Interim Results

Thu, 27th May 2021 07:00

RNS Number : 9495Z

AJ Bell PLC

27 May 2021

 

27 May 2021

AJ Bell plc

Interim results for the six months ended 31 March 2021

 

AJ Bell plc ('AJ Bell' or the 'Company'), one of the UK's largest investment platforms, today announces interim results for the six-month period ended 31 March 2021.

Performance overview

Revenue up 21% to £73.9 million (HY20: £60.9 million)

Profit before tax (PBT) up 39% to £31.6 million (HY20: £22.7 million)

PBT margin up 5.6 percentage points to 42.8% (HY20: 37.2%)

Balance sheet strengthened, with net assets up 8% in the period to £117.9 million

Interim dividend of 2.46 pence per share, in line with the Company's dividend policy (HY20: 1.50 pence per share)

Total customers increased by a record 51,492 in the period, up 32% over the last 12 months and 17% in the first half of the current financial year

Total net inflows of £3.1 billion (HY20: £2.1 billion), driven by platform net inflows of £3.3 billion (HY20: £2.5 billion)

Assets under administration (AUA) up 35% over the last 12 months and 15% in the first half of the current financial year, closing at £65.2 billion

Assets under management (AUM) up 180% over the last 12 months and 75% in the first half of the current financial year, closing at £1.4 billion

Customer retention rate remained high at 94.8% (FY20: 95.5%)

 

Andy Bell, Chief Executive Officer at AJ Bell, commented:

"We have delivered a strong financial performance in the first half of the year, driven by record levels of new customers, inflows and dealing activity, with revenue up 21% and profit before tax up 39%.

"The average age of our new direct-to-consumer customers was 38 in the first half of the year, five years younger than the average of the wider customer base. Average portfolio values remained high at £79,000. Our record number of new customers has been helped by the low interest rate environment, as savers seek higher returns on cash held in savings accounts and Cash ISAs.

"Our advised platform proposition remains very popular with advisers, who appreciate the wider adoption of digital processes to support their remote working and the highly competitive charging structure. The recent acquisition of Adalpha will accelerate the development of a new mobile-focused platform to enhance our advised proposition and enable advisers to service a wider range of clients.

"Our investment business has performed extremely well, supporting both our advised and direct-to-consumer platform propositions, with total AUM increasing by 75% in the first half of the year. The recent additions of the AJ Bell Responsible Growth fund and Responsible Managed Portfolio service to our suite of investment solutions have proved very popular with customers and advisers.

"We have a resilient business model, our financial position is strong, we continue to grow market share and the outlook for the business remains positive."

 

Financial highlights

 

Six months ended 31 March 2021

Six months ended 31 March 2020

Change

Revenue

£73.9 million

£60.9 million

21%

Revenue per £AUA*

 24.0bps

 23.2bps

0.8bps

PBT

£31.6 million

£22.7 million

39%

PBT margin

42.8%

37.2%

5.6ppts

Diluted earnings per share

6.26 pence

4.36 pence

44%

Interim dividend per share

2.46 pence

1.50 pence

64%

 

Non-financial highlights

 

Six months ended 31 March 2021

Year ended

30 September 2020

Change

Number of retail customers

346,797

295,305

17%

- Platform

332,276

281,094

18%

- Non-platform

14,521

14,211

2%

 

 

 

 

AUA*

£65.2 billion

£56.5 billion

15%

- Platform

£58.0 billion

£49.7 billion

17%

- Non-platform

£7.2 billion

£6.8 billion

6%

 

 

 

 

AUM*

£1.4 billion

£0.8 billion

75%

 

 

 

 

Customer retention rate

94.8%

95.5%

(0.7ppts)

 

*see Alternative Performance Measures below

 

Contacts:

AJ Bell

 

Shaun Yates, Head of Investor Relations

+44 (0) 7522 235 898

Charlie Musson, Head of PR

+44 (0) 7834 499 554

 

Analyst presentation details

A recorded Q&A with Andy Bell (CEO) and Michael Summersgill (CFO) discussing these results will be available on our website (ajbell.co.uk/investor-relations) along with an accompanying investor presentation from 07.00 BST today. Management will be hosting a Q&A video call for sell-side analysts at 09:15 BST today. Those wishing to participate should register their interest with Shaun Yates by emailing ir@ajbell.co.uk.

 

Forward-looking statements

The interim results contain forward-looking statements that involve substantial risks and uncertainties, and actual results and developments may differ materially from those expressed or implied by these statements. These forward-looking statements are statements regarding AJ Bell's intentions, beliefs or current expectations concerning, among other things, its results of operations, financial condition, prospects, growth, strategies, and the industry in which it operates. By their nature, forward-looking statements involve risks and uncertainties because they relate to events and depend on circumstances that may or may not occur in the future. These forward-looking statements speak only as of the date of these interim results and AJ Bell does not undertake any obligation to publicly release any revisions to these forward-looking statements to reflect events or circumstances after the date of the interim results.

 

Chief Executive Officer's report

 

We delivered a strong financial performance in the first half of the year, driven by record levels of new customers, inflows and dealing activity. As more and more people look to take control of their financial future, whether directly or via an adviser, we remain focused on providing a high-quality service at a low cost through our award-winning, easy-to-use platform.

 

Overview

 

We delivered strong organic growth in the six-month period to 31 March 2021, with revenue increasing by 21% to £73.9m (HY20: £60.9m) and profit before tax (PBT) rising by 39% to £31.6m (HY20: £22.7m). Retail customers grew by a record 51,492 during the period to 346,797 (FY20: 295,305), an increase of 17%. The increase was driven by significant growth in the platform business, with our retention rate remaining high at 94.8%.

 

We delivered record net AUA inflows of £3.1bn (HY20: £2.1bn) in the first half of the year, with AUA closing at £65.2bn (FY20: £56.5bn). The strong performance across global markets during the period led to favourable market movements of £5.6bn.

 

We operate a profitable, well-capitalised and highly cash-generative business model. We have not participated in any of the Government's financial support schemes during the COVID-19 pandemic and none of our people were furloughed. I am pleased to announce that we will pay an interim dividend of 2.46 pence per share.

 

Strategic update

 

We remain focused on our core purpose, to help people to invest. Fundamental to this is our ability to innovate and continuously enhance our platform propositions to support the investment needs of our growing customer base.

 

Advised proposition

 

Customer numbers grew by 9,598 during the period to 118,509 (FY20: 108,911), an increase of 9%. Net inflows of £1.7bn in the period resulted in closing AUA of £41.1bn.

 

During the period we continued to support advisers online with the increasing use of digital processes and virtual engagement channels, whilst providing our very popular 'Off the Road' webinars remotely.

 

Financial advisers increasingly need a variety of solutions to meet the diverse range of clients' needs and we continue to develop, adapt and simplify our propositions for the benefit of our customers and their advisers.

 

The introduction of our Retirement Investment Account (RIA), our simplified pension proposition, designed to meet the needs of advised customers with pension portfolios under £250,000, continues to be well received following its launch last year. The addition of the RIA to our existing product range ensures we are highly competitive on service and price across all client scenarios and portfolio sizes.

