27 Mar 2014 07:00
IFG Group plc
Preliminary statement of results for the year ended 31 December 2013
Financial Highlights
· Revenue increased by 4.6% to £79.6 million (2012: £76.2 million)
· Adjusted operating profit of £9.6 million in line with 2012
· Operating profit of £4.6 million compared to £6.2 million in 2012
· Profit after tax from continuing operations increased by 49% to £3.6 million
· Basic EPS of 4.69p (2012: 17.22p) and adjusted EPS of 6.92p (2012: 4.89p)
· Final dividend proposed of 3.19c per share, maintaining dividend pay-out
· Strong, well-funded balance sheet
Business Highlights
· Strong new business momentum: James Hay Partnership SIPP sales of 5,071 (2012: 2,469) which reversed a net loss of 947 in 2012 to net growth of 2,163 in 2013
· SIPPs under administration at the end of December 2013 of 39,505 (2012: 37,342)
· Strong performance in Saunderson House with increased revenue: 154 new client wins
· Assets under Advice and Administration of £19.7bn compared to £18.0bn in 2012
· Saunderson House won the prestigious award for Best Advisory Firm at the Investment Week's Fund Manager of the Year Awards 2013
· Improved performance in Ireland: 30 new client wins in IFG Corporate Pensions
· Disposal of non-core business in 2014
Commenting on the results Mark Bourke, CEO of IFG Group plc, said:
"In 2013, the Group delivered a solid financial performance, increased revenues and expanded its client and asset base. We continued to invest in people, technology and operational capability. New business momentum has been maintained in 2014. With a strong balance sheet, management strength and clear strategic focus, the Group is positioned to deliver growth."
-ends-
Mark Bourke John Cotter Niamh Hore
Group CEO Group Finance Director Investor Relations & Corporate Development
IFG Group plc IFG Group plc IFG Group plc
Tel: 01 275 2800 Tel: 01 275 2800 Tel: 01 275 2800
Chairman's Statement
IFG Group plc ("IFG" or the "Group") is pleased to announce its results for the year ended 31 December 2013. A detailed commentary on the business is outlined in the strategic report.
Revenue for the year was £79.6 million, which compares to £76.2 million in the prior year. Saunderson House and the Ireland Segment were the principal drivers of this revenue growth. Operating profit for the year was £4.6 million (2012 re-presented: £6.2 million). Profit attributable to the owners of the parent company was £4.9 million in 2013 (2012: £21.6 million which included the profit of £18.7 million from discontinued operations (International Segment)).
The Group delivered basic earnings per share of 4.69 pence in 2013 compared to 17.22 pence in 2012 (including the gain on the disposal of the International Segment of earnings per share of 14.92 pence). On an adjusted basis, the earnings per share were 6.92 pence (2012 re-presented: 4.89 pence).
RETURNS TO SHAREHOLDERS
The Board proposes to maintain the dividend per share in line with 2012. The Board is recommending a final dividend of 3.19 cent per share (current GBP equivalent of 2.66 pence per share). This final dividend, when added to the interim dividend of 1.65 cent paid on 28 November 2013 (current GBP equivalent of 1.38 pence per share), makes a total of 4.84 cent per share (current GBP equivalent of 4.04 pence per share).
Subject to Shareholder approval, the final dividend will be paid on 30 May 2014 to Shareholders on the Register on 9 May 2014.
GROUP STRATEGY
We announced on 12 March 2014 that we had reached agreement to sell our UK traditional IFA business, IFG Financial Services, subject to regulatory approval. This is in line with our strategy to exit non-core businesses. The deal delivers value to shareholders and was a final step in the rationalisation of our non-core UK activities. It also facilitates an increased focus on the continued growth and development of our core UK businesses, James Hay Partnership and Saunderson House.
The results of James Hay Partnership for the year, where profits have decreased compared to 2012, reflects the strategic decision by the Board to substantially increase our investment in the business, in people, technology and operational capability, as we position James Hay Partnership to become a market-leader in scale, product offering and client service in the platform arena. We have similarly invested in Saunderson House's capability, increasing the focus on organic growth. In Ireland we have grown revenues and improved the underlying performance of the businesses.
GOVERNANCE AND MANAGEMENT
John Cotter was appointed Group Finance Director in December 2013, replacing Aidan Comerford following his resignation in July. John is a Chartered Accountant with significant experience of the UK financial services industry. He was previously Group Finance Director at Collins Stewart Hawkpoint plc, and spent fifteen years at Morgan Stanley.
As previously announced, Mark Bourke, Chief Executive of the business since 2006, will leave the business in April and will be replaced by John Cotter, as Interim CEO, whilst the search for a replacement continues.
Over the past twelve months the Company has further invested in strengthening management, both at group level and within the operating businesses. Alastair Conway was appointed CEO of James Hay Partnership, and at Saunderson House there were senior appointments to the management team in order to support their growth strategy.
FUTURE
The Group is focused on its core business and is committed to investing in those businesses in order to create long term value for shareholders. We are confident that IFG is well positioned, with a strong balance sheet, to deliver on our strategic goals.
STAFF
I would like to thank Mark Bourke, who has been with the Group for 13 years, for his valuable contribution.
I express my thanks to all our people for their commitment, dedication and professionalism.
Strategic Report
GROUP STRATEGY AND BUSINESS MODEL
IFG's objective is to be a leading independent financial services group, with a focus on advisory and multi-class investment administration, as well as providing holistic financial and investment planning, in both the United Kingdom and Ireland. Headquartered in Dublin, but with extensive businesses in the UK, we look to develop long term relationships with our clients by providing high-quality advice and administration in a range of financial products. As the Group has evolved, we have concentrated our efforts and resources on establishing and developing capabilities which will competitively differentiate our businesses. Our aim is to build businesses which are consistent with the core IFG proposition and have the following features:
· long term relationships with clients and intermediaries;
· un-conflicted high quality advice and administrative services;
· growing recurring revenue streams; and
· scalable businesses in our markets, growing both organically and by acquisition.
In 2013, the Board undertook a strategic review.
Our strategic objective in James Hay Partnership is to expand the business from being a solely focused SIPP provider to being a platform with a broader capability in retirement wealth investment administration. Our focus will remain on the primary distribution channel of financial advisers which is currently serviced by relationship-based teams coupled with high end technology. We continue to explore other distribution channels and uses of technology to widen our target market and drive efficiencies.
In Saunderson House, our strategy is to grow the business by increasing the clients and assets under management which will result in increased revenues and operating profit. We aim to achieve this through a combination of broadening our market offering, increasing client-winning resources and generating margin improvement through efficiency gains and the greater use of technology. The firm has a proven team-based operating model with best-in-class client service delivered by high quality professionals. Saunderson House provides holistic financial and investment planning to high net-worth individuals and an investment proposition based on macroeconomic research and active asset allocation, with an emphasis on transparency of process.
In Ireland, our objective is to build a business, as in the UK, which provides financial advice and administration of, principally, pension assets. Utilising an integrated business model, the IFG Corporate Pensions and IFG Private Clients businesses work together to promote and deliver the service offering to corporate and individual clients.
Through the divestments of IFG International in 2012 and IFG Financial Services in 2014, the Group's business model has been simplified. It reflects our ambition to develop a focused market-leading financial services firm offering multi-class asset administration and independent financial advisory services.
The Group has established a process for the identification and management of risk across the business. We have identified four main risk areas which includes strategic risk. See note 4 for the principal risks and uncertainties identified by the Group.
Operationally, the Group deploys a decentralised business model with local management, functional capability and infrastructure within each core business. Strong central oversight is exercised by Group management. This structure facilitates effective performance management, strong governance, discrete capital and investment allocation and strategy formulation.
