22 June 2023

XPS Pensions Group plc

Delivering another year of record growth

Final results for the year ended 31 March 2023

XPS Pensions Group plc ("XPS" or the "Group"), the Pensions Advisory and Administration business, is pleased to announce its full year results for the year ended 31 March 2023 ("FY 2023").

Financial Highlights:

⁽¹⁾        Management responsibilities and operations for a small part of the business moved during the year from the Pensions division to Administration. Related revenue was £1.5 million, and the prior year (which has been restated) was also £1.5 million.

⁽²⁾        Adjusted measures exclude the impact of acquisition related amortisation, share based payments, exceptional costs and the fair value adjustment to contingent consideration

·      Strong client demand, inflationary fee increases and bolt on M&A drove 20% growth in Group revenues to £166.6 million (organic growth of 17% year on year)

·      Operational gearing coming through with adjusted EBITDA ⁽²⁾ up 24% YoY, ahead of revenue growth despite inflationary pressures in our cost base

·      Highest YoY growth in Pensions Actuarial Consulting and Investment Consulting since listing - 24% and 31% respectively - driven by inflationary fee increases, strong client demand due to regulatory changes and market volatility

·      Pensions Administration revenue grew 10% YoY driven by new client wins and ongoing project work.  Increased inflation partially reflected in contractual revenue growth, but lag delays full impact into FY24

·      SIP revenues up 54% with strong underlying sales, full year impact of the MJF acquisition and increase in the bank base rate

·      NPT revenues flat YoY with AUM at 31 March 2023 over £1.4 billion

·      Strong balance sheet supported by highly cash generative platform - operating cash-flow conversion of 99%

·      Net debt/adjusted EBITDA⁽²⁾ of 1.38x at 31 March 2023 (31 March 2022: 1.74x)

·      Statutory profit before tax up 13% YoY

·      Adjusted diluted EPS⁽²⁾ up 24% YoY to 12.6p

·      Continuing with progressive dividend policy - final Dividend of 5.7p resulting in total dividends for the year of 8.4p up 17% YoY

Operational Highlights:

·      Sixth consecutive year of growth since listing - performance underscores the non-cyclical and resilient nature of the business

·    Strong growth in higher margin value-add services including Risk Transfer, DC Consulting, Scheme Secretarial and Corporate Consulting - areas where we have significantly bolstered our capabilities in the last two years

·      Good new business performance - winning new clients across all our business units

·      New administration platform, which will drive operational efficiency and new business opportunities, developed during the year and successfully went live in June 2023, on time and on budget

·      Delivered on our M&A strategy with the acquisition of Penfida, boosting our capability in employer covenant advice, a growing area in which our clients need support

·      Agile response to LDI crisis with strong client feedback and an enhanced reputation, bolstering a strong new business pipeline in Investment Consulting

·   Strong brand, enhanced by multiple industry awards - 'Pensions Actuarial Consulting Firm of the Year', 'Investment Consulting Firm of the Year' and 'Third Party Administrator of the Year' won in September 2022 - the first time a firm has won all three awards simultaneously

·      Strong employee-centric culture, with an employee net promoter score of +33, increased from +5 in FY 2022.  Also named as one of the Best Places to Work 2023 by The Sunday Times

·      Continued focus on sustainability within the business, notable milestones achieved:

o  Fully carbon neutral for the second year in a row (scope 1, 2 and 3 emissions)

o  Retained signatory to the FRC's Stewardship Code

Paul Cuff, Co-CEO of XPS Pensions Group, commented:

"We are pleased with the Group's performance, and proud of our people.  It was a very busy year indeed, as we helped our clients to navigate volatile financial markets, including of course the gilts crisis in September and October last year.  Our people worked incredibly hard and provided excellent support throughout, and we received fantastic feedback from our clients.  With our reputation enhanced we are continuing to see excellent opportunities to grow our client base in this area.

It was also a year in which many of the investments we have made in the Group's services really paid off, as we grew strongly and gained real market traction in areas such as risk transfer work and DC consulting.  This, combined with new client wins coming onboard, and against the backdrop of higher contractual inflationary fee increases coming through, drove a record year of growth for the firm.

We were delighted to welcome new colleagues to the Group through the acquisition of Penfida, which enhanced our existing capability in the area of employer covenant advice.  This is in line with our strategy to offer a market leading service across the full range of support that our clients need."

Ben Bramhall, Co-CEO of XPS Pensions Group, commented:

"The delivery of our new administration platform, Aurora, is a big milestone for our Pensions Administration business.  It was delivered on time and on budget and is now live.  We are excited as Aurora is truly cutting edge and will deliver a better experience for our clients and their members.  It is already driving new business opportunities for us in this area.

We remain a truly employee-centric organisation and were very proud of both our staff survey results, with an employee net promoter score of +33, and to be recognised in the Sunday Times annual survey as one of the best big companies to work for in the UK.

Our culture is set by everyone at our firm, and we would like to thank all of our people for the way they look after each other and our clients.  We are proud of what they have achieved in what has been a brilliant year for XPS."

Outlook

The FY 2023 results demonstrate the non-cyclical, resilient and predictable nature of our business and the opportunities for growth.  Our brand has strengthened further in the year with multiple awards, we have won further new mandates and have achieved high levels of client and staff satisfaction. The investments we have made into high-growth, high-margin areas are increasingly being reflected in our earnings.

We expect the demand for our services to remain high as we help our clients navigate the complex and evolving regulatory backdrop as well as economic and financial market developments.  We have continued to grow market share, but with this still under 10% there are continued opportunities to grow, supported by both market and regulatory tailwinds. We expect the operational gearing that has come through this year to be a continued feature of our results in the future.

The Group has made a strong start to the new financial year with continued high levels of demand for our services particularly within Advisory and further success in winning new business.  We remain confident in delivering against our expectations for the current year.

-Ends-

For further information, contact:

Notes to Editors:

XPS Pensions Group is a leading pension consulting and administration business focussed on UK pension schemes. XPS combines expertise, insight and technology to address the needs of over 1,500 pension schemes and their sponsoring employers on an ongoing and project basis. We undertake pensions administration for over 1 million members and provide advisory services to schemes and corporate sponsors in respect of schemes of all sizes, including 81 with assets over £1bn.

