IntegraFin : Interim Report 2020

May 21, 2020 at 03:44 am EDT

INTERIM RESULTS

SIX MONTHS ENDED 31 MARCH 2020

IntegraFin Holdings plc

Company registration number: 08860879

IntegraFin Holdings plc - Interim Results for the Six Months Ended

31 March 2020

IntegraFin Holdings plc today announces its Interim Results for the six months to 31 March 2020.

Highlights

Revenue up 13.0% to £53.8m (HY2019: £47.6m)
Profit before tax profits up 21.9% to £27.3m (HY2019: £22.4m)
Earnings per share up 23.6% to 6.8 pence (HY2019: 5.5p)
Interim dividend 2.7 pence per share (HY2019: 2.6pps)
Funds under direction up 1.7% to £34.99bn (HY2019: £34.41bn)
Gross inflows up 14.0% to £3.2bn (HY2019: £2.8bn)
Client numbers up 8.1% to 187k (HY2019: 173k)

Alex Scott, Chief Executive Officer, commented:

"Results for the first half of the year are positive. We have seen our highest ever gross inflows and record first half year profits.

Strong inflow growth has contributed to a year on year increase in Funds Under Direction (FUD), despite the COVID-19 pandemic causing substantial, downward movements in world equity markets from late February. Prior to these market falls, FUD growth had been solid.

The growth in net flows and higher daily average FUD over the period (£38.3bn) have driven strong revenue growth. Coupled with sensible expense management, this has enabled us to deliver an increase in profit before tax.

Performance in the second half of the year will very much depend upon the effects of measures taken to combat COVID-19 and their impact upon the economy, the equity markets, FUD and flows.

Against this backdrop, the business continues to be well positioned. The number of clients on the platform increased from 173k to 187k year on year, an increase of 8.1%. In the same period the number of advisers using the platform increased by 6.3%.

The welfare of our staff and the maintenance of services to clients are, of course, my primary concerns. All staff are currently working from home, from where they continue to do a fantastic job, providing as good a quality service as possible to clients and their advisers.

We are not utilising any schemes under the National Temporary Framework for State Aid and none of our staff have been furloughed.

After careful consideration, the Board has declared a first interim dividend in accordance with the Company's dividend policy. In respect of the six months to 31 March 2020, an interim dividend of 2.7 pence per ordinary share (H1 2019: 2.6 pence) will be payable on 26 June 2020 to ordinary shareholders on the register on 5 June 2020. The ex-dividend date will be 4 June 2020."

Financial Highlights

	Change	Six months	Six months	Year ended 30
		ended 31 March	ended 31 March	September 2019
		2020	2019
		£m	£m	£m
Funds under direction	+1.7%	34,990	34,406	37,799
Revenue	+13.0%	53.8	47.6	99.2
Profit before tax	+21.9%	27.3	22.4	49.0
Basic and diluted	+23.6%	6.8p	5.5p	12.1p
earnings per share
Operating profit	+22.5%	27.2	22.2	48.6
Operating margin	+8.5%	51%	47%	49%
Contacts
Media
Lansons
Tony Langham			+44 (0)79 7969 2287
Maddy Morgan Williams			+44 (0)79 4736 4578
Investors
Jane Isaac			+44 (0)20 7608 4937

Analyst Presentation

IntegraFin Holdings plc will be hosting an analyst presentation on 21 May 2020, following the release of these results for the half year ended 31 March 2020. Attendance is by invitation only. Slides accompanying the analyst presentation will be available on the IntegraFin Holdings plc website.

Cautionary Statement

These Interim Results have been prepared in accordance with the requirements of English Company Law and the liabilities of the Directors in connection with these Interim Results shall be subject to the limitations and restrictions provided by such law.

These Interim Results are prepared for and addressed only to the Company's shareholders as a whole and to no other person. The Company, its Directors, employees, agents or advisers do not accept or assume responsibility to any other person to whom these Interim Results are shown or into whose hands it may come and any such responsibility or liability is expressly disclaimed.

These Interim Results contain forward looking statements, which are unavoidably subject to risk and uncertainty because they relate to events and depend upon circumstances that will occur in the future. It is believed that the expectations set out in these forward looking statements are reasonable but they may be affected by a wide range of variables which could cause future outcomes to differ from those foreseen. All statements in these Interim Results are based upon information known to the Company at the date of this report. Except as required by law, the Company undertakes no obligation to publicly update or revise any forward looking statement, whether as a result of new information, future events or otherwise.

Financial Review

Operational performance

Transact achieved record platform inflows in the first half of financial year 2020. The strong inflows in the period helped negate the effect of market falls and contributed to a small increase in Funds Under Direction over the year, ending £0.6bn higher than at 31 March 2019. FUD ended the interim period £2.8bn lower than at 2019 financial year end, due to the substantial, downward movements in world equity markets since late February.

