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Sanne Group PLC  -  SNN   

Half-year Report

Released 07:00 11-Sep-2018

RNS Number : 3392A
Sanne Group PLC
11 September 2018
 

11 September 2018

 

 

Sanne Group plc

("the Company") together with its subsidiaries ("the Group" or "SANNE")

Interim results for the six months ended 30 June 2018

 

 

 

 

The Group delivered a good performance in the first half of 2018 against strong prior year comparatives reflecting an atypical first half weighting of results in 2017. The continued growth momentum across the business and increased annualised new business wins underpin the Board's confidence that the business will deliver its expectations for the full year.

 

 

 

6 months to 30 June 2018

 

6 months to 30 June 20171

 

 

Change

Constant currency change3

Revenue

£65.9m

£56.3m

17.1%

19.5%

Underlying operating profit 2

£20.0m

£20.9m

(4.3%)

(1.4%)

Operating profit

£11.5m

£13.2m

(12.9%)

(12.1%)

Underlying profit before tax 2

£19.4m

£20.3m

(4.4%)

(1.5%)

Profit before tax

£10.9m

£12.5m

(12.8%)

(12.0%)

Underlying operating profit margin 2

30.3%

37.1%

 

 

Underlying diluted earnings per share2

12.2p

13.0p

(6.2%)

(3.8%)

Interim dividend per share

4.6p

4.2p

+9.5%

 

 

1. Restated for prior year adjustment detailed in note 9

2. The items classified as non-underlying are as detailed in note 4

3. At constant currency

 

Operational Highlights:

-       New Business wins continue with annualised fees of approximately £11.5 million won in the first six months (H1 2017: £10.0 million)

-       Strong underlying performance within the Group's EMEA and North America alternatives business divisions with organic growth in the period of 13.3%3 and 10.9%3 respectively while the Corporate and Private Client business was broadly flat

-       Growth momentum building in the Group's Asia-Pacific & Mauritius business with organic growth in the period of 5.2%3 and significant client wins expected to drive a higher growth rate for the full year

-       Continued investment to drive operational efficiency and effectiveness and to enhance the platform for future growth

-     Organic revenue growth of 8.7%3 on a constant currency basis and underlying operating margin at 30.3%, with margin impacted by the continued investment; both metrics expected to improve in H2

 

Acquisition of AgenSynd:

-       SANNE has, in September 2018, acquired AgenSynd S.L. ("AgenSynd"), a leading European loan agency administration specialist headquartered in Madrid

-       The acquisition augments SANNE's existing loan agency business and adds an additional footprint in Madrid and Paris as well as enhancing SANNE's existing London presence

-       The transaction involved upfront consideration of €11.4 million, settled 65% in cash and 35% in new SANNE shares as well as an earn-out based on AgenSynd's performance to 31 December 2018

 

Outlook and current trading

-       Strong momentum of the business in the first six months has continued post H1 period end

-       The Board remains confident that the Group will deliver a full year result in line with its expectations

-       Continued focus on acquisition prospects

 

Dean Godwin, Chief Executive Officer of Sanne Group plc, said:

 

"These results demonstrate the continuing momentum in our business and the result of the investment we are making to enhance our platforms and capabilities. We delivered a strong performance in our core alternatives divisions and we continue to broaden our geographic presence and client offering. Our most recent acquisitions in Mauritius and Luxembourg are integrating successfully and contributing to the Group's performance and we are pleased to announce today the acquisition of AgenSynd which further expands our European footprint and capabilities within the private debt market."

 

"We will build on this progress in the second half of the year, given the strong new business pipeline, and remain confident in meeting our expectations for the full year. SANNE remains well-positioned to capture the exciting long-term opportunities in our markets."

 

Enquiries:

 

Sanne Group plc

Dean Godwin, Chief Executive Officer

James Ireland, Chief Financial Officer

 

+44 (0) 1534 722 787        

Investec Bank plc

Chris Baird / David Flin

Edward Thomas / Neil Coleman

+44 (0) 20 7597 5970

 

RBC Capital Markets

Darrell Uden

Daniel Werchola

Jonathan Hardy

 

+44 (0) 20 7653 4000

 

Tulchan Communications LLP

Tom Murray

 

 

+44 (0) 20 7353 4200

 

 

Investor and analyst webcast:

 

The Company will be hosting an investor and analyst presentation at 09:30am (GMT) on 11 September 2018. This presentation can be viewed live on the 'investor relations' section of the SANNE website:

 

https://www.sannegroup.com/investor-relations/half-year-results-2018-webcast/

 

Participants can also dial into the presentation in listen-only mode using the following details:

 

Number: +44 20 3713 5011

Access Code: 492-915-541

 

A replay of the presentation will be available on the SANNE website shortly after the conclusion of the webcast.

 

Notes:

 

SANNE is a leading global provider of alternative asset and corporate services. Established for over 30 years and listed as a FTSE 250 company on the Main Market of the London Stock Exchange, SANNE employs more than 1,300 people worldwide and administers structures and funds that have in excess of £200 billion of assets.

 

Key clients include alternative asset managers, financial institutions, family offices, ultra-high net-worth individuals and corporates.

 

SANNE operates from a global network of offices located in leading financial jurisdictions, which are spread across the Americas, Europe, Africa and Asia-Pacific.

www.sannegroup.com

 

INTERIM MANAGEMENT REPORT

 

First half review

 

The Group's core business lines continued to see good revenue growth in the first half of the year driven by strong organic growth performance on a constant currency basis. This was combined with a five month contribution from Luxembourg Investment Solutions S.A. and Compliance Partners S.A. (LIS) which were acquired in February 2018. This pleasing result was partially offset by a decline in the Group's Private Client business.

 

In the first six months of the year the Group secured new business from both new and existing clients totalling approximately £11.5 million on a projected annualised fee basis (compared to £10.0 million in the same period in 2017). Of this approximately £5.7 million was from clients that are new to SANNE. As in previous reporting periods the full revenue impact of many of these new structures will commence in the second half of the financial year with the remaining structures commencing in 2019 as implementation is completed.

 

Organic growth in the period was a result of good momentum from new business opportunities delivered throughout 2017. This is despite the fact that the Group has seen a headwind from foreign exchange translation versus results for the same period in the prior year, in particular the movement between sterling and the US dollar. The combination of these factors and the acquisition of LIS has resulted in revenue increasing by 17.1%, or 19.7% on a constant currency basis, to £65.9 million compared with the same period in the prior year. Underlying operating profit for the period was £20.0 million, which is broadly flat on the same period in the prior year. In additional to the currency headwind between H1 2017 and H1 2018, this relative performance comparison is adversely distorted by the fact that in 2017, 54% of the full year underlying operating profit was recognised in the first half as a result of the significant second half weighting of investment spend in 2017 whereas the Group is expecting results in 2018 to return to the traditional second half weighting.

 

SANNE's core alternatives market continues to grow strongly, driven by a growing number and size of alternative funds and the ever-increasing regulatory obligations on fund managers increasing the attractiveness of outsourcing. These fundamentals both grow SANNE's potential client base and create new opportunities to provide additional services, with GDPR a particularly good example in the first half of 2018. This growth is well demonstrated in the Group's EMEA Alternatives business that has delivered over 13% organic growth on a constant currency basis in the first half of 2018 compared with the same period in the prior year. In addition, as we start to leverage our Mauritius presence to drive growth across Asia, we have seen some large and high profile new client wins in our Asia-Pacific & Mauritius business.

 

The Group also continues to target the corporate administration and private client markets. The corporate administration market enjoys a healthy growth in demand from which SANNE continues to benefit. The Group has taken the opportunity to bring together all its services to corporate clients, previously the separate Corporate & Institutional, Executive Incentive and Treasury divisions, in order to target opportunities across the common client base. The Group's Private Client business has experienced headwinds in the period which has resulted in substantial realignment of the business in H1.

 

The Group has continued to invest in strengthening its capabilities and infrastructure to capture the global opportunities in its markets. The investment has impacted the underlying operating profit margins in the second half of 2017 and into the first half of 2018. This investment is focused on people, processes and technology including a number of Group-wide initiatives. These initiatives include the development of the Group's dedicated business development team to help capture future growth. They also include the creation of centralised payment processing and on-boarding teams. The Group has also continued to invest in its risk and compliance functions to ensure SANNE is best placed to meet its increasing regulatory obligations it faces as it becomes a larger and more geographically diverse operator in an increasingly regulated global environment.

 

In terms of the investment in people, the executive management team continues to be strengthened to deliver the necessary strategic capacity to drive the business forward for the next phase of growth. In the period this change has included Spencer Daley, formerly the Group's Chief Financial Officer ("CFO"), moving into a new role as Head of M&A and Strategy. James Ireland has joined the Group as CFO from Investec having worked closely with the business over the past four years both at the time of the Group's IPO and through its subsequent growth and development. Both Mel Carvill and Julia Chapman joined the Sanne Group plc Board as Non-Executive Directors in the period bringing with them extensive experience in the global financial services and alternative assets industries respectively.

 

In addition to increasing the leadership capability at Board level, the Group has continued to invest and enhance the senior management to ensure the Group has the best people and skills to take advantage of its attractive market opportunities. In the period this has included Martin Schnaier becoming the Group's Chief Commercial Officer, responsible for Client Services, Jonathan Ferrara and Peter Nagle joining as heads of the Jersey and Mauritius offices respectively, and Martin Pearson appointed as the Group's new Chief Risk Officer.

 

In February 2018 the Group acquired LIS. Headquartered in Luxembourg and with operational capabilities in Dublin, LIS is a leading third party Alternative Investment Fund Manager (AIFM) authorised to deliver Management Company services. The acquisition increases the scale and capability of the Group's Luxembourg operations and further enhances SANNE's ability to provide an integrated full service offering of fund administration, ManCo and AIFMD compliant Depositary services.