Forward Looking Statements

This announcement may include statements that are forward-looking in nature. Forward-looking statements involve known and unknown risks, assumptions, uncertainties and other factors which may cause the actual results, performance or achievements of the Group to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements. These forward-looking statements are made only as at the date of this announcement. Nothing in this announcement should be construed as a profit forecast. Except as required by applicable law, regulation or stock exchange rules, the Group undertakes no obligation to update, revise or change any forward-looking statements to reflect events or developments occurring after the date such statements are published.

The release, publication, transmission or distribution of this announcement in jurisdictions other than the United Kingdom may be restricted by law and therefore persons in such jurisdictions into which this announcement is released, published, transmitted or distributed should inform themselves about and observe such restrictions. Any failure to comply with the restrictions may constitute a violation of the securities laws of any such jurisdiction.

Co-Chief Executives' review

Sixth consecutive year of growth

A year of record revenues, record dividends, a strategic bolt-on acquisition, multiple award wins, a strong culture with excellent employee feedback sustainably delivered including carbon neutrality - shareholders would be forgiven for thinking they are reading last year's Co-CEO Statement. There's even another five-year anniversary to mention. It is true all the above were milestones achieved during the year ended 31 March 2022 but 12 months on and many of those same achievements have been repeated, and in many cases bettered. This is testament to the successful execution of the strategy we have pursued since we listed to deliver our societal purpose.

Record revenues: the year ended 31 March 2023 saw a record 20% increase in year on year revenues to £166.6 million, of which 17% was organic growth.

Record dividends: the Board is proposing a 17% increase in the full-year payout to 8.4p per share.

Strategic acquisition: this year we acquired Penfida, a leading covenant adviser to UK pension funds. Just as the previous year's acquisition of Michael J Field brought scale to our SIP division, Penfida has done the same for our existing employer covenant practice. Together with our award-winning Administration, Actuarial and Investment Advisory divisions, XPS is now a one-stop shop of scale for all services needed by pension trustees and sponsoring employers.

Multiple awards: we won arguably the three most important awards at the 2022 Professional Pensions' UK Pensions Awards - Third Party Administrator of the Year; Actuarial and Pensions Consultancy of the Year (second consecutive year); and Investment Consultancy of the Year (second consecutive year). This represents the first time all three of these categories have been won outright by one company in the same year - third-party validation of our continued excellence in client service and innovation. Our SIP business also won Best SIP Provider at the Moneyfacts awards.

Carbon neutral: for the second year in a row, our activities have been carbon neutral, just one example of how we strive to do business sustainably. This has been achieved through a combination of a reduction in our direct footprint and the purchase of high-quality carbon offsets. Fostering a strong and caring culture is another, and with this in mind it is encouraging to note that 98% of our people rate XPS a good place to work.

Fifth anniversary: 2023 marks the fifth anniversary of the launch of XPS as a new brand in the market with clear objectives to be the best for people and for clients.

By developing content, investing in people and innovating consistently, our brand has grown stronger each year ever since, so that five years on we are reporting revenues of £166.6 million. Furthermore, this 60% revenue growth has been achieved during a period which included the pandemic, heightened macroeconomic uncertainty and decades-high inflation, evidence of our non-cyclical, all-weather end markets - our defined benefit (DB) and defined contribution (DC) pension scheme clients require our advice and services regardless of the prevailing economic environment.

The progress made is also down to our people. Without their commitment and expertise, becoming the first company to win all three key awards at the 2022 Professional Pensions' UK Pensions Awards while reporting a sixth consecutive year of growth would have been impossible.

Record financial performance

Total Group revenues for the year ended 31 March 2023 came in at a record £166.6 million, a 20% increase on FY 2022's £138.6 million. Of this, 17% of the growth was organic.

The record revenues represent a step-change compared to the mid-to-high single-digit revenue growth we have reported for each of the years since our listing. This is partly down to higher inflation being passed through to clients and onboarding of new client wins but is also due to a considerable amount of regulatory and market change - the two chief drivers of activity in our client base. The record revenue performance can also be attributed to the scaling up of our platform into high-growth areas - the product of investment in staff, technology and acquisitions to respond to these market and regulatory changes. Because of this, we are now able to service larger pensions schemes and offer a wider range of value-add services. The increased scale of our capabilities is being reflected in our financial performance, a trend we expect to continue going forward.

In the past, the investments we have made in our business have meant growth in earnings has not outpaced revenues. Last year, we reported a significant narrowing in this historical revenue and earnings gap. We also stated that we expected this metric to improve further in the years ahead as our efficiency drive and investment into higher-growth areas increasingly translated into higher margins. This has proven to be the case with FY 2023 adjusted EBITDA increasing 24% to £42.4 million (FY 2022: £34.1 million); statutory profit before tax rising 13% to £19.1 million (FY 2022: £16.9 million); and adjusted diluted EPS up 24% to 12.6p (FY 2022: 10.2p). The improved profitability and continued confidence in future prospects has enabled us to propose a 17% increase in the full-year dividend, another record.

Divisionally, Advisory (comprising Pensions Actuarial & Consulting and Pension Investment Consultancy) was the top performer with full-year revenues growing 26% to £95.4 million (FY 2022: £75.9 million), while Administration increased revenues 10% to £57.5 million (FY 2022: £52.3 million).

Pension Actuarial & Consulting revenues grew 24% to £77.4 million (FY 2022: £62.2 million) thanks to inflationary fee increases, new client wins such as BT Group plc contributing for a full year and elevated levels of activity centred around regulatory/market-driven dynamics. Risk transfer work was a stand-out performer with revenues rising sharply to £6.4 million compared to £1.5 million the previous year thanks to big new mandate wins. This follows the appointment of a Head of Risk Settlement and further team hires in 2022.

Pension Investment Consulting has also been a beneficiary of new business wins. Increased demand from clients for support in navigating regulatory and financial market upheaval (including the gilts crisis in autumn 2022) has also been a tailwind, as has inflation-aligned fee increases. In all, YoY revenues grew 31% YoY to £18.0 million (FY 2022: £13.7 million).

Pension Administration revenues rose 10% to £57.5 million (FY 2022: £52.3 million) helped by new client wins including Peugeot and BAA and a full year of our outsourced contract with IBM. The wins saw the number of members we have under administration surpass the one million mark for the first time. We see further growth opportunities within Administration and continue to invest in our capability here. For example, this year we successfully developed our own proprietary Administration platform which, as well as giving us greater control, will drive efficiencies and differentiate us as we look to win further mandates.

