Final Results

RNS Number : 7343G

Curtis Banks Group PLC

31 March 2022

 

31 March 2022

Curtis Banks Group plc

("Curtis Banks" or the "Group")

Final Results for the 12 Months to 31 December 2021

Curtis Banks Group PLC is pleased to announce its final results for the 12 months to 31 December 2021. These results represent the full 12 month period.

Financial Highlights

· Revenue increased by 17.5% to £63.3m (2020: £53.9m)

· Adjusted profit before tax^{1 4} increased by 4.7% to £14.0m (2020 restated: £13.4m)

· Adjusted operating margin^{2 4} decreased to 23.5% (2020 restated: 26.0%), mainly impacted by the £3.9m decrease of interest income (note 2) compared to the prior year. If interest income had remained at the same level, the adjusted operating margin would be 28.0%

· Profit before tax increased by 22.2% to £9.3m (2020 restated: £7.6m)

· Adjusted diluted EPS of 16.9p (2020: 17.9p)^{3 4}

· Gross organic growth in Full and Mid SIPP numbers of 7.9% (2020: 7.8%) with total SIPPs, including third party administered, now 79,679 (2020: 82,224)

· Attrition rate on own Full and Mid SIPPs increased to 6.1% (2020: 4.6%)

· Assets under Administration ("AuA") increased by 15.4% to £37.4bn (2020: £32.4bn)

· Proposed final dividend of 6.5p (2020: 6.5p) making a full year payment of 9.0p (2020: 9.0p)

Operational Highlights

· Gross increase in core Full and Mid SIPPs of 7.9%, improving both the quantum and quality of earnings.

· Revisions to our annual fixed sterling charge model have further improved the annuity-like revenue stream with no negative impact on attrition rates.  Annual SIPP administration fees increased by 20% in February 2021, with a further 7% increase in January 2022 to annual and transactional charges.

· Progress continues with the integration of Talbot and Muir and Dunstan Thomas.  Dunstan Thomas faced revenue headwinds due to COVID-19, but continues to improve the customer proposition and revenue diversification opportunities through its technology solutions.

· The Group continues to make good progress on delivering operational efficiencies through our five-year systems strategy, which remains on time and on budget.

· The Curtis Banks Group ESG Strategy has been formulated and includes commitments to act on issues most important to the Group and its stakeholders, including the promotion of intergenerational wealth transfer and fairness.

Highlights and Key Performance Indicators:

	2021	2020 Restated
Financial
Revenue	£63.3m	£53.9m
Adjusted profit before tax1 4	£14.0m	£13.4m
Profit before tax	£9.3m	£7.6m3
Adjusted operating margin2 4	23.5%	26.0%
Diluted EPS	11.5p	9.7p3
Adjusted diluted EPS4	16.9p	17.9p
Operational Highlights
Number of SIPPs administered	79,679	82,224
Assets under Administration	£37.4bn	£32.4bn
Total organic new Full and Mid SIPPs in year	4,329	3,700
Attrition rates (Mid & Full SIPP)	6.1%	4.6%
Number of properties administered	9,065	8,905

1 Profit before tax, amortisation and adjusting items 

2 The ratio of operating profit before amortisation and adjusting items to revenue.

3 Results for the year ended 31 December 2020 have been restated to account for measurement period adjustments arising under IFRS 3 Business Combinations.

4 In addition to statutory IFRS performance measures, the Group has presented a number of non-statutory alternative performance measures ("APMs"). The Board believes that the APMs used give a more representative view of the underlying performance of the Group and enhance comparability of information between reporting periods.

Will Self, Chief Executive Officer of Curtis Banks, commented: "These are robust results given the COVID-19 headwinds the Group faced in 2021 and are testament to the strengths of the business, its suite of products and our operational teams.

"Dunstan Thomas, which was acquired in 2020, faced some significant challenges resulting from the COVID-19 pandemic which impacted revenue and profitability. However, the integration of the business within the Group is progressing well thanks to its contribution to the diversification of intermediary and customer relationships, through the launch of Fintech products like Imago. The value that Dunstan Thomas delivered to the Group is clearly evident and as the macro-economy recovers from COVID-19 we expect significant improvement in the next financial year.

Changes made to our pricing policy now mean that 88% of our core revenues recur in perpetuity, with fixed rates of increase providing higher quality revenues that protect earnings against inflation. This, alongside the prospect of a rising interest rate environment, provides confidence that we will see additional earnings growth in 2022. There was also a notable decrease in delayed SIPP attrition rates by October, as the SIPP market began to normalise following the phasing out of COVID-19 restrictions, and this has continued into 2022.

"We are maximising the strong organic growth signals witnessed in our core SIPP products and we remain well positioned to deliver our medium-term growth strategy from a more efficient systems platform and a transition to a more diverse retirement solutions group."

Analyst Presentation

An analyst briefing is being held at 09:30 BST on 31 March 2022 via an online video conference facility.  To register your attendance, please contact [e-mail].

For more information, please contact:

Curtis Banks Group PLC	Via Instinctif Partners
Will Self - Chief Executive Officer
Dan Cowland - Chief Financial Officer
Peel Hunt LLP (Nominated Adviser & Joint Broker)	[phone]
James Britton
Rishi Shah
Singer Capital Markets (Joint Broker)	[phone]
Mark Taylor
Rachel Hayes
Instinctif Partners (Financial PR)	[e-mail]
Mark Walter	[phone]
Joe Quinlan

Chairman's Statement

I am pleased to report the Curtis Banks Group results for the year ended 31 December 2021. The business has continued its growth trajectory while taking specific actions to improve the quality of earnings and the efficiency of operations, against a tough external backdrop.

Despite some headwinds, 2021 witnessed the continued delivery of our stated strategic objectives, delivering strong organic growth in our core SIPP products and the further integration of Talbot and Muir. The Group has continued to broaden the range of services it offers to its customers. We adjusted our fee model early in 2021 to improve the quality and visibility of revenue, while also seeking to bring more standardisation of charging structures across the various SIPP books that have been acquired over several years. This provides us with a strong platform for our medium-term growth ambitions. Following the Dunstan Thomas acquisition, the Group has improved its operations through further technical efficiencies and can now provide incremental value-added technology solutions and services. This puts the Group in a strong position to capture the growth in the advised retirement market place. 

The Group has also continued to progress with its systems strategy on time and on budget. However, the Board is now considering / evaluating how this strategy might be enhanced and accelerated to achieve the benefits sooner, by maximising the growth achieved by our core products alongside the new technology solutions being supported by Dunstan Thomas. This enables us to further enhance our product proposition and service quality for our customers and intermediaries, whilst also accelerating achievement of our target operating model and growing the operating margin in the medium term. 

2021 Review

We have delivered a year of continued growth in both revenue and profits. Revenue increased by 18% to £63.3m, reflecting primarily the contribution from a maiden full year of Talbot and Muir and Dunstan Thomas, as well as steady underlying growth in the core business of Full and Mid SIPPs. The Group's adjusted profit before tax grew by 4.7% to £14.0m, albeit impacted by an underperformance in Dunstan Thomas which has been more severely impacted by the COVID-19 pandemic. The headwinds experienced by Dunstan Thomas were not uncommon in the financial service technology sector as the relative reluctance of customers to invest in new technology solutions or upgrades, as a result of the pandemic.

The scale of the business continues to grow with Assets under Administration ("AuA") up 15.4% to £37.4bn (2020: £32.4bn). The Group saw a gross increase of 4,329 (7.9%) in Full and Mid SIPPs, including 693 new SIPPs from Talbot and Muir in the year, offset by attrition of 6.1%.  The growth in attrition from 4.6% to 6.1% during the year can be attributed to a COVID-19 lag effect following the lower than anticipated rate in 2020, although there is already evidence that the attrition rate is normalising with the return to pre-COVID levels in Q4 2021 and into 2022. In comparison, the non-core eSIPPs and third party administered SIPPs had experienced higher attrition rates (14.9% and 10.5% respectively) with minimal organic growth. Together the total SIPPs number has reduced to 79,679 (2020: 82,224).

The Group's revenue model in the pension administration business is highly resilient with a high proportion of fixed, recurring income which is adjusted annually for inflation. As mentioned above, we made a step change in early 2021 by applying a 20% increase to annual SIPP administration fee paid on Full and Mid SIPPs. At the same time, we introduced arrangements for customers to share more fully in the interest income generated from their cash balances. These amendments have improved both the quality and visibility of the Group's revenue, while also benefiting customers and have had no discernible direct impact on attrition.

The two acquisitions of Talbot and Muir and Dunstan Thomas have seen a full financial year within the Group. Talbot and Muir actively contributed to the growth in volumes achieved during the year, and also the margin of the pension administration segment. There is clear evidence that Dunstan Thomas has been impacted by COVID-19 to a greater extent than the rest of the Group's activities as the nature of its business contracts leads to a less predictable revenue pattern than our pension administration business; however, it remains an important component of the Group's business and a key contributor to our growth strategy. We continue to be excited about the potential for Dunstan Thomas to enhance and develop our product and service offering, while creating significant new opportunities for the use of technology in the retirement marketplace.