 

Strategy for growth

 

The Group's strategic focus is to continue building scale in established and emerging markets and to be recognised as one of the world's leading providers of alternative asset and corporate services.

 

In September 2018, SANNE has acquired AgenSynd S.L. ("AgenSynd"). Founded in 2012, AgenSynd provides agency services to more than 150 transactions. It employs around 20 people and has offices in Madrid, Paris and London. Like SANNE, AgenSynd has an institutional client base, and is well known in the European Agency market for providing high levels of client service. The acquisition adds further strength and depth to SANNE's existing agency service offering. The combination of AgenSynd and SANNE positions the combined business strongly in Europe as one of the leading providers of this specialist service. AgenSynd's two shareholders, Manuel Rodríguez de Andrés and Fernando García Molina are intending to stay with the Group and continue to grow the combined loan agency business.

 

The Group continues to invest in its people and infrastructure in support of its strategic objectives while maintaining the financial discipline required to deliver value for shareholders. This includes further leveraging of the technology platform in support of client service initiatives and an increasing demand for transparent, real time reporting.

 

While there has been a continued focus on integration and delivering organic growth, the Group has also continued to focus on and evaluate acquisition opportunities that enable SANNE to deepen existing capabilities, broaden its product offering and deliver greater jurisdictional diversification. This has been demonstrated by the completion in the first half of 2018 of the acquisition of LIS which builds SANNE's presence in Luxembourg as well as adding the new capability of AIFMD ManCo services. In addition, the acquisition of AgenSynd in September 2018 augments the Group's existing presence in the European loan agency market as well as adding a presence in Madrid and Paris.

 

Operational Review:

 

EMEA Alternatives (EMEA)

 

The four key alternative asset strategies (Debt, Real Estate, Private Equity and Hedge) within EMEA make up the EMEA Alternatives business. Revenues for the first six months were £32.7 million (six months to June 2017: £23.1 million) with a gross profit of £19.7 million (six months to June 2017: £14.2 million).

 

As a whole, EMEA Alternatives saw revenue growth in the period of 41.2% (39.8% on a constant currency basis). This was driven by good organic growth of 14.0% (13.3% on constant currency basis) and the acquisition of LIS which contributed for five months of the period. Fund administration related work contributed to the majority of that growth, followed by corporate services and loan agency thereafter.

 

The Debt business has enjoyed another period of strong growth with continued traction in the capital markets space. The business's Luxembourg and Dublin operational teams were particularly busy in the period as a result of growth in the number of debt funds that in recent years have been looking to northern European countries for deal flow. The business is also beginning to take advantage of cross-selling opportunities in the US which is the largest and most mature market for private, non-governmental debt globally. This should represent an attractive opportunity in future years as SANNE builds its presence in North America.

 

During the first half of 2018, the Private Equity business has seen continued growth from both new and existing institutional clients. The Private Equity fund raising market remains particularly strong which, together with good portfolio performance, has resulted in a number of private equity managers returning to the market and successfully raising significantly larger funds while continuing to look to SANNE for administration support. In addition there has been continued growth as established Private Equity Managers have expanded their geographies for both fund raising and the deployment of capital. SANNE has been able to benefit from this as our global private equity platform has offered multiple cross selling opportunities, particularly from the US into Luxembourg. Having one service provider across multiple jurisdictions is particularly appealing for a number of managers and continues to offer growth opportunities. 

 

The Real Estate business continues to grow quickly and has benefited from the strong growth in Luxembourg real estate funds in the period. The acquisition of LIS has provided a number of good cross-selling opportunities and exposure to a new range of institutional real estate fund managers. Strong transactional activity in Europe from key US customers has also supported strong revenue growth. Despite UK CGT changes and the uncertainty surrounding Brexit negotiations the division continues to see increased demand for real estate administration services across our offices in London, Dublin, Luxembourg and the Netherlands.

 

The Hedge business, which has been historically entirely focused on the South African market, has seen a more difficult trading period with trading results broadly flat on the prior year given a backdrop of very tough market conditions. The period saw the South African Rand devalue by 7% impacting fund performance and the region, like many emerging markets, has suffered net fund outflows driven by political uncertainty. Despite the difficult backdrop in its traditional geography, the Division has invested in growth in Europe having successfully applied for the amendment of its Irish administrative licence to cover the servicing of hedge fund products. The ability to service such funds, along with the closer working relationship with LIS, will ensure that AIFM funds can be hosted as well as administered out of Ireland, breaking new ground for the Group.

 

The acquisition of LIS completed in February 2018 has significantly enhanced the Group's Luxembourg operations in both scale and capability. LIS is the leading independent Management Company (ManCo) platform in Luxembourg for servicing closed ended Alternative Investment Funds (AIFs) as well as open ended mutual funds (UCITS). Since acquisition, the business has delivered good organic growth, benefiting from its leading market position as well as strong growth in the Luxembourg market. LIS's core ManCo services are highly complementary to SANNE's existing fund administration and depositary service offering, providing customers with a full AIFMD compliant solution.  LIS has therefore been able to pitch a combined solution for clients which has seen good take-up in the first five months.

 

North America Alternatives (NA)

 

Revenues for the first six months were £9.7 million (six months to June 2017: £9.5 million) with a gross profit of £4.6 million (six months to June 2017: £4.7 million). The results for the North America Alternatives were negatively impacted by currency headwinds when compared with the same period in the prior year with revenue growth of 2.1% on the first half of 2017 which equated to 10.9% on a constant currency basis.

 

Organic growth in the period has been driven by continued growth from existing clients as well as some new client wins, partially offset by the runoff of certain niche, ancillary services provided to some more mature funds.  The business also continued to source additional business to SANNE's EMEA operations through the cross-selling to existing clients of offshore (non-US) services.

 

Underlying market conditions in the US for alternative asset management continue to be positive, with an increasing trend of investment managers outsourcing back and middle office functions in response to investor demands for independent oversight and the managers seeking efficiencies offered by an outsourced platform.  This growth also is driven by increased reporting requirements from underlying investors, as well as increased regulatory reporting requirements for the managers.

 

Asia-Pacific & Mauritius Alternatives (APM)

 

The APM Alternatives business is predominantly made up of real estate, private equity and a growing proportion of debt across Asia-Pacific and Mauritius. Revenues for the first six months were £13.7m (six months to June 2017 £14.0m) with a gross profit of £9.9m (six months to June 2017 £10.9.m). The APM business books revenue and costs in USD and therefore the prior period comparatives reflect the FX fluctuation between GBP and USD. As a result of the currency headwind, first half revenue was down 2.0% on the first half of 2017. On a constant currency basis the business has grown revenue by 5.2% and this growth rate is expected to increase as the benefits of new growth initiatives are realised.

 

During the first half of the year, strong growth has been delivered within the Asia-Pacific business in Hong Kong, Shanghai and Singapore, with this region doubling the number of client groups and exhibiting 23.9% revenue growth on a constant currency basis. A strong pipeline exists to ensure continued growth despite some business wins deferring launch towards the latter part of the year.

 

Mauritius has started to grow on a constant currency basis as the integration of IFS Group has been largely completed and the focus has moved to rolling out growth initiatives for the business as well as building out infrastructure to support the wider business. The growth initiatives have included a significant investment in the senior team managing the business. This includes Mark Law who joined the Group in October 2017 as head of the APM region and has been instrumental in driving the strong new client growth in Asia-Pacific as well as building the sales capability in Mauritius. A new Managing Director, Peter Nagle, has also been appointed in July to head up the Mauritius office to focus on continued growth for the business. The Group has also invested in opening a representative sales office in India to further offer services to Indian corporate and institutional clients which should be fully operational by the end of 2018.

 

The region displays significant growth potential within the existing jurisdictional offering and looks to continue expansion not just to India but also offer full services to real estate and private equity clients in Japan.

 

Corporate and Private Clients (CPC)

 

CPC comprises two business divisions: Corporate and Private Client.  The Corporate division represents the amalgamation in H1 2018 of the legacy Corporate & Institutional (C&I), Executive Incentives (EI), and Treasury (ITS) divisions, which were all previously reported separately. CPC revenues for the first six months were £9.7 million (six months to June 2017: £9.6 million) with a gross profit of £6.1 million (six months to June 2016: £6.1 million). This performance represented organic revenue growth of 0.9% on the first half of 2017 (0.7% on a constant currency basis).

 

The Corporate business showed good revenue and profit growth resulting from strong new business wins, cross-selling and disciplined cost management. The amalgamation of C&I, EI and Treasury further enhances operational synergies and cross-selling opportunities given the similarity of the corporate client base, particularly between the legacy C&I and EI businesses. Demand for regulatory and financial reporting services, both internal and external, saw a particularly strong increase during the period. This has resulted in additional resources being added to a growing Corporate Services team based in SANNE's South Africa operations. New business during the half year was strong with increased product and jurisdictional diversification and on the basis of a blend of both new and existing customers. A strong pipeline for H2 2018 bodes well for the full year.

 

The Private Client (PC) division continues its strategic focus on institutionally minded ultra-high net-worth families and their family offices, with a continued focus on meeting their needs with regards to the outsourcing of their fiduciary and administrative requirements.  The PC division had a challenging first half into 2018 due in most part to client attrition, as well as managing the retirement and succession of a number of senior professionals. Recognising such challenges, the PC division has refocused in H1 2018 with initiatives that are strategically designed to better position the division for sustained growth.

 

Post Balance Sheet Event - Acquisition of AgenSynd

 

In September 2018, SANNE acquired AgenSynd S.L. ("AgenSynd"). The acquisition has been made for an upfront consideration of €11.4 million, payable 65% in cash and 35% in shares. There is also a deferred consideration mechanism agreed based on the performance of the business in the year to 31 December 2018. The deferred consideration is not payable until 2020 and is subject to a cap such that the total consideration cannot exceed €15 million.