SIP revenues benefited from a full-year contribution from the acquisition of the Michael J Field SIPP and SSAS books, as well as strong organic growth and the higher bank base rate. Overall, SIP revenues rose 54% to £9.4 million (FY 2022: £6.1 million). We continue to expand the distribution channels for our SIPP offering and we were recently added to the panel of recommended SIPP providers for St James' Place, one of the UK's leading financial advisers. We view our inclusion on the panel as a major endorsement of our SIPP offering.

National Pensions Trust (NPT), our defined contribution (DC) master trust, posted another year of growth in assets under management (AUM) which grew 8% to £1.4 billion (FY 2022: £1.3 billion), while revenues came in flat at £4.3 million (FY 2022: £4.3 million) driven by lower asset prices early in the financial year as well as competitive price pressures. Growth in AUM was driven by an increase in client numbers to 152 during the year but was suppressed a little by reductions in asset prices.

Four core strategic pillars to capture growth in our all-weather markets

Our markets are driven by regulatory and market change rather than by economic cycles - pension schemes require support to navigate the ever-changing regulatory/market landscape, which leads to increased demand for services and in turn market growth. Our markets are therefore all-weather and to capture the regulatory and market-driven growth, we have in place four core strategic pillars:

1.   Regulatory change as a driver of activity

2.   Growth through expanding services

3.   Growing market share

4.   Growth through M&A

Every time a regulatory change is made, pension schemes require bespoke advice and guidance on how the change affects them. Examples of this in action include the November 2020 GMP equalisation ruling which stipulated that companies rectify the unequal treatment of men and women who were members of pension schemes in the 1980s and 1990s. The ruling triggered a work stream that did not exist prior to November 2020 and will take years to complete. Further regulatory change is on the horizon. The Single Code of Practice, which is focused on trustees' governance requirements, is expected to come into force later this year or in early 2024.

Compared to regulations, market-driven change has been relatively muted in recent years thanks to the prevalence of low interest rates. Low interest rates have had a largely negative impact on schemes' financial positions, but the stable environment meant strategy/advice did not require frequent resets. All this changed in 2022 with aggressive rate hikes to tackle inflation causing a paradigm shift in interest rates.

By reducing pension scheme liabilities, higher interest rates are generally positive for pension schemes - we estimate in aggregate schemes moved from a deficit of around £300 billion at the start of 2022 to a surplus of around £60 billion by the end of the year. This was a positive move for many of our clients, but one that has generated much work for pension schemes. Clients have needed wide-ranging advice on the consequences for them specifically, with many seeking support to lock in improvements through changes in their investment strategy. In some cases employers have sought to reduce their cash commitments towards deficits. This has caused a major uptick in work, as all of our clients have needed to reassess the 'journey plans' they have in place. We expected to remain busy supporting clients for the foreseeable future, particularly against the backdrop of evolving regulations.

Another consequence of the increase in long-term interest rates is that bulk annuities, insurance policies purchased by defined benefit schemes to secure members' benefits, have become more affordable for many schemes. The bulk annuities market has grown in recent years as pension schemes have sought to de-risk and transaction volumes are expected to rise further, from around £30-40 billion a year to £50-60 billion a year in 2024 and beyond. High interest rates are expected to spur this further growth, as financially healthier pension schemes re-evaluate de-risking options. This will generate more work for our Risk Transfer team, which provides all the support required including broking insurance transactions and all of the 'behind the scenes' additional work that is required, which typically includes complex data cleansing projects. We expect tangential growth opportunities to open up too; one such opportunity is working more closely with insurance companies that take on the liabilities of pension schemes in these transactions. Insurers are resource constrained and frequently outsource to meet some of their needs and we therefore see considerable scope to expand our footprint here.

Aside from higher interest rates, the Liability Driven Investment (LDI) crisis was the standout market development of 2022. LDI allows pension schemes to hedge against volatility and financial risk caused by moves in interest rates. If these risks are not hedged the risks can be material - for a typical scheme a 1% fall in interest rates could increase the mark to market value of the scheme's liabilities by 25%, all else being equal, which can put huge pressure on cash funding requirements and company balance sheets. LDI funds have protected schemes from sharply widening deficits as interest rates fell during the last 20 years. What triggered the 2022 crisis was the speed of interest rate moves - bond yields rose 1% in the space of three days causing bond prices to fall 25%. Whilst in terms of funding levels this resulted in an improvement of the financial position of many schemes it put LDI funds under stress, with many facing significant liquidity challenges. Clients needed advice to navigate the crisis. This gave us a real chance to differentiate ourselves and we are very proud of how well we looked after our clients.

Despite the crisis, LDI continues to have an important role to play, particularly in helping to protect the improved financial position many pension schemes find themselves in today. There are learnings to be had though. Schemes need to ensure they invest in sound LDI funds with strong controls and more oversight is required. Post-crisis, we are offering an enhanced LDI reporting and oversight service that is open to schemes, including those that are not clients - a further example of market changes giving rise to growth opportunities and our response to it.

M&A is a route to growing market share, and/or addressing any gaps in our capability. This year we acquired Penfida, a firm that specialises in 'employer covenant' advice - this is advice that pension trustees need about the strength of the sponsoring employer that stands behind the scheme. We had a team in this area of work, but it was small - the addition of Penfida brings scale to our existing offering, in the one remaining area in the pensions business where our presence had been sub-scale. We will continue to look at M&A and partnership opportunities which we believe make strategic sense as well as those that allow us to expand into tangential markets, for example, around support for insurers.

We value our people

Our revenues are not the only area seeing growth. So too is the number of our people. The year under review saw our numbers increase by a further 200 so that today our employee count stands at over 1,600. Regardless of how many we are, we take our responsibility to every one of our people seriously. Our people work hard for the Group and the Group must work hard for our people. This is why we have a growing number of employee committees and networks as part of our inclusion and diversity ('I&D') drive so that all our people feel they are a part of XPS regardless of background, gender or ethnicity. It is why we introduced our flexible working model, My XPS My Choice, last year and why, during the year under review, we awarded an additional mid-year pay rise to all staff (apart from those in senior positions) in response to the cost-of-living crisis.

We are proud of our eNPS of +33%, a very high score for a professional services firm, and that 89% of our people think we are truly committed to I&D. We will continue to work hard for our people, caring for their wellbeing, supporting their many volunteering efforts and providing opportunities for career progression. Not only is this the right thing to do but it also helps attract and retain talented people.