ESG

Curtis Banks plays an important role in the lives of our customers, providing the platform to support them and their families in retirement. We recognise our responsibility in this regard, as well as the commitments we have to our staff, customers, communities and the wider environment. I am therefore very pleased to present the Group's purpose-led ESG strategy within this report, which sets our priorities and plans, particularly around the issue of intergenerational fairness. The Group's ESG performance is overseen at Board level by Jill Lucas alongside Group CEO, Will Self. We very much look forward to providing timely updates as we formalise this important aspect of the business.

Dividend

We paid an interim dividend of 2.5p per share (2020: 2.5p) on 12 November 2021 and the Board proposes a final dividend of 6.5p per share (2020: 6.5p) which, if approved by shareholders, will be paid on 1 June 2022 to shareholders on the register at the close of business on 6 May 2022. Total dividends for the year are therefore 9.0p per share (2020: 9.0p).

Outlook

The Board remains fully committed to implementing the Group's strategy and indeed to accelerate our initiatives. This will include efforts to maximise the recent growth in our core business, complemented by leveraging the technology capability provided by Dunstan Thomas. 

We will look to achieve our fundamental objectives whilst also continuing to meet the increasing financial costs of regulatory change on our otherwise largely controllable cost base. The expectation is that material additional costs will be required to support the Pensions Dashboard initiative and the FCA's proposals around Consumer Duty will add to the general inflationary pressure on our expenditure.

That aside, the Board remains confident that the Group is well positioned to deliver on its objectives, driven by organic growth from high-quality recurring fee revenues, which are expected to be enhanced by normalised levels of customer attrition. In addition, we expect greater interest returns for both the Group and our customers. Assuming sentiment improves, we also expect a recovery in performance at Dunstan Thomas. Finally, we believe that further improvements to our operating margins are achievable as we transition to a more diverse provider of administration, technology and complementary services to the advised retirement market providing multiple complementary solutions, including FinTech, Legal and Property services.

Section 172

The disclosures required under section 172 of the Companies Act are included in the Directors' report. 

Chris Macdonald

Chairman

30 March 2022

Chief Executive Officer's Review

I am delighted to report on another year where we made good progress, adding scale and diversification to the business, strengthening our platform for the long-term to provide sustainable growth. This is underpinned by our on-going transition from a predominantly SIPP administration business to a more diverse retirement group providing multiple complementary services, including FinTech, Legal and Property services, to the advised pre and post retirement market.

Delivery of strategic objectives

Dunstan Thomas continues to play a critical role in enabling the diversification of Curtis Banks into a diverse provider of administration, technology and complementary services to the advised retirement market.  Specific progress made in 2021 includes the launch of Imago Administration for Small Self-Administered Schemes (SSAS) during the first quarter. Advanced discussions are taking place with potential customers for the platform and clear plans have been drawn on how the platform can be combined with Curtis Banks Trustee Services for third party product provision.

Dunstan Thomas continues to be the backbone of CB Labs, our innovation hub and collaboration centre, which is also helping to drive operational efficiency and uncover new product opportunities.  CB Labs is bringing a clear bank of ideas and technical concepts to life.  Priority concepts that have moved to prototyping and beyond during 2021 include:

-  a new Chatbot developed and launched using artificial intelligence that has facilitated customer and adviser queries;

-  a suite of new adviser tools including Annual Allowance and Salary Sacrifice calculators with others in the development pipeline;

-  an enhanced suite of new and fully integrated solutions, including a low code Integro CX portal framework that is more agile and can be adopted and integrated in different environments.

The initiatives listed above broaden Curtis Banks advisers' capabilities, while expanding the suite of products available directly via IFA platforms. These developments are earnings enhancing and strengthen our potential to grow market share and expand our target market by using technology to diversify Curtis Banks' offering.

System transformation and acceleration of our ambition

We remain on track to deliver on our systems strategy which will see existing operational systems within Curtis Banks, and all of our back-office systems, move into Navision, one of our incumbent platforms. We anticipate the resulting cost savings for the Group to amount to £1.2m per annum upon completion.  In 2022, we are now beyond the half-way stage and there is an opportunity to accelerate the process to enable a quicker roll-out of an enhanced proposition to our customers and intermediaries, moving closer to full implementation of our target operating model and a consequent improvement in operating margin.

Given our ambitions in the pre and post retirement market, it is clear that we have an opportunity to accelerate our existing strategic deliverables as well as broaden our proposition. Not only could this bring forward the existing project benefits but also ensure that our proposition leads the sector in delivering customer centric retirement solutions in a digital and efficient way. We are exploring how this will impact our investment timeline and will provide further market updates this summer.

Operational Review

Curtis Banks revenues increased by 18% in 2021, driven primarily by the inclusion of both Dunstan Thomas and Talbot and Muir for the full 12 months, as well as the underlying growth of our core business. Our predictable, highly cash generative business model was further in evidence when our new, fixed-fee charging structure enabled us to increase annual SIPP admin fees by 20% in February 2021 with negligible impact on customer attrition.  This led to a material increase in fee income by 11% compared to 2020, and by 22% when including the contribution from Talbot and Muir. This has resulted in 62% (2020: 54%) of revenue now attributable to predictable, fixed fees.  This initiative not only improves our quality of earnings, but is also a long-term strategic move which leaves Curtis Banks well positioned to benefit from a rising interest rate environment. It is highly likely that 2021 can be seen as a floor, with net interest margin upside now available for the Group. Not only does this allow for more predictable earnings growth, it also provides customers with a transparent offering; a clear point of differentiation in the market.

Overall, the strong underlying performance of our core Full and Mid SIPPs led to net organic growth of 1.8% (calculated as organic growth less attrition, divided by 2020 closing number of core SIPPs)  in 2021, despite delayed customer attrition during the year due to COVID-19. We expect attrition to normalise in 2022, as it did during the last three months of 2021, and the relaxation of COVID-19 restrictions will further facilitate new business gains.

Strong growth in core SIPP administration business

By the end of 2021, the number of SIPPs administered saw a 7.9% gross organic increase of our core Full and Mid SIPPs, offset by attrition of 6.1%.

The continued growth in our core product offering, Your Future SIPP, continues to have a positive impact on the Group's organic growth as well as on our relationships with advisers and introducers.  

The resulting increase in the total number of properties administered by the Group rose to 9,065 and we expect further growth based on a record number of enquiries in Q4 2021. The Rivergate legal business has provided value adding services to our customers during the year and was successful in trading as a proof of concept driven by demand. We continue to explore options to fast-track the evolution of Rivergate as the business is still in its infancy.

Number of policies	Full SIPPs	Mid SIPPs	Total Full and Mid SIPPs	eSIPPs	Third Party Administered	Total
As at 31 December 2021	21,272	34,699	55,971	17,881	5,827	79,679
As at 31 December 2020	23,013	31,985	54,998	20,742	6,484	82,224
SIPPs added organically	914	3,415	4,329	236	24	4,589
Conversions and reclassifications	(1,216)	1,216	-	-	-	-
SIPPs lost through attrition	(1,439)	(1,917)	(3,356)	(3,097)	(681)	(7,134)
Gross organic growth rate	4.0%	10.7%	7.9%	1.1%	0.4%	5.6
Annualised attrition rate	6.3%	6.0%	6.1%	14.9%	10.5%	8.7%

Industry backdrop

Whilst the last two years have seen broader market volatility, the strength of the Curtis Banks business model has again shone through with our fixed fee model delivering consistent revenue generation. Curtis Banks' product proposition and breadth of service enable us to provide superior choice and flexibility to the needs of a retirement market that is having to deal with increasing levels of macro-volatility.

Retail investment platforms continue to see significant in-flows and Curtis Banks is rapidly developing a Digital Proposition that sits alongside the classic retail platform solutions, providing customers greater control of their portfolios at the higher end of the market. During 2021, our average transfer to the group included the consolidation of 2 existing pensions totalling an average transfer value of over £465k, further reinforcing our strategy. In 2021, 86% of all transfers came from retail platforms, further evidencing the migration driven by asset values and product complexity.

The pension market continued to be the focus of regulators during 2021. The Curtis Banks business model adopts a very clear approach in that we only work with regulated financial advisers and we do not provide advice on investments held within our SIPPs. Our fee structures also remain fair, transparent and competitive for our target market and remains well positioned to withstand any industry pressure on fee levels.

Integration of Talbot and Muir and Dunstan Thomas

The acquisitions of Talbot and Muir and Dunstan Thomas have been further integrated into the Group and made a maiden full year contribution in 2021. As evidenced by the strategic update provided, both businesses underpin our transition to a more diverse retirement group, providing multiple complementary solutions, including FinTech, legal and property services to the advised retirement market.

The additional scale from Talbot and Muir has enhanced the operating margin across the pension administration segment. 