BUSINESS OVERVIEW
Following the sale of the International Segment in 2012, the strategy of focusing on the growth and development of our core businesses has resulted in a year of solid financial performance and targeted strategic progress for the Group. The announced sale, subject to regulatory approval, of our non-core traditional UK IFA business, IFG Financial Services, has further enhanced our strategic focus, and better positioned the Group to deliver on its growth strategy.
Our primary UK businesses, James Hay Partnership and Saunderson House, have maintained their momentum as both continue to grow their client and asset bases. In James Hay Partnership we added over 5,000 new SIPPs in 2013 which was more than double the total of the previous year, while in Saunderson House, following the investment in client focused resources, the number of new client wins increased by over 50% year on year to 154. Operating profit was impacted by investments in people and technology, as we build a sustainable and scalable business, particularly in James Hay Partnership. In 2013, we have added over 100 people, primarily in the UK business, and also invested in our core IT platform, building capability for further organic growth. In Ireland, the businesses have delivered an improved performance, both in revenue and operating results, against the backdrop of marginally improved market conditions.
Revenue for the year increased by 4.6% to £79.6 million compared to £76.2 million in the prior year. Saunderson House and the Ireland segment were the principal drivers of this revenue growth. Total staff compensation spend has increased by £6.0 million or 15% compared to 2012.
Profit for the year was £5.0 million (£21.1 million in 2012 which included the £18.7 million gain on sale of the International Segment).
Adjusted earnings of £7.2 million (2012 re-presented: £6.1 million) and adjusted operating profit of £9.6 million (2012 re-presented: £9.6 million) was recorded as shown below:
GROUP PERFORMANCE
2013 | 2012 | ||
Revenue | £'000 | £'000 | |
United Kingdom | 63,312 | 61,694 | |
Ireland | 16,323 | 14,459 | |
Total | 79,635 | 76,153 |
2013 | 2012 | ||
Re-presented | |||
Adjusted operating profit | £'000 | £'000 | |
United Kingdom | 10,893 | 13,098 | |
Ireland | (1,313) | (3,545) | |
Total | 9,580 | 9,553 |
On an adjusted basis, which we believe more accurately reflects the performance of the Group, operating profit of £9.6 million was in line with £9.6 million in 2012 (see note 5) and adjusted earnings were £7.2 million (2012 re-presented: £6.1 million). During the year, the Group incurred an exceptional charge of £2.7 million (2012: £1.1 million). This consists of an impairment charge against a receivable from an associate for £1.2 million and restructuring costs incurred during the year in relation to the UK and Ireland of £1.5 million. The release of the fair value provision on finalisation of the completion deed in relation to the disposal of the International Segment of £1.4 million, was recorded in the discontinued line. See note 6 for further details.
This performance reflects the level of financial investment in the businesses and our strategy to build efficient, scalable market-leading businesses. In 2013, we continued to invest in the management and organisational infrastructure to support our growing businesses, while simultaneously navigating the UK businesses through the Retail Distribution Review (RDR), and addressing legacy issues in our business model.
In 2013, the Group delivered basic earnings per share of 4.69 pence which compares to 17.22 pence in 2012. Both included a gain on the disposal of the International Segment. On an adjusted basis, earnings per share increased 42% to 6.92 pence compared to 4.89 pence in the previous year.
United Kingdom
Market overview
The UK wealth management and retirement planning market continues to be impacted by a range of regulatory, legislative and competitive change. Challenging market conditions demand increased efficiency. The changes announced in the UK budget on 19 March 2014 relating to the pension and savings market will, we believe be a positive development in terms of increasing market access and providing greater flexibility to clients. The resultant impact on our business, and the regulatory changes which may develop over time, will need to be assessed. Our objective, as advisers and administrators, remains to service our clients in a way that optimises their choices in wealth and retirement planning.
We believe our businesses are competitively positioned, as evidenced by the growth achieved in 2013, which has been maintained in 2014.
From a regulatory perspective, 2013 was notable for the implementation of the RDR, which has removed commission-bias, increased price transparency and raised the level of professionalism within the financial advisory industry. The overall impact on our businesses, we believe, was positive. Saunderson House, a fee-based adviser, has always operated with transparency, independence and putting the client at the heart of the business. James Hay Partnership ensured its clients and their advisers were prepared for RDR by providing RDR-compliant products well in advance of the new regulation and continues to facilitate flexible and competitive adviser charging structures.
The impact of RDR on the competitive landscape continues to unfold. The financial adviser community has seen some departures but overall at a lower level than anticipated and not in the pensions area. It remains a strategically important distribution channel for James Hay Partnership and the number of financial advisers we do business with, continues to grow and deepen. Looking forward, we will continue to develop our approach and product set to target and service financial advisers. RDR has also led some competitors, who were heavily reliant on fund manager rebates, to adapt their business models and pricing structures. This has not impacted us. We are confident that our platform proposition is very well positioned to compete and win clients, whether they are advised, unadvised or a combination thereof.
With increased transparency and enhanced technology, consumer behaviour and attitudes to wealth management and retirement planning will change. However, the underlying demand for financial planning, investment management and asset administration continues to grow. Market forecasts predict an increase in assets on platforms from £200bn to £500bn by 2016. Through organic growth and selected acquisition, we aim to be a major participant in this growth.
United Kingdom - Adjusted operating profit | 2013 | 2012 | |
Re-presented | |||
£'000 | £'000 | ||
Pension administration | 6,725 | 9,049 | |
Independent financial advisory | 4,168 | 4,049 | |
Total | 10,893 | 13,098
|
Pension administration - James Hay Partnership
2013 | 2012 | |
Re-presented | ||
£'000 | £'000 | |
Revenue | 36,964 | 37,679 |
Adjusted operating profit | 6,725 | 9,049 |
James Hay Partnership delivered £6.7 million adjusted operating profit (2012: £9.0 million). Revenue was marginally down on the previous year as the loss of revenue on maturing/expiring SIPPs continued to outpace the timing of the revenue benefit of new business. Revenue includes interest earned on client cash held, which is subject to fluctuation as interest rates change. This impact will vary, depending on where cash is deposited and the terms associated with each deposit. Adjusted operating profit has been impacted by continued investment in the business as we developed the necessary improvements to our infrastructure to support our growth plans, whilst maintaining our high service standards, expanding our product suite and enhancing our distribution capability to drive sales. Headcount in the business increased by 15%, and we invested £3.1 million in our IT systems and controls.
2013 | 2012 | ||
SIPP No. | SIPP No. | ||
Opening balance | 37,342 | 38,289 | |
Additions | 5,071 | 2,469 | |
Attrition | (2,908) | (3,416) | |
Closing balance | 39,505 | 37,342 |
In January 2013, we launched a highly successful and ground-breaking modular approach to retirement wealth planning, in the form of the Modular iSIPP. The Modular iSIPP embraces fair and flexible pricing, where the customer only pays for what they use, when they use it. This increased control and ability to switch exposure to different asset classes has been very well received by financial advisers. Total new SIPP sales of 5,071 were recorded, which exceeded the original acquisition target of 4,000 SIPPs a year by 2014 and the prior year's total of 2,469. This is the first year since we acquired the business that James Hay Partnership had net growth in the number of SIPPs under administration. Inflows for the year were £1.2bn, a 63% increase on 2012. Assets under administration have increased from £14.0bn to £15.3bn.
Key performance indicators
The Group uses a variety of performance measures which are detailed below in its review of Pension Administration.
Key performance indicators (KPIs) | Result | Why considered key |
1. Number of SIPPs | 2013 sales of 5,071 SIPPs (2012: 2,469) Total scheme equivalents MiSIPPs of 4,406 (2012: 2,896) exceeded budget. | Revenues are a function of the number of SIPPs.
