CBP.L Regulatory News (CBP)

18 March 2020

Curtis Banks Group plc

("Curtis Banks", the "Group")

Final Results for 12 months to 31 December 2019

Growth across all our financial metrics and substantial operational progress

Curtis Banks Group PLC, one of the UK's leading SIPP providers, is pleased to announce its final results for the 12 months to 31 December 2019.

Highlights

· Operating Revenue increased by 6% to £48.9m (2018: £46.1m)

· Adjusted Profit before tax[1] increased by 11% to £13.4m (2018: £12.1m)

· Adjusted Operating Margin2 increased to 28.1% (2018: 27.1%)

· Profit before tax increased by 8% to £10.9m (2018: £ 10.1m)

· Adjusted diluted EPS increased by 10% to 19.37p (2018: 17.63p) 3

· Gross organic growth in own SIPP numbers of 7% (2018: 9%) with total including third party administered now 76,541 (2018: 77,730)

· Assets under Administration increased by 17.3% to £29.1bn (2018: £24.8bn)

· Proposed final dividend of 6.50p (2018: 6.00p) making a full year payment of 9.00p (2018: 8.00p), an increase of 12.5%

Highlights and key performance indicators for the year include:

Commenting on the results, Will Self, CEO of Curtis Banks, said:

"These results demonstrate growth across all our financial metrics during a year in which we made important changes to the executive team and demonstrated the positive results of operational changes made in recent years.

"The highlights of our financial results show disciplined growth and an improving operating margin. During the year, we continued to invest in the operations of our business. A key highlight has been the launch of Your Future SIPP which has been a success with enormously positive feedback received from the adviser community.

"2020 began well with an improvement in the wider market, but the current COVID-19 outbreak has created uncertainty as to the outlook for the remainder of the financial year. It is clear that there will be a level of impact over the coming months, including operational disruption, but we have contingency plans in place for the business and the health of our employees and clients are our main priority."

Analyst and Investor Presentation:

There will be a presentation for analysts and investors via webcast on Wednesday 18th March 2020 at 9.30am. The webcast details are as follows:

URL: https://zoom.us/j/819422756

Meeting ID: 819 422 756

Dial in details for audio only: +44 203 051 2874

Contact:

Chairman's Statement

I am pleased to report the Curtis Banks Group results for the year ended 31 December 2019. These results disclose growth across all our financial metrics during a year in which we made important changes to the executive team and demonstrate the positive results of operational changes made in recent years. I am delighted by the way our new management team, with Will Self as CEO, Dan Cowland as CFO and Jane Ridgley as COO, work together to run the business.

The highlights of our financial results show disciplined growth and further improvement in the operating margin. Operating revenue has increased by 6% from £46.1m to £48.9m compared to the previous financial year, with adjusted profit before tax increasing by 11% from £12.1m to £13.4m. Our adjusted operating margin increased to 28.1% (2018: 27.1%) and profit before tax increased by 8% to £10.9m. Fully diluted earnings per share on these adjusted operating results (after tax) amounted to 19.37p per share (2018: 17.63p).

During the year, we have continued to invest in the operations of our business. The launch of Your Future SIPP has been a success with enormously positive feedback received from the adviser community. As stated in our interim results, we continue to see the benefits of the investment in our new sales structure, with 226 new adviser relationships delivering new business in the year. We have also invested significantly in our digital capabilities with a successful launch of a new customer portal which is accessible to 66% of clients onboarding. We are now beginning to see these investments benefiting the Group.

Our results need to be assessed in the context of the wider political and economic uncertainty in the pension market where Brexit and political uncertainties impacted client and adviser sentiment. This, in conjunction with proactive management of plans under administration, has led to a small decrease in the total number of SIPPs administrated by the Group from 77,739 to 76,541.

Dividends

We paid an interim dividend of 2.5p per share (2018: 2p per share) on 14 November 2019 and the Board proposes a final dividend of 6.5p per share (2018: 6p per share) which, if approved, will be paid to shareholders on the register at the close of business on 1 May 2020. The shares will be marked ex-dividend on 30 April 2020 and the proposed dividend paid on 8 June 2020. This will mean the total dividend paid in respect of the year ended 31 December 2019 will increase by 12.5% to 9p per share (2018: 8p).