The nature of Dunstan Thomas's FinTech business means that the revenue stream is more volatile than that of pension administration, with lower certainty on the timing of revenue recognition on its customer contracts. Dunstan Thomas has perhaps felt the impact of COVID-19 to a greater degree than the wider business as some customers have chosen to slow or defer some projects. While this is disappointing, we remain confident of the medium and long term benefits this acquisition will bring. Dunstan Thomas has improved the customer proposition offered by the Group and broadened our customer base by introducing Fintech solutions for wealth managers. This diversifies our revenue base, helps the Group to reach a wider target market and pursue natural cross-sell opportunities to our existing SIPP administration offering.

ESG Strategy - Promoting Fairness for Current and Future Generations

The Group is pleased to publish its inaugural ESG Policy. Following an independent materiality assessment of the Group, we identified a number of opportunities to make a real difference in addressing important issues to society, the economy and the environment.

Key initiatives delivered in 2021 include:

· Established a new partnership with The Intergenerational Foundation to keep generations of families out of poverty and on our platform for generations to come; 

· Engaged with our deposit taking counterparties to better understand the use of the cash which is placed with them;

· Undertook an initial analysis of our Commercial Property holdings in pensions to understand the future climate risk;

· Accreditation as an UK Living Wage Foundation employer. This commitment applies not only to directly employed staff but also to our third party contracted staff in recognition that life is hard for working generations;

Plans for 2022:

· Engage further with The Intergenerational Foundation to help us review our products and services with the aim of adapting our products and services to enable better Intergenerational planning.

· Further discussions with deposit takers to establish how cash funds can be deployed to make an even bigger positive impact.

· Delivery of unconscious bias in software training in our Dunstan Thomas business - an industry first.

· Pricing decisions on holding more environmentally friendly commercial properties in SIPPS.

· ESG Data centre for the Group all in one place (i.e. adviser, customer, employee satisfaction, carbon, financials) 

We have established board level accountability for the Group's ESG performance, overseen jointly by Jill Lucas, Non-executive Director, and through my position as CEO. Progress on activities will be reported at monthly Executive Committee meetings with regular updates alongside the formal annual reporting cycle. 

Outlook - Well positioned to execute medium-term growth strategy

The Group is in a strong position to execute its medium-term growth strategy and broaden its services in the advised pre and post retirement market. We expect to report further growth from our high-quality recurring fee revenue, with net organic growth benefiting a return to more normal rates of customer attrition for the core Full and Mid SIPPs. These rates had already reduced in 2021 from a high of 8.0% in June to 4.6% in December and into 2022 (4.9% in February 2022).

Given the opportunities arising from the core business and the technology platform provided by Dunstan Thomas, the Board is reviewing the scope to accelerate our growth initiatives. This would enable us to streamline the business and enhance our customer proposition while continuing to meet the increasing regulatory burden, for example supporting the Pensions Dashboard initiative and the FCA's proposals around Consumer Duty.

As a result of the Group's improved earnings quality and visibility, coupled with its technology initiatives, the Board is confident of meeting its stated growth objectives. Furthermore, the combination of accelerated strategy implementation and organic growth leaves the Group well positioned to achieve improvements in operating margin ahead of current expectations.

Will Self

Chief Executive Officer

30 March 2022

Chief Financial Officer's Review

Results

A resilient financial performance for the year ended 31 December 2021 saw revenue increase by 18% to £63.3m (2020: £53.9m) and statutory profit before tax improved by 22% to £9.3m (2020 restated: £7.6m). Diluted EPS on a statutory basis increased by 19% to 11.5p (2020 restated: 9.7p).

Adjusted profit before tax, which excludes items which do not arise from our core operating activities, increased by 5% to £14.0m (2020: £13.4m). We have previously referred to these items as non-recurring items, as they arise principally from acquisitions, restructuring and other one-off events. However, to avoid any potential confusion that some may find in this term, we have decided to now refer to adjusting items. Adjusted diluted EPS was 6% lower at 16.9p (2020: 17.9p).  

The robust financial performance in our core SIPP administration activities was achieved against the persisting economic and political challenges from both the UK's exit from the European Union and the constant presence over the past 24 months of the COVID-19 pandemic. As with many firms within our sector, the Group has not been immune from the economic impact of these challenges, but proactive changes in February 2021 to Curtis Banks's annual pension administration fee model and a full year contribution from Talbot and Muir has resulted in a 22% increase in fees to £45.1m (2020: £36.9m).

The ongoing Russian invasion of Ukraine has led to an unprecedented level of severe economic sanctions against the Russian state, businesses and personnel. These exacerbated the ongoing energy crisis grappling Europe and have wide knock-on impacts on the global economy. We do not expect this to have a significant impact on the Group's operations in the foreseeable future because of the fixed fee nature of our SIPP revenue and the lack of direct exposure from our existing suppliers and customers. Management will continue to monitor the situation in case of any new developments that might warrant a reassessment.

It remains our strong belief that the demonstrable growth in fees which has been achieved is underpinned by the strength of our core business model, which continues to generate strong levels of recurring sterling fixed fees. Over the past 18 months the Group has seen a marked reduction in sensitivity from interest income which has also improved the quality of the Group's revenue.

The acquisition of Dunstan Thomas in 2020 introduced a new revenue stream into the Group and was a further step in crystallising the Group's objective towards greater diversification. The 2021 Group results contain a full year contribution from Dunstan Thomas for the first time and, despite a very challenging calendar year, it successfully launched its Imago Administration solution for SSAS pensions which provides encouragement for 2022 revenue opportunities. 2021 also saw the collaborative Group initiative under CB Labs launch a number of solutions and adviser tools to provide more extensive support to our intermediaries and customers.

The Group reports certain Alternative Performance Measures ("APMs") which we believe provides more clarity to stakeholders over the Group's underlying performance and better enables them to form a view on the Group's future prospects. The principal APMs adopted are Adjusted Profit before Tax, Adjusted EPS and Adjusted Operating Margin, and these will be discussed further below.

Adjusting items are classified as such when the nature and quantum of the income or expense is significant and arises from a business event or activity that does not form part of usual day to day operations. Examples of such items include acquisitions, including any subsequent re-measurement of contingent deferred consideration and amortisation of intangible assets acquired, office relocations and restructuring activities.

In addition, the Group has simplified its reported Statement of Comprehensive Income by reverting to a statutory format only, removing the 'non-recurring costs' adjustment column and other non-statutory changes that were previously included. Our APMs are now only disclosed within the front half of the financial statements and a full reconciliation between these APMs and the statutory measures will be disclosed within the CFO's report going forward, with a strengthened focus and description of the key reconciling items. The Group believe that this change is an improvement to our financial disclosure and will facilitate a more clear and transparent representation of our financial performance.

The relevant reconciliation table is shown below for 2021 and prior year comparatives:

£'000	2021		2020 Restated
Adjusted operating profit	14,905		13,986
Adjusted operating margin	23.5%		26.0%
Finance income	20		83
Interest expense	(921)		(697)
Adjusted profit before tax	14,004		13,372
Adjusting items:
Dunstan Thomas acquisition costs	(70)		(769)
Talbot & Muir acquisition costs	(63)		(561)
Other M&A related costs	(1,401)		(136)*
Movement on contingent consideration relating to acquisitions	1,870		-
Discount unwind on contingent consideration	(879)		(357)*
Redundancy & restructuring costs	(626)		(1,091)
In-specie contributions	76		(402)
Centralisation of pension administration system	(322)		-
Treasury solution implementation	(45)		(286)
Data cleansing provision	(288)		(53)
Adjusting items	(1,748)		(3,655)
Impairment on customer portfolios	-		(344)
Intangible asset amortisation	(2,934)		(1,744)**
IFRS Profit before tax	9,322		7,629
Taxation	(1,603)		(1,732)
Profit after tax	7,719		5,897
Adjusted EPS
Basic	17.1		18.1
Diluted	16.9		17.9

*Measurement period restatements of £15k decrease in other acquisition related costs, £169k increase in discount unwind, and £354k decrease in amortisation.

Revenue

Revenues of £63.3m in 2021 (2020: £53.9m) represent an 18% year on year increase, driven primarily by the full-year contributions from Dunstan Thomas and Talbot and Muir, as well as the increased annual SIPP administration fees applied on our core  Full and Mid SIPPs.

Fee revenue from SIPP products remains the overwhelming source of income for the Group with 88% of these fees being recurring fixed annual fees (2020: 86%). These annual fees are subject to annual contractual inflationary increases referenced to average weekly earnings. Additional fixed fees are charged depending on the transactional services provided for each of the products and these are also subject to the same annual inflationary increases.

All SIPP fees levied are fixed sterling charges and are not dependent on the value of the underlying assets held within the SIPP. As a result, the revenues generated by both Curtis Banks and Talbot and Muir are insulated from the movements in financial markets and/or commercial property values and are therefore subject to less volatility than many of our peers who operate a basis point charging structure which is driven by the underlying asset value held within a SIPP. We view this as a key differential that sets us apart from most of our competitors and provides an attractively priced product with better clarity and certainty, especially in respect to higher value SIPPs.  As such, where the underlying value of a SIPP increases our product offering becomes increasingly affordable. In the meantime, the exposure to the volatility of financial markets is reduced compared to our competitors.