Using an equivalent MiSIPP basis allows us to reflect a diverse product range and varied pricing model. |
2. Attrition levels on James Hay Partnership legacy book | Attrition in 2013 at 7% (2012: 8%) was lower than budgeted and significantly beat our assumptions at acquisition. | We measure the rate at which SIPPs are lost due to annuity purchase, death or commercial reasons to allow us to understand and manage the book.
|
3. Assets under administration | Assets under administration at the end of December reached £15.3bn (2012: £14.0bn).
The value of assets under administration has increased by over £1.3bn reflecting the growth in new SIPPs, additional assets from existing clients and market performance. | Revenue is derived from a number of components, including asset values.
|
4. Adjusted operating profit
| Achievement of budgeted results, both in terms of revenue and cost targets. 2013 results were in line with forecast and expectations of management, in light of the ongoing investment in the business.
| Validates performance of business against budget and strategic goals and expected operating characteristics. |
Strategy
We continue to invest in the business to position James Hay Partnership for growth. The primary areas of focus for investment are in:
· distribution and marketing;
· operational efficiency; and
· platform development with retirement planning at its centre.
Future development
Recognising and adapting to meet our customers' evolving investment needs is best evidenced by the adoption of the modular platform approach and emphasises our focus on moving the business from being a 'SIPP provider' to a broad based and flexible 'platform for retirement wealth planning'.
The change in how we describe the core function of the business reflects the planned evolution of the modular platform approach in Q1 2014, which will be extended to the full range of products beneath which will sit an extensive range of underlying investments.
The proposed extension of the guiding principles of the Modular iSIPP - fair and flexible - to non-pension specific tax wrappers, positions the business to take advantage of the anticipated growth in the use of ISAs and GIAs in retirement planning.
We will continue to invest in the business, which is already reaping the benefits of our enhanced capability in IT, marketing and service delivery.
Awards
• Best SIPP Provider winner, Moneyfacts Investment Life & Pensions Awards 2013 (second year in a row)
• Gold service rating - SIPP service, Money Marketing Service Ratings survey 2013
• 5 Star rating SIPP winner, Defaqto Service Ratings 2013
• Brand: Best known SIPP provider in the UK among Advisers during 2013 (BDifferent Research 2013)
Independent financial advisory
2013 | 2012 | |
Re-presented | ||
£'000 | £'000 | |
Revenue | 26,348 | 24,015 |
Adjusted operating profit | 4,168 | 4,049 |
Our Independent Financial Advisory business consists principally of Saunderson House together with our non-core traditional IFA business, IFG Financial Services. Revenue for the year was up 10% and adjusted operating profit marginally improved, impacted by restructuring costs associated with IFG Financial Services, as we positioned it for sale.
Saunderson House
Saunderson House delivered an impressive revenue performance in 2013. This is against the backdrop of continued investment in the business, particularly in client facing roles. We have also added a Chief Operating Officer and Marketing and Business Development Director which will help drive the organic growth strategy.
Our strategy to win more clients by increasing client-winning resources is achieving results. The business won 154 new clients in 2013 compared to 100 in the previous year, and has added 59 clients in the first two months of 2014. Client attrition remains low, reflecting excellent client service and relationship management. Assets Under Advice have increased to £3.2bn from £3.0bn. Operating on a time-charge basis, the business exceeded its target billable hours recovery rate of 80%.
The firm is successful because of its team-based business model, first class advisory capability and an adherence to its core values of being client-centric. Its investment proposition, based on macroeconomic research and active asset allocation with an emphasis on transparency of process, continues to deliver best in class returns.
We have continued to deliver benchmark-beating returns to our clients, outperforming comparative portfolios. The continued success of the investment proposition and performance track record is a key competitive advantage.
Key performance indicators
The Group uses a variety of performance measures which are detailed below in its review of Independent Financial Advisory.
Key performance indicators (KPIs) | Result | Why considered key |
1. Number of clients | Added 154 clients in 2013 (2012: 100). New client wins were on target and Q1 2014 has started positively. Currently we have over 1,400 clients. | Measuring the number of new clients shows new business momentum and demonstrates business expansion.
|
2. Number of client-facing and client winning advisers | 7 teams (2012: 6), continued growth of team resources.
The number of teams has increased and the number of client winning resources has grown in number.
| Saunderson House operates a team-based business model and growth is driven by the number of teams and client winning resources.
Revenue is generated on a time-charge basis so the number of client-facing and charging individuals is an important measure. |
3. Billable hours and recovery rate | 2013: 87% (2012: 81%)
High efficiency rates were recorded in 2013, comfortably exceeding budget and 2012 levels. | We track the number of hours billed and the rates at which fees are recovered as a measure of efficiency. |
4. Assets under advice | Assets under advice at the end of December were £3.2bn.
The value of assets under advice has increased reflecting the growth in new clients and additional assets from existing clients as well as market performance. | While not a driver of revenues currently, it is useful to measure the value of assets for market and pricing positioning, promotional purposes as well as operational planning and management.
|
5. Adjusted operating profit | Achievement of budgeted results, both in terms of revenue and cost targets. 2013 results in line with forecast and expectations of management.
| Validates performance of business against budget and strategic goals and expected operating characteristics |
Strategy
We continue to invest in the business to position Saunderson House for growth. The primary areas of focus for investment are in:
· people;
· efficiency; and
· marketing.
Future development
The development of people will be key to Saunderson House's expansion. Our graduate programme, the promotion and achievement of the highest level of industry recognised professional qualifications and ongoing investment in training and development have delivered exceptional staff. Our talent management strategy of "home grown" people ensures we maintain a client-centric culture and this provides the foundation for sustainable growth.
We are focused on delivering further enhancements to our operating capabilities in order to support growth plans of the business. This will include simplification and greater integration of the technologies and platforms that the business depends on to deliver its services to clients.
As part of our enhanced marketing programme, we rolled out new Saunderson House branding in January 2014. We believe we have created a look that reflects traditional values of exemplary services and client care, whilst being modern and fresh. We will build on this with other marketing initiatives to promote the Saunderson House brand both within our existing target market and adjacent markets.
We believe our strong investment proposition will support our organic growth strategy, as the research driven approach to client asset allocation, backed by rigorous and independent fund selection and review process, ensures Saunderson House provides strong returns allied to excellent client service.
Awards
· Best Advisory Firm at the Investment Week's Fund Manager of the Year Awards 2013 (second year in a row)
· Named one of Top 25 IFA companies by Private Client Practitioner 2013
· Finalist for Chartered Financial Planners of the Year overseen by Chartered Institute of Insurance and the Personal Finance Society
· Winner of the Best Advisory Firm at the City of London Wealth Management Awards
IFG Financial Services
On 12 March 2014, we announced the sale, subject to regulatory approval of our UK non-core traditional IFA business (IFG Financial Services) to Ascot Lloyd Financial Services Ltd for an initial consideration of £3.5 million, which will be paid on completion and additional consideration of up to a maximum of £5.6 million in deferred consideration, dependent upon future revenue targets.
These businesses, collectively known as IFG Financial Services are: IFG Financial Services Ltd, DK Wild & Company Ltd, John Siddall Financial Services Ltd and Berkeley Jacobs Financial Services Ltd.
