Jtc Plc Regulatory News (JTC)

22 April 2020

JTC PLC

("the Company) together with its subsidiaries ("the Group" or "JTC")

Full year results for the year ended 31 December 2019

JTC delivers continued disciplined growth and announces

positive outlook based on its resilient business model

* Reconciliation of performance measures to reported results. For further information on underlying results see appendix to CFO Review.

** As reported 2019 results include the impact of IFRS 16.

*** Average number of shares for 2019: 111,352,868 (2018: 99,631,757). Underlying EPS is calculated per note 34.4 of the company financial statements and is referred to as adjusted underlying basic EPS.

financial highlights

· Revenue up 28.5% to £99.3m (2018: £77.3m), reflecting a combination of good net organic growth of 8.4% (+15.4% gross) and growth from acquisitions (+20.1%)

· Underlying EBITDA up 32.4% to £31.7m (2018: £23.9m) with underlying EBITDA margin up 0.9pp to 31.9% (2018: 31.0%)

· Performance in line with guidance given for the period of 8 - 10% net organic growth and 30 - 35% underlying EBITDA margin

· Record annualised new business wins totaling £14.9m, comprising £8.9m in ICS (up 48%) and £6.0m in PCS (up 62%)

· A robust balance sheet with available facilities of £150m, and no debt falling due for repayment until 2023

strategic highlights

· Good performance from both the Institutional Client Services (ICS) and Private Client Services (PCS) Divisions, with particularly strong results from the PCS Division

· Acquired Exequtive Partners in Luxembourg and small bolt-ons in Cayman and Netherlands

· Post period end, small bolt-ons in the UK (Registrar services) and Ireland (corporate services) and announcement of the acquisitions of the Sanne private client business in Jersey and technology-enabled US fund administration business NES Financial (NESF)

· M&A pipeline remains healthy. Disciplined approach will continue in 2020 with focus on the integration of acquisitions announced in Q1 while continuing to seek opportunities, particularly in the US, UK and mainland Europe

outlook

· Continued positive growth prospects for the Group, underpinned by fundamental drivers for our industry

· Medium-term guidance for net organic growth maintained at 8 - 10% and update guidance for underlying EBITDA margin to 33 - 38% taking into account IFRS 16

· Focus on integration of acquisitions announced in Q1 2020 (NESF and Sanne private client)

· The Group remains well invested to deliver continued operational improvement and take advantage of further consolidation opportunities.

covid-19

· Swift, effective and resilient response to the risks and challenges that have emerged with seamless transition to remote working for c.900 employees with no interruption to client service

· A highly experienced management team, resilient global platform and 32 year track record of growth year on year

· Highly visible recurring revenues with diversification across clients, services and geographies and no immediate impact seen on client activity levels

Nigel Le Quesne, Chief Executive Officer of JTC PLC, said:

"2019 has seen another strong set of results maintaining our 32 year record of revenue and profit growth. In particular, we have seen good revenue growth, further margin improvement and record new business wins in both Divisions. We have maintained our disciplined approach to acquisitions with Exequtive Partners in 2019 and the Sanne private client business and NES Financial (US fund services) in Q1 2020.

"I would like to take this opportunity to extend my thanks to the excellent JTC team for their dedication and support in 2019 and in particular in their response to the challenges brought by the Coronavirus pandemic in 2020."

Enquiries:

JTC PLC +44 (0) 1534 700 000

Nigel Le Quesne, Chief Executive Officer

Martin Fotheringham, Chief Financial Officer

David Vieira, Chief Communications Officer

Camarco +44(0)20 3757 4985

Geoffrey Pelham-Lane

Kimberley Taylor

Monique Perks

A presentation for analysts will be held at 09:30 today via audio-conference arranged by Camarco.

An audio-cast of the presentation will subsequently be made available on the JTC website: www.jtcgroup.com/investor-relations

Forward Looking Statements

This announcement may contain forward looking statements. No forward looking statement is a guarantee of future performance and actual results or performance or other financial condition could differ materially from those contained in the forward looking statements. These forward looking statements can be identified by the fact they do not relate only to historical or current facts. They may contain words such as "may", "will", "seek", "continue", "aim", "anticipate", "target", "projected", "expect", "estimate", "intend", "plan", "goal", "believe", "achieve" or other words with similar meaning. By their nature forward looking statements involve risk and uncertainty because they relate to future events and circumstances. A number of these influences and factors are outside of the Company's control. As a result, actual results may differ materially from the plans, goals and expectations contained in this announcement. Any forward looking statements made in this announcement speak only as of the date they are made. Except as required by the FCA or any applicable law or regulation, the Company expressly disclaims any obligation or undertaking to release publicly any updates or revisions to any forward looking statements contained in this announcement.

About JTC

JTC is an award-winning provider of fund, corporate and private wealth services.

Founded in 1987, we have over 900 people working across our global office network and are trusted to administer assets of more than US$130 billion.

The principle of making all our people owners of the business is fundamental to our culture and aligns us completely with the best interests of our clients and other stakeholders.

www.jtcgroup.com

Strategic ReportChief Executive Officer's Review

A year of disciplined growth and robust performance

Introduction

JTC has a strong track record of performance and growth spanning more than 30 years and we are very pleased that this continued in 2019.

Last year I stated that our goal is to continue to build an outstanding business for the long term where high standards are coupled with entrepreneurial spirit and the commitment to become a better business for all stakeholders every day. I am pleased to say that these goals were achieved during the year.

Good results do not just happen and I want to take this opportunity, personally and on behalf of the Board, to thank every one of our c. 900 colleagues around the world, all of whom contributed to another strong year at JTC.

Financial highlights

2019 saw the business deliver a strong set of results that were in line with our expectations. At Group level we generated revenue growth of 28.5% to £99.3m, underlying EBITDA growth of 32.4% to £31.7m and an improvement of 0.9pp in underlying EBITDA margin to 31.9%.

These results were achieved through a combination of net organic growth of 8.4% (15.4% gross) and the positive contribution of the full-year effect of the two acquisitions made in 2018, the Netherlands corporate services business, Van Doorn, and the multi‑jurisdictional private client focused business, Minerva. In addition, the Luxembourg fund and corporate services business, Exequtive Partners, acquired in March 2019, also made a positive part-year contribution.

These activities mean that we again delivered within our guidance of 30 - 35% underlying EBITDA margin and 8 - 10% net organic growth, metrics that we believe represent 'good to very good' performance for a company in our sector that is growing and operating in a stable and sustainable manner.

Institutional client services division

Gross revenue for the ICS Division increased 26.4% to £54.8m (2018: £43.4m) and there was a 25.2% increase in underlying EBITDA to £15.6m (2018: £12.5m). The underlying EBITDA margin fell 0.3pp to 28.5% (2018: 28.8%), but the Division did improve the margin during the year from 27.8% in H1. We believe that positive further improvements can be achieved, especially through the adoption of new process and technology capabilities, helping to ensure that the ICS Division delivers within our Group-wide guidance, which we update for 2020 and beyond to 33 - 38% underlying EBITDA margin, taking into account IFRS 16.

Jon Jennings took over the reins as Group Head of ICS from April and has strengthened and aligned his team to take up the twin challenges of driving both growth and efficiency, while maintaining a focus on client service excellence.