Everyone at XPS plays a part in the continued success of the Group. One individual who has played an invaluable role in XPS's success to date is Tom Cross Brown, who was our Chairman until September 2022. Tom had held the Chair since our listing and has therefore overseen tremendous change at the Company. We thank him wholeheartedly for the substantial contribution he has made over the years and we and the rest of the Board wish him all the best with his retirement.

We value our environment

Environmental and climate considerations shape our strategy and culture. We are proud of the growth we have achieved to date but we are equally proud of our efforts to ensure we grow in a sustainable way. The year under review was the second in which XPS has been a carbon-neutral business. We have reduced our emissions and additionally as with last year, we achieved this by purchasing UN Approved Carbon Credits that cover our own Scope 1 and 2 emissions, as well as Scope 3 emissions produced by our suppliers.

Carbon neutrality is not the sum of our ambitions. Our ultimate aim is to achieve a significant reduction in our direct carbon footprint which we aim to accomplish as part of our science-based net zero objective, which we committed to in 2023. Our pledge includes ambitious targets to halve our operational Scope 1 and 2 emissions by 2030, sourcing 100% renewable energy in all our offices, while promoting a low-carbon culture amongst our staff and suppliers. Ultimately this can support our ambition of reducing all emissions to net zero by 2050.

Outlook

The FY 2023 results demonstrate the non-cyclical, resilient and predictable nature of our business and the opportunities for growth.  Our brand has strengthened further in the year with multiple awards, we have won further new mandates and have achieved high levels of client and staff satisfaction. The investments we have made into high-growth, high-margin areas are increasingly being reflected in our earnings.

We expect the demand for our services to remain high as we help our clients navigate the complex and evolving regulatory backdrop as well as economic and financial market developments.  We have continued to grow market share, but with this still under 10% there are continued opportunities to grow, supported by both market and regulatory tailwinds. We expect the operational gearing that has come through this year to be a continued feature of our results in the future.

The Group has made a strong start to the new financial year with continued high levels of demand for our services particularly within Advisory and further success in winning new business.  We remain confident in delivering against our expectations for the current year.

Paul Cuff                                                                                                          Ben Bramhall

Co-Chief Executive Officer                                                                                Co-Chief Executive Officer

21 June 2023                                                                                                     21 June 2023

FINANCIAL REVIEW

The business has performed strongly with revenues growing 20% year on year; 17% organically. The revenue growth has been delivered efficiently, with total staff cost growth now below revenue growth. We have continued to invest in areas such as risk transfer and member analytics and made capital investment in developing our own administration platform which will further enhance our operational gearing in the future.

Significant accounting matters

Adjusted numbers

We continue to show adjusted numbers in our results to better reflect the underlying business performance. The adjusted numbers exclude exceptional and non-trading items such as the amortisation of acquired intangible assets as well as share-based payment costs. The exceptional and non-trading items are disclosed in the notes to the financial statements. These alternative performance measures may differ from those defined by other entities but help to explain the progress within the underlying business.

Group income statement

1      Management responsibilities and operations for a small part of the business moved during the year from the Pensions division to Administration. Related revenue was £1.5 million, and the prior year (which has been restated) was also £1.5 million.

2      Adjusted measures exclude the impact of exceptional and non-trading items: acquisition-related amortisation, share-based payments, corporate transaction costs, restructuring costs and other items considered exceptional by virtue of nature, size and incidence.  See note 2 for details of exceptional and non-trading items.

Revenue

Total Group revenues grew 20% year on year; 17% organically.

Pensions Actuarial and Consulting is the Group's largest business. The division achieved 24% year on year growth in revenues, due to high client activity levels driven by continued regulatory changes as well as inflationary increases in fees. The Penfida acquisition in the year has contributed £2.3 million of the growth.

Pensions Investment Consulting had another strong year with a number of new client mandates, continued demand driven by regulatory changes and financial market volatility as well as inflationary fee increases. The LDI crisis following the September mini-budget led to a significant increase in client activity. Revenues in this division grew 31% year on year.

Pensions Administration revenues grew 10% year on year with a number of new client wins coming on stream during the year and increased levels of project work. As with the advisory business, inflationary increases in fees also drove the growth in the year. Pensions Administration accounted for 35% of the Group revenues (FY 2022: 38%).

SIP revenues were up 54% on prior year, due to strong underlying sales, and increases in commission due to the base rate increases in the year. The acquisition of the trade and assets of Michael J Field Consulting Actuaries ("Michael J Field") completed in February 2022, and this accounted for £2.0 million of the revenue in FY 2023.

The National Pension Trust (NPT) revenues were flat year on year; driven by competitive price pressures, asset price volatility partially offset by increased contributions paid into the trust in the year. Total assets under management are now over £1.5 billion.

Operating costs

Total operating costs (excluding exceptional and non-trading items) for the Group grew by 19% or £19.7 million year on year. The main drivers for the cost increases are an increase in headcount as the business grew (1,574 FTE v 1,442 last year), inflationary pay increases including a mid-year salary increase for all our people below Partner level amounting to c. £1.5 million additional cost for the year, higher bonus cost commensurate with the strong financial performance and inflationary increases in other operating costs.

Despite the high inflation impacting our costs, the Group has delivered further operational gearing with adjusted EBITDA growing by 24% year on year - ahead of the Group revenue growth of 20%. Adjusted EBITDA margin was 25.5% (FY 2022: 24.6%). Statutory profit before tax grew by 13% year on year.

Exceptional and non-trading items

Exceptional and non-trading items in the year totalled £14.2 million (FY 2022: £9.8 million). Amortisation of acquired intangible assets amounted to £6.9 million (FY 2022: £6.6 million). Share-based payment charges were £4.7 million (FY 2022: £3.9 million) with higher levels of vesting expected due to the strong financial performance of the Group. The Group also incurred corporate transaction costs of £2.9 million (FY 2022: £0.3 million) in the year. Included within that is £0.8 million of contingent consideration in respect of the acquisition of Penfida Limited.  The maximum contingent consideration of £3.4 million would be payable on the second anniversary of the acquisition subject to business performance which includes retention of clients as well as continued employment of key employees.  As continued employment is one part of the contingent consideration test, according to IFRS 3, the entire contingent consideration must be treated as a post transaction employment cost accruing over the deferment period of two years.  The contingent consideration is material in size and it is one-off in nature.  As such, in line with the Group's accounting policies, it has been classified as an exceptional item.  If the entire contingent consideration is not payable at the end of the two year period, any resulting credit will also flow through the exceptional category.  The remainder £2.1 million of corporate transaction costs relate to the acquisition of Penfida Limited and other potential M&A opportunities explored by the Group in the year.  These costs have been partially offset by a credit of £0.2 million relating to the write back of contingent consideration for the acquisition of the business of Michael J Field completed in February 2022.

