Source - LSE Regulatory
RNS Number : 4888I
JTC PLC
19 April 2022
 

 

19th April 2022

 

JTC PLC

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

Full year results for the year ended 31 December 2021

Strong revenue and underlying profit growth demonstrating continued resilience; Positive outlook for 2022

 

 

As reported

Underlying *

 

2021

2020

Change

2021

2020

Change

Revenue (£m)

147.5

115.1

+28.2%

147.5

115.1

+28.2%

EBITDA (£m)

26.6

34.9

-23.8%

48.4

38.7

+25.0%

EDITDA margin

18.0%

30.3%

-12.3pp

32.8

33.6

-0.8pp

Operating profit/EBIT (£m)

9.0

21.0

-57.2%

30.8

24.9

+23.9%

Profit before tax (£m)

27.8

11.2

+147.2%

24.9

20.1

+23.7%

Earnings Per Share (p)**

20.49

9.02

+127.2%

25.55

21.77

+17.4%

Cash conversion

79%

91%

-12pp

87%

91%

-4pp

Net debt (£m)

-117.2

-76.0

-41.2

-113.3

-75.8

-37.5

Dividend per share (p)

7.67

6.75

+0.92p

7.67

6.75

+0.92p

 

* For further information on underlying results see appendix to CFO Review.

** Average number of shares (thousands) for 2021: 130,044 (2020: 116,737).

 

FINANCIAL HIGHLIGHTS

·  Revenue up 28.2% to £147.5m (2020: £115.1m), reflecting strong net organic growth of 9.6% (+17.5% gross) and inorganic growth of 18.6%

·   Underlying EBITDA up 25.0% to £48.4m (2020: £38.7m) with an underlying EBITDA margin of 32.8% (2020: 33.6%) and 34.4% in the core business excluding acquisitions (2020: 35.7%)

·   Annualised new business wins totalling £20.9m (2020: £17.9m), comprising £13.1m in ICS and £7.8m in PCS, which included our largest ever single mandate (c. £2.5m per annum)

·    Strong underlying cash conversion in line with guidance at 87% (2020: 91%)

·    Dividend up 13.6% at 7.67p per share (2020: 6.75p)

·   A robust balance sheet, which was further strengthened by £144.8m gross proceeds from two equity fundraises, which includes an undrawn £69.3m out of the available £225m banking facilities secured during the year with no debt falling due for repayment before 2024. Pro-forma net debt at the period end was 2.0x underlying EBITDA.

 

STRATEGIC HIGHLIGHTS

·   Continued demonstration of the resilience of the business model, achieving the Group's 34th consecutive year of growth with balanced performances from both Divisions

·    Shared Ownership distribution of £20m to our global employee-owner workforce

·    Strong demand for JTC's services as demonstrated by organic growth and new business performance

·  Executing on our inorganic growth strategy with seven high quality acquisitions completed in the year, including substantial scaling of the ICS business in the US market

 

OUTLOOK

·    Medium-term guidance maintained; net organic revenue growth of 8% - 10% per annum; underlying EBITDA margin of 33% - 38%; cash conversion of 85% - 90% and net debt up to 2.0x underlying EBITDA

·    Continued focus on the integration of recent acquisitions, with all seven on track, after an active year of inorganic growth

·  A positive start to the year, with the Group remaining well invested to deliver continued growth and operational improvements

·    M&A pipeline remains healthy and a disciplined approach will continue with particular focus on the US, UK, Ireland and mainland Europe

 

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

"I would like to thank every member of the team for their commitment and hard work in delivering such a strong performance in 2021.

"2021 was a great first year for our current business plan, the Galaxy era, where our aim is to double the size of the Group relative to where we ended 2020. We once again delivered performance in-line with market expectations and medium-term guidance, with revenue growth to £147.5m, achieving £48.4m of underlying EBITDA at a Group margin of 32.8% and 34.4% when acquisitions are excluded. It was particularly pleasing to achieve net organic growth of 9.6% driven by record new business wins of £20.9m alongside inorganic growth of 18.6%, which reflected our busiest year yet for M&A.

"2021 saw JTC execute on its inorganic growth strategy with seven high quality acquisitions completed in the year - the most we have ever achieved in a single calendar year. The quality businesses in Segue, SALI and EFS, also supported our strategic push into the US.

"A key achievement and probably our proudest moment in 2021, was the e £20m shared-ownership distribution made to our people globally in July. The award reflected the progress made under our Odyssey era business plan, which ran from our IPO in 2018 to the end of 2020. And while it was our first distribution as a listed business and our first in shares, it was the third in our history and brought the total value generated for JTC employee owners since 1998 to over £350m.

"Looking ahead, while much of the focus will be on improving and integrating what we have, we also remain of the view that the sector is primed for consolidation and that our proven approach to identifying, securing and integrating high quality acquisitions is a key part of creating long-term value for JTC and our stakeholders."

 

ENQUIRIES:

JTC PLC                                                                       +44 (0) 1534 700 000

Nigel Le Quesne, Chief Executive Officer                      

Martin Fotheringham, Chief Financial Officer

David Vieira, Chief Communications Officer

 

Camarco                                                                      +44(0)20 3757 4985

Geoffrey Pelham-Lane    

Monique Perks                                               

Emily Shea-Simonds

 

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

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

 

FORWARD LOOKING STATEMENTS

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

ABOUT JTC

JTC is a publicly listed, global professional services business with deep expertise in fund, corporate and private client services. Every JTC person is an owner of the business, and this fundamental part of our culture aligns us with the best interests of all our stakeholders. Our purpose is to maximize potential and our success is built on service excellence, long-term relationships and technology capabilities that drive efficiency and add value.

www.jtcgroup.com

 

CHIEF EXECUTIVE OFFICER'S REVIEW

Great people, great culture, strong performance

Nigel Le Quesne

Chief Executive Officer

People, culture and shared ownership

Last year I wrote about the overall resilience of the business and how it enabled us to navigate the challenges of the pandemic while continuing to grow in line with our established medium-term guidance. I referenced our well-invested infrastructure, experienced management, track record of navigating previous macro events and our scale and diversification. I also highlighted that the most important ingredient of all was our people and our culture. JTC's shared ownership model - where every employee is an owner of the business - is now in its 25th year and is more important to us than ever. With that in mind, a key achievement, probably our proudest in 2021, was the £20m shared ownership award made to our global team in July. The award was a reflection of the progress made under our Odyssey era business plan, which ran from our IPO in 2018 to the end of 2020. And while it was our first distribution as a listed business and our first in shares, it was the third in our history and brought the total value generated for JTC employee owners since 1998 to over £350m. To prove that the concept remains valid as a public company and to be able to share the success achieved since listing with everyone was very satisfying. Our sector leading staff turnover and the record 26 industry awards won across the Group in 2021 are evidence of our unique culture and the quality of the JTC brand.

Financial performance

2021 was a great first year for our current business plan, the Galaxy era, where our aim is to double the size of the Group relative to where we ended 2020. We once again delivered performance in line with market expectations and medium-term guidance, with revenue growth to £147.5m (2020: £115.1m), achieving £48.4m of underlying EBITDA (2020: £38.7m) at an underlying Group margin of 32.8% (2020: 33.6%) and 34.4% when acquisitions are excluded (2020: 35.7%). It was particularly pleasing to achieve net organic growth of 9.6% (2020: 7.9%) driven by record new business wins of £20.9m (2020: £17.9m) alongside inorganic growth of 18.6% (2020: 8.0%), which reflected our busiest year yet for M&A.

Growth

In our Galaxy era, we expect two thirds of our growth to be inorganic, so the seven acquisitions completed - the most we have ever achieved in a single calendar year - gets us out of the blocks quickly. The quality businesses in Segue, SALI and most recently EFS, also supported our strategic push into the US, which is now our second-largest jurisdiction by revenue. Overall, these seven additions mean the JTC global team now extends to more than 1,300 colleagues. As we grow our platform, we will respect its integrity and underlying strength and in 2022 we will continue to consolidate the acquisitions made in 2021, while remaining alert to the potential of further high quality deals.

Achieving net organic revenue growth of 9.6% near the top end of our guidance range of 8% - 10% was a strong result. Our record new business wins of £20.9m included the largest single mandate the Group has ever won, with a value of c.£2.5m per annum, which we expect to start delivering revenue from H2 2022. Considering the ongoing travel restrictions that affected new business development activities and the fact that most of our acquisitions came towards the end of the year and therefore had little time to impact the organic growth figures, these results show very welcome and encouraging demand for our services. As we move through 2022, an increasing focus will be placed on leveraging our growing range of services and solutions to create an internal market that provides a richer and deeper range of services to existing clients, increasing share of wallet and making client relationships even 'stickier' over their lifetime.

Institutional Client Services Division

Revenue increased 43.6% to £92.7m (2020: £64.6m) with a 55.8% increase in underlying EBITDA to £28.0m (2020: £18.0m). Pleasingly, and in keeping with the progress that began in 2020 with our Blueprint margin expansion programme, the underlying EBITDA margin increased 2.3pp to 30.2% (2020: 27.9%). Net organic growth increased to 11.5% (2020: 6.9%) with the annualised value of new business wins £13.1m (2020: £13.4m).

M&A activity in 2021 was particularly focused on increasing scale and capability in the US, Ireland and the UK. The seven deals completed in the year, which were all primarily orientated towards the ICS offering, met these jurisdictional targets, with RBC Cees, INDOS, Ballybunion Capital, SALI Fund Services, Segue Partners, EFS and perfORM all adding scale, expertise and quality.

With so many first-class acquisitions in the US, we are well placed to capitalise on opportunities in that market, and the US is now the ICS Division's second biggest jurisdiction, providing a solid platform from which to grow the JTC brand. The growth of our UK office in 2021 demonstrates an ability to widen our service offering around the mandates we attract, while in the EU, we have been particularly successful in attracting new business to our Luxembourg office.

With regard to our ambitions to be recognised as the fund and corporate services firm of choice, we have begun to deliver our strategy. With the acquisition of Cees, we are already the market-leading provider in the Employer Solutions sector, while in Jersey, London and the Netherlands, we are developing a reputation for providing top-quality service to high value, blue chip clients.

Overall, the ICS Division made very positive progress on our plan for the Galaxy era and I am confident we are firmly on the path to establishing JTC as the number-one partner for expert solutions for fund and corporate services clients. Our restructured cross-jurisdictional operating model will help us maintain our margins, while continually enhancing service delivery and supporting growth via technology.

Private Client Services Division

Revenue increased 8.4% to £54.8m (2020: £50.5m) with a small decrease in underlying EBITDA to £20.4m (2020: £20.7m). The underlying EBITDA margin decreased 3.8pp to 37.2% (2020: 41.0%) but remains at the top end of our guidance range of 33% - 38% and reflects continued investment in the PCS platform to support future growth and manage an increasingly complex regulatory environment. Net organic growth was 7.1% (2020: 9.0%) with the annualised value of new business wins a record £7.8m (2020: £4.5m), including the Group's largest ever single win providing 'white label' services to a US-based global bank and its clients. As noted last year, we continue to attract work from global financial institutions who trust us to provide services for their individual private clients and this trend for major corporates to opt for a lighter operating model by partnering with JTC is an area where we expect to see further opportunities. The Division has invested in people, technology and other infrastructure to support this type of work and has the necessary expertise to scale its capabilities further.

In addition, the experience of our PCS management team has been reflected in the growth of several of our regional offices, notably South Dakota, Cayman, Guernsey and Dubai, which provides welcome diversification alongside our continued strength in Jersey. The development of new services and in particular those focused on the areas of regulatory and tax compliance is an example of how we are able to leverage the ever increasing volume of international legislation and regulation as a growth driver for the business.

The PCS Division continues to be the pre-eminent private client practice and a leader in its markets, as evidenced in part by a record 15 award wins in the year. The focus for 2022 will be multi-faceted and include further development of the PCS service offering, an increased emphasis on cross-selling, including with key ICS service lines such as Employer Solutions, and our nascent strategic expansion into the US domestic market, which we believe has exceptional potential on both an organic and inorganic basis. All of this will be supported by an agenda to cement the JTC brand as the hallmark of quality and excellence in the PCS trust company space.

Continuous improvement

As mentioned, our priorities for 2022 will be shaped around consolidating our acquisitions and large business wins, and we have therefore identified and started a series of initiatives that will further strengthen our global platform and ensure we remain fit for growth through the Galaxy era and beyond. These projects, which include an enhanced and refreshed next generation approach to business development to accelerate organic growth, enhanced financial reporting aimed at improving future behaviours and further enhancements to our talent management programme, build on existing capabilities. These are interconnected, such that the sum of their impact on the business will be greater than their individual component parts.

Risk

JTC has always had an excellent record in managing the risks associated with being a leading regulated professional services business. Throughout 2021 the senior risk team have focused a large amount of their time and effort on developing and enhancing our Risk & Compliance function globally as the approach and expectations of external parties has hardened. I have highlighted for some time now the increasing complexity and burden of international regulation and how this inevitably brings a degree of challenge to a business such as ours. It does also however, provide huge opportunity. We are, in many respects, a governance business and a substantial part of the value that we offer clients is our understanding of - and ability to work effectively within - an ever evolving and complex international framework. It has never been more important to the long-term success of the Group, or more compelling to clients and partners, to be able to offer a robust, well-organised and expert set of capabilities in this area.

In addition, we have seen long-term emerging risks come into greater focus, and in particular transition risks associated with the world moving to a low carbon future. At JTC we are proud to play our part by becoming a Carbon Neutral+ organisation in 2021 as part of our own journey and we also see tremendous opportunity for the Group as a result of the positive changes driven by the ESG agenda. At the time of writing, the conflict in Ukraine continues and it is unclear how or when it will come to an end. As a Group, we have limited exposure to Russia, Ukraine or Belarus with no operations there and limited exposure amongst a small number of clients to those countries. However, we are acutely aware of our responsibilities in relation to sanctions compliance and enforce all such measures rigorously. As a compassionate organisation, we are appalled at the humanitarian suffering and have made direct donations to the UNHCR and Save the Children.

Outlook

Two phrases I often repeat are that we like to keep things simple at JTC and that it's all about making this a better business every year. In 2021 I am confident that we did both. Building on our strong foundations and business resilience, we executed well on our organic and inorganic growth strategies to drive the business forward and deliver a strong start to our Galaxy era business plan. We have proved that our shared ownership model is a genuine differentiator and have successfully adapted it as a listed business, and I am delighted that we were able to celebrate the fruits of long-term success with all our people. Our two Divisions continue to provide balance and diversification to the Group and are generating more cross-pollination opportunities than ever before. We also materially increased our presence in a number of key growth markets and won more new work from clients than ever before.

Looking ahead, we have taken time to step back from all that was achieved in 2021 and map out the next important steps that will be needed to ensure our well-invested platform and talented global team are ready and equipped to deliver continued high performance. We are pleased with the integration and business performance of recent acquisitions, with all seven on track. The project to maximise the opportunity to internalise SALI's fund accounting work is now progressing and will generate revenues from Q2 2022. While much of the focus will be on improving and integrating what we have, we also remain of the view that the sector is primed for consolidation and that our proven approach to identifying, securing and integrating high quality acquisitions is a key part of creating long-term value for JTC and our stakeholders.

In concluding, I return to the most important part of JTC, our people and our shared ownership culture. I would like to thank every member of the team for their commitment and hard work in delivering such a strong performance in 2021. We have an exceedingly talented group of employee-owners, all of whom I am very proud to work alongside.

Nigel Le Quesne

Chief Executive Officer

 

CHIEF FINANCIAL OFFICER'S REVIEW

Investing in the future to create an even stronger platform for growth

MARTIN FOTHERINGHAM

CHIEF FINANCIAL OFFICER

Revenue

In 2021, revenue was £147.5m, an increase of £32.4m (+28.2%) compared with 2020.

Whilst the macroeconomic environment during the first half of 2021 provided less conducive conditions for new business, H2 was strong and helped us deliver net organic growth of 9.6% in the year (2020: 7.9%). Our rolling three year average is now 8.6% and continues to be within our medium-term guidance range of 8 - 10% net organic growth. Included in the year was our largest ever single new business win (estimated at c. £2.5m per annum) which evidences our ability to secure significant new mandates from large institutions. The size and complexity of the mandate has necessitated meaningful upfront investment which impacted margins in the PCS Division in 2021 and we expect revenues to commence in H2 22.

The growth in 2021 was driven by gross new business of 17.5% (2020: 16.7%), inorganic growth of 18.6% (2020: 8.0%) and attrition of 7.9% (2020: 8.8%). The lower attrition was notable but this is consistent with the rolling three year average which was also 7.9%. The retention of revenues that were not end of life increased to 97.4% (2020: 96.6%). Consistent with prior years, the not end of life attrition is being driven by less complex clients that are seeking lower cost solutions. The rolling three year average retention of not end of life revenues was 97.2%.

ICS net organic growth was 11.5% (2020: 6.9%) with a rolling three year average of 9.3%. We have experienced the expected recovery in revenue with particularly strong growth in the UK, Cayman, and Luxembourg. Attrition for the Division in the year was 8.7% (2020: 8.3%) which included 6.3% for end of life losses.

PCS net organic growth was 7.1% (2020: 9.0%) with a rolling three year average of 7.8% (2020: 7.4%). We continue to see growing demand for our increasing suite of services and were pleased to have recorded the largest ever new business win for JTC alongside strong revenue growth in Cayman, Guernsey, Mauritius and the US. Attrition in PCS was 6.9% (2020: 9.4%) and was a significant drop to the prior period when we consciously chose to exit a number of BVI structures. The rolling three year average attrition is 7.9%.

Revenue growth, on a constant currency basis, is summarised as follows:

 

PLC

ICS

PCS

2020 Revenue

£112.7m

£63.2m

£49.5m

Lost - JTC decision

(£0.6m)

(£0.4m)

(£0.2m)

Lost - Moved service provider

(£2.1m)

(£0.9m)

(£1.2m)

Lost - End of life/no longer required

(£5.6m)

(£3.7m)

(£1.9m)

Net more from existing clients

£11.2m

£7.5m

£3.7m

New clients

£7.2m

£4.3m

£2.9m

Acquisitions

£24.7m

£22.7m

£2.0m

2021 Revenue

£147.5m

£92.7m

£54.8m

 

ACQUISITIONS

Acquisitions contributed £24.7m of new revenue in the year which is detailed as follows:

 

PLC

ICS

PCS

SALI (Q4 2021)

£1.6m

£1.6m

-

Ballybunion (Q4 2021)

£0.4m

£0.4m

-

PerfORM (Q4 2021)

£0.1m

£0.1m

-

Segue (Q3 2021)

£0.3m

£0.3m

-

INDOS (Q2 2021)

£2.3m

£2.3m

-

RBC cees (Q2 2021)

£16.6m

£16.6m

-

Sanne Private Clients (Q3 2020)

£2.0m

-

£2.0m

NESF (Q2 2020)

£1.3m

£1.3m

-

Anson Registrars (Q1 2020)

£0.1m

£0.1m

-

Total

£24.7m

£22.7m

£2.0m

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

NEW BUSINESS/PIPELINE

JTC secured new work with an annual value of £20.9m (2020: £17.9m) and £9.8m of this was recognised during the period (2020: £9.0m). The divisional split of new work won was ICS £13.1m (2020: £13.4m) and PCS £7.8m (2020: £4.5m). The PCS new business wins were strong and pleasingly we are seeing an increase in the size of mandates won. Whilst overall new business wins increased, we continued to see delays in the take-on of ICS business, particularly in the first half of the year, as investors continued to be deterred by the uncertainty in the macroeconomic environment. As previously referenced, we have increased our share of larger client mandates and these more complex assignments typically take longer to on-board.

The enquiry pipeline increased by £2.4m (+5.3%) from £45.5m at 31 December 2020 to £47.9m at 31 December 2021.

UNDERLYING EBITDA AND MARGIN PERFORMANCE

Underlying EBITDA in 2021 was £48.4m, an increase of £9.7m (25.0%) from 2020. The underlying EBITDA margin for the Group was 32.8% (2020: 33.6%).

As anticipated, continuing investment in clients, people and systems alongside the integration of the seven acquired businesses in 2021 resulted in a small drop in the EBITDA margin. The acquisitions we made in the first nine months of 2021 were strategically important but immediately dilutive to the existing Group margin. Significant progress has been made in delivering margin improvements in 2021. The overall impact of the businesses we acquired in Q4 will improve the Group margin. However, the volume of acquisitions in 2021 is such that we need to continue to invest in our platform to maximise the opportunity for our growing global capabilities. Management reiterate their medium-term guidance on the underlying EBITDA margin of 33% - 38%.

ICS's underlying EBITDA margin increased from 27.9% in 2020 to 30.2% in 2021. This demonstrates the progress made in the implementation of a revised operating model in the Division as well as the improvement in profitability during the year of the acquisitions made in H1 21.

PCS's underlying EBITDA margin decreased from 41.0% in 2020 to 37.2% in 2021. The Division continues to perform well and the drop in margin reflects the continuing investment in clients, people and systems. Throughout H2 21 we made a significant investment in a large client mandate for which revenue will be reflected from H2 22. We have also seen increasing amounts of time spent handling regulatory oversight and this is consistent with what we have witnessed across the industry.

DEPRECIATION AND AMORTISATION

The depreciation and amortisation charge increased to £17.6m in 2021 from £13.8m in 2020. £2.4m of this increase was as a result of acquired intangible assets and £1.3m of the increase was as a result of an increased charge for right-of-use assets reflecting the increased footprint of the business.