In the year ended 31 December 2021, £8.3m of the Group revenue was generated from interest margin (2020: £12.2m), with the proportion of contribution to total revenue falling to 13% from 23% in the previous year. Interest income from client money held includes amounts earned through the use of pooled banking arrangements. In the year ended 31 December 2021, a net interest margin of 0.80% (2020: 1.12%) was generated from client money held within pooled banking arrangements, despite the low interest environment which persisted for most of the financial year and into 2022. However, the Group is well positioned to benefit from a rising interest rate environment in 2022. A combination of the transparent interest sharing model introduced in February 2021 and the current yield curve presents considerable upside for the Group, particularly in 2023.

When we implemented the change to Curtis Banks's annual SIPP administration fees, effective from 1 February 2021, we also announced that the amount of interest paid to customers would no longer be set on a discretionary basis. The Group believes that its clear commitment to sharing interest generated with our customers is fairer, more transparent and provides greater certainty to those customers. The way in which we share interest with our customers can is explained at https://www.curtisbanks.co.uk/bankinterest/. The amount of interest generated by the Group, and the amount shared with our customers, is monitored by the Group Assets and Liabilities Committee under its established Treasury Framework model.

£9.9m (2020: £4.8m) of revenue was generated from Fintech services. The net increase year on year was driven by the full year contribution in 2021 and partly offset by headwind experienced by Dunstan Thomas as a result of the COVID-19 pandemic.

Expenses

The year ended 31 December 2021 saw administrative expenses increase by 16% to £52.2m from £44.9m, impacted from the full year cost from Dunstan Thomas and Talbot and Muir.

Staff costs for the year increased by 17% to £30.5m (2020: £26.1m) and were influenced by salary inflation, referenced to average weekly earnings, and the full year impact from the acquisitions of Dunstan Thomas of £7.1m (2020: £1.9m) and Talbot and Muir of £2.7m (2020: £0.4m).

Staff costs continue to reflect the cost of share based payment awards under the Group's Long Term Incentive Plans and Save As You Earn ("SAYE") schemes, as well as the commitment to the auto enrolment of staff pension contributions. These measures continue to reflect the importance of staff satisfaction to the Group and contribute not only to improved levels of key staff engagement and retention but also drive the provision of desired service levels to customers which are demanded by our introducers of business. We continue to review the manner in which we reward staff performance and we are delighted that since the appointment of Jaynie Vincent, as Group People Officer, the Group has received accreditation as a Living Wage Employer.

Average staff numbers increased to 828 (2020: 698), primarily as a result of the Group's acquisition of Talbot and Muir and Dunstan Thomas in 2020.

The other material cash outflow that the Group incurs is in respect of IT and in 2021 this amounted to £4.7m (2020: £3.5m). This reflects not only the cost of supporting the core IT infrastructure across the Group's multiple office locations but also the amount of investment in technological improvements to the SIPP administration platform and the programme of these improvements is expected to continue into 2024. As previously announced, the Group is implementing a strategic system change which will see the upgrade of the existing Navision platform used by the majority of the Group and the subsequent migration of SIPPs administered on other platforms used within the Group onto this upgraded Navision administration platform. By 2024, this is anticipated to yield annual cost savings of £1.2m.

The cost of undertaking regulated activities continues to increase and for the year ended 31 December 2021 the Group's cost increased to £2.1m (2020: £1.7m) from the combination of regulatory fees, levies and insurance. The Group considers this cost to be largely uncontrollable in nature.

Finance costs relating to interest payable on banking facilities increased by £0.2m year on year following the re-negotiated credit facilities with Santander to finance the acquisition of Dunstan Thomas. Borrowings continue to be repaid in line with the scheduled terms and the covenants required by the bank are well covered. Interest on the debt during the year accrued at a rate of 2.25% over the London Interbank Offered Rate ("LIBOR"). LIBOR was replaced by the Sterling Overnight Indexed Average ("SONIA") on 1 January 2022 and our credit facilities are now benchmarked against this rate.

The Group continues to take steps to improve its adjusted operating margin through a combination of revenue enhancements and operational efficiencies, balanced with continued investment back into the business and the provision of a high quality service to our customers. The adjusted operating margin has decreased during the year, impacted by the increase in non-controllable regulatory costs and more materially by the pressure that the low interest environment has had on interest income. The Group has sought to mitigate its sensitivity to interest income through an increase in annual fees on Full and Mid SIPPs which were effective 1 February 2021 and a full year's benefit of these increases will be enjoyed in 2022.

Adjusting Items

As outlined above, 'Adjusting Items' are classified as such when the nature and quantum of the income or expense is significant and arises from a business event or activity that does not form part of usual day to day operations. Examples of such items include acquisitions, office relocations and restructuring activities. Adjusting items for the year can be broadly categorised into several core elements.

Acquisition related items

Costs of £133,000 (2020: £1,330,000) associated with the acquisitions of Dunstan Thomas and Talbot and Muir, were recognised during the financial year as outside of the operating cost base of the Group. In addition to these costs, a net credit of £991,000 (2020: debit of £357,000) was recognised in respect of movements in the deferred consideration payable (£1.9m reduction) and the discount unwind (£0.9m expense) associated with the acquisitions of Dunstan Thomas and Talbot and Muir. The considerations are contingent of the business performance post acquisition and the underperformances in Dunstan Thomas in the year led to the reduction of the liability. Further movements in both the aggregate amount of deferred consideration payable and the unwind of discount associated with each acquisition are expected to recognised in the current financial year ahead of the conclusion of earn out period provisions.

Other M&A related costs of £1,401,000 (2020: £136,000) relate primarily to costs associated with a corporate transaction which did not subsequently proceed during the period. The transaction was potentially transformational for both parties, the partner operating in a similar market to Group, and demonstrates the Board's ambition for growth. The costs incurred reflect the external advice received on the proposed transaction and no further costs are expected to be incurred in relation to this in the financial year ending 31 December 2022.

Redundancy and restructuring costs

During the year ended 31 December 2021, the Group progressed its strategy to deliver its Target Operating Model through the centralisation of its commercial property administration within one office location. Redundancy costs associated with this centralisation process, as well as costs associated with duplicated staff efforts while work was transferred between offices, totalled £626,000 in the year ended 31 December 2021 (2020: £1,091,000). No further costs are expected to be incurred in relation to the centralisation of commercial property administration in the current financial year.

In-specie contributions

As has been widely reported in the wider industry press, HMRC has challenged all SIPP providers on whether pension contributions could be made in-specie. The Group has been in correspondence with HMRC regarding processes and documentation in respect of in-specie contributions for some time. In the year ended 31 December 2020, following a favourable outcome for HMRC in an appeal against the First-Tier Tribunal's ruling in favour of another SIPP operator in a similar case, and with further legal advice, the Group considered it more likely than not that some cost associated with this liability would be borne by the Group and had recognised a provision of £402,000 to reflect this. In the year ended 31 December 2021, the Group continued to assess the liability and has revised the provision to £320,000.

As referenced earlier in my report, the Group is implementing its articulated strategy to transition its entire SIPP administration onto a single administration platform, paving the way to deliver our Target Operating Model and the accompanying efficiencies. The first phase of the strategy, being the development and construction of a new digital portal, has already been delivered in partnership with Dunstan Thomas. The next phase, which is currently underway, will see the current Navision platform which supports the majority of the Group's SIPPs upgraded to the Navision Business Central platform. Once this upgrade has been completed, the Group will be in a position for all of the SIPPs held on other administration platforms to be migrated onto the upgraded Navision Business Central platform. Once this has been completed the Group anticipates annual cost savings of at least £1.2m and, as importantly, will provide the Group with the opportunity to implement its Target Operating Model based on this common technology.

Treasury solution implementation

During 2020, the Group invested in a new strategic treasury solution with a global provider of back office operational cash management software. The investment was designed to innovate and improve the Group's treasury management function through the provision of a system that provides a multibank facility and further enhancements to this system which supports the virtual pooling of customer cash has resulted in a further charge of £45,000 in the year ended 31 December 2021 (2020: £286,000). No further costs are currently anticipated in relation to the system during the current financial year.

Data cleansing provision

Up until the current year ended 31 December 2021, a contingent liability was held in relation to the data cleansing exercise with an estimated value of £1,400,000. Management now consider that the contingent liability is no longer applicable but that a probable provision of £211,000 is required to settle remaining costs as at 31 December 2021.

Amortisation and impairment of intangible assets

Amortisation of the Group's intangible assets represented a charge of £2,933,000 for the period. We had not taken any impairment charges against the value of any SIPP portfolios recognised within intangible assets (2020: £344,000).

Cash flows

Shareholder cash balances at year end were £31.9m compared to £32.5m at the end of the previous financial year.

Net cash inflows from shareholder operating activities for the period were £14.3m (2020: £7.7m net cash inflow), with the increase in cash generation primarily attributable to improvements in working capital management.

A combination of the investment in intangible assets, equity dividends paid and repayment of borrowings during the year saw significant net cash outflows from investing and financing activities.

