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RNS

Final Results

Released 07:00 29-Nov-2018

RNS Number : 8320I
Premier Asset Management Group PLC
29 November 2018
 

29 November 2018

Premier Asset Management Group PLC

("Premier" or the "Company") Annual Results for the Year Ended 30 September 2018

Premier Asset Management Group PLC (AIM: PAM) today announces its audited results for the year ended 30 September 2018.

Assets under management

·     £6.9 billion as at 30 September 2018 (30 September 2017: £6.1 billion)

·     £6.6 billion as at close of business on 23 November 2018

 

Investment performance

·     Continued strong investment performance:

Over five years: 83% of AUM above median1

Over five years: 78% of AUM in first quartile of IA sectors1

 

Net inflows

·     Net flows of £734 million (FY17: £747m)

·     22 consecutive quarters of net positive flows

 

Financial results

·     Adjusted EBITDA2 of £19.1 million (2017: £15.0m), an increase of 27.3%

·     Adjusted profit before tax3 of £18.9 million (2017: £14.7 million), an increase of 28.6%

·     Profit before tax of £15.9 million (2017: £11.5 million), an increase of 38.3%

·     Basic earnings per share of 12.09p (2017: 8.53p), an increase of 41.7%

 

Full year dividend

·     Total dividend: 10.25p (2017: 8.00p) an increase of 28%

1 Performance figures represent 82% of Premier's total AUM as at 30 September 2018 and exclude absolute return funds, investment trusts and segregated mandates. Median and quartile ranking figures are shown relative to respective Investment Association sectors. Source: FE Analytics, data to 30 September 2018.  Net income reinvested. Data shown net of all fund charges. C share class, or, where a C share class was not available for the full time period, the pre RDR bundled or equivalent retail share class has been used for the period the C share class was not available.

2 Earnings before interest, tax, depreciation, amortisation, share based payments and exceptional items

3 Profit stated before exceptional items, amortisation, interest expense, share based payments and tax

 

Mike O'Shea, Chief Executive Officer, commented:

 

"I am pleased to report another strong year for the business in terms of continuing to deliver good long term investment performance for our clients, continued flows into Premier funds and good financial results for shareholders. 

 

Although investment and political conditions have remained uncertain, Premier achieved another year of strong net inflows supported by good performance, relevant products, including our broad range of multi-asset funds and our strong distribution capabilities.

 

We remain a market leader for multi-asset investments1 and believe we have strengthened our future position in this area by the continued development of our multi-asset product range to include both multi-manager and directly invested multi-asset funds. We are confident that in a more difficult investment environment, there will continue to be strong demand for good actively managed products, including both multi-asset and single strategy funds.

 

Independent recognition for the quality of our investment managers, products and performance continued during the year. Premier won a number of individual fund and company awards including Specialist Management Group of the Year (under £10 billion AUM) in the Investment Week Specialist Investment Awards 2018.

 

The need for individuals to save and invest for their future remains critically important even if the economic and political environment is uncertain. We believe that our combination of relevant investment products, good investment performance, strong distribution capability, strong brand and experienced investment managers means we are well placed to take advantage of the opportunities that arise for both our investors and shareholders.

 

Trading during the early part of the current financial year has been more challenging as the UK government seeks to finalise an acceptable withdrawal agreement with the EU. Anecdotal evidence suggests that retail investors are taking a wait-and-see approach and, as a result, fund flows have been slower in the first few weeks of the current year than they have been in recent months. Despite this, investment performance, particularly across our multi asset range has remained resilient on a relative basis."

 

1 Source: Bdifferent Financial Services Market Research. Based on UK adviser fieldwork from 2 May 2018 to 5 June 2018.

 

Dividend

 

The Company's dividend for the financial year ended 30 September 2018 will be 10.25p, comprising three interim dividends of 1.65p per share, paid on 2 March 2018, 1 June 2018 and 31 August 2018, and a final interim dividend of 5.30p per share which will go ex-dividend on 6 December 2018 with a record date of 7 December 2018, and which will be paid on 4 January 2019.

 

 

Enquiries:

 

Premier Asset Management Group PLC

Tel: 01483 306090

Mike O'Shea

 

Numis Securities Limited

(NOMAD and Broker)

Tel: 020 7260 1000

Kevin Cruickshank

Charles Farquhar

 

Liberum Capital Limited

(Joint Broker)

Tel: 020 3100 2000

Richard Crawley

Jamie Richards

 

Smithfield Consultants

(Financial PR)

Tel: 020 3047 2544

John Kiely

Andrew Wilde

 

Note to editors 

About Premier

Premier is a fast-growing UK retail asset management group with a focus on delivering good investment outcomes for investors through relevant products and active management across its range of investment strategies, which include multi-asset, equity and absolute return funds.  Premier had £6.9 billion of assets under management as at 30 September 2018.

 

Chairman's statement

 

Introduction

The Group continued to make good progress this year.  Premier is a client focused and investment led business and we believe our strong financial results have been driven by our relevant investment products, good long term investment performance and strong distribution capabilities.

 

Financial results

Over the year we experienced net inflows of £734 million and have now recorded twenty two successive quarters of positive net inflows. As a result of these strong inflows and some market movement, our assets under management reached a record high level of £6.9 billion as at the end of September 2018.

 

The increase in assets under management helped to deliver an increase in profit before tax to £15.9m, whilst underlying profit before tax increased by 29% to £18.9m, with net management fees increasing by £7.2m to £48.1m, and adjusted EBITDA increasing by 27% to £19.1m.

 

The Group has adopted a quarterly dividend policy, expecting to pay three smaller interim dividends, representing approximately half of the estimated total dividend for the full financial year, followed by a larger final dividend. The Board may revise the dividend policy from time to time in line with the actual results of the Group.

 

The Board has announced a final interim dividend of 5.30p which means the full-year dividend will be 10.25p (2017: 8.0p), equivalent to a 28% increase on last year. The full year dividend represents 70% of adjusted profit after taxation.

 

Business update

We believe our existing investment product range is well placed to meet the needs of UK advisers and their clients, whether they are looking for standalone managed solutions, offered by our range of multi-asset funds, or specialist funds which we expect will form part of a broader investment portfolio. Many of our funds are income focused, and are designed to help those seeking long term income from their investments.

 

During the year we have continued to develop our product range. This included promoting existing members of our UK equity team to manage our UK equity growth fund, and utilising existing investment capabilities from our derivatives desk and global equity team to launch a new high yielding global equity income fund. We believe that these developments will create further opportunities to attract fund flows over the coming years.

 

At the core of what we do is active investment management. All of our investment products are managed by our specialist investment teams on this basis, and this approach has produced good long term investment results, after all charges, over many years.

 

Over the course of the year, business conditions have continued to be challenging, with continued economic, political and investment uncertainty. We believe this uncertainty, including concerns over the outcome of the Brexit negotiations, has created a more volatile and difficult environment for the investment industry. So far, this belief has been borne out in a lower level of fund sales in 2018, as compared to 2017, across the UK funds industry. We clearly do not know how this challenging environment will evolve, but we believe our active investment management approach is well placed to help investors over the longer term.

 

Board

I would like to thank my fellow Board members for their guidance over the year. Although there were no changes to the composition of the Board over the year, Luke Wiseman and I stepped down from the Audit & Risk Committee at the end of September. It was our intention that Robert Colthorpe, who currently serves as our senior independent director, would succeed Luke Wiseman as Chair of the Audit & Risk Committee and I am pleased to announce that Robert commenced in this role on 1 January 2018. The Audit & Risk Committee will now comprise of the independent non-executive directors only, currently Robert Colthorpe and William Smith.

 

Outlook

Despite the current political and macroeconomic uncertainties impacting the investment environment, particularly as the UK enters the final stages of Brexit, the Board believes that Premier has a compelling and resilient long term strategy, built around active investment management, relevant products, strong investment performance and strong distribution capabilities that can continue to deliver value for our clients and shareholders. In closing, I would like to say thank you to everyone at Premier who has worked hard to contribute to the Company's success, and to everyone else who has supported us, including our clients and our shareholders.

 

Approved and signed on behalf of the Board.

 

 

Mike Vogel

Chairman

28 November 2018

 

Chief executive's report

Introduction

I am pleased to report another strong year for the business, in terms of continuing to deliver good long term investment performance for our clients after all fees, continued flows into Premier funds and good financial results for shareholders.

 

At the core of what we do is our focus on helping our clients achieve their financial goals. We do this by retaining and hiring high quality, specialist investment professionals to actively manage our range of investment products. Each fund that we run or service that we offer is designed to meet a specific investment objective and produce good long term investment results for our clients, after all fund fees.

 

By doing this well, and by managing our business effectively and efficiently, we believe we can deliver value to our clients, create value for our shareholders, and also reinvest in our business and our people to create ongoing value for our clients and shareholders.

 

Thanks to the quality of the people who work for Premier, including their skills, experience and hard work, and the strength of our investment products and operating platform, I believe our business is well placed for the future.

 

Investment performance after fees

We have continued to maintain good long term investment performance, with 83% of our assets under management outperforming their respective sector medians over five years.  As well as producing good long term growth after all fund fees, many of our funds have a primary objective of delivering income or risk-adjusted returns for our clients. I am pleased that despite many external challenges, our fund managers have continued to deliver good income and risk-adjusted performance for our clients over time.

 

Awards

We are pleased to report that the quality of our multi-asset investment teams, investment products and investment performance has continued to be recognised by various recent awards.

 

Premier won Multi-Asset Group of the Year at the Investment Week Specialist Investment Awards 2017, Best Multi-Asset Fund Group of the Year at the Professional Adviser Awards 2018 and Best Multi-Asset Group 2017 in the Rayner Spencer Mills Awards.

 

Individual multi-asset fund awards included Premier Multi-Asset Distribution Fund winning Best Multi-Asset Fund in the rising income category at the Professional Adviser Awards 2018.

 

Premier Multi-Asset Global Growth Fund won Best Managed Growth Fund at the Investment Week Fund Manager of the Year Awards 2018, Best Mixed Asset Aggressive Fund at the Thomson Reuters Lipper Fund Awards 2018 and was the winner in an FTAdviser FT100 Club 2017 category.

 

Premier Diversified Fund was highly commended in the Managed Balanced Category in the Investment Week Fund Manager of the Year Awards 2018.

 

One of Premier's absolute return funds, Premier Defensive Growth Fund, won Best Multi-Asset Fund in the Positive Return category at the Professional Adviser Awards 2018.

 

Financial results

Over the year, we experienced strong net inflows of £734m and our assets under management hit a record high of £6.9 billion as at the end of September 2018, up 13% on the previous year. These strong net inflow figures were achieved despite a more subdued environment for industry retail fund sales, which according to the Investment Association, fell 34% over the year to 30 September 2018 when compared with the previous year.

 

Relevant investment products

Premier launched its first multi-asset style fund in 1995 and we now manage £4.3 billion across our range of twelve multi-asset funds, which include ten multi-manager funds. Whilst each of the twelve funds has specific investment objectives, they can be categorised as having a primary investment focus on either income, growth, wealth preservation or risk-targeted returns.

 

As many advisers seek suitable outsourced investment partners for their respective centralised investment propositions, we believe the combination of our broad multi-asset product range, specialist investment expertise and experience in this area, performance track record and client support make Premier an attractive ongoing investment partner for advisers.

 

We are pleased we have established a strong position in the adviser market for multi-asset funds, and according to research from Bdifferent, Premier is a market leader for multi-asset and multi-strategy funds. We remained focused on continuing to develop and grow in this area.