Summary and outlook

Curtis Banks has entered 2020 with good momentum and at the start of the new year we saw an improvement in conditions in the wider market. Whilst our revenue model is not linked to equity market movements the outlook for the coming year is likely to be affected by the current COVID-19 outbreak and there remains significant uncertainty over how this will unfold. Nevertheless, we believe our investments in the operations of the business will continue to benefit the Group and that the majority of the return on these investments is yet to come. We continue to actively seek appropriate acquisition opportunities to complement our organic growth.

I look forward to the future with confidence as Curtis Banks remains well placed to deliver long term value for all stakeholders.

Chris Macdonald

Chairman

17 March 2020

Chief Executive Officer's Review

Summary

My first year as Chief Executive Officer of the Group has seen growth delivered across all our financial metrics. We have reported an improved operating margin, whilst still investing in the business, to build a platform that will deliver excellent client service and operational efficiency to support further organic growth.

The last month has been dominated by the COVID 19 outbreak and has created a huge amount of uncertainty in the market. It is clear that there will be a level of impact over the coming months including operational disruption and the potential impact on new sales volumes however we have contingency plans in place for the business and remain confident in our underlying robust and resilient business model.

The financial performance of the business was strong with 6% growth in operational revenue and 11% in adjusted profit before tax. Importantly, we delivered a consequent improvement in adjusted operating margin to 28.1% (2018: 27.1%), continuing progression towards our target of 30%. This has been achieved through operational efficiencies such as the closer alignment of key operational teams and improved management of legacy issues. During the year we commenced a project to centralise commercial property administration within one office location.

We have continued to make significant operational progress throughout the business during the year. We successfully completed the launch of Your Future SIPP, a single proposition for the Group that combines the best offerings of both the Curtis Banks and Suffolk Life SIPPs. Already, 31% of own SIPP new business is written into Your Future SIPP, expected to increase to 70% of own SIPP new business by the end of 2020.

We have continued to diversify the business by focusing on areas of complementary strategic interest. We expanded our commercial property expertise through the launch of Rivergate Legal Limited and this activity was profitable over its first full year of trading in 2019. Rivergate is a complementary service for Curtis Banks and as such a significant portion of Rivergate's revenue is derived from clients selecting its services from the 'Curtis Banks Panel' of Solicitors. Rivergate has established a strong brand recognition in line with that of the Group, and as such longstanding client relations are driving notable success in increasing the number of repeat clients using its services, diversifying its offering. Rivergate's client base has expanded across the year which consists not only of pension scheme trustees and operators but also high net worth individuals. Rivergate has remained focused on the supply of commercial property and real estate services in line with the Groups strategy. Total properties administered by the Group has increased to over 6,350 (2018: 6,231) and we expect this to continue.

In June we announced the appointment of Dan Cowland to the Board as Chief Financial Officer. Dan is extremely experienced in financial services and previously worked for WH Ireland and Shore Capital. We are delighted at the way Dan has fitted into the business and adapted quickly to his new role. Dan and his team have continued to elevate the standards in financial reporting across the Group and will further support commercial analysis over the year ahead.

SIPP Sales

At the year end the number of SIPPs administered fell slightly to 76,541 (2018: 77,739), largely as a result of the inevitable, and largely expected, attrition from our older books combined with a slowdown in the pension transfer market. We added 4,567 gross new own SIPPs added organically (2018: 5,838), representing a gross organic growth rate of 6.55% (2018: 8.66%). In our two core areas of strategic focus, the Full SIPP saw a higher level of gross organic growth than last year at 3.35% (2018: 3.14%) but our mid SIPP gross organic growth rate reduced slightly to 10.78% (2018: 12.43%). This was due to a slowdown in the pension transfer market, with the wider retail savings sector remaining subdued. Our total own SIPP attrition rate was 7.04% during the year (2018: 6.07%). The table below sets out more detail on SIPPs numbers and rates of attrition.

*Growth and attrition percentage rate based on opening SIPP numbers at the beginning of the year

Your Future SIPP

The launch of Your Future SIPP in February was a milestone for the Group and has allowed us to deploy our expertise and focus on customer service to offer advisers an extremely well-rounded product. The new SIPP has been well received by the market with 226 new adviser relationships delivering new business in the year, and 2,964 advisers and 2,259 clients registered to use the new adaptive portal.

The new SIPP and introduction of the new client portal greatly improves the user experience. This has been designed and continually developed in consultation with advisers; it will deliver efficiencies for our clients and reduce the time spent on administration for advisers, clients and our business. The enhanced digital functionality is completely responsive to all modern devices including smart phones, tablets and desktops. The new proposition also includes market access to a wide range of investment solutions, easy management of cash and automated adviser charging.