IRELAND
2013 | 2012 | ||
£'000 | £'000 | ||
Revenue | 16,323 | 14,459 |
| 2013 | 2012 | |
Re-presented | |||
Adjusted operating profit/(loss) | £'000 | £'000 | |
Core businesses | 29 | (211) | |
Non-core businesses | (38) | (1,671) | |
(9) | (1,882) | ||
Central overheads | (1,304) | (1,663) | |
Total | (1,313) | (3,545) |
Good growth in revenues, a focus on cost management and the growth in assets under administration, have resulted in reduced losses in the business, with adjusted operating performance improving in excess of £2.0 million, to an adjusted loss of £1.3 million. We are building a core business in Ireland which specialises in financial advisory and the administration of, predominantly, pension assets. Whilst market conditions remain challenging, there are signs of economic recovery, and our core businesses are now well positioned to pursue market opportunities. In 2013, IFG Corporate Pensions achieved 30 new client wins (2012: 51) and a 32% increase in funds under management to €955m from €725m.
In terms of the non-core businesses, on 6 March 2014 we acquired the remaining 50% of One Network not previously owned, from our Joint Venture partner GE Capital Woodchester Limited. We continue to address other legacy issues by taking necessary action. Central overhead includes Group corporate costs.
Key performance indicators (KPIs) | Result | Why considered key |
1. Number of new corporate client wins | 2013: 30 new corporate client wins (2012: 51) though they were higher value clients. | Measuring the number of new corporate client wins shows new business momentum and demonstrates business expansion. |
2. Assets under administration and advice | Assets under administration and advice at the end of December were €955 million (2012: €725 million). The value of assets under administration and advice reflects ongoing contribution from existing members of pension schemes, the addition of new corporate schemes, additional assets from existing schemes and market performance. | Revenue is partly derived from assets under administration and advice.
|
3. Funds under advice | In the individual advisory business funds under advice at the end of December were €526 million (2012: €390 million).
The value of assets under advice has increased reflecting the growth in additional assets from existing clients, recruitment of new clients and market performance.
| This is a driver of revenues and it is useful to measure the value of assets under advice for competitive positioning, promotional purposes and operational planning and management. |
4. Adjusted operating profit
| Achievement of budgeted results, both in terms of revenue and cost targets. 2013 results in line with forecast and expectations of management.
| Validates performance of business against budget and strategic goals and expected operating characteristics. |
Strategy
In Ireland, our objective is to build a business which provides financial advice and administration of principally pension assets. The Irish business has evolved from being largely dependent on property transactional income to generating high levels of recurring fee income. The business is focused on the corporate pensions market and targets employers with defined contribution schemes. This builds renewal fee income and assets under advice and administration as well as providing access to the individuals. Independence, a conflict free asset allocation strategy, leading technology and a partnership approach with customers are the key proposition strengths.
Utilising an integrated business model, IFG Corporate Pensions and IFG Private Clients work together to promote and deliver the service offering to corporate and individual clients.
As the market for retirement planning changes and the need for financial advice and administration of financial assets grows, we are confident that the businesses are well-placed to take advantage of this opportunity.
Additionally, the Group has a number of small non-core general broking businesses which are profitable and are under review.
Awards
· Winner of Overall Best Broker of the year at the 2014 LPI Awards
· Winner of the Pension Scheme Administrator of the Year at the 2013 Pension's Industry Awards
GROUP FINANCING
Group net cash/(debt) is summarised and compared to 2012 year end below.
2013 | 2012 | |
£'m | £'m | |
Debt | (6.5) | (6.6) |
Cash * | 23.5 | 27.2 |
Net cash | 17.0 | 20.6 |
*excludes cash held in disposal group
The Group is in a strong financial position with net cash of £18.3 million (including £1.3 million cash classified within the disposal group held for sale). During 2013 the businesses generated £6.0 million of operating cash flow which was utilised to fund finance and investing activities of £8.4 million. The principal elements of these outgoings were tax, dividend payments and platform related capital expenditure, predominantly in James Hay Partnership. The Directors have reviewed the liquidity and solvency of the Group as part of the going concern assessment as noted on page 21.
DIVIDEND
The Board is recommending a final dividend of 3.19 cent per share (current GBP equivalent of 2.66 pence per share). This final dividend, when added to the interim dividend of 1.65 cent paid on 28 November 2013 (current GBP equivalent of 1.38 pence per share), makes a total of 4.84 cent per share (current GBP equivalent of 4.04 pence per share).
GOVERNANCE AND MANAGEMENT
In February 2013, John Gallagher joined the Board and assumed the role of Chairman, replacing Patrick Joseph Moran who retired. The Board also welcomed Cara Ryan as a Non-Executive Director.
In July 2013, Aidan Comerford resigned as Group Finance Director and he was replaced by John Cotter in December 2013.
Mark Bourke, Group Chief Executive, will leave the Group in April 2014. The Board announced that it was conducting a search for a replacement.
STAFF
The staff who work at IFG Group plc are key to its continued success. The gender of our staff at 31 December 2013 was as follows:
Male | Female | Total | |
Non-Executive Directors | 5 | 2 | 7 |
Executive Directors | 3 | - | 3 |
Senior managers | 44 | 14 | 58 |
Other employees | 426 | 450 | 876 |
Total | 478 | 466 | 944 |
OUTLOOK
The Group is well positioned in its core businesses, and has a clear strategy to grow and develop its capability and offering. We continue to invest in the business in terms of technology and people, and the momentum being achieved in growing customer assets under administration and advice, will support continued growth of revenues and improved operating performance.
Supported by a strong balance sheet, we will continue to invest in the businesses which we believe will deliver sustainable growth in the medium term.
Consolidated Income Statement
Year Ended 31 December 2013
Notes | 2013 | 2012 | |
£'000 | £'000 | ||
Continuing operations | |||
Revenue | 5 | 79,635 | 76,153 |
Cost of sales | (69,048) | (64,520) | |
Gross profit | 10,587 | 11,633 | |
Administrative expenses | (4,814) | (4,668) | |
Other expenses | (1,144) | (803) | |
Operating profit | 4,629 | 6,162 | |
Analysed as: | |||
Operating profit before exceptional items | 7,290 | 7,263 | |
Exceptional items | 6 | (2,661) | (1,101) |
Operating profit | 4,629 | 6,162 | |
Finance income | 132 | 476 | |
Finance costs | (570) | (1,712) | |
Finance costs - exceptional | - | (867) | |
Profit before income tax | 4,191 | 4,059 | |
Income tax expense | 7 | (590) | (1,640) |
Profit for the year from continuing operations | 3,601 | 2,419 | |
Discontinued operations | |||
Profit from discontinued operations (net of income tax) | 6 | 1,404 | 18,717 |
Profit for the year | 5,005 | 21,136 | |
Profit for year attributable to: | |||
Owners of the parent company | 4,874 | 21,600 | |
Non-controlling interest | 131 | (464) | |
Profit for the year | 5,005 | 21,136 | |
Earnings per share from continuing and discontinued operations attributable to the owners of the Company during the year: | |||
2013 | 2012 | ||
Basic earnings per ordinary share (pence) | |||
From continuing operations | 3.34 | 2.30 | |