Tax on the exceptional and non-trading items was a credit of £2.9 million (FY 2022: charge of £2.5 million). The charge in the prior year was due to the revaluation of deferred tax liabilities as a consequence of the increase in corporation tax from 1 April 2023 to 25%. The credit in the current year is driven by the unwinding of deferred tax liabilities linked to intangible assets acquired in previous periods.

Net finance costs

Net finance costs for the year were £3.6 million (FY 2022: £2.1 million). The increase is due to the increases in the bank base rate during the year, along with a modest increase in the loan balance.

Taxation

A tax charge of £6.2 million (FY 2022: £5.0 million) was recognised on adjusted profits (before exceptional and non-trading items) which represents an effective tax rate of 19% (FY 2022: 19%). The Group also recognised a tax credit of £2.9 million (FY 2022: charge of £2.5 million) on exceptional and non-trading items, which resulted in an overall tax charge for the year of £3.3 million (FY 2022: £7.5 million). As previously disclosed, the increase in corporation tax in FY 2024 to 25% drove an increase in tax charges in the prior year as the deferred tax liabilities were revalued at the higher rate.

Our businesses generate considerable tax revenue for the government in the UK. For the year ended 31 March 2023, we paid corporation tax of £4.9 million (FY 2022: £3.9 million); we collected employment taxes of £27.0 million (FY 2022: £22.5 million) and VAT of £24.7 million (FY 2022: £21.3 million). Additionally, we have paid £1.2 million (FY 2022: £1.2 million) in business rates. The total tax contribution of the Group was therefore £57.8 million (FY 2022: £48.9 million), which equates to 35% of revenue (FY 2022: 35%).

EPS

Basic EPS for FY 2023 grew 67% year on year to 7.7p (FY 2022: 4.6p) owing to the strong financial performance of the Group. Adjusted fully diluted EPS grew 24% year on year to 12.6p in FY 2023 (FY 2022: 10.2p) enabled by the strong revenue growth as well as delivery of further operational gearing in the business.

Dividend

A final dividend of 5.7p is being proposed by the Board (FY 2022: 4.8p). The final dividend, if approved, which amounts to £11.8 million (FY 2022: £9.7 million), will be paid on 21 September 2023 to those shareholders on the register on 25 August 2023.

Cash flow, capital expenditure and financing

FY 2023 has been another year of strong cash performance for the Group. Adjusted operating cash flow increased by £9.3 million driven by a £8.3 million increase in EBITDA and a £1.0 million increase in net working capital. Overall, this resulted in adjusted operating cash flow conversion of 99% compared to 96% in the prior year.

Taxes paid in the year were £1.6 million higher than the income statement charge due to the current year tax credit in relation to exceptional items in the year which is largely a deferred tax.

During the year, the Group drew down £4.0 million of the RCF. Capital expenditure in the year amounted to £5.4 million (FY 2022: £7.9 million) with £0.6 million spent on leasehold improvements and office fitouts and the remaining £4.8 million on software development, enhancements to our platforms, cyber security, and other IT equipment.

In September 2022, the Group acquired Penfida Limited for an initial cash consideration of £8.3 million net of cash acquired.

After paying £15.3 million in dividends and £1.8 million of exceptional costs, the Group cash balance increased by £3.1 million year on year to close at £13.3 million. The Group had drawn down £68 million of its £100 million RCF at 31 March 2023, resulting in a net debt of £55.3 million, an increase of £0.7 million year on year.

Going concern

Details on the Directors continuing to adopt the going concern basis in preparing the financial statements can be found in the Viability Statement in the Strategic Report in the Annual Report. The Directors have confirmed that, after due consideration, they have a reasonable expectation that the Company and the Group have adequate resources to continue in operational existence for the foreseeable future. For this reason, they continue to adopt the going concern basis in preparing the financial statements.

Subsidiary undertakings

The subsidiary undertakings of the Group in the year are listed in note 35 in the Annual Report.

Share premium reduction

The Group undertook an exercise in the year to reduce the balance in XPS Pensions Group plc's share premium account. This was completed in October 2022, and as a result £116.8 million was transferred to retained earnings.

Snehal Shah

Chief Financial Officer

21^st June 2023

Principal Risks and Uncertainties

The Risk Management Frameworks embedded within the Group continue to support the growth of the business.  Effective risk management provides the Group with the information required to understand our key risks and identify and embrace opportunity.  The frameworks also allow us to proactively develop our controls, protecting the Group and its customers from new and developing threats such as Cyber Crime.

Over the last year our risk management frameworks have been fundamental to enabling us to react effectively to the changing risk environment that the business faces during its day-to-day operations. The risk profile of the Group is regularly reviewed by senior management along with the controls framework in place, to ensure they are enhanced to address changes in the external threat environment. These reviews are supported by comprehensive internal and external assurance activities, which validate controls design and effectiveness, highlighting opportunities for further improvements. The increasing threat of cyber-crime continues to be a key area of focus for management, with particular focus on protecting the Group from phishing, business email compromise and ransomware attacks.

To allow the Group to address the evolving threat environment it faces we have continued to develop our overall risk management capabilities, improving our ability to detect, understand and manage our risks. Since the last report there have been a number of significant enhancements, including:

·      The successful achievement of the PASA Pensions administration standard. This standard is recognised by The Pensions Regulator as a way of demonstrating high-quality pensions administration as provided by XPS to its clients.

·      The development of the existing Risk team, through the recruitment of additional SMEs and supporting existing staff members to achieve this status. This has been done through supporting training to achieve and then maintain relevant professional qualifications, e.g. CISA/CRISC/CISM.

·      The expansion of the existing ISO 27001 information security certification to cover all activities provided by the Group. This external assurance provides assurance that the Group has the right frameworks in place to identify and effectively manage its information security and cyber risks.

·      The development of the existing acquisitions framework, to support the effective integration of new businesses. This supports the alignment of risk and controls frameworks, including the application of relevant assurance frameworks.

·      The development of the existing third party assurance framework, recognising the importance of supply chain risk in relation to cyber and business resilience risks.

·      The ongoing development of the executive level Risk Management Committee to support the identification of new risks and monitoring of existing risks, and agree prioritisation of mitigation activities.