Suffolk Life Annuities

Part of the Suffolk Life Group of Companies, Suffolk Life Annuities Limited, is an insurance company that writes SIPP Products as insurance contracts. These are all non-participating investment contracts and so the Group does not bear any insurance risk. As the policyholder assets and liabilities are shown on the balance sheet of Suffolk Life Annuities Limited, these also show on the Group balance sheet on consolidation. Assets in the SIPPs administered by the rest of the Group are held in trust and not under insurance contracts and therefore do not need to be included on the balance sheet. As the policies are non-participating contracts, the customer related assets and liabilities in Suffolk Life Annuities Limited match. In addition the revenues, expenses and investment returns of the non-participating investment contracts are shown in the consolidated statement of comprehensive income. Again, these income, expense items and investment returns due to the policyholders are completely matched. An illustrative balance sheet as at 31 December 2021 showing the financial position of the Group excluding the policyholder assets and liabilities is included as supplementary unaudited information after the notes to the financial statements. An illustrative cash flow on the same basis has also been provided.

Employee Benefit Trust ("EBT")

The EBT continues to be used to acquire shares in the Group in the open market to satisfy future vesting of options and long term incentive awards. The EBT is funded by loans from the Group. As at 31 December 2021, the EBT held 488,296 shares in Curtis Banks Group PLC (2020: 261,276). A number of options awarded under the Company's SAYE schemes vested during the year and awards were made from the shares held by the EBT.

The financial statements of the EBT are consolidated within the overall Group financial statements and these shares are shown on the balance sheet of the Group as Treasury Shares and are included within total equity.

Capital requirements

The Group's four (2020: four) regulated subsidiary companies submit regular returns to the FCA and the PRA relating to their capital resources. At 31 December 2021 the total regulatory capital requirement across the Group was £15.1m (2020: £15.2m) and the Group had an aggregate surplus of £17.0m (2020: £17.2m) across all regulated entities. In addition to this, it is Group internal policy for regulated companies within the Group to hold at least 130% of their required regulatory capital and this has been maintained throughout the year.

Three (2020: three) of the principal trading subsidiaries of the Group are regulated by the FCA and are subject to the relevant capital adequacy rules. The fourth (2020: fourth) regulated entity Suffolk Life Annuities Limited ("SLA"), being an insurance company, is subject to Solvency II rules and it's capital requirement is determined by the Standard Formula as set out in the Solvency II directives.
Full details of SLA's capital position are set out in the Solvency and Financial Condition Report published annually on the Group's website.

Financial Position

The Group increased net assets by 1.7% to £81.6m as at 31 December 2021 (2020: £80.2m), and reduced shareholder cash reserves slightly from £32.5m to £31.9m over the same period.

As at 31 December 2021, the Group had net shareholder cash (after debt) of £12.0m (2020: £8.8m).

The Group adopted the provisions of IFRS 16, accounting for leases, for the accounting period commencing 1 January 2019. The effect of this on our financial performance is not material although the impact on the Group's balance sheet has been to increase Non-current assets and Current/Non-current liabilities.  It should be noted that our principal lenders exclude the impact of IFRS 16 when calculating our banking covenants. We have also received confirmation previously from the FCA that the provisions of IFRS 16 do not need to be taken into account in our regulatory capital calculations.

Outlook

The Group's profitability is not directly linked to market performance and therefore the growth in our SIPP numbers provides more visibility and less volatility of earnings, combined with discipline over our controllable cost base. In 2022, we expect the combination of SIPP revenue growth, improved performance by Dunstan Thomas and a positive impact on the Group's interest revenue following recent changes, to materially improve top line growth, and we will maintain careful cost discipline whilst supporting investment in our stated growth strategies.

Dan Cowland

Chief Financial Officer

30 March 2022

Consolidated statement of comprehensive income

					Year ended 31 December 2021			Year ended 31 December 2020 - As restated*
					Total			Total
				Notes	£'000			£'000
Revenue				2	63,307			53,871
Administrative expenses					(52,205)			(44,942)
Impairment on customer portfolios						-			(344)
Policyholder investment returns					466,811			125,231
Non-participating investment contract expenses					(33,850)			(35,343)
Changes in provisions: Non-participating investment contract liabilities					(432,961)			(89,888)
Policyholder total					-			-
Operating profit						11,102			8,585
Finance income						20			83
Finance costs				6		(1,800)			(1,039)
Profit before tax						9,322			7,629
Taxation				7		(1,603)			(1,732)
Total comprehensive income for the year						7,719			5,897
Attributable to:
Equity holders of the company						7,723			5,897
Non-controlling interests						(4)			-
						7,719			5,897
Earnings per ordinary share on net profit
Basic (pence)				8	11.6			9.9
Diluted (pence)				8	11.5			9.7

The consolidated statement of comprehensive income has been prepared on the basis that all operations are continuing operations.

*The audited results for year ended 31 December 2020 have been restated to account for measurement period adjustments arising under IFRS 3 Business Combinations relating to the acquisitions of the Dunstan Thomas Group and the Talbot and Muir Group that took place in H2 2020. The changes impact administrative expenses and tax only.

Consolidated statement of financial position

							Group
Group			Notes				As at 31-Dec-21 £'000		As restated* As at 31-Dec-20 £'000
ASSETS
Non-current assets
Intangible assets			9				89,814		91,078
Investment property							1,316,468		1,208,605
Property, plant and equipment			10				8,636		7,658
Investments							2,224,965		2,072,317
							3,639,883		3,379,658
Current assets
Trade and other receivables							27,981		26,649
Cash and cash equivalents			11				410,133		430,578
Current tax asset							957		581
							439,071		457,808
Total assets							4,078,954		3,837,466
LIABILITIES
Current liabilities
Trade and other payables							20,853		18,895
Deferred income							29,960		26,995
Borrowings			12				46,832		53,533
Lease liabilities							964		672
Provisions			13				453		501
Contingent consideration			15				2,467		2,375
							101,529		102,971
Non-current liabilities
Borrowings			12				43,957		53,370
Lease liabilities							6,774		5,201
Provisions			13				178		7
Contingent consideration			15				5,199		6,537
Non-participating investment contract liabilities							3,836,211		3,585,307
Deferred tax liability							3,464		3,790
							3,895,783		3,654,212
Total liabilities							3,997,312		3,757,183
Net assets							81,642		80,283
Equity attributable to owners of the parent
Issued capital							332		330
Share premium							58,087		57,799
Equity share based payments							2,840		2,747
Treasury shares							(1,382)		(741)
Retained earnings							21,755		20,134
							81,632		80,269
Non-controlling interest							10		14
Total equity							81,642		80,283

*The audited results for year ended 31 December 2020 have been restated to account for measurement period adjustments arising under IFRS 3 Business Combinations relating to the acquisitions of the Dunstan Thomas Group and the Talbot and Muir Group that took place in H2 2020. The changes impact intangible assets, trade and other receivables, contingent consideration, and deferred tax liability.

Consolidated statement of changes in equity

	Issued capital £'000		Share premium £'000		Equity share based payments £'000		Treasury shares £'000		Retained earnings* £'000		Total* £'000		Non-controlling interest £'000		Total Equity* £'000
At 1 January 2020	271		33,659		2,313		(534)		19,730		55,439		14		55,453
Total comprehensive income for the year*	-		-		-		-		5,898		5,898		-		5,898
Share based payments	-		-		434		-		-		434		-		434
Ordinary shares bought and sold by EBT	-		-		-		(207)		-		(207)		-		(207)
Ordinary shares issued	59		24,140		-		-		-		24,199		-		24,199
Deferred tax on share based payments	-		-		-		-		(345)		(345)		-		(345)
Ordinary dividends declared and paid	-		-		-		-		(5,149)		(5,149)		-		(5,149)
At 31 December 2020 - As restated*	330		57,799		2,747		(741)		20,134		80,269		14		80,283
Total comprehensive income for the year	-		-		-		-		7,723		7,723		(4)		7,719
Share based payments	-		-		93		-		-		93		-		93
Ordinary shares bought and sold by EBT	-		-		-		(641)		-		(641)		-		(641)
Ordinary shares issued	2		288		-		-		-		290		-		290
Deferred tax on share based payments	-		-		-		-		(105)		(105)		-		(105)
Ordinary dividends declared and paid	-		-		-		-		(5,997)		(5,997)		-		(5,997)
At 31 December 2021	332		58,087		2,840		(1,382)		21,755		81,632		10		81,642

*The audited results for year ended 31 December 2020 have been restated to account for measurement period adjustments arising under IFRS 3 Business Combinations relating to the acquisitions of the Dunstan Thomas Group and the Talbot and Muir Group that took place in H2 2020.

