IntegraFin : Interim Report 2021

INTERIM RESULTS

SIX MONTHS ENDED 31 MARCH 2021

IntegraFin Holdings plc

Company registration number: 08860879

IntegraFin Holdings plc - Interim results for the six months ended

31 March 2021

IntegraFin Holdings plc (IHP) today announces its interim results for the six months to 31 March 2021.

Highlights

• Group revenue up 10% to £59.4m (H1 2020: £53.8m)
• Group profit before tax attributable to shareholder returns up 12% to £31.2m (H1 2020 restated*: £27.9m)
• Platform profit before tax up 19% to £30.7m (H1 2020 restated*: £25.8m)
• Earnings per share up 9% to 7.5 pence (H1 2020 restated*: 6.9 pence)
• Interim dividend 3.0 pence per share (H1 2020: 2.7pps)
• Funds under direction up 34% to £46.93bn (H1 2020: £34.99bn)
• Gross inflows up 15% to £3.73bn (H1 2020: £3.23bn)
• Client numbers up 7% to 201k (H1 2020: 187k)

• H1 2020 restated to reflect the pro-rated effect to 31 March 2020 of the release of tax relief on corporate expenses due to shareholders, recognised at year end 2020

H1 2021 represents the six months to 31 March 2021, H1 2020 represents the six months to 31 March 2020. YE 2020 represents the 12 months to 30 September 2020

Alex Scott, Chief Executive Officer, commented:

"We are pleased to announce our results for the first half of the year. Demonstrating our strength and continuing growth, we have delivered record first half year profits.

Our Transact platform has again seen its highest ever gross and net inflows over the period. Coupled with increased confidence in world equity markets, driven by the positive outcomes from Covid-19 vaccination programmes, these flows have helped drive growth in FUD, generating record revenue in the period. This helps support our approach of delivering continuous improvement in price to clients, as our fees have once again been reduced to make our service even better value for money.

The number of clients on the platform increased from 187k to 201k year on year, an increase of 7%. In the same period the number of advisers using the platform increased by 5%.

In January we took the opportunity to invest in our strategy of delivering the highest quality financial services infrastructure and associated services to UK advisers and our mutual clients by acquiring Time for Advice Limited (T4A). We see the T4A offering, CURO, as complementary to Transact. CURO is already highly capable and, with IHP providing the necessary investment and support, we believe T4A will be a great long term fit that will deliver positive outcomes for all.

Whilst the general outlook has improved from that prevailing this time last year, we still face many uncertainties in the second half of the year as we contemplate the easing of lockdown restrictions. The key challenges will be the safe return to the office of our staff and the implementation of a flexible working plan, whilst continuing to deliver award winning service.

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 2021, an interim dividend of 3.0 pence per ordinary share (H1 2020: 2.7 pence) will be payable on 25 June 2021 to ordinary shareholders on the register on 28 May 2021. The ex-dividend date will be 27 May 2021."

Financial highlights

	Change	H1 2021	H1 2020	YE 2020
			Restated
		£m	£m	£m
Revenue	+10%	59.4	53.8	107.3
Profit before tax	+12%	31.2	27.9	55.3
attributable to
shareholder returns
Basic and diluted	+9%	7.5p	6.9p	13.7p
earnings per share
Operating margin		53%	52%	52%
Contacts
Media
Lansons
Tony Langham			[phone]
Maddy Morgan Williams			[phone]
Investors
Jane Isaac			[phone]

Analyst presentation

IntegraFin Holdings plc will be hosting an analyst presentation on 20 May 2021, following the release of these results for the half year ended 31 March 2021. 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. Th e 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 - FUD, inflows and outflows

Transact's platform inflows surpassed any other year in the six months to 31 March 2021 and, coupled with market recovery from the lows of March 2020, this has led to a 34% increase in FUD year on year.

	H1 2021	H1 2020	YE 2020
	£m	£m	£m
Opening FUD	41,093	37,799	37,799
Inflows	3,734	3,234	5,750
Outflows	(1,427)	(1,172)	(2,160)
Net flows	2,307	2,062	3,590
Market movements	3,632	(4,872)	(224)
Other movements1	(103)	1	(72)
Closing FUD	46,929	34,990	41,093

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

Gross inflows for the six months to 31 March 2021, which were all organic, increased by £500m (15%) compared with the same period in the prior year. Gross outflows increased by £255m (22%) in the six months, representing an annualised outflow of 7%, which remains in the range we expect. The net result of the increase in both inflows and outflows was an increase in net flows of £245m (12%).