 

Product development

We continue to review and refine our product range with the aim of trying to make sure we offer products that meet the ongoing demands from clients.

 

To complement our existing range of market-leading multi-asset funds, over the last few years we have developed two new multi-asset funds, Premier Diversified Fund and Premier Diversified Income Fund. Premier Diversified Fund has now built a strong five year track record. Premier Diversified Income Fund was launched in June 2017 and has had a good first year. Both of these funds have been a core part of Premier's sales and marketing activity over the last year and have achieved encouraging positive net flows.

 

Premier Diversified Fund and Premier Diversified Income Fund are managed by Premier's Chief Investment Officer together with our in-house equity and fixed income teams. They invest directly into a diversified portfolio of stocks and shares using the skills of seven of Premier's specialist investment managers, covering different asset classes. The Diversified funds have a focus on producing returns with significantly less volatility than the UK equity market.

 

During the year, we were pleased to promote two of our UK equity investment team as co-managers of the Premier UK Growth Fund. Over their first year, the fund is ranked 11 out of 262 funds in the IA UK All Companies universe, and has significantly outperformed the fund's comparative index, the FTSE All-Share Index. Whilst this is a very short term time frame, we are pleased with this initial success and will be supporting the managers as they build their longer term track record.

 

In September 2018, we launched the Premier Global Optimum Income Fund. This new fund is based on our existing investment capabilities in global equities and in managing option strategies to target a yield of 6% p.a. In a continued low interest rate environment, and with more people looking for suitable income options in retirement, we believe this fund will prove an attractive option for income-seeking investors.

 

Regulation

This year has included some key regulatory changes and announcements. A significant amount of work went into ensuring we were ready for the new MiFID II regulations when they were implemented in January 2018. This year also saw important market study announcements by the FCA.

 

In April 2018, the FCA published a policy statement outlining its feedback and final rules relating to its Asset Management Market Study. The final rules and guidance cover a number of areas, including a requirement for fund managers to make an annual assessment of value, as part of their duty to act in the best interests of the investors in their funds, and a requirement for fund managers to appoint a minimum of two independent directors to their boards. These specific new rules come into effect during 2019.

 

We support these measures, which are designed to deliver better protection for investors, including those who are actively engaged with their investments and those who do not follow their investments closely.

 

We are proud of the good investment outcomes that we deliver for our clients, and we will continue to work hard to ensure we are transparent about our fund charges, as well as exploring ways to improve how we show the value we are delivering to our clients, after all fund fees.

 

The FCA published their investment platforms market study interim report in July 2018. This is of relevance to Premier as a significant amount of our business is held through investment platforms.  The report sets out the FCA's provisional view on the way competition works in the investment platform market and how they would like the market to develop. We will monitor the FCA's next report with interest.

 

Brexit

Our business, along with other UK based investment companies, faces a number of challenges. Although economic and political uncertainty is a global phenomenon, the Brexit negotiations and the various potential outcomes continue to dominate economic and political discussions in the UK.

 

In the short term, it is possible that Brexit results in the UK economy having a period of prolonged contraction, which could also mean exchange rate volatility and further falls in the value of sterling.

 

As an active investment manager, our fund managers can be proactive about where they invest, and many of our funds can choose to be partly, mainly or wholly invested outside of UK listed investments.

 

However, Brexit could well lead to a period of very difficult economic circumstances and poor investor confidence, which could impact on future flows into Premier's funds.

 

The Board has considered market access rights in the context of Brexit for fund distribution and fund management. Whilst the outcome of negotiations remains uncertain, the Board notes that Premier is a UK retail funds business distributing UK funds through UK intermediaries to UK investors. The Board has concluded that as far as Premier's existing business strategy is concerned, the overall impact of changes in the rules governing distribution of funds within and to the EU post Brexit will not be a significant risk factor. Other than its potential impact on markets and investor confidence as noted above, the Board does not believe that Brexit will significantly impact on Premier's ongoing business strategy or, importantly, on our current operational platform.

 

The Board has also noted that Brexit could have an impact on the retention of skilled employees and on recruitment for many businesses. As at 30 September 2018, 5% of Premier's employees are from non-UK countries in the EU. The Board very much hopes that negotiations will be concluded in such a way as to enable us to retain these people and for the business to continue to benefit from their positive contribution.

 

In an ideal world, the Board would like the Group to have the ability to recruit from as wide a pool of talent as possible, from both within the EU and further afield. However, taking into account the overall size of Premier, the Board does not feel that a "no deal" Brexit creates significantly increased risk for the business in the area of recruitment and retention.

 

Finally, the Board has considered the impact of declines in the debt market and the impact of tighter credit conditions more generally and concluded that, other than their overall impact on the economy, these do not present increased risks to Premier in terms of our debtors or creditors.

Industry Dynamics

Technology is changing the way most of us are leading and managing our lives, and is also impacting our industry in areas such as technology driven investment management, the way advisers and our clients buy, hold and sell funds, and how funds are marketed. We also face increasing competition from passive funds and from combined investment and advice firms that offer their own in-house investment products.

 

Against this backdrop, it is important that we have a robust and responsive business model, including relevant investment products backed by good investment performance records and strong distribution. We believe that we have this and can continue to do well for our clients and shareholders by delivering good performing investment products that meet the long term needs of our clients.

 

To our minds, the case for active management remains strong. Active managers have the ability to make ongoing proactive investment decisions about where to invest and where not to invest and to give investors access to different types of asset classes and portfolio structures, as well as avoiding specific types of investments. We also believe that active management is well placed to help clients achieve specific investment outcomes, including long term income in retirement, and to navigate the investment challenges that can arise from an increasingly uncertain global economic and political environment. Our view is that active management plays a crucial part in the efficient allocation of capital within the economy. It does this by not only influencing the way that today's companies are managed but also by providing finance for the growth of these companies and for the growth of tomorrow's companies.

 

Our strategy

We believe there are clear reasons to be optimistic about the long term future for the investment industry and investment providers who can demonstrate they deliver value to clients by offering good investment solutions. We also believe we have investment products well suited for financial advisers seeking to outsource investment management for their own clients, as well as for advisers seeking relevant investment components for their own managed portfolios. We remain a highly focused business in terms of our product offering, our market and our clients. We are wholly focused on the UK market and our distribution is through UK intermediaries, including financial advisers, wealth managers, life companies, fund of funds, and platforms, which means our end clients will typically be UK based.

 

We will continue to evolve our business strategy and we plan to ensure we are well placed to help our clients achieve their objectives by offering relevant investment products, delivering strong investment performance, running a strong distribution capability and maintaining a scalable operating platform.

 

Outlook

Trading during the early part of the current financial year has been more difficult. The combination of more volatile investment markets and the ongoing uncertainty around Brexit have impacted on both the level of assets under management and the rate of fund flows. Anecdotal evidence suggests that retail investors are taking a wait-and-see approach and, as a result, fund flows have been slower in the first few weeks of the current year than they have been in recent months. Despite this, investment performance, particularly across our multi asset range has remained resilient on a relative basis. We are confident that as the uncertainty around Brexit clears one way or another over the coming months, we can resume making further progress in terms of both continued good outcomes for investors as well as in increasing assets under management from new fund flows.

 

Thank you

Finally, I would like to finish where I started my review of the year, by thanking my colleagues at Premier and our clients. I would like to thank my co-workers for their professionalism, hard work and enthusiasm during the year. I would also like to thank our clients for their trust in allowing us to manage their money, and their advisers for their support in using or recommending our funds. And finally, I would like to thank our shareholders for their continued support.

 

Approved and signed on behalf of the Board.

 

 

 

Mike O'Shea

Chief Executive Officer

28 November 2018

 

Financial review

 

Assets under management ('AUM')

AUM as at 30 September 2018 stood at £6,866m, up some £778m (+12.8%) over the year, with average AUM standing at £6,554m for the year, up £1,019m (+18.4%) on the previous financial year. The following table shows the progression of AUM over the last three financial years:

 

 

 

FY18

FY17

FY16

 

 

£m

£m

£m

Opening AUM

6,088

4,999

4,081

 

Sales

2,239

2,150

1,944

 

Redemptions

(1,505)

(1,403)

(1,166)

 

Net sales

734

747

778

 

Closures

-

-

(174)

 

Performance

44

342

314

Closing AUM

6,866

6,088

4,999

Average AUM

6,554

5,535

4,526

 

Average AUM has grown year-on-year as a function of continued positive net inflows and market performance. The final quarter of the financial year ended September 2018 was the twenty-second consecutive quarter of positive net inflows.

 

The following table shows the split of closing AUM by product type as at the end of the last three financial years:

 

 

FY18

FY17

FY16

Retail funds

95.3%

94.6%

93.9%

Investment trusts

2.2%

2.7%

3.0%

Segregated mandates

2.5%

2.7%

3.1%

 

100.0%

100.0%

100.0%

 

In terms of closing AuM by asset class as at the end of the last three financial years, this is shown in the following table:

 

 

FY18

FY17

FY16

Multi-asset, multi-manager

59%

54%

51%

UK equities

21%

24%

27%

Absolute return

9%

12%

11%

Fixed income

6%

6%

7%

Global equities

3%

3%

3%

Multi-asset

2%

1%

1%

 

100%

100%

100%

 

 

Financial performance

Profit before tax for the year ended 30 September 2018 amounted to £15.9m (2017: £11.5m), representing an increase of £4.4m (+38.3%) over the previous financial year. The following table shows an analysis of the financial performance over the last three financial years.

 

 

 

FY18

FY17

FY16

Net management fees

 

£48.1m

£40.9m

£33.3m

Other income

 

£0.7m

£0.1m

£0.1m

Net revenues

 

£48.8m

£41.0m

£33.4m

Adjusted administrative costs

 

(£29.9m)

(£26.3m)

(£22.8m)

Amortisation

 

(£1.7m)

(£2.5m)

(£5.1m)

Exceptional items

 

(£0.3m)

(£0.4m)

(£0.5m)

Share based payments

 

(£1.0m)

(£0.3m)

-

Operating profit

 

£15.9m

£11.5m

£5.0m

Finance costs

 

-

-

(£2.5m)

Profit before tax

 

£15.9m

£11.5m

£2.5m

Taxation

 

(£3.4m)

(£2.6m)

(£1.5m)

Profit after tax

 

£12.5m

£8.9m

£1.0m

 

Net management fees

Net management fees generated during the year amounted to £48.1m, which represents a £7.2m (+17.6%) increase over the previous financial year and an annual compound growth rate over the last three financial years of 20.2%.

 

 

 

FY18

FY17

FY16

Management fees

 

£52.7m

£45.9m

£39.0m

Less: Trail/renewal commission

 

(£4.6m)

(£5.0m)

(£5.7m)

Net management fees

 

£48.1m

£40.9m

£33.3m

Average AuM

 

£6,554m

£5,535m

£4,526m

Net management fee margin

 

73.4bps

73.9bps

73.6bps

 

Based on the average AUM as shown above, the net management fee margin has decreased slightly during the year from 73.9bps to 73.4bps, with the change in margin being primarily due to a change in the product mix.

 

Other income

Other income generated during the year amounted to £0.7m compared to £0.1m in the previous financial year. This increase is mainly due to a £0.56m performance fee that was generated during the year in respect of the Acorn Income Fund and is not considered to be a recurring item. Included within Administrative Costs is an amount of £0.38m which represents the amount of the performance fee that is payable to the relevant fund managers, with £0.35m included within Variable Other Costs and £0.03m included within Variable Staff Costs.