STATUTORY OPERATING PROFIT

The Group recognises that statutory operating profit is a more commonly accepted reporting metric and hence shows these results for the benefit of external stakeholders.

Statutory operating profit is impacted by a variety of non-underlying items which are detailed below.

PROFIT BEFORE TAX

The reported profit before tax was £27.8m (2020: £11.2m).

Adjusting for non-underlying items, the underlying profit before tax for 2021 was £24.9m (2020: £20.1m). The improvement reflects the strong growth in revenues although the margin decreased in the year.

NON-UNDERLYING ITEMS

Non-underlying items incurred in the year totalled a £2.9m credit (2020: £8.9m debit) and is comprised of:

 

2021

£m

2020

£m

EBITDA

 

 

EIP

14.5

-

Acquisition and integration costs

6.6

3.3

Revision of ICS operating model

0.4

0.4

Other costs

0.3

0.1

Total non-underlying items within EBITDA

21.8

3.8

 

 

 

Profit before tax

 

 

Items impacting EBITDA

21.8

3.8

(Gain)/loss on revaluation of contingent consideration

(20.9)

6.5

Loss/(gain) on settlement of contingent consideration

0.7

(0.2)

(Gain) on bargain purchase of RBC cees

(5.4)

-

Foreign exchange losses/(gains)

0.9

(1.2)

Total non-underlying items within profit before tax

(2.9)

8.9

We announced the distribution of the EIP awards during H2 21, these were made in JTC shares and have been reflected in the full-year results. The expense of £14.5m relates to the first tranche of the award which vested upon grant and a proportion of the second and final tranche which vests in 2022. The remaining expense will be recognised in 2022.

Acquisition and integration costs were significantly higher (+£3.3m) than the prior period and this reflects the increased number of transactions completed (seven in 2021, two in 2020).

The movement in the revaluation of the contingent consideration is due to the requirement to revalue the equity-settled financial liability in relation to the NESF acquisition. When we purchased NESF, we ensured that there was a two year capped earn-out and that all future contingent consideration would be settled in JTC equity. The earn-out hurdle was set at an annual target of $3.2m of EBITDA and, based upon our latest forecasts, we do not expect that this will be achieved. We have therefore credited operating profit with the £20.9m reversal of contingent consideration that had previously been accrued. The loss recognised in the prior year was due to an increase in the share price estimate for the previously anticipated earn-out.

The gain on bargain purchase relates to the RBC cees acquisition and reflects the fact that the price paid for this business was less than the fair value of the assets acquired.

TAX

The net tax charge in the year was £1.1m (2020: £0.7m). The cash tax charge is £2.6m (2020: £1.8m) but this is reduced by significant deferred tax credits of £1.4m (2020: £1.1m) as a result of movements in relation to the value of acquired intangible assets held on the balance sheet.

The Group continuously reviews its transfer pricing policy and updates this to reflect the evolving nature and increasing complexity of the business and the way it operates. The policy continues to be fully compliant with OECD guidelines.

The Group continues to monitor the likelihood of the proposed introduction of minimum global tax rates and we believe that it is too early to be able to accurately assess the impact such a change would have on JTC.

UNDERLYING EARNINGS PER SHARE

Underlying basic EPS increased by 17.4% and was 25.55p (2020: 21.77p). Underlying basic EPS reflects the profit for the year adjusted to remove the impact of non-underlying items, amortisation of acquired intangible assets and associated deferred tax, amortisation of loan arrangement fees and unwinding of net present value discounts.

CASH FLOW AND DEBT

Underlying cash generated from operations was £38.4m (2020: £35.3m) and the underlying cash conversion was 87% (2020: 91%). This continues to reflect the predictability and highly cash generative nature of our business, and we maintain our medium-term market guidance range of 85% - 90%.

Underlying net debt at the year end was £113.3m compared with £75.8m at 31 December 2020. Underlying leverage is therefore 2.34x underlying EBITDA (2020: 1.96x) and this increase was expected as five acquisitions completed in the final four months of 2021. The pro-forma net debt at year end was 2.0 times underlying EBITDA. Excluding the impact of any additional acquisitions in 2022, the strong cash generating nature of our business should result in a significant decrease in leverage by the end of the year.

In total, the Group raised gross proceeds of £144.8m from two equity fundraises in 2021. This strengthened our balance sheet and allowed us to capitalise on a high quality pipeline of M&A opportunities during the second half of the year.

On 6 October 2021 the Group entered into a new £225m revolving credit and term loan facilities agreement with an initial three year maturity together, with two one year extension options. This new facility was used to repay the existing facility and provide financing for the SALI and EFS acquisitions.

The gross proceeds from the two fundraises and new facility were used as follows:

 

Proceeds utilised

Fees/issue costs

Repay existing facility

Net proceeds

SALI

Other acquisitions

Excess cash

 

Undrawn facility

Equity fundraise

£144.8m

 

 

 

 

 

 

 

 

New facility

£155.7m

 

 

 

 

 

 

 

 

Total

£300.5m

(£9.2m)

(£104.1m)

£187.2m

(£143.3m)

(£43.1m)

£0.8m

 

£69.3m

 

Martin Fotheringham

Chief Financial Officer

 

Appendix: Reconciliation of Reported results to APMs

In order to assist the reader's understanding of the financial performance of the Group, alternative performance measures (APMs) have been included to better reflect the underlying activities of the Group excluding specific items as set out in note 7 to the financial statements. The Group appreciates that APMs are not considered to be a substitute for, or superior to, IFRS measures but believes that the selected use of these may provide stakeholders with additional information which will assist in the understanding of the business.

1. EBITDA

 

2021

£m

2020

£m

Reported EBITDA

26.6

34.9

Non-underlying items

 

 

Acquisition and integration costs

6.6

3.3

Revision of ICS operating model

0.4

0.4

EIP

14.5

-

Other costs

0.3

0.1

Underlying EBITDA

48.4

38.7

 

2. CASH CONVERSION

 

2021

£m

2020

£m

Net cash generated from operations

28.9

27.6

Non-underlying cash items

7.7

6.3

Income taxes paid

1.8

1.4

Underlying cash generated from operations

38.4

35.3

Acquisition normalisation*

3.6

-

Normalised underlying cash generated from operations

42.0

35.3

Underlying EBITDA

48.4

38.7

Underlying cash conversion

87%

91%

 

3. Underlying NET DEBT/LEVERAGE

 

2021

£m

2020

£m

Cash balances

39.3

31.1

Bank debt

(152.6)

(104.4)

Other debt

-

(2.5)

Net debt

(113.3)

(75.8)

Underlying EBITDA

48.4

38.7

Leverage

2.34

1.96

 

4. UNDERLYING PROFIT AND EPS

Management have updated the definition of non-underlying items to include foreign exchange (losses)/gains (see note 7 to the financial statements) in order to reflect the underlying performance of the Company. This has removed the impact of gains and losses on intercompany loan balances and (losses)/gains on the Group's former Euro loan facility.

As a result of the volume and nature of acquisitions, management reviewed and updated the definition of underlying basic EPS to exclude the impact of the amortisation of acquired brands and software. This change ensures that underlying EPS continues to measure performance excluding the impact of all intangible assets and liabilities created through the IFRS 3 'Business Combinations' accounting standard.

The above resulted in the update of the 2020 comparative for underlying profit before tax (previously £21.4m and now £20.1m) and underlying EPS (previously 22.49p and now 21.77p).

FINANCIAL STATEMENTS
CONSOLIDATED INCOME STATEMENT

FOR THE YEAR ENDED 31 DECEMBER 2021

 

Note

2021

£'000

2020

£'000

 

 

 

 

Revenue

4

147,502

115,090

Staff costs

5

(89,540)

(57,364)

Other operating expenses

6

(30,114)

(20,875)

Credit impairment losses

12

(1,690)

(2,382)

Other operating income

 

61

49

Share of profit of equity-accounted investee

32

364

359

Earnings before interest, taxes, depreciation and amortisation ("EBITDA")

 

26,583

34,877

 

 

 

 

Comprising:

 

 

 

Underlying EBITDA

 

48,405

38,724

Non-underlying items

7

(21,822)

(3,847)

 

 

26,583

34,877

 

 

 

 

Depreciation and amortisation

8

(17,591)

(13,846)

Profit from operating activities

 

8,992

21,031

 

 

 

 

Other gains/(losses)

9

24,707

(5,409)

Finance income

10

112

33

Finance cost

10

(6,028)

(4,415)

Profit before tax

 

27,783

11,240

 

 

 

 

Comprising:

 

 

 

Underlying profit before tax

 

24,908

20,133

Non-underlying items

7

2,875

(8,893)

 

 

27,783

11,240

 

 

 

 

Income tax

11

(1,135)

(707)

 

 

 

 

Profit for the year

 

26,648

10,533

 

 

 

 

Earnings per Ordinary share ("EPS")

 

Pence

Pence

Basic EPS

34.1

20.49

9.02

Diluted EPS

34.2

20.21

8.96

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

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

FOR THE YEAR ENDED 31 DECEMBER 2021

 

Note

2021

£'000

2020

£'000

 

 

 

 

Profit for the year

 

26,648

10,533

 

 

 

 

Other comprehensive loss

 

 

 

Items that may be reclassified to profit or loss

 

 

 

        Exchange difference on translation of foreign operations (net of tax)

 

(2,476)

(3,928)

 

 

 

 

Items that will not be reclassified to profit or loss:

 

 

 

        Remeasurements of post-employment benefit obligations

5

61

(808)

Total comprehensive income for the year

 

24,233

5,797

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

CONSOLIDATED BALANCE SHEET

AS AT 31 DECEMBER 2021

 

 

Note

2021

£'000

2020

£'000

Assets

 

 

 

Property, plant and equipment

20

48,340

49,249

Goodwill

21

341,605

173,777

Other intangible assets

21

120,715

54,944

Investments

32

2,638

2,274

Other non-financial assets

22

558

303

Other receivables

15

988

64

Deferred tax assets

23

119

104

Total non-current assets

 

514,963

280,715

 

 

 

 

Trade receivables

12

28,870

17,230

Work in progress

13

12,834

11,431

Accrued income

14

19,587

13,382

Other non-financial assets

22

4,147

3,671

Other receivables

15

2,090

4,368

Cash and cash equivalents

16

39,326

31,078

Total current assets

 

106,854

81,160

Total assets

 

621,817

361,875

 

 

 

 

Equity

 

 

 

Share capital

26.1

1,476

1,225

Share premium

26.1

285,852

130,823

Own shares

26.2

(3,366)

(3,084)

Capital reserve

26.3

17,536

1,456

Translation reserve

26.3

(5,335)

(2,859)

Retained earnings

26.3

48,462

30,844

Total equity

 

344,625

158,405

 

 

 

 

Liabilities

 

 

 

Trade and other payables

17

23,680

23,027

Loans and borrowings

18

152,578

104,376

Lease liabilities

19

37,916

39,154

Deferred tax liabilities

23

24,355

8,902

Other non-financial liabilities

24

179

311

Provisions

25

1,720

1,601

Total non-current liabilities

 

240,428

177,371

 

 

 

 

Trade and other payables

17

19,497

11,684

Loans and borrowings

18

-

2,456

Lease liabilities

19

5,463

4,215

Other non-financial liabilities

24

8,579

5,171

Current tax liabilities

11

2,978

2,534

Provisions

25

247

39

Total current liabilities

 

36,764

26,099

Total equity and liabilities

 

621,817

361,875

The consolidated financial statements were approved by the Board of Directors on 14 April 2022 and signed on its behalf by:

 

NIGEL LE QUESNE                           

CHIEF EXECUTIVE OFFICER         

 

MARTIN FOTHERINGHAM

CHIEF FINANCIAL OFFICER

 

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

FOR THE YEAR ENDED 31 DECEMBER 2021

 

 

Note

Share

capital

£'000

Share

premium

£'000

Own

shares

£'000

Capital

reserve

 £'000

Translation

reserve

£'000

Retained

earnings

£'000

Total

equity

£'000

 

 

 

 

 

 

 

 

 

Balance at 1 January 2021

 

1,225

130,823

(3,084)

1,456

(2,859)

30,844

158,405

 

 

 

 

 

 

 

 

 

Profit for the year

 

-

-

-

-

-

26,648

26,648

Other comprehensive loss

 

-

-

-

-

(2,476)

61

(2,415)

Total comprehensive income for the year

 

-

-

-

-

(2,476)

26,709

24,233

 

 

 

 

 

 

 

 

 

Issue of share capital

26.1

251

159,537

-

-

-

-

159,788

Cost of share issuance

26.1

-

(4,508)

-

-

-

-

(4,508)

Share-based payments

36.2

-

-

-

2,164

-

-

2,164

EIP share-based payments

36.2

-

-

-

13,916

-

-

13,916

Movement of own shares

26.2

-

-

(282)

-

-

-

(282)

Dividends paid

27

-

-

-

-

-

(9,091)

(9,091)

Total transactions with owners

 

251

155,029

(282)

16,080

-

(9,091)

161,987

 

 

 

 

 

 

 

 

 

Balance at 31 December 2021

 

1,476

285,852

(3,366)

17,536

(5,335)

48,462

344,625

 

 

 

 

 

 

 

 

 

Balance at 1 January 2020

 

1,141

100,658

(3,027)

451

1,069

28,265

128,557

 

 

 

 

 

 

 

 

 

Profit for the year

 

-

-

        -

-

-

10,533

10,533

Other comprehensive loss

 

-

-

-

-

(3,928)

(808)

(4,736)

Total comprehensive income for the year

 

-

-

-

-

(3,928)

9,725

5,797

 

 

 

 

 

 

 

 

 

Issue of share capital

26.1

84

30,240

-

-

-

-

30,324

Cost of share issuance

 

-

(75)

-

-

-

-

(75)

Share-based payment expense

36.2

-

-

-

1,082

-

-

1,082

Movement in EBT

 

-

-

-

(77)

-

-

(77)

Movement of own shares

26.2

-

-

(57)

-

-

-

(57)

Dividends paid

27

-

-

-

-

-

(7,146)

(7,146)

Total transactions with owners

 

84

30,165

(57)

1,005

-

(7,146)

 24,051

 

 

 

 

 

 

 

 

 

Balance at 31 December 2020

 

1,225

130,823

(3,084)

1,456

(2,859)

30,844

158,405

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

CONSOLIDATED CASH FLOW STATEMENT

FOR THE YEAR ENDED 31 DECEMBER 2021

 

 

Note

2021

£'000

2020

£'000

 

 

 

 

 

Cash generated from operations

 

35.1

30,697

28,997

Income taxes paid

 

 

(1,835)

(1,413)

Net cash generated from operations

 

 

28,862

27,584

 

 

 

 

 

Comprising:

 

 

 

 

Underlying cash generated from operations

 

 

38,402

35,290

Non-underlying cash items

 

35.2

(7,705)

(6,293)

 

 

 

30,697

28,997

 

 

 

 

 

Investing activities

 

 

 

 

Interest received

 

 

87

33

Payment for property, plant and equipment

 

20

(1,378)

(1,518)

Payment for intangible assets

 

21

(2,620)

(2,884)

Payment for business combinations (net of cash acquired)

 

31

(186,433)

(18,912)

Payment for investment

 

32

-

(791)

Net cash used in investing activities

 

 

(190,344)

(24,072)

 

 

 

 

 

Financing activities

 

 

 

 

Proceeds from issue of shares

 

 

144,801

-

Share issuance costs

 

 

(4,409)

(75)

Purchase of own shares

 

26.2

(269)

(45)

Dividends paid

 

27

(9,091)

(7,146)

Loans to related parties

 

15

(415)

(311)

Repayment of loans and borrowings

 

 

(127,784)

(2,236)

Proceeds from loans and borrowings

 

 

178,690

18,914

Loan arrangement fees

 

 

(3,364)

(642)

Interest paid on loans and borrowings

 

 

(2,571)

(2,442)

Facility fees paid on loans and borrowings

 

 

(285)

(156)

Principal paid on lease liabilities

 

 

(4,639)

(3,138)

Interest paid on lease liabilities

 

 

(1,183)

(1,006)

Net cash from financing activities

 

 

169,481

1,717

 

 

 

 

 

Net increase in cash and cash equivalents

 

 

7,999

5,229

 

 

 

 

 

Cash and cash equivalents at the beginning of the year

 

 

31,078

26,317

Effect of foreign exchange rate changes

 

 

249

(468)

Cash and cash equivalents at the end of the year

 

16

39,326

31,078

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

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEAR ENDED 31 DECEMBER 2021

SECTION 1 - BASIS FOR REPORTING AND GENERAL INFORMATION

1.         Reporting entity

2.         Basis of preparation

3.         Significant accounting policies

SECTION 2 - RESULT FOR THE YEAR

4.         Segmental reporting

5.         Staff costs

6.         Other operating expenses

7.         Non-underlying items

8.         Depreciation and amortisation

9.         Other gains/(losses)

10.       Finance income and finance cost

11.       Income tax expense

SECTION 3 - FINANCIAL ASSETS AND FINANCIAL LIABILITIES

12.       Trade receivables

13.       Work in progress

14.       Accrued income

15.       Other receivables

16.       Cash and cash equivalents

17.       Trade and other payables

18.       Loans and borrowings

SECTION 4 - NON-FINANCIAL ASSETS AND NONFINANCIAL LIABILITIES

19.       Lease liabilities

20.       Property, plant and equipment

21.       Goodwill and other intangible assets

22.       Other non-financial assets

23.       Deferred taxation

24.       Other non-financial liabilities

25.       Provisions

SECTION 5 - EQUITY

26.       Share capital and reserves

27.       Dividends

 

SECTION 6 - RISK

28.       Critical accounting estimates and judgements

29.       Financial risk management

30.       Capital management

 

SECTION 7 - GROUP STRUCTURE

31.       Business combinations

32.       Investments

33.       Subsidiaries

 

SECTION 8 - OTHER DISCLOSURES

34.       Earnings Per Share

35.       Cash flow information

36.       Share-based payments

37.       Contingencies

38.       Foreign currency

39.       Related party transactions

40.       Events occurring after the reporting period

 

SECTION 1 - BASIS FOR REPORTING AND GENERAL INFORMATION

1. Reporting entity

JTC PLC (the "Company") was incorporated on 2 January 2018 and is domiciled in Jersey, Channel Islands. The Company was admitted to the London Stock Exchange on 14 March 2018 (the "IPO"). The address of the Company's registered office is 28 Esplanade, St Helier, Jersey.

The consolidated financial statements of the Company for the year ended 31 December 2021 comprise the Company and its subsidiaries (together the "Group" or "JTC") and the Group's interest in an associate and investments.

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

2. Basis of preparation

2.1. Statement of compliance and basis of measurement

The consolidated financial statements have been prepared in accordance with International Financial Reporting Standards ("IFRS") as adopted by the European Union, the interpretations of the IFRS Interpretations Committee ("IFRS IC") and Companies (Jersey) Law 1991.

The consolidated financial statements are prepared on a going concern basis and under the historical cost convention except for the following:

·  Certain financial liabilities measured at fair value (see note 29).

·  Defined benefit liabilities/(assets) recognised at the fair value of plan assets less the present value of defined benefit obligations (see note 5).

In assessing the going concern assumption in light of the Covid-19 pandemic, the Directors noted that the Group continued to grow revenues and generate positive cash flows from operating activities. Considering these factors as part of the review of the Group's financial performance and position, forecasts and expected liquidity, the Directors have a reasonable expectation that the Group will have adequate resources to continue in operational existence for the foreseeable future, being at least 12 months from the date of approval of the consolidated financial statements. They have concluded it is appropriate to adopt the going concern basis of accounting in preparing the consolidated financial statements.

2.2. Functional and presentation currency

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

3. Significant accounting policies

3.1. Changes in accounting policies and new standards adopted

The accounting policies set out in these consolidated financial statements have been consistently applied to all the years presented, and have been applied consistently by Group entities. There have been no significant changes compared to the prior year consolidated financial statements as at and for the year ended 31 December 2020.

To the extent relevant, all IFRS standards and interpretations including amendments that were in issue and effective from 1 January 2021, have been adopted by the Group from 1 January 2021. These standards and interpretations had no material impact for the Group.

New standards and interpretations issued and effective from 1 January 2021

(a)   Interest Rate Benchmark Reform - Phase 2: Amendments to IFRS 9, IAS 39, IFRS 7, IFRS 4 and IFRS 16.

The Phase 2 amendments address issues that arise during the reform of an interest rate benchmark, including the replacement of some interbank offered rates ("IBOR") with alternative benchmark rates. The key reliefs provided by the Phase 2 amendments are as follows:

· Where there are changes in the basis for determining the contractual cash flows of financial assets and liabilities (including lease liabilities), the reliefs have the effect that the changes required by IBOR reform will not result in an immediate gain or loss in the consolidated income statement.

· Hedge accounting reliefs allow most IAS 39 or IFRS 9 hedge relationships that are directly affected by IBOR reform to continue.

On 6 October 2021, the Group entered into a new multicurrency loan facility agreement where interest payable is based on SONIA plus a margin rather than LIBOR and EURIBOR. The impact of this replacement is not deemed to be material.

The Group intends to use practical expedients as they become applicable.

(b) Covid-19 Related Rent Concessions - amendments to IFRS 16

This amendment provides relief to lessees from applying IFRS 16 guidance on lease modification accounting for rent concessions arising as a direct consequence of the Covid-19 pandemic. The Group has no lease modifications arising from the pandemic so did not require relief from applying IFRS 16.