 

Working capital and cash flow

 

Working capital at 30 June 2018 as a percentage of annualised revenue was 20.4% (30 June 2017: 11.8%).4 Underlying operating cash flow conversion for the first half was 67.9% (2017: 101.7%). Whilst the business continues to enjoy an attractive cash flow profile, the overall result was lower than prior periods due to a change to the timing of billing in the Mauritian business to align to the Group's practice and an increase in debtors in certain high growth jurisdictions. Both these impacts are expected to reverse in the second half and full year cash conversion is expected to be in line with the Group's historic levels.

 

The Group's net debt position at 30 June 2018 was £49.3 million (30 June 2017: £23.4 million)5 reflecting the acquisition of LIS as well as the short term working capital items described above.

 

4 The component parts of the balance sheet that make up working capital include trade receivables (net of allowances), accrued income, trade payables and deferred revenue.

 

5 Net debt includes cash and bank balances excluding cash held for regulatory capital, and borrowings. Cash held for regulatory capital is £11.1million (2017: £5.4million).

 

Restatement of prior period

 

The Group has restated its financial statements for the year ended 31 December 2017 to correct a prior period error in recognising the value of intangible assets on acquisition of IFS in Mauritius. The correction results in the creation of a deferred tax liability against the intangibles of IFS. Further details are provided in note 9.

 

Dividend

 

The Board has declared an interim dividend of 4.6pence per share (2017: 4.2 pence). The dividend will be paid on 19 October 2018 to shareholders on the register as at the close of business on the record date of 21 September 2018.

 

Our people

 

SANNE's employees around its global operations remain core to the quality of the service offering provided to clients and the Group will continue to recruit high-calibre individuals as it continues to grow. SANNE is committed to encouraging employees to continue with their professional development both through recognised qualification routes as well as continuous, industry specific learning and engagement programmes.

 

SANNE is also committed to developing the employee value proposition to ensure that it is recognised as nurturing a positive and supportive working environment which recognises and rewards individual and collective performance.

 

The Group continues to recruit in operational centres outside of the Jersey headquarters as the Group expands its service offering and client base globally.

 

 

Risk

 

The principal risks facing the Group are reviewed regularly and represented by those as set out in the Annual Report 2017 namely: Acquisition Risk; Strategic Risk; Competitor Risk; Business Change Risk; Data Security Risk; Process Risk; Staff Resourcing Risk; Political/Regulatory Change Risk; Regulatory Licence (Compliance) Risk; Foreign Exchange Risk and Intangible Asset Risk. During the period the Group completed the acquisitions of LIS but notwithstanding this activity, the Group's net risk determination with respect to acquisition risk (which includes integration risk) remains unchanged.

 

Shareholder Circular - Proposed Change of Articles

 

It has been over three years since the Company was listed on the London Stock Exchange and the SANNE has continued to expand, both organically and by way of acquisition. As the Company continues to grow it is important that it is able to attract and retain the best people to serve as both executive and non-executive directors of the Company. In order to facilitate this goal, it is proposed that the Company's articles of association (the "Articles") be amended to remove the current requirement that a majority of the Company's directors be resident outside the United Kingdom together with other consequential amendments. These amendments, if approved, will materially open up the pool of potential talent from which the Company can draw. In addition, to provide the Board with as much flexibility as possible with regard to the holding of meetings and conducting the business of the Company, it is also proposed that the Articles be amended to remove the absolute restriction on holding board meetings in the United Kingdom.

 

In addition to the above, following a review of the Articles generally, including in light of the UK Listing Rules and Corporate Governance Code, it is proposed that it be formalised by way of amendment of the Articles that all of the directors of the Company resign at each annual general meeting and offer themselves for re-appointment, as opposed to the current obligation in the Articles for certain directors to retire by rotation at each annual general meeting.

 

Furthermore, in order to benefit from potential future technology, it is proposed that the directors should have the flexibility in the future to hold electronic general meetings in addition to, but not instead of, physical general meetings and the Resolution contains amendments to the Articles that will provide this flexibility.

 

It is intended that a circular be posted to shareholders later this week.

 

Outlook

 

The Board remains confident in the continued growth of the Group. The strong momentum of the business in the first six months of the year has continued into the second half and the Company has a healthy pipeline of further new business opportunities. This is supported by compelling underlying fundamentals in SANNE's markets.

 

In addition, revenues for the full year are expected to return to the Group's traditional pattern of being second half weighted following the atypical first half weighting in 2017.

 

The Board continues to believe that results for the full year will be in line with its expectations.

 

 

Rupert Robson

Chairman

11 September 2018

Dean Godwin

Chief Executive Officer

11 September 2018

 

 

 

 

 

 

 

 

STATEMENT OF DIRECTORS' RESPONSIBILITIES IN RESPECT OF THE INTERIM STATEMENT

 

We confirm to the best of our knowledge that:

 

-      The condensed set of financial statements have been prepared in accordance with IAS 34 Interim Financial Reporting as adopted by the EU; and

 

-      The interim management report includes a fair review of the information required by:

 

A.     DTR 4.2.7R of the Disclosure Guidance and Transparency Rules, being an indication of important events that have occurred during the first six months of the financial year and their impact on the condensed set of financial statements; and a description of the principal risks and uncertainties for the remaining six months of the year; and

 

B.     DTR 4.2.8R of the Disclosure Guidance and Transparency Rules, being related party transactions that have taken place in the first six months of the current financial year and that have materially affected the financial position or performance of the entity during that period; and any changes in the related party transactions described in the last annual report that could do so.

 

The interim statement contains certain forward looking statements which are made by the directors in good faith based on the information available to them at the time of their approval of this interim statement. Forward looking statements contained within the interim statement should be treated with some caution due to the inherent uncertainties, including economic, regulatory and business risk factors, underlying any such forward looking statements.

 

We undertake no obligation to update any forward looking statements whether as a result of new information, future events or otherwise. The interim statement has been prepared by Sanne Group plc to provide information to its shareholders and should not be relied upon by any other party or for any other purpose.

 

Dean Godwin

Chief Executive Officer

 

11 September 2018

 

 

 

 

INDEPENDENT REVIEW REPORT TO SANNE GROUP PLC

We have been engaged by the Company to review the condensed set of financial statements in the half-yearly financial report for the six months ended 30 June 2018 which comprises the consolidated income statement, the consolidated statement of comprehensive income, the consolidated balance sheet, the consolidated statement of changes in equity, the consolidated cash flow statement and related notes 1 to 17. We have read the other information contained in the half-yearly financial report and considered whether it contains any apparent misstatements or material inconsistencies with the information in the condensed set of financial statements.

This report is made solely to the company in accordance with International Standard on Review Engagements (UK and Ireland) 2410 "Review of Interim Financial Information Performed by the Independent Auditor of the Entity" issued by the Auditing Practices Board. Our work has been undertaken so that we might state to the company those matters we are required to state to it in an independent review report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the company, for our review work, for this report, or for the conclusions we have formed.

 

 

Directors' responsibilities

The half-yearly financial report is the responsibility of, and has been approved by, the directors. The directors are responsible for preparing the half-yearly financial report in accordance with the Disclosure Guidance and Transparency Rules of the United Kingdom's Financial Conduct Authority.

As disclosed in note 1, the annual financial statements of the group are prepared in accordance with IFRSs as adopted by the European Union. The condensed set of financial statements included in this half-yearly financial report has been prepared in accordance with International Accounting Standard 34 "Interim Financial Reporting" as adopted by the European Union.

Our responsibility

Our responsibility is to express to the Company a conclusion on the condensed set of financial statements in the half-yearly financial report based on our review.

Scope of review

We conducted our review in accordance with International Standard on Review Engagements (UK and Ireland) 2410 "Review of Interim Financial Information Performed by the Independent Auditor of the Entity" issued by the Auditing Practices Board for use in the United Kingdom. A review of interim financial information consists of making inquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with International Standards on Auditing (UK and Ireland) and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion.

Conclusion

Based on our review, nothing has come to our attention that causes us to believe that the condensed set of financial statements in the half-yearly financial report for the six months ended 30 June 2018 is not prepared, in all material respects, in accordance with International Accounting Standard 34 as adopted by the European Union and the Disclosure Guidance and Transparency Rules of the United Kingdom's Financial Conduct Authority.

