Solutions AUM 15.4 71.6
-------------------- ------ ---------- --------- --------- --------- --------- --------- --------- --------- --------- -------
RETURN
GENERATION/INCOME
UK Equity Income 0.1 1.5 8.1% 0.0% (1.8%) 10.0% 4.9% 0.3% 10.2% 1.7% Feb-09
RETURN GENERATION
- SPECIALIST
UK Equity Smaller
Companies 0.4 0.8 29.5% (1.4%) 20.4% 15.5% 11.5% 3.4% 14.4% 7.0% Nov-06
UK Recovery 0.2 0.5 25.9% 17.8% (2.8%) 9.0% 10.0% 5.4% 11.7% 5.5% Jul-08
Global Recovery 0.3 1.6 19.6% 7.5% 4.5% (8.2%) 11.8% (2.1%) 12.5% 1.0% Mar-13
Global Recovery
Focus Segregated 0.1 0.5 36.2% 12.2% 7.1% (9.2%) 10.7% (1.6%) 13.7% 3.2% Feb-12
Global Recovery
Concentrated
Segregated 0.6 1.5 29.2% 6.2% (0.9%) (16.8%) n/a n/a 11.0% (1.7%) Apr-16
RETURN GENERATION
- CORE
UK Equity High
Alpha 0.1 0.8 23.9% 15.8% (5.8%) 6.0% 8.3% 3.7% 7.4% 2.9% Nov-06
UK Core Segregated 0.2 0.5 7.0% (1.1%) (7.4%) 4.4% 6.1% 1.5% 7.0% 1.8% Nov-10
UK Dynamic Equity 0.1 2.0 13.9% 5.8% (3.8%) 8.0% 7.0% 2.5% 6.6% 2.3% Mar-07
UK Micro Cap
Investment Company 0.1 0.1 30.8% (0.0%) 26.5% 21.6% 15.8% 7.7% 16.2% 7.9% Dec-14
Global High Alpha 0.1 6.0 17.6% 5.5% 5.3% (7.4%) 12.6% (1.4%) 11.4% (0.6%) Dec-14
International High
Alpha 0.0 3.8 23.3% (1.1%) n/a n/a n/a n/a 0.0% 0.0% May-20
European Fund 0.0 2.0 n/a n/a n/a n/a n/a n/a 0.0% 0.0% Sep-20
Segregated 2.1 n/a n/a n/a n/a n/a n/a n/a n/a n/a
Mandates(2)
ILC Emerging
Markets
Global EM 0.1 3.5 34.3% 3.2% 21.2% 2.9% 13.7% 0.9% 6.3% 0.7% Jan-12
Small/Mid Cap 0.0 2.0 34.5% (2.2%) 18.3% (1.0%) 10.0% 1.8% 5.7% 2.0% Jan-13
Total Equity
Solutions AUM 4.5 27.1
-------------------- ------ ---------- --------- --------- --------- --------- --------- --------- --------- --------- -------
Structured Equity 7.8 >20 n/a(3) Dec-05
LDI 18.0 >30 Dec-05
Total Derivatives 25.8 >50
NUM
-------------------- ------ ---------- --------- --------- --------- --------- --------- --------- --------- --------- -------
Total AUM/NUM 45.7 >100
-------------------- ------ ---------- --------- --------- --------- --------- --------- --------- --------- --------- -------
Z share class (gross of fees) performance for all funds except
the ES R&M UK Equity Income and ES R&M UK Equity Smaller
Companies funds which is B class performance. Performance for the
ES R&M UK Equity Income Fund B share class (Inc) and the ES
R&M UK Equity Smaller Companies Fund B share class
(accumulation units) is net of an annual management charge of 0.75%
per annum.
1. Fiduciary Defined Benefit (DB) reflects an equally weighted
composite of all full fiduciary active schemes total portfolio
returns against its full liabilities benchmark where used to report
to the client, does not include schemes with asset
restrictions.
2. Segregated mandates are measured against specific client
benchmarks and therefore a composite performance benchmark is not
meaningful.
3. Derivatives mandates do not target investment outperformance
therefore this is not measured.
4. Capacity is the estimated maximum level of assets that could
be managed without compromising the relevant investment
strategy.
A key theme we have had for some time is that liquid equities
are likely to be the key beneficiary of the post COVID environment.
Also, because of the level of stimulus in the economic system,
which in turn drives economic momentum, we have been expecting
cyclicals to outperform, along with value and small cap. The
reversal that made this come to fruition came very quickly around
the US election period. November proved to be an extraordinary
month for this on a number of levels, and this carried on into
December.
Our multi-asset strategies, including Fiduciary Management, have
been beneficiaries of this, and our ongoing commitment to value
equity strategies has paid off during this period. We expect this
to continue into 2021 and beyond.
We have also seen relatively strong performance since inception
on our systematic equity strategies, and particularly our ESG
capabilities, where we have achieved outperformance in a period
that has been difficult for many ESG approaches. I talked about our
approach to ESG in last year's annual report, and our
differentiated approach has weathered this challenge well.
Investment Outlook
The same influences that have led us to be positive about equity
markets remain in place. Strong stimulus, short interest rates
lower for longer, low debt costs and improving economics all point
to a great environment for listed equities. I do believe that at
some point equities will experience a correction as valuations
re-connect to economic reality, but this will simply be a speed
bump on the road to strong equity returns in the next few
years.
However, I also believe there is something more important going
on. The transition of capital from the West to the East and back
again tends to take the best part of a decade in each direction. At
least for now the direction appears to favour the East. The
weakness in the dollar in recent months is a sign of that movement.
Economic stimulus in any event supports a medium term move towards
the rest of the world, but I believe that valuation disparity
between equity markets and relatively high returns on investment at
attractive prices, particularly in EM, could lead to a more
persistent migration of capital, a depreciation in the dollar, and
a rise in commodity prices.
The attractiveness of segments within EM is illustrated by our
Emerging Market Core portfolio. Al Bryant, the manager, has a
process with a focus on valuation, and his portfolio currently
offers a return on investment of around 18 per cent, with a PE that
represents a discount of 25-30 per cent to the EM index, and more
when compared to the global index. This is an extraordinary
discount and exists simply because of the demand for "quality"
companies in a falling yield environment.
It seems highly likely that bond yields will continue their
rise. There are two critical influences here. The first is that
central banks, particularly the Fed, are trying to engineer
inflation. This is perhaps unsurprising given the high levels of
debt that the COVID environment has brought, and inflation is the
politest way to default. The second is that, as part of the
stimulus process, central banks have bought a significant amount of
sovereign debt, which will need to be sold back to the market at
some point.
The effect of rising bond yields should be to reduce some of the
attraction of high-quality companies, which have benefited from
being high duration in a falling yields environment. Rising yields
should run this in reverse, at least to a degree, and good
old-fashioned value coupled with strong ROI should start working
for the first time in many years. This is particularly the case
when we have commodity-driven reflation. As a result, I believe
there is a great opportunity to achieve significant positive
returns through allocating to EM strategies such as Al's. The same
is true for our value and small cap strategies managed by our PVT
team. This is a great macro environment for those strategies to
thrive.
I do believe, however, that these returns will come with some
volatility, particularly in the process of economics re-connecting
with valuations. We have been working for some time on a strategy
that could complement equity portfolios and produce significant
returns when equity markets fall. We are calling it anti-beta (for
obvious reasons) and are using it to stabilise returns within
multi-asset class portfolios, including for our Fiduciary
Management clients.
Product Development we are Undertaking as a Result
We obviously already offer strategies that capture the simple
ideas expressed above. But we have also been developing more
focused equity strategies to play specific themes within our DAA
fund. This includes a NASDAQ quality portfolio, and a local economy
China portfolio. Both have ESG overlays. We will likely introduce
other thematically focused portfolios in the coming months.
We do see strong demand for ESG-related strategies, and while
the track record of our strategies is not multi-year, what we have
for both our diversified and concentrated global portfolios is
strong. We have designed the strategies with the objective of
outperforming broad market indices, in order to overcome the
historical challenges with these types of products in that they
have tended to lag the market.