FUD, inflows and outflows

	Six months ended	Six months ended	Year ended 30
	31 March 2020	31 March 2019	September 2019
	£m	£m	£m
Opening FUD	37,799	33,113	33,113
Inflows	3,234	2,837	5,700
Outflows	(1,172)	(1,027)	(2,203)
Net flows	2,062	1,810	3,497
Market movements	(4,872)	(515)	1,197
Other movements1	1	(2)	(8)
Closing FUD	34,990	34,406	37,799

1Other movements includes dividends, interest, fees and tax charges and rebates.

Gross inflows for the six months to 31 March 2020 increased by £397m (14.0%) compared with the same period in the prior year. Gross outflows increased by £145m (14.1%) in the six months, representing an annualised outflow of 6.2% of opening FUD, which remained broadly consistent with both March 2019 (6.2%) and financial year 2019 (6.7%). The net result of the increase in both inflows and outflows was in an increase in net flows of £252m (13.9%).

Financial performance

Total gross profit in the six months to 31 March 2020 increased by £6.3m (13.4%) from the same period in financial year 2019. This growth was driven by an uplift in the average value of FUD through the period, strong inflows and an increase in the number of tax wrappers.

Profit before tax grew from £22.4m at half year March 2019 to £27.3m at March 2020, an increase of 21.9% year on year. This can be attributed to increased revenue and prudent expense management.

	Six months ended	Six months ended	Year ended 30
Income	31 March 2020	31 March 2019	September 2019
	£m	£m	£m
Revenue	53.8	47.6	99.2
Cost of sales	(0.4)	(0.5)	(0.8)
Gross profit	53.4	47.1	98.4
Operating expenses	(26.2)	(24.9)	(49.8)
Operating profit	27.2	22.2	48.6
attributable to
shareholder returns
Investment returns	0.1	0.2	0.4
and interest income
Profit before tax	27.3	22.4	49.0
attributable to
shareholder
returns
Tax on ordinary	(4.8)	(4.2)	(8.9)
shareholder only
activities
Profit after tax	22.5	18.2	40.1

The above table does not include income, expenses or tax charges relating to policyholders as their net impact on profit is £nil. For more details on policyholder returns please see note 7.

Components of revenue

Our revenue comprises three elements: annual commission income, wrapper fee income and other income.

Annual commission income (an annual, ad valorem tiered fee on FUD) and wrapper administration fee income (quarterly fixed wrapper fees for each of the tax wrapper types clients hold) constitute our recurring revenue. Other income includes buy commission charged on asset purchases.

	Six months ended	Six months ended	Year ended 30
	31 March 2020	31 March 2019	September 2019
	£m	£m	£m
Annual commission	47.4	41.3	86.7
income
Wrapper fee income	4.8	4.4	9.0
Other income	1.6	1.9	3.5
Total revenue	53.8	47.6	99.2

Recurring revenue streams constituted 97.0% of total fee income in the six months to 31 March 2020, which is a small increase from 96.0% in the same period in the prior year.

Annual commission income increased by £6.1m (14.8%) in the period versus the same period in the prior financial year. This resulted from higher average FUD over the period (the downturn in the markets only affected asset values towards the end of the period).

Wrapper administration fee income increased by £0.4m (9.1%) year on year, reflecting the increase in the number of open tax wrappers.

Other income, mainly buy commission and dealing charges, reduced by £0.3 million (15.8%) year on year. The primary reason for this fall was the reduction in the buy commission rebate threshold in March 2019 and March 2020. The required portfolio value for client family groups to receive the rebate was reduced from £1.0 million to £0.5 million, with effect from 1 March 2019, and was reduced again from £0.5 million to £0.4 million from 1 March 2020.

Operating expenses

	Six months ended	Six months ended	Year ended 30
	31 March 2020	31 March 2019	September 2019
	£m	£m	£m
Staff costs	18.3	18.4	36.3
Occupancy	1.0	1.8	3.6
Regulatory and	3.5	2.5	5.5
professional fees
Other costs	2.2	1.9	3.7
Total expenses	25.0	24.6	49.1
Depreciation and	1.2	0.3	0.7
amortisation
Total operating	26.2	24.9	49.8
expenses

In the six months to March 2020, total operating expenses increased by £1.3m (5.2%), compared with the six months to March 2019.

Staff costs decreased by £0.1m (0.5%) to £18.3m in the six months to March 2020. This was the net effect of Group headcount reducing to 492 at the end of March 2020 (March 2019:

and general, inflationary cost increases. The reduction in headcount resulted from natural attrition and efficiency gains delivered through platform development.

Regulatory and professional fees increased by £1.0m in the six months to March 2020, mainly due to changes in regulatory fee tariff data calculations. These include Financial Services Compensation Scheme levies, which increased by £0.7m (197.8%).