New standards and interpretations issued but not yet adopted

Certain new accounting standards and interpretations have been published that are not mandatory for 31 December 2021 reporting periods and have not been early adopted by the Group. These standards are not expected to have a material impact on the entity in the current or future reporting periods or on foreseeable future transactions.

3.2. Summary of significant accounting policies

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

Basis of consolidation

The consolidated financial statements incorporate the financial statements of the Company and entities controlled by the Company (its "subsidiaries"). The Group controls an entity when it is exposed to, or has rights to, variable returns from its involvement with the entity and has the ability to affect those returns through its power to direct the activities of the entity. De-facto control exists where the Company has the practical ability to direct the relevant activities of the investee without holding the majority of the voting rights. In determining whether de-facto control exists the Company considers the size of the Company's voting rights relative to other parties, substantive potential voting rights held by the Company and by other parties, other contractual arrangements and historical patterns in voting attendance.

Subsidiaries are fully consolidated from the date on which control is transferred to the Group. They are deconsolidated from the date that control ceases. When the Group loses control over a subsidiary, it derecognises the assets and liabilities of the subsidiary, and any related non-controlling interest and other components of equity. Any resulting gain or loss is recognised in the consolidated income statement. Where necessary, adjustments are made to the financial statements of subsidiaries to bring their accounting policies in line with the Group. All inter-company transactions and balances, including unrealised gains and losses, arising from transactions between Group companies are eliminated on consolidation.

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

Company only financial statements

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

SECTION 2 - RESULT FOR THE YEAR

4. Segmental reporting

Revenue recognition

Revenue is measured as the fair value of the consideration received or receivable for satisfying performance obligations contained in contracts with customers excluding discounts, VAT and other sales-related taxes.

To recognise revenue in accordance with IFRS 15 'Revenue from Contracts with Customers', the Group applies the five step approach: identify the contract(s) with a customer, identify the performance obligations in the contract, determine the transaction price, allocate the transaction price to the performance obligations and recognise revenue when, or as, performance obligations are satisfied by the Group.

The Group enters into contractual agreements with institutional and private clients for the provision of fund, corporate and private client services. The agreements set out the services to be provided and each component is distinct and can be performed and delivered separately. For each of these performance obligations, the transaction price can be either a pre-set (fixed) fee based on the expected amount of work to be performed or a variable time spent fee for the actual amount of work performed. For some clients, the fee for agreed services is set at a percentage of the net asset value ("NAV") of funds being administered or deposits held. Where contracts include multiple performance obligations, the transaction price is allocated to each performance obligation based on its stand-alone selling price.

Revenue is recognised in the consolidated income statement when, or as, the Group satisfies performance obligations by transferring control of services to clients. This occurs as follows depending upon the nature of the contract for services:

·  Variable fees are recognised over time as services are provided at the agreed charge out rates in force at the work date where there is an enforceable right to payment for performance completed to date. Time recorded but not invoiced is shown in the consolidated balance sheet as work in progress (see note 13). To determine the transaction price, an assessment of the variable consideration for services rendered is performed by estimating the expected value, including any price concessions, of the unbilled amount due from clients for the work performed to date (see note 28.2).

·  Pre-set (fixed) and NAV based fees are recognised over time; based on the actual service provided to the end of the reporting period as a proportion of the total services to be provided where there is an enforceable right to payment for performance completed to date. This is determined based on the actual inputs of time and expenses relative to the total expected inputs.

  Where services have been rendered and performance obligations have been met but clients have not been invoiced at the reporting date, accrued income is recognised, this is recorded based on agreed fees to be billed in arrears (see note 14). Where fees are billed in advance in respect of services under contract and give rise to a trade receivable when recognised, deferred income is recognised and released to revenue on a time apportioned basis in the appropriate reporting period (see note 24).

The Group does not adjust transaction prices for the time value of money as it does not have any contracts where the period between the transfer of the promised services to the client and the payment by the client exceeds one year.

4.1. Basis of segmentation

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

Fund services

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

Corporate services

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

Private client services

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

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

4.2. Segmental information

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

 

ICS

 

PCS

 

Total

2021

£'000

2020

£'000

2021

£'000

2020

£'000

2021

£'000

2020

£'000

Revenue

92,706

64,560

 

54,796

50,530

 

147,502

115,090

 

 

 

 

 

 

 

 

 

Direct staff costs

(39,256)

(26,138)

 

(20,025)

(17,248)

 

(59,281)

(43,386)

Other direct costs

(640)

(359)

 

(1,467)

(1,540)

 

(2,107)

(1,899)

 

 

 

 

 

 

 

 

 

Underlying gross profit

52,810

38,063

 

33,304

31,742

 

86,114

69,805

Underlying gross profit margin %

57.0%

59.0%

 

60.8%

62.8%

 

58.4%

60.7%

 

 

 

 

 

 

 

 

 

Indirect staff costs

(8,225)

(7,529)

 

(6,296)

(5,429)

 

(14,521)

(12,958)

Other operating expenses

(16,573)

(12,557)

 

(7,040)

(5,975)

 

(23,613)

(18,532)

Other income

18

18

 

407

390

 

425

408

 

 

 

 

 

 

 

 

 

Underlying EBITDA

28,030

17,995

 

20,375

20,728

 

48,405

38,724

Underlying EBITDA margin %

30.2%

27.9%

 

37.2%

41.0%

 

32.8%

33.6%

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

 

5. Staff costs

Employee benefits

Short-term benefits

Short-term employee benefits are expensed as the related service is provided. A liability is recognised for the amount expected to be paid if the Group has a present legal or constructive obligation to pay this amount as a result of past service provided by the employee, and the obligation can be estimated reliably.

Defined contribution pension plans

Under defined contribution pension plans, the Group pays contributions to publicly or privately administered pension insurance plans. The Group has no further payment obligation once the contributions have been paid. The contributions are recognised as an employee benefit expense when they are due.

Defined benefit pension plans
The liability or asset recognised in the consolidated balance sheet in respect of defined benefit pension plans is the present value of the defined benefit obligation at the end of the reporting period less the fair value of plan assets. The calculation of defined benefit obligations is performed annually by independent qualified actuaries using the projected unit credit method.

The present value of the defined benefit obligation is determined by discounting the estimated future cash outflows using interest rates of high quality corporate bonds that are denominated in the currency in which the benefits will be paid, and that have terms approximating to the terms of the related obligation. In countries where there is no established market in such bonds, the market rates on local government bonds are used.

The net interest cost is calculated by applying the discount rate to the net balance of the defined benefit obligation and the fair value of plan assets. This cost is included as an employee benefit expense in the consolidated income statement.

Remeasurement gains and losses arising from experience adjustments and changes in actuarial assumptions are recognised in the period in which they occur, directly in other comprehensive income. They are included in retained earnings in the consolidated statement of changes in equity and the consolidated balance sheet.

Changes in the present value of the defined benefit obligation resulting from plan amendments or curtailments are recognised immediately in the consolidated income statement as past service costs.

Termination benefits

Termination benefits are expensed at the earlier of when the Group can no longer withdraw the offer of those benefits and when the Group recognises costs for a restructuring that is within the scope of IAS 37 and involves the payment of termination benefits. If benefits are not expected to be settled wholly within one year of the end of the reporting period, then they are discounted to their present value using an appropriate discount rate.

 

 

Note

2021

£'000

2020

£'000

Salaries and Directors' fees

 

62,685

48,658

Employer-related taxes and other staff-related costs

 

6,141

4,167

Other short-term employee benefits

 

2,099

1,555

Pension employee benefits(i)

 

2,535

1,902

Share-based payments

36.2

2,164

1,082

EIP share-based payments

7(iv), 36.2

13,916

-

 

 

89,540

57,364

(i)    Pension employee benefits include defined contributions of £2.39m (2020: £1.66m) and defined benefits of £0.14m (2020: £0.24m).

Defined benefit pension plans

The Group operates defined benefit pension plans in Switzerland and Mauritius. Both plans are contribution based with guarantee of a minimum interest credit and fixed conversion rates at retirement. Disability and death benefits are defined as a percentage of the insured salary.

At 31 December 2021, the Group's net defined benefit obligation that was recognised on the consolidated balance sheet in respect of amounts that are expected to be paid out to employees was £0.8m (2020: £0.9m). The Group does not expect a significant change in contributions for the following years.

The Swiss plan must be fully funded in accordance with Swiss Federal Law on Occupational Benefits (LPP/BVG) on a static basis at all times. The subsidiary, JTC (Suisse) SA, is affiliated to the collective foundation Swiss Life. The collective foundation is a separate legal entity. The foundation is responsible for the governance of the plan, the board is composed of an equal number of representatives from the employers and the employees chosen from all affiliated companies. The foundation has set up investment guidelines, defining in particular the strategic allocation with margins. Additionally, there is a pension committee responsible for the set-up of the plan benefit, this is composed of an equal number of representatives of JTC (Suisse) SA and its employees.

The Mauritius plan is administered by Swan Life Ltd. JTC Fiduciary Services (Mauritius) Limited is required to contribute a specific percentage of payroll costs to the retirement benefit scheme. Employees under this pension plan are entitled to statutory benefits prescribed under parts VIII and IX of the Workers' Rights Act 2019.

The amounts recognised in the consolidated balance sheet are as follows:

 

2021

£'000

2020

£'000

Present value of funded obligations

(2,010)

(2,285)

Fair value of plan assets(i)

1,233

1,382

Consolidated balance sheet liability

(777)

(903)

(i)    All plan assets are held in insurance contracts.

 

The movement in the net defined benefit obligation recognised in the consolidated balance sheet is as follows:

 

2021

 

2020(i)

Defined

benefit

obligation

£'000

Fair value

of plan

assets

£'000

Net defined

benefit

obligation

£'000

Defined

benefit

obligation

£'000

Fair value

of plan

assets

£'000

Net defined

benefit

obligation

£'000

At 1 January

2,285

1,382

903

 

1,765

897

868

Included in the consolidated income statement

 

 

 

 

 

 

 

Current service cost

207

-

207

 

235

-

235

Past service cost

(66)

-

(66)

 

-

-

-

Interest

5

1

4

 

9

3

6

Total

146

1

145

 

244

3

241

Included in other comprehensive loss

 

 

 

 

 

 

 

Remeasurements loss/(gain):

 

 

 

 

 

 

 

-   change in demographic assumptions

-

-

-

 

(191)

-

(191)

-   change in financial assumptions

(42)

-

(42)

 

118

-

118

-   experience adjustment

(93)

-

(93)

 

(15)

-

(15)

-   return on plan assets

-

(74)

74

 

-

-

-

Total

(135)

(74)

(61)

 

(88)

-

(88)

Other

 

 

 

 

 

 

 

Contributions:

 

 

 

 

 

 

 

-   Employers

-

177

(177)

 

-

149

(149)

-   Plan participants

87

87

-

 

73

73

-

Benefit payments

(302)

(302)

-

 

216

216

-

Exchange differences

(71)

(38)

(33)

 

75

44

31

Total

(286)

(76)

(210)

 

364

482

(118)

At 31 December

2,010

1,233

777

 

2,285

1,382

903

(i)    During the prior year, management reviewed the accounting for their pension schemes across the Group and recognised a defined benefit pension scheme in Switzerland which was previously accounted for as a defined contribution scheme. The accounting was corrected in the 31 December 2020 consolidated financial statement, it was not considered material for restatement of prior periods.

 

The plans are exposed to actuarial risks relating to discount rate, interest rate for the projection of the savings capital, salary increase and pension increase. The principal annual actuarial assumptions used for the IAS 19 disclosures were as follows:

 

Switzerland

Mauritius

Discount rate at 1 January 2021

0.1%

2.8%

Discount rate at 31 December 2021

0.3%

4.6%

Future salary increases

1.0%

5.0%

Rate of increase in deferred pensions

0.0%

0.0%

In Switzerland, longevity must be reflected in the defined benefit liability. The mortality probabilities used were as follows:

 

2021

2020

Mortality probabilities for pensioners at age 65

 

 

-   Males

21.70

21.72

-   Females

23.41

23.47

Mortality probabilities at age 65 for current members aged 45

 

 

-   Males

23.29

23.31

-   Females

24.98

25.04

 

6. Other operating expenses

Other operating expenses are accounted for on an accruals basis.

 

2021

£'000

2020

£'000

Third party administration fees

2,300

1,994

Legal and professional fees(i)

9,846

5,923

Auditor's remuneration for audit services

1,126

1,055

Auditor's remuneration for other services

190

128

Establishment costs

2,611

1,806

Insurance

1,703

1,183

Travelling

433

438

Marketing

1,493

964

IT expenses

7,942

5,343

Other expenses

2,470

2,041

Other operating expenses

30,114

20,875

(i)    Included in legal and professional fees are £5.2m (2020: £2.73m) of non-underlying items (see note 7(i)).

 

7. Non-underlying items

Non-underlying items represent specific items of income or expenditure that are not of a continuing operational nature and do not represent the underlying operating results, and based on their significance in size or nature are presented separately to provide further understanding about the financial performance of the Group.

 

2021

£'000

2020

£'000

EBITDA

26,583

34,877

Non-underlying items within EBITDA:

 

 

Acquisition and integration costs(i)

6,610

3,302

Revision of ICS operating model(ii)

421

401

Other(iii)

263

144

EIP share-based payments(iv)

14,528

-

Total non-underlying items within EBITDA

21,822

3,847

Underlying EBITDA

48,405

38,724

 

 

 

Profit before tax

27,783

11,240

Total non-underlying items within EBITDA

21,822

3,847

Unwinding of discount on capital distribution

-

33

Gain on bargain purchase(v)

(5,357)

-

(Gain)/loss on revaluation of contingent consideration(vi)

(20,910)

6,479

Loss/(gain) on settlement of contingent consideration(vii)

701

(213)

Foreign exchange losses/(gains)(viii)

869

(1,253)

Total non-underlying items within profit before tax

(2,875)

8,893

Underlying profit before tax

24,908

20,133

(i)     During 2021, the Group expensed £6.61m (2020: £3.3m) in relation to business combinations. For those completed in the year: RBC cees £1.83m (see note 31.1), INDOS £0.6m (see note 31.2), Segue £0.33m (see note 31.3), perfORM £0.06m (see note 31.4), Ballybunion £0.2m (see note 31.5), SALI £3.17m (see note 31.6) and EFS £0.22m (see note 31.7). For those completed in prior periods: NESF (£0.08m) (see note 31.8) and Sanne Private Client Business £0.07m (see note 31.9). For potential projects there was £0.21m. Acquisition and integration costs includes but is not limited to: travel costs, professional fees, legal fees, tax advisory fees, onerous leases, transitional services agreement costs, any client-acquired penalties and staff reorganisation costs.

(ii)   During 2021, the Group incurred further costs in relation to the implementation of a revised operating model for the fund services practice. This exercise was prolonged due to the impact of Covid-19 and is expected to be completed in 2022.

(iii)   One-off costs relating to other items not considered to represent the ongoing operations of the business. This includes aborted project costs and legal costs relating to a regulatory action from the Dutch Central Bank.             

(iv)   Following the conclusion of the Odyssey business plan era, share awards were made to staff members under the EIP (see note 36.1); this includes employer-related taxes relating to the share awards.

(v)   Gain on bargain purchase arising on the acquisition of RBS cees (see note 31.1).

(vi)   The NESF earn-out is a liability-classified contingent consideration and the fair value is updated at each reporting date. At 31 December 2021, a gain on revaluation was recognised as management concluded that the required EBITDA threshold would not be met and no earn-out was due (see note 31.8). At 31 December 2020, a loss was recognised as a result of applying an increase to the estimated share price (from £4.01 to £5.58) to the number of shares calculated as due for the previously anticipated earn-out.

(vii)  In the current year, a loss was recognised on settlement of the holdback fund share consideration for NESF (see note 31.8). In the prior year, a gain was recognised on final settlement of contingent consideration for the Swiss & Global Fund Administration (Cayman) Ltd acquisition.

(viii)  Foreign exchange losses relate to the revaluation of both intercompany loans and the Group's former Euro loan facility. Management consider these foreign exchange movements to be non-underlying items and have removed these in calculating EBITDA in order to reflect the Group's underlying performance.

 

8. Depreciation and amortisation

 

Note

2021

£'000

2020

£'000

Depreciation of property, plant and equipment

20

7,157

5,884

Amortisation of intangible assets

21

9,776

7,327

Amortisation of contract assets

22

658

635

Depreciation and amortisation

 

17,591

13,846

 

9. Other gains/(losses)

 

Note

2021

£'000

2020

£'000

Foreign exchange (losses)/gains

 

(861)

842

Net profit on disposal of property, plant and equipment

 

2

15

(Loss)/gain on settlement of contingent consideration

7

(701)

213

Gain on bargain purchase

7

5,357

-

Gain/(loss) on revaluation of contingent consideration

7

20,910

(6,479)

Other gains/(losses)

 

24,707

(5,409)

 

10. Finance income and finance cost

Finance income includes interest income from loan receivables and bank deposits and is recognised when it is probable that the economic benefits will flow to the Group and the amount of revenue can be measured reliably.

Finance costs include interest expenses on loans and borrowings, the unwinding of the discount on provisions, contingent consideration and lease liabilities and the amortisation of directly attributable transaction costs which have been capitalised upon issuance of the financial instrument and released to the consolidated income statement on a straight-line basis over the contractual term.

 

2021

£'000

2020

£'000

Bank interest

80

33

Loan interest

32

-

Finance income

112

33

 

 

 

Bank loan interest

1,772

2,319

Amortisation of loan arrangement fees

1,501

603

Unwinding of net present value discounts

1,769

1,043

Other finance expense

986

450

Finance cost

6,028

4,415

 

11. Income tax

Income tax

Income tax includes current and deferred tax. Current and deferred tax are recognised in the consolidated income statement, 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. Where current tax or deferred tax arises from the initial accounting for a business combination, the tax effect is included in the accounting for the business combination.

Current tax

Current tax is the expected tax payable or receivable on the taxable income or loss for the year using tax laws enacted or substantively enacted at the balance sheet date, and any adjustment to tax payable in respect of previous years.

Deferred tax

Deferred tax is the tax expected to be payable or recoverable on differences between the carrying amounts of assets and liabilities in the financial statements and the corresponding tax bases used in the computation of taxable profit.

Deferred tax liabilities are generally recognised for all taxable temporary differences and deferred tax assets are recognised to the extent that it is probable that taxable profits will be available against which deductible temporary differences can be utilised. Such assets and liabilities are not recognised if the temporary difference arises from the initial recognition of goodwill or from the initial recognition (other than in a business combination) of other assets and liabilities in a transaction that affects neither the taxable profit nor the accounting profit.

The carrying amount of deferred tax assets is reviewed at the end of each reporting period 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.

Deferred tax is calculated using tax rates that are expected to apply when the liability is settled or the asset realised using tax rates enacted or substantively enacted at the balance sheet date.

Deferred tax assets offset with deferred tax liabilities when there is a legally enforceable right to set off tax assets against current tax liabilities and when they relate to income taxes levied by the same taxation authority and the Group intends to settle its current tax assets and liabilities on a net basis.   

 

2021

£'000

2020

£'000

Current tax

 

 

Jersey tax on current year profit

1,362

692

Foreign company taxes on current year profit

1,249

1,128

 

2,611

1,820

Deferred tax (see note 23)

 

 

Jersey origination and reversal of temporary differences

(15)

(10)

Temporary differences in relation to acquired intangible assets

(1,446)

(1,102)

Foreign company origination and reversal of temporary differences

(15)

(1)

 

(1,476)

(1,113)

Total tax charge for the year

1,135

707

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

 

2021

£'000

2020

£'000

Profit on ordinary activities before tax

27,783

11,240

Tax on profit on ordinary activities at standard Jersey income tax rate of 10% (2020: 10%)

2,778

1,124

Effects of:

 

 

Results from entities subject to tax at a rate of 0% (Jersey company)

(432)

(485)

Results from tax exempt entities (foreign company)

(120)

56

Foreign taxes not at Jersey rate

664

670

Depreciation in excess of capital allowances (Jersey company)

(15)

(10)

Depreciation in excess of capital allowances (foreign company)

(15)

(1)

Temporary differences in relation to acquired intangible assets

(1,446)

(1,102)

Non-deductible expenses(i)

1,398

15

Consolidation adjustments(ii)

(1,738)

463

Other differences

61

(23)

Total tax charge for the year

1,135

707

(i)    The current year includes £13.9m of expenses relating to share awards made under the EIP (see note 36.1).

(ii)   The current year includes gains of £20.9m and £5.4m relating to the revaluation and settlement of contingent consideration (see notes 31.1 and 31.8).

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

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

 

2021

£'000

2020

£'000

Reconciliation of effective tax rates

 

 

Tax on profit on ordinary activities

10.00%

10.00%

Effect of:

 

 

Results from entities subject to tax at a rate of 0% (Jersey company)

(1.55%)

(4.32%)

Results from tax exempt entities (foreign company)

(0.43%)

0.49%

Foreign taxes not at Jersey rate

2.39%

5.96%

Depreciation in excess of capital allowances (Jersey company)

(0.05%)

(0.09%)

Depreciation in excess of capital allowances (foreign company)

(0.06%)

(0.01%)

Temporary differences in relation to acquired intangible assets

(5.20%)

(9.80%)

Non-deductible expenses

5.03%

0.13%

Consolidation adjustments

(6.26%)

4.12%

Other differences

0.22%

(0.21%)

Effective tax rate

4.09%

6.27%

 

SECTION 3 - FINANCIAL ASSETS AND FINANCIAL LIABILITIES

This section provides information about the Group's financial instruments, including; accounting policies; specific information about each type of financial instrument; and, where applicable, information about determining the fair value, including judgements and estimation uncertainty involved.