We believe that our new proposition is truly market leading by virtue of the suite of features it contains and the flexibility it provides to both advisers and their clients. Through the introduction of Your Future SIPP we are well placed to increase our organic growth of Full and Mid SIPPs over the coming years.

Legacy review

The first phase of our legacy review has been completed, identifying elements of our product portfolio to cleanse and informing our Target Operating Model. The commercial property data cleanse initiative has been completed with no further provision required (2018: £0.5m) although we have revised our assessment of contingent liabilities for £2.3m (2018: £1.5m).

Acquisition activity

Acquisitions are a core component of our growth strategy. We remain disciplined in our approach by considering each opportunity from both an earnings per share and return on investment perspective. We remain committed to exploring opportunities to add scale to our existing SIPP book and expand our offering through complementary acquisitions.

Industry context and regulation

Regulatory focus on the pension market continued during 2019. The Curtis Banks business model is clear and the fact that we only work with regulated financial advisers and do not give any advice or provide the investments held within our SIPPs protects our business from some of the challenges experienced by other SIPP Providers. Our fee structures also remain fair, transparent and competitive for our target market.

Non-standard investments have received an increasing amount of media coverage of late. While these are a significant issue for the wider industry, we do not consider them to be a material risk to our business. The Group continues to carry out robust due diligence on non-standard investments both at outset and throughout the life of the investment and all new Curtis Banks products have a clear Schedule of Allowable Investments.

We have undertaken a detailed review of the business to ensure a prudent approach to our legacy book, which is composed of our own SIPPs as well as a large number of historic acquisitions.

Our People and Culture

We have continued our focus on corporate social responsibility activities. I am delighted by the way our employees have fundraised for the charities we support and Curtis Banks continues to be an integral member of the communities in which we operate.

Being a diverse and inclusive business is integral to Curtis Banks. We continue to evaluate ways in which we can take steps forward to improve our commitment to our employees. As a business, we continue to strive to improve our diversity and our initiatives in this space will continue into 2020.

I would like to pay thanks to all our employees for their efforts over the course of the past year. They have made an enormous contribution to the Group and I look forward to working with them as Curtis Banks continues to grow.

Will Self

Chief Executive Officer

17 March 2020

Chief Financial Officer's Review

Results

A consistent financial performance for the year ended 31 December 2019 resulted in operational revenue increasing by 6% to £48.9m (2018: £46.1m) and adjusted profit before tax of £13.4m (2018: £12.1m), an increase of 11% over the previous year. Adjusted diluted EPS similarly increased by 10% to 19.37p (2018: 17.63p). Statutory profit before tax, which is stated after amortisation and non-recurring costs, was £10.9m (2018: £10.1m), up 8% on the previous year despite the non-recurring costs incurred during the year on previously announced restructuring activities. Diluted EPS on a statutory basis increased by 8% to 15.85p (2018: 14.71p). 

The improvement in underlying performance was achieved despite the domestic economic and political headwinds which persisted throughout the reporting year. As with many other firms, we were not immune from the undeniable impact these have had on the financial services sector as a whole and the lack of client investment into SIPPs more generally has affected our organic growth.

These results show further improvement in adjusted operating margin to 28.1% (2018: 27.1%). A contributor to this was the increasing success of our Your Future SIPP product launched in early 2019, supported by a newly restructured nationwide sales distribution network which provides the Group with a much a broader geographic footprint than ever before.

The investment in our IT infrastructure is gaining positive momentum amongst advisers and clients. In addition to this the Group continues to leverage alignment opportunities across its three offices and identify areas which will improve both efficiencies and the levels of client servicing.

Revenue

Operational revenues of £48.9m in 2019 (2018: £46.1m) increased by 6% year on year, driven in particular by the resilient organic growth in own mid-SIPP numbers excluding attrition and an improvement in interest income.

Fee revenue from SIPP products remains the predominant source of fee income for the Group with 84% (2018: 87%) of these fees being recurring fixed annual fees. These fees are subject to contractual annual inflationary rises linked to average weekly earnings. Additional fixed fees are charged depending on the transactional services provided for each of the products.

All SIPP fees levied are fixed sterling charges and are not a percentage based charge on the value of the underlying assets held within the SIPP. As a result, the revenues of the Group are not vulnerable to movements in financial markets or commercial property values and are therefore subject to less volatility than many of our peers. This is a key differential that sets us apart from most of our competitors and provides an attractively priced product in terms of fees applied on higher value SIPPs.