 

Adjusted administrative costs

Administrative costs (excluding renewal commissions and share-based payments) during the year amounted to £29.9m, compared to £26.3m in the previous financial year, representing an increase of £3.6m (+13.7%). The largest component of administrative costs continues to be staff costs, which amounted to £16.7m compared to £14.7m in the previous financial year. The following table analyses the adjusted administrative costs between both fixed and variable elements of staff costs and other costs:

 

 

FY18

FY17

FY16

Fixed staff costs

£9.4m

£8.6m

£7.7m

Variable staff costs

£7.3m

£6.1m

£5.4m

Total staff costs

£16.7m

£14.7m

£13.1m

Fixed other costs

£9.3m

£8.0m

£6.5m

Variable other costs

£3.9m

£3.6m

£3.2m

Total

£29.9m

£26.3m

£22.8m

 

Share based payments are excluded from administration costs on the basis that they are disclosed separately in the financial performance table shown above.

 

The total administrative costs shown in the consolidated statement of comprehensive income includes renewal commissions and share-based payments, which for the purposes of this review are analysed separately. A reconciliation of the above totals and those shown in the Consolidated Statement of Comprehensive Income is shown below:

 

 

 

FY18

FY17

FY16

Consolidated statement of comprehensive income

£35.5m

£31.6m

£28.5m

Less: Renewal commission

 

(£4.6m)

(£5.0m)

(£5.7m)

Less: Share based payments

 

(£1.0m)

(£0.3m)

-

Total

 

£29.9m

£26.3m

£22.8m

 

Staff costs consist of two elements, the first being fixed, which includes salaries and associated national insurance, employers' pension contributions and other indirect costs of employment, which rose by 9.3% to £9.4m; this compares with a 7% increase in average headcount as shown in note 6(a). The second element of staff costs is in respect of variable items such as general discretionary bonuses, sales bonuses and fund based bonuses in respect of the fund management teams, together with the associated employers national insurance. Variable staff costs increased by £1.2m (+19.7%), which compares with the 18.4% increase in average AUM as mentioned above, together with a 27% increase in adjusted EBITDA (see below).

 

Fixed other costs have increased by £1.3m (+16.3%) with the main components being office costs, advertising & marketing, consultancy (including audit, taxation, legal and regulatory fees) and other items, including irrecoverable VAT.

 

Variable other costs, which includes the cost of the fund administrators, have increased by £0.3m (+8.3%).

 

Share based payments

Included within the Consolidated Statement of Comprehensive Income is a charge of £1.0m (2017: £0.3m) in respect of awards that have been made over shares held within the Employee Benefit Trust ("EBT"). Such awards, which are considered to be the deferred element of the overall annual bonus plan, are an integral part of the long term incentive and retention package for executive directors and senior employees. It aims to reward good performance and ensure that the interests of such employees are aligned with the interests of shareholders. As at 30 September 2018 the EBT held 3,242,830 ordinary shares, representing 3.07% of the issued ordinary share capital. As at 30 September 2018 the total awards issued amounted to 2,885,000 ordinary shares. The fair value of the awards is amortised over the relevant three year vesting period. The increase in charge is in respect of a full year's cost relating to the 2017 awards, together with a part year charge for those awards made in 2018.

 

Exceptional items

Exceptional costs incurred during the year amounted to £248,000. These costs relate firstly to FSCS levies, which have increased significantly over previous years due to increased compensation paid by the FSCS, and secondly, to PremierConnect development costs relating to external consultants who have been engaged in the testing of the PremierConnect platform during the year.

 

Underlying profit before and after tax*, and underlying earnings per share*

Underlying profit before tax increased to £18.9m from £14.7m in the previous financial year, representing an increase of £4.2m (+28.6%). The following table reconciles retained profit and underlying profit before tax for the last three financial years:

 

 

 

FY18

FY17

FY16

Retained profit

 

£12.5m

£8.9m

£1.0m

Taxation

 

£3.4m

£2.6m

£1.5m

Profit before tax

 

£15.9m

£11.5m

£2.5m

Amortisation of intangible assets

 

£1.7m

£2.5m

£5.1m

Exceptional items

 

£0.3m

£0.4m

£0.5m

Share based payments

 

£1.0m

£0.3m

-

Net interest payable

 

-

-

£2.5m

Underlying profit before tax

 

£18.9m

£14.7m

£10.6m

Taxation

 

(£3.4m)

(£2.6m)

(£1.5m)

Underlying profit after tax

 

£15.5m

£12.1m

£9.1m

 

In arriving at underlying profit before and after tax, the Board believes that making adjustments for amortisation of intangible assets, exceptional items, share based payments and net interest payable, provides for consistent period on period comparisons and makes it easier for users of the accounts to identify trends.

 

Underlying profit after tax increased to £15.5m from £12.1m in the previous financial year, representing an increase of £3.4m (+28.1%).

 

The underlying earnings per share, which is based on the underlying profit after tax, is a non-GAAP measure, which the Board believes provide a useful representation of the Group's trading performance.

 

 

 

FY18

FY17

FY16

Underlying profit after tax

 

£15.50m

£12.10m

£9.10m

Weighted average number of ordinary shares

105,060,401

104,085,100

68,742,550

Adjusted diluted earnings per share

 

14.75p

11.63p

13.24p

 

The Group's basic and diluted earnings per share, which is based on profit after tax, for FY18 were 12.09p and 11.92p respectively, compared with 8.53p for FY17 on a basic and diluted basis.

 

It should be noted that the figures for FY16 represent a period which was prior to the Company's shares being admitted to trading on the Alternative Investment Market of the London Stock Exchange, which took effect on 7 October 2016. As part of the listing process, the Company subdivided its ordinary share capital, with each ordinary share of 1p nominal value being replaced with 50 ordinary shares with a nominal value of 0.02p; in addition, and as part of the listing process, the Company issued 35,875,660 ordinary shares with a nominal value of 0.02p each. The weighted average number of ordinary shares for FY16 have, for comparative purposes, been adjusted to reflect the sub-division of shares as if it had taken place prior to 30 September 2016.

 

Adjusted EBITDA

Adjusted EBITDA increased to £19.1m from £15.0m in the previous financial year, representing an increase of £4.1m (+27.3%). The following table reconciles retained profit and Adjusted EBITDA for the last three financial years:

 

 

 

FY18

FY17

FY16

Retained profit

 

£12.5m

£8.9m

£1.0m

Taxation

 

£3.4m

£2.6m

£1.5m

Profit before tax

 

£15.9m

£11.5m

£2.5m

Amortisation of intangible assets

 

£1.7m

£2.5m

£5.1m

Exceptional items

 

£0.3m

£0.4m

£0.5m

Share based payments

 

£1.0m

£0.3m

-

Net interest payable

 

-

-

£2.5m

Depreciation

 

£0.2m

£0.3m

£0.3m

Adjusted EBITDA

 

£19.1m

£15.0m

£10.9m

Adjusted EBITDA margin

 

39.1%

36.6%

32.6%

 

Balance sheet and cash management

The Group is cash generative and as at 30 September 2018 the cash balances of the Group amounted to £20.8m (2017: £16.4m), representing an increase of £4.3m (+26.3%) over the year. The split between Group and Trading account cash balances over the last three financial years is shown in the table below:

 

 

FY18

FY17

FY16

Company cash

£19.4m

£15.8m

£9.4m

Trading account cash

£1.4m

£0.6m

£1.2m

 

£20.8m

£16.4m

£10.6m

 

The above Trading account cash balances relate to the designated bank accounts that are used for the settlement of trades in the open-ended funds as operated by Premier Portfolio Managers Ltd. As at 30 September 2018, the projected trading account balance, after accounting for all outstanding trades, was a surplus cash balance of £1.2m (2017: £1.2m).

 

Shareholders' equity

Total shareholders' equity as at 30 September 2018 stood unchanged at £45.3m (2017: £45.3m). The EBT is consolidated into the group financial statements. As such, those shares that are held in the EBT and which have awards attaching to them, are accounted for as own shares held by an EBT, and are therefore shown as a deduction in the Consolidated Statement of Changes in Equity, amounting to £4.0m. During the year retained earnings increased by £4.0m; this consisting of a retained profit for the financial year of £12.5m less dividends paid during the year of £9.5m plus, a £1.0m movement in reserves associated with the share based payments.

 

Going concern

The Directors have assessed the prospects of the Group over a period of three years after the balance sheet date, rather than the 12 months required by the Going Concern provision.

 

The Directors confirm that they have a reasonable expectation that the Group will continue to operate and meet its liabilities, as they fall due, up to 30 September 2021. The Directors assessment has been made with reference to the Group's current position and strategy, the Board's appetite for risk, the Group's financial forecasts, and the Group's principal risks and how these risks are managed, as detailed in the Strategic Report. The Directors have also reviewed and examined the financial stress testing inherent in the Internal Capital Adequacy Assess Process ('ICAAP').

 

The three-year period is consistent with the Group's current strategic forecast and ICAAP. The forecast considers the Group's profitability, cash flows, dividend payments and other key variables. Sensitivity analysis is also performed on certain of the key assumptions in the forecast, both individually and combined, in addition to scenario analysis that is performed as part of the ICAAP process, which if formally approved by the Board.

 

Alternative Performance Measures ('APMs')

The group uses the following APMs which should be read together with the Group's financial statements:

 

Underlying profit before tax

Definition: Profit before taxation, amortisation of intangible assets, exceptional items, share based payments and net interest

 

Reason for use: This measure of profitability presents users of the accounts with a clear view of what the Group considers to be the results of its underlying operations after excluding the effects of taxation, financing (interest payable), capital investment (depreciation and amortisation), non-recurring exceptional items and share based payments, thereby enabling consistent period on period comparisons and making it easier for users of the accounts to identify trends.

 

Underlying profit after tax

Definition: Profit after taxation but before amortisation of intangible assets, exceptional items, share based payments and net interest

 

Reason for use: This measure of profitability presents users of the accounts with a clear view of what the Group considers to be the results of its underlying operations after excluding the effects of financing (interest payable), capital investment (depreciation and amortisation), non-recurring exceptional items and share based payments, thereby enabling consistent period on period comparisons and making it easier for users of the accounts to identify trends.

 

Underlying earnings per share

Definition: Underlying profit after tax divided by the weighted average number of shares in issue during the period

 

Reason for use: This measure of profitability presents users of the accounts with a clear view of what the Group considers to be the results of its underlying operations per share after excluding the effects of financing (interest payable), capital investment (depreciation and amortisation), non-recurring exceptional items and share based payments, thereby enabling consistent period on period comparisons and making it easier for users of the accounts to identify trends.

 

Assets Under Management ("AUM")

Definition: AUM is the total value of assets that are managed by the Group on behalf of clients.

 

Reason for use: AUM is a financial industry measure of size of an investment management firm that allows comparison with other firms within the sector. AUM is also the base value that is used for calculating management fee income and directly related variable costs.

 

Adjusted EBITDA

Definition:  Earnings before interest, taxation, depreciation, amortisation of intangible assets, exceptional items and share based payments

 

Reason for use: To provide a measure of profitability which is aligned with the requirements of shareholders and potential shareholders and which excludes the effects of taxation, financing (net interest payable), capital investment (depreciation and amortisation), non-recurring exceptional items and share based payments, enabling comparison with the Group's competitors who may use different accounting policies and finance methods.

 

Adjusted EBITDA margin

Definition: Adjusted EBITDA divided by Net Revenue

 

Reason for use: To provide a measure of profitability which is aligned with the requirements of shareholders and potential shareholders and which excludes the effects of taxation, financing (net interest payable), capital investment (depreciation and amortisation), non-recurring exceptional items and share based payments, enabling comparison with the Group's competitors who may use different accounting policies and finance methods.