Financial assets

The Group classifies its financial assets as either amortised cost, fair value through profit or loss ("FVTPL") or fair value through other comprehensive income ("FVOCI") depending on the Group's business model objective for managing financial assets and their contractual cash flow characteristics.

As the Group's financial assets arise principally from the provision of services to clients (e.g. trade receivables), but also incorporate other types of financial assets where the objective is to hold these assets in order to collect contractual cash flows and the contractual cash flows are solely payments of principal and interest, they are classified at amortised cost.

Financial assets are recognised initially on the trade date, which is the date that the Group became party to the contractual provisions of the instrument and are derecognised when the contractual rights to the cash flows from the asset expire, or the rights to receive the contractual cash flows from the transaction in which substantially all of the risks and rewards of ownership of the financial asset have been transferred.

Financial assets are initially recognised at fair value plus transaction costs that are directly attributable to their acquisition or issue, and are subsequently carried at amortised cost using the effective interest rate method, less provision for impairment.

The Group assesses, on a forward-looking basis, the expected credit losses ("ECL") associated with its financial assets carried at amortised cost. The impairment methodology applied takes into consideration whether there has been a significant increase in credit risk.

Financial assets comprise trade receivables, work in progress, accrued income, other receivables and cash and cash equivalents. For further details on impairment for each, see notes 12 to 16.

Financial liabilities

The Group classifies its financial liabilities as either amortised cost or FVTPL depending on the purpose for which the liability was acquired.

As the Group does not have any financial liabilities held for trading (derivatives), all other financial liabilities are classified as measured at amortised cost. Other financial liabilities include trade and other payables, borrowings and lease liabilities.

Trade and other payables represent liabilities incurred for goods and services provided to the Group prior to the end of the financial year which are unpaid. They are recognised initially at fair value and subsequently measured at amortised cost using the effective interest method and are presented as current liabilities unless payment is not due within 12 months after the reporting period. The Group derecognises a financial liability when its contractual obligations are discharged, cancelled or expired.

Borrowings are initially recognised at fair value, net of transaction costs incurred. Borrowings are subsequently measured at amortised cost. Any difference between the proceeds (net of transaction costs) and the redemption amount is recognised in the consolidated income statement over the period of the borrowings using the effective interest rate method.

Borrowings are removed from the consolidated balance sheet when the obligation specified in the contract is discharged, cancelled or has expired. The difference between the carrying amount of a financial liability that has been extinguished or transferred to another party and the consideration paid, including any non-cash assets transferred or liabilities assumed, is recognised in the consolidated income statement as finance income or finance cost.

Borrowings are classified as current liabilities unless the Group has an unconditional right to defer settlement of the liability for at least 12 months after the reporting period.

Lease liabilities are financial liabilities measured at amortised cost. They are initially measured at the net present value of the following lease payments:

·  fixed payments, less any lease incentives receivable;

·  variable lease payments that are based on an index or a rate;

·  amounts expected to be payable by the lessee under residual value guarantees;

·  the exercise price of a purchase option if the lessee is reasonably certain to exercise that option; and

·  payments of penalties for terminating the lease, if the lease term reflects the lessee exercising that option.

Lease payments to be made under reasonably certain extension options are also included in the measurement of the liability.

The lease payments are discounted using the interest rate implicit in the lease. If that rate cannot be determined, which is generally the case for leases in the Group, the lessee's incremental borrowing rate is used, being the rate that the lessee would have to pay to borrow the funds necessary to obtain an asset of similar value to the right-of-use asset in a similar economic environment with similar terms, security and conditions.

The incremental borrowing rate applied to each lease was determined considering the Group's borrowing rate and the risk-free interest rate, adjusted for factors specific to the country, currency and term of the lease.

The Group can be exposed to potential future increases in variable lease payments based on an index or rate which are not included in the lease liability until they take effect. When adjustments to lease payments based on an index or rate take effect, the lease liability is reassessed and adjusted against the right-of-use asset.

Lease payments are allocated between principal and finance cost. The finance cost is charged to the consolidated income statement over the lease period so as to produce a constant periodic rate of interest on the remaining balance of the liability for each period.

Offsetting financial assets and liabilities

Financial assets and liabilities are offset and the net amount is reported in the consolidated balance sheet where there is a legally enforceable right to offset the recognised amounts, and there is an intention to settle on a net basis or realise the asset and settle the liability simultaneously.

12. Trade receivables

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

2021

Gross

£'000

 Loss allowance

£'000

Net

£'000

<30 days

15,167

(164)

15,003

30 - 60 days

3,493

(100)

3,393

61 - 90 days

1,868

(136)

1,732

91 - 120 days

3,579

(203)

3,376

121 - 180 days

1,965

(412)

1,553

180> days

7,629

(3,816)

3,813

Total

33,701

(4,831)

28,870

 

2020

Gross

£'000

 Loss allowance

£'000

Net

£'000

<30 days

7,990

(113)

7,877

30 - 60 days

1,770

(36)

1,734

61 - 90 days

1,834

(127)

1,707

91 - 120 days

967

(126)

841

121 - 180 days

1,369

(262)

1,107

180> days

8,192

(4,228)

3,964

Total

22,122

(4,892)

17,230

 

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

 

2021

£'000

2020

£'000

Balance at the beginning of the year

(4,892)

(4,002)

Credit impairment losses

(1,690)

(2,382)

Amounts written off (including unused amounts reversed)

1,750

1,492

Total allowance for doubtful debts

(4,832)

(4,892)

To measure the ECL, trade receivables are grouped based on shared credit risk characteristics and the days past due. The ECL are estimated collectively using a provision matrix based on the Group's historical credit loss experience, adjusted for factors that are specific to the debtor's financial position (this includes unlikely to pay indicators such as liquidity issues, insolvency or other financial difficulties) and an assessment of both the current as well as the forecast direction of macroeconomic conditions at the reporting date. Management have identified gross domestic product and inflation in each country the Group provides services in to be the most relevant macroeconomic factors.

Management have given consideration to these factors and the challenging trading environment presented by the Covid-19 pandemic and are satisfied that any impact is highly immaterial to the ultimate recovery of receivables, such is the diversification across the book in industries and geographies. The loss allowance at 31 December 2021 supports this conclusion. See note 29.2 for further comment on credit risk management.

Provision rates are segregated according to geographical location and by business line. The Group considers specific impairment on a by-client basis rather than on a collective basis. The carrying amount of the asset is reduced through the use of an allowance account and the amount of the loss is recognised in the consolidated income statement as a credit impairment loss. When a trade receivable is uncollectible, it is written off against the allowance account. Subsequent recoveries of amounts previously written off are credited against credit impairment losses.

13. Work in progress

 

2021

£'000

2020

£'000

Total

12,906

11,491

Loss allowance

(72)

(60)

Net

12,834

11,431

Work in progress ("WIP") relates to variable fee contracts and represents the net unbilled amount expected to be collected from clients for work performed to date. It is measured at the chargeable rate agreed with the individual clients less progress billed, allowances for unrecoverable amounts and ECL. As these financial assets relate to unbilled work and have substantially the same risk characteristics as trade receivables, the Group has concluded that the expected loss rates for trade receivables <30 days is an appropriate estimation of the ECL.

Sensitivity analysis
The total carrying amount of WIP (before ECL allowances) is £12.91m (2020: £11.49m). If management's estimate of the recoverability of the WIP (the amount expected to be billed and collected from clients for work performed to date) is 10% lower than expected on the total WIP balance due to allowances for unrecoverable amounts, revenue would be £1.29m lower (2020: £1.15m lower).

14. Accrued income

 

2021

£'000

2020

£'000

Total

19,621

13,400

Loss allowance

(34)

(18)

Net

19,587

13,382

Accrued income relates to fixed and NAV based fees across all service lines and represents the billable amount relating to the provision of services to clients which has not been invoiced at the reporting date. Accrued income is recorded based on agreed fees billed in arrears less ECL. As these financial assets relate to unbilled work and have substantially the same risk characteristics as trade receivables, the Group has concluded that the expected loss rates for trade receivables <30 days is an appropriate estimation of the ECL.       

15.        Other receivables

 

2021

£'000

2020

£'000

Non-current

 

 

Loans receivable from related undertakings

833

64

Loan receivable from third party

155

-

Total non-current

988

64

 

 

 

Current

 

 

Other receivables

1,884

1,934

Loans receivable from employees

206

2,214

Loan receivable from related undertakings

-

220

Total current

2,090

4,368

Total other receivables

3,078

4,432

Non-current loans receivable from related undertakings are due from Harmonate Corp. (£0.77m), Northpoint Byala IC (£0.05m) and Northpoint Finance IC (£0.01m). The loan receivable from Harmonate Corp. (see note 32) is unsecured, interest bearing at 4% per annum and repayable on demand at any time on or after 31 December 2023. The Northpoint Byala IC and Northpoint Finance IC loans are considered related parties due to common directorships. The loans are unsecured, interest free and with an unspecified repayment date.

Non-current loan receivable from a third party is due 19 October 2024 and is interest bearing at 2.5% per annum.

Loans receivable from employees in the current year includes £0.2m due from employees participating in Advance to Buy programmes (2020: £0.05m). These are interest bearing at 3% per annum and repayable two years after the commencement date of each annual programme unless the employment contract is terminated at an earlier date. In the prior year, £2.16m was due from employees of NESF in order to participate in JTC share options as part of the acquisition; these were repaid during 2021. These were interest bearing at 2% per annum.

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

16. Cash and cash equivalents

 

2021

£'000

2020

£'000

Cash attributable to the Group

39,326

31,078

Total

39,326

31,078

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

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

17. Trade and other payables

 

Note

2021

£'000

2020

£'000

Non-current

 

 

 

Other payables

 

382

-

Contingent consideration

 

22,521

22,124

Employee benefit obligations

5

777

903

Total non-current

 

23,680

23,027

 

 

 

 

Current

 

 

 

Trade payables

 

2,091

1,970

Other taxation and social security

 

642

312

Other payables

 

3,803

3,006

Accruals

 

7,059

5,022

Contingent consideration

 

5,902

1,374

Total current

 

19,497

11,684

Total trade and other payables

 

43,177

34,711

Contingent consideration payable is discounted to net present value, split between current and non-current and is due by acquisition as follows: £1.32m for INDOS (see note 31.2), £1.69m for Segue (see note 31.3), £2.77m for perfORM (see note 31.4), £1.61m for Ballybunion (see note 31.5), £21.01m for SALI (see note 31.6) and £0.02m for EFS (see note 31.7). At 31 December 2020, contingent consideration payable was £23.35m for NESF (see note 31.8) and £0.15m for Sanne Private Client Business (see note 31.9)).

For current trade and other payables, due to their short-term nature, management consider the carrying value of these financial liabilities to approximate to their fair value.

18. Loans and borrowings

This note provides information about the contractual term of the Group's interest-bearing loans and borrowings, which are measured at amortised cost. For more information about the Group's exposure to interest rate, foreign currency and liquidity risk, see note 29.

 

2021

£'000

2020

£'000

Non-current

 

 

Bank loans

152,578

104,376

 

 

 

Current

 

 

Other loans

-

2,456

Total loans and borrowings

152,578

106,832

 

18.1. Bank loans

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

Facility

Currency

Termination date

Interest rate

2021

£'000

2020

£'000

Term facility

GBP

8 October 2024

SONIA + 1.9% margin

75,000

45,000

Revolving credit facility

GBP

8 October 2024

SONIA + 1.9% margin

80,662

35,425

Revolving credit facility

EUR

 

 

-

25,169

Total principal value

 

 

 

155,662

105,594

Issue costs

 

 

 

(3,084)

(1,218)

Total bank loans

 

 

 

152,578

104,376

The interest rate applied to loan facilities was previously determined using LIBOR and EURIBOR plus a margin based on net leverage calculations. At 1 January 2021, the margin was 2%. This changed in May 2021 to 1.75% and in August 2021 to 1.25%.

Following the refinancing on 6 October 2021 and as at 31 December 2021, the interest rate applied to loan facilities is determined using SONIA plus a margin of 1.9% (2020: using LIBOR AND EURIBOR plus a margin of 2%).

Under the terms of the facility, the debt is supported by guarantees from JTC PLC and other applicable subsidiaries deemed to be obligors, and in the event of default, demand could be placed on these entities to settle outstanding liabilities.

Movement in bank facilities is as follows:

 

At 1

January

2021

£'000

Drawdowns

£'000

Repayment

£'000

Amortisation

release

£'000

Effect of

foreign

exchange

£'000

At 31

December

2021

£'000

Principal value

105,594

176,662

(125,099)

-

(1,495)

155,662

Issue costs

(1,218)

(3,364)

-

1,498

-

(3,084)

Total

104,376

173,298

(125,099)

1,498

(1,495)

152,578

 

 

At 1

January

2020

£'000

Drawdowns

£'000

Repayment

£'000

Amortisation

release

£'000

Effect of

foreign

exchange

£'000

At 31

 December

2020

£'000

Principal value

87,836

16,425

-

-

1,333

105,594

Issue costs

(1,155)

(625)

-

562

-

(1,218)

Total

86,681

15,800

-

562

1,333

104,376

During the current year, a withdrawal was made on 30 March 2021 for £21m to fund the acquisition of RBC cees (see note 31.1), following the placing on 5 May 2021 (see note 26.1), this amount was refunded to the facility. In the prior year, withdrawals were made from the facility for £6.425m to assist with settlement of contingent consideration for Exequtive (£5.5m) and Aufisco (£0.58m) and for £10m to partially fund the acquisition of Sanne Private Clients (see note 31.9).

In the current year, on 6 October 2021, the Group entered into a multicurrency loan facility agreement with HSBC for a total commitment of £225m consisting of a term loan of £75m and a revolving credit facility ("RCF") of £150m. The initial termination date is the third anniversary of the date of the agreement (being 6 October 2024) and for the RCF, the termination date can be extended for two one year extensions. The loan agreement was amended on 22 November 2021 and introduced Fifth Third Bank and Citibank N.A. as incoming lenders, joining the syndicate that includes existing lenders HSBC, Barclays Bank Plc, Santander UK Plc and the Bank of Ireland. The new facility was used to repay in full the drawn amounts on the existing facility and amounts of £45.6m and £6m were drawn to part satisfy the cash consideration for the acquisition of SALI (see note 31.6) and fully fund the cash consideration of EFS (see note 31.7).         

The cost of the facility depends upon net leverage, being the ratio of total net debt to underlying EBITDA (for LTM at average FX rates and adjusted for pro-forma contributions from acquisitions) for a relevant period as defined in the facilities agreement. At 31 December 2021, arrangement and legal fees amounting to £3.36m have been capitalised for amortisation over the term of the loan.

At 31 December 2021, the Group had available £69.3m of committed facilities currently undrawn (2020: £44.4m). All facilities are due to be repaid on or before the termination date of 6 October 2024.

18.2. Compliance with loan covenants

The Company has complied with the financial covenants of its borrowing facilities during the 2021 and 2020 reporting periods, see note 30.

18.3. Other loans

On 25 January 2021, the Company repaid £2.5m ($3.4m) for the revolving credit note acquired with NESF that was held with CIBC Bank USA, an Illinois banking corporation.  

18.4. Fair value

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

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

19. Lease liabilities

Where the Group is a lessee its lease contracts are for the rental of buildings for office space and also some office furniture and equipment. In accordance with IFRS 16 'Leases', the Group recognises right-of-use assets which are shown with property, plant and equipment (see note 20) and lease liabilities which are shown separately on the consolidated balance sheet.

 

2021

£'000

2020

£'000

Non-current

37,916

39,154

Current

5,463

4,215

Total lease liabilities

43,379

43,369

20. Property, plant and equipment

Items of property, plant and equipment are initially recorded at cost and are stated at historical cost less depreciation and impairment losses. Depreciation is recognised so as to write off the cost or valuation of assets less their residual values over their useful lives, using the straight-line method, on the following bases:

·  Computer equipment - 4 years

·  Office furniture and equipment - 4 years

·  Leasehold improvements - over the period of the lease

The estimated useful lives, residual values and depreciation methods are reviewed at the end of each reporting period with the effect of any changes in estimate accounted for on a prospective basis. Assets under the course of construction are stated at cost. These assets are not depreciated until they are available for use.

An asset's carrying amount is written down immediately to its recoverable amount if the asset's carrying amount is greater than its estimated recoverable amount.

An item of property, plant and equipment and any significant part initially recognised is derecognised upon disposal or when no future economic benefits are expected from its use or disposal. Any gain or loss arising on derecognition of the asset (calculated as the difference between the net disposal proceeds and the carrying amount of the asset) is included in the consolidated income statement when the asset is derecognised.

For right-of-use assets, upon inception of a contract, the Group assesses whether a contract conveys the right to control the use of an identified asset for a period in exchange for consideration, in which case it is classified as a lease. The Group recognises a right-of-use asset and a lease liability at the lease commencement date. Right-of-use assets are measured at cost comprising of the following: the amount of the initial measurement of lease liability; any lease payments made at or before the commencement date less any lease incentives received; any initial direct costs; and estimated restoration costs.

The right-of-use asset is subsequently depreciated using the straight-line method from the commencement date to the end of the useful life, this is considered to be the end of the lease term as assessed by management. The lease asset is periodically adjusted for certain remeasurements of the lease liability and impairment losses (if any).

The movements of all tangible assets are as follows:

 

Computer

equipment

£'000

Office furniture

and equipment

£'000

Leasehold

improvements

£'000

Right-of-use

assets

£'000

Total

£'000

Cost

 

 

 

 

 

At 1 January 2020

3,175

1,821

8,060

33,466

46,522

Additions

935

430

414

13,324

15,103

Additions through business combinations

38

151

-

2,068

2,257

Disposals

(1)

(29)

(66)

(352)

(448)

Exchange differences

15

25

33

304

377

At 31 December 2020

4,162

2,398

8,441

48,810

63,811

Additions

114

299

1,092

4,037

5,542

Additions through business combinations

20

100

-

1,495

1,615

Disposals

(6)

-

-

(79)

(85)

Exchange differences

(102)

(87)

(76)

(959)

(1,224)

At 31 December 2021

4,188

2,710

9,457

53,304

69,659

 

 

 

 

 

 

Accumulated depreciation

 

 

 

 

 

At 1 January 2020

2,390

767

2,264

3,236

8,657

Charge for the year

406

361

773

4,440

5,980

Disposals

(1)

(26)

(55)

-

(82)

Exchange differences

10

5

6

(14)

7

At 31 December 2020

2,805

1,107

2,988

7,662

14,562

Charge for the year

471

449

687

5,500

7,107

Disposals

(6)

-

-

-

(6)

Exchange differences

(55)

(45)

(48)

(196)

(344)

At 31 December 2021

3,215

1,511

3,627

12,966

21,319

 

 

 

 

 

 

Carrying amount

 

 

 

 

 

At 31 December 2021

973

1,199

5,830

40,338

48,340

At 31 December 2020

1,357

1,291

5,453

41,148

49,249

21. Goodwill and other intangible assets

Goodwill

Goodwill that arises on the acquisition of subsidiaries is considered an intangible asset. See note 31 for the measurement of goodwill at initial recognition; subsequent to this, measurement is at cost less accumulated impairment losses.

Intangible assets acquired in a business combination

Intangible assets acquired in a business combination and recognised separately from goodwill are initially recognised at their fair value at the acquisition date (which is regarded as their cost). Subsequent to initial recognition, these are measured at cost less accumulated amortisation and accumulated impairment losses. Amortisation is recognised in the consolidated income statement on a straight-line basis over the estimated useful life of the asset from the date of acquisition. The estimated useful lives are as follows:

·  Customer relationships - 2 to 25 years

·  Software - 4 to 10 years

·  Brand - 5 years

The estimated useful lives and residual value are reviewed at each reporting date and adjusted if appropriate, with the effect of any change in estimate being accounted for on a prospective basis.

Intangible assets acquired separately

Intangible assets that are acquired separately by the Group and have finite useful lives are measured at cost less accumulated amortisation and accumulated impairment losses. Amortisation is recognised in the consolidated income statement on a straight-line basis over the estimated useful life of the asset from the date that they are available for use. The estimated useful lives are as follows:

·  Customer relationships - 10 years

·  Regulatory licence - 12 years

·  Software - 4 years

The estimated useful lives and residual value are reviewed at each reporting date and adjusted if appropriate, with the effect of any change in estimate being accounted for on a prospective basis.

Intangible assets under the course of construction are stated at cost and are not amortised until they are available for use.

Internally generated software intangible assets

Development costs that are directly attributable to the design and testing of identifiable and unique software products controlled by the Group are recognised as intangible assets where the following criteria are met:

·  It is technically feasible to complete the software so that it will be available for use

·  Management intend to complete the software and use or sell it

·  There is an ability to use or sell the software

·  It can be demonstrated how the software will generate probable future economic benefits

·  Adequate technical, financial and other resources to complete the development and to use or sell the software are available

·  The expenditure attributable to the software during its development stage can be reliably measured

Directly attributable costs that are capitalised as part of the software include employee costs and an appropriate portion of relevant overheads

Capitalised development costs are recorded as intangible assets and amortisation is recognised in the consolidated income statement on a straight-line basis over the estimated useful life of the asset from the date at which the asset is ready to use. The estimated useful life for internally generated software intangible assets is 4 years.

The estimated useful lives and residual value are reviewed at each reporting date and adjusted if appropriate, with the effect of any change in estimate being accounted for on a prospective basis.