Another significant trend in recent years is the migration of
capital towards illiquid strategies. While we are not advocates of
the illiquidity premium as a general theme, there are illiquid
strategies that we believe are very compelling. One such strategy
is infrastructure equity, and that is why we have brought in Ian
Berry, who with his team have a very well-regarded track record in
running infrastructure. Their strategy is compelling, and we would
encourage those who have not looked at it, but desire stable,
predictable income, to consider it.
Overall Summary
This has been a very good period for the business in terms of
investment performance and product development. We have managed to
attract some excellent investors, which will help diversify the
business and broaden the range of opportunities we can offer. All
of these strategies are consistent with our outlook for the next
few years and therefore we believe will support the growth
aspirations of the business that James has described.
Mike Faulkner
Group Chief Investment Officer
Financial Review
Overview
The Group has continued to grow its AUM since June 2020 by 3.4
per cent, albeit mainly through investment performance rather than
net flows which were broadly flat for the period. Underlying
revenue for the period was down 3.0 per cent partly due to lower in
force revenue going into the new financial year and partly due to
net redemptions in our higher margin products during the period.
Adjusted underlying profit before tax was down 15.0 per cent
primarily due to this revenue reduction, with administration and
staff costs in aggregate flat versus the comparable period,
notwithstanding the investment in the business.
The CMA market review and re-tendering continues with the Group
retaining the large majority of clients re-tendered since the
process began. The effect of the CMA market review has created some
inertia within the industry in relation to new Fiduciary mandates,
with the focus being placed on fulfilling the CMA requirements.
During the process, in line with our expectations, we have
continued to see fee compression in the Fiduciary Management
business which is common across the industry.
Our Derivatives business continues to show healthy growth across
both LDI and Structured Equity with net flows of +GBP0.6 billion
(2.5 per cent) for the period.
Considering the fact that the new Wholesale distribution team
has been in place for a short period of time, it has been
encouraging to see a return to net inflows for the second quarter
of the financial year and a significant reduction in the net
outflows for the period as a whole in this part of the
business.
As we set out in our Annual Report last year, we expect a
material improvement in AUM flows in the second half of the
financial year. Our pipeline of potential new business is
significantly better now than this time last year. The nature of
our client base is largely institutional and with that comes more
sizeable mandates but often lumpy and uneven flows. The delays in
prospective clients making decisions on mandates that we saw in the
first half has continued into early 2021. At the date of
publication, whilst we have a number of institutional clients that
have verbally confirmed our appointment, new IMA's signed since the
end of the reporting period have been modest. As a consequence, and
also accounting for the time it takes for assets to transition and
become fee earning after an IMAs is signed, we will not see a full
period impact on revenue from our anticipated improvement in flows
for the remainder of the financial year.
We continue to build on the good momentum in Wholesale albeit
against a backdrop of significant outflows seen by the industry
during the early part of 2021.
Looking forward, we anticipate a modest and temporary decline in
Advisory revenues in H2 compared to H1 due to lower billings as we
focus on completing retenders before the June 2021 CMA
deadline.
Financial Highlights
6 months ended 31 December
--------------------------------------
GBP'000 unless stated 2020 2019 Movement Movement
%
================================= ======= ======= ========= =========
Net management fees 28,418 29,835 (1,417) -5%
Advisory fees 5,782 5,408 374 +7%
================================= ======= ======= ========= =========
Total underlying revenue 34,200 35,243 (1,043) -3%
Performance fees 57 1,090 (1,033) -95%
================================= ======= ======= ========= =========
Total Revenue 34,257 36,333 (2,076) -6%
Total Remuneration and benefits 19,864 20,648 (784) -4%
Administration expenses 7,854 7,594 260 +3%
Adjusted underlying profit
before tax 6,185 7,281 (1,096) -15%
Performance fee profit before
tax 28 812 (784) -97%
Adjusted profit before tax 6,213 8,093 (1,880) -23%
Statutory profit before tax 4,555 5,655 (1,100) -19%
Adjusted underlying EPS basic
(pence) 5.56 6.52 (0.96) -15%
Adjusted EPS basic (pence) 5.59 7.31 (1.72) -24%
EPS basic (pence) 3.94 4.86 (0.92) -19%
AUM
For the six months ended 31 December 2020:
Fiduciary Liquid Derivative Solutions Equity Solutions Total
--------------------------- ----------------------------------
GBP'm Management Alternatives S. LDI Total Wholesale Institutional Total AUM
Equity
============= =========== ============= ======== ======= ======== ========== ============== ====== ========
Opening AUM 14,619 154 7,395 17,817 25,212 1,024 3,211 4,235 44,220
Sales 162 4 1,028 423 1,451 162 123 285 1,902
Redemptions (999) (2) (449) (893) (1,342) (223) (513) (736) (3,079)
------------- ----------- ------------- -------- ------- -------- ---------- -------------- ------ --------
(837) 2 579 (470) 109 (61) (390) (451) (1,177)
Net
rebalance
and
transfers 718 0 (108) 635 527 0 0 0 1,245
------------- ----------- ------------- -------- ------- -------- ---------- -------------- ------ --------
Net flow (119) 2 471 165 636 (61) (390) (451) 68
Investment
performance 705 16 0 0 0 209 502 711 1,432
------------- ----------- ------------- -------- ------- -------- ---------- -------------- ------ --------
Closing AUM 15,205 172 7,866 17,982 25,848 1,172 3,323 4,495 45,720
------------- ----------- ------------- -------- ------- -------- ---------- -------------- ------ --------
Change in
fee earning
assets 4.0% 11.7% 6.4% 0.9% 2.5% 14.5% 3.5% 6.1% 3.4%
Notes: Certain redemptions during the period totalling GBP0.9
billion had been previously notified to the market as part of our
Q4 FY2020 and Q1 FY2021 trading statements, which took the
remainder of the calendar year to transition. This comprised of
GBP0.2 billion of Institutional Equities, GBP0.3 billion of
Fiduciary Management assets and GBP0.4 billion of LDI
Derivatives.
Fee Margins
Equity Solutions
==========================
6 months to 31 December 2020 Fiduciary Management (1) Derivative Wholesale Institutional
Solutions
======================================== ========================= =========== ========== ==============
Average fee earning AUM (GBP million) 15,273 25,685 1,034 3,169
Net management fees (GBP 000s ) 10,728 8,495 3,603 5,592
Average margin 6m/e Dec 2020 (bps) 14.0 6.6 69.3 35.1
Average margin 6m/e Dec 2019 (bps) 16.2 6.2 66.1 34.2
In-force margin at December 2020 (bps) 13.7 6.5 69.6 34.5
Medium term margin guidance (bps) 13-14 6-7 60-65 33-36
Note:
(1) Includes Liquid Alternatives
Our medium-term fee margin guidance remains unchanged from last
year's annual report. The in-force margin in Fiduciary has reduced
to 13.7 basis points with one of the primary factors behind this
being a GBP0.7 billion upwards rebalance, previously advised in our
last trading statement, relating to the Group's largest client
which, as part of our reappointment following the CMA re-tender,
increased its AUM with the Group without any change in the total
annual management fee.
AUM Movements Since the Period End
Since the end of the reporting period, the significant upwards
rates movement in markets last month negatively impacted our
Fiduciary Management AUM which sat GBP1.3 billion lower at the end
of February than at the end of the reporting period, primarily as a
result of this market movement.
Derivatives AUM was GBP0.5 billion lower over the same period
mainly due to GBP0.7 billion of negative rebalancing as a result of
mark to market movement on rolled contracts and clients adjusting
their level of hedging.
Equity Solutions AUM was marginally up by GBP0.1 billion over
the two months to February.
Average Fiduciary Client Term
In the Annual Report we explained why we are no longer
publishing Regretted Institutional Attrition as a metric. As an
alternative, the long-term nature of our Fiduciary Management
business can be illustrated by the length of time clients have been
engaged with the Group. Weighted by AUM, as at the end of December
2020, our average client term was 8.1 years and 72 per cent of our
assets have been managed by the Group for over five years.