 

Deloitte LLP

St Helier, Jersey

11 September 2018

 

 

Sanne Group plc

 

 

 

 

 

 

Consolidated Income Statement

 

 

 

 

 

 

For the period from 1 January 2018 to 30 June 2018

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Unaudited

 

Unaudited1

 

Audited1

 

 

 

6 Months to

 

6 Months to

 

12 Months to

 

 

 

30 Jun

 

30 Jun

 

31 Dec

 

 

 

2018

 

2017

 

2017

 

 

Notes

£'000

 

£'000

 

£'000

 

 

 

 

 

 

 

 

 

Revenue

 

65,850

 

56,310

 

113,168

 

Direct costs

 

(25,441)

 

(20,337)

 

(40,711)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Gross profit

3

40,409

 

35,973

 

72,457

 

 

 

 

 

 

 

 

 

Other operating income

 

94

 

128

 

179

 

Operating expenses

 

(29,005)

 

(22,925)

 

(49,494)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating profit

 

11,498

 

13,176

 

23,142

 

 

 

 

 

 

 

 

 

Comprising:

 

 

 

 

 

 

 

   Underlying operating profit

4

20,045

 

20,930

 

38,812

 

   Non-underlying items within operating expenses

4

(8,547)

 

(7,754)

 

(15,670)

 

 

 

11,498

 

13,176

 

23,142

 

 

 

 

 

 

 

 

 

Other gains and losses

 

126

 

(74)

 

348

 

Finance costs

 

(816)

 

(604)

 

(1,194)

 

Finance income

 

75

 

50

 

111

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Profit before tax

 

10,883

 

12,548

 

22,407

 

 

 

 

 

 

 

 

 

Comprising:

 

 

 

 

 

 

 

   Underlying profit before tax

4

19,430

 

20,327

 

38,077

 

   Non-underlying items

4

(8,547)

 

(7,779)

 

(15,670)

 

 

 

10,883

 

12,548

 

22,407

 

 

 

 

 

 

 

 

 

Tax

5

(1,857)

 

(1,856)

 

(3,129)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Profit for the period/year

 

9,026

 

10,692

 

19,278

 

 

 

 

 

 

 

 

Earnings per ordinary share ("EPS") (expressed in pence per ordinary share)

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic

6

6.4

 

7.7

 

13.9

 

Diluted

6

6.3

 

7.5

 

13.5

 

 

 

 

 

 

 

 

 

Underlying basic

6

12.5

 

13.4

 

25.2

 

Underlying diluted

6

12.2

 

13.0

 

24.5

 

 

 

 

 

 

 

 

All profits in the current and preceding periods and year are derived from continuing operations.

 

 

1. Refer to note 9 for details of prior year restatement.

 

 

 

 

 

 

 

 

Sanne Group plc

 

 

 

 

 

 

Consolidated Statement of Comprehensive Income

 

 

 

 

 

For the period from 1 January 2018 to 30 June 2018

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Unaudited

 

Unaudited1

 

Audited1

 

 

 

6 Months to

 

6 Months to

 

12 Months to

 

 

 

30 Jun

 

30 Jun

 

31 Dec

 

 

 

2018

 

2017

 

2017

 

 

 

£'000

 

£'000

 

£'000

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Profit for the period/year

 

9,026

 

10,692

 

19,278

 

 

 

 

 

 

 

 

 

Other comprehensive income

 

 

 

 

 

 

 

Items that will not be reclassified subsequently to the profit and loss:

 

 

 

 

 

 

    Actuarial loss on retirement benefit obligation

 

(44)

 

(7)

 

(83)

 

    Income tax relating to items not reclassified

 

6

 

1

 

12

 

 

 

 

 

 

 

 

 

Items that may be reclassified subsequently to the profit and loss:

 

 

 

 

 

 

 

    Exchange differences on translation of foreign operations

 

2,315

 

(8,712)

 

(14,377)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total comprehensive income for the period/year

 

11,303

 

1,974

 

4,830

1. Refer to note 9 for details of prior year restatement.

 

 

 

 

 

 

 

Sanne Group plc

 

 

 

 

 

 

Consolidated Balance Sheet

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Unaudited

 

Unaudited1

 

Audited1

 

 

 

30 Jun

 

30 Jun

 

31 Dec

 

 

 

2018

 

2017

 

2017

 

 

Notes

£'000

 

£'000

 

£'000

Assets

 

 

 

 

 

 

 

Non-current assets

 

 

 

 

 

 

 

Goodwill

10

157,905

 

110,828

 

107,271

 

Other intangible assets

11

69,720

 

68,168

 

59,998

 

Equipment

 

3,831

 

3,184

 

3,814

 

Deferred tax asset

 

1,549

 

728

 

1,042

 

 

 

 

 

 

 

 

 

Total non-current assets

 

233,005

 

182,908

 

172,125

 

 

 

 

 

 

 

 

 

Current assets

 

 

 

 

 

 

 

Trade and other receivables

 

33,959

 

24,356

 

28,874

 

Cash and bank balances

 

32,527

 

32,560

 

50,803

 

Accrued income

 

7,964

 

4,750

 

3,096

 

 

 

 

 

 

 

 

 

Total current assets

 

74,450

 

61,666

 

82,773

 

 

 

 

 

 

 

 

 

Total assets

 

307,455

 

244,574

 

254,898

 

 

 

 

 

 

 

 

 

 

Equity

 

 

 

 

 

 

 

Share capital

12

1,436

 

1,411

 

1,416

 

Share premium

 

185,012

 

169,279

 

171,850

 

Own shares

 

(1,307)

 

(692)

 

(1,141)

 

Shares to be issued

 

22,731

 

15,014

 

13,373

 

Retranslation reserve

 

(8,965)

 

(5,615)

 

(11,280)

 

Retained losses

 

(19,265)

 

(19,918)

 

(16,437)

 

 

 

 

 

 

 

 

 

Total equity

 

179,642

 

159,479

 

157,781

 

 

 

 

 

 

 

 

 

Non-current liabilities

 

 

 

 

 

 

 

Borrowings

14

70,720

 

50,569

 

64,335

 

Deferred tax liabilities

 

11,312

 

8,712

 

7,880

 

Retirement gratuity liability

 

721

 

602

 

718

 

 

 

 

 

 

 

 

 

Total non-current liabilities

 

82,753

 

59,883

 

72,933

 

 

 

 

 

 

 

 

 

Current liabilities

 

 

 

 

 

 

 

Trade and other payables

 

29,374

 

7,581

 

8,522

 

Current tax liabilities

 

4,265

 

3,801

 

2,306

 

Provisions

 

503

 

388

 

506

 

Deferred revenue

 

10,918

 

13,442

 

12,850

 

 

 

 

 

 

 

 

 

Total current liabilities

 

45,060

 

25,212

 

24,184

 

 

 

 

 

 

 

 

 

Total equity and liabilities

 

307,455

 

244,574

 

254,898

1. Refer to note 9 for details of prior year restatement.

 

 

 

 

 

 

 

Sanne Group plc

 

 

 

 

 

 

 

Consolidated Statement of Changes in Equity

 

 

 

 

 

As at 30 June 2018

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Share Capital

Share Premium

Own shares

Shares to be issued

Re-translation reserve

Retained Earnings

Total Equity

 

 

£'000

£'000

£'000

£'000

£'000

£'000

£'000

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance at 1 January 2017

1,353

135,354

(562)

13,867

3,097

(21,745)

131,364

 

 

 

 

 

 

 

 

 

 

Profit for the period

-

-

-

-

-

10,692

10,692

 

Other comprehensive income for the period

-

-

-

-

(8,712)

(6)

(8,718)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total comprehensive income for the period

-

-

-

-

(8,712)

10,686

1,974

 

 

 

 

 

 

 

 

 

 

Issue of share capital

58

34,132

-

-

-

-

34,190

 

Cost of issuance of shares

-

(207)

-

-

-

-

(207)

 

Net buyback of own shares

-

-

(130)

-

-

-

(130)

 

Dividend payments

-

-

-

-

-

(8,859)

(8,859)

 

Share based payment - employees

-

-

-

1,147

-

-

1,147

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance at 30 June 2017

1,411

169,279

(692)

15,014

(5,615)

(19,918)

159,479

 

 

 

 

 

 

 

 

 

 

Profit for the period

-

-

-

-

-

8,586

8,586

 

Other comprehensive income for the period

-

-

-

-

(5,665)

(65)

(5,730)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total comprehensive income for the period

-

-

-

-

(5,665)

8,521

2,856

 

 

 

 

 

 

 

 

 

 

Issue of share capital

5

2,458

-

(2,463)

-

-

-

 

Cost of share issuance

-

113

-

-

-

-

113

 

Dividend payments

-

-

-

-

-

(5,809)

(5,809)

 

Share based payment - employees

-

-

-

822

-

769

1,591

 

Net buyback of own shares

-

-

(449)

-

-

-

(449)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance at 31 December 2017

1,416

171,850

(1,141)

13,373

(11,280)

(16,437)

157,781

 

 

 

 

 

 

 

 

 

 

Profit for the period

-

-

-

-

-

9,026

9,026

 

Other comprehensive income for the period

-

-

-

-

2,315

(38)

2,277

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total comprehensive income for the period

-

-

-

-

2,315

8,988

11,303

 

 

 

 

 

 

 

 

 

 

Issue of own shares

18

12,344

-

-

-

-

12,362

 

Net buyback of own shares

-

-

(166)

-

-

-

(166)

 

Dividend payments

-

-

-

-

-

(11,816)

(11,816)

 

Share based payment - acquisitions

-

-

-

8,558

-

-

8,558

 

Share based payment - employees

-

-

-

1,620

-

-

1,620

 

Deferred consideration - acquisitions

2

818

-

(820)

-

-

-

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance at 30 June 2018

1,436

185,012

(1,307)

22,731

(8,965)

(19,265)

179,642

 

Sanne Group plc

 

 

 

 

 

 

Consolidated Cash Flow Statement

 

 

 

 

 

 

For the period from 1 January 2018 to 30 June 2018

 

 

 

 

 

 

 

 

 

Unaudited

 

Unaudited

 

Audited

 

 

 

30 Jun

 

30 Jun

 

31 Dec

 

 

 

2018

 

2017

 

2017

 

 

 

£'000

 

£'000

 

£'000

 

 

 

 

 

 

 

 

 

Operating profit

 

11,498

 

13,176

 

23,142

 

Adjustments for:

 

 

 

 

 

 

 

Depreciation of equipment

 

961

 

731

 

1,742

 

Amortisation of intangible assets

 

7,492

 

6,609

 

12,972

 

Impairment of intangible assets

 

-

 

-

 

20

 

Share-based payment expense

 

1,678

 

1,318

 

2,927

 

Disposal of equipment

 

-

 

-

 

15

 

Retirement gratuity reserve movement

 

(32)

 

-

 

99

 

(Decrease)/increase in provisions

 

(3)

 

35

 

153

 