From discontinued operations | 1.35 | 14.92 | |
From profit for the year | 8 | 4.69 | 17.22 |
Diluted earnings per ordinary share (pence) | |||
From continuing operations | 3.33 | 2.29 | |
From discontinued operations | 1.35 | 14.90 | |
From profit for the year | 8 | 4.68 | 17.19 |
Consolidated Statement of Comprehensive Income
Year Ended 31 December 2013
2013 | 2012 | ||
£'000 | £'000 | ||
Profit for the year | 5,005 | 21,136 | |
Other comprehensive income/(loss) | |||
Items that will not be reclassified to profit or loss | |||
Actuarial losses on retirement benefit obligation - discontinued operations | - | (89) | |
Items that may be subsequently reclassified to profit or loss | |||
Foreign currency translation differences | 335 | (1,255) | |
Currency translation differences recycled - discontinued operations | - | (191) | |
Other comprehensive income/(loss) | 335 | (1,535) | |
Total comprehensive income for the year | 5,340 | 19,601 | |
Total comprehensive income attributable to: | |||
- Owners of the Company | 5,218 | 20,055 | |
- Non-controlling interest | 122 | (454) | |
Total comprehensive income for the year | 5,340 | 19,601 | |
Total comprehensive income attributable to owners of the Company: | |||
- Continuing operations | 3,814 | 1,618 | |
- Discontinued operations | 1,404 | 18,437 | |
Total comprehensive income attributable to owners of the Company | 5,218 | 20,055 |
Consolidated Balance Sheet
As at 31 December 2013
2013 | 2012
| ||
£'000 | £'000 | ||
ASSETS | |||
Non-current assets | |||
Property plant and equipment | 2,725 | 2,866 | |
Intangible assets | 62,865 | 68,154 | |
Deferred income tax asset | 838 | - | |
Total non-current assets | 66,428 | 71,020 | |
Current assets | |||
Trade and other receivables | 22,419 | 22,374 | |
Cash and cash equivalents | 23,469 | 27,325 | |
Total current assets | 45,888 | 49,699 | |
Assets of disposal group classified as held for sale | 7,177 | - | |
53,065 | 49,699 | ||
Total assets | 119,493 | 120,719 | |
LIABILITIES | |||
Non-current liabilities | |||
Borrowings | 6,486 | 6,591 | |
Deferred income tax liabilities | 2,305 | 2,317 | |
Provisions for other liabilities | 1,564 | 1,612 | |
Total non-current liabilities | 10,355 | 10,520 | |
Current liabilities | |||
Trade and other payables | 24,493 | 23,954 | |
Current income tax liabilities | 848 | 1,117 | |
Borrowings | 9 | 143 | |
Provisions for other liabilities | 1,519 | 4,487 | |
Total current liabilities | 26,869 | 29,701 | |
Liabilities of disposal group classified as held for sale | 800 | - | |
27,669 | 29,701 | ||
Total liabilities | 38,024 | 40,221 | |
Net assets | 81,469 | 80,498 | |
EQUITY | |||
Share capital | 9,982 | 9,949 | |
Share premium | 81,399 | 81,141 | |
Other reserves | (10,831) | (3,950) | |
Retained earnings | 1,502 | (6,651) | |
82,052 | 80,489 | ||
Non-controlling interest | (583) | 9 | |
Total equity | 81,469 | 80,498 |
Consolidated Cash Flow Statement
Year Ended 31 December 2013
Notes | 2013 | 2012 | ||
£'000 | £'000 | |||
Cash flows from operating activities | ||||
Cash generated from operations | 10 | 7,846 | 11,639 | |
Interest received | 132 | 487 | ||
Income taxes paid | (1,979) | (1,201) | ||
Net cash generated from operating activities | 5,999 | 10,925 | ||
Cash flows from investing activities | ||||
Purchase of property, plant and equipment | (1,782) | (536) | ||
Sale of property, plant and equipment | - | 9 | ||
Sale of International Segment | - | 56,743 | ||
Purchase of intangible assets | (1,901) | (645) | ||
Net cash (used)/generated in investing activities | (3,683) | 55,571 | ||
Cash flows from financing activities | ||||
Dividends paid | (4,553) | (4,536) | ||
Interest paid | (487) | (1,800) | ||
Proceeds from issue of share capital | 291 | 306 | ||
Share buy-back | - | (30,386) | ||
Proceeds from long-term borrowings | - | 7,000 | ||
Repayment of debt | - | (42,358) | ||
Payment of finance lease liabilities | - | (2) | ||
Net cash used in financing activities | (4,749) | (71,776) | ||
Net decrease in cash and cash equivalents | (2,433) | (5,280) | ||
Cash and cash equivalents at the beginning of the year | 27,182 | 32,244 | ||
Effect of foreign exchange rate changes | (7) | 218 | ||
Cash and cash equivalents at end of year | 11 | 24,742 | 27,182 | |
Cash and cash equivalents for the purpose of the statement of cash flows are comprised of cash and short term deposits net of bank overdrafts. For the purpose of the cash flow statement cash and cash equivalents include the following: | ||||
2013 | 2012 | |||
£'000 | £'000 | |||
Cash and short term deposits | ||||
- as disclosed on the balance sheet | 23,469 | 27,325 | ||
Cash held in disposal group | 1,282 | - | ||
Bank overdrafts | (9) | (143) | ||
Cash and cash equivalents at end of year | 11 | 24,742 | 27,182 | |
Consolidated Statement of Changes in Equity
Attributable | Non- | ||||||
Share | Share | Other | Retained | to owners of | controlling | Total | |
capital | premium | reserves | earnings | the parent | interest | equity | |
£'000 | £'000 | £'000 | £'000 | £'000 | £'000 | £'000 | |
At 1 January 2012 | 11,785 | 80,879 | (4,665) | 6,810 | 94,809 | 262 | 95,071 |
Total comprehensive income for 2012 | |||||||
Profit/(loss) for year | - | -
- | - | 21,600 | 21,600 | (464) | 21,136 |
Other comprehensive income | |||||||
Currency translation differences | - | - | (1,456) | - | (1,456) | 10 | (1,446) |
Actuarial losses on retirement benefit obligation | - | - | - | (89) | (89) | - | (89) |
Other comprehensive (loss)/income | - | - | (1,456) | (89) | (1,545) | 10 | (1,535) |
Total comprehensive income for the year | - | - | (1,456) | 21,511 | 20,055 | (454) | 19,601 |
Dividends | - | - | - | (4,536) | (4,536) | - | (4,536) |
Issue of share capital | 77 | 281 | (33) | - | 325 | - | 325 |
Transaction costs | - | (19) | - | - | (19) | - | (19) |
Share buy-back | (1,913) | - | 1,913 | (30,436) | (30,436) | - | (30,436) |
Sale of International Segment | - | - | - | - | - | (26) | (26) |
Share based payment compensation | |||||||
- Value of employee services - share options | - | - | 291 | - | 291 | - | 291 |
Investment by non-controlling interest | - | - | - | - | - | 227 | 227 |
Transaction with owners | (1,836) | 262 | 2,171 | (34,972) | (34,375) | 201 | (34,174) |
At 31 December 2012 | 9,949 | 81,141 | (3,950) | (6,651) | 80,489 | 9 | 80,498 |
Total comprehensive income for 2013 | |||||||
Profit for year | - | -
- | - | 4,874 | 4,874 | 131 | 5,005 |
Other comprehensive income | |||||||
Currency translation differences | - | - | 344 | - | 344 44 | (9) | 335 |
Other comprehensive income/(loss) | - | - | 344 | - | 344 | (9) | 335 |
Total comprehensive income for the year | - | - | 344 | 4,874 | 5,218 | 122 | 5,340 |
| |||||||
Dividends | - | - | - | (4,553) | (4,553) | - | (4,553) |
Issue of share capital | 33 | 265 | - | - | 298 | - | 298 |
Transaction costs | - | (7) | - | - | (7) | - | (7) |
Share buy-back | - | - | - | 6 | 6 | - | 6 |
Non-controlling interest transfer to retained earnings | - | - | - | 258 | 258 | (258) | - |
Non-controlling interest purchase of option | - | - | - | - | - | (629) | (629) |
Transfer of vested share based payment | - | - | (7,568) | 7,568 | - | - | - |
Share based payment compensation | |||||||
- Value of employee services - share options | - | - | 343 | - | 343 | - | 343 |
Investment by non-controlling interest | - | - | - | - | - | 173 | 173 |
Transaction with owners | 33 | 258 | (7,225) | 3,279 | (3,655) | (714) | (4,369) |
At 31 December 2013 | 9,982 | 81,399 | (10,831) | 1,502 | 82,052 | (583) | 81,469 |
Notes to the Financial Information
1. General information
IFG Group plc ("the Company") and its subsidiaries (together "the Group") provide a range of financial solutions including pension's administration and independent financial advice. The Company is a public company, listed on the Irish and London Stock Exchanges and is incorporated and domiciled in the Republic of Ireland. The address of its registered office is IFG House, Booterstown Hall, Booterstown, County Dublin, Ireland.