Consolidated statement of cashflows

							Group
							Year ended 31 December
							2021   £'000		As restated* 2020 £'000
Cash flows from operating activities
Profit before tax							9,322		7,629
Adjustments for:
Depreciation							1,806		1,499
Amortisation and impairments							2,934		2,088
Finance costs							1,800		697
Share based payment expense							93		434
Fair value gains on movement in contingent consideration							(1,870)		-
Fair value gains on financial investments							(213,701)		(119,957)
Additions of financial investments							(647,479)		(631,200)
Disposals of financial investments							708,532		673,037
Fair value (gains)/losses on investment properties							(120,416)		60,751
Increase in liability for investment contracts							250,904		13,403
Changes in working capital:
Increase in trade and other receivables							(1,330)		(2,737)
Increase/(decrease) in trade and other payables							5,017		(1,105)
Taxes paid							(2,410)		(2,996)
Net cash flows (used in) / from operating activities							(6,798)		1,543
Cash flows from investing activities
Payments for intangible assets							(1,670)		(986)
Purchase of property, plant and equipment							(270)		(591)
Purchase of investment property							(92,456)		(122,449)
Purchase and sale of shares in the Group by the EBT							(641)		(207)
Receipts from sale of investment property							105,009		118,877
Net cash flows from acquisitions							(255)		(34,484)
Net cash flows received from / (used in) in investing activities							9,717		(39,840)
Cash flows from financing activities
Equity dividends paid							(5,997)		(5,149)
Net proceeds from issue of ordinary shares							290		24,199
Net (decrease)/increase in borrowings							(16,114)		29,595
Principal elements of lease payments							(762)		(934)
Interest paid							(781)		(383)
Net cash (used in)/received from  financing activities							(23,364)		47,328
Net (decrease) / increase in cash and cash equivalents							(20,445)		9,031
Cash and cash equivalents at the beginning of the year							430,578		421,547
Cash and cash equivalents at the end of the year							410,133		430,578

*The audited results for year ended 31 December 2020 have been restated to account for measurement period adjustments arising under IFRS 3 Business Combinations relating to the acquisitions of the Dunstan Thomas Group and the Talbot and Muir Group that took place in H2 2020.

1  Corporate information

Curtis Banks Group PLC ("the Company") is a public limited company incorporated and domiciled in England and Wales, whose shares are publicly traded on the AIM market of the London Stock Exchange PLC.

At 31 December 2021 the Group administered circa £37.4bn (2020: £32.4bn) of pension assets on behalf of over 80,000 (2020: 82,000) active customers. More than 800 staff are employed across its head office in Bristol and regional offices in Ipswich, Dundee, Portsmouth, Nottingham and Leeds.

The Executive Directors have proven experience in the retail savings, pensions and wealth markets and have established a business that focuses on a service-driven proposition for the administration of flexible SIPPs. The Group's core pension products are primarily distributed by authorised and regulated financial advisers, targeted towards pension savers who wish to take full advantage of the features and flexibility offered in the UK's modern and changing pension regime. Long standing relationships with key distributors result in high levels of repeat business and demonstrate satisfaction with products and services provided.

The Group is focussed on continuing to deliver value to both customers and shareholders in the years ahead.

Note: The Group includes an insurance company, Suffolk Life Annuities Limited, which provides SIPPs through non-participating individual insurance contracts. Due to Suffolk Life Annuities Limited's status as an insurance company, the consolidated results for the whole Group are required to include insurance policyholder assets and liabilities as well as the assets and liabilities and profits attributable to our shareholders. Notes 16 and 17 to this Announcement illustrate the split between policyholder and shareholder assets and liabilities and cash flows.

2  Revenue

Revenue is wholly derived from activities undertaken within the United Kingdom and comprises the following categories:

		Year ended 31 December
				2021 £'000		2020 £'000
Pension administration fees				45,091		36,856
FinTech services				9,900		4,793
Interest income				8,316		12,222
				63,307		53,871

3  Profit for the year

Profit for the year is arrived at after charging:

		Year ended 31 December
				2021 £'000		2020 £'000
Amortisation and impairment of intangible assets				2,933		2,442
Depreciation of property, plant and equipment				1,806		1,499
Auditors' remuneration:
- audit of the company and consolidated financial statements				227		177
- audit of the financial statements of the subsidiaries				397		314
- audit related assurance services				40		37

4  Operating segment reporting

The following tables present revenue and profit information regarding the Group's operating segments for the two years ended 31 December 2021 and 31 December 2020 respectively.

Year ended 31 December 2021		Pension Administration £'000		FinTech £'000		Consolidation adjustments £'000		Consolidated £'000
Revenue
External customers		53,407		9,900		-		63,307
Internal customers		-		1,349		(1,349)		-
		53,407		11,249		(1,349)		63,307
Administrative expenses
External customers		43,866		8,339		-		52,205
Internal customers		813		390		(1,203)		-
		44,679		8,729		(1,203)		52,205
Operating profit		8,728		2,520		(146)		11,102

Year ended 31 December 2020		Pension Administration £'000		FinTech £'000		Consolidation adjustments £'000		Consolidated £'000
Revenue
External customers		49,078		4,793		-		53,871
Internal customers		-		485		(485)		-
		49,078		5,278		(485)		53,871
Administrative expenses
External customers		42,231		3,055		-		45,286
Internal customers		-		485		(485)		-
		42,231		3,540		(485)		45,286
Operating profit		6,847		1,738		-		8,585

Corporate costs

The Group's operating segments are managed together as one business. Accordingly, certain corporate costs such as finance income and expenses, adjusting items, gains and losses on the disposal of assets, taxes, intangible assets and certain other assets and liabilities are not allocated to individual segments as they are managed on a group basis. Segment adjusted operating profit or loss reflects the measure of segment performance reviewed by the Board of Directors (the Chief Operating Decision Maker).

The following table presents a split of assets and liabilities of the Group's operating segments for the year ended 31 December 2021.

Corporate assets and liabilities are not allocated to individual operating segments as they are managed on a group basis. Policyholder assets and liabilities are not allocated to individual operating segments as all investment returns associated with these are due back to policyholders under non-participating investment contracts, alongside non-participating investment contract expenses and changes in provisions for non-participating investment contract liabilities, such that the impact on shareholder assets and liabilities, and profit or loss, is nil.

Year ended 31 December 2021		Pension Administration £'000		FinTech £'000		Corporate £'000		Policyholder £'000		Consolidated £'000
Total assets		65,960		9,508		70,853		3,932,633		4,078,954
Total liabilities		32,793		3,113		28,773		3,932,633		3,997,312

5  Directors and employees

	Year ended 31 December
			2021 £'000		2020 £'000
Wages and salaries			25,189		21,317
Social security costs			2,644		2,301
Other pension costs			2,327		2,015
Share-based incentive awards			364		434
			30,524		26,067
			2021		2020
The monthly average number of employees during the year was:			Number		Number
Directors			7		6
Administration			821		692
			828		698
Details of emoluments paid to the directors and key management personnel of the Group are as follows:
	Year ended 31 December
			2021 £'000		2020 £'000
Total emoluments paid to:
Directors
Wages and salaries			1,354		1,487
Social security costs			162		220
Post-employment costs			14		20
Share-based incentive awards			80		202
Other key management personnel
Wages and salaries			1,005		908
Compensation for loss of office			62		-
Social security costs			129		136
Post-employment costs			69		60
Share-based incentive awards			2		80
			2,877		3,113
Emoluments of highest paid director:
Wages and salaries			429		508
Pension contribution			6		7
			435		515

Short term employee benefits include wages and salaries. Long term employee benefits include share-based incentive awards.

6  Finance costs

	Year ended 31 December
			2021 £'000		2020 £'000
Interest payable on bank loans			702		523
Interest and finance costs on lease liabilities			209		174
Other interest expense			10		-
Total interest expense			921		697
Unwind of discount on contingent consideration relating to:
Acquisition of Dunstan Thomas			364		131
Acquisition of Talbot and Muir			515		57
Total finance costs			1,800		885

7  Taxation  

	Year ended 31 December
			2021 £'000		2020 £'000
Domestic current year tax
UK Corporation tax			1,996		1,542
Deferred tax
Origination and reversal of temporary differences			(393)		122
			1,603		1,664
Factors affecting the tax charge for the year
Profit before tax			9,322		7,429
Profit before tax multiplied by standard rate of UK Corporation tax of 19% (2020: 19%)			1,771		1,412
Effects of:
Adjustment to prior year			121		117
Non-deductible expenses			93		177
Other tax adjustments			(382)		(42)
			(168)		252
Total tax charge			1,603		1,664

8  Earnings per share

Basic earnings per share amounts are calculated by dividing net profit for the year attributable to equity holders of the Company by the weighted average number of ordinary shares outstanding during the year.

Diluted earnings per share amounts are calculated by dividing the net profit attributable to ordinary equity holders of the Company by the weighted average number of ordinary shares outstanding during the year plus the weighted average number of ordinary shares that would be issued on the conversion of all the dilutive potential ordinary shares into ordinary shares.

Changes in income or expense that would result from the conversion of the dilutive potential ordinary shares are deemed to be trivial, and therefore no separate diluted net profit is presented.

