Premier Miton Regulatory News (PMI)

28 November 2019

Premier Miton Group plc

("Premier Miton" or the "Company")

Annual results for the Year Ended 30 September 2019

Premier Miton Group plc (AIM: PMI) today announces the audited results for Premier Asset Management Group PLC ("Premier") for the year ended 30 September 2019.

Premier Miton merger completed

·; Recommended all-share merger announced on 4 September 2019

·; Effective date: 14 November 2019

·; Creates diversified asset manager business with pro-forma assets under management of £11.1 billion (as at 31 October 2019) and greater financial strength to grow

Premier assets under management ('AUM')

·; £6.6 billion as at 30 September 2019 (30 September 2018: £6.9 billion)

Premier investment performance1

·; Over three years: 57% of AUM above median

·; Over five years: 64% of AUM above median

·; Over 7 years: 92% of AUM above median

·; Over 10 years: 94% of AUM above median

Premier net flows

·; Net outflows of £233 million (2018: net inflows £734 million)

Premier financial results

·; Adjusted EBITDA2 of £19.2 million (2018: £19.1 million)

·; Adjusted profit before tax3 of £19.0 million (2018: £18.9 million)

·; Profit before tax of £13.7 million (2018: £15.9 million), a decrease of 13.8%

·; Basic earnings per share of 10.82p (2018: 12.09p), a decrease of 10.5%

Premier Miton Group plc full year dividend

·; Total dividend:10.50p (2018: 10.25p) an increase of 2.4%

1 Performance figures represent: 83% (3, 5 and 7 years), 74% (10 years) of Premier's total AUM as at 30 September 2019 and exclude: absolute return funds, investment trusts, segregated mandates, and Premier Pan European Property Share Fund. Median and quartile ranking figures are shown relative to respective Investment Association sectors. Source: FE Analytics, data to 30 September 2019. Net income reinvested. Data shown net of all fund charges. Based on C share class except Premier Diversified Growth Fund (D share class) and Premier UK Money Market Fund (B share class). 2 Earnings before interest, tax, depreciation, amortisation, share based payments and exceptional items

3 Profit stated before exceptional items, amortisation, interest expense, share based payments and tax

Mike O'Shea, Chief Executive Officer, commented:

"Premier's assets under management ended the year at £6.6 billion, which is down from £6.9 billion at the end of September 2018. This has been a more difficult year for the business and indeed for the UK funds industry generally, with investment decisions largely on hold while investors wait for clarity over Brexit. As confidence returns to the UK market, we believe that our focus on delivering good client outcomes and our relevant product range mean we are well placed for future growth. With interest rates likely to remain at historically low levels for many years to come, UK based investors still need to find suitable, well-diversified ways to protect their capital against the impact of inflation and to enhance their income. Our actively managed strategies will continue to provide useful solutions to these problems.

We are very pleased that the shareholders of Premier and Miton have approved the all‐share merger between the two companies and we are excited about the opportunities for the new enlarged Premier Miton Group. The merger will create a diversified active UK asset manager with a strong investment capability that benefits from a more efficient platform and greater financial strength, with combined AUM of £11.1 billion. Premier Miton's blend of outcome-based multi-asset strategies and genuinely active single strategies, run by highly regarded teams, and supported by enhanced distribution is a unique proposition, which we believe will be highly attractive for advisers and wealth managers."

Dividend

The Company's dividend for the financial year ended 30 September 2019 will be 10.50p, comprising three interim dividends of 1.70p per share, paid on 8 March 2019, 7 June 2019 and 6 September 2019, and a final interim dividend of 5.40p per share which will go ex‐dividend on 5 December 2019 with a record date of 6 December 2019, and which will be paid on 10 January 2020.

Enquiries:

Note to editors 

About Premier Miton

Premier Miton Investors is focused on delivering good investment outcomes for investors through relevant products and active management across its range of investment strategies, which include multi-asset, equity, absolute return and fixed income. The Company had pro forma assets under management of £11.1 billion as at 31 October 2019.

Chairman's statement

Introduction

This was a more challenging year for Premier following a prolonged period of significant growth in assets under management and strong positive net inflows. We believe that a significant factor influencing our results was that our core investment strategies fell out of favour as investors stayed on the sidelines amid turbulent market and political conditions. General investor uncertainty and a lack of confidence to invest in stock market linked investments was reflected, for example, in high industry inflows into bond funds. Where investors did choose equities, there was an aversion to UK equity assets in favour of more global strategies. Our view is that this is likely to be a shorter-term response to the current market climate as opposed to a secular trend.

Although it is disappointing to have recorded net outflows for the year, we continued to record positive inflows into our range of outcome based multi-asset funds. Importantly, we continue to believe we have a strong foundation for future growth, based on relevant products, effective distribution, a strong brand, our scalable operating platform and our financial strength.

We are also very optimistic about our future following our merger with Miton Group, to create a new company known as Premier Miton Group plc. There is an exceptional strategic and commercial fit between these two companies, which strengthens our investment capabilities across market leading outcome-based multi-asset funds and high conviction, actively-managed equity and fixed income funds. It will mean we have a significant footprint in the UK adviser and wealth management market and an even stronger operating platform. The new group had assets under management of £11.1 billion as at 31 October 2019.

Financial results

Over the year, we experienced net outflows of £233 million. This reflected positive inflows in the first half of the year and net outflows in the second half of the year. We have now had twenty-four quarters of positive net inflows out of the last twenty-six quarters. As a result of these outflows and some market movement, our assets under management* fell over the year to £6.6 billion as at the end of September 2019.

Net management fees* for the year were £48.4m. Adjusted EBITDA* was £19.2m and underlying profit before tax was £19.0m with actual profit before tax of £13.7m.

The Group has adopted a quarterly dividend policy, expecting to pay three smaller interim dividends, representing approximately half of the estimated total dividend for the full financial year, followed by a larger final dividend. The Board may revise the dividend policy from time to time in line with the actual results of the Group. The Board has announced a final interim dividend of 5.40p which means the full‐year dividend will be10.50p (2018: 10.25p), equivalent to a 2.4% increase on last year. The full year dividend represents 65.7% of adjusted profit after taxation.

Business update

There was significant product development during the year reflecting the continuing changes in market demand for different styles of multi-asset products. In March 2019, we launched three new multi-asset funds to expand our directly invested multi-asset Diversified fund range. More recently, we announced the planned launch of a new range of managed indexed multi-asset funds with our first fund scheduled for launch before the end of 2019. These developments allow us to offer a wide suite of multi-asset solutions to advisers allowing them to select the appropriate multi-asset investment approach and cost profile to meet their clients' needs.

We announced that we had made a number of fund manager changes at the end of 2017 to our UK equity growth funds. I am pleased to report that the performance of these funds since the changes has been strong and we are looking forward to marketing these funds to advisers over the coming year.

Our overall product range has been significantly expanded following the merger with Miton, and Premier Miton Investors now offers a leading range of multi-asset, equity and fixed income funds, with our investment teams now covering UK, European, US and global equities. 

We remain convinced that our investment product range is well placed to meet the needs of UK advisers and their clients, whether they are looking for standalone managed solutions, offered by our range of multi‐asset funds, or specialist funds which we expect will form part of a broader investment portfolio. Many of our funds are income focused, which we believe will continue to be a key area of investor demand.

Operational efficiency has been a continued focus for us, to deliver benefit to our clients and our shareholders. Managing our clients' costs of investing, and explaining the value delivered to our investors will be amongst our key priorities over the next year and beyond.

Board

I would once again like to thank my fellow Board members for their guidance over the year. Following the merger with Miton, Neil Macpherson stepped down having served on the Board since our listing in October 2016. I have been Chairman of the Board of Premier since 2008 and have had the privilege of working with Neil in his role as a fellow Board member and Chief Financial Officer throughout this period. Neil has worked at Premier since 1991 and on behalf of the entire Board I would like to thank him for his significant contribution over many years and to wish him all the best for the future. He will remain with the Group to ensure an orderly handover until March 2020.

Luke Wiseman, who has served as a non-executive director of Premier since our listing in October 2016, will also be stepping down and I would like to thank Luke for his thoughtful guidance to the Board over the last few years.