 

In March 2021, we successfully completed the acquisition of the Adalpha group of companies. Adalpha is currently developing a mobile-focused platform proposition, which will be known as Touch by AJ Bell. This will complement our advised proposition and further broaden our offering to financial advisers, helping them to service a wider base of clients.

 

D2C (direct-to-consumer) proposition

 

Customer numbers grew by 41,584 during the period to 213,767 (FY20: 172,183), an increase of 24%. Net inflows of £1.6bn in the period, resulted in closing AUA of £16.9bn.

 

We continue to see an increase in applications from younger and less experienced investors, as a growing number of people look to take control of their financial future and seek to generate better returns in a low-interest-rate environment. AJ Bell Youinvest offers our customers an award-winning platform proposition, with access to global stock markets and a range of investment solutions to suit different risk appetites.

 

High levels of customer engagement have continued throughout the period, with a higher number of customers dealing via our mobile app. We have seen a year-on-year increase in dealing activity and increased demand for dealing in US equities, across our different account types.

 

We continue to develop our online dealing service and, in response to customer feedback, launched live portfolio pricing in January 2021 allowing users to view real-time prices for UK shares in their portfolio, during market hours.

 

As I outlined last year, the launch of our Cash savings hub in September 2020 means we can now cater for our customers' cash saving requirements as well as their investment needs. Our customers have access to a range of competitive notice and fixed-term savings accounts from UK authorised banks. Our Cash savings hub offers customers greater choice and flexibility, making it easy to generate better returns from long-term cash savings. We anticipate growing levels of customer engagement as interest rates increase over the longer term.

 

AJ Bell Investments

 

We have seen significant growth across our range of investment solutions, with total AUM increasing by 75% to £1.4bn in the first half of the year.

 

This growth was driven by increased demand for our simple, transparent, low-cost investment solutions from both advisers and D2C customers, as we maintain a strong three-year track record of performance across our range of active and passive portfolios.

 

We continued to see an increasing level of demand for investment solutions which place a greater emphasis on environmental, social and governance (ESG) factors. In October 2020, we launched the AJ Bell Responsible Growth fund, a well-diversified portfolio favouring companies with strong ESG credentials. The fund provides a low-cost, easy-to-understand responsible investing option for both our advised and D2C customers. This was supplemented by the launch of the AJ Bell Responsible MPS range in March 2021, providing advisers with a highly-competitive ESG solution for their clients. It is managed by our investment team, with the objective of long-term growth, combined with a wider social and environmental benefit.

 

Customer services and technology

 

We continue to invest in technology to enhance our platform propositions and operational resilience, in line with the growth of our business. 

 

Following Board approval in September 2020, we commenced our transition to a hybrid cloud-based technology framework. This will provide a more efficient environment to accelerate the delivery of our change programme to support our strategic aim to become the easiest platform to use.

 

Our secure and scalable platform has been designed to facilitate the continued growth in the business and during the first six months we welcomed a record number of new retail customers onto our platform and executed a record number of deals on behalf of our customers.

 

During the period, and as referenced in our latest Annual Report, the announcement of two significant events on a single day in November 2020, the development of a vaccine for COVID-19 and the outcome of the US election, led to an exceptional spike in activity across the market. This resulted in intermittent service issues over a few hours on that day. We subsequently carried out an extensive and detailed root-cause analysis and have taken a number of actions which have prevented any recurrence. Additionally, we have also accelerated work on our operational resilience strategy to further enhance the resilience of our platform.

 

We have continued to operate successfully within the COVID-19 environment and our customer services and operations teams have worked incredibly hard to meet the needs of our growing customer base.

 

People and culture

 

Our investment in technology has enabled the vast majority of our people to work remotely since the start of the pandemic and has resulted in a new and successful way of working. None of our staff were furloughed and we have continued to recruit new talent to support the continued growth in the business.

 

We have maintained our training and personal development programmes and have put systems in place to ensure employees feel secure and supported both in the office and whilst working at home. We recognise the benefits of the current working patterns and will consider the continued adoption of a hybrid approach to office and home working over the longer-term, as we emerge from current restrictions.

 

Our Wage War on COVID campaign continues to distribute funds to support those in need as a result of the pandemic. As part of our AJ Bell Easter Eats campaign, volunteers from our Manchester office supported FareShare, the UK's largest food redistribution charity, to distribute over 4,800 food hampers to local families. The food hampers also included a holiday activity pack from children's mental health charity Place2Be, which was awarded the naming rights of the North Stand at the AJ Bell Stadium in November 2020.

 

Regulatory developments

 

During the period we have continued to engage with the Government and the FCA on changes to the legislative and regulatory framework that we operate within.

 

The low level of retirement savings remains a significant challenge and now, more than ever, we need the Government to promote stability in the UK pensions system so that people can invest for their own retirement with confidence. We are encouraged that no changes were made to the tax relief available for pension contributions in the recent Budget and believe the focus should be firmly on encouraging more people to save for their financial future. 

 

In February 2021, I co-wrote an open letter to HM Treasury, which called for a Government consultation into retail investors' access to participate in UK IPOs. Individual investors are currently disadvantaged in favour of city institutions, and, despite growing demand, were excluded from 93% of new share listings between 2017 and 2020. Our platform propositions are well equipped to provide quick and easy access to IPOs for retail investors and I look forward to further discussion with the Treasury.

 

In line with the final phase of the FCA's Retirement Outcomes Review, investment pathways were introduced in February 2021 for non-advised customers entering drawdown. We support the intention of investment pathways to encourage investors to engage with their portfolios, however we remain sceptical that default investments will resolve the issues around investors holding cash in their pension portfolios.

 

The FCA remains focused on ensuring the UK financial sector is operationally resilient for consumers, firms and financial markets. In March 2021, we welcomed the publication of the Policy Statement 'PS21/3 Building Operational Resilience', which outlines a series of either new or enhanced requirements that firms need to meet ahead of 31 March 2022.

 

Board appointments

 

I am delighted to announce two Board appointments during the period. Baroness Helena Morrissey and Evelyn Bourke have been appointed as Non-Executive Directors and will join the Board on 1 July 2021. Helena will join the Board as Chair Designate and will succeed Les Platts, who will have served on the Board for 13 years. Les will step down as Chair at the Company's next Annual General Meeting, which is expected to take place in January 2022.

 

Helena and Evelyn bring with them a wealth of knowledge and experience in the financial services sector. Their appointments will further strengthen the diversity and skillset of our Board as we progress our ambitious growth plans.

 

Dividend

 

Our strong balance sheet and robust liquidity position support both ongoing investment in the business and continuing returns to shareholders. The Board therefore recommends an interim dividend of 2.46 pence per share.

 

The Board recognises the importance that our investors place on AJ Bell's progressive dividend history and remains committed to this and our stated dividend policy for future dividend distributions.

 

Outlook

 

At AJ Bell, our core purpose is to help people to invest and we continue to develop our platform propositions and range of simple investment solutions to make investing easier for our customers.

