IntegraFin Holdings Regulatory News (IHP)

IntegraFin Holdings plc - Interim Results for the Six Months Ended 31 March 2018

IntegraFin Holdings plc was admitted to the London Stock Exchange on 2 March 2018, and is pleased to report its Interim Results for the six months to 31 March 2018 as a listed company.

Highlights

· Funds under direction £29.75bn

· Gross inflows of £3bn in the first half of the year

Ian Taylor, Chief Executive Officer, commented:

"Following a successful IPO, we are pleased to announce a pleasing set of results for the first half of the year. Despite the backdrop of stock market volatility, Transact achieved its highest ever H1 inflows.

Given our differentiated premium offering and the quality of the service we offer to advisers and their clients, we remain confident in our ability to sustain growth as we move into the second half of the year."

Financial Highlights

Contacts

Media

Lansons +44 (0)7979 692287, or +44 (0)20 7490 8828

Tony Langham

Maddy Morgan-Williams

Eva Murphy

Investors

Mark Mochalski +44 (0)20 7608 5339

Analyst Presentation

IntegraFin Holdings plc will be hosting an analyst presentation on 18 May 2018 following the release of these results for the half year ended 31 March 2018. Attendance is by invitation only. Slides accompanying the analyst presentation will be available on the IntegraFin Holdings plc website.

Cautionary Statement

These Interim Results have been prepared in accordance with the requirements of English Company Law and the liabilities of the Directors in connection with these Interim Results shall be subject to the limitations and restrictions provided by such law.

These Interim Results are prepared for and addressed only to the Company's shareholders as a whole and to no other person. The Company, its Directors, employees, agents or advisers do not accept or assume responsibility to any other person to whom these Interim Results are shown or into whose hands it may come and any such responsibility or liability is expressly disclaimed.

These Interim Results contain forward looking statements, which are unavoidably subject to risk and uncertainty because they relate to events and depend upon circumstances that will occur in the future. It is believed that the expectations set out in these forward looking statements are reasonable but they may be affected by a wide range of variables which could cause future outcomes to differ from those foreseen. All statements in these Interim Results are based upon information known to the Company at the date of this report. Except as required by law, the Company undertakes no obligation to publicly update or revise any forward looking statement, whether as a result of new information, future events or otherwise. 

Operating and Financial Review

The first six months of financial year 2018 saw good levels of client inflows onto Transact, despite market volatility in the second half of the period. Growth in Funds Under Direction (FUD) was affected by this volatility in the three months to 31 March 2018, but still ended the interim period some £1.8bn higher than at 2017 financial year end.

FUD, inflows and outflows

1 Other movements includes dividends, interest, fees and tax charges and rebates.

2 FUD held historically for a single private client, for which the only charge was a nominal fee for custody.

Gross inflows for the six months to 31 March 2018 increased by £537m or 21.7% from the six months to 31 March 2017. Gross inflows for the first half of financial year 2018 are the highest since the platform's inception. Gross outflows grew by 8.5%. Lower outflow growth than inflow growth led to an increase in net flows of £471m (27.8%).

Despite significantly less favourable market conditions in the second quarter, FUD continued to grow, ending the reporting period 6.5% higher than at the 2017 financial year end.

Financial performance

Total gross profit in the six months to 31 March 2018 increased by £5.7m, or 14.8%, from the same period in financial year 2017. This growth was driven by the increase in value of FUD due to strong inflows in the period and an increase in the number of tax wrappers.

Components of revenue

Revenue comprises three elements. Of these, annual commission income and wrapper fee income constitute the recurring revenue. Other income includes "buy commission" and "dealing income".

Annual commission income increased by £5.3m, or 15.8%, in the period versus the same period in the prior financial year. This growth was due to increased value of FUD arising from strong inflows and, in the first quarter, market growth. This increase in annual commission was achieved even after a planned reduction in the annual commission rate effective from 1 April 2017.

Wrapper fee income increased by £0.4m (11.4%) in the 2018 period. This was due to an increase in the number of both new and existing clients on the platform with open tax wrappers. This has been offset by wrappers being closed.

These recurring revenue streams constituted 95.7% of total fee income in the six months to 31 March 2018.

The main constituent of other income is buy commission, which accounts for £1.7m (89.5%) of other income in the 2018 six month period, and £1.5m (88.2%) in the 2017 six month period.