2. Basis of preparation
The consolidated financial statements of the Group are prepared in accordance with International Financial Reporting Standards (IFRS) issued by the International Accounting Standards Board (IASB), adopted by the European Union (EU) and in accordance with Irish law.
The financial information in this report has been prepared in accordance with the Listing Rules of the Irish Stock Exchange and in accordance with Group accounting policies. Full details of the accounting policies adopted by the Group are contained in the consolidated financial statements included in the Company's annual report for the year ended 31 December 2012, which is available on the Group's website at www.ifggroup.com.
The accounting policies and methods of computation and presentation adopted in the preparation of the Group financial information are consistent with those described and applied in the annual report for the year ended 31 December 2012. No new standards, amendments or interpretations, which became effective in 2013, have had a material effect on the Group financial statements.
The financial information presented in this preliminary release does not constitute "full group accounts" under Regulation 40(1) of the European Communities (Companies: Group Accounts) Regulations, 1992 of Ireland insofar as such group accounts would have to comply with all of the disclosure and other requirements of those regulations. The preliminary release was approved by the Board of Directors. The annual report and accounts will be approved by the Board of Directors and reported on by the auditors in due course.
Accordingly, the financial information is unaudited. Full Group accounts for the year ended 31 December 2012 received an unqualified audit report and have been filed with the Irish Registrar of Companies.
Going concern
The Directors report that they have satisfied themselves that the Group is a going concern, having adequate resources to continue in operational existence for the foreseeable future.
In forming this view, the Directors have reviewed the Group's solvency and liquidity position by reviewing the budget for a period of not less than 12 months, the medium term plans, as set out in the four year plan approved by the Board in January 2014, and have taken into account the cash flow implications of the plans, which include a sensitivity analysis based on the key business risks identified by the Group. They have also considered surplus cash available to the Group, the availability of credit facilities, the review of the Group's committed borrowing facilities and the forecasted banking covenants.
Having assessed the Company's relevant business risks, the Directors believe that the Group is well-placed to manage these risks successfully and have a reasonable expectation that the Company and the Group, as a whole, have adequate resources to continue in operational existence for the foreseeable future.
For these reasons, the Directors continue to adopt the going concern basis in preparing the financial information presented in this preliminary release.
3. Critical accounting estimates and judgements
Estimates and judgements are continually evaluated and are based on historical experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances. The resulting accounting estimates will, by definition, seldom equal the related actual results. The estimates and assumptions that have a significant risk of causing a material adjustment to the carrying amount of assets and liabilities within the next financial year are discussed below.
a) Goodwill impairment
In accordance with the accounting policy, the Group tests annually whether goodwill has been impaired. The recoverable amounts of groups of cash-generating units have been determined based on value-in-use calculations. These calculations require the use of significant estimates with regards to discount rates, long term growth rates and the estimated cash flows for the five year period 2014 to 2018.
b) Non goodwill intangible assets
The estimated useful lives of intangibles are determined at acquisition date and reviewed at each balance sheet date. The estimated useful lives currently range from three to fifteen years. Intangibles are tested for impairment if impairment indicators are identified. In 2013, the continuing amortisation charge was £3,086,000 (2012: £4,270,000). If, in 2013, the amortisation period was shortened by one year for all categories of intangibles, other than goodwill, it would have resulted in an additional continuing amortisation charge in the year of £385,000 (2012: £482,000).
c) Provision for impairment of trade and other receivables
Management reviews the recoverability of receivables taking into account objective evidence that the Group will not be able to collect all amounts due according to the original terms of the receivable. At 31 December 2013, a provision of £809,000 (2012: £1,863,000) was held.
d) Provision for legal and other claims
This financial information includes provisions to cover certain legal and other claims brought against some subsidiaries of the Group. The provisions recorded represent management's best estimate of the exposures based on information available at the time of the approval of the accounts. These estimates will, by definition, differ from the related actual outturn.
e) Working capital adjustment on International Segment disposal
The terms of the International Segment sale agreement provided for a working capital adjustment to the £70.0 million disposal consideration received based on a completion balance sheet. As at the date of the approval of this financial information the valuation of the completion balance sheet has been agreed and settled. Residual risk under the terms of the sale remains until July 2014, and £1.1 million of the initial provision of £3.5 million has therefore been retained. This is management's best estimate of the adjustment that may be required in order to finalise the process with regards to the disposal of the Segment.
f) Exceptional Items
Management also exercise judgment in determining the revenue and expenses disclosed as exceptional items. Note 6 of the financial information includes a table outlining details of the items classified as exceptional for the current and prior year.
g) Deferred tax
Deferred tax assets are recognised for unused tax losses to the extent that it is probable that future taxable profits will be available, against which the losses can be utilised. Judgement is required to determine the value of the deferred tax asset, based upon the timing and level of future taxable profits. The quality of these estimates is highly dependent upon management's ability to properly project future earnings from activities that may apply loss carry forward positions against future income taxes.
4. Principal Risks and Uncertainties
The markets, in which the Group operates, may be affected by numerous factors, many of which are outside the Group's control and the impact of which cannot be accurately predicted. The Board is responsible for the Group's risk management systems, which are designed to identify, manage and mitigate potential material risks to the achievement of the Group's strategic and business objectives.
In accordance with the Transparency (Directive 2004/109/EC) Regulations 2007, the Directors note that the principal risks and uncertainties facing the Group include the following areas:
Strategic risks | Description of risks | Measures to reduce risk |
Environment and market conditions | The economic, technological and other macro factors affecting demand for the Group's services. | The Group has operations across two Segments - UK and Ireland. Whilst the current economic climate will affect all business, the impact will vary according to the markets in which they operate. The Group continues to focus on operating efficiencies and business model changes to ensure it remains competitive. |
Competitor activity | The Group faces competition in its various markets and if it fails to compete successfully, market share and operating performance may decline.
| Competitor activity is monitored by the Board, Group and Subsidiary management and is focused on market development and assessing the quality of our offering in terms of: - technology solutions; - quality of service; - pricing to meet the demands of customers; - appropriate governance and cost structures; and - growth. |
Acquisitions | The risks associated with selecting appropriate investment targets, integrating them into the business and successfully realising the growth expected from such transactions. | The Group conducts stringent due diligence processes prior to completing any transaction. Group and subsidiary management have significant experience and expertise in acquisition and integration management. |
Disposals | The financial and strategic risks associated with a significant business disposal and the risk of material warranty and indemnity claims. | The Group sets very clear limits in terms of warranty and indemnity claims in share purchase agreements. Together with historically low claim levels - these risks are further mitigated by the maintenance of professional indemnity insurance policies. |
Operational risks | Description of risks | Measures to reduce risk |
Loss of key customers/intermediaries | The risks associated with maintaining relationships with key customers and intermediaries and their financial impact on the business. | The Group invests significant resources to maintain strong relationships with its key customers and intermediaries.