 

 

 

 

 

 

 

 

Operating cash flows before movements in working capital

21,594

 

21,869

 

41,070

 

 

 

 

 

 

 

 

 

Increase in receivables

 

(4,396)

 

(1,398)

 

(4,262)

 

(Increase)/Decrease in deferred revenue

 

(1,998)

 

2,033

 

1,441

 

Decrease in payables

 

(1,693)

 

(1,616)

 

(698)

 

 

 

 

 

 

 

 

 

Cash generated by operations

 

13,507

 

20,888

 

37,551

 

 

 

 

 

 

 

 

 

Income taxes paid

 

(2,243)

 

(2,803)

 

(6,301)

 

 

 

 

 

 

 

 

 

Net cash from operating activities

 

11,264

 

18,085

 

31,250

 

 

 

 

 

 

 

 

 

Investing activities

 

 

 

 

 

 

 

Interest received

 

75

 

50

 

111

 

Purchases of equipment

 

(584)

 

(1,289)

 

(2,454)

 

Decrease in deferred consideration

 

-

 

(5,619)

 

(5,757)

 

Acquisition of subsidiaries

 

(22,990)

 

(68,543)

 

(68,543)

 

 

 

 

 

 

 

 

 

Net cash used in investing activities

 

(23,499)

 

(75,401)

 

(76,643)

 

 

 

 

 

 

 

 

 

Financing activities

 

 

 

 

 

 

 

Dividends paid

 

(11,816)

 

(8,858)

 

(14,669)

 

Interest on bank loan

 

(629)

 

(698)

 

(1,069)

 

Costs of share issuance

 

-

 

(207)

 

(94)

 

Buyback of own shares

 

(166)

 

(130)

 

(579)

 

Capitalised loan cost

 

-

 

-

 

(308)

 

Redemption of bank loans

 

(4,000)

 

(14,000)

 

(19,000)

 

New bank loans raised

 

10,300

 

5,000

 

24,000

 

 

 

 

 

 

 

 

 

Net cash used in financing activities

 

(6,311)

 

(18,893)

 

(11,719)

 

 

 

 

 

 

 

 

 

Net decrease in cash and cash equivalents

 

(18,546)

 

(76,209)

 

(57,112)

 

 

 

 

 

 

 

 

 

Cash and cash equivalents at beginning of period/year

 

50,803

 

108,673

 

108,673

 

Effect of foreign exchange rate changes

 

270

 

96

 

(758)

 

 

 

 

 

 

 

 

 

Cash and cash equivalents at end of period/year

 

32,527

 

32,560

 

50,803

 

Sanne Group plc

 

 

 

 

 

 

 

 

 

Notes to the consolidated results

 

 

 

 

 

 

 

 

For the period from 1 January 2018 to 30 June 2018

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

1. Basis of preparation

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Sanne Group plc ("the Company") is a company incorporated in Jersey, Channel Islands. The unaudited, condensed and consolidated financial statements for the six months ended 30 June 2018 comprise of the Company and its subsidiaries (collectively the "Group").

 

The consolidated results have been prepared in accordance with International Accounting Standard 34 'Interim Financial Reporting' as adopted by the European Union ("EU"). The financial statements are therefore presented on a condensed basis as permitted and do not include all disclosures that would otherwise be required in a full set of financial statements and should be read in conjunction with the Annual Report for the year ended 31 December 2017, available at www.sannegroup.com.

 

Going concern

 

 

 

 

 

 

 

 

 

The Directors have a reasonable expectation that the Group has adequate resources to continue in operational existence for the foreseeable future. The Directors have reviewed the Group's financial projections and cash flow forecasts and believe, based on those projections and forecasts, that it is appropriate to prepare the consolidated financial statements of the Group on a going concern basis. Accordingly, they have adopted the going concern basis of accounting in preparing the consolidated financial statements.

 

 

Accounting policies

 

 

 

 

 

 

 

 

 

The accounting policies adopted in the preparation of the condensed consolidated financial statements are consistent with those followed in the preparation of the Group's financial statements for the year ended 31 December 2017, except as disclosed below.

 

Impact of standards issued and applied from 1 January 2018

 

IFRS 9 makes changes to accounting for financial instruments in the areas of classification and measurement, impairment and hedge accounting. There is no impact on the classification for the Group as a result of IFRS 9. IFRS 9 replaces the incurred credit loss impairment model for financial assets in IAS 39 with an expected credit loss model (ECL).  This has no impact on the Group financial statements due to the short term nature of the receivables on the Group's balance sheet.

 

As a result of adopting IFRS 9, the accounting policy for trade receivables at 31 December 2017 is replaced with the following with effect from 1 January 2018:

 

For trade and other receivables, the Group applied IFRS 9's simplified approach to measuring ECLs which uses a lifetime expected loss allowance. The Group updates its forward-looking estimates at each reporting date when calculating its impairment provision.

 

The Group's financial liabilities include borrowings and trade and other payables. They are initially measured at fair value, net of transaction costs and then subsequently measured using the amortised cost model applying the effective interest rate method. The adoption of IFRS 9 has not had any impact on how these liabilities have been accounted for.

 

IFRS 15 establishes principles for reporting useful information to users of financial statements about the nature, amount, timing and uncertainty of revenue and cash flows arising from an entity's contracts with customers. Revenue is recognised when a customer obtains control of a good or service and thus has the ability to direct the use and obtain the benefits from the good or service. The Group assessed the different revenue streams and grouped their recognition as either point of time or over time based on the delivering of service obligations, this resulted in no difference from how the Group recognised revenue under IAS 18.

 

The accounting policy for revenue recognition at 31 December 2017 is replaced with the following with effect from 1 January 2018.

 

Rendering of services - revenue is recognised at the point in time when specific performance obligations are met and over time for services provided over a specific time period. The following revenue types are recognised at a point in time when specific performance obligations are met; transactional services outside the scope of service agreements and net asset based fees. The following revenue types are recognised over time as these services are rendered and performance obligations met; service agreements for various administration, accounting and fiduciary services billed on fixed and time based fees.

 

Accrued income - presents the billable provision of services which are rendered and where performance obligations are met but clients has not been invoiced at the reporting date. Accrued income is recorded based on agreed fees billed in arrears and time-based charge-out rates in force at the work date, less any specific provisions against the value of accrued income where recovery will not be made in full.

 

Deferred revenue - fees in advance and upfront fees in respect of services due under contract are time apportioned to the respective accounting periods, and those billed but not yet earned are included in deferred revenue in the Consolidated Balance Sheet.

 

Impact of standards issued but not yet applied

 

 

 

 

 

 

 

 

IFRS 16 was issued in January 2016. It will result in almost all leases being recognised on the balance sheet, as the distinction between operating and finance leases is removed. Under the new standard, an asset (the right to use the leased item) and a financial liability to pay rentals are recognised. The only exceptions are short-term and low-value leases.

 

IFRS 16 is effective for periods beginning on or after 1 January 2019. The Group has performed preliminary assessments on the impact of the new standard and considers that it will have a significant impact on the gross assets and liabilities of the Group. The EBITDA of the Group will be impacted positively due to rental costs moving from operating expenses to finance costs and depreciation. The exact impact cannot be quantified at this stage.

 

 

 

 

 

 

 

 

 

 

 

 

 

2 . Estimates, critical accounting judgements and key sources of estimation uncertainty

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

In the application of the Group's accounting policies, the Directors are required to make judgements, estimates and assumptions about the carrying amounts of assets and liabilities that are not readily apparent from other sources. The estimates and associated assumptions are based on historical experience and other factors that are considered to be relevant. Actual results may differ from these estimates.

 

The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimate is revised if the revision affects only that period, or in the period of the revision and future periods if the revision affects both current and future periods.

 

Other than the interpretation of tax legislation which has resulted in a prior period error, see note 9, the critical judgements and estimations of uncertainty at the balance sheet date that the Directors have made in the process of applying the Group's accounting policies and that have the most significant effect on the amounts recognised in the financial statements are as set out in the Annual Report for the year ended 31 December 2017.

 

Seasonality

 

 

 

 

 

 

 

 

 

Given the make-up of the Group's customers and contracts, seasonality is not expected to have a significant bearing on the financial performance of the Group.

 

 

 

 

 

 

 

 

 

 

3 . Segmental Reporting

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

The reporting segments engage in corporate, fund and private client administration, reporting and fiduciary services. Declared revenue is generated from external customers.

 

The Group's consolidated financial statements presents four segments namely EMEA Alternatives (EMEA), Asia-Pacific & Mauritius Alternatives (APM), North American Alternatives (NA) and Corporate & Private Client (CPC).

 

The chief operating decision-maker is the Board of Directors of Sanne Group plc. Each segment is defined as a set of business activities generating a revenue stream determined by segmental responsibility and the management information reviewed by the Board of Directors. The Board evaluates segmental performance on the basis of gross profit, after the deduction of the direct costs of staff, marketing and travel. No inter-segment sales are made.