Revenue growth was a success, driven by improvements in business development and marketing, with record annualised new business wins of £8.9m, up 48% (2018: £6m). Fund and corporate services remain complementary with a focus on private equity and real estate, as well as debt, renewables and other alternative asset types. The performance of our Luxembourg, UK and Jersey offices were particular highlights.

The acquisition of the Exequtive Partners business in Luxembourg added scale to our platform in this high growth market and also enhanced our leadership team in the region. We saw higher rates of client attrition in the Netherlands due to changing market dynamics, but were also able to make the small bolt-on purchase of the Aufisco business for a very reasonable price for the same reasons.

Post period end we purchased a small bolt-on in the UK that adds Registrar services to our offering and another that expands our footprint to Ireland for the first time and where we will commence with corporate services before expanding into fund services once relevant regulatory approvals have been secured.

Also post period end, we were delighted to announce the acquisition of NES Financial (NESF), a US based, technology-enabled fund administration business. The US is a key growth market for the industry and we believe that NESF provides the perfect platform to drive the strategic expansion of our ICS Division and in particular our presence in the high growth alternatives fund administration sector.

The ICS Division enjoys strong market fundamentals and we will continue to invest in the platform to deliver organic growth and to capitalise on the technology capabilities brought by the NESF acquisition.

Private client services division

Gross revenue for the PCS Division showed a 31.2% increase to £44.5m (2018: £33.9m) and a 40.3% increase in underlying EBITDA to £16.1m (2018: £11.4m). The underlying EBITDA margin improved by 2.3pp to 36.1% (2018: 33.8%) which was a particularly strong performance given the ongoing investment in the platform.

Revenue growth was driven by a new regional model for business development and marketing, supported by an enhanced and centralised approach to client on-boarding and traction from our private office capabilities. This delivered record annualised new business wins of £6.0m, up 62% (2018: £3.7m). Performance of the Jersey and Americas offices were particularly strong, with good contributions from Guernsey, Switzerland and Cayman.

Margin improvement was strong following a period of deliberate investment in the Division in 2018 and this was driven in part by the full integration of the Minerva business, which was achieved three months ahead of schedule. A new Executive Committee governance structure was also introduced, streamlining decision making and operational change management.

Investment was made in JTC Private Office, including a number of senior hires and further investment in technology. The focus continues to be on using this innovative holistic offering to differentiate JTC in the market and drive organic growth. Evidence of progress can be seen in the number of clients where annual fee income is greater than £100k, which increased by 50% in 2019 and helped to drive up the average mandate size within the Division.

The Division was named Trust Company of the Year (Large Firm) at the Society of Trust and Estate Practitioners (STEP) Private Client Awards, one the most prestigious awards of its type in this sector and an accolade that I believe is the external confirmation of what the Division has achieved for some time now.

Post period end we announced the acquisition of the Sanne private client business, a simple and straightforward addition to our market-leading Jersey platform.

The PCS Division is very much a leader in its sector and we see clear opportunities for further investment and growth.

Our people and culture

We have always understood that our people are a fundamental source of differentiation and that is why our culture is based on shared ownership, with every employee being an owner of the business. This approach has been a driver of client service excellence, financial performance and continuous operational improvement across the Group for more than 20 years.

It is not often that external validation is available for something as intangible as culture, but in 2019 we were honoured to be selected by Professor Ethan Bernstein of Harvard Business School (HBS) as the subject of a case study for the full-time HBS Master of Business Administration (MBA) programme, detailing the features and successes of JTC's shared ownership model since its inception in 1998. This world class, yet unsolicited, recognition of our core cultural philosophy is testament to an unwavering belief that aligning the interests of our people and the Company with the interests of our clients and partners is a powerful and effective way to build a successful, sustainable and growth orientated organisation. It was an enormous privilege to attend HBS and participate in the inaugural teaching of the case study, and the insights from the students were powerful and life affirming in equal measure.

We believe that through our shared ownership model we have long been exponents of a more sustainable and responsible approach to finance and capitalism. We therefore regard the increasing emphasis being placed on environmental, social and governance (ESG) practices as very positive and an opportunity for the Group that aligns with our culture and purpose.

In keeping with our Guiding Principle to maximise the potential of every colleague, 2019 saw us expand the JTC Academy with a suite of additional online and real-world learning and development courses. 85 high performers were promoted across the Group during the year and 14 colleagues took up internal roles in new locations (from secondments to permanent relocations) as part of JTC Gateway. We also enhanced our JTC Wellbeing programme with the launch of a new 24/7 Employee Assistance Service that extends to all employees and their immediate families.

Risk

The principal and emerging risks facing the Group are set out in our 2019 Annual Report. Material risks include acquisition risk, competition risk, data protection and cyber security risk, staff resourcing risk, political and regulatory change risk, natural disaster risk, and regulatory and procedural compliance risk.

Post period end we have been required to deal with the challenges presented by the global COVID-19 pandemic and I am pleased to report that the business has so far proved itself to be highly responsive and resilient. To support the safety and wellbeing of all our people we achieved a Group-wide transition to remote working in a matter of days and have been able to directly monitor the commercial performance of the business on a daily basis under our Business Continuity Planning (BCP) operational framework.

We remain satisfied as to the effectiveness of the Group's overall risk analysis, management and culture, developed over more than 30 years of JTC operations.

Post period end, we were pleased to appoint William (Bill) Byrne as Chief Risk Officer (CRO), effective from February 2020. Bill joined JTC in 2016 as Group Counsel and takes over as CRO from Steven Bowen, who joined the Group as part of the Minerva acquisition in 2018.

Going concern

The financial statements are prepared on a going concern basis, as the Directors are satisfied that the Group has the resources to continue in business for at least 12 months from the approval of the financial statements. In making this assessment, the Directors have considered a wide range of information relating to present and future conditions, including future projections of profitability and cash flows.

Dividend

In addition to the interim dividend of 1.7p per share, the Board has recommended a final dividend of 3.6p per share in line with expectations. Subject to shareholder approval, the final dividend will be paid on 3 July 2020 to Shareholders on the register as at close of business on the record date of 5 June 2020.

Outlook

We have always believed that JTC is a highly resilient business and the challenges presented by the COVID-19 pandemic have brought this into focus. The response of the Group has been excellent and we are confident in our ability to successfully trade through this period for a number of reasons. We have a highly experienced management team; a track record of revenue and profit growth spanning 32 years; a well-invested and scalable global platform; we are well diversified across clients, services and geographies; our revenue is highly visible and recurring; we deliver strong cash conversion and we have a robust balance sheet with a net debt to underlying EBITDA ratio of less than 2.0 times on a pro-forma basis.

We will continue to operate under our BCP framework for as long as required, focusing on the wellbeing of our people, the delivery of excellent client service and the commercial success of the Group.

Thinking more broadly, we constantly monitor and analyse the momentum of the business and in particular the drivers of underlying growth. We are positive about the prospects for the Group and believe the fundamental drivers, as articulated in our investment case, remain valid.

Delivering consistent organic growth of the underlying business, which we always measure net of attrition, is fundamental to our approach and it is worth remembering that the Group's growth was purely through organic means for the first 23 of its 32 years. We continue to believe that net organic growth in the range of 8 - 10% at Group level is a measure of good to excellent long-term performance in our sector. Organic growth will be driven by further improvements in our 'go to market' strategies and activities; the enhancement and expansion of our service offering and expertise, the smart application of new technological capabilities and an unwavering dedication to delivering client service excellence. We believe that the combination of our people, technology, processes and global reach will enable the Group to continue to win new business, further penetrate established markets and successfully develop new markets.