|
Loss of key management resources | Strong and effective management has been fundamental to the Group's success. The ability to attract and retain highly skilled employees and executives is critical to this continued success. | The Group maintains a focus on succession planning, strong recruitment processes, long term management incentive programmes and management development. |
Customer claims experience | The ability to contain the level of loss arising from complaints from customers who may have suffered losses as a result of the miss-selling of financial products or administration errors, coupled with potential regulatory action. | Detailed compliance monitoring controls and procedures and complaints monitoring processes are in place across all subsidiary companies. The Group maintains appropriate professional indemnity insurance policies. |
Information technology systems | The ability of the Group to avoid disruption to its key information technology systems. The Group employs a range of information technology and support system solutions across its businesses, focusing on efficient client administration, comprehensive control procedures and careful financial management. | Business continuity and disaster recovery planning is regularly assessed and tested to ensure the businesses are appropriately resourced and the Group maintains a robust control environment. All key IT systems are continuously reviewed and updated to meet the needs of the Group.
|
Compliance / Regulatory Risks | Description of risks | Measures to reduce risk |
Regulation | Changes to regulation, taxation or legislative environment applicable to the Group's activities. Risks of regulatory actions and fines. | All regulatory, taxation and legislative requirements are managed locally by compliance, risk managers and finance managers. The Group also reviews and monitors regulation and legislative developments centrally. |
Fraud
| Technological advances and austerity measures have increased the risk of fraud and cybercrime fraud in particular. | IT and banking system security measures are subject to both external and internal review and are continuously updated and improved. Full and detailed adherence to Anti Money Laundering processes and procedures is monitored and tested. The Group has preventative controls on cybercrime. |
Financial Risks | Description of risks | Measures to reduce risk |
Capital markets, interest rates and treasury | The ability to arrange financing having regard to capital market conditions. Exposure to fluctuations in both foreign exchange rates and interest rate movements including the impact on client account interest earned. | Treasury risks are actively managed by Group Finance in adherence to Board approved policies and procedures. The Group has in place committed funding lines. The Company actively monitors and negotiates interest rate arrangements relating to client accounts. |
Credit risk | The exposure to a financial loss as a result of a default by customers or counterparties with which the Group transacts business. | The Group has a credit policy in place and monitors credit risk on an on-going basis. Customers and counterparties are subject to prior credit evaluations and are subject to continuous monitoring at an operating company level. |
5. Segmental information
In line with the requirements of IFRS 8 "Operating Segments", the Group has identified its Chief Operating Decision Maker (CODM). The Group has identified the Group Chief Executive Officer (Group CEO) of the Company as its CODM. The Group CEO reviews the Group's internal reporting in order to assess the performance of the Group and allocate resources. The operating Segments have been identified based on these reports.
During the year, the Group CEO considered the business from a largely geographic perspective, based on two reporting Segments: UK and Ireland. The Segments were managed by Executive Directors who reported to the Group CEO and the Board of Directors. The Group CEO has responsibility for the UK Segment.
The Group CEO assesses the performance of the Segments based on a measure of adjusted earnings. He reviews working capital and overall balance sheet performance on a Group wide basis.
The Group earns its revenues in these Segments by way of fees from the provision of services and commissions earned in the intermediation of financial service products.
Goodwill is allocated to cash-generating units on a reporting Segment level and that is the level at which it is assessed for impairment.
The Segment information provided to the Group CEO for the reportable Segments for the year ended 31 December 2013 is as follows:
UK | Ireland | Total | |
£'000 | £'000 | £'000 | |
Revenue | 63,312 | 16,323 | 79,635 |
Adjusted operating profit/(loss) | 10,893 | (1,313) | 9,580 |
Amortisation of intangibles | (2,290) | ||
Exceptional costs | (2,661) | ||
Operating profit | 4,629 | ||
Finance income | 132 | ||
Finance costs | (570) | ||
Profit before income tax | 4,191 | ||
Income tax expense | (590) | ||
Profit for the year from continuing operations | 3,601 |
The represented 2012 comparatives (excluding discontinued operations) are as follows:
UK | Ireland | Total | |
£'000 | £'000 | £'000 | |
Revenue | 61,694 | 14,459 | 76,153 |
Adjusted operating profit/(loss) | 13,098 | (3,545) | 9,553 |
Amortisation of intangibles | (2,290) | ||
Exceptional costs | (1,101) | ||
Operating profit | 6,162 | ||
Finance income | 476 | ||
Finance costs | (1,712) | ||
Finance costs - exceptional | (867) | ||
Profit before income tax | 4,059 | ||
Income tax expense | (1,640) | ||
Profit for the year from continuing operations | 2,419 |
Breakdown of revenue by country of operation is as follows:
The home country of IFG Group plc is Ireland. The Group's revenues are derived from the following countries:
2013 | 2012 | |
£'000 | £'000 | |
Ireland | 15,761 | 13,884 |
United Kingdom | 62,814 | 61,296 |
Other | 1,060 | 973 |
Total | 79,635 | 76,153 |
Revenue in the table above has been allocated based on the country where the customer is located.
Analysis of revenue by category
2013 | 2012 | |
£'000 | £'000 | |
Pension administration | 42,043 | 41,895 |
Independent financial advisory | 37,592 | 34,258 |
Total | 79,635 | 76,153 |
During the year there were no revenues derived from a single customer that represent 10% or more of total revenues.
Analysis of total non-current assets at the year-end by geographical region
The total non-current assets at the year end (excluding deferred tax assets), split by geographical region, are as follows:
2013 | 2012 | |
£'000 | £'000 | |
Ireland | 9,900 | 10,552 |
United Kingdom | 55,676 | 60,443 |
Other | 14 | 25 |
Total | 65,590 | 71,020 |
6. Exceptional items & discontinued operations
Exceptional items charged against operating profit
2013 | 2012 | |
£'000 | £'000 | |
Provision against receivable from associate | 1,144 | - |
Redundancy and restructuring related costs | 1,517 | 301 |
Provision against receivable from joint venture | - | 800 |
Total | 2,661 | 1,101 |
Provision against receivable from associate
In assessing the carrying value of a £1.14 million receivable due from Rayband (an associate of the Group) management reassessed the value of the underlying assets, primarily land, owing to the land not being designated as development land as previously expected. This resulted in an impairment provision of £1.14 million against the full value of the receivable. The impairment provision has been recorded within "other expenses".
Restructuring costs
During the year, £1.5 million of costs were incurred in relation to redundancy and termination related costs, of which £0.6 million related to the UK Segment and £0.9 million related to the Ireland Segment.
The prior year exceptional items related to:
· redundancy and related costs of £0.3 million in the UK Segment; and
· an impairment review which was carried out in the prior year on the recoverability of the balance due from IFG McGivern Flynn Teoranta (trading as "Insure4less"). On review of the recoverable amount, an impairment provision of £0.8 million was recorded.
Discontinued operations
2013
Release of working capital provision - International Segment disposal
During 2013, a settlement was made to AnaCap Financial Partners II LP as required by the completion accounts related deed. This was the final settlement with regards to the net asset delivery on the sale of the International business. In addition an amount was paid in relation to the insurance cover for the International Segment as agreed as part of the sale agreement.
Management have reviewed the provision and released an amount of £1.4 million as the completion deed has been agreed and settled and therefore this component of the provision is no longer required. The release of this provision has been recorded in discontinued operations in the Consolidated Income Statement. The remaining provision is £1.1 million.
2012
Profit from discontinued operations (net of income tax)
A profit of £18.7m was recorded in the 2012 Annual Report following the sale of the entire International Segment to AnaCap Financial Partners II LP which completed on 5 July 2012. Full details are in note 13 of the 2012 Annual Report.