Impairment of non-financial assets

Goodwill and intangible assets that have an indefinite useful life are not subject to amortisation and are tested annually for impairment, or more frequently if events or changes in circumstances indicate that they might be impaired. Other non-financial assets are tested for impairment whenever events or changes in circumstances indicate that the carrying amount might not be recoverable. An impairment loss is recognised for the amount by which the asset's carrying amount exceeds its recoverable amount. The recoverable amount is the higher of an asset's fair value less costs of disposal and value in use. For the purposes of assessing impairment, assets are grouped at the lowest levels for which there are separately identifiable cash inflows which are largely independent of the cash inflows from other assets or groups of assets ("CGUs"). Non-financial assets other than goodwill that suffered an impairment are reviewed for possible reversal of the impairment at the end of each reporting period.

The movements in goodwill and other intangible assets are as follows:       

 

Goodwill

£'000

Customer

relationships

£'000

Regulatory

licence

£'000

Software(i)

£'000

Brands

£'000

Total

£'000

Cost

 

 

 

 

 

 

At 1 January 2020

124,880

57,780

238

4,034

-

186,932

Additions

39

106

-

1,368

-

1,513

Additions through business combinations

50,927

8,926

81

2,757

691

63,382

Exchange differences

(2,069)

539

19

(233)

(61)

(1,805)

At 31 December 2020

173,777

67,351

338

7,926

630

250,022

Additions

-

-

-

1,771

-

1,771

Additions through business combinations

171,983

72,393

-

1,151

1,993

247,520

Exchange differences

(4,155)

(1,975)

(24)

13

(10)

(6,151)

At 31 December 2021

341,605

137,769

314

10,861

2,613

493,162

 

 

 

 

 

 

 

Accumulated amortisation

 

 

 

 

 

 

At 1 January 2020

-

11,129

69

2,815

-

14,013

Charge for the year

-

6,038

57

1,143

89

7,327

Exchange differences

-

(18)

5

(21)

(5)

(39)

At 31 December 2020

-

17,149

131

3,937

84

21,301

Charge for the year

-

8,070

58

1,462

186

9,776

Exchange differences

-

(235)

(11)

7

4

(235)

At 31 December 2021

-

24,984

178

5,406

274

30,842

 

 

 

 

 

 

 

Carrying amount

 

 

 

 

 

 

At 31 December 2021

341,605

112,785

136

5,455

2,339

462,320

At 31 December 2020

173,777

50,202

207

3,989

546

228,721

(i)      Included in software are internally generated software intangible assets with a net book value of £0.89m; within this, £0.18m is classified as assets under construction.

21.1. Goodwill

Goodwill impairment

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

In the current year:

CGU

Balance at

1 Jan 2021 £'000

Business

combinations £'000

Post-acquisition adjustments

£'000

Exchange

differences

£'000

Balance at

31 Dec 2021

£'000

 

 

 

 

 

 

Jersey

66,569

-

(465)

-

66,104

Guernsey

10,761

-

-

-

10,761

BVI

752

-

-

-

752

Switzerland

2,400

-

-

(34)

2,366

Cayman

222

-

-

2

224

Luxembourg

29,721

-

-

(1,912)

27,809

Netherlands

15,292

-

-

(1,072)

14,220

Dubai

1,746

-

-

17

1,763

Mauritius

2,357

-

-

22

2,379

US - NESF

43,957

-

-

430

44,387

US - Other

-

151,724

-

(1,548)

150,176

Ireland

-

8,748

-

(60)

8,688

UK

-

11,976

-

-

11,976

Total

173,777

172,448

(465)

(4,155)

341,605

 

In the prior year:

CGU

Balance at

1 Jan 2020

£'000

Business

combinations

£'000

 

Post-acquisition adjustments

£'000

Exchange

differences

£'000

Balance at

31 Dec 2020

£'000

 

 

 

 

 

 

Jersey

63,987

2,582

-

-

66,569

Guernsey

10,598

163

-

-

10,761

BVI

752

-

-

-

752

Switzerland

2,328

-

-

72

2,400

Cayman

231

-

-

(9)

222

Luxembourg

28,240

-

39

1,442

29,721

Netherlands

14,482

-

-

810

15,292

Dubai

1,815

-

-

(69)

1,746

Mauritius

2,447

-

-

(90)

2,357

US

-

48,118

64

(4,225)

43,957

Total

124,880

50,863

103

(2,069)

173,777

 

Key assumptions used to calculate the recoverable amount for each CGU

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

The year 1 cash flow projections are based on the latest approved budget and years 2 to 5 on detailed outlooks prepared by management. The terminal growth rate value beyond the initial five year period is based on the expected long-term inflation rate of the relevant jurisdiction of the CGU.

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

·  Long-term treasury bond rate for the relevant jurisdiction

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

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

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

·  Revenue growth rate: up to 25.1% (the maximum annual growth rate excluding the US - NESF CGU was 18.6%)

·  Terminal value growth rate: between 0% to 3%

·  Discount rate: between 10.5% to 16.4%

·  EBIT margin: between 19.8% to 66.7%

Conclusion          

The recoverable amount of goodwill determined for each CGU as at 31 December 2021 was found to be higher than its carrying amount.

Sensitivity to changes in assumptions

Management believe that any reasonable changes to the key assumptions on which recoverable amounts are based would not cause the aggregate carrying amount to exceed the recoverable amount of the CGUs, except for the US - NESF CGU where the sensitivity of key assumptions have been detailed below.

The following would cause the carrying amount to exceed the recoverable amount:

·  A reduction of 5% in the forecast annual revenue growth rates used for years 1 - 5 would result in a £3.1m impairment

·  A reduction of 6% in the forecast EBIT margin used for years 1 - 5 would result in a £3.1m impairment

The following would cause the recoverable amount to be equal to the carrying amount:

·  A reduction of 3.2% in the forecast annual revenue growth rates used for years 1 - 5

·  A reduction of 3.9% in the forecast EBIT margin used for years 1 - 5

21.2. Customer relationship intangible assets

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

Acquisition

Note

 

Amortisation period end

Useful
economic
life
("UEL")

Carrying amount

2021

£'000

2020

£'000

Signes(i)

 

30 April 2025

10 years

928

1,284

KB Group(i)

 

30 June 2027

12 years

1,918

2,267

S&GFA(i)

 

30 September 2025

10 years

1,392

1,747

BAML(i)

 

30 September 2029

12 years

6,168

6,896

NACT(i)

 

31 July 2027

10 years

1,146

1,544

Van Doorn(i)

 

28 February 2030

11.4 years

5,114

6,182

Minerva(i)

 

30 May 2027 - 30 July 2030

8.7 - 11.8 years

9,759

11,003

Exequtive(i)

 

31 March 2029

10 years

7,012

8,581

Aufisco(i)

 

30 June 2029

10 years

1,494

1,821

Sackville(i)

 

28 February 2029

10 years

703

790

NESF(i)

 

30 April 2022 - 30 April 2028

2 - 8 years

1,555

1,987

Sanne Private Clients(i)

 

30 June 2030

10 years

5,433

6,072

Anson Registrars(i)

 

28 February 2030

10 years

25

28

RBC cees

31.1

31 March 2033

12 years

20,969

-

INDOS

31.2

31 May 2031

10 years

1,273

-

Segue

31.3

30 September 2031

10 years

1,036

-

perfORM

31.4

30 September 2031

10 years

26

-

Ballybunion

31.5

31 October 2031

10 years

2,494

-

SALI

31.6

31 October 2046

25 years

42,999

-

EFS

31.7

30 November 2031

10 years

1,341

-

Total

 

 

 

112,785

50,202

(i)    Acquisitions in previous years included: Signes S.a.r.l and Signes S.A. ("Signes"), Kleinwort Benson (Channel Islands) Fund Services Limited ("KB Group"), Swiss & Global Fund Administration (Cayman) Ltd ("S&GFA"), International Trust and Wealth Structuring Business of Bank of America ("BAML"), New Amsterdam Cititrust B.V. ("NACT"), Van Doorn B.V. ("Van Doorn"), Minerva Holdings Limited and MHL Holdings S.A. ("Minerva"), Exequtive Partners S.A. ("Exequtive"), Aufisco B.V. ("Aufisco"), Sackville Bank and Trust Company Limited ("Sackville"), NES Financial Corp. ("NESF"), Sanne Private Client Business ("Sanne Private Clients") and Anson Registrars Limited and Anson Registrars (UK) Limited ("Anson Registrars").

(a) Customer relationships acquired in a business combination

Customer relationship intangible assets acquired in a business combination and recognised separately from goodwill are initially recognised at their fair value at the acquisition date. In 2021, the Group recognised customer relationship intangible assets as follows: RBC cees £22.37m, INDOS £1.35m, Segue £1.07m, perfORM £0.03m, Ballybunion £2.55m, SALI £43.65m and EFS £1.37m. The UEL and carrying amounts at 31 December 2021 are shown in the previous table.

Key assumptions in determining fair value

The fair value at acquisition was derived using the multi-period excess earnings method ("MEEM") financial valuation model. Management consider the following key assumptions to be significant for the valuation of new customer relationships:

·  Year on year revenue growth

·  The discount rate applied to free cash flow

·  Year on year client attrition rate

Sensitivity analysis

Management carried out a sensitivity analysis on the key assumptions used in the valuation of new customer relationship intangible assets for RBC cees and SALI. For the RBC cees customer relationships, an increase of 2.5% in year on year client attrition rates would decrease fair value by £0.9m. For the SALI customer relationships, an increase of 2.5% in year on year client attrition rates would decrease fair value by £1.4m. A decrease of 2.5% in the forecast year on year revenue growth for years 1 to 5 would result in a decrease in fair value of £3.8m. Management estimate that any other reasonable change to the key assumptions for the new customer relationship intangible assets recognised in the year would not result in a significant change to fair value.

(b) Customer relationship intangibles impairment

Management review customer relationship intangible assets for indicators of impairment at each reporting date and have concluded that no indicators were present as at 31 December 2021.

21.3. Software intangible assets

(a) Software intangible assets acquired in a business combination

Software intangible assets acquired in a business combination and recognised separately from goodwill are initially recognised at their fair value at the acquisition date. In 2021, the Group recognised £1.15m of software intangible assets for the INDOS acquisition.

Key assumptions in determining fair value

The fair value at acquisition was derived using a relief from royalty methodology. Management consider the key assumptions in this model to be the projected revenue growth and the royalty rate applied.

Sensitivity analysis

Management carried out a sensitivity analysis on the key assumptions used in the valuation of new brand intangible assets and have concluded that any reasonable change to the key assumptions would not result in a significant change to fair value.

(b) Software intangible assets impairment

Management review software intangible assets for indicators of impairment at each reporting date and have concluded that no indicators were present as at 31 December 2021.

21.4. Brand intangible assets

(a) Brand intangible assets acquired in a business combination

Brand intangible assets acquired in a business combination and recognised separately from goodwill are initially recognised at their fair value at the acquisition date. In 2021, the Group recognised brand intangible assets upon acquisition as follows: SALI £1.61m and INDOS £0.38m.

Key assumptions in determining fair value

The fair value at acquisition was derived using a relief from royalty methodology. Management consider the key assumptions in this model to be the UEL and the royalty rate applied to projected revenue growth.

Sensitivity analysis

Management carried out a sensitivity analysis on the key assumptions used in the valuation of the SALI brand intangible asset. An increase in UEL of 2.5 years would increase fair value by £1.08m and a 1pp decrease to the royalty rate would decrease fair value by £0.8m. Management estimate that any other reasonable change to the key assumptions for the new brand intangible assets recognised in the year would not result in a significant change to fair value.

(b) Brand intangible assets impairment

Management review brand intangible assets for indicators of impairment at each reporting date and have concluded that no indicators were present as at 31 December 2021.

22.        Other non-financial assets

Contract assets

Incremental costs of obtaining a contract (i.e. costs that would not have been incurred if the contract had not been obtained) and the costs incurred to fulfil a contract are recognised as a contract cost within non-financial assets if the costs are expected to be recovered. The capitalised costs are amortised on a straight-line basis over the estimated useful economic life of the contract. The carrying amount of contract asset is tested for impairment in accordance with the policy described in note 21.

 

 

 

 

2021

£'000

2020

£'000

Non-current

 

 

Prepayments

42

99

Contract assets

516

204

Total non-current

558

303

 

 

 

Current

 

 

Prepayments

3,468

2,803

Contract assets

247

544

Current tax receivables

432

324

Total current

4,147

3,671

Total other non-financial assets

4,705

3,974

Current and non-current contract assets include £0.6m for costs to obtain a contract (2020: £0.75m) and £0.17m for costs incurred to fulfil a contract (2020: nil). The amortisation charge for the year was £0.66m (2020: £0.64m). Management review contract assets for indicators of impairment at each reporting date and have concluded that no indicators were present at 31 December 2021.

23.        Deferred taxation

For the accounting policy on deferred income tax, see note 11.

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

 

 

2021

£'000

2020

£'000

Deferred tax assets

 

(119)

(104)

Deferred tax liabilities

 

24,355

8,902

 

 

24,236

8,798

 

 

 

 

Intangible assets

 

24,238

8,784

Other origination and reversal of temporary differences

 

(2)

14

 

 

24,236

8,798

 

The movement in the year is analysed as follows:

Intangible assets

Note

2021

£'000

2020

£'000

Balance at the beginning of the year

 

8,784

7,528

Recognised through business combinations(i)

31

17,349

2,247

Recognised in the consolidated income statement

11

(1,446)

(1,102)

Foreign exchange (to other comprehensive income)

 

(449)

111

Balance at 31 December

 

24,238

8,784

 

 

 

 

Other origination and reversal of temporary differences

 

 

 

Balance at the beginning of the year

 

14

25

Acquired through acquisitions

 

14

-

Recognised in the consolidated income statement

 

(30)

(11)

Balance at 31 December

 

(2)

14

(i)    Deferred tax liabilities have been recognised in relation to identified intangible assets, the amortisation of which is non-deductible against Corporation Tax in the jurisdictions in which the business operates and therefore creates temporary differences between the accounting and taxable profits. See note 31.

24.        Other non-financial liabilities

Deferred income

Fixed fees received in advance across all the service lines and up-front fees in respect of services due under contract are time apportioned to respective accounting periods, and those billed but not yet earned are included in deferred income in the consolidated balance sheet. As such liabilities are associated with future services, they do not give rise to a contractual obligation to pay cash or another financial asset.       

Contract liabilities

Commissions expected to be paid over the term of a customer contract are discounted and recognised at the net present value. The finance cost is charged to the consolidated income statement over the contract life so as to produce a constant periodic rate of interest on the remaining balance of the liability for each period.

 

2021

£'000

2020

£'000

Non-current

 

 

Contract liabilities

179

311

 

 

 

Current

 

 

Deferred income

8,205

4,801

Contract liabilities

374

370

Total current

8,579

5,171

Total other non-financial liabilities

8,758

5,482

 

25. Provisions

Provisions are recognised when the Group has a present obligation (legal or constructive) as a result of a past event, it is probable that an outflow of resources will be required to settle the obligation, and a reliable estimate can be made of the amount of the obligation. Provisions are not recognised for future operating losses.

The amount recognised as a provision is the best estimate of the consideration required to settle the present obligation at the end of the reporting period, taking into account the risks and uncertainties surrounding the obligation. If the impact of the time value of money is material, provisions are determined by discounting the expected future cash flows at a pre-tax rate that reflects current market assessments of the time value of money and the risks specific to the liability. The unwinding of the discount is recognised as a finance cost in the consolidated income statement.

Dilapidations

The Group has entered into lease agreements for the rental of office space in different countries. There are a number of leases which include an obligation to remove any leasehold improvements (thus returning the premises to an agreed condition at the end of the respective lease terms) and to restore wear and tear by repairing and repainting (this is known as "dilapidations"). The estimated cost of the dilapidations payable at the end of each tenancy, unless specified, is generally estimated by reference to the square footage of the building and in consultation with local property agents, landlords and prior experience. Having estimated the likely amount due, a country specific discount rate is applied to calculate the present value of the expected outflow. The provisions are expected to be utilised when the leases expire or upon exit. The discounted dilapidation cost has been capitalised against the leasehold improvement asset in accordance with IFRS 16.

 

 

 

Dilapidation

provisions

£'000

Total

£'000

At 1 January 2020

1,189

1,189

Additions

528

528

Disposals

(73)

(73)

Unwind of discount

28

28

Amounts utilised

36

36

Impact of foreign exchange

(68)

(68)

At 31 December 2020

1,640

1,640

 

 

 

Additions

294

294

Unwind of discount

60

60

Amounts utilised

(31)

(31)

Impact of foreign exchange

4

4

At 31 December 2021

1,967

1,967

 

Analysis of total provisions:

2021

£'000

2020

£'000

Non-current

1,720

1,601

Current

247

39

Total

1,967

1,640

 

Section 5 - equity

26. Share capital and reserves

26.1. Share capital and share premium

The Group's Ordinary shares are classified as equity. Incremental costs directly attributable to the issue of Ordinary shares are recognised as a deduction from equity, net of any tax effects.

 

 

2021

£'000

2020

£'000

Authorised

 

 

300,000,000 Ordinary shares (2020: 300,000,000 Ordinary shares)

3,000

3,000

 

 

 

Called up, issued and fully paid

 

 

147,585,261 Ordinary shares (2020: 122,521,974 Ordinary shares)

1,476

1,225

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

Movements in Ordinary shares

Note

No. of shares

(thousands)

Par value

£'000

Share premium

£'000

At 1 January 2020

 

114,068

1,141

100,658

 

 

 

 

 

PLC EBT issue

 

1,146

11

(13)

Acquisition of NESF

31.8

6,747

67

27,813

Acquisition of Exequtive

31.10

561

6

2,364

Movement in the year

 

8,454

84

30,165

At 31 December 2020

 

122,522

1,225

130,823

 

 

 

 

 

Shares issued for equity raises

 

21,618

216

140,135

PLC EBT issue

 

1,333

13

(19)

Acquisition of INDOS

31.2(b)

177

2

1,065

Acquisition of Segue

31.3(b)

110

1

789

Acquisition of Ballybunion

31.5(b)

77

1

664

Acquisition of SALI

31.6(b)

1,260

13

8,570

Acquisition of EFS

31.7(b)

85

1

706

Acquisition of NESF

31.8

404

4

3,119

Movement in the year

 

25,064

251

155,029

At 31 December 2021

 

147,586

1,476

285,852

On 5 May 2021, the Company issued 10,626,078 Placing shares at a price of £6.20 per share, raising gross proceeds of £65.9m for the Company. On 11 October 2021, the Company issued 10,991,543 Placing shares at a price of £7.18 per share, raising gross proceeds of £78.9m for the Company. The share issuance costs for both equity raises were £1.99m and £2.46m respectively. The Placing shares are fully paid and rank pari passu in all respects with the existing shares, including the right to receive all dividends and other distributions declared, made or paid after the issue date.

On 1 July 2021, the Company issued an additional 1,333,248 Ordinary shares in order for PLC EBT to satisfy future exercises of awards granted to beneficiaries (27 April 2020: 1,146,291 Ordinary shares).

For detailed information on Ordinary shares issued for business combinations in the current and prior year, see note 31.

26.2. Own shares

Own shares represent the shares of the Company that are unallocated and currently held by PLC EBT. They are recorded at cost and deducted from equity. When shares vest unconditionally, are cancelled or are reissued, they are transferred from the own shares reserve at their cost. Any consideration paid or received for the purchase or sale of the Company's own shares is shown as a movement in shareholders' equity.

Movements in Ordinary shares

Note

No. of shares

(thousands)

PLC EBT

£'000

At 1 January 2020

 

2,161

3,027

 

 

 

 

PLC EBT issue

26.1

1,146

11

Purchase of own shares

 

10

46

Movement in year

 

1,157

57

At 31 December 2020

 

3,317

3,084

 

 

 

 

EIP awards

36.1

(1,545)

-

PSP and DBSP awards

36.1

(252)

-

PLC EBT issue

26.1

1,333

13

Acquisition of Segue

31.3(b)

26

-

Acquisition of Ballybunion

31.5(b)

30

-

Acquisition of SALI

31.6(b)

215

-

Purchase of own shares

 

47

269

Movement in year

 

(146)

282

At 31 December 2021

 

3,171

3,366

 

Share awards

On 22 July 2021, as part of the EIP, 1,544,950 Ordinary shares were exercised by employees of the Company.

During the current year, 249,758 Ordinary shares were exercised by employees of the Company for fully vested PSP and DBSP awards.

Other movements

On 11 October 2021, as part of the consideration for Segue and Ballybunion, 25,844 and 29,865 Ordinary shares respectively were purchased for PLC EBT; this is shown within cash consideration.

On 8 December 2021, as part of the consideration for SALI, 214,585 Ordinary shares were purchased for PLC EBT; this is shown within cash consideration.

Purchase of own shares

Shares were purchased for PLC EBT using its surplus cash held as a result of dividend income.

26.3. Other reserves

Capital reserve

This reserve is used to record the gains or losses recognised on the purchase, sale, issue or cancellation of the Company's own shares, which may arise from capital transactions by the Group's Employee Benefit Trust as well as any movements in share-based awards to employees (see note 36).     

Translation reserve

The translation reserve comprises all foreign currency differences arising from the translation of the financial statements of foreign operations.

Retained earnings

Retained earnings includes accumulated profits and losses.