Alongside our core organic growth strategy, growth through acquisitions remains an important part of the Group's future. We continue to see consolidation across the sector and have good visibility of deal flow of all sizes within both the ICS and PCS spaces. Our M&A pipeline remains healthy and we continue to take a disciplined approach. Our immediate focus in 2020 will be the completion and integration of the acquisitions we have announced in the first quarter, but we will continue to monitor opportunities for further acquisitions in particular in the US, the UK and mainland Europe.

In terms of profitability, we update our medium term guidance to 33 - 38% underlying EBITDA margin, taking into account IFRS 16. The PCS Division is already operating consistently within this range and will work to maintain performance whilst simultaneously investing in growth opportunities. The ICS Division is making steady progress to deliver margin performance comfortably within our target range and will be investing further in the expertise, technological capabilities and process improvements to achieve that goal. We also believe that the ICS Division will benefit from relatively stronger market growth rates, particularly in the area of alternative asset fund administration.

Strategic ReportChief Financial Officer's Review

Continuing to improve the business

Financial review

* Reconciliation of performance measures to reported results. For further information on underlying results see appendix to CFO Review.

** As reported 2019 results include the impact of IFRS 16.

*** Average number of shares for 2019: 111,352,868 (2018: 99,631,757). Underlying EPS is calculated per note 34.4 of the company financial statements and is referred to as adjusted underlying basic EPS.

Revenue

In 2019, revenue was £99.3m, an increase of £20.0m (28.5%) compared with 2018.

Year on year growth was driven by net organic growth of 8.4% (gross 15.4%) and growth from acquisitions of 20.1%. Overall client attrition in the period was 7.0% compared with 8.8% in 2018 and is lower than previous periods. 97.4% (2018: 98.3%) of revenues that are not end of life were retained in the period.

ICS net organic growth was 9.4%. We saw good growth in Luxembourg, Jersey and the UK but this was offset by contractions in Guernsey and the NACT business in the Netherlands. The latter was from a tightening of the regulatory regime. We expect to see a continuance of this and as a consequence we have impaired the value of client relationships associated with the NACT business which was bought in 2017 (at a multiple of 5 times EBITDA). Conversely, this tightening of regulation has also created opportunities to acquire businesses at attractive prices as shown by the gain on bargain purchase which arose on the acquisition of Aufisco.

PCS organic growth was 7.2%. We continue to see strong demand for our Private Client offering and were pleased at the continuing strength of our Channel Islands business and ongoing development of our US onshore offering. Attrition in PCS was 7.4% with no particular bias in any one jurisdiction.

Revenue growth, on a constant currency basis, in the year is summarised below.

Acquisitions

Acquisitions contributed £15.3m of new revenue in the year broken down as follows:

When JTC acquires a business, the acquired book of clients is defined as inorganic. These clients continue to be treated as inorganic for the first two years of JTC ownership.

NEW BUSINESS/PIPELINE

The enquiry pipeline decreased by £1.6m (5.0%) from £32.0m at 31 December 2018 to £30.4m at 31 December 2019. The drop in pipeline value was due to the high value of work won in H2 and improvements in our speed of on-boarding. During 2019 JTC secured new work with an annual value of £14.9m (2018: £9.7m). The divisional split was ICS £8.9m (2018: £6.0m) and PCS £6.0m (2018: £3.7m). Typically this revenue will have an average life-cycle of approximately 10 years. We are confident that the quality of the pipeline is higher than in previous periods. We are conscious of the impact that the current COVID-19 situation may have on activity levels and anticipate that there may be a reduction in new business wins; however, we anticipate that will be compensated by increased activity in our existing book of business.

UNDERLYING EBITDA AND MARGIN PERFORMANCE

Underlying EBITDA in 2019 was £31.7m, an increase of £7.8m (32.4%) from 2018. The reconciliation of the improvement in the underlying EBITDA is shown below.

The underlying EBITDA margin % is the primary KPI used by the business and is a key measure of management's ability to run the business effectively and in line with competitors and historic performance levels. The performance in 2019 highlights the continuing progress that has been made by the Group with underlying EBITDA margin increased to 31.9% from 31.0% in 2018 - an improvement of 0.9pp. This has been primarily driven by improved operational efficiency in the PCS Division.

ICS's underlying EBITDA margin fell back from 28.8% in 2018 to 28.5% in 2019. At mid-year the ICS margin was 27.8% but with a focus on cost efficiencies and the impact of the Commercial Office the full year margin improved to 28.5%. We believe that the acquisition of the NESF business and adoption of its market-leading technology will support further margin improvement in the Division, albeit we appreciate that the improvements may take time to implement.

PCS's underlying EBITDA margin improved from 33.8% to 36.1% in the year. This was driven by the integration of the Minerva business and also a focus upon operational improvement and process efficiency.

We continue to invest in the business and have been encouraged by the strong growth in new business wins in H2 2019 and in the size of mandates being won by both Divisions.

DEPRECIATION AND AMORTISATION

As a result of the adoption of IFRS 16 there has been a significant increase in the depreciation charge in 2019. In 2018 the depreciation charge was £0.9m but this increased to £4.6m in 2019. This was due to the inclusion of a charge against the right-of-use assets of £3.4m.

The Group has £171.5m (2018: £145.2m) of balance sheet assets consisting of goodwill (2019: £124.9m, 2018: £104.8m) and customer relationships (2019: £46.6m, 2018: £40.4m). We regularly test these assets for impairment and monitor the recoverability of the carrying amounts. During 2019 there was an acceleration of client attrition in the NACT business owing to a more stringent regulatory environment in the Netherlands. This in turn resulted in an impairment to the NACT customer relationships intangible asset of by £0.5m.

No other impairments were required for other acquisitions. We recognise that in the current uncertain COVID-19 business environment there may be an increased need to monitor for impairment indicators and where there is evidence of impairment, we shall review carrying amounts in our balance sheet.

STATUTORY OPERATING PROFIT/EBIT

The Group recognises that EBIT is a more commonly accepted reporting metric and hence shows these results for the benefit of external stakeholders. Statutory EBIT is impacted by non-underlying costs albeit these are substantially reduced from 2018 which was the first year of reporting post the IPO. Details of these non-underlying costs are set out below.

NON-UNDERLYING ITEMS

Non-underlying items incurred in the period totalled £2.1m (2018: £19.1m). These comprised the following:

· (£0.4m) credit from EBT12 whereby staff that left the business forfeited their rights to the EBT distribution (2018: £13.2m)

· £2.0m of acquisition and integration costs (2018: £4.3m)

· £0.5m other costs/charges (2018: £0.6m)

In 2018 we incurred £1.0m of costs associated with the IPO that took place that year.

Of the £2.1m (2018: £19.1m) of non-underlying costs, £1.7m (2018: £18.6m) are incurred at EBITDA level and £0.2m (2018: £0.4m) are included within finance costs and £0.2m (2018: £0.1m) are other costs.

JTC is required to consolidate its EBTs within its results and for that reason the capital distribution is included within staff costs. The full charge to the income statement was recognised in the period to 31 December 2018. Acquisition and integration costs reflect costs incurred on the completed acquisitions as well as transactions which are ongoing or did not complete.

PROFIT BEFORE TAX

The reported profit before tax for the period ended 31 December 2019 was £17.6m (2018: £2.1m loss).