Operating Expenses

Total operating expenses increased by £4.4m (21.0%) in the six months to 31 March 2018, compared with the same period in the prior financial year. This increase arose predominantly from professional fees and additional staff costs associated with the listing of IntegraFin Holdings plc (IHP) on the London Stock Exchange on 2 March 2018. Additionally there was an increase in client servicing staff numbers in the period to 31 March 2018.

Staff costs increased by £2m, or 13.2%, in the six months to 31 March 2018, compared with the six months to 31 March 2017. This is in line with staff numbers increasing to 507 from 451, an increase of 12.4%. The main area of people growth was in the area that provides service to advisers and clients and reflects the increase in business volumes and the Group's commitment to maintaining premium service. There were some increases in governance staffing ahead of the listing.

The increase in regulatory and professional fees of £2.3m, or 104.5%, in the six months to 31 March 2018 compared with the six months to 31 March 2017 was mostly due to the increase of £2.2m in professional fees from £1.4m to £3.6m across the comparative periods. The increase is attributable to non-recurring IPO expenses which totalled £4.0m across all periods.

Profit Before Tax Attributable to Shareholder Returns

Profit before tax increased by £1.4m, or 8.1%, comparing the six months to 31 March 2018 with the six months to 31 March 2017. This growth was despite the IPO costs included in the financial year 2018 period and reflects strong revenue growth and general control of expenses.

The operating margin was 41.5% in the six months to March 2018. Allowing for IPO one off costs of £0.4m in the six months to March 2017 and £2.9m in the six months to March 2018, offset by other adjustments in both periods, the adjusted operating margin increased from 44.7% in the six months to March 2017, to 47.5% in the six months to March 2018.

Dividends

During the six month period to 31 March 2018 the Company paid an interim dividend of £19.4m and a special dividend of £11.4m to shareholders. This compares with an interim dividend of £13.5m in the six month period to 31 March 2017.

Earnings Per Share

1 Shares in issue restated for financial year 2017 periods to reflect number of shares in issue following the IHP listing.

Earnings per share has grown by 4.8% comparing the six months to 31 March 2018 with the six months to 31 March 2017, and adjusted earnings per share has grown by 23.8%.

Principal Risks and Uncertainties

The principal risks and uncertainties which affect the Group are those detailed on Pages 24 to 26 of the Group's Annual Report and Financial Statements for the year ended 30 September 2017. The principal risks and uncertainties remain unchanged from year end and are not expected to change for the remainder of the financial year. The key risks and uncertainties are listed below.

Financial risks:

· Market risk - impact of changes in the following on the value of client Portfolios, which can affect future charges and expenses: equity, property market values, currency exchange rates, credit spreads, interest rates and inflation;

· Liquidity risk - the Group not having sufficient financial resources to meet its obligations;

· Outflow risk - loss of future profits due to unexpectedly high client outflows;

· Expense risk - impact of expenses rising faster than expected.

Non-financial risks:

· Regulatory risk - impact of new regulatory requirements on the Group's business model, or the Group failing to comply with regulations;

· Operational risk - risk of loss from inadequate or failed internal processes, people, systems, or external events;

· Competition risk - risk of competitor activity reducing inflows, and increasing outflows;

· Geopolitical risk - changes in the political landscape disrupting the business, or requiring development spending;

· Reputational risk - risk of clients no longer wishing do business with the Group due to a poor perception of Transact service in the market place.

Directors' Responsibility Statement

The Directors confirm to the best of their knowledge:

· The unaudited condensed consolidated set of financial statements has been prepared in accordance with IAS 34 "Interim Financial Reporting" as adopted by the EU, and gives a true and fair view of the assets, liabilities, financial position, and profit and loss of the Group;

· The interim management report includes a fair review of the information required by sections 4.2.7R and 4.2.8R of the Disclosure and Transparency Rules of the UK Financial Conduct Authority; and

· The condensed financial statements have been prepared in accordance with ASB's 2007 statement half yearly reports.

By Order of the Board

David Johnson

Company Secretary

Registered Office

29 Clement's Lane

London

EC4N 7AE

17 May 2018

Independent Review Report to IntegraFin Holdings plc

Introduction

We have been engaged by the Company to review the condensed set of financial statements in the half-yearly financial report for the six months ended 31 March 2018 which comprises the condensed consolidated profit and loss and other comprehensive income, condensed consolidated statement of financial position, condensed consolidated statement of cash flows and condensed consolidated statement of changes in shareholder's equity; and the related notes.