·      The further expansion of the dedicated Information Security team, along with developing and enhancing the suite of technical controls in place.

·      The development of the Environmental Management System to ensure we identify and manage our impact on the environment. This includes supporting TCFD reporting and consideration of the risks associated with climate change.

The Group continues to operate a three lines of defence model which supports the promotion of effective risk management and seeks to prevent risk taking that exceeds the Group's appetite.

The Board, with the support of the Audit & Risk Committee, has identified the principal risks that could materially impact the Group's ability to achieve its objectives and deliver its strategy.

These include general business risks that are faced by the Group and are comparable to those that would be faced by similar businesses operating in the pensions sector.

These general business risks include:

            Political/economic/social - risks created by the political, economic/ financial and social environment in which we operate, e.g. war, demographic trends, pandemics, government influence on business, currency changes, market volatility, interest rates, liquidity.

            Competition - risks of change on demand side of business due to changes in customer demands or competitors, likely to influence the entire industry, e.g. aggressive competitor pricing, consolidation trends, major technological innovation, substitute technologies. These changes may not directly affect the Group but could influence the entire industry.

            Legal and regulatory - risks associated with the criminal and civil judicial processes and contract law, e.g. not identifying changes required by new legislation, increased litigation in a particular field, industrial accidents.

            Environmental - risks associated with climate-related change, how these changes can impact business models and how businesses in turn can manage the impact of their operations on the environment.

The material risks and uncertainties which are either unique to the Group or apply to the pensions industry in which we operate are detailed below. They are not set out in any priority order, nor do they include all those associated with the Group.

Specific risks that are material to XPS Group are:

The Directors confirm that they have carried out a robust assessment of the principal risks facing the Group, including those that would threaten its business model, future performance, solvency or liquidity. The principal risks are those listed above. The Directors do not believe there to be any additional emerging risks that are not already addressed within the principal risks and uncertainties section.

This Strategic Report has been approved by the Board and signed by order of the Board:

Paul Cuff                                                                                  Ben Bramhall

Co-Chief Executive Officer                                                         Co-Chief Executive Officer

21 June 2023                                                                             21 June 2023

INDEPENDENT AUDITOR'S REPORT TO THE SHAREHOLDERS OF XPS PENSIONS GROUP PLC ON THE PRELIMINARY STATEMENT OF ANNUAL RESULTS

As the independent auditor of XPS Pensions Group Plc we are required by UK Listing Rules to agree to the publication of the company's preliminary statement of annual results for the year ended 31 March 2023 which includes the Financial Highlights, Operational Highlights, Outlook, Co-Chief Executives' review, Financial review, Principal Risks and Uncertainties, the Consolidated Statement of Comprehensive Income, the Consolidated Statement of Financial Position, the Consolidated Statement of Changes in Equity, the Consolidated Statement of Cash Flows and selected notes to the Consolidated Financial Statements. 

Use of our report

This report and our auditor's report on the company's financial statements are made solely to the company's members, as a body, in accordance with Chapter 3 of part 16 of the Companies Act 2006 and the terms of our engagement. Our audit work has been undertaken so that we might state to the company's members those matters we have agreed to state to them and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the company and the company's members as a body, for our audit work, for our auditor's report on the financial statements or this report, or for the opinions we have formed.

Responsibilities of directors and auditor

The directors of the company are responsible for the preparation, presentation and publication of the preliminary statement of annual results in accordance with the UK Listing Rules. We are responsible for agreeing to the publication of the preliminary statement of annual results, having regard to the Financial Reporting Council's Bulletin "The Auditor's Association with Preliminary Announcements made in accordance with the requirements of UK Listing Rules".

Status of our audit of the financial statements

Our audit of the annual financial statements of the company is complete and we signed our auditor's report on 21 June 2023. Our auditor's report is not modified and contains no emphasis of matter paragraph.

Our auditor's report on the full financial statements contained the following information regarding key audit matters and how they were addressed by us in the audit, our application of materiality and the scope of our audit.

An overview of the scope of our audit

Our Group audit was scoped by obtaining an understanding of the Group and its environment, including the Group's system of internal control, and assessing the risks of material misstatement in the financial statements.  We also addressed the risk of management override of internal controls, including assessing whether there was evidence of bias by the Directors that may have represented a risk of material misstatement.

Significant components:

Non-significant components:

Other than the four significant components noted above, there were 12 other components within the Group which formed part of our Group audit.

The following three non-significant components were subjected to a full scope audit on account of them being part of a non-small group and being entities that do not avail themselves of a parental guarantee from audit under s479A of the Companies Act 2006:

All 9 of the remaining non-significant components were subjected to desktop review procedures. All audit work on all entities (significant and non-significant) was undertaken by the Group audit team.

Climate change

Our work on the assessment of potential impacts on climate-related risks on the XPS Pensions Group plc operations and financial statements included:

• Enquiries and challenge of management to understand the actions they have taken to identify climate-related risks and their potential impacts on the financial statements and adequately disclose climate-related risks within the Annual Report;

• Reviewing management's SECR report and supporting workings to check that the climate change disclosure ties into the disclosures presented in the financial statements as required;

• Our own qualitative risk assessment taking into consideration the sector in which the Group operates and how climate change affects this particular sector; and

• Review of the minutes of Board and Audit & Risk Committee meetings and other papers related to climate change and performed a risk assessment as to how the impact of the Group's commitment as set out in strategic report may affect the financial statements and our audit.

•We challenged the extent to which climate-related considerations, including the expected cash flows from the initiatives and commitments have been reflected, where appropriate, in the Directors' going concern assessment and viability assessment;

•We also assessed the consistency of management's disclosures included as Statutory Other Information' with the financial statements and with our knowledge obtained from the audit.

Based on our risk assessment procedures, we did not identify there to be any key audit matters materially impacted by climate-related risks and related commitments.

Key audit matters

Key audit matters are those matters that, in our professional judgement, were of most significance in our audit of the financial statements of the current period and include the most significant assessed risks of material misstatement (whether or not due to fraud) that we identified, including those which had the greatest effect on: the overall audit strategy, the allocation of resources in the audit, and directing the efforts of the engagement team. These matters were addressed in the context of our audit of the financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters.

Our application of materiality

We apply the concept of materiality both in planning and performing our audit, and in evaluating the effect of misstatements.  We consider materiality to be the magnitude by which misstatements, including omissions, could influence the economic decisions of reasonable users that are taken on the basis of the financial statements.