DB Fiduciary Management Clients as at
31 December 2020
Term AUM GBPbn
------------------------- --------------
Less than a year 1.32
1-2 Years 0.65
2-5 Years 2.03
5-10 Years 5.87
10-15 Years 1.85
15 Years + 2.49
Total 14.21
--------------
Administrative expenses
Administration costs increased by 3.4 per cent over the
comparable half year period. Technology costs increased by GBP0.2m
(8.4 per cent) compared to H1 FY2020 primarily as a result of
market data spend reflecting additional requirements due to remote
working and the launch of new funds.
Professional fees increased by GBP0.5 million, primarily in
relation to our medium-term operational infrastructure project.
Work continues on this project which during the next phase will be
run utilising internal resource for the remainder of the financial
year and we do not expect to incur material professional fees in
relation to this project during H2 FY2021.
COVID-19 has impacted the Group's ability to meet clients
face-to-face and naturally we have seen a continued reduction in
travel and marketing spend.
In last year's annual report, we estimated administrative
expenses would increase by approximately GBP1.5 million to GBP17.5
million for FY2021. Our current expectation is these costs will
increase between GBP1.0 to GBP1.5 million for the full year versus
FY2020 as we balance short and medium-term cost cutting initiatives
with the growth in the business such as our new Infrastructure
division.
Remuneration
Total pre-performance fee remuneration costs were 58 per cent of
underlying revenue for the period (H1 FY2020: 57 per cent) the
increase in this ratio being primarily attributable to an increase
in fixed remuneration as a result of the Group's growth
initiatives. Total remuneration decreased by GBP0.8 million
comprising a GBP1.4 million reduction in variable remuneration and
a GBP0.6 million increase in fixed remuneration. We continue to
expect remuneration to fall within the range of 58 per cent to 60
per cent of underlying revenue for the current financial year
before any impact of any performance fees and any accounting charge
in relation to dilutive awards under the Value Transformation Plan
and Senior Management Share Plan.
Liquidity and Regulatory Capital
The Group is strongly cash generative with net cash generated
from operations of GBP6.2 million and at the period end the Group's
cash and cash equivalents were GBP23.5 million. The Group prudently
manages its regulatory capital position with surplus regulatory
capital of GBP13.0 million at the period end and our regulatory
capital resources representing approximately 175 per cent of our
regulatory capital requirement.
Taxation
The effective tax rate on adjusted underlying profit was 25 per
cent for the period reflecting unrelieved tax losses in the US and
has reduced compared to last year as a result of the improving
financial performance in the US.
Dilutive Share Awards
The Company announced this January the grant of conditional
awards to the Executive Directors under the Value Transformation
Plan ("VTP") which was approved by shareholders at the Company's
annual general meeting in December 2020. In addition to these
awards, the Company issued further conditional dilutive share
awards as part of its Senior Management Share Plan to incentivise
and retain the Group senior management and key people (the "SMSP
Awards"). The number of conditional shares granted to date under
the SMSP Awards totals 1,735,000 shares.
The SMSP Awards are subject to a performance condition, aligned
with the VTP, where vesting is conditional on the Company achieving
a minimum 12 per cent per annum compound Total Shareholder Return
('TSR') over a performance period of three years from the award
date. The initial share price used for the measurement of the
performance condition is 170 pence. The SMSP Award will vest on a
straight-line basis between a TSR of 12 per cent per annum
compounded (nil vesting) and 15 per cent per annum compounded (100
per cent vesting).
A further one-year employment period applies to SMSP Award at
the end of the three-year performance period, after which the SMSP
Award will vest subject to the terms of the Group's DEP Rules.
The fully diluted share count in relation to, inter alia, the
VTP and SMSP will be calculated and reported for each period end
based on the TSR since grant as at such period end.
Quarterly Trading Statements
The Board of the Company has determined to cease releasing
quarterly trading statements. In addition to the Group's routine
reporting of its interim and preliminary results, it will release
AUM updates as at 31 December and 30 June each year and trading
updates will be given at any time as deemed necessary or timely by
the Board.
Distributable Reserves
As at 31 December 2020 the Company has GBP53.0 million of
distributable reserves (30 June 2020: GBP55.0 million).
Dividends
On 20 November 2020, the FY2020 second interim dividend of 2.81
pence per share was paid. In addition, on 18 December 2020 the
FY2020 final dividend of 2.34 pence per share was paid, of which
0.10 pence was a special dividend relating to net performance
fees.
The Directors have declared a first interim dividend of 3.89
pence per share, all of which is ordinary. This represents 70 per
cent of the Group's total adjusted underlying profit after tax.
This will be paid on 15 April 2021 to shareholders on the register
as at 26 March 2021 and the ex-dividend date will be 25 March
2021.
Simon Wilson
Chief Financial Officer
Principal risks and uncertainties
There are a number of potential risks and uncertainties,
including current and emerging risks, which could have a material
impact on the Group's performance over the remaining six months of
the financial year and could cause actual results to differ
materially from expected and historical results. The risks noted
below implicitly cover a wide range of business risks including the
potential affects arising from an event such as COVID-19. The
Directors do not consider that the principal risks and
uncertainties have changed since the publication of the Annual
Report for the year ended 30 June 2020. At that date, the most
significant risks were identified as being:
Sustained market decline
The risk of a severe economic downturn and related sustained
decline in asset prices.
A severe economic downturn could lead to a reduction in AUM
resulting in a decline in revenue and capital levels.
Sustained fund underperformance
The risk that our clients will not meet their investment
objectives due to poor relative performance of one or more of the
Group's funds over a prolonged period.
Sustained underperformance across a range of the Group's
products and strategies could result in a corresponding reduction
in management and performance fee revenue.
People risk (loss of critical staff)
The risk of failure to retain or attract the people critical to
successfully delivering investment outperformance to our clients
and all other aspects of our strategy.
The unplanned departure of a senior fund manager or a member of
our leadership team could lead to significant redemptions from our
funds, failure to deliver our strategy or failure to run our
business efficiently, resulting in a material impact on revenue and
capital levels.
Liquidity risk
The risk that the Group, although solvent, either does not have
available sufficient financial resources to enable it to meet its
obligations as they fall due or can only secure such resources at
excessive cost.
Counterparty and credit risk
The risk that clients or counterparties fail to fulfil their
contractual obligations to make a payment.
Failure of a critical outsourced service provider
The risk that an outsourced partner fails to provide the service
required either through their own organisational failure, or
through substandard performance. Our relationships with
stakeholders may be jeopardised if our outsourced partners provide
inadequate service, resulting in the loss of clients or regulatory
or financial censure and negative financial consequences.
Information and communication technology
The risk of critical systems or connectivity failures leading to
an inability of the Group to operate for a period of time. The
unavailability of our key systems could mean we are unable to act
on behalf of our clients and/ or perform other time-critical
activities to ensure the smooth running of our business. This could
lead to trading losses, as well as client losses and reputational
damage.
Cyber crime
The risk that a successful cyberattack could result in the loss
of Group or client assets or data or cause significant disruption
to key systems. Failure to repel successfully a significant attack
could undermine stakeholder confidence in our ability to safeguard
assets, which could affect our ability to retain existing clients
and attract new business, and hence affect capital and revenue.
Legal and regulatory risks
The risk of breaching, or non-compliance with applicable law and
regulations, resulting in an increased level of regulatory
intervention, regulatory censure and/or fines, and temporary
restrictions on our ability to operate. A breach of regulatory or
legal requirements could result in fines and sanctions which could
diminish the Group's reputation with clients and the market
generally.
Failure to perform fiduciary duty
The risk that we unintentionally or negligently fail to meet a
professional obligation to specific clients (including fiduciary
and suitability requirements). This could lead to direct financial
loss, a loss of clients, failure to win new business and
reputational issues.
Breakdown of processes and controls resulting in operational
errors
The risk that inadequate or failed processes, people, systems
and controls or from external events could result in direct
financial losses, reputational damage and failure to win new
business.
A significant error or breach of a client agreement may result
in additional costs to redress the issue and could lead to
outflows.
The unavailability of our business premises could mean we are
unable to act on behalf of our clients and/or perform other
time-critical activities to ensure the smooth running of our
business. This could lead to trading losses, as well as client
losses and reputational damage.
