Assetco Regulatory News (ASTO)

15 June 2022

AssetCo plc

("AssetCo" or the "Company")

2022 Half-year Report

 for the six months ended 31 March 2022

Key highlights

· Two acquisitions announced to expand AssetCo's listed equity platform and to build a private markets capability:

o  River and Mercantile Group ("RMG")

o  Revera Asset Management

· Progress made at underlying businesses:

o  Rize ETF - three additional strategies launched and positive net inflows in each month

o  Saracen Fund Managers - improvement in positioning and performance

o  Parmenion - strong profit growth, with growth prospects improved through broadening of investment offering

· Assets under Management: £12.2 billion (following completion of River and Mercantile acquisition)

· Proposed 13.0p interim dividend expected to be declared in Q4 2022

Campbell Fleming, Chief Executive Officer of AssetCo plc, commented:

"We have made good progress in developing AssetCo's listed equity platform, private markets capability and thematic ETF business. At the same time, Parmenion, which provides investment solutions to advisers and their clients, has expanded. The current market environment, alongside the structural shifts taking place within the asset and wealth management sector, supports a strategy of building an agile asset and wealth manager, uninhibited by legacy issues, to meet the needs of investors."

"There is still much to do, but we have the people, products and the financial strength to deliver for clients and shareholders alike. We will continue to invest in our existing businesses, assess strategic opportunities that will add value to our capabilities, and focus on generating organic growth."

For further information, please contact:

For further details, visit the website, www.assetco.com

Ticker: AIM: ASTO.L

CHAIRMAN'S STATEMENT

The six months ended 31 March 2022 was a period of building and growing, following a transformational financial year for AssetCo, during which the Company was transformed into an asset and wealth management business and agreed to acquire interests in four businesses.

There are numerous structural shifts taking place within the asset and wealth management industry driven by changing investor needs, demographics, an evolving approach to savings products, the use of technology and digitalisation, and a continuing pressure on fees. These are presenting both challenges and opportunities. AssetCo is focused on identifying and building on a limited number of growth opportunities and in unlocking value from the repositioning of more traditional asset managers. Of particular relevance are high conviction active equities, ESG/sustainable strategies and thematic investing, and private markets capabilities.

Financials

The Income Statement for the six months ended 31 March 2022 shows revenue of £1.3 million (31 March 2021: nil) and a loss before taxation of £2.6 million (31 March 2021: profit £22.3 million), which is in line with our expectations as we continue to build the business. The profit in 2021 principally arose from the final payment received from the successful litigation claim against Grant Thornton.

Net assets at 31 March 2022 were £55.6 million (31 March 2021: £31.1 million). This uplift in net assets includes the investment gain in RMG shares of £1.2 million, where the Company held 5.85% of the issued equity share capital prior to the acquisition and the goodwill recognised on investments in Rize ETF and Saracen totalling £19.8 million.

Building Active Equity and Private Markets platforms

In January 2022, the Company announced an offer to acquire River and Mercantile Group by way of a scheme of arrangement for effectively £95.3 million, to be satisfied by the issue of around 6 million new AssetCo shares. The offer was conditional on the sale of River and Mercantile's UK Solutions business and a subsequent £190 million return of capital to shareholders, both of which have now occurred. The acquisition received overwhelming support from both River and Mercantile and AssetCo shareholders at their respective General Meetings and has received regulatory approval from the Financial Conduct Authority. Completion of the acquisition and the issue of the new AssetCo shares takes place today.

River and Mercantile has an established and well-respected equities team that manages around £2.7 billion of Assets under Management (AuM). Importantly, the acquisition also provides the foundation stone to building a private markets business given its infrastructure investment team.

Significant progress has already been made in terms of right-sizing the River and Mercantile business post the sale of the UK Solutions business. Material cost efficiencies have been identified, with a large proportion being implemented. It is hoped that, due to the actions being taken both on cost and building new revenue, River and Mercantile can be returned to profitability by early 2023.

Separately, in February 2022 the Company announced the acquisition of Revera Asset Management for £2.8 million, to be satisfied through a mix of new AssetCo shares and cash. Revera has approximately £103 million of AuM and is based in Edinburgh. The acquisition of Revera is conditional on regulatory approval from the Financial Conduct Authority, which is expected shortly. The proposed acquisition of Revera, along with that of Saracen Fund Managers last year, demonstrates our desire to have a strong presence in Scotland, given the talent and expertise located there.

Subject to regulatory approval and completion, River and Mercantile, Saracen Fund Managers and Revera will form the Company's listed equity platform, offering a range of UK, smaller companies, European and Global capabilities. Individual teams will continue to employ their existing investment processes, but will benefit from sharing research, ESG analysis, distribution and marketing resources. This should result in a more efficient and cost effective platform.