The Group adopted IFRS 16 (Leases) from the start of the new financial year. This standard requires recognition and subsequent depreciation of right of use assets - in our case buildings leased by the Group - and it means that we no longer recognise building rent expense. The year to date, financial impact of IFRS 16 is a reduction in occupancy costs of £0.8m and an increase in depreciation and amortisation costs of £0.9m.

Profit before tax attributable to shareholder returns

Profit before tax increased by £4.9m (21.9%) year on year.

	Six months ended	Six months ended	Year ended 30
	31 March 2020	31 March 2019	September 2019
	£m	£m	£m
Operating profit	27.3	22.2	48.6
attributable to
shareholder returns

The operating margin increased to 50.6% (March 2019: 46.6%) in the six months to 31 March 2020. The increase is due to higher revenue, as a result of the increase in average FUD, and controlled expenses.

Financial position

The material items on the consolidated statement of financial position that merit comment include the following:

IFRS 16 (Leases)

On adoption of IFRS 16, the Group recognised right of use assets of £5.6m and corresponding lease liabilities of £8.3m. Liabilities of £2.5m previously recognised in relation to the rent free reserve were also derecognised and adjusted through retained earnings.

The overall reduction in retained earnings on 1 October 2019 was therefore £0.2m, which is the cumulative effect of recognising the asset and corresponding liabilities for each of the leases and the release of the rent free reserve.

Deferred tax

Deferred policyholder tax liabilities decreased by £12.7m to £0.5m, while deferred policyholder tax assets increased by £7.9m to £8.1m. These movements have arisen from the deemed capital losses on policyholder assets, as a result of the market falls in relation to the COVID-19 pandemic.

Dividends

During the six month period to 31 March 2020, the Company paid a second interim dividend of £17.2m to shareholders in respect of financial year 2019. This was in addition to the first interim dividend of £8.6m, which was paid in June 2019. The financial year total of £25.8m compares with a full year interim dividend of £21.2m in respect of the full financial year 2018.

In respect of the six months to 31 March 2020, and in line with dividend policy, the Board has declared a first interim dividend of £8.9 million, or 2.7 pence per ordinary share. This compares with an interim dividend of £8.6 million, or 2.6 pence per ordinary share, in respect of the same period in the prior year.

Earnings Per Share

	Six months ended	Six months ended
	31 March 2020	31 March 2019
Profit after tax for the period	£22.5m	£18.2m
Number of shares in issue	331.3m	331.3m
Earnings per share - basic and diluted	6.8p	5.5p

Earnings per share grew to 6.8p per share up 23.6% on the six months to 31 March 2019.

Going Concern

The financial statements have been prepared on a going concern basis following an assessment by the Directors.

When making this assessment the Directors have taken into consideration the reduction in FUD of £2.8bn in the interim period, due to the substantial, downward movements in world equity markets since late February. Market volatility and uncertainty is expected to continue for some time, due to the COVID-19 pandemic and the effect of measures taken to combat it. Operations continue as near as possible to usual, whilst being in compliance with Government guidelines. The Group continues to maintain a robust financial position.

Having conducted detailed cash flow and working capital projections, and stress-tested liquidity, profitability and regulatory capital, taking account of the impact of the COVID-19 pandemic and further possible adverse changes in trading performance, the Directors are satisfied that the Group is well placed to manage its business risks.

The Directors are also satisfied that it will be able to operate within the regulatory capital limits imposed by the Financial Conduct Authority (FCA), Prudential Regulation Authority (PRA), and Isle of Man Financial Services Authority (IoM FSA). Accordingly, after considering the effects of the COVID-19 pandemic, the Directors do not believe a material uncertainty exists that would have an effect on the going concern of the Group and have prepared the financial statements on a going concern basis.

Principal Risks and Uncertainties

Following the onset of the COVID-19 pandemic, we implemented a number of business continuity measures. In particular, following the Government announcement on 24 March 2020 that the public should not leave homes to travel to work if they could work at home, we limited office attendance to short visits by essential IT colleagues and other key workers necessary to maintain the continuity of operations and systems. All other staff support the business through remote home working.

The pandemic has created many uncertainties and we have adapted the business rapidly to reflect the sudden change in its risk profile. This has resulted in changes to our operational risk profile. However, in other respects the key risks and uncertainties associated with our strategic objectives remain broadly the same. An overview of those risks, along with the associated risk management and controls, follows:

1. Increased operational risk:The remote working of staff and the inaccessibility of the Group's normal offices presents heightened operational risks. The extent of use of remote IT access has increased threat of external fraud and cyber-attack. Our critical business services have been reviewed and, in some instances, it has been necessary to amend the usual routines and procedures.