The following reflects the income and share data used in the basic and diluted earnings per share computations:

		2021 £'000		As restated* 2020 £'000
Net profit available to equity holders of the Company		7,723		5,897
		Number		Number
Weighted average number of ordinary shares:
Issued ordinary shares at start of the year		66,414,312		54,142,346
Effect of shares issued during the year		333,781		5,859,094
Effect of shares held by employee benefit trust		(316,688)		(296,835)
Basic weighted average number of shares		66,431,405		59,704,605
Effect of dilutive options		510,602		886,707
Diluted weighted average number of shares		66,942,007		60,591,312
		Pence		Pence
Earnings per share:
Basic		11.6		9.9
Diluted		11.5		9.7

*The audited results for year ended 31 December 2020 have been restated to account for measurement period adjustments arising under IFRS 3 Business Combinations relating to the acquisitions of the Dunstan Thomas Group and the Talbot and Muir Group that took place in H2 2020.

9  Intangible assets

Group

		Goodwill £'000		Brand £'000s		Customer Portfolios £'000		Computer Software £'000		Internally Generated Software £'000					Total £'000
Cost
At 1 January 2020		28,903		-		18,866		2,177		-					49,946
Arising on acquisitions*		26,829		1,595		14,939		-		5,390					48,753
Additions		-		-		-		606		380					986
At 31 December 2020		55,732		1,595		33,805		2,783		5,770					99,685
Arising on acquisitions		-		-		-		-		-					-
Additions		-		-		-		492		1,178					1,670
At 31 December 2021		55,732		1,595		33,805		3,275		6,948					101,355
Amortisation and Impairment
At 1 January 2020		-		-		5,320		1,199		-					6,519
Charge for the year*		-		66		1,190		248		240					1,744
Impairment		-		-		344		-		-					344
At 31 December 2020		-		66		6,854		1,447		240					8,607
Charge for the year		-		160		1,878		264		632					2,934
At 31 December 2021		-		226		8,732		1,711		872					11,541
Net book value
At 1 January 2020		28,903		-		13,546		978		-					43,427
At 31 December 2020 - As restated*		55,732		1,529		26,951		1,336		5,530					91,078
At 31 December 2021		55,732		1,369		25,073		1,564		6,076					89,814

Goodwill

Goodwill totalling £28,903,000 arose on the acquisition of Suffolk Life Group Limited and its subsidiaries on 25 May 2016.  Goodwill totalling £17,075,000 arose on the acquisition of Dunstan Thomas Group Limited and its subsidiaries on 3 August 2020. Goodwill totalling £9,754,000 arose on the acquisition of Talbot and Muir Limited and its subsidiaries on 30 October 2020.

The Group tests goodwill for impairment annually or more frequently if there are indications that goodwill might be impaired.  The recoverable amount of goodwill has been determined based on value-in-use calculations using a discount rate appropriate to the risk profile of the asset. These calculations use operating cash flow projections based on financial budget & forecast approved by management covering a three year period, assuming business then continues onwards after this period at a steady rate for the purpose of the analysis. No impairment was identified and sensitivity analysis was performed.

Customer Portfolios

Represent individual customer portfolios acquired through business combinations and accounted for under the acquisition method. The directors consider that there is no impairment to assets as at the year-end (2020: £344,000). The customer portfolios are being amortised over a period of 20 years.

The brought forward balance relates to the purchase by Curtis Banks Limited, a subsidiary company, of the trade and assets of Montpelier Pension Administration Services Limited on 13 May 2011, the full SIPP business of Alliance Trust Savings Limited on 18 January 2013, the full SIPP business and certain assets of Pointon York SIPP Solutions Limited on 31 October 2014, the full SIPP business of Rathbones Pension & Advisory Services Limited on 31 December 2014, a book of full SIPPs from Friends Life PLC (now Aviva PLC) on 13 March 2015 and a book of SIPPs from Hargreave Hale Limited on 10 December 2018.

The brought forward balance also includes the purchase by Suffolk Life Pensions Limited, a subsidiary company, of the trade and assets of European Pensions Management Limited on 14 July 2016, and books of SIPPs purchased from Pointon York SIPP Solutions Limited on 9 November 2012, Pearson Jones PLC on 30 April 2013, and Origen Investment Services Limited on 22 May 2013.

Lastly, the brought forward balance includes customer portfolios fair valued at £11,229,000 which arose on acquisition of Talbot and Muir Limited and its subsidiaries on 30 October 2020.

Computer Software

Computer software comprises costs that meet the recognition criteria under IAS 38 as Intangible Assets. General small computer software costs are amortised over their useful economic life of four years on a straight-line basis. Computer software costs for significant projects are amortised over an estimated UEL on a project by project basis.

Internally Generated Software

Internally generated software represents the value of principal software products owned and licensed by Dunstan Thomas. The asset includes both value arising on acquisition of Dunstan Thomas during the year ended 31 December 2020, and further development of the asset since. Internally generated software is being amortised over a period of 10 years.

Brand

Brand comprises the value of the Dunstan Thomas brand, which was obtained following acquisition of Dunstan Thomas during the year ended 31 December 2020. Dunstan Thomas has been established in the UK for over 30 years and has a strong market presence. The Group operates Dunstan Thomas as an independent brand. The value of the brand was assessed at acquisition and is being amortised over 10 years.

Research and development

The amount of research and development expenditure recognised as an expense is nil (2020: nil).

10  Property, plant and equipment

Assets held at cost

Group

	Right of use assets		Computer equipment		Office equipment, fixtures & fittings		Total
	£'000		£'000		£'000		£'000
Cost
At 1 January 2020	5,285		5,083		1,626		11,994
Arising from acquisitions	1,904		292		468		2,664
Additions	-		570		21		591
At 31 December 2020	7,189		5,945		2,115		15,249
Additions	2,627		265		5		2,897
Disposals	(579)		-		(81)		(660)
At 31 December 2021	9,237		6,210		2,039		17,486
Depreciation
At 1 January 2020	695		3,842		1,262		5,799
Arising from acquisitions	-		180		113		293
Charge for the year	763		547		189		1,499
At 31 December 2020	1,458		4,569		1,564		7,591
Arising from acquisitions	-		(14)		14		-
Charge for the year	944		611		251		1,806
Disposals	(469)		-		(78)		(547)
At 31 December 2021	1,933		5,166		1,751		8,850
Carrying value
At 1 January 2020	4,590		1,241		364		6,195
At 31 December 2020	5,731		1,376		551		7,658
At 31 December 2021	7,304		1,044		288		8,636

The total cash outflow for leases was £0.9m (2020: £0.9m).

11  Cash and cash equivalents

As at 31 December 2021 and 2020 cash and cash equivalents were as follows:

	Group			Company
	As at 31 December			As at 31 December
	2021 £'000		2020 £'000		2021 £'000		2020 £'000
Cash at bank and in hand	31,891		32,509		4,458		4,411
Deposits with credit institutions	376,856		397,518		-		-
Cash equivalents	1,386		551		-		-
Cash and cash equivalents	410,133		430,578		4,458		4,411

The Group considers potential expected credit losses on cash and cash equivalents to be insignificant.

12  Borrowings

		Group			Company
		As at 31 December			As at 31 December
		2021 £'000		2020 £'000		2021 £'000		2020 £'000
Current
Bank loans		46,832		53,533		4,507		3,852
		46,832		53,533		4,507		3,852
Non-current
Bank loans		43,957		53,370		15,399		19,904
		43,957		53,370		15,399		19,904
Total borrowings		90,789		106,903		19,906		23,756

Bank borrowings

The bank borrowings are repayable as follows:

	Group				Company
	As at 31 December				As at 31 December
		2021 £'000		2020 £'000		2021 £'000		2020 £'000
Within 1 year		46,832		53,533		4,507		3,852
Between 1 year and 5 years		34,928		42,531		15,399		19,904
After more than 5 years		9,029		10,839		-		-
		90,789		106,903		19,906		23,756

Bank borrowings of the Company are repayable between January 2021 and July 2025 and bear average coupons of 2.25% plus LIBOR per annum. After 31 December 2021, LIBOR will generally not be available, the reference rate used to calculate interest will be replaced by the Sterling Overnight Index Average (SONIA) compounded in arrear plus a credit adjustment spread. The changes are not intended to increase the interest rate compared to that under LIBOR, and the frequency, number and timing of interest payments remain the same.

Total borrowings of the Group include liabilities of £70,883,000 (2020: £83,147,000) secured by legal charge over certain properties held within non-participating investment contracts, and liabilities of £19,906,000 (2020: £23,756,000) secured on the shares of Curtis Banks Limited, Suffolk Life Pensions Limited, Suffolk Life Annuities Limited, and Dunstan Thomas Group Limited.

The company's undiscounted borrowing repayable is £4,477k within one year and £16,836k over one year.