7. Income tax expense/(credit)
2013 | 2012 | 2012 | |||||||
Continuing | Continuing | Discontinued | |||||||
£'000 | £'000 | £'000 | |||||||
Current tax | |||||||||
Ireland (at 12.5%): | |||||||||
- current year | 91 | (49) | 71 | ||||||
- prior year | 33 | (156) | - | ||||||
UK and other (primarily at 23.25%): | |||||||||
- current year | 1,882 | 2,569 | 156 | ||||||
- prior year | (255) | 555 | - | ||||||
1,751 | 2,919 | 227 | |||||||
|
| ||||||||
Deferred tax Other re |
| ||||||||
Ireland: |
| ||||||||
- current year | (117) | (313) | (30) |
| |||||
UK and other: |
| ||||||||
- current year | (856) | (641) | (14) |
| |||||
- prior year | (188) | (325) | - |
| |||||
(1,161) | (1,279) | (44) |
| ||||||
Income tax expense | 590 | 1,640 | 183 |
| |||||
8. Earnings per ordinary share
2013 | 2012 | |
Basic | ||
Profit after income tax and non-controlling interest (£'000) | ||
Continuing operations | 3,470 | 2,883 |
Discontinued operations | 1,404 | 18,717 |
Total | 4,874 | 21,600 |
Weighted average number of ordinary shares in issue for the | ||
calculation of earnings per share | 103,998,107 | 125,404,061 |
Basic earnings per share (pence) | ||
Continuing operations | 3.34 | 2.30 |
Discontinued operations | 1.35 | 14.92 |
From profits for the year | 4.69 | 17.22 |
| ||
Diluted | ||
Profit after income tax and non-controlling interest (£'000) | ||
Continuing operations | 3,470 | 2,883 |
Discontinued operations | 1,404 | 18,717 |
Total | 4,874 | 21,600 |
Weighted average number of ordinary shares in issue for the | ||
calculation of earnings per share | 103,998,107 | 125,404,061 |
Dilutive effect of share options | 228,963 | 282,890 |
Weighted average number of ordinary shares for the calculation of | ||
diluted earnings per share | 104,227,070 | 125,686,951 |
Diluted earnings per share (pence) | ||
Continuing operations | 3.33 | 2.29 |
Discontinued operations | 1.35 | 14.90 |
From profits for the year | 4.68 | 17.19 |
The number of shares used in the calculation of basic earnings per share and diluted earnings per share has been calculated in accordance with International Accounting Standard No. 33.
Diluted earnings per share are based on the weighted average number of ordinary shares used in the basic earnings per share calculation, with an adjustment to reflect the bonus element of the average number of options outstanding during the year. The bonus element arises when the exercise price is lower than the average market price during the year.
At 31 December 2013, there were no shares earned by participantsbut not yet issued under the 2011 LTIP.
9. Commitments, contingencies and guarantees
Given the nature of the business, the Group has a number of claims against it. The Group has procedures in place to assess the veracity of the claims and provision has been made to cover its best estimate of the exposure in respect of these matters.
The Company, along with some of its subsidiaries, has guaranteed Group borrowings of £7,000,000 (2012: £8,600,000). There are certain share pledges for some subsidiary companies under the bank facility agreement.
The Company has provided rent guarantees totalling £1,912,000 over the period to 2017 (2012: £2,547,000).
The agreement for the sale of the International Segment contains certain limitations on the ability of the purchaser to claim against the Company for breach of warranty and under indemnities. In particular, the aggregate liability of the Company for all claims under the sale agreement (other than certain fundamental warranties) will not exceed the net consideration.
The Company will not be liable for any warranty or indemnity claim unless it exceeds £500,000. The Company will also have no liability for any warranty claim unless and until warranty claims exceed £1,350,000 in aggregate (in which case the Company will be liable for the full amount and not just the excess over £1,350,000). In addition, claims in respect of non-tax warranties claims or indemnities must be brought within twenty four months of the date of completion. Tax warranty and/or tax indemnity claims must be brought within seven years of the date on which completion occurs.
10. Cash generated from operations
2013 | 2012 | |
£'000 | £'000 | |
Continuing operations | ||
Profit before income tax | 4,191 | 4,059 |
Depreciation and amortisation | 4,502 | 5,181 |
Receivable from associate provision | 1,144 | - |
Loss on sale of property, plant and equipment | 14 | 23 |
Finance costs | 570 | 2,579 |
Finance income | (132) | (476) |
Foreign exchange movement | (6) | (257) |
Non-cash share based payment compensation charges | 343 | 291 |
(Increase)/decrease in trade and other receivables | (1,585) | 329 |
Movement on loan and other payments to associates | (122) | (224) |
(Decrease)/increase in current and non-current liabilities | (1,073) | 2,214 |
Cash generated from continuing operations | 7,846 | 13,719 |
| ||
Discontinued operations | ||
Profit before income tax | 1,404 | 2,564 |
Working capital adjustment and other indemnities | (1,404) | (3,500) |
Depreciation and amortisation | - | 682 |
Finance income | - | (11) |
Finance costs | - | 88 |
Foreign exchange movement | - | (99) |
Decrease in trade and other receivables | - | 2,767 |
Decrease in current and non-current liabilities | - | (4,571) |
Cash flow from discontinued operations | - | (2,080) |
Cash generated from operations - net | 7,846 | 11,639 |
11. Analysis of net debt
Opening | Cash | Other | Closing | |
balance | flow | movements | balance | |
£'000 | £'000 | £'000 | £'000 | |
Cash and short term deposits | 27,325 | (2,567) | (7) | 24,751 |
Overdrafts | (143) | 134 | - | (9) |
27,182 | (2,433) | (7) | 24,742 | |
Bank loans due after one year | (6,591) | - | 105 | (6,486) |
Total | 20,591 | (2,433) | 98 | 18,256 |
Other movements
Other movements of £98,000 include the impact of exchange rate movements arising on balances denominated in currencies other than GBP and the non-cash impact of unamortised borrowing transaction costs.
12. Business combinations
On 29 July 2011 the Company acquired 70% of the issued share capital of A.R.B Underwriting Limited and its subsidiary A.R. Brassington & Co Ltd (ARB). This acquisition resulted in voting rights for 70% of the acquired business and thus control and full consolidation in the results of the Group. However, it did not result in an economic interest in the profits of the business at the point of acquisition, which was retained by the minority shareholder. The transfer of 70% of the economic ownership is being achieved over a five year period, through a series of five self-financing call options (financed through the ongoing profits of the business), in increments of 14%. As at 31 December 2013, IFG Group retains a 28% economic interest in the business, which will increase to 42% in July 2014, and in further 14% increments to 70% over the following two years.
13. Events since the year end
On 6 March 2014 we acquired the remaining 50% of One Network, not previously owned, from our joint venture partner GE Capital Woodchester Limited.
On 12 March 2014 we announced the sale of our non-core UK traditional IFA business (IFG Financial Services) to Ascot Lloyd Financial Services Ltd for an initial consideration of £3.5 million, which will be paid on completion and up to a maximum of £5.6 million in deferred consideration, dependent upon future revenue targets. The sale is subject to regulatory approval.
The Board is recommending a final dividend of 3.19 cent per share (current GBP equivalent of 2.66 pence per share) which will be considered by the Shareholders at the AGM.
14. Approval of financial information
This preliminary announcement was approved by the Board of Directors on 26 March 2014.
Forward-looking statements
Certain statements in this report are forward-looking. Although the Group believes that the expectations reflected in these forward looking statements are reasonable, it can give no guarantee that these expectations will prove to have been correct. Because these statements involve risks and uncertainties, actual results may differ materially from those expressed or implied by these forward-looking statements. The Group undertakes no commitment to update any forward-looking statements whether as a result of new information, future events or otherwise.