 

Net revenue

Definition: Turnover of £53.4m (2017: £46.0m) less trail/renewal commission expense of £4.6m (2017: £5.0m), which is included within administrative costs in the Consolidated Statement of Comprehensive Income.

 

Reason for use: Asset managers and analysts typically use this performance measure to smooth out the effect of fee related trail/renewal commission that is included within administrative costs.

 

Net management fees

Definition: Management fee income of £52.7m (2017: £45.9m) less trail/renewal commission expense of £4.6m (2017: £5.0m), which is included within administrative costs in the Consolidated Statement of Comprehensive Income.

 

Reason for use: Asset managers and analysts typically use this performance measure to smooth out the effect of fee related trail/renewal commission that is included within administrative costs.

 

Net management fee margin

Definition: Net management fees divided by average AUM

 

Reason for use: Asset managers and analysts typically use this performance measure to smooth out the effect of fee related trail/renewal commission that is included within administrative costs and provides a measure of the revenue earning capability of AUM. The use of basis points (bps) is a commonly used term within the finance sector with one basis point being equivalent to one hundredth of a percent.

 

 

 

Neil Macpherson

Group Finance Director

28 November 2018

 

Consolidated statement of comprehensive income

For the year ended 30 September 2018

 

 

 

 

Year to

30 September 2018

 

Year to

30 September 2017

 

Note

 

£000

 

£000

Revenue

3

 

53,396

 

46,046

 

 

 

 

 

 

Administrative costs

 

 

(35,548)

 

(31,558)

Amortisation of intangible assets

 

 

(1,686)

 

(2,536)

Exceptional items

4

 

(248)

 

(415)

Total operating costs

 

 

(37,482)

 

(34,509)

Operating profit

5

 

15,914

 

11,537

 

 

 

 

 

 

Finance income/(costs)

7

 

2

 

(44)

Profit on ordinary activities before taxation

 

 

15,916

 

11,493

 

 

 

 

 

 

Tax expense

8

 

(3,393)

 

(2,617)

Profit on ordinary activities after taxation

 

 

12,523

 

8,876

 

 

 

 

 

 

Other comprehensive income

 

 

-

 

-

Total comprehensive income

 

 

12,523

 

8,876

 

 

 

 

 

 

Basic earnings per share

9

 

12.09p

 

8.53p

Diluted basic earnings per share

9

 

11.92p

 

8.53p

 

All the amounts relate to continuing operations.

 

Consolidated statement of financial position

As at 30 September 2018

 

 

 

 

2018

 

2017

 

Note

 

£000

 

£000

Assets

 

 

 

 

 

Non-current assets

 

 

 

 

 

Intangible assets

10

 

13,479

 

15,165

Goodwill

10

 

15,597

 

15,597

Property, plant and equipment

11

 

999

 

911

Deferred tax asset

8

 

543

 

1,097

Total non-current assets

 

 

30,618

 

32,770

 

 

 

 

 

 

Current assets

 

 

 

 

 

Financial assets at fair value through profit and loss

14

 

910

 

1,354

Trade and other receivables

13

 

53,710

 

47,932

Cash and cash equivalents

15

 

20,774

 

16,449

Total current assets

 

 

75,394

 

65,735

 

 

 

 

 

 

Total assets

 

 

106,012

 

98,505

 

 

 

 

 

 

Equity

 

 

 

 

 

Capital and reserves attributable to equity holders

 

 

 

 

 

Share capital

18

 

50

 

21

Capital redemption reserve

19

 

4,532

 

4,532

Own shares held by an EBT

21

 

(4,047)

 

-

Retained earnings

 

 

44,733

 

40,728

Total equity

 

 

45,268

 

45,281

 

 

 

 

 

 

Liabilities

 

 

 

 

 

Current liabilities

 

 

 

 

 

Trade and other payables

16

 

57,941

 

51,079

Current tax liabilities

 

 

2,803

 

2,145

Total current liabilities

 

 

60,744

 

53,224

 

 

 

 

 

 

Total liabilities

 

 

60,744

 

53,224

Total equity and liabilities

 

 

106,012

 

98,505

 

 

Consolidated statement of changes in equity

For the year ended 30 September 2018

 

 

Share capital

 

Share premium

 

Own shares held by an EBT

 

Capital redemption reserve

 

Retained

earnings

 

Total

equity

 

£000

 

£000

 

£000

 

£000

 

£000

 

£000

At 1 October 2016

14

 

34

 

-

 

4,532

 

(9,278)

 

(4,698)

Shares issued

7

 

44,713

 

-

 

-

 

-

 

44,720

Cancellation of share premium

-

 

(44,747)

 

-

 

-

 

44,747

 

-

Equity dividends paid (note22)

-

 

-

 

-

 

-

 

(3,939)

 

(3,939)

Share based payment expense

-

 

-

 

-

 

-

 

322

 

322

Profit for the financial year

-

 

-

 

-

 

-

 

8,876

 

8,876

At 30 September 2017

21

 

-

 

-

 

4,532

 

40,728

 

45,281

Deferred share issued

29

 

-

 

-

 

-

 

(29)

 

-

Purchase of own shares held by an EBT

-

 

-

 

(4,047)

 

-

 

-

 

(4,047)

Equity dividends paid (note22)

-

 

-

 

-

 

-

 

(9,522)

 

(9,522)

Share based payment expense

-

 

-

 

-

 

-

 

1,033

 

1,033

Profit for the financial year

-

 

-

 

-

 

-

 

12,523

 

12,523

At 30 September 2018

50

 

-

 

(4,047)

 

4,532

 

44,733

 

45,268

 

Consolidated statement of cash flow

For the year ended 30 September 2018

 

 

 

 

2018

 

2017

 

Note

 

£000

 

£000

Cash flows from operating activities

 

 

 

 

 

Profit for the year

 

 

12,523

 

8,876

Adjustments for:

 

 

 

 

 

Financial (income)/expense

7

 

(2)

 

44

Taxation

8

 

3,393

 

2,617

Depreciation

11

 

237

 

225

Share based payments

 

 

1,033

 

322

Gain on sale of financial assets at fair value through profit and loss

 

 

-

 

(16)

Gain on revaluation of financial assets at fair value through profit and loss

 

 

(25)

 

(51)

Amortisation

10

 

1,686

 

2,536

Changes in working capital:

 

 

 

 

 

Increase in trade and other receivables

 

 

(5,778)

 

(11,308)

Increase in trade and other payables 

 

 

6,862

 

10,934

Cash generated from operations

 

 

19,929

 

14,179

Tax paid

 

 

(2,181)

 

(1,364)

Net cash from operating activities

 

 

17,748

 

12,815

 

 

 

 

 

 

Cash flows from investing activities

 

 

 

 

 

Acquisition of assets at fair value through profit and loss

 

 

(262)

 

(856)

Proceeds from disposal of assets at fair value through profit and loss

 

 

733

 

630

Acquisitions of property, plant and equipment

11

 

(325)

 

(203)

Net cash from investing activities

 

 

146

 

(429)

 

 

 

 

 

 

Cash flows from financing activities

 

 

 

 

 

Repayment of borrowings

 

 

-

 

(42,670)

Interest paid on borrowings

 

 

-

 

(4,686)

Dividends paid to shareholders

 

 

(9,522)

 

(3,939)

Purchase of own shares held by an EBT

21

 

(4,047)

 

-

Proceeds from the issue of share capital

 

 

-

 

44,720

Net cash from financing activities

 

 

(13,569)

 

(6,575)

 

 

 

 

 

 

Net increase in cash and cash equivalents

 

 

4,325

 

5,811

Cash and cash equivalents at the beginning of the period

 

 

16,449

 

10,638

Cash and cash equivalents at the end of the period

 

 

20,774

 

16,449

             

 

 

Notes to the consolidated financial statements

At 30 September 2018

 

1.   Authorisation of financial statements and statement of compliance with IFRS

The consolidated financial statements of Premier Asset Management Group PLC (the "Company") and its subsidiaries (the "Group") for the year ended 30 September 2018 were authorised for issue by the Board of Directors on 28 November 2018 and the statement of financial position was signed on the Board's behalf by Mike O'Shea and Neil Macpherson. The Company is incorporated and domiciled in England and Wales.

 

These consolidated financial statements were prepared in accordance with International Financial Reporting Standards (IFRS) as adopted by the EU. The consolidated financial statements are presented in Sterling and all values are rounded to the nearest thousand pounds (£000) except when otherwise indicated.

 

The principal accounting policies adopted by the Group are set out in note 2.

 

2.   Accounting policies

2.1   Basis of preparation

The consolidated Group financial statements for the year ended 30 September 2018 have been prepared in accordance with IFRS. The consolidated financial statements have been prepared on a going concern basis, which has been explained in greater detail in the Financial Review, under the historical cost convention, as modified by the revaluation of financial assets and financial liabilities measured at fair value through profit or loss. Costs are expensed as incurred.

 

2.2   Basis of consolidation

The consolidated financial statements comprise the financial statements of the Company and its subsidiary undertakings as at 30 September 2018. Profits and losses on intra-group transactions are eliminated in full. On acquisition of a subsidiary, all of the subsidiary's identifiable assets and liabilities which exist at the date of acquisition are recorded at their fair values reflecting their condition at that date.

 

Control is achieved when the Group is exposed, or has rights, to variable returns from its involvement with the investee and has the ability to affect those returns through its power over the investee. Specifically, the Group controls an investee if, and only if, the Group has:

 

(i)    power over the investee (i.e., existing rights that give it the current ability to direct the relevant activities of the investee);

(ii)   exposure, or rights, to variable returns from its involvement with the investee; and

(iii) the ability to use its power over the investee to affect its returns.

 

Consolidation of a subsidiary begins when the Group obtains control over the subsidiary and ceases when the Group loses control of the subsidiary. Assets, liabilities, income and expenses of a subsidiary acquired or disposed of during the year are included in the consolidated financial statements from the date the Group gains control until the date the Group ceases to control the subsidiary.

 

When necessary, adjustments are made to the financial statements of subsidiaries to bring their accounting policies into line with the Group's accounting policies. All intra-group assets and liabilities, equity, income, expenses and cash flows relating to transactions between members of the Group are eliminated in full on consolidation.

 

2.3   New standards, amendments and interpretations

At the date of authorisation of these financial statements, the following Standards and Interpretations which have not been applied in these financial statements were in issue but not yet effective:

 

(i)    IFRS 9 'Financial instruments' (effective for a period beginning on or after 1 January 2018)

(ii)   IFRS 15 'Revenue from contracts with customers' (effective for a period beginning on or after 1 January 2018)

IFRS 15 specifies the requirements that an entity must apply in order to measure and recognise revenue and its related cash flows. The core principle of the standard is that an entity should recognise revenue at an amount that reflects the consideration to which the entity expects to be entitled in exchange for transferring promised goods or services to a customer. The Group does not anticipate that the implementation of the standard will have a material impact on its results, though some minor changes to disclosures around the payments of rebates and commissions may be required.

(iii) IFRS 16 'Leases' (effective for a period beginning on or after 1 January 2019)

IFRS 16 provides a single accounting model for leases, requiring lessees to recognise assets and liabilities for all leases unless the lease term is 12 months or less or the underlying asset has a low value. It will supersede the current guidance found in IAS 17 Leases. The Group has not yet quantified the impact that the adoption of IFRS 16 may have on the Group's total assets and liabilities as a result of the requirement to capitalise both the right to use leased assets and the contractual payments to be made under lease obligations, the amounts of which will be driven by the Group's outstanding lease commitments at the date of adoption.