I am pleased to welcome Piers Harrison, Chief Operating Officer of Miton Group plc, to the board as Chief Financial Officer of Premier Miton. I am also pleased to welcome David Barron, previously Chief Executive Officer of Miton Group plc and Katrina Hart, previously a non-executive director of Miton Group plc, as new non-executive directors of Premier Miton.

I very much look forward to working with the new Board as we develop the new combined business.

Outlook

Premier has grown strongly over recent years and, notwithstanding a more difficult year, we have built an attractive product range, with strong investment teams, supported by a leading brand in the UK adviser market and a significant distribution capability. Given our good long-term performance coupled with a highly scalable operating platform and a strong balance sheet, we believe that the business has a positive future.

The launch of Premier Miton creates a new, diversified active UK asset management business with a strong investment capability that leverages an efficient platform, including a wider product range, greater scale, enhanced distribution relationships with the opportunity for compelling value creation for shareholders. I believe Premier Miton is well positioned for future growth.

In closing, I would like to say thank you to everyone at Premier who has worked hard to contribute to the Group's success during the last year and to welcome everyone from Miton to the enlarged Group. I look forward to working with you all over the coming years. Finally, I would like to thank everyone else who has supported us, including our clients, their advisers and our shareholders.

This report was approved by the Board on 27 November 2019 and signed on its behalf.

Mike Vogel

Chairman

27 November 2019

Chief executive's report

Strategy

As we entered into the financial year covered in this report, Premier had experienced six years of positive inflows and seen assets under management rise from £2.1 billion to £6.9 billion. The current year has proven to be more challenging for both the industry and our business, against a backdrop of continued economic and political uncertainty, and leading to low investor confidence.

Our assets under management ended the year at £6.6 billion, which is down from £6.9 billion at the end of September 2018. Although this has been a more difficult year, as confidence eventually returns to the UK market, we believe that our focus on delivering good client outcomes and our relevant product range mean we are well positioned for future growth. On 4 September 2019, we announced the all-share merger of Premier with Miton Group plc. I am delighted that our newly merged business, Premier Miton Group plc, became effective on 14 November 2019, creating a broader, bigger and stronger business well placed to make the most of future growth opportunities and to face future challenges.

Market environment

The general market and political environment remained unsettled over the year, dominated as it was by continued uncertainty over Britain's exit from the EU. Whilst politicians argued, investors, savers and business people throughout the UK deferred investment decisions, understandably worried about the future direction of the economy. It is hardly surprising therefore that the year was characterised by a general lack of investor confidence.

We hope that a resolution one way or the other will soon be forthcoming. There is plenty for investors and savers to be concerned about within the global economy without the added uncertainty of Brexit dragging on indefinitely. With interest rates likely to remain at historically low levels for many years to come, UK based investors need to find suitable, well-diversified ways to protect their capital against the impact of inflation and to enhance their income. We believe that our actively managed strategies will continue to provide useful solutions to these problems.

Investment

Our investment capabilities fall into two distinct categories: outcome based multi-asset funds and single strategy funds. We are active managers who aim to deliver good investment outcomes for our clients, through clear, straightforward products, coupled with high levels of service. Our investment engine is powered by bright minds, focused on delivering sustainable, durable returns for our clients. Our fund managers are given the freedom to think creatively, think actively and think curiously to find the best ideas, rather than adhering to a central house view.

Our approach delivers results, with 57%, 64%, 92% and 94% of our assets under management performing above median over 3, 5, 7 and 10 years respectively.*

It is pleasing that the quality of our investment products, teams and performance has been recognised again during the year with a number of new awards including the following:

1. 2019 Professional Adviser awards:

·; Winner, Best Multi-Asset Group of the Year

·; Winner, Best Multi-Asset Fund: Rising Income Premier Multi-Asset Distribution Fund

·; Winner, Best Multi-Asset Fund: Positive Return Premier Defensive Growth Fund

2. Investment Week Specialist Investment Awards 2018:

·; Winner, Risk Targeted Funds

·; Winner, Specialist Management Group of the Year (under £10bn AUM)

3. Investment Week Fund Manager of the Year Awards 2019:

·; Winner, Multi-Manager Income Premier Multi-Asset Distribution Fund and Premier Multi-Asset Monthly Income Fund

·; Winner, Managed Growth Premier Diversified Growth Fund

4. Winner of the Multi-Asset GBP Balanced category, Refinitiv Lipper Awards 2019, Premier Multi-Asset Distribution Fund

*Performance figures represent: 83% (3, 5 and 7 years), 74% (10 years) of Premier's total AUM as at 30 September 2019 and exclude: absolute return funds, investment trusts, segregated mandates, and Premier Pan European Property Share Fund. Median and quartile ranking figures are shown relative to respective Investment Association sectors. Source: FE Analytics, data to 30 September 2019. Net income reinvested. Data shown net of all fund charges. Based on C share class except Premier Diversified Growth Fund (D share class) and Premier UK Money Market Fund (B share class). Where a C share class was not available for the full time period, the pre RDR bundled or equivalent retail share class has been used for the period the C share class was not available.

Relevant products

One of our key areas of focus is offering relevant products to our clients. We are proud of our range of multi-asset, equity and fixed income funds, which have clear investment purposes for clients. For example, many of our equity funds focus on producing attractive dividends, helping the growing number of income-seeking investors.

Our relevant product range includes outcome based multi-asset funds. Rather than being designed to outperform a specific index over time, each one of our fifteen multi-asset funds has a specific client-focused objective; for example, the Premier Multi-Asset Distribution Fund aims to pay clients a durable income through regular dividends whilst the Premier Diversified Growth Fund aims to achieve long-term growth for clients with less volatility than the UK stock market.

Our single strategy funds typically provide solutions for investors building their own portfolios. Our fund managers, including our UK, European, US and global equity teams, together with our fixed income and absolute return teams, have an active, high conviction investment approach designed to allow us to make a real long term difference for our clients.

We have developed a strong reputation and position with UK advisers for our multi-asset funds, and we believe we are well positioned for future growth in this market, as advisers continue to look for relevant investment solutions to offer their clients. And we have a strong position with UK wealth managers for our single strategy funds which also gives us a strong platform for future growth.

Connect

The development of new, technology-enabled solutions is an important component of our ongoing commitment to offer good service and value for clients. We have continued to progress Connect, a no-cost online portal for advisers allowing them to hold and manage their clients' investments in Premier funds. This new service is specifically aimed at advisers using multi-asset funds for their clients, who do not require the wide range of funds offered on fund platforms. With no portal fee, this will bring down the total cost of investing in our funds for clients. We are currently trialling under a soft launch program and have a number of advisors using the system. We will roll this out to a wider range of advisers and their clients over the course of the coming year.

Corporate responsibility

In September 2019, we hired our first Head of Responsible Investing within the investment team under the guidance of our Chief Investment Officer. This appointment brings significant experience to Premier Miton and will support the enhancement of our responsible investing approach as well as prepare us for a market where consumers are increasingly focussed on sustainability. Our culture of offering long term, actively managed investments ensures that we already consider financially material factors such as governance, and also increasingly environmental and social factors in many of our strategies. We are active stewards of the companies we invest in, with our fund managers attending 658 company meetings with their portfolio companies and voting 5,423 resolutions at 502 shareholder meetings during the year. 

We believe that sustainability is inextricably linked to the future success of our business and that we need to act to help address the global challenges relating to climate change, limited resources and economic and social inequality. In doing so, we hope to build a successful and resilient business that embraces innovation and positive change.

Our Environmental Policy sets out our approach and commitments, and we have an Environmental Committee responsible for driving our programme of activities forward. We will implement an action plan that aligns with the United Nations Sustainable Development Goals (SDG's), that embeds sustainability considerations within investment decision making and that minimises our operational impact on the environment and society.