Adjusting for non-underlying items the underlying profit before tax for 2019 was £20.4m (2018: £17.0m). The improvement reflects the growth in revenues and margin increase in the period. However, the relative profitability was negatively impacted by £1.7m adverse foreign exchange movements. This is due to the translation of substantial US dollar and Euro monetary balance sheet items held at the year end.

Finance costs in the year comprise £1.6m of amortisation/non-cash flow items (2018: £1.5m) and £2.4m of costs which impact cash flow (2018: £2.0m).

TAX

The tax charge in the year was £0.5m (2018: £1.7m). This was lower than in previous periods and reflects the impact of a significant deferred tax credit of £0.8m as a result of the movements in relation to the value of customer relationships held on the balance sheet. During the year the Group reviewed its transfer pricing policy and updated this to reflect the evolving nature of the business and the way it operates. The policy continues to be fully compliant with OECD guidelines.

EARNINGS PER SHARE

Adjusted underlying basic EPS was 22.33p (2018: 19.23p). Adjusted underlying basic EPS is the profit for the year adjusted to remove the impact of non-underlying items within profit after tax, amortisation of customer relationships and associated deferred tax impact, amortisation of loan arrangement fees and unwinding of NPV discounts and the impact of IFRS 16.

CASH FLOW AND DEBT

Cash generated from underlying operating activities was £28.7m (2018: £19.5m) and the underlying cash conversion was 89% (2018: 90%). During 2019 the actual conversion rate was adversely impacted by the timing of receipts from the Exequtive business which we purchased in April 2019 and Aufisco which was acquired in July 2019. This impact will be eliminated in the 2020 cash conversion result and hence we continue with our medium-term guidance that underlying cash conversion will be in the range of 85 - 90% p.a. Post year end we have maintained a strong focus on cash collection.

Net debt at the period end was £66.5m compared with £48.7m at 31 December 2018. The underlying net debt of £59.3m (2018: £46.4m) excludes regulatory capital (which is not included for banking covenant testing) and also excludes the £4.2m loan advanced to NESF prior to the post-period end acquisition - which will be subsequently settled at completion. Underlying leverage is therefore 1.9 times underlying EBITDA (2018: 1.9 times). At 31 December 2019 the bank covenant test for leverage was 3.5 times pro-forma EBITDA. The covenant test moves to 3.25 times pro-forma EBITDA on 31 March 2020 and then decreases to 3.0 times on 31 March 2021.

Our banking facility was increased by £50.0m on 9 January giving a total undrawn facility balance of £63.3m. The facilities expire on 8 March 2023.

RECONCILIATION OF UNDERLYING EBITDA TO REPORTED RESULTS

During 2019 IFRS 16 was adopted by the business. It has a significant impact on the comparison of performance of the business year on year. The table below sets out the impact of the adoption of the new standard.

As a result of the adoption of this accounting standard we raise our guidance on underlying EBITDA from a range of 30 - 35% to 33 - 38%. We estimate that the annual impact on reported profit after tax will be a deduction of £1.0m. The standard does not have a cash flow impact and we will adjust for this in calculating underlying profit available for dividends.

MARTIN FOTHERINGHAM

CHIEF FINANCIAL OFFICER

Appendix: Reconciliation of Reported results to APM's

1. EBITDA

2. Cash conversion

* Acquisition normalisation refers to the following: In 2019, in line with customer contracts, £2.0m of Exequtive revenues were collected by the previous owners in advance of JTC ownership. Aufisco revenue was recorded in 2019 but cash collected in 2020 in accordance with the acquisition agreement and customer billing cycles. In 2018 under the terms of the BAML customer agreements and due to the timing of the acquisition in 2017, JTC had billed for 12 months of work but had only been paid for 9 months.

3. Net Debt / Leverage

FINANCIAL STATEMENTSCONSOLIDATED INCOME STATEMENT

For the year ended 31 December 2019

The notes are an integral part of these consolidated financial statements.

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

For the year ended 31 December 2019

The notes are an integral part of these consolidated financial statements.

Consolidated Balance Sheet

As at 31 December 2019

The notes are an integral part of these consolidated financial statements.

The consolidated financial statements were approved by the Board of Directors on 21 April 2020 and signed on its behalf by:

Nigel Le Quesne Martin Fotheringham

Chief Executive officer Chief Financial Officer

Consolidated Statement of Changes in Equity

For the year ended 31 December 2019

The notes are an integral part of these consolidated financial statements.

Consolidated cash flow Statement

For the year ended 31 December 2019

The notes are an integral part of these consolidated financial statements.

Notes to the Consolidated financial statements

For the year ended 31 December 2019

SECTION 1 - BASIS FOR REPORTING AND GENERAL INFORMATION

1. REPORTING ENTITY

JTC PLC (the "Company") was incorporated on 2 January 2018 and is domiciled in Jersey, Channel Islands. The address of the Company's registered office is 28 Esplanade, St Helier, Jersey.

The consolidated financial statements of the Company for the year ended 31 December 2019 comprise the Company and its subsidiaries (together the "Group" or "JTC") and the Group's interest in an associate.

The Company was admitted to the London Stock Exchange on 14 March 2018 (the "IPO") having obtained control of the entire share capital of JTC Group Holdings Limited ("JTCGHL") via a share exchange, and thus control of the Group, see note 26. The consolidated balance sheet at 31 December 2018 reflected the change in legal ownership of the Group, including the share capital of JTC PLC and the effects of the share exchange transactions.

The Group provides fund, corporate and private wealth services to institutional and private clients.

2. BASIS OF PREPARATION

2.1. STATEMENT OF COMPLIANCE AND BASIS of MEASUREMENT

The consolidated financial statements have been prepared in accordance with International Financial Reporting Standards ("IFRS") as adopted by the European Union, the interpretations of the IFRS Interpretations Committee ("IFRS IC") and Companies (Jersey) Law 1991. The consolidated financial statements comply with IFRS as issued by the International Accounting Standards Board ("IASB") and have been prepared on a going concern basis, under the historical cost convention.

2.2. FUNCTIONAL AND PRESENTATION CURRENCY

The consolidated financial statements are presented in pounds sterling, which is the functional and reporting currency of the Company and the presentation currency of the consolidated financial statements. All amounts disclosed in the consolidated financial statements and notes have been rounded to the nearest thousand (`000) unless otherwise stated.

3. SIGNIFICANT ACCOUNTING POLICIES

3.1. CHANGES IN ACCOUNTING POLICIES AND NEW STANDARDS ADOPTED

The accounting policies set out in these consolidated financial statements have been consistently applied to all the years presented, unless otherwise stated.

New standards and interpretations issued and effective from 1 January 2019

To the extent they are relevant, the Group has adopted, from 1 January 2019, all IFRS standards and interpretations including amendments that were in issue and effective for accounting periods beginning on 1 January 2019. These are as follows:

· IFRS 16 'Leases'

· IFRIC 23 'Uncertainty over Income Tax Treatments'

· Prepayment Features with Negative Compensation (Amendments to IFRS 9)

· Long-term Interests in Associates and Joint Ventures (Amendments to IAS 28)

· Annual Improvements to IFRS Standards 2015-2017 Cycle

· Plan Amendment, Curtailment or Settlement (Amendments to IAS 19)

These standards and interpretations had no material impact for the Group, except for IFRS 16, as described below.