 

We have delivered a strong set of results in the first half of the year, with our award-winning, competitively-priced propositions attracting record levels of new customers and AUA inflows. The platform market continues to grow at pace in both the advised and D2C segments, and there is a growing awareness of the importance of investing for the future. Our secure, scalable and resilient platform ensures we continue to be well placed to capitalise on the resulting opportunities. 

 

We expect to be operating in a low-interest-rate environment for the foreseeable future, as the UK and global economies recover from the COVID-19 pandemic. While we expect to see some normalisation of trading activity, our balanced revenue model provides resilience during times of market volatility and low interest rates.

 

The future for the business remains positive. We have a robust business model, with a track record of delivering strong organic growth and increasing market share.

  

 

Andy Bell

Chief Executive Officer

 

Financial review

 

The Group delivered strong growth in the first half of the year, with revenue up 21% from £60.9m to £73.9m and PBT increasing by 39% from £22.7m to £31.6m. The strong performance was primarily due to the continued success of our platform propositions.

 

Business performance

 

Customers

 

Customer numbers increased by a record 51,492 during the period to a total of 346,797. This growth has been driven by our platform propositions, with particularly strong customer acquisition on our D2C platform. In addition, our platform customer retention rate remained high at 94.8% (FY20: 95.5%).

 

 

 

 

 

 

 

Six months ended

Six months ended

 

 

31 March

31 March

 

 

2021

2020

Platform

 

332,276

248,074

Non-platform

 

14,521

14,105

Total

 

346,797

262,179

 

Assets Under Administration (AUA)

 

Six months ended 31 March 2021

 

 

Advised

D2C

Total

 

 

 

platform

platform

platform

Non-platform

Total

 

£bn

£bn

£bn

£bn

£bn

As at 1 October 2020

36.3

13.4

49.7

6.8

56.5

Inflows

2.8

2.2

5.0

0.1

5.1

Outflows

(1.1)

(0.6)

(1.7)

(0.3)

(2.0)

Net inflows/(outflows)

1.7

1.6

3.3

(0.2)

3.1

Market and other movements

3.1

1.9

5.0

0.6

5.6

As at 31 March 2021

41.1

16.9

58.0

7.2

65.2

 

Six months ended 31 March 2020

 

 

Advised

D2C

Total

 

 

 

platform

platform

platform

Non-platform

Total

 

£bn

£bn

£bn

£bn

£bn

As at 1 October 2019

33.8

11.1

44.9

7.4

52.3

Inflows

2.4

1.4

3.8

-

3.8

Outflows

(0.9)

(0.4)

(1.3)

(0.4)

(1.7)

Net inflows/(outflows)

1.5

1.0

2.5

(0.4)

2.1

Market and other movements

(3.9)

(1.5)

(5.4)

(0.7)

(6.1)

As at 31 March 2020

31.4

10.6

42.0

6.3

48.3

  

We continued to see significant growth in the level of AUA inflows across both our advised and D2C platform propositions, with total platform inflows increasing by 32% to £5.0bn, compared to £3.8bn in the same period last year.

 

The £0.2bn non-platform net outflows in the period were primarily due to the loss of an institutional stockbroking client and were in line with our expectations for the period.

 

The strong performance across global markets contributed £5.6bn to asset values with AUA closing at £65.2bn at 31 March 2021, an overall increase of 15% in the period.

 

Financial performance

 

Revenue

 

 

 

 

 

 

Unaudited

Six months ended

Unaudited

Six months ended

Audited

Year ended

 

31 March

31 March

30 September

 

2021

2020

2020

 

£000

£000

£000

Recurring fixed

14,050

13,395

26,618

Recurring ad valorem

37,917

35,978

72,422

Transactional

21,930

11,503

27,709

Total

73,897

60,876

126,749

 

Revenue increased by 21% to £73.9m (HY20: £60.9m). We have three categories of revenue, these being: recurring fixed fees, recurring ad valorem fees and transactional fees.

 

Revenue from recurring fixed fees saw an increase of 5% to £14.1m (HY20: £13.4m), primarily as a result of increased pension administration revenue from our advised platform customers.

 

Recurring ad valorem revenue grew by 5% to £37.9m (HY20: £36.0m). The key driver of the growth in ad valorem revenue was the increase in average AUA, which was partially offset by a lower interest rate earned on customer cash balances in the period.

 

Revenue from transactional fees grew by 91% to £21.9m (HY20: £11.5m). This increase was driven by the strong growth in D2C customers, elevated levels of customer dealing throughout the period and a higher proportion of deals placed in international equities.

 

Our overall revenue margin increased by 0.8bps from 23.2bps to 24.0bps in the period, primarily due to the increased transactional revenues noted above.

 

Administrative expenses

 

 

 

 

 

Unaudited

Six months ended

Unaudited

Six months ended

Audited

Year ended

 

31 March

31 March

30 September

 

2021

2020

2020

 

£000

£000

£000

Distribution

5,402

5,517

10,245

Technology

11,482

9,784

20,027

Operational and support

24,978

21,115

45,646

CSR initiative

-

1,595

1,595

Total

41,862

38,011

77,513

 

Administrative expenses increased by 10% to £41.9m (HY20: £38.0m). We have three core categories of administrative expenses: distribution, technology, and operational and support.

 

Distribution costs remained broadly flat at £5.4m, with a higher number of customers acquired by word of mouth and increased brand awareness.

 

Technology costs increased by 17% to £11.5m (HY20: £9.8m). This increase reflects the continued investment in the scalability and resilience of the platform, to support our continuing growth.

 

Operational and support costs increased by 18% to £25.0m (HY20: £21.1m). Excluding the costs associated with the customer dealing activity referenced in the revenue section, the underlying increase was 5% in support of the longer-term growth of the business.

 

Our 2020 share-based payment expense included a one-off charge of £1.6m relating to the CSR initiative announced in December 2019.

 

While we do not anticipate a material change in our underlying cost base, administrative expenses in the second half of the year are expected to include additional costs in the region of £3m relating to Adalpha and then £3m-£4m in FY22.

 

Profit before tax (PBT)

 

PBT rose to £31.6m (HY20: £22.7m), an increase of 39% compared with the prior period, and our PBT margin increased to 42.8% (HY20: 37.2%). This was due to the continued growth in the business and higher revenue margins.

 

Tax

 

The effective rate of tax for the period was 18.7% (HY20: 21.2%), slightly lower than the standard rate of UK Corporation tax of 19.0%, as a result of allowable deductions relating to employee share schemes.

 

Earnings per share

 

Basic earnings per share increased by 44% to 6.29 pence and diluted earnings per share (DEPS) increased by 44% to 6.26 pence. The increase in DEPS was higher than the 39% increase in PBT due to a change in the effective tax rate in the period, as discussed above.

 

Financial position

 

Capital and liquidity

 

The Group's financial position remains strong, with net assets totalling £117.9m (HY20: £93.3m) at 31 March 2021 and a return on assets of 22% (HY20: 19%).

 

We operate a highly cash-generative business, with a short working-capital cycle that ensures PBT is quickly converted into cash. Our period end balance sheet included cash balances of £80.6m.

 

Our regulatory capital requirements are continually kept under review, incorporating comprehensive stress and scenario testing, and are formally reviewed at least annually. We have maintained a healthy surplus over our regulatory capital requirement throughout the period.