27.        Dividends

Provision is made for the amount of any dividend declared, being appropriately authorised and no longer at the discretion of the entity, on or before the end of the reporting period but not distributed at the end of the reporting period. Interim dividends are recognised when paid.

The following dividends were declared and paid by the Company for the year:

 

2021

£'000

2020

£'000

Final dividend for 2019 of 3.6p per qualifying Ordinary share

-

4,288

Interim dividend for 2020 of 2.4p per qualifying Ordinary share

-

2,858

Final dividend for 2020 of 4.35p per qualifying Ordinary share

5,670

-

Interim dividend for 2021 of 2.6p per qualifying Ordinary share

3,421

-

Total dividend declared and paid

9,091

7,146

 

Section 6 - risk

28. Critical accounting estimates and judgements

In the application of the Group's accounting policies, management are required to make judgements, estimates and assumptions about the carrying amounts of assets and liabilities that are not readily apparent from other sources. The estimates and associated assumptions are regularly evaluated based on historical experience, current circumstances, expectation of future events and other factors that are considered to be relevant. Actual results may differ from these estimates. Management continue to be vigilant in monitoring for any potential effects whilst uncertainties relating to the Covid-19 pandemic remain.

This note provides an overview of the areas that involved a higher degree of judgement or complexity, and of items which are more likely to be materially adjusted due to estimates and assumptions turning out to be wrong.

The following are the critical judgements and estimates that management have made in the process of applying the Group's accounting policies and that have the most significant effect on the amounts recognised in the consolidated financial statements.

28.1. Critical judgements in applying the group's accounting policies

Recognition of separately identifiable intangibles

In 2021, the Group made seven acquisitions and, in accordance with IFRS 3 'Business Combinations', management are required to identify assets and liabilities purchased, including intangible assets. Following their assessment, management concluded that the intangible assets meeting the recognition criteria were customer relationships, brand and software. The fair value at acquisition date is as follows:

Acquisition

Note

Customer

relationships

£'000

Software

£'000

Brands

£'000

RBC cees

31.1

22,367

-

-

INDOS

31.2

1,352

1,150

383

Segue

31.3

1,073

-

-

perfORM

31.4

27

-

-

Ballybunion

31.5

2,553

-

-

SALI

31.6

43,647

-

1,610

EFS

31.7

1,374

-

-

 

Extension options on leases

Many of the leases for office space contain extension options as these provide operational flexibility. The Group assesses at each reporting period if they are reasonably certain that an extension option will be exercised. Such assessment involves judgement and is based on the information available at the time the assessments are made. This includes the following factors: the length of time remaining before the option is exercisable, current trading, future trading forecasts and business plans for the jurisdiction taking into account any potential business combinations. As at the reporting date, management have assessed the extension options available in their leases and have deemed they cannot be reasonably certain at this time that they would exercise the extension options.

28.2. Critical accounting estimates and assumptions

Recoverability of WIP

To assess the fair value of consideration received for services rendered, management are required to make an assessment of the net unbilled amount expected to be collected from clients for work performed to date. To make this assessment, WIP balances are reviewed regularly on a by-client basis and the following factors are taken into account: the ageing profile of the WIP, the agreed billing arrangements, value added and status of the client relationship. See note 13 for the sensitivity analysis.

Goodwill impairment - key assumptions used to calculate the recoverable amount for each CGU

Goodwill is tested annually for impairment and the recoverable amount of CGUs is determined based on a value in use calculation using cash flow projections containing key assumptions. See note 21.1 for further detail on key assumptions and sensitivity analysis.

Fair value of customer relationship intangibles

The customer relationship intangible assets are valued using the MEEM financial valuation model. Cash flow forecasts and projections are produced by management and form the basis of the valuation analysis. Other key estimates and assumptions used in the modelling to derive the fair values include: year on year growth rates, client attrition rates, EBIT margins and the discount rate applied to free cash flow. See note 21.2(a) for the sensitivity analysis.

Fair value of earn-out consideration for SALI

To derive the fair value of the earn-out contingent consideration, management assessed the likelihood of achieving pre-defined revenue targets across a two year period to determine the value of contingent consideration. Management consider the forecast revenue to be the key assumption in the calculation of the fair value. See note 31.6(b) for the sensitivity analysis.

Fair value of SALI brand

To derive the fair value of the brand acquired as part of the SALI acquisition, a relief from royalty valuation methodology was used. Management consider the key assumptions in this model to be the UEL and the royalty rate applied to projected revenue growth. See note 21.4(a) for the sensitivity analysis.

29. Financial risk management

The Group is exposed through its operations to the following financial risks: market risk (including foreign currency risk and interest rate risk), credit risk and liquidity risk.

The Group is exposed to risks that arise from the use of its financial instruments. This note describes the Group's objectives, policies and processes for managing those risks and the methods used to measure them.

There have been no substantive changes in the Group's exposure to financial instrument risks, its objectives, policies and processes for managing those risks or the methods used to measure them from previous periods unless otherwise stated in this note.

Principal financial instruments

The principal financial instruments used by the Group, from which financial instrument risk arises, are as follows. All are classified as measured at amortised cost:

 

Note

2021

£'000

2020

£'000

Financial assets - measured at amortised cost

 

 

 

Trade receivables

12

28,870

17,230

Work in progress

13

12,834

11,431

Accrued income

14

19,587

13,382

Other receivables

15

3,078

4,432

Cash and cash equivalents

16

39,326

31,078

 

 

103,695

77,553

 

 

 

 

Financial liabilities - measured at amortised cost

 

 

 

Trade and other payables

17

41,835

11,366

Loans and borrowings

18

152,578

106,832

Lease liabilities

19

43,379

43,369

 

 

237,792

161,567

 

 

 

 

Financial liabilities - measured at fair value

 

 

 

Trade and other payables(i)

17

1,342

23,345

 

 

1,342

23,345

(i)    All financial assets and liabilities are measured at amortised cost which is deemed to be representative of fair value. The exception to this is liability-classified contingent consideration of £1.3m for perfORM (see note 31.4) and £23.35m for NESF in the prior year that was measured at fair value in line with IAS 32. As at 31 December 2021, management have concluded that the earn-out thresholds would not be met for NESF and no further consideration would be payable (see note 31.8).

Management considered the following fair value hierarchy levels in line with IFRS 13.

·  Level 1 - Inputs are quoted prices (unadjusted) in active markets for identical assets and liabilities.

·  Level 2 - Inputs other than quoted prices included within Level 1 that are observable for the asset and liability, either directly or indirectly.

·  Level 3 - Inputs are unobservable inputs for the asset or liability.

Management concluded that the contingent consideration was classified under the level 3 inputs of the fair value hierarchy.

General objectives, policies and processes

The Board has overall responsibility for determining the Group's financial risk management objectives and policies and, whilst retaining ultimate responsibility for them, it delegates the authority for designing and operating processes that ensure effective implementation of the objectives and policies to management, in conjunction with the Group's finance department.

The financial risk management policies are considered on a regular basis to ensure that these are in line with the overall business strategies and the Board's risk management philosophy. The overall objective is to set policies to minimise risk as far as possible without adversely affecting the Group's financial performance, competitiveness and flexibility.

The Board has overall responsibility for determining the Group's financial risk management objectives and policies and, whilst retaining ultimate responsibility for them, it delegates the authority for designing and operating processes that ensure effective implementation of the objectives and policies to management, in conjunction with the Group's finance department.

The financial risk management policies are considered on a regular basis to ensure that these are in line with the overall business strategies and the Board's risk management philosophy. The overall objective is to set policies to minimise risk as far as possible without adversely affecting the Group's financial performance, competitiveness and flexibility.

29.1. Market risk

Market risk arises from the Group's use of interest-bearing, tradable and foreign currency financial instruments. It is the risk that changes in interest rates (interest rate risk) or foreign exchange rates (currency risk) will affect the Group's future cash flows or the fair value of the financial instruments held. The objective of market risk management is to manage and control market risk exposures within acceptable parameters, while optimising the return.

Foreign currency risk management

Foreign currency risk arises when individual Group entities enter into transactions denominated in a currency other than their functional currency. The Group's policy is, where possible, to allow Group entities to settle liabilities denominated in their functional currency with the cash generated from their own operations in that currency. Where Group entities have liabilities denominated in a currency other than their functional currency (and have insufficient reserves of that currency to settle them), cash already denominated in the required currency will, where possible and ensuring no adverse impact on local regulatory capital adequacy requirements (see note 30), be transferred from elsewhere in the Group.

The Group's exposure to the risk of changes in exchange rates relates primarily to the Group's operating activities when the revenue or expenses are denominated in a different currency from the Group's functional and presentation currency of pounds sterling ("£"). For trading entities that principally affect the profit or net assets of the Group, the exposure is mainly from Euro, US dollar and South African rand. The Group's bank loans were denominated in £ and Euros, and following the refinancing during 2021 they are all now denominated in £, although the facility is multicurrency.

As at 31 December 2021, the Group's exposure to the Group's material foreign currency denominated financial assets and liabilities is as follows:

Net foreign currency
assets/(liabilities)

£

 

Euro

 

US dollar

 

South African rand

2021

£'000

2020

£'000

2021

£'000

2020

£'000

2021

£'000

2020

£'000

2021

£'000

2020

£'000

Trade receivables

18,048

9,966

 

1,712

2,936

 

5,031

3,949

 

-

10

Work in progress

10,327

8,760

 

1,518

1,530

 

1,062

907

 

-

-

Accrued income

9,499

7,158

 

1,243

454

 

8,207

5,523

 

94

-

Other receivables

1,141

561

 

317

416

 

1,487

3,285

 

13

-

Cash and cash equivalents

11,361

7,812

 

7,418

10,134

 

19,178

11,789

 

892

619

Trade and other payables

(11,665)

(28,324)

 

(4,070)

(1,720)

 

(25,840)

(2,134)

 

(380)

(990)

Loans and borrowings

(152,578)

(79,207)

 

-

(25,169)

 

-

(2,456)

 

-

-

Lease liabilities

(28,149)

(26,440)

 

(9,387)

(11,401)

 

(3,986)

(4,243)

 

(846)

(139)

Total net exposure

(142,016)

(99,714)

 

(1,249)

(22,820)

 

5,139

16,620

 

(227)

(500)

In order to implement and monitor this policy, management receive a monthly analysis showing cash reserves by individual Group entities and in major currencies together with information on expected liabilities due for settlement. The effectiveness of this policy is measured by the number of resulting cash transfers made between entities and any necessary foreign exchange trades. Management consider this policy to be working effectively but continues to regularly assess if a foreign currency hedge is appropriate.

Foreign currency risk sensitivity

The following table illustrates the possible effect on comprehensive income for the year and net assets arising from a 10% strengthening or weakening of pounds sterling against other currencies.

 

 

Strengthening/

(weakening) of

pounds sterling(i)

Effect on comprehensive income and net assets

2021

£'000

2020

£'000

Euro

+20%

208

3,804

US dollars

+20%

(857)

(2,770)

South African rand

+20%

38

83

Total

 

(611)

1,117

 

 

 

 

Euro

(20%)

(312)

(5,705)

US dollars

(20%)

1,285

4,155

South African rand

(20%)

(57)

(125)

Total

 

916

(1,675)

(i)    Holding all other variables constant.

Interest rate risk management and sensitivity

The Group is exposed to interest rate risk as it borrows all funds at floating interest rates. The interest rate applied to loan facilities was previously determined using LIBOR and EURIBOR plus a margin based on net leverage calculations. Following the refinancing on 6 October 2021 (see note 18.1), the interest rate applied to loan facilities is determined using SONIA plus a margin based on net leverage calculations. The impact of this replacement is not deemed to be material. The interest rate risk is managed by the Group maintaining an appropriate leverage ratio and through this ensuring that the interest rate is kept as low as possible.

The interest fluctuations have historically been low, which has minimised the Group's exposure to interest rate fluctuations. As a result, no hedging instruments have been put in place.

Sensitivity analysis for variable rate instruments

An increase/decrease of 50 basis points in interest rates on loans and borrowing with floating interest rates would have decreased/increased the profit and loss before tax by £778k (2020: £528k). This analysis assumes that all other variables remain constant.

The Group's exposures to interest rates on financial assets and financial liabilities are detailed in the liquidity risk management section of this note.

29.2. Credit risk management

Credit risk is the risk of financial loss to the Group should a customer or counterparty to a financial instrument fail to meet its contractual obligations. The Group's principal exposure to credit risk arises from contracts with customers and therefore the following financial assets: trade receivables, work in progress and accrued income (together "customer receivables").

The Group manages credit risk for each new customer by giving consideration to the risk of insolvency or closure of the customer's business, current or forecast liquidity issues and general creditworthiness (including past default experience of the customer or customer type).

Subsequently, customer credit risk is managed by each of the Group entities subject to the Group's policy, procedures and control relating to customer credit risk management. Outstanding customer receivables are monitored and followed up continuously. Specific provisions incremental to ECL are made when there is objective forward-looking evidence that the Group will not be able to bill the customer in line with the contract or collect the debts arising from previous invoices. This evidence can include the following: indication that the customer is experiencing significant financial difficulty or default, probability of bankruptcy, problems in contacting the customer, disputes with a customer, or similar factors. This analysis is performed on a customer-by-customer basis. For more commentary on this, the ageing of trade receivables and the provisions thereon at the year end, including the movement in the provision, see note 12.

Credit risk in relation to other receivables is considered for each separate contractual arrangement by management. As these are primarily with related parties the risk of the counterparty defaulting is considered to be low.

Credit risk also arises from cash and cash equivalents and deposits with banks and financial institutions. Cash and cash equivalents are held mainly with banks which are rated 'A-' or higher by Standard & Poor's Rating Services or Fitch Ratings Ltd for long-term credit rating.

The financial assets are subject to the impairment requirements of IFRS 9, for further detail of how this is assessed and measured, see notes 12 to 16.

Credit risk exposure

Trade receivables, work in progress and accrued income result from the provision of services to a large number of customers (individuals and corporate), spread across different industries and geographies. The gross carrying amount of financial assets represents the maximum credit exposure and as at the reporting date this can be summarised as follows:

 

Total

2021

£'000

Loss

allowance

2021

£'000

Net

2021

£'000

Total

2020

£'000

Loss

allowance

2020

£'000

Net

2020

£'000

Trade receivables

33,701

(4,831)

28,870

22,122

(4,892)

17,230

Work in progress

12,906

(72)

12,834

11,491

(60)

11,431

Accrued income

19,621

(34)

19,587

13,400

(18)

13,382

Other receivables

3,078

-

3,078

4,432

-

4,432

Cash and cash equivalents

39,326

-

39,326

31,078

-

31,078

 

108,632

(4,937)

103,695

82,523

(4,970)

77,553

29.3. Liquidity risk management

Liquidity risk is the risk that the Group will not be able to meet its financial obligations as they fall due. The Group manages liquidity risk to maintain adequate reserves by regular review around the working capital cycle using information on forecast and actual cash flows.

The Board is responsible for liquidity risk management and they have established an appropriate liquidity risk management framework for the management of the Group's short, medium and long-term funding and liquidity management requirements. Regulation in most jurisdictions also requires the Group to maintain a level of liquidity in order that the Group does not become exposed.

Liquidity tables

The tables detail the Group's remaining contractual maturity for its financial liabilities with agreed repayment years. The tables have been drawn up based on the undiscounted cash flows of financial liabilities based on the earliest date on which the Group can be required to pay. The table includes both interest and principal cash flows. To the extent that interest flows are floating rate, the undiscounted amount is derived from interest rates at the balance sheet date. The contractual maturity is based on the earliest date on which the Group may be required to pay.

2021

<3 months

£'000

3 - 12 months

£'000

1 - 5 years

£'000

>5 years

£'000

Total

contractual

cash flow

£'000

Loans and borrowings(i)

510

2,548

161,013

-

164,071

Trade payables and accruals

13,483

-

1,047

-

14,530

Contingent consideration

177

4,196

23,002

-

27,375

Lease liabilities

1,644

4,932

21,119

25,056

52,751

Total

15,814

11,676

206,181

25,056

258,727

 

 

 

 

 

 

2020

<3 months

£'000

3 - 12 months

£'000

1 - 5 years

£'000

>5 years

£'000

Total

contractual

cash flow

£'000

Loans and borrowings.

2,814

1,786

108,273

-

112,873

Trade payables and accruals

10,680

-

311

-

10,991

Contingent consideration

-

153

-

-

153

Lease liabilities

1,295

3,885

19,477

27,345

52,002

Total

14,789

5,824

128,061

27,345

176,019

(i)    This includes the future interest payments not yet accrued and the repayment of capital upon maturity.

30. Capital management

Risk management

The Group's objective for managing capital is to safeguard the ability to continue as a going concern, while maximising the return to shareholders through the optimisation of the debt and equity balance and to ensure that capital adequacy requirements are met for local regulatory requirements at entity level.

The managed capital refers to the Group's debt and equity balances. For quantitative disclosures, see note 18 for loans and borrowings and note 26 for share capital.

Loan covenants

The Group has bank loans which require it to meet leverage and interest cover covenants. In order to achieve the Group's capital risk management objective, the Group aims to ensure that it meets financial covenants attached to bank borrowings. Breaches in meeting the financial covenants would permit the lender to immediately recall the loan. In line with the new loan agreement the Group tests compliance with the financial covenants on a bi-annual basis.

Under the terms of the new loan facility, the Group is required to comply with the following financial covenants:

·  Leverage (being the ratio of total net debt to underlying EBITDA (for LTM at average FX rates and adjusted for pro-forma contributions from acquisitions) for a relevant period) must not be more than 3:1)

·  Interest cover (being the ratio of EBITDA to net finance charges must not be less than 4:1)

The Group has complied with all financial covenants throughout the reporting period.

Capital adequacy

Individual regulated entities within the Group are subject to regulatory requirements to ensure adequate capital and liquidity to meet local requirements in Jersey, Guernsey, Ireland, the Isle of Man, the UK, the US, Switzerland, the Netherlands, Luxembourg, Mauritius, South Africa and the Caribbean; all are monitored regularly to ensure compliance. There have been no breaches of applicable regulatory requirements during the reporting period.

Section 7 - group structure

31. Business combinations

A business combination is defined as a transaction or other event in which an acquirer obtains control of one or more businesses. Where the business combination does not include the purchase of a legal entity but the transaction includes acquired inputs and processes applied to those inputs in order to generate outputs, the transaction is also considered a business combination.

The Group applies the acquisition method to account for business combinations. The consideration transferred in an acquisition comprises the fair value of assets transferred, the liabilities incurred to the former owners of the acquiree and the equity interests issued by the Group in exchange for control of the acquiree. The identifiable assets acquired and liabilities assumed in a business combination are measured at their fair values at the acquisition date. Acquisition-related costs are recognised in the consolidated income statement as non-underlying items within operating expenses.

The excess of the consideration transferred, the amount of any non-controlling interest in the acquiree and the acquisition date fair value of any previous equity interest in the acquiree over the fair value of the identifiable net assets acquired is recorded as goodwill. If those amounts are less than the fair value of the net identifiable assets of the business acquired, the difference is recognised directly in the consolidated income statement as a gain on bargain purchase.

When the consideration transferred includes an asset or liability resulting from a contingent consideration arrangement, this is measured at its acquisition-date fair value. Changes in fair value of the contingent consideration that qualify as measurement period adjustments are adjusted retrospectively, with corresponding adjustments against goodwill. Measurement period adjustments are adjustments that arise from additional information obtained during the measurement period (which cannot exceed one year from the acquisition date) about facts and circumstances that existed at the acquisition date.

The subsequent accounting for changes in the fair value of the contingent consideration that do not qualify as measurement period adjustments depend on how the contingent consideration is classified. Contingent consideration that is classified as equity is not remeasured at subsequent reporting dates and its subsequent settlement is accounted for within equity. Contingent consideration that is classified as an asset or liability is remeasured at subsequent reporting dates at fair value with the corresponding gain or loss being recognised in the consolidated income statement.

31.1. Rbc cees limited ("rbc cees")

On 6 April 2021, JTC (Jersey) Limited entered into an agreement to acquire 100% of the share capital of RBC cees from RBC Holdings (Channel Islands) Limited, part of RBC Wealth Management. RBC cees provides a market-leading employee benefits platform for an internationally diverse blue chip corporate client base. The acquisition is complementary to JTC's existing corporate and Trustee services and significantly enhances the Group's employee benefits offering.

Regulatory approval for the transaction was received on 19 February 2021 and 24 March 2021 from the Guernsey and Jersey Financial Services Commissions respectively and consideration was transferred on 6 April 2021. The results of the acquired business have been consolidated from 6 April 2021 as management concluded that this was the date control was obtained by the Group.

The acquired business contributed revenues of £16.6m and underlying profit before tax (before central costs have been applied) of £8.8m to the Group for the period from 6 April 2021 to 31 December 2021. If the business had been acquired on 1 January 2021, the consolidated pro-forma revenue and underlying profit before tax for the period would have been £153m and £26.2m respectively.

(a) Identifiable assets acquired and liabilities assumed on acquisition

The following table shows, at fair value, the recognised assets acquired and liabilities assumed at the acquisition date:   

 

£'000

Property, plant and equipment

855

Intangible assets - Customer relationships

22,367

Trade receivables

1,609

Accrued income

4,698

Cash and cash equivalents

4,083

Assets

33,612

 

 

Deferred income

3,901

Deferred tax liabilities

2,237

Trade and other payables

1,953

Liabilities

8,091

 

 

Total identifiable net assets

25,521

Between the acquisition date and 31 December 2021, the following fair value adjustments were made to identifiable assets acquired:

· To recognise £0.515m of additional accrued income for pre-acquisition fees and retrocession income

· To accrue £0.05m for additional third party administration fees due

· To write off £3.1m of deferred tax assets

(b) Consideration

Consideration for the acquisition was cash of £20.164m with £20m paid upon completion and £0.164m thereafter for purchase price adjustments.