New standards and interpretations issued but not yet adopted

Certain new accounting standards and interpretations have been published that are not mandatory for 31 December 2019 reporting periods and have not been early adopted by the Group. These standards are not expected to have a material impact on the entity in the current or future reporting periods and on foreseeable future transactions, except for Definitions of a Business (Amendments to IFRS 3).

This amendment narrows the definition of a business and adds an optional concentration test that permits a simplified assessment of whether an acquired set of activities and assets is not a business. For the Group, this amendment could result in more acquisitions being accounted for as asset acquisitions.

3.2. IFRS 16 'LEASES'

This note explains the impact of the adoption of IFRS 16 'Leases' on the Group's consolidated financial statements.

The Group has adopted IFRS 16 'Leases' retrospectively from 1 January 2019, but has not restated comparatives for the 2018 reporting period, as permitted under the specific transition provisions in the standard. The reclassifications and the adjustments arising from the new leasing rules are therefore recognised in the opening balance sheet on 1 January 2019. The new accounting policies are disclosed in note 19.

To assess the impact of IFRS 16, Management have considered existing operating and finance leases as well as reviewing all other contracts in place within the business to ascertain if they fall within the definition of a lease. The most significant contracts identified are where the Group enters into leases for the rental of office space in different countries. Leases are negotiated for a variety of terms over which rentals are primarily fixed with break clauses and options to extend for further periods at the prevailing market rate. Any lease incentives are spread over the term of the lease. The break dates for the lease agreements vary.

On adoption of IFRS 16, the Group recognised lease liabilities in relation to leases which had previously been classified as 'operating leases' under the principles of IAS 17 'Leases'. The liabilities were measured at the present value of the remaining lease payments, discounted using the lessee's incremental borrowing rate as at 1 January 2019.

The incremental borrowing rate applied to each lease was determined considering the Group's borrowing rate and the risk-free interest rate, adjusted for factors specific to the country, currency and term of the lease. The incremental borrowing rates applied to individual leases ranged between 1.5% and 9.2%. The weighted average lessee's incremental borrowing rate applied to the lease liabilities on 1 January 2019 was 3.1%.

For those leases previously classified as finance leases, the right-of-use asset and lease liability are measured at the date of initial application at the same amounts as under IAS 17 immediately before the date of initial application. The measurement principals of IFRS 16 are only applied after that date.

The right-of-use assets recognised relate only to leases for the rental of office space, other right-of-use assets were all considered to be low-value or short-term.

Practical expedients applied

In applying IFRS 16 for the first time, the Group used the following practical expedients permitted by the standard:

· The exclusion of initial direct costs in the measurement of the right-of-use asset for operating leases at the date of initial application.

· Reliance on previous assessments on whether leases are onerous instead of performing an impairment review.

· For operating leases with a remaining lease term of less than 12 months and for leases of low-value assets, accounting for the lease expense on a straight-line basis over the remaining lease term.

· The use of hindsight in determining the lease term where the contract contains options to extend or terminate leases.

The Group has also elected not to reassess whether a contract is, or contains, a lease at the date of initial application. Instead, for contracts entered into before the transition date the Group relied on the assessment it made in applying IAS 17 and IFRIC 4 'Determining whether an Arrangement Contains a Lease'.

Measurement of lease liabilities

The following is a reconciliation of total operating lease commitments at 31 December 2018 to the lease liabilities recognised at 1 January 2019:

Measurement of right-of-use assets

The associated right-of-use assets for property leases were measured at the amount equal to the lease liability, adjusted by the amount of any prepaid or accrued lease payments relating to that lease recognised in the balance sheet as at 31 December 2018. There were also onerous lease contracts that required adjustment to the right-of-use asset at the date of initial application.

Adjustments recognised in the balance sheet on 1 January 2019

The change in accounting policy affected the following items in the balance sheet on 1 January 2019:

· Property, plant and equipment increased by £29.1m for right-of-use assets.

· Prepayments decreased by £0.1m.

· Provisions for onerous leases decreased by £0.1m.

· Provisions for rent-free periods decreased by £1.6m.

· Lease liabilities increased by £29.2m; £26.6m is shown in non-current liabilities and £2.6m in current liabilities.

· The net impact on retained earnings on 1 January 2019 was an increase of £1.8m.

Impact for the current financial year end

For the current financial year end, IFRS 16 has impacted as follows:

· EBITDA for the year to 31 December 2019 increased by £3.7m.

· Profit after tax for the year to 31 December 2019 decreased by £0.7m.

· The carrying value of non-current lease liabilities is £28.7m and £2.9m for current lease liabilities at 31 December 2019, see note 19.1.

· The carrying value of right-of-use assets is £30.2m at 31 December 2019, this is presented within property, plant and equipment, see note 20.

· Basic Earnings Per Share have decreased by 0.06p per share for the year to 31 December 2019 as a result of the adoption of IFRS 16.

3.3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

The basis of consolidation is described below, otherwise significant accounting policies related to specific items are described under the relevant note. The description of the accounting policy in the notes forms an integral part of the accounting policies. Unless otherwise stated, these policies have been consistently applied to all the years presented.

Basis of consolidation

The consolidated financial statements incorporate the financial statements of the Company and entities controlled by the Company (its "subsidiaries"). The Group controls an entity when it is exposed to, or has rights to, variable returns from its involvement with the entity and has the ability to affect those returns through its power to direct the activities of the entity.

De-facto control exists where the Company has the practical ability to direct the relevant activities of the investee without holding the majority of the voting rights. In determining whether de-facto control exists the Company considers the size of the Company's voting rights relative to other parties, substantive potential voting rights held by the Company and by other parties, other contractual arrangements and historical patterns in voting attendance.

Subsidiaries are fully consolidated from the date on which control is transferred to the Group. They are deconsolidated from the date that control ceases. When the Group loses control over a subsidiary, it derecognises the assets and liabilities of the subsidiary, and any related non-controlling interest and other components of equity. Any resulting gain or loss is recognised in the consolidated income statement.

Where necessary, adjustments are made to the financial statements of subsidiaries to bring their accounting policies in line with the Group. All inter-company transactions and balances, including unrealised gains and losses, arising from transactions between Group companies are eliminated on consolidation.

The acquisition method of accounting is used to account for business combinations by the Group (see note 31). Associates are accounted for via the equity method of accounting (see note 32).

Company only financial statements

Under Article 105(11) of the Companies (Jersey) Law 1991, the Directors of a holding company need not prepare separate financial statements (i.e. company only financial statements). Separate financial statements for the Company are not prepared unless required to do so by the members of the Company by ordinary resolution. The members of the Company had not passed a resolution requiring separate financial statements and, in the Directors' opinion, the Company meets the definition of a holding company. As permitted by law, the Directors have elected not to prepare separate financial statements.

SECTION 2 - RESULT FOR THE YEAR

4. Segmental Reporting

4.1. Basis of segmentation

The Group has a multi-jurisdictional footprint and the core focus of operations is on providing services to its institutional and private client base, with revenues from alternative asset managers, financial institutions, corporates, high-net-worth ("HNW") and ultra-high-net-worth ("UHNW") individuals and family office clients. Declared revenue is generated from external customers. Business activities include:

Fund services

Supporting a diverse range of asset classes, including real estate, private equity, renewables, hedge, debt and alternative asset classes providing a comprehensive set of fund administration services (e.g. fund launch, NAV calculations, accounting, compliance and risk monitoring, investor reporting, listing services).