Strategic developments

On 11 January 2021, IntegraFin Holdings plc completed the acquisition of T4A, a specialist software provider for financial planning and wealth management. The acquisition supports IHP's strategy to provide platform and associated services to clients and their advisers.

The acquisition provides IHP with ownership of T4A's CURO software (which is an adviser back office system) plus access to T4A's existing base of users, their system development expertise and service support. Over time IHP's Transact platform will integrate with CURO in selected areas where this will further enhance service to advisers and clients.

The acquisition cost comprised an up-front cash payment of £8.6 million, plus £8.6 million of deferred consideration, payable in phases over the next four years. Additional consideration of up to £8.6 million may also be payable in January 2025, although this is contingent on T4A meeting certain performance targets over each of the next four years.

The cash payments, plus £0.4 million of the deferred and additional consideration, were considered part of the purchase cost, whilst the remaining fair value of £12.5 million deferred and additional consideration is required, under IFRS 3 - Business Combinations, to be treated as post-combination remuneration over the four years from January 2021 to December 2024.

The fair value of identifiable assets and liabilities acquired was £0.1 million, leading to the recognition of £8.9 million goodwill. The main reason the goodwill has arisen is the value of the T4A software, CURO, which is a complementary offering to Transact and is expected to enhance the overall service that can be offered to advisers and clients. As explained in Note 9, the purchase price allocation exercise is still being finalised, and it is therefore possible that the goodwill will be revised if additional intangible assets are recognised.

With effect from the date of acquisition on 11 January, T4A's accounts have been consolidated into IHP's results, resulting in the inclusion of £732k of revenue achieved from that date to 31 March 2021, and losses after tax of £271k in the same period.

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T4A will require enhanced investment for the next two years, due to the business investing in its software development through recruitment of developers, and also through growing the sales and support teams to ensure the growing customer base is fully supported. T4A is therefore expected to generate a loss in financial year 2021 and financial year 2022.

Group financial performance

	H1 2021	H1 2021	H1 2020	H1 2020	YE 2020
	Group	Platform	Group	Platform
			(restated)	(restated)
	£m	£m	£m	£m	£m
Revenue	59.4	58.6	53.8	53.8	107.3
Amortisation of deferred	3.8	3.8	3.8	3.8	7.6
income liability
Cost of sales	(0.6)	(0.4)	(0.4)	(0.3)	(0.8)
Gross profit	62.6	62.0	57.2	57.3	114.1
Operating expenses	(25.7)	(27.6)	(25.6)	(27.8)	(51.2)
Amortisation of deferred	(3.8)	(3.8)	(3.8)	(3.8)	(7.6)
acquisition costs
Non-underlying expenses	(1.9)	-	-	-	-
Operating profit	31.2	30.6	27.8	25.7	55.3
attributable to
shareholder returns
Net interest income	0.0	0.1	0.1	0.1	0.0
Profit before tax	31.2	30.7	27.9	25.8	55.3
attributable to
shareholder returns
Tax on ordinary activities	(6.2)	(5.6)	(4.9)	(4.4)	(9.8)
Profit after tax	25.0	25.1	23.0	21.4	45.5
Operating margin	53%	52%	52%	48%	52%

Group profit

Gross profit for the six months to 31 March 2021 rose by £5.4 million (9%), to £62.6 million, from £57.2 million. This increase reflects the strong performance of Transact, demonstrated by the upturn in the value of FUD, which is due to record inflows, market recovery and growth in number of clients and tax wrappers held on the platform. The Group gross profit also includes T4A's gross profit of £648k for the period from acquisition on 11 January to 31 March 2021.

Profit after tax for the six months to March 2021 was £25.0 million, an increase from the restated six months to March 2020, of £2.0 million, or 9%.

There were, however, the following non-underlying expenses incurred by IntegraFin Holdings plc in the period. Non-underlying expenses are those outside the normal course of business, which are therefore not reflective of the underlying performance of IHP or the Group.

• £1.2 million relating to the Nucleus process and the acquisition of T4A. These were one- off costs which would not be expected to recur
• £0.7 million post-combination compensation to the original shareholders of T4A. This relates to the deferred and additional consideration payable in relation to the acquisition of T4A, which is recognised as remuneration over the four years from January 2021 to December 2024

The restatement of the six months to March 2020 is due to: pro-rating the policyholder tax provision release of £1.0 million that was effected at 2020 financial year end, this has therefore increased profit after tax to March 2020 by £485k; and the amortisation of the deferred acquisition costs and deferred income liability being shown gross to properly reflect the amortisation of balances shown separately on the statement of financial position, these net off exactly so there is zero net effect on profit.

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