Distribution & net flows

Our distribution focus is through UK intermediaries, including financial advisory firms, wealth managers, fund research agencies and fund rating agencies. We typically expect our multi-asset funds to be selected by financial advisory firms and our single strategy funds by wealth managers and other types of portfolio managers. Over the years, we have developed a strong UK distribution capability, with our distribution team focused on the many financial advisers and wealth managers around the UK. Against the challenging backdrop described earlier, although we attracted positive inflows in the first six months of the year, we had total net outflows of £233 million for the twelve months to 30 September 2019 (twelve months to 30 September 2018: inflows £734 million).

Premier Miton merger

In summary, 2019 has been more challenging for Premier compared with recent years, but we have built a UK focused asset manager that offers relevant products, with highly regarded investment teams, a proven distribution capability, a strong and scalable operating platform and a strong balance sheet. More importantly the merger with Miton significantly enhances this position. As highlighted above, combined group assets under management stands at £11.1 billion as at 31 October 2019.

The merger has combined two businesses with complementary investment capabilities, evenly balanced between outcome-based multi-asset strategies and genuinely active single strategies. It creates a business with greater financial strength with a more diversified revenue mix, access to economies of scale and a robust balance sheet. We believe this will

create meaningful client benefits through investment in new client initiatives such as product development and enhanced client service as well as by reducing costs through economies of scale. For both sets of shareholders, the merger offers compelling value creation and earnings accretion, underpinned by expected recurring run-rate pre-tax cost synergies of approximately £7 million per annum from alignment of operating platforms.

I look forward to reporting on Premier Miton's progress in next year's report, but in the meantime, I would like to say thank you to our whole team across the enlarged business for all their hard work, to all of our clients and the large number of advisers and investment professionals who have chosen our funds for their clients.

This report was approved by the Board on 27 November 2019 and signed on its behalf.

Mike O'Shea

Chief Executive

Financial review

Assets under management* ('AUM')

AUM* as at 30 September 2019 stood at £6,556m, down £310m (-4.5%) over the year, with average AUM* standing at £6,695m for the year, up £141m (+2.2%) on the previous financial year. The following table shows the progression of AUM* over the last three financial years:

Average AUM* has grown over the three year period as a result of £1,248m of net inflows and market performance of £382m.

The following table shows the split of closing AUM* by product type as at the end of the last three financial years:

In terms of closing AUM* by asset class as at the end of the last three financial years, this is shown in the following table:

* This is an alternative performance measure ("APM").

Financial performance

Profit before tax for the year ended 30 September 2019 amounted to £13.7m (2018: £15.9m), representing a decrease of £2.2m (-13.8%) over the previous financial year. The following table shows an analysis of the financial performance over the last three financial years.

Net management fees*

Net management fees* generated during the year amounted to £48.4m, which represents a £0.3m (+0.6%) increase over the previous financial year and an annual compound growth rate over the last two financial years of 8.8%*.

Based on the average AUM* as shown above, the net management fee margin* has decreased slightly during the year from 73.4bps to 72.3bps, with the change in margin being primarily due to a change in the product mix.

* This is an alternative performance measure ("APM").

Other income

Other income generated during the year amounted to £0.2m compared to £0.7m in the previous financial year. This decrease is mainly due to a £0.56m performance fee that was generated during the previous year in respect of the Acorn Income Fund and is not considered to be a recurring item. Included within Administrative Costs for the previous year is an amount of £0.38m which represents the amount of the performance fee that is payable to the relevant fund managers, with £0.35m included within Variable Other Costs and £0.03m included within Variable Staff Costs.

Administrative costs

Administrative costs (excluding renewal commissions) during the year amounted to £32.2m, compared to £30.9m in the previous financial year, representing an increase of £1.3m (4.2%). The largest component of administrative costs continues to be staff costs, which amounted to £18.9m compared to £17.7m in the previous financial year. The following table analyses administrative costs between both fixed and variable elements of staff costs and other costs:

The total administrative costs shown in the consolidated statement of comprehensive income includes renewal commissions and share-based payments, which for the purposes of this review are analysed separately. A reconciliation of the above totals and those shown in the Consolidated Statement of Comprehensive Income is shown below:

Staff costs consist of two elements, the first being fixed, which includes salaries and associated national insurance, employers' pension contributions and other indirect costs of employment, which rose by 5.3% to £9.9m; this compares with a 0.9% increase in average headcount as shown in note 6(a). The second element of staff costs is in respect of variable items such as general discretionary bonuses, sales bonuses and fund based bonuses in respect of the fund management teams, together with the associated employers national insurance and also share-based payments in respect of awards that have been made over shares held within the Employee Benefit Trust. Variable staff costs increased by £0.7m (8.4%), which compares with the 2.2% increase in average AUM as mentioned above and adjusted EBITDA* (see below) increasing slightly over the period at £19.2m for FY19 compared with £19.1m for FY18.

Fixed other costs have increased marginally by £0.2m (2.2%) whilst variable other costs, which includes the cost of the fund administrators, have decreased by £0.1m (-2.6%).

Share based payments

Included within the consolidated statement of comprehensive income is a charge of £2.6m (2018: £1.0m) in respect of awards that have been made over shares held within the Employee Benefit Trust ("EBT"). The increase in costs over the previous year is a result of the issue of 1,733,333 awards over ordinary shares during the year together with a full year's charge in respect of the awards made during the previous financial year. As at 30 September 2019 the EBT held 4,642,830 ordinary shares, representing 4.39% of the issued ordinary share capital. This compares with 3,242,830 as at 30 September 2018, representing 3.07% of the then issued ordinary share capital. As at 30 September 2019 the total awards issued amounted to 4,618,333 ordinary shares, compared to 2,885,000 as at 30 September 2018.

Exceptional items

Exceptional costs incurred during the year amounted to £1,178,000 (2018: £248,000). These costs relate firstly to the FSCS levies, which have increased significantly over previous years, partly due to increased compensation paid by the FSCS, but also because of a change in the allocation of the levy between sectors. During the year the Group saw significant increases in the FSCS levy for both its FCA regulated subsidiaries in respect of the 2019/20 levy year together with an additional levy that was charged in respect of the 2018/19 levy year. Secondly, they relate to the forthcoming launch of Connect and the associated development costs that have been incurred via external consultants who have been engaged in the testing of the Connect platform prior to it going live. These costs will not be incurred once the development stage has completed and are therefore not considered to be recurring. Finally, during the year the Group entered into new leases at its existing Guildford location, Eastgate Court, which involved the move to alternative floors within the building and incurring additional one-off costs including refurbishments and the write-off of certain leasehold improvements that had previously been capitalised as fixed assets.

In accordance with the accounting policy for Exceptional items set out in Note 2.5(i), these costs have been treated as exceptional due to them not being incurred in the normal course of the Group's operations, and because of the nature of the events giving rise to them. The level of cost and nature of events giving rise to them are not expected to be recurring.

Underlying profit before and after tax*, and underlying earnings per share*

Underlying profit before tax* remained flat during the year at £18.9m. The following table reconciles retained profit and underlying profit before tax* for the last three financial years:

Underlying profit after tax* increased to £16.3m from £15.5m in the previous financial year, representing an increase of £0.8m (+5.2%).

The underlying earnings per share* is a non-GAAP measure which the Board believes provides a useful representation of the Group's trading performance.

The weighted average number of ordinary shares represents the number of ordinary shares held during the year and exclude the ordinary shares that are held within the EBT.

* This is an alternative performance measure ("APM").

Adjusted EBITDA*

Adjusted EBITDA* increased slightly during the year to £19.2m compared with £19.1m the previous year. The following table reconciles retained profit and Adjusted EBITDA* for the last three financial years:

* This is an alternative performance measure ("APM").

Balance sheet and cash management

Cash balances of the Group amounted to £20.7m (2018: £20.8m), representing a decrease of £0.1m (-0.4%) over the year. The split between Group and Trading account cash balances over the last three financial years is shown in the table below:

The above Trading account cash balances relate to the designated bank accounts that are used for the settlement of trades in the open-ended funds as operated by Premier Portfolio Managers Ltd. As at 30 September 2019, the projected trading account balance, after accounting for all outstanding trades, was a surplus cash balance of £1.2m (2018: £1.2m).