Risk management and control:All modifications to operating procedures were reviewed by management and assessed by Risk Management for impact, prior to approval. Management also considered any potential impact on clients with the aim to avoid client detriment. Where necessary, external regulatory approval was sought to ensure documentation and data met requirements. A revised IT strategy was put in place which includes enhanced remote access controls.

2. Stock market volatility:The COVID-19 pandemic and Brexit have created uncertainty in stock markets and are expected to continue to have a negative impact for some time. This has an effect upon the value of FUD.

Risk management and control:Stock market volatility, and its impact on revenue, is partly mitigated by the wide range of assets in which FUD is invested. This ensures that FUD based revenue is not wholly correlated to any one market. Clients are also able to switch into cash, and this is likely to remain on platform. The wrapper fees are also not reduced by falls in the value of assets, as they are levied at a fixed rate. Expenses are also closely monitored and controlled.

3. Service standards failure:Our high levels of client and adviser retention are dependent to a great extent upon our consistently reliable and high quality service. Failure to maintain these service levels would affect our ability to attract and retain business. As discussed above, recent events have resulted in changes to working practices - so making this service harder to deliver.

Risk management and control:The risk of service standards failure is managed by providing client service teams with extensive initial and ongoing training, supported by experienced subject matter experts and managers. During the working at home phase, the monitoring and checking of service levels and capacity has continued and any deviation from the expected has been addressed by management.

4. Increased competition:The market is competitive. Increased levels of competition for clients and advisers; improvements in offerings from other investment platforms; and consolidation in the adviser market may all make it more challenging to attract and retain business. The COVID-19 pandemic has added to this uncertainty. The level of client and adviser activity may be adversely impacted for some time.

Risk management and control:Competition is countered by focussing on providing exceptionally high levels of service and being responsive to client and financial adviser demands. The efficient management of expenses also helps make possible a continued proposition of "value for money" involving the reduction of charges.

5. Reduced investment:The maintenance of quality and relevance requires ongoing investment. Any reduction in investment due to diversion of resources to other non- discretionary expenditure may affect our competitive position.

Risk management and control:This risk has not significantly increased as a result of the COVID-19 pandemic as minimal additional unexpected expenses have been incurred so far Otherwise, the risk of reduced investment in the business is managed through a disciplined approach to expense management and forecasting. In particular, forthcoming regulatory and taxation regime changes are noted and planned for and a contingency sum is maintained to allow for unexpected expenses.

6. Expense overrun:Expenses that were higher than expected and budgeted for could adversely impact profits. Whilst the key constituent of expenses is salary cost, other expenses, such as legal, compliance or regulatory costs and levies are more likely to change unexpectedly. The outcome of a reconsideration of HMRC's view that Integrated Application Development Pty Ltd should be excluded from a UK VAT group is currently awaited. Following that, a formal review may be required and, possibly, a referral to the Tribunal and/or litigation before the matter is finally resolved. It is possible that a retrospective additional VAT charge (plus interest and/or a penalty) and/or a prospective increase in VAT charges might be applied. Further details are set out in the RNS issued on 28 January 2020.

Risk management and control:Expenses have not significantly increased as a result of the COVID-19 pandemic. The most significant element of the expense base is staff cost. This is controlled through modelling staff requirements against forecast business volumes and factoring in expected efficiencies from platform and other systems development. Expenditure requests that deviate from plan are rigorously challenged and must receive prior approval. With regard to the HMRC VAT issue, the Group has taken and continues to take specialist legal and tax advice. Financial projections assuming an unfavourable outcome, including those used to demonstrate viability, have been cast.

7. Capital strain:Unexpected, additional capital requirements imposed by regulators could negatively impact solvency coverage ratios.

Risk management and control:Specific resources are allocated to monitor the current and anticipated regulatory environment to ensure that all regulatory obligations are met. Assessments of capital requirements are also undertaken, which includes running extreme stress and scenario tests to the point of regulatory failure. A buffer over and above the regulatory minimum solvency capital requirements is maintained. The capital position has not significantly changed as a result of the COVID-19 pandemic and the regulated companies within the Group continue to maintain healthy solvency coverage ratios.

Directors' Responsibility Statement

The Directors are responsible for preparing the interim financial statements in accordance

with applicable law and regulations. A list of current directors is maintained on the Group's

website: https://www.integrafin.co.uk.

The Directors confirm that, to the best of their knowledge, the interim financial statements have been prepared in accordance with IAS 34 as adopted by the European Union, and give a true and fair view of the assets, liabilities, financial position and profit or loss of the issuer, or the undertakings included in the consolidation as a whole as required by DTR 4.2.4 R.

The Directors further confirm that the interim financial statements include a fair review of the information required by DTR 4.2.7R and DTR 4.2.8R.