13  Provisions

		As at 31 December
Provisions		Other provision £'000		Restructuring provision £'000		In-specie contributions provision £'000		Group Total £'000
Balance as at 1 January 2020		246		307		-		553
Amounts provided		53		-		402		455
Amounts arising on acquisitions		7		-		-		7
Amounts utilised		(292)		(170)		-		(462)
Amounts released as unutilised		(7)		(38)				(45)
Balance as at 31 December 2020		7		99		402		508
Amounts provided		211		93		11		315
Amounts utilised		-		(99)		-		(99)
Amounts released as unutilised		-		-		(93)		(93)
Balance as at 31 December 2021		218		93		320		631

Other provision

As part of the consolidation and integration exercise undertaken during the year ended 31 December 2018 management initiated a review of data records relating to commercial properties held within SIPPs administered by the Group. A provision of £500,000 was made for the estimated costs of completing this exercise.

By 31 December 2019, the Group had completed its review enabling identification of the total number of cases potentially requiring remediation, and as of 31 December 2020, the vast majority of cases had been settled. There were no material variances to the original estimate of future remaining direct costs the Group expected to potentially bear.

A contingent liability was also recorded in respect of possible remediation that might be required depending on the outcome of the review. The estimate of these possible costs at 31 December 2019 was £1,400,000. Having largely completed the review during 2021, management have been able to quantify the expected remediation costs and provision of £211,000 has been made to the remaining costs as at 31 December 2021.

Restructuring provision

During the year ended 31 December 2019, the Group progressed its strategy to deliver its Target Operating Model by deciding to centralise commercial property administration within one office location. Redundancy costs associated with this decision, relating to the year ended 31 December 2019, are included as amounts introduced to the restructuring provision for that year. A further £93,000 provision in 2021 has been made to reflect the updated estimate of the impact from the restructuring activities.

In-specie contributions provision

As previously reported, the Group has been in correspondence with HMRC regarding processes and documentation in respect of in specie contributions. HMRC have alleged that incorrect procedures were followed and is seeking to reclaim tax reliefs granted and interest thereon. This is an industry wide issue affecting other SIPP operators and has been challenged by the sector as a whole. Following a favourable ruling for HMRC in a case affecting another SIPP operator, and having taken further legal advice, the Directors now consider it more likely than not that some cost associated with this issue will be incurred by the Group.

The total exposure for affected customers is estimated at £1.1m inclusive of interest. However, in recognition of the possibility that some customers may have insufficient assets to settle their share of the cost, the Group has recognised a provision of £0.4m as at 31 December 2020. In 2021, this has been revised to £0.3m based on updated information and the movement year on year has been included in the adjusting items consistent with prior period.

14  Dividends

		Year to 31 December
				2021		2020
				£'000		£'000
Ordinary dividend declared and paid				5,997		5,149
				5,997		5,149

A final dividend in respect of the year ended 31 December 2020 of 6.5p per share was proposed by reference to audited distributable reserves as at 31 December 2020 and was paid on 4 June 2021.

An interim dividend in respect of the year ended 31 December 2021 of 2.5p per share was declared by reference to audited distributable reserves as at 31 December 2020 and paid on 12 November 2021.

15  Contingent consideration

The Group and Company has entered into certain acquisition agreements that provide for contingent consideration to be paid. These agreements and the basis of calculation of the net present value of the contingent consideration are summarised below. While it is not possible to determine the exact amount of contingent consideration (as this will depend on the performance of the acquired businesses during the period), the Group estimates the fair value of the remaining contingent consideration payable is £7.7m (2020: £8.2m).

On 3 August 2020 the Group acquired Dunstan Thomas for total maximum consideration of up to £27.5m, comprising initial consideration of £21.9m in cash plus contingent consideration of up to £5.6m payable in cash after three years post completion date if certain financial targets based on growth in earnings before interest, tax, depreciation and amortisation are met. The Group estimates the fair value of the remaining contingent consideration at 31 December 2021 to be £3.2m (2020: £4.1m) using forecasts approved by the Board covering the contingent consideration period.

On 30 October 2020 the Group acquired Talbot and Muir for total maximum consideration of up to £25.25m, comprising initial consideration of £18.0m in cash plus contingent consideration of up to £7.25m payable in cash over a two year period post completion if certain financial targets based on growth in earnings before interest, tax, depreciation and amortisation are met. The Group estimates the fair value of the remaining contingent consideration at 31 December 2021 to be £4.5m (2020: £4.1m) using forecasts approved by the Board covering the contingent consideration period.

16  Unaudited IFRS Consolidated Statement of Financial Position as at 31 December 2021 split between insurance policy holders and the Group's shareholders

		2021 £'000		2021 £'000		2021 £'000		As restated* 2020 £'000
ASSETS		Group Total		Policyholder		Shareholder		Shareholder
Non-current assets
Intangible assets		89,814		-		89,814		91,078
Investment property		1,316,468		1,316,468		-		-
Property, plant and equipment		8,636		-		8,636		7,658
Investments		2,224,965		2,224,965		-		-
		3,639,883		3,541,433		98,450		98,736
Current assets
Trade and other receivables		27,981		12,837		15,144		14,406
Cash and cash equivalents		410,133		378,241		31,892		32,509
Current tax asset		957		122		835		359
		439,071		391,200		47,871		47,274
Total assets		4,078,954		3,932,633		146,321		146,010
LIABILITIES
Current liabilities
Trade and other payables		20,853		11,398		9,455		8,269
Deferred income		29,960		14,141		15,819		14,619
Borrowings		46,832		42,325		4,507		3,852
Lease liabilities		964		-		964		672
Provisions		453		-		453		501
Contingent consideration		2,467		-		2,467		2,375
		101,529		67,864		33,665		30,288
Non-current liabilities
Borrowings		43,957		28,558		15,399		19,904
Lease liabilities		6,774		-		6,774		5,201
Provisions		178		-		178		7
Contingent consideration		5,199		-		5,199		6,537
Non-participating investment contract liabilities		3,836,211		3,836,211		-		-
Deferred tax liability		3,464		-		3,464		3,790
		3,895,783		3,864,769		31,014		35,439
Total liabilities		3,997,312		3,932,633		64,679		65,727
Net assets		81,642		-		81,642		80,283
Equity attributable to owners of the parent
Issued capital		332		-		332		330
Share premium		58,087		-		58,087		57,799
Equity share based payments		2,840		-		2,840		2,747
Treasury shares		(1,382)		-		(1,382)		(741)
Retained earnings		21,755		-		21,755		20,134
		81,632		-		81,632		80,269
Non-controlling interest		10		-		10		14
Total equity		81,642		-		81,642		80,283

17  Unaudited IFRS Consolidated Statement of Cash Flows as at 31 December 2021 split between insurance policy holders and the Group's shareholders

		2021 £'000 Group Total		2021 £'000 Policyholder		2021 £'000 Shareholder		As restated* 2020 £'000 Shareholder
Cash flows from operating activities
Profit before tax		9,322		-		9,322		7,429
Adjustments for:
Depreciation		1,806		-		1,806		1,499
Amortisation and impairments		2,934		-		2,934		2,088
Finance costs		1,800		-		1,800		885
Share based payment expense		93		-		93		434
Fair value gains on movement in contingent consideration		(1,870)		-		(1,870)		-
Fair value gains on financial investments		(213,701)		(213,701)		-		-
Additions of financial investments		(647,479)		(647,479)		-		-
Disposals of financial investments		708,532		708,532		-		-
Fair value losses on investment properties		(120,416)		(120,416)		-		-
Increase in liability for investment  contracts		250,904		250,904		-		-
Changes in working capital:
Increase in trade and other receivables		(1,330)		(593)		(737)		(1,523)
Increase/(Decrease) in trade and other payables		5,017		2,386		2,631		(477)
Taxes (paid) / refunded		(2,410)		100		(2,510)		(2,996)
Net cash flows from operating activities		(6,798)		(20,267)		13,469		7,693
Cash flows from investing activities
Payments for intangible assets		(1,670)		-		(1,670)		(986)
Purchase of property, plant & equipment		(270)		-		(270)		(591)
Purchase of investment property		(92,456)		(92,456)		-		-
Purchase and sale of shares in the Group by the EBT		(641)		-		(641)		(207)
Receipts from sale of investment property		105,009		105,009		-		42
Net cash flows from acquisitions		(255)		-		(255)		(34,484)
Net cash flows from investing activities		9,717		12,553		(2,836)		(36,380)
Cash flows from financing activities
Equity dividends paid		(5,997)		-		(5,997)		(5,149)
Net proceeds from issue of ordinary shares		290		-		290		24,199
Net increase/(decrease) in borrowings		(16,114)		(12,114)		(4,000)		12,235
Principal element of lease payments		(762)		-		(762)		(934)
Interest paid		(781)		-		(781)		(383)
Net cash flows from financing activities		(23,364)		(12,114)		(12,250)		29,968
Net increase in cash and cash equivalents		(20,445)		(19,828)		(617)		1,281
Cash and cash equivalents at the beginning of the year		430,578		398,069		32,509		31,228
Cash and cash equivalents at the end of the year		410,133		378,241		31,892		32,509

*The audited results for year ended 31 December 2020 have been restated to account for measurement period adjustments arising under IFRS 3 Business Combinations relating to the acquisitions of the Dunstan Thomas Group and the Talbot and Muir Group that took place in H2 2020.

 

END

 

 

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