 

Unaudited 6 Months to 30 Jun 2018

 

Revenue

 

Direct costs

 

Gross profit

 

 

 

 

 

£'000

 

£'000

 

£'000

 

 

 

Segments

 

 

 

 

 

 

 

 

 

EMEA Alternatives

 

32,671

 

(12,930)

 

19,741

 

 

 

Asia-Pacific & Mauritius Alternatives

 

13,744

 

(3,851)

 

9,893

 

 

 

North American Alternatives

 

9,707

 

(5,058)

 

4,649

 

 

 

Corporate & Private Client

 

9,728

 

(3,602)

 

6,126

 

 

 

Total

 

65,850

 

(25,441)

 

40,409

 

 

 

 

 

 

 

 

 

 

 

 

 

Other operating income

 

 

 

 

 

94

 

 

 

Operating expenses

 

 

 

 

 

(29,005)

 

 

 

Operating profit

 

 

 

 

 

11,498

 

 

 

 

 

 

 

 

 

 

 

 

 

Unaudited 6 Months to 30 Jun 2017

 

Revenue

 

Direct costs

 

Gross profit

 

 

 

 

 

£'000

 

£'000

 

£'000

 

 

 

Segments

 

 

 

 

 

 

 

 

 

EMEA Alternatives

 

23,136

 

(8,961)

 

14,175

 

 

 

Asia-Pacific & Mauritius Alternatives

 

14,025

 

(3,098)

 

10,927

 

 

 

North American Alternatives

 

9,508

 

(4,772)

 

4,736

 

 

 

Corporate & Private Client

 

9,641

 

(3,506)

 

6,135

 

 

 

Total

 

56,310

 

(20,337)

 

35,973

 

 

 

 

 

 

 

 

 

 

 

 

 

Other operating income

 

 

 

 

 

128

 

 

 

Operating expenses

 

 

 

 

 

(22,925)

 

 

 

Operating profit

 

 

 

 

 

13,176

 

 

 

 

 

 

 

 

 

 

 

 

 

Audited 12 Months to 31 Dec 2017

 

Revenue

 

Direct costs

 

Gross profit

 

 

 

 

 

£'000

 

£'000

 

£'000

 

 

 

Segments

 

 

 

 

 

 

 

 

 

EMEA Alternatives

 

46,822

 

(17,795)

 

29,027

 

 

 

Asia/Pacific & Mauritius Alternatives

 

27,857

 

(6,398)

 

21,459

 

 

 

North American Alternatives

 

19,112

 

(9,440)

 

9,672

 

 

 

Corporate & Private Client

 

19,377

 

(7,078)

 

12,299

 

 

 

Total

 

113,168

 

(40,711)

 

72,457

 

 

 

 

 

 

 

 

 

 

 

 

 

Other operating income

 

 

 

 

 

179

 

 

 

Operating expenses

 

 

 

 

 

(49,494)

 

 

 

Operating profit

 

 

 

 

 

23,142

 

 

 

 

 

 

 

 

 

 

 

 

 

Geographical information

 

 

 

 

 

 

 

 

 

The Group's revenue from external customers by geographical location of contracting Group entity is detailed below:

 

 

 

 

 

Unaudited

 

Unaudited

 

Audited

 

 

 

 

 

6 Months to

 

6 Months to

 

12 Months to

 

 

 

 

 

30 Jun

 

30 Jun

 

31 Dec

 

 

 

 

 

2018

 

2017

 

2017

 

 

 

 

 

£'000

 

£'000

 

£'000

 

 

 

 

 

 

 

 

 

 

 

Jersey

 

 

 

19,692

 

19,638

 

38,882

 

Luxembourg

 

 

 

13,278

 

4,721

 

10,232

 

Rest of Europe

 

 

 

8,368

 

6,980

 

14,773

 

Mauritius

 

 

 

10,318

 

11,224

 

21,503

 

Americas

 

 

 

9,621

 

9,508

 

19,140

 

South Africa

 

 

 

2,889

 

3,302

 

6,110

 

Asia-Pacific

 

 

 

1,684

 

937

 

2,528

 

Total Revenue

 

 

 

65,850

 

56,310

 

113,168

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

4 . Non-underlying items

 

 

 

Unaudited

 

Unaudited

 

Audited

 

 

 

 

 

 

6 Months to

 

6 Months to

 

12 Months to

 

 

 

 

 

30 Jun

 

30 Jun

 

31 Dec

 

 

 

 

 

2018

 

2017

 

2017

 

 

 

 

 

£'000

 

£'000

 

£'000

 

 

 

 

 

 

 

 

 

 

 

Operating profit

 

 

 

11,498

 

13,176

 

23,142

 

Non-underlying items within operating expenses:

 

 

 

 

 

 

 

  Share based payments

 

 

(i)

953

 

714

 

1,323

 

  Acquisition and integration expense

 

 

(ii)

102

 

413

 

1,355

 

  Amortisation of intangible assets

 

 

(iii)

7,492

 

6,609

 

12,972

 

  Other items

 

 

 

-

 

18

 

20

 

 

 

 

 

8,547

 

7,754

 

15,670

 

Underlying operating profit

 

 

 

20,045

 

20,930

 

38,812

 

 

 

 

 

 

 

 

 

 

 

Profit before tax

 

 

 

10,883

 

12,548

 

22,407

 

Non-underlying items within other costs:

 

 

 

8,547

 

7,754

 

15,670

 

  Loan restructuring within finance costs

 

 

 

-

 

25

 

-

 

Total non-underlying items

 

 

 

8,547

 

7,779

 

15,670

 

Underlying profit before tax

 

 

 

19,430

 

20,327

 

38,077

 

 

 

 

 

 

 

 

 

 

 

The above reflect expenses which management do not consider to be representative of underlying performance.

 

 

 

 

 

 

 

 

 

 

 

(i) Share based payments are detailed in note 13, all acquisition related share based payments ("RSA" plan) are disclosed as non-underlying as these are not part of the normal cost of business, these are awarded to employees as part of the acquisitions to retain key workforce and to recruit key management to support the acquisitions. These costs are recorded as non-underlying to enable Shareholders to assess the core performance of the business. In the first half of 2017 all share based payments were deemed to be non-underlying, this was changed at the end of 2017 as the Performance Share Plan ("PSP") and Annual Bonus Plans ("ABP") were deemed to be part of managements normal remuneration and do not form part of non-underlying costs. The 2017 interim numbers have been adjusted for this approach.

 

 

(ii) During the period ended 30 June 2018 the Group completed the acquisition of LIS Group as detailed in note 8. The Group has completed various other acquisitions in the past two years.  Integration costs relating to these acquisitions for the period ending 30 June 2018 were £102k. With acquisitions being outside the day-to-day activities of the core ongoing business of the Group, these costs are disclosed as non-underlying to enable Shareholders to assess the core ongoing performance of the Group.

 

(iii) The amortisation charges relate to the amortisation of intangible assets acquired through acquisitions. As with the acquisition costs, the amortisation of intangibles is directly linked to the acquisitions which do not form part of the core ongoing business of the Group. These costs are disclosed as non-underlying to enable Shareholders to assess the core performance of the business.

 

 

 

 

 

 

 

 

 

 

5 . Tax

 

 

 

Unaudited

 

Unaudited1

 

Audited1

 

 

 

 

 

 

6 Months to

 

6 Months to

 

12 Months to

 

 

 

 

 

30 Jun

 

30 Jun

 

31 Dec

 

 

 

 

 

2018

 

2017

 

2017

 

 

 

 

 

£'000

 

£'000

 

£'000

 

 

 

 

 

 

 

 

 

 

 

Current income tax

 

 

 

3,260

 

3,208

 

5,408

 

Deferred income tax

 

 

 

(1,403)

 

(1,352)

 

(2,279)

 

Total income tax

 

 

 

1,857

 

1,856

 

3,129

 

1. Refer to note 9 for details of prior year restatement.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Income tax is calculated across the Group based on the prevailing income tax rates in the jurisdictions in which profits are earned.

 

 

 

 

 

 

 

 

 

 

6 . Earnings per share

 

 

 

Unaudited

 

Unaudited1

 

Audited1

 

 

 

 

 

 

6 Months to

 

6 Months to

 

12 Months to

 

 

 

 

 

30 Jun

 

30 Jun

 

31 Dec

 

 

 

 

 

2018

 

2017

 

2017

 

 

 

 

 

£'000

 

£'000

 

£'000

 

 

 

 

 

 

 

 

 

 

 

Profit for the period/year

 

 

 

9,026

 

10,692

 

19,278

 

Non-underlying items within:

 

 

 

 

 

 

 

 

 

   Operating expenses

 

 

 

8,547

 

7,754

 

15,670

 

   Other costs

 

 

 

-

 

                   25

 

-

 

 

 

 

 

 

 

 

 

 

 

Underlying earnings

 

 

 

17,573

 

18,471

 

34,948

 

 

 

 

 

 

 

 

 

 

 

Weighted average number of ordinary shares in issue

 

140,333,180

 

138,327,654

138,433,199

 

Effect of dilutive potential ordinary shares:

 

 

 

 

 

 

 

 

   Deferred consideration shares

 

 

 

1,909,964

 

2,546,626

 

2,387,219

 

Restricted Stock Awards

 

 

 

1,307,550

 

1,143,340

 

1,102,475

 

Performance share plan

 

 

 

627,264

 

528,719

 

484,130

 

Weighted average number of ordinary shares for the purposes of diluted earnings per share

144,177,958

142,546,339

142,407,023

 

 

 

 

 

 

 

 

 

 

 

Basic earnings per share (pence)

 

 

 

6.4

 

7.7

 

13.9

 

Diluted earnings per share (pence)

 

 

 

6.3

 

7.5

 

13.5

 

 

 

 

 

 

 

 

 

 

 

Underlying basic earnings per share (pence)

 

 

12.5

 

13.4

 

25.2

 

Underlying diluted earnings per share (pence)

 

 

12.2

 

13.0

 

24.5

 

1. Refer to note 9 for details of prior year restatement.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

The Group presents basic and diluted earnings per share ("EPS") data for its ordinary shares.

 

 

 

 

 

 

 

 

 

 

Basic EPS is calculated by dividing the profit attributable to ordinary shareholders by the weighted average number of ordinary shares in issue during the period.

 

Diluted EPS takes into consideration the Company's dilutive, contingently issuable shares as disclosed above. These arrangements have no impact on the earnings or underlying earnings figures used to calculate diluted EPS. The weighted average number of ordinary shares used in the diluted calculation is inclusive of the number of shares which are expected to be issued to satisfy the awards when they become due and where the performance criteria, if any, have been deemed to have been met as at the respective period end.