By Order of the Board

Helen Wakeford

Company Secretary

Registered Office

29 Clement's Lane

London

EC4N 7AE

20 May 2020

Independent Review Report to IntegraFin Holdings plc

Introduction

We have been engaged by the Company to review the condensed set of financial statements in the half-yearly financial report for the six months ended 31 March 2020 which comprises the Condensed Consolidated Statement of Comprehensive Income, Condensed Consolidated Statement of Financial Position, Condensed Consolidated Statement of Cash Flows and Condensed Consolidated Statement of Changes in Equity and related notes.

We have read the other information contained in the half-yearly financial report and considered whether it contains any apparent misstatements or material inconsistencies with the information in the condensed set of financial statements.

Directors' responsibilities

The half-yearly financial report is the responsibility of and has been approved by the Directors. The Directors are responsible for preparing the half-yearly financial report in accordance with the Disclosure Guidance and Transparency Rules of the United Kingdom's Financial Conduct Authority.

As disclosed in note 1, the annual financial statements of the Group are prepared in accordance with International Financial Reporting Standards (IFRSs) as adopted by the European Union. The condensed set of financial statements included in this half-yearly financial report has been prepared in accordance with International Accounting Standard 34, ''Interim Financial Reporting'', as adopted by the European Union.

Our responsibility

Our responsibility is to express to the Company a conclusion on the condensed set of financial statements in the half-yearly financial report based on our review.

Scope of review

We conducted our review in accordance with International Standard on Review Engagements (UK and Ireland) 2410, ''Review of Interim Financial Information Performed by the Independent Auditor of the Entity'', issued by the Financial Reporting Council for use in the United Kingdom. A review of interim financial information consists of making enquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with International Standards on Auditing (UK) and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion.

Conclusion

Based on our review, nothing has come to our attention that causes us to believe that the condensed set of financial statements in the half-yearly financial report for the six months ended 31 March 2020 is not prepared, in all material respects, in accordance with International Accounting Standard 34, as adopted by the European Union, and the Disclosure Guidance and Transparency Rules of the United Kingdom's Financial Conduct Authority.

Use of our report

Our report has been prepared in accordance with the terms of our engagement to assist the Company in meeting its responsibilities in respect of half-yearly financial reporting in accordance with the Disclosure Guidance and Transparency Rules of the United Kingdom's Financial Conduct Authority and for no other purpose. No person is entitled to rely on this report unless such a person is a person entitled to rely upon this report by virtue of and for the purpose of our terms of engagement or has been expressly authorised to do so by our prior written consent. Save as above, we do not accept responsibility for this report to any other person or for any other purpose and we hereby expressly disclaim any and all such liability.

BDO LLP

Chartered Accountants

London

United Kingdom

20 May 2020

BDO LLP is a limited liability partnership registered in England and Wales (with registered number OC305127).

Condensed Consolidated Statement of Comprehensive Income

			Six months to		Six months to
	Note		31 March 2020		31 March 2019
			£'000		£'000
Revenue
Fee income	4		53,824		47,615
Cost of sales			(382)		(456)
Gross profit			53,442		47,159
Administrative expenses			(26,137)		(24,879)
Impairment losses on financial assets			(57)		(19)
Net income/(expense) attributable to
8		(24,312)		(5,098)
policyholder returns

Operating profit			2,936		17,163
Operating profit/(loss) attributable to			(24,312)		(5,098)
policyholder returns

Operating profit attributable to shareholder			27,248		22,261
returns

Investment returns			30		25
Interest income			186		149
Interest expense			(126)		-

Profit on ordinary activities before taxation			3,026		17,337
Profit/(loss) on ordinary activities before			(24,312)		(5,098)
taxation attributable to policyholder returns

Profit on ordinary activities before taxation			27,338		22,435
attributable to shareholder returns

Policyholder tax	8		24,312		5,098
Tax on profit on ordinary activities	6		(4,849)		(4,241)
Profit for the period			22,489		18,194
Other comprehensive income
Exchange gains/(losses) arising on translation of			(131)		(25)
foreign operations

Total other comprehensive income for the			(131)		(25)
period

Total comprehensive income for the period			22,358		18,169
Earnings per share

Ordinary shares - basic and diluted	5		6.8p		5.5p

All activities of the Group are classed as continuing.