 

There are no other IFRSs or IFRIC interpretations that are not yet effective and would be expected to have a material impact on the Group.

 

2.4   Judgements and key sources of estimation uncertainty

The preparation of consolidated financial statements requires management to make judgements, estimates and assumptions that affect the amounts reported for assets and liabilities as at the statement of financial position date and the amounts reported for revenue and expenses during the year. However, the nature of estimation means that actual outcomes could differ from those estimates. The Group has not had to make any judgements or estimates in preparing the

financial statements, that require disclosure under the relevant accounting standard.

 

2.5   Significant accounting policies

(a)   Business combinations and goodwill

Business combinations are accounted for using the acquisition method. The cost of an acquisition is measured as the aggregate of the consideration transferred, which is measured at the acquisition date fair value and the amount of any non-controlling interest in the acquiree. For each business combination, the Group elects whether to measure the non-controlling interest in the acquiree at fair value or at the proportionate share of the acquiree's identifiable net assets.

 

When the Group acquires a business, it assesses the financial assets and liabilities assumed for appropriate classification and designation in accordance with the contractual terms, economic circumstances and pertinent conditions as at the acquisition date. This includes the separation of embedded derivatives in host contracts by the acquiree.

 

Any contingent consideration to be transferred by the acquirer will be recognised at fair value at the acquisition date. All contingent consideration is measured at fair value with the changes in fair value in profit or loss.

 

Goodwill is initially measured at cost (being the excess of the aggregate of the consideration transferred and the amount recognised for non-controlling interests) and any previous interest held, over the net identifiable assets acquired and liabilities assumed. If the fair value of the net assets acquired is in excess of the aggregate consideration transferred, the Group re-assesses whether it has correctly identified all of the assets acquired and all of the liabilities assumed and reviews the procedures used to measure the amounts to be recognised at the acquisition date. If the reassessment still results in an excess of the fair value of net assets acquired over the aggregate consideration transferred, then the gain is recognised in profit or loss. Goodwill is monitored at the Group level.

 

Goodwill is not amortised but is tested annually for impairment or more frequently if events or changes in circumstances indicate potential impairment. After initial recognition, goodwill is measured at cost less any accumulated impairment losses.

 

In respect of goodwill, the recoverable amount is estimated at each annual balance sheet date. The recoverable amount is the higher of fair value less costs to sell and value in use. Impairment losses represent the amount by which the carrying amount exceeds the recoverable amount; they are recognised in profit and loss in amortisation. Impairment losses recognised in respect of the cash generating unit are allocated first to reduce the carrying amount of any goodwill allocated to the cash generating unit and then to reduce the value of any other assets in the unit on a pro-rata basis.

 

An impairment loss in respect of goodwill is not reversed.

(b)   Property, plant and equipment

Plant and equipment is stated at cost less accumulated depreciation and accumulated impairment losses. Cost comprises the aggregate amount paid and the fair value of any other consideration given to acquire the asset and includes costs directly attributable to making the asset capable of operating as intended.

 

Depreciation is provided on all property, plant and equipment, other than land, on a straight-line basis over its expected useful life as follows:

 

Short leasehold property - the term of the lease

Plant and equipment - 5 years

Computer equipment - 3 years

Motor vehicles - 3 years

Fixtures and fittings - 15%

 

The carrying amounts of property, plant and equipment are reviewed for impairment if events or changes in circumstances indicate the carrying amount may not be recoverable, and are written down immediately to their recoverable amount. Useful lives and residual values are reviewed annually and where adjustments are required these are made prospectively.

 

An item of property, plant and equipment is derecognised upon disposal or when no future economic benefits are expected to arise from the continued use of the asset. Any gain or loss arising on the derecognition of the asset is included in the income statement in the period of derecognition.

 

(c)    Trade and other receivables

Trade and other receivables are initially recognised at fair value and subsequently at amortised cost. A bad debt provision is made when there is objective evidence that the Group will not be able to recover balances in full. Balances are written off when the probability of recovery is assessed as being remote. Other receivables mainly comprise of refundable rent deposits and amounts the Group is due to receive from third parties in the normal course of business.

 

(d)   Provisions and other liabilities

A provision is recognised when the Group has a legal or constructive obligation as a result of a past event; it is probable that an outflow of economic benefits will be required to settle the obligation; and a reliable estimate can be made of the amount of the obligation.

 

Where the effect of the time value of money is material provisions are discounted. The increase in the provision due to passage of time is recognised as a finance cost.

 

Where the Group, as lessee, is contractually required to restore a leased property to an agreed condition prior to the release by a lessor, provision is made for such costs as they are identified.

 

Where the Group expects some or all of a provision to be reimbursed, the reimbursement is recognised as a separate asset but only when recovery is virtually certain.

 

(e)   Income taxes

Current and deferred tax are recognised in income or expense, except when they relate to items that are recognised in other comprehensive income or directly in equity, in which case the current and deferred tax are also recognised in other comprehensive income or directly in equity respectively. Current tax assets and liabilities are measured at the amount expected to be recovered from or paid to the taxation authorities based on tax rates and laws that are enacted or substantively enacted by the statement of financial position date.

 

Deferred income tax is recognised on all temporary differences arising between the tax bases of assets and liabilities and their carrying amounts in the financial statements, with the following exceptions:

 

(i)    where the temporary difference arises from the initial recognition of goodwill or of an asset or liability in a transaction that is not a business combination that at the time of the transaction affects neither accounting nor taxable profit or loss;

(ii)   in respect of taxable temporary differences associated with investments in subsidiaries, associates and joint ventures, where the timing of the reversal of the temporary differences can be controlled and it is probable that the temporary differences will not reverse in the foreseeable future; and

(iii) deferred income tax assets are recognised only to the extent that it is probable that taxable profit will be available against which the deductible temporary differences, carried forward tax credits or tax losses can be utilised.

 

Deferred income tax assets and liabilities are measured on an undiscounted basis at the tax rates that are expected to apply when the related asset is realised or liability is settled, based on tax rates and laws enacted or substantively enacted at the statement of financial position date.

 

The carrying amount of deferred income tax assets is reviewed at each statement of financial position date and reduced to the extent that it is no longer probable that sufficient taxable profits will be available to allow all or part of the asset to be recovered.

 

(f)    Foreign currencies

The Group's consolidated financial statements are presented in pounds sterling. The functional currency of the Group's entities is pounds sterling. Transactions in foreign currencies are initially recorded in the functional currency by applying the spot exchange rate ruling at the date of the transaction. Monetary assets and liabilities denominated in foreign currencies are retranslated at the functional currency rate of exchange ruling at the statement of financial position date. All differences are taken to the profit and loss account.

 

Non-monetary items that are measured in terms of historical cost in a foreign currency are translated using the exchange rates as at the dates of the initial transactions. Non-monetary items measured at fair value in a foreign currency are translated using the exchange rates at the date when the fair value was determined.

 

The Group does not apply hedge accounting of foreign exchange risks in its company financial statements.

 

(g)   Financial instruments

(i)    Financial assets

Initial recognition and measurement - Financial assets within the scope of IAS 39 are classified as financial assets at fair value through profit and loss, loans and receivables or available for sale financial assets, as appropriate. Management determines the classification of its financial assets at initial recognition. All financial assets are recognised initially at fair value plus directly attributable transaction costs.

 

Subsequent measurement - The subsequent measurement of financial assets depends on their classification as follows:

 

•      Financial assets at fair value through profit of loss

Financial assets at fair value through profit or loss include financial assets held for trading and financial assets designated upon initial recognition at fair value through profit or loss. Financial assets are classified as held for trading if they are acquired for the purpose of selling in the near term. The Group has designated financial assets in this category if acquired principally for the purpose of selling in the short term or if so designated by management. Financial assets at fair value through profit and loss are carried in the statement of financial position at fair value with changes in fair value recognised in finance revenue or finance expense in the income statement.

 

•      Loans and receivables

Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. Such assets are carried at amortised cost using the effective interest (EIR) method, less impairment. Amortised cost is calculated by taking into account any discount or premium on acquisition and fees or costs that are an integral part of the EIR. The EIR amortisation is included in finance revenue in the income statement. The losses arising from impairment are recognised in the income statement in other operating expenses. They are included in current assets, except for maturities greater than 12 months after the end of the reporting period. Loans and receivables comprise mainly cash and cash equivalents and trade and other receivables.

 

•      Available for sale financial assets

Available for sale financial investments include equity securities. Equity investments classified as available for sale are those, which are neither classified as held for trading nor designated at fair value through profit or loss. After initial measurement, available for sale financial investments are subsequently measured at fair value with unrealised gains or losses recognised as other comprehensive income in the unrealised gains and losses reserve until the investment is derecognised, at which time the cumulative gain or loss is recognised in other operating income, or determined to be impaired, at which time the cumulative loss is recognised in the income statement in other operating expenses and removed from the unrealised gains and losses reserve. The Company evaluates its available for sale financial assets and whether the ability and intent to sell them in the near term is still appropriate. When the Company is unable to trade these financial assets due to inactive markets and management's intent significantly changes to do so in the foreseeable future, the Company may elect to reclassify these financial instruments in rare circumstances. Reclassification to loans and receivables is permitted when the financial asset meets the definition of loans and receivables and when the Company has the intent and ability to hold these assets for the foreseeable future or until maturity. The Company has not designated any financial assets upon initial recognition as available for sale.

 

Derecognition of financial assets - A financial asset is derecognised when (i) the rights to receive cash flows from the asset

have expired or (ii) the Group has transferred its rights to receive cash flows from the asset or has assumed an obligation to pay the received cash flows in full without material delay to a third party under a "pass through" arrangement; and either (a) the Group has transferred substantially all the risks and rewards of the asset, or (b) the Group has neither transferred nor retained substantially all the risks and rewards of the asset, but has transferred control of the asset.

 

Impairment of financial assets - The Group assesses at each reporting date whether there is any objective evidence that a financial asset or group of financial assets is impaired. If there is objective evidence that an impairment loss on loans and receivables carried at amortised cost has been incurred, the amount of the loss is measured as the difference between the asset's carrying amount and the present value of estimated future cash flows (excluding future credit losses that have been incurred) discounted at the financial asset's original effective interest rate (i.e. the effective interest rate computed at initial recognition). The carrying amount of the asset is reduced, with the amount of the loss recognised in administration costs.

 

If, in a subsequent period, the amount of the impairment loss decreases and the decrease can be related objectively to an event occurring after the impairment was recognised, the previously recognised impairment loss is reversed. Any subsequent reversal of an impairment loss in recognised in the profit and loss account, to the extent that the carrying amount of the asset does not exceed its amortised cost at the reversal date.

 

(ii)   Financial liabilities and equity

Debt and equity instruments are classified as either financial liabilities or as equity in accordance with the substance of the contractual arrangement. Generally, an obligation to deliver cash or other financial asset to another party at a fixed date in the future would require presentation of a financial instrument as a liability.

 

No significant restrictions exist to transfer cash or assets within the Group or pay out dividends, except for regulatory capital restrictions within the regulated companies.

 

Preference shares, which are mandatorily redeemable on a specific date, are classified as liabilities. The fair value of preference shares is not materially different to their carrying value. The dividends on these preference shares are recognised in the income statement as interest expense.

 

 

(iii) Other financial liabilities

Other financial liabilities, including borrowings, are initially measured at fair value, net of transaction costs. Other financial liabilities are subsequently measured at amortised cost using the EIR, with interest expense recognised on an effective yield basis.

 

The EIR used to recognise interest expense is the rate that exactly discounts estimated future cash payments through the expected life of the financial liability, or, where appropriate, a shorter period, to the net carrying amount on initial recognition.