Responsibility Statement
The Directors confirm that to the best of their knowledge: The
unaudited condensed consolidated set of financial statements has
been prepared in accordance with IAS 34 "Interim Financial
Reporting" as adopted by the EU are gives a true and fair view of
the asset, liabilities, financial positive and profit or loss of
the Group; and
The interim management report includes a fair review of the
information required by sections 4.2.7R and 4.2.8R of the
Disclosure Guidance and Transparency Rules of the UK Financial
Conduct Authority.
By order of the Board
James Barham
Group Chief Executive
16 March 2021
A copy of this interim report will be posted on the Company's
website on the date of this statement at www.riverandmercantile.com
.
Independent review report to River and Mercantile Group PLC
Introduction
We have been engaged by the Company to review the condensed set
of financial statements in the half-yearly financial report for the
six months ended 31 December 2020 which comprises the condensed
consolidated income statement, condensed consolidated statement of
comprehensive income, condensed consolidated statement of financial
position, condensed consolidated statement of cash flows and
condensed consolidated statement of changes in shareholder's
equity; and the related notes.
We have read the other information contained in the half-yearly
financial report and considered whether it contains any apparent
misstatements or material inconsistencies with the information in
the condensed set of financial statements.
Directors' responsibilities
The half-yearly financial report is the responsibility of and
has been approved by the directors. The directors are responsible
for preparing the half-yearly financial report in accordance with
the Disclosure Guidance and Transparency Rules of the United
Kingdom's Financial Conduct Authority.
As disclosed in note 2, the annual financial statements of the
group are prepared in accordance with international financial
reporting standards adopted pursuant to Regulation (EC) No
1606/2002 as it applies in the European Union. The condensed set of
financial statements included in this half-yearly financial report
has been prepared in accordance with International Accounting
Standard 34, "Interim Financial Reporting", as adopted pursuant to
Regulation (EC) No 1606/2002 as it applies in the European
Union.
Our responsibility
Our responsibility is to express to the Company a conclusion on
the condensed set of financial statements in the half-yearly
financial report based on our review.
Scope of review
We conducted our review in accordance with International
Standard on Review Engagements (UK and Ireland) 2410, "Review of
Interim Financial Information Performed by the Independent Auditor
of the Entity", issued by the Financial Reporting Council for use
in the United Kingdom. A review of interim financial information
consists of making enquiries, primarily of persons responsible for
financial and accounting matters, and applying analytical and other
review procedures. A review is substantially less in scope than an
audit conducted in accordance with International Standards on
Auditing (UK) and consequently does not enable us to obtain
assurance that we would become aware of all significant matters
that might be identified in an audit. Accordingly, we do not
express an audit opinion.
Conclusion
Based on our review, nothing has come to our attention that
causes us to believe that the condensed set of financial statements
in the half-yearly financial report for the six months ended 31
December 2020 is not prepared, in all material respects, in
accordance with International Accounting Standard 34, as adopted
pursuant to Regulation (EC) No 1606/2002 as it applies in the
European Union, and the Disclosure Guidance and Transparency Rules
of the United Kingdom's Financial Conduct Authority.
Use of our report
Our report has been prepared in accordance with the terms of our
engagement to assist the Company in meeting its responsibilities in
respect of half-yearly financial reporting in accordance with the
Disclosure Guidance and Transparency Rules of the United Kingdom's
Financial Conduct Authority and for no other purpose. No person is
entitled to rely on this report unless such a person is a person
entitled to rely upon this report by virtue of and for the purpose
of our terms of engagement or has been expressly authorised to do
so by our prior written consent. Save as above, we do not accept
responsibility for this report to any other person or for any other
purpose and we hereby expressly disclaim any and all such
liability.
BDO LLP
Chartered Accountants
London
16 March 2021
BDO LLP is a limited liability partnership registered in England
and Wales (with registered number OC305127).
Condensed consolidated interim financial statements
This Interim Report should be read in conjunction with the
Annual Report of the Group for the year ended 30 June 2020.
Condensed consolidated income statement
Unaudited Unaudited
Note 6 months 6 months
ended ended
31 December 31 December
2020 2019
GBP'000 GBP'000
------------- -------------
Revenue:
Net management fees 28,418 29,835
Net advisory fees 5,782 5,408
Performance fees 57 1,090
------------- -------------
Total revenue 3 34,257 36,333
Administrative expenses 4 7,854 7,594
Depreciation of owned assets 107 107
Amortisation of intangible assets 8 1,511 1,658
Impairment of intangible assets 8 180 450
------------- -------------
Total operating expenses 9,652 9,809
Remuneration and benefits
Fixed remuneration and benefits 14,918 14,305
Variable remuneration 4,946 6,343
------------- -------------
Total remuneration and benefits 19,864 20,648
EPSP costs - (17)
------------- -------------
Total remuneration and benefits including
EPSP costs 19,864 20,631
Total expenses 29,516 30,440
Realised gain on disposal of investment
held at fair value - 267
Other unrealised (losses) (21) (358)
------------- -------------
Profit before interest and tax 4,720 5,802
Finance income 25 42
Finance expense (59 ) (101)
Foreign exchange (loss) (131) (88)
------------- -------------
Profit before tax 4,555 5,655
Tax charge/(credit)
Current tax 9 1,336 1,626
Deferred tax 9 (90) (25)
------------- -------------
Profit after tax for the period attributable
to owners of parent 3,309 4,054
============= =============
Earnings per share
Basic (pence) 11 3.94 4.86
Diluted (pence) 11 3.94 4.85
Condensed consolidated statement of comprehensive income
Unaudited Unaudited
6 months 6 months
ended ended
31 December 31 December
2020 2019
GBP'000 GBP'000
------------- -------------
Profit for the period 3,309 4,054
Items that may be subsequently reclassified
to profit or loss:
Foreign currency translation differences (142) (27)
------------- -------------
Other comprehensive (loss) (142) (27)
Total comprehensive income for the
period
attributable to owners of the parent 3,167 4,027
============= =============
The notes to the condensed consolidated interim financial
statements form part of and should be read in conjunction with
these financial statements.
Condensed consolidated statement of financial position
Unaudited Audited
31 December 30 June
Note 2020 2020
GBP'000 GBP'000
------------ --------------------
Assets
Cash and cash equivalents 23,460 24,251
Fee receivables 3,320 10,233
Other receivables 15,978 15,458
Assets held for sale 7 741 810
Investments held at fair value
through profit or loss 6 1,407 290
Deferred tax asset 9 143 276
Right of use lease asset 17 1,868 2,586
Property, plant and equipment 319 438
Intangible assets 8 25,103 26,560
------------ --------------------
Total assets 72,339 80,902
Liabilities
Current tax liabilities 504 383
Trade and other payables 11,374 17,493
Lease liability 17 1,885 2,691
Deferred tax liability 9 1,806 2,078
------------ --------------------
Total liabilities 15,569 22,645
Net assets 56,770 58,257
------------ --------------------
Equity
Share capital 13 256 256
Share premium 15,429 15,429
Other reserves 12 868 1,010
Own shares held by EBT 14 (4,130) (4,255)
Retained earnings 44,347 45,817
Equity attributable to owners
of the parent 56,770 58,257
============ ====================
The notes to the condensed consolidated interim financial
statements form part of and should be read in conjunction with the
financial statements.
The financial statements were approved by the Board and
authorised for issue on 16 March 2021.