Shareholders' equity

Total shareholders' equity as at 30 September 2019 was £45.3m (2018: £45.3m). As noted in the previous year, the EBT was consolidated into the group financial statements and as such, those shares that are held in the EBT, and which have awards attaching to them, are accounted for as treasury shares, and are therefore shown as a deduction in the consolidated statement of changes in equity, amounting to £6.9m (2018: £4.0m). During the year retained earnings increased by £3.0m, consisting of retained profit for the financial year of £11.0m less dividends paid during the year of £10.6m and, a £2.6m movement in reserves associated with the share based payments.

Going concern

The Directors have assessed the prospects of the Group over a period of three years after the balance sheet date, rather than the 12 months required by the Going Concern provision.

The Directors confirm that they have a reasonable expectation that the Group will continue to operate and meet its liabilities, as they fall due, up to 30 September 2022. The Directors assessment has been made with reference to the Group's current position and strategy, the Board's appetite for risk, the Group's financial forecasts, and the Group's principal risks and how these risks are managed, as detailed in the Strategic Report. The Directors have also reviewed and examined the financial stress testing inherent in the Internal Capital Adequacy Assessment Process ('ICAAP').

The three-year period is consistent with the Group's current strategic forecast and ICAAP. The forecast considers the Group's profitability, cash flows, dividend payments and other key variables. Sensitivity analysis is also performed on certain key assumptions used in preparing the forecast, both individually and combined, in addition to scenario analysis that is performed as part of the ICAAP process, which is formally approved by the Board.

Alternative Performance Measures ('APMs')

The group uses the following APMs:

Underlying profit before tax

Definition: Profit before taxation, amortisation of intangible assets, exceptional items, share based payments and net interest

Reason for use: This measure of profitability presents users of the accounts with a clear view of what the Group considers to be the results of its underlying operations after excluding the effects of taxation, financing (interest payable), capital investment (amortisation), non-recurring exceptional items and share based payments, thereby enabling consistent period on period comparisons. This makes it easier for users of the accounts to identify trends enabling comparison with the Group's competitors who may use different accounting policies and finance methods.

The share based payment expense in relation to employee share incentivisation schemes has been excluded to further aid the comparison of year on year results by removing the impact of the timing of granting of awards, and quantity, which may vary year on year.

Underlying profit after tax

Definition: Profit after taxation, amortisation of intangible assets, exceptional items, share based payments and net interest

Reason for use: This measure of profitability presents users of the accounts with a clear view of what the Group considers to be the results of its underlying operations after excluding the effects of financing (interest payable), capital investment (depreciation and amortisation), non-recurring exceptional items and share based payments, thereby enabling consistent period on period comparisons. This makes it easier for users of the accounts to identify trends enabling comparison with the Group's competitors who may use different accounting policies and finance methods.

In accordance with the accounting policy for Exceptional items set out in Note 2.5(i), these costs have been treated as exceptional due to them not being incurred in the normal course of the Group's operations, and because of the nature of the events giving rise to them. The level of cost and nature of events giving rise to them are not expected to be recurring.

Underlying earnings per share

Definition: Underlying profit after tax divided by the weighted average number of shares in issue during the period

Reason for use: This measure of profitability presents users of the accounts with a clear view of what the Group considers to be the results of its underlying operations per share after excluding the effects of financing (interest payable), capital investment (depreciation and amortisation), non-recurring exceptional items and share based payments, thereby enabling consistent period on period comparisons. This makes it easier for users of the accounts to identify trends.

Assets Under Management ("AUM")

Definition: AUM is the total value of assets that are managed by the Group on behalf of clients.

Reason for use: AUM is a financial industry measure of the magnitude of the assets that are managed by an investment management firm and thereby allows comparison with other firms within the sector. AUM is also the base value that is used for calculating management fee income and directly related variable costs.

Adjusted EBITDA

Definition:  Earnings before interest, taxation, depreciation, amortisation of intangible assets, exceptional items and share based payments

Reason for use: To provide a measure of profitability which is aligned with the requirements of shareholders and potential shareholders and which excludes the effects of taxation, financing (net interest payable), capital investment (depreciation and amortisation), non-recurring exceptional items and share based payments, enabling comparison with the Group's competitors who may use different accounting policies and finance methods.

In accordance with the accounting policy for Exceptional items set out in Note 2.5(i), these costs have been treated as exceptional due to them not being incurred in the normal course of the Group's operations, and because of the nature of the events giving rise to them. The level of cost and nature of events giving rise to them are not expected to be recurring.

Adjusted EBITDA margin

Definition: Adjusted EBITDA divided by Net Revenue

Reason for use: To provide a measure of profitability which is aligned with the requirements of shareholders and potential shareholders and which excludes the effects of taxation, financing (net interest payable), capital investment (depreciation and amortisation), non-recurring exceptional items and share based payments, enabling comparison with the Group's competitors who may use different accounting policies and finance methods.

Net revenue

Definition: Turnover of £52.8m (2018: £53.4m) less trail/renewal commission expense of £4.2m (2018: £4.6m), which is included within administrative costs in the consolidated statement of comprehensive income.

Reason for use: Asset managers and analysts typically use this performance measure to smooth out the effect of fee related trail/renewal commission that is included within administrative costs.

Net management fees

Definition: Management fee income of £52.6m (2018: £52.7m) less trail/renewal commission expense of £4.2m (2018: £4.6m), which is included within administrative costs in the consolidated statement of comprehensive income.

Reason for use: Asset managers and analysts typically use this performance measure to smooth out the effect of fee related trail/renewal commission that is included within administrative costs.

Net management fee margin

Definition: Net management fees divided by average AUM

Reason for use: Asset managers and analysts typically use this performance measure to smooth out the effect of fee related trail/renewal commission that is included within administrative costs and provides a measure of the revenue earning capability of AUM. The use of basis points (bps) is a commonly used term within the finance sector with one basis point being equivalent to one hundredth of a percent.

Mike O'Shea

Chief Executive

27 November 2019

Consolidated statement of comprehensive income

For the year ended 30 September 2019

All the amounts relate to continuing operations.

Consolidated statement of financial position

As at 30 September 2019

Company number 06306664

The financial statements were approved on behalf of the Board of Directors on 27 November 2019.

Mike O'Shea Mike Vogel

Chief Executive Officer Chairman

Consolidated statement of changes in equity

For the year ended 30 September 2019

Consolidated statement of cash flow

For the year ended 30 September 2019

Notes to the consolidated financial statements

At 30 September 2019

1. Authorisation of financial statements and statement of compliance with IFRS

The consolidated financial statements of Premier Miton Group PLC (the "Company") and its subsidiaries (the "Group") for the year ended 30 September 2019 were authorised for issue by the Board of Directors on 27 November 2019 and the statement of financial position was signed on the Board's behalf by Mike O'Shea and Mike Vogel. The Company is incorporated and domiciled in England and Wales.

These consolidated financial statements were prepared in accordance with International Financial Reporting Standards (IFRS) as adopted by the EU. The consolidated financial statements are presented in Sterling and all values are rounded to the nearest thousand pounds (£000) except when otherwise indicated.

The principal accounting policies adopted by the Group are set out in note 2.

2. Accounting policies

2.1 Basis of preparation

The consolidated Group financial statements for the year ended 30 September 2019 have been prepared in accordance with IFRS. The consolidated financial statements have been prepared on a going concern basis, which has been explained in greater detail in the Financial Review, under the historical cost convention, as modified by the revaluation of financial assets and financial liabilities measured at fair value through profit or loss. Costs are expensed as incurred.

The Directors have assessed the prospects of the Group over a period of three years after the balance sheet date, rather than the 12 months required by the Going Concern provision.

The Directors confirm that they have a reasonable expectation that the Group will continue to operate and meet its liabilities, as they fall due, up to 30 September 2022. The Directors assessment has been made with reference to the Group's current position and strategy, the Board's appetite for risk, the Group's financial forecasts, and the Group's principal risks and how these risks are managed, as detailed in the Strategic Report. The Directors have also reviewed and examined the financial stress testing inherent in the Internal Capital Adequacy Assessment Process ('ICAAP').