 

Acquisition of Adalpha

 

On 18 March 2021, AJ Bell plc acquired Adalpha, which is currently developing a simplified mobile-focused platform proposition for financial advisers.

 

Given the proximity of the acquisition to the reporting date, the acquisition has had minimal impact on the Group's first half results. Costs incurred in the period relate to the costs incurred in the development of the simplified advised platform proposition.

 

On acquisition, the Group recognised an intangible asset of £1.1m, relating to the development of the simplified advised platform proposition, and goodwill of £3.3m. Further details can be found within note 7.

 

Dividend

 

The Board has recommended an interim dividend of 2.46 pence per share (HY20: 1.50 pence per share), representing 40% of the FY20 total ordinary dividend of 6.16 pence per share, in line with our dividend policy.

 

The recommended interim dividend reflects the financial strength of the business, as evidenced by our well-capitalised, profitable and highly cash-generative business model.

 

 

Michael Summersgill

Chief Financial Officer

 

 

Responsibility statement

Directors' responsibility statement

We confirm that to the best of our knowledge:

(a) the condensed set of financial statements has been prepared in accordance with International Accounting Standard 34 'Interim Financial Reporting' (IAS 34) as adopted by the European Union (EU); and

(b) the Interim management report includes a fair review of the information required by:

(i) 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 facing the Group for the remaining six months of the financial year; and

(ii) 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 Group during that period; and any changes in the related-party transactions described in the last annual report that could do so.

By order of the Board:

Christopher Bruce Robinson

Company Secretary

26 May 2021

 

 

Independent review report to AJ Bell plc

Introduction

 

We have been engaged by the Company to review the condensed set of financial statements in the half-yearly financial report for the six months ended 31 March 2021, which comprises the condensed consolidated income statement, the condensed consolidated statement of financial position, the condensed consolidated statement of changes in equity, the condensed consolidated statement of cash flows and the related explanatory notes.

 

We have read the other information contained in the half-yearly financial report and considered whether it contains any apparent misstatements or material inconsistencies with the information in the condensed set of financial statements.

 

Directors' responsibilities

 

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

 

As disclosed in note 2, the annual financial statements of the group are prepared in accordance with International Financial Reporting Standards adopted pursuant to Regulation (EC) No 1606/2002 as it applies in the European Union. The condensed set of financial statements included in this half-yearly financial report has been prepared in accordance with International Accounting Standard 34, ''Interim Financial Reporting'', as adopted 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 Financial Reporting Council for use in the United Kingdom. A review of interim financial information consists of making enquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with International Standards on Auditing (UK) and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion.

 

Conclusion

 

Based on our review, nothing has come to our attention that causes us to believe that the condensed set of financial statements in the half-yearly financial report for the six months ended 31 March 2021 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.

 

Use of our report

 

Our report has been prepared in accordance with the terms of our engagement to assist the Company in meeting its responsibilities in respect of half-yearly financial reporting in accordance with the Disclosure Guidance and Transparency Rules of the United Kingdom's Financial Conduct Authority and for no other purpose. No person is entitled to rely on this report unless such a person is a person entitled to rely upon this report by virtue of and for the purpose of our terms of engagement or has been expressly authorised to do so by our prior written consent. Save as above, we do not accept responsibility for this report to any other person or for any other purpose and we hereby expressly disclaim any and all such liability.

 

 

BDO LLP

Chartered Accountants

London, UK

26 May 2021

BDO LLP is a limited liability partnership registered in England and Wales (with registered number OC305127).

 

Condensed consolidated income statementFor the six months ended 31 March 2021

 

Notes

Unaudited Six months ended 31 March 2021£000

Unaudited Six months ended 31 March 2020 £000

Audited Year ended

30 September 2020£000

Revenue

 

73,897

60,876

126,749

Administrative expenses

 

(41,862)

(38,011)

(77,513)

Operating profit

 

32,035

22,865

49,236

Investment income

 

6

219

162

Finance costs

 

(398)

(433)

(848)

Profit before tax

 

31,643

22,651

48,550

Tax expense

8

(5,926)

(4,794)

(9,721)

Profit for the period attributable to:

 

 

 

 

Equity holders of the parent company

 

25,717

17,857

38,829

Earnings per ordinary share:

 

 

 

 

Basic (pence)

9

6.29

4.38

9.51

Diluted (pence)

9

6.26

4.36

9.47

 

All revenue, profit and earnings are in respect of continuing operations.

 

There were no other components of recognised income or expense in any of the periods presented and consequently no statement of other comprehensive income has been presented.

 

Condensed consolidated statement of financial positionAs at 31 March 2021

Assets

Non-current assets

Notes

Unaudited 31 March 2021 £000

Unaudited 31 March 2020 £000

Audited 30 September 2020£000

Goodwill

 

6,991

3,660

3,660

Other intangible assets

10

4,350

2,189

1,986

Property, plant and equipment

11

3,426

3,387

3,224

Right-of-use assets

11

13,650

15,421

14,522

Deferred tax asset

 

797

551

1,003

 

 

29,214

25,208

24,395

Current assets

 

 

 

 

Trade and other receivables

 

39,727

37,172

30,561

Cash and cash equivalents

 

80,596

60,816

86,384

 

 

120,323

97,988

116,945

Total assets

 

149,537

123,196

141,340

Liabilities

 

 

 

 

Current liabilities

 

 

 

 

Trade and other payables

 

(11,577)

(10,178)

(12,368)

Current tax liabilities

 

(1,200)

(32)

(17)

Lease liabilities

 

(1,404)

(1,416)

(1,323)

Provisions

12

(1,570)

(1,095)

(1,595)

 

 

(15,751)

(12,721)

(15,303)

Non-current liabilities

 

 

 

 

Lease liabilities

 

(14,292)

(15,674)

(15,022)

Provisions

12

(1,549)

(1,550)

(1,549)

 

 

(15,841)

(17,224)

(16,571)

Total liabilities

 

(31,592)

(29,945)

(31,874)

Net assets

 

117,945

93,251

109,466

Equity

 

 

 

 

Share capital

13

51

51

51

Share premium

 

8,647

8,383

8,459

Own shares

 

(1,037)

(1,147)

(1,147)

Retained earnings

 

110,284

85,964

102,103

Total equity

 

117,945

93,251

109,466

The condensed consolidated financial statements were approved by the Board of Directors and authorised for issue on 26 May 2021 and signed on its behalf by:

Michael SummersgillChief Financial Officer

AJ Bell plc

Company registered number: 04503206

 

Condensed consolidated statement of changes in equityFor the six months ended 31 March 2021

 

Share capital £000

Share premium £000

Own shares £000

Retained earnings £000

Total equity £000

Balance at 1 October 2020

51

8,459

(1,147)

102,103

109,466

 

 

 

 

 

 

Total comprehensive income for the period:

 

 

 

 

 

Profit for the period

-

-

-

25,717

25,717

Transactions with owners, recorded directly in equity:

 

 

 

 

 

Issue of shares

-

188

-

-

188

Dividends paid

-

-

-

(19,070)

(19,070)