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

Directors' responsibilities

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

As disclosed in note 1, the annual financial statements of the group are prepared in accordance with International Financial Reporting Standards (IFRSs) as adopted by the European Union. The condensed set of financial statements included in this half-yearly financial report has been prepared in accordance with International Accounting Standard 34, ''Interim Financial Reporting'', as adopted by the European Union.

Our responsibility

Our responsibility is to express to the Company a conclusion on the condensed set of financial statements in the half-yearly financial report based on our review.

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

Scope of review

We conducted our review in accordance with International Standard on Review Engagements (UK and Ireland) 2410, ''Review of Interim Financial Information Performed by the Independent Auditor of the Entity'', issued by the Financial Reporting Council for use in the United Kingdom. A review of interim financial information consists of making enquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with International Standards on Auditing (UK) and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion.

Conclusion

Based on our review, nothing has come to our attention that causes us to believe that the condensed set of financial statements in the half-yearly financial report for the six months ended 31 March 2018 is not prepared, in all material respects, in accordance with International Accounting Standard 34, as adopted by the European Union, and the Disclosure Guidance and Transparency Rules of the United Kingdom's Financial Conduct Authority.

BDO LLP

Chartered Accountants

London

United Kingdom

Date

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

Interim Consolidated Profit and Loss and Other Comprehensive Income

All activities of the Group are classed as continuing.

Interim Consolidated Statement of Financial Position

These interim financial statements were approved by the Board of Directors on 17 May 2018 and are signed on their behalf by:

Ian Taylor, Director

Company Registration Number: 08860879

Interim Consolidated Statement of Cash Flows

Interim Consolidated Statement of Changes in Equity

Notes to the Financial Statements

1. Basis of preparation

The consolidated interim financial statements have been prepared and approved by the Directors in accordance with International Financial Reporting Standards (IFRSs) as adopted by the EU, and in accordance with the International Accounting Standard (IAS) 34 Interim Financial Reporting, and the Disclosure Guidance and Transparency Rules of the Financial Conduct Authority (FCA).

The financial information contained in these interim financial statements does not constitute statutory accounts within the meaning of Section 434 of the Companies Act 2006. The information has been reviewed by the company's auditor, BDO LLP, and their report is presented on page 7-8.

The same accounting policies, methods of calculation and presentation have been followed in the preparation of the interim financial statements for the six months to 31 March 2018 as were applied in the Audited Annual Financial Statements for the year ended 30 September 2017.

The financial statements have been prepared on a going concern basis following an assessment by the Directors.

Principal risks and uncertainties

The Group's principal risks and uncertainties have not changed from year end, and are listed on page 5.

Basis of consolidation

The consolidated financial statements incorporate the financial statements of the Company and its subsidiaries.

Future standards, amendments to standards, and interpretations not early-adopted in the 2018 consolidated interim statements

A full impact assessment of IFRS 9 Financial Instruments, IFRS 15 Revenue from Contracts with Customers, and IFRS 17 Insurance Contracts was conducted at financial year 2017 year end. None of the standards was found to have a material impact on the Group, and this position has not changed.

An initial assessment of the impact of IFRS 16 Leases was conducted at financial year 2017 year end, which indicated that whilst there will be a material adjustment to gross assets and liabilities as a result of bringing leased assets on balance sheet, there is unlikely to be a material net impact at Group level. This position has not changed.

2. Critical accounting estimates and judgements

The preparation of interim consolidated financial statements in compliance with IAS 34 requires the use of certain critical accounting estimates. There have been no material revisions to the Group's critical accounting estimates and judgements methodology from year ending 30 September 2017.

3. Financial instruments

Financial assets and liabilities have been classified into categories that determine their basis of measurement and, for items measured at fair value, whether changes in fair value are recognised in the profit and loss and other comprehensive income statement. The following tables show the carrying values of assets and liabilities for each of these categories.

Financial assets:

Financial liabilities:

Financial Instruments - Fair Value Hierarchy

The following table shows the Group's assets measured at fair value and split into the three levels described below:

Level 1: quoted prices (unadjusted) in active markets for identical assets;

Level 2: inputs other than quoted prices included within Level 1 that are observable for the asset either directly (i.e. as prices) or indirectly (i.e. derived from prices); and

Level 3: inputs for the asset that are not based on observable market data (unobservable inputs).

Level 1 valuation methodology

Financial assets included in Level 1 are measured at fair value using quoted mid prices that are available at the reporting date and are traded in active markets. These financial assets are mainly collective investment schemes and listed equity instruments.