 

The Group derecognises financial liabilities when the Group's obligations are discharged, cancelled or expired.

 

(iv)  Fair values

The fair value of financial instruments that are traded in active markets at the reporting date is determined by reference to quoted market prices or dealer price quotations (bid price for long positions and ask price for short positions), without any deduction for transaction costs. For financial instruments not traded in an active market, the fair value is determined using appropriate valuation techniques. Such techniques may include using recent arm's length market transactions; reference to the current fair value of another instrument that is substantially the same; discounted cash flow analysis or other valuation models.

 

(h)   Cash and cash equivalents

Cash and cash equivalents comprise cash balances and highly liquid short-term deposits that are readily convertible to known amounts of cash within three months or less. Bank overdrafts that are repayable on demand and form an integral part of the Group's cash management are included as a component of cash and cash equivalents for the purpose of the statement of cash flows and are presented in current liabilities.

 

(i)    Exceptional items

The Group presents as exceptional items those items of income and expense, which are not incurred in the normal course of the Group's operations, and because of the nature of the events giving rise to them, merit separate presentation to allow shareholders to understand better the elements of financial performance in the year. This aids to facilitate comparison with prior periods and assists in assessing trends in financial performance.

 

(j)    Revenue recognition

Revenue is recognised to the extent that it is probable that the economic benefits will flow to the Group and the revenue can be reliably measured. Revenue is measured at the fair value of the consideration received, excluding value added tax.

 

The Group's primary source of income is fee income from investment management activities. These fees are generally based on an agreed percentage, as per the management contract, of the assets under management and are recognised as the service is provided.

 

Commission includes fees based on a set percentage of certain flows into our funds and are recognised on receipt.

 

Other income also included within revenue includes performance fees which are accounted for as and when relevant performance criteria are met and the fees become receivable. This policy is in line with IAS 18.

 

(k)   Pensions

The Group operates defined contribution plans. The Group has no further payment obligations once the contributions have been paid. The contributions are recognised as employee benefit expense as the service is provided. Prepaid contributions are recognised as an asset to the extent that a cash refund or a reduction in the future payments is available.

 

(l)    Leases

All leases are classified as operating leases. Rents payable under operating leases are charged to income on a straight-line basis over the term of the relevant lease. Contingent rentals arising under operating leases are recognised as an expense in the period in which they are incurred.

 

In the event that lease incentives are received to enter into operating leases, such incentives are recognised as a liability. The aggregate benefit of incentives is recognised as a reduction of rental expense on a straight-line basis over the lease term.

 

(m)  Intangible assets

Intangible assets with finite lives are amortised over the useful economic life and assessed for impairment whenever there is an indication that the intangible asset may be impaired. The amortisation period and the amortisation method are reviewed at least at each financial year end. Changes in the expected useful life or the expected pattern of consumption of future economic benefits embodied in the asset are accounted for by changing the amortisation period or method, as appropriate, and are treated as changes in accounting estimates. Gains or losses arising from derecognition of an intangible asset are measured as the difference between the net disposal proceeds and the carrying amount of the asset and are recognised in the income statement in amortisation when the asset is derecognised.

 

Investment management contracts purchased by the Group are capitalised as intangible fixed assets and are amortised on a straight line basis over periods ranging from 7 to 20 years depending on the nature of the assets purchased.

 

(n)   Trade and other payables

Trade payables are obligations to pay for goods or services that have been acquired in the ordinary course of business from suppliers. Accounts payable are classified as current liabilities if payment is due within one year or less (or in the normal operating cycle of the business if longer). If not, they are presented as non-current liabilities.

 

Trade payables are recognised initially at fair value and subsequently measured at amortised cost using the effective interest method.

 

(o)   Borrowings

Borrowings, are recognised initially at fair value, net of attributable transaction costs. Subsequent to initial recognition, borrowings are carried at amortised cost, with any difference between the proceeds (net of transaction costs) and the redemption value being recognised in the statement of comprehensive income over the period of the borrowings using the EIR.

 

All other borrowing costs are recognised in profit and loss in the period in which they are incurred.

 

(p)   Related party transactions

All companies forming part of the consolidated Group are considered to be related parties as these companies are owned either directly or indirectly by Premier Asset Management Group PLC. Key management, being the members of the Executive Committee, are also identified as a related party.

 

The adoption of IFRS 10 Consolidated Financial Statements has not resulted in the consolidation of additional funds where the Group is now deemed to have a controlling interest under the definition of this standard. The Group did not hold a material investment in any of the funds managed by the Group and has therefore determined that no controlling interest was held.

 

(q)   Earnings per share

Basic earnings per share is calculated by dividing the total comprehensive income for the year by the weighted average number of ordinary shares in issue during the year, excluding the average number of ordinary shares purchased by the Group as own shares held by an EBT.

 

(r)    Employee benefit trust ('EBT')

The Company provides finance to the EBT to purchase the Company's shares on the open market in order to meet its obligation to provide shares when an employee exercises awards made under the Group's share based payment scheme. Administration costs connected with the EBT are charged to the Consolidated Statement of Comprehensive Income. The cost of shares purchased and held by the EBT is deducted from equity. The assets held by the EBT are consolidated into the Group's financial statements.

 

(s)   Share based payments

The Group makes equity-settled share based payment transactions in respect of services received from certain employees. The fair value of the services received is measured by reference to the fair value of the shares on the grant date. This cost is then recognised in the Consolidated Statement of Comprehensive Income over the vesting period, with a corresponding credit to equity.

 

3.   Revenue

Revenue recognised in the statement of comprehensive income is analysed as follows:

 

 

 

 

2018

 

2017

 

 

 

£000

 

£000

Management fees

 

 

52,718

 

45,894

Commissions

 

 

57

 

83

Other income

 

 

621

 

69

Total revenue

 

 

53,396

 

46,046

 

All revenue is derived from the United Kingdom and Channel Islands.

 

4.   Exceptional items

Recognised in arriving at operating profit from continuing operations:

 

 

 

 

2018

 

2017

 

 

 

£000

 

£000

Staff redundancy costs

 

 

-

 

40

FCA FSCS levy

 

 

138

 

-

PremierConnect development costs

 

 

110

 

-

Floating on AIM

 

 

-

 

331

Capital reduction

 

 

-

 

44

Total exceptional items

 

 

248

 

415

 

Exceptional items are those items of income and expense, which are considered not to be incurred in the normal course of business of the Group's operations, and because of the nature of the events giving rise to them, merit separate presentation to allow shareholders to understand better the elements of financial performance in the year.

 

Staff redundancy costs are in relation to the rationalisation and restructuring of various departments and functions.

Floating on AIM represents costs associated with the admission to trading on the Alternative Investment Market.

Capital reduction costs in 2017 were in respect of professional fees relating to the cancellation of the share premium account of the Company, which became effective on 27 July 2017. FCA FSCS levy costs in 2018 represents the 2018/19 contribution to the FSCS which have increased significantly over the previous year as a result of the increased levels of compensation paid by the FSCS. PremierConnect development costs relate to external consultants who have been deployed in the testing of the new PremierConnect platform during the development stage prior to launch. These costs will not be incurred once the development stage is completed.

 

5.   Operating profit

(a)   Operating profit is stated after charging:

 

 

 

 

2018

 

2017

 

Note

 

£000

 

£000

Auditor's remuneration

5(b)

 

172

 

572

Staff costs

6

 

16,107

 

14,260

Operating lease payments - rent

17

 

284

 

255

Amortisation of intangible assets

10

 

1,686

 

2,536

Exceptional items

4

 

248

 

415

Depreciation of property, plant and equipment

11

 

237

 

225

 

(b)   Auditor's remuneration

The remuneration of the auditors is analysed as follows:

 

 

 

2018

 

2017

 

 

 

£000

 

£000

Audit of Company

 

 

46

 

35

Audit of Subsidiaries

 

 

62

 

47

Total audit

 

 

108

 

82

Audit-related assurance services

 

 

65

 

67

Tax compliance services

 

 

34

 

28

Services related to corporate finance transactions not covered above

 

 

-

 

351

Other non-audit services not covered above

 

 

28

 

44

Total other non-audit services

 

 

62

 

423

Total non-audit services

 

 

127

 

490

Total fees

 

 

235

 

572

 

6.   Staff costs and Directors' remuneration

(a)   Staff costs during the year were as follows:

 

 

 

 

2018

 

2017

 

 

 

£000

 

£000

Salaries, bonus and performance fee share

 

 

13,826

 

12,181

Social security costs

 

 

1,790

 

1,648

Other pension costs

 

 

491

 

431

Total staff costs

 

 

16,107

 

14,260

 

The average monthly number of employees of the Group during the year was made up as follows:

 

 

 

 

2018

 

2017

Directors

 

 

6

 

6

Investment management

 

 

29

 

28

Sales and marketing

 

 

29

 

28

Finance and systems

 

 

7

 

6

Legal and compliance

 

 

7

 

8

Administration

 

 

29

 

24

Total employees

 

 

107

 

100

 

(b)   Directors' remuneration

The remuneration of the Directors during the year was as follows:

 

 

 

Salary and payment in lieu of pension

Bonus

Benefits

2018

2017

 

£000

£000

£000

£000

£000

Executive Directors

 

 

 

 

 

Michael Patrick O'Shea

302

500

8

810

680

Neil Macpherson

185

175

28

388

338

Non-executive Directors

 

 

 

 

 

Michael Andrew Vogel

75

-

-

75

75

Luke Anton Wiseman

43

-

-

43

50

William Longden Smith

35

-

-

35

35

Robert Colthorpe

48

-

-

48

40

Total Director's remuneration

688

675

36

1,399

1,218

 

Details of awards made under the EBT to the Directors as part of their annual bonus packages, and which are not included in the above table, can be seen in the Remuneration Committee Report.

 

The number of Directors accruing benefits under money purchase pension schemes at the year end was nil (2017: nil).

 

7.   Finance costs

 

 

 

 

2018

 

2017

 

 

 

£000

 

£000

Interest receivable

 

 

(2)

 

-

Other loans (including the debt component of preference shares)

-

 

44

Total interest expense

 

 

-

 

44

Net finance (income)/costs

 

 

(2)

 

44

 

8.   Income taxes

(a)   Tax charged in the statement of comprehensive income

 

 

 

 

2018

 

2017

 

 

 

£000

 

£000

Current income tax:

 

 

 

 

 

UK corporation tax

 

 

2,684

 

2,106

Current income tax charge

 

 

2,684

 

2,106

Adjustments in respect of prior periods

 

 

155

 

29

Total current income tax

 

 

2,839

 

2,135

Deferred tax:

 

 

 

 

 

Origination and reversal of temporary differences

 

 

684

 

482

Adjustments in respect of prior periods

 

 

(130)

 

-

Total deferred tax

 

 

554

 

482

Tax expense in the statement of comprehensive income

3,393

 

2,617

 

(b)   Reconciliation of the total tax charge

The tax expense in the statement of comprehensive income for the year is higher than the standard rate of corporation tax in the UK of 19% (2017: 19.5%). The differences are reconciled below:

 

 

 

 

2018

 

2017

 

 

 

£000

 

£000

Profit on ordinary activities before taxation

 

 

15,916

 

11,493

Tax calculated at UK standard rate of corporation tax of 19% (2017: 19.5%)

 

 

3,024

 

2,241

Deferred tax not recognised

 

 

196

 

63

Expenses not deductible for tax purposes

 

 

12

 

103

Dividends on preference shares included in finance costs

 

-

 

7

Amortisation not deductible

 

 

255

 

258

Income not subject to UK tax

 

 

(69)

 

(19)

Change in tax rate

 

 

(80)

 

(71)

Fixed asset differences

 

 

30

 

6

Adjustments in respect of prior periods

 

 

25

 

29

Tax expense in the statement of comprehensive income

3,393

 

2,617

 

(c)    Change in Corporation Tax rate

A reduction in the UK corporation tax rate from 20% to 19% (effective from 1 April 2017) and to 18% (effective 1 April 2020) were substantively enacted on 26 October 2015, and an additional reduction to 17% (effective 1 April 2020) was substantively enacted on 6 September 2016. This will reduce the Group's future current tax charge accordingly. The deferred tax asset at 30 September 2018 has been calculated based on these rates.