Equity-settled share-based payment transactions

-

-

-

1,656

1,656

Deferred tax effect of share-based payment transactions

-

-

-

(228)

(228)

Tax relief on exercise of share options

-

-

-

216

216

Employee share transfer

-

-

110

(110)

-

Total transactions with owners

-

188

110

(17,536)

(17,238)

Balance at 31 March 2021

51

8,647

(1,037)

110,284

117,945

 

 

Share capital £000

Share premium £000

Own shares £000

Retained earnings £000

Total equity £000

Balance at 1 October 2019

51

7,667

(1,147)

79,136

85,707

Total comprehensive income for the period:

 

 

 

 

 

Profit for the period

-

-

-

17,857

17,857

Transactions with owners, recorded directly in equity:

 

 

 

 

 

Issue of shares

-

716

-

-

716

Dividends paid

-

-

-

(13,601)

(13,601)

Equity-settled share-based payment transactions

-

-

-

2,352

2,352

Deferred tax effect of share-based payment transactions

-

-

-

(623)

(623)

Tax relief on exercise of share options

-

-

-

843

843

Total transactions with owners

-

716

-

(11,029)

(10,313)

Balance at 31 March 2020

51

8,383

(1,147)

85,964

93,251

 

Condensed consolidated statement of cash flowsFor the six months ended 31 March 2021

Cash flows from operating activities

Notes

Unaudited Six months ended 31 March 2021£000

Unaudited Six months ended 31 March 2020£000

Audited Year ended 30 September 2020£000

Profit for the period

 

25,717

17,857

38,829

Adjustments for:

 

 

 

 

Investment income

 

(6)

(219)

(162)

Finance costs

 

398

433

848

Income tax expense

 

5,926

4,794

9,721

Depreciation and amortisation

 

2,035

1,807

3,574

Share-based payment expense

 

1,277

2,352

3,364

(Decrease)/increase in provisions and other payables

 

(25)

-

499

Loss on disposal of property, plant and equipment

 

-

1

1

Profit on disposal of right-of-use assets

 

(3)

-

-

Increase in trade and other receivables

 

(9,154)

(14,236)

(7,644)

(Decrease)/increase in trade and other payables

 

(2,535)

295

2,485

Cash generated from operations

 

23,630

13,084

51,515

Income tax paid

 

(4,766)

(6,720)

(11,827)

Interest expense paid

 

(1)

-

-

Net cash flows from operating activities

 

18,863

6,364

39,688

Cash flows from investing activities

 

 

 

 

Purchase of other intangible assets

10

(1,413)

(63)

(201)

Purchase of property, plant and equipment

11

(732)

(489)

(856)

Purchase of right-of-use assets

 

-

(9)

-

Acquisition of subsidiary, net of cash acquired

7

(2,561)

-

-

Proceeds from sale of property, plant and equipment

 

-

2

3

Interest received

 

6

218

180

Net cash used in investing activities

 

(4,700)

(341)

(874)

Cash flows from financing activities

 

 

 

 

Payments of principal in relation to lease liabilities

 

(672)

(956)

(1,708)

Payments of interest on lease liabilities

 

(397)

(433)

(848)

Proceeds from issue of shares

 

188

716

792

Dividends paid

14

(19,070)

(13,601)

(19,733)

Net cash used in financing activities

 

(19,951)

(14,274)

(21,497)

Net (decrease)/increase in cash and cash equivalents

 

(5,788)

(8,251)

17,317

Cash and cash equivalents at beginning of period

 

86,384

69,067

69,067

Cash and cash equivalents at end of period

 

80,596

60,816

86,384

 

Notes to the condensed consolidated financial statementsFor the six months ended 31 March 2021

 

1 General information

 

AJ Bell plc ('the Company') is the Parent Company of the AJ Bell group of companies (together 'the Group'). The Group provides investment administration, dealing and custody services. The Company is a public limited company which is listed on the Main Market of the London Stock Exchange and incorporated and domiciled in the United Kingdom. The Company's number is 04503206 and the registered office is 4 Exchange Quay, Salford Quays, Manchester, M5 3EE.

 

2 Basis of preparation

 

The condensed consolidated interim financial statements ('interim financial statements') have been prepared in accordance with International Accounting Standard 34 'Interim Financial Reporting' (IAS 34) as adopted by the European Union (EU). They do not include all of the information and disclosures required for full annual financial statements and therefore should be read in conjunction with the AJ Bell plc Annual Report and financial statements for the year ended 30 September 2020, which were prepared under International Financial Reporting Standards (IFRSs) as adopted by the EU and the Companies Act 2006.

 

The interim financial statements have been prepared on the historical cost basis and are presented in pounds sterling, which is the currency of the primary economic environment in which the Group operates. All amounts have been rounded to the nearest thousand, unless otherwise stated.

 

The financial information contained in the interim financial statements does not constitute statutory accounts within the meaning of section 434 of the Companies Act 2006. The financial information for the year ended 30 September 2020 has been derived from the audited financial statements of AJ Bell plc for that year, which have been reported on by the Company's auditor and delivered to the registrar of companies. The report of the auditor was:

 

(i) unqualified, and

(ii) did not include a reference to any matters to which the auditors drew attention by way of emphasis without qualifying their report, and

(iii) did not contain a statement under section 498 (2) or (3) of the Companies Act 2006.

 

The consolidated financial statements of the Group for the year ended 30 September 2020 are available to view online at ajbell.co.uk/investor-relations.

 

Going concern

 

The Group's forecasts and objectives, taking into account a number of potential changes in trading performance, show that the Group should be able to operate at adequate levels of both liquidity and capital for the foreseeable future. The Directors have performed a number of stress tests, covering a significant reduction in equity market values and negative Bank of England base interest rates with a further Group-specific, idiosyncratic stress relating to a scenario whereby prolonged IT issues cause a reduction in customers. These provide assurance that the Group has sufficient capital and liquidity to operate under stressed conditions.

 

As a consequence, the Directors believe that the Group has sufficient resources to continue in operation for a period of at least 12 months from the date of approval of these interim financial statements. Accordingly, they have continued to adopt the going concern basis in preparing the interim financial statements.

 

Significant accounting policies

 

The accounting policies adopted by the Group in these interim financial statements are consistent with those applied by the Group in its consolidated financial statements for the year ended 30 September 2020, except for:

 

· an update to the share-based payment accounting policy (see below).

 

The following amendments and interpretations became effective during the year. Their adoption has not had any significant impact on the Group.

 

 

 

Effective from

IFRS 16

Covid-19-Related Rent Concessions (Amendment)

1 June 2020

IFRS 9, IAS 39 and IFRS 7

Interest Rate Benchmark Reform (Amendments)

1 January 2020

IAS 1 and IAS 8

Definition of Material (Amendments)

1 January 2020

IFRS 3

Definition of a Business (Amendments)

1 January 2020

Amendments to References to the Conceptual Framework in IFRS Standards

1 January 2020

 

The Group has not early adopted any other standard, interpretation or amendment that has been issued but is not yet effective.

 

 

Effective from

IFRS 17

Insurance Contracts

1 January 2023

 

The accounting policies have been updated as follows.