Level 2 and Level 3 valuation methodology

The Group regularly reviews whether a market is active, based on available market data and the specific circumstances of each market. Where the Group assesses that a market is not active, then it applies one or more valuation methodologies to the specific financial asset. These valuation methodologies use quoted market prices where available, and may in certain circumstances require the Group to exercise judgement to determine fair value.

Financial assets included in Level 2 are measured at fair value using observable mid prices traded in markets that have been assessed as not active enough to be included in Level 1.

Otherwise, financial assets are included in Level 3. These are assets where one or more inputs to the valuation methodology are not based on observable market data.

Level 3 sensitivity to changes in unobservable measurements

For financial assets assessed as Level 3, based on its review of the prices used, the Company believes that any change to the unobservable inputs used to measure fair value would not result in a significantly higher or lower fair value measurement at year end, and therefore would not have a material impact on its reported results.

Changes to valuation methodology

There have been no changes in valuation methodology since year end.

Transfers between Levels

There have been no material changes between Levels since year end.

4. Segmental reporting

The revenue and profit before tax are attributable to activities carried out in the UK and Isle of Man.

The Group has three classes of business as follows:

- provision of investment administration services

- transaction of ordinary long term insurance and underwriting life assurance

- provision of consultancy services.

 Analysis by class of business is given below:

The figures above comprise the results of the companies that fall directly into each segment, as well as a proportion of the results from the other Group companies that only provide services to the revenue-generating companies. This therefore has no effect on revenue, but has an effect on the profit before tax and net assets figures.

5. Earnings per share

On 2 March 2018, as part of the IntegraFin Holdings plc IPO process, a bonus share issue occurred resulting in the numbers of shares in issue increasing from 1,137,278 to 331,322,014. The nominal value of each share was also reduced through the bonus share issue process, from 0.05p to 0.01p. The calculation of earnings per share for the comparative period presented has been adjusted retrospectively to reflect the new share structure.

Earnings per share is calculated based on the share capital of IntegraFin Holdings plc and the earnings of the consolidated Group.

6. Tax on profit on ordinary activities

Tax is charged at 22% for the six month period ended 31 March 2018 (31 March 2017: 19%), representing the best estimate of the average annual effective tax rate expected to apply for the full year, applied to the pre-tax income of the six month period. The effective tax rate reflects entities in the Group operating in non-UK tax jurisdictions, and includes the effect of IPO costs not deductible for tax purposes.

7. Called up share capital - Company and Group

Immediately prior to Admission to the London Stock Exchange, the share capital of the Company was increased from £56,863.90 to £3,313,220.14 by virtue of a bonus issue of a further: 122,017,456 A Ordinary Shares of 0.01p each; 102,244,000 B Ordinary Shares of 0.01p each; 97,063,720 C Ordinary Shares of 0.01p each; and, 6,859,560 D Ordinary Shares of 0.01p each.

Immediately prior to Admission each A, B, C and D share was then re-designated into an Ordinary Share of 0.01p each.

8. Other non-distributable reserves

The share premium account per the Audited Annual Financial Statements for the year ended 30 September 2017 has been reclassified as other non-distributable reserves. The share premium is held by one of the Company's subsidiaries, Integrated Financial Arrangements Limited, so it is more appropriate to classify this within other reserves on a Group level.

9. Related parties

There were no material changes to the related party transactions during the period.

10. Events after the reporting date

There are no events subsequent to the year-end that require disclosure in, or amendment to the financial statements. 

11. Dividends

During the six month period to 31 March 2018 the Company paid an interim dividend of £19,418,436 (six months to 31 March 2017: £13,527,336) and a special dividend of £11,372,780 (six months to 31 March 2017: nil) to shareholders.

DIRECTORS, COMPANY DETAILS, ADVISERS

Executive Directors

Ian Taylor

Michael Howard

Alexander Scott

Non-Executive Directors

Christopher Munro

Patrick Snowball (appointed 1 October 2017)

Neil Holden

Company Secretary

David Johnson

Independent Auditors

BDO LLP London

Solicitors

Eversheds Sutherland, London

Principal Bankers

NatWest

Registrars

Equiniti

Registered Office

29 Clement's Lane, London, EC4N 7AE

Website

www.integrafin.co.uk 

Company number

8860879

IntegraFin Holdings plc, 29 Clement's Lane, London, EC4N 7AE Tel: (020) 7608 4900 Fax: (020) 7608 5300

(Registered office: as above; Registered in England and Wales under number: 8860879)

The holding company of the Integrated Financial Arrangements Ltd group of companies.