Progress of existing businesses

The last six months has been a challenging period for financial markets. Despite this, all of the Company's existing businesses have made good progress.

Since the Company acquired Rize in July 2021, the business has successfully launched three new thematic strategies - Digital Payments Economy, Pet Care and Emerging Market Internet and Ecommerce. The business now offers eight ETFs with total AuM of $512.9 million and, despite a challenging market environment, recorded net inflows in each of the six months to 31 March 2022.

During the period under review, Parmenion, a B2B investment and advisory platform to the UK wealth and IFA sector, broadened the range of managed portfolio solutions that are available on its platform. It has added strategies managed by LGT Wealth Management, Tatton Investment Management and Dimensional. The platform's AuM was £9.4 billion at 31 March 2022, and has been relatively robust given the volatility in financial markets, but should see growth over the calendar year.

In May 2022, Parmenion published its annual report and accounts for the 12 months ended 31 December 2021, which provided a good overview of the business and its potential. Year-on-year management and custody fees grew from £29.6 million to £35.6 million - an increase of 21%. There was a significant increase in underlying profit to £4.6 million. AuM grew by 17.2%, from £8.2 billion to £9.6 billion. Parmenion partners with over 1,500 advisers providing investment solutions to over 80,000 underlying clients.

Following the acquisition of Saracen in July 2021, the business has been relaunched with an updated brand. At 31 March 2022, AuM was £113.2 million.

Capital structure and dividend policy

We intend to write to shareholders shortly with proposals to instigate a sub-division of the Company's ordinary shares of 10p each ("Ordinary Shares") on a basis to be determined. Such a sub-division would increase the number of Ordinary Shares in issue and the Board believes this would reduce the Company's share price to a level where smaller sized dealings in Ordinary Shares would be more efficient. It should also improve the liquidity, spread and marketability of the Ordinary Shares to a wider group of investors.

The Board recognises the importance some investors attach to receiving a regular income from their shareholdings. It is, therefore, expected that the Company declares a 13.0p interim dividend in Q4 2022. Thereafter, the Company intends to adopt a progressive dividend policy.

Board and Corporate Broker

I would like to welcome Jonathan Dawson to the Board further to the completion of the acquisition of River and Mercantile. Jonathan was previously Chairman of River and Mercantile. He started his career in the Ministry of Defence before joining Lazard, the investment bank, where he spent over 20 years. He left Lazard in 2005 and co-founded Penfida Limited, the leading independent corporate finance advisor to pension funds. Jonathan's experience and expertise will be a valuable addition to the Board.

In April, the Company announced the appointment of Numis as Nominated Adviser and Joint Broker. The Company also appointed Panmure Gordon as Joint Broker. The Board and I are grateful to the team at Arden Partners, our former Nominated Adviser, for their advice and hard work over the years and wish them well for the future.

Outlook

The Company continues to make good progress in executing on its strategy. The Company is also in sound financial shape and following completion of the acquisition of, and return of capital from, River and Mercantile, the Group will have net cash of more than £45 million.

The acquisition of River and Mercantile results in the Group having investments in businesses with total AuM of £12.2 billion, with genuine strength in active equities and thematic strategies, together with an embryonic private markets business. Our aim in relation to the integration of the businesses is to develop an operating model which will improve scalability, drive material cost synergies and strengthen distribution.

Martin Gilbert

Chairman

15 June 2022

AssetCo plc

Consolidated Income Statement

for the six month ended 31 March 2022

AssetCo plc

Consolidated Statement of Comprehensive Income

for the six month ended 31 March 2022

AssetCo plc

Consolidated Statement of Financial Position

as at 31 March 2022

AssetCo plc

Consolidated Cash Flows

for the six month ended 31 March 2022

AssetCo plc

Consolidated Statement of Changes in Equity

for the six month ended 31 March 2022

NOTES FORMING PART OF THE INTERIM FINANCIAL STATEMENTS

1. General information and basis of presentation

AssetCo Plc ("AssetCo" or the "Company") is a public limited company incorporated and domiciled in England and Wales. The address of its registered office is Singleton Court Business Park, Wonastow Road, Monmouth, Monmouthshire, NP25 5JA.

The Group's principal activity is the development of an asset and wealth management business.

The financial information in the Half-year Report has been prepared using the recognition and measurement principles of the international accounting standards in conformity with the requirements of the Companies Act 2006 ("IFRS"). The principal accounting policies used in preparing the Half-year Report are those the Company expects to apply in its financial statements for the year ending 30 September 2022 and are unchanged from those disclosed in the Annual Report and Financial Statements for the year ended 30 September 2021 with the exception that following the acquisition of 30% of Parmenion Capital Partners LLP on 1 October 2021 the Group has adopted IFRS 10 in respect of accounting for Associated undertakings.