Corporate services

Includes clients spanning across small and medium entities, public companies, multinationals, sovereign wealth funds, fund managers, HNW and UHNW individuals and families requiring a 'corporate' service for business and investments. As well as entity formation, administration and other company secretarial services, the Group also services international and local pension plans, employee share incentive plans, employee ownership plans and deferred compensation plans.

Private client services

Supporting HNW and UHNW individuals and families, from 'emerging entrepreneurs' to established single and multi-family offices. Services include JTC's own comprehensive Private Office, as well as the formation and administration of trusts, companies, partnerships, and other vehicles and structures across a range of asset classes, including cash and investments.

The Chief Executive Officer and Chief Financial Officer are together the Chief Operating Decision Makers of the Group and determine the appropriate business segments to monitor financial performance. Each segment is defined as a set of business activities generating a revenue stream determined by divisional responsibility and the management information reviewed by the Board. They have determined that the Group has two reportable segments: these are Institutional Client Services ("ICS") and Private Client Services ("PCS").

4.2. Segmental information

The table below shows the segmental information provided to the Board for the two reportable segments (ICS and PCS) on an underlying basis:

The Board evaluates segmental performance based on revenue, underlying gross profit and underlying EBITDA. Profit before income tax is not used to measure the performance of the individual segments as items such as depreciation, amortisation of intangibles, other gains and net finance costs are not allocated to individual segments. Consistent with the aforementioned reasoning, segment assets and liabilities are not reviewed regularly on a by-segment basis and are therefore not included in the IFRS segmental reporting.

5. Staff costs

6. OTHER OPERATING EXPENSES

7. non-underlying items

(i) Following the IPO in March 2018, the Group expensed £13.21m to staff costs being the discounted value of the total committed capital distributions from EBT12. During 2019, £0.4m was credited to staff costs in relation to leavers who forfeited their distributions.

(ii) During 2019, the Group completed two acquisitions (Exequtive and Aufisco) and expensed £0.82m of acquisition and integration expenditure (see notes 31.1 and 31.2). Also expensed in the year was £0.78m in relation to the acquisition of Minerva (see note 31.3) and £0.37m in relation to the acquisition of Van Doorn (see note 31.4). Acquisition and integration costs includes but is not limited to: travel costs, professional fees, legal fees, tax advisory fees, onerous leases, transitional services agreement costs, any client-acquired penalties, acquisition-related share-based payments and staff reorganisation costs.

(iii) The gain on bargain purchase arose on the acquisition of Aufisco (see note 31.2) (2018: gain on bargain purchase arose on the acquisition of BAML).

(iv) Impairment of customer relationship intangible asset separately identified on acquisition of NACT (see note 21.2).

8. DEPRECIATION AND AMORTISATION

(i) Depreciation has increased by £3.2m following the adoption of IFRS 16 'Leases` (see note 3.2) as a result of recognising right-of-use assets.

9. OTHER (LOSSES)/GAINS

10. FINANCE INCOME AND FINANCE COST

(i) Unwinding of net present value discounts has increased by £0.9m following adoption of IFRS 16 'Leases` (see note 3.2) as a result of recognising lease liabilities.

11. INCOME TAX EXPENSE

The difference between the total current tax shown above and the amount calculated by applying the standard rate of Jersey income tax to the profit/(loss) before tax is as follows:

Income tax expense computations are based on the jurisdictions in which profits were earned at prevailing rates in the respective jurisdictions.

The Company is subject to Jersey income tax at the general rate of 0%; however, the majority of the Group's profits are reported in Jersey by Jersey financial services companies. The income tax rate applicable to certain financial services companies in Jersey is 10%. It is therefore appropriate to use this rate for reconciliation purposes.

SECTION 3 - FINANCIAL ASSETS AND FINANCIAL LIABILITIES

12. TRADE RECEIVABLES

The ageing analysis of trade receivables with the loss allowance is as follows:

The movement in the allowances for trade receivables is as follows:

To measure the expected credit losses, trade receivables are grouped based on shared credit risk characteristics and the days past due. The expected credit losses are estimated collectively using a provision matrix based on the Group's historical credit loss experience, adjusted for factors that are specific to the debtor's financial position (this includes unlikely to pay indicators such as liquidity issues, insolvency or other financial difficulties) and an assessment of both the current as well as the forecast direction of macroeconomic conditions at the reporting date. The Group has identified gross domestic product and inflation in each country the Group provides services in to be the most relevant macroeconomic factors. The impact of expected changes in these forward-looking macroeconomic factors has been assessed and is considered to be highly immaterial. Provision rates are segregated according to geographical location and by business line. The Group considers specific impairment on a by-client basis rather than on a collective basis. The carrying amount of the asset is reduced through the use of an allowance account and the amount of the loss is recognised in the consolidated income statement as credit impairment losses. When a trade receivable is uncollectible, it is written off against the allowance account. Subsequent recoveries of amounts previously written off are credited against credit impairment losses.

13. WORK IN PROGRESS


Work in progress ("WIP") represents the net unbilled amount expected to be collected from clients for work performed to date. It is measured at the chargeable rate agreed with the individual clients less progress billed, less allowances for unrecoverable amounts and less expected credit losses. As these financial assets relate to unbilled work and have substantially the same risk characteristics as trade receivables, the Group has concluded that the expected loss rates for trade receivables

Sensitivity analysis

The total carrying amount of WIP (before ECL allowances) is £9.35m (2018: £7.13m). If Management's estimate of the recoverability of the WIP (the amount expected to be billed and collected from clients for work performed to date) is 10% lower than expected on the total WIP balance due to allowances for unrecoverable amounts, revenue would be £0.94m lower (2018: £0.71m lower).

14. ACCRUED INCOME

Accrued income across all the service lines represents the billable provision of services to clients which has not been invoiced at the reporting date. Accrued income is recorded based on agreed fees billed in arrears less expected credit losses. As these financial assets relate to unbilled work and have substantially the same risk characteristics as trade receivables, the Group has concluded that the expected loss rates for trade receivables

15. OTHER RECEIVABLES

Loans receivable from employees include the following: (i) a loan for £0.18m which is interest bearing (LIBOR +1.5%) and repayable on 31 December 2020 unless the employment contract is terminated at an earlier date; and (ii) £0.15m which is due from employees participating in the Advance to Buy ("A2B") programme; these are interest bearing at 3% per annum and repayable two years after the commencement date (in early 2021) unless the employment contract is terminated at an earlier date.

Loans receivable from Northpoint Byala IC (£53k) and Northpoint Finance IC (£11k) are unsecured and interest free and, as the repayment date is unspecified, these are non-current. Both are incorporated cell companies registered in Jersey, Channels Islands and are considered related parties due to common directorships.

Loans receivable from third parties are due from NES Financial ("NESF"), a business acquired by the Group on 2 April 2020. On 26 November 2019, the Group provided an unsecured interest free, short-term loan of $2m to secure exclusivity. On 5 December 2019, a further loan was extended for $3.5m which was secured, with interest payable at 3% per annum with a repayment date of 5 June 2021. Both of these loans have been settled post year end as part of the purchase consideration calculation (see note 40).

Other receivables are subject to the impairment requirements of IFRS 9 but as balances are primarily with related parties or part of a business combination, they were assessed to have low credit risk and no loss allowance is recognised.

16. CASH AND CASH EQUIVALENTS


For the purpose of presentation in the statement of cash flow, cash and cash equivalents includes cash in hand, deposits held at call with banks, other short-term highly liquid investments with original maturities of three months or less and bank overdrafts.