 

(d)   Deferred tax

The deferred tax included in the Group statement of financial position is as follows:

 

 

 

 

2018

 

2017

 

 

 

£000

 

£000

Deferred tax asset:

 

 

 

 

 

Fixed asset temporary differences

 

 

(44)

 

(71)

Accrued bonuses

 

 

264

 

225

Losses and other deductions*

 

 

323

 

943

Deferred tax disclosed on the statement of financial position

543

 

1,097

 

*Deferred tax assets have been recognised in respect of this item because it is probable that future taxable profits will be available against which the Group can use the benefits therefrom.

 

 

 

 

2018

 

2017

 

 

 

£000

 

£000

Deferred tax in the statement of comprehensive income:

 

 

 

 

Origination and reversal of temporary differences

 

 

684

 

482

Adjustments in respect of prior periods

 

 

(130)

 

-

Deferred tax expense / (credit)

 

 

554

 

482

 

Deferred tax assets have not been recognised in respect of the following items because it is not probable that future taxable profits will be available against which the Group can use the benefits therefrom.

 

 

 

 

2018

 

2017

 

 

£000

£000

Unprovided deferred tax asset:

 

 

 

 

Non trade loan relationship losses

 

 

1,693

 

1,693

Excess management expenses

 

 

249

 

53

Non trade intangible fixed asset losses

 

420

420

Deferred tax expense

 

 

2,362

 

2,166

 

9.   Earnings per share

Reported earnings per share has been calculated as follows:

 

The calculation of basic earnings per share is based on profit after taxation for the year and the weighted average number of ordinary shares in issue for each period.

 

 

 

 

2018

 

2017

 

 

 

£000

 

£000

Basic:

 

 

 

 

 

Profit attributable to equity holders of the Group

 

 

12,523

 

8,876

Issued ordinary shares at 1 October

 

 

105,801,310

 

1,398,513

Effect of shares issued during the year

 

 

-

 

102,686,587

Effect of own shares held by an EBT

 

 

(2,236,175)

 

-

Weighted average number of ordinary shares in issue

 

 

103,565,135

 

104,085,100

Basic earnings per share

 

 

12.09p

 

8.53p

 

 

 

 

 

 

Diluted:

 

 

 

 

 

Profit attributable to equity holders of the Group

 

 

12,523

 

8,876

Issued ordinary shares at 1 October

 

 

105,801,310

 

1,398,513

Effect of shares issued during the year

 

 

-

 

102,686,587

Effect of own shares held by an EBT

 

 

(2,236,175)

 

-

Effect of share options awarded

 

 

1,495,266

 

-

Weighted average number of ordinary shares in issue

 

 

105,060,401

 

104,085,100

Diluted earnings per share

 

 

11.92p

 

8.53p

 

On 23 September 2016, and in accordance with rule 2 of the AIM rules, the Company issued an announcement to the London Stock Exchange giving notice of its intention to apply for admission of its shares onto the Alternative Investment Market ("AIM"). In preparation for the proposed listing of its shares, the Company applied to, and received consent from, Companies House to re-register from a private company to a public company with effect from 29 September 2016.

 

The Company then issued on 4 October 2016 an announcement to the London Stock Exchange giving notice of its proposed admission to trading on AIM and announced its initial public offering by way of a placing of 35,875,660 new and 12,381,916 existing ordinary shares of 0.02 pence each at a price of 132 pence per share, raising gross proceeds of £63.7 million.

 

On 7 October 2016 the Company subdivided its ordinary share capital, with each ordinary share of 1 pence each being replaced by 50 ordinary shares of 0.02 pence each. The effect of this subdivision was to replace the 1,398,513 ordinary shares of 1 pence each with 69,925,650 new ordinary shares of 0.02 pence each.

 

On 7 October 2016 the Company's shares were admitted to trading on AIM and 35,875,660 ordinary shares of 0.02 pence each were allotted at a price of 132 pence per share, increasing the number of issued ordinary share capital to 105,801,310 shares.

 

Own shares held by an EBT represents the Company's own shares purchased and held by the Employee Benefit Trust (EBT), shown at cost. In the year ending 30 September 2018 the EBT purchased 1,643,000 (2017: nil) of the Company's own shares.

 

10.   Goodwill and other intangible assets

Cost amortisation and net book value of intangible assets are as follows:

 

 

Goodwill

 

Other

 

Total

 

£000

 

£000

 

£000

Cost:

 

 

 

 

 

At 1 October 2017

22,576

 

56,231

 

78,807

At 30 September 2018

22,576

 

56,231

 

78,807

 

 

 

 

 

 

Amortisation and impairment:

 

 

 

 

 

At 1 October 2017

6,979

 

41,066

 

48,045

Amortisation during the year

-

 

1,686

 

1,686

At 30 September 2018

6,979

 

42,752

 

49,731

 

 

 

 

 

 

Carrying amount:

 

 

 

 

 

At 30 September 2018

15,597

 

13,479

 

29,076

At 30 September 2017

15,597

 

15,165

 

30,762

 

Impairment tests for goodwill

Goodwill is monitored by management at the operating segment level, which reflects the entire Group. Therefore, goodwill is assessed as part of one CGU in relation to asset management. No further allocation of goodwill has been made.

The recoverable amount of the Group has been determined based on value-in-use calculations. These calculations are for the three-year period following the year end and are based on the next year's annual budget and subsequent two year forecasts.  Budgeted increases in the level of assets under management, revenues and associated costs have been taken into account.  Management forecasts revenues and associated costs based on the current structure of the business, adjusting for inflationary increases and these do not reflect any future restructurings or cost saving measures.  To arrive at the net present value, the cash flows have been discounted using a discount factor of 12.0%. The compound annual growth rate for the net cash flows over the forecast period is 28.2% (2017: 17.7%). The overall value in use was greater than the carrying amount of the CGU and so no impairment charge has been recognised.  The key estimates made in calculating the value in use were the net cash flows and the discount rate. In determining the net cash flows assumptions were made on the level of future fund inflows, fund redemptions and market growth.

 

Investment management contracts purchased by the Group are capitalised as intangible fixed assets and are amortised over periods ranging from 7 to 20 years depending on the nature of the assets purchased. These finite life intangible assets were assessed for indicators of impairment, both internal and external factors, of which no indicators were noted. The largest of the intangible assets was in relation to a business combination in 2007 with a carrying value of £13,199,256 and a remaining amortisation period of 10 years.

 

Sensitivity analysis

Management have performed a sensitivity analysis as of 30 September 2018 and any reasonable changes in key assumptions in the determination of the recoverable amount would not result in an impairment in goodwill. 

 

11. Property, plant and equipment

 

 

Land and buildings

Plant and equipment

Total

 

£000

£000

£000

Cost or fair value:

 

 

 

At 1 October 2017

1,057

547

1,604

Additions

243

82

325

At 30 September 2018

1,300

629

1,929

 

 

 

 

Depreciation:

 

 

 

At 1 October 2017

398

295

693

Depreciation during the year

118

119

237

At 30 September 2018

516

414

930

 

 

 

 

Carrying amount:

 

 

 

At 30 September 2018

784

215

999

At 30 September 2017

659

252

911

 

12. Group entities

At 30 September 2018 the Company held (directly and indirectly) 100% of the allotted share capital of the following subsidiary undertakings, all of which are incorporated in Great Britain with the exception of Premier Asset Management (Guernsey) Limited which is incorporated in Guernsey. All subsidiary undertakings are consolidated within the Group accounts.

 

 

Class of share held

Proportion of voting rights and shares held

Nature of the business

(a)   Directly held

 

 

 

Premier Asset Management MidCo Limited

Ordinary

100%

Holding company

(b)   Indirectly held

 

 

 

Premier Asset Management Holdings Limited

Ordinary

100%

Holding company

Premier Asset Management Limited

Ordinary

100%

Holding company

Premier Investment Group Limited

Ordinary

100%

Holding company

Premier Portfolio Managers Limited

Ordinary

100%

Investment manager/ACD

PAM PLC

Ordinary

100%

Dormant

Premier Offshore Asset Management Limited

Ordinary

100%

Dormant

Premier Asset Management (Guernsey) Limited

Ordinary

100%

Investment manager

Eastgate Court Nominees Limited

Ordinary

100%

Nominee company

Premier Fund Managers Limited

Ordinary

100%

Investment manager

Premier Investment Administration Limited

Ordinary

100%

Dormant

Premier Discretionary Asset Management PLC

Ordinary

100%

Dormant

Premier Fund Services Limited

Ordinary

100%

Dormant

PremierConnect Nominees Limited

Ordinary

100%

Dormant

Eastgate Investment Services Limited

Ordinary

100%

Dormant

 

13. Trade and other receivables

 

 

2018

 

2017

 

£000

 

£000

Due from trustees/investors for open end fund redemptions/sales

46,405

 

42,170

Other trade debtors

160

 

113

Accrued income

4,605

 

4,221

Prepayments

2,310

 

1,326

Other receivables

230

 

102

Total trade and other receivables

53,710

 

47,932

 

Trade and other receivables are all current and any fair value difference is not material. Trade and other receivables are considered past due once they have passed their contracted due date.

 

The ageing profile of trade receivables that are due but not impaired is:

 

 

2018

 

2017

 

£000

 

£000

Days

 

 

 

0 to 30

46,485

 

42,226

31 to 60

40

 

57

61 to 90

40

 

-

Over 90

-

 

-

Total trade receivables

46,565

 

42,283

 

These amounts have not been impaired as there has not been any significant changes in credit quality and the amounts are still considered recoverable.

 

14. Financial instruments

(a)   Financial assets at fair value through profit and loss

The financial instruments carried at fair value are analysed by valuation method. The different levels have been defined as follows:

 

(i) Quoted prices (unadjusted) in active markets for identical assets or liabilities (Level 1)

(ii) Inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly (that is, as prices) or indirectly (that is, derived from prices) (Level 2)

(iii) Inputs for the asset or liability that are not based on observable market data (that is, unobservable inputs) (Level 3).

 

The fair value of financial assets is as follows:

 

 

 

 

2018

 

2017

 

 

 

£000

 

£000

Other investments

 

 

 

 

 

Quoted - level 1

 

 

910

 

1,354

Total

 

 

910

 

1,354

 

Quoted investments - Level 1

The Group holds shares and units in a number of funds for which quoted prices in an active market are available. The fair value measurement is based on Level 1 in the fair value hierarchy.

 

Financial instruments measured at amortised cost, but fair value is disclosed

The following financial instruments are not measured at fair value in the balance sheet, but information about the fair value is disclosed.

 

Trade debtors and trade creditors

The trade debtors and trade creditors largely have a maturity of less than one year. The fair value of trade creditors and trade debtors are not materially different to their carrying value.

 

Borrowings and overdraft

The fair value of the bank borrowings and overdrafts are not materially different from the carrying value due to the variable interest rate and the short duration.