The three-year period is consistent with the Group's current strategic forecast and ICAAP. The forecast considers the Group's profitability, cash flows, dividend payments and other key variables. Sensitivity analysis is also performed on certain key assumptions used in preparing the forecast, both individually and combined, in addition to scenario analysis that is performed as part of the ICAAP process, which is formally approved by the Board.

2.2 Basis of consolidation

The consolidated financial statements comprise the financial statements of the Company and its subsidiary undertakings as at 30 September 2019. Profits and losses on intra-group transactions are eliminated in full. On acquisition of a subsidiary, all of the subsidiary's identifiable assets and liabilities which exist at the date of acquisition are recorded at their fair values reflecting their condition at that date.

Control is achieved when the Group is exposed, or has rights, to variable returns from its involvement with the investee and has the ability to affect those returns through its power over the investee. Specifically, the Group controls an investee if, and only if, the Group has:

(i) power over the investee (i.e., existing rights that give it the current ability to direct the relevant activities of the investee);

(ii) exposure, or rights, to variable returns from its involvement with the investee; and

(iii) the ability to use its power over the investee to affect its returns.

Consolidation of a subsidiary begins when the Group obtains control over the subsidiary and ceases when the Group loses control of the subsidiary. Assets, liabilities, income and expenses of a subsidiary acquired or disposed of during the year are included in the consolidated financial statements from the date the Group gains control until the date the Group ceases to control the subsidiary.

When necessary, adjustments are made to the financial statements of subsidiaries to bring their accounting policies into line with the Group's accounting policies. All intra-group assets and liabilities, equity, income, expenses and cash flows relating to transactions between members of the Group are eliminated in full on consolidation.

2.3 New standards, amendments and interpretations

At the date of authorisation of these financial statements, the following Standards and Interpretations which have not been applied in these financial statements were in issue but not yet effective:

(i) IFRS 16 Leases (effective for a period beginning on or after 1 January 2019)

IFRS 16 provides a single accounting model for leases, requiring lessees to recognise assets and liabilities for all leases unless the lease term is 12 months or less or the underlying asset has a low value. It will supersede the current guidance found in IAS 17 Leases.

Where the Group is a lessee, IFRS 16 requires operating leases to be recorded in the Group's statement of financial position. A right-of-use (ROU) asset will be recognised within property, plant and equipment and a lease liability will be recorded.

The ROU asset and lease liability will be calculated based on the expected payments, requiring an assessment as to the likely effect of renewal options, and are discounted using the relevant incremental borrowing rate. The ROU asset will be depreciated on a straight-line basis over the expected life of the lease. The lease liability will be reduced as lease payments are made with an interest expense recognised as a component of finance costs.

This will result in a higher proportion of the lease expense being recognised earlier in the life of the lease. In preparation for transition to IFRS 16, the Group has reviewed all its leasing arrangements and assessed the estimated impact that the initial application of IFRS 16 will have on its consolidated financial statements. The Group intends to adopt IFRS 16 using the modified retrospective approach.

The Group expects to apply the optional exemption contained within IFRS 16, which permits the cost of short-term (less than 12 months) leases to be expensed on a straight-line basis over the lease term. These lease arrangements are not material to the Group.

At 30 September 2019, the Group had non-cancellable operating lease commitments of £3.7 million, see note 18. Consequently, on 1 October 2019 the Group expects to recognise ROU assets and lease liabilities of approximately £3.3 million and £3.3 million respectively. The adoption of IFRS 16 will reduce the Group's profit before tax with respect to these leases, however, the impact is not expected to be material.

There are no other IFRSs or IFRIC interpretations that are not yet effective and would be expected to have a material impact on the Group.

2.4 Judgements and key sources of estimation uncertainty

The preparation of consolidated financial statements requires management to make judgements, estimates and assumptions that affect the amounts reported for assets and liabilities as at the statement of financial position date and the amounts reported for revenue and expenses during the year. However, the nature of estimation means that actual outcomes could differ from those estimates. The Group has not had to make any judgements or estimates in preparing the financial statements, that require disclosure under the relevant accounting standard.

2.5 Significant accounting policies

(a) Business combinations and goodwill

Business combinations are accounted for using the acquisition method. The cost of an acquisition is measured as the aggregate of the consideration transferred, which is measured at the acquisition date fair value and the amount of any non-controlling interest in the acquiree. For each business combination, the Group elects whether to measure the non-controlling interest in the acquiree at fair value or at the proportionate share of the acquiree's identifiable net assets.

When the Group acquires a business, it assesses the financial assets and liabilities assumed for appropriate classification and designation in accordance with the contractual terms, economic circumstances and pertinent conditions as at the acquisition date. This includes the separation of embedded derivatives in host contracts by the acquiree.

Any contingent consideration to be transferred by the acquirer will be recognised at fair value at the acquisition date. All contingent consideration is measured at fair value with the changes in fair value in profit or loss.

Goodwill is initially measured at cost (being the excess of the aggregate of the consideration transferred and the amount recognised for non-controlling interests) and any previous interest held, over the net identifiable assets acquired and liabilities assumed. If the fair value of the net assets acquired is in excess of the aggregate consideration transferred, the

Group re-assesses whether it has correctly identified all of the assets acquired and all of the liabilities assumed and reviews the procedures used to measure the amounts to be recognised at the acquisition date. If the reassessment still results in an excess of the fair value of net assets acquired over the aggregate consideration transferred, then the gain is recognised in profit or loss. Goodwill is monitored at the Group level.

Goodwill is not amortised but is tested annually for impairment or more frequently if events or changes in circumstances indicate potential impairment. After initial recognition, goodwill is measured at cost less any accumulated impairment losses.

In respect of goodwill, the recoverable amount is estimated at each annual balance sheet date. The recoverable amount is the higher of fair value less costs to sell and value in use. Impairment losses represent the amount by which the carrying amount exceeds the recoverable amount; they are recognised in profit and loss in amortisation. Impairment losses recognised in respect of the cash generating unit are allocated first to reduce the carrying amount of any goodwill allocated to the cash generating unit and then to reduce the value of any other assets in the unit on a pro-rata basis.

An impairment loss in respect of goodwill is not reversed.

(b) Property, plant and equipment

Plant and equipment is stated at cost less accumulated depreciation and accumulated impairment losses. Cost comprises the aggregate amount paid and the fair value of any other consideration given to acquire the asset and includes costs directly attributable to making the asset capable of operating as intended.

Depreciation is provided on all property, plant and equipment, other than land, on a straight-line basis over its expected useful life as follows:

Short leasehold property - the term of the lease

Plant and equipment - 5 years

Computer equipment - 3 years

Motor vehicles - 3 years

Fixtures and fittings - 15%

The carrying amounts of property, plant and equipment are reviewed for impairment if events or changes in circumstances indicate the carrying amount may not be recoverable, and are written down immediately to their recoverable amount. Useful lives and residual values are reviewed annually and where adjustments are required these are made prospectively.

An item of property, plant and equipment is derecognised upon disposal or when no future economic benefits are expected to arise from the continued use of the asset. Any gain or loss arising on the derecognition of the asset is included in the income statement in the period of derecognition.

(c) Trade and other receivables

Trade and other receivables are initially recognised at fair value and subsequently at amortised cost. A bad debt provision is made when there is objective evidence that the Group will not be able to recover balances in full. Balances are written off when the probability of recovery is assessed as being remote. Other receivables mainly comprise of refundable rent deposits and amounts the Group is due to receive from third parties in the normal course of business.

(d) Provisions and other liabilities

A provision is recognised when the Group has a legal or constructive obligation as a result of a past event; it is probable that an outflow of economic benefits will be required to settle the obligation; and a reliable estimate can be made of the amount of the obligation.

Where the effect of the time value of money is material provisions are discounted. The increase in the provision due to passage of time is recognised as a finance cost.

Where the Group, as lessee, is contractually required to restore a leased property to an agreed condition prior to the release by a lessor, provision is made for such costs as they are identified.

Where the Group expects some or all of a provision to be reimbursed, the reimbursement is recognised as a separate asset but only when recovery is virtually certain.