 

The share-based payment accounting policy has been updated to include a new equity-settled share-based payment arrangement introduced during the period, as described in note 15.

Share-based payments

The Group operates a number of share-based payment arrangements for its employees and non-employees. These generally involve an award of share options (equity-settled share-based payments) which are measured at the fair value of the equity instrument at the date of grant.

 

The share-based payment arrangements have conditions attached before the beneficiary becomes entitled to the award. These can be performance and/or service conditions.

 

The total cost is recognised, together with a corresponding increase in the equity reserves, over the period in which the performance and/or service conditions are fulfilled. Costs relating to the development of internally generated intangible assets are capitalised in accordance with IAS 38. The cumulative cost recognised for equity-settled transactions at each reporting date until the vesting date reflects the extent to which the vesting period has expired and management's estimate of shares that will eventually vest. At the end of each reporting period, the entity revises its estimates of the number of share options expected to vest based on the non-market vesting conditions. It recognises any revision to original estimates in the income statement, with a corresponding adjustment to equity reserves.

 

No cost is recognised for awards that do not ultimately vest, except for equity-settled transactions for which vesting is conditional upon a market or non-vesting condition. These are treated as vested irrespective of whether or not the market or non-vesting condition is satisfied, provided that all other performance and/or service conditions are satisfied.

 

The cost of equity-settled awards is determined by the fair value at the date when the grant is made using an appropriate valuation model or the market value discounted to its net present value, further details of which are given in note 15. The expected life applied in the model has been adjusted based on management's best estimate for the effects of non-transferability, exercise restrictions and behavioural considerations. Following the listing of AJ Bell plc in December 2018, share price volatility has been estimated as the average volatility applying to a comparable group of listed companies.

 

3 Accounting judgements and estimates

 

The preparation of the interim financial statements requires management to make judgements, estimates and assumptions that affect the reported amounts of assets and liabilities, income and expenses. The estimates and associated assumptions are based on historical experience and other factors that are believed to be reasonable under the circumstances, the results of which form the basis of making judgements about carrying value of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates.

 

The judgements, estimates and assumptions made by the Group in these interim financial statements are consistent with those applied by the Group in its consolidated financial statements for the year ended 30 September 2020.

 

4 Seasonality of operations

 

There is a peak in the Group's operational activity around the tax year end. This impacts the financial results primarily in March and April, either side of the interim period-end. As such, no significant seasonal fluctuations affect the first or second half of the Group's financial year in isolation.

 

5 Segmental reporting

 

It is the view of the Directors that the Group has a single operating segment: investment services in the advised and D2C space administering investments in SIPPs, ISAs and General Investment/Dealing Accounts. Details of the Group's revenue, results and assets and liabilities for the reportable segment are shown within the condensed consolidated income statement and condensed consolidated statement of financial position.

 

The Group operates in one geographical segment, being the UK.

 

Due to the nature of its activities, the Group is not reliant on any one customer or group of customers for the generation of revenues.

 

6 Revenue

 

The analysis of the consolidated revenue is disclosed within the Financial Review. The total revenue for the Group has been derived from its principal activities undertaken in the UK.

 

7 Business combinations

 

On 18 March 2021, AJ Bell plc acquired the entire issued share capital of Whiztec Limited and its wholly-owned subsidiary Ad Alpha Solutions Limited ('Adalpha'). Adalpha is an early-stage start-up business currently developing a simplified, mobile-focused platform proposition for advisers.

 

The acquisition will complement the Group's existing adviser platform business, AJ Bell Investcentre, and will broaden the offering to financial advisers and help them service a wider base of clients.

 

The consideration for the acquisition of Whiztec Limited was in the form of an earn-out arrangement, conditional upon completion of a number of operational and financial milestones. The maximum consideration payable is £16.5m and will be satisfied by the issue of shares in AJ Bell plc. This consideration is accounted for as post-combination remuneration in accordance with IFRS 3, for which further details are included within note 15.

 

Whiztec Limited acquired Ad Alpha Solutions Limited on the same day for consideration of £2.6m, comprising £2.6m cash together with a share-for-share exchange for the management team for nominal value shares in Whiztec Limited.

 

The purchase has been accounted for as a business combination under the acquisition method in accordance with IFRS 3. The fair value of the identifiable assets and liabilities of Adalpha as at the date of acquisition was as follows:

 

Book value

Fair value adjustments

Fair value on acquisition

 

£000

£000

£000

Intangible assets

-

1,142

1,142

Deferred tax liability (arising on intangible assets)

-

(217)

(217)

 

-

925

925

Property, plant and equipment

37

-

37

Trade and other receivables

12

-

12

Cash and cash equivalents

56

-

56

Total assets

105

925

1,030

Trade and other payables

(1,744)

-

(1,744)

Total liabilities

(1,744)

-

(1,744)

Total net liabilities acquired

 

 

 

(714)

Goodwill

 

 

3,331

Total cost of acquisition

 

 

2,617

 

Satisfied by:

 

 

 

 

 

 

£000

Cash consideration

 

 

2,617

Cash outflow on acquisition:

 

 

 

 

 

 

£000

Cash paid for the subsidiary

 

 

2,617

Less: cash acquired

 

 

(56)

Net cash outflow

 

 

2,561

 

Acquisition costs of £344,000 are recognised within administrative expenses in the condensed consolidated income statement.

 

The goodwill is attributable to the skills and technical talent of the assembled workforce and synergies expected to arise following the acquisition. It has been allocated to the Group's single CGU.

 

In addition to the goodwill recognised, the development of the simplified platform proposition obtained through the acquisition met the requirements to be separately identifiable under IFRS 3. A deferred tax liability of £217,000 has been provided in relation to these fair value adjustments.

 

None of the acquired intangible assets or goodwill is expected to be deductible for tax purposes.

 

Adalpha has not yet started to trade and therefore has not contributed any revenue to the Group but has contributed a net loss of £273,000 for the period from acquisition to 31 March 2021.

 

If the acquisition had occurred on 1 October 2020, Group revenue and Group profit after tax for the half-year ended 31 March 2021 would have been an estimated £73.9m and £25.2m respectively.

 

8 Taxation

Tax recognised in the condensed consolidated income statement:

 

 

Unaudited Six months ended 31 March 2021£000

Unaudited Six months ended 31 March 2020£000

Audited Year ended 30 September 2020£000

Current taxation

 

 

 

UK Corporation tax

6,167

4,793

9,830

Adjustment to current tax in respect of prior periods

-

-

21

 

6,167

4,793

9,851

Deferred taxation

 

 

 

Origination and reversal of temporarydifferences

(249)

(14)

(132)

Adjustment in respect of prior periods

8

21

23

Effect of changes in tax rates

-

(6)

(21)

 

(241)

1

(130)

Total tax expense

5,926

4,794

9,721

 

Corporation tax for the six months ended 31 March 2021 has been calculated at 19% (six months ended 31 March 2020: 19%; year ended 30 September 2020: 19%), representing the average annual effective tax rate expected for the full year, applied to the estimated assessable profit for the six-month period.

