2 Feb 2018 07:00
IFG Group plc
Update on Trading, Elysian Fuels and Other Matters
2nd February 2018
This announcement contains inside information.
IFG Group plc (the "Company" or the "Group") is a focused financial services group with full market listings in London and Dublin. The Company provides a range of financial solutions through its subsidiaries, James Hay and Saunderson House. James Hay is a market leading UK retirement wealth planning platform and Saunderson House is an award-winning independent financial adviser.
Trading update
The Group continues to make good progress in the implementation of its strategy of developing its two first class, client-centric businesses.
James Hay has added more than 6,000 new clients in 2017, an increase of over 30% compared to 2016 and has £25.5bn assets under administration (2016: £22.1bn). Attrition within James Hay was 6.2% (2016: 6.3%). The pricing changes implemented, together with the increase in interest rates in November 2017, provide an improved and more stable and predictable revenue stream for James Hay in 2018, in addition to further organic growth.
Saunderson House has added 247 new clients compared to 215 in 2016, driven by the faster than anticipated growth in its new discretionary management offering. Saunderson House now advises on £5.1bn of clients' assets (2016 - £4.6bn).
On the basis of preliminary, unaudited financial information, the Group expects to report adjusted operating profits for the year ended 31st December 2017 in line with market consensus.
Strategy Update
Saunderson House continues to perform strongly, winning clients and growing assets under advice, and is uniquely positioned in its core markets. The Board, in consultation with its advisers, has however concluded that greater value for shareholders may be created by a sale of Saunderson House. In this regard, we have received a number of approaches. Discussions are at a preliminary stage. The Group will consider a sale if appropriate value for shareholders can be achieved. There can, however, be no certainty that a transaction will complete.
Legacy Matters
1. Elysian Fuels
As previously disclosed, the Group is incurring material legal and remediation costs relating to James Hay's inception of Elysian Fuels investments between 2011-2015. James Hay received notices of assessment arising from Elysian Fuels for tax years 2011/2012 and 2012/2013 totalling £1.8m, which have been appealed, and our discussions with the HMRC seeking an acceptable potential resolution of James Hay's inception of Elysian Fuels investments over the overall 2011-2015 period are on-going. If the matter is not resolved by the end of March 2018, James Hay would expect to receive further assessments for one or both of the additional tax years. Such further notices of assessment could be materially higher than the initial two years reflecting the volume of business incepted. James Hay is committed to working collaboratively with HMRC to resolve this matter and will continue to do so. However, if assessments are received James Hay will apply to HMRC for the assessments to be discharged and pursue appeals to the Tax Tribunals as necessary to protect its position.
The maximum potential sanction charge which may be assessed by HMRC against James Hay for the overall 2011-2015 period would be approximately £20m, assuming all Elysian Fuels shares are deemed valueless at inception, and no underlying clients discharge their own tax liabilities.
Based on advice from the Group's legal advisers, the directors are confident that the outcome at Tribunal and/or any settlement with HMRC would be substantially lower than the maximum potential sanction charge, and would be fundable from the Company's cash resources. The potential exposure remains uncertain and is expected to remain so whilst discussions with HMRC and/or any Tribunal proceedings continue.
2. Other matters
As previously reported, the Company received a legacy claim relating to a legal action in Jersey, pursuant to indemnities provided in respect of the 2012 sale of its International Division. The underlying claim has now been settled by the acquirer who may seek redress from the Company under the indemnity. The total amount of the possible claim of up to £3m has now been reduced to £2m. The Company is seeking legal advice on whether the indemnity is valid and the extent, if any, to which the Company is liable.
The Group has continued its reviews of other legacy business, using external advisers, to check that any other legacy exposures are identified and remediated. Over time these may result in further remediation costs, including legal costs for legacy claims, and whilst the exposures are uncertain, they are not expected to exceed £5m. These reviews remain in progress and an update will be given with the year-end results. They are designed to enable all identified legacy issues in those businesses to be assessed and remediated.
The level of exceptional costs, provisions and contingent liabilities in 2017 may be significantly greater than market expectations, depending upon the extent to which they crystallise or are determined, which could lead to materially reduced statutory accounting results for 2017 for the Group. In light of the inherent uncertainty noted above, the Board has taken the prudent decision that no final dividend will be paid in respect of 2017.
John Cotter, Group Chief Executive, commented:
"Strong fundamentals, good growth and improving underlying financial performance in both our businesses has been overshadowed by a number of legacy issues. Our desire is to bring closure to these issues as soon as possible and we will provide further updates as matters develop".
Enquiries:
IFG
John Cotter Group CEO Tel: +44 203 887 6181
Mark Dearsley Interim Group CFO Tel: +44 203 887 6181
Joint Corporate Brokers
Nicholas Harland Macquarie Capital (Europe) Ltd
Tel: +44 203 037 2369
Charlotte Craigie Goodbody Stockbrokers UC
Tel: +44 203 841 6202