(e) Income taxes

Current and deferred tax are recognised in income or expense, except when they relate to items that are recognised in other comprehensive income or directly in equity, in which case the current and deferred tax are also recognised in other comprehensive income or directly in equity respectively. Current tax assets and liabilities are measured at the amount expected to be recovered from or paid to the taxation authorities based on tax rates and laws that are enacted or substantively enacted by the statement of financial position date.

Deferred income tax is recognised on all temporary differences arising between the tax bases of assets and liabilities and their carrying amounts in the financial statements, with the following exceptions:

(i) where the temporary difference arises from the initial recognition of goodwill or of an asset or liability in a transaction that is not a business combination that at the time of the transaction affects neither accounting nor taxable profit or loss;

(ii) in respect of taxable temporary differences associated with investments in subsidiaries, associates and joint ventures, where the timing of the reversal of the temporary differences can be controlled and it is probable that the temporary differences will not reverse in the foreseeable future; and

(iii) deferred income tax assets are recognised only to the extent that it is probable that taxable profit will be available against which the deductible temporary differences, carried forward tax credits or tax losses can be utilised.

Deferred income tax assets and liabilities are measured on an undiscounted basis at the tax rates that are expected to apply when the related asset is realised or liability is settled, based on tax rates and laws enacted or substantively enacted at the statement of financial position date.

The carrying amount of deferred income tax assets is reviewed at each statement of financial position date and reduced to the extent that it is no longer probable that sufficient taxable profits will be available to allow all or part of the asset to be recovered.

(f) Foreign currencies

The Group's consolidated financial statements are presented in pounds sterling. The functional currency of the Group's entities is pounds sterling. Transactions in foreign currencies are initially recorded in the functional currency by applying the spot exchange rate ruling at the date of the transaction. Monetary assets and liabilities denominated in foreign currencies are retranslated at the functional currency rate of exchange ruling at the statement of financial position date. All differences are taken to the profit and loss account.

Non-monetary items that are measured in terms of historical cost in a foreign currency are translated using the exchange rates as at the dates of the initial transactions. Non-monetary items measured at fair value in a foreign currency are translated using the exchange rates at the date when the fair value was determined.

The Group does not apply hedge accounting of foreign exchange risks in its company financial statements.

(g) Financial instruments

IFRS 9 Financial Instruments has replaced the classification and measurement models for financial instruments currently contained in IAS 39 Financial Instruments: Recognition and Measurement. IFRS 9 was endorsed by the EU in November 2016 and is effective for accounting periods beginning on or after 1 January 2018. On adoption of IFRS 9 the Group's financial assets have been reclassified as either at amortised cost, fair value through other comprehensive income or fair value through profit or loss (FVTPL). The financial asset classification will be determined on the basis of the contractual cash flow characteristics of the instruments and the Group's business model for the collection of cash flows arising from its investments.

The Group holds non-controlling interests in unconsolidated funds at fair value, designated at FVTPL. Under the new standard, this designation has not changed.

Under IAS 39 impairment provisioning is historical performance based whereas IFRS 9 brings an expected credit loss (ECL) model where credit loss provisioning is required to be based on expected future credit losses. The majority of the Group's revenue comes from investment management fees due from the retail investment funds we manage. These fees are paid to the Group on a monthly basis. For segregated accounts, the majority of fees are paid on a monthly basis with some paying on a quarterly basis. Typically, receivables comprise unpaid sales contracts and cancellations, which are receivables in transit between funds and end clients. These are contractually required to be settled within one or four days. Based on (a) there being no credit losses on trade debtors over a period in excess of 10 years; and (b) cash balances being held with banks with credit ratings of S&P A+/A-1 stable, the ECL was not material. There was no material effect in adopting IFRS9.

(i) Financial assets

The Group classifies its financial assets in the following categories: at fair value through profit or loss and loans and receivables.

The Group holds non-controlling interests in unconsolidated funds at fair value, designated at FVTPL.

The Group's loans and receivables comprise trade and other receivables and cash and cash equivalents in the statement of financial position. The Group assesses at each statement of financial positon date whether there is objective evidence that a financial asset or a group of financial assets is impaired.

(ii) Financial liabilities and equity

Debt and equity instruments are classified as either financial liabilities or as equity in accordance with the substance of the contractual arrangement. Generally, an obligation to deliver cash or other financial asset to another party at a fixed date in the future would require presentation of a financial instrument as a liability.

No significant restrictions exist to transfer cash or assets within the Group or pay out dividends, except for regulatory capital restrictions within the regulated companies.

(iii) Other financial liabilities

Other financial liabilities, including borrowings, are initially measured at fair value, net of transaction costs. Other financial liabilities are subsequently measured at amortised cost using the EIR, with interest expense recognised on an effective yield basis.

The EIR used to recognise interest expense is the rate that exactly discounts estimated future cash payments through the expected life of the financial liability, or, where appropriate, a shorter period, to the net carrying amount on initial recognition.

The Group derecognises financial liabilities when the Group's obligations are discharged, cancelled or expired.

(iv) Fair values

The fair value of financial instruments that are traded in active markets at the reporting date is determined by reference to quoted market prices or dealer price quotations (bid price for long positions and ask price for short positions), without any deduction for transaction costs. For financial instruments not traded in an active market, the fair value is determined using appropriate valuation techniques. Such techniques may include using recent arm's length market transactions; reference to the current fair value of another instrument that is substantially the same; discounted cash flow analysis or other valuation models.

(h) Cash and cash equivalents

Cash and cash equivalents comprise cash balances and highly liquid short-term deposits that are readily convertible to known amounts of cash within three months or less. Bank overdrafts that are repayable on demand and form an integral part of the Group's cash management are included as a component of cash and cash equivalents for the purpose of the statement of cash flows and are presented in current liabilities.

(i) Exceptional items

The Group presents as exceptional items those items of income and expense, which are not incurred in the normal course of the Group's operations, and because of the nature of the events giving rise to them, merit separate presentation to allow shareholders to understand better the elements of financial performance in the year. This aids to facilitate comparison with prior periods and assists in assessing trends in financial performance.

(j) Revenue recognition

IFRS 15 Revenue from Contracts with Customers has replaced the current requirements in IAS 18 Revenue and related interpretations when it became effective on 1 January 2018. IFRS 15 specifies the requirements that an entity must apply in order to measure and recognise revenue and its related cash flows. The core principle of the standard is that an entity should recognise revenue at an amount that reflects the consideration to which the entity expects to be entitled in exchange for transferring promised goods or services to a customer.

The standard introduces a five step model for recognising revenue as follows: Identifying the contract with the customer; identifying the relevant performance obligations of the contract; determining the amount of consideration to be received under the contract; allocating the consideration to the relevant performance obligation; and accounting for the revenue as the performance obligations are satisfied. In preparation for the implementation of the standard the Group has carried out a detailed review of its contracts with customers. Following this review and impact assessment no material change to the revenue recognition policy was necessary. There has been no material impact on its results.

Revenue is recognised to the extent that it is probable that the economic benefits will flow to the Group and the revenue can be reliably measured. Revenue is measured at the fair value of the consideration received, excluding value added tax.

The Group's primary source of income is fee income from investment management activities. These fees are generally based on an agreed percentage, as per the management contract, of the assets under management and are recognised as the service is provided. Under the requirements of IFRS 15 revenue is presented gross with rebates and commission presented in cost of sales. The performance obligation for management fees is satisfied.

Commission includes fees based on a set percentage of certain flows into our funds and are recognised on receipt.

Other income also included within revenue includes performance fees which are accounted for as and when relevant performance criteria are met and the fees become receivable. This policy is in line with IFRS 15.

For all revenue streams, Premier acts as principal and therefore recognises revenue gross with any related expenses (e.g. rebates or commissions) presented in cost of sales.

(k) Pensions

The Group operates defined contribution plans. The Group has no further payment obligations once the contributions have been paid. The contributions are recognised as employee benefit expense as the service is provided. Prepaid contributions are recognised as an asset to the extent that a cash refund or a reduction in the future payments is available.

(l) Leases

All leases are classified as operating leases. Rents payable under operating leases are charged to income on a straight-line basis over the term of the relevant lease. Contingent rentals arising under operating leases are recognised as an expense in the period in which they are incurred.