 

In addition to the amount charged to the income statement, certain tax amounts have been recognised directly in equity as follows:

 

 

Unaudited Six months ended 31 March 2021£000

Unaudited Six months ended 31 March 2020£000

Audited Year ended 30 September 2020£000

 

 

 

 

Deferred tax relating to share-based payments

228

623

304

Current tax relief on exercise of share options

(216)

(843)

(811)

 

12

(220)

(507)

 

The charge for the period can be reconciled to the profit per the condensed consolidated income statement as follows:

 

 

Unaudited Six months ended 31 March 2021£000

Unaudited Six months ended 31 March 2020£000

Audited Year ended 30 September 2020£000

 

 

 

 

Profit before tax

31,643

22,651

48,550

 

 

 

 

UK Corporation tax at 19% (six months ended 31 March 2020: 19%; year ended 30 September 2020: 19%)

6,012

4,304

9,225

Tax effects of:

 

 

 

Expenses not deductible for tax purposes

(98)

471

448

Change in recognised deductible temporary difference

4

4

25

Effect of tax rate changes to deferred tax

-

(6)

(21)

Adjustments in respect of prior periods

8

21

44

Total tax expense

5,926

4,794

9,721

Effective tax rate

18.7%

21.2%

20.0%

 

Deferred tax has been recognised at 19% (six months ended 31 March 2020: 19%; year ended 30 September 2020: 19%), being the rate at which the deferred tax assets are expected to reverse.

 

The UK Corporation tax charge is due to increase to 25% from 1 April 2023. As the tax rate increase had not been substantively enacted at the reporting date the deferred tax asset was not re-measured.

 

9 Earnings per share

 

Basic earnings per share is calculated by dividing the profit attributable to the owners of the parent company by the weighted average number of ordinary shares, excluding own shares, in issue during the period.

 

Diluted earnings per share is calculated by adjusting the weighted average number of shares to assume exercise of all potentially dilutive share options.

 

The calculation of basic and diluted earnings per share is based on the following data:

 

 

Unaudited Six months ended 31 March 2021£000

Unaudited Six months ended 31 March 2020£000

Audited Year ended 30 September 2020£000

Earnings

 

 

 

Earnings for the purposes of basic and diluted EPS being profit attributable to equity holders of the parent company

25,717

17,857

38,829

 

 

Number

Number

Number

Number of shares

 

 

 

Weighted average number of ordinary shares for the purposes of basic EPS in issue during the period

409,058,991

407,943,894

408,342,783

Effect of potentially dilutive share options

1,685,073

1,664,706

1,722,941

Weighted average number of ordinary shares for the purposes of fully diluted EPS

410,744,064

409,608,600

410,065,724

 

Unaudited

Unaudited

 

 

Six months

Six months

Audited

 

ended

ended

Year ended

 

31 March

31 March

30 September

 

2021

2020

2020

Earnings per share

Pence

Pence

Pence

Basic

6.29

4.38

9.51

Diluted

6.26

4.36

9.47

10 Other intangible assets

 

Key operating systems

£000

Contractual customer relationships

£000

Computer software

£000

Total

£000

Cost

 

 

 

 

As at 1 October 2019

8,657

2,135

5,234

16,026

Additions

50

-

13

63

As at 31 March 2020

8,707

2,135

5,247

16,089

Additions

-

-

138

138

As at 30 September 2020

8,707

2,135

5,385

16,227

Additions

379

-

1,413

1,792

Disposals

-

-

(554)

(554)

Arising on acquisition

1,142

-

-

1,142

As at 31 March 2021

10,228

2,135

6,244

18,607

Amortisation

As at 1 October 2019

6,240

2,135

5,198

13,573

Amortisation charge

304

-

23

327

As at 31 March 2020

6,544

2,135

5,221

13,900

Amortisation charge

310

-

31

341

As at 30 September 2020

6,854

2,135

5,252

14,241

Amortisation charge

309

-

261

570

Eliminated on disposal

-

-

(554)

(554)

As at 31 March 2021

7,163

2,135

4,959

14,257

Carrying amount

 

 

 

 

As at 31 March 2021

3,065

-

1,285

4,350

As at 30 September 2020

1,853

-

133

1,986

As at 31 March 2020

2,163

-

26

2,189

 

As part of the acquisition of Adalpha in the period, £1,142,000 of intangibles met the requirements to be separately identifiable under IFRS 3.

 

Additions include an amount of £379,000 relating to internally generated assets for the period to 31 March 2021 (six months ended 31 March 2020: £nil; year ended 30 September 2020: £nil).

 

The net carrying amount of key operating systems include £1,521,000 relating to assets in development which are currently not amortised.

 

11 Changes in capital expenditure

 

During the six months ended 31 March 2021, the Group acquired plant and equipment with a cost of £732,000 (six months ended 31 March 2020: £489,000; year ended 30 September 2020: £856,000).

 

During the six months ended 31 March 2021, the Group recognised additional right-of-use assets with a cost of £36,000 (six months ended 31 March 2020: £9,000; year ended 30 September 2020: £9,000).

 

12 Provisions

 

Office

dilapidations

£000

Other

provisions

£000

Total

£000

As at 1 October 2019

1,550

1,095

2,645

As at 31 March 2020

1,550

1,095

2,645

Provisions used

(1)

-

(1)

Additional provisions

-

500

500

As at 1 October 2020

1,549

1,595

3,144

Provisions used

-

(33)

(33)

Additional provisions

-

8

8

As at 31 March 2021

1,549

1,570

3,119

Current liabilities

-

1,570

1,570

Non-current liabilities

1,549

-

1,549

 

 

Office dilapidations

The Group is contractually obliged to reinstate its leased properties to their original state and layout at the end of the lease terms. The office dilapidations provision represents management's best estimate of the present value of costs which will ultimately be incurred in settling these obligations.

 

Other provisions

 

The other provisions relate to the settlement of an operational tax dispute and the costs associated with defending a legal case. There is some uncertainty regarding the amount and timing of the outflows required to settle the obligations; therefore a best estimate has been made by assessing a number of different outcomes considering the potential areas and time periods at risk and any associated interest. The timings of the outflows are uncertain but the Group expects that settlement will be within the next 12 months.

 

13 Share capital and share premium

 

 

Unaudited Six months ended 31 March 2021 

Unaudited Six months ended 31 March 2020 

Audited Year ended 30 September 2020 

Issued, fully-called and paid:

£

£

£

Ordinary shares of 0.0125p each

51,308

51,250

51,271

Issued, fully-called and paid:

Number

Number

Number

Number of ordinary shares of 0.0125p each

410,471,093

410,003,449

410,168,330

 

All ordinary shares have full voting and dividend rights.

 

The following share transactions have taken place during the period:

 

Transaction type

Share class

Number of shares

Share premium £000

Exercise of CSOP options

Ordinary shares of 0.0125p each

302,763

188

 

Own shares

 

As at 31 March 2021, the Group held 1,238,733 own shares in the AJ Bell Employee Benefit Trust (31 March 2020: 1,369,428; 30 September 2020: 1,369,428). During the period, 130,695 EIP options were exercised and issued from the AJ Bell Employee Benefit Trust.