Interest income margin on client deposits remains a significant part of the Group's revenue. In the year ended 31 December 2019, £12.7m of the Group operating revenues were from interest margin (2018: £10.8m). The Group operates a highly efficient treasury operation with diverse partners that helps keep SIPP fees lower for clients. The further strengthening of our relationships with these deposit providers has also been supported by an increase in the level of deposits held during the year. 

Interest rates paid to clients are set on a discretionary basis by the Group, in accordance with our terms and conditions, allowing flexibility to change as and when market movements necessitate and allow the Group to maintain more predictable and commercial levels of interest income. This is monitored via the Group Assets and Liabilities Committee which ensures fairness to clients as well as commercial outcome for the Group. Any discretion exercised is balanced carefully with the need to demonstrate fairness to clients as well as other stakeholders.

Expenses

The year ended 31 December 2019 saw administrative expenses increase by 4.8% to £35.2m from £33.6m.

Staff costs for the year increased by 4.6% to £22.9m (2018: £21.7m) and were primarily driven by salary inflation, referenced to average weekly earnings, and the first full year impact of the expanded distribution and sales team referred to earlier.

Staff costs continue to reflect the cost of share based payment awards under the Group's Long Term Incentive Plan 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 clients which are demanded by our introducers of business.

Staff numbers have increased to 572 as at 31 December 2019 (2018: 558). This represents the support provided for the organic growth in own Full and Mid SIPPs achieved and to manage the migration of commercial property administration to a centralised function.

The other material operating expense that the Group incurs is in respect of IT and in 2019 this amounted to £3.4m (2018: £3.3m). This reflects not only the cost of supporting the core IT infrastructure across the Group's three offices 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 2023.

The cost of undertaking regulatory activity continues to increase and for the year ended 31 December 2019 the Group spent £1.1m (2018: £1.0m) on a combination of regulatory fees, levies and insurance.

Finance costs relating to interest payable on bank loans reduced by £0.1m year on year as the Group continues to repay borrowings taken out to facilitate the Suffolk Life acquisition in 2016. The debt continues to be repaid in line with scheduled terms and the covenants required by the bank in respect of this gearing are well covered.

Interest on the debt accrues at a rate of 1.75% over LIBOR.

The Group continues to take steps to improve its adjusted operating margin through a combination of revenue enhancements and operational efficiencies, balanced with the continued investment back into the business and the provision of a high quality service to our clients.

Non-Recurring costs

Non-recurring costs for the year can be broadly categorised into two core elements.

The senior management restructuring activities which have been signposted in our previous statements have now been completed with changes to both the Group's Executive Committee and the main Board. These changes leave the Group well placed to drive forward its strategic plans through both organic growth and targeted acquisition.

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 as well as costs associated with duplicated staff efforts while work is transferred between offices have been included within non-recurring costs, totalling £696,000 in the year ended 31 December 2019. The Group expects further costs will be incurred associated with this transition, but not yet committed, of approximately £825,000 in the year ended 31 December 2020 recognisable as non-recurring costs.

Delivery of the Target Operating Model is ultimately seen as the main driver of operational efficiencies which are expected to be attainable once the broader investment in our IT infrastructure has been completed.

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 client 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 2019 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 2019, the EBT held 206,286 shares in Curtis Banks Group PLC (2018: 263,790). 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 regulated subsidiary companies submit regular returns to the FCA and the PRA relating to their capital resources. At 31 December 2019 the total regulatory capital requirement across the Group was £12.5m (2018: £11.7m) and the Group had an aggregate surplus of £11.7m (2018: £9.0m) 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.

Two of the principal trading subsidiaries of the Group are regulated by the FCA and the relevant capital adequacy rules do not allow current year profits to contribute towards solvency requirements until such profits are audited or externally verified. Once profits for the year ended 31 December 2019 are taken into account the regulatory capital surplus at 31 December 2019 increases to £21.7m.

Financial Position

The Group increased net assets by 12% to £55.5m as at 31 December 2019 (2018: £49.7m), and increased shareholder cash reserves from £28.0m to £31.2m over the same period.

As at 31 December 2019, the Group had net shareholder cash (after debt) of £19.9m (2018: £13.6m).

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 linked to market performance and therefore provides more visibility and less volatility of earnings. In 2020 we expect the combination of SIPP revenue growth and interest income to continue to add top line growth and we will maintain careful cost discipline whilst supporting our stated growth strategy.