In the event that lease incentives are received to enter into operating leases, such incentives are recognised as a liability. The aggregate benefit of incentives is recognised as a reduction of rental expense on a straight-line basis over the lease term.

(m) Intangible assets

Intangible assets with finite lives are amortised over the useful economic life and assessed for impairment whenever there is an indication that the intangible asset may be impaired. The amortisation period and the amortisation method are reviewed at least at each financial year end. Changes in the expected useful life or the expected pattern of consumption of future economic benefits embodied in the asset are accounted for by changing the amortisation period or method, as appropriate, and are treated as changes in accounting estimates. Gains or losses arising from derecognition of an intangible asset are measured as the difference between the net disposal proceeds and the carrying amount of the asset and are recognised in the income statement in amortisation when the asset is derecognised.

Investment management contracts purchased by the Group are capitalised as intangible fixed assets and are amortised on a straight line basis over periods ranging from 7 to 20 years depending on the nature of the assets purchased.

(n) Trade and other payables

Trade payables are obligations to pay for goods or services that have been acquired in the ordinary course of business from suppliers. Accounts payable are classified as current liabilities if payment is due within one year or less (or in the normal operating cycle of the business if longer). If not, they are presented as non-current liabilities.

Trade payables are recognised initially at fair value and subsequently measured at amortised cost using the effective interest method.

(o) Borrowings

Borrowings, are recognised initially at fair value, net of attributable transaction costs. Subsequent to initial recognition, borrowings are carried at amortised cost, with any difference between the proceeds (net of transaction costs) and the redemption value being recognised in the statement of comprehensive income over the period of the borrowings using the EIR.

All other borrowing costs are recognised in profit and loss in the period in which they are incurred.

(p) Related party transactions

All companies forming part of the consolidated Group are considered to be related parties as these companies are owned either directly or indirectly by Premier Miton Group PLC. Key management, being the members of the Executive Committee, are also identified as a related party.

The adoption of IFRS 10 Consolidated Financial Statements has not resulted in the consolidation of additional funds where the Group is now deemed to have a controlling interest under the definition of this standard. The Group did not hold a material investment in any of the funds managed by the Group and has therefore determined that no controlling interest was held.

(q) Earnings per share

Basic earnings per share is calculated by dividing the total comprehensive income for the year by the weighted average number of ordinary shares in issue during the year, excluding the average number of ordinary shares purchased by the Group as own shares held by an EBT.

(r) Employee benefit trust (EBT)

The Company provides finance to the EBT to purchase the Company's shares on the open market in order to meet its obligation to provide shares when an employee exercises awards made under the Group's share based payment scheme. Administration costs connected with the EBT are charged to the Consolidated Statement of Comprehensive Income. The cost of shares purchased and held by the EBT is deducted from equity. The assets held by the EBT are consolidated into the Group's financial statements.

(s) Share based payments

The Group makes equity-settled share based payment transactions in respect of services received from certain employees. The fair value of the services received is measured by reference to the fair value of the shares on the grant date. This cost is then recognised in the Consolidated Statement of Comprehensive Income over the vesting period, with a corresponding credit to equity.

3. Revenue

Revenue recognised in the statement of comprehensive income is analysed as follows:

All revenue is derived from the United Kingdom and Channel Islands.

4. Exceptional items

Recognised in arriving at operating profit from continuing operations:

Exceptional items are those items of income and expense, which are considered not to be incurred in the normal course of business of the Group's operations, and because of the nature of the events giving rise to them, merit separate presentation to allow shareholders to understand better the elements of financial performance in the year.

Staff redundancy costs are in relation to the rationalisation and restructuring of various departments and functions.

The FCA FSCS levy costs in 2019 represents elements of the 2018/19 and 2019/20 contributions to the FSCS which have increased significantly over the previous year as a result of the increased levels of compensation paid by the FSCS, together with a change in the amount of total levy that is allocated to asset managers; in addition, the amount included in exceptional items also includes an amount that was invoiced during the year by the FCA but which related to the previous year. Connect development costs relate to external consultants who have been deployed in the testing of the new Connect platform during the development stage prior to launch. These costs will not be incurred once the development stage is completed and are therefore not considered to be recurring. Office refurbishment PPE write offs relate to the write off of the net book value of certain tangible fixed assets following a relocation between floors at the Eastgate Court offices and the subsequent signing of new leases and is not considered to be a recurring cost.

In accordance with the accounting policy for Exceptional items set out in Note 2.5(i), these costs have been treated as exceptional due to them not being incurred in the normal course of the Group's operations, and because of the nature of the events giving rise to them. The level of cost and nature of events giving rise to them are not expected to be recurring.

5. Operating profit

(a) Operating profit is stated after charging:

(b) Auditor's remuneration

The remuneration of the auditors is analysed as follows:

6. Staff costs and Directors' remuneration

(a) Staff costs during the year were as follows:

The average monthly number of employees of the Group during the year was made up as follows:

(b) Directors' remuneration

The remuneration of the Directors during the year was as follows:

Details of awards made under the EBT to the Directors as part of their annual bonus package and which are not included in the above table can be seen in the Remuneration Committee Report.

The number of Directors accruing benefits under money purchase pension schemes at the year end was nil (2018: nil).

7. Finance income

8. Income taxes

(a) Tax charged in the statement of comprehensive income

(b) Reconciliation of the total tax charge

The tax expense in the statement of comprehensive income for the year is higher than the standard rate of corporation tax in the UK of 19% (2018: 19%). The differences are reconciled below:

(c) Change in Corporation Tax rate

A reduction in the UK corporation tax rate from 20% to 19% (effective from 1 April 2017) and to 18% (effective 1 April 2020) were substantively enacted on 26 October 2015, and an additional reduction to 17% (effective 1 April 2020) was substantively enacted on 6 September 2016. This will reduce the Group's future current tax charge accordingly. The deferred tax asset at 30 September 2019 has been calculated based on these rates.

(d) Deferred tax

The deferred tax included in the Group statement of financial position is as follows:

*Deferred tax assets have been recognised in respect of this item because it is probable that future taxable profits will be available against which the Group can use the benefits therefrom.

Deferred tax assets have not been recognised in respect of the following items.

9. Earnings per share

Reported earnings per share has been calculated as follows:

The calculation of basic earnings per share is based on profit after taxation for the year and the weighted average number of ordinary shares in issue for each period.

Own shares held by an EBT represents the Company's own shares purchased and held by the Employee Benefit Trust (EBT), shown at cost. In the year ending 30 September 2019 the EBT purchased 1,400,000 (2018: 1,643,000) of the Company's own shares.

10. Goodwill and other intangible assets

Cost amortisation and net book value of intangible assets are as follows:

Impairment tests for goodwill

Goodwill is monitored by management at the operating segment level, which reflects the entire Group. Therefore, goodwill is assessed as part of one CGU in relation to asset management. No further allocation of goodwill has been made.

The recoverable amount of the Group has been determined based on value-in-use calculations. These calculations are for the three-year period following the year end and are based on the next year's annual budget and subsequent two year forecasts. Budgeted increases in the level of assets under management, revenues and associated costs have been taken into account. Management forecasts revenues and associated costs based on the current structure of the business, adjusting for inflationary increases and these do not reflect any future restructurings or cost saving measures. To arrive at the net present value, the cash flows have been discounted using a discount factor of 12.35%. The compound annual growth rate for the net cash flows over the three year forecast period is 14.27% (2018: 28.2%) with a terminal value calculated assuming 2.0% terminal growth. The overall value in use was greater than the carrying amount of the CGU and so no impairment charge has been recognised. The key estimates made in calculating the value in use were the net cash flows and the discount rate. In determining the net cash flows assumptions were made on the level of future fund inflows, fund redemptions and market growth.

Sensitivity analysis

Management have performed a sensitivity analysis as of 30 September 2019 and with 0% three year cashflow growth, a terminal growth rate of 0% and increased discount rate of 17.35% the determination of the recoverable amount would not result in an impairment in goodwill. 

Investment management contracts purchased by the Group are capitalised as intangible fixed assets and are amortised over periods ranging from 7 to 20 years depending on the nature of the assets purchased. These finite life intangible assets were assessed for indicators of impairment, both internal and external factors, of which no indicators were noted. The largest of the intangible assets was in relation to a business combination in 2007 with a carrying value of £11,878,607 and a remaining amortisation period of 9 years.

11. Property, plant and equipment

12. Group entities

At 30 September 2019 the Company held (directly and indirectly) 100% of the allotted share capital of the following subsidiary undertakings, all of which are incorporated in Great Britain with the exception of Premier Asset Management (Guernsey) Limited which is incorporated in Guernsey and the registered office is PO Box 255, Trafalgar Court, Les Banques, St Peter Port, Guernsey GY1 3QL. The registered office for all other subsidiary undertakings is Eastgate Court, High Street, Guildford, GU1 3DE. All subsidiary undertakings are consolidated within the Group accounts.

13. Trade and other receivables

Trade and other receivables are all current and any fair value difference is not material. Trade and other receivables are considered past due once they have passed their contracted due date.

The ageing profile of trade receivables that are due but not impaired is:

These amounts have not been impaired as there has not been any significant changes in credit quality and the amounts are still considered recoverable.

14. Financial instruments

(a) Financial assets at fair value through profit and loss

The financial instruments carried at fair value are analysed by valuation method. The different levels have been defined as follows:

(i) Quoted prices (unadjusted) in active markets for identical assets or liabilities (Level 1)

(ii) Inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly (that is, as prices) or indirectly (that is, derived from prices) (Level 2)

(iii) Inputs for the asset or liability that are not based on observable market data (that is, unobservable inputs) (Level 3).

The fair value of financial assets is as follows:

Quoted investments - Level 1

The Group holds shares and units in a number of funds for which quoted prices in an active market are available. The fair value measurement is based on Level 1 in the fair value hierarchy.

Financial instruments measured at amortised cost, but fair value is disclosed

The following financial instruments are not measured at fair value in the balance sheet, but information about the fair value is disclosed.

Trade debtors and trade creditors

The trade debtors and trade creditors largely have a maturity of less than one year. The fair value of trade creditors and trade debtors are not materially different to their carrying value.

Borrowings and overdraft

The fair value of the bank borrowings and overdrafts are not materially different from the carrying value due to the variable interest rate and the short duration.

Financial risk management

The Group's activities expose it to a variety of financial risks: market risk (including foreign exchange risk, cash flow and fair value interest rate risk), credit risk and liquidity risk.

The Group monitors and manages the financial risks relating to the operations of the Group through internal risk reports which analyses exposure by degree and magnitude of risks. These risks include market risk (including currency risk, fair value interest rate risk and price risk), credit risk, liquidity risk and cash flow interest rate risk.

Market risks

The Group is exposed to market risk through interest rates, availability of credit, liquidity and foreign exchange fluctuations.

(a) Interest rate risk

The Group is exposed to interest rate risk as the Group borrows at floating interest rates.

A 1% increase in interest rates on the Group's debt balances at 30 September 2019, would increase the annual net interest payable in the statement of comprehensive income and reduce equity by £nil (2018: £nil). The sensitivity has been calculated by applying the interest rate change to the variable rate borrowings.

(b) Foreign exchange risk

The Group undertakes transactions denominated in US Dollars and Euros; consequently, exposures to exchange rate fluctuations arise.

At 30 September 2019, if the US Dollar and Euro had strengthened by 10% against the Pound with all other variables held constant, this would have had an £138,000 (2018: £126,000) impact on the statement of comprehensive income and equity.

The Group does not have any cash holdings in a currency other than GBP.

(c) Credit risk

The Group credit risk is primarily focused on trade receivables due from trustees/investors for open end fund cancellations/sales. The risk is that a counterparty fails to settle on a trade and thereby creates an illiquid asset. However, in such cases the Group has the ability to arrange with the trustees of the relevant fund to cancel the trade and to liquidate the units issued, thereby settling the trade. A possible exposure will arise in such an instance whereby the price achieved on a cancellation of a trade is less than the original price at which the units were issued.

The credit risk on liquid assets is limited because the counterparties are banks with credit ratings of S&P A+/A-1 stable.

The Group has no significant concentration of credit risk as exposure is spread over a large number of counterparties and customers.

(d) Liquidity risk

The Group's approach to managing liquidity risk is to ensure, as far as possible, that it will always have sufficient liquidity to meet its liabilities when due without incurring unacceptable losses or risking damage to the Group's reputation. 

The table below analyses the Group's financial liabilities into relevant maturity groupings based on the remaining period at the balance sheet date to the contractual maturity date. The amounts disclosed in the table are the contractual undiscounted cash flows.

Capital Management

Working capital

The Group manages the level of its working capital on an ongoing basis. The Group uses detailed financial information provided by its forecasting model and by regular review of its consolidated management information.

Regulatory capital requirements

In accordance with the Capital Requirements Directive (CRD), the Group is required to maintain a minimum level of capital as prescribed in the UK by the Financial Conduct Authority (FCA). The Group is required to conduct an Internal Capital Adequacy Assessment Process (ICAAP), referred to as Pillar 2 capital requirements. The objective of this process is to ensure that firms have adequate capital to enable them to manage risks not deemed to be adequately covered under Pillar 1 minimum requirements. This is a forward looking exercise which includes stress testing on major risks, considering how the firm would cope with a significant market downturn, for example, and an assessment of the Group's ability to mitigate the risks. Each of the regulated companies in the Group maintained surpluses of regulatory capital throughout the year.

The primary objective of the Group's capital management is to maintain a strong capital base in order to maintain investor, creditor and market confidence and to provide a suitable base to sustain the future development of the business, while ensuring compliance with regulatory capital requirements.

During the period the Group and its subsidiary entities complied with all regulatory capital requirements.

Offsetting financial assets and financial liabilities

There are no financial assets and liabilities subject to offsetting, enforceable master netting arrangements and similar agreements.

15. Cash and cash equivalents

16. Trade and other payables

Trade creditors and accruals principally comprise amounts outstanding for trade purchases and ongoing costs. The Group has financial risk management policies in place to ensure that all payables are paid within the pre-agreed credit terms.

The Directors consider that the carrying amount of trade payables approximates to their fair value.

17. Changes in liabilities arising from financing activities

18. Obligations under leases

Operating lease agreements where the Group is lessee.

The Group has entered into commercial leases on certain properties. These leases have an average duration of between 5 and 10 years. The costs associated with the development of Connect will be treated as an operating lease with a duration of 5 years.

Future minimum rentals payable under non-cancellable operating leases are as follows:

19. Share capital

The deferred share carries no voting rights and no right to receive a dividend.

20. Capital redemption reserve

On the redemption of the preference shares a transfer was made from retained earnings to the capital redemption reserve equivalent to the nominal value of the preference shares redeemed. On 19 October 2015 £4,000,000 of the 8% Preference shares, plus £359,452 of accrued interest, was redeemed.

21. Shared based payments

All share options awarded to employees through the EBT under the Group's equity-settled share based payments are valued by reference to the fair value of the share options on the grant date. The share options in issue under the equity-settled share based payment scheme have been valued at prices ranging from £1.87 to £2.12 per share. The charge to the Consolidated Statement of Comprehensive Income for the year to 30 September 2019 in respect of these was £2,551,259 (2018: £1,033,458).

All share options have an exercise price of £nil, the fair value of share options outstanding at the end of the period are:

Premier Miton Group PLC established an EBT on 25 July 2016 to purchase ordinary shares in the Company to satisfy awards of share options to certain employees. All administrative expenses connected with the EBT are charged to the Consolidated Statement of Comprehensive Income. The EBT has waived the rights to dividends. Shares purchased and held by the EBT are deducted from equity and classified as own shares held by an EBT. The following table shows the number of shares held by the EBT that have not yet vested.

22. Own shares held by an EBT

The reserve for the Company's own shares held by an EBT comprises of the Company's ordinary shares held by the Group. At 30 September 2019, the Group held ordinary shares 4,642,830 (2018: 3,242,830).

23. Dividends paid