 

Financial risk management

The Group's activities expose it to a variety of financial risks: market risk (including foreign exchange risk, cash flow and fair value interest rate risk), credit risk and liquidity risk.

 

The Group monitors and manages the financial risks relating to the operations of the Group through internal risk reports which analyses exposure by degree and magnitude of risks.  These risks include market risk (including currency risk, fair value interest rate risk and price risk), credit risk, liquidity risk and cash flow interest rate risk.

 

Market risks

The Group is exposed to market risk through interest rates, availability of credit, liquidity and foreign exchange fluctuations.

 

(a)   Interest rate risk

The Group is exposed to interest rate risk as the Group borrows at floating interest rates.

 

A 1% increase in interest rates on the Group's debt balances at 30 September 2018, would increase the annual net interest payable in the statement of comprehensive income and reduce equity by £nil (2017: £nil). The sensitivity has been calculated by applying the interest rate change to the variable rate borrowings.

 

(b)   Foreign exchange risk

The Group undertakes transactions denominated in US Dollars and Euros; consequently, exposures to exchange rate fluctuations arise.

 

At 30 September 2018, if the US Dollar and Euro had strengthened by 10% against the Pound with all other variables held constant, this would have had an £126,000 (2017: £124,000) impact on the statement of comprehensive income and equity.

 

The Group does not have any cash holdings in a currency other than GBP.

 

(c)    Credit risk

The Group credit risk is primarily focused on trade receivables due from trustees/investors for open end fund cancellations/sales. The risk is that a counterparty fails to settle on a trade and thereby creates an illiquid asset. However, in such cases the Group has the ability to arrange with the trustees of the relevant fund to cancel the trade and to liquidate the units issued, thereby settling the trade. A possible exposure will arise in such an instance whereby the price achieved on a cancellation of a trade is less than the original price at which the units were issued.

 

The credit risk on liquid assets is limited because the counterparties are banks with relatively high credit ratings.

 

The Group has no significant concentration of credit risk as exposure is spread over a large number of counterparties and customers.

 

(d)   Liquidity risk

The Group's approach to managing liquidity risk is to ensure, as far as possible, that it will always have sufficient liquidity to meet its liabilities when due without incurring unacceptable losses or risking damage to the Group's reputation. 

 

The table below analyses the Group's financial liabilities into relevant maturity groupings based on the remaining period at the balance sheet date to the contractual maturity date. The amounts disclosed in the table are the contractual undiscounted cash flows.

 

 

Less than

3 months

Between

3 months

 and 1 year

Between

1 and 5 years

Over 5 years

 

£000

£000

£000

£000

As at 30 September 2018

 

 

 

 

Trade and other payables

55,763

218

1,764

196

 

55,763

218

1,764

196

As at 30 September 2017

 

 

 

 

Trade and other payables

49,416

293

1,174

196

 

49,416

293

1,174

196

 

Capital Management

Working capital

The Group manages the level of its working capital on an ongoing basis. The Group uses detailed financial information provided by its forecasting model and by regular review of its consolidated management information.

 

Regulatory capital requirements

In accordance with the Capital Requirements Directive (CRD), the Group is required to maintain a minimum level of capital as prescribed in the UK by the Financial Conduct Authority (FCA).  The Group is required to conduct an Internal Capital Adequacy Assessment Process (ICAAP), referred to as Pillar 2 capital requirements. The objective of this process is to ensure that firms have adequate capital to enable them to manage risks not deemed to be adequately covered under Pillar 1 minimum requirements. This is a forward looking exercise which includes stress testing on major risks, considering how the firm would cope with a significant market downturn, for example, and an assessment of the Group's ability to mitigate the risks. Each of the regulated companies in the Group maintained surpluses of regulatory capital throughout the year.

 

The primary objective of the Group's capital management is to maintain a strong capital base in order to maintain investor, creditor and market confidence and to provide a suitable base to sustain the future development of the business, while ensuring compliance with regulatory capital requirements.

 

During the period the Group and its subsidiary entities complied with all regulatory capital requirements.

 

Offsetting financial assets and financial liabilities

There are no financial assets and liabilities subject to offsetting, enforceable master netting arrangements and similar agreements.

 

15. Cash and cash equivalents

 

 

 

 

2018

 

2017

 

 

 

£000

 

£000

Cash at bank and in hand

 

 

20,744

 

16,449

Total cash and cash equivalents

 

 

20,744

 

16,449

 

16. Trade and other payables

 

 

2018

 

2017

 

£000

 

£000

Due to trustees/investors for open end fund creations/redemptions

46,333

 

41,375

Other trade payables

1,256

 

1,145

Other tax and social security payable

1,325

 

1,048

Accruals

8,097

 

6,830

Pension contributions

24

 

26

Other payables

906

 

655

Total trade and other payables

57,941

 

51,079

 

Trade creditors and accruals principally comprise amounts outstanding for trade purchases and ongoing costs.  The Group has financial risk management policies in place to ensure that all payables are paid within the pre-agreed credit terms.

The Directors consider that the carrying amount of trade payables approximates to their fair value.

 

17. Obligations under leases

Operating lease agreements where the Group is lessee.

The Group has entered into commercial leases on certain properties. These leases have an average duration of between 5 and 10 years. The costs associated with the development of PremierConnect will be treated as an operating lease with a duration of 5 years.

 

Future minimum rentals payable under non-cancellable operating leases are as follows:

 

 

 

 

2018

 

Restated*

2017

 

 

 

£000

 

£000

Between zero and one year

 

 

857

 

306

Between one and two years

 

 

1,001

 

666

Between two and five years

 

 

2,694

 

1,653

Over five years

 

 

409

 

630

Total lease obligations

 

 

4,961

 

3,255

 

*The restatement of the 2017 disclosure is now in line with required disclosure of IAS 17; previously the amounts disclosed did not reflect all future payments but just the following year's payments.

 

18. Share capital

 

 

 

 

2018

 

2017

Authorised

 

 

 

 

 

  Ordinary shares of 0.02p each

 

 

105,801,310

 

105,801,310

  Deferred shares

 

 

1

 

-

 

 

 

 

 

 

Allotted, issued and fully paid

 

 

 

 

 

  Ordinary shares of 0.02p each

 

 

105,801,310

 

105,801,310

  Deferred shares

 

 

1

 

-

 

On 8 February 2018, following the approval of a special resolution, one redeemable deferred share with a nominal value of £28,839.74 was issued and allotted to Eastgate Court Nominees Limited. The deferred share carries no voting rights and no right to receive a dividend.

 

19. Capital redemption reserve

 

 

 

 

2018

 

2017

 

 

 

£000

 

£000

Redemption of preference shares

 

 

4,000

 

4,000

Cancellation of deferred shares

 

 

532

 

532

Total capital redemption reserve

 

 

4,532

 

4,532

 

On the redemption of the preference shares a transfer was made from retained earnings to the capital redemption reserve equivalent to the nominal value of the preference shares redeemed. On 19 October 2015 £4,000,000 of the 8% Preference shares, plus £359,452 of accrued interest, was redeemed.

 

20. Shared based payments

All share options awarded to employees through the EBT under the Group's equity-settled share based payments are valued by reference to the fair value of the share options on the grant date. The share options in issue under the equity-settled share based payment scheme have been valued at prices ranging from £1.40 to £2.70 per share. The charge to the Consolidated Statement of Comprehensive Income for the year to 30 September 2018 in respect of these was £1,033,458 (2017: £322,778).

 

All share options have an exercise price of £nil, the fair value of share options outstanding at the end of the period are:

 

 

 

 

Fair value

 

 

Award date

 

 

£000

 

Number of options

7 March 2017

 

 

1,703

 

1,216,667

11 April 2018

 

 

1,720

 

735,000

10 July 2018

 

 

2,614

 

968,333

Awards via the EBT

 

 

6,037

 

2,920,000

 

Premier Asset Management Group PLC established an EBT on 25 July 2016 to purchase ordinary shares in the Company to satisfy awards of share options to certain employees. All administrative expenses connected with the EBT are charged to the Consolidated Statement of Comprehensive Income. The EBT has waived the rights to dividends. Shares purchased and held by the EBT are deducted from equity and classified as own shares held by an EBT. The following table shows the number of shares held by the EBT that have not yet vested.

 

 

 

 

2018

 

2017

 

 

 

Number of shares

 

Number of shares

At 1 October

 

 

1,599,830

 

1,160,550

Acquired in the year

 

 

1,643,000

 

439,280

At 30 September

 

 

3,242,830

 

1,599,830

 

The 439,280 shares acquired by the EBT in the prior period were acquired in lieu of cash consideration.

 

21. Own shares held by an EBT

 

 

 

 

2018

 

2017

 

 

 

£000

 

£000

Own shares held by an EBT

 

 

4,047

 

-

Total own shares held by an EBT

 

 

4,047

 

-

 

The reserve for the Company's own shares held by an EBT comprises of the Company's shares held by the Group. At 30 September 2018, the Group held 3,242,830 (2017: 1,599,830).

 

22. Dividends paid

 

 

 

 

2018

 

2017

 

 

 

£000

 

£000

Declared and paid during the year:

 

 

 

 

 

Equity dividends on ordinary shares:

 

 

 

 

 

 First interim: 1.65 (2017: 1.25) pence per share

 

 

1,689

 

1,323

 Second interim: 1.65 (2017: 1.25) pence per share

 

 

1,712

 

1,308

 Third interim: 1.65 (2017: 1.25) pence per share

 

 

1,692

 

1,308

 Final dividend for 2017

 

 

4,429

 

-

Dividends paid

 

 

9,522

 

3,939

 

23. Related party transactions

All companies forming part of the consolidated Group are considered to be related parties as these companies are owned either directly or indirectly by Premier Asset Management Group PLC.

 

The Group manages, through its subsidiaries, a number of open ended investment companies and investment trusts. The subsidiary companies receive management fees from these entities for managing assets and in some instances receive performance fees. The Group acts as manager and/or authorised corporate director for 28 (2017: 27) funds as at 30 September 2018.

 

(a)   Asset management vehicles

The Group provides investment management services for a number of collective investment schemes where Group companies are investment managers/advisors of underlying funds and which meet the criteria of related parties (note 2.5(p)). In return the Group receives management fees for the provision of these services.

 

 

 

 

2018

 

2017

 

 

 

£000

 

£000

Management fees

 

 

52,353

 

44,968

Amounts outstanding at the year end

 

 

4,526

 

4,102

Investment in funds held by the Group

 

 

910

 

1,354

 

(b)   Key management compensation

The key management personnel compensation that is represented by the Executive Committee, for employee and Director services during the year is shown below:

 

 

 

 

2018

 

2017

 

 

 

£000

 

£000

Salaries and bonuses

 

 

3,998

 

3,281

Share-based payments

 

 

517

 

186

Benefits in kind

 

40

 

33

Short-term employee benefits

 

 

4,555

 

3,500

 

24. Segment reporting

The Group operates a single business segment of asset management for reporting and control purposes.

 

IFRS 8 Operating Segments requires disclosures to reflect the information which Group management uses for evaluating performance and the allocation of resources. The Group is managed as a single asset management business and as such, there are no additional operating segments to disclose.

 

Under IFRS 8, the Group is also required to make disclosures by geographical segments. As Group operations are solely in the UK and Channel Islands, there are no additional geographical segments to disclose.

 

25. Post balance sheet events

The Directors are not aware of any conditions that existed at the reporting date or events since, that would affect the disclosures in these financial statements.

 

26. Contingent liabilities

There were no contingent liabilities as at 30 September 2018 (2017: nil).

 


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