Cash and cash equivalents are subject to the impairment requirements of IFRS 9 but, as balances are mainly held with reputable international banking institutions, they were assessed to have low credit risk and no loss allowance is recognised.

17. TRADE AND OTHER PAYABLES

Included in current other payables is £2.5m being the discounted value of capital distributions due from EBT12 to employees (2018: £3.0m).

Included in non-current other payables in the prior year was the discounted value of capital distributions due from EBT12 to employees of £2.85m.

Deferred consideration payable is discounted to net present value, split between current and non-current and is due by acquisition as follows: £7.64m for Exequtive (see note 31.1), £0.56m for Aufisco (see note 31.2) and £0.26m for S&GFA (2018: £5.06m for Van Doorn, £1.96m for Minerva, £0.88m for NACT and £0.3m for S&GFA).

Due to their short-term nature, Management consider the carrying value of these financial liabilities to approximate to their fair value.

18. LOANS AND BORROWINGS

18.1. BANK LOANS

The terms and conditions of outstanding bank loans are as follows:

(i) The initial interest rate margin was 2%; this can change as a result of net leverage calculations. As at 31 December 2019, the interest rate margin was 1.75% (2018: 1.75%).

Under the terms of the facility, HSBC Bank Plc ("HSBC") holds a charge against the shares of JTC PLC and other subsidiaries deemed to be obligors and, in the event of default, could place charges against the net assets held.

Movement in bank facilities during the year:

On 9 March 2018, the Group entered into a five year loan facility agreement with HSBC for a total commitment of £55m (or its equivalent in EUR and USD) consisting of a term loan of £45m and a revolving facility commitment of £10m. The loan agreement was amended on 19 October 2018 to increase the total commitment to £100m and to introduce Barclays Bank Plc ("Barclays"), Santander UK Plc ("Santander") and the Bank of Ireland ("BOI") as incoming lenders with an additional revolving facility commitment of £15m each.

An amount of £45m from the loan facility was used to partially fund the repayment of the existing secured bank loan with HSBC and Royal Bank of Scotland Plc totalling £55.8m in March 2018. The issue costs of £251k associated with this loan have been written off, having previously been capitalised for amortisation over the term of the loan. On 25 September 2018 and 16 November 2018, further withdrawals were made for £9m and £19m respectively to partially fund the two acquisitions made by the Group during the prior year, see notes 31.3 and 31.4. On 22 March 2019, a further withdrawal was made for £15.5m (€17.9m) to partially fund the acquisition of Exequtive, see note 31.1.

The cost of the facility depends upon net leverage, being the ratio of total net debt to underlying EBITDA (for LTM at average FX rates and adjusted for pro-forma contributions from acquisitions and synergies) for a relevant period. As at 31 December 2019, arrangement and legal fees amounting to £1.75m have been capitalised for amortisation over the term of the loan.

At 31 December 2019, the Group had available £12.1m of committed facilities currently undrawn (2018: £27m). All facilities are due to be repaid on or before the termination date of 8 March 2023.

On 9 January 2020, the revolving facility commitment was increased by £50m increasing the total facility commitment to £150m. The commitments were increased by bank as follows: £10m from Barclays, Santander and BOI and £20m from HSBC. The additional commitments are made on the same terms as the existing commitments.

18.2. COMPLIANCE WITH LOAN COVENANTS

The Company has complied with the financial covenants of its borrowing facilities during the 2019 and 2018 reporting period, see note 30.

18.3. OTHER LOANS

On 10 April 2017, the Group entered into a loan facility with Close Leasing Limited for £2.52m. The loan arrangement fee of £25k and an initial instalment of £194k were deducted from the cash received and the remaining balance due is being settled in 41 monthly instalments of £65k each.

18.4. FAIR VALUE

For the majority of the borrowings, the fair values are not materially different from their carrying amounts, since the interest payable on those borrowings is close to current market rates or the borrowings are short-term in nature.

19. LEASES

19.1. AMOUNTS RECOGNISED IN THE CONSOLIDATED BALANCE SHEET

In 2018, the Group only recognised lease assets and lease liabilities in relation to leases that were classified as 'finance leases' under IAS 17 'Leases'. The assets were presented in property, plant and equipment and the liabilities as part of Group loans and borrowings. For adjustments recognised on adoption of IFRS 16 on 1 January 2019, please refer to note 3.2.

Sensitivity analysis

The Group has measured the lease liability at the present value of the remaining lease payments, discounted using the lessee's incremental borrowing rate at the date of transition and right-of-use assets at an amount equal to the lease liability, adjusted by the amount of any prepaid or accrued lease payments recognised in the consolidated balance sheet before transition. The discount rate determined on a lease-by-lease basis is a significant estimate. The incremental borrowing rate for each lease has been determined by considering the term of the arrangement, the value of the lease liability and the economic environment specific to the jurisdiction. Should the discount rate used for the calculation on each lease arrangement be increased by 1%, the right-of-use asset and lease liability recognised upon transition would both be £2m lower.

19.2. AMOUNTS RECOGNISED IN THE CONSOLIDATED INCOME STATEMENT

The consolidated income statement shows the following amounts relating to leases:

The total cash outflow for leases in 2019 was £3.1m.

SECTION 4 - NON-FINANCIAL ASSETS AND NON-FINANCIAL LIABILITIES

20. PROPERTY, PLANT AND EQUIPMENT

(i) The carrying value of office furniture and equipment included an amount of £162k where the Group was a lessee under finance leases. These leases expired during 2019.

21. INTANGIBLE ASSETS

The movements of the intangible assets and goodwill are as follows:

21.1. GOODWILL

Goodwill impairment

Goodwill is not amortised but it is tested for impairment annually, or more frequently if events or changes in circumstances indicate that the carrying amount may not be recoverable. Goodwill is monitored by Management at jurisdictional levels. Goodwill is allocated to CGUs for the purpose of impairment testing and this allocation is made to those CGUs or groups of CGUs that are expected to benefit from the business combination in which the goodwill arose. The aggregate carrying amounts of goodwill allocated to each CGU is as follows:

Key assumptions used in discounted cash flow projection calculations

The recoverable amount of all CGUs has been determined based on a value in use calculation using cash flow projections. Projected cash flows are calculated with reference to each CGU's latest budget and business plan which are subject to a rigorous review and challenge process. Management prepare the budgets through an assessment of historical revenues from existing clients, the pipeline of new projects, historical pricing, and the required resource base needed to service new and existing clients, coupled with their knowledge of wider industry trends and the economic environment.

The year 1 cash flow projections are based on detailed financial budgets and years 2 to 5 on detailed outlooks prepared by Management. The revenue growth rate assumed beyond the initial five year period is between 0.3% and 2.5%, based on the expected long-term inflation rate of the relevant jurisdiction of the CGU (the "terminal value growth rate").

Management estimate discount rates using pre-tax rates that reflect current market assessments of the time value of money. In assessing the discount rate applicable to the Group the following factors have been considered:

· Long-term treasury bond rate for the relevant jurisdiction

· The cost of equity based on an adjusted Beta for the relevant jurisdiction

· The risk premium to reflect the increased risk of investing in equities

The above assumptions have resulted in weighted average cost of capital ("WACC") of between 10.5% and 16.4%.