 

Underlying basic EPS and Underlying diluted EPS are calculated the same as Basic EPS and Diluted EPS with the only difference being the earnings used are the underlying earnings which is the profit for the period/year adjusted for non-underlying items as detailed in note 4.

 

 

 

 

 

 

 

 

 

 

7 . Dividends

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

An interim dividend of 4.6 pence per ordinary share (2017: 4.2 pence) was declared by the Directors on 11 September 2018 and will be payable on 19 October 2018 to shareholders on the record on 21 September 2018. The 2017 final dividend of 8.4 pence was paid on 15 May 2018.

 

 

 

 

 

 

 

 

 

 

8 . Business combinations

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Investment Solutions S.A. ("LIS Group")

 

 

 

 

 

On 6 February 2018 the Group acquired 100% of the issued share capital of Investment Solutions S.A. and Compliance Partners S.A., these entities are incorporated in Luxembourg and together trade as LIS.

 

This acquisition provides the Group with the opportunity to expand its platform in Luxembourg, enhance the Group's new funds proposition in Dublin and grow its existing EMEA operations.

 

The consideration for the acquisition is satisfied through a payment of approximately £55.3 million (€62.3 million) in cash and the issuance of 1,786,173 consideration shares. At 30 June 2018 the portion of the cash and the shares to be issued forms the deferred consideration.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

EUR

 

GBP

 

 

 

 

 

 

 

'000

 

'000

 

Recognised amounts of identifiable net assets (at fair value):

 

 

 

 

 

 

 

Non-current assets

 

Useful economic life

 

 

 

 

 

Equipment

 

3 - 5 years

 

 

 

426

 

378

 

Customer & contract intangibles

 

5 years

 

 

 

18,868

 

16,751

 

 

 

 

 

 

 

19,294

 

17,129

 

Current assets

 

 

 

 

 

 

 

 

 

Trade and other receivables

 

 

 

 

 

2,117

 

1,879

 

Cash and cash equivalents

 

 

 

 

 

3,983

 

3,536

 

Accrued income

 

 

 

 

 

4,143

 

3,678

 

 

 

 

 

 

 

10,243

 

9,093

 

Current liabilities

 

 

 

 

 

 

 

 

 

Trade and other payables

 

 

 

 

 

2,425

 

2,153

 

Current tax liabilities

 

 

 

 

 

1,163

 

1,032

 

Deferred income

 

 

 

 

 

74

 

66

 

 

 

 

 

 

 

3,662

 

3,251

 

Non-current liabilities

 

 

 

 

 

 

 

 

 

Deferred tax liabilities

 

 

 

 

 

4,907

 

4,356

 

 

 

 

 

 

 

4,907

 

4,356

 

 

 

 

 

 

 

 

 

 

 

Identifiable net assets

 

 

 

 

 

20,968

 

18,615

 

 

 

 

 

 

 

 

 

 

 

Goodwill

 

 

 

 

 

55,267

 

49,065

 

 

 

 

 

 

 

 

 

 

 

Total consideration

 

 

 

 

 

76,235

 

67,680

 

 

 

 

 

 

 

 

 

 

 

Total consideration satisfied by:

 

 

 

 

 

 

 

 

 

  Cash consideration - on acquisition

 

 

 

 

 

29,878

 

26,525

 

  Equity instruments - ordinary shares (1,786,173 shares in Sanne Group plc)

 

13,923

 

12,361

 

  Deferred consideration - known

 

 

 

 

 

25,772

 

22,880

 

  Deferred consideration - contingent

 

 

 

 

 

6,662

 

5,914

 

Fair value of consideration payable at acquisition date

 

 

 

76,235

 

67,680

 

 

 

 

 

 

 

 

 

 

 

Net cash outflow arising on acquisition:

 

 

 

 

 

 

 

 

 

Cash consideration

 

 

 

 

 

29,878

 

26,526

 

Less: cash and cash equivalent balances acquired

 

 

 

(3,983)

 

(3,536)

 

 

 

 

 

 

 

 

 

 

 

Net cash outflow arising on acquisition:

 

 

 

 

 

25,895

 

22,990

 

 

 

 

 

 

 

 

 

 

 

Fair value of consideration

 

 

 

 

 

 

 

 

 

The shares were valued based on the closing share price the day before reissuance with this amount appropriately allocated between share capital and share premium.

 

Included in the deferred consideration is contingent consideration of £5.9 million (€6.7 million). The contingent consideration is payable in 2018 and based on a multiple of the increase of the 2017 EBITDA to the 2018 EBITDA for the LIS Group. The potential undiscounted future payment for the contingent consideration is nil to £23.7 million (€26.7 million), the fair value of the current estimate is based on the 2018 forecast for the LIS Group.

 

Transaction costs

 

 

 

 

 

 

 

 

 

The Group incurred £610k of acquisition and integration expense in 2017. During the first half of 2018 the Group incurred integration costs which are disclosed as non-underlying in note 4. These costs have been expensed within operating expenses in this financial period and have further been identified as non-underlying as detailed in note 4.

 

Goodwill

 

 

 

 

 

 

 

 

 

Goodwill is represented by assets that do not qualify for separate recognition or other factors. These include the opportunities for new business wins from new customers, the effects of an assembled workforce and synergies from combining operations of the acquiree and the acquirer. Goodwill is not tax deductible.

 

Trade and other receivables

 

 

 

 

 

 

 

 

 

The fair value of the financial assets acquired includes trade and other receivables with a fair value of £1.88 million. The gross amount receivable is £1.89 million of which £0.01 million is expected to be uncollectible.

 

Effect on the results

 

 

 

 

 

 

 

 

 

LIS Group contributed £6.3 million of revenue and a profit of £1.6 million to the Group's profit for the period between the date of acquisition and the balance sheet date. If the business had been acquired at 1 January 2018 on a pro rata basis the Group revenue for the period would have been £67.1 million (£1.2 million higher) and net profit £9.3 million (£0.3 million higher).

 

 

 

 

 

 

 

 

 

 

9 . Correction of prior period error

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

On 1 January 2017 the Group acquired IFS in Mauritius, and consolidated the business into the 2017 Group accounts. In consolidating IFS into the Group, an error was made in the interpretation and application of Mauritius tax legislation in respect of the deductibility of the amortisation of the intangible assets arising from a business combination. The impact of correcting this error is to recognise a deferred tax liability and a corresponding increase of goodwill on the balance sheet at the acquisition date. The deferred tax liability will release as a credit through the Group's reported tax charge as the acquired intangibles in IFS are amortised.

 

 

The error has been corrected by restating each of the affected financial statement line items for the prior period as follows:

 

 

 

 

 

(Audited)

 

 

 

(Restated)

 

 

 

 

 

12 Months to

 

 

 

12 Months to

 

 

 

 

 

31 Dec

 

Increase/

 

31 Dec

 

 

 

 

 

2017

 

(Decrease)

 

2017

 

Consolidated Income Statement (extract)

 

 

£'000

 

£'000

 

£'000

 

Tax

 

 

 

4,277

 

(1,148)

 

3,129

 

 

 

 

 

 

 

 

 

 

 

Basic EPS

 

 

 

13.1

 

0.8

 

13.9

 

Diluted EPS

 

 

 

12.7

 

0.8

 

13.5

 

Underlying basic EPS

 

 

 

24.4

 

0.8

 

25.2

 

Underlying diluted basic EPS

 

 

 

23.7

 

0.8

 

24.5

 

 

 

 

 

 

 

 

 

 

 

Consolidated Balance Sheet (extract)

 

 

 

 

 

 

 

 

 

Goodwill

 

 

 

100,387

 

6,884

 

107,271

 

Deferred tax liabilities

 

 

 

(2,144)

 

(5,736)

 

(7,880)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(Unaudited)

 

 

 

(Restated)

 

 

 

 

 

6 Months to

 

 

 

6 Months to

 

 

 

 

 

30 Jun

 

Increase/

 

30 Jun

 

 

 

 

 

2017

 

(Decrease)

 

2017

 

 

 

 

 

£'000

 

£'000

 

£'000

 

Consolidated Income Statement (extract)

 

 

 

 

 

 

 

 

Tax

 

 

 

2,452

 

(596)

 

1,856

 

 

 

 

 

 

 

 

 

 

 

Basic EPS

 

 

 

7.3

 

0.4

 

7.7

 

Diluted EPS

 

 

 

7.1

 

0.4

 

7.5

 

Underlying basic EPS   (i)

 

 

 

13.4

 

0.0

 

13.4

 

Underlying basic diluted EPS   (i)

 

 

 

13.0

 

0.0

 

13.0

 

 

 

 

 

 

 

 

 

 

 

Consolidated Balance Sheet (extract)

 

 

 

 

 

 

 

 

 

Goodwill

 

 

 

103,678

 

7,150

 

110,828

 

Deferred tax liabilities

 

 

 

(2,158)

 

(6,554)

 

(8,712)

 

 

 

(i) All share based payments were disclosed as non-underlying for the 6 months ending 30 June 2017, this was changed during the second half of 2017 to only disclose share based payments relating to acquisitions as non-underlying. Refer to note 4 for further detail.

 

 

 

 

 

 

 

 

 

 

10 . Goodwill

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Goodwill represents the excess of the cost of the acquisition over the fair value of the Group's share of the net identifiable assets of the acquired subsidiary at the date of acquisition.