James Barham Simon Wilson
Group Chief Executive Chief Financial Officer
Condensed consolidated statement of cash flows
Unaudited Unaudited
6 months 6 months
ended ended
31 December 31 December
Note 2020 2019
GBP'000 GBP'000
------------- -------------
Cash flow from operating activities
Profit before interest and tax 4,720 5,802
Adjustments for:
Amortisation of intangible assets 8 1,511 1,658
Impairment of intangible assets 8 180 450
Depreciation of right of use asset 17 634 638
Depreciation of property, plant and equipment 107 107
Share-based payment (credit) / charge 5 (29) 639
Gain on disposal of fair value investments - (267)
Other unrealised gains and losses 21 358
------------- -------------
Operating cash flow before movement in
working capital 7,144 9,385
------------- -------------
Decrease in operating assets 6,335 30,691
(Decrease) in operating liabilities (6,056) (33,446)
------------- -------------
Cash generated from operations 7,423 6,630
Tax paid (1,215) (1,281)
------------- -------------
Net cash generated from operations 6,208 5,349
------------- -------------
Cash flow from investing activities
Purchase of intangible assets (370) -
Purchase of property, plant and equipment - (33)
New seed investment held at fair value 6 (1,020) -
Proceeds from disposal of investments
held at fair value - 5,048
Interest received 25 42
------------- -------------
Net cash (used in) / generated from investing
activities (1,365) 5,057
------------- -------------
Cash flow from financing activities
Interest paid - (6)
Lease liability payments 17 (769) (385)
Dividends paid 10 (4,322) (8,457)
Purchase of own shares (350) -
Share issue - 275
------------- -------------
Net cash used in financing activities (5,441) (8,573)
------------- -------------
Net (decrease) / increase in cash and
cash equivalents (598) 1,833
------------- -------------
Cash and cash equivalents at beginning
of period 24,251 24,046
Foreign exchange movement (193) (120)
------------- -------------
Cash and cash equivalents at end of period 23,460 25,759
============= =============
The notes to the condensed consolidated interim financial
statements form part of and should be read in conjunction with the
financial statements.
Condensed consolidated statement of changes in shareholders'
equity
Own shares
Share Share Other held by Retained
capital premium reserves EBT earnings Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
--------- --------- ----------- ----------- ----------- ---------
Audited balance as at 30
June 2019 256 15,136 45,472 (6,251) 10,250 64,863
Adjustment to retained
earnings on transition
to IFRS 16 - - - - (189) (189)
--------- --------- ----------- ----------- ----------- ---------
Adjusted as at 1 July 2019 256 15,136 45,472 (6,251) 10,061 64,674
--------- --------- ----------- ----------- ----------- ---------
Comprehensive income for
the period:
Profit for the period - - - - 5,343 5,343
Other comprehensive income - - (29) - - (29)
--------- --------- ----------- ----------- ----------- ---------
Total comprehensive income - - (29) - 5,343 5,314
--------- --------- ----------- ----------- ----------- ---------
Transactions with owners:
Dividends - - - - (12,135) (12,135)
Share-based payment expense - - - - 409 409
Deferred tax on share-based
payment expense - - - - (202) (202)
Realised tax in respect
of award vesting - - - - (96) (96)
Disposal of shares in respect
of award vesting - - - 1,996 (1,996) -
Purchase of own shares - - - - - -
by EBT
Shares issued in respect
of award vesting - 293 - - - 293
Capitalisation of merger
reserve and capital reduction - - (44,433) - 44,433 -
--------- --------- ----------- ----------- ----------- ---------
Total transactions with
owners: - 293 (44,433) 1,996 30,413 (11,731)
--------- --------- ----------- ----------- ----------- ---------
Audited balance as at 30
June 2020 256 15,429 1,010 (4,255) 45,817 58,257
Profit for the period - - - - 3,309 3,309
Other comprehensive income - - (142) - - (142)
--------- --------- ----------- ----------- ----------- ---------
Total comprehensive income - - (142) - 3,309 3,167
Transactions with owners:
Dividends - - - - (4,322) (4,322)
Share-based payment credit - - - - (29) (29)
Purchase of own shares - - - (350) - (350)
Shares issued in respect - - - - - -
of award vesting
Deferred tax - - - - 47 47
Disposal of shares in respect
of award vesting - - - 475 (475) -
--------- --------- ----------- ----------- ----------- ---------
Total transactions with
owners: - - - 125 (4,779) (4,654)
Unaudited balance as at
31 December 2020 256 15,429 868 (4,130) 44,347 56,770
========= ========= =========== =========== =========== =========
The notes to the condensed consolidated interim financial
statements form part of and should be read in conjunction with
these financial statements.
Notes to the condensed consolidated interim financial
statements
1. General information
River and Mercantile Group PLC ("the Company"), is a company
incorporated in England and Wales (Co. no. 04035248). The condensed
consolidated interim financial statements for the six months ended
31 December 2020 comprise the Company and its subsidiaries
(together referred to as "the Group").
2. Accounting policies
Basis of preparation
These condensed consolidated financial statements have been
prepared in accordance with IAS 34, "Interim Financial Reporting",
as adopted pursuant to Regulation (EC) No 1606/2002 as it applies
in the European Union. They do not include all disclosures that
would otherwise be required in a complete set of financial
statements and should be read in conjunction with the Group's 2020
Annual Report. The comparative financial information for the year
ended 30 June 2020 included in these interim financial statements
does not constitute statutory accounts within the meaning of
Section 434(3) of the Companies Act 2006.
The annual financial statements of the Group are prepared in
accordance with international financial reporting standards (IFRS)
adopted pursuant to Regulation (EC) No 1606/2002 as it applies in
the European Union. The Independent Auditors' Report on that Annual
Report and financial statements for the year ended 30 June 2020 was
unqualified, did not draw attention to any matters by way of
emphasis, and did not contain a statement under 498(2) or 498(3) of
the Companies Act 2006.
The same accounting policies, presentation and methods of
computation are followed in these condensed consolidated financial
statements as were applied in the Group's latest annual audited
financial statements.
Going concern
The Directors have a reasonable expectation that the Group have
adequate resources to continue in operational existence for the
foreseeable future.
The COVID-19 pandemic has resulted in significant volatility in
UK and global stock markets. Whilst this has had an effect on
underlying revenues, the Directors have reasonable belief that,
having considered the Group and Company's forecasted continued
profitability, positive cashflow and capital base, the Group and
Company has adequate resources to continue as a going concern for
the foreseeable future.
Accordingly, the Group condensed financial statements have been
prepared on a going concern basis using the historical cost
convention, except for the measurement at fair value of certain
financial instruments that are held at fair value.
Foreign currencies
The majority of revenues, assets, liabilities and funding are
denominated in UK Pounds sterling (GBP/GBP), and therefore the
presentation currency of the Group is GBP. All entities within the
Group have a functional currency of GBP, except for River and
Mercantile LLC which is based in the US.
Monetary items which are denominated in foreign currencies are
translated at the rates prevailing at the reporting date. All
resulting exchange differences are recognised in the Income
Statement. Non-monetary items are measured at the rates prevailing
on the date of the transaction and are not subsequently
retranslated.
The functional currency of River and Mercantile LLC is US
Dollars and is translated into the presentational currency as
follows:
- Assets and liabilities are translated at the closing rate at
the date of the respective Statement of Financial Position;
- Income and expenses are translated at the daily exchange rate
for the date on which they are incurred; and
- All resulting exchange differences are recognised in other comprehensive income.
Goodwill and fair value adjustments arising on the acquisition
of a foreign entity are treated as assets and liabilities of the
foreign entity and translated at the closing rate. Exchange
differences arising are recognised in other comprehensive
income.
Assets held for sale
Assets are classified as held for sale if their carrying amount
will be recovered principally through a sale transaction rather
than through continuing use and a sale is considered highly
probable. They are measured at the lower of their carrying amount
and fair value less costs to sell.
Assets classified as held for sale are presented separately from
the other assets in the balance sheet and are not depreciated or
amortised while they are classified as held for sale.
An impairment loss is recognised for any initial or subsequent
write-down of the asset to fair value less costs to sell. A gain is
recognised for any subsequent increases in fair value less costs to
sell of an asset but not in excess of any cumulative impairment
loss previously recognised. A gain or loss not previously
recognised by the date of the sale of the non-current asset is
recognised at the date of derecognition.
Adoption of new standards and interpretations affecting the
reported results or the financial position
There have been no new or revised standards or interpretations
which have become effective or been early adopted in the six months
to 31 December 2020.
Significant judgments and estimates
As detailed in the basis of preparation above, these financial
statements are prepared in accordance with IFRS. The significant
accounting policies of the Group which include estimates are
detailed below:
Recognition of management and performance fee revenues. This
involves estimates of AUM positions for the purposes of accruing
revenue, which are described in note 3.
- The accounting for UCITS V deferred remuneration involves estimates of forfeiture rates.
- Calculation of lease assets and lease liabilities.