Condensed Consolidated Statement of Financial Position

		31 March	30 September
	Note	2020	2019
		£'000	£'000
Non-current assets
Loans	12	2,242	1,185
Intangible assets		12,951	12,951
Property, plant and equipment		2,307	2,405
Right of use assets		4,741	-
Deferred tax assets	7	8,084	157
Deferred acquisition costs	11	52,886	50,443
		83,211	67,141
Current assets
Financial assets at fair value through profit or loss		5,094	5,066
Other prepayments and accrued income		12,956	13,082
Trade and other receivables	13	3,232	6,510
Investments and cash held for the benefit of	10	15,410,189	16,665,048
policyholders
Cash and cash equivalents		131,668	132,340
		15,563,139	16,822,046
Current liabilities
Trade and other payables	14	18,449	17,024
Finance lease liabilities		2,379	-
Liabilities for linked investment contracts	10	15,410,189	16,665,048
Current tax liabilities		91	3,342
		15,431,108	16,685,414
Non-current liabilities
Provisions	9	36,912	24,564
Finance lease liabilities		4,807	-
Deferred income liability	11	52,886	50,443
Deferred tax liabilities	7	528	13,248
		95,133	88,255
Net assets		120,109	115,518
Capital and reserves
Called up equity share capital		3,313	3,313
Capital redemption reserve		2	2
Share-based payment reserve		961	1,008
Employee Benefit Trust reserve		(540)	(275)
Foreign exchange reserve		(175)	(44)
Non-distributable reserves		5,722	5,722
Non-distributable insurance reserves		501	501
Profit or loss account		110,325	105,291
Total equity		120,109	115,518

These interim financial statements were approved by the Board of Directors on 20 May 2020 and are signed on their behalf by:

Alexander Scott, Director

Company Registration Number: 08860879

Condensed Consolidated Statement of Cash Flows

	Six months to	Six months to
	31 March 2020	31 March 2019
	£'000	£'000
Cash flows from operating activities
Profit before tax	3,026	17,337
Adjustments for:
Amortisation and depreciation	1,250	297
Share-based payments expense	814	561
Interest on cash held	(186)	(149)
Interest paid on lease liability	126	-
Investment returns	(30)	(25)
Increase in policyholder tax recoverable	3,663	-
Decrease/(increase) in receivables	3,405	(4,678)
Increase/(decrease) in payables	3,941	(318)
Decrease/(increase) in current asset investments	(29)	(13)
Increase/(decrease) in provisions	12,348	7,118
Decrease/(increase) in investments and cash
held for the benefit of policyholders	1,254,859	(597,820)
Increase/(decrease) in liabilities for linked
investment contracts	(1,254,859)	597,820
Cash generated from operations	28,328	20,130
Income taxes paid	(8,099)	(3,034)
Net cash flows from operating activities	20,229	17,096
Investing activities
Acquisition of tangible assets	(314)	(574)
(Increase)/decrease in loans	(1,056)	-
Interest on cash held	186	149
Investment returns	30	25
Net cash used in investing activities	(1,154)	(400)
Financing activities
Repayment of lease liabilities	(1,111)	-
Interest paid on lease liability	(126)	-
Purchase of own shares in Employee Benefit	(265)	(104)
Trust
Settlement of share-based payment reserve	(860)	(377)
Equity dividends paid	(17,215)	(21,197)
Net cash used in financing activities	(19,577)	(21,678)

Net decrease in cash and cash equivalents	(502)	(4,982)

Cash and cash equivalents at beginning of	132,340	116,849
period
Exchange losses on cash and cash equivalents	(170)	(25)
Cash and cash equivalents at end of period	131,668	111,842

Condensed Consolidated Statement of Changes in Equity

				Share-	Non-
		Non-		based	distributable	Employee
	Share	distributable	Other	payment	insurance	benefit	Retained	Total
	capital	reserves	reserves	reserve	reserves	trust	earnings	equity
	£'000	£'000	£'000	£'000	£'000	£'000	£'000	£'000
Balance at 1	3,313	5,722	(22)	530	501	-	94,899	104,943
October 2018
Comprehensive
income for the
year:
Profit for the year	-	-	-	-	-	-	18,194	18,194
Movement in
currency	-	-	(25)	-	-	-	-	(25)
translation
Other movement	-	-	-	-	-	-	(1)	(1)
Total
comprehensive
income for the	-	-	(25)	-	-	-	18,193	18,168
year
Distributions to
owners:
Dividends	-	-	-	-	-	-	(21,197)	(21,197)
Share-based	-	-	-	561	-	-	-	561
payment expense
Settlement of
share-based	-	-	-	(377)	-	-	-	(377)
payment
Purchase of own	-	-	-	-	-	(104)	-	(104)
shares in EBT
Total
distributions to	-	-	-	184	-	(104)	(21,197)	(21,117)
owners
Balance at 31	3,313	5,722	(47)	714	501	(104)	91,895	101,994
March 2019
Balance at 1	3,313	5,722	(42)	1,008	501	(275)	105,291	115,518
October 2019
Effect of adoption
of IFRS 16 (note	-	-	-	-	-	-	(239)	(239)
1)
Adjusted
balance at 1	3,313	5,722	(42)	1,008	501	(275)	105,052	115,279
October 2019
Comprehensive
income for the
year:
Profit for the year	-	-	-	-	-	-	22,489	22,489
Movement in
currency	-	-	(131)	-	-	-	-	(131)
translation
Other movement	-	-	-	-	-	-	-	-
Total
comprehensive
income for the	-	-	(131)	-	-	-	22,489	22,358
year
Distributions to
owners:
Dividends	-	-	-	-	-	-	(17,215)	(17,215)
Share-based	-	-	-	814	-	-	-	814
payment expense
Settlement of
share-based	-	-	-	(860)	-	-	-	(860)
payment
Purchase of own	-	-	-	-	-	(265)	-	(265)
shares in EBT
Total
distributions to	-	-	-	(46)	-	(265)	(17,215)	(17,526)
owners
Balance at 31	3,313	5,722	(173)	962	501	(540)	110,325	120,109
March 2020