(c) Goodwill

 

£'000

Total consideration

20,164

Less: fair value of identifiable net assets

(25,521)

Negative goodwill

(5,357)

 

Negative goodwill represents a bargain purchase. This is supported by: (i) the synergies management expect to realise and (ii) the transaction price being impacted by RBC cees previously suffering from high central cost allocations and that the acquired business was viewed as non-core by the sellers.

(d) Impact on cash flow

 

£'000

Cash consideration

20,164

Less: cash balances acquired

(4,083)

Net cash outflow from acquisition

16,081

(e) Acquisition-related costs

The Group incurred acquisition-related costs of £1.83m for professional, legal and advisory fees. These costs have been recognised in other operating expenses in the Group's consolidated income statement (see note 6) and are treated as non-underlying items to calculate underlying EBITDA (see note 7).

31.2. Indos Financial Limited ("INDOS")

On 1 June 2021, JTC acquired 100% of INDOS, a privately owned UK and Irish based specialist provider of depositary and other high value services for alternative investment funds. This acquisition adds further technical expertise in the fund services business line within the ICS Division and directly adds scale in the UK and Ireland, two growth jurisdictions.

Regulatory approval for the transaction was received on 24 May 2021 from the Financial Conduct Authority and consideration was transferred on 1 June 2021. The results of the acquired business have been consolidated from 1 June 2021 as management concluded that this was the date control was obtained by the Group.

The acquired business contributed revenues of £2.3m and underlying profit before tax (before central costs have been applied) of £0.1m to the Group for the period from 1 June to 31 December 2021. If the business had been acquired on 1 January 2021, the consolidated pro-forma revenue and underlying profit before tax for the period would have been £149.1m and £25m respectively.

(a) Identifiable assets acquired and liabilities assumed on acquisition

The following table shows, at fair value, the recognised assets acquired and liabilities assumed at the acquisition date:

 

£'000

Property, plant and equipment

111

Intangible assets - Brand

383

Intangible assets - Customer relationships

1,352

Intangible assets - Software

1,150

Trade receivables

573

Other receivables

115

Cash and cash equivalents

584

Assets

4,268

 

 

Deferred income

9

Deferred tax liabilities

703

Trade and other payables

422

Lease liabilities

95

Liabilities

1,229

 

 

Total identifiable net assets

3,039

(b) Consideration

 

£'000

Cash consideration

10,019

Equity instruments(i)

1,080

Contingent consideration - Earn-out(ii)

1,192

Deferred consideration relating to aged receivables

37

Fair value of total consideration

12,328

(i)    On 4 June 2021, the Company issued and admitted an additional 176,783 Ordinary shares at fair value to satisfy the equity element of initial consideration.

(ii)   Contingent consideration of £1.5m is payable subject to JTC PLC meeting an underlying EPS target for the period ending 31 December 2022. Based on historic performance and the forecast for 2022, management anticipate this will be paid in full. The consideration is payable in equity and is subject to a one year lock in period which expires on 31 December 2023. The amount payable has been discounted to its present value of £1.19m.

(c) Goodwill

 

£'000

Total consideration

12,328

Less: fair value of identifiable net assets

(3,039)

Goodwill

9,289

Goodwill is represented by assets that do not qualify for separate recognition or other factors. These include new business wins to new customers, effects of an assembled workforce and synergies from combining operations of the acquiree and the acquirer.

(d) Impact on cash flow

 

£'000

Cash consideration paid

10,019

Less: cash balances acquired

(584)

Net cash outflow from acquisition

9,435

(e) Acquisition-related costs

The Group incurred acquisition-related costs of £0.6m for professional, legal and advisory fees. These costs have been recognised in other operating expenses in the Group's consolidated income statement (see note 6) and are treated as non-underlying items to calculate underlying EBITDA (see note 7).

31.3. Segue Partners LLC ("Segue")

On 15 September 2021, JTC entered into an agreement to acquire 100% of the membership interest of Segue, an innovative fund services provider headquartered in St. Louis, Missouri, US. The business provides a range of sophisticated fund solutions to meet the needs of private equity, venture capital, debt funds and family offices. Segue also delivers accounting services specifically designed to meet the needs of entrepreneurs, portfolio companies and start-ups.

The acquired business contributed revenues of £0.3m and underlying loss before tax (before central costs have been applied) of £0.03m to the Group for the period from 15 September 2021 to 31 December 2021. If the business had been acquired on 1 January 2021, the consolidated pro-forma revenue and underlying profit before tax for the period would have been £148.6m and £25.1m respectively.

(a) Identifiable assets acquired and liabilities assumed on acquisition

The following table shows, at fair value, the recognised assets acquired and liabilities assumed at the acquisition date:

 

$'000

£'000

Property, plant and equipment

321

239

Intangible assets - Customer relationships

1,441

1,073

Trade receivables

68

51

Other receivables

12

9

Cash and cash equivalents

320

238

Assets

2,162

1,610

 

 

 

Deferred tax liabilities

359

267

Trade and other payables

244

182

Lease liabilities

264

197

Liabilities

867

646

 

 

 

Total identifiable net assets

1,295

964

(b) Consideration

 

$'000

£'000

Cash consideration

5,171

3,837

Equity instruments(i)

1,111

803

Contingent consideration - Earn-out(ii)

2,164

1,611

Fair value of total consideration at acquisition

8,446

6,251

(i)    On 17 September 2021, the Company issued and admitted an additional 109,741 Ordinary shares at fair value to satisfy the equity element initial consideration.

(ii)   Contingent consideration of £2.2m ($3m) is subject to Segue meeting adjusted EBITDA targets for the calendar years 2022 and 2023. Based on the historical performance of the business and management's view of expected adjusted EBITDA, it is anticipated that this will be paid in full. The estimated contingent consideration has been discounted to its present value of £1.6m ($2.2m) and is payable in a 80%/20% ratio of cash and JTC PLC Ordinary shares.

(c) Goodwill

 

 

$'000

£'000

Total consideration

8,446

6,251

Less: fair value of identifiable net assets

(1,295)

(964)

Goodwill

7,151

5,287

 

(d) Impact on cash flow

 

 

$'000

£'000

Cash consideration paid

5,171

3,837

Less: cash balances acquired

(320)

(238)

Net cash outflow from acquisition

4,851

3,599

(e) Acquisition-related costs

The Group incurred acquisition-related costs of £0.33m for professional, legal and advisory fees. These costs have been recognised in other operating expenses in the Group's consolidated income statement (see note 6) and are treated as non-underlying items to calculate underlying EBITDA (see note 7).

31.4 perfORM Due Diligence Services Limited ("perfORM")

On 18 October 2021, JTC entered into an agreement to purchase 100% of the membership interest of perfORM, a London based technology-led provider of due diligence services for a diverse base of UK and international investment managers and allocators.

The acquired business contributed revenues of £0.1m and underlying loss before tax (before central costs have been applied) of £0.1m to the Group for the period from 18 October 2021 to 31 December 2021. If the business had been acquired on 1 January 2021, the consolidated pro-forma revenue and underlying profit before tax for the period would have been £147.9m and £24.3m respectively.

(a) Identifiable assets acquired and liabilities assumed on acquisition

The following table shows, at fair value, the recognised assets acquired and liabilities assumed at the acquisition date:

 

£'000

Intangible assets - Customer relationships

27

Work in progress

43

Assets

70

 

 

Trade and other payables

13

Deferred tax liabilities

6

Liabilities

19

 

 

Total identifiable net assets

51

 

(b) Consideration

 

 

£'000

Cash consideration

53

Contingent consideration - Earn-out(i)

2,685

Fair value of total consideration at acquisition

2,738

(i)    The earn-out contingent consideration is calculated based on a multiple of perfORM's underlying EBITDA for the year ended 31 December 2024, up to a maximum of £6m. To calculate the anticipated earn-out at the acquisition date, management applied a probability weighting to EBITDA forecasts and, based on their assessment, it is estimated that £4.44m will be due, payable in a 50%/50% ratio of cash and JTC PLC Ordinary shares. To determine the fair value of the 283 JTC Ordinary shares, an estimated share price was calculated using a Monte Carlo simulation based on JTC's share price at acquisition and historical volatility, adjusted for any projected dividend payments and then discounted using an appropriate risk free rate. This derived a share price estimate of £7.99 to be applied to the number of shares to determine a fair value at acquisition of £2.26m in addition to the cash proportion of £2.22m. The total estimated earn-out contingent consideration due of £4.48m was then discounted to a present value of £2.68m.

(c) Goodwill

 

 

£'000

Total consideration

2,738

Less: fair value of identifiable net assets

(51)

Goodwill

2,687

 

(d) Impact on cash flow

 

£'000

Cash consideration paid

53

Less: cash balances acquired

-

Net cash outflow from acquisition

53

 

(e) Acquisition-related costs

The Group incurred acquisition-related costs of £0.06m for professional, legal and advisory fees. These costs have been recognised in other operating expenses in the Group's consolidated income statement (see note 6) and are treated as non-underlying items to calculate underlying EBITDA (see note 7).

31.5. Ballybunion Capital Limited ("Ballybunion")

On 26 March 2021, JTC entered into an agreement to acquire the share capital of Ballybunion, a boutique asset manager based in Dublin that provides management and regulatory oversight services to investment funds. Regulatory approval for the transaction was received on 7 September 2021 but the results of the acquired business have been consolidated from 3 November 2021 as management concluded that this was the date control was obtained by the Group.

The acquired business contributed revenues of £0.35m and underlying profit before tax (before central costs have been applied) of £0.1m to the Group for the period from 3 November 2021 to 31 December 2021. If the business had been acquired on 1 January 2021, the consolidated pro-forma revenue and underlying profit before tax for the period would have been £149.1m and £25.7m respectively.

(a) Identifiable assets acquired and liabilities assumed on acquisition

The following table shows, at fair value, the recognised assets acquired and liabilities assumed at the acquisition date:   

 

€'000

£'000

Property, plant and equipment

47

40

Intangible assets - Customer relationships

3,023

2,553

Accrued income

38

32

Other receivables

16

14

Cash and cash equivalents

1,510

1,276

Assets

4,634

3,915

 

 

 

Deferred income

218

184

Deferred tax liabilities

378

319

Trade and other payables

237

200

Corporation Tax

65

55

Lease liabilities

37

31

Liabilities

935

789

 

 

 

Total identifiable net assets

3,699

3,126

(b) Consideration

 

€'000

£'000

Cash consideration

11,409

9,677

Equity instruments(i)

780

665

Contingent consideration - Earn-out(ii)

1,200

1,014

Contingent consideration - Put/call option(iii)

669

565

Fair value of total consideration at acquisition

14,058

11,921

(i)    On 2 December 2021, the Company issued and admitted an additional 77,225 Ordinary shares at fair value to satisfy the equity         element of initial consideration.

(ii)   Contingent consideration of £1.3m (€1.5m) is payable subject to meeting an underlying EBITDA target for the period ended 30 June 2022. Based on the historical performance of the business and management's view of expected future EBITDA, it is anticipated that this will be paid in full. The amount payable has been discounted to its present value of £1m (€1.2m).

(iii) JTC entered into a put/call option agreement to acquire the remaining 5% of equity in Ballybunion for a value of £0.6m (€0.7m). The agreement has a maturity date of 1.5 years from the date of acquisition and it is management's view that this option will be exercised.

(c) Goodwill

 

€'000

£'000

Total consideration

14,058

11,921

Less: fair value of identifiable net assets

(3,699)

(3,126)

Goodwill

10,359

8,795

(d) Impact on cash flow

 

€'000

£'000

Cash consideration paid

11,427

9,692

Less: cash balances acquired

(1,510)

(1,276)

Net cash outflow from acquisition

9,917

8,416

(e) Acquisition-related costs

The Group incurred acquisition-related costs of £0.2m for professional, legal and advisory fees. These costs have been recognised in other operating expenses in the Group's consolidated income statement (see note 6) and are treated as non-underlying items to calculate underlying EBITDA (see note 7).

31.6. SALI Fund Management, LLC And SALI GP Holdings, LLC ("SALI")

On 12 November 2021, JTC entered into an agreement to acquire 100% of the share capital in SALI Fund Management, LLC and SALI GP Holdings, LLC (together "SALI"). SALI is a US based and market-leading provider of fund services to the Insurance Dedicated Fund and Separately Managed Account market and provides a sophisticated turn-key solution for the creation and administration of these products.

The acquired business contributed revenues of £1.6m and underlying profit before tax (before central costs have been applied) of £0.8m to the Group for the period from 12 November 2021 to 31 December 2021. If the business had been acquired on 1 January 2021, the consolidated pro-forma revenue and underlying profit before tax for the period would have been £157.4m and £29.6m respectively.

(a) Identifiable assets acquired and liabilities assumed on acquisition

The following table shows, at fair value, the recognised assets acquired and liabilities assumed at the acquisition date:   

 

$'000

£'000

Property, plant and equipment

405

303

Intangible assets - Customer relationships

58,334

43,647

Intangible assets - Brand

2,152

1,610

Trade receivables

2,836

2,122

Loan receivable

308

230

Other receivables

166

124

Cash and cash equivalents

2,003

1,499

Assets

66,204

49,535

 

 

 

Deferred income

1,320

987

Deferred tax liabilities

17,964

13,441

Trade and other payables

1,572

1,176

Loan payable

389

291

Lease liabilities

321

240

Liabilities

21,566

16,135

 

 

 

Total identifiable net assets

44,638

33,400

(b) Consideration

 

$'000

£'000

Cash consideration

193,593

144,791

Equity instruments(i)

11,471

8,583

Contingent consideration - EBT contribution(ii)

2,500

1,871

Contingent consideration - Closing payment(iii)

212

159

Contingent consideration - Earn-out(iv)

25,258

18,899

Fair value of total consideration at acquisition

233,034

174,303

(i)    On 19 November 2021, the Company issued and admitted an additional 1,260,457 Ordinary shares at fair value to satisfy the equity element of initial consideration.

(ii)   This relates to a £1.9m ($2.5m) contribution to PLC EBT due to be paid during 2022.

(iii) This relates to a £0.2m ($0.2m) purchase price adjustment due to be paid during 2022.

(iv) A total of up to £23.6m ($31.5m) is payable subject to meeting revenue targets for the two year period following acquisition. Based on management's assessment of the budgeted forecast for the period, it is estimated that the contingent consideration payable will be £23.6m ($31.5m), therefore meeting the earn-out in full. The amount payable in cash has been discounted to its present value of £18.9m ($25.3m).

Sensitivity analysis on fair value of earn-out consideration

Management carried out a sensitivity analysis on the output of the key assumptions and estimates used to calculate the fair value of the earn-out contingent consideration. Management consider the key assumption and estimate to be forecast revenue for the two year period. A decrease in the forecast revenue of 10% would decrease the earn-out contingent consideration by £2.3m ($3.2m). Discounted to its present value, this would be equal to a £1.9m ($2.6m) decrease.

(c) Goodwill

 

 

$'000

£'000

Total consideration

233,034

174,303

Less: fair value of identifiable net assets

(44,638)

(33,400)

Goodwill

188,396

140,903

(d) Impact on cash flow

 

$'000

£'000

Cash consideration paid

193,593

144,791

Less: cash balances acquired

(2,003)

(1,499)

Net cash outflow from acquisition

191,590

143,292

 

(e) Acquisition-related costs

The Group incurred acquisition-related costs of £3.17m for professional, legal and advisory fees. These costs have been recognised in other operating expenses in the Group's consolidated income statement (see note 6) and are treated as non-underlying items to calculate underlying EBITDA (see note 7).

31.7. Essential Fund Services, LLC ("EFS")

On 15 December 2021, JTC entered into an agreement to acquire 100% of the membership interest in Essential Fund Services LLC. EFS is a fund services provider, a Delaware limited liability company headquartered in New York, US. The business provides a broad range of services in the alternative assets space, including accounting, reporting and administrative services to investment partnerships and their investment managers.

The acquired business contributed revenues of £0.05m and profit before tax (before central costs have been applied) of £0.03m to the Group for the period from 15 December 2021 to 31 December 2021. If the business had been acquired on 1 January 2021, the consolidated pro-forma revenue and underlying profit before tax for the period would have been £148.8m and £25.2m respectively.

(a) Identifiable assets acquired and liabilities assumed on acquisition

The following table shows, at fair value, the recognised assets acquired and liabilities assumed at the acquisition date:   

 

$'000

£'000

Property, plant and equipment

108

82

Intangible assets - Customer relationships

1,818

1,374

Trade receivables

57

43

Other receivables

5

4

Cash and cash equivalents

252

191

Assets

2,240

1,694

 

 

 

Deferred income

62

47

Deferred tax liabilities

514

389

Trade and other payables

202

152

Lease liabilities

108

82

Liabilities

886

670

 

 

 

Total identifiable net assets

1,354

1,024

 

(b) Consideration

 

$'000

£'000

Cash consideration

7,589

5,745

Equity instruments(i)

932

705

Contingent consideration(ii)

25

19

Fair value of total consideration at acquisition

8,546

6,469

(i)    On 6 December 2021, the Company issued and admitted an additional 84,619 Ordinary shares at fair value to satisfy the equity element of initial consideration.

(ii)   Contingent consideration of £0.02m ($0.03m) is payable following a reconciliation of the closing cash reserve.

(c) Goodwill

 

 

$'000

£'000

Total consideration

8,546

6,469

Less: fair value of identifiable net assets

(1,354)

(1,024)

Goodwill

7,192

5,445

(d) Impact on cash flow

 

 

$'000

£'000

Cash consideration paid

7,589

5,745

Less: cash balances acquired

(252)

(191)

Net cash outflow from acquisition

7,337

5,554

(e) Acquisition-related costs

The Group incurred acquisition-related costs of £0.22m for professional, legal and advisory fees. These costs have been recognised in other operating expenses in the Group's consolidated income statement (see note 6) and are treated as non-underlying items to calculate underlying EBITDA (see note 7).

31.8. NES Financial Corp ("NESF")

On 29 April 2020, JTC acquired 100% of NESF, a US based, technology-enabled, market-leading provider of specialist fund administration services. On 4 May 2020, the Company issued and admitted an additional 6,746,623 Ordinary shares at fair value to satisfy the initial consideration payable.

The transaction included an earn-out and an indemnification holdback, both of which are liability-classified contingent consideration. Management are required to assess and update the fair value of both at each reporting date. At 31 December 2020, the values were as follows: earn-out £20.91m ($26.69m) and indemnification holdback £2.44m ($3.11m). In light of trading since 1 January 2021, management have reassessed these and concluded as follows:

(i)   The earn-out contingent consideration was subject to NESF meeting certain EBITDA thresholds across assessment periods 1 June 2020 to 31 May 2021 ("earn-out AP1") and 1 June 2021 to 31 May 2022 ("earn-out AP2"). As management had anticipated, the required threshold for earn-out AP1 was not met. For earn-out AP2, the forecast scenarios were revisited at 31 December 2021. In light of the continued impact of the Covid-19 pandemic on trading, management have concluded that this threshold would also not be met and therefore no earn-out contingent consideration would be payable. As a result, a gain on revaluation of £20.91m is recognised in other gains/(losses) in the consolidated income statement (see note 9).

(ii) On 25 November 2021, the indemnification holdback consideration was approved for release and the Company issued and admitted an additional 403,593 Ordinary shares at a fair value of £3.14m. As a result, a loss on settlement of £0.7m is recognised in other gains/(losses) in the consolidated income statement (see note 9).

31.9. Sanne Private Client Business ("Sanne Private Clients")

On 1 July 2020, JTC acquired 100% of Sanne Private Clients, the private client services division of Sanne PLC ("Sanne"), the division providing specialist expertise in fiduciary, administration and family office services.

The consideration payable for the shares was a completion payment of £12m less a non-transferred client adjustment; a net balance due for working capital would also be payable/receivable when completion accounts were available. Following an assessment of the actual transferring revenue at completion (including any subsequently transferred clients), the purchase price adjustment for non-transferring clients reduced the fair value of total consideration to £9.12m. During 2021, following agreement between both parties of the net balance due for working capital, £0.465m was received by JTC, reducing the total cash consideration to £8.65m.

31.10. Exequtive Partners S.A. ("Exequtive")

On 8 April 2020, the Company issued and admitted an additional 560,707 Ordinary shares at fair value to satisfy the final earn-out consideration payable.

32. Investments

The Group's interest in other entities includes an associate and an investment held at cost.

An associate is an entity in which the Group has significant influence, but not control or joint control, over the financial and operating policies. The Group's interest in an equity-accounted investee solely comprises of an interest in an associate.

Investments in associates are accounted for using the equity method. Under the equity method, the investment in an associate is initially recognised at cost, which includes transaction costs. Subsequent to initial recognition, the carrying amount of the investment is adjusted to recognise the Group's share of post-acquisition profits or losses in the consolidated income statement within EBITDA, and the Group's share of movements in other comprehensive income of the investee in other comprehensive income. Unrealised gains and losses resulting from transactions between the Group and the associate are eliminated to the extent of the interest in the associate.

The carrying amount of equity-accounted investments is tested for impairment in accordance with the policy described in note 21.

Where the Group has an interest in an entity but does not have significant influence, the investment is held at cost.

The following table details the associate and an investment the Group holds as at 31 December 2021. The entities listed have share capital consisting solely of Ordinary shares, which are held directly by the Group. The country of incorporation is also their principal place of business, and the proportion of ownership interest is the same as the proportion of voting rights held.

Name of entity

Country of

incorporation

Nature of

relationship

Measurement

method

% of ownership interest

 

Carrying amount

2021

%

2020

%

2021

£'000

2020

£'000

Kensington International Group Pte. Ltd

Singapore

Associate(i)

Equity method

42

42

 

1,847

1,483

Harmonate Corp.

US

Investment(ii)

Cost method

16

16

 

791

791

Total investments

 

 

 

 

 

 

2,638

2,274

(i)    Kensington International Group Pte. Ltd ("KIG") provides corporate, fiduciary, trust and accounting services and is a strategic partner of the Group, providing access to new clients and markets in the Far East.

(ii)   Harmonate Corp. ("Harmonate") provides fund operation and data management solutions to clients in the financial services industry.

The summarised financial information for KIG, which is accounted for using the equity method, is as follows:

Summarised income statement

2021

£'000

2020

£'000

Revenue

6,184

5,336

Gross profit

5,217

4,327

 

 

 

Profit for the year

654

947

 

Summarised balance sheet

2021

£'000

2020

£'000

Total non-current assets

637

667

Total current assets

6,043

5,134

Total assets

6,680

5,801

 

 

 

Total current liabilities

3,547

3,529

Net assets less current liabilities

3,133

2,272

 

Reconciliation of summarised financial information

2021

£'000

2020

£'000

Opening net assets

2,272

1,423

Profit for the year

654

947

Foreign exchange differences

207

(98)

Closing net assets

3,133

2,272

Group's share of closing net assets

1,325

961

Goodwill

522

522

Carrying value of investment in associate

1,847

1,483

 

 

 

Impact on consolidated income statement

£'000

Balance at 1 January 2020

1,124

Share of profit of equity-accounted investee

359

Balance at 31 December 2020

1,483

 

 

Balance at 1 January 2021

1,483

Share of profit of equity-accounted investee

364

Balance at 31 December 2021

1,847

33. Subsidiaries

The Group's subsidiaries at 31 December 2021 which, in the opinion of management, principally affect the profit or the net assets of the Group are listed below. Unless otherwise stated, the Company owns 100% of share capital consisting solely of Ordinary shares, and the proportion of ownership interests held equals the voting rights held by the Group. The country of incorporation is also their principal place of business.

Where the shareholding and voting rights are equal to or less than 50%, management have concluded that it is appropriate to include these entities as subsidiaries in the consolidation, in accordance with the basis of consolidation accounting policy described in note 3.2. The interests in subsidiaries not 100% owned are attributed to the Company and no minority interest is recognised.

Name of subsidiary

Country of incorporation

and place of business

Activity

Holding

JTC Fund Solutions (Jersey) Limited

Jersey

Trading

100

JTC Group Holdings Limited

Jersey

Holding

100

JTC Group Limited

Jersey

Head office services

100

JTC (Jersey) Limited

Jersey

Trading

100

JTC Fund Services (UK) Limited

United Kingdom

Trading

100

JTC Group Holdings (UK) Limited

United Kingdom

Holding

100

JTC Trust Company (UK) Limited

United Kingdom

Trading

100

JTC UK (Amsterdam) Limited

United Kingdom

Holding

100

JTC (UK) Limited

United Kingdom

Trading

100

JTC Miami Corporation

US

Trading

50

JTC Trustees (USA) Ltd

US

Trading

100

JTC Fund Solutions (Guernsey) Limited

Guernsey

Trading

100

JTC Global AIFM Solutions Limited

Guernsey

Trading

100

JTC Fund Solutions RSA (Pty) Ltd

South Africa

Trading

100

JTC Fiduciary Services (Singapore) Pte Limited

Singapore

Trading

100

JTC (BVI) Limited

British Virgin Islands

Trading

100

Exequtive Management S.à r.l.

Luxembourg

Trading

49

Exequtive Partners S.A.

Luxembourg

Trading

100

Exequtive Services S.à r.l.

Luxembourg

Trading

100

JTC Global AIFM Solutions SA

Luxembourg

Trading

100

JTC Luxembourg Holdings S.à r.l.

Luxembourg

Holding

100

JTC (Luxembourg) S.A.

Luxembourg

Trading

100

JTC Signes S.à r.l.

Luxembourg

Trading

100

JTC Signes Services SA

Luxembourg

Trading

100

JTC (Suisse) SA

Switzerland

Trading

100

JTC Trustees (Suisse) Sàrl

Switzerland

Trading

100

JTC Trustees (IOM) Limited

Isle of Man

Trading

100

Global Tax Support B.V. (i)

Netherlands

Trading

-

JTC Holdings (Netherlands) B.V.

Netherlands

Holding

100

JTC Institutional Services Netherlands B.V.

Netherlands

Trading

100

JTC (Netherlands) B.V.

Netherlands

Trading

100

JTC Trust Company (New Zealand) Limited

New Zealand

Trading

100

JTC (Cayman) Limited

Cayman Islands

Trading

100

JTC Fund Services (Cayman) Ltd

Cayman Islands

Trading

100

JTC Fiduciary Services (Mauritius) Limited

Mauritius

Trading

100

JTC Corporate Services (DIFC) Limited

Dubai

Trading

100

JTC Corporate Services (Ireland) Limited

Ireland

Trading

100

JTC Registrars Limited

Guernsey

Trading

100

JTC Registrars (UK) Limited

UK

Trading

100

JTC USA Holdings, Inc.

US

Trading

100

JTC Employer Solutions Limited

Jersey

Trading

100

JTC Employer Solutions (Guernsey) Limited

Guernsey

Trading

100

JTC Americas Holdings, LLC

US

Holding

100

Segue Partners, LLC

US

Trading

100

perfORM Due Diligence Services Limited

United Kingdom

Trading

100

SALI Fund Management, LLC

US

Trading

100

Essential Fund Services, LLC

US

Trading

100

INDOS Financial Limited

United Kingdom

Trading

100

INDOS Financial (Ireland) Limited

Ireland

Trading

100

Ballybunion Capital Limited

Ireland

Trading

95

(i)    As the parent company JTC Group Holdings (UK) Limited has a call option to purchase Global Tax Support B.V. for €1 from its parent, management consider it has control of this entity and it has, therefore, been consolidated.

SECTION 8 - OTHER DISCLOSURES

34. EARNINGS PER SHARE

Basic Earnings Per Share

The calculation of basic Earnings Per Share is based on the profit for the year divided by the weighted average number of Ordinary shares for the same year.

Diluted Earnings Per Share

The calculation of diluted Earnings Per Share is based on basic Earnings Per Share after adjusting for the potentially dilutive effect of Ordinary shares that have been granted.

Underlying Basic Earnings Per Share

The calculation of underlying basic Earnings Per Share is based on basic Earnings Per Share after adjusting profit for the year for non-underlying items and to remove the amortisation of acquired intangible assets and associated deferred tax, amortisation of loan arrangement fees and unwinding of net present value discounts.

The Group calculates basic, diluted and underlying basic Earnings Per Share. The results can be summarised as follows:

 

Note

2021

Pence

2020

Pence

Basic EPS

34.1

 20.49

 9.02

Diluted EPS

34.2

 20.21

 8.96

Underlying basic EPS

34.3

 25.55

 21.77

34.1. Basic Earnings Per Share

 

2021

£'000

2020

£'000

Profit for the year

26,648

10,533

 

 

No. of shares

(thousands)

No. of shares

(thousands)

Issued Ordinary shares at 1 January

119,097

111,821

Effect of shares issued to acquire business combinations

362

4,947

Effect of movement in treasury shares held

850

(31)

Effect of placing

9,735

-

Weighted average number of Ordinary shares (basic):

130,044

116,737

Basic EPS

 20.49

 9.02

34.2. Diluted Earnings Per Share

 

2021

£'000

2020

£'000

Profit for the year

26,648

10,533

 

 

Note

No. of shares

(thousands)

No. of shares

(thousands)

Weighted average number of Ordinary shares (basic)

34.1

130,044

116,737

Effect of share-based payments issued

 

1,796

858

Weighted average number of Ordinary shares (diluted):

 

131,840

117,594

Diluted EPS

 

 20.21

 8.96

 

34.3. Underlying basic Earnings Per Share

 

Note

2021

£'000

2020

£'000

Profit for the year

34.1

26,648

10,533

Non-underlying items

7

(2,875)

8,893

Amortisation of customer relationships, acquired software and brands

21

8,809

6,445

Amortisation of loan arrangement fees

10

1,501

603

Unwinding of net present value discounts

 

586

38

Temporary differences on amortisation of acquired intangible assets

11

(1,446)

(1,102)

Adjusted underlying profit for the year

 

33,223

25,410

 

 

Note

No. of shares

(thousands)

No. of shares

(thousands)

Weighted average number of Ordinary shares (basic)

34.1

130,044

116,737

Underlying basic EPS

 

 25.55

 21.77

Underlying basic EPS is an alternative performance measure which reflects the underlying activities of the Group excluding specific non-recurring items.

The definition of underlying basic Earnings Per Share has been updated to include amortisation for acquired software and brand intangibles and to remove non-underlying foreign exchange losses/(gains) which management consider require adjustment in order to reflect the Group's underlying trading. Prior to these adjustments, underlying basic Earnings Per Share was 24.26p (2020: 22.49p).

35. CASH FLOW INFORMATION

35.1. Cash generated from operations

 

2021

£'000

2020

£'000

Operating profit

8,992

21,031

 

 

 

Adjustments:

 

 

Depreciation of property, plant and equipment

7,157

5,884

Amortisation of intangible assets

10,434

7,962

Share-based payment expense

1,708

1,082

EIP share-based payment expense

13,778

-

Share of profit of equity-accounted investee

(364)

(359)

Operating cash flows before movements in working capital

41,705

35,600

 

 

 

Net changes in working capital:

 

 

Increase in receivables

(9,972)

(1,226)

Decrease in payables

(1,036)

(5,377)

Cash generated from operations

30,697

28,997

35.2. Non-underlying items within cash generated from operations

 

 

2021

£'000

2020

£'000

Cash generated from operations

30,697

28,997

Non-underlying items:

 

 

Capital distribution from EBT

581

2,641

Acquisition and integration

6,440

3,108

Revision of ICS operating model

421

401

Other

263

143

Total non-underlying items within cash generated from operations

7,705

6,293

Underlying cash generated from operations

38,402

35,290

 

35.3. FINANCING ACTIVITIES

Changes in liabilities arising from financing activities:

 

Lease

liabilities

due within

one year

£'000

Lease

liabilities

due after

one year

£'000

Borrowings

due within

one year

£'000

Borrowings

due after

one year

£'000

Total

£'000

At 1 January 2020

2,875

28,616

508

86,681

118,680

Cash flows:

 

 

 

 

 

Acquired on acquisition

743

2,293

3,070

-

6,106

Drawdowns

-

-

-

16,425

16,425

Repayments

(132)

(4,012)

(883)

-

(5,027)

Other non-cash movements(i)

729

12,258

(239)

1,270

14,018

At 31 December 2020

4,215

39,155

2,456

104,376

150,202

Cash flows:

 

 

 

 

 

Acquired on acquisition

324

1,018

-

-

1,342

Drawdowns

-

-

-

176,662

176,662

Repayments

(74)

(5,748)

(2,434)

(125,099)

(133,355)

Other non-cash movements(i)

(285)

4,775

(22)

(3,361)

1,107

At 31 December 2021

4,180

39,200

-

152,578

195,958

(i)    Other non-cash movements include the capitalisation and amortisation of loan arrangement fees, foreign exchange movement, additions and disposals of lease liabilities relating to right-of-use assets and the unwinding of net present value discounts.

35.4. Net debt

 

 

Note

2021

£'000

2020

£'000

Bank loans

18

(152,578)

(104,376)

Other loans

18

-

(2,456)

Trapped cash(i)

 

(3,903)

(2,444)

Loans receivable from employees

15

3

2,164

Less: cash and cash equivalents

 

39,326

31,078

Total net debt

 

(117,152)

(76,034)

(i)    Trapped cash represents the minimum cash balance to be held to meet regulatory capital requirements.

36. SHARE-BASED PAYMENTS

The Company operates equity-settled share-based payment arrangements under which services are received from eligible employees as consideration for equity instruments. The total amount to be expensed for services received is determined by reference to the fair value at grant date of the share-based payment awards made, including the impact of any non-vesting and market conditions.

The fair value determined at the grant date is expensed on a straight-line basis over the vesting period, based on management's estimate of equity instruments that will eventually vest. At each balance sheet date, management revises its estimate of the number of equity instruments expected to vest as a result of the effect of non-market based vesting conditions. The impact of the revision of the original estimates, if any, is recognised in the consolidated income statement such that the cumulative expense reflects the revised estimate, with a corresponding adjustment to equity reserves.

36.1. Description of share-based payment arrangements

The Group has implemented and made awards to eligible employees under three equity-settled share-based payment plans; it also continues to make awards when employees join the business, for the retention of key employees as part of business combinations and to incentivise key employees. Details of the share plans are as follows:

Employee Incentive Plan

JTC has an ongoing commitment to the concept of shared ownership and adopted the EIP upon listing on the London Stock Exchange in March 2018. The EIP is designed to recognise and reward long-term performance across the whole Group and its alignment of employees' and shareholders' interests is linked to multi-year business plans. All permanent employees of the Group (excluding all Executive Directors of JTC PLC) are eligible to be granted an award under the EIP at the discretion of the Remuneration Committee.

On 22 July 2021, following the conclusion of the Odyssey business plan (which ran from the IPO until the end of 2020), JTC PLC granted 3,104,007 shares to employees of the Company. Each award is separated into two tranches: 50% vests at the grant date ("Tranche one") and 50% is a deferred award in the form of a conditional right to receive shares on the first anniversary of grant, subject to the achievement of the applicable performance conditions ("Tranche two"). Tranche one is expensed in full upon grant and Tranche two will be expensed over the one year vesting period.

Details of movements in the number of shares are as follows:

 

No. of shares

(thousands)

2021

£'000

No. of shares

(thousands)

2020

£'000

Granted

3,104

19,372

-

-

Exercised

(1,545)

(9,652)

-

-

Forfeited

(80)

(480)

-

-

Outstanding at the end of the year

1,479

9,240

-

-

Performance share plan

Executive Directors and senior managers may receive awards of shares, which may be granted annually under the PSP. The maximum policy opportunity award size under the PSP for an Executive Director is 150% of annual base salary; however, the plan rules allow the Remuneration Committee the discretion to award up to 250% of annual base salary in exceptional circumstances. The Remuneration Committee determines the appropriate performance measures, weightings and targets prior to granting any awards. Performance conditions specific to each Executive Director include Total Shareholder Return relative to a relevant comparator group and the Company's absolute underlying Earnings Per Share performance.

The following table provides details for each PSP award:

Plan name

Performance period

Grant date

Vest date

No. of shares

(thousands)

Fixed amount

at fair value

£'000

PSP 2018

14 March 2018 to
31 December 2020

18 September 2018

15 April 2021

157

534

PSP 2019

1 January 2019 to
31 December 2021

3 April 2019

(i)

254

614

PSP 2020

1 January 2020 to
31 December 2022

23 April 2020

(i)

213

825

PSP 2021

1 January 2021 to
31 December 2023

20 May 2021

(i)

283

1,507

(i)    The vesting of awards is subject to continued employment and achievement of performance conditions over the specified period. The awards will vest for each PSP when the conditions have been measured for the relevant performance period.

Details of movements in the number of shares are as follows:

 

No. of shares

(thousands)

2021

£'000

No. of shares

(thousands)

2020

£'000

Outstanding at the beginning of the year

607

1,930

411

1,148

Awarded

283

1,507

213

825

Exercised

(153)

(519)

-

-

Forfeited

(4)

(15)

(17)

(43)

Outstanding at the end of the year

733

2,903

607

1,930

Deferred bonus share plan

Certain employees at Director level may be eligible for an annual bonus designed to incentivise high performance based on financial and non-financial performance measures. In line with market practice, a portion of the bonus due, as determined by the Remuneration Committee, may be deferred into shares before it is paid.

Depending on the performance of the Group, consideration is given annually by the Remuneration Committee to the granting of share awards under DBSP to eligible Directors as part of the annual bonus award for performance during the preceding financial year end.

The following table provides details for each DBSP award:

Plan name

Performance period

Grant date

Vest date(i)

No. of shares

(thousands)

Fixed amount

£'000

DBSP 1

Year-ended
31 December 2018

3 April 2019

3 April 2021

50

149

DBSP 2

Year-ended
31 December 2019

23 April 2020

23 April 2022

73

313

DBSP 3

Year-ended
31 December 2020

14 April 2021

1 January 2023

56

364

DBSP 4

Year-ended
31 December 2021

(ii)

1 January 2024

(ii)

469

(i)    The vesting of awards is subject to continued employment up to the vest date.

(ii)   The date of vest will be determined following the release of the annual report for the relevant performance period.      

Details of movements in the number of shares are as follows:

 

No. of shares

(thousands)

2021

£'000

No. of shares

(thousands)

2020

£'000

Outstanding at the beginning of the year

108

411

45

137

Awarded

56

364

73

313

Exercised

(42)

(127)

-

-

Forfeited

(8)

(34)

(10)

(39)

Outstanding at the end of the year

114

614

108

411

Other awards

The Group has continued to make awards to employees joining the business. The grant date of each award is the start date of employment, with the fair value being a fixed amount stated in an employee's offer letter. The number of shares awarded is determined by the market value at the grant date. The awards will vest on the second anniversary of the grant date subject to continued employment.

Details of movements in the number of shares are as follows:

 

No. of shares

(thousands)

2021

£'000

No. of shares

(thousands)

2020

£'000

Outstanding at the beginning of the year

102

398

26

95

Awarded(i)

217

1,933

82

328

Exercised

(57)

(219)

(6)

(25)

Forfeited

(2)

(10)

-

-

Outstanding at the end of the year

260

2,102

102

398

(i)    As part of the RBC cees acquisition, the Group inherited historic share awards for the eligible Directors of the acquired entities. These awards are settled in cash or a combination of 50% cash and 50% equity; as such they are recorded as a liability with the fair value being remeasured at each reporting period end. At the date of acquisition, 141,875 shares with a fair value of £0.88m were awarded.

36.2. Expenses recognised during the year

The equity-settled share-based payment expenses recognised during the year, per plan and in total, are as follows:

 

2021

£'000

2020

£'000

PSP awards

988

630

DBSP awards

334

242

Other awards

842

210

Share-based payments

2,164

1,082

EIP share-based payments(i)

13,778

-

Total share-based payments expense

15,942

1,082

(i)    The total EIP expense of £13.92m, as disclosed in note 5, included £0.14m of cash awards.

37. CONTINGENCIES

The Group operates in a number of jurisdictions and enjoys a close working relationship with all of its regulators. It is not unusual for the Group to find itself in discussion with regulators in relation to past events. With any such discussions there is inherent uncertainty in the ultimate outcome but the Board currently does not believe that any such current discussions are likely to result in an outcome that would have a material impact upon the Group.

38. FOREIGN CURRENCY

The individual financial statements of each Group company are presented in the currency of the primary economic environment in which it operates (its functional currency). For the purpose of the consolidated financial statements, the results and financial position of each Group company are expressed in pounds sterling, which is the functional currency of the Company and the presentation currency for the consolidated financial statements.

In preparing the financial statements of the individual companies, transactions in currencies other than the entity's functional currency (foreign currencies) are recognised at the rates of exchange prevailing on the dates of the transactions.

At each balance sheet date, monetary assets and liabilities that are denominated in foreign currencies are retranslated at the rates prevailing at that date. Exchange differences are recognised in the consolidated income statement in the year in which they arise.

For the purpose of presenting consolidated financial statements, the assets and liabilities of the Group's operations with a functional currency other than pounds sterling are translated at exchange rates prevailing on the balance sheet date. Income and expense items are translated at the average exchange rates for the year, unless exchange rates fluctuate significantly during that year, in which case the exchange rates at the date of transactions are used. Goodwill and other intangible assets arising on the acquisition of a foreign operation are treated as assets and liabilities of the foreign operation and are translated at the closing rate. Exchange differences arising, if any, are recognised in other comprehensive income and accumulated in equity in the translation reserve.

39. RELATED PARTY TRANSACTIONS

Balances and transactions between the Company and its subsidiaries, which are related parties, have been eliminated on consolidation and are not disclosed in this note.

39.1. Key management personnel

The Group has defined key management personnel as Directors and members of senior management who have the authority and responsibility to plan, direct and control the activities of the Group. The remuneration of key management personnel in aggregate for each of the specified categories is as follows:

 

2021

£'000

2020

£'000

Salaries and other short-term employee benefits

2,723

2,199

Post-employment and other long-term benefits

133

130

Share-based payments

1,066

625

EIP share-based payments

418

-

Total payments

4,340

2,954

39.2. Other related party transactions

Loans receivable from employees, associates and other related undertakings are disclosed in note 15.

The Group's associate, KIG (see note 32), has provided £802k of services to Group entities during the year (2020: £838k).

The Group has an interest in Harmonate (see note 32); the Group has provided £76k of services (2020: £273k) to it and received £155k of services (2020: £nil) from it during the year.

39.3. Ultimate controlling party

JTC PLC is the ultimate controlling party of the Group.

40.        Events occurring after the reporting period

There are no material subsequent events to disclose other than those already noted in the consolidated financial statements.

 

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