The significant accounting policies of the Group which include
judgements are detailed below:
-- Impairment of intangible assets, goodwill and investments
recorded in previous acquisitions. Depending upon the asset, this
can involve judgements which include business growth and also
estimates including discount rates, comparable revenue multiples
and comparable earnings multiples. During the period, the basis of
assessment for impairment was changed from a value in use method,
to fair value less costs to sell.
-- Provisions, which are recognised when the Group has a present
obligation as a result of a past event, and it is probable that the
Group will be required to settle that obligation. Determining
whether provisions are required and at what level, requires both
judgement and estimates.
-- The accounting for share-based remuneration. This involves
judgements relating to forfeiture rates and business outcomes and
estimates of future share prices for National Insurance cost.
-- The accounting for the contingent consideration in respect of
the acquisition of the Emerging Markets ILC team. This involves
judgements relating to revenue growth over time.
-- Whether an asset should be classified as held for sale.
Consolidation of seed capital investments
The Group holds seeding investments in funds which it manages.
Judgement is required to be exercised in terms of assessing whether
these funds are to be consolidated in accordance with IFRS 10.
Where the Group holds seed investments in funds that it controls,
it typically expects its interest in the funds to be diluted to
such an extent that it will no longer control the fund within
twelve months of seeding. The Group considers these investments to
be assets acquired with a view to subsequent disposal. The Group's
policy is to hold these seed investments as assets held for sale in
accordance with IFRS 5, where the conditions are met.
3. Revenue
Unaudited Unaudited
6 months 6 months
ended ended
31 December 31 December
2020 2019
----------------------------------- ------------ ------------
Net management fees
- Fiduciary Management 10,728 10,707
- Derivatives 8,495 7,426
- Equity Solutions - Wholesale 3,603 4,845
- Equity Solutions - Institutional 5,592 6,857
----------------------------------- ------------ ------------
Net management fees 28,418 29,835
Advisory fees
- Retainers 2,602 2,440
- Project fees 3,180 2,968
----------------------------------- ------------ ------------
Advisory fees 5,782 5,408
----------------------------------- ------------ ------------
Total underlying revenue 34,200 35,243
----------------------------------- ------------ ------------
Performance fees
- Fiduciary Management 57 1,090
- Equity Solutions - -
----------------------------------- ------------ ------------
Total performance fees 57 1,090
----------------------------------- ------------ ------------
Total revenue 34,257 36,333
----------------------------------- ------------ ------------
NET MANAGEMENT FEES
Net management fees represent the fees charged pursuant to an
IMA. Net management fees are reported net of rebates to clients and
are typically charged as a percentage of the client's AUM. The fees
are generally accrued based on a contractual daily fee calculation
and billed to the client either monthly or quarterly. During the
six months ended 31 December 2020, rebates totalling GBP961,000
(2019: GBP1,306,000) were paid in respect of Equity Solutions and
DAA Fund management fees.
ADVISORY FEES
Advisory fees represent fees charged under advisory agreements
and are typically charged on a fixed retainer fee basis or through
a fee for the delivery of a defined project. Fees are accrued
monthly and charged when the work has been completed.
PERFORMANCE FEES
Performance fees are fees paid under certain IMAs for generating
excess investment performance either on an absolute basis subject
to a high-water mark, or relative to a benchmark. Performance fees
are typically calculated as a percentage of the excess investment
performance generated and may be subject to deferral and continued
performance objectives in future periods. Performance fees are
recognised in income when it is probable that the fee will be
realised and there is a low probability of a significant reversal
in future periods. This occurs once the end of the performance
period has been reached. The client is invoiced for the performance
fee at the end of the performance period which is generally on the
anniversary of their IMA or on a calendar year basis.
4. Administrative expenses
Unaudited Unaudited
6 months 6 months
ended ended
31 December 31 December
2020 2019
GBP'000 GBP'000
------------------------------------------- ------------ ------------
Marketing 289 442
Travel and entertainment 21 254
Office facilities 1,211 1,324
Technology, market data and communications 3,101 2,861
Professional fees 1,128 652
Research 604 727
Governance expenses 393 424
Fund administration 412 295
Other costs 695 615
Total administrative expenses 7,854 7,594
------------------------------------------- ------------ ------------
Included within office facilities expenses in the current period
is the depreciation charge on the right of use asset of GBP634,000
(December 2019: GBP525,000).
5. Share-based payments
Employee share plans
Where share-based awards are granted to employees, the fair
value of the award at the date of grant is charged to the
Consolidated Income Statement over the vesting period. Non-market
vesting conditions are taken into account by adjusting the number
of equity instruments expected to vest at the end of each period so
that, ultimately, the cumulative amount recognised over the vesting
period is based on the number of shares that eventually vest.
Market vesting conditions are factored into the fair value of the
awards granted. As long as all other vesting conditions are
satisfied, a charge is made irrespective of whether the market
vesting conditions are satisfied. The cumulative expense is not
adjusted for failure to achieve a market vesting condition.
Where the terms and conditions of awards are modified before
they vest, the change in the fair value of the award, measured
immediately before and after the modifications, is recognised in
the Consolidated Income Statement over the remaining vesting
period.
Performance Share Plan
The Group's Performance Share Plan and DEP (collectively PSP)
allows for the grant of nil cost options, contingent share awards
or forfeitable share awards.
The fair value of the awards has been estimated using
Black-Scholes modelling.
Full details of the share awards in respect of 2016, 2017, 2018,
2019 and 2020 can be found in the 30 June 2020 Annual Report.
Awards granted in the period will be detailed in the June 2021
Annual Report.
Save-as-you earn (SAYE)
All eligible UK employees may participate in the Group's
Sharesave Plan. Under the terms of this plan, employees may enter
into contracts to save up to the maximum amount permitted under
legislation and, at the expiry of a fixed term, have the option to
use these savings to acquire shares in the Company at a discounted
price, calculated under the rules of the plan (currently a 20%
discount to the market price at the date of award).
6. Investments held at fair value
The movement in the carrying value of investments is analysed
below:
Investments
held at
FVTPL
GBP'000
-------------------------------- -----------
At 30 June 2019 (Audited) 5,387
Additions 1,523
Movement in FVTPL (435)
Foreign exchange movement (58)
Disposals (6,127)
-------------------------------- -----------
At 30 June 2020 (Audited) 290
Additions 1,020
Movement in FVTPL 116
Foreign exchange movement (19)
Disposals -
-------------------------------- -----------
At 31 December 2020 (Unaudited) 1,407
-------------------------------- -----------
7. Assets Held for Sale
Available-for-sale
investments
GBP'000
-------------------------------- ------------------
At 30 June 2019 (Audited) -
Additions 810
At 30 June 2020 (Audited) 810
Foreign exchange movement (69)
Disposals -
-------------------------------- ------------------
At 31 December 2020 (Unaudited) 741
-------------------------------- ------------------
8. Intangible assets
Customer
lists
Goodwill and IMAs Software Total
GBP'000 GBP'000 GBP'000 GBP'000
----------------------------------------- -------- --------- -------- --------
Cost:
At 30 June 2019 (Audited) 15,642 38,556 84 54,282
Exchange difference 47 65 - 112
Additions - - 385 385
----------------------------------------- -------- --------- -------- --------
At 30 June 2020 (Audited) 15,689 38,621 469 54,779
Exchange difference (136) (188) - (324)
Additions - - 370 370
At 31 December 2020 (Unaudited) 15,553 38,433 839 54,825
----------------------------------------- -------- --------- -------- --------
Accumulated amortisation and impairment:
At 30 June 2019 (Audited) 418 23,053 58 23,529
Amortisation charge - 3,226 31 3,257
Impairment 21 1,356 - 1,377
Exchange difference - 56 - 56
----------------------------------------- -------- --------- -------- --------
At 30 June 2020 (Audited) 439 27,691 89 28,219
Amortisation charge - 1,457 54 1,511
Impairment 180 - - 180
Exchange difference - (188) - (188)
----------------------------------------- -------- --------- -------- --------
At 31 December 2020 (Unaudited) 619 28,960 143 29,722
----------------------------------------- -------- --------- -------- --------
Net book value:
At 30 June 2020 (Audited) 15,250 10,930 380 26,560
----------------------------------------- -------- --------- -------- --------
At 31 December 2020 (Unaudited) 14,934 9,473 696 25,103
----------------------------------------- -------- --------- -------- --------
9. Current and deferred tax
The tax charge consists of current tax and deferred tax. Current
tax represents the estimated tax payable on the taxable profits for
the period. Taxable profit differs from profit before tax reported
in the Consolidated Income Statement because it excludes items of
income or expense that are taxable or deductible in other years and
it further excludes items that are never taxable or deductible.