Notes to the Financial Statements

1. Basis of preparation

The consolidated interim financial statements have been prepared and approved by the Directors in accordance with International Financial Reporting Standards (IFRSs) as adopted by the EU, and in accordance with the International Accounting Standard (IAS) 34 Interim Financial Reporting, and the Disclosure Guidance and Transparency Rules of the Financial Conduct Authority (FCA).

The financial information contained in these interim financial statements does not constitute statutory accounts within the meaning of Section 434 of the Companies Act 2006. The information has been reviewed by the company's auditor, BDO LLP, and their report is presented on pages 7-8.

The comparative financial information for the year ended 30 September 2019 in this interim report does not constitute statutory accounts for that year.

The statutory accounts for 30 September 2019 have been delivered to the Registrar of Companies. The auditor's report on those accounts was unqualified, did not draw attention to any matters by way of emphasis, and did not contain a statement under 498(2) or 498(3) of the Companies Act 2006.

The same accounting policies, methods of calculation and presentation have been followed in the preparation of the interim financial statements for the six months to 31 March 2020 as were applied in the Audited Annual Financial Statements for the year ended 30 September 2019. The only change is the adoption of IFRS 16 on 1 October 2019, as noted below.

Going Concern

The financial statements have been prepared on a going concern basis following an assessment by the Directors.

The Directors are also satisfied that it will be able to operate within the regulatory capital limits imposed by the Financial Conduct Authority (FCA), Prudential Regulation Authority (PRA), and Isle Man Financial Services Authority (IoM FSA). Accordingly, after considering the effects of the COVID- 19 pandemic, the Directors do not believe a material uncertainty exists that would have an effect on the going concern of the Group and have prepared the financial statements on a going concern basis.

Principal risks and uncertainties

The Group's principal risks and uncertainties are listed on pages 5-6, and have changed since year end as a result of the COVID-19 pandemic.

Basis of consolidation

The consolidated financial statements incorporate the financial statements of the Company and its subsidiaries.

New accounting standards

The Group adopted IFRS 16 on 1 October 2019. The Group used the modified retrospective approach of transition, which uses the net effect of applying IFRS 16 on the first day of the first accounting period in which the new standard is applied.

On commencement date, the Group measured the lease liability as the present value of all future lease payments, discounted using the incremental borrowing rate. The Group's incremental borrowing rate is the rate at which a similar borrowing could be obtained from an independent creditor under comparable terms and conditions.

The right of use asset was measured at its net book value, assuming it had been capitalised and depreciated from inception. The net effect is recognised through an adjustment to retained earnings. Prior periods have not been restated.

On adoption the Group recognised right of use assets of £5.6m and corresponding lease liabilities of £8.3m. Liabilities of £2.5m previously recognised in relation to the rent free reserve were also derecognised and adjusted through retained earnings.

Right of use assets - Property:
	£'000
Additions on adoption of IFRS 16 - 1 October 2019	5,582
Depreciation charge	(807)
AUD FX adjustment	(34)
Balance at 31 March 2020	4,741
Depreciation is calculated on a straight line basis over the term of the lease.
Lease liabilities - Property:
	£'000
Lease liability on adoption of IFRS 16 - 1 October 2019	8,336
Lease payments	(1,237)
Interest expense	126
AUD FX adjustment	(40)
Balance at 31 March 2020	7,185

The following is a reconciliation of total operating lease commitments at 30 September 2019 (as disclosed in the Annual Report to 30 September 2019) to the lease liabilities recognised at

1 October 2019:

	£'000
Lease commitments - 1 October 2019	8,841
Discounted using incremental borrowing rate	(505)
Lease liabilities on adoption of IFRS 16 - 1 October 2019	8,336

Critical accounting estimates and judgements
The preparation of interim consolidated financial statements in compliance with IAS 34 requires the use of certain critical accounting estimates. There have been no material revisions to the Group's critical accounting estimates and judgements methodology from year ending 30 September 2019.
Financial instruments
Financial assets and liabilities have been classified into categories that determine their basis of measurement and, for items measured at fair value, whether changes in fair value are recognised in the statement of comprehensive income. The following tables show the carrying values of assets and liabilities for each of these categories.