In order to reduce to an appropriately low level the probability that any misstatements exceed materiality, we use a lower materiality level, performance materiality, to determine the extent of testing needed. Importantly, misstatements below these levels will not necessarily be evaluated as immaterial as we also take account of the nature of identified misstatements, and the particular circumstances of their occurrence, when evaluating their effect on the financial statements as a whole.

Based on our professional judgement, we determined materiality for the financial statements as a whole and performance materiality as follows:

Component materiality

We set materiality for each significant component of the Group based on a percentage of between 36% and 62% (FY 2022: 22% and 75%) of Group materiality dependent on the size and our assessment of the risk of material misstatement of that component.  Component materiality ranged from £360,000 to £620,000 (FY 2022: £200,000 to £675,000), with aggregation risk considered. In the audit of each component, we further applied performance materiality levels of 70% of the component materiality to our testing to ensure that the risk of errors exceeding component materiality was appropriately mitigated.

Reporting threshold 

We agreed with the Audit & Risk Committee that we would report to them all individual audit differences in excess of £40,000 (FY2022:£40,000).  We also agreed to report differences below this threshold that, in our view, warranted reporting on qualitative grounds.

Procedures performed to agree to the preliminary statement of annual results

In order to agree to the publication of the preliminary statement of annual results of the company we:

·    checked the accuracy of extraction of the financial information in the preliminary statement from the audited financial statements of the company;

·    considered whether any "alternative performance measures" and associated narrative explanations may be misleading; and

·    read the Financial Highlights, Operational Highlights and Outlook and considered whether it is in conflict with the information that we have obtained in the course of our audit.

Andrew Radford (Senior Statutory Auditor)

For and on behalf of BDO LLP, Statutory Auditor

London, UK

21 June 2023

Consolidated Statement of Comprehensive Income

for the year ended 31 March 2023

Consolidated Statement of Financial Position

as at 31 March 2023

In prior years, deferred tax assets and liabilities were disaggregated and presented gross in the statement of financial position; per IAS 12 these are now netted off and presented as a deferred tax liability. The prior year has been restated. There is no impact on the income statement as a result of this; it purely impacts the presentation on the statement of financial position of deferred tax, decreasing deferred tax assets and deferred tax liabilities by £1,099,000 (£767,000 as at 1 April 2021).

Consolidated Statement of Changes in Equity

for the year ended 31 March 2023

Consolidated Statement of Cash Flows

for the year ended 31 March 2023

Selected notes to the Consolidated Financial Statements

for the year ended 31 March 2023

1 Accounting Basis

The financial information set out in this document does not constitute the Company's statutory accounts for the years ended 31 March 2023 or 31 March 2022.  Statutory accounts for the year ended 31 March 2023, which were approved by the directors on 21 June 2023, and 31 March 2022 have been reported on by the Independent Auditors.  The Independent Auditor's report on the Annual Report and Financial Statements for years ended 31 March 2023 and 31 March 2022 were unqualified, did not draw attention to a matter by way of emphasis, and did not contain a statement under 498(2) or 498(3) of the Companies Act 2006. 

The statutory accounts for the year ended 31 March 2023 will be delivered to the Registrar of Companies in due course and will be posted to shareholders shortly, and thereafter will be available from the Company's registered office at Phoenix House, 1 Station Hill, Reading, RG1 1NB and from the Company's website www.xpsgroup.com. The statutory accounts for the year ended 31 March 2022 have been filed with the Registrar of Companies and are available from the Company's registered office and from the Company's website.

The financial information set out in these results has been prepared in accordance with UK adopted International Accounting Standards. The accounting policies adopted in these results have been consistently applied to all the years presented and are consistent with the policies used in the preparation of the financial statements for the year ended 31 March 2022. New standards, amendments, and interpretations to existing standards effective for the first time for periods beginning on (or after) 1 April 2022, which have been adopted by the Group have not been listed, since they have no material impact on the financial statements.

2 Non-trading and exceptional items

1 The Group incurred corporate transaction costs of £2,871,000 in the year (2022: £320,000, relating to acquisitions by the Group). Included within that is £845,000 of contingent consideration in respect of the acquisition of Penfida Limited.  The maximum contingent consideration of £3,379,000 would be payable on the second anniversary of the acquisition subject to business performance which includes retention of clients as well as continued employment of key employees.  As continued employment is one part of the contingent consideration test, according to IFRS 3, the entire contingent consideration must be treated as a post transaction employment cost accruing over the deferment period of two years.  The contingent consideration is material in size and it is one-off in nature.  As such, in line with the Group's accounting policies, it has been classified as an exceptional item.  If the entire contingent consideration is not payable at the end of the two year period, any resulting credit will also flow through the exceptional category.  The remaining £2,026,000 of corporate transaction costs relate to the acquisition of Penfida Limited and other potential M&A opportunities explored by the Group in the year.

2 The prior year credit of £966,000 relates to the reversal of the exceptional holiday pay accrual in the previous year. The one-off non-cash holiday pay accrual in the year ended 31 March 2021 arose as the holiday cycle was disrupted by the pandemic and a higher than normal level of holiday was carried forward at the end of the holiday year in December 2020. Prior to the pandemic the holiday pay accrual had been stable. In the year ending 31 March 2022 the Group changed its holiday year to align with its accounting year, and as a result there was no cash outflow as a result of the charge in the year ended 31 March 2021. Due to its one off nature and the size of the holiday pay accrual in the prior year, as well as the corresponding reversal in the year ending 31 March 2022, it was deemed appropriate to disclose the amount separately from the underlying business performance.

3 The contingent consideration write back relates to the revaluation of the contingent consideration for the MJF acquisition.

4 Share-based payment expenses are included in non-trading and exceptional costs as they are a significant non-cash cost which are excluded from the results for the purposes of measuring performance for PSP awards and dividend amounts. Additionally, the largely non-cash related credits go directly to equity and so have a limited impact on the reserves of the Group. They are therefore shown as a non-trading item to give clarity to users of the accounts on the profit figures that dividends and PSP performance are based on.

5 During the year the Group incurred £6,882,000 of amortisation charges in relation to acquired intangible assets (customer relationships and brand) (2022: £6,579,000).