Deferred tax is recognised on temporary differences arising between
the tax bases of assets and liabilities, and their carrying amounts
in the Consolidated Financial Statements, and is measured using the
substantively enacted rates expected to apply when the asset or
liability will be realised or settled.
Deferred tax assets and liabilities are not offset unless the
Group has legal right to offset which it intends to apply. Deferred
tax assets are recognised only to the extent that the Directors
consider it probable that they will be recovered. Subsequent to the
balance sheet date the UK Government announced changes to the UK
Corporation tax rate from 19% to 25% effective April 2023, this
will not have a material impact on the Group's financial
statements. The impact of this change has not been reflected in the
interim financial statements but the impact on deferred taxation
will be recognised in our results for the year ended 30 June
2021.
Current and deferred tax (continued)
Deferred tax is recognised in the income statement except where
the future income or expense exceeds the life-to-date income or
charge in the income statement, then the excess deferred tax will
be recognised within equity.
The most significant deferred tax items are the deferred tax
liability established against the IMA intangible asset arising from
the acquisition of RAMAM and the deferred tax asset recognised in
respect of the share-based payment expenses. The amortisation of
the IMA intangible asset is not tax deductible for corporate tax
purposes therefore the deferred tax liability is released into the
Consolidated Income Statement to match the amortisation of the IMA
intangible.
Unaudited Unaudited
6 months 6 months
ended ended
31 December 31 December
2020 2019
GBP'000 GBP'000
-------------------------------------------------------------- ------------ ------------
Current tax:
Current tax on profits for the year 1,336 1,626
Deferred tax - origination and reversal of timing differences (90) (25)
-------------------------------------------------------------- ------------ ------------
Total tax charge 1,246 1,601
-------------------------------------------------------------- ------------ ------------
The total tax charge assessed for the year is higher (2019:
higher) than the average standard rate of corporation tax in the
UK.
The differences are explained below:
Unaudited Unaudited
6 months 6 months
ended ended
31 December 31 December
2020 2019
GBP'000 GBP'000
---------------------------------------------------------------- ------------ ------------
Profit before tax 4,555 5,655
Profit before tax multiplied by the average rate of corporation
tax in the UK of 19% (2019: 19%) 865 1,074
Effects of:
Expenses not deductible for tax purposes 6 14
Losses not deductible for tax purposes 176 380
Other reconciling differences 199 133
---------------------------------------------------------------- ------------ ------------
Total tax charge 1,246 1,601
---------------------------------------------------------------- ------------ ------------
Current and deferred tax (continued)
The analysis of deferred tax assets and liabilities is as
follows:
Unaudited Audited
at 31 Year ended
December 30 June
2020 2020
GBP'000 GBP'000
------------------------------------------------------------ --------- -----------
Deferred tax assets
At beginning of year 276 1,034
(Charge)/credit to the income statement:
- share-based payment expense (86) (562)
- movement in foreign exchange - 6
Debit to equity:
- share-based payment expense (47) (202)
At end of period 143 276
------------------------------------------------------------ --------- -----------
Deferred tax liabilities
At beginning of year 2,078 2,483
Charge/(credit) to the income statement:
- amortisation of intangibles (276) (554)
- re-measurement of deferred tax on intangibles for changes
in expected tax rate - 233
- movement on investments held at fair value 4 (84)
------------------------------------------------------------ --------- -----------
At end of period 1,806 2,078
------------------------------------------------------------ --------- -----------
10. Dividends
During the period, the following dividends were paid:
Unaudited Unaudited
31 December 31 December
Ordinary Special Total 2020 2019
(pence) (pence) (pence) GBP'000 GBP'000
-------------------- -------- -------- -------- ------------ ------------
2019 second interim 3.50 1.60 5.10 - 4,269
2019 final 2.60 2.40 5.00 - 4,188
2020 second interim 2.81 - 2.81 2,360 -
2020 final 2.24 0.10 2.34 1,962 -
4,322 8,457
-------------------- -------- -------- -------- ------------ ------------
The first interim dividend of 3.89 pence per share will be paid
on 15 April 2021 to shareholders on the register as at 26 March
2021.
11. Earnings per share
The basic earnings per share are calculated by dividing the
profit attributable to equity holders of the Company by the
weighted average number of ordinary shares of the Company in issue
during the year (excluding any shares held by the Group's EBT). The
diluted earnings per share adjusts the basic earnings per share for
the conversion of any dilutive potential ordinary shares,
calculated at the balance sheet date.
The Group operates a SAYE Scheme for employees. The SAYE Scheme
allows employees to contribute towards a share option scheme over a
three year period. At the end of the scheme the employees have the
option to either receive shares in River and Mercantile Group PLC
or cash. The potential dilutive effect of this scheme is also
considered in the calculation of diluted earnings per share.
Unaudited Unaudited
6 months 6 months
ended ended
31 December 31 December
2020 2019
------------------------------------------------------ ------------ ------------
Profit attributable to owners of the parent (GBP'000) 3,309 4,054
Weighted average number of shares in issue ('000) 83,874 83,437
Weighted average number of diluted shares ('000) 83,921 83,638
Earnings per share:
Basic (pence) 3.94 4.86
Diluted (pence) 3.94 4.85
-------------------- ---- ----
Reconciliation between weighted average number of shares in
issue
Unaudited Unaudited
6 months 6 months
ended ended
31 December 31 December
2020 2019
000s 000s
----------------------------------------------------- ------------ ------------
Weighted average number of shares in issue - basic 83,874 83,437
Dilutive effect of shares granted under SAYE 47 201
Weighted average number of shares in issue - diluted 83,921 83,638
----------------------------------------------------- ------------ ------------
Adjusted profit
The Group uses adjusted profit (pre and post-tax), adjusted
underlying profit (pre and post-tax), adjusted earnings per share
and adjusted underlying earnings per share as alternative
performance measures.
The alternative performance measures are used to present
shareholders and analysts with a clear view of what the Board
considers to be a fair reflection of the Group's results by
excluding certain non-cash items detailed below. In the case of
underlying measures, these also exclude the impact of performance
fees which are more volatile and less consistent in nature than the
Group's other revenue sources. This enables consistent
period-on-period comparison and makes it easier for users of the
accounts to identify trends.
Earnings per share (continued)
Adjusted profit before tax is determined by adjusting statutory
profit before tax for the impact of amortisation and impairment of
intangible assets (excluding software), other unrealised gains and
losses, and dilutive share awards.
Adjusted underlying profit before tax is calculated by
subsequently deducting any performance fee profit before tax from
adjusted profit before tax.
Performance fee profit represents performance fees, less the
associated remuneration costs plus the realised gain or loss on
disposal of seed investments held.