Dan Cowland

Chief Financial Officer

17 March 2020

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

*Adjusted to exclude anti-dilutive options, see note 7 for further detail

Approved by the Board of Directors and authorised for issue on 17 March 2020.

Dan Cowland

Chief Financial Officer

Company Registration No. 07934492

*During the year ended 31 December 2019 the Group identified that cash flows relating to investment properties should be presented separately in the consolidated statement of cash flows. These cash flows were previously included within cash flows relating to property, plant and equipment. Consequently, a new line has been inserted to reflect these cash flows and the prior year has been restated on the same basis. There is no impact to either the income statement or balance sheet of the group or company, or the closing cash positions brought forward and carried forward.

1 Corporate information

Curtis Banks Group PLC ("Curtis Banks" or "the Group") is one of the United Kingdom's leading administrators of self-invested pension products, principally SIPPs and SSASs. The Group commenced trading in 2009 and has successfully developed, through a combination of organic growth and acquisitions, into one of the largest UK providers of these products.

As at 31 December 2019 the Group administered circa £29.1bn (2018: £24.8bn) of pension assets on behalf of over 76,000 (2018: 77,000) active clients. More than 600 staff are employed across its head office in Bristol and regional offices in Ipswich and Dundee.

The Executive Directors have proven experience in the pensions market and have established a business that focuses on a service-driven proposition for the administration of flexible SIPPs. The Group's 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:

3 Profit for the year

Profit for the year is arrived at after:

4 Non-recurring costs

Non-recurring costs include the following significant items:

Redundancy & restructuring costs

During the year ended 31 December 2019, the Group progressed its strategy to deliver its Target Operating Model and centralise commercial property administration within one office location. Redundancy costs associated with this decision as well as costs associated with duplicated staff efforts while work is transferred between offices have been included within non-recurring cost.

During the year ended 31 December 2018, the two existing sales teams within the Group were restructured into one to coincide with the launch of a new Group wide product in H1 2019.

Costs relating to directorate and senior management changes

During the year ended 31 December 2019, the incumbent Chief Financial Officer of the Group announced he was stepping down from the role and a successor was recruited. An orderly handover of responsibilities took place between the previous Chief Financial Officer and the new Chief Financial Officer. Costs associated with this transitional period, including recruitment costs and costs of associated senior staff changes, have been treated as non-recurring costs.

Data cleansing 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. No further costs associated with this process arose during 2019.

Hargreave Hale & European Pension Management Ltd acquisition costs

During the year ended 31 December 2019 some further costs were incurred in relation to these historic acquisitions in connection with data migration and data cleanse work.

5 Directors and employees

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

6 Taxation

7 Earnings per share

Basic earnings per share amounts are calculated by dividing net profit for the year attributable to ordinary equity holders of the parent 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 parent 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:

*In order to reduce the impact of accounting measures such as deferred tax, and the timing of tax reliefs, the effective tax rate matches the current tax rate applicable to the accounting year. The current tax rate applicable for the year ended 31 December 2019 was 19.00% (2018: 19.00%).

**During the year the diluted EPS calculation was adjusted to exclude anti-dilutive options. The 2018 diluted EPS has been restated on the same basis in these financial statements, resulting in an increase of 0.22p per share in 2019 (2018: 0.25p). There is no impact to either the income statement or balance sheet of the Group.

8 Intangible assets

Group

Goodwill

Goodwill arose on the acquisition of Suffolk Life Group Limited and its subsidiaries on 25 May 2016. 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 budgets 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.

Client Portfolios

Client portfolios represent individual client 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. The client 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.

All acquisitions have been accounted for under the acquisition method of accounting. 

The directors have considered the carrying value of the client portfolios and have concluded that no impairment is required. The client portfolios are being amortised over a period of 20 years and have an average remaining expected useful economic life as at 31 December 2019 of 14 years and 6 months.

Computer Software

Computer software contains 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.

9 Investment Property

Assets held at fair value

Group

All investment properties have been valued at the year end by reference to most recent professional valuations and this is further adjusted by applying the corresponding property index available. Investment properties held to cover the linked policyholder business are included in non-participating investment contract liabilities.

10 Property, plant and equipment

Assets held at cost

Group

11 Cash and cash equivalents

As at 31 December 2019 and 2018 cash and cash equivalents were as follows:

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

12 Borrowings

Bank borrowings

The bank borrowings are repayable as follows: