This announcement contains inside information. Upon the publication of this announcement the inside information is now in the public domain.

The Ince Group plc

("Ince" or the "Group")

Interim results for the six months to 30 September 2021

The Ince Group plc (AIM: INCE), the international legal and professional services company, today announces its unaudited results for the six months ended 30 September 2021.

Financial highlights

* The comparative results for the six months ended 30 September 2021 have been restated for the effect of activities discontinued since 30 September 2020

** Adjusted diluted earnings per share is computed from operating profit from continuing operations before non-underlying items and after adjusting for any taxation effect as fully explained in note 5 to the financial statements.

·    Revenue £49.9m (HY21 restated*: £47.6m): +4.8%

o  UK is again showing growth and continuing to benefit from service spread

o  Traditional business development and face to face client contact possible again in the UK, giving an optimistic outlook for new business generation

o  International now 43.5% up from 41% last year

§ Asia continuing to grow

§ EMEA has had a slower start to the year

·    Operating profit before non-underlying items £3.5m (HY21 restated*: £3.2m): +9.4%

·    Operating profit £3.4m (HY21 restated*: £2.5m): +36.0%

·    Diluted earnings per share before non-underlying items 2.56p (HY21 restated*: 3.05p): -16.1%

·    Interim dividend of 0.5p per share (HY21: nil) for payment on 20 April 2022 to shareholders on the register at 18 March 2022

·    Deferred consideration remaining reduced by £3.2m to £20.9m (HY21 restated*: £24.5m)

Operational and strategic highlights  

·    Board strengthened with

o  The appointment of two new Non-Executive Directors, each bringing first class front line executive experience from significant law firms

o  New Chairman appointed in September

·    Investment in team and individual lateral fee-earner hires

·    New collaborations established with specialist predictive intelligence company and U.S. law firm to offer sanctions compliance solution to maritime clients

·    Launch of Ince Corporate Finance, the Group's FCA regulated business which provides bespoke advisory and structured finance solutions internationally

·    Recommended All Share Offer for Arden Partners plc

·    New office opened in Scotland for senior lateral hire joining in November to focus on the strategic development of Ince's Scottish operations

·    Integration of our private client offerings continued with formal launch of 'Ince Private Wealth' in November 

·    BDO appointed as new auditors to the Group

Commenting on the results, Adrian Biles, Chief Executive of Ince said:

"This is a solid set of results. I am particularly pleased to see that the UK business is gaining strength and the offices in Asia are continuing to grow.

"I would like to thank all our colleagues for their hard work and commitment. These results could not have been delivered without their continued efforts to service our clients. 

"Most of our offices are now back and open with more colleagues attending regularly, a positive development for our more junior colleagues and those new to the business in particular. 

"Second half trading so far has been encouraging, and I am optimistic about our future and for the Group's next phase focussing on delivering on our growth strategy." 

Results presentations

Adrian Biles, Chief Executive, and Simon Oakes, CFO, are holding a presentation and Q&A for analysts and investors via the Investor Meet Company platform at 12.00 today.

Questions can either be posted in advance via email to investorrelations@incegd.com by 11am today or during the meeting following registration for the event via: https://www.investormeetcompany.com/ince-group-plc-the/register-investor 

Enquiries:

About The Ince Group plc

The Ince Group is a dynamic international legal and professional services business with offices in nine countries across Europe, Asia and the Middle East. With over 700 people, The Ince Group delivers legal advice, strategic guidance and business solutions to clients ranging from the world's oldest and biggest businesses operating across numerous industries to ultra-high net worth individuals. Through its entrepreneurial culture and "one firm" approach, the business offers its clients over 150 years of experience, insight and relationships. The Group is driven by a unique team of passionate people whose broad expertise and deep sector specialisms provide their clients with solutions to all their complex legal and strategic needs.

Operating review

Strategy and model

Strategy - clear growth drivers

The Group's strategy continues to be to grow income profitably by adding fee earning partners to a single efficient administrative operation. Implementation of this strategy should increase the intellectual capital of the business and the quality of its client and matter base. The delivery of this strategy includes recruiting high quality personnel, developing new business streams, acquiring complementary businesses and forging strategic alliances where appropriate.

Robust central infrastructure

To support the delivery of the strategy, the Group has a well-established platform and infrastructure. 

We own our practice management system which, on an integrated basis, manages our paperwork, records time and enables billing and collection of fees. We believe that this is unique as it enables us to tailor the system to our needs when we need a refinement and removes the need to rely on external software providers. The back office for the Group is based in South Wales, which is a relatively low-cost environment with an abundant pool of suitable talent.

Remuneration model and brand are key to growth

The Group has a well-developed basic remuneration structure for partners. It rewards delivery of our KPIs by billing work done and collecting those billed fees, growing revenues and, in certain instances, achieving a gross margin of over 45%. While the basic structure is well-defined, it is subject to ongoing strategic review by senior management and the Remuneration Committee to ensure it remains competitive in the market and achieves the right behaviours.

We remain committed to attracting and retaining world class talent, both through competitive remuneration and offering compelling career progression opportunities. Due to the current market dynamics we also raised starting salaries for newly qualified lawyers in December and have introduced a new financial incentive to reward associates who bring in new clients.

The remuneration structure combined with the strength of the Ince brand, are powerful tools in attracting the additional talent the Group seeks.

Review of the half year       

Our colleagues have adapted extremely well to the disruptions caused by the pandemic and business across the Group is starting to normalise. Despite business development activity in the UK (in particular) being restricted for parts of the period, overall revenue exceeded last year's by 4.8% and we continue to benefit from our spread of service lines as well as geographies. In the UK, which now represents 56.5% of overall revenue, our dispute resolution department, which experienced the largest revenue impact last year, came back strongly, whilst activity in some of our other sector practices slowed, in part due to increased staff churn. Colleagues are now increasingly attending our offices, including the main London office, which is particularly positive for the development of our more junior lawyers and for those new to the business. Traditional business development and face-to-face client contact and travel, the latter being of particular importance to our sector practices with a large proportion of overseas clients, became possible again and saw an increase in activity, which is promising for future revenue generation.

We enhanced our contentious and non-contentious practices through recruitment and partner promotions

Firms across the legal sector are increasingly competing for talent, however, a development which we are not immune to is resulting in salary pressure and increased staff churn, but our ability to attract high calibre teams and lateral hires continues. Recruitment of new talent continued and the first partner promotion round since 2019 (pre-pandemic) was completed adding ten new partners.

-          Our regulatory solutions team was strengthened by the addition of a highly respected criminal and regulatory partner with more than two decades experience in investigations and enforcement proceedings.

-          The development of Ince's global maritime division and offering continued with the further arrival of a specialist and highly experienced Maritime and Marine Insurance team in Bristol, adding two new partners, and in total a team of five new colleagues who have worked together for many years. 

-          A new international shipping litigator joined as partner in Greece with extensive experience advising Shipowners, P&I Clubs, Charterers, Traders and H&M Insurers on shipping, international trade and marine insurance law matters.

-          A total of ten talented lawyers were promoted to partner bolstering our maritime, private client, insurance, real estate and employment practices.

-          Further colleagues who were working lengthy notices joined in November and December:

o  In November we expanded our geographical footprint with the opening of a new office in Glasgow, Scotland, adding a new Maritime partner and Head of Office to lead the development of our offering in that region

o  New heavyweight partner and Global Head of Insurance joined in London together with a new insurance partner and Senior Associate

We diversified and integrated our service offerings further with new client solutions and with the launch of Ince Private Wealth

-          In August we launched our new sanctions compliance solution in cooperation with Windward, a predictive intelligence company applying artificial intelligence (AI) to transform global maritime trade. The new solution is also supported by our collaboration with a U.S. law firm. This is the second collaboration for Ince Maritime, the global maritime industry's first integrated suite of legal advisory, business consultancy, and technology services within one offering.

-          The integration of our private client offerings, Ince Private Wealth, continued successfully with the education of our colleagues and client networks, the addition of a new partner and formal launch in November 2021. Recruitment of further team members is also underway and a review of the overall combined offering shows this is already a c. £5 million annual revenue offering of private wealth services for individuals, families and the institutions and advisers who support them.

We are aligning our brands and seizing new opportunities to increase marketing efforts

-          In September, we formally launched Ince Corporate Finance, the Group's FCA regulated business which provides bespoke advisory and structured finance solutions to an international client base of large and small corporates, governments and larger investment banks with particular expertise in real estate, infrastructure, shipping and aviation. This business traded previously under the name James Stocks & Co, which became a full subsidiary of the Group last financial year, and has undertaken 88 transactions with a total value of $3.4bn across 19 countries since becoming FCA registered in September 2016.

-          Ince reaffirmed its strong position in the maritime sector during London International Shipping Week, hosting seven events over four days, attracting several hundred people and an impressive list of external speakers and opening up many new opportunities.

-          Our Bristol operation which previously traded as Metcalfe's, a well-known brand locally in Bristol, is now trading as Ince, and is fully aligned with the international firm.

-          An internal working group focussed on strengthening our relationships and increasing work referrals from Africa was formally launched, recognising our expertise in the region, developed through advising clients in the African continent for decades.

Board strengthened, new Chairman and new auditors appointed

-          In July, we announced the appointment of Carol Ashton and Laurence Milsted as Non-Executive Directors. Both bring first class front line executive experience from significant law firms.

-          Peter Rogan, who had a long and successful career with the former Ince business, stepped down from the Board with effect from the same month.

-          Simon Howard took over from David Furst as new Chairman of the Group in September bringing significant expertise and experience and a robust track record of leading and building professional services businesses. 

-          BDO were appointed as new Auditors to the Group

Recommended offer for Arden Partners plc

We announced an all share offer for Arden Partners on 26 October, which, if it completes as expected before April 2022, will further extend our corporate finance and private wealth capabilities, as well as enhance our corporate offering and add a new competitive advantage through the ability to raise capital among other synergies as described in the announcement.

HY22 Operational performance

We have continued to integrate all aspects of our operations onto a single administrative platform which can serve all our offices on a basis which enables appropriate regional and departmental management control. Operations are managed across all service lines to enable sensible operational decisions at global and local levels.

The installation of the Group's proprietary practice management system in our Asian offices, which we believe will increase efficiency and reduce overheads in the medium term, will complete by the end of this financial year provided the practicalities of international travel do not make the ideally required local support during transition impossible. It is one of, if not the only, independent multi-office, multi-currency practice management system available to UK based businesses which is not associated with a major data supplier, and we plan to consider whether the system can be profitably sold to other businesses.

Our core remuneration model continues to be a magnet for partners in other firms to join us. It focuses on professional practitioners being rewarded both for the billable work they do and for the income generated from their clients.

We have just completed a strategic review of the underlying model with the partner group and a revised model will be implemented before the year end. This increases the focus on ensuring partners and fee earners refer work across the business to build our multi-service offering, but the core fundamentals remain the same and ensures that fee earners are rewarded for the activity in the business.

Our aim remains to promote a culture which provides an environment of trust for partners and colleagues which is open and transparent and in which everyone can perform to the best of their abilities. The stability of partners and other colleagues is, we believe, vital in delivering the continuing satisfaction of clients.

Financial review

The Group's consolidated results for the six months ended 30 September 2021 are ahead of last year, reflecting the start of a return to a more normalised business environment. The results show total revenue of £49.9 million (HY21 restated*: £47.6 million) and Operating profit before non-underlying items of £3.5 million (HY21 restated*: £3.2 million).

Alternative Performance Measures

Consistent with our financial statements for the year ended 31 March 2021, the Group presents three Alternative Performance Measures ("APMs") which included adjustments for specific items to provide a balanced view of the underlying performance of the Group's operations:

·    Operating profit before non-underlying costs

·    Diluted earnings per share before non-underlying costs

·    Free cash flow

Definitions of these measures are set out in our annual financial statements and they are presented throughout where relevant in these interim results. The Board believes these measures provide a clear view of the underlying performance trends of the Group.

Key Performance Indicators (KPIs)

To achieve profits for shareholders, we focus the business on a small number of KPIs which we consider essential business drivers of profit growth. In simple terms, if we grow revenues, maintain or increase gross margin, constrain overheads and convert work undertaken into cash, the profits for shareholders (as measured by the Alternative Performance Measures, described above) will grow.

We therefore monitor the progress of the business through four essential KPIs:

·    Revenue (measured net of disbursements and VAT)

·    Gross margin percentage

·    Overheads as a percentage of revenue

·    Lockup

Revenue

Revenue for the six months has grown by 4.8% despite the impact and uncertainty caused by the pandemic and can be analysed by geography as follows:

The Group continues to benefit from its spread of service lines as well as geographies.

UK business gaining strength 

In the UK, which now represents 56.5% of Group revenues, revenues grew by 5.6% versus the same period last year, whereas in the same period last year they had decreased year on year when the pandemic impact was more severe. Covid-19 hit our UK operations harder than our international offices last year for a number of reasons, particularly in London, due to the ability to travel into central London by public transport and restrictions on access to our main office imposed by the landlord. This restricted the ability of partners and colleagues to meet clients and, particularly, in respect of then recent lateral hires, build business relationships and revenue opportunities. The re-opening of our UK offices from mid-July 2021 has therefore begun to mitigate these restrictions on trading and is beginning to normalise. 

The UK business is more transactional than the international business and the dispute resolution, real estate and corporate divisions are now ahead of pre-pandemic revenue levels, in line with our expectations for these practices. While activity is still muted in certain sectors in the UK, new matter openings and billable hours have both been increasing as we enter the second half of the financial year.

International business continued momentum

The Group's international network of entities increased revenues by 3.8% versus the same period last year, although the drivers and movements between Asia and EMEA were different.

The Asia business has continued to benefit from high activity levels, achieving year on year growth again (revenues increases 7.8% versus the same period last year). Over the last two years, second half revenue in this region has consistently accounted for at least 55% of annual revenue for that area. 

The EMEA business has had a slower start to the financial year as a result of: (i) a slowdown in trade in Germany as the effects of certain structural, Brexit-related regulatory changes have been worked through; and (ii) a change of leadership in Dubai. However, the effect of these changes is temporary and as our Greek and other practices have grown year on year, EMEA is expected to return to growth through the second half of the financial year.

Gross margin

Gross margin for the half year was 43.7% (HY21 restated*: 44.5%) reflecting our ongoing investment in building our fee earner base for future growth, which includes the beginning of a return to more normal levels of business development expenditure as the ability to travel to meet with clients face-to-face has begun to increase.

Bad debt charges have reduced in the period (from £1.5m in the prior year period to £1.3m) as we have slowed the amount of current debtors falling beyond 180 days overdue (which is the provisioning method applied by the Group). As noted below, however, previously accumulated debtors are still taking time to unwind to cash, particularly in Asia.

Typically, we have found that gross margin improves in the second half of a given financial year, in particular in Q4, as turnover typically skews to that period over a largely fixed cost base.

Lock-up

Lock-up, which represents debtors (excluding VAT and disbursements) compared with revenue, was 124 days at the half year end which is greater than last year and our target of 100 days. This has been extended particularly by increased lock-up levels across our Asia offices which is higher than for the rest of the Group. 

It continues to be a focus for management in the short and medium term to educate the Asia business that the Group should not be a significant source of credit for the client. There are issues regarding local and international travel restrictions and typical collection practices in that area which suggest that it will take time to achieve a more satisfactory level. However, even a partial unwinding of the lock up in Asia could significantly increase the cash position of the Group.

Overheads 

Overheads as a proportion of revenue were 36.9%, representing a reduction of 2.1% compared with the first half of last year and towards the 30% we aim for. This reduction is in part a result of the effects of cost reductions implemented last year as well as a continued limitation of discretionary spend. The target of 30% is expected to be achieved over time both by limiting any future overhead increases versus revenue growth and when contracts allow cost reductions to be implemented - for example, the UK office footprint rationalisation that can be achieved when property break clause dates are reached (largely over the next 12 months).

Cash and borrowings

As reported earlier this year, the Group expected net borrowings to increase to this point in the year, while we work on reducing lock up across the business and pay back costs postponed (in agreement with third parties including HMRC) in the initial stages of the pandemic. Accordingly net borrowings stood at £15.1m at 30 September 2021, which includes the full draw down of the term loan and RCF facility with Investec.

Our typical cash generation profile for the year as well as our improving trading and the reduction in repayments of postponed items indicates we will now move to a position of reducing net borrowings back down through the second half of the financial year.

Deferred consideration

Deferred consideration arises from previous acquisitions where further consideration is payable to the vendors. We are now entering the phase over the next 12 months where these balances will begin to reduce to zero. Some of these deferred considerations may be replaced by future remuneration for vendors where they remain active in the Group, but this is expected to be far below the level of deferred consideration pay out in comparative cash terms.

Many commentators regard the deferred consideration on the balance sheet as a fixed amount which the Group will pay. However, it is important to note that the amount stated in the balance sheet is management's estimate at the date of the acquisition of the liability over a number of years. It is a contingent liability. The actual amount which will be paid depends, in nearly all cases, on the level of revenue achieved, and collected, by the businesses acquired. Therefore, if revenue drops, so will the deferred consideration providing some protection against underperformance and bad debts of the acquired businesses and cash is only paid out to the extent that cash has been received.

Outlook and current trading

The Board considers that the business is performing well in the circumstances and expects that, in the absence of further adverse events beyond our control, it will continue to grow.

We typically observe an increase in revenues and profit in the second half of the year over the first. Although recent trading trends are encouraging, and so far in this second half of the year the Group is ahead of prior year trading, market uncertainties persist across our territories. The extent to which these uncertainties may affect this seasonal trend is difficult to estimate and may impact the extent of the normal second half weighting.

We continue to look for suitable opportunities to expand the teams in all our service offerings and geographies, largely through lateral team hires, as well as broadening our services. In doing so, we look to expand either the quality of the client base of the Group, the service offering of certain offices or the Group as a whole and thereby enhance the intellectual capital of the business.

The Board believes that working practices are likely to change rendering the Group's current office space too large or unsuitable. We expect that there will be a reduction in our office footprint, but this can only be realised when we reach the relevant break clause dates next calendar year and will depend on the requirements of the business at that point in time. In this context, investors should note that the Group's material, long-term property commitments in the UK all have an opportunity for a tenant's break within the next 12 months. This allows the Group flexibility to meet such changed working practices and, in the medium term, the potential to achieve significant further operational cost savings.

The Board has adopted a medium-term dividend policy of distributing 20% of post-tax earnings to shareholders each year subject to the Ince Group's overall forecast cash requirements as previously indicated. Based on our trading so far and our current outlook we are pleased to reintroduce an interim dividend of 0.5p per share payable on 20 April 2022 to shareholders on the register on 18 March 2022.  In the event that the Offer for Arden Partners has not completed by that record date, Arden Partners' shareholders will receive an equivalent special dividend in lieu of receiving this dividend if and when the offer completes. The declaration of this interim dividend reflects both our confidence in the future of the Group as well as the need for us to continue to ensure we retain sufficient cash to develop and grow our business over the medium term.

We are very pleased to see the gradual return to a more normal business environment and the increasing number of opportunities this brings. 

The Board considers that the Group has the strength, flexibility and commitment to prosper and grow for the benefit of shareholders and colleagues over the coming years.

Adrian Biles

8 December 2021

Unaudited Consolidated Statement of Comprehensive Income

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

Unaudited Consolidated Statement of Financial Position        

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

Unaudited Consolidated Statement of Cash Flows

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

Unaudited Consolidated Statement of Changes in Equity

Notes to the Financial Statements

These interim consolidated financial statements have been approved for issue by the Board of Directors on 7 December 2021.

1.              Summary of significant accounting policies

1.1            Basis of preparation and significant accounting policies

The financial information for the year ended 31 March 2021 set out in this half yearly report does not constitute statutory financial statements as defined in section 434 of the Companies Act 2006. The figures for the year ended 31 March 2021 have been extracted from the Group financial statements for that year. Those financial statements have been delivered to the Registrar of Companies and included an independent auditor's report, which was unqualified and did not contain a statement under section 493 of the Companies Act 2006.

The half yearly financial information has been prepared using the same accounting policies and estimation techniques as will be adopted in the Group financial statements for the year ending 31 March 2022. The Group financial statements for the year ended 31 March 2021 were prepared under International Financial Reporting Standards as adopted by the UK. These half yearly financial statements have been prepared on a consistent basis and format with the Group financial statements for the year ended 31 March 2021. The interim condensed consolidated financial statements for the six months ended 30 September 2021 have been prepared in accordance with IAS 34 Interim Financial Reporting. The interim condensed consolidated financial statements do not include all the information and disclosures required in the annual financial statements, and should be read in conjunction with the Group's annual financial statements as at 31 March 2021.

1.2            Business combinations

The Group applies the acquisition method of accounting to account for business combinations in accordance with IFRS 3 (R), 'Business Combinations'. The consideration transferred for the acquisition of a subsidiary is the fair values of the assets transferred, the liabilities incurred and the equity interests issued by the Group. The consideration transferred includes the fair value of any asset or liability resulting from a contingent consideration arrangement. Identifiable assets acquired and liabilities and contingent liabilities assumed in a business combination are measured initially at their fair values at the acquisition date. The excess of the consideration transferred over the fair value of the Group's share of the identifiable net assets acquired is recorded as goodwill. All transaction related costs are expensed in the period they are incurred. If the consideration is lower than the fair value of the net assets of the subsidiary acquired, the difference is recognised in the Statement of Comprehensive Income.

Any contingent consideration to be transferred by the Group is recognised at fair value at the acquisition date. Subsequent changes to the fair value of the contingent consideration that is deemed to be an asset or liability is recognised in accordance with IFRS 9 in the Statement of Comprehensive Income.

1.3            Financial instruments

The Group classifies financial instruments, or their component parts, on initial recognition as a financial asset, a financial liability or an equity instrument in accordance with the substance of the contractual arrangement. Financial instruments are recognised on trade date when the Group becomes a party to the contractual provisions of the instrument. Financial instruments are recognised initially at fair value plus, in the case of a financial instrument not at fair value through profit and loss, transaction costs that are directly attributable to the acquisition or issue of the financial instrument. Financial instruments are derecognised on trade date when the Group is no longer a party to the contractual provisions of the instrument.

Financial assets are included on the Statement of Financial Position as trade and other receivables and cash and cash equivalents.

Financial liabilities are included on the Statement of Financial Position as trade and other payables and borrowings.

(a)            Trade receivables

Trade receivables are stated at their original invoiced value, as the interest that would be recognised from discounting future cash receipts over the short credit period is not considered to be material. The Group recognises a provision against receivables being an estimate based on prior experience of credit losses for irrecoverable amounts adjusted for known foreseeable estimated losses.

(b)            Trade payables

Trade payables are stated at their original invoiced value, as the interest that would be recognised from discounting future cash payments over the short payment period is not considered to be material.

1.              Summary of significant accounting policies (continued)

1.3            Financial instruments (continued)

(c)            Interest-bearing borrowings

Interest-bearing borrowings are stated at amortised cost using the effective interest method. The effective interest method is a method of calculating the amortised cost of a financial liability and of allocating interest expense over the relevant period. The effective interest rate is the rate that exactly discounts estimated future cash payments through the expected life of the financial liability.

1.4            Going concern

The financial statements have been prepared on the going concern basis. In deciding this, the directors have considered the detailed budgets for the current financial year and high-level budgets for the succeeding two years including in both cases cash flows. The Group secured new funding facilities in March 2021 which are considered to be sufficient for the Group's purposes based on current projections. Financial forecasts project the Group to be fully compliant with the covenants associated with these facilities.

They have also considered the impact of adverse changes resulting from the major risks and uncertainties they consider apply to the Group. At the date of this report, the Group continues to take the Covid-19 threat to its clients, vendors, staff and overall business very seriously. The Group is taking proactive action and has activated business continuity plans, where required across the jurisdictions in which the Group operates, to minimise the risk of disruption to business operations. In doing this, the Group has taken account of government advice in the jurisdictions in which it operates and the need to safeguard the health of our clients. We will continue to follow the various locations' national policies and advice and in parallel will do our upmost to continue our operations in the best and safest way possible without jeopardising anyone's health.

Consequently, the Board of Directors has a reasonable expectation that the Company and the Group have adequate resources to continue in operational existence for the next 12 months.

2.              Segmental reporting

Revenue by region

In the following table, revenue from contracts with customers is disaggregated by primary geographical market:

3.              Staff and partner costs

The average number of persons employed by the Group (excluding Directors) during the period, analysed by category, was as follows:

The aggregate staff and partner costs of the Group were as follows:                                                       

4.              Non-underlying costs

Costs and income are assessed by management as non-underlying where they are considered outside of or related to events outside of the normal scope of operation of the Group's business, non-recurring in nature in the financial period.

5.              Earnings per share

Earnings per share are based on the weighted average number of shares of the Company in issue or issued as consideration for the entities whose results are reported in the period. The number of shares and periods are as follows:

The calculation of the basic and diluted earnings per share is based on the following data:

Basic earnings before non-underlying costs is calculated as follows:

6.              Intangible assets

Client portfolio represents the acquisition of the business and certain assets from other professional services firms. The client portfolio intangible asset is carried at cost less accumulated amortisation. Amortisation is provided for in line with the fees billed and cash collections generated by the client portfolio acquired. Amortisation of client portfolio intangibles of £1,397,000 is recognised in production staff and partner costs on the Statement of Comprehensive Income.

Brands and trademarks of £17,000,000 relate to the value attributed to the Ince brand that the Group acquired on 1 January 2019. This was determined on acquisition based on an external valuation report. The carrying value of the brand is subject to annual impairment reviews on the reporting date. These reviews are similarly undertaken based on external valuations.

Internally generated software includes development costs relating to development of software applications. The Directors have considered the carrying value of internally generated software of £3,052,000 as appropriate as it is expected to create future economic benefit.

Intellectual property carrying amount includes £95,000 of intellectual property acquired on the acquisition of certain assets and liabilities of Prolegal Limited from its administrator.

The Intangible assets of the Group for the prior year were as follows:-

6.              Intangible assets (continued)

Goodwill

Goodwill acquired in a business combination is allocated, at acquisition, to the cash-generating units (CGUs), or group of units that are expected to benefit from that business combination and is analysed below. 

6.1            Business combinations and acquisitions

The details set out below provide the information required under IFRS 3 'Business Combinations' for the acquisitions that occurred during the period to 30 September 2021.

There were no business combinations or acquisitions during the period to 30 September 2021.

6.2            Discontinued operations

There were no discontinued operations during the period to 30 September 2021.

7.              Trade and other receivables

Trade receivables are stated including £3,057,000 of VAT and £3,277,000 of disbursements.

8.              Cash and cash equivalents

Cash and cash equivalents include the following:-

9.              Share capital

Ordinary shares rank equally as regards to dividends, other distributions and return on capital. Each ordinary share carries the right to one vote.

10.           Reserves

Share premium represents the difference between the amount received and the par value of shares issued less transaction costs.

The reverse acquisition reserve has arisen under IFRS3 'Business Combinations' following the acquisition of The Ince Group.

Other reserves represents the impact of the valuation of share options issued in the year and the difference between fair value and nominal value of shares issued in share-for-share exchanges.

Foreign exchange translation reserve includes gains or losses in translating overseas operations into GBP sterling.

11.           Trade and other payables

Deferred consideration relates to business combinations and the purchase of client lists and relationships.

12.           Borrowings

13.           Free cash flow