Financial assets:

	Fair value through profit	Amortised cost
	or loss
	31 Mar	30 Sep	31 Mar	30 Sep
	2020	2019	2020	2019
	£'000	£'000	£'000	£'000
Cash and cash equivalents	-	-	131,668	132,340
Listed shares and securities	104	69	-	-
Loans	-	-	2,242	1,185
Investments in quoted debt instruments	4,990	4,997	-	-
Accrued income	-	-	9,682	9,768
Trade and other receivables	-	-	2,952	2,766
Investments and cash held for the
policyholders	15,410,189	16,665,048	-	-
Total financial assets	15,415,283	16,670,114	146,544	146,059

Financial liabilities:

	Fair value through profit or	Amortised cost
	loss
	31 Mar		30 Sep	31 Mar	30 Sep
	2020		2019	2020	2019
	£'000		£'000	£'000	£'000
Trade and other payables	-		-	6,777	5,889
Accruals	-		-	6,580	6,909
Liabilities for linked investments contracts	15,410,189		16,665,048	-	-
Total financial liabilities	15,410,189		16,665,048	13,357	12,798

Financial instruments not measured at fair value

Financial instruments not measured at fair value include cash and cash equivalents, accrued fees, loans, trade and other receivables, and trade and other payables. Due to their short-term nature and/or annual impairment review, the carrying value of these financial instruments approximates their fair value.

Financial instruments measured at fair value - fair value hierarchy

The table below classifies financial assets that are recognised on the statement of financial position at fair value in a hierarchy that is based on significance of the inputs used in making the measurements. The levels of hierarchy are disclosed on the next page.

Level 1: quoted prices (unadjusted) in active markets for identical assets;

Level 2: inputs other than quoted prices included within Level 1 that are observable for the asset either directly (i.e. as prices) or indirectly (i.e. derived from prices); and

Level 3: inputs for the asset that are not based on observable market data (unobservable inputs).

At 31 March 2020	Level 1	Level 2	Level 3	Total
	£'000	£'000	£'000	£'000
Investments and assets
held for the benefit of
policyholders
- Policyholder cash	1,509,721	-	-	1,509,721
- Investments and securities	389,437	111,905	21,188	522,530
- Bonds and other fixed-	14,189	84	4	14,277
income securities
- Holdings in collective	13,251,742	111,052	867	13,363,661
investment schemes

	15,165,089	223,041	22,059	15,410,189
Other investments	5,094	-	-	5,094

Total	15,170,183	223,041	22,059	15,415,283

At 30 September 2019	Level 1	Level 2	Level 3	Total
	£'000	£'000	£'000	£'000
Investments and assets
held for the benefit of
policyholders
- Policyholder cash	1,213,371	-	-	1,213,371
- Investments and	444,076	140,991	2,447	587,514
securities
- Bonds and other fixed-	4,485	9,320	3,005	16,810
income securities
- Holdings in collective	14,731,562	109,714	6,077	14,847,353
investment schemes

	16,393,494	260,025	11,529	16,665,048
Other investments	5,066	-	-	5,066

Total	16,398,560	260,025	11,529	16,670,114

Level 1 valuation methodology

Financial assets included in Level 1 are measured at fair value using quoted mid prices that are available at the reporting date and are traded in active markets. These financial assets are mainly collective investment schemes and listed equity instruments.

Level 2 and Level 3 valuation methodology

The Group regularly reviews whether a market is active, based on available market data and the specific circumstances of each market. Where the Group assesses that a market is not active, then it applies one or more valuation methodologies to the specific financial asset. These valuation methodologies use quoted market prices, where available, and may in certain circumstances require the Group to exercise judgement to determine fair value.

Financial assets included in Level 2 are measured at fair value using observable mid prices traded in markets that have been assessed as not active enough to be included in Level 1.

Otherwise, financial assets are included in Level 3. These are assets where one or more inputs to the valuation methodology are not based on observable market data. The key unobservable input is the pre-tax operating margin needed to price asset holdings.

Level 3 sensitivity to changes in unobservable measurements

For financial assets assessed as Level 3, based on its review of the prices used, the Company believes that any change to the unobservable inputs used to measure fair value would not result in a significantly higher or lower fair value measurement at year end, and therefore would not have a material impact on its reported results.

Changes to valuation methodology

There have been no changes in valuation methodology since year end.

Transfers between Levels

There have been no material changes between Levels since year end.

4. Segmental reporting

The revenue and profit before tax are attributable to activities carried out in the UK and Isle of Man. The Group has two classes of business as follows:

provision of investment administration services
transaction of ordinary long term insurance and underwriting life assurance

Analysis by class of business is given below:

Revenue