 

14 Dividends

 

The following dividends were declared and paid by the Company during the period:

 

Unaudited Six months ended 31 March 2021£000

Unaudited Six months ended 31 March 2020£000

Audited Year ended 30 September 2020£000

Final dividend for the year ended 30

 

 

 

September 2019 of 3.33p per share

-

13,601

13,601

Interim dividend for the year ended 30

 

 

 

September 2020 of 1.50p per share

-

-

6,132

Final dividend for the year ended 30

 

 

 

September 2020 of 4.66p per share

19,070

-

-

Ordinary dividends paid on equity shares

19,070

13,601

19,733

 

An interim dividend of 2.46 pence per share was approved by the Board on 26 May 2021 and is payable on 2 July 2021 to shareholders on the register at the close of business on 11 June 2021. The ex-dividend date will be 10 June 2021. This dividend has not been included as a liability as at 31 March 2021.

 

AJ Bell Employee Benefit Trust, which held 1,238,733 ordinary shares (31 March 2020: 1,369,428; 30 September 2020: 1,369,428) in AJ Bell plc at 31 March 2021, has agreed to waive all dividends.

 

15 Share-based payments

 

The Group operates the same equity-settled share-based payment arrangements as reported at 30 September 2020 with the exception of the below earn-out arrangement introduced during the period.

 

Earn-out arrangement

 

The acquisition of Adalpha during the period has given rise to an earn-out arrangement whereby share awards will be made should a number of operational and financial milestones, relating to AUA targets and the development of a simplified proposition for financial advisers, be met. The awards will be equity-settled and will vest in several tranches in line with the agreed milestones, expiring on 30 September 2026.

 

Under the terms of the acquisition agreement, shares will be awarded to eligible employees conditional upon the successful completion of certain performance milestones and their continued employment with the Group during the vesting period. There is no exercise price attached to the share award and the contractual life outstanding at the end of the period was five years (2020: nil). There were no share awards in the period (2020: £nil).

 

The fair value of the share awards is estimated as at the date of grant calculated by reference to the quantum of the earn-out payment for each performance milestone and an estimated time to completion, discounted to net present value. The performance condition included within the arrangement is not considered a market condition and therefore the expected vesting will be reviewed at each reporting date.

 

During the period the Group recognised a total share-based payment expense in the income statement of £1,277,000 (six months ended 31 March 2020: £2,352,000; year ended 30 September 2020: £3,364,000), and capitalised £379,000 (six months ended 31 March 2020: £nil; year ended 30 September 2020: £nil) within the statement of financial position.

 

16 Principal risks and uncertainties

 

We continually review the principal risks and uncertainties facing the Group that could pose a threat to the delivery of our strategic objectives. The Board believes that the nature of the principal risks and uncertainties that may have a material effect on the Group's performance over the remainder of the financial year remain unchanged from those presented within the 2020 annual report and accounts.

 

17 Related-party transactions

 

The Group has a related-party relationship with its Directors and members of the Executive Management Board ('the key management personnel'). There were no changes to the related-party relationships or significant transactions during the financial period that would materially affect the financial position or performance of the Group, other than the acquisition of Adalpha disclosed in note 7. All other transactions are consistent in nature with the disclosure in note 29 of the consolidated financial statements for the year ended 30 September 2020.

 

18 Subsequent events

 

There have been no material events occurring between the reporting date and the date of approval of these interim financial statements.

 

19 Cautionary statement

 

The interim results for the six months ended 31 March 2021 contain forward-looking statements that involve substantial risks and uncertainties, and actual results and developments may differ materially from those expressed or implied by these statements. These forward-looking statements are statements regarding AJ Bell's intentions, beliefs or current expectations concerning, among other things, its results of operations, financial condition, prospects, growth, strategies and the industry in which it operates. By their nature, forward-looking statements involve risks and uncertainties because they relate to events and depend on circumstances that may or may not occur in the future. These forward-looking statements speak only as of the date of these interim results and AJ Bell does not undertake any obligation to publicly release any revisions to these forward-looking statements to reflect events or circumstances after the date of these interim results.

 

Alternative performance measures

Within the interim report and condensed financial statements, various Alternative Performance Measures (APM) are referred to. APMs are not defined by International Financial Reporting Standards and should be considered together with the Group's IFRS measurements of performance. We believe APMs assist in providing greater insight into the underlying performance of the Group and enhance comparability of information between reporting periods. The table below states those which have been used, how they have been calculated and why they have been used.

 

APMs

How they have been calculated

Why they have been used

 

 

 

Assets Under Administration (AUA)

AUA is the value of assets for which AJ Bell provides either an administration, custodian or transactional service.

AUA is a measurement of the growth of the business and is the primary driver of ad valorem revenue, which is the largest component of Group revenue.

 

 

 

Revenue per £AUA

Revenue per £AUA is the total revenue generated during the year expressed as a percentage of the average AUA in the year.

Revenue per £AUA provides a simple measurement to facilitate comparison of our charges with our competitors.

 

 

 

Assets Under Management (AUM)

AUM is the value of assets for which AJ Bell provides a management service.

AUM is a measurement of the growth of the business and is a driver of ad valorem revenue.

 

 

Definitions

 

 

Adalpha

Acquisition of Whiztec Limited and its wholly-owned subsidiaries

AUA

Assets Under Administration

AUM

Assets Under Management

BAYE

Buy As You Earn Plan

Board, Directors

The Board of Directors of AJ Bell plc

BPS

Basis points

Company

AJ Bell plc

CSOP

Company Share Option Plan

CSR

Corporate Social Responsibility

Customer retention rate

Relates to platform customers

DEPS

Diluted Earnings per Share

D2C

Direct-to-Consumer

EIP

Executive Incentive Plan

EMB

Executive Management Board

EPS

Earnings per Share

ESG

Environmental, Social and Governance

FCA

Financial Conduct Authority

FTSE

Financial Times Stock Exchange

GIA

General Investment Account

HMRC

Her Majesty's Revenue and Customs

IAS

International Accounting Standard

IFPR

Investment Firm Prudential Regime

IFRS

International Financial Reporting Standards

IPO

Initial Public Offering

ISA

Individual Savings Account

MPS

Managed Portfolio Service

Own Shares

Shares held by the Group to satisfy future incentive plans

PBT

Profit before tax

Plc

Public Limited Company

PPTS

Percentage Points

RIA

Retirement Investment Account

SIPP

Self-Invested Personal Pension

TPDFM

Third-Party Discretionary Fund Managers

UK

United Kingdom

VAT

Value Added Tax

       

 

Company information

Executive Directors

Andy Bell

 

Michael Summersgill

 

 

Non-Executive Directors

Les Platts

 

Simon Turner

 

Laura Carstensen

 

Eamonn Flanagan

 

 

Company Secretary

Christopher Bruce Robinson

 

 

Company number

04503206

 

 

Registered office

4 Exchange Quay

 

Salford Quays

 

Manchester

 

M5 3EE

 

 

Auditor

BDO LLP

 

55 Baker Street

 

London

 

W1U 7EU

 

 

Principal banker

Bank of Scotland plc

 

1 Lochrin Square

 

92-98 Fountainbridge

 

Edinburgh

 

EH3 9QA

 

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