 

 

 

 

 

Unaudited

 

Unaudited1

 

Audited1

 

 

 

 

 

30 Jun

 

30 Jun

 

31 Dec

 

 

 

 

 

2018

 

2017

 

2017

 

 

 

 

 

£'000

 

£'000

 

£'000

 

 

 

 

 

 

 

 

 

 

 

Opening balance

 

 

 

107,271

 

55,094

 

55,094

 

Acquired during the period/year

 

 

 

49,065

 

61,345

 

61,345

 

Exchange difference

 

 

 

1,569

 

(5,611)

 

(9,168)

 

Closing balance

 

 

 

157,905

 

110,828

 

107,271

 

1. Refer to note 9 for details of prior year restatement.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

11 . Other intangible assets

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Unaudited

 

Unaudited

 

Audited

 

 

 

 

 

30 Jun

 

30 Jun

 

31 Dec

 

 

 

 

 

2018

 

2017

 

2017

 

 

 

 

 

£'000

 

£'000

 

£'000

 

 

 

 

 

 

 

 

 

 

 

Opening balance

 

 

 

59,998

 

27,587

 

27,587

 

Acquired during the period

 

 

 

16,751

 

50,306

 

50,306

 

Amortisation charge for the period/year

 

 

 

(7,492)

 

(6,609)

 

(12,972)

 

Impairments

 

 

 

-

 

-

 

(20)

 

Exchange difference

 

 

 

463

 

(3,116)

 

(4,903)

 

Closing balance

 

 

 

69,720

 

68,168

 

59,998

 

 

 

 

 

 

 

 

 

 

12 . Share capital

 

 

 

Unaudited

 

Unaudited

 

Audited

 

 

 

 

 

 

6 Months to

 

6 Months to

 

12 Months to

 

 

 

 

 

30 Jun

 

30 Jun

 

31 Dec

 

 

 

 

 

2018

 

2017

 

2017

 

 

 

 

 

£'000

 

£'000

 

£'000

 

 

 

 

 

 

 

 

 

 

 

Opening balance

 

 

 

1,416

 

1,353

 

1,353

 

Issue of shares

 

 

(i)

20

 

58

 

63

 

Closing balance

 

 

 

1,436

 

1,411

 

1,416

 

 

 

 

 

 

 

 

 

 

 

(i) The Company issued 1,786,173 shares on 6 February 2018 as part consideration in the acquisition of LIS (note 8). The Company also issued 159,095 shares on 25 May 2018 in relation to the Company's acquisition of FLSV Fund Administration Services LLC which completed on 1 November 2016. The shares issued represent an element of the deferred share consideration.

 

 

 

 

 

 

 

 

 

 

13. Share based payments

 

 

 

Unaudited

 

Unaudited

 

Audited

 

 

 

 

 

 

30 Jun

 

30 Jun

 

31 Dec

 

 

 

 

 

2018

 

2017

 

2017

 

 

 

 

 

£'000

 

£'000

 

£'000

 

Sanne Group plc

 

 

 

 

 

 

 

 

 

Performance Share Plan

 

 

(i)

503

 

605

 

912

 

Restricted Stock Awards

 

 

(ii)

1,175

 

713

 

2,015

 

Total share based payments

 

 

 

1,678

 

1,318

 

2,927

 

 

 

 

 

 

 

 

 

 

 

(i)  During the current and prior year periods, the Group granted awards over its ordinary shares under the terms of its Performance Share Plan ("PSP"). The exercise of awards under the PSP is conditional upon the achievement of one or more challenging performance targets set at the time of the grant and measured over a three-year performance period from grant date. All the awards were granted for a nil consideration. Further awards were made through the year. The Group estimates the number of shares to be vested based on the performance targets set to be achieved and the current performance of the Group, this is then grown by an assumed rate in line with Group forecast as per market expectation to determine the probable performance at vesting date. The leavers assumption set by the Group is nil for PSP's as only senior management receive share grants and historical data has shown this to be appropriate. The vesting periods of the grants are not more than 3 years.

 

(ii)  During the current and prior periods, the Group granted awards over its ordinary shares in the form of Restrictive Stock Awards ("RSA").  The awards are granted as part of the mechanics of an acquisition to act as retentions for staff, they are also used as Annual Performance Bonuses for senior management. The vesting of the awards are subject to continued employment over an agreed period. All the awards were granted for a nil consideration. The Group makes use of a leavers assumption for specific jurisdictions where these awards were granted to all staff and not only senior management, the assumptions are based on historical data. RSA's awarded as part of Annual Performance Bonuses are considered to be an underlying cost of the business. RSA's granted in relation to acquisitions or to senior management employed to support them are deemed to be non-underlying costs of the business.

14. Borrowings

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

The Group has a loan facility of £100m with HSBC Bank Plc with a final repayment date for any drawn balances of 30 September 2021. This is sub-divided into three sections, a long term loan, a revolving credit facility, that can be drawn down and repaid by the Group at any time, and an accordion facility which is not immediately available but which can be reclassified into the revolving credit facility with the agreement of HSBC.

 

Covenants, attached to the loan, relate to interest cover and leverage. Undrawn funds in the revolving credit facility are charged at 40% of the interest margin whilst the accordion facility attracts no interest.

 

The balances available and drawn are as follows:

 

 

 

 

 

Unaudited

 

Unaudited

 

Audited

 

 

 

 

 

as at

 

as at

 

as at

 

 

 

 

 

30 Jun

 

30 Jun

 

31 Dec

 

 

 

 

 

2018

 

2017

 

2017

 

 

 

 

 

£'000

 

£'000

 

£'000

 

Available

 

 

 

 

 

 

 

 

 

Term loan

 

 

 

46,000

 

46,000

 

46,000

 

Revolving credit facility

 

 

 

44,000

 

14,000

 

14,000

 

Accordion

 

 

 

10,000

 

40,000

 

40,000

 

 

 

 

 

100,000

 

100,000

 

100,000

 

Drawn

 

 

 

 

 

 

 

 

 

Term loan

 

 

 

46,000

 

46,000

 

46,000

 

Revolving credit facility

 

 

 

25,300

 

5,000

 

19,000

 

Accordion

 

 

 

-

 

-

 

-

 

 

 

 

 

71,300

 

51,000

 

65,000

 

Capitalised loan fees

 

 

 

580

 

431

 

665

 

Total borrowings

 

 

 

70,720

 

50,569

 

64,335

 

 

 

 

 

 

 

 

 

 

 

During the 6 months ending 30 June 2018, the Group drew down from the revolving credit facility a net total of £6.3 million for the LIS acquisition.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

15. Related party transactions

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balances and transactions between the Company and its subsidiaries, which are related parties, have been eliminated on consolidation and are not disclosed in this note. Transactions between the Group and its associates are disclosed below:

 

 

 

 

 

 

 

 

 

Unaudited

 

 

 

 

 

 

 

 

 

as at

 

 

 

 

 

 

 

 

 

30 Jun

 

 

 

 

 

 

 

 

 

2018

 

 

 

 

 

 

 

 

 

£'000

 

 

 

 

 

 

 

 

 

 

Consulting services - 10PA Solutions Limited

 

 

 

 

 

 

337

 

Consulting services - 10PA Investments Limited

 

 

 

 

 

100

 

 

 

 

 

 

 

 

 

437

 

 

 

 

 

 

 

 

 

 

 

10PA Solutions Limited and 10PA Investments Limited are related parties of the Group as these entities are owned by one of the key management personnel. During the first quarter of the year the member of key management personnel was remunerated through 10PA Investments Limited for consultancy services provided and 10PA Solutions Limited was engaged with a Group company for the provision of temporary consultancy services.  The Group terminated its trading relationship with both companies on the individual ceasing to work with the Group as a consultant and becoming a full-time member of staff.

 

The Group's only other significant related parties are key management personnel, comprising all members of the plc Board of Directors and the Executive Committee who are responsible for planning and controlling the activities of the Group.

 

The remuneration of any employee who met the definition of key management personnel of the Group during the period is set out below in aggregate for each of the categories specified in IAS 24 Related Party Disclosures.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Unaudited

 

Unaudited

 

Audited

 

 

 

 

 

as at

 

as at

 

as at

 

 

 

 

 

30 Jun

 

30 Jun

 

31 Dec

 

 

 

 

 

2018

 

2017

 

2017

 

 

 

 

 

£'000

 

£'000

 

£'000

 

Short term payments

 

 

 

 

 

 

 

 

 

Short-term employee benefits

 

 

 

1,778

 

2,301

 

2,278

 

Share Based Payments (see note 13)

 

 

 

306

 

344

 

549

 

Total short term payments

 

 

 

2,084

 

2,645

 

2,827

 

 

 

 

 

 

 

 

 

 

 

Other

 

 

 

 

 

 

 

 

 

Ordinary Dividends

 

 

 

262

 

506

 

632

 

Total other payments

 

 

 

262

 

506

 

632

 

 

 

 

 

 

 

 

 

 

 

Other than the items listed above, the Group has not entered into any material transactions with related parties since the last annual report.

 

 

 

 

 

 

 

 

 

 

16. Contingent liability

 

 

 

 

 

 

 

 

 

 

The Group operates in a number of jurisdictions and enjoys a close working relationship with all of its regulators. The Group is currently in discussions with the regulator of one of its subsidiaries in relation to past events. With any such discussions there is inherent uncertainty in the ultimate outcome but the Board currently believes these discussions are unlikely to result in any outcome that would have a material impact on the Group.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

17. Subsequent events

 

 

 

 

 

 

 

 

 

 

On 14 August 2018, the Group entered into a conditional agreement to acquire 100% of the issued share capital of AgenSynd S.L. The Group has entities in Spain, the United Kingdom and France. The acquisition provides the Group with an opportunity to expand its platform in Spain and its existing EMEA operations and completed on 3 September 2018.

 

The acquisition accounting for this transaction is incomplete at issuance of these financial statements.

 

 

 

 

                         

 


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Half-year Report - RNS