The financial information for the six months ended 31 March 2022 and the six months ended 31 March 2021 is unaudited and does not constitute the Group's statutory financial statements for those periods. The comparative financial information for the full year ended 30 September 2021 has, however, been derived from the audited statutory financial statements for that period. A copy of those statutory financial statements has been delivered to the Registrar of Companies.

While the financial figures included in this Half-year Report have been computed in accordance with IFRSs applicable to interim periods, this Half-year Report does not contain sufficient information to constitute an interim financial report as that term is defined in IAS 34.

The financial statements have been presented in sterling to the nearest thousand pounds (£'000), except where otherwise indicated.

2. Going concern

At the time of approving the financial statements, the Directors have a reasonable expectation that the Company and Group have adequate resources to continue in operational existence for the foreseeable future. Accordingly, they continue to adopt the going concern basis in preparing the financial statements.

3. Segmental reporting

The core principle of IFRS 8 'Operating segments' is to require an entity to disclose information that enables users of the financial statements to evaluate the nature and financial effects of the business activities in which the entity engages and the economic environments in which it operates. Segment information is therefore presented in respect of the company's commercial competencies, Active Specialists, High-Growth Thematics and Digital Platforms and Head Office Costs.

All revenues are earned in the UK. The Directors consider that the chief operating decision maker is the Board.

The amounts provided to the Board with respect to net assets are measured in a manner consistent with that of the financial statements. The Company is domiciled in the UK and also operated out of a branch in UAE. Unallocated comprises the assets and liabilities of AssetCo, including the UAE business with Head Office costs identified separately.

The segment information provided to the Board for the reportable segments is as follows:

4. Other income

The case against Grant Thornton was concluded successfully in the financial year 2021. The total award came to £30.515 million, of which £4.597 million was reflected in the 2020 full year accounts, as it had been awarded by the Courts irrespective of the outcome of any appeal. Other income shown in these accounts represents the balance of the Court's award, less the success fee of 15% of claim proceeds excluding costs.

5. Investment income

6. Adjusted profit

The Group has grown rapidly since shareholder approval was given to change its strategy in April 2021. Because of AssetCo's relatively low market capitalisation at the outset of its growth journey it has required two re-admission circulars. Prior to the change in strategy the Group had successfully concluded the long-running litigation against its former auditor, Grant Thornton, resulting in a significant settlement which, net of related costs, gave rise to an Other Income figure of £22.388 million.

These items, together with a new incentivisation scheme for management in the form of the LTIP, have perhaps masked the underlying progress of the business's results. Accordingly, we have set out above the Group's pre-tax result adjusted for the three items mentioned.

7. Income tax charge

8. Earnings per share

Basic earnings per share is calculated by dividing the profit attributable to equity owners of the parent by the weighted average number of Ordinary Shares in issue during the period. 

Diluted earnings per share is calculated by adjusting the weighted average number of Ordinary Shares outstanding assuming conversion of all dilutive potential Ordinary Shares. The Company has one category of dilutive potential Ordinary Shares, being shares allocated to the LTIP pool.

9. Investments accounted for using the equity method

On 1 October 2021 the Group acquired a 30% stake in Parmenion Capital Partners LLP for a purchase price of £21.9 million. The investment is accounted for using the equity method and a reconciliation of the cost of investment and accumulated results of Parmenion is set out below:

10. Financial assets at fair value through profit and loss

At 31 March 2022 the Group held 5,000,000 shares in River and Mercantile Group Plc and the fair value at that date is recognised here. The six months to 31 March 2022 shows a fair value gain of £1.2 million (see note 5). The Group has also received dividends amounting to £390,000 in the period (see note 5). As we report in the Chairman's statement and note 12 we have today announced the completion of the acquisition of River and Mercantile Group Plc so from today's date the investment will be accounted for as a business combination.

 11. Cash generated by operations

12. Post balance sheet event

On 25 January 2022 the Company announced a formal bid to acquire the 94.15% of River and Mercantile Group Plc which was not already owned, with River and Mercantile shareholders entitled to receive 0.07392 New AssetCo shares for each River and Mercantile share held. As referred to in the Chairman's statement the acquisition has completed today. The effective acquisition cost is £46 million.

13. Electronic communications

This Half-year Report is available on the Company's website www.assetco.com . News updates, regulatory news and financial statements can be viewed and downloaded from the Company's website, www.assetco.com. Copies can also be requested, in writing, from The Company Secretary, AssetCo plc, Singleton Court Business Park, Wonastow Road, Monmouth, Monmouthshire NP25 5JA. The Company is not proposing to bulk print and distribute hard copies of the Half-year Report unless specifically requested by individual shareholders.