6 The tax credit on non-trading items of £2,910,000 (2022: charge of £2,530,000) represents 20% (2022: 26%) of the non-trading items incurred of £14,216,000 (2022: £9,808,000). This is different to the expected tax credit of 19% (2022: 19%), as various adjustments are made to tax including for deferred tax, and the exclusion of amounts not allowable for tax.  The tax on non-trading and exceptional items was a large tax charge in the year ended 31 March 2022 instead of a tax credit, because of the tax rate increase from 19% to 25% from 1 April 2023, which was enacted in the year to 31 March 2022. As a result the Group incurred a large deferred tax charge in the prior year (£4.4 million).

3 Business combinations during the period

On 21 September 2022, the Group acquired 100% of the share capital of Penfida Limited from the shareholders of Penfida Limited for £8.64 million in cash upon completion, and a further payment of £3.38 million in September 2024, subject to the achievement of a client retention target, and the sellers still being in employment with the Group. Because this element is only payable to the sellers who remain in employment at the end of the two-year period, under IFRS 3 the £3.38 million is treated as post-acquisition remuneration and will be an expense to the business over the two year period to September 2024. This expense will be treated as an exceptional cost, as it meets the Group's definition of an exceptional item (see note 2).

Penfida Limited provides employer covenant advisory services. The transaction will strengthen the covenant advice offering of XPS and give the Group the resource to expand this offering to both existing clients, and new prospects.

Details of the fair value of identifiable assets and liabilities acquired, purchase consideration and goodwill are as follows:

The fair value and the gross value of acquired receivables are the same. The receivables have been reviewed and it is expected that all contractual cashflows will be collected.

Fair value of consideration paid

The main factors leading to the recognition of goodwill are the presence of certain intangible assets, such as the assembled workforce of the acquired entities, synergies and potential future cost savings, and the expected growth in the business generated by new customers, which do not qualify for separate recognition.

The goodwill arising from the above acquisition is not deductible for tax purposes.

Since the acquisition date, Penfida Limited has contributed £2.3 million to Group revenues and £0.4 million to Group profit before tax, before taking into account the post-acquisition remuneration referred to above. Including this figure, Penfida has contributed a loss of £0.3 million since the acquisition date.

If the acquisition had occurred on 1 April 2022, Group revenue would have been £168.8 million and Group profit before tax would have been £20.7 million, excluding the impact of the post-acquisition remuneration disclosed above. Including this, and assuming the transaction had taken place on 1 April, Group profit before tax would have been £19.0 million.

Acquisition expenses

Costs relating to the above acquisition (excluding the post-acquisition remuneration) totalled £474,000 and are included within exceptional costs as corporate transaction costs.

4 Operating segments

In accordance with IFRS 8 Operating Segments, an operating segment is defined as a business activity whose operating results are reviewed by the chief operating decision-maker ('CODM') and for which discrete information is available. The Group's CODM is the Board of Directors.

The Group has one operating segment, and one reporting segment due to the nature of services provided across the whole business being the same: pension and employee benefit solutions. The Group's revenues, costs, assets, liabilities and cash flows are therefore totally attributable to this reporting segment. The table below shows the disaggregation of the Group's revenue, by product line.

1 Self Invested Pensions (SIP) business, incorporating both SIPP and SSAS products

In the year, there was a change in the way that divisional revenues are reported to the CODM which is more reflective of the responsibilities and operations of the business. As a result related revenue of £1.5m has been reallocated from Pensions Actuarial & Consulting division to Pensions Administration division.

The prior year comparative have been restated to enable fair comparability against the current year results amounting to a reallocation of £1.5m revenue.

5 Finance income and expense

Other costs of borrowing largely represent the amortisation expense of capitalised loan arrangement fees on the Group's bank debt.

6 Income tax expense

Recognised in the statement of comprehensive income

The standard rate of corporation tax in the UK was 19% (2022: 19%). Deferred tax assets and liabilities have been measured at the rate they are expected to unwind at, using a rate substantively enacted at 31 March 2023, which is not lower than 25% (2022: 19%). Deferred tax not recognised relates to £6 million of finance expense losses in a prior year and their future recoverability is uncertain.  At 31 March 2023 the total unrecognised deferred tax asset in respect of these losses was approximately £1.1m (2022: £1.1m).

7 Loans and borrowings

The book value and fair value of loans and borrowings are not materially different.

At 31 March 2023 the Group had drawn down £68,000,000 (2022: £64,000,000) of its £100,000,000 Revolving Credit Facility. The Group's Revolving Facility Agreement is for £100 million with an accordion of £50 million. This facility has a 4 year term which started in October 2021. In April 2023, a 1 year extension to the term was agreed, extending it to October 2026. Interest is calculated at a margin above SONIA, subject to a net leverage test. The related fees for access to the facility are included in the consolidated statement of comprehensive income.

Capitalised loan-related costs are amortised over the life of the loan to which they relate.

Bank debt is secured by way of debentures in the Group companies which are obligors to the loans. These are XPS Reading Limited, XPS Consulting (Reading) Limited, XPS Pensions Consulting Limited (and its subsidiaries), Xafinity Pensions Consulting Limited (and its subsidiaries), XPS SIPP Services Limited, and XPS Holdings Limited (and its subsidiaries). The security is over all the assets of the companies which are obligors to the loans.

8 Reserves

The following describes the nature and purpose of each reserve within equity:

9 Earnings per share

The calculation of basic earnings per share is based on the earnings attributable to ordinary shareholders divided by the weighted average number of shares in issue during the period.

Reconciliation of weighted average ordinary shares in issue to diluted weighted average ordinary shares:

Share awards were made to the Executive Board members and key management personnel in each year since the year ending 31 March 2017, these are subject to certain conditions, and each tranche of awards vest 3 years after the award date. Dividend yield shares relating to these awards will also be awarded upon vesting of the main awards. Further shares have been issued under SAYE share schemes in the years ending 31 March 2020, 2022 and 2023, these will vest in the years ending 31 March 2023, 2025 and 2026 respectively. These shares are reflected in the diluted number of shares and diluted earnings per share calculations.

Adjusted earnings per share

10 Dividends

Amounts recognised as distributions to equity holders of the parent in the year

The recommended final dividend payable in respect of the year ended 31 March 2023 is £11.8 million or 5.7p per share (2022: £9,696,000).

The proposed dividend has not been accrued as a liability as at 31 March 2023 as it is subject to approval at the Annual General Meeting.

The Trustee of the Xafinity Employee Benefit Trust has waived its entitlement to dividends.

The Company statement of changes in equity shows that the Company has positive reserves of £161,040,000. Therefore there are sufficient distributable reserves in XPS Pensions Group plc in order to pay the proposed final dividend.