Unaudited Unaudited
6 months 6 months
ended ended
31 December 31 December
2020 2019
GBP'000 GBP'000
-------------------------------------------------------- ------------ ------------
Adjusted profit calculation:
Statutory profit before tax 4,555 5,655
Adjustments:
Amortisation and impairments of intangible assets 1,637 2,097
Other unrealised (gains) and losses 21 358
Dilutive share awards costs/(credits) - (17)
-------------------------------------------------------- ------------ ------------
Adjusted profit before tax 6,213 8,093
Taxes (1,528) (1,993)
-------------------------------------------------------- ------------ ------------
Adjusted profit after tax 4,685 6,100
-------------------------------------------------------- ------------ ------------
Performance fee profit calculation:
Performance fees 57 1,090
Less remuneration at 50% (29) (545)
Gains and (losses) on disposal of investments - 267
-------------------------------------------------------- ------------ ------------
Performance fee profit before tax 28 812
Taxes (5) (154)
-------------------------------------------------------- ------------ ------------
Performance fee profit after tax 23 658
Adjusted underlying profit calculation:
Adjusted profit before tax 6,213 8,093
Less: Performance fee profit before tax (28) (812)
-------------------------------------------------------- ------------ ------------
Adjusted underlying profit before tax 6,185 7,281
Taxes on adjusted profit (1,528) (1,993)
Add back: Taxes on performance fee profit 5 154
-------------------------------------------------------- ------------ ------------
Adjusted underlying profit after tax 4,662 5,442
-------------------------------------------------------- ------------ ------------
Adjusted underlying pre-tax margin (calculated on total
revenue excluding performance fees) 18% 21%
-------------------------------------------------------- ------------ ------------
Earnings per share (continued)
Adjusted earnings per share
Unaudited Unaudited
6 months 6 months
ended ended
31 December 31 December
2020 2019
----------------------------------------------- ------------ ------------
Adjusted profit after tax (GBP'000) 4,685 6,100
Adjusted underlying profit after tax (GBP'000) 4,662 5,442
Weighted average shares ( 000) 83,874 83,437
Weighted average diluted shares ( 000) 83,921 83,638
Adjusted earnings per share:
Basic (pence) 5.59 7.31
Diluted (pence) 5.58 7.29
Adjusted underlying earnings per share:
Basic (pence) 5.56 6.52
Diluted (pence) 5.56 6.51
----------------------------------------------- ------------ ------------
12. Other reserves
Unaudited Audited
31 December 30 June
2020 2020
GBP'000 GBP'000
----------------------------- ------------ --------
Foreign exchange reserve 208 350
Capital redemption reserve 84 84
Capital contribution reserve 576 576
----------------------------- ------------ --------
868 1,010
----------------------------- ------------ --------
13. Share capital
The Company had the following share capital at the reporting
dates:
Allotted, called up and fully paid: Ordinary shares
of GBP0.003 each Number GBP
---------------------------------------------------- ---------- -------
Balance at 30 June 2019 (Audited) 85,296,176 255,889
Shares issued in respect of SAYE award vesting 157,458 472
Balance as at 30 June 2020 (Audited) 85,453,634 256,361
Balance as at 31 December 2020 (Unaudited) 85,453,634 256,361
---------------------------------------------------- ---------- -------
The ordinary shares carry the right to vote and rank pari passu
for dividends.
The share premium account arises from the excess paid over the
nominal value of the shares issued.
14. Own Shares held by EBT
GBP'000
----------------------------------------------- -------
Balance at 30 June 2019 (Audited) 6,251
Disposal of shares in respect of award vesting (1,996)
----------------------------------------------- -------
Balance at 30 June 2020 (Audited) 4,255
Acquisition of own shares by EBT 350
Disposal of shares in respect of award vesting (475)
----------------------------------------------- -------
Balance as at 31 December 2020 (Unaudited) 4,130
----------------------------------------------- -------
15. Related party transactions
Related parties to the Group are its key management
personnel.
Key management personnel remuneration
Key management includes the Executive and Non-Executive
Directors, and the Executive Committee members. The remuneration
paid or payable to key management for employee services is shown
below:
Unaudited Unaudited
6 months 6 months
ended ended
31 December 31 December
2020 2019
GBP'000 GBP'000
---------------------------------------- ------------ ------------
Short-term employee benefits 2,143 2,268
Long-term employee benefits 2 3
Post-employment benefits 72 92
Share-based payments (credit) / expense (304) 313
---------------------------------------- ------------ ------------
Total 1,913 2,676
---------------------------------------- ------------ ------------
16. Financial instruments
Categories of financial instruments
Financial instruments held by the Group are categorised under
IFRS 9 as follows:
Unaudited Audited
31 December 30 June
2020 2020
GBP'000 GBP'000
---------------------------------------------- ------------- --------
Financial assets
Cash and cash equivalents 23,460 24,251
Fee receivables 3,320 10,233
Other receivables 14,199 13,767
---------------------------------------------- ------------- --------
Total financial assets held at amortised cost 40,979 48,251
Investments held at FVTPL 1,407 290
---------------------------------------------- ------------- --------
Total Investments held at FVTPL 1,407 290
---------------------------------------------- ------------- --------
Total financial assets 42,386 48,541
---------------------------------------------- ------------- --------
Other receivables exclude prepayments.
Unaudited Audited
31 December 30 June
2020 2020
GBP'000 GBP'000
----------------------------------------------- ------------- --------
Financial liabilities
Trade and other payables 11,136 17,493
----------------------------------------------- ------------- --------
Total financial liabilities at amortised cost 11,136 17,493
----------------------------------------------- ------------- --------
Contingent consideration 219 228
----------------------------------------------- ------------- --------
Total financial liabilities held at fair value 219 228
----------------------------------------------- ------------- --------
Total financial liabilities 11,355 17,721
----------------------------------------------- ------------- --------
Trade and other payables exclude deferred income.
The Directors consider the carrying amounts of the financial
assets and financial liabilities carried at amortised cost to be a
reasonable approximation to their fair values based upon their
nature and the relatively short period of time between the
origination of the instruments and their expected realisation.
Financial instruments (continued)
Fair value of financial assets and liabilities
Fair value of financial assets and liabilities
The following provides an analysis of financial instruments that
are measured subsequent to initial recognition at fair value, and
held as FVTPL and revalued on a recurring basis, grouped into
levels 1 to 3:
- Level 1 fair value measurements are those derived from quoted
prices (unadjusted) in active markets for identical assets or
liabilities. The Group does not hold financial instruments in this
category;
- Level 2 fair value measurements are those derived from inputs
other than quoted prices included within Level 1 that are
observable for the asset or liability, either directly (i.e. as
prices) or indirectly (i.e. derived from prices). The Group's
seeding of funds is held within this category;
- Level 3 fair value measurements are those derived from
valuation techniques that include inputs for the asset or liability
that are not based on observable market data (unobservable
inputs).
Financial assets
Unaudited Audited
31 December 30 June
2020 2020
GBP'000 GBP'000
---------------------------------------------- ------------- ---------
Financial assets
Financial assets held at fair value - level 2 1,407 290
---------------------------------------------- ------------- ---------
1,407 290
---------------------------------------------- ------------- ---------
Financial liabilities
Unaudited Audited
31 December 30 June
2020 2020
GBP'000 GBP'000
--------------------------------------------------- ------------- ---------
Financial liabilities
Financial liabilities held at fair value - level 3 220 228
--------------------------------------------------- ------------- ---------
220 228
--------------------------------------------------- ------------- ---------
There have been no transfers of financial instruments between
levels during the period.
17. Leases
Right of Use Asset on Leasehold Property GBP'000
------------------------------------------------------------ -------
Cost:
At 30 June 2019 -
Recognition of asset on transition to IFRS 16 5,591
Additions 41
------------------------------------------------------------ -------
At 30 June 2020 (Audited) 5,632
------------------------------------------------------------ -------
Foreign Exchange (140)
------------------------------------------------------------ -------
At 31 December 2020 (Unaudited) 5,492
------------------------------------------------------------ -------
Accumulated depreciation:
At 30 June 2019 -
Recognition of depreciation charge on transition to IFRS 16 1,768
Depreciation charge 1,278
------------------------------------------------------------ -------
At 30 June 2020 (Audited) 3,046
------------------------------------------------------------ -------
Foreign Exchange (56)
Depreciation Charge 634
------------------------------------------------------------ -------
At 31 December 2020 (Unaudited) 3,624
------------------------------------------------------------ -------
Net book value:
At 30 June 2020 2,586
------------------------------------------------------------ -------
At 31 December 2020 (Unaudited) 1,868
------------------------------------------------------------ -------
Lease Liability GBP'000
-------------------------------------------------- --------
Liability:
At 30 June 2019 -
Recognition of liability on transition to IFRS 16 4,024
Payments made (1,503)
Interest charge 170
-------------------------------------------------- --------
At 30 June 2020 (Audited) 2,691
Foreign Exchange (96)
Payments made (769)
Interest charge 59
At 31 December 2020 (Unaudited) 1,885
Of which:
Current lease liabilities 1,217
Non-current lease liabilities 668
-------------------------------------------------- --------
At 31 December 2020 (Unaudited) 1,885
-------------------------------------------------- --------
18. Events after the reporting period
The Directors have declared an interim dividend of 3.89 pence
per share.
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