A summary of the values assigned to the key assumptions used in the value in use calculations are as follows:

· Revenue growth rate: up to 19.0%

· Terminal value growth rate: between 0.3% and 2.5%

· Discount rate: between 10.5% and 16.4%

· EBIT margin: between 31.3% and 63.0%

Sensitivity analysis

Management believe that any reasonable changes to the key assumptions on which recoverable amounts are based would not cause the aggregate carrying amount to exceed the recoverable amount of the CGUs, except for the revenue growth rate in the Luxembourg CGU. For this CGU, should the revenue growth rate estimated by Management in their detailed outlook for years 1 to 5 be 4% lower, an impairment of £0.9m would be recognised.

Conclusion

The recoverable amount of goodwill determined for each CGU as at 31 December 2019 was found to be higher than its carrying amount.

21.2. CUSTOMER RELATIONSHIP INTANGIBLE ASSETS

The carrying amounts of the identifiable customer relationship intangible assets acquired separately and through business combinations are as follows:

(i) Acquisitions in previous years included: Signes S.a.r.l and Signes S.A. ("Signes"), Kleinwort Benson (Channel Islands) Fund Services Limited ("KB Group"), Swiss & Global Fund Administration (Cayman) Ltd ("S&GFA"), International Trust and Wealth Structuring Business of Bank of America ("BAML"), New Amsterdam Cititrust B.V. ("NACT"), Minerva Holdings Limited and MHL Holdings S.A. ("Minerva") and Van Doorn B.V. ("Van Doorn").

(a) Customer relationships acquired in a business combination

Intangible assets acquired in a business combination and recognised separately from goodwill are initially recognised at their fair value at the acquisition date. In 2019, the Group acquired Exequtive and Aufisco and recognised customer relationship intangible assets of £9.9m and £2.3m respectively, see notes 31.1 and 31.2.

Key assumptions in determining fair value

The fair value at acquisition was derived using the multi-period excess earnings method ("MEEM") financial valuation model. Management consider the key assumptions in this model to be:

· Year on year revenue growth

· The discount rate applied to free cash flow

Sensitivity analysis

Management carried out a sensitivity analysis on the key assumptions used in the valuation of new customer relationship intangible assets.

For Exequtive, an increase of 2% in year on year revenue growth would increase fair value by £0.56m and an increase in discount rate of 2% would decrease fair value by £0.59m.

Management estimate that any similar changes to these key assumptions for the other customer relationship intangible assets recognised in the year would not result in a significant change to fair value.

(b) Customer relationships acquired separately

On 12 February 2019, the Group entered into a facilitation and referral agreement and an outsourcing agreement with Sackville Bank and Trust Company Limited ("Sackville") whereby Sackville's clients would be referred to the Group as a provider of trust, custody and administration services.

The fair value of the customer relationships acquired is the consideration due, this is based on a percentage of revenue attributable to each client successfully introduced. The assets are being amortised over their estimated useful economic life of 10 years.

Amounts due from Sackville for £0.643m where clients were billed in advance of transferring to JTC have been offset against consideration due for customer relationships acquired of £0.78m. These amounts have been offset in accordance with the accounting policy for offsetting financial assets and financial liabilities, see section 3.

(c) Customer relationship intangible asset impairment

Management review customer relationship intangible assets for indicators of impairment at the reporting date. The only indicators identified were that actual revenues generated by BAML, KB Group, Minerva and NACT were lower than forecast.

An impairment assessment was performed on those assets with indicators and Management concluded that the only impairment was on the NACT customer relationship intangible asset. An in-depth review of the client relationships acquired from this business identified some customer relationships would be terminated sooner than originally anticipated due to an increasingly stringent regulatory environment, this resulted in an impairment of £0.46m.

All other customer relationship intangible assets were deemed to have a recoverable amount in excess of the carrying amount as at 31 December 2019.

22. OTHER NON-FINANCIAL ASSETS

23. DEFERRED TAXATION

The deferred taxation (assets) and liabilities recognised in the consolidated financial statements are set out below:

The movement in the year is analysed as follows:

24. OTHER NON-FINANCIAL LIABILITIES

25. PROVISIONS

Dilapidations provision

As part of the Group's property leasing arrangements there are a number of leases which include an obligation to remove any leasehold improvements (thus returning the premises to an agreed condition at the end of the lease) and to restore wear and tear by repairing and repainting. The provisions are expected to be utilised when the leases expire or upon exit.

Onerous lease provisions

The Group had identified onerous leases for premises in Jersey, Guernsey and Switzerland. Following transition to IFRS 16, for leases that have already commenced, no requirements are necessary. After commencement date, the Group appropriately reflects an onerous lease contract by applying the requirements of the policy described in note 19.

SECTION 5 - EQUITY

26. SHARE CAPITAL AND RESERVES

26.1. SHARE CAPITAL

Ordinary shares have a par value of £0.01 each. All shares are equally eligible to receive dividends and the repayment of capital and represent one vote at Shareholders' meetings of JTC PLC.

Movements in the current year

On 29 March 2019, the Company issued and admitted an additional 1,925,650 Ordinary shares at fair value to satisfy the share consideration payable for its acquisition of Exequtive, see note 31.1.

On 1 October 2019, the Company issued an additional 1,128,210 Ordinary shares in order for PLC EBT to satisfy future exercises of awards granted to beneficiaries.

On 26 November 2019, the Company issued an additional 119,166 Ordinary shares at fair value to satisfy the share consideration payable for its acquisition of Aufisco, see note 31.2.

Movements in the prior year

The Company was incorporated on 12 January 2018 with an authorised share capital of £10,000 divided into 1,000,000 shares of £0.01 each. Immediately prior to Admission, the Group undertook a reorganisation (the "Reorganisation") of its corporate structure that resulted in the Company being the ultimate holding company of the Group and JTCGHL becoming a direct subsidiary of the Company. In connection with the Reorganisation and the IPO Offer, the authorised share capital of the Company was increased from £10,000 divided into 1,000,000 Ordinary shares to £3,000,000 divided into 300,000,000 Ordinary shares (known as "PLC shares").

The Reorganisation was effected pursuant to a Share Exchange Agreement whereby all of the shares in, and remaining Loan Notes issued by JTCGHL, were transferred to the Company and the Company issued an additional 99,097,573 Ordinary shares to such Shareholders and noteholders, following which the Company became the sole shareholder of JTCGHL.

On 14 March 2018, the Directors authorised the issue of 99,097,573 Ordinary shares at par for the Reorganisation and a further 6,896,552 Ordinary shares at par for the IPO Offer and Admission.

The IPO Offer comprised the sale by Original Shareholders of 77,173,702 Ordinary shares and 6,896,552 New Ordinary Shares at £2.90 per share, raising gross proceeds of £243.8m. These were admitted to the Official List of the UK Listing Authority with a Premium Listing and approval to trade on the Main Market of the London Stock Exchange.

Following the IPO, the Company settled a new EBT, known as the JTC PLC Employee Benefit Trust ("PLC EBT"). A capital appointment of £1.5m was made from EBT12 to PLC EBT and 741,345 Ordinary shares in the Company were purchased to be held by PLC EBT.

On 28 September 2018, the Company issued and admitted an additional 1,121,007 Ordinary shares at fair value to satisfy the share consideration payable for its acquisition of Van Doorn, see note 31.4.

On 20 November 2018, the Company issued an additional 2,877,698 Ordinary shares at fair value to satisfy the share consideration payable for its acquisition of Minerva, see note 31